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Signet Results Ahead of Expectations
Dividend up 9.1%
LONDON, April 18 /PRNewswire-FirstCall/ -- Signet Group plc ( SIG;
LSE) today released preliminary results for the 53 weeks ended 3 February
2007.
Constant
Reported Exchange Rate
53 weeks 52 weeks(1)
* Group total sales: 1,893.2m pounds Sterling up 8.0% up 9.9%
* Group like for like sales up 4.8% up 5.4%
* Group profit before tax: 213.2m pounds up 6.4% up 9.3%
* Earnings per share: 8.2p up 9.3% up 11.0%
* Total annual dividend per share: 3.6p(2) up 9.1%
(1) See note 11 for reconciliation. (2) Final dividend proposed in US
dollars, see note 8 for translation assumption.
Divisional Highlights
* US: -- Increased leading speciality jewellery market share to 8.8%
-- Kay strengthened its No.1 speciality brand position with sales up
15.2% to $1,486.7m
-- Jared sales up 24.4% to $664.4m, national cable television
advertising commenced
-- Space growth of 11%, part of $1 billion five year new store
investment programme
* UK: -- Operating profit up 12.0% to 55.0 million pounds, benefiting from
cost realignment completed in early 2006
-- Diamonds now 30% of product mix, up from 23% in 2001/02
-- 44% of sales from reformatted stores
Terry Burman, Group Chief Executive, commented: "The Group continued to
make good progress. The US business again increased its share of the $63
billion US jewellery market and significantly outperformed its main
competition. The UK division reported a solid increase in profits in a
challenging trading environment.
Since the start of the financial year the trading environment in the US
appears to have weakened somewhat. As a result, in the year to date, the US
business has experienced a low single digit like for like sales increase on
an underlying basis, after taking into account the adverse weather
disruption over Valentine's Day and the benefit of the timing of
promotional events. The strong competitive advantages of the division means
it continues to be well positioned to gain further market share. In the UK,
like for like sales growth has strengthened a little from the performance
of last year, although the marketplace remains challenging."
Enquiries: Terry Burman, Group Chief Executive +44 (0) 20 7317 9700
Walker Boyd, Group Finance Director +44 (0) 20 7317 9700
Tom Buchanan, Brunswick +44 (0) 20 7404 5959
Pamela Small, Brunswick +44 (0) 20 7404 5959
Signet operated 1,889 speciality retail jewellery stores at 3 February
2007; these included 1,308 stores in the US, where the Group trades as "Kay
Jewelers", "Jared The Galleria Of Jewelry", and under a number of regional
names. At that date Signet operated 581 stores in the UK, where the Group
trades as "H.Samuel", "Ernest Jones", and "Leslie Davis". Further
information on Signet is available at http://www.signetgroupplc.com. See
also http://www.kay.com, http://www.jared.com, http://www.hsamuel.co.uk and
http://www.ernestjones.co.uk.
Chairman's Statement
Group performance
I am pleased to report that the Group achieved record profits in
2006/07. Financial highlights of the year included:
* Sales up 8.0% to 1,893.2 million pounds;
* Profit before tax up 6.4% to 213.2 million pounds; and
* Earnings per share up 9.3% to 8.2p.
The US division substantially strengthened its position as the largest
speciality retail jeweller in the US, continued to achieve sector-leading
operating ratios and increased space by 11%, a little above the top end of
its target range. Kay built further on its position as the leading US
speciality jeweller by sales and Jared is now the number four brand in the
sector. In a trading environment that continued to be challenging, the UK
division achieved a solid increase in operating profit and an improved
operating margin.
During 2006/07 the Group again made good progress towards its
objectives, which are to:
* continue to achieve sector leading performance standards on both sides
of the Atlantic;
* increase store productivity in the US and the UK;
* grow new store space in the US; and
* maintain a strong balance sheet.
Signet has been a member of the FTSE4Good Index since it was
established, and endeavours to meet its changing criteria. During the year
the Group continued to support the activities of the Council for
Responsible Jewellery Practices and the World Diamond Council, as we
believe this to be the best and most effective way to achieve improvements
in the sector's supply chain with regard to social, ethical and
environmental issues. The Group has recently written to most of its
suppliers of diamond and gold jewellery highlighting the importance we
place on a responsibly managed supply chain and reminding them of the
expectations we have of them. The Group also takes its environmental
responsibilities seriously and seeks opportunites to improve its
performance.
The Group's distribution policy is regularly reviewed by the Board
taking into account earnings, cash flow, gearing and the needs of the
business. On 5 February 2007 the redenomination of the Company's share
capital became effective, therefore the final dividend will be declared in
US dollars. The Board is pleased to recommend a final dividend of 6.317
cents per share (2005/06: 2.8875p). Based on the exchange rate on 17 April
2007, this represents a total dividend for the year of 3.6p, an increase of
9.1% (see Financial review and note 8). A 50 million pounds share
repurchase programme was announced in July 2006 and this has now been
substantially completed.
Current trading
Since the start of the financial year the trading environment in the US
appears to have weakened somewhat. As a result, in the year to date, the US
business has experienced a low single digit like for like sales increase on
an underlying basis, after taking into account the adverse weather
disruption over Valentine's Day and the benefit of the timing of
promotional events. The strong competitive advantages of the division means
it continues to be well positioned to gain further market share. The US bad
debt performance remains comfortably within the range of the last ten
years. In the UK, like for like sales growth has strengthened a little from
the performance of last year, although the marketplace remains challenging.
On both sides of the Atlantic, a tight control of costs has been
maintained.
People
I would like to thank our staff and management for their invaluable
contribution to the continued success of the Group. In particular, James
McAdam who stood down as Chairman in June 2006, deserves special thanks for
his long and invaluable service to the Group. I am pleased to report that
he has recovered from the illness that prevented him from attending the
2006 annual general meeting.
Chief Executive's Review
Group Results
In the 53 weeks to 3 February 2007 total sales rose by 11.5% at
constant exchange rates (see note 11); the reported increase was 8.0% to
1,893.2 million pounds (2005/06: 1,752.3 million pounds). Total sales were
adversely impacted by 3.5% due to the movement in the average US
dollar/pound sterling exchange rate from $1.80/1 pound to $1.88/1 pound but
benefited from the 53rd week which contributed 1.6% to Group sales. Like
for like sales advanced by 4.8%, with US sales negatively affected by a
change in timing of a Valentine's Day 2007 promotional event which moved
into the first week of 2007/08. On a 52 week basis to 27 January 2007,
which was not affected by this promotional timing difference, like for like
sales were up by 5.4%.
