Preliminary Results

RNS Number : 1428K

Walker Greenbank PLC

14 April 2010

 



For immediate release

14 April 2010

 

 

WALKER GREENBANK PLC

("Walker Greenbank" or "the Company")

Preliminary Results for the 12 months ended 31 January 2010

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings group whose brands include Sanderson, Morris & Co., Harlequin and Zoffany, is pleased to announce its preliminary results for the 12 month period ended 31 January 2010.

Highlights

·      The Group is returning to the dividend list after nine years, declaring a dividend of 0.50p per share reflecting the underlying strength of the business

·      Our mid-market brands, Harlequin and Sanderson, have performed well during the economic downturn

·      Second half revenues were up 1.8% compared with the corresponding period last year giving full year revenue of £60.38 million (2009: £63.70 million)

·      Operating profit of £2.42 million (2009: £3.56 million) with improvement in second half profitability

·      Profit before taxation of £1.55 million (2009: £2.79 million) and earnings per share of 2.10p (2009: 2.96p)

·      Gearing reduced substantially to 17% (2009: 31%)

Terry Stannard, the Chairman of Walker Greenbank, said: "We have started our new financial year in line with internal projections and we look forward to the unique opportunity created by the 150^th anniversary of Sanderson during the coming year. Whilst remaining cautious we are convinced by the potential of the Group, which is in a strong position to exploit domestic and international opportunities even in uncertain market conditions."

For further information:

Walker Greenbank PLC	0844 543 4667
John Sach, Chief Executive
Alan Dix, Finance Director
Julian Wilson, Company Secretary
Arden Partners Limited	020 7614 5900
Chris Hardie / Adrian Trimmings
Buchanan Communications	020 7466 5000
Mark Court / Suzanne Brocks / George Prassas

CHAIRMAN'S STATEMENT

Overview

I am pleased to report that the gradually improving trend in revenue seen in the latter part of the first half of the year continued to gain momentum with the result that second half revenues were up 1.8% compared with the corresponding period last year.

We are encouraged by the positive revenue performance of the second half, which resulted in a considerably improved operating profit, although revenue for the year as a whole fell 5% and operating profits were £2,415,000 (2009: £3,561,000).

We have reduced net debt substantially at the year end to £3,114,000 from £6,218,000 in 2009. This places the Group in a strategically strong position in continuing uncertain market conditions.

Our mid-market brands Harlequin and Sanderson, which account for 80% of our brands' revenues, have performed well during the economic downturn. The quality of design and value of the products have helped Harlequin and Sanderson to grow annual revenues. However in a price-conscious market, our premium-end brand, Zoffany, has, not surprisingly, experienced a significant decline in revenues.

I am pleased to report that in the UK, currently the largest market for our brands, retail performance has been relatively robust with annual revenues down only 2%, having been down 10% at the half year. We remain focused on international expansion where we see significant opportunity. However, in the year, Continental Europe and the USA have experienced much tougher trading conditions, being down 20% and 25% respectively. Encouragingly, we have grown our revenues in the Rest of the World by 14% particularly in the Far East and Australasia.

Manufacturing significantly improved its second half performance, following a first half programme to reduce the cost base and a second-half return in customer confidence leading to increased revenues. Profitability was substantially improved, with a first half operating loss before exceptional items of £84,000 being turned into a full year operating profit before exceptional items of £633,000.

Financials

Revenue decreased 5% to £60,378,000, from £63,698,000 over the same period last year. The operating profit for the year was £2,415,000 (2009: £3,561,000) and the profit before tax was £1,552,000 (2009: 2,787,000). The profit after tax declined to £1,173,000 (2009: £1,622,000).

Earnings per share were 2.10p (2009: 2.96p).

Interest cover on bank borrowings increased to 9.2 times, compared with 5.1 times last year.

The Group's net indebtedness at the year end reduced to £3,114,000 (2009: £6,218,000). This represents a reduction in gearing to 17% (2009: 31%). The cash inflow from operating activities was £4,338,000 (2009: £2,830,000), reflecting lower interest costs and strong working capital management. At the year end, the Group had available banking facilities of £12,395,000 (2009: £12,773,000) representing headroom of £9,281,000 (2009: £6,555,000).

Dividend

It has been our intention to return to the dividend list at the appropriate time, based on the strength of our business and our confidence in the future. Our decision to pay a final dividend for the year ending 31 January 2010 marks a major milestone in the Company's recent history, reflecting the strength of our cash flows and our modest level of debt.

We are now at the point where we can continue to invest in the Company's growth and at the same time pay dividends. The Directors have therefore decided to recommend the payment of a final dividend of 0.50 pence per share (2009: nil) which will be payable on 6 August 2010 to shareholders on the register on 9 July 2010. 

People

On behalf of the Board, I would like to thank all of our management and employees for their loyalty and commitment during a challenging year.

