Final Results

MFI Furniture Group PLC 27 February 2003 February 27th 2003 Preliminary results for the 52 weeks to 28 December 2002 Financial Highlights - Turnover up 19.4% to Â£1,287m - UK Retail up 12.5% to Â£861m - Howdens up 45.6% to Â£327m - France up 11.9% to Â£94m - Pre-tax profit up 24.9% to Â£80.8m* - Earnings per share up 23.4% to 9.5p* - Dividends per share up 24% to 3.1p - Pre-exceptional operating cash inflow of Â£140m compared to Â£104m last year * 2001 reported before exceptional items Business Highlights - Good progress on all strategic priorities, with Â£1.3bn Group sales target achieved one year early - Third year of strong sales growth at UK Retail, driven by MFI refurbishments and range improvements - Fifth year of exceptional growth at Howdens - Hygena Cuisines responding well to UK retail template - Pilot of Howdens in US performing in line with expectations - Developing new supply chain systems and initiatives John Hancock, Chief Executive, said: 'These are excellent results which demonstrate the progress the Group has made over the last year. We are very pleased by the response of MFI's customers to our new store formats and product range improvements. Howdens delivered another year of exceptional growth, driven by its specialty focus and close customer relationships. We will continue to focus our attention and investment in these two businesses in 2003, and we remain very excited by the opportunities ahead.' - ends - Contacts: MFI Furniture Group Plc John Hancock, Chief Executive 020 8913 5319 Martin Clifford-King, Finance Director 020 8913 5350 Brunswick Group Limited Charlotte Elston / Katya Reynier 020 7404 5959 Company Statement Financial results Sales and profitability both increased strongly, with the principal contributors to growth being UK Retail and Howdens. Sales of Â£1,287m represented a 19.4% increase on the previous year, while profit before tax and exceptional items rose by 24.9% to Â£80.8m. Earnings per share rose by 23.4% to 9.5 p. Sales % increase % increase Â£m Total business Like for like UK Retail 861 12.5 6.7 Howdens 327 45.6 28.8 France 94 11.9 7.9 Other 5 n/a n/a _________ _________ _________ Total Group 1,287 19.4 13.8 _________ _________ _________ The Group has delivered improved financial performance for the third successive year in a period when we have been investing significantly to consolidate the Group's position in our core businesses. We have successfully progressed our five key strategic priorities in the course of 2002, namely the rollout of the new format into our stores both in the UK and in France, the continued expansion of our highly successful Howdens trade operation in the UK together with the establishment of a pilot trade operation in the US and the development of new integrated systems. The MFI brand continues to show itself capable of expansion, with new product categories winning immediate acceptance with our customers. We are successfully transforming our brand offer from 'pure value' to a more fashion-driven and aspirational one, while remaining fully committed to the mass market. Overall gross margin has increased from 50.0% to 50.2% reflecting higher margins from the introduction of new product ranges in MFI. This has been partially offset by sales growth in lower margin areas such as fitting service sales, together with stock markdowns arising from the store reformatting. Total selling and distribution costs have increased by 20.9%. After stripping out the additional costs associated with new and reformatted stores and depots, the like for like selling and distribution costs have increased by 12.3%, which compares to like for like sales growth of 13.8%. Administration costs have risen 3.3%, broadly in line with inflation. - UK Retail Sales were Â£861m, representing an increase over the previous year of 12.5%, up 6.7% on a like for like basis. The profitability of the UK Retail division has increased from Â£34.9m to Â£37.7m, an increase of 8%. This has been achieved after incurring Â£20m of costs and lost revenues associated with the refurbishment programme. There has been a net Â£7m increase in operating profit from sales of our insurance-backed structural guarantees, with profits from this source rising from Â£2m (product was launched in August 2001) in 2001 to Â£9m in 2002. The new store format brings a new and higher standard of presentation to our industry, and provides a greatly