REG - Topps Tiles - Annual Financial Report <Origin Href="QuoteRef">TPT.L</Origin> - Part 2
28/11/2017 07:06
- Part 2: For the preceding part double click ID:nRSb6436Xa
2017 mean at 30 September 2017 or
the 52 weeks then ended; references to 2016 mean at 1 October 2016 or the 52 weeks then ended.
F. GOODWILL
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition
date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair
value of the acquirer's previously held equity interest (if any) in the entity over the net of the acquisition-date amounts
of the identifiable assets acquired and the liabilities assumed.
If, after reassessment, the Group's interest in the fair value of the acquiree's identifiable net assets exceeds the sum of
the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the
acquirer's previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss
as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill
is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination.
Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than
the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset
in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on
disposal.
Goodwill arising on acquisitions before the date of transition to IFRSs has been retained at the previous UK GAAP amounts
subject to being tested for impairment at that date. Goodwill of £15,080,000 written off to reserves under UK GAAP prior to
1998 has not been reinstated and will not be included in determining any subsequent profit or loss on disposal.
G. REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for
goods and services provided in the normal course of business, net of discounts, VAT and other sales-related taxes.
Revenue from the sale of goods is recognised on the collection or delivery of goods, when all the following conditions are
satisfied:
· the Group has transferred to the buyer the significant risks and rewards of ownership of the goods, being the date
goods are collected from store or received by the customers;
· the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor
effective control over the goods sold;
· the amount of revenue can be measured reliably;
· it is probable that the economic benefits associated with the transaction will flow to the entity; and
· the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The level of sales returns is closely monitored by management and provided for when management considers them to be
significant .
Sales of goods that result in award credits for customers, under the Company's Trader Loyalty Scheme, are accounted for as
multiple element revenue transactions and the fair value of the consideration received or receivable is allocated between
the goods supplied and the award credits granted. The consideration allocated to the award credits is measured by reference
to their fair value being the amount for which the award credits should be sold separately. Such consideration is not
recognised as revenue at the time of the initial sale transaction, but is deferred and recognised as revenue when the award
credits are redeemed and the Company's obligations have been fulfilled.
Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of
income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and
at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to that asset's net carrying amount on initial recognition.
H. INTANGIBLE ASSETS ACQUIRED IN BUSINESS COMBINATION
Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at
the fair value at the acquisition date (which is regarded as their cost).
Subsequently to initial recognition, intangible assets acquired in a business combination are reported at costs less
accumulated impairment losses.
Separately identifiable intangible assets are amortised over their useful economic lives.
I. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets, less estimated residual value, over their estimated useful
lives, on the following bases:
Freehold buildings 2% per annum on cost on a straight-line basis
Short leasehold land and buildings over the period of the lease, up to 50 years on a straight-line basis
Fixtures and fittings over 10 years, except for the following; 4 years for computer equipment or 5 years for display stands, as appropriate
Motor vehicles 25% per annum on a reducing balance basis
Freehold land is not depreciated.
Residual value is calculated on prices prevailing at the date of acquisition.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the statement of financial performance.
J. IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS
At each period end, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there
is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future post-tax cash flows are discounted to their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised
as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.
A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued
amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
K. INVENTORIES
Inventories are stated at the lower of cost and net realisable value and relate solely to finished goods for resale, net of
supplier rebates. Cost comprises the purchase price of materials and an attributable proportion of distribution overheads
based on normal levels of activity and is valued at standard cost. Net realisable value represents the estimated selling
price, less costs to be incurred in marketing, selling and distribution. Provision is made for those items of inventory
where the net realisable value is estimated to be lower than cost. The net replacement value of inventories is not
considered materially different from that stated in the consolidated statement of financial position.
L. TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in
the statement of financial performance because it excludes items of income or expense that are taxable or deductible in
other periods and it further excludes items that are never taxable or deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, and
interests in jointly controlled entities, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised based on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged or
credited in the statement of financial performance, except when it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
M. FOREIGN CURRENCY
The individual financial statements of each Group company are presented in pounds sterling (its functional currency). For
the purpose of the consolidated financial statements, the results and financial position of each Group company are
expressed in pound sterling, which is the functional currency of the Company, and the presentational currency for the
consolidated financial statements.
Transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of
exchange prevailing on the dates of transactions. At each period end, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items carried at fair value that
are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included
in the statement of financial performance for the period.
Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in statement of
financial performance for the period.
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on
transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge
accounting).
N. LEASES
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease
even where payments are not made on such a basis, except where another more systematic basis is more representative of the
time pattern in which economic benefits from the lease asset are consumed or a provision has been made for an onerous
lease. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are
incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from the leased
asset are consumed.
The Group provides for the unavoidable costs prior to lease termination or sub-lease relating to onerous leases.
Dilapidation costs are provided for against all leasehold properties across the entire estate.
O. INVESTMENTS
Fixed asset investments are shown at cost less provision for impairment.
P. RETIREMENT BENEFIT COSTS
For defined contribution schemes, the amount charged to the statement of financial performance in respect of pension costs
is the contributions payable in the period. Differences between contributions payable in the period and contributions
actually paid are shown as either accruals or prepayments in the Statement of Financial Position.
Q. FINANCE COSTS
Finance costs of debt are recognised in the statement of financial performance over the term of the debt at a constant rate
on the carrying amount.
R. FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is
under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified
as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or
loss' (FVTPL), 'held-to- maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'.
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial
recognition.
FINANCIAL ASSETS AT FVTPL
Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is designated as at
FVTPL. A Financial asset is classified as held for trading if:
• it has been acquired principally for the purpose of selling in the near future; or
• it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent
actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The
Directors use their judgement in selecting an appropriate valuation technique for financial instruments not quoted in an
active market. Valuation techniques commonly used by market practitioners are applied, such as discounted cash flows and
assumptions regarding market volatility.
LOANS AND RECEIVABLES
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective
interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for
short-term receivables when the recognition of interest would be immaterial.
EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash
receipts (including all fees on points paid or received that form an integral part of the effective interest rate,
transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments other than those financial assets and liabilities
classified as at FVTPL.
IMPAIRMENT OF FINANCIAL ASSETS
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each Statement of Financial
Position date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been
impacted.
For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of
delayed payments in the portfolio past the average credit period of 50 days, as well as observable changes in national or
local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the financial asset's original effective
interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account
are recognised in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit
or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed
what the amortised cost would have been had the impairment not been recognised.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are
readily convertible to a known amount of cash within three months and are subject to an insignificant risk of changes in
value.
DERECOGNITION OF FINANCIAL ASSETS
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it
transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If
the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may
have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds
received.
FINANCIAL LIABILITIES AND EQUITY
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of
direct issue costs.
Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is
designated as at FVTPL. The Group does not have any designated FVTPL liabilities.
A financial liability is classified as held for trading if:
• it has been incurred principally for the purpose of disposal in the near future; or
• it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent
actual pattern of short-term profit taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss.
OTHER FINANCIAL LIABILITIES
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other
financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost
of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
DERECOGNITION OF FINANCIAL LIABILITIES
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they
expire.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group's activities expose it to the financial risks of changes in foreign currency exchange rates and interest rates.
The Group uses foreign exchange forward contracts to manage its foreign currency risk. The Group does not hold or issue
derivative financial instruments for speculative purposes.
The use of financial derivatives is governed by the Group's policies approved by the board of directors, on the use of
financial derivatives.
Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each period end date. The resulting gain or loss is recognised in profit or loss
immediately.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is
more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as
current assets or current liabilities.
S. SHARE-BASED PAYMENTS
The Group has applied the requirements of IFRS 2 Share-based payments. In accordance with the transitional provisions, IFRS
2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 October 2005.
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured
at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined
at the grant date of the share- based payment is expensed on a straight-line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest. Fair value is measured by use of the Black-Scholes model.
The Group provides employees with the ability to purchase the Group's ordinary shares at 80% of the current market value
through the operation of its share save scheme. The Group records an expense, based on its estimate of the 20% discount
related to shares expected to vest on a straight-line basis over the vesting period.
