Preliminary Results

RNS Number : 4491B

Walker Greenbank PLC

17 April 2012

 



For immediate release

17 April 2012

WALKER GREENBANK PLC

("Walker Greenbank" or "the Company")

 

Preliminary Results for the year ended 31 January 2012

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings Group whose brands include Sanderson, Morris & Co., Harlequin, Zoffany and Scion, is pleased to announce its preliminary results for the 12 month period ended 31 January 2012.

Highlights

·      Sales up 7.6% to £74.0 million (2011: £68.8 million) with strong international brands growth of 11% to £22.0 million (2011: £19.7 million)

·      Licensing income up 11% to £1.59 million (2011: £1.44 million) and new licence agreements signed with Portmeirion (tableware), Brink & Campman (rugs) and others

·      Operating profits before exceptional gain up 24% to £5.56 million (2011: £4.47 million)

·      Earnings per share up 26% to 6.76p (2011: 5.36p)

·      Final dividend up 25% to 1.00p per share (2011: 0.80p) giving a total dividend of 1.20p per share (2011: 0.95p)

Terry Stannard, the Chairman of Walker Greenbank, said: "These results demonstrate further progress towards our vision of creating a highly profitable international luxury brands group. We have built strong market positions in our core sectors of wallpaper and fabrics and our brands have stretched into lifestyle categories such as rugs, tableware and lighting through our worldwide licence partners.

"We remain focused on opportunities to develop our international business, where our brand assets and UK manufacturing base bring significant potential to build on our strong position in established markets.

"After 11 weeks of the current year Brand sales are 7% ahead of the same period last year. We are confident of delivering a positive outcome for the year."

For further information:

Walker Greenbank PLC	[phone]
John Sach, Chief Executive
Alan Dix, Finance Director
Seymour Pierce Limited
Mark Percy / Catherine Leftley - (Corporate Finance) Katie Ratner - (Corporate Broking)	[phone] [phone]
Buchanan	[phone]
Mark Court / Sophie Cowles

CHAIRMAN'S STATEMENT

Overview

The year to 31 January 2012 was an excellent year during which we continued to exploit the potential of our brands, both in the UK and internationally.

Sales for the year grew by 7.6% to £74.0 million with all segments of the Group achieving year on year growth leading to an increase of 24% in operating profit before exceptional items at £5.56 million.

Our Brand sales grew by 7.3% to £57.4 million with international sales growing strongly by 11% to £22.0 million. In our largest market, the UK, sales grew by 4.6% to £33.8 million. Our global licence income grew 11%, led by Japan and our UK bed linen licensee.

Our UK manufacturing operations had another successful year with third party sales growing by 8.8% helped by international sales growth of 32% as existing customers developed their ranges and new customers were attracted by our innovative printing techniques.

These results demonstrate further progress towards our vision of creating a highly profitable international luxury brands group. We have built strong market positions in our core sectors of wallpaper and fabrics and our brands have stretched into lifestyle categories such as rugs, tableware and lighting through our worldwide licence partners.

Financials

Overall sales increased 7.6% to £74.0 million (2011: £68.8 million). The operating profit for the year was up 24% to £5.56 million (2011: £4.47 million before an exceptional gain of £0.50 million from a loss of profits claim). Profit before tax grew 9.7% to £4.89 million (2011: £4.46 million). The profit after tax increased 26% to £3.83 million (2011: £3.03 million).

Earnings per share were 6.76p (2011: 5.36p), a growth of 26%

The cash inflow from operating activities was £4.28 million (2011: £4.26 million), reflecting strong operating profits partially offset by a continued significant investment in new product. The Group's net indebtedness at the year end reduced to £0.67 million (2011: £1.82 million).

Dividend

During the year, the Group has paid a final dividend for the year to 31 January 2011 of 0.80p per share and an interim dividend of 0.20p per share. The Directors recommend the payment of a final dividend of 1.00p per share (2011: 0.80p) which will be payable on 10^th August 2012 to shareholders on the register on 13^th July 2012. This brings the total dividend for the year to 1.20p per share (2011: 0.95p), an increase of 26%.

People

On behalf of the Board, I would like to thank all of our management and employees for their contribution to an extremely successful year.

Outlook

We remain focused on opportunities to develop our international business, where our brand assets and UK manufacturing base bring significant potential to build on our strong position in established markets.