improved showcase for our developing range of products - now including sofas and bathrooms. It has also resulted in substantially increased sales, with a shift towards higher value and higher margin product lines. There are currently 191 out of town stores, 4 new stores being opened in the year. The average year-on-year increase in orders in refurbished stores has been 20% with those stores that have had a full refit achieving 25% and those that have received a partial refit producing 8%. We are working to improve the performance of the partial refit stores by reviewing the layout of the ranges. While 45 stores were scheduled for conversion in 2002, we in fact added 58 stores to the 18 that were open at the beginning of the year. A further 65 are scheduled for conversion in 2003, and by the end of this year just under 90% of our sales will be coming from new formatted stores. In total new product categories are performing in line with expectation, with bathrooms accounting for 8% and sofas 4% of sales in those stores where the product is sold. It is clear that our move towards solutions for every room in the house has valuable growth potential, as the furniture market becomes increasingly fashion-driven. In November we acquired the Sofa Workshop business and, by the year-end, sofas were sold in 86 out of town stores, and bathrooms in 83. We anticipate substantially completing the rollout of both product categories to the full chain by the end of 2003. As a consequence of introducing these new product categories, the total addressable furniture market for the MFI chain will have increased from Â£6.7bn to Â£11bn. Combined with the success of the refurbishment programme, this underpins our confidence in the future prospects for our stores. The new High Street stores have allowed us to access a new demographic group of customers - potentially around 5m of the UK's more affluent homes - without cannibalising our existing customer base. Sales have been satisfactory and are skewed towards higher value kitchens. The Hygena at Currys venture was launched at the end of 2000 and now operates in 124 Currys outlets. Performance has improved strongly over the year, as we have learned important lessons about store format, staff motivation and training, range mix and advertising/promotion. - Howdens Howdens continues to deliver outstanding results, with operating profits of Â£44.4m, up 81.2% on last year's figure of Â£24.5m. This success is underpinned by Howdens' strategy of combining a focused product offering with close trade customer relationships. By the end of 2002 we had 269 Howdens depots trading in the UK, 41 being opened in the year. Like for like sales growth was 28.8% in 2002, and the original depots which were open in 1997 continued to grow sales at more than 20%. The continued organic growth from our existing depots, and the rollout of the opening programme, resulted in total sales of Â£327m - an increase of 45.6% on last year. We aim to open a further 40 depots in 2003 and are ultimately targeting a total of 380 depots within the UK by the end of 2005. We are making good progress on our target of a 15% operating margin, moving to 13.6% by the end of 2002. We are pleased with the performance of our pilot of 12 depots in Georgia and North Carolina in the US. Our investment to date of Â£10m includes, as expected, start-up losses of Â£4.5m. Early results suggest that the format is exportable, and the depots are performing very much in line with the UK model; however, we continue to develop cautiously with minimal risk. - France Despite a challenging market, sales in France are Â£94m, up 11.9% on last year with like for like growth up by 7.9%. Using experience gained from our UK High Street operation, we have commenced a refurbishment programme of all of our stores, and this will be complete by the end of 2004. We have converted 20 of our chain of 133 stores in the new format and are seeing orders increase by around 18% as a result of the refurbishment. Profits of Â£2.3m, compared to Â£3m in the previous year, represent an improvement in profit in the second half, reflecting sales uplifts partly offset by disruption from the conversion process. Cash flow Our pre-exceptional operational cash inflow has grown from Â£104m last year to Â£140m, demonstrating the significant cash generation within the business. We have reinvested this money in capital expenditure, the acquisition