T. TRADE PAYABLES
Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective
interest rate method.
U. OPERATING PROFIT
Operating profit is stated after charging/(crediting) restructuring costs but before property disposals, investment income
and finance costs.
V. PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and
it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount
of that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the
obligation at the balance sheet date, and are discounted to present value where the effect is material.
W. SUPPLIER INCOME
Amounts receivable from suppliers are initially held on the balance sheet within the cost of inventory and recognised
within the income statement once the contractual terms of the supplier agreements are met and the corresponding inventory
has been sold.
Volume rebates and price discounts are recognised in the income statement, as a reduction in cost of sales, in line with
the recognition of the sale of a product.
X. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are described above, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
The Directors have concluded that there are no critical areas of accounting judgement in the application of the Group's
accounting policies in the current period.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The key assumptions concerning the future, and other key sources of estimation uncertainty at the period end date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial period, are discussed below:
PROPERTY PROVISIONS
Onerous lease provision - During the period the Group has continued to review the performance of its store portfolio, which
has resulted in one further store being exited before its lease terms had expired (2016: seven stores). In respect of the
leases in relation to stores exited before lease end dates in prior periods that are still vacant, the Group has provided
for what it considers to be the unavoidable
costs prior to lease termination or sublease. The Group has further reviewed any trading loss making stores and provided
for those leases considered to be onerous. These estimates are based upon available information and knowledge of the
property market. The ultimate costs to be incurred in this regard may vary from the estimates.
Dilapidations provision - The Group has estimated its likely dilapidation charges for its store portfolio and provided
accordingly. This estimate involves an assessment of average costs per store and the expected exit period for the current
portfolio, and is based on management's best estimate, taking into account knowledge of the property market and historical
trends. The ultimate costs to be incurred may vary from the estimates.
Property provisions are discounted to a present value by applying a discount rate consistent with market conditions at the
reporting date. Discount rates used and sensitivity of the discount rate is disclosed in note 20.
3 REVENUE
An analysis of Group revenue is as follows:
52 weeksended 30 September2017£'000 52 weeksended 1 October2016£'000
REVENUE FROM THE SALE OF GOODS 211,848 214,994
TOTAL REVENUE 211,848 214,994
Investment revenue represents bank interest receivable. There are no other gains recognised in respect of loans and
receivables.
The Group has one reportable segment in accordance with IFRS 8 - Operating Segments, which is the Topps Tiles stores and
online business segment. The Group's Board is considered the chief operating decision maker. The Board receives monthly
financial information at this level and uses this information to monitor the performance of the Topps Tiles stores and
online business segment, allocate resources and make operational decisions. Internal reporting focuses on the Group as a
whole and does not identify any further individual segments. All revenue is derived from sales in the UK and from one class
of business.
4 ACQUISITION OF SUBSIDIARIES
The Group acquired 100% of the issued share capital of Parkside Ceramics Limited on 31 August 2017. The acquisition of
Parkside Ceramics Limited gives the Group greater coverage in the commercial tile market and allows the Group to utilise
economies of scale to create additional value and create further synergies.
The Group performed a purchase price allocation exercise on Parkside Ceramics Limited to restate assets and liabilities at
their fair value. Intangible assets were recognised in relation to the Parkside Ceramics brand and customer
relationships.
The contingent consideration is estimated based on performance conditions in place for Parkside Ceramics Limited over the
next 12 months.
The Group incurred £169,000 of cost in relation to acquisition activity during the year.
The fair value of the net assets acquired and liabilities assumed at the acquisition date were:
Fair value of net assets acquired
£'000
PROPERTY, PLANT AND EQUIPMENT 45
INVENTORIES 248
TRADE AND OTHER RECEIVABLES 117
TRADE AND OTHER PAYABLES (347)
OTHER FINANCIAL LIABILITIES (12)
CORPORATION TAX 11
DEFERRED TAX (35)
CASH AND CASH EQUIVALENTS 128
BRAND VALUATIONCUSTOMER RELATIONSHIPS VALUATION 229200
FAIR VALUE OF ASSETS ACQUIRED 584
CASH CONSIDERATION 1,265
CONTINGENT CONSIDERATION * 170
TOTAL CONSIDERATION 1,435
GOODWILL 851
* Contingent consideration is valued at fair value based on forecast attainment of performance conditions associated with
the payment of the contingent consideration.