After 11 weeks of the current year Brand sales are 7% ahead of the same period last year. We are confident of delivering a positive outcome for the year.

Terry Stannard

Non-Executive Chairman

16^th April 2012

CHIEF EXECUTIVE'S REVIEW

Strategy

I am pleased to report that the Group continues to make significant progress with the implementation of its strategy, which comprises:

·      International expansion - to focus on the distribution and marketing of our brands in the European and North American markets where we see significant potential to grow our market share and to invest in the exciting growth opportunities in other international markets;

·      Market penetration - to continue to grow our brands in the UK and internationally through extension of  market positions;

·      Lifestyle product extension - to profit from the global recognition of the Group's heritage brands, Sanderson and Morris & Co, and the contemporary design excellence of the Harlequin brand, by extending the product range and exploiting the product licensing opportunities;

·      Extending manufacturing capability - to continue to invest in the latest printing techniques and to promote the considerable opportunities of being a quality UK manufacturer; and

·      Acquisitions - to continue to evaluate acquisition opportunities that fit with our current brand portfolio with the objective of further advancing our earnings growth.

Overview

I am extremely pleased to report that we have continued to make progress on our record year last year with further growth in sales and profits.

Our Brands have benefited from the continued investment in design, marketing and product launch and have increased sales 4.6% to £33.8 million in what has been a challenging UK market. Internationally the Brands sales have grown 11% to £22.0 million.

Europe as a whole has grown 10%, led by strong growth of 22% in Eastern Europe and 15% in Scandinavia particularly driven by Russia and Sweden. Despite the Euro zone difficulties, trading was resilient with sales growth of 6.2% in Western Europe and encouragingly our own business in France has grown 23% following showroom investment and increased management focus.

Our business in the US is showing signs of improvement and is slightly up for the year as a whole in reportable currency and up 4.4% in local currency having been flat at the half year.

Following a number of business initiatives, our other international markets have grown 28% to £5.64 million. This was led by growth in the Middle East of 105%, helped by a significant hotel contract in Dubai, and growth of 22% in the Far East with the significant Morris & Co launch in the year helping Japan grow sales 46% and growth of 13% in China where our distributor has recently opened a showroom in Shenzhen predominately dedicated to our brands.

Global Licensing income has grown 11% to £1.59 million with both UK and overseas growing strongly. In the UK our established bed linen licensee, Bedeck, achieved significant growth. Amongst our overseas licensees, our Japanese licensees did particularly well benefiting from the Morris & Co 150^th anniversary and products being launched into China. The luxury and heritage nature of the Group's brands has led to the signing of new licence arrangements such as Portmeirion tableware, Blueprint stationery, Elstead Lighting and Brink & Campman rugs.

Manufacturing has had another successful year. The activity levels in the second half of the year reduced from the high levels seen in the first half, when manufacturing benefited from customers restocking in the early months. Annual sales were flat at £28.7 million with a small improvement in profitability.

The Brands

Our commitment to invest in the strength and depth of our product range and our attention to customer service has ensured another successful year for our four interior furnishings brands that make up the Brands segment. 

In March 2012 a new brand, Scion, was launched which is a young, contemporary brand aimed at aspirational and fashion aware customers and stretches the reach of our brands into new market areas.

The Brands achieved growth in sales of 7.3% over last year to £54.4 million. The Brands' operating profits before exceptional items grew 14% to £5.37 million with continued substantial investment in product and marketing.

Brands UK

Harlequin

Harlequin has grown its overall sales 9.2% over the same period last year to £22.4 million, maintaining its position as the UK's leading mid-market contemporary brand. The growth has been driven by strong international sales led by particularly strong growth in the Far East, Middle East and Sweden. Harlequin launched an innovative collection with Clarissa Hulse during the year and revenues exceeded expectations. Harlequin continues to develop its licensing income and launched a range of lighting in conjunction with Elstead Lighting.

We were particularly pleased with the performance of Harlequin's Momentum collection, which has become the brand's biggest selling range in recent years.