of Sofa Workshop and purchase of shares for staff incentive schemes. At the year-end we had available cash of Â£32m compared to Â£52m at the end of the previous year. Structural guarantee We recognise that, elsewhere in our industry, Customs & Excise has challenged the VAT accounting treatment for insurance-backed structural guarantees and has raised assessments for the reduction in VAT paid. Whilst we may receive an assessment from Customs and Excise in the future, we have taken extensive legal and taxation advice on our own position, and any such action against MFI would be contested vigorously. As a result no provision has been made (see note 11). Pensions We have reviewed our pension arrangements during the year and intend to continue with our defined benefits scheme, but we have revised our employee benefits and contribution levels to manage the future exposure to the Group. The charge to profit under SSAP 24 was Â£11m. This would have been Â£15m under FRS 17, but we would expect this to reduce after taking into account the changes to employee benefits and contribution levels. In common with many other businesses we are not adopting FRS 17. The FRS 17 deficit on the balance sheet is Â£102m compared to an actuarial deficit of Â£17m. Systems With sales having increased 60% in three years, we have been investing in a new SAP system that will embrace processes and people to achieve margin improvements by driving efficiency throughout the supply chain. During 2002 we have spent Â£12m of cash and expect it to pay for itself within three years. Dividend The Board has proposed a final dividend of 1.6p per share to be paid on 13 June 2003 to shareholders on the register at 30 May 2003. The shares will be quoted ex-dividend from 28 May 2003. This brings a total dividend for the year to 3.1p per share, an increase of 24% over last year. Outlook Over the last three years, MFI has grown sales and profits at average annual compound rates of 20% and 40% respectively. We have every confidence that the business remains capable of further strong growth in a series of highly fragmented markets; markets in which we can outperform our competitors in terms of product, pricing and service standards. The UK market for furniture is predicted to grow at between 4 - 5% per annum over the next three to five years, and, even if there is a slowdown in consumer spending, we still expect to benefit from our growth opportunities and self-help measures. Current trading We are pleased with progress to date and expect the profit outcome for the first half of the year to be higher than our original expectations. We will release a further statement on 18 March 2003 on completion of our UK Winter sale. Consolidated Profit and Loss Account For the 52 weeks ended 28 December 2002 52 weeks to 52 weeks to 29 December 2001 28 December 2002 Before Exceptional Total exceptional items Total items Notes Â£m Â£m Â£m Â£m Turnover : Group and share of joint ventures 2 1,288.8 1,078.2 - 1,078.2 Less : Share of joint ventures (1.4) (0.2) - (0.2) _________ _________ _________ _________ Group turnover 1,287.4 1,078.0 - 1,078.0 Cost of sales (641.2) (539.3) (4.7) (544.0) _________ _________ _________ _________ Gross profit / (loss) 646.2 538.7 (4.7) 534.0 Selling and distribution costs (507.4) (419.7) - (419.7) Administrative expenses (59.0) (57.1) - (57.1) _________ _________ _________ _________ Operating profit / (loss) 2 79.8 61.9 (4.7) 57.2 Share of operating loss of joint ventures (2.0) (0.9) - (0.9) _________ _________ _________ _________ Total operating profit / (loss) - Group and share 77.8 61.0 (4.7) 56.3 of joint ventures Net profit / (loss) on disposal of fixed assets 0.1 0.5 (1.2) (0.7) _________ _________ _________ _________ Profit / (loss) on ordinary activities before 77.9 61.5 (5.9) 55.6 interest Interest receivable and similar income 3.2 4.2 - 4.2 Interest payable and similar charges (0.3) (1.0) - (1.0) _________ _________ _________ _________ Profit / (loss) on ordinary activities before 80.8 64.7 (5.9) 58.8 taxation Tax on profit/(loss) on ordinary activities 3 (23.4) (18.7) 1.8 (16.9) _________ _________ _________ _________ Profit / (loss) for the financial period 57.4 46.0 (4.1) 41.9 Dividends paid and proposed 4 (17.4) (14.7) - (14.7) _________ _________ _________ _________ Amount transferred to reserves 6 40.0 31.3 (4.1) 27.2 ========= ========= ========= ========= Earnings per share Basic