Group Interim Results 2003
October 07 2003 - 3:00AM
UK Regulatory
RNS Number:5860Q
Matalan PLC
07 October 2003
Group Interim Results for 26 weeks ended 30th August 2003
* Profit before tax: #41.2m (27 weeks ended 31st August 2002: #53.6m)
* Turnover: #507.6m (2002: #492.2m)
* Gross margin: 43.0% (2002: 42.9%)
* Matalan Retail like for like sales: -6.7% (2002: +4.2%)
* Basic earnings per share: 7.3p (2002: 9.1p)
* Interim dividend: 2.7p per share (2002: 2.7p per share)
John Hargreaves, Group Chairman of Matalan said today:
"The results for the last six months have been disappointing with profits below
last year's level.
The Board believes that the majority of actions needed to deliver a credible
Autumn/Winter season and onwards have been implemented and expect these to
contribute to a stronger performance in the second half of the year.
Early results are encouraging with Matalan Retail's sales for the five weeks
ended 4th October growing 16.2% overall and 5.7% like for like, driven by new
Autumn/Winter ranges and more effective marketing spend. Gross margins are as
planned."
John King, Group Chief Executive of Matalan said today:
"Over the last six months we have worked hard to re-establish Matalan's value
proposition - Great Prices, Great Promotions, Great Quality and Great Choice. I
am confident we have made a good start with the Autumn/Winter season and can
build upon this for the Spring/Summer season."
Contact:
MATALAN Tel no: 01695 552400
John King, Group Chief Executive
Phil Dutton, Group Finance Director
TULCHAN COMMUNICATIONS Tel no: 020 7353 4200
Kirstie Hamilton/Katie Macdonald-Smith
Interim Statement and Review of Activities
Group Results
In the 26 week period ended 30th August 2003, Group sales increased to #507.6m
(2002: 27 week period ended 31st August 2002 #492.2m), gross margins improved by
0.1 percentage point and operating profit decreased to #42.1m (2002: #54.0m).
After net interest payable of #0.9m (2002: #0.4m), profit before tax was #41.2m
(2002: #53.6m).
Capital investment was #22.9m (2002: #28.2m), incurred mainly on new space and
systems development. Terminal stock levels were lower than last year, although
total stock levels at 30th August were disproportionately higher than last year
as product was brought in early as part of the implementation of our new supply
chain systems and to replenish stocks following the sell through of Spring/
Summer ranges.
Cash outflow in the period was #5.5m (2002: inflow #5.0m). Net debt at 30th
August was #23.3m (2002: net funds #0.5m).
Dividend
The Board is declaring an interim dividend of 2.7p per share, the same as last
year.
Matalan Retail Business
Performance
The key contributor to lower profits was the under-performance of the core
retail business, with total sales increasing by 3.3% to #473.6m (2002:
#458.6m) and like for like sales on a comparable 26 week period falling 6.7%
(2002: increase of 4.2%).
There are three main causes of the poor sales performance across the first
half:-
* reduction in density of stock, reducing choice for our customers
* inconsistency in the monthly mailer
* range gaps, particularly in classic ladieswear.
The lower than expected sales resulted in a higher level of markdown than
forecast. Despite this, gross margins were flat year on year at 42.2%.
The overhead cost to sales ratio has increased by 2.8 percentage points year
on year. One off termination payment costs linked to senior management
changes amounted to #2.0m, representing 0.4% of the increase in costs. The
balance was principally a result of lower than expected sales and the
increase in fixed property costs. As a result, operating profit was #41.2m
(2002: #53.0m), with an operating margin of 8.7% compared to last year's
11.5%.
Active membership has grown by over 0.8 million in the first half, and there
are now over 9.9 million active members.
Additional Space Programme
During the period, Matalan opened 8 new stores (including 1 re-site),
bringing the total to 170 stores at the half year, compared to 13 new
(including 1 re-site) a year ago. In aggregate, an additional 0.3 million
square feet of net selling space was added to the estate in the period.
The second half opening programme is expected to add a further 0.3 million
square feet of net selling space from 8 new stores and 2 re-sites (2002: 8
new stores, 5 re-sites and 2 extensions). Total net selling space is
expected to grow to 5.1 million square feet by the year-end.
Systems
The system change programme has continued at pace. All warehouses have now
been converted to new systems with minimum disruption to ongoing trade.
Delivering A Credible Autumn/Winter Performance
The objective over the last six months has been to return the business to
like for like sales and earnings growth. In doing so, three key principles
have been followed; stability, consistency and sustainability. Stability of
management for our colleagues; consistency in terms of value delivery for
our customers; and sustainability of earnings growth for our shareholders.
