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Galiform PLC (HWDN)

  Print      Mail a friend       Annual reports

Wednesday 22 July, 2009

Galiform PLC

Half Yearly Report

RNS Number : 0576W
Galiform PLC
22 July 2009
 



GALIFORM Plc


HALF YEARLY REPORT FOR THE 24 WEEKS ENDED 13 JUNE 2009


HIGHLIGHTS

Howden Joinery has performed resiliently during the first half of 2009, reflecting actions taken during the course of 2008 and this year to enable the business to deal with an economic slowdown. This is despite market conditions continuing to be impacted by the downturn that occurred in 2008, most notably in October. In addition, progress continues to be made on pro-actively dealing with legacy issues.


Financial highlights


Satisfactory underlying performance on key measures:


  • Howden Joinery UK depot revenue decreased by 8.3%* to £310.1mdown 9.8%* on same depot basis** (*Excluding the distorting effect of week 1 - see note 1 below; **Excluding depots opened in 2008);
  • Group revenue was £316.8m (2008: £354.6m);
  • Gross profit margin rose from 52.7% to 54.1%, despite impact of adverse currency movements;
  • Operating profit fell to £10.0m (2008: £20.8m), reflecting lower sales partly offset by gross profit margin improvement;
  • Profit before tax and exceptional items fell to £4.7m (2008: £20.1m)partly reflecting the £5.2increase in the net finance charge in respect of pensions;
  • Basic earnings per share before exceptional items from continuing operations of 0.5(20082.1p);
  • Basic loss per share from continuing and discontinued operations of (0.2)(2008: Basic earnings of 2.4p);
  • Net debt fell to £50.3m at 13 June 2009 (27 December 2008: £61.2m), reflecting a £21.8m reduction in stock levels. The fall in debt was achieved despite cash payments totalling £15.4m relating to 'legacy' properties and a payment of £13.4m to the Group's pension schemes in excess of the operating charge.


Other highlights


We continue to manage 'legacy' issues pro-actively and strengthen our competitive position:


  • further mitigation of legacy property liability, including termination of leases on five more guaranteed properties;
  • agreement reached on funding of pension deficit for three years starting April 2009 (announced 16 July 2009);
  • various new products introduced, including 'own label' Lamona appliances and nine kitchen ranges.


Note 1: Week 1 sales (2008: £5.7m, 2009 £0.8m) excluded because of the impact arising from New Year's Day falling on different days of the week (Tuesday in 2008, Thursday in 2009) which meant not only were there two fewer days trading this year, but also that there were far fewer builders returning to work that week.


CURRENT TRADING


Howden Joinery UK depot revenue fell 5.2in the first period of the second half of the year (period 7) compared with the same period last year.  The lower relative decline in sales compared to that seen in the first half of the year reflects the weaker comparators arising from the change in sales pattern that occurred in the middle of last year. 



Galiform's Chief Executive, Matthew Ingle, said:


'We are encouraged by the resilient operating and financial performance of the business in a challenging environment. Sales have remained stable throughout the year and the impact on profitability of the weakness of the pound has been more than offset by actions we have taken to protect our gross profit margin.  The fall in net debt we have seen since the start of the year reflects our continuing focus on all aspects of cash flow management.


'In addition, we continue to make progress on dealing with legacy issues, including reducing our guaranteed properties liability. We remain confident of the strength and potential of the Howdens business model and, in time, plan to resume depot openings.' 




Enquiries


Investors/analysts:


Gary Rawlinson

Head of Investor Relations    +44 (0)207 404 5959 (22 July 2009 only)

                                              +44 (0)207 535 1127

                                              +44 (0)7989 397527


Media:


Brunswick                              +44 (0)207 404 5959

    Kate Holgate

    Annabel Entress


SUMMARY OF GROUP RESULTS


The information presented below relates to the 24 weeks to 13 June 2009 and the 24 weeks to 14 June 2008, unless otherwise stated.


£m unless stated

2009

2008

Continuing operations before exceptional items:






Revenue

 - Group

316.8

354.6

 - Howden Joinery UK depots

310.1

342.6

Gross profit

171.3

186.8

Gross profit margin, %

54.1

52.7

Operating profit

10.0

20.8

Profit before tax



- excluding exceptional items

4.7

20.1

- including exceptional items1

4.7

21.6




Loss from discontinued operations before tax



- including exceptional items1

(4.4)

-




Earnings per share from continuing operations



- basic excluding exceptional items

0.5p

2.1p

- basic including exceptional items

0.5p

2.4p




Earnings/(loss) per share from continuing and discontinued operations



- basic excluding exceptional items

0.5p

2.1p

- basic including exceptional items

(0.2)p

2.4p




Net debt at end of period

50.3

40.9


1  Details of exceptional items are given in note 7 to the Condensed Financial Statements.            



FINANCIAL REVIEW

The following discussion relates to the 24 weeks to 13 June 2009 and the 24 weeks to 14 June 2008, unless otherwise stated.


FINANCIAL RESULTS FOR FIRST HALF OF 2009


The financial performance of the Group during the first half of 2009 benefited from the strength of the Group's competitive position and the characteristics of the end-users of its products.  This includes significant exposure to the tenanted housing sector, both public and private, which is subject to different economic drivers than the owner-occupied sector, and very limited exposure to the new housing market.  Performance also benefited from actions taken during the course of 2008 and this year to enable the business to cope with weaker economic and market conditions, including rationalising depot operations and pursuing opportunities to improve gross profit. 


Sales through our Howden Joinery UK depots decreased by £32.5m to £310.1m in 2009, Group revenue falling slightly more as a result of the ending of supply to Hygena Cuisines early this year.



Revenue £m


2009


2008

Group

316.8

354.6

comprising:

Howden Joinery UK depots

Howden Joinery French depots

Hygena Cuisines*


* now terminated


310.1

5.5

1.1


342.6

5.0

7.1


Excluding the distorting effect of trading in the first week of the year (see note 1 at end of Highlights section above)Howden Joinery UK depots' revenue was down 8.3%declining 9.8% on a same depot basis (excludes depots opened in 2008).  Trading conditions were stable throughout the first half of the year, remaining on a par with that seen in the last three periods of 2008.