Outlook

Whilst the market in which we operate has been difficult during the year, we have successfully reduced our cost base, improved our manufacturing efficiency, and most importantly have halved our net debt. The strength of our brands, the excellence of our product design and the depth of our distribution has returned the Group to second half revenue growth. The robust nature of our balance sheet allows us to invest in our business going forward in order to ensure strong medium term growth.

We have started our new financial year in line with internal projections and we look forward to the unique opportunity created by the 150^th anniversary of Sanderson during the coming year. Whilst remaining cautious we are convinced by the potential of the Group, which is in a strong position to exploit domestic and international opportunities even in uncertain market conditions.

Terry Stannard

Non-Executive Chairman

13 April 2010

CHIEF EXECUTIVE'S REVIEW

Strategy

The trading year just completed has been the toughest the Group has encountered for many years, as a direct consequence of the global downturn. However, through strict cost control and tight cash management, whilst maintaining our commitment to product investment and design excellence, we have finished the year with a growing momentum and in a strategically strong position.

Whilst our turnover and trading profits have inevitably declined in the year as a whole we remain committed to the five key elements of our growth strategy, which comprise:

·      Organic growth - to continue to develop the growth opportunities that exist for our influential mid market brands in the UK  retail market by extending their market positions;

·      Geographic expansion - to focus on the distribution and marketing of our brands in Europe and the Rest of the World where as a Group we are presently underdeveloped, and  to invest in marketing and distribution in the North American market, where again our Group is currently immature relative to our peers;

·      Contract sales - to drive the expansion of our developing contracts business through further investment in contract specific product supported by the strength of our brand names, our ability to competitively source product and our manufacturing capability, predominantly focusing at the mid to upper end of the contract market;

·      Licensing income - to exploit the global recognition of the Sanderson and Morris & Co brand names and to develop further the licensing opportunities that exist for Harlequin in the UK; and

·      Acquisitions - to evaluate acquisition opportunities that may arise and fit with our current brand portfolio and potentially provide synergistic and earnings enhancing opportunities.

Overview

As the Chairman has highlighted, the gradually improving revenue trend we experienced in the latter part of the first half has continued, leading to a considerably improved performance in the second half.

UK retail brand revenues, currently our most important geographic market representing 51% of external brand revenues, declined by 2%. We have seen a significant improvement in the second half with revenues up 7% having suffered a decline of 10% in the first half. This was particularly influenced by the strength of our mid-market brands of Harlequin and Sanderson.

Overall, overseas retail revenues have experienced an annual decline of 8%, suffering most significantly from very weak USA and continental European markets, down 25% and 20% respectively in local currency. Revenues in the Rest of the World have grown 14% driven by strong performances from the Far East, Middle East and Australasian markets.

Continued commitment and investment in our Contracts business in an extremely challenging market environment has seen revenue increase in the second half, following a first half revenue decline. There has been a consistent level of specification activity throughout the year but a much higher level of conversion into projects in the second half.

Licensing income has fallen due primarily to extremely tough market conditions for some of our bed linen retailers, where we have seen an annual income decline in excess of 40%. Our continued commitment and success in developing new licence arrangements supported by our globally recognised brands has helped mitigate this problem resulting in an overall decline of 13%.

External manufacturing has experienced an annual decline in revenues of 8%. However this is very much a story of two halves, with the first half suffering from reduced volumes and customer de-stocking and the second half benefiting from a first half cost reduction programme and a return of customer confidence leading to increased revenues and substantially improved profitability.

The Brands

Walker Greenbank has continued its strong product investment and commitment to customer service within its four premium interior furnishing brands. We believe we have witnessed a shift in consumer sentiment in which we have seen revenue growth in our mid-market brands of Harlequin and Sanderson, despite extremely challenging market conditions, whilst Zoffany, which is positioned at the upper end of the premium furnishings market, has seen a revenue decline.

Total revenues have declined year on year by 3%, having been down by 11% at the half year. This represents a second half revenue increase of 5%. Year on year operating profits before exceptional items were down 12%.

Harlequin

Despite the tough market conditions suffered in the first half of the year, it is pleasing to report that Harlequin has managed to maintain its revenues at the same level as last year, having been 10% down in the first half, and to continue its position as the leading mid-market contemporary brand in the UK.

UK revenues were flat but export showed a small growth, however, significant declines were experienced in continental Europe and USA mitigated by growth in the Far East, Middle East and Australasia. Harlequin has grown its licensing income principally with the development of a range of product lines in the John Lewis Partnership. The mix of the three main product categories, woven fabric, printed fabric and wallpaper has remained broadly unchanged.

Arthur Sanderson & Sons incorporating the Morris & Co brand

Despite the difficult trading conditions in the first half, Sanderson and Morris & Co, two globally recognised brands, have continued their commitment to invest in product and design leading to strong second-half growth of 10%, with a year-on-year overall revenue improvement of 2%.  Small growth in European revenues was buoyed by strong growth in Scandinavia and Eastern Europe with the traditional markets of Western Europe experiencing tougher market conditions. As with Harlequin the Australasian market proved strong for Sanderson. There was no significant change in product mix with all ranges growing but wallpaper and printed fabric doing better than woven fabric. We have and will continue to invest strongly in Sanderson and Morris & Co in product and marketing support with particular emphasis on the important milestones of Sanderson's 150^th anniversary in 2010 followed in 2011 with Morris & Co's 150^th anniversary.

