REG - Howden Joinery Grp - Half Yearly Report <Origin Href="QuoteRef">HWDN.L</Origin> - Part 2
06/09/2014 20:29
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have been in the second half of the year.
5 Write down of inventories
During the period, the Group has recognised a net charge of £1.5m in respect
of writing inventories down to their net realisable value (24 weeks to 15 June
2013 - net charge of £0.9m, 52 weeks to 28 December 2013 - net charge of
£3.2m).
6 Continuing operations - exceptional items
There were no exceptional items in continuing operations in the 24 weeks to 14
June 2014. However, there were discontinued exceptional items in the period,
which are analysed further in Note 17
Exceptional items for the 2013 financial year
During the 52 weeks to 28 December 2013, the Group reconfigured its transport
operations to better reflect the geographical mix of its sales in the UK and
to improve service to its depots. This restructuring involved closure,
relocation and reorganisation costs.
Of the total expenditure of £4.5m, the majority (£3.9m) was incurred in the 24
weeks to 15 June 2013 and the remainder was incurred during the second half of
2013, having been accrued at 15 June 2013.
24 weeks to 15 June 2013unaudited£m 52 weeks to28 December 2013audited£m
Exceptional cost before tax (4.5) (4.5)
Tax on exceptional cost 0.4 0.5
Exceptional cost after tax (4.1) (4.0)
24 weeks to14 June 2014 unaudited£m 24 weeks to15 June 2013unauditedrestated*£m 52 weeks to28 December 2013auditedrestated*£m
7 Finance income
Bank interest receivable 0.3 0.2 0.4
8 Finance expenses and other finance expense - pensions
Finance expense
Bank interest - (0.1) (0.1)
Other interest (including finance lease interest) payable - - (0.2)
Finance charge on remeasuring creditors to fair value - (0.1) (0.1)
- (0.2) (0.4)
Other finance expense - pensions
Pensions finance expense (0.7) (2.6) (5.7)
*Restated for amendments to IAS19 - see Note 2.
9 Tax
Tax for the 24 weeks to 14 June 2014 is charged at 5.9% (24 weeks to 15 June
2013: 27.9%), representing the tax effects of discrete items arising in the
period, together with the best estimate of the average effective tax rate
expected for the full year applied to the pre-tax income of the 24-week
period. This reflects a prior year adjustment to tax for discontinued
operations of £11.5m, excluding which the rate would have been 26.0%.
10 Earnings per share
24 weeks to 14 June 2014unaudited 24 weeks to 15 June 2013unauditedrestated* 52 weeks to 28 December 2013auditedrestated*
Earnings£m Weighted averagenumberof sharesm Earnings per sharep Earnings£m Weighted average numberof sharesm Earningsper sharep Earnings£m Weighted average numberof sharesm Earningsper sharep
From continuing operations
Basic earnings per share 42.3 639.7 6.6 26.7 636.3 4.2 97.3 636.6 15.3
Effect of dilutive share options - 1.4 - - 1.4 - - 5.6 (0.1)
Diluted earnings per share 42.3 641.1 6.6 26.7 637.7 4.2 97.3 642.2 15.2
From discontinued operations
Basic earnings per share 9.8 639.7 1.5
Effect of dilutive share options - 1.4 -
Diluted earnings per share 9.8 641.1 1.5
From continuing and discontinued operations
Basic earnings per share 52.1 639.7 8.1 26.7 636.3 4.2 97.3 636.6 15.3
Effect of dilutive share options - 1.4 - - 1.4 - - 5.6 (0.1)
Diluted earnings per share 52.1 641.1 8.1 26.7 637.7 4.2 97.3 642.2 15.2
There were no discontinued operations in either of the two comparative
periods.
*Restated for amendments to IAS19 - see Note 2.
11 Dividends
Amounts recognised as distributions to equity holders in the period
24 weeks to14 June 2014 unaudited£m 24 weeks to15 June 2013unaudited£m 52 weeks to28 December 2013audited£m
Final dividend for the 52 weeks to 28 December 2013 - 4.5p/share 28.8 - -
Final dividend for the 53 weeks to 29 December 2012 - 2.7p/share - 17.0 17.0
Interim dividend for the 52 weeks to 28 December 2013 - 1.0p/share - - 6.3
28.8 17.0 23.3
No dividends were paid in the current period or the 24 weeks to 15 June 2013.