Sales by our French depots of £5.5m were down slightly in constant currency terms.


Gross profit fell by £15.5m to £171.3m.   The impact of lower underlying sales volumes was exacerbated by the £7.0m adverse effect of the deterioration in the exchange rate on the cost of goods purchased from overseas suppliers.  However, the impact of the weaker exchange rates was more than offset by an increased focus in our depots on gross profit margin and the benefit from a small price increase early in the year. In addition, gross profit benefited from purchasing and manufacturing efficiencies.


Although gross profit fell, the gross profit margin rose from 52.7in 2008 to 54.1%.


Selling and distribution costs and administrative expenses fell by £4.8m to £161.3m.


Within this, operating costs of Howden Joinery UK depots opened before 2008 fell as a result of changes to resource levels made in the middle of last year. In addition, logistics (warehouse and transport) costs were reduced. These savings were partly offset by the impact of inflation on certain other costs and the costs of depots opened in 2008 (no depots have been opened in 2009). In addition, we have increased the provision for bad debt, reflecting delays in our ability to recover debt through the judicial system and the consequent increase in the ageing of the debtor book.  Whilst the provision has been increased, this issue has not led to an increase in the occurrence of debt write-offs at this stage.


Operating profit before exceptional items was £10.0m (2008: £20.8m).


The net interest charge rose by £4.6m to £5.3m, mainly due to the £3.7m finance expense in respect of pensions (2008: £1.5m income).  The net result was profit before tax and exceptional items from continuing operations of £4.7m (2008: £20.1m).


There was an exceptional charge before tax of £4.4m in respect of discontinued operations.  This related to the rent and other obligations payable on nine properties which had been occupied by Sofa Workshop prior to it going into administration earlier this year.  Cash expenditure incurred in the first half of this year in respect of these properties was £0.4m.


The tax charge on profit before tax was £1.7m, based on the estimated effective rate of tax on profit before tax for the 2009 financial year of 35.6% This tax rate mainly reflects the proportionate increase in the impact of depreciation on capital expenditure that is disallowable for tax purposes.


Basic earnings per share excluding exceptional items was 0.5p (2008: 2.1p) and including exceptional items was a loss of (0.2)p (20082.4p earnings).

 

Net cash inflows from operating activities were £13.5m.  Within this, working capital changes generated a cash inflow of £7.4m. This was after payments relating to 'legacy' properties (including Sofa Workshop - see above) totalling £15.4m, including rent & rates and payments in respect of early termination of leases.  Stock levels at the end of the period were £21.8m lower than at the beginning of the year, having been reduced to bring them into line with current trading levels. Trade creditors and debtors at the end of the period were little changed from the start of the year.


Also included within net cash flows from operating activities was a cash contribution to the Group's pension schemes, in excess of the operating charge, of £13.4m.


Payments to acquire fixed and intangible assets totalled £3.8m (2008: £10.0m). 


As a result of the above, net debt fell by £10.9m in the first half of 2008resulting in Group net borrowings of £50.3m at 13 June 2009.  At the same date, in respect of the Group's £175m bank facility (see note 23 of 2008 Annual Report and Accounts), the Group had available £75.7m of undrawn committed borrowing facilities (£77.3m at 27 December 2008).


At 13 June 2009, the pension deficit shown on the balance sheet was £131.2m (27 December 2008: £122.2m).  The increase in the deficit was driven by changes in certain assumptions used to calculate liabilities, principally an increase in inflation expectations. This has been partially offset by the impact of a higher discount rate and the Company's contribution (£13.4m) made as part of the 2006 agreement to clear the actuarial deficit (over a 10-year period).


Details of the 2009 funding agreement covering the three-year period commencing April 2009, that was announced on 16 July 2009, are given below.




OPERATIONAL REVIEW


The overriding strategic goal of Galiform was first set out in the original Howden Joinery business plan and remains unaltered. It is 'To supply from local stock nationwide the small builder's routine kitchen and joinery requirements, assuring no call back quality and best local price'.


Against the background of a continuing weakness in consumer confidence and concerns about economic prospects, the Group continues to focus on opportunities to grow sales through improving its products and service, and increasing awareness of Howdens.  We continue to work to increase profitability through greater efficiencies and prudently manage cash flow.


In pursuing these goals, numerous actions have been taken, the most significant of which are as follows.


Product


We continue to review arrangements with suppliers, re-sourcing where appropriate, the benefits from which have helped offset cost pressures within our supply chain.


Investment in product development remains key to our continued success.  We have introduced the new 'Lamona' brand name for our 'own label' appliances, which brings a number of competitive advantages.  So far this year, we have also introduced nine new kitchens as well as various new items in our other product ranges.  


Runcorn


New IT systems for manufacturing and warehouse management have been successfully implemented in our operations in Runcorn, where we manufacture some 3.5m kitchen cabinets each year.  These facilitate improved production planning and stock control.



GROUP DEVELOPMENTS


Guaranteed and other legacy properties


The Group continues to manage proactively its 'legacy property' portfolio.


Since the end of the first half of the year, agreement has been reached with the landlords of five more properties that will further reduce Galiform's financial exposure to properties that had until November 2008 been occupied by MFI Retail operations (the 'guaranteed' properties). In return for being released from all obligations in respect of the leases, Galiform has made a cash payment to the landlords totalling £6.0m, which is equivalent to around twice the average net annual costs of the leases, the average remaining period of the leases being in excess of seven years. This payment mitigates total future costs of almost £22m at current rates.  This cash outflow will be included in the results for the second half of the year and was in line with the amount provided.


Excluding a property that reaches the end of its lease period in September, this means that there are now 32 outstanding guaranteed properties. The profile of properties remaining and the net annual rent and rates (current values) for the associated leases, before any mitigating action is taken, is shown below, along with the situation when this liability crystallised last September.