Zoffany

This brand, which is positioned at the upper end of the premium market, has experienced revenue declines of 18% with the second half only marginally better than the first half, where the decline was 23%. Zoffany appears to have suffered from customers that are trading down to the benefit of our mid-market brands of Harlequin and Sanderson. Both the UK and export markets suffered similar overall declines. The Far East, Middle East and Australasia achieved growth whilst the more mature markets of Europe and USA had considerable declines. Woven fabric which forms a significant proportion of Zoffany's revenue suffered higher year-on-year reductions than printed fabric and wallpaper.

Overseas

USA

The US market continues to be extremely challenging. Revenues in our US business are down 18%, equating to 28% in constant currency. Whilst the second half has shown a slight improvement the market remains enormously difficult. Despite this the US remains an important part of the Group's medium to long term growth strategy. The level of investment in patterning and marketing was significantly reduced during the year to reflect the difficult market and this action has enabled the US business to mitigate the very significant reduction in revenues. We will continue to invest in marketing, patterning and sample support as and when we see improvements in the market.

Europe

Following continued focus on the organisation of our French business we have maintained the level of revenue in a difficult European market. 

The Group's Italian distribution business in Rome for Harlequin and Zoffany was sold in December 2009 to B&B Distribuzione in Milan, which has distributed Sanderson successfully for many years. We are confident that the amalgamation of all our brands under one dedicated distributor will lead to significant growth over the coming years in the important Italian market

Manufacturing

Our manufacturing businesses suffered lower volumes in the early part of the year as customers reduced product launches and stock levels in the face of the recession. We reacted quickly in the early part of the year to reduce headcount through a redundancy programme in order to mitigate these lower volumes. This cost reduction combined with growing customer confidence and improved volumes in the second half has turned a first half operating loss before exceptional items of £84,000 into a full year operating profit before exceptional items of £633,000.

Anstey

Anstey our wallpaper printing factory suffered an overall revenue decline of 15% having been down 23% at the half year. Its revenues are down more significantly in its export markets than in the UK being hit most severely by the difficulties in the US market. Despite this the factory has returned a healthy second half profit. Our brands, and our peer group, are starting to develop exciting new products to expand the overall demand for wallpaper and we remain confident about the medium-term prospects for Anstey.

Standfast

Standfast, our fabric printing factory, has maintained revenues over the same period last year having been 13% down at the half year. Its cost reduction programme in the very early part of the year, followed by its main UK competitor going into administration and emerging in a significantly reduced form, has helped Standfast deliver revenue growth in the second half of 13% and a significant return to profitability having incurred a first half operating loss. Woven fabric has enjoyed many years of growth and market dominance, however, our brands have seen for the first time in the second half of the year the return of an appetite for the design and colour that only printed fabric can offer. Both Harlequin and Sanderson have recently launched some of the most successful printed fabric ranges for a number of years, which bodes well for the future prospects of the Standfast factory.

Summary

It is disappointing that the global recession has inevitably set us back this year. However the prompt action we took to reduce our cost base in the early part of the year and the commitment to significantly reduce our net debt has placed the Group in a strong position.

We have four world renowned brands within our Group and a strong financial base that allows us to significantly invest in our business going forwards. We remain confident that we are well placed to return the Group to its growth path. 

John Sach

Group Chief Executive

13 April 2010

FINANCIAL REVIEW

Income Statement and Exceptional Items

The Chairman's Statement and Chief Executive's Review provide an analysis of the key factors impacting the revenue and operating profit. In addition to the information on our brands and production facilities included in these reports, the Group has included in note 2 of this announcement, further information on our segments.

Exceptional items are both material and their nature is sufficient to warrant separate disclosure and identification. During the year redundancy costs of £332,000 (2009: £146,000) were incurred to reduce the cost base of the Group during the economic downturn. There was net income from an insurance claim of £225,000 (2009: costs £150,000) for marketing material products held at a third party's premises which were destroyed in a fire in the previous year. The insurance loss in the previous year arose due to the uncertainty over the level of insurance settlement recoverable.

Interest

The net interest charge for the year was £263,000 (2009: £695,000) including amortisation of debt issue costs capitalised. The reduced cost reflects the reduced average level of borrowings during the year and the reduction in interest rates over the year.

Net Defined Benefit Pension

The charge during the year was £600,000 (2009: £79,000). This is a consequence of the significant decrease in asset values at the start of the financial year compared with that at the beginning of the previous year, leading to a fall in expected return on assets.

Current Taxation

There is a small corporation tax credit of £32,000 arising from recovery of withholding tax suffered on overseas licence income in the previous year.

