REG - Headlam Group PLC - Half Yearly Report <Origin Href="QuoteRef">HEAD.L</Origin> - Part 1

HeadlamAnnouncement

29/10/2014 16:07

RNS Number : 2920Q
Headlam Group PLC
29 August 2014
29 August 2014
Interim Financial Results for the six month period ended 30 June 2014
Headlam Group plc ("Headlam"), Europe's leading floorcoverings distributor, announces its Interim Financial Results for the six months ended 30 June 2014.
Financial highlights

2014
000
2013
000
Change




Revenue
301,580
280,385
+7.6%




Operating profit
11,331
9,738
+16.4%




Profit before tax
10,759
9,076
+18.5%




Basic earnings per share
10.2p
8.4p
+21.4%




Dividend per share
5.20p
4.65p
+11.8%




Key points 
 Further market gains in the UK with revenue increasing by 7.9% on a like for like basis
 Continental European contribution to group operating profit improved
 Basic earnings per share up by 21.4 %
 Interim dividend increased by 11.8% to 5.2p
 Increase in net funds to 11.7 million compared with 4.8 million at 30 June 2013
Tony Brewer, Headlam's Group Chief Executive, said:
"The particularly positive performance for the first six months, due in part to improved market conditions, is principally as a result of the various business initiatives combined with the efforts of management, sales representatives and all employees.
The momentum created during the first half as a result of these factors has continued into July and August and is evident in both the commercial and residential sectors. Assuming that normal seasonality in the traditionally busy autumn selling period prevails, the group is very well placed to continue this trend for the remainder of 2014."
Enquiries:
Headlam Group plc 
Tony Brewer, Group Chief Executive  Tel: 01675 433000
Steve Wilson, Group Finance Director 
Chairman's Statement
I am pleased to report that group revenue in the first six months of 2014 increased from 280.4 million to 301.6 million. Improving market conditions in the UK contributed to a like for like revenue increase of 7.9% and with more stable conditions on the Continent, we experienced only a slight revenue decline of 0.1%.
Earnings and dividend
Basic earnings per share increased by 21.4% from 8.4p to 10.2p compared with the first six months of 2013 and as a result, your board has decided to increase the interim dividend by 11.8% from 4.65p to 5.20p. The dividend will be paid on 2 January 2015 to shareholders on the register at 5 December 2014.
UK operations
The first six months of 2014 have produced a particularly positive performance and whilst undoubtedly improved market conditions will have contributed to the result, the various initiatives introduced across all our businesses, including management and sales representative training, enhanced point of sale and improved selling techniques, have enabled the group to out-perform the overall market.
The group now operates with 54 businesses from 18 distribution centres and 26 service centres and continues to be structured in the five business sectors of regional multi-product, national multi-product, regional commercial, residential specialist and commercial specialist. The increase in revenue reflected a slightly stronger performance from our residential business, where the growth rate was greater than our commercial business resulting in the overall product mix moving marginally to 69% residential and 31% commercial.
We have recently established service centres in Stoke and Norwich and a further opening in Hayes, west London is imminent. This will result in 43 collection points in the UK to assist in the servicing of our customers' requirements and there are plans to open additional service centres, in strategic geographical locations, to further extend the service proposition for our customers. 
During the last five years when markets and trading have been particularly difficult, we decided to retain the group's structure in order to maintain our service levels. It is now particularly encouraging that the regional and national multi-product businesses, which historically have been the foundation of the group's success, are recovering from their recent subdued performances and are now once again providing a platform for growth and contributing to the group's improving performance.
The second phase of our Management Training Programme for general and sales management has now been completed. Sales representatives are currently undertaking their phase two training, all of which is intended to improve communication, individual motivation, preparation and ultimately an improved service and business development with our customers.
The Customer Relationship Management App ("CRM"), utilised on our management and sales representatives' iPads, continues to advance and is now a hugely beneficial facility, particularly for our 419 sales representatives. They collectively make over 530,000 visits each year to customers and the iPad CRM, in conjunction with the training programmes, ensures that our sales representatives are fully prepared when visiting a customer, with clearly focused objectives, and are able to measure their achievement whilst interacting with their sales manager.
Market presence in independent floorcovering retailers and contractors continues to be enhanced through our ongoing product development with suppliers, resulting in the launch of 1,830 new products, supported by 319,796 point of sale items. Lifestyle Floors, which continues to take a more prominent market position, now has a huge presence in independent floorcovering retailers providing point of sale for each of the key residential product categories of carpet, vinyl, wood, laminate and luxury vinyl tile. With the constant launch of new products through Lifestyle Floors and our other business activities, we will continue to provide the independent floorcovering retailer and contractor with a comprehensive selection of product initiatives into the UK market.
Hall's Floorings and Fell's Carpets, the businesses acquired during 2013, have been fully integrated operationally, whilst maintaining their individual and autonomous sales and marketing activities. These businesses are now making a positive contribution to the group's results. We continue to assess similar acquisition opportunities to further strengthen our geographical or product position where appropriate.