As at 30 Sept


As at 1 Jan

1 Jan

1 Jan

1 Jan


2008

Current

2012

2015

2020

2025

Number of properties

46

32

29

15

10

-

Net annual rent and rates, £m

21.4

15.7

14.7

7.5

4.6

-


The future costs associated with these properties have been provided foin the £108.8m exceptional charge incurred in 2008.


In respect of retail properties that were excluded from the sale of MFI in 2006, one that was previously vacant has now been sub-let. In addition, one that was previously vacant has been taken back by the landlord and one of the previously sub-let properties has been assigned to a new tenant, removing any further liability for Galiform in both cases.


Pensions


As announced on 16 July 2009, the triennial actuarial review of the pension schemes as at April 2008 has been completed and deficit funding contributions for the three years commencing April 2009 have been agreed with the schemes' trustees.


Under the agreement, Galiform's contributions to the pension deficit will be as follows: 


Year ending 5 April

2010

2011

2012






£19m

£28m

£33m


An element of each of the annual contributions is, however, contingent on the attainment of an agreed level of performance of the Group in the financial year that ends during the relevant pension year. The contingent payments are:


Year ending 5 April

2010

2011

2012






£5m

£8m

£8m



If payable, these contingent payments will be made shortly after the relevant audited accounts have been signed. All other amounts are payable in equal monthly instalments during the relevant pension year.


The agreement will result in an expected cash contribution to the pension deficit in the current financial year (ending 26 December 2009) of £21m. This includes payments in respect of the previous agreement with the trustees, reached in 2006.


OUTLOOK


Should economic and market conditions continue to remain stable, we would expect the reported sales performance of Howden Joinery UK depots in the second half of 2009 relative to last year to improve compared with the performance seen in the first half of the year. This would reflect the slowdown of sales growth seen in mid-2008 and the sharp decline seen from October 2008.


We are not expecting the economic environment to improve markedly in the short term and will continue to manage the business in light of prevailing conditions.  However, if our current performance is sustained during the coming months and we have a successful Period 11 in October, we will consider opening a small number of depots later this year.


The key risk to performance in the second half of the year is the continuing uncertainty surrounding the general economic environment, in particular, the impact of rising unemployment and the effect this could have on trading.  Other risks to the business are discussed in the following section on 'Risks and Uncertainties'.



GOING CONCERN AND RISKS AND UNCERTAINTIES


GOING CONCERN


The Group meets its day to day working capital requirements through an asset backed lending facility of £175m, which is not due for renewal until May 2011. The current economic conditions create uncertainty, particularly over (a) the level of demand for the Group's products and, (b) the exchange rate between sterling and both the Euro and the US Dollar which would affect the cost of the Group's operations.


The Group's forecasts and projections have been stress-tested for reasonably possible adverse variations in trading performance. The results of this testing shows that the Group should be able to operate within the level of its current committed facility and covenants. The Group's banking facility expires in May 2011 so at this stage the Group has not sought any written commitment that the facility will be renewed. We will open renewal negotiations with the banks in due course.


After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed financial statements.


RISKS AND UNCERTAINTIES


The Board continually assesses and monitors the key risks of the business.  The principal risks and uncertainties that could have a material impact on the Group's performance over the remaining 28 weeks of the financial year have not changed from those which are set out in detail on pages 14 to 17 of the Group's 2008 Annual Report, and which are summarised below:


  • Market conditions

  • Continuity of supply

  • Product design leadership

  • Failure to implement the Howdens' strategy

  • Loss of key personnel

  • IT systems

  • Defined benefit pension scheme

  • Disposal of MFI property leases


A copy of the Group's 2008 Annual Report is available on the Group's website, www.galiform.com 



Condensed consolidated income statement



24 weeks to 13 June 2009

unaudited


24 weeks to 14 June 2008

unaudited


52 weeks to 27 December 2008

audited


Notes

Before exceptional items

£m

 Exceptional items

£m

Total

£m 


Before exceptional items

£m

 Exceptional items

£m

Total

£m 


Before exceptional items

£m

 Exceptional items

£m

Total

£m 

Continuing operations:













Revenue


316.8 

316.8 


354.6 

-

354.6 


805.7 

805.7 

Cost of sales


(145.5)

(145.5)

 

(167.8)

-

(167.8)

 

(378.2)

1.0 

(377.2)

Gross profit


171.3 

171.3 


186.8 

-

186.8 


427.5 

1.0 

428.5 

Selling & distribution costs


(131.7)

(131.7)


(139.8)

-

(139.8)


(298.3)

1.5 

(296.8)

Administrative expenses


(29.6)

(29.6)


(26.3)

-

(26.3)


(53.4)

0.4 

(53.0)

Other operating income

7


1.5

1.5 


-

1.9

1.9

Share of joint venture profit


 

0.1 

-

0.1 

 

0.1 

0.1 

Operating profit


10.0 

10.0 


20.8 

1.5

22.3 


75.9 

4.8 

80.7 

Finance income

8

0.1 

0.1 


0.3 

-

0.3 


1.4 

1.4 

Finance expense

8

(1.7)

(1.7)


(2.5)

-

(2.5)


(6.3)

(6.3)

Other finance (expense)/income - pensions

8

(3.7)

(3.7)

 

1.5 

-

1.5 

 

3.3 

3.3 

Profit before tax from continuing operations 


4.7 

4.7 


20.1 

1.5

21.6 


74.3 

4.8 

79.1 

Tax charge for the period from continuing operations

9

(1.7)

(1.7)

 

(7.5)

-

(7.5)

 

(23.3)

(0.8)

(24.1)

Profit after tax from continuing operations


3.0 

3.0 


12.6 

1.5

14.1 


51. 0 

4.0 

55.0 

Discontinued operations:













Loss before tax from discontinued operations

7

-

(4.4)

(4.4)



(108.8)

(108.8)

Tax on loss from discontinued operations

7

-

-

-

 

 

2.6 

2.6 

Loss after tax from discontinued operations


-

(4.4)

(4.4)



(106.2)

(106.2)














Profit/(loss) for the period attributable to the equity holders of the parent


3.0

(4.4)

(1.4)

 

12.6

1.5

14.1

 

51. 0 

(102.2)

(51.2)














Earnings per share:




pence




pence




pence

From continuing operations













Basic earnings per 10p share

10



0.5




2.4




9.2

Diluted earnings per 10p share

10



0.5




2.3




9.0














From continuing and discontinued operations













Basic (loss)/earnings per 10p share

10



(0.2)




2.4




(8.6)

Diluted (loss)/earnings per 10p share

10



(0.2)




2.3




(8.4)


Exceptional items are analysed in note 7.