Arthur Sanderson & Sons incorporating the Morris & Co brand

There has been particular investment both in product and marketing during the 150^th anniversary year of Morris & Co. which was marked by special UK exhibitions at several key Morris houses including Wightwick Manor, Standen and Red House and unique events in over 20 international markets including major seminars as far afield as Tokyo and Los Angeles. These, and other activities, have raised the profile of Morris & Co. and, combined with the global recognition of the Sanderson brand, have helped increase sales by 8.2% to £19.0 million. The growth has been driven by international sales with particularly strong growth in Sweden, Russia and Japan, an important market for Morris & Co.

Zoffany

Zoffany is positioned at the upper end of the premium market and sales have been much more challenging in the second half. Overall sales grew by 3.3% to £9.10 million, this has been supported by strong international performance up 14.9% over last year with particularly strong performances in Scandinavia, Russia, the Far East and the Middle East where there were specific contract wins.

Brands Overseas

Our Overseas segment comprises our two wholly-owned subsidiaries in New York and Paris.

Following two extremely challenging years in the US market, the second half of the year has shown signs of recovery helping grow revenues for the full year by 4.4% in local currency, but flat in reportable currency. This performance has been helped by key changes to our showroom partners in certain states and investment in a new back office in New Jersey. We are committed to this market where we remain confident about the medium term potential.

Despite challenging conditions in Western Europe, our French distribution business has grown 23% greatly helped by increased management focus and investment in remodelling our Paris showroom. 

Manufacturing

Following an extremely strong performance last year it is pleasing to report that our manufacturing segment has maintained both overall revenues and profitability helped by strong third party and international growth.

Anstey

Anstey, our wallpaper printing business, grew overall sales by 3.5% to £13.5 million. Third party sales in the UK were up 11% and third party export sales were up 32%. Internal sales to our own brands were down due to the timing and volume of product launches.

The investment made in a scatter machine in the first half of the year has given us the capability to add glass beads and other particles to wallpaper offering our customers a wider range of exciting new textured effects. This was commissioned in the second half and Harlequin led the way with the recent launch of the Momentum collection utilising this technique. Third party customers are also progressing with design developments. We continue to invest and to innovate our manufacturing capability and commissioned our first digital printer early this year.

Standfast

Standfast, our fabric printing factory, had a small decline in overall annual sales of 3.7% to £15.2 million. Third party sales grew 5.8% with export sales growing strongly, by 32%, and UK sales growing 1.9%. Sales to our own brands declined 16% following a very strong launch of new print collections last year.

Standfast continues to invest in digital printing due to increasing demand and commissioned its fourth machine during the year. Digital printers allow customers the flexibility of high value, short print runs and large scale designs. Further significant investment in digital printing will continue to be made in order to satisfy the demand for this type of product. There was a significant investment in the capacity and extension of the flatbed printing capability during the year.

Summary

Our on-going investment in product design, marketing, customer service and manufacturing capability has helped us deliver excellent results during the year and it is particularly pleasing that 39% of our brand sales are now international.

We intend to continue to exploit our brand assets internationally and remain confident of continued progress during the current year and beyond.

John Sach

Group Chief Executive

16^th April 2012

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 Preliminary Statement, further information on our segments.

Exceptional items are both material and their nature is sufficient to warrant separate disclosure and identification. There were no exceptional items in the year but during the previous year a full and final payment of £500,000 was received for an insurance settlement 'loss of profits claim' which arose from the disruption to collection launches in 2009 as a consequence of the loss of marketing material products held at a third party's premises which were destroyed in a fire in January 2009.

Interest

The net interest charge for the year was £254,000 (2011: £146,000) including amortisation of debt issue costs capitalised. Included in the previous year was an interest receipt of £86,000 as a consequence of a successful Fleming claim for the recovery of VAT.

Net Defined Benefit Pension

The charge during the year was £407,000 (2011: £364,000). There was a net settlement gain last year arising from the two remaining deferred members of the Walker Greenbank Senior Management Scheme accepting enhanced transfer values and the effective closure of that scheme.

Current Taxation

There is a small corporation tax charge of £15,000 arising from withholding tax suffered on overseas licence income and a prior year adjustment for overseas tax of £36,000.

Deferred Taxation

Due to the substantial brought forward UK corporation tax losses (£12.6 million), the Group does not anticipate paying UK corporation tax in 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. Although the pension deficit has increased during the year there has been a small decrease in the associated deferred tax asset due to the reduction in the tax rate to 25% which has been recognised in the Statement of Comprehensive Income.

