Source - RNS
RNS Number : 5601L
ScS Group PLC
04 October 2016
 

For Immediate Release     

 

ScS Group plc

("ScS" or the "Company")

 

Preliminary Results for the year ended 30 July 2016

 

ScS, one of the UK's largest retailers of upholstered furniture and floorings, is pleased to announce its Preliminary Results for the 53 weeks ended 30 July 2016.

 

Financial Highlights:

 

·      Gross sales up 14.5% to £334.7m (2015: £292.2m)

·      Revenue up 14.7% to £317.3m (2015: £276.7m)

·      Like for like order intake up 14.8% (2015: 5.0%)

·      Gross profit increased 17.3% to £149.1m (2015: £127.2m)

·      EBITDA increased to £16.0m (Adjusted EBITDA 2015: £11.3m)

·      Operating profit £11.0m (2015: £2.8m, 2015 operating profit before exceptional items £6.4m)

·      Earnings per share 21.8p (2015: loss per share 5.6p, 2015 adjusted earnings per share 13.8p)

·      Strong balance sheet with cash of £22.4m (2015: £21.1m) and no debt

·      Recommended final dividend of 9.83p per share, full year dividend of 14.5p per share (2015: 14.0p), an increase of 3.6%

 

Operational Highlights:

 

·    ScS sales density per square foot increased 12.9% to £219 (2015: £194) supported by a significant increase in marketing spend

·      Two new stores opened in Bromborough on the Wirral on Boxing Day 2015 and in Aberdeen in September 2016

·      Three further stores in Plymouth, Thanet and Edinburgh targeted to open on Boxing Day 2016

·    House of Fraser concession gross sales up 19.7% to £25.3m (2015: £21.2m) resulting in a positive EBITDA contribution

·      Continued investment and development of the e-commerce platform for ScS trading website resulting in gross sales increasing 19.8% to £10.0m (2015: £8.4m)

·     Improved distribution management leading to a reduction in costs expressed as a percentage of revenue to 4.9% (2015: 5.1%)

 

Current Trading:

 

·      Sales order intake up 4.5% on a like-for-like basis for the 9 weeks to 1 October 2016

 

David Knight, Chief Executive Officer of ScS commented:

 

"We are delighted to be reporting significant growth across all areas of the Group for the 2016 financial year.  Our sales order intake is the highest ever and is up 14.8% on a like-for-like basis.  These results demonstrate that the Group has made significant progress in developing ScS into a strong national brand with three very clear retail offers - upholstered furniture, flooring and our House of Fraser concessions, all supported by an online platform that has seen continued investment.

 

We are encouraged by our trading performance since the start of the current financial year which is in line with our expectations.  However, we are mindful that the Group continues to face very strong comparatives during the remainder of the year.

 

Looking further ahead, we are excited about our prospects, including the continued growth from our existing ScS network, the concession agreement with House of Fraser, our flooring offering and our online proposition. We continue to identify new store opportunities within our target areas. The Group's cash flow dynamics underpin the strong financial position which will support our ambitions for future growth and continue to deliver value for our shareholders."

 

 

Investor and Analyst Meeting

A meeting for analysts will be held at the office of Buchanan, 107 Cheapside, London, EC2V 6DN on 4 October 2016 commencing at 9.00am. ScS Group plc's Preliminary Results 2016 are available at www.scsplc.co.uk

 

An audio webcast will be available on:

http://vm.buchanan.uk.com/2016/scs041016/registration.htm

 

Enquiries:

 

ScS Group plc

David Knight, Chief Executive Officer

Chris Muir, Chief Financial Officer

 

c/o Buchanan +44 (0)20 7466 5000

Buchanan

Richard Oldworth / Jane Glover/ Madeleine Seacombe

Tel: +44 (0)20 7466 5000

[email protected]

 

 

Notes to Editors:

 

ScS is one of the UK's largest retailers of upholstered furniture and floorings, promoting itself as the "Sofa Carpet Specialist" seeking to offer value and choice through a wide range of upholstered furniture and flooring products. The Group's product range is designed to appeal to a broad customer base with a mid-market priced offering and is currently traded from 97 stores.