As reflected in our increase in revenue, the independent floorcovering retailer and contractor are trading positively. A measure of their financial health is that their payment activity has resulted in a further reduction in outstanding debtor days and the occurrence of bad debts continues to decline.
The project to extend the Coleshill distribution hub to 300,000 square feet was completed in January and is now fully operational both to the benefit of the businesses directly operating from Coleshill and the enhancement it provides for the group's overall supply chain management.
We are now intending to proceed with the development of a new purpose-built 145,000 square feet distribution facility in the south-east of England for our regional multi-product business, Faithfulls. The enlarged facility, to be located in Ipswich, will allow Faithfulls to extend its product offering, increase its service and enhance its historically strong customer relationships.
Continental Europe
It is pleasing to report an improved performance from our businesses in France and the Netherlands, where a slight improvement in market conditions, in conjunction with local initiatives, has delivered an increase in profitability. Unfortunately, market conditions in Switzerland continue to hamper our overall development in Continental Europe.
Cash flow
The cash flow from operating profit, before changes in working capital and other payables, amounted to 13.9 million compared with 12.3 million during the comparative six months in 2013. The increase was largely attributable to the 1.7 million improvement in profit before tax during the first six months of 2014.
Net working capital cash outflow amounted to 3.5 million compared with a net cash outflow of 8.9 million during the equivalent period in 2013. The group's operations typically lead to an increase in net working capital investment during the first six months which then tends to reverse through the second half of the year.
On average, this characteristic of the group's operations would normally give rise to a net working capital investment during the first six months equating to approximately 3.5% of revenue for the period. However, this year, the investment level, measured by reference to group revenue for the first six months, has been confined to 1.2% due to increased levels of activity during the period. If trading during the second half of the year continues in line with internal expectations, it is likely that the level of net working capital investment will double.
As a result of the reduced first half working capital investment, cash generated from operations amounted to 5.1 million compared with a cash outflow of 1.7 million during the corresponding period in 2013.
Cash outflows from investing activities during the first half of 2014 totalled 3.8 million, which was 2.0 million down on the previous year's cash outflow due to the completion of the investment in the Coleshill extension and no acquisition activity during this year's first half.
Cash outflows from financing activities were up 5.0 million on the previous year due to the repayment of term debt.
Overall, cash and cash equivalents decreased during the first six months by 7.5 million compared with a decrease of 11.4 million during the equivalent period in 2013. As shown below, the group ended the first six months with net funds of 11.7 million compared with 4.8 million at 30 June 2013, and 14.0 million at 31 December 2013.
Changes in net funds
At
1 January
2014
000
Cash
flows
000
Translation
differences
000
At
30 June 
2014
000
Cash at bank and in hand
47,477
(6,591)
(67)
40,819
Bank overdraft
-
(944)
19
(925)
47,477
(7,535)
(48)
39,894
Debt due within one year
(218)
-
8
(210)
Debt due after one year
(33,239)
5,089
120
(28,030)
14,020
(2,446)
80
11,654
Employee benefits
The actuarial assumptions at the half year have been derived using the same methodology adopted for 31 December 2013, but based on economic market conditions as at 30 June 2014. Over the six month period, there has been a fall in the discount rate of 0.2%, which has increased all the liabilities, and a fall in the assumed rate of inflation of 0.1%, which has reduced the liabilities linked to inflation, compared to the assumptions used at 31 December 2013. Therefore, the change in the discount rate assumption has been the predominant factor giving rise to the modest increase in the employee benefits liability, 16.0 million, compared with the liability at 31 December 2013 of 15.6 million.
The net actuarial losses arising from changes in the financial assumptions in the disclosures at 31 December 2013 of 0.08 million were lower than at 30 June 2014, 1.1 million, because during 2013, the increase in the inflation assumption of 0.5% had a greater impact in offsetting the increase in the discount rate of 0.3%.
Principal risks and uncertainties
The board has ultimate responsibility for identifying and managing the effect of risk and uncertainty on the group's business, results and financial condition. Whilst the board maintains a policy of continuous identification and review, it nevertheless recognises that a number of risks and uncertainties lie beyond its control.
Currently, the key risks and uncertainties, which have or can potentially affect the group's operations are, market demand, competition, credit risk, IT failure, people, pension costs, legislation and regulation. The potential impact and mitigation of these risks and uncertainties are discussed in more detail on pages 28 and 29 of the 2013 Annual Report and Accounts.
Outlook
The particularly positive performance for the first six months, due in part to improved market conditions, is principally as a result of the various business initiatives combined with the efforts of management, sales representatives and all employees.
The momentum created during the first half as a result of these factors has continued into July and August and is evident in both the commercial and residential sectors. Assuming that normal seasonality in the traditionally busy autumn selling period prevails, the group is very well placed to continue this trend for the remainder of 2014.


