REG - Headlam Group PLC - Interim Results <Origin Href="QuoteRef">HEAD.L</Origin> - Part 2
21/08/2017 07:05
- Part 2: For the preceding part double click ID:nRSU4668Oa
International Financial Reporting Standard (IFRS) 9 'Financial
instruments' (effective 1 January 2018)
· International Financial Reporting Standard (IFRS) 16 'Leases' (effective
1 January 2019)
· Clarification of Acceptable Methods of Depreciation and Amortisation -
Amendments to IAS 16 and IAS 38.
· Equity Method in Separate Financial Statements - Amendments to IAS 27
· Disclosure Initiative - Amendments to IAS 1
· Annual Improvements to IFRSs - 2012 -2014 Cycle.
The directors have assessed the impact of IFRS 15 on the financial statements
of the Group and estimates show that adoption on the 1 January 2018 will
require a restatement of revenue reported for 2017 of approximately £5 million
due to customer rebates currently reported in distribution costs.
The impact of IFRS 16 is also being evaluated and initial estimates would see
a leased asset of approximately £32 million and a leasing liability of £32
million on the Statement of Financial Position as at December 2016.
With the exception of IFRS 15 and IFRS 16 mentioned above, none of the other
standards listed are expected to have a material impact on the Group.
Going concern
The group's business activities, together with the factors likely to affect
its future development, performance and position are described in the Chief
Executive's Review.
The Directors have reviewed current performance and forecasts, combined with
borrowing facilities and expenditure commitments, including capital
expenditure, pensions and proposed dividends. After making enquiries, the
Directors have a reasonable expectation that the group has adequate financial
resources to continue its current operations, including contractual and
commercial commitments for the foreseeable future. For these reasons, the
going concern basis has been adopted in preparing the financial statements.
Bank facilities at 30 June 2017
Committed credit facilities Uncommitted credit facilities Total facilities
£ million £ million £ million
Drawn funds 21.8 0.0 21.8
Undrawn funds 32.6 33.0 65.6
54.4 33.0 87.4
Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these Condensed Consolidated Interim Financial Statements, the
significant judgements made by management in applying the group's accounting
policies and key sources of estimation uncertainty were the same as those that
applied to the Consolidated Financial Statements as at and for the year ended
31 December 2016.
Risks and uncertainties
The risk factors which could cause the group's results to differ materially
from expected results and the result of the Board's review of those risks are
set out in the Annual Report and Accounts for the year ended 31 December
2016.
2 SEGMENT REPORTING
The group has 58 operating segments in the UK and three operating segments in
Continental Europe. Each segment represents an individual trading operation
and each operation is wholly aligned to the sales, marketing, supply and
distribution of floorcovering products. The operating results of each
operation are regularly reviewed by the Chief Operating Decision Maker, which
is deemed to be the Chief Executive. Discrete financial information is
available for each segment and used by the Chief Executive to assess
performance and decide on resource allocation.
The operating segments have been aggregated to the extent that they have
similar economic characteristics, with relevance to products and services,
type and class of customer, methods of sale and distribution and the
regulatory environment in which they operate. The group's internal management
structure and financial reporting systems differentiate the operating segments
on the basis of the differing economic characteristics in the UK and
Continental Europe and accordingly present these as two separate reportable
segments. This distinction is embedded in the construction of operating
reports reviewed by the Chief Executive, the Board and the executive
management team and forms the basis for the presentation of operating segment
information given below.
UK Continental Europe Total
30 June2017£000 Restated*30 June2016£000 31 December2016£000 30 June2017£000 Restated*30 June2016£000 31 December2016£000 30 June2017£000 Restated*30 June2016£000 31December2016£000
Revenue
External revenues 293,520 286,260 602,104 48,348 42,413 91,468 341,868 328,673 693,572
Reportable segment operating profit 18,019 15,504 40,944 723 528 793 18,742 16,032 41,737
Reportable segment assets 269,148 252,399 263,968 44,937 39,710 44,516 314,085 292,109 308,484
Reportable segment liabilities (170,851) (156,387) (167,755) (17,924) (16,103) (23,801) (188,775) (172,490) (191,556)
During the periods shown above there have been no inter-segment revenues for
the reportable segments (2016: £nil).
Reconciliations of reportable segment profit, assets and liabilities and other
material items:
30 June2017£000 30 June2016£000 31 December2016£000
Profit for the period
Total profit for reportable segments 18,742 16,032 41,737
Non-underlying items - - (1,927)
Unallocated expense (1,624) (667) (665)
Operating profit 17,118 15,365 39,145
Finance income 146 498 756
Finance expense (497) (752) (1,722)
Profit before taxation 16,767 15,111 38,179
Taxation (3,102) (3,022) (7,216)
Profit for the period 13,665 12,089 30,963
* The results for the six months ended 30 June 2016 have been restated to
reflect changes made at 31 December 2016 reported in note 1 of the group
Annual Report and Accounts for the year ended 31 December 2016.