 

The Company's upholstered furniture business specialises primarily in fabric and leather sofas and chairs. ScS sells a range of branded products which are not sold under registered trade marks (such as the Ellis and the Neptune) and a range of branded products which are sold under registered trade marks owned by ScS (such as Endurance and SiSi Italia). The Group also offers a range of third party brands (which include La-Z-Boy, G Plan and Parker Knoll). The Company's flooring business includes carpets, as well as laminate and vinyl flooring. 

 

In 2014, ScS began to operate the furniture and carpet concession ranges for House of Fraser. ScS currently operates in 28 House of Fraser stores across the UK.

 

CHAIRMAN'S STATEMENT

 

This is my second annual statement to our shareholders following the Company's IPO in January 2015 and I am pleased to report that the business has made excellent progress against its strategic objectives in the year.  This has resulted in growth in both revenue and margins.

 

Financial and strategic objectives

 

The Company has set itself the following objectives:

 

·      To deliver profitable and sustainable growth;

·      To improve the quality of earnings;

·      To improve business resilience through the economic cycle, and

·      To increase shareholder returns.

 

The business has continued to pursue these objectives determinedly, growing revenue, gross profit and tightly controlling costs and cash flow.  These objectives are well underpinned by the pursuit of our strategy for growth, which includes four key areas as follows:

 

·      Increasing sales densities at our stores;

·      Optimising the opportunity with House of Fraser customers;

·      Growing online revenue, and

·      Achieving strong and speedy financial returns from new store openings.

 

Performance

 

The business traded strongly throughout the year supported by increased marketing spend.  This growth coupled with strong cost control resulted in an increase in earnings per share (EPS) to 21.8p (adjusted EPS 2015: 13.8p).

 

During the year the Group saw increases in both the gross margin and the EBITDA margin in line with the objective of improving quality of earnings.  This improved performance also increased the Group's resilience.  Continued strong cash generation provides scope to further expand the business and also increase shareholder returns in the form of dividends.

 

Progress was also seen in all four strategic areas for growth as detailed above and the business has increased market share in both the upholstery and flooring markets.  Encouragingly these market share gains have been achieved at higher gross margins than in the prior year.

 

Dividend

 

The Group remains in a strong financial position, with good cash generation and a balance sheet that is growing in resilience.  This, coupled with the Board's continued confidence in the outlook for the Group, means we are proposing a full year dividend of 14.5p, a 3.6% increase on the full year dividend for 2015.  This results in a final dividend of 9.83p.  This final dividend is lower than in the prior year (11.2p) because a higher interim dividend was paid in line with the Board's intention of paying a one third and two thirds split between the interim and the final respectively.

 

Board changes

 

During the year we welcomed Chris Muir to the Board as Chief Financial Officer, following the decision of Ron Turnbull to step down from the Board and resign from the Company.  Chris joined the Group on 4 April 2016 from Northgate plc where he was Group Finance Director from May 2011.  Chris brings substantial experience to the Board and will be a valuable asset as we look to further grow and develop our business. 

 

Colleagues

 

I would like to record the Board's thanks to all of our 1,848 team members throughout the business.  It is their commitment, expertise and enthusiasm that allows the Group to deliver our mission to provide our customers with excellent service, value and quality.

 

Outlook

 

The Group has a clear strategy for growth underpinned by strong cash flows and the Board remains positive about the long-term prospects for the business.

 

The Board feels the business is in a strong position to maximise opportunities as they arise and continue to grow market share by pursuing the four areas of our strategy for growth. 

 

 

Alan Smith

Chairman

 

 

 

CHIEF EXECUTIVE'S REPORT

 

Overview

 

We are delighted to be reporting significant growth across all areas of the Group for the 2016 financial year.  Our sales order intake is the highest ever and is up 14.8% on a like-for-like basis.  These results continue to demonstrate the progress that has been made in developing ScS into a strong national brand with three very clear retail offers - upholstered furniture, flooring and our House of Fraser concessions, all supported by an online platform that has seen continued investment.

 

Results

The Group saw a £40.6m (14.7%) increase in revenue in the year to £317.3m (2015: £276.7m).  Gross profits increased 17.3% to £149.1m with gross margin as a percentage of gross sales increasing 110 basis points to 44.6% (2015: 43.5%).  EBITDA increased to £16.0m (2015: £11.3m after adjusting for exceptional items).