Condensed consolidated balance sheet


Notes


As at

13 June 2009

unaudited

£m


As at

14 June 2008

unaudited

£m


As at

27 December 2008

audited

£m

Non current assets








Goodwill



2.5


2.5


2.5 

Other intangible assets



5.8


6.6


6.2 

Property, plant and equipment

11


85.2


90.5


89.4 

Investments 

12


2.0


8.0


4.0 

Deferred tax asset



56.9


55.5


52.6 

 


 

152.4

 

163.1

 

154.7 

Current assets








Inventories



99.5


116.2


121.3 

Trade and other receivables



100.1


116.1


99.2 

Other assets



1.0


2.1


1.3 

Cash at bank and in hand



18.4


27.3


21.2 

 


 

219.0

 

261.7

 

243.0 

Total assets classified as held for sale



 

1.3

 

1.0 

Total assets


 

371.4

 

426.1

 

 398.7




 





Current liabilities








Trade and other payables



(122.4)


(174.8)


(120.4)

Current tax liability



(5.7)


(8.6)


(4.9)

Current borrowings



(2.6)


(3.0)


(3.4)




(130.7)


(186.4)


(128.7)

Non current liabilities








Non-current borrowings



(67.1)


(67.3)


(80.3)

Pension liability

17


(131.2)


(112.0)


(122.2)

Deferred tax liability



(5.5)


(2.9)


(5.5)

Provisions 

15


(107.5)


(36.6)


(119.8)




(311.3)


(218.8)

 

(327.8)

Total liabilities



(442.0)

 

(405.2)

 

(456.5)





 

 

 


Net (liabilities)/assets



(70.6)

 

20.9

 

(57.8)









Equity








Called up share capital

13


63.4


63.4


63.4 

Share premium account

13


85.1


85.1


85.1 

ESOP reserve

13


(25.3)


(29.0)


(27.1)

Other reserves

13


28.1


28.1


28.1 

Retained loss

13


(221.9)


(126.7)


(207.3)

Total (deficit)/equity



(70.6)

 

20.9

 

(57.8)

  

Condensed consolidated cash flow statement


Notes

24 weeks to

13 June 2009

unaudited

£m

24 weeks to  

14 June 2008  

unaudited  

£m  

52 weeks to

27 December 2008

audited

£m

Net cash flows from operating activities

14

13.5 

(26.9)

(37.8) 






Cash flows from investing activities





Interest received


0.1 

0.3 

1.5 

Cash flow from acquisitions


3.2 

3.2 

Redemption of investment


2.0 

-

4.0

Payments to acquire property, plant and equipment and intangible assets


(3.8)

(10.0)

(19.4)

Receipts from sale of property, plant and equipment and intangible assets


1.0 

3.5 

3.5

Net cash used in investing activities


(0.7)

(3.0)

(7.2)






Cash flows from financing activities





Interest paid


(1.9)

(4.8)

(8.5)

Receipts from issue of own share capital


0.1 

0.1 

(Decrease)/increase in loans


(13.2)

31.5 

44.1 

Repayment of capital element of finance leases


(0.8)

(0.5)

(1.2)

Decrease in other assets


0.3 

0.3 

1.1 

Dividends paid to Group shareholders


-

(3.0)

(3.0)

Net cash (used in)/from financing activities


 (15.6)

23.6 

32.6 






Net decrease in cash and cash equivalents


(2.8)

(6.3)

(12.4)

Cash and cash equivalents at beginning of period

14

21.2 

33.6

33.6

Cash and cash equivalents at end of period

14

18.4

27.3

21.2


For the purpose of the cash flow statement, cash and cash equivalents are included net of overdrafts payable on demand.  These overdrafts are excluded from the definition of cash and cash equivalents disclosed on the balance sheet.


Cash flows from discontinued operating activities are shown in note 14. There are no cash flows from discontinued investing or financing activities.



Condensed consolidated statement of recognised income and expense



24 weeks to

13 June 2009

unaudited

£m

24 weeks to    

14 June 2008    

unaudited    

£m    

52 weeks to

27 December 2008

audited

£m

Actuarial loss on defined benefit pension schemes

17

(18.7)

(43.3)

(66.3)

Deferred tax on actuarial loss on defined benefit pension schemes


5.3 

12.1 

18.6 

Deferred tax on share schemes


0.1 

Currency translation differences

 

0.1 

0.2 

1.4 

Net loss recognised directly in equity


(13.2)

(31.0)

(46.3)

(Loss)/profit for the financial period


(1.4)

14.1 

(51.2)

Total recognised income and expense for the period, attributable to the equity shareholders of the parent

 

(14.6)

(16.9)

(97.5)


NOTES TO THE CONDENSED FINANCIAL STATEMENTS



1 General information


The results for the 24 week periods ended 13 June 2009 and 14 June 2008 are unaudited but have been reviewed by the Group's auditors, whose report on the current period forms part of this document. The information for the 52 week period ended 27 December 2008 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified or modified, did not draw attention to any matters by way of emphasis and did not contain statements under section 237(2) or (3) of the Companies Act 1985.


2 Accounting policies


The annual financial statements of Galiform Plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.