Earnings per share ('EPS')

The basic and diluted EPS was 6.76p (2011: 5.36p).

Operating Cash Flow and Net Debt

The Group generated net cash inflow from operating activities during the year of £4,282,000 (2011: £4,260,000) reflecting the increased revenues, operating profits and continued investment in product.

The Group paid net interest of £230,000 (2011: £121,000), last year benefited from interest on a VAT refund by HMRC in respect of expenses incurred on the issue of shares in earlier years. Capital expenditure was £2,538,000 (2011: £2,453,000). The depreciation and amortisation charge during the period was £1,853,000 (2011: £1,738,000). The Group will continue to invest in the Manufacturing facilities and is part way through a major investment in a new IT system for the Brands. Capital expenditure will remain high during the next 12 months.

The Group made additional payments to the Pension schemes of £1,022,000 (2011: £1,038,000) to reduce the deficit, part of the ongoing planned reduction, along with £436,000 (2011: £322,000) of regular contributions to fund scheme expenses. 

Income tax and NI of £348,000 that arose on the vesting of an LTIP award was paid during the year.

Net debt in the Group has reduced by £1,150,000 to £667,000 (2011: £1,817,000) representing gearing of 2.9% (2011: 8.5%). The average level of debt during the year is higher due to the timing and seasonality of revenues and investment in product.

The Group utilises facilities provided by Barclays Bank Plc. There is a term property facility of £2,200,000 (2011: £2,600,000) at the year end expiring in July 2017. There is also a facility linked to working capital which allows the Group to more effectively manage 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 £680,000 (2011: £1,161,000), representing headroom of £11,257,000 (2011: £10,559,000). The headroom is set out below:

	Utilisation	Availability
	£000	£000
Property	2,184	2,200
Inventory	-	2,500
Receivables	680	7,224
	2,864	11,924
Less: Cash and cash equivalents	(2,197)
Net Debt	667	(667)
Headroom		11,257

The total facilities have a current limit of £16.50 million (2011: £16.50m).

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 from the Company to reduce the deficit; an increase in the liabilities of the scheme arising from lower discount rates but an increase in scheme assets reflecting the improvement in bond values. The impact of these factors is shown as follows:

	2012
	£000
Deficit at beginning of period	(6,742)
Scheme expenses	(488)
Interest cost	(2,565)
Expected return on plan assets	2,646
Contributions	1,458
Actuarial gain on scheme assets	5,460
Actuarial losses from the change in discount factor	(6,864)
Gross deficit at the end of the year	(7,095)

Long-Term Incentive Plan

There has been a new award of shares during the year under the Long-Term Incentive Plan ("LTIP") with vesting conditions based on Total Shareholder Return with a Profit before Tax floor. There has been a charge of £414,000 (2011: £697,000) in the Income Statement relating to LTIP awards. The charge last year was high as the award made in May 2007 fully vested in May 2011 as the top range of the financial target of profit before tax had been met. Accruals made up to January 2010 were based on achievement of the lowest range of the financial target which reflected internal projections at that time.

Dividends

During the year, the Group has paid a final dividend for the year to 31 January 2011 of 0.80p per share and an interim dividend of 0.20p per share. The Directors recommend the payment of a final dividend of 1.00 p per share (2011: 0.80p) which will be payable on 10^th August 2012 to shareholders on the register on 13^th July 2012. This brings the total dividend for the year to 1.20p per share (2011: 0.95p) an increase of 26%.

Disposals

There were no major disposals during the year.

 

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 financial statements.

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. Working capital exposures are hedged using currency swaps.

The Group does not trade in financial instruments and hedges are used for highly probable future cash flows and to hedge working capital exposures. There is a hedging liability of £50,000 (2011: £63,000 asset) at the end of the year in relation to US dollar and Japanese Yen forward contracts.

There is an asset of £54,000 arising from US dollar swaps used to hedge working capital exposures.

Credit Risk

The Group no longer seeks credit insurance as this is not 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 payments from customers are close to terms however there have been specific expenses 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 £314,000 (2011: £253,000) which is a collective assessment of the risk.