 

Strategy for Growth

As previously articulated, the Group has four key areas in its strategy for growth:

 

Area 1 - Increasing sales densities

 

Increasing sales densities is being targeted in the following ways:

·      The ongoing use and further introduction of a branded range of products, including both third party brands and ScS private label brands;

·      The continued development of our flooring offering;

·      Ongoing investment in our online capability and offer;

·      Increasing footfall quality (both physically and digitally via our websites) by raising brand awareness;

·      Improving sales conversion at our stores; and

·      Improving the customer journey, experience and confidence.

 

Sales density per square foot at our ScS stores has increased to £219.  This is an increase of £25 or 12.9% on that achieved in 2015 and 19.0% higher than that achieved in 2014.  Flooring continues to prove a very successful product offering since its introduction in 2012, with gross sales increasing £6.3m (19.9%) in the year.

 

The average order price in furniture was stable with an increase in flooring as the business ceased the aggressive flooring promotion that it ran in the previous year as it continued to establish its market share and awareness.

 

Marketing spend increased to £23.1m in the year (2015: £19.2m) as the Group invested in brand awareness, targeting and achieving increased footfall and website hits.  Increases were also noted in sales conversion, being the proportion of customers who purchased a product after entering a store.

 

The Group recognises the importance of the customers' experience and measures and monitors this on an ongoing basis.  As with a number of other retail companies, satisfaction levels are provided by Trustpilot, which allows customers to provide feedback and a rating on their experience.  I am pleased to announce that our continued dedication to improving this means we are now rated as excellent based on over 31,000 Trustpilot reviews and have been awarded the maximum 5-star rating.

 

Area 2 - Optimising the opportunity with House of Fraser customers

 

When reviewing opportunities for growth the Group identified that certain customer types prefer to shop in department stores and town centres and have a different expectation of the product being offered.  Rather than losing the focus that is evident in our ScS stores the Group looked at concession opportunities across the UK.

 

Following a pilot, the full roll out was completed by July 2014.  The arrangement currently operates from 28 House of Fraser stores and has delivered a gross sales increase of £4.1m (19.7%) in the year to £25.3m (2015: £21.2m) and made a positive contribution to the Group's EBITDA. 

 

As the relationship matures, both ScS and House of Fraser management teams recognise the potential that exists.  In light of this, the Group has recently appointed a senior manager to help lead and maximise this opportunity.

 

Area 3 - Growing online revenue

 

Evidence indicates that customers are increasingly researching online prior to making a purchase and our websites are an integral tool to support our customers.  Given the high-ticket and bespoke nature of the items we sell, a high proportion of our customers will visit our stores before they make their final purchase decision.  However, the Group recognises that the investment in our website is critical and that it is an ever increasing part of the customer journey. 

 

Accordingly, in the year ended 30 July 2016, the Group has continued to improve its online offering, investing £1.4m in website development (2015: £0.7m).  The business has also significantly increased website marketing spend.

 

Online gross sales increased 19.8% to £10.0m (2015: £8.4m).

 

Area 4 - Achieving strong and speedy financial returns from new store openings

 

During the year ended 30 July 2016, the Group opened a new ScS store in Bromborough, in the Wirral. This new store made a positive contribution to the Group's EBITDA in the 2016 year with performance being ahead of original expectations.

 

A further new store was opened in Aberdeen in September, post the year end.  New stores in Plymouth, Thanet and Edinburgh are targeted to open on Boxing Day 2016.

 

In line with the Group's commitment to increase quality of earnings and resilience, store profitability is regularly reviewed and lease extensions are considered in line with the Group's objectives.  Following careful consideration, the decision was taken to close the Stechford store in August 2016.  

 

We now operate from 97 stores across the UK, almost all of which are in modern out of town retail parks, often alongside competing furniture and floorcoverings retailers - plus the 28 House of Fraser concessions.

 

Current Trading and Outlook

We are encouraged by our trading performance since the start of the current financial year and this is in line with our expectations.  However, we are mindful that the Group continues to face very strong comparatives during the remainder of the year.

 

Looking further ahead, we are excited about our prospects, including the continued growth from our ScS network, the concession agreement with House of Fraser, our flooring offering and our online proposition. We continue to identify new store opportunities within our target areas. The Group's cash flow dynamics underpin the strong financial position which will support our ambitions for future growth and continue to deliver value for our shareholders.