Operating profit increased by 10.1% at constant exchange rates (see
note 11); the reported increase was 6.3% to 221.4 million pounds (2005/06:
208.2 million pounds). The 53rd week contributed 1.8 million pounds to
Group operating profit. Operating margin was 11.7% (2005/06: 11.9%). Profit
before tax was up by 10.1% at constant exchange rates (see note 11) and by
6.4% on a reported basis to 213.2 million pounds (2005/06: 200.4 million
pounds), the 53rd week contributing 1.5 million pounds. The tax rate was
33.6% (2005/06: 34.7%). Earnings per share rose by 12.3% at constant
exchange rates (see note 11) and by 9.3% on a reported basis to 8.2p
(2005/06: 7.5p), the 53rd week contributing 0.1p.
The balance sheet remains strong and gearing (net debt to total equity)
at 3 February 2007 was 13.4% (28 January 2006: 11.2%). Total investment in
fixed and working capital during the year was 158.5 million pounds
(2005/06: 147.1 million pounds), predominantly to fund the record number of
new stores opened. The return on capital employed ("ROCE") improved to
22.8% (2005/06: 22.4%).
US division
During 2006/07 significant progress was made in implementing the
division's strategy of:
* gaining further profitable market share;
* achieving above sector average like for like sales growth; and
* increasing new store space by 8% - 10% per annum.
Total dollar sales increased by 14.9% (13.2% on a 52 week basis, see
note 11). The division significantly outperformed the total US jewellery
market which grew by 7.1% to $63.1 billion in calendar 2006 (2005: $58.9
billion, Source: US Department of Commerce); its share of the speciality
jewellery market was 8.8% (2005: 8.2%). The division's like for like sales
rose by 6.2% (on a 52 week basis to 27 January 2007, which was not impacted
by the change in timing of a Valentine's Day promotional event, like for
like sales were up 7.0%).
Operating profit rose by 8.6% at constant exchange rates (see note 11).
On a reported basis operating profit increased by 4.0% to 173.8 million
pounds (2005/06: 167.1 million pounds). The commencement of television
advertising for Valentine's Day 2007 in the last week of 2006/07, with the
related sales benefit occurring in 2007/08, meant that the 53rd week did
not contribute to operating profit.
As part of the $1 billion five year expansion programme announced last
year, new store space grew by 11% (2005/06: 9%), slightly above the 8% -
10% target range. This was the largest annual increase since the
acquisition of Marks & Morgan in 2000/01. Compound annual growth in new
store space over the last five years has been 8%. While Jared accounted for
the majority of the space growth over this period, Kay has increased its
store base by almost 25% since 3 February 2002. Over the longer term the US
division has the potential to almost double store space within the three
existing formats of Jared, Kay and the regional brands.
Where appropriate, acceleration of the US division's growth through
acquisitions will be considered. However, as always, the Group's strict
operational and financial criteria will be applied to any such
opportunities.
UK division
The UK division's strategy remains to:
* improve store productivity and operating margin;
* lift the average transaction value; and
* increase diamond participation in the sales mix.
Whilst the retail environment remained challenging, UK operating profit
rose 12.0% to 55.0 million pounds (2005/06: 49.1 million pounds), the 53rd
week contributing 1.8 million pounds. Like for like sales were up 1.2%. The
division achieved a healthy operating margin of 11.4%, a good ROCE of 32.7%
and strong cash flow. Notwithstanding the demanding trading conditions, the
average transaction value was up by 10.5% to 63 pounds (2005/06: 57 pounds)
and diamond sales increased to 30% (2005/06: 29%) of the product mix.
In 2006/07, there was a significant initiative to further differentiate
the division's brands within the marketplace by implementing a greater
focus on jewellery collections, exclusive ranges and the assortment of
diamond merchandise offered. The business continued to emphasise customer
service with the launch of major new staff training programmes. The
development of television advertising continued with H.Samuel moving to
national coverage, and Ernest Jones maintaining a similar level to the
prior year. While the number of stores remodelled during the year was fewer
than in 2005/06, it was in line with the normal refurbishment cycle. In
implementing these initiatives the division continued to draw on the US
business' best practice and experience.
Business Reviews
US division (75% of Group sales)
Details of the US division's results are set out below:
Change at
constant Like for
2006/07 2005/06 Change exchange like
53 weeks 52 weeks reported rates(1) change
m pounds m pounds % % %
Sales 1,410.7 1,282.7 10.0(2) 14.9 6.2(3)
Operating profit 173.8 167.1 4.0(2) 8.6
Operating margin 12.3% 13.0%
ROCE 21.5% 22.4%
(1) See note 11 for reconciliation of impact of exchange rates.
(2) The 53rd week contributed 1.7% to sales and had no impact on operating
profit, see note 11.
(3) Like for like sales for the 52 weeks to 27 January, which were not
impacted by the change in timing of a Valentine's Day promotion were
7.0%.
Financial performance
The operating margin of 12.3% remained within the range of the last
five years (2005/06: 13.0%). Expense leverage of 70 basis points from like
for like sales growth partly offset the impact of additional immature space
of 50 basis points as well as the adverse effect of both the movement in
gross margin percentage of 70 basis points and the 53rd week of 20 basis
points.
Expense leverage was curtailed by an above normal level of increase in
healthcare costs, freight charges and property taxes. The bad debt charge
was 2.8% of total sales (2005/06: 3.0%). The proportion of sales through
the in- house credit card was 51.7% (2005/06: 51.6%).
The movement in gross margin percentage reflected the adverse impact of
higher commodity costs, changes in mix and a slightly more competitive
pricing environment in the fourth quarter. In 2006/07 gold prices increased
significantly, however, diamond prices were broadly stable. The variance in
mix reflected the growth of Jared and an increase in diamond participation,
both of which are driving like for like sales growth and expense leverage.