Basis of preparation


The Group's business activities, together with the factors likely to affect its future development, performance, and position are set out on pages 4 to 8, and include a summary of the Group's financial position, its cash flows and borrowing facilities, and a discussion of why the directors consider that the going concern basis is appropriate. 


The same accounting policies, presentation methods and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements, except that the taxation charge for the half-year is calculated by applying the annual estimated effective tax rate to the profit for the period.


3 Segmental results


Basis of segmentation


The Group operates and reports as one business segment, Howden Joinery.  Thus, the information required in respect of segmental disclosure can all be found in the condensed consolidated income statement.


Seasonality of revenue


Howden Joinery sales are more heavily weighted to the second half of the financial year. This partly reflects the fact that there are 24 weeks in the first half of the financial year and 28 weeks in the second half. It also reflects sales in the peak October trading period. In the last two financial years, approximately 60% of sales have been in the second half of the year.


5 Write down of inventories


During the period, the Group incurred a charge of £3.5m to write inventories down to their net realisable value (24 weeks to 14 June 2008 - £2.4m, 52 weeks to 27 December 2008 - £9.5m).


6 Dividends


 
24 weeks
to 13 June
2009
unaudited
£m
24 weeks
to 14 June
2008
unaudited
£m
52 weeks to
27 December 2008
audited
£m
Amounts recognised as distributions to equity holders in the period:
 
 
 
Proposed final dividend for the 52 weeks to 27 December 2008 – nil (24 weeks to 14 June 2008 and 52 weeks to 27 December 2008 - both 0.5p per share)
-
 
3.0
(3.0)
 
-
3.0
(3.0)

 



7 Exceptional items


Exceptional items charged to operating profit in the 24 weeks to 13 June 2009 are analysed as follows:




Total



£m

Discontinued operations:



Costs and obligations relating to empty properties


(4.4)

Total discontinued exceptional items before tax


(4.4)

Tax on discontinued exceptional items


-

Net exceptional items in discontinued operations


(4.4)




Continuing and discontinued operations:



Total exceptional items before tax


(4.4)

Tax on exceptional items


-

Total exceptional items after tax


(4.4)


There are no exceptional items in continuing operations. The items in discontinued operations relate to the Group's former Sofa Workshop Limited operations, which were sold and treated as discontinued in 2006 and which are currently in administration.


As was disclosed in the Contingent Liabilities note to the Group's Annual Report and Accounts for the 52 weeks to 27 December 2008, the Group is guarantor on up to 12 leases in relation to properties which were held by Sofa Workshop Limited and which were occupied by Sofa Workshop Limited retail operations. During the course of the current period, these contingent liabilities have crystallised and the Group has begun to incur costs in connection with them.


The item 'Costs and obligations relating to empty properties' covers the Group's best estimate of the rent, rates, and other associated costs of these properties. It includes amounts paid under the property guarantees up to the end of the current period, as well as a provision for expected future amounts payable. The amounts are discounted to their present value where material. The provision element of the exceptional item is included as part of the total additions to the property provision in the current period as shown in note 15.

   

Exceptional items credited to operating profit in the 24 weeks to 14 June 2008 are analysed as follows:


 
 
Other operating income
£m
Total
£m
Profit on sale of tangible fixed assets
 
1.5
1.5
Total credited to operating profit
 
1.5
1.5
Tax on exceptional items
 
 
-
Total exceptional items after tax
 
 
1.5

 


Exceptional items (credited)/charged to operating profit in the 52 weeks to 27 December 2008 are analysed as follows:


 
Notes
Cost of sales
£m
 
Administration expenses
£m
Selling and distribution costs
£m
Other operating expenses
£m
Total
£m
Continuing operations:
 
 
 
 
 
 
Provision for future rent payable on vacated sites
 
-
-
(1.5)
-
(1.5)
Redundancies and other staff costs
 
-
-
-
(0.2)
(0.2)
Other administrative costs
 
-
-
-
(0.2)
(0.2)
Release of exceptional stock provision made in 2006
 
(1.0)
-
-
-
(1.0)
Other profit on disposal of property, plant and equipment
 
-
(1.9)
-
-
(1.9)
Total credited to operating profit
 
(1.0)
(1.9)
(1.5)
(0.4)
(4.8)
Tax on exceptional items
 
 
 
 
 
0.8
Net exceptional items
 
 
 
 
 
(4.0)
 
 
 
 
 
 
 
Discontinued operations:
 
 
 
 
 
 
Costs and obligations relating to empty properties
 
 
 
 
 
99.7
Redundancies and other staff costs
 
 
 
 
 
3.0
Associated legal and professional costs
 
 
 
 
 
2.1
Product warranty liabilities
 
 
 
 
 
2.0
Bad debts written off
 
 
 
 
 
2.0
Total exceptional items before tax
 
 
 
 
 
108.8
Tax on exceptional items
 
 
 
 
 
(2.6)
Net exceptional items
 
 
 
 
 
106.2
 
 
 
 
 
 
 
Continuing and discontinued operations:
Total exceptional items before tax
 
 
 
 
 
104.0
Tax on exceptional items
 
 
 
 
 
(1.8)
Total exceptional items after tax
 
 
 
 
 
102.2

 


All items in continuing operations for the 52 weeks to 27 December 2008, with the exception of 'Other profit on disposal of property, plant and equipment', represent releases from provisions made in prior periods. Further details can be found on page 54 of the Group's 2008 Annual Report.