Condensed Consolidated Interim Income Statement
Unaudited

Note
Six months ended 
30 June 
2014
000
Six months ended 
30 June 
2013
000
* Year ended 
31 December 2013
000





Revenue
2
301,580
280,385
603,051
Cost of sales

(212,104)
(195,751)
(421,796)
Gross profit

89,476
84,634
181,255
Distribution expenses

(58,515)
(56,161)
(115,067)
Administrative expenses

(19,630)
(18,735)
(43,860)
Operating profit
2
11,331
9,738
22,328
Finance income
3
126
96
629
Finance expenses
3
(698)
(758)
(1,870)
Net finance costs

(572)
(662)
(1,241)
Profit before tax

10,759
9,076
21,087
Taxation
4
(2,313)
(2,110)
(6,146)
Profit for the period attributable to the equity
shareholders
2
8,446
6,966
14,941





Dividend paid per share
6
15.30p
14.85p
14.85p





Earnings per share




Basic
5
10.2p
8.4p
18.0p





Diluted
5
10.0p
8.3p
17.9p
All group operations during the financial periods were continuing operations.
* Included within administrative expenses in the results for the year ended 31 December 2013 are non-underlying items that relate to the impairment of intangible and tangible fixed assets, totalling 5,352,000, details of which can be found in the Annual Report of the group.


Condensed Consolidated Interim Statement of Comprehensive Income
Unaudited

Six months
ended 
30 June
2014
000
Six months
ended 
30 June
2013
000
Year ended 
31 December
2013
000
Profit for the period attributable to the equity
shareholders
8,446
6,966
14,941




Other comprehensive income:



Items that will never be reclassified to profit or loss



Re-measurement of defined benefit plans
(1,391)
(410)
450
Related tax
291
(124)
(529)

(1,100)
(534)
(79)
Items that are or may be reclassified to profit or loss



Foreign exchange translation differences arising on
 translation of overseas operations
(548)
999
397
Effective portion of changes in fair value of cash flow hedges
(15)
75
115
Transfers to profit or loss on cash flow hedges
67
68
137
Related tax
(13)
(14)
(65)

(509)
1,128
584




Other comprehensive (expense)/income for the period
(1,609)
594
505




Total comprehensive income attributable to the equity shareholders for the period
6,837
7,560
15,446


Condensed Consolidated Interim Statement of Financial Position
Unaudited


At
30 June 
2014
000
At
30 June 
2013
000
At
31 December 2013
000
Assets




Non-current assets




Property, plant and equipment

104,434
99,608
103,079
Intangible assets

10,013
13,210
10,013
Deferred tax assets

2,393
2,173
2,388


116,840
114,991
115,480
Current assets




Inventories

120,624
120,656
115,678
Trade and other receivables

113,525
109,932
119,488
Cash and cash equivalents

40,819
40,444
47,477


274,968
271,032
282,643
Total assets

391,808
386,023
398,123





Liabilities




Current liabilities




Bank overdraft

(925)
(1,918)
-
Other interest-bearing loans and borrowings

(210)
(225)
(218)
Trade and other payables

(169,024)
(159,061)
(164,519)
Employee benefits

(2,887)
(2,798)
(2,842)
Income tax payable

(5,687)
(5,863)
(7,022)