Deferred Taxation

Due to the substantial brought forward corporation tax losses (£20.1 million), the Group does not anticipate paying UK corporation tax for the immediate future. However, as the majority of the corporation tax losses have now been recognised as a deferred tax asset, in the current and future years there will be a deferred tax charge in the Income Statement until such time as the losses have been fully utilised at which point the Group will incur and pay UK corporation tax.

The Group also continues to recognise the deferred tax asset arising from the pension deficit. As the pension deficit has increased during the year an increase in the associated deferred tax asset has been recognised in the Statement of Comprehensive Income.

Earnings per share ('EPS')

The basic and diluted EPS was 2.10p (2009: 2.96p).

Operating Cash Flow and Net Debt

The Group generated net cash inflow from operating activities during the year of £4,338,000 (2009: £2,830,000) reflecting strong working capital controls during the year and lower interest costs.

The Group paid interest of £239,000 (2009: £704,000) and capital expenditure of £1,067,000 (2009: £1,687,000). The depreciation and amortisation charge during the period £1,786,000 (2009: £1,846,000) continue to be greater than required capital expenditure but the level of capital expenditure going forward will increase substantially.

The Group made additional payments to the Pension schemes of £1,063,000 (2009: £1,052,000) to reduce the deficit, part of the ongoing planned reduction, along with £289,000 (2009: £275,000) of regular contributions to fund scheme expenses. 

The Group purchased 610,000 shares at a cost of £128,000 in January 2010 to satisfy LTIP awards expected to vest in future periods.

Net debt in the Group has reduced by £3,104,000 to £3,114,000 (2009: £6,218,000) representing gearing of 17% (2009: 31%).

The Group utilises facilities provided by Barclays Bank Plc. There is a term property facility of £3,000,000 (2009: £3,400,000) at the year end expiring in July 2017. There is also a facility linked to working capital which allows the Group to manage more effectively seasonal fluctuations in working capital. This facility was renewed in March 2010 for a further 3 year term expiring in July 2013. The borrowings at the end of the year under the working capital facility were £2,467,000 (2009: £3,868,000), representing headroom of £9,281,000 (2009: £6,555,000). The headroom is set out below:

	Utilisation	Availability
	£000	£000
Property	2,980	3,000
Inventory	-	3,000
Receivables	2,467	6,395
	5,447	12,395
Less: Cash and cash equivalents	(2,333)
Net Debt	3,114	(3,114)
Headroom		9,281

The total facilities have a current limit of £16.5m (2009: £17m).

All of the Group bank facilities remain secured by first fixed and floating charges over the Group's assets.

Pension Deficit

The pension deficit has increased this year. The key factors affecting the movement in the deficit have been: contributions of £1,352,000 from the Company to reduce the deficit; an increase in the liabilities of the scheme arising predominantly from lower discount rates during the year; a change to mortality assumptions bringing them in line with that used in the triennial valuation in April 2009; and finally the significant increase in scheme assets reflecting the improvement in the economic climate compared to the end of the previous financial year. The impact of these factors is shown as follows:

	2010
	£000
Deficit at beginning of period	(4,161)
Scheme expenses	(289)
Other finance expense	(311)
Contributions	1,352
Actuarial gain on scheme assets	2,665
Change in mortality assumptions	495
Actuarial losses from the change in discount factor	(7,694)
Gross deficit at the end of the year	(7,943)

Long-Term Incentive Plan

There has been a new award of shares during the year under the Long-Term Incentive Plan ("LTIP") and the award granted in July 2006 has vested. There has been a charge of £145,000 (2009: £373,000) in the Income Statement relating to these awards.

Disposals

There were no major disposals during the year, however, the Group's loss making Italian distribution business, Whittaker & Woods SRL was sold in December for net asset value.

 

Going Concern

The Directors are confident, after having made appropriate enquiries that the Group and Company have adequate resources to continue trading for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts.

Foreign Currency Risk

All foreign currencies are bought and sold centrally on behalf of the Group. Regular reviews take place of the foreign currency cash flows and unmatched exposures are covered by forward contracts wherever economically practical.

The Group does not trade in financial instruments and hedges are only used for anticipated cash flows. There is a hedging asset of £175,000 (2009: liability £812,000) at the end of the year in relation to US dollar position.

 

Credit Risk

The Group no longer seeks credit insurance as this was no longer considered a commercial solution to reducing credit risk. The Board reviews the internal credit limits of all major customers and reviews the credit risk regularly. The aging profile of trade debtors shows that generally customers do pay to terms however there have been specific bad debts during the year. The current economic environment creates a significant level of risk and in addition to specific provisioning, a provision has been required of £172,000 which is a collective assessment of the risk.