 

David Knight

Chief Executive Officer

 

FINANCIAL REVIEW

 

  

FY16

 

FY15

 

 

£m

£m

Gross Sales

334.7

292.2

Revenue

317.3

276.7

Gross profit

149.1

127.1

Distribution costs

(15.5)

(14.0)

Administration expenses (excluding exceptionals)

(122.6)

(106.7)

Total operating expenses (excluding exceptionals)

(138.1)

(120.7)

Operating profit (excluding exceptionals)

11.0

6.4

 

 

 

Net finance costs (excluding exceptionals)

(0.1)

(3.9)

Exceptional items

-

(4.2)

Profit / (Loss) before tax

10.9

(1.7)

Tax

(2.2)

(0.5)

Profit / (Loss) after tax

8.7

(2.2)

Earnings / (loss) per share

21.8p

(5.6p)

 

 

 

EBITDA (excluding exceptionals)

        16.0

11.3

 

Gross sales and revenue

Gross sales increased by £42.5m (14.5%) on the previous financial year to £334.7m (2015: £292.2m) and is attributable to:

·      An increase in upholstered furniture gross sales in ScS stores of 13.2% to £261.3m;

·      An increase in flooring gross sales in ScS stores of 19.9% to £38.1m;

·      An increase in online gross sales of 19.8% to £10.0m, and

·      An increase in gross sales from the House of Fraser concession of 19.7% to £25.3m.

Revenue, which represents gross sales less charges relating to interest free credit sales (see note 3 - Segment information), increased by 14.7% on the previous financial year to £317.3m (2015: £276.7m).

Like for like order intake for the financial year ended 30 July 2016, calculated on the basis of all stores opened for 12 months or longer, was up 14.8% on the previous financial year (2015: 5.0%).

Gross profit

Gross margin as a percentage of gross sales increased by 110 basis points from 43.5% in the year ended 25 July 2015 to 44.6% in the year ended 30 July 2016.  The 2015 margin was impacted by very competitive promotions, notably a "free carpet" offer during the 2014 Autumn period to support the growth and awareness of our flooring business.

The increase in gross margin and growth achieved in the year resulted in an increase in gross profit of £22.0m or 17.3%.

Operating profit

On a statutory basis operating profit for the year ended 30 July 2016 increased to £11.0m (2015: £2.8m).  The 2015 operating profit before exceptional items (relating to the January 2015 IPO) was £6.4m.

Distribution costs

Distribution costs comprise the total cost of the in-house distribution function and includes employment costs, the cost of leasing vehicles and related running costs and property costs (principally rent, rates and utilities) for the ten distribution centres, as well as costs of third party delivery services contracted to support peak delivery periods. During 2016 we have successfully implemented initiatives for improved route planning and central arranging of onward delivery to customers. The resulting efficiency gains have contributed to the reduction in distribution costs expressed as a percentage of revenue year on year from 5.1% to 4.9%.

Administrative expenses

Administrative expenses comprise:

·      Store operating costs, principally employment costs and property related costs (rent and rates, utilities, store repairs and depreciation of capital investment) and costs associated with the concession agreement with House of Fraser;

·      Marketing expenditure, and

·      General administrative expenditure which includes the employment costs for the directors and senior management and all head office based functions (customer call centre, finance, human resources, IT, merchandising, online sales support, flooring administration, administrative support for House of Fraser concession), company pension contributions, legal and professional costs, insurance, company car costs, IT systems support and telecommunications.

Administration costs for the year totalled £122.6m, this compares to £106.7m in the year ended 25 July 2015 after removing IPO related exceptional costs of £3.7m (see Exceptional items - note 4). Administrative costs as a percentage of revenue were in line with the prior year.

The year saw an increase in administrative costs of £15.9m, with the majority of the increase being driven by the following:

·      £8.5m increase in payroll costs, £7.1m relating to bonuses and commission, reflecting the strong sales and profit performance in the year, and

·      Marketing investment increased by £3.9m to £23.1m.

Net finance costs

Net finance costs for the year ended 30 July 2016 were £0.1m reflecting the Group's strong balance sheet with no debt (2015: net finance cost £4.5m).

Net finance costs in 2015 comprised interest payable on the pre-IPO US$ denominated debt owed to the principal shareholder, together with a loss on exchange thereon.  The year ended 25 July 2015 included exceptional items of £0.6m and a loss on exchange of £2.8m.