Alan Dix

Group Finance Director

16^th April 2012

Unaudited Consolidated Income Statement

Year ended 31 January 2012

	Note	2012 £000	2011 £000
Revenue		74,014	68,778
Profit from operations before exceptional items		5,555	4,472
Exceptional items
Insurance settlement	4	-	500
Profit from operations	3	5,555	4,972
Net defined benefit pension charge	6	(407)	(364)
Interest payable	5	(254)	(234)
Interest receivable	5	-	88
Net borrowing costs	5	(254)	(146)
Net finance costs		(661)	(510)
Profit before taxation		4,894	4,462
Total tax charge	7	(1,065)	(1,434)
Profit for the year		3,829	3,028
Earnings per share - Basic and diluted	9	6.76p	5.36p

Unaudited Consolidated Statement of Comprehensive Income

Year ended 31 January 2012

	2012 £000	2011 £000
Profit for the year	3,829	3,028
Other Comprehensive Income/(Expense):
Actuarial gains on scheme assets	5,460	1,718
Other actuarial losses on scheme liabilities	(6,864)	(1,559)
Currency translation (losses)/gains	(41)	4
Cash flow hedges (losses)	(113)	(112)
(Reduction) of deferred tax asset relating to pension scheme liability	(47)	(403)
Other comprehensive expense for the year, net of tax	(1,605)	(352)
Total comprehensive income for the year attributable to the owners of the parent	2,224	2,676

Unaudited Consolidated Balance Sheet

As at 31 January 2012

	Note	2012 £000	2011 £000
Non-current assets
Intangible assets		6,111	5,973
Property, plant & equipment		9,313	8,768
Deferred income tax assets	8	2,850	3,982
		18,274	18,723
Current assets
Inventories		17,000	15,630
Trade and other receivables	10	13,047	14,383
Derivative  financial asset		54	63
Cash and cash equivalents	11	2,197	1,927
		32,298	32,003
Total assets		50,572	50,726
Current liabilities
Trade and other payables		(17,511)	(18,847)
Derivative financial liability		(50)	-
Borrowings	11	(400)	(400)
		(17,961)	(19,247)
Net current assets		14,337	12,756
Non-current liabilities
Borrowings	11	(2,464)	(3,344)
Retirement benefit obligation	13	(7,095)	(6,742)
		(9,559)	(10,086)
Total liabilities		(27,520)	(29,333)
Net assets		23,052	21,393
Equity
Share capital		590	590
Share premium account		457	457
Foreign currency translation reserve		(202)	(161)
Accumulated losses		(18,250)	(20,063)
Other reserves		40,457	40,570
Total Equity		23,052	21,393

Unaudited Consolidated Cash Flow Statement

Year ended 31 January 2012

	Note	2012 £000	2011 £000
Cash flows from operating activities
Cash generated from operations	12	4,530	4,456
Interest paid		(230)	(209)
Debt issue costs		-	(62)
Interest received		-	88
Income tax paid		(18)	(13)
		4,282	4,260
Cash flows from investing activities
Purchase of intangible fixed assets		(441)	(503)
Purchase of property, plant & equipment		(2,097)	(1,950)
Proceeds on sale of property, plant and equipment		-	1
		(2,538)	(2,452)
Cash flows from financing activities
Purchase of treasury shares		-	(178)
Repayment of borrowings		(904)	(1,666)
Dividends paid to company's shareholders		(570)	(368)
		(1,474)	(2,212)
Net increase / (decrease) in cash, cash equivalents and bank overdrafts		270	(404)
Cash, cash equivalents and bank overdrafts at beginning of year		1,927	2,333
Exchange  losses on cash and bank overdrafts		-	(2)
Cash, cash equivalents and bank overdrafts at end of year	11	2,197	1,927

Unaudited Consolidated Statement of Changes in Equity

Other Reserves

	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 2011	590	457	(20,063)	43,457	(2,950)	63	(161)	21,393
Profit for the year	-	-	3,829	-	-	-	-	3,829
Other comprehensive Income:
Actuarial gains on scheme assets (note 13)	-	-	5,460	-	-	-	-	5,460
Other actuarial losses on scheme liabilities (note 13)	-	-	(6,864)	-	-	-	-	(6,864)
Deferred tax relating to pension scheme liability	-	-	(47)	-	-	-	-	(47)
Currency translation differences	-	-	-	-	-	-	(41)	(41)
Cash flow hedging reserve - released to income statement	-	-	-	-	-	(61)	-	(61)
Cash flow hedging reserve - recognised in equity during the year	-	-	-	-	-	(52)	-	(52)
Total comprehensive income/(expense)	-	-	2,378	-	-	(113)	(41)	2,224
Transactions with owners:
Dividends	-	-	(570)	-	-	-	-	(570)
Long term incentive plan charge	-	-	353	-	-	-	-	353
Long term incentive plan vesting	-	-	(348)	-	-	-	-	(348)
Purchase of treasury shares	-	-	-	-	-	-	-	-
Balance at 31 January 2012	590	457	(18,250)	43,457	(2,950)	(50)	(202)	23,052