The final dividend for the 52 weeks to 28 December 2013 (4.5p per share) was
approved at the 2014 AGM in May 2014 and was paid on 20 June 2014. The final
dividend for the 53 weeks to 29 December 2012 (2.7p per share) was approved at
the 2013 AGM in May 2013 and was paid on 21 June 2013. The interim dividend
for the 52 weeks to 28 December 2013 (1.0p per share) was paid on 22 November
2013.
Dividends have been waived indefinitely on all shares held by the Group's
employee share trusts which have not yet been awarded to employees.
Proposed dividends
On 23 July 2014, the Board approved the payment of an interim dividend of 1.9p
per share, to be paid on 21 November 2014 to ordinary shareholders on the
register on 24 October 2014.
24 weeks to14 June 2014unaudited£m 24 weeks to15 June 2013unaudited£m 52 weeks to28 December 2013audited£m
Proposed interim dividend for the 52 weeks to 27 December 2014 - (1.9p/share) 12.2
Proposed interim dividend for the 52 weeks to 28 December 2013 - (1.0p/share) 6.3
Proposed final dividend for the 52 weeks to 28 December 2013 - (4.5p/share) 28.4
12 Property, plant and equipment
During the period, the Group spent £17.2m on additions to property, plant and
equipment (24 weeks to 15 June 2013 - £8.8m; 52 weeks to 28 December 2013 -
£23.6m). It also disposed of property, plant and equipment with a net book
value of £0.3m (24 weeks to 15 June 2013 - £nil; 52 weeks to 28 December 2013
- £0.3m) for proceeds of £0.2m (24 weeks to 15 June 2013 - £nil; 52 weeks to
28 December 2013 - £nil).
There are non-cancellable commitments to purchase property, plant and
equipment of £4.9m at the current period end (24 weeks to 15 June 2013 -
£2.1m; 52 weeks to 28 December 2013 - £6.5m).
13 Retirement benefit obligations
(a) Adoption of revisions to IAS19 in the current period
The revised IAS19 was adopted in the current period. As required, prior
periods have been restated as if the revised standard had been in force in
those periods.
Further detail of the nature of the revisions is given in Note 2. Their
financial effect is shown below:
24 weeks to14 June 2014unaudited£m 24 weeks to15 June 2013unaudited£m 52 weeks to28 December 2013audited£m
Income statement
Admin expenses - increase to defined benefit pensions current service cost 0.9 0.9 1.8
Other finance charge - pensions. Increase to charge 2.9 0.7 1.6
Tax charge - deferred tax element of current tax charge (0.8) (0.4) (0.9)
Net decrease in profit for the period 3.0 1.2 2.5
Other Comprehensive Income (OCI)
Change in gross actuarial gain - increase in OCI (3.8) (1.6) (3.4)
Change in deferred tax on actuarial gain - decrease in OCI 0.8 0.4 0.9
(3.0) (1.2) (2.5)
Net effect on total income (and net assets) - - -
Earnings per share
Reduction in basic EPS (pence/share) (0.5) (0.2) (0.4)
Reduction in diluted EPS (pence/share) (0.5) (0.2) (0.3)
(b) Total amounts charged in respect of defined benefit pensions in the
period
24 weeks to14 June 2014 unaudited£m 24 weeks to15 June 2013Unauditedrestated*£m 52 weeks to28 December 2013auditedrestated*£m
Charged to the income statement
Defined benefit scheme - total operating charge 6.5 6.5 14.0
Defined benefit scheme - net finance charge 0.7 2.6 5.7
Total net amount charged to profit before tax 7.2 9.1 19.7
Charged/(credited) to equity
Defined benefit scheme - actuarial losses/(gains), net of deferred tax 24.0 (39.3) (56.2)
*Restated for amendments to IAS19 - see Note 2.
(c) Other information - defined benefit pension scheme
The most recent completed actuarial valuation was carried out at 5 April 2011
by the scheme actuary. The actuary advising the Group has subsequently rolled
forward the results of this valuation to 14 June 2014 and restated the results
onto a basis consistent with market conditions at that date. The pension
deficit has increased over the 24 weeks to 14 June 2014. The following
summary information analyses the main changes in greater detail.