 

Exceptional costs

 

Exceptional costs in the year ended 25 July 2015, comprised legal and professional fees associated with the IPO, management fees paid to an affiliate of Parlour Product Holding (Lux) Sarl, the principal shareholder, in relation to the early termination of a management services agreement as a result of the IPO and commitment and legal fees relating to the new banking facilities.

Taxation

The Group's effective tax rate for the year ended 30 July 2016 was 19.8%.

The 2015 tax charge based on profit before tax adjusted for IPO costs charged as exceptional operating items was an effective rate of 25.8% which was higher than if the standard rate of corporation tax had been applied due to charges not deductible for tax purposes, principally foreign exchange losses.

Earnings per share (EPS)

 

EPS for the year ended 30 July 2016 was 21.8p compared to a loss per share of 5.6p in the previous year.  Adjusting the 2015 year for exceptional / non-recurring operating costs and non-recurring net finance costs gives a revised EPS for 2015 of 13.8p.

EBITDA

 

An analysis of EBITDA (2015: adjusted EBITDA) is as follows:

 

 

 

Year ended 

30 July 2016

Year ended    

25 July 2015  

 

 

£'m

£m

Operating profit

 

11.0

2.8

Depreciation

 

4.5

4.2

Amortisation  

 

0.5

0.6

Exceptional items

 

-

3.7

EBITDA

 

16.0

11.3

 

 

Cash flow and cash equivalents

 

A strong cash flow has been generated from operations reflecting the negative working capital business model whereby:

·      For cash / card sales, customers pay deposits at the point of order and settle outstanding balances before delivery;

·      For consumer credit sales, the loan provider pays ScS approximately 7 days after delivery, and

·      The majority of product suppliers are paid at the end of the month following the month of delivery into the distribution centres.

 

A summary of the Group's cash flows is shown below:

 

 

 

Year ended 

30 July 2016

Year ended    

25 July 2015  

 

 

£'m

£m

Cash generated from operating activities

 

13.2

10.0

Net capital expenditure

 

(3.4)

(4.1)

Net taxation and interest payments

 

(2.2)

(1.8)

Free cash flow

 

7.6

4.1

Loan repayment

 

-

(0.8)

Dividends

 

(6.3)

(1.0)

Net cash generated

 

1.3

2.3

 

At an operational level the Group remained strongly cash generative with cash generated from operating activities of £13.2m (2015: £10.0m).

Capital expenditure of £3.4m (2015: £4.1m) included £1.0m on new stores (2015: £2.5m) and refurbishment expenditure of £1.0m (2015: £0.5m).

The Group's cash and cash equivalents at the end of the financial year are very strong at £22.4m (2015: £21.1m), whilst debt is £nil. The year-end closing cash balance has been impacted by the 53-week year with the year-end falling in line with the month end.  This timing means that the month end payment runs to suppliers and employees have been made.  The Group's cash and cash equivalents at the end of week 52 was £31.9m.

In August 2016, the Group also extended its £12.0m committed revolving credit facility to October 2018. 

Dividend

 

An interim dividend of 4.67p per ordinary share was paid in May 2015. With confidence in the Group's future growth prospects, and supported by strong cash flow dynamics, robust financial position and the extended committed banking facility, it is proposed to pay a final dividend of 9.83p per ordinary share, resulting in a full year dividend of 14.5p (2015: 14.0p).

 

KEY PERFORMANCE INDICATORS

 

The Group's key financial performance indicators and how we have performed against them are as follows:

 

 

2016

2015

2014

(1) Total year on year gross sales growth %

 

14.5%

13.2%

5.1%

(2) ScS sales density per square foot

£219

£194

£184

 

 

 

 

(3)  Like for like order intake growth %

14.8%

5.0%

4.7%

 

(4)  Gross margin % of gross sales

 

44.6%

 

43.5%

 

43.8%

 

(5) Trustpilot customer satisfaction (out of 10)

8.9

7.4

-

 

(6) Adjusted EBITDA

 

2016

2015

2014

 

£m

£m

£m

Operating profit

11.0

2.8

6.6

Depreciation and impairment

4.5

4.2

4.0

Amortisation

0.5

0.6

0.2

EBITDA

16.0

7.6

10.8

 

IPO related costs

 

-

 

3.7

 

-

House of Fraser roll out costs

-

-

1.4

Management fees and other

-

-

1.5

                               

Total EBITDA adjustments

-

3.7

2.9

               

