SCS GROUP PLC

Earnings Release • Mar 23, 2015

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RNS Number : 1190I

ScS Group PLC

23 March 2015

For Immediate Release	23 March 2015

ScS Group PLC

("ScS" or the "Company")

Interim Results for the 26 weeks ended 24 January 2015

ScS, one of the UK's largest retailers of upholstered furniture and floorings, is pleased to announce its maiden interim results for the 26 weeks ended 24 January 2015.

Financial Highlights:

·      Total sales order intake up 7.8% on a like for like basis

·      Flooring sales order intake up 13.0% on a like for like basis

·      Total sales up 14.5% to £132.0m (H1 2014: £115.3m)

·      Gross profit increased 13.2% to £57.4m (H1 2014: £50.7m)

·      Operating loss of £8.7m (H1 2014 loss: £3.4m)

·      EBITDA loss  (excluding exceptional items) of £3.0m (H1 2014 loss: £1.3m)

·      Operating loss (excluding exceptional items) of £5.2m (H1 2014 loss: £3.4m) in line with expectations and reflecting weighting of advertising and investment in establishing House of Fraser concession 

·      Interim dividend of 2.8p per share

·      Strong balance sheet with net cash of £26.6m

Operational Highlights:

·      Successful listing on the premium segment of the Official List of the London Stock Exchange on 28 January 2015, raising £35.7m

·      3 new stores opened in: Abbotsinch in Glasgow, Croydon and Slough (total: 97 Stores)

·      House of Fraser concession launched in 30 stores in July 2014

·      New e-commerce platform for ScS trading website and bespoke House of Fraser 'For Living' website launched

·      Online Sales up 27.6% to £3.7m (H1 2014: £2.9m)

·      £12m committed revolving credit facility with Lloyds Bank plc agreed in January 2015

Current Trading and Outlook:

·      Current trading remains in line with market expectations

·      Sales order intake up 7.5% on a like-for-like basis for the first 33 weeks of the year

David Knight, Chief Executive Officer of ScS commented:

"We are delighted to be reporting our maiden set of results since listing on the London Stock Exchange. These results demonstrate the progress that has been made to develop ScS into a strong and resilient business. Our sales order intake is our best ever at this time of year and this momentum gives us good visibility for the second half. We are, therefore, confident of meeting market expectations for the full year.

Looking ahead, we are excited about our future growth prospects, including our new concession agreement with House of Fraser, our flooring offering and online proposition. The Group's cash flow dynamics and new committed bank facilities underpin the strong financial position which will support our ambitions for future growth and deliver value for our new shareholders. To reflect this confidence, the board is today proposing a maiden interim dividend of 2.8p per share."

Enquiries:

ScS Group PLC David Knight, Chief Executive Officer Ron Turnbull, Chief Financial Officer	c/o Buchanan +44 (0)20 7466 5000
Investec Garry Levin / David Flin / George Price / Symmie Swil	Tel: +44 (0) 20 7597 5970 Fax: +44 (0) 20 7597 5120
Buchanan Mark Edwards / Gabriella Clinkard/ Jane Glover	Tel: +44 (0)20 7466 5000 scs@buchanan.uk.com

Investor and Analyst Meeting

A meeting for analysts will be held at the office of Buchanan, 107 Cheapside, London, EC2V 6DN on 23 March 2015 commencing at 9.30am. ScS Group plc's Interim Results 2015 are available at www.scsplc.co.uk

Photography

Photographs are available from Buchanan.  To arrange to receive soft copies, please contact +44 (0)20 7466 5000 or scs@buchanan.uk.com.

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 currently trades 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 Lotti, the Danni and the Zamba) 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 the House of Fraser "For Living" brand. ScS currently operates in 30 House of Fraser stores across the UK.

CHAIRMAN'S STATEMENT

It is with great pleasure that I introduce the Group's maiden interim statement as a listed company.  This period has been one of huge significance for ScS, having achieved our highest levels of sales order intakes, successfully opened up concessions in 30 House of Fraser stores, and of course completed the flotation of the Group on the stock market.  The listing combined with this good set of results, which is in line with expectations and reflects the historical H2 weighting, helps position the Group well for continued future growth. I also welcome Ron McMillan and Paul Daccus as Non-Executive Directors who both bring with them considerable knowledge and experience in their fields of expertise.