Over this period we have worked towards underpinning our new Autumn/Winter
ranges by re-establishing Matalan's value proposition - Great Prices, Great
Promotions, Great Quality and Great Choice.
We have introduced a clear good/better/best price architecture, regularly
checked against the competition, for all our product ranges. We have also
developed our marketing activity in order to ensure a consistent weight of
compelling offers is presented to our customers week in week out. In order
to deliver greater consistency in product quality, all of our sourcing
partners' factories have been re-assessed for capability of delivery against
our good/better/best product requirements, and we have closely reviewed
ranges to ensure previous gaps are not replicated.
Lee Cooper / Wolsey
Lee Cooper contributed #30.1m of sales in the period, down 1.3% on last year's
#30.5m. Operating profit, after goodwill amortisation charges, was slightly down
on last year at #0.9m (2002: #1.0m). Wolsey contributed #3.9m of sales (19 weeks
ended 31st August 2002: #3.1m) in the period and operating profit of #nil (2002:
#nil).
Long Term Incentive Scheme
A circular to shareholders will be sent with the Interim Report calling an
Extraordinary General Meeting on 18th November to approve a new long term
incentive scheme.
Current Trading
Matalan Retail's sales for the five weeks ended 4th October grew 16.2% overall
and 5.7% like for like, driven by new Autumn/Winter ranges and more effective
marketing spend. Gross margins are as planned. We still have much to do, but
believe that we are now getting back on track.
John Hargreaves
GROUP CHAIRMAN
7th October 2003
MATALAN PLC
Consolidated Profit and Loss Account
for the 26 weeks ended 30th August 2003
Unaudited Unaudited Audited
26 weeks to 27 weeks to 53 weeks to
Notes 30th August 31st August 1st March
2003 2002 2003
#'m #'m #'m
Turnover 507.6 492.2 1,021.5
Operating profit 42.1 54.0 118.3
Net interest payable (0.9) (0.4) (0.9)
Profit on ordinary activities
before taxation 41.2 53.6 117.4
Taxation (11.4) (16.6) (30.7)
Profit on ordinary activities
after taxation 29.8 37.0 86.7
Dividends 1 (11.1) (11.2) (33.3)
Profit retained for the period 18.7 25.8 53.4
Earnings per share 2
Basic 7.3p 9.1p 21.3p
Diluted 7.2p 9.1p 21.2p
MATALAN PLC
Consolidated Balance Sheet
at 30th August 2003
Unaudited Unaudited Audited
Notes 30th August 31st August 1st March
2003 2002 2003
#'m #'m #'m
Fixed assets
Intangible 36.3 38.3 37.3
Tangible 3 174.6 148.4 167.6
Investments 3 22.7 24.1 22.5
233.6 210.8 227.4
Current assets
Stocks 152.7 115.5 135.0
Debtors 37.0 27.6 22.5
Cash at bank and in hand 30.9 3.1 16.2
220.6 146.2 173.7
Creditors: Amounts falling
due within one year (194.9) (141.9) (159.8)
Net current assets 25.7 4.3 13.9
Total assets less current
liabilities 259.3 215.1 241.3
Creditors: Amounts falling
due after more than one year (13.3) (17.5) (14.8)
Provision for liabilities
and charges (10.3) (7.6) (9.5)
Net assets 235.7 190.0 217.0
Capital and reserves
Called up share capital 42.0 42.0 42.0
Share premium 2.0 2.0 2.0
Profit and loss account 191.7 146.0 173.0
Total equity shareholders' funds 235.7 190.0 217.0
MATALAN PLC
Consolidated Cash Flow Statement
for the 26 weeks ended 30th August 2003
Unaudited Unaudited Audited
Notes 26 weeks to 27 weeks to 53 weeks to
30th August 31st August 1st March
2003 2002 2003
#'m #'m #'m
Cash flow from operating
activities 4 56.2 62.5 107.8
Returns on investments and
servicing of finance (1.0) (0.3) (0.9)
Taxation paid (14.8) (5.2) (26.2)
Capital expenditure and
financial investment (23.9) (25.2) (56.0)
Acquisitions - (7.3) (7.3)
Dividends paid (22.0) (19.5) (30.6)
Cash (outflow)/inflow before
use of liquid resources
and financing (5.5) 5.0 (13.2)
Management of liquid resources (3.5) 11.8 11.8
Financing (2.5) (0.3) (0.2)
(Decrease/increase in cash
in the period (11.5) 16.5 (1.6)
Reconciliation of cash flow to movement
in net debt
(Decrease)/increase in cash
in the period (11.5) 16.5 (1.6)
Cashflow from debt 2.5 0.3 0.2
Net debt issued to acquire
subsidiary - (2.5) (2.5)
Cashflow from liquid resources 3.5 (11.8) (11.8)
(5.5) 2.5 (15.7)
Exchange adjustments - 0.1 -