All of these factors were partly offset by supply chain initiatives, and
selective pricing changes predominantly implemented in the second quarter
of 2006/07.
ROCE was 21.5% (2005/06: 22.4%) reflecting the additional investment in
an 11% increase in space. The proportion of stores under six years old in
2006/07 was 32% compared to 22% in 2001/02 (treating the acquired Marks &
Morgan sites as existing stores). The higher proportion of immature store
space constrains the ROCE in the short term, but increases operating profit
and drives future growth.
Store operations
During 2006/07 the first phase of an enhanced training system, to
develop customer service skills and product knowledge further, was
introduced into the stores; the systems for training jewellery repair staff
were improved; and a customer satisfaction index was included in the
monthly performance indicators for each store. Store staff also received
additional training on supply chain issues such as conflict diamonds and
the environmental impact of gold mining.
Merchandising
Average unit selling prices in mall stores and Jared increased by 4%
and 3% respectively, reflecting selective changes in retail prices as a
result of increased commodity costs. This was partly offset by the rapid
growth of the heavily promoted "Circle" and "Journey" merchandise, the
latter being a new range launched in conjunction with a marketing campaign
by the Diamond Trading Company. The right hand diamond ring selection was
increased and the upper end of the diamond collection continued to be
successfully developed. In Jared, the "Peerless Diamond" was introduced
into all stores and the luxury watch ranges were further extended. The
rough diamond sourcing trial, the objective of which is to secure
additional reliable and consistent supplies of diamonds at a lower cost,
was increased over the prior year and will be expanded further in 2007/08.
Marketing
Annual gross marketing spend amounted to 7.0% of sales (2005/06: 6.7%).
Dollar marketing expenditure increased by 21% reflecting the growth in
total sales, the higher proportion of sales being generated by Jared and
the impact of the commencement of television advertising for Valentine's
Day 2007 in the 53rd week. Further leverage of the "Every kiss begins with
Kay" advertising campaign continued to help drive sales performance. The JB
Robinson television advertising test was expanded to a further three
markets; the other markets with regional brands continued to be supported
by radio advertising. National cable television advertising was used by
Jared stores for the first time during the holiday period and the "He went
to Jared" campaign was further developed. It is expected that Jared will
have sufficient scale to move to national network television advertising in
the fourth quarter of 2007/08.
Kay Jewelers
Kay sales increased by 15.2% to $1,486.7 million (2005/06: $1,290.1
million). During the year a further net 51 stores were opened, bringing the
total to 832. Following a successful three year trial of 31 sites, the
roll- out of Kay stores in open-air retail centres began with 21 opened in
2006/07; a further 35 - 40 are planned for 2007/08. Due to the division's
strict real estate criteria, no new stores in metropolitan locations were
opened in 2006/07; the three metropolitan locations opened in 2005/06
traded satisfactorily. The test of Kay stores in outlet centres started
with four additional sites. A trial of a mall superstore format, drawing on
the experience of Jared and the metropolitan store concept, was commenced
in 11 locations during 2006/07. In September 2006 an e-commerce facility
was successfully launched on the Kay website and will be developed further
in 2007/08.
Regional brands
341 mall stores traded under strong regional brand names at 3 February
2007 with sales up 3.4% to $501.0 million (2006/07: $484.5 million). There
are now 114 JB Robinson locations; 19 stores were rebranded to that format
during 2006/07 as part of the test of local television advertising. The
regional brands continue to significantly outperform the speciality
jewellery sector average sales per store.
Jared The Galleria Of Jewelry
Jared sales were up by 24.4% to $664.4 million (2005/06: $534.2
million); the portfolio of 135 stores, equivalent in space terms to about
550 mall stores, increased by 25 during 2006/07. The Jared concept again
accounted for the majority of the Group's space growth. The chain is
immature with only 41% of stores having traded for five or more years. In
their fifth year of trading the average sales of these stores was some $5.6
million, above the target level set at the time of the original investment.
The average sales per store for those Jared locations that have been open
for six years or more was $6.8 million in 2006/07. Jared's average store
contribution rate was broadly similar to that of the division as a whole.
In 2006/07, Jared entered nine new markets, the largest being Los
Angeles. Representation was expanded in eight cities, including Boston,
Chicago, Baltimore and Denver. It is planned to enter the major centres of
New York and Philadelphia in 2007/08.
Real estate
The table below sets out the store numbers, net new openings and the
potential number of stores by chain:
28 Net 3 Planned net
January openings February openings
Store 2006 2006/07 2007 2007/08 Potential
numbers
Kay
Mall 746 26 772 25-30 850+
Off-mall 31 21 52 35-40 500+
Outlet 1 4 5 5 50-100
Metropolitan 3 nil 3 nil 30+
781 51 832 65-75 1,430+
Regionals 330 11 341 5 c.700
Jared 110 25 135 20-25 250+
Total 1,221 87 1,308 90-105 2,380+
Investment
In 2006/07 fixed capital investment was $101.1 million (2005/06: $88.4
million), including some $57 million related to new store space. In 2007/08
capital expenditure is planned to rise to about $135 million, including
circa $65 million related to new space. The investment in working capital,
that is inventory and receivables, associated with space growth amounted to
some $119 million in 2006/07 and is expected to be higher in 2007/08. 59
stores were refurbished or relocated (2005/06: 57) with some 77 planned for
2007/08. During 2006/07, a two year project to increase the capacity of the
distribution centre was completed on schedule.
Recent investment in the store portfolio, both fixed and working capital,
is set out below:
2006/07 2005/06 2004/05
$m $m $m
New stores
Fixed capital investment 57 45 27
Working capital investment 119 96 76
Total investment 176 141 103
Other store fixed capital investment 30 28 29
Total store investment 206 169 132
UK division (25% of Group sales)
Details of the UK division's results are set out below:
2006/07 2005/06 Change Like for
53 weeks 52 weeks like
change
m pounds m pounds % %
Sales: H.Samuel 260.8 256.2 1.8 0.7
Ernest Jones 217.6 208.5 4.4 1.7
Other 4.1 4.9 (16.3)
Total 482.5 469.6 2.7(1) 1.2
Operating profit 55.0(1) 49.1 12.0(1)
Operating margin 11.4% 10.5%
ROCE 32.7% 26.6%
(1) The 53rd week contributed 1.5% to sales and 3.6% to operating profit,
that is 1.8 million pounds. See note 11 for reconciliation.
