RNS Number:7593Q
ScS Upholstery PLC
26 March 2008
For Immediate Release 26 March 2008
ScS Upholstery plc
Unaudited Interim Results for the Six Months Ended 26 January 2008
ScS Upholstery plc, the fully listed furniture retailer of fabric and leather
upholstered furniture, today announces its interim results for the six months
ended 26 January 2008.
KEY POINTS
* Revenue �91.8m (2007: �105.3m) Down 13%
* Gross margin 47.2% (2007: 48.4%)
* Group trading loss �8.8m (2007: profit �3.3m)
* Loss after tax credit �4.1m (2007: profit after tax charge �2.8m)
* Loss per share 12.0p (2007: earnings per share 8.2p)
* Net cash �15.0m
* Interim dividend per share �nil
* Like for like sales order intake - First 26 weeks Down 15%
Mike Browne, Chairman, commented:
"This has been an extremely challenging trading period and we are under no
illusions about the economic trading environment. Whilst we remain confident of
a profitable second half, we will continue to manage the business on the basis
that we are unlikely to see any upturn in economic conditions for some time."
For further information please contact:
ScS Upholstery plc
David Knight, Chief Executive 0191 5146054
Buchanan Communications
Richard Oldworth / Susanna Gale 020 7466 5000
CHAIRMAN'S STATEMENT
Results
The first half of the financial year, which ended on 26 January 2008, was an
extremely challenging trading period. Like for like sales order intake was down
by 15% and revenue of �91.8m was �13.5m (13%) less than the comparative period.
Gross margin at 47.2% (2007: 48.4%) during the first half was virtually
unchanged from the 47.4% for the ten months to 28 July 2007.
Distribution costs (see below) were �7.1m (2007: �5.5m). Administration costs
were �45.0m (2007: �42.1m) with the half year effect of costs at new stores
accounting for most of this increase.
The trading loss for the period was �8.8m (2007: trading profit �3.3m).
Finance income of �0.3m (2007: �0.5m) reduced the loss before tax to �8.5m
(2007: increased the profit before tax to �4.0m, including income from property
transactions of �0.3m).
After the tax credit of �4.4m (2007: tax charge �1.3m) - see note 3 to the
interim financial statements - the loss attributable to shareholders was �4.1m
(2007: profit �2.8m).
The loss per share for the period was 12.0p (2007: earnings per share 8.2p).
Interim Dividend
As we announced in mid January 2008, given the trading environment and the focus
on maintaining our cash position, the Board is not recommending the payment of a
dividend this financial year.
Expansion Programme
As also previously announced, we deferred the planned store expansion programme
until trading conditions improve. We currently trade from 95 stores with one new
store planned to open in Llanelli before the end of the financial year.
Distribution
In May 2007 we announced our planned increase in investment in this area of our
business in order to ensure an improved delivery experience for our customers.
During the first half we implemented the plan to reconfigure our distribution
centre network. Two new centres were opened in Coventry and Livingston and four
were closed. Also, having reviewed the delivery requirement in the London and
Anglian regions, we opened an additional centre in Radlett. During the
transitional period there was the inevitable overlap in costs, together with
additional costs on the extra temporary space taken on during November and
December 2007 to ensure that the important pre-Christmas deliveries were
achieved.
CHAIRMAN'S STATEMENT (continued)
Principal risks and uncertainties
In line with the recently introduced Transparency Directive, the Board is
required to comment on the principal risks and uncertainties facing the Company
for the next six months.
These can be summarised as the effects of the ongoing economic pressures on the
consumer and possible further weakness in like for like sales order intake on a
business with relatively high operational gearing.
As referred to in the Outlook, below, the Board has undertaken a comprehensive
cost review and the benefits are already flowing through in the second half.
Whilst this action addresses the variable cost base, it is the fixed cost nature
of the business that should be noted.