(178,733)
(169,865)
(174,601)
Non-current liabilities




Other interest-bearing loans and borrowings

(28,030)
(33,468)
(33,239)
Employee benefits

(13,096)
(13,917)
(12,780)


(41,126)
(47,385)
(46,019)
Total liabilities

(219,859)
(217,250)
(220,620)
Net assets

171,949
168,773
177,503





Equity attributable to equity holders




of the parent




Share capital

4,268
4,268
4,268
Share premium

53,512
53,512
53,512
Other reserves

(5,165)
(4,639)
(4,742)
Retained earnings

119,334
115,632
124,465
Total equity

171,949
168,773
177,503


Condensed Consolidated Interim Statement of Changes in Equity
Unaudited

Share
capital
000
Share
premium
000
Capital
redemption
reserve
000
Translation
reserve
000
Cash flow
hedging
reserve
000
Treasury
reserve
000
Retained
earnings
000
Total
equity
000









Balance at 
 1 January 2013
4,268
53,512
88
5,768
(339)
(11,329)
121,361
173,329
Profit for the period attributable to the equity shareholders
-
-
-
-
-
-
6,966
6,966
Other comprehensive income
-
-
-
999
143
-
(548)
594
Total comprehensive income for the period
-
-
-
999
143
-
6,418
7,560









Transactions with equity shareholders, recorded directly in equity








Share-based payments
-
-
-
-
-
-
166
166
Share options exercised by employees



-
-
31
(16)
15
Deferred tax on share options 
-
-
-
-
-
-
3
3
Dividends to equity holders
-
-
-
-
-
-
(12,300)
(12,300)
Total contributions by and distributions to equity shareholders
-
-
-
-
-
31
(12,147)
(12,116)
Balance at 
 30 June 2013
4,268
53,512
88
6,767
(196)
(11,298)
115,632
168,773









Balance at 
 1 July 2013
4,268
53,512
88
6,767
(196)
(11,298)
115,632
168,773
Profit for the period attributable to the equity shareholders
-
-
-
-
-
-
7,975
7,975
Other comprehensive income
-
-
-
(602)
109
-
404
404
Total comprehensive income for the period
-
-
-
(602)
109
-
8,379
7,886









Transactions with equity shareholders, recorded directly in equity








Share-based payments
-
-
-
-
-
-
122
122
Share options exercised by employees
-
-
-
-
-
390
(162)
228
Deferred tax on share options 
-
-
-
-
-
-
494
494
Total contributions by and distributions to equity shareholders
-
-
-
-
-
390
454
844
Balance at 
 31 December 2013
4,268
53,512
88
6,165
(87)
(10,908)
124,465
177,503


Condensed Consolidated Interim Statement of Changes in Equity continued
Unaudited

Share
capital
000
Share
premium
000
Capital
redemption
reserve
000
Translation
reserve
000
Cash flow hedging reserve 000
Treasury
reserve
000
Retained
earnings
000
Total
equity
000









Balance at 
 1 January 2014
4,268
53,512
88
6,165
(87)
(10,908)
124,465
177,503
Profit for the period attributable to the equity shareholders
-
-
-
-
-
-
8,446
8,446
Other comprehensive income
-
-
-
(548)
52
-
(1,113)
(1,609)
Total comprehensive income for the period
-
-
-
(548)
52
-
7,333
6,837









Transactions with equity shareholders, recorded directly in equity








Share-based payments
-
-
-
-
-
-
233
233
Share options exercised by employees
-
-
-
-
-
73
(10)
63
Deferred tax on share options 
-
-
-
-
-
-
2
2
Dividends to equity holders
-
-
-
-
-
-
(12,689)
(12,689)
Total contributions by and distributions to equity shareholders
-
-
-
-
-
73
(12,464)
(12,391)
Balance at 
 30 June 2014
4,268
53,512
88
5,617
(35)
(10,835)
119,334
171,949


Condensed Consolidated Interim Cash Flow Statements
Unaudited


Six months ended 
30 June 2014
000
Six months ended 
30 June 2013
000
Year ended 
31 December
2013
000
Cash flows from operating activities




Profit before tax for the period

10,759
9,076
21,087
Adjustments for:




Depreciation, amortisation and impairment

2,380
2,412
10,136
Finance income

(126)
(96)
(629)
Finance expense

698
758
1,870
Profit on sale of property, plant and equipment

(14)
(10)
(177)
Share-based payments

233
166
288
Operating profit before changes in working capital and other payables