Adjusted EBITDA

16.0

11.3

13.7

 

(7) Adjusted cash generated from operations

 

2016

2015

2014

 

£m

£m

£m

Net cash from operating activities

11.0

8.2

13.8

EBITDA adjustments (6)

-

3.7

2.9

Interest paid

0.2

0.7

0.2

Adjusted cash generated from operations

11.2

12.6

16.9

 

(8) Adjusted earnings per share - pence

 

2016

2015

2014

 

£m

£m

£m

Profit/(loss) after tax

8.7

(2.2)

5.9

EBITDA adjustments (6)*

-

3.7

2.3

Net finance costs/(income)*

-

4.0

(1.2)

Adjusted profit after tax

8.7

5.5

7.0

 

 

 

 

Weighted average number of shares

40,006,654

40,000,000

40,000,000

               

Adjusted earnings per share - pence

21.8p

13.8p

17.5p

 

* net of tax

 

Consolidated statement of comprehensive income for the year ended 30 July 2016

 

 

 

Note

                2016

                £'000

                 2015

                £'000

Gross sales

3

334,660

292,163

Revenue

3

317,305

276,734

Cost of sales

 

(168,177)

(149,583)

Gross profit

 

149,128

127,151

Distribution costs

 

(15,491)

(14,041)

Administrative expenses

 

(122,622)

(110,343)

Operating profit

 

11,015

2,767

 

 

 

 

Analysed as:

 

 

 

Operating profit before exceptional items

 

11,015

6,420

Exceptional items

4

-

(3,653)

Operating profit after exceptional items

 

11,015

2,767

Finance costs

5

(217)

(4,515)

Finance income

6

86

20

Net finance costs

 

(131)

(4,495)

Profit / (loss) before taxation

 

 

10,884

(1,728)

Taxation

7

(2,155)

(496)

 

Profit / (loss) for the year

 

8,729

(2,224)

Attributable to:

 

 

 

Profit / (loss) to the owners of the parent

 

8,729

(2,224)

Earnings per share

 

 

 

Basic

8

21.8p

(5.6p)

Diluted

 

 

 

 

8

21.3p

(5.6p)

All results arise from continuing operations.  There are no other sources of comprehensive income.

 

 

Consolidated statement of changes in equity

 

 

 

Share

capital

Share
premium

Capital Redemption
reserve

Merger reserve

Retained
earnings

 

Total equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

At 27 July 2014

 

-

-                 

-

-

4,253

4,253

Total comprehensive income

 

-

-

-

-

(2,224)

(2,224)

Share based payments

 

-

-

-

-

234

234

Proceeds from shares issued

 

50

70,000

-

-

-

70,050

Capital reduction

 

-

(70,000)

-

-

-

(70,000)

Share buyback

 

(13)

-

13

-

-

-

Group re-organisation

 

-

-

-

25,511

-

25,511

Dividend paid

 

-

-

-

-

(1,044)

(1,044)

At 25 July 2015

 

37

-

13

    25,511

1,219

26,780

 

 

 

 

 

 

 

 

At 26 July 2015

 

37

-

13

25,511

1,219

26,780

Total comprehensive income

 

-

-

-

-

8,729

8,729

Share based payments

 

-

-

-

-

437

437

Proceeds from shares issued

 

3

16

-

-

-

19

Dividend paid

 

-

-

-

-

(6,349)

(6,349)

At 30 July 2016

 

40

16

13

25,511

4,036

29,616

 

Consolidated statement of financial position as at 30 July 2016

  

Note

2016

£'000

2015

£'000 

Non-current assets

 

 

 

Intangible assets

 

1,145

1,291

Property, plant and equipment

 

23,501

25,005

Total non-current assets

 

24,646

26,296

 

 

 

 

Current assets

 

 

 

Inventories

 

23,188

20,705

Trade and other receivables

 

9,014

8,887

Cash and cash equivalents

 

22,379

21,055

Total current assets

 

54,581

50,647

Total assets

 

79,227

76,943

Capital and reserves attributable to the equity shareholders of the parent

 

 

 

Share capital

 

40

37

Share premium

 

16

-

Capital redemption reserve

 

13

13

Merger reserve

 

25,511

25,511

Retained earnings

 

4,036

1,219

Equity shareholders' funds

 

29,616

26,780

Total equity

 