Outlook
We are under no illusions about the challenging conditions prevailing in our
market. Recognising our high operational gearing, we have to manage the business
on the basis that we are unlikely to see any upturn in economic conditions for
some time.
Like for like sales order intake for the year to date up to and including the
week ended 15 March 2008 remained at 15% down. Easter trading was well ahead of
a weak comparative Easter trading period, when the unseasonably warm weather
resulted in a disappointing performance. In projecting the full year outcome we
have assumed no improvement in trading conditions but we are budgeting the
initial benefits of the cost review. In considering the split between first half
and second half profitability, it is important to remember that the significant
advertising expenditure relating to a campaign running for the five weeks from
Boxing Day was all expensed in the first half, while the associated sales
benefit accrues in the second half.
As already referred to above, the benefits of the actions following the
comprehensive cost review have started to flow through in the second half and we
therefore remain confident of a profitable second half.
M F Browne
Chairman
The Interim Announcement was approved by the Board of Directors
25 March 2008
Responsibility Statements
We confirm that to the best of our knowledge:
a) The interim financial statements have been prepared in accordance with IAS
34; Interim Reporting as adopted by the European Union:
b) The Chairman's statement includes a fair review of the information required
by DTR 4.2.7R (indication of important events during the first six months and
description of principal risks and uncertainties for the remaining six months of
the year); and
c) The interim financial statements include a fair review of the information
required by DTR 4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
David Knight
25 March 2008
ScS Upholstery plc
--------------------
Summarised Interim Consolidated Income Statement
For the 26 weeks to 26 January 2008
Unaudited Unaudited
Six months Six months
ended ended
26 January 27 January
2008 2007
Notes �000 �000
Revenue 91,772 105,315
Cost of sales (48,455) (54,391)
--------------- ---------------
Gross profit 43,317 50,924
Distribution costs (7,133) (5,510)
Administration costs (44,981) (42,147)
--------------- ---------------
Group trading (loss)/profit (8,797) 3,267
Other income 2 - 291
--------------- ---------------
Group operating (loss)/profit
from continuing operations (8,797) 3,558
Finance revenue 342 486
--------------- ---------------
(Loss)/profit from continuing
operations before taxation (8,455) 4,044
Income tax credit/(expense) 3 4,390 (1,267)
--------------- ---------------
(Loss)/profit attributable to
equity shareholders of the parent (4,065) 2,777
--------------- ---------------
--------------- ---------------
(Loss) / earnings per share -
Basic - (pence) 5 (12.0) 8.2
(Loss) / earnings per share -
Diluted - (pence) 5 (12.0) 8.2
ScS Upholstery plc
--------------------
Interim Consolidated Balance Sheet
------------------------------------
As at 26 January 2008
Unaudited Audited
As at As at
26 January 28 July
2008 2007
�000 �000
Non-current assets
Property, plant and equipment 40,175 40,256
Intangible assets 3,509 2,374
Other receivables 750 778
--------------- ---------------
44,434 43,408
--------------- ---------------
Current assets
Trade and other receivables 8,869 9,163
Inventories 14,207 10,452
Income tax receivable 4,295 -
Cash and cash equivalents 14,965 16,610
--------------- ---------------
42,336 36,225
--------------- ---------------
Total assets 86,770 79,633
--------------- ---------------
Current liabilities
Trade and other payables (49,809) (33,631)
Income tax payable - (1,025)
--------------- ---------------
(49,809) (34,656)
--------------- ---------------
Non-current liabilities
Trade and other payables (8,652) (8,802)
Deferred tax liability (31) (105)
--------------- ---------------
(8,683) (8,907)
--------------- ---------------
Total liabilities (58,492) (43,563)
--------------- ---------------
Net assets 28,278 36,070
--------------- ---------------
--------------- ---------------