earnings per 10p ordinary share 5 9.5p 7.7p (0.7)p 7.0p ========= ========= ========= ========= Diluted earnings per 10p ordinary share 5 9.1p 7.4p (0.7)p 6.7p ========= ========= ========= ========= All results are derived from continuing operations Consolidated Balance Sheet ______________________________________________________________________________ 28 Dec 2002 29 Dec 2001 Notes Â£m Â£m FIXED ASSETS Intangible assets 14.6 - Tangible assets 356.8 300.6 Investments 46.1 27.7 _________ _________ Total fixed assets 417.5 328.3 _________ _________ CURRENT ASSETS Stocks 177.1 128.7 Debtors 124.0 111.0 Investments 6.9 0.2 Cash at bank and in hand 33.3 52.1 _________ _________ 341.3 292.0 CREDITORS Amounts falling due within one year 7 316.0 229.5 _________ _________ Net current assets 25.3 62.5 _________ _________ Total assets less current liabilities 442.8 390.8 CREDITORS Amounts falling due after more than one year 8 2.8 0.1 PROVISIONS FOR LIABILITIES AND CHARGES 9 21.9 15.2 _________ _________ Net assets 418.1 375.5 ========= ========= CAPITAL AND RESERVES Called up share capital 61.3 59.9 Share premium account 6 62.1 48.6 Revaluation reserve 6 40.0 42.1 Other reserves 6 24.3 21.9 Profit and loss account 6 230.4 203.0 _________ _________ Equity shareholders' funds 418.1 375.5 ========= ========= Consolidated Cash Flow Statement For the 52 weeks ended 28 December 2002 52 weeks to 52 weeks to 28 Dec 2002 29 Dec 2001 Notes Â£m Â£m Net cash inflow from operating activities 10 138.0 102.8 Returns on investments and servicing of finance 10 2.9 3.2 Taxation (16.2) (11.9) Capital expenditure and financial investment 10 (117.5) (68.3) Acquisitions 10 (8.5) - Equity dividends paid (16.0) (12.7) _________ _________ Cash (outflow) / inflow before use of liquid resources (17.3) 13.1 and financing Management of liquid resources (6.7) 0.1 Financing 10 5.5 (0.6) _________ _________ (Decrease) / increase in cash in the period 10 (18.5) 12.6 ========= ========= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 52 weeks to 52 weeks to 28 Dec 2002 29 Dec 2001 Notes Â£m Â£m (Decrease) / increase in cash in the period 10 (18.5) 12.6 Cash movement on : - debt and lease financing 10 (0.1) 3.2 - cash flow from increase/(decrease) 6.7 (0.1) in liquid resources _________ _________ Change in net funds resulting from cash flows (11.9) 15.7 Foreign currency translation differences 10 (0.3) (0.1) _________ _________ Movement in net funds in the period (12.2) 15.6 Net funds at the beginning of the period 10 51.1 35.5 _________ _________ Net funds at the end of the period 10 38.9 51.1 _________ _________ 1. BASIS OF PREPARATION The financial information set out does not constitute statutory financial statements for the periods ended 52 weeks to 28 December 2002 and 52 weeks to 29 December 2001, but is derived from those accounts. Statutory accounts for the 52 weeks to 29 December 2001 have been delivered to the Registrar of Companies and those for the 52 weeks to 28 December 2002 will be sent to shareholders and filed with the Registrar of Companies on 10 April 2003. The auditors have reported on the accounts, their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. 2. SEGMENTAL ANALYSIS 52 weeks to 29 Dec 2001 52 weeks Before Exceptional Total to 28 Dec exceptional items 2002 items Â£m Â£m Â£m Â£m TURNOVER 1 UK - Retail 861.4 765.9 - Howden Joinery 326.9 224.5 France 94.2 84.2 US - Howden Millwork 2.0 - Other operations 2.9 3.4 1,287.4 1,078.0 Joint venture operations 1.4 0.2 Total turnover 1,288.8 1,078.2 PROFIT BEFORE TAXATION 2 UK - Retail 37.7 34.9 (4.7) 30.2 - Howden Joinery 44.4 24.5 - 24.5 France 2.3 3.0 - 3.0 US - Howden Millwork (4.5) - - - Other operations (0.1) (0.5) - (0.5) Operating profit / (loss) 79.8 61.9 (4.7) 57.2 Joint venture operations (2.0) (0.9) - (0.9) Total operating profit / 77.8 61.0 (4.7) 56.3 (loss) Profit / (loss) on disposal 0.1 0.5 (1.2) (0.7) of fixed assets Net interest receivable 2.9 3.2 - 3.2 Profit / ( loss) before 80.8 64.7 (5.9) 58.8 taxation NET ASSETS UK - Retail 229.4 219.4 - Howden Joinery 85.6 74.3 France 29.3 17.9 US - Howden Millwork 4.6 - Other operations 1.5 0.6 Joint venture operations 2.1 0.9 352.5 313.1 Unallocated net assets 3 65.6 62.4 Total net assets 418.1 375.5 1 The analysis of turnover by destination is not materially different from the analysis of turnover by origin 2 All results are from continuing operations 3 Unallocated net assets comprise balances in respect of dividends, cash, borrowings and investment in own shares 3. TAX ON PROFIT ON ORDINARY ACTIVITIES 52 weeks to 29 Dec 2001 52 weeks to Before 28 Dec 2002 exceptional Exceptional Total items items Â£m Â£m Â£m Â£m Taxation on profit for the period comprises: UK corporation tax at 30.0% (2001 - 19.0 18.4 (0.5) 17.9 30.0%) Adjustments relating to prior (4.0) (1.3) - (1.3) periods Deferred tax 8.4 1.6 (1.3) 0.3 _________ _________ _________ _________ 23.4 18.7 (1.8) 16.9 ========= ========= ========= ========= The taxation charge is calculated at 29.0% (2001 - 28.9%) on profits before exceptional items. 