Key assumptions used in the valuation of the scheme
24 weeks to 14 June 2014unaudited% 24 weeks to 15 June 2013unaudited% 52 weeks to28 December 2013audited%
Rate of increase of pensions in deferment capped at lower of CPI and 5% 2.50 2.35 2.60
Rate of CARE revaluation capped at lower of RPI and 3% 2.60 2.50 2.60
Rate of increase of pensions in payment:
pensions with increases capped at the lower of CPI and 5% 2.60 2.60 2.70
pensions with increases capped at the lower of CPI and 5%, with a 3% minimum 3.60 3.70 3.65
pensions with increases capped at the lower of RPI and 2.5% 2.30 2.30 2.30
Rate of increase in salaries 4.60 4.60 4.70
Inflation assumption - RPI 3.60 3.60 3.70
Inflation assumption - CPI 2.60 2.60 2.70
Discount rate 4.45 4.65 4.80
Balance sheet
Movements in the deficit during the period are as follows:
24 weeks to14 June 2014 unaudited£m 24 weeks to15 June 2013unaudited*£m 52 weeks to28 December 2013audited*£m
Deficit at start of period (54.3) (154.5) (154.5)
Current service cost (6.5) (6.5) (14.0)
Employer contributions 19.1 19.2 46.9
Other finance charge (0.7) (2.6) (5.7)
Actuarial (losses)/gains gross of deferred tax (30.0) 51.1 73.0
Deficit at end of period (72.4) (93.3) (54.3)
*Restated for amendments to IAS19 - see Note 2.
Statement of comprehensive income
Amounts taken to equity via the statement of comprehensive income in respect
of the Group's defined benefit scheme are shown below.
24 weeks to14 June 2014 unaudited£m 24 weeks to15 June 2013unauditedrestated*£m 52 weeks to28 December 2013auditedrestated*£m
Actuarial gain on scheme assets 19.1 16.4 25.7
Actuarial (loss)/gain on scheme liabilities (49.1) 34.7 47.3
Total actuarial (loss)/gain before tax (30.0) 51.1 73.0
*Restated for amendments to IAS19 - see Note 2.
14 Provisions
Property £m Warranty£m Business closure£m Total£m
At 28 December 2013 - audited 9.0 2.9 0.1 12.0
Created in the period 2.3 1.1 - 3.4
Utilised in the period (1.2) (1.3) (0.1) (2.6)
Released in the period - (0.1) - (0.1)
At 14 June 2014 - unaudited 10.1 2.6 - 12.7
Property provision
The property provision covers onerous leases on any non-trading leased
properties. For some properties, the provision is based on the shortfall
between rent payable and rent receivable. For other properties, where
negotiations to surrender the lease are in progress, the provision is based on
the amount which the landlord has indicated that they are willing to take as a
premium in order for the Group to surrender the lease. The provision is based
on the period until the end of the lease, or until the Group considers that it
can cover the shortfall by subletting, assigning or surrendering the lease.
Throughout the course of the year, the Group reviews the range of options for
unused properties, and maintains ongoing discussions with landlords and
external agents, with a view to identifying possible lease surrenders and
finding tenants. The property provision also includes amounts for any related
shortfalls in business rates on these properties, dilapidations, agents' fees
and other professional fees.
During the current period, the property provision has been increased by less
than £0.1m arising from an unwinding of the discount rate over time. None of
this amount relates to changes in the discount rate. This amount is included
as a finance expense. The amount of the expected future cash flows has been
adjusted to reflect the expected range of possibilities and, as the outflows
under this provision are expected to take place over a number of years, the
provision has been discounted to its present value.
The timing of outflows from the provision is variable, and is dependent on
property lease expiry dates and on opportunities to surrender leases.
Warranty provision
The warranty provision relates to amounts due in respect of product
warranties. As products are sold, the Group makes provision for potential
future claims under warranties. As claims are made, the Group utilises the
provision and then uses this data to periodically revise the basis on which it
makes further provision.
Business closure provision
The provision for business closure related to the costs of closure of the
Group subsidiary company Howden Joinery Supply Division (Asia) Ltd and was
fully utilised in the period as the remaining expenses related to the closure
of the company were incurred.
15 Related party transactions
There have been no changes to related party arrangements or transactions as
reported in the 2013 Annual Report and Accounts.