30 June2017£000 Restated *30 June2016£000 31 December2016£000
Assets
Total assets for reportable segments 314,085 292,109 308,484
Unallocated assets:
Properties, plant and equipment 90,447 91,637 90,981
Deferred tax assets 920 372 1,138
Cash and cash equivalents 41,219 30,747 28,171
Derivative assets 3 52 -
Total assets 446,674 414,917 428,774
Liabilities
Total liabilities for reportable segments (188,775) (172,490) (191,556)
Unallocated liabilities:
Employee benefits (20,649) (17,436) (22,950)
Other interest-bearing loans and borrowings (21,793) (15,000) -
Income tax payable (4,660) (5,640) (6,824)
Proposed dividend (13,360) (12,368) -
Deferred tax liabilities (4,039) (4,533) (4,077)
Total liabilities (253,276) (227,467) (225,407)
UK Continental Europe Reportable segmenttotal Unallocated Consolidated total
£000 £000 £000 £000 £000
Other material items 30 June 2017
Capital expenditure 1,561 375 1,936 133 2,069
Depreciation 1,015 368 1,383 1,020 2,403
Amortisation 800 - - - 800
Other material items 30 June 2016
Capital expenditure 991 412 1,403 53 1,456
Depreciation 1,108 276 1,384 1,005 2,389
Other material items 31 December 2016
Capital expenditure 1,808 872 2,680 283 2,963
Depreciation 2,388 732 3,120 2,156 5,276
Non-underlying items - - - 1,927 1,927
* The results for the six months ended 30 June 2016 have been restated to
reflect changes made at 31 December 2016 reported in note 1 of the group
Annual Report and Accounts for the year ended 31 December 2016.
In the UK the group's freehold properties are held within Headlam Group plc
and a rent is charged to the operating segments for the period of use.
Therefore, the operating reports reviewed by the Chief Executive show all the
UK properties as unallocated and the operating segments report a segment
result that includes a property rent. This is reflected in the above
disclosure.
Each segment is a continuing operation.
The Chief Executive, the Board and the senior executive management team have
access to information that provides details on revenue by principal product
group for the two reportable segments, as set out in the following table:
UK Continental Europe Total
30 June2017£000 30 June2016£000 31 December2016£000 30 June2017£000 30 June2016£000 31 December2016£000 30 June2017£000 30 June2016£000 31 December2016£000
Revenue
Residential 207,173 200,610 422,048 24,519 20,777 46,337 231,692 221,387 468,385
Commercial 86,346 85,650 180,056 23,830 21,636 45,131 110,176 107,286 225,187
293,519 286,260 602,104 48,349 42,413 91,468 341,868 328,673 693,572
3 FINANCE INCOME AND EXPENSE
Six months ended 30 June2017£000 Six months ended 30 June2016£000 Year ended 31 December 2016£000
Interest income:
Bank interest 113 243 756
Other 33 255 -
Finance income 146 498 756
Interest expense:
Bank loans, overdrafts and other financial expenses (262) (449) (1,062)
Net change in fair value of cash flow hedges transferred from equity - (23) (23)
Net interest on defined benefit plan obligation (235) (280) (566)
Other - - (71)
Finance expenses (497) (752) (1,722)
4 TAXATION
The group's consolidated effective tax rate in respect of continuing
operations for the six months ended 30 June 2017 was 18.5% (for the six months
ended 30 June 2016: 20%; for the year ended 31 December 2016: 18.9%).
Reductions in the UK corporation tax rate from 20% to 19% (effective from 1
April 2017) and to 18% (effective 1 April 2020) were substantively enacted on
26 October 2015. A further reduction to 17% (effective from 1 April 2020) was
announced in the Budget on 16 March 2016 and substantively enacted on the 6
September 2016. This will reduce the company's future current tax charge
accordingly. The deferred tax asset at 30 June 2017 has been calculated based
on the rate of 17% substantively enacted at the balance sheet date as these
balances will materially reverse after 1 April 2020.