8 Finance income, finance expense and other finance charges - pensions


 
24 weeks
to 13 June
2009
unaudited
£m
24 weeks
to 14 June
2008
unaudited
£m
52 weeks to
  27 December 
2008
audited
£m
Finance income
 
 
 
Bank interest receivable
0.1
0.3
0.5
Other interest receivable
-
-
0.9
 
0.1
0.3
1.4
 
 
 
 
Finance expense
 
 
 
Bank interest payable
(1.5)
(1.9)
(5.6)
Other interest (including finance lease interest) payable
(0.1)
(0.4)
(0.5)
Interest charge on remeasuring creditors to fair value
(0.1)
(0.2)
(0.2)
 
(1.7)
(2.5)
(6.3)
 
 
 
 
Other finance (expense)/income - pensions
 
 
 
Finance element of pension charge
(3.7)
1.5
3.3

 


  9 Tax


(a) Tax in the income statement


 
 
 
24 weeks
to 13 June
2009
unaudited
£m
 
 
24 weeks
to 14 June
2008
unaudited
£m
Continuing
operations
52 weeks to
29 December 2008
audited
£m
Discontinued operations
52 weeks to
27 December 2008
audited
£m
 
Total
52 weeks to
27 December 2008
audited
£m
Current tax
 
 
 
 
 
Current year
0.9
5.3
12.0
(2.6)
9.4
Adjustments in respect of previous periods
-
-
(2.1)
-
(2.1)
Total current tax
0.9
5.3
9.9
(2.6)
7.3
 
 
 
 
 
 
Deferred tax
 
 
 
 
 
Current year
0.8
2.2
16.2
-
16.2
Adjustments in respect of previous periods
-
-
(2.0)
-
(2.0)
Total deferred tax
0.8
2.2
14.2
-
14.2
 
 
 
 
 
 
Total tax charged/(credited) in the income statement
1.7
7.5
24.1
(2.6)
21.5

 


The tax charge is based on the estimated effective rate of tax on profit before tax for the 2009 financial year of 35.6% (52 weeks to 27 December 2008 - 30.5%). Tax on losses from discontinued operations for the 24 weeks to 13 June 2009 was £nil. There were no discontinued operations for the 24 weeks to 14 June 2008.


(b) Tax relating to items credited to equity

 

 
24 weeks
to 13 June
2009
unaudited
£m
24 weeks
to 14 June
2008
unaudited
£m
52 weeks to
27 December 2008
audited
£m
Deferred tax
 
 
 
Actuarial loss on pension scheme
(5.2)
(12.0)
(18.6)
Share schemes
(0.1)
-
-
Total tax credited to statement of recognised income and expense
(5.3)
(12.0)
(18.6)


 


10 Earnings per share



24 weeks to 13 June 2009

unaudited


24 weeks to 14 June 2008

unaudited


52 weeks to 27 December 2008

audited

 

Earnings

£m

Weighted average

number

of shares

m

Earnings per share

p

 

Earnings

£m

Weighted average number

of shares

m

Earnings

per share

p


Earnings

£m

Weighted average number

of shares

m

Earnings

per share

p

From continuing operations












Basic earnings per share

3.0 

602.5 

0.5 


14.1 

602.0 

2.4 


55.0 

598.0 

9.2 

Effect of dilutive share options

7.1 

-


22.8 

(0.1)


11.5 

(0.2)

Diluted earnings per share

3.0 

609.6 

0.5 

 

14.1 

624.8 

2.3 

 

55.0 

609.5 

9.0 


From discontinued operations










 


Basic loss per share

(4.4)

602.5 

(0.7)



(106.2)

598.0 

(17.8)

Effect of dilutive share options

7.1 


-


11.5 

0.4 

Diluted loss per share

(4.4)

609.6 

(0.7)

 

-

 

(106.2)

609.5 

(17.4)


From continuing and discontinued operations



 




 


Basic (loss)/earnings per share

(1.4)

602.5 

(0.2)


14.1 

602.0 

2.4 


(51.2)

598.0 

(8.6)

Effect of dilutive share options

7.1 


22.8 

(0.1)


11.5 

0.2 

Diluted (loss)/earnings per share

(1.4)

609.6 

(0.2)

 

14.1 

624.8 

2.3 

 

(51.2)

609.5 

(8.4)


From continuing operations, excluding exceptional items









Basic earnings per share

3.0 

602.5 

0.5 


12.6

602.0

2.1


51.0 

598.0 

8.5 

Effect of dilutive share options

7.1 

-


-

22.8

(0.1)


11.5 

(0.1)

Diluted earnings per share

3.0 

609.6 

0.5 


12.6

624.8 

2.0


51.0 

609.5 

8.4 


From continuing and discontinued operations, excluding exceptional items







Basic earnings per share

3.0 

602.5 

0.5 


12.6 

602.0 

2.1 


51.0 

598.0 

8.5 

Effect of dilutive share options

7.1 

-


22.8 

(0.1)


11.5 

(0.1)

Diluted earnings per share

3.0 

609.6 

0.5 


12.6 

624.8 

2.0 


51.0 

609.5 

8.4 




11 Property, plant and equipment


During the period, the Group spent £3.8m on additions to property, plant and equipment (24 weeks to 14 June 2008 - £10.0m; 52 weeks to 27 December 2008 - £14.5m). It also disposed of fixed assets with a net book value of £1.0m (24 weeks to 14 June 2008 - £2.0m; 52 weeks to 27 December 2008 - £0.6m) for proceeds of £1.0m (24 weeks to 14 June 2008 - £3.5m; 52 weeks to 27 December 2008 - £3.5m).


There are non-cancellable commitments to purchase property, plant and equipment of £0.5m (24 weeks to 14 June 2008 - £4.1m; 52 weeks to 27 December 2008 - £0.3m) at the current period end.


12 Investments


The change in investments during the current period relates to the redemption of part of an unlisted investment at cost during the period. The part of the investment which was disposed of had a cost and carrying value of £2m. The £2m cash received on redemption is shown in the cash flow statement for the current period.


The change in investments from 14 June 2008 to 31 December 2008 relates to the redemption of another part of the same unlisted investment, which had a cost and carrying value of £4m and which was redeemed for £4m. The £4m proceeds is shown in the cash flow for the period to 27 December 2008.