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 2010	590	457	(22,794)	43,457	(2,950)	175	(165)	18,770
Profit for the year	-	-	3,028	-	-	-	-	3,028
Other comprehensive Income:
Actuarial gains on scheme assets (note 13)	-	-	1,718	-	-	-	-	1,718
Other actuarial losses on scheme liabilities (note 13)	-	-	(1,559)	-	-	-	-	(1,559)
Deferred tax relating to pension scheme liability	-	-	(403)	-	-	-	-	(403)
Currency translation differences	-	-	-	-	-	-	4	4
Cash flow hedging reserve - released to income statement	-	-	-	-	-	(175)	-	(175)
Cash flow hedging reserve - recognised in equity during the year	-	-	-	-	-	63	-	63
Total comprehensive income/(expense)	-	-	2,784	-	-	(112)	4	2,676
Transactions with owners:
Dividends	-	-	(368)	-	-	-	-	(368)
Reserve for long-term incentive plan	-	-	493	-	-	-	-	493
Purchase of treasury shares	-	-	(178)	-	-	-	-	(178)
Balance at 31 January 2011	590	457	(20,063)	43,457	(2,950)	63	(161)	21,393

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 2012. The audit of the statutory accounts for the year ended 31 January 2012 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 2011 have been filed with the Registrar of Companies and contained an auditor's report which was (i) unqualified and (ii) did not contain a reference to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report, and (iii) did not contain any statement under section 498(2) or (3) of the Companies Act 2006. This preliminary announcement was approved for release by the Board on 4 April 2012.

2.

Segmental Analysis

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 UK - comprising the design, marketing, sales and distribution, and licensing activities of Harlequin, Sanderson, Zoffany and Morris & Co brands operated from the UK. -       Brands Overseas - comprising the marketing, sales and distribution operations of the Group's foreign based subsidiaries in France and the United States. -       Brands Total has been added to the segmental reporting to better reflect the decisions made by the CODM on resource allocation. -       Manufacturing - comprising the wall covering and printed fabric manufacturing businesses operated by Anstey and Standfast respectively. 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'.

Notes to the Accounts continued

2.     Segmental Analysis continued

a.     Reportable segment information

Year ended 31 January 2012

	Brands UK £000	Brands Overseas £000	Brands Total £000	Manufacturing£000	Eliminations& unallocated £000	Total £000
UK Revenue	33,834	-	33,834	14,043	-	47,877
International Revenue	15,125	6,870	21,995	2,554	-	24,549
Licence Revenue	1,588	-	1,588	-	-	1,588
Revenue - External	50,547	6,870	57,417	16,597	-	74,014
Revenue - Internal	-	-	-	12,057	(12,057)	-
Total Revenue	50,547	6,870	57,417	28,654	(12,057)	74,014
Profit / (loss) from operations	5,869	(492)	5,377	2,572	(2,394)	5,555
Net borrowing costs	-	-	-	-	(254)	(254)
Net pension charge	-	-	-	-	(407)	(407)
Profit / (loss) before taxation	5,869	(492)	5,377	2,572	(3,055)	4,894
Tax charge	-	36	36	-	(1,101)	(1,065)
Profit / (loss) for the year	5,869	(456)	5,413	2,572	(4,156)	3,829