The net cash outflow in the cash flow statement is as follows:
£'000
CASH CONSIDERATION 1,265
CASH ACQUIRED (128)
NET CASH OUTFLOW IN THE CASH FLOW STATEMENT 1,137
Since the date of control, the following amounts have been included within the Group's financial statements for the
period.
£'000
REVENUE 124
LOSS BEFORE TAX 38
Had the acquisition been included from the start of the period, £2,238,000 of revenue and £172,000 of loss before tax would
have been included in the Group's financial statements.
There were no contingent liabilities acquired as a result of the above transaction.
5 PROFIT BEFORE TAXATION
Profit before taxation for the period has been arrived at after charging/ (crediting):
52 weeksended 30 September 2017£'000 52 weeksended 1 October2016£'000
DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT 6,544 5,832
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT 438 152
DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT LOSS 151 -
PROPERTY RELATED PROVISIONS CHARGED 349 719
STAFF COSTS (SEE NOTE 6) 50,548 53,816
OPERATING LEASE RENTALS 24,762 23,830
WRITE-DOWN OF INVENTORIES RECOGNISED AS AN EXPENSE 3,177 3,971
COST OF INVENTORIES RECOGNISED AS EXPENSE 79,296 78,612
During the year the business disposed of one freehold property (2016: no freehold property disposal).
Analysis of auditor's remuneration is provided below:
52 weeksended 30 September2017 £'000 52 weeksended 1 October 2016 £'000
FEES PAYABLE TO THE COMPANY'S AUDITOR WITH RESPECT TO THE COMPANY'S ANNUAL ACCOUNTS 46 41
FEES PAYABLE TO THE COMPANY'S AUDITOR AND THEIR ASSOCIATES FOR OTHER AUDIT SERVICES TO THE GROUP:
AUDIT OF THE COMPANY'S SUBSIDIARIES PURSUANT TO LEGISLATION 97 87
TOTAL AUDIT FEES 143 128
TAXATION COMPLIANCE SERVICES - 70
TOTAL NON AUDIT FEES - 70
TOTAL FEES PAYABLE TO THE COMPANY'S AUDITOR 143 198
A description of the work of the Audit Committee is set out on page 44 and includes an explanation of how auditor
objectivity and independence is safeguarded when non-audit services are provided by the auditor.
6 STAFF COSTS
The average monthly number of persons and their full-time equivalents employed by the Group in the UK during the accounting
period (including executive directors) was:
52 weeksended 30 September2017Number employed 52 weeksended 1 October2016Number employed
SELLINGADMINISTRATION 1,837193 1,778 199
2,030 1,977
2017 £'000 2016£'000
THEIR AGGREGATE REMUNERATION COMPRISED:
WAGES AND SALARIES (INCLUDING LTIP, SEE NOTE 29) 45,967 48,667
SOCIAL SECURITY COSTS 3,719 4,286
OTHER PENSION COSTS (SEE NOTE 28B) 862 863
50,548 53,816
Details of directors' emoluments are disclosed on pages 50 to 69. The Group considers key management to be the directors
only. Employee profit sharing of £5.0 million (2016: £10.0 million) is included in the above and comprises sales commission
and bonuses.
7 INVESTMENT REVENUE AND FINANCE COSTS
52 weeksended 30 September2017£'000 52 weeksended 1 October2016£'000
INVESTMENT REVENUE 24 85
BANK INTEREST RECEIVABLE AND SIMILAR INCOME
24 85
FINANCE COSTS (1,092)
INTEREST ON BANK LOANS AND OVERDRAFTS (868) (1,092)
OTHER INTEREST (46) -
INTEREST ON UNDERPAID TAX† - (84)
(914) (1,176)
No finance costs are appropriate to be capitalised in the period, or the prior period.