5 EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the
following data:
Six months ended 30 June2017£000 Six months ended 30 June2016£000 Year ended 31 December 2016£000
Earnings
Earnings for underlying basic and underlying diluted earnings per share 13,665 12,089 32,505
Earnings for basic and diluted earnings per share 13,665 12,089 30,963
2017 2016 2016
Number of shares
Issued ordinary shares at end of period 85,363,743 85,363,743 85,363,743
Effect of shares held in treasury (1,233,853) (1,330,565) (1,330,339)
Weighted average number of ordinary shares for the purposes of basic earnings per share 84,129,890 84,033,178 84,033,404
Effect of diluted potential ordinary shares:
Weighted average number of ordinary shares at period end 84,492,101 84,033,178 84,033,404
Dilutive effect of share options 367,677 617,808 458,697
Weighted average number of ordinary shares for the purposes of diluted earnings per share 84,859,778 84,650,986 84,492,101
6 DIVIDENDS
Six months ended30 June2017£000 Six months ended30 June 2016£000 Year ended31 December 2016£000
Interim dividend for 2016 of 6.70p paid 3 January 2017 5,638 - -
Special dividend for 2016 of 8.00p paid 24 April 2017 6,731 - -
Final dividend for 2016 of 15.85p proposed 13,360 - -
Interim dividend for 2015 of 6.00p paid 2 January 2016 - 5,048 5,048
Special dividend for 2015 of 6.00p paid 25 April 2016 - 5,048 5,048
Final dividend for 2015 of 14.70p proposed - 12,368 12,368
25,729 22,464 22,464
The proposed final dividend for 2016 of 15.85p per share was authorised by
shareholders at the Annual General Meeting on 25 May 2017 and paid on 3 July
2017. The proposed final dividend for 2015 of 14.70p per share was authorised
by shareholders at the Annual General Meeting on 20 May 2016 and paid on 1
July 2016.
The Board of Directors has declared an interim dividend for 2017 of 7.55p to
be paid on 2 January 2018.
7 ACQUISITIONS
On 28 February 2017, a subsidiary company of Headlam Group plc entered into an
agreement to acquire Mitchell Carpets Limited. The company is a distributor
of floorcoverings in the south east of England.
On 28 April 2017, a subsidiary company of Headlam Group plc entered into an
agreement to acquire the business and certain assets of McMillan Flooring
Distributors Limited. McMillan Flooring Distributors Limited is a distributor
of commercial floorcoverings in Scotland.
Revenue for the calendar year 2016 was approximately £4.870 million for both
acquisitions. Consideration at completion amounted to £1.942 million, net of
cash acquired with the businesses of £0.809 million. Net assets acquired were
£1.666 million (including cash acquired), goodwill was £0.285 million and
customer relationships amounted to £0.8 million. The intangible relating to
customer relationships was written off in the first half.
The disclosures required by IFRS 3 will be shown in the Annual Report and
Accounts for the Group for the year ended 31 December 2017.
8 FINANCIAL INSTRUMENTS
The fair value of the Group's financial assets and liabilities as detailed
below at 30 June 2017 were not materially different to the carrying value.
The table below sets out the Group's accounting classification of each class
of financial assets and liabilities at 30 June 2017.
Available for sale£000 Other derivatives at fair value£000 Amortised cost£000 Totalcarrying value£000
Cash and cash equivalents - - 71,566 71,566
Borrowings due within one year - - (230) (230)
Borrowings due after one year - - (21,563) (21,563)
Trade payables - - (143,690) (143,690)
Non-trade payables - - (28,163) (28,163)
Trade receivables - - 103,381 103,381
Other receivables - - 18,466) 18,466
Provisions - - (1,531) (1,531)
Derivative assets - 6 - 6
- 6 (1,764) (1,758)
Financial instruments carried at fair value are categorised according to their
valuation method. The different levels have been defined below:
■ Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities.
■ Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly, as prices or
indirectly, derived from prices.
■ Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The Group has a diesel commodity swap used for hedging which was fair valued
in accordance with level 2 for the six months ended 30 June 2017 (30 June and
31 December 2016: level 2) and forward currency contracts which were fair
valued in accordance with level 2 (30 June and 31 December 2016: level 2).
Fair values
The carrying amounts shown in the Statement of Financial Position for
financial instruments are a reasonable approximation of fair value.
Trade receivables, trade payables and cash and cash equivalents
Fair values are assumed to approximate to cost due to the short-term maturity
of the instrument.
Borrowings, other financial assets and other financial liabilities
Where available, market values have been used to determine fair values. Where
market values are not available, fair values have been estimated by
discounting expected future cash flows using prevailing interest rate curves.
Amounts denominated in foreign currencies are valued at the exchange rate
prevailing at the Statement of Financial Position date.
9 CAPITAL COMMITMENTS
As at 30 June 2017, the group had contractual commitments relating to the
purchase of property, plant and equipment of £291,000 (30 June 2016: £408,000,
31 December 2016: £663,000).
10 RELATED PARTIES
The group has a related party relationship with its subsidiaries and with its
key management. There have been no changes to the nature of related party
transactions entered into since the last annual report.
11 SUBSEQUENT EVENTS
Management have given due consideration to any events occurring in the period
from the reporting date to the date these Interim Financial Statements were
authorised for issue and have concluded that there are no material adjusting
or non-adjusting events to be disclosed in these Interim Financial
Statements.
This information is provided by RNS
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