Transactions between Group companies, which are related parties, have been
eliminated on consolidation and are therefore not disclosed. Other
transactions which fall to be treated as related party transactions are: those
relating to the remuneration of key management personnel, which are not
disclosed in the Half-Yearly Report, and which will be disclosed in the
Group's next Annual Report and Accounts; in addition, transactions between the
Group and the Group's defined benefit pension scheme, which are disclosed in
Note 13.
16 Notes to the cash flow statement
(a) Net cash flows from operating activities
24 weeks to14 June 2014 unaudited£m 24 weeks to15 June 2013unaudited£m 52 weeks to28 December 2013audited£m
Net cash flows from operating activities comprises:
Continuing operating activities 35.6 10.2 87.2
(b) Reconciliation of movement in net cash
Net cash at start of period 140.5 96.4 96.4
Net increase in cash and cash equivalents 20.3 5.0 43.0
Increase in bank borrowings 0.2 0.6 1.1
Decrease in finance leases 0.1 - -
Net cash at end of period 161.1 102.0 140.5
Represented by:
Cash and cash equivalents 160.0 101.7 139.7
Bank loans 1.2 0.5 1.0
Finance leases (0.1) (0.2) (0.2)
161.1 102.0 140.5
(c) Analysis of net cash
Cash and cash equivalents£m Bank loans£m Finance leases£m Netcash£m
At 28 December 2013 - audited 139.7 1.0 (0.2) 140.5
Cash flow 20.3 0.2 0.1 20.6
At 14 June 2014 - unaudited 160.0 1.2 (0.1) 161.1
Closing bank loans at 14 June 2014 comprise £0.6m disclosed in current assets
and a non-current asset of £0.6m. Both of these items represent the excess of
prepaid loan fees over the amount of current and non-current borrowings which
are drawn down at the period end.
Closing finance leases of £0.1m at 14 June 2014 are all current liabilities.
As previously announced, the Group's debt facilities are due to expire in July
2016.
17 Discontinued operations
There were no discontinued operations in either of the comparative periods.
All discontinued operations in the current period are discontinued exceptional
items, and are analysed as follows:
Notes 24 weeks to 14 June 2014 unaudited
£m
Increase to discontinued operations property provision (a) (1.8)
Release of discontinued interest accrual (b) 0.1
Exceptional item - loss on discontinued operations (1.7)
Release of tax creditor for discontinued operations (c) 11.5
Exceptional profit after tax 9.8
(a) Increase to discontinued property provisions
During the 24 weeks to 14 June 2014, we have increased the provision for our
remaining legacy properties.
(b) Release of discontinued interest accrual
In prior periods, the Group had been accruing for possible interest which
would be due in relation to overdue tax in the event that we were unsuccessful
in our dispute with HMRC relating to discontinued operations (see (c) below).
Following the partial resolution of this dispute in the current period, we
now have certainty that some of this accrual will no longer be needed. We
have therefore released this amount in the current period.
(c) Release of tax creditor for discontinued operations
During the 24 weeks to 14 June 2014, we received a First Tier Tribunal
judgement which gave a partial resolution of a dispute with HMRC, regarding
the tax treatment of certain expenses relating to our legacy properties which
had been incurred in prior periods.
In prior years, we had prepared our tax computations for accounts purposes on
the basis that the disputed expense items would not be deductible for tax, and
we provided for tax on that basis. Now that the judgement has given us
certainty that particular expenses may be treated as deductible for tax, we
are recognising a credit of £11.5m of tax in the current period.
INDEPENDENT REVIEW REPORT TO HOWDEN JOINERY GROUP PLC
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly report for the 24 week period ended 14 June
2014, which comprises the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated cash flow
statement and related notes 1 to 17. We have read the other information
contained in the half-yearly 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 (UK and Ireland) 2410"Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
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 it 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 report is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the half-yearly report
in accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct 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 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 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
report for the 24 week period ended 14 June 2014 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 Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor, London
23 July 2014
FINANCIAL CALENDAR
2014
Interim Management Statement 13 November 2014
End of financial year 27 December 2014
2015
2014 Preliminary Results 26 February 2015
Interim Management Statement 30 April 2015
Half-Yearly Report 23 July 2015
Interim Management Statement 12 November 2015
End of financial year 26 December 2015
This information is provided by RNS
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