Alan Dix

Group Finance Director

13 April 2010

Unaudited Consolidated Income Statement

Year ended 31 January 2010

	Note	2010 £000	2009 £000
Revenue		60,378	63,698
Profit from operations before exceptional items		2,522	3,857
Exceptional items
- Redundancy expenses		(332)	(146)
- Net proceeds from insurance recovery / (costs from insurance event)	4	225	(150)
Profit from operations	3	2,415	3,561
Net defined benefit pension charge	6	(600)	(79)
Net borrowing costs	5	(263)	(695)
Net finance costs		(863)	(774)
Profit before taxation		1,552	2,787
Deferred tax - exceptional	7	-	(320)
Deferred tax - other	7	(411)	(788)
Current taxation	7	32	(57)
Total tax charge		(379)	(1,165)
Profit for the year		1,173	1,622
Earnings per share - Basic and diluted	9	2.10p	2.96p

Unaudited Consolidated Statement of Comprehensive Income

Year ended 31 January 2010

	2010 £000	2009 £000
Profit for the year	1,173	1,622
Other Comprehensive Income:
Actuarial gains /(losses) on scheme assets	2,665	(7,458)
Changes in actuarial mortality assumptions	495	-
Other actuarial (losses)/gains on scheme liabilities	(7,694)	5,458
Currency translation differences	175	(350)
Cash flow hedges	987	(702)
Recognition of deferred tax asset relating to pension scheme liability	1,059	211
Other comprehensive expense for the year, net of tax	(2,313)	(2,841)
Total comprehensive  expense for the year attributable to the owners of the parent	(1,140)	(1,219)

Unaudited Consolidated Balance Sheet

As at 31 January 2010

	Note	2010 £000	2009 £000
Non-current assets
Intangible assets		5,687	5,877
Property, plant & equipment		8,160	8,734
Deferred income tax assets	8	5,806	5,158
Trade and other receivables		-	12
		19,653	19,781
Current assets
Trade and other receivables		10,309	12,552
Inventories		13,238	13,887
Derivative  financial instruments		175	-
Cash and cash equivalents	10	2,333	1,050
		26,055	27,489
Total assets		45,708	47,270
Current liabilities
Trade and other payables		(13,548)	(15,118)
Derivative financial instruments		-	(812)
Borrowings	10	(2,867)	(400)
		(16,415)	(16,330)
Net current assets		9,640	11,159
Non-current liabilities
Borrowings	10	(2,580)	(6,868)
Retirement benefit obligation	12	(7,943)	(4,161)
		(10,523)	(11,029)
Total liabilities		(26,938)	(27,359)
Net assets		18,770	19,911
Equity
Share capital		590	590
Share premium account		457	457
Foreign currency translation reserve		(165)	(340)
Accumulated losses		(22,794)	(20,491)
Other reserves		40,682	39,695
Total Equity		18,770	19,911

Unaudited Consolidated Cash Flow Statement

Year ended 31 January 2009

	Note	2010 £000	2009 £000
Cash flows from operating activities
Cash generated from operations	11	4,592	3,536
Interest paid		(239)	(704)
Interest received		-	35
Income tax received		50	-
Income tax paid		(65)	(37)
		4,338	2,830
Cash flows from investing activities
Purchase of intangible fixed assets		(272)	(420)
Purchase of property, plant & equipment		(795)	(1,267)
Proceeds from disposal of subsidiary		-	-
Proceeds on sale of property, plant and equipment		-	7
		(1,067)	(1,680)
Cash flows from financing activities
Purchase of treasury shares		(128)	(83)
Net repayment of borrowings		(1,845)	(2,064)
		(1,973)	(2,147)
Net increase / (decrease) in cash, cash equivalents and bank overdrafts		1,298	(997)
Cash, cash equivalents and bank overdrafts at beginning of year		1,050	2,017
Exchange (losses)/gains on cash and bank overdrafts		(15)	30
Cash, cash equivalents and bank overdrafts at end of year	10	2,333	1,050

Unaudited Consolidated Statement of Changes in Equity

Other Reserves

	Share capital £000	Share premium account £000	Retained earnings £000	Capital reserve £000	Merger reserve £000	Hedge Reserve £000	Translation reserve £000	Total £000
Balance at 1 February 2009	590	457	(20,491)	43,457	(2,950)	(812)	(340)	19,911
Profit for the year	-	-	1,173	-	-	-	-	1,173
Other comprehensive Income:
Actuarial gains on scheme assets	-	-	2,665	-	-	-	-	2,665
Changes in actuarial mortality assumptions	-	-	495	-	-	-	-	495
Other actuarial losses on scheme liabilities	-	-	(7,694)	-	-	-	-	(7,694)
Deferred tax relating to pension scheme liability	-	-	1,059	-	-	-	-	1,059
Currency translation differences	-	-	-	-	-	-	175	175
Cash flow hedging reserve - released to income statement	-	-	-	-	-	812	-	812
Cash flow hedging reserve - recognised in equity during the year	-	-	-	-	-	175	-	175
Total comprehensive income/(expense)	-	-	(2,302)	-	-	987	175	(1,140)
Transactions with owners:
Reserve for long-term incentive plan	-	-	127	-	-	-	-	127
Purchase of treasury shares	-	-	(128)	-	-	-	-	(128)
Balance at 31 January 2010	590	457	(22,794)	43,457	(2,950)	175	(165)	18,770