29,616

26,780

 

 

 

 

Non-current liabilities

 

 

 

Trade and other payables

 

6,068

5,668

Deferred tax liability

 

1,101

530

Total non-current liabilities

 

7,169

6,198

 

 

 

 

Current liabilities

 

 

 

Current income tax liabilities

 

210

675

Trade and other payables

9

42,232

43,290

Total current liabilities

 

42,442

43,965

Total liabilities

 

49,611

50,163

Total equity and liabilities

 

79,227

76,943

 

                                                                                                                                                                                                

Consolidated statement of cash flows for the year ended 30 July 2016

 

2016

£'000 

2015

 £'000 

Cash flows from operating activities

 

 

Profit / (loss) before taxation

10,884

               (1,728)

Adjustments for:

 

 

Depreciation of property plant and equipment

4,478

4,185

Amortisation of intangible assets

556

596

Share-based payments

437

234

Finance costs

217

4,515

Finance revenue

(86)

(20)

 

16,486

7,782

Changes in working capital:

 

 

Increase in inventories

(2,483)

(704)

Increase in trade and other receivables

(127)

(571)

(Decrease) / increase in trade and other payables

(658)

3,492

Cash generated from operating activities

13,218

9,999

Interest paid

(217)

(731)

Income taxes paid

(2,049)

(1,088)

Net cash flow from operating activities

10,952

8,180

 

 

 

Cash flows from investing activities

 

 

Purchase of property, plant and equipment

(2,974)

(3,666)

Payments to acquire intangible assets

(410)

(480)

Interest received

86

20

Net cash flow from investing activities

(3,298)

(4,126)

 

 

 

Cash flows from financing activities

 

 

Repayment of borrowings from related party

-

(799)

Dividends paid

(6,349)

(1,044)

Proceeds of share issue

19

50

Net cash flow from financing activities

(6,330)

(1,793)

 

 

 

Net increase in cash and cash equivalents

1,324

2,261

 

 

 

Cash and cash equivalents at beginning of year

21,055

18,794

 

 

 

Cash and cash equivalents at end of year

22,379

21,055

 

 

Notes to the audited consolidated financial statements

1.             General information

ScS Group plc (the "Company") is a company incorporated and domiciled in the UK (Company registration number 03263435). The address of the registered office is 45-49 Villiers Street, Sunderland, SR1 1HA. The Company and its subsidiaries' (the "Group") principal activity is the provision of upholstered furniture and flooring, trading under the name ScS. The shares in the Company were admitted to the Official List of the London Stock Exchange ("LSE") on 28 January 2015.

2.             Accounting Policies

Basis of preparation

The Board approved the preliminary announcement on 3 October 2016.

 

The results for the year ended 30 July 2016, including comparative financial information, have been prepared in accordance with EU endorsed International Financial Standards ("IFRS"), IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement of IFRS, this announcement does not itself contain sufficient information to comply with IFRS.  ScS Group plc will publish full financial statements that comply with IFRS in October 2016.

 

The financial information does not constitute the Company's statutory accounts for the years ended 2016 or 2015, but is derived from those accounts.  Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting.  The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) of the Companies Act 2006.

 

The financial information presented in respect of the year ended 30 July 2016 has been prepared on a basis consistent with that presented in the annual report for the year ended 25 July 2015.

 

Going concern

The Group generates strong cash flows, reflecting the negative working capital requirements of the business model. In addition, the Group has a committed £12.0m revolving credit facility in place. The Group's forecasts and projections show that the Group has adequate resources to continue in operational existence for the foreseeable future.

Having considered the Group's current trading and cash flow generation including severe but plausible stress testing scenarios, the Directors have concluded that it is appropriate to prepare the Group Financial statements on a going concern basis.

New standards, amendments and interpretations

Amendments to and interpretation of standards effective and adopted by the Group will be disclosed in the 2016 annual financial statements.

Critical accounting judgements and estimates

The preparation of the financial statements under IFRS requires the directors' to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Relevant accounting judgement and estimates will be disclosed in the 2016 annual financial statements.

3.             Segment information

The directors have determined the operating segments based on the operating reports reviewed by the senior management team (the executive directors and the other directors of the trading subsidiary, A. Share & Sons Limited) that are used to assess both performance and strategic decisions. The directors have identified that the senior management team are the chief operating decision makers in accordance with the requirements of IFRS 8 'Segmental reporting'.