Interest on bank loans and overdrafts represents gains and losses on financial liabilities measured at amortised cost.
There are no other gains or losses recognised in respect of financial liabilities measured at amortised cost.
8 TAXATION
52 weeksended 30 September 2017£'000 52 weeksended 1 October2016£'000
CURRENT TAX - CHARGE FOR THE PERIODCURRENT TAX - ADJUSTMENT IN RESPECT OF PREVIOUS PERIODS DEFERRED TAX - CHARGE FOR PERIOD (NOTE 20)DEFERRED TAX - ADJUSTMENT IN RESPECT OF PREVIOUS PERIODS (NOTE 20) 3,504(104)12543 3,906148302 95
3,568 4,451
The charge for the period can be reconciled to the profit per the statement of financial performance as follows:
52 weeksended 30 September2017£'000 52 weeksended 1 October2016£'000
CONTINUING OPERATIONS: 16,999 19,982
PROFIT BEFORE TAXATION
TAX AT THE UK CORPORATION TAX RATE OF 19.5% (2016: 20.0%) 3,315 3,997
EXPENSES THAT ARE NOT DEDUCTIBLE IN DETERMINING TAXABLE PROFIT 57 58
DIFFERENCE BETWEEN IFRS 2 AND CORPORATION TAX RELIEF 67 137
REDUCTION IN UK CORPORATION TAX RATE 8 (246)
TANGIBLE FIXED ASSETS WHICH DO NOT QUALIFY FOR CAPITAL ALLOWANCES 182 261
ADJUSTMENT IN RESPECT OF PRIOR PERIODS (61) 244
TAX EXPENSE FOR THE PERIOD 3,568 4,451
In the period, the Group has recognised a corporation tax credit directly to equity of £3,254 (2016: £448,000) and a
deferred tax debit to equity of £157,921 (2016: £630,000) in relation to the Group's share option schemes.
9 DIVIDENDS
52 weeksended 30 September2017£'000 52 weeksended 1 October2016£'000
INTERIM DIVIDEND FOR THE PERIOD ENDED 30 SEPTEMBER 2017 OF £0.011 (2016: £0.010) PER SHARE 2,116 1,930
PROPOSED FINAL DIVIDEND FOR THE PERIOD ENDED 30 SEPTEMBER 2017 OF £0.023 (2016: £0.025)
PER SHARE 4,425 4,803
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included
as a liability in these financial statements.
10 EARNINGS PER SHARE
The calculation of earnings per share is based on the earnings for the financial period attributable to equity shareholders
and the weighted average number of ordinary shares.
52 weeks ended 30 September 2017£'000 52 weeks ended 1 October 2016£'000
WEIGHTED AVERAGE NUMBER OF ISSUED SHARES FOR BASIC EARNINGS PER SHAREWEIGHTED AVERAGE IMPACT OF TREASURY SHARES FOR BASIC EARNINGS PER SHARETOTAL WEIGHTED AVERAGE NUMBER OF SHARES FOR BASIC EARNINGS PER SHARESWEIGHTED AVERAGE NUMBER OF SHARES UNDER OPTION 196,367,310(4,038,495) 195,063,550(2,131,436)
192,328,8153,487,211 192,932,1145,769,647
FOR DILUTED EARNINGS PER SHARE 195,816,026 198,701,761
FOR DILUTED EARNINGS PER SHARE
195,816,026
198,701,761
The calculation of the basic and diluted earnings per share used the denominators as shown above for both basic and diluted
earnings per share.
11 GOODWILL
£'000
COST AND CARRYING AMOUNT AT 3 OCTOBER 2015 AND 1 OCTOBER 2016 245
ACQUISITION OF PARKSIDE CERAMICS LIMITED (NOTE 4) 851
COST AND CARRYING AMOUNT AT 30 SEPTEMBER 2017 1,096
The balance of goodwill remaining is the carrying value that arose on the acquisition of Surface Coatings Ltd in 1998 and
Parkside Ceramics Limited in 2017.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be
impaired.