Financial performance
The UK division's operating margin was 11.4% (2005/06: 10.5%)
reflecting stable sales, tight management of gross margin and strict
control of costs. Gross margin percentage increased by 30 basis points, the
benefit from advantageous hedging positions and selective price increases
more than offsetting higher commodity costs. Actions taken to reduce costs
in early 2006 benefited the business throughout 2006/07 and resulted in a
40 basis point improvement to operating margin; the impact of the 53rd week
was favourable by 20 basis points.
ROCE improved to 32.7% (2005/06: 26.6%), reflecting the high leverage
of capital employed in the UK division.
Store operations
An improved customer service training programme called Amazing Customer
Experience ("ACE") was introduced in 2006/07 and will be developed further
in 2007/08. Training for all tiers of store operations management took
place to support the introduction of the ACE programme and to build general
management skills. Opportunities for enhanced store procedures and
employment practices were identified through a staff opinion survey. Store
staff also received additional training on supply chain issues such as
conflict diamonds and the environmental impact of gold mining.
Merchandising
The division focused on the development of jewellery collections and
exclusive merchandise to further differentiate its brands in the
marketplace. For example, in H.Samuel the Forever Diamond selection was
increased, the Soulmate and Cafe diamond collections were introduced and
there was a range of exclusive watches from Rotary. In Ernest Jones the Leo
Diamond range was further expanded, the Vintage and Nature collections
launched, a selection of "Journey" pieces tested and exclusive watches from
manufacturers such as Emporio Armani stocked. Since 2001/02 diamond
participation has risen from 17% to 23% in H.Samuel and from 33% to 38% in
Ernest Jones. The average unit selling price in H.Samuel was 42 pounds
(2005/06: 38 pounds) and in Ernest Jones 163 pounds (2005/06: 148 pounds);
during the last five years average transaction values have increased by
35.4% and 36.9% respectively.
Marketing
For Christmas 2006 television advertising was successfully expanded to
national coverage for H.Samuel and regional support continued for Ernest
Jones at a similar level to 2005/06. H.Samuel was also supported by
national newspaper advertising during December 2006. Gross marketing
expenditure represented 3.1% of sales in 2006/07 (2005/06: 3.2%). In
September 2006 an e- commerce capability was launched on the Ernest Jones
website as a complement to store-based customer service. The H.Samuel
website is the most visited among speciality jewellery retailers according
to Hitwise, while that of Ernest Jones is the third most visited; the
e-commerce initiatives are meeting their investment targets.
Real estate and investment
During 2006/07, 28 stores were refurbished or relocated, including two
in the traditional design. At the year end 255 stores, mostly H.Samuel,
traded in the modernised format. This type of store accounted for 44% of
the UK division's sales in 2006/07. During the year 11 H.Samuel and two
Ernest Jones stores were closed, and one Ernest Jones opened. At the year
end there were 581 stores (375 H.Samuel and 206 Ernest Jones). The level of
store capital expenditure was 8 million pounds (2005/06: 22 million
pounds), significantly less than the prior year reflecting the phasing of
the normal store refurbishment cycle and only one new store opening. The
level of store refit is planned to be at a similar level in 2007/08, with
some design enhancements to the Ernest Jones format being tested. Store
capital expenditure is expected to increase to some 13 million pounds
largely reflecting a planned higher level of investment in relocations and
new stores.
Recent investment in the store portfolio is set out below:
2006/07 2005/06 2004/05
Store refurbishments and relocations 28 78 81
New H.Samuel stores - 3 2
New Ernest Jones stores 1 5 7
Store fixed capital investment 8m pounds 22m pounds 23m pounds
Group Financial Review
Operating margin and ROCE
Operating margin (operating profit to sales ratio) was 11.7% (2005/06:
11.9%) and ROCE was 22.8% (2005/06: 22.4%). Capital employed is based on
the average of the monthly balance sheets and at 3 February 2007 included
US in- house credit card debtors amounting to 395.6 million pounds (28
January 2006: 382.7 million pounds).
Group and financing costs
Group central costs amounted to 7.4 million pounds (2005/06: 8.0
million pounds including a property provision of 0.7 million pounds). Net
financing costs amounted to 8.2 million pounds (2005/06: 7.8 million
pounds), the increase being primarily due to the transition from a
securitised borrowing facility to the new private placement note facility
and incremental borrowing as a result of the share buy back programme
offset by the movement in the US dollar / pound sterling exchange rate.
Taxation
The charge of 71.7 million pounds (2005/06: 69.6 million pounds)
represents an effective tax rate of 33.6% (2005/06: 34.7%). The rate is
lower than previously indicated due to the tax treatment of share options
and the favourable resolution of certain prior year tax positions. It is
anticipated that, subject to the outcome of various uncertain tax
positions, the Group's effective tax rate in 2007/08 may increase to a
level of up to 37%, this being an approximation to the underlying effective
tax rate for the Group.
Profit for the financial period
Profit for the 53 weeks ended 3 February 2007 was 141.5 million pounds
(2005/06: 130.8 million pounds).
Impact of 53rd week
2006/07 was a 53 week financial year. The extra week increased total
sales by 1.6% (1.7% in the US and 1.5% in the UK) and contributed 1.8
million pounds to operating profit (nil effect in the US and 1.8 million
pounds in the UK). Net of additional interest costs of 0.3 million pounds,
profit before tax benefited by 1.5 million pounds.
Purchase of own shares
During 2006/07 the Group commenced a share buy back programme with 30.3
million shares being purchased for 33.7 million pounds. A further 11.4
million shares have been purchased for 13.8 million pounds since the start
of the 2007/08 financial year, substantially completing the 50 million
pounds target announced in July 2006.
Liquidity and capital resources
Cash generated from operations amounted to 182.2 million pounds
(2005/06: 188.1 million pounds) after funding a working capital increase of
92.3 million pounds (2005/06: 71.2 million pounds), principally as a result
of the growth of the US division. It is anticipated that in 2007/08 there
will be a further increase in the level of working capital investment as a
result of planned US store openings. Interest of 16.7 million pounds
(2005/06: 11.4 million pounds) and tax of 69.2 million pounds (2005/06:
64.7 million pounds) were paid. Net cash from operating activities was 96.3
million pounds (2005/06: 112.0 million pounds).