The results for the first half of this year, demonstrate the success of our strategy of growing revenue and gross profits and are underpinned by our 5 strategic goals to:

·      develop branded upholstered furniture products

·      grow market share in the flooring market

·      grow online revenue

·      controlled expansion with new store openings

·      develop the House of Fraser concession opportunity

The Group remains in a strong position to build on the progress we have made in the first half. The successful IPO in January 2015 marks a significant point in the company's development, demonstrates the strength and renewed focus that ScS now has and provides a strong platform for further growth.

Alan Smith

Chairman

23 March 2015

CHIEF EXECUTIVE'S REPORT

Business Review

The 26 week period ended 24 January 2015 has been a hugely successful period for ScS during which we have:

·      grown like for like sales orders by 7.8% as we continue to gain market share, assisted by ongoing development of our branded upholstered furniture product range and our flooring business

·      opened 3 new stores (Abbotsinch in Glasgow in August 2014, Croydon in October 2014 and Slough in December 2014), taking our total number of stores to 97

·      launched a new scalable and more stable e-commerce platform that improves user experience, visual merchandising, search engine optimisation and delivers a responsive mobile solution. Like for Like KPI's are positive; website hits up 14.9%, conversion up 17.8%, sales order intake up 27.9%

·      launched an upholstered furniture and flooring concession in 30 House of Fraser stores and developed and launched a bespoke House of Fraser 'For Living' website that links through the House of Fraser website

·      Significant investment in supporting the House of Fraser concession and business growth generally

·      negotiated a £12.0m committed revolving credit facility

·      and finally, successfully listed on the London Stock Exchange

Total revenue increased from £115.3m to £132.0m, an increase of £16.7m or 14.5%, and gross profit increased from £50.7m to £57.4m, an increase of £6.7m or 13.2%.

In view of the high levels of activity in this period, total operating expenses (before exceptional items) increased from £54.1m to £62.6m, an increase of 15.7%, and an increase as a percentage of sales from 46.9% to 47.4%. This principally reflects the impact of the launch of the House of Fraser concession at the end of last year, which we believe will stand us in good stead for the future as House of Fraser customers become increasingly aware of the new products and service offered and we develop this revenue and profit opportunity over time.  Advertising and marketing expenditure is also typically larger in H1 due to seasonal holidays, with revenue from orders booked during late December/January recognised in H2.

I can report therefore, that the operating loss (pre-exceptional items relating to the IPO) of £5.2m is in line with our expectations, and we have good visibility over H2 as a result of our strong sales order intake.

Financial Review

	H1 FY15 £m	H1 FY14 £m	FY14 £m
Revenue	132.0	115.3	258.2
Gross profit	57.4	50.7	113.0
Distribution costs	(7.1)	(5.9)	(12.3)
Administration expenses *	(55.5)	(48.2)	(94.1)
Total operating expenses *	(62.6)	(54.1)	(106.4)
Operating (loss)/profit*	(5.2)	(3.4)	6.6
Net finance (costs)/income*	(3.9)	0.9	0.5
Exceptional items	(4.0)	-	-
(Loss)/profit before tax	(13.1)	(2.5)	7.1
Tax	1.4	0.8	(1.2)
(Loss)/profit after tax	(11.7)	(1.7)	5.9
Interim dividend per share	2.80	-	-
Adjusted EBITDA	(2.7)	(0.7)	13.7
	24 January  2015	25 January  2014	26  July  2014
Debt	-	(22.3)	(22.5)
Cash and cash equivalent	26.6	20.3	18.8
Net cash/(debt)	26.6	(2.0)	(3.7)

* Excluding exceptional items

Revenue

The strong growth in revenue, up by £16.7m or 14.5%, is attributable to:

·      an increase in upholstered furniture revenue in ScS stores of £5.0m or 5.1%

·      an increase in flooring revenue in ScS stores of £1.6m or 12.7%

·      3 new stores, contributing revenue of £2.0m

·      an increase in online revenue of £0.8m or 27.6%

·      revenue from the House of Fraser concession, which was launched in 30 sites from the start of H1 2015 (H1 2014: 3 sites), up from £1.5m to £8.8m, an increase of £7.3m.