The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use
calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs
during the period. Management estimates discount rates based on the Group's weighted average cost of capital. The growth
rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and
expectations of future changes in the market. Discounted cash flows are calculated using a pre-tax rate of 13.2% (2016:
14.2%).
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next
five years and extrapolates cash flows for the following years. The growth rate applied does not exceed the average
long-term growth rate for the relevant markets. There are no reasonable changes that would result in the carrying value of
goodwill being reduced to its recoverable amount.
No impairment has been identified in the current period as a result of the annual test for impairment.
12 INTANGIBLE ASSETS
BRAND £'000 CUSTOMER RELATIONSHIPS£'000 TOTAL£'000
COST AND CARRYING AMOUNT AT 1 OCTOBER 2016- -
ADDITIONS 229 200 429
COST AND CARRYING AMOUNT AT 30 SEPTEMBER 2017 229 200 429
The intangible assets additions occurred on the acquisition of Parkside Ceramics Limited on 31 August 2017.
The brand is amortised over its estimated useful life of 10 years. Customer relationships are amortised over their
estimated useful lives of 3 years.
13 PROPERTY, PLANT AND EQUIPMENT
Land and buildings
Freehold£'000 Shortleasehold£'000 Fixtures and fittings£'000 Motor vehicles£'000 Total£'000
COSTAT 3 OCTOBER 2015 18,560 1,954 72,309 58 92,881
ADDITIONS - 93 10,411 5 10,509
DISPOSALS - - (691) - (691)
AT 1 OCTOBER 2016 18,560 2,047 82,029 63 102,699
ADDITIONS 801 88 9,225 - 10,114
DISPOSALS (231) - (413) - (644)
RECLASSIFICATION OF ASSETS* (142) (686) 779 49 -
ACQUISITION OF SUBSIDIARY UNDERTAKINGS - - 31 14 45
AT 30 SEPTEMBER 2017 18,988 1,449 91,651 126 112,214
ACCUMULATED DEPRECIATION
AT 3 OCTOBER 2015 2,046 1,648 42,046 47 45,787
CHARGE FOR THE PERIOD 289 49 5,482 12 5,832
PROVISION FOR IMPAIRMENT - - 152 - 152
ELIMINATED ON DISPOSALS - - (691) - (691)
AT 1 OCTOBER 2016 2,335 1,697 46,989 59 51,080
CHARGE FOR THE PERIOD 293 53 6,188 10 6,544
PROVISION FOR IMPAIRMENT - - 438 - 438
ELIMINATED ON DISPOSALS (86) - (104) - (190)
RECLASSIFICATION OF ASSETS* (6) (680) 671 15 -
AT 30 SEPTEMBER 2017 2,536 1,070 54,182 84 57,872
CARRYING AMOUNTAT 30 SEPTEMBER 2017 16,452 379 37,469 42 54,342
AT 1 OCTOBER 2016 16,225 350 35,040 4 51,619
*During the period the Group undertook an asset reclassification exercise to reclassify some assets between asset
categories.
Freehold land and buildings include £4,104,000 of freehold land (2016: £4,104,000) on which no depreciation has been
charged in the current period. There is no material difference between the carrying and market values.
Cumulative finance costs capitalised in the cost of tangible fixed assets amount to £nil (2016: £nil). Contractual
commitments for the acquisition of property, plant and equipment are detailed in note 28.
During the period, the Group has closed five stores in the UK. As the fixtures and fittings within these stores cannot be
re-used in other locations within the Group, the carrying value of these assets has been fully provided for in the period,
with the associated impairment charge of £268,000 (2016: £152,000) included within other operating expenses.
14 SUBSIDIARIES
A list of all subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in
note 3 to the Company only financial statements.
15 TRADE AND OTHER RECEIVABLES
2017£'000 2016£'000
AMOUNTS FALLING DUE WITHIN ONE YEAR: 493 681
AMOUNTS RECEIVABLE FOR THE SALE OF GOODS
ALLOWANCE FOR DOUBTFUL DEBTS (37) (33)
OTHER DEBTORS AND PREPAYMENTS
- RENT AND RATES 4,192 4,001
- OTHER 1,854 2,059
6,502 6,708
The Directors consider that the carrying amount of trade and other receivables at 30 September 2017 and 1 October 2016
approximates to their fair value on the basis of discounted cash flow analysis.