13,930
12,306
32,575
Change in inventories

(5,409)
(3,790)
1,967
Change in trade and other receivables

5,406
(19)
(9,114)
Change in trade and other payables

(3,497)
(5,119)
9,421
Cash generated from the operations

10,430
3,378
34,849
Interest paid

(429)
(314)
(1,565)
Tax paid

(3,370)
(3,307)
(6,344)
Additional contributions to defined benefit plan

(1,495)
(1,449)
(2,913)
Net cash flow from operating activities

5,136
(1,692)
24,027
Cash flows from investing activities




Proceeds from sale of property, plant and equipment

115
66
479
Interest received

161
64
613
Acquisition of subsidiaries, net of cash acquired

-
(600)
(1,974)
Acquisition of property, plant and equipment

(4,065)
(5,343)
(13,267)
Net cash flow from investing activities

(3,789)
(5,813)
(14,149)
Cash flows from financing activities




Proceeds from the issue of treasury shares

63
15
243
Repayment of borrowings

(5,089)
(93)
(223)
Dividends paid

(3,856)
(3,850)
(12,300)
Net cash flow from financing activities

(8,882)
(3,928)
(12,280)
Net decrease in cash and cash equivalents

(7,535)
(11,433)
(2,402)
Cash and cash equivalents at 1 January

47,477
49,798
49,798
Effect of exchange rate fluctuations on cash held

(48)
161
81
Cash and cash equivalents at end of period

39,894
38,526
47,477


Notes to the Condensed Consolidated Interim Financial Statements
Unaudited
1 BASIS OF REPORTING
Reporting entity
Headlam Group plc the "company" is a company incorporated in the UK. The Condensed Consolidated Interim Financial Statements consolidate those of the company and its subsidiaries which together are referred to as the "group" as at and for the six months ended 30 June 2014. 
The Consolidated Financial Statements of the group as at and for the year ended 31 December 2013 are available upon request from the company's registered office or the website.
The comparative figures for the financial year ended 31 December 2013 are not the group's statutory accounts for that financial year. Those accounts have been reported on by the group's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2)or(3) of the Companies Act 2006.
These Condensed Consolidated Interim Financial Statements have not been audited or reviewed by the auditor pursuant to the Auditing Practices Board's Guidance on Financial Information. 
Statement of compliance
These Condensed Consolidated Interim Financial Statements have been prepared and approved by the directors in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and International Accounting Standard IAS 34 Interim Financial Reporting as adopted by the EU. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the Consolidated Financial Statements of the group as at and for the year ended 31 December 2013.
These Condensed Consolidated Interim Financial Statements were approved by the board of directors on 
29 August 2014.
Significant accounting policies
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the group's published Consolidated Financial Statements for the year ended 
31 December 2013, except as explained below.
Adoption of new and revised standards
The following standards and interpretations are applicable to the group and have been adopted in 2014 as they are mandatory for the year ended 31 December 2014.
 IFRS 10 Consolidated Financial Statements: This standard provides a single model to be applied in the control analysis for all investees, including entities that currently are special purpose entities in the scope of SIC-12.
 IFRS 11 Joint Arrangements: This standard carves out from IAS 31, those cases in which there is a separate vehicle but that separation is overcome by form, contract or other facts and circumstances and removes the choice of equity or proportionate accounting for jointly controlled entities (as was under IAS 31).


Notes to the Condensed Consolidated Interim Financial Statementscontinued
Unaudited
1 BASIS OF REPORTING - continued
Significant accounting policies (continued)
 IFRS 12 Disclosure of Interests in Other Entities: Contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities.
 IAS 27 Separate Financial Statements 2011: IAS 27 (2011) carries forward the existing accounting and disclosure requirements of IAS 27 (2008) for separate financial statements, with some minor clarifications.
 IAS 28 Investments in Associates and Joint Ventures 2011: Amendments relating to held for sale interests and changes of classification.
 Amendments to IAS 32 and IFRS 7 for 'Offsetting Financial Assets and Financial Liabilities': Amendments to clarify offsetting criteria and specific disclosures.
There are no other new standards, amendments to standards or interpretations mandatory for the first time for the year ending 31 December 2014. The above standards have not had a significant impact on the financial statements of 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 Chairman's Statement.
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. 
The group has undrawn borrowing facilities, at 30 June 2014 totalling 57.2 million. This comprised committed credit facilities of 15 million and uncommitted of 42.2 million. At 30 June 2014, the group had drawn upon 28.2 million of the committed credit facilities, and 0.9 million of the uncommitted credit facilities.
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 2013.
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 Chairman's Statement.