The directors consider the business to be one type of business generating gross sales and revenue, the retail of upholstered furniture and flooring. All gross sales and revenue, profit / (loss) before taxation, assets and liabilities are attributable to the principal activity of the Group and other related services. All gross sales and revenues are generated in the United Kingdom.

An analysis of Gross sales is as follows:

 

 

 

  Year ended 30 July 2016

£'000

Year ended

25 July 2015

£'000

 

 

 

 

 

 

Sale of goods

 

 

 

312,776

273,491

Associated sale of warranties

 

 

 

21,884

18,672

Gross sales

 

 

 

334,660

292,163

 

Charges associated with interest free credit are deducted from gross sales in arriving at revenue. Charges for interest free credit in 2016 and 2015 were £17,355k and £15,429k respectively.

4.             Exceptional items

Exceptional costs comprise:

Note 

  Year ended

30 July 2016

£'000

  Year ended

25 July 2015

£'000

  Year ended

25 July 2015

£'000

 

 

 

Administrative 
 expenses               

Finance costs

Management fees

4(a)

-

1,100

-              

IPO deal fees

  4(b)

-

2,553

-

Bank facility fees

 4(c)

-

-

555

 

 

-

3,653

555

 

4 (a)        Management fees payable to an affiliate of the former parent undertaking, Sun Capital Partners, Inc. in relation to the termination of a management service agreement due to the IPO.

4 (b)        Legal and professional fees related to the admission.

4 (c)        Banking and legal fees related to the committed £12m revolving credit facility.

 

 

 

5.             Finance costs                       

 

 

Year ended

30 July 2016

                £'000

Year ended

25 July 2015

£'000

 

 

                                

 

Foreign exchange losses on amounts owed to related parties

 

-

2,829

Interest payable on amounts owed to related parties

 

-

995

Bank facility fees

 

71

555

Other finance costs

 

146

176

 

 

217

 

6.             Finance income                               

 

 

Year ended

30 July 2016

                £'000

Year ended

25 July 2015

£'000

 

 

                                

 

Bank interest received

 

86

20

 

7.             Taxation

The total tax charge for the financial year of £2.2 million (2015: £0.5 million) comprises a corporation tax charge of £1.6 million (2015: £1.5 million) and a deferred tax charge of £0.6 million (2015: credit £1.0 million). The tax charge is an effective rate of 19.8% which is in line with the standard rate of corporation tax (2015: 25.8% - based on profit before tax adjusted for IPO costs charged as exceptional operating items - which is higher than if the standard rate of corporation tax had been applied due to charges not deductible for tax purposes, principally foreign exchange losses).

 

8.             Earnings per share

 

 

Year ended  

30 July 2016

                £'000

Year ended

25 July 2015

£'000

Profit / (loss) attributable to owners of the Company

 

8,729

(2,224)

Weighted average number of shares in issue for the purposes of basic earnings per share

 

40,006,654

40,000,000

 

 

 

 

Effect of dilutive potential Ordinary shares:

 

 

 

-       share options

 

965,889

-

Weighted average number of Ordinary shares for the purpose of diluted earnings per share

 

40,972,543

40,000,000

Basic earnings / (loss) per share

 

21.8p

(5.6p)

Diluted earnings / (loss) per share

 

21.3p

(5.6p)

             

 

A total of 1,085,791 potential ordinary shares have not been included within the calculation of diluted earnings per share for the year ended 25 July 2015 as they are antidilutive.

 

 

9.             Trade and Other Payables - Current                               

               

Year ended    

30 July 2016

                £'000

Year ended

25 July 2015

£'000

 

                                

 

Trade payables

14,430

24,356

Payments received on account

12,825

7,247

Other taxation and social security payable

4,862

3,449

Accruals

10,115

8,238

 

42,232

43,290

 

The fair value of financial liabilities approximates their carrying value due to short maturities. Financial liabilities are denominated in pounds sterling.

 

10.          Dividends

An interim dividend of 4.67p per ordinary share was declared by the Board of directors on 12 April 2016 and paid on 27 May 2016. It has been recognised in shareholders' equity in the year to 30 July 2016.

A final dividend of 9.83p per ordinary share has been proposed by the Board of directors.

At 30 July 2016 the retained earnings of the parent Company amounted to £66.5m.

 


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