Equity
Share capital 341 341
Share premium account 3,123 3,123
Capital redemption reserve 195 195
Treasury shares (1,225) (1,225)
Retained earnings 25,844 33,636
--------------- ---------------
Total equity 28,278 36,070
--------------- ---------------
--------------- ---------------
ScS Upholstery plc
Interim Consolidated Cash Flow Statement
For the 26 weeks to 26 January 2008
Unaudited Unaudited
Six months Six months
Ended Ended
26 January 27 January
2008 2007
�000 �000
Cash flows from operating activities
Group operating (loss)/profit (8,797) 3,558
Depreciation 2,217 1,979
Amortisation of non-current other
receivables 32 27
Amortisation of other intangibles 309 97
Share based payments 326 104
Increase in inventories (3,755) (4,083)
Decrease in trade and other receivables 293 234
Increase in trade and other payables 16,045 15,798
--------------- ---------------
Cash generated from operations 6,670 17,714
--------------- ---------------
Income taxes paid (1,004) (2,018)
--------------- ---------------
Net cash flow from operating
activities 5,666 15,696
--------------- ---------------
Cash flows from investing activities
Interest received 342 486
Payments to acquire intangible
fixed assets (1,328) (1,169)
Purchase of property, plant and
equipment (2,272) (5,565)
Proceeds on disposal of property,
plant and equipment - 367
--------------- ---------------
Net cash flows from investing
activities (3,258) (5,881)
--------------- ---------------
Cash flows from financing activities
Net proceeds from issue of
ordinary shares - 118
Payment to acquire own shares - (99)
Dividends paid to equity
shareholders of the parent (4,053) -
--------------- ---------------
Net cash flows from financing
activities (4,053) 19
--------------- ---------------
(Decrease)/increase in cash and cash equivalents
(Decrease)/increase in cash and
cash equivalents (1,645) 9,834
Cash and cash equivalents at the
beginning of the period 16,610 12,222
--------------- ---------------
Cash and cash equivalents at the
end of the period 14,965 22,056
--------------- ---------------
Interim Consolidated Statement of Changes in Equity
For the 26 weeks to 26 January 2008
Equity Share Capital
share premium redemption Treasury Retained Total
capital account reserve shares earnings equity
�000 �000 �000 �000 �000 �000
At 29 July 2006 340 2,937 195 (1,172) 28,847 31,147
Profit for the period - - - - 2,777 2,777
Items recognised
directly in equity:
Share-based payments - - - - 104 104
Taxation - - - - 184 184
Acquisition of
treasury shares - - - (99) - (99)
Employee share
options exercised 1 117 - 46 - 164
-------- ------- --------- -------- -------- -------
At 27 January 2007 341 3,054 195 (1,225) 31,912 34,277
======== ======= ========= ======== ======== =======
At 28 July 2007 341 3,123 195 (1,225) 33,636 36,070
Loss for the period - - - - (4,065) (4,065)
Equity dividends - - - - (4,053) (4,053)
Items recognised
directly in equity:
Share-based payments - - - - 326 326
-------- ------- --------- -------- -------- -------
At 26 January 2008 341 3,123 195 (1,225) 25,844 28,278
======== ======= ========= ======== ======== =======
ScS Upholstery plc
Notes to the Interim Results
This interim report was approved by the Directors on 25 March 2008. This
announcement is being sent to shareholders and will be made available at the
Group's registered office at 45-49 Villiers Street, Sunderland, SR1 1HA. Copies
of this report will also be available on the group's website at www.scs.co.uk.
1. Basis of preparation
The interim financial statements for the six months ended 26 January 2008 have
been prepared in accordance with the DTR of the Financial Services Authority and
IAS 34, 'Interim Financial Reporting', as adopted by the European Union. The
interim financial information has been prepared using the same accounting
policies and methods of computation used to prepare the group's 2007 Annual
Report as described on pages 30 to 32 of that report which can be found on the
group's website at www.scs.co.uk, except for the adoption of new standards and
interpretations, noted below. The annual financial statements of the group are
prepared in accordance with IFRS as adopted by the European Union.
