Final Results

Victoria PLC 13 June 2000 Victoria P.L.C. Preliminary Results Tuesday, 13 June 2000 9.30am - Analysts' Presentation 10.30am - Press Briefings @ Citigate Dewe Rogerson 3 London Wall Buildings London Wall London EC2M 5SY Tel: 0207 638 9571 Victoria P.L.C. a leading independent manufacturer of high quality domestic and commercial carpets and carpet yarns Preliminary Results for the year ended 1 April 2000 Operating profit £2.4m up 27% Pre-tax profit £2.1m up 40% Earnings per share 24.46p up 66% - excluding exceptional income 20.54p up 39% Dividend 5.5p up 22% Special Dividend 15p - returning over £1m to shareholders Successful consolidation onto one site in Kidderminster benefits to flow through from the new financial year Substantial capital investment keeps the Group at the forefront of the carpet industry 'Our stated strategy of continuing to improve performance, by understanding the customers' requirements, providing a consistently high level of service, quality and value for money products, has enabled us to produce a particularly pleasing set of results again this year, whilst continuing to deliver shareholder value. 'In the UK, whilst the market continues to be testing, we have a very strong portfolio of attractive, value for money products and now that we are operating from one consolidated site are well placed to see a continued growth. We will, therefore, continue with our capital expenditure programme so that we remain at the forefront in the UK carpet industry. 'Whilst our Australian business continued at a pace throughout the year, it will remain to be seen whether the introduction of a Goods and Services Tax will affect consumer demand in the short term. We however, remain optimistic that any fall off in demand will be short lived and we continue to invest heavily at our Castlemaine spinning mill. The benefits from this latest capital expenditure are expected to feed through to the bottom line from the last quarter of the next financial year.' Bob Gilbert, Chairman FULL STATEMENT ATTACHED Enquiries:- Fiona Tooley Alan Bullock, Group Managing Director Citigate Dewe Rogerson Mark Lee, Group Finance Director Today: 0207-638 9571 Victoria P.L.C. Thereafter: 0121-631 2299 Today: 0207 638 9571 (9.00am - 12.30pm) Mobile: 07785 703523 Thereafter: 01562 749300 Mobile: 07785 325701 (Alan Bullock) Mobile: 07887 753206 (Mark Lee) -2- Victoria P.L.C. Preliminary Results for the year ended 1 April 2000 STATEMENT BY THE CHAIRMAN, BOB GILBERT Introduction I am pleased to be able to report another year of significant progress, not withstanding the difficult trading conditions, which prevailed in the United Kingdom in the first-half of our reporting year. Our stated strategy of continuing to improve performance, by understanding the customers' requirements, providing a consistently high level of service, quality and value for money products, has enabled us to produce a particularly pleasing set of results again this year, whilst continuing to deliver shareholder value. Results Profit before tax and exceptional items was up by 40.16% to £2.108m from £1.504m in 1999 and after exceptional items of £363k up by 64.30% to £2.471m. Turnover increased by 2.3% to £35.6m from £34.8m in the previous year and Earnings per Share, excluding exceptional items, increased by 39% to 20.54p per share (1999 14.73p per share). Good performances were delivered by all parts of our operation. In the UK profits were increased in a challenging year, where not only were market conditions difficult, but at the same time our management skills were fully tested in completing the task of consolidating our carpet manufacturing operation on to one site in Kidderminster. Australia too delivered its highest profit in recent years, benefiting from a buoyant market in which our products continued to find favour. Dividend We have already announced that a special interim dividend of 15p per share will be paid to all shareholders, returning £1.03m of the proceeds from the disposal of surplus property in Kidderminster to our shareholders. Additionally, the Board is pleased to continue with its progressive dividend policy by recommending a final dividend of 5.5p per share, subject to shareholder approval at the Annual General Meeting on 13th July 2000. This dividend, which represents an increase of 22.22% and the special dividend will be paid on 20th July 2000 to all shareholders on the register at 23rd June 2000. -3- Property The first of four surplus properties, namely Castle Works, Kidderminster was successfully disposed of on 31st March 2000 for £0.50 million bringing an exceptional profit of £0.22 million into this year's accounts. Following the year-end we also completed the disposal of our Green Street, Kidderminster site, when vacant possession was granted to the purchaser on 26th April 2000; this sale for £3.00 million will give rise to a £2.16m exceptional profit in the first half of next year's accounts. The sale of the remaining part of the Group's surplus property, previously detailed and identified, is still being pursued, but it will take longer to realise the full value from these holdings as their maximum value will only come from a change of permitted use. People The employees within the Group have all played their part in contributing to the success we have enjoyed this year and I would like to acknowledge my grateful thanks to them. Whilst perhaps unfair to single out any particular group of employees in particular, it would be remiss of me not to mention the tremendous efforts and the adaptability that our employees in Kidderminster have put into the consolidation of our carpet manufacturing operation onto one site. The consolidation has gone almost seamlessly, whilst business has been maintained at higher levels enabling the Company to say good-bye to part of its past history and deliver new opportunities for the future. Prospects In the UK, whilst the