CREDIT RISK
The Group's principal financial assets are bank balances and cash and trade receivables.
The Group considers that it has no significant concentration of credit risk. The majority of sales in the business are cash
based sales in the stores.
Total trade receivables (net of allowances) held by the Group at 30 September 2017 amounted to £0.5 million (2016: £0.6
million). These amounts mainly relate to sundry trade account generated sales. In relation to these sales, the average
credit period taken is 49 days (2016: 54 days) and no interest is charged on the receivables.
Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer's
credit quality and defines credit limits by customer. Limits and scoring attributed to customers are reviewed
periodically.
Included in the Group's trade receivable balance are debtors with a carrying amount of £70,000 (2016: £94,000) which are
past due at the reporting date for which the Group has not provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.
Ageing of past due but not impaired receivables
2017£'000 2016£'000
GREATER THAN 60 DAYS 70 94
The allowance for doubtful debts was £37,000 by the end of the period (2016: £33,000). Given the minimal receivable
balance, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful
debts.
The allowance for doubtful debts includes £24,000 relating to individually impaired trade receivables (2016: £20,000) which
are due from companies that have been placed into liquidation.
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
16 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash held by the Group and short term bank deposits (with associated right of set off)
net of bank overdrafts, with an original maturity of three months or less. The carrying amount of these assets approximates
their fair value. A breakdown of significant bank and cash balances by currency is as follows:
2017£'000 2016£'000
STERLING 5,232 8,738
US DOLLAR 919 715
EURO 1,350 775
TOTAL CASH AND CASH EQUIVALENTS 7,501 10,228
17 OTHER FINANCIAL LIABILITIES
TRADE AND OTHER PAYABLES
2017£'000 2016£'000
AMOUNTS FALLING DUE WITHIN ONE YEAR 18,330 16,598
TRADE PAYABLES
OTHER PAYABLES 3,641 3,740
ACCRUALS AND DEFERRED INCOME 10,529 12,770
32,500 33,108
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 53 days (2016: 49 days). No interest is charged on these payables.
The Directors consider that the carrying amount of trade payables at 30 September 2017 and 1 October 2016 approximates to
their fair value on the basis of discounted cash flow analysis.
18 BANK LOANS
2017£'000 2016£'000
BANK LOANS (ALL STERLING) 34,807 34,691
2017£'000 2016£'00034,691
THE BORROWINGS ARE REPAYABLE AS FOLLOWS: - -
ON DEMAND OR WITHIN ONE YEAR
IN THE SECOND YEAR 35,000 -
IN THE THIRD TO FIFTH YEAR 35,000
LESS: TOTAL UNAMORTISED ISSUE COSTS 35,000 35,000
(193) (309)
ISSUE COSTS TO BE AMORTISED WITHIN 12 MONTHS 34,807 34,691
116 116
AMOUNT DUE FOR SETTLEMENT AFTER 12 MONTHS 34,923 34,807
The Directors consider that the carrying amount of the bank loan at 30 September 2017 and 1 October 2016 approximates to
its fair value since the amounts relate to floating rate debt.
The average interest rates paid on the loan were as follows:
2017% 2016%
LOANS 1.78 2.19
The Group borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.
The Group is part way through a five year revolving credit facility of £50.0 million, expiring 31 May 2019. As at the
financial period end
£35.0 million of this facility was drawn (2016: £35.0 million). The loan facility contains financial covenants which are
tested on a bi-annual basis. The Group did not breach any covenants in the period.
At 30 September 2017, the Group had available £15.0 million (2016: £15.0 million) of undrawn committed banking facilities.
19 FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's overall strategy
remains unchanged from 2016. The capital structure of the Group consists of debt, which includes the borrowings disclosed
in note 18, cash and cash equivalents disclosed in note 16 and equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained losses as disclosed in notes 21 to 27.
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