Notes to the Condensed Consolidated Interim Financial Statementscontinued
Unaudited
2 SEGMENT REPORTING
The group has 54 operating segments in the UK and five 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 Group Chief Executive. Discrete financial information is available for each segment and used by the Group 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 Group 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 June
2014
000
30 June
2013
000
31 December
2013
000
30 June
2014
000
30 June
2013
000
31 December
2013
000
30 June
2014
000
30 June
2013
000
31 December
2013
000
Revenue









External revenues
257,770
234,708
509,340
43,810
45,677
93,711
301,580
280,385
603,051




















Reportable segment operating profit
11,356
9,936
26,877
614
498
1,678
11,970
10,434
28,555




















Reportable segment assets 
232,288
217,195
233,913
32,590
38,611
35,708
264,878
255,806
269,621










Reportable segment liabilities
(144,868)
(134,740)
(148,457)
(16,213)
(17,593)
(15,975)
(161,081)
(152,333)
(164,432)
During the periods shown above there have been no inter-segment revenues for the reportable segments (2013: nil).
Reconciliations of reportable segment profit, assets and liabilities and other material items:




30 June
2014
000
30 June
2013
000
31 December
2013
000
Profit for the period






Total profit for reportable segments


11,970
10,434
28,555
Impairment of intangibles and assets



-
-
(5,352)
Unallocated expense



(639)
(696)
(875)







Operating profit



11,331
9,738
22,328







Finance income



126
96
629
Finance expense



(698)
(758)
(1,870)







Profit before taxation



10,759
9,076
21,087
Taxation



(2,313)
(2,110)
(6,146)







Profit for the period



8,446
6,966
14,941









Notes to the Condensed Consolidated Interim Financial Statementscontinued
Unaudited
2 SEGMENT REPORTING - continued








30 June
2014
000
30 June
2013
000
31 December
2013
000
Assets





Total assets for reportable segments

264,878
255,806
269,621
Unallocated assets:





Properties, plant and equipment


96,449
92,364
93,883
Deferred tax assets


2,393
2,173
2,388
Cash and cash equivalents


28,088
35,680
32,231






Total assets


391,808
386,023
398,123






Liabilities





Total liabilities for reportable segments

(161,081)
(152,333)
(164,432)
Unallocated liabilities:





Employee benefits


(15,983)
(16,714)
(15,622)
Other interest-bearing loans and borrowings


(28,240)
(33,693)
(33,457)
Income tax payable


(5,687)
(5,863)
(7,022)
Proposed dividend


(8,833)
(8,450)
-
Derivative liabilities


(35)
(196)
(87)






Total liabilities


(219,859)
(217,250)
(220,620)







UK
Continental Europe
Reportable segment
total
Unallocated
Consolidated total

000
000
000
000
000
Other material items 30 June 2014





Capital expenditure
1,986
182
2,168
1,897
4,065
Depreciation
1,107
286
1,393
987
2,380






Other material items 30 June 2013





Capital expenditure
1,333
470
1,803
3,540
5,343
Depreciation
1,110
318
1,428
905
2,333
Amortisation
-
-
-
79
79






Other material items 31 December 2013





Capital expenditure
3,043
649
3,692
9,847
13,539
Depreciation
2,171
666
2,837
1,797
4,634
Amortisation
-
-
-
150
150
Impairment of assets
-
-
-
2,155
2,155
Impairment of intangible assets
-
-
-
3,197
3,197
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 Group 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.