Group capital expenditure was 66.2 million pounds (2005/06: 75.9
million pounds). The level of capital expenditure was some 1.3 times
(2005/06: 1.6 times) the depreciation and amortisation charge of 50.3
million pounds (2005/06: 46.2 million pounds). Capital expenditure in
2007/08 is expected to be 85 million pounds to 95 million pounds, most of
which will be store related. There were disposal proceeds of 2.4 million
pounds (2005/06: 7.5 million pounds). Equity dividends of 57.8 million
pounds (2005/06: 52.7 million pounds) were paid in the year and the net
movement in shares outstanding was an outflow of 29.6 million pounds
(2005/06: inflow 1.9 million pounds) reflecting the share buy back
programme. The rise in net debt before exchange adjustments was 45.9
million pounds (2005/06: 4.8 million pounds), the increase reflecting the
higher rate of space growth in the US and the 33.7 million pounds (2005/06:
2.0 million pounds) purchase of own shares. In 2007/08 the increase in net
debt before exchange adjustments and net movement in equity capital is
expected to be between 35 million pounds and 45 million pounds reflecting a
planned higher level of capital expenditure and an anticipated rise in tax
and dividend payments.
Net debt
Net debt at 3 February 2007 was 118.4 million pounds (28 January 2006:
98.6 million pounds). Group gearing at the year end was 13.4% (28 January
2006: 11.2%) and the fixed charge cover was unchanged at 2.0 times.
Pensions
The Group has one defined benefit plan (the "Group Scheme") for
UK-based staff, which was closed to new members in 2004. All other pension
arrangements consist of defined contribution plans. The IAS 19 present
value of obligations of the Group Scheme decreased last year by 10.9
million pounds to 130.9 million pounds and the market value of the Group
Scheme's assets increased by 6.5 million pounds to 132.8 million pounds; as
a result the balance sheet at 3 February 2007 reflected a net pension asset
of 1.3 million pounds (28 January 2006: net pension liability of 10.9
million pounds).
The triennial valuation of the Group Scheme was carried out as at 5
April 2006. There was a surplus and as a result no additional contributions
were required as part of a recovery plan to eliminate a deficit. The cash
contribution to the fund in 2006/07 was 3.6 million pounds (2005/06: 4.3
million pounds) and the Group expects to contribute some 3.9 million pounds
in 2007/08.
Dollar reporting and payment of dividends
Following the approval of shareholders and the High Court, the
redenomination of the Company's share capital became effective on 5
February 2007. The Company's functional currency is now US dollars and in
the future the Group will report in US dollars. The Company will continue
to be registered and have its headquarters in England, and will maintain
its primary listing on the London Stock Exchange with the shares quoted in
pounds sterling. It will also continue to maintain a listing on the New
York Stock Exchange, with the American Depositary Receipts quoted in US
dollars. A US dollar presentation of the results will shortly be available
on the Signet website http://www.signetgroupplc.com.
Following the redenomination of the share capital the final dividend
will be declared in US dollars. A letter will be sent today to all
shareholders on the register asking whether they wish to receive this, and
future dividends, in US dollars or pounds sterling. Shareholders will in
future be able to change their election by contacting the Company's
registrar. For shareholders who wish to receive the proposed final dividend
in pounds sterling, the actual amount will be calculated using the exchange
rate as derived from Reuters at 4.00 p.m. on the record date of 1 June
2007.
Summary of Fourth Quarter Results (Unaudited)
14 weeks 13 weeks
ended ended Like for
3 February 28 January like
2007 2006 change
m pounds m pounds %
Sales
UK 204.1 195.8 +1.5
US 550.3 523.1 +5.4
754.4 718.9 +4.2
Operating profit
UK - Trading 59.5 54.0
- Group central costs (1.8) (3.3)
57.7 50.7
US 95.0 96.5
Total operating profit 152.7 147.2
Net financing costs (1.6) (1.9)
Profit before tax 151.1 145.3
Taxation (49.6) (50.6)
Profit for the period 101.5 94.7
EPS - basic 5.9p 5.4p
- diluted 5.9p 5.4p
The Board of Directors approved this statement of preliminary results
on 18 April 2007.
Investor relations programme details
There will be an analysts' presentation and conference call today at
2.00 p.m. BST (9.00 a.m. EDT and 6.00 a.m. Pacific Time) and a simultaneous
audio and video webcast at http://www.signetgroupplc.com. To help ensure
the conference call begins in a timely manner, could all participants
please dial in 5 to 10 minutes prior to the scheduled start time. The call
details are:
European dial-in: +44 (0) 20 7138 0816
US dial-in: +1 718 354 1171
European 48hr. replay: +44 (0) 20 7806 1970 Access code: 1908484#
US 48hr. replay: +1 718 354 1112 Access code: 1908484#
Virtual Store Tour
A virtual store tour of the Group's major retail formats is available
at http://www.signetgroupplc.com.
Investor Day and Store Tour, Akron, Ohio, Wednesday 9 May 2007
It is intended to hold an Investor Day and Store Tour for professional
investors in Akron, Ohio on Wednesday 9 May 2007.
First quarter sales
First quarter sales figures are expected to be announced on 10 May
2007.
This release includes statements which are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements, based upon management's beliefs as well as on assumptions
made by and data currently available to management, appear in a number of
places throughout this release and include statements regarding, among
other things, our results of operation, financial condition, liquidity,
prospects, growth, strategies and the industry in which the Group operates.
Our use of the words "expects," "intends," "anticipates," "estimates,"
"may," "forecast," "objective," "plan" or "target," and other similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are not guarantees of future performance and are
subject to a number of risks and uncertainties, including but not limited
to general economic conditions, the merchandising, pricing and inventory
policies followed by the Group, the reputation of the Group, the level of
competition in the jewellery sector, the price and availability of
diamonds, gold and other precious metals, seasonality of the Group's
business and financial market risk.