The following new standards or interpretations are mandatory for the first time
for the financial year ending 26 July 2008:
*Amendment to IAS1 - Presentation of financial statements: capital disclosures
*IFRIC 9 - Reassessment of embedded derivatives
*IFRIC 10 - Interims and impairment
*IFRIC 11 - IFRS 2 - Group and treasury share transactions
*IFRS 7 - Financial instruments: disclosures.
Adoption of IFRICS's 9, 10 and 11 did not have any effect on the reported
financial position or performance of the group. The disclosure requirements of
IFRS7 and the amendment to IAS1 apply only to the annual financial statements of
the group.
The financial information for the six months ended 26 January 2008 and the
comparative financial information for the six months ended 27 January 2007 has
not been audited, but has been reviewed by the auditors. The comparative
financial information for the year ended 28 July 2007 has been extracted from
the 2007 annual report and financial statements. The financial information
contained in this interim report does not constitute statutory financial
statements as defined in section 240 of the Companies Act 1985 and does not
reflect all of the information contained in the group's annual report and
financial statements. The annual financial statements for the year ended 28 July
2007, which were approved by the Board of Directors on 24 September 2007,
received an unqualified audit report, did not contain a statement under section
237 (2) or (3) of the Companies Act 2006 and have been filed with the Registrar
of Companies.
The Board of Directors approved this report including the interim financial
statements, on 25 March 2008.
2. Other income
Other income in the comparative period represents net income received on the
early termination of property leases.
3. Taxation
The taxation charge is calculated by applying the Directors' estimate of the
annual tax rate to the result for the period. The estimated effective rate in
the period is 51.9% (6 months to 27 January 2007: 31.3%). This is higher than
the standard rate of corporation tax in the UK of 29.3%, due primarily to the
effect of accounting depreciation on certain fixed assets not eligible for tax
allowances, which is at a proportionately higher level compared to the result
before tax than in the comparative period.
4. Dividends paid
The equity dividend paid in the period was �4.1m and related to the final
dividend for the period ended 28 July 2007. No equity dividends were paid in the
comparative period as the final dividend paid relating to the year ended 30
September 2006 was paid in February 2007.
5. Loss per share
The calculation of basic earnings per share is based on the loss for the
financial period and a weighted average of 33,770,128 shares in issue during the
period (27 January 2007: 33,726,993). The diluted earnings per share is based on
the loss for the financial period and a weighted average of 33,770,128 shares in
issue and under option during the period (27 January 2007: 33,772,845).
At 26 January 2008 there were 34,111,584 ordinary shares in issue (28 July 2007:
34,104,284).
6. Capital expenditure
During the six months to 26 January 2008, the group purchased �2.1m (2007:
�6.9m) of tangible fixed assets.
7. Changes in commitments and contingencies
Capital commitments contracted but not provided at 26 January 2008 were �2.0m
(28 July 2007: �2.4m).
8. Related party transactions
There are no related party transactions or changes since the year end that could
have a material impact on the group's financial position or performance for the
period.
INDEPENDENT REVIEW REPORT TO SCS UPHOLSTERY PLC
Introduction
We have been engaged by the Company to review the interim set of financial
statements in the half-yearly financial report for the six months ended 26
January 2008 which comprises the Summarised Interim Consolidated Income
Statement, Interim Consolidated Balance Sheet, Interim Consolidated Cash Flow
Statement, Interim Consolidated Statement of Changes in Equity and the related
notes 1 to 8. 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 interim set of financial
statements.
This report is made solely to the Company in accordance with guidance contained
in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed
by the Independent Auditor of the Entity" issued by the Auditing Practices
Board. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our 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 Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRS as adopted by the European Union. The interim
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 interim 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 enquiries, 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 interim set of financial statements in the half-yearly financial report
for the six months ended 26 January 2008 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.
Ernst & Young LLP
Registered Auditor
Newcastle upon Tyne
25 March 2008
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