Gross profit

Gross margin reduced by 50 bps from 44.0% to 43.5% reflecting the competitive promotions during H1 FY15, notably a "free carpet" offer during the Autumn (pre-Christmas) sale, as we continued to successfully grow and promote our flooring business, as well as increasing combined sales of furniture/flooring. We see significant potential to grow our share of the flooring market, and these promotional investments are driving awareness of our unique offering.  The focus on generating growth in cash margin resulted in an increase in gross profit of £6.7m or 13.2%.

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. Distribution costs expressed as a percentage of sales have increased year on year from 5.1% to 5.4% reflecting the opening of our tenth distribution centre in West Thurrock, which was operational by August 2014. This centre provides capacity to support the growth from predominantly southern based House of Fraser stores and future expansion of ScS stores in that area.

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

·    advertising and marketing expenditure

·    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, advertising and marketing, 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

Expressed as a percentage of sales, administrative expenses (excluding exceptional items) have increased slightly year on year from 41.8% to 42.0% and reflects the investment in supporting the future growth of the business,  the newly launched House of Fraser concession.

Adjusted EBITDA

EBITDA, adjusted to exclude management fees (payable to Sun Capital pre-IPO) and other non-recurring costs, is usually negative in H1 reflecting the seasonal nature of our business, with higher revenue, lower media costs and higher profits occurring in H2. The year on year movement reflects the investment in infrastructure following the launch of the House of Fraser concession and the planned year on year increase in media spend, with the income from orders booked during late December/January recognised in the third quarter of our financial year. Adjusted EBITDA loss for H1 of £2.7m is in line with expectations.

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£m	£’m	£m
Operating (loss)/profit		(8.7)	(3.4)	6.6
Depreciation		2.0	2.0	4.0
Amortisation		0.3	0.1	0.2
Exceptional items		3.4	-	-
EBITDA		(3.0)	(1.3)	10.8
House of Fraser roll out costs		-	-	1.4
Management fees		0.2	0.2	0.8
Other non-recurring items		0.1	0.4	0.7
Adjusted EBITDA		(2.7)	(0.7)	13.7

Exceptional costs

Exceptional costs comprise legal and professional fees associated with the IPO, management fees payable to an affiliate of Sun Capital 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.

Net finance costs

Net finance costs comprise the interest payable on the pre-IPO US$ denominated debt owed to an affiliate of Sun Capital, together with a loss on exchange thereon (H1 FY14: gain on exchange).

Taxation

The tax credit for the 26 weeks ended 24 January 2015 is based on an estimated effective tax rate for the full year of 11.0% (26 weeks ended 25 January 2014: tax credit 31.4%). The tax credit is lower than if the standard rate of corporation tax had been applied, mainly due to charges/(credits) not deductible for tax purposes, principally IPO costs, foreign exchange losses/(gains), and depreciation on capital expenditure that does not qualify for capital allowances.

Cash and cash equivalents

Despite the adjusted EBITDA loss which typically occurs during H1, there is strong cash flow 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 7-10 days after delivery

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

Total capital expenditure in H1 2015 of £3.4m (H1 2014: £1.1m) includes the investment of £2.4m in 3 new stores.

Debt outstanding under the pre-IPO group structure has been repaid/capitalised as part of the group reorganisation leading up to Admission. The cash position at end H1 2015 is therefore very strong at £26.6m (H1 2014: net debt £2.0m).

Dividend

As an expression of our confidence in the Group's prospects, I am delighted to announce the payment of our maiden interim dividend of 2.8p per ordinary share, this dividend will be payable on 22 May 2015 to shareholders on the register at 1 May 2015. The ex-dividend date is 30 April 2015. 