Unaudited Consolidated Statement of Changes in Equity continued

                                                                                                                                        Other Reserves

	Share capital £000	Share premium account £000	Retained earnings £000	Capital reserve £000	Merger reserve £000	Hedge reserve £000	Translation reserve £000	Total £000
Balance at 1 February 2008	590	457	(20,655)	43,457	(2,950)	(110)	10	20,799
Profit for the year	-	-	1,622	-	-	-	-	1,622
Other comprehensive Income:
Actuarial losses on scheme assets	-	-	(7,458)	-	-	-	-	(7,458)
Other actuarial gains on scheme liabilities	-	-	5,458	-	-	-	-	5,458
Deferred tax relating to pension scheme liabilities	-	-	211	-	-	-	-	211
Currency translation differences	-	-	-	-	-	-	(350)	(350)
Cash flow hedging reserve - released to income statement	-	-	-	-	-	110	-	110
Cash flow hedging reserve - recognised in equity during the year	-	-	-	-	-	(812)	-	(812)
Total comprehensive income/(expense)	-	-	(167)	-	-	(702)	(350)	(1,219)
Transactions with owners:
Reserve for long-term incentive plan	-	-	414	-	-	-	-	414
Purchase of treasury shares	-	-	(83)	-	-	-	-	(83)
31 January 2009	590	457	(20,491)	43,457	(2,950)	(812)	(340)	19,911

Unaudited Notes to the Accounts

1.

Basis of preparation

The Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards adopted for use in the European Union (IFRS). While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS this announcement does not itself contain sufficient information to comply with IFRS. The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the year ended 31 January 2010. The audit of the statutory accounts for the year ended 31 January 2010 is at an advanced stage but is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. The statutory accounts for the year ended 31 January 2009 have been filed with the Registrar of Companies and contained an unqualified audit report. This preliminary announcement was approved for release by the Board on 13 April 2010.

2.     Segmental Analysis

The Board of Walker Greenbank PLC predominantly manages the operations of the Group as two divisions which are the Brands and Manufacturing, which has been the basis of segmentation information disclosed in previous financial years. Following the adoption of the principles set out in IFRS 8 'Operating Segments' the Group has identified its operating segments and applied aggregation criteria, as set out in IFRS 8, and has determined that the reportable segments of the Group are as follows:

-       Brands - comprising the design, marketing, sales and distribution, and licensing activities of Harlequin, Sanderson, Zoffany and Morris & Co brands operated from the UK in the retail and contract sectors of the market.

-       Manufacturing - comprising the wall covering and printed fabric manufacturing businesses operated by Anstey and Standfast respectively.

-       Overseas - comprising the marketing, sales and distribution operations of the Group's foreign based subsidiaries in Europe and United States.

This is the basis on which the Group presents its operating results to the Board of Directors of the parent company, which is considered to be the Chief Operating Decision Maker (CODM) for the purposes of IFRS 8. Additional revenue-only data is also reported to the CODM and is disclosed on the basis explained below. Other group wide activities and expenses, predominantly related to corporate head office costs, defined benefit pension costs, long term incentive plans expenses, taxation and eliminations of intersegment items, are presented within 'Eliminations and unallocated'.

Segmentation information for the comparative period year ended 31 January 2009 has been restated to ensure consistent form of presentation following adoption of IFRS 8 principles.

2.     Segmental Analysis continued

a.     Reportable segment information

Year ended 31 January 2010

	Brands £000	Manufacturing  £000	Overseas £000	Eliminations & unallocated £000	Total £000
Revenue - External	41,757	11,936	6,685	-	60,378
Revenue - Internal	1,397	10,168	-	(11,565)	-
Total Revenue	43,154	22,104	6,685	(11,565)	60,378
Operating profit/(loss) before exceptional items	4,616	633	5	(2,732)	2,522
Exceptional items (refer note 4):
-  Redundancy expenses	(78)	(182)	(72)	-	(332)
-  Net proceeds from insurance recovery	225	-	-	-	225
Profit/(loss) from operations	4,763	451	(67)	(2,732)	2,415
Net borrowing costs	-	-	-	(263)	(263)
Net pension charge	-	-	-	(600)	(600)
Profit/(loss) before taxation	4,763	451	(67)	(3,595)	1,552
Tax charge	-	-	-	(379)	(379)
Profit/(loss) for the year	4,763	451	(67)	(3,974)	1,173