For a discussion of these and other risks and uncertainties which could
cause actual results to differ materially, see the "Risk and Other Factors"
section of the Company's 2005/06 Annual Report on Form 20-F filed with the
U.S. Securities and Exchange Commission on May 4, 2006 and other filings
made by the Company with the Commission. Actual results may differ
materially from those anticipated in such forward-looking statements even
if experience or future changes make it clear that any projected results
expressed or implied therein may not be realised. The Company undertakes no
obligation to update or revise any forward-looking statements to reflect
subsequent events or circumstances.
SIGNET GROUP plc
Consolidated income statement
for the 53 weeks ended 3 February 2007
53 52
weeks weeks
ended ended
3 28
February January
2007 2006 Notes
m pounds m pounds
Sales 1,893.2 1,752.3 2,11
Cost of sales (1,644.9)(1,516.3)
Gross profit 248.3 236.0
Administrative expenses (75.6) (74.1)
Other operating income 48.7 46.3 3
Operating profit 221.4 208.2 2,11
Finance expense (18.2) (11.4) 4
Finance income 10.0 3.6 4
Profit before tax 213.2 200.4 11
Taxation - UK (14.8) (12.9) 5
- US (56.9) (56.7) 5
Profit for the financial period 141.5 130.8 11
Earnings per share - basic 8.2p 7.5p 7,11
- diluted 8.2p 7.5p 7,11
All of the above relate to continuing activities.
Consolidated balance sheet
at 3 February 2007
3 28
February January
2007 2006 Notes
m pounds m pounds
Assets:
Non-current assets
Intangible assets 23.5 22.9
Property, plant and equipment 246.1 253.8
Other receivables 14.8 14.3
Retirement benefit asset 1.9 -
Deferred tax assets 14.7 17.4
301.0 308.4
Current assets
Inventories 685.6 679.7
Trade and other receivables 441.2 430.4
Cash and cash equivalents 77.3 52.5
1,204.1 1,162.6
Total assets 1,505.1 1,471.0
Liabilities:
Current liabilities
Borrowings due in less than one year (2.8) (151.1)
Trade and other payables (199.2) (204.7)
Deferred income (62.3) (62.8)
Current tax (51.6) (50.2)
(315.9) (468.8)
Non-current liabilities
Borrowings due in more than one year (192.9) -
Trade and other payables (37.9) (36.0)
Deferred income (67.0) (65.6)
Provisions (5.1) (6.2)
Retirement benefit obligation - (15.5)
(302.9) (123.3)
Total liabilities (618.8) (592.1)
Net assets 886.3 878.9
Equity:
Capital and reserves attributable to
shareholders
Share capital 8.6 8.7
Share premium 77.0 71.7 9
Other reserves 142.3 142.2 9
Retained earnings 658.4 656.3 9
Total equity 886.3 878.9
Consolidated cash flow statement
for the 53 weeks ended 3 February 2007
53 weeks 52 weeks
ended ended
3 28
February January
2007 2006
m pounds m pounds
Cash flows from operating activities:
Profit before tax 213.2 200.4
Adjustments for:
Finance income (10.0) (3.6)
Finance expense 18.2 11.4
Depreciation of property, plant and equipment 49.0 45.0
Amortisation of intangible assets 1.3 1.2
Other non-cash movements 2.4 4.9
Loss on disposal of property, plant and equipment 0.4 -
Operating cash flows before movements in
working capital 274.5 259.3
Increase in inventories (62.8) (72.8)
Increase in trade and other receivables (54.0) (51.4)
Increase in payables and deferred income 24.5 53.0
Cash generated from operations 182.2 188.1
Interest paid (16.7) (11.4)
Taxation paid (69.2) (64.7)
Net cash from operating activities 96.3 112.0
Investing activities:
Interest received 9.0 2.4
Purchase of property, plant and equipment (62.2) (70.4)
Purchase of intangible assets (4.0) (5.5)
Proceeds from sale of property, plant and equipment 2.4 7.5
Cash flows from investing activities (54.8) (66.0)
Financing activities:
Dividends paid (57.8) (52.7)
Proceeds from issue of share capital 4.1 3.9
Purchase of own shares (33.7) (2.0)
Decrease in borrowings falling due within one year (132.1) (46.6)
Increase in borrowings falling due in more
than one year 204.4 -
Cash flows from financing activities (15.1) (97.4)
Cash and cash equivalents at beginning of the period 52.5 102.4
Increase/(decrease) in cash and cash equivalents 26.4 (51.4)
Exchange adjustments (1.6) 1.5
Closing cash and cash equivalents 77.3 52.5
Reconciliation of net cash flow to movement in net debt
Net debt at beginning of period (98.6) (83.5)
Increase/(decrease) in cash and cash equivalents 26.4 (51.4)
Decrease in borrowings falling due within one year 132.1 46.6
Increase in borrowings falling due in more
than one year (204.4) -
Exchange adjustments 26.1 (10.3)
Net debt at end of period (118.4) (98.6)
Net debt represents cash and cash equivalents and borrowings.
Consolidated statement of recognised income and expense
for the 53 weeks ended 3 February 2007
53 weeks 52 weeks
ended ended
3 28
February January
2007 2006
m pounds m pounds
Exchange differences on translation of foreign
operations (63.4) 35.7
Effective portion of fair value movements on cash
flow hedges 0.9 4.9
Actuarial gain/(loss) on retirement benefit
obligation 16.2 (16.3)
Deferred tax on items recognised in equity (5.5) 1.7
Net (expense)/income recognised directly in equity (51.8) 26.0
Transfer to initial carrying value of inventory
from cash flow hedges 0.8 (2.9)
Profit for the financial period 141.5 130.8
Total recognised income & expense attributable to
shareholders 90.5 153.9
Notes to the financial results
for the 53 weeks ended 3 February 2007
1. Basis of preparation
This financial information has been prepared in accordance with
International Financial Reporting Standards as adopted by the European
Union ("Adopted IFRS"). No adjustment would be required if the Group
wished to assert compliance with IFRS as adopted by the International
Accounting Standards Board for the accounting periods presented in
this announcement. This financial information has been prepared on the
basis of the accounting policies set out in the Annual Report &
Accounts for the 52 weeks ended 28 January 2006 which are available on
the Group's website http://www.signetgroupplc.com.