Current Trading and Outlook

Current trading is in line with market expectationswith like for like sales orders up 7.5% for the first 33 weeks of FY15. The Board remains confident of the medium term outlook and strategy to maintain and grow the business. The Group's cash flow dynamics and new committed facilities help to maintain a strong financial position which will support our ambitions for future growth and returns for our shareholders.

Principal risks and uncertainties

The principal risks and uncertainties for the remainder of the financial year are unchanged from those detailed on pages 13 to 15 and pages 59 to 60 of the Initial Public Offering Prospectus dated 23 January 2015, available from the ScS Group plc website: www.scsplc.co.uk.

David Knight

Chief Executive Officer

23 March 2015

STATEMENT OF DIRECTORS RESPONSIBILITIES

The directors' confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·      an indication of important events that have occurred during the first 26 weeks and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining 26 weeks of the financial year; and 

·      material related-party transactions in the first 26 weeks and any material changes in the related-party transactions described in the last annual report.

The directors of ScS Group plc are listed on pages 140 and 141 of the Initial Public Offering Prospectus dated 23 January 2015.

A list of current directors is maintained on the IFRS GAAP plc website: www.scsplc.co.uk.

By order of the Board

Ronald Turnbull

Company Secretary

23 March 2015

Independent review report to ScS Group Plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed the condensed consolidated interim financial statements, defined below, in the half-yearly financial report of ScS Group Plc for the 26 weeks ended 24 January 2015. Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

This conclusion is to be read in the context of what we say in the remainder of this report.

What we have reviewed

The condensed consolidated interim financial statements, which are prepared by ScS Group Plc, comprise:

·      the condensed consolidated balance sheet as at 24 January 2015;

·      the condensed consolidated statement of comprehensive income for the period then ended;

·      the condensed consolidated cash flow statement for the period then ended;

·      the condensed consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the condensed consolidated interim financial statements.

As disclosed in note 2, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The condensed consolidated interim financial statements included in the half-yearly financial report have been prepared in accordance with International Accounting Standard 34, as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Other matter

The accompanying financial statements include comparative information as required by IAS34. The comparative information as at, and for the period ended 25 January 2014 has not been audited or reviewed.

What a review of condensed consolidated financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial statements.

Responsibilities for the condensed consolidated interim financial statements and the review

Our responsibilities and those of the directors

The half-yearly financial report, including the condensed consolidated interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, 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.

PricewaterhouseCoopers LLP

Chartered Accountants

23 March 2015

ScS Group plc

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Note	Unaudited 26 weeks ended 24 January 2015	Unaudited 26 weeks ended 25 January 2014	Audited 52 weeks ended  26 July 2014
		£'000	£'000	£'000
---	---	---	---	---
Revenue		132,005	115,299	258,206
Cost of sales		(74,652)	(64,603)	(145,204)
Gross profit		57,353	50,696	113,002
Distribution costs		(7,117)	(5,901)	(12,303)
Administrative expenses		(58,937)	(48,172)	(94,091)
Group operating (loss)/profit		(8,701)	(3,377)	6,608
Analysed as:
Operating (loss)/profit before exceptional items		(5,263)	(3,377)	6,608
Exceptional items	9	(3,438)	-	-
Operating (loss)/profit		(8,701)	(3,377)	6,608
Finance costs	9, 10	(4,432)	(1,022)	(1,967)
Finance income	11	-	1,864	2,515
Net finance (costs)/income		(4,432)	842	548
(Loss)/profit before taxation		(13,133)	(2,535)	7,156
Taxation	12	1,439	795	(1,243)
(Loss)/profit for the year		(11,694)	(1,740)	5,913
Attributable to:
Owners of the parent		(11,694)	(1,740)	5,913
(Loss)/profit attributable and total comprehensive income for the year		(11,694)	(1,740)	5,913

(Loss)/earnings per share (expressed in pence per share):	13
Basic (loss)/earnings per share		(31.37)p	(4.67)p	15.86

There is no variance between the diluted and basic earnings per share.

There are no other sources of comprehensive income.