Year ended 31 January 2009

	Brands £000	Manufacturing £000	Overseas £000	Eliminations & unallocated £000	Total £000
Revenue - External	42,766	12,963	7,969	-	63,698
Revenue - Internal	1,942	10,992	-	(12,934)	-
Total Revenue	44,708	23,955	7,969	(12,934)	63,698
Operating profit/(loss) before exceptional items	5,240	931	(8)	(2,306)	3,857
Exceptional items (refer note 4)
Redundancy expenses	-	(146)	-	-	(146)
Net proceeds from insurance recovery	(150)	-	-	-	(150)
Profit/(loss) from operations	5,090	785	(8)	(2,306)	3,561
Net borrowing costs	-	-	-	(695)	(695)
Net pension income	-	-	-	(79)	(79)
Profit/(loss) before taxation	5,090	785	(8)	(3,080)	2,787
Tax charge	-	-	-	(1,165)	(1,165)
Profit/(loss) for the year	5,090	785	(8)	(4,245)	1,622

 

2.     Segmental Analysis continued

The segmental revenues of the Group are reported to the CODM in more detail. One of the analyses presented is by strategic objectives of the Group. These are the external retail sales in each major geographical area, the contract sector revenues throughout the world including those in the Group's overseas subsidiaries, licence revenue and external manufacturing revenues.

Revenue by strategic objective:	2010 £000	2009 £000
United Kingdom retail	24,723	25,221
Continental Europe retail	9,030	10,186
North America retail	4,664	5,572
Rest of the World retail	3,657	3,196
Contract (includes all global revenues)	5,265	5,285
Licence	1,103	1,275
Manufacturing	11,936	12,963
	60,378	63,698

Revenue of the Brands reportable segments - revenue from retail operations in all territories where the sale is sourced from the United Kingdom Brands operations, including sales to overseas subsidiaries, together with contract and license revenue:

Brand Revenue Analysis:	2010 £000	2009 £000
Harlequin	19,236	19,220
Sanderson incorporating Morris & Co	15,243	14,877
Zoffany	8,675	10,611
	43,154	44,708

Revenue of the Manufacturing reportable segments - including revenues from internal sales to the group's Brands:

Manufacturing Revenue Analysis:	2010 £000	2009 £000
Standfast	12,511	12,613
Anstey	9,593	11,342
	22,104	23,955

Revenue of the Overseas reportable segments - revenue of the group's overseas subsidiaries from retail operations which includes contract and licence revenue:

Overseas Revenue Analysis:	2010 £000	2009 £000
United States of America	5,095	6,228
France	1,017	972
Italy	573	769
	6,685	7,969

 

2      Segmental Analysis continued

b.     Additional segment information

Revenue by geographical location of customer:	2010 £000	2009 £000
United Kingdom	39,969	41,026
Continental Europe	9,750	10,987
North America	6,442	7,893
Rest of the World	4,217	3,792
	60,378	63,698

3.         Analysis of Operating Profit

	2010 £000	2009 £000
Turnover	60,378	63,698
Cost of sales	(24,359)	(25,567)
Gross profit	36,019	38,131
Net operating expenses	(33,604)	(34,570)
Profit from operations	2,415	3,561

 

 

4.    Exceptional items

Items that are both material and whose nature is sufficient to warrant separate disclosure and identification are disclosed within the financial statements and classified within their relevant income statement category. In the current year, 'Redundancy expenses' of £332,000 (2009: £146,000) incurred to reduce the cost base of the group during the economic downturn and 'Net income from an insurance claim' of £225,000 (2009: costs of £150,000) for marketing material products held at third party's premises which were destroyed in a fire in the previous year have been presented as exceptional in accordance with the Group's accounting policy for exceptional items. The insurance loss in the previous year arose due to the uncertainty over the level of insurance settlement recoverable.

5.     Net borrowing costs

	2010 £000	2009 £000
Interest expense:
Interest payable on bank borrowings	(218)	(685)
Amortisation of issue costs on bank loans	(24)	(26)
Other interest and similar charges payable	(21)	(19)
Total borrowing expense	(263)	(730)
Interest income:
Interest receivable on bank deposits	-	35
Net borrowing costs	(263)	(695)

 

6.     Net defined benefit pension costs
	2010 £000	2009 £000
Expected return on pension scheme assets	2,306	2,829
Interest on pension scheme liabilities	(2,617)	(2,633)
Scheme expenses met by group	(289)	(275)
Net charge	(600)	(79)

7.     Tax
	2010 £000	2009 £000
Current tax:
- overseas, current tax	(18)	(57)
-       overseas, adjustment in respect of prior year	50	-
Current tax	32	(57)
Deferred tax:
- ordinary	(422)	(788)
-       adjustment in respect of prior year	11	-
- exceptional	-	(320)
Deferred tax	(411)	(1,108)
Tax charge for the year	(379)	(1,165)

	2010 £000	2009 £000
Profit on ordinary activities before tax	1,552	2,787
Tax on profit on ordinary activities at standard rate 28% (2009: 28%)	(435)	(780)
Non deductible expenditure	(22)	(59)
Parent and overseas losses and temporary timing differences not recognised	17	(6)
Exceptional impact of phasing out of Industrial Building Allowances	-	(320)
Adjustments in respect of prior years	61	-
Tax charge for year	(379)	(1,165)

 

Factors affecting current and future tax charges

The Group does not anticipate that UK corporation tax will become payable on profits within the immediate future due to the availability of tax losses of approximately £20.1 million (2009: £21.3 million).