Notes to the Condensed Consolidated Interim Financial Statementscontinued
Unaudited
2 SEGMENT REPORTING - continued
The Group 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 June
2014
000
30 June
2013
000
31 December
2013
000
30 June
2014
000
30 June
2013
000
31 December
2013
000
30 June
2014
000
30 June
2013
000
31 December
2013
000
Revenue









Residential
178,268
160,567
350,020
19,917
20,816
47,608
198,185
181,383
397,628
Commercial
79,502
74,141
159,320
23,893
24,861
46,103
103,395
99,002
205,423











257,770
234,708
509,340
43,810
45,677
93,711
301,580
280,385
603,051
3 FINANCE INCOME AND EXPENSE

Six months
ended 
30 June
2014
000
Six months
ended 
30 June
2013
000
Year ended 
31 December 2013
000
Interest income:



Bank interest
29
65
629
Other
97
31
-
Finance income
126
96
629




Interest expense:



Bank loans, overdrafts and other financial expenses
(361)
(392)
(1,044)
Net change in fair value of cash flow hedges transferred from equity
(67)
(68)
(137)
Interest on net defined benefit plan deficit
(270)
(298)
(578)
Other
-
-
(111)
Finance expenses
(698)
(758)
(1,870)


Notes to the Condensed Consolidated Interim Financial Statementscontinued
Unaudited
4 TAXATION
The group's consolidated effective tax rate in respect of continuing operations for the six months ended 30 June 2014 was 21.5% (for the six months ended 30 June 2013: 23.25%; for the year ended 31 December 2013: 23.25% based on results prior to including non-underlying items that relate to the impairment of intangible and tangible fixed assets, totalling 5,352,000.).
The Budget 2013, issued on 20 March 2013, announced that the main rate of corporation tax would be reduced to 21% from 1 April 2014 and to 20% with effect from 1 April 2015. These future rate reductions were substantively enacted on 2 July 2013 and have been appliedreducing the company's current tax charge accordingly. 
The deferred tax asset at 30 June 2014 has been calculated based on the rates of 20% and 21% substantively enacted at the balance sheet date.
5 EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:

Six months
ended 
30 June
2014
000
Six months
ended 
30 June
2013
000
Year ended 
31 December 2013
000
Earnings



Earnings for the purposes of basic and diluted earnings per share being profit attributable to equity holders of the parent
8,446
6,966
14,941





2014
2013
2013
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
(2,328,375)
(2,422,387)
(2,383,937)




Weighted average number of ordinary shares for the purposes of basic earnings per share
83,035,368
82,941,356
82,979,806




Effect of diluted potential ordinary shares:



Weighted average number of ordinary shares at period end
83,035,368
82,941,356
82,979,806
Dilutive effect of share options
1,072,187
744,954
646,209




Weighted average number of ordinary shares for the purposes of diluted earnings per share
84,107,555
83,686,310
83,626,015


Notes to the Condensed Consolidated Interim Financial Statementscontinued
Unaudited
6 DIVIDENDS

Six months ended
30 June
2014
000
Six months ended
30 June 
2013
000
Year ended
31 December 2013
000




Interim dividend for 2013 of 4.65p paid 2 January 2014
3,856
-
-
Final dividend for 2013 of 10.65p proposed
8,833
-
-
Interim dividend for 2012 of 4.65p paid 2 January 2013
-
3,850
3,850
Final dividend for 2012 of 10.20p proposed
-
8,450
8,450

12,689
12,300
12,300
The final proposed dividend for 2013 of 10.65p per share was authorised by shareholders at the Annual General Meeting on 21 May 2014 and paid on 1 July 2014. The final proposed dividend for 2012 of 10.20p per share was authorised by shareholders at the Annual General Meeting on 24 May 2013 and paid on1 July 2013.
7 CAPITAL COMMITMENTS
As at 30 June 2014, the group had contractual commitments relating to the purchase of property, plant and equipment of 198,000 (30 June 2013: 8,969,000, 31 December 2013: 2,261,000). 
8 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.
9 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, with the exception of the matter described below. 
On 2 July 2014, the group completed the acquisition of the business and certain assets of Kalm Investments Limited. Kalm Investments consisted of two trading entities; RPS Flooring based in Mansfield and Mytton Flooring based in Norwich. The combined annual sales revenue of the two businesses is approximately 2.8 million. Consideration at completion amounted to 297,000 and a further 158,000 was paid following the verification of the fair value of assets acquired. 
At the end of July, the RPS Flooring business was transferred to and now operates from our distribution facility in Nottingham, whilst retaining its autonomous sales and marketing identity.
Mytton Flooring remains in Norwich and will now also provide an enhanced logistics service for our businesses operating from Tamworth and Coleshill for customers located in East Anglia.


Statement of Directors' Responsibilities
We confirm to the best of our knowledge:







(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;
(b) the interim management report includes a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
This report has been approved by the board of directors and signed on its behalf by
Dick Peters
Chairman
29 August 2014

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