ScS Group plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

			Attributable to owners of the parent
	Note	Share capital	Capital Redemption Reserve	Merger Reserve	Retained  earnings	Total equity
		£'000	£'000	£'000	£'000	£'000
Balance at 28 July 2013		-	-	-	4,839	4,839
Loss for the period		-	-	-	(1,740)	(1,740)
Share based payment expense		-	-	-	28	28
Dividend Paid		-	-	-	(6,555)	(6,555)
Balance at 25 January 2014		-	-	-	(3,428)	(3,428)
Balance at 26 January 2014		-	-	-	(3,428)	(3,428)
Profit for the period		-	-	-	7,653	7,653
Share-based payment expense		-	-	-	28	28
Balance at 26 July 2014		-	-	-	4,253	4,253

Balance at 27 July 2014		-	-	-	4,253	4,253
Loss for the period		-	-	-	(11,694)	(11,694)
Share-based payment expense		-	-	-	86	86
Group re-organisation	15	37	13	25,561	-	25,611
Balance at 24 January 2015		37	13	25,561	(7,355)	18,256

ScS Group plc

CONDENSED CONSOLIDATED BALANCE SHEET

	Note	Unaudited 26 weeks ended 24 January 2015	Unaudited 26 weeks ended 25 January 2014	Audited 52 weeks ended 26 July 2014
		£'000	£'000	£'000
---	---	---	---	---
Assets
Non-current assets
Intangible assets		1,436	551	1,407
Property, plant and equipment		26,617	26,393	25,524
Total non-current assets		28,053	26,944	26,931
Current assets
Inventories		20,161	18,662	20,001
Trade and other receivables		9,926	8,641	8,316
Cash and cash equivalents		26,550	20,342	18,794
Total current assets		56,637	47,645	47,111
Total assets		84,690	74,589	74,042

Capital and reserves attributable
to the equity shareholders of the
parent
Share capital	15	37	-	-
Capital redemption reserve		13	-	-
Merger reserve		25,561	-	-
Retained earnings		(7,355)	(3,428)	4,253
Equity shareholder funds		18,256	(3,428)	4,253
Total equity		18,256	(3,428)	4,253
Non-current liabilities
Provisions for other liabilities and charges		-	260	-
Trade and other payables		5,612	5,539	5,332
Deferred tax liability		1,134	1,525	1,569
Total non-current liabilities		6,746	7,324	6,901
Current liabilities
Current income tax liabilities		-	-	227
Trade and other payables	14	59,688	70,693	62,661
Total current liabilities		59,688	70,693	62,888
Total liabilities		66,434	78,017	69,789
Total equity and liabilities		84,690	74,589	74,042

ScS Group plc

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		Unaudited 26 weeks ended 24 January 2015	Unaudited 26 weeks ended 25 January 2014	Audited 52 weeks ended 26 July 2014
Cash flows from operating activities		£'000	£'000	£'000
(Loss)/profit before taxation		(13,133)	(2,535)	7,156
Adjustments for:
Depreciation		1,992	2,034	3,938
Amortisation of intangible assets		286	107	225
Share-based payment charge		86	28	56
Finance costs		3,877	1,022	1,967
Finance income		-	(1,864)	(2,515)
		(6,892)	(1,208)	10,827
Changes in working capital:
Increase in inventories		(160)	(104)	(1,443)
(Increase)/decrease in trade and other receivables		(899)	2,185	1,619
Increase in trade and other payables		19,831	12,715	4,267
(Decrease) in provisions		-	-	(260)
Cash generated from operations		11,880	13,588	15,010
Interest paid		(93)	(95)	(189)
Tax received/(paid)		67	(125)	(1,000)
Net cash inflow from operating activities		11,854	13,368	13,821
Cash flows from investing activities
Purchase of property, plant and equipment		(3,085)	(958)	(1,992)
Purchase of intangible assets		(315)	(127)	(1,102)
Interest received		-	5	13
Net cash outflow from investing activities		(3,400)	(1,080)	(3,081)
Cash flows from financing activities
Repayments of loan from a parent company		(748)	(6,583)	(6,583)
Dividends paid		-	(6,555)	(6,555)
Proceeds of  share issue		50	-	-
Net cash outflow from financing activities		(698)	(13,138)	(13,138)
Net increase/(decrease) in cash and cash equivalents		7,756	(850)	(2,398)
Cash and cash equivalents at beginning of period		18,794	21,192	21,192
Cash and cash equivalents at end of period		26,550	20,342	18,794

Notes to the unaudited condensed 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.