8.     Deferred income tax

A net deferred tax asset of £5,806,000 (2009: £5,158,000) has been recognised in respect of tax losses and other temporary differences.

	2010 £000	2009 £000
Taxable temporary differences on property, plant and equipment	(581)	(872)
Taxable temporary differences on intangible assets	(149)	(128)
Other temporary timing differences	40	-
Tax losses	4,272	4,993
	3,582	3,993
Pension scheme obligations	2,224	1,165
	5,806	5,158

9.	Earnings per share
	Basic and diluted earnings per share is calculated by dividing the earnings attributable to ordinary equity shareholders by the weighted average number of shares outstanding during the year, excluding those held in the employee share trust  and those held in treasury, which are treated as cancelled.

		2010				2009
	Earnings £000	Weighted average number of shares (000s)	Per Share Amount Pence		Earnings £000	Weighted average number of shares (000s)	Per Share Amount Pence
Basic and diluted earnings per share	1,173	55,977	2.10		1,622	54,880	2.96

On 27 July 2009 2,386,794 shares vested under the companies Long Term Incentive Plan and these were removed from the Walker Greenbank PLC Employee Benefit Trust (EBT). On 13 November 2009 1,690,093 shares were transferred from treasury to the 'EBT'. On 8 January 2010 Walker Greenbank PLC purchased 610,000 ordinary shares of 1p each in the Company at 21p per ordinary share.   Following these transactions Walker Greenbank's issued ordinary share capital with voting rights consists of 59,006,162 (2009: 59,006,162) ordinary shares of which 610,000 (2009: 1,690,093) ordinary shares are held in treasury and a further 1,852,445 (2009: 2,549,146) ordinary shares are held by the 'EBT'. Shares held in treasury or by the 'EBT' are treated as cancelled when calculating EPS.  At 31 January 2010 the market value of the treasury shares was £137,250.

 

10.

Analysis of net debt

	1 February 2009 £000	Cash flow £000	Working capital facilities (see note below) £000	Current portion of term facilities £000	Other non-cash changes £000	Exchange movement £000	31 January 2010 £000
Cash at bank and in hand	1,050	1,298	-	-	-	(15)	2,333
Borrowings due within 1 year	(400)	400	(2,445)	(400)	(22)	-	(2,867)
Borrowings due after 1 year	(6,868)	1,445	2,445	400	(2)	-	(2,580)
	(7,268)	1,845	-	-	(24)	-	(5,447)
Net debt	(6,218)	3,143	-	-	(24)	(15)	(3,114)

The working capital facilities provided by Barclays in place at the end of the financial year were due to end their term in July 2010 and have been classified as Borrowings due within one year. These facilities were renewed in March 2010 for another three year term. Other non-cash changes are amortisation of issue costs relating to the borrowings.

11.    Cash generated from operations

	31 January 2010 £000	31 January 2010 £000	31 January 2009 £000	31 January 2009 £000
Operating profit		2,415		3,561
Depreciation	1,324		1,470
Amortisation	462		376
Charge for long-term incentive plan recognised in equity	127		414
Loss on disposal of property, plant and equipment	-		6
Unrealised foreign exchange losses/(gains) included in operating profit	221		(499)
Defined benefit pension cash contributions	(1,352)		(1,327)
Changes in working capital
Decrease/(increase) in inventories	649		(1,341)
Decrease in trade and other receivables	2,062		1,164
Decrease in trade and other payables	(1,316)		(288)
		2,177		(25)
Cash generated from operating activities		4,592		3,536

12.	Retirement benefit obligations
The Group operates the following funded defined benefit pension schemes in the UK which offer pensions in retirement and death benefits to members: the Walker Greenbank Pension Plan, the Abaris Holdings Limited Pension Scheme and the WG Senior Management Pension Scheme. Pension benefits are related to the members' salary at retirement and their length of service. The schemes are closed to new members and the future accrual of benefits.  This disclosure excludes any defined contribution assets and liabilities.  The Company's contributions to the schemes for the year beginning 1 February 2010 are expected to be £1,380,000.
		2010 £000	2009 £000
Deficit at beginning of year		(4,161)	(3,409)
Scheme expenses met by group		(289)	(275)
Other net finance (expense) / income		(311)	196
Contributions payable		1,352	1,327
Actuarial gains/(losses) on scheme assets		2,665	(7,458)
Changes in actuarial mortality assumptions		495	-
Other actuarial (losses)/gains on scheme liabilities		(7,694)	5,458
Deficit at end of year		(7,943)	(4,161)

13.          Post Balance Sheet Event

The Directors have recommended the payment of a final dividend of 0.5 pence per share, at a total cost of £295,000, which is subject to the approval of shareholders at the annual general meeting on 28 July 2010.

 

END

 

 

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