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with Adopted IFRS, this
announcement does not itself contain sufficient information to comply
with Adopted IFRS.
2. Segmental information
2007 2006
m pounds m pounds
Sales by origin and destination
UK, Channel Islands & Republic of Ireland 482.5 469.6
US 1,410.7 1,282.7
1,893.2 1,752.3
Operating profit/(loss)
UK, Channel Islands & Republic of Ireland
- Trading 55.0 49.1
- Group function (1) (7.4) (8.0)
47.6 41.1
US 173.8 167.1
221.4 208.2
(1) Group function costs for 2006 included a net charge of 0.7 million
pounds relating to property provisions.
The Group's results derive from one business segment - the retailing of
jewellery, watches and associated services.
3. Other operating income
Other operating income comprises interest receivable from the US
in-house credit programme of 49.7 million pounds (2006: 45.5 million
pounds) and foreign exchange losses of 1.0 million pounds (2006: 0.8
million pounds gains).
4. Finance income and expense
2007 2006
m pounds m pounds
Interest income 8.9 2.4
Defined benefit pension scheme - expected return on
scheme assets 7.8 6.9
- interest on pension
liabilities (6.7) (5.7)
Finance income 10.0 3.6
Finance expense (18.2) (11.4)
Net finance charge (8.2) (7.8)
5. Taxation
2007 2006
m pounds m pounds
Current taxation - UK 16.3 11.5
- US 56.3 60.0
Deferred taxation - UK (1.5) 1.4
- US 0.6 (3.3)
71.7 69.6
6. Translation differences
The exchange rates used for the translation of US dollar transactions
and balances in these accounts are as follows:
2007 2006
Income statement (average rate) 1.88 1.80
Balance sheet (closing rate) 1.97 1.77
7. Earnings per share
2007 2006
Earnings attributable to shareholders (m pounds) 141.5 130.8
Basic weighted average number of shares in issue
(million) 1,727.6 1,736.6
Dilutive effect of share options (million) 6.8 3.3
Diluted weighted average number of shares (million) 1,734.4 1,739.9
Earnings per share - basic 8.2p 7.5p
- diluted 8.2p 7.5p
The number of shares in issue at 3 February 2007 was 1,713,553,809 (28
January 2006: 1,738,843,382).
8. Dividends
2007 2006
m pounds m pounds
Final dividend paid of 2.8875p per share (2006: 2.625p) 50.1 45.5
Interim dividend paid of 0.4434p per share (2006: 0.4125p) 7.7 7.2
57.8 52.7
During 2006/07, a dividend of 2.8875p per share was paid on 7 July 2006
in respect of the final dividend declared for the year ended 28 January
2006. An interim dividend for the year ended 3 February 2007 was also
paid on 3 November 2006.
Subject to shareholder approval, a proposed dividend of 6.3170 cents per
share will be paid on 6 July 2007 to those shareholders on the register
of members at close of business on 1 June 2007. This financial
information does not reflect this proposed dividend, which will be
treated as an appropriation of retained earnings in the year ending 2
February 2008.
Following the redenomination of the Company's share capital on 5 February
2007, dividends are declared in US dollars. A letter will be sent today
to all shareholders on the register asking whether they wish to receive
this, and future dividends, in US dollars or pounds sterling.
Shareholders will in future be able to change their election by
contacting the Company's registrars. For shareholders who wish to receive
the proposed final dividend in pounds sterling, the actual amount will be
calculated using the exchange rate as derived from Reuters at 4.00 p.m.
on the record date of 1 June 2007.
Under US tax legislation the rate of US federal income tax on dividends
received by individual US shareholders from qualified foreign
corporations is reduced to 15%. Dividends paid by the Group to individual
US holders of shares or ADSs should qualify for this preferential tax
treatment. The change in legislation only applies to individuals subject
to US federal income taxes and therefore the tax position of UK
shareholders is unaffected. Individual US holders are urged to consult
their tax advisers regarding the application of this US legislation to
their particular circumstances.
9. Share premium and reserves
Other reserves Retained earnings
Capital Pur-
re- chase Trans- Total
Share demp- Special of own Hedging lation Retained
premium tion reserves shares reserve reserve reserve(1)
(all in m pounds)
Balance at 29
January 2005 68.0 - 142.2 (7.9) - (118.0) 678.7 763.0
Recognised income
and expense:
- profit for
the
financial
period - - - - - - 130.8 130.8
- cash flow
hedges (net) - - - - 1.4 - - 1.4
- translation
differences - - - - - 33.1 - 33.1
- actuarial
loss (net) - - - - - - (11.4) (11.4)
Dividends - - - - - - (52.7) (52.7)
Equity-settled
transactions
(net) - - - - - - 4.1 4.1
Share options
exercised 2.3 - - 1.6 - - - 3.9
Purchase of own
shares by ESOT - - - (2.0) - - - (2.0)
Shares issued to
ESOTs 1.4 - - - - - (1.4) -
Balance at 28
January 2006 71.7 - 142.2 (8.3) 1.4 (84.9) 748.1 870.2
Recognised income
and expense:
- profit for
the financial
period - - - - - - 141.5 141.5
- cash flow
hedges (net) - - - - 1.2 - - 1.2
- translation
differences - - - - - (63.4) - (63.4)
- actuarial
gain (net) - - - - - - 11.2 11.2
Dividends - - - - - - (57.8) (57.8)
Equity-settled
transactions
(net) - - - - - - 4.3 4.3
Share options
exercised 4.6 - - 1.1 - - (1.6) 4.1
Purchase of own
shares - 0.1 - - - - (33.7) (33.6)
Shares issued to
ESOTs 0.7 - - - - - (0.7) -
Balance at 3
February 2007 77.0 0.1 142.2 (7.2) 2.6 (148.3) 811.3 877.7
(1) The retained reserve includes the unrealised surplus arising from
revaluing freehold and long leasehold properties of 4.3 million pounds
(2005/06: 4.3 million pounds).
10. Accounts
The financial information set out above does not constitute the
Company's statutory accounts for the 53 weeks ended 3 February 2007 or
the 52 weeks ended 28 January 2006, but is derived from those
accounts. Statutory accounts for the 52 weeks ended 28 January 2006
have been delivered to the Registrar of Companies, whereas those for
the 53 weeks ended 3 February 2007 will be delivered following the
Company's annual general meeting. The auditors have reported under
Section 235 of the Companies Act 1985 on those accounts for each of
those periods; their reports were unqualified and did not contain a
statement under Section 237 (2) or (3) of that Act.