2.             Basis of preparation

This interim report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and IAS 34 "Interim Financial Reporting" as adopted by the European Union.

The shares in the Company were admitted to the Official List of the London Stock Exchange on 28th January 2015. The condensed consolidated financial statements for the 26 weeks ended 24 January 2015 should be read in conjunction with the Initial Public Offering Prospectus dated 23 January 2015 (the "Prospectus") which includes the financial results of the group on pages 75 to 109 prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  The full financial statements for the 52 weeks ended 26 July 2014 were prepared in accordance with UK GAAP and have been filed with the Registrar of Companies. Reconciliations between this and IFRS are contained on pages 100 to 108 of the Prospectus.

The report of the auditors for the financial statements for the 52 weeks ended 26 July 2014 was unqualified, did not contain an emphasis of matter paragraph and did not include a statement under Section 498 of the Companies Act 2006.

The Group's interim condensed consolidated financial information is not audited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006.

These condensed interim financial statements were approved for issue on 23 March 2015

3.             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 £12m revolving credit facility in place. The Group's forecasts and projections show that the Group has adequate resources to continue to operational existence for the foreseeable future. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements. 

4.             Accounting policies

The Group's principal accounting policies used in preparing this information are as stated on pages 79 to 82 of the Prospectus with the exception of the Group reorganisation as described below. There has been no change to any accounting policy from the date of the Prospectus.

In connection with the admission, the Group undertook a reorganisation of its corporate structure which resulted in the Company becoming the ultimate holding company of the Group. Prior to the reorganisation the ultimate holding company was Parlour Product Topco Limited.

The transaction was accounted for as a capital reorganisation rather than a reverse acquisition since it did not meet the definition of a business combination under IFRS 3, because the Company did not meet the definition of a business (as defined in the application guidance to IFRS 3) at the date of acquisition. In a capital reorganisation, the consolidated financial statements of the Group reflect the predecessor carrying amounts of Parlour Product Topco Limited with comparative information of Parlour Product Topco Limited presented for all periods since no substantive economic changes have occurred.

5.             Segmental Information

The directors have determined the operating segments based on the operating reports reviewed by the senior management team (as defined on pages 176 of the Prospectus) 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 main type of business generating revenue; the retail of upholstered furniture and flooring. All segment revenue, (loss)/profit before taxation, assets and liabilities are attributable to the principal activity of the Operating Group and other related services. All revenues are generated in the United Kingdom. There have been no changes to the directors determination of segments since those disclosed in the Prospectus.

6.             Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the historical financial information in the Prospectus.

7.             Financial risk management

The Groups activities expose it to a variety of financial risks which include funding and liquidity risk, credit risk, interest rate risk and other price risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and they should be read in conjunction with the Prospectus. There have been no change to the risk management procedures or the  accounting policies from those included in the Prospectus.

8.             Seasonality of Operations

Due to the seasonal nature of this retail segment, higher revenues and operating profits are usually expected in the second half of the year than the first half. In the 52 week period ended 26 July 2014, 45% of revenues accumulated in the first half of the year and an operating loss (before exceptional items) of £3.4m was incurred. In the second half of 52 week period ended 26 July 2014, 55% of total revenue was earned and a profit before tax of £10.0m was generated.

9.             Exceptional items

Items that are material either because of their size and nature, or that are non-recurring, are considered as exceptional items and are presented within the line items in the income statement to which they best relate.

Exceptional items comprise:

	Note	26 weeks ended 24 January 2015	26 weeks ended 24 January 2015	26 weeks ended 25 January 2014 and  52 weeks ended 26 July 2014
		Administrative expenses £'000	Finance costs £'000	£'000
Management fees	9(a)	1,100	-	-
IPO deal fees	9(b)	2,338	-	-
Bank facility fees	9(c)	-	555	-
		3,438	555	-

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

9 (b)        Legal and professional fees related to the IPO.