13 Reconciliation of movement in reserves and details of shares issued in the period



Share capital

£m

Share premium account

£m

ESOP reserve

£m

Other reserves

£m

Retained earnings

£m

Total

£m

As at 27 December 2008 - audited

63.4 

85.1 

(27.1)

28.1 

(207.3)

(57.8) 

Loss for the period

-

-

-

-

(1.4)

(1.4)

Net actuarial loss on pension schemes

-

-

-

-

(13.4)

(13.4)

Deferred tax on share schemes

-

-

-

-

0.1 

0.1 

Currency translation differences

-

-

-

-

0.1 

0.1 

Net movement in ESOP

-

-

1.8

-

1.8 

As at 13 June 2009 - unaudited

63.4

85.1

(25.3)

28.1

(221.9)

(70.6)


During the current period, the Group did not issue any shares.



Share capital

£m

Share premium account

£m

ESOP reserve

£m

Other reserves

£m

Retained earnings

£m

Total

£m

As at 28 December 2007 - audited

63.4 

85.0 

(32.6)

28.1 

(106.8)

37.1 

Profit for the period

-

-

-

-

14.1 

14.1 

Dividends paid

-

-

-

-

(3.0)

(3.0)

Net actuarial loss on pension schemes

-

-

-

-

(31.2)

(31.2)

Issue of new shares

-

0.1 

-

-

-

0.1 

Currency translation differences

-

-

 - 

-

0.2 

0.2 

Net movement in ESOP

-

-

3.6 

-

-

3.6 

As at 14 June 2008 - unaudited

63.4 

85.1 

(29.0)

28.1 

(126.7)

20.9 


During the period above, the Group issued 132,119 shares.



Share capital

£m

Share premium account

£m

ESOP reserve

£m

Other reserves

£m

Retained earnings

£m

Total

£m

As at 29 December 2007

63.4

85.0

(32.6)

28.1

(106.8)

37.1

Net actuarial loss on defined benefit scheme

-

-

-

-

(47.7)

(47.7)

Foreign exchange

-

-

-

-

1.4

1.4

Accumulated loss for the period

-

-

-

-

(51.2)

(51.2)

Issue of new shares

-

0.1

-

-

-

0.1

Net movement in ESOP

-

-

5.5

-

-

5.5

Dividends declared and paid

-

-

-

-

(3.0)

(3.0)

As at 27 December 2008

63.4

85.1

(27.1)

28.1

(207.3)

(57.8)


During the period above, the Group issued 132,119 shares.


14 Notes to the cash flow statement


(a) Net cash flows from operating activities


 

24 weeks to 13 June 2009

unaudited

£m

24 weeks to

14 June 2008

unaudited

£m

52 weeks to 27 December 2008

audited

£m









Group operating profit before tax and interest - continuing operations

10.0

22.3

80.7 

Group operating profit before tax and interest - discontinued operations

(4.4)

-

(108.8)

Group operating profit before tax and interest

5.6

22.3

(28.1)





Adjustments for:




Depreciation and amortisation included in operating profit

8.1

8.0

17.2 

Share based payments charge

1.8

3.6

5.5 

Share of joint venture profits

-

(0.1)

(0.1)

Profit on disposal of property, plant and equipment and intangible assets

-

(1.5)

(1.9)

Other exceptional items before tax

4.4

-

105.9 

Operating cash flows before movements in working capital

19.9 

32.3

98.5 





Movements in working capital and exceptional items




Decrease/(increase) in stock

21.8

(15.2)

(19.3)

(Increase)/decrease in trade and other receivables

(0.9)

6.2

22.4 

Decrease in trade and other payables and provisions

(13.5)

(31.7)

(92.6)

Difference between pensions operating charge and cash paid

(13.4)

(13.3)

(24.3)

Net cash flow - other exceptional items

(0.4)

-

(11.7)

 

(6.4)

(54.0)

(125.5)

Cash generated from/(used in) operations

13.5 

(21.7)

(27.0)

Tax paid

-

(5.2)

(10.8)

Net cash flows from/(used in) from operating activities

13.5 

(26.9)

(37.8) 





Net cash flows from/(used in) from operating activities comprises:




Continuing operating activities

13.9

(26.9)

(26.1)

Discontinued operating activities

(0.4)

-

(11.7)

 

13.5

(26.9)

(37.8)


(b) Reconciliation of movement in net debt


 

24 weeks to 13 June 2009

unaudited

£m

24 weeks to

14 June 2008

unaudited

£m

52 weeks to 27 December 2008

audited

£m

Net debt at start of period

(61.2)

(3.3)

(3.3)

Net decrease in cash and cash equivalents

(2.8)

(6.3)

(12.4)

Decrease in investments

(0.3)

(0.3)

(1.1)

Decrease/(increase) in bank borrowings

13.2

(31.5)

(44.1)

Decrease/(increase) in finance leases

0.8

0.5

(0.3)

Net debt at end of period

(50.3)

(40.9)

(61.2)





Represented by:




Cash and cash equivalents

18.4

27.3

21.2 

Investments

1.0

2.1

1.3 

Bank loans

(67.0)

(67.6)

(80.2)

Finance leases

(2.7)

(2.7)

(3.5)


(50.3)

(40.9)

(61.2)


(c) Analysis of net debt



Cash and cash equivalents

£m

Current asset investment

£m

Bank loans

£m

Finance leases

£m

Net

borrowings

£m

At 27 December 2008 - audited

21.2

1.3

(80.2)

(3.5)

(61.2)

Cash flow

(2.8)

(0.3)

13.2

0.8

10.9

At 13 June 2009 - unaudited

18.4

1.0

(67.0)

(2.7)

(50.3)


Closing bank loans at 13 June 2009 comprise £66.1m of non-current liabilities and £0.9m of current liabilities. Closing finance leases at 13 June 2009 comprise £1.0m of non-current liabilities and £1.7m of current liabilities.


15 Provisions



Property provision

£m

Other provisions

£m

Total

£m

At 27 December 2008 - audited

115.7

4.1

119.8

Additional provision in the period

4.5

0.7

5.2

Utilisation of provision in the period

(16.1)

(1.4)

(17.5)

Provision released in the period

-

-

-

At 13 June 2009 - unaudited

104.1

3.4

107.5


The property provision mainly covers onerous leases. For any such leases, the Group provides for any shortfall between rent payable and rent receivable on any non-trading leased properties. The provision is based on the period until the end of the lease, or until the Group can cover the shortfall by subletting, assigning or surrendering the lease. None of the provisions are short term. The property provision also includes amounts for any related shortfalls in business rates on these properties and for dilapidations.