Movement in net (debt)/cash
in the period (5.5) 2.6 (15.7)
Net debt at the beginning
of the period (17.8) (2.1) (2.1)
Net (debt)/funds at the end
of the period (23.3) 0.5 (17.8)
MATALAN PLC
Consolidated
Statement of Total Recognised Gains and Losses
for the 26 weeks ended 30th August 2003
Unaudited Unaudited Audited
Notes 26 weeks to 27 weeks to 53 weeks to
30th August 31st August 1st March
2003 2002 2003
#'m #'m #'m
Profit for the financial period 29.8 37.0 86.7
Exchange adjustments - 0.6 -
Total recognised gains and losses
since previous financial
statements 29.8 37.6 86.7
Notes
1. Dividends
The Directors have declared an interim dividend of 2.7p per share, costing
#11.1m, which will be paid on 4th December 2003 to those shareholders whose
names are on the Register of Members at close of business on 7th November
2003. The ordinary shares will become ex-dividend on 5th November 2003.
2. Earnings Per Share
26 weeks to 27 weeks to 53 weeks to
30th August 31st August 1st March
2003 2002 2003
Per share Per share Per share
amount amount amount
pence pence pence
Basic earnings per share 7.3 9.1 21.3
Diluted earnings per share 7.2 9.1 21.2
2003 2002 2003
#'m #'m #'m
The calculation of basic and
diluted earnings per share
is based on:
Profit on ordinary activities
after taxation 29.8 37.0 86.7
Number of Number of Number of
shares shares shares
millions millions millions
Weighted average number of
shares used in basic earnings
per share calculation 408.1 405.7 406.7
Dilutive shares from
exercisable options 4.6 2.5 2.1
Weighted average number of
shares used in diluted earnings
per share calculation 412.7 408.2 408.8
The weighted average number of shares excludes shares held by the Employee
Benefit Trust (EBT) and the Matalan Qualifying Employee Share Trust (QUEST)
and is adjusted for the issue of shares during the year.
3. Capital Expenditure and Investments
Capital expenditure incurred during the half year was #22.9m (2002: #28.2m).
Additional shares in the company to the value of #1.7m (2002: nil) were
purchased through the QUEST.
4. Reconciliation of Operating Profit to Operating Cash Flows
26 weeks to 27 weeks to 53 weeks to
30th August 31st August 1st March
2003 2002 2003
#'m #'m #'m
Operating profit 42.1 54.0 118.3
Depreciation 11.6 10.5 21.3
Amortisation of intangible
fixed assets 1.0 2.0 3.0
Amortisation of investments
in own shares 1.3 0.3 0.5
Loss on sale of tangible assets 0.8 1.7 1.2
Increase in stocks (17.7) (7.6) (27.9)
Increase in debtors
and prepayments (14.5) (4.6) (0.5)
Increase/(decrease) in
creditors 31.6 6.2 (8.1)
Net cash flow from operating
activities 56.2 62.5 107.8
5. Basis of Preparation
This interim report has been prepared using accounting policies consistent
with those set out in the 2003 Annual Report and Accounts.
The comparative figures for the period ended 1st March 2003 do not
constitute statutory accounts. These figures have been extracted from the
audited accounts for that year, which have been delivered to the Registrar
of Companies and on which the Auditors issued an unqualified report, which
did not contain a statement under either section 237(2) or (3) of the
Companies Act 1985.
The financial information for the 26 weeks to 30th August 2003 and the
comparative half year information is unaudited. It has been reviewed by the
Auditors, PricewaterhouseCoopers LLP.
Independent review report to Matalan PLC
Introduction
We have been instructed by the company to review the financial information which
comprises the consolidated profit and loss account, the consolidated balance
sheet, the consolidated cash flow statement, the consolidated statement of total
recognised gains and losses and the related notes. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the twenty six week
period ended 30th August 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
Manchester
7th October 2003
Notes:
a. The maintenance and integrity of the Matalan plc website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
interim report since it was initially presented on the website.
b. Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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