9 (c)        Banking and legal fees related to the committed £12.0 million revolving credit facility.

10.          Finance costs

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£'000	£'000	£'000
Foreign exchange losses on amounts owed to group
undertakings		2,829	-	-
Interest payable on amounts owed to group
undertakings		955	927	1,778
Bank facility fees - exceptional item (note 9)		555	-	-
Other finance costs		93	95	189
		4,432	1,022	1,967

11.          Finance income                                                                                                                                   

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£'000	£'000	£'000
Foreign exchange gains on amounts owed to group
undertakings		-	1,859	2,502
Bank interest received		-	5	13
		-	1,864	2,515

12.          Taxation

The tax credit for the 26 weeks ended 24 January 2015 is based on an estimated effective tax rate for the full year of 11.0% (52 weeks ended 26 July 2014: tax charge 17.4%; 26 weeks ended 25 January 2014: tax credit 31.4%). The tax credit is lower than if the standard rate of corporation tax had been applied, mainly due to charges/(credits) not deductible for tax purposes, principally IPO costs, foreign exchange losses/(gains), and depreciation on capital expenditure that does not qualify for capital allowances.

13.          Earnings per share

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£'000	£'000	£'000
(Loss)/profit attributable to owners of the Company		(11,694)	(1,740)	5,913

Basic weighted average number of shares in issue		37,277,437	37,277,437	37,277,437
Basic earnings per share (in pence per share)		(31.37)	(4.67)	15.86

The weighted average number of shares figure for 2015 reflect the share capital movements that occurred on the

reorganisation of the Group (see note 15) for the full period retrospectively. The 2014 comparatives have been

adjusted retrospectively for the impact of this reorganisation to allow for comparability

There is no variance between the diluted and basic earnings per share.

On admission on 28 January 2015 the Company issued a further 2,722,563 ordinary shares of £0.001 each bringing the total number of ordinary shares in issue to 40,000,000 at that date. An illustrative earnings per share calculation has been presented below to demonstrate the earnings attributable to ordinary shareholders at admission.

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£'000	£'000	£'000
(Loss)/profit attributable to Ordinary Shareholders		(11,694)	(1,740)	5,913

Basic weighted average number of Ordinary Shares		40,000,000	40,000,000	40,000,000
Basic earnings per Ordinary Share (in pence per
share)		(29.24)	(4.35)	14.78

14.          Trade and other payables current

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£'000	£'000	£'000
Trade payables		20,582	18,372	21,349
Borrowing from group undertakings		-	22,319	22,526
Payments received on account		19,049	16,842	7,159
Other tax and social security payable		5,931	4,657	3,129
Accruals		14,126	8,503	8,498
		59,688	70,693	62,661

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

Borrowings from group undertakings are analysed as follows and include interest capitalised:

		26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
		£'000	£'000	£'000
23,987,885 Series 1.8 per cent. Unsecured payment
In kind notes of US$1.00 each		-	13,859	13,987
9,233,000 Series 2.8 per cent. Unsecured payment
In kind notes of US$1.00 each		-	8,460	8,539
		-	22,319	22,526

As part of the Group re-organisation, the borrowings from group undertakings were capitalised during the period.

15.          Share Capital

		Number of shares	Ordinary shares	Share premium	Total
	£m	£m	£m	£m
		£'000	£'000	£'000
At 28 July 2014		1	-	-	-
Share sub-division	15(a)	99,999	-	-	-
Shares issued /proceeds	15(a)	5,000,000,000	50	70,000	70,050
Capital reduction	15(a)	-	-	(70,000)	(70,000)
Consolidation of shares	15(b)	4,963,079,840	-	-	-
Share sub-division	15(b)	37,020,160	-	-	-
Share re-designation and buyback	15(b)	(37,020,160)	(13)	-	(13)
Shares issued/proceeds	15(c)	257,277	-	-	-
At 24 January 2015		37,277,437	37	-	37