11. Impact of constant exchange rates and 53rd week
The Group has historically used constant exchange rates to compare
period-to-period changes in certain financial data. This is referred
to as 'at constant exchange rates' throughout this release. The Group
considers this a useful measure for analysing and explaining changes
and trends in the Group's results. The impact of the re-calculation of
sales, operating profit, profit before tax, profit for the financial
period and earnings per share at constant exchange rates and the
impact of the 53rd week, including a reconciliation to the Group's
GAAP results, is analysed below.
53 weeks ended 3 February 2007
2006/07 2005/06 Growth Impact 2005/06
at of at
actual exchange constant
exchange rate exchange
rates movement rates
(non-GAAP)
m pounds m pounds % m pounds m pounds
Sales by origin and destination:
UK 482.5 469.6 2.7 - 469.6
US 1,410.7 1,282.7 10.0 (54.6) 1,228.1
1,893.2 1,752.3 8.0 (54.6) 1,697.7
Operating profit:
UK - Trading 55.0 49.1 12.0 - 49.1
- Group function (7.4) (8.0) n/a - (8.0)
47.6 41.1 15.8 - 41.1
US 173.8 167.1 4.0 (7.1) 160.0
221.4 208.2 6.3 (7.1) 201.1
Profit before tax 213.2 200.4 6.4 (6.7) 193.7
Profit for the financial
period 141.5 130.8 8.2 (4.4) 126.4
Earnings per share 8.2p 7.5p 9.3 (0.2)p 7.3p
Growth Impact 2006/07 2006/07
at of 53rd on 52 week 52 week
constant week basis at growth at
exchange constant constant
rates exchange exchange
(non-GAAP) rates rates
(non-GAAP) (non-GAAP)
% m pounds m pounds %
Sales by origin and destination:
UK 2.7 (7.3) 475.2 1.2
US 14.9 (20.8) 1,389.9 13.2
11.5 (28.1) 1,865.1 9.9
Operating profit:
UK - Trading 12.0 (1.8) 53.2 8.4
- Group function n/a - (7.4) n/a
15.8 (1.8) 45.8 11.4
US 8.6 - 173.8 8.6
10.1 (1.8) 219.6 9.2
Profit before tax 10.1 (1.5) 211.7 9.3
Profit for the financial period 11.9 (0.9) 140.6 11.2
Earnings per share 12.3 (0.1)p 8.1p 11.0
12. Post balance sheet event
On 5 February 2007, the Company redenominated its share capital into
US dollars by way of a reduction in capital and subsequent issue and
allotment of new dollar ordinary shares, which had been approved by
shareholders on 12 December 2006 and received Court approval on 31
January 2007.
The nominal value of each dollar denominated ordinary share is 0.9
cent, and shareholders received one new dollar denominated ordinary
share for each sterling ordinary share held. The new shares have the
same rights and restrictions as the previously issued ordinary shares
and the existing share certificates remain valid.
Additionally, to comply with UK listing requirements, 50,000 pounds of
share capital is required to be held denominated in pounds sterling to
which end 50,000 deferred shares of 1 pound each were allotted and
issued, credited to the Company Secretary of the Company on 5 February
2007. These shares have limited and deferred rights.
No of
shares $m
Authorised at 5 February 2007:
Ordinary shares of 0.9 cent each 5,929,874,019 53.4
Deferred shares of 1 pound each 50,000 0.1
Allotted, called up and fully paid at
5 February 2007:
Ordinary shares of 0.9 cent each 1,713,533,809 15.4
Deferred shares of 1 pound each 50,000 0.1
13. Reconciliation of Adopted IFRS to US GAAP
Effect on profit for the financial period of differences between Adopted
IFRS and US GAAP
53 weeks 52 weeks
ended ended
3 February 28 January
2007 2006
m pounds m pounds
Profit for the financial period in accordance with
Adopted IFRS 141.5 130.8
Pensions (2.4) (1.8)
Sale and leaseback transactions 0.8 0.8
Returns provisions - (6.0)
Share-based payment (2.4) 4.4
Asset retirement obligations - (1.0)
Taxation 0.1 5.0
US GAAP adjustments before change in accounting
principle (3.9) 1.4
Cumulative effect of change in accounting principle (3.2) -
Retained profit attributable to shareholders in
accordance with US GAAP 134.4 132.2
Earnings per ADS in accordance with US GAAP - basic 77.8p 76.1p
- diluted 76.1p 76.0p
Weighted average number of ADSs outstanding (million)
- basic 172.8 173.7
- diluted 176.5 174.0
Effect on shareholders' funds of differences between Adopted IFRS and US
GAAP
2007 2006
m pounds m pounds
Shareholders' funds in accordance with Adopted IFRS 886.3 878.9
Goodwill in respect of acquisitions (gross) 462.4 501.0
Adjustment to goodwill (53.7) (59.7)
Accumulated goodwill amortisation (142.0) (153.0)
Sale and leaseback transactions (6.2) (7.1)
Pensions - 14.4
Depreciation of properties (2.5) (2.5)
Revaluation of properties (4.3) (4.3)
Share-based payment (10.8) -
Taxation 1.7 (2.2)
US GAAP adjustments 244.6 286.6
Shareholders' funds in accordance with US GAAP 1,130.9 1,165.5
Reconciliation of shareholders' funds in accordance
with US GAAP
Shareholders' funds at beginning of period 1,165.5 1,056.0
Adoption of FAS 123(R) (2.8) -
1,162.7 1,056.0
Retained profit attributable to shareholders 134.4 132.2
(Purchase)/issue of shares (net) (29.6) 1.9
Increase/(decrease) in additional paid-in capital 1.2 (0.3)
Dividends paid (57.8) (52.7)
Other comprehensive income/(expense) 21.8 (18.1)
Translation differences (85.0) 46.5
1,147.7 1,165.5
Adoption of FAS 158 (16.8) -
Shareholders' funds at end of period 1,130.9 1,165.5
SOURCE Signet Group plc