Year ended 31 January 2011

	Brands  UK £000		Brands Overseas £000	Brands Total £000	Manufacturing  £000	Eliminations & unallocated £000	Total £000
UK Revenue	32,359		-	32,359	13,313	-	45,672
International Revenue	13,124		6,607	19,731	1,940	-	21,671
Licence Revenue	1,435		-	1,435	-	-	1,435
Revenue - External	46,918		6,607	53,525	15,253	-	68,778
Revenue - Internal	-		-	-	13,529	(13,529)	-
Total Revenue	46,918		6,607	53,525	28,782	(13,529)	68,778
Operating profit / (loss) before exceptional items:		5,282	(557)	4,725	2,519	(2,772)	4,472
Insurance settlement	500		-	500	-	-	500
Profit / (loss) from operations	5,782		(557)	5,225	2,519	(2,772)	4,972
Net borrowing costs	-		-	-	-	(146)	(146)
Net pension charge	-		-	-	-	(364)	(364)
Profit / (loss) before taxation	5,782		(557)	5,225	2,519	(3,282)	4,462
Tax charge	-		-	-	-	(1,434)	(1,434)
Profit / (loss) for the year	5,782		(557)	5,225	2,519	(4,716)	3,028

There was £1,435,000 (2011: £1,303,000) of intercompany sales between the UK and overseas brand segments.

Notes to the Accounts continued

2.     Segmental Analysis continued

The segmental revenues of the Group are reported to the CODM in more detail. One of the analyses presented is Brands export revenues, an analysis of which is shown below:

Brands revenue by export market:	2012 £000	2011 £000
Western Europe	6,776	6,382
Scandinavia	1,997	1,740
Eastern Europe	2,104	1,731
Europe Total	10,877	9,853
Middle  East	1,223	598
Far East	2,853	2,334
USA	5,478	5,475
South America	199	175
Australasia	770	731
Other	595	565
	21,995	19,731

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:	2012 £000	2011 £000
Harlequin	22,426	20,537
Sanderson incorporating Morris & Co	19,018	17,569
Zoffany	9,103	8,812
	50,547	46,918

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

Manufacturing Revenue Analysis:	2012 £000	2011 £000
Standfast	15,172	15,751
Anstey	13,482	13,031
	28,654	28,782

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:	2012 £000	2011 £000
United States of America	5,478	5,475
France	1,392	1,132
	6,870	6,607

Notes to the Accounts continued

2      Segmental Analysis continued

b.     Additional entity-wide disclosures

Revenue by geographical location of customer:	2012 £000	2011 £000
United Kingdom	48,573	46,322
Continental Europe	11,678	10,507
North America	7,398	7,105
Rest of the World	6,365	4,844
	74,014	68,778

3.         Analysis of profit from operations

	2012 £000	2011 £000
Revenue	74,014	68,778
Cost of sales	(30,029)	(27,384)
Gross profit	43,985	41,394
Net operating expenses	(38,430)	(36,422)
Profit from operations	5,555	4,972

 

 

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 prior year, a full and final payment of £500,000 was received for an insurance settlement 'loss of profits claim' which arose from the disruption to collection launches in 2009 as a consequence of the loss of marketing material products held at third party's premises which were destroyed in a fire in January 2009. This has been renamed 'insurance settlement' for clarity.

5.     Net borrowing costs

	2012 £000	2011 £000
Interest expense:
Interest payable on bank borrowings	(230)	(209)
Amortisation of issue costs on bank loans	(24)	(25)
Total borrowing expense	(254)	(234)
Interest income:
Other interest receivable	-	88
Net borrowing costs	(254)	(146)

Other interest receivable includes £86,000 on VAT recovery.

Notes to the Accounts continued

6.     Net defined benefit pension costs
	2012 £000	2011 £000
Expected return on pension scheme assets	2,646	2,434
Interest on pension scheme liabilities	(2,565)	(2,542)
Scheme expenses met by group	(488)	(322)
Settlement gain	-	66
Net charge	(407)	(364)

In 2011, the Group no longer had any remaining obligations in respect of The Walker Greenbank Senior Management Pension Scheme as the two remaining deferred members accepted enhanced transfer values during the period. A net settlement gain of £66,000 is included within net defined benefit costs.

7.     Tax
	2012 £000	2011 £000
Current tax:
- overseas, current tax	(15)	(13)
-       overseas, adjustment in respect of prior year	36	-
Current tax	21	(13)
Deferred tax:
- ordinary	(933)	(1,339)
-       adjustment in respect of prior year	7	(2)
- effect of change in corporation tax rate to 25%	(160)	(80)
Deferred tax	(1,086)	(1,421)
Tax charge for the year	(1,065)	(1,434)

	2012 £000	2011 £000
Profit on ordinary activities before tax	4,894	4,462
Tax on profit on ordinary activities at standard rate 26% (2011: 28%)	(1,272)	(1,249)
Non deductible expenditure	(32)	(31)
Parent and overseas losses and temporary timing differences not recognised	356	(72)
Adjustments in respect of prior years	43	(2)
Effect of change in corporation tax rate at 25%	(160)	(80)
Tax charge for year	(1,065)	(1,434)

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 £12.6 million (2011: £16.2 million).