4. EQUITY DIVIDENDS 52 weeks to 52 weeks to 28 Dec 2002 29 Dec 2001 Â£m Â£m Interim paid - 1.5 pence per share 8.0 6.9 (2001 - 1.2 pence per share) Final proposed - 1.6 pence per share 9.4 7.8 (2001 - 1.3 pence per share) _______ _____ Total dividend - 3.1 pence per share 17.4 14.7 (2001 - 2.5 pence per share) ======= ===== 5. EARNINGS PER SHARE 52 weeks to 28 December 2002 52 weeks to 29 December 2001 Earnings Weighted Earnings Earnings Weighted Earnings average per share average per share number of number of shares shares Â£m m p Â£m m p Basic earnings per share Earnings attributable to ordinary 57.4 603.1 9.5 41.9 599.5 7.0 shares Effect of dilutive share options - 28.6 (0.4) - 21.8 (0.3) _________ _________ _________ _________ _________ _________ Diluted earnings per share 57.4 631.7 9.1 41.9 621.3 6.7 ========= ========= ========= ========= ========= ========= Reconciliation of earnings per share to exclude exceptional items Basic earnings per share 57.4 603.1 9.5 41.9 599.5 7.0 Exceptional items net of tax - - - 4.1 - 0.7 _________ _________ _________ _________ _________ _________ Basic earnings per share before 57.4 603.1 9.5 46.0 599.5 7.7 exceptional items ========= ========= ========= ========= ========= ========= Diluted earnings per share 57.4 631.7 9.1 41.9 621.3 6.7 Exceptional items net of tax - - - 4.1 - 0.7 _________ _________ _________ _________ _________ _________ Diluted earnings per share before 57.4 631.7 9.1 46.0 621.3 7.4 exceptional items ========= ========= ========= ========= ========= ========= 6. RESERVES Share Profit and premium Other Revaluation loss account reserves reserve account Â£m Â£m Â£m Â£m At 29 December 2001 48.6 21.9 42.1 203.0 Retained profit for the period - - - 40.0 Shares issued 13.5 - - (9.5) Amortisation of goodwill - 2.4 - (2.4) Realised revaluation surplus - - (2.1) 2.1 Foreign exchange - - - (2.8) _________ _________ _________ _________ At 28 December 2002 62.1 24.3 40.0 230.4 ========= ========= ========= ========= 7. CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR 28 Dec 2002 29 Dec 2001 Â£m Â£m Bank loans and overdrafts - 0.8 Trade creditors 128.7 84.2 Corporation tax 14.5 15.7 Other taxation and social security 21.3 15.0 Obligations under finance leases - 0.4 Proposed dividends 9.3 7.9 Other creditors 17.9 10.6 Accruals and deferred income 124.3 94.9 _________ _________ 316.0 229.5 ========= ========= 8. CREDITORS AMOUNTS FALLING DUE WITHIN ONE YEAR 28 Dec 2002 29 Dec 2001 Â£m Â£m Bank loans and overdrafts 1.3 - Other creditors 1.5 0.1 _________ _________ 2.8 0.1 ========= ========= 9. PROVISIONS FOR LIABILITIES AND CHARGES Pension Property Deferred provision provision taxation Total Â£m Â£m Â£m Â£m At 29 December 2001 10.1 3.8 1.3 15.2 Created in the period - - 8.4 8.4 Interest charge 0.5 - - 0.5 Utilised in period (1.4) (0.8) - (2.2) _________ _________ _________ _________ At 28 December 2002 9.2 3.0 9.7 21.9 ========= ========= ========= ========= 10. CONSOLIDATED CASH FLOW STATEMENT a) Reconciliation of operating profit to net cash inflow from operating activities 52 weeks to 52 weeks to 28 Dec 2002 29 Dec 2001 Â£m Â£m Operating profit before exceptional items 79.8 61.9 Depreciation of tangible fixed assets 40.2 30.9 Amortisation of goodwill 0.1 - Amortisation of fixed asset investment 8.3 1.8 Increase in stocks (45.9) (1.2) Increase in debtors (10.4) (24.1) Increase in creditors and provisions 67.5 34.9 _________ _________ Net cash inflow - pre-exceptional operating activities 139.6 104.2 Net cash outflow - operating exceptionals (1.6) (1.4) _________ _________ Net cash inflow from operating activities 138.0 102.8 ========= ========= b) Analysis of cash flows for headings netted in the cash flow statement 52 weeks to 52 weeks to 28 Dec 2002 29 Dec 2001 Â£m Â£m Returns on