Other provisions relate to amounts due in respect of a contractual termination.


16 Related party transactions


Transactions between Group companies, which are related parties, have been eliminated on consolidation and are not disclosed in this note.


(a) Trading transactions


During the period, Group companies did not enter into any transactions with related parties who are not members of the Group. Transactions in prior periods were:


Howden Joinery Supply Division (Asia) Limited - formerly Howden Kitchens (Asia) Limited


24 weeks to

14 June 2008

unaudited

£m

52 weeks to 27 December 2008

audited

£m

Sale of goods and services during the period

-

-

Purchases of goods and services during the period

5.2

5.2

Amounts owed to related party at period end

-

-

Amounts owed by related party at period end

-

-


Howden Joinery Supply Division (Asia) Limited was a related party because it was a joint venture.  On 7 March 2008, the Group purchased the remaining 50% of the joint venture and from that time it became a 100% owned subsidiary. The information given above for the period ended 14 June 2008 and 27 December 2008 are only in respect of the time from 29 December 2007 until 7 March 2008.


Purchases from the related party were on the basis of cost plus a commission based on benefits achieved and throughput. 


(b) Remuneration of key management personnel


This information will be disclosed in the Group's Annual Report for the year ending 26 December 2009.


17 Retirement benefit obligations


(a) Total amounts charged in respect of defined benefit pensions in the period



24 weeks to 13 June 2009

unaudited

£m

24 weeks to

 14 June 2008

unaudited

£m

52 weeks to

27 December 2008

audited

£m

Charged/(credited) to the income statement




Defined benefit schemes - current service cost and total operating charge

3.2

3.5

7.6

Defined benefit schemes - net finance charge/(credit)

3.7

(1.5)

(3.3)

Total net amount charged to profit before tax

6.9

2.0

4.3





Charged to equity




Defined benefit schemes - net actuarial losses, net of deferred tax

13.4

30.8

47.7


(b) Other information - defined benefit pension schemes


The most recent actuarial valuation was carried out at 6 April 2008 by the scheme actuary. The actuary advising the Group has subsequently rolled forward this valuation to 13 June 2009 and restated the results onto a basis consistent with market conditions at that date.  The pension deficit has increased over the 24 weeks ended 13 June 2009. The following summary information analyses the main changes in greater detail.


Key assumptions used in the valuation of the schemes



24 weeks to 13 June 2009

%

24 weeks to

 14 June 2008

%

52 weeks to

27 December 2008

%

Rate of increase of pensions in payment:




Pensions with guaranteed increases (i.e. most of the pre-1997 pensions)

3.00

3.00

3.00

Pensions with increases capped at the lower of RPI and 5%

3.60

4.00

3.00

Pensions with increases capped at the lower of RPI and 2.5%

2.50

2.50

2.50

Rate of increase in salaries

4.60

4.00

4.00

Inflation assumption

3.60

4.00

3.00

Expected return on scheme assets (weighted average)

6.35

7.39

6.35

Discount rate

6.60

6.40

6.30


Balance sheet


Movements in the deficit during the period were as follows:



24 weeks to 13 June 2009

£m

24 weeks to

 14 June 2008

£m

52 weeks to

27 December 2008

£m

Deficit at start of period

(122.2)

(83.5)

(83.5)

Current service cost

(3.2)

(3.5)

(7.6)

Employer contributions

16.6

16.8

31.9

Other finance (charge)/income

(3.7)

1.5

3.3

Actuarial losses gross of deferred tax

(18.7)

(43.3)

(66.3)

Deficit at end of period

(131.2)

(112.0)

(122.2)


Statement of recognised income and expense


Amounts taken to equity via the statement of recognised income and expense in respect of the Group's defined benefit schemes are shown below.



24 weeks to 13 June 2009

£m

24 weeks to

 14 June 2008

£m

52 weeks to

27 December 2008

£m

Actuarial loss on scheme assets

(0.7)

(46.8)

(140.1)

Actuarial (loss)/gain on scheme liabilities

(18.0)

3.5

73.8

Total actuarial loss before tax

(18.7)

(43.3)

(66.3)


CAUTIONARY STATEMENT


Certain statements in this Half Yearly Report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.



RESPONSIBILITY STATEMENT


We confirm that to the best of our knowledge:


(a) the condensed set of financial statements has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’;
(b) the Half Yearly Report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first 24 weeks and description of principal risks and uncertainties for the remaining 28 weeks of the year); and
(c) the Half Yearly Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

 

The directors are responsible for the maintenance and integrity of the corporate and financial information included in the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions.


By order of the Board


Matthew Ingle                           Mark Robson

Chief Executive Officer                Chief Financial Officer


21 July 2009


INDEPENDENT REVIEW REPORT TO GALIFORM PLC


We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 24 weeks ended 13 June 2009  which comprises the income statement, the balance sheet, the cash flow statement, the statement of recognised income and expense and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.


This report is made solely to the company in accordance with International Standard on Review Engagements 2410 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.


Directors' responsibilities


The half-yearly financial report is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdoms' Financial Services Authority.


As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.


Our responsibility


Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.


Scope of Review 


We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.


Conclusion


Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 24 weeks ended 13 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.




Deloitte LLP

Chartered Accountants and Registered Auditor
London


21 July 2009

 

 

APPENDIX 1


FINANCIAL CALENDAR


2009


Interim Management Statement         12 November 2009


End of financial year                        26 December 2009


2010


2009 Preliminary Results                   4 March 2010


Interim Management Statement        29 April 2010 (provisional)


Half Yearly Report                          21 July 2010 (provisional)


Interim Management Statement       11 November 2010 (provisional)




This information is provided by RNS
The company news service from the London Stock Exchange
 
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