At 27 July 2013 and 25 January 2014			1	-	-	-
	15(a)   As part of the Group reorganisation on 21st January 2015 the existing £1 share capital which consisted of 1 ordinary share was subdivided into 100,000 (£0.00001) ordinary shares. A further 4,999,900,000 (£0.00001) ordinary shares were issued to Parlour Products Holdings (Lux) S.a.r.l ("PPH(L)") for cash. A further 100,000 (£0.00001) ordinary shares were issued to PPH (L) as consideration for the acquisition of the entire 'A' ordinary shares in issue in Parlour Product Topco Limited. The value attributable to the acquisition was £70,000,000 thereby creating a share premium of £69,999,999. This was subsequently reduced through a capital reduction. 15(b)   The shares in issue were consolidated down to 37,020,160 ordinary shares of £0.001351 per share and subdivided into 37,020,160 ordinary shares of £0.001 per share and 37,020,160 ordinary shares of £0.000351 per share. The ordinary £0.000351 shares were redesignated as deferred shares and bought back out of distributable reserves for total consideration of £0.01 and held as Treasury shares. 15 (c)   On 22 January 2015 the company issued 257,439 ordinary (£0.001) shares in exchange for the 750 'C' ordinary shares held by a senior manager in Parlour Product Topco Limited.

16.         Dividend

An interim dividend of 2.8p per ordinary share was proposed by the Board of directors on 22 March 2015. Subject to approval by shareholders, the dividend is payable on 22 May 2015 to all shareholders who are on the register at 1 May 2015. The interim dividend, amounting to £1,120,000 has not been recognised as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 25 July 2015.

17.          Related party transactions

Loans from related parties

The Group received the following loans from Parlour Product Holding (Lux) Sarl, the parent company:

·      Unsecured interest free loan of US$6,125,000 payable on maturity at 12 August 2068

·      23,987,885 Series 1 8% unsecured payment in Kind notes of US$1.00 payable on demand

·      9,233,000 Series 2 8% unsecured payment in Kind notes of US$1.00 payable on demand

·      18,076,284 unsecured payment in kind notes of US$1.00 payable on demand in recognition of interest accrued and capitalised at each balance sheet date

·      As part of the group reorganisation these amounts were capitalised

The movement on the amounts outstanding are as follows:

	26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
Unsecured interest free loan	£'000	£'000	£'000
---	---	---	---
Opening balance	-	3,708	3,708
Foreign exchange loss/(gain)	-	(150)	(150)
Repaid	-	(3,558)	(3,558)
Closing balance	-	-	-

Series 1 payment in kind notes

	26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
	£'000	£'000	£'000
---	---	---	---
Opening balance	13,987	17,405	17,405
Issued	593	589	1,117
Repaid	(748)	(3,025)	(3,025)
Foreign exchange loss/(gain)	1,756	(1,110)	(1,510)
Capitalised in period (see note 14)	(15,588)	-	-
Closing Balance	-	13,859	13,987

Series 2 payment in kind notes

	26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
	£'000	£'000	£'000
---	---	---	---
Opening balance	8,539	8,720	8,720
Issued	362	337	661
Foreign exchange loss/(gain)	1,073	(597)	(842)
Capitalised in period (see note 14)	(9,974)	-	-
Closing Balance	-	8,460	8,539

Purchases of goods and services

Management fees and expenses have been paid to Sun Advisor in relation to Management Services Agreement as follows:

	26 weeks ended 24 January 2015	26 weeks ended 25 January 2014	52 weeks ended 26 July 2014
	£'000	£'000	£'000
---	---	---	---
Management Fees and expenses	152	274	981
Termination fee	1,100	-	-
	1,252	274	981

Letter of Credit

At 26 July 2014 and 25 January 2014 the Bank of Montreal had provided Barclays Bank plc, the Group's bankers at those dates, with an irrevocable standy letter of credit for £6.0 million to underwrite merchant services transactions in A Share & Sons Limited, the Group's trading subsidiary. Sun Capital Partners inc. had provided a guarantee in favour of the Bank of Montreal for any losses suffered in connection with such irrevocable standby letter of credit. This standby letter of credit was cancelled as part of the group reorganisation.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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