investments and servicing of finance Interest received 3.2 4.2 Interest paid (0.3) (1.0) _________ _________ Net inflow on investments and servicing of finance 2.9 3.2 ========= ========= Capital expenditure and financial investment Payments to acquire tangible fixed assets (98.3) (51.1) Receipts from sales of tangible fixed assets 9.5 2.6 Payment to acquire own shares (25.5) (18.0) Investment in joint ventures (3.2) (1.8) _________ _________ Net outflow for capital expenditure and financial investment (117.5) (68.3) ========= ========= Acquisitions Acquisition of subsidiary undertaking (10.9) - Cash acquired with subsidiary undertaking 2.4 - _________ _________ Net outflow from acquisitions (8.5) - ========= ========= Financing Share issue 5.4 2.6 Loan acquired with subsidiary undertaking 1.3 - Decrease in bank finance (0.8) (3.1) Capital element of finance lease rental payments (0.4) (0.1) _________ _________ Net inflow/(outflow) from financing 5.5 (0.6) ========= ========= c) Analysis of net funds Cash at Term loans Net Current Finance Total net bank asset leases funds funds investments Â£m Â£m Â£m Â£m Â£m Â£m As at 30 December 2000 39.6 (3.9) 35.7 0.3 (0.5) 35.5 Cash flow 12.6 3.1 15.7 (0.1) 0.1 15.7 Exchange difference (0.1) - (0.1) - - (0.1) _________ _________ _________ _________ _________ _________ As at 29 December 2001 52.1 (0.8) 51.3 0.2 (0.4) 51.1 Cash flow (20.9) 0.8 (20.1) 6.7 0.4 (13.0) Acquisition of subsidiary 2.4 (1.3) 1.1 - - 1.1 Exchange difference (0.3) - (0.3) - - (0.3) _________ _________ _________ _________ _________ _________ As at 28 December 2002 33.3 (1.3) 32.0 6.9 - 38.9 ========= ========= ========= ========= ========= ========= 11. STRUCTURAL GUARANTEE In August 2001 the Group introduced an optional insurance-backed structural guarantee on certain items of furniture sold in its UK retail stores. Value Added Tax (VAT) is paid on the furniture element of the transaction, and Insurance Premium Tax (IPT) on the sale of these warranties. Elsewhere in our industry Customs and Excise has challenged the VAT accounting treatment for this product and has raised assessments for the reduction in VAT paid. Whilst an assessment may be raised on the reduction in VAT, the directors have taken extensive legal and taxation advice and any such action against MFI would be contested vigorously. As a result no provision has been made in the accounts. To date the following amounts have been recorded: 2001 2002 Cumulative Â£m Â£m Â£m Reduction in VAT 7.3 22.0 29.3 IPT paid (2.1) (5.6) (7.7) External insurance / expenses (1.2) (2.8) (4.0) Reinsurance to Group company (1.7) (4.5) (6.2) _________ _________ _________ Net benefit to profit and loss 2.3 9.1 11.4 ========= ========= ========= 80% of the insurance has been reinsured through the Group's captive insurance company - Southon Insurance Limited. No underwriting profit has been taken in this company to date. 12 ACQUISITION OF SOFA WORKSHOP On 4 November 2002, the Group acquired the issued share capital of The Sofa Workshop Holdings Limited and The Sofa Workshop Direct Holdings Limited ('Sofa Workshop'). The total consideration was Â£14.0m, which includes Â£9.7m paid in cash, Â£2.6m satisfied by the issue of loan notes, fees of Â£1.2m and deferred consideration of Â£0.5m. The capitalised goodwill on the transaction is Â£14.7m and will be amortised in the profit and loss account over 20 years. The fair value of assets and liabilities acquired as shown below are provisional as the completion accounts have yet to be finalised. In the last financial year to December 2001 Sofa Workshop had sales of Â£33.4m and profits of Â£1.2m. The balance sheet of Sofa Workshop, together with fair value adjustments, is set out below: Fair value Fair Book Value adjustments value Â£m Â£m Â£m Tangible fixed assets 2.3 - 2.3 Stock 3.2 (0.1) 3.1 Debtors 3.0 (0.2) 2.8 Cash 2.4 - 2.4 Creditors (9.7) (0.3) (10.0) Bank loans (1.3) - (1.3) _________ _________ _________ Net liabilities acquired (0.1) (0.6) (0.7) Consideration paid - cash (9.7) - acquisition expenses (1.2) - issue of loan notes (2.6) - deferred consideration (0.5) _________ Capitalised goodwill (14.7) ========= The fair value adjustments comprise revaluations and an accounting policy alignment in respect of warranties of Â£0.1m. This information is provided by RNS The company news service from the London Stock Exchange

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