Notes to the Accounts continued

8.     Deferred income tax

A net deferred tax asset of £2,850,000 (2011: £3,982,000) has been recognised in respect of tax losses and other temporary differences.

	2012 £000	2011 £000
Taxable temporary differences on property, plant and equipment	(849)	(776)
Taxable temporary differences on intangible assets	(171)	(164)
Other temporary differences	107	38
Unutilised tax losses	1,989	3,063
	1,076	2,161
Retirement benefit obligations	1,774	1,821
	2,850	3,982

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  ('EBT') and those held in treasury, which are treated as cancelled.

		2012				2011
	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	3,829	56,655	6.76		3,028	56,491	5.36

Walker Greenbank's issued ordinary share capital with voting rights consists of 59,006,162 (2011: 59,006,162) ordinary shares of which 960,000 (2011: 960,000) ordinary shares are held in treasury and a further 1,093,541 (2011: 1,852,445) ordinary shares are held by the 'EBT' at a cost of £224,638 (2011:  £380,534).  At 31 January 2012 the market value of the treasury shares was £496,800.

10.     Trade and other receivables

Current	2012 £000	2011 £000
Trade receivables	9,574	10,075
Less: Provision for impairment of trade receivables	(487)	(515)
Net trade receivables	9,087	9,560
Other receivables	516	595
Marketing materials	2,068	2,894
Prepayments	1,376	1,334
	13,047	14,383

 

Notes to the Accounts continued

11.

Analysis of net debt

	1 February 2011 £000	Cash flow £000	Working capital facilities £000	Current portion of term facilities £000	Other non-cash changes £000	Exchange movement £000	31 January 2012 £000
Cash at bank and in hand	1,927	270	-	-	-	-	2,197
Borrowings due within 1 year	(400)	400	-	(400)	-	-	(400)
Borrowings due after 1 year	(3,344)	504	-	400	(24)	-	(2,464)
	(3,744)	904	-	-	(24)	-	(2,864)
Net debt	(1,817)	1,174	-	-	(24)	-	(667)

The working capital facilities provided by Barclays in place at the end of the previous financial year were renewed in March 2010 for another three year term. Other non-cash changes are capitalisation and amortisation of issue costs relating to the borrowings.

12.    Cash generated from operations

	2012 £000	2012 £000	2011 £000	2011 £000
Profit before tax:		4,894		4,462
Defined benefit pension charge	407		364
Net borrowing costs	254		146
Depreciation	1,550		1,419
Amortisation	303		319
Charge for long-term incentive plan recognised in equity	353		493
Tax on vesting on LTIP 2	(348)		-
Unrealised foreign exchange losses  included in operating profit	(39)		9
Defined benefit pension cash contributions	(1,458)		(1,406)
Changes in working capital
(Increase)/decrease in inventories	(1,370)		(2,392)
(Increase)/decrease in trade and other receivables	1,282		(3,962)
Increase/(decrease) in trade and other payables	(1,298)		5,004
		(364)		(6)
Cash generated from operations		4,530		4,456

Notes to the Accounts continued

13.	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 of the Walker Greenbank Pension Plan and the Abaris Holdings Limited 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 2012 are expected to be £1,583,000.
		2012 £000	2011 £000
Deficit at beginning of year		(6,742)	(7,943)
Scheme expenses met by group		(488)	(322)
Other net finance income / (expense)		81	(42)
Contributions payable		1,458	1,406
Actuarial gains on scheme assets		5,460	1,718
Changes in actuarial mortality assumptions		-	-
Other actuarial  losses on scheme liabilities		(6,864)	(1,559)
Deficit at end of year		(7,095)	(6,742)

14.   Post Balance Sheet Event

The Directors have recommended the payment of a final dividend of 1.0 pence per share, at a total cost of £570,000, which is subject to the approval of shareholders at the annual general meeting on 27 June 2012.

 

END

 

 

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