market continues to be testing, we have a very strong portfolio of attractive, value for money products and now that we are operating from one consolidated site are well placed to see a continued growth. We will, therefore, continue with our capital expenditure programme so that we remain at the forefront of the UK carpet industry. Whilst our Australian business continued at a pace throughout the year, taking full advantage of good market conditions, as a slight cautionary note, it will remain to be seen whether the introduction of a Goods and Services Tax (GST) in July 2000 and rising interest rates will affect consumer demand in the short term. We however, remain optimistic that any fall off in demand will be short lived and we continue to invest heavily at our Castlemaine spinning mill, increasing production flexibility and the quality of our yarns, whilst reducing the amount of yarn needed from outsourcing. The benefits from this latest capital expenditure are expected to feed through to the bottom line from the last quarter of the next financial year. -4- Victoria P.L.C. Preliminary Results for the year ended 1 April 2000 OPERATING REVIEW BY GROUP MANAGING DIRECTOR, ALAN BULLOCK United Kingdom Despite an extremely challenging year in the UK, the Group has performed well, increasing both turnover and profitability. Whilst UK turnover was marginally increased by 1.5% to £23.8m (1999: £23.5m), Gross Profit was lifted 4% in the year and the Gross Profit Margin increased to 30% from 29% in the previous year. In the early part of our financial year the market conditions were difficult, as retail sales of carpeting failed to respond to both lower interest rates and a more active housing market in many parts of the UK. From the summer onwards, however, the Company enjoyed a much stronger trading period as its investments, particularly in new products, enabled it to take full advantage of better market conditions. Throughout the year, the Company has continued with its strategy of investment in the Independent Retail sector, with the introduction of attractive and strong new product lines, several additional new ranges being launched late in this financial year. Expenditure on 'point of sale' display materials and marketing was likewise maintained throughout the year. We believe that the strength of our new product ranges allowed us to fare far better than most of our competitors during the year and that this enabled us to gain market share in our targeted area, of the Independent Retailers. Sales to the Independent Retailers increased in the year by 6%, and now represent 53% of our UK business. At the same time as combating initially testing market conditions and then burgeoning sales demand from September onwards, we had to complete the consolidation of our UK carpet manufacturing operation onto one site. As part of this process the Group commenced a building programme costing circa £2m to extend its Worcester Road, Kidderminster site with 42,500 sq. ft. of additional factory / warehousing, an 8,000 sq. ft. hank dye-house and 8,500 sq. ft. of office accommodation. All of this allowed us to complete the sale of our Castle Works - Wilton factory on 31st March 2000 and then subsequently, the Green Street site on 26th April 2000. Whilst the consolidation onto Worcester Road is now complete, it is still likely to be several months before we have everything on the new site fully operational. The move, however, has gone remarkably well and one cannot praise highly enough the dedication, adaptability and resourcefulness of our Kidderminster employees for having implemented and accepted the changes so well. The benefits of a 'hands-on' management and the consolidated operation will now flow through fully in the new financial year. -5- In 1999, Victoria Carpets, along with several other leading UK carpet manufacturers, became a founder member of the Carpet Foundation. This organisation has initiated a three-year, £4 million, generic marketing campaign aimed at increasing consumer awareness of quality carpets. This campaign will not only highlight the benefits of carpet over that of alternative floor coverings, but also aims to raise carpets' rating in the scale of consumer spending. Despite the difficulties of exporting from the UK to our main export market, the EU, the Company has managed to retain a significant proportion of its turnover (£4 million) whilst margin was only slightly down. We continue to be well placed should the value of the Pound return to more realistic levels against the Euro. We have also continued to invest in plant and equipment, when a strong pay-back can be identified and in February 2000 installed a new, fully automated, cutting board and sortation system, enabling us to handle a significantly higher number of cut length carpet orders in a more cost effective way. Our Westwood Yarns facility has enjoyed another good year, contributing positively, as always, to the Group's success. The stronger levels of activity at Victoria Carpets helped to counter a down turn in outside trade orders for yarn caused by the poor market conditions in the first half year. Outside orders picked up in the second half and, overall, Westwoods enjoyed a reasonably busy year. Once more the Group has invested in new technology at Westwood, where we introduced a new 36 head Gilbos winding frame in September 1999 which enabled us to increase capacity and improve yarn quality. Australia The Australian operation has enjoyed a buoyant market throughout the year and has taken full advantage of these conditions to produce an excellent result. Turnover increased by 8.1% in the year from A$30.0m to A$32.6m as the Company's products, particularly the high styled Wool ranges, continue to appeal to both the local and export markets. Home sales were particularly strong throughout the year and export sales were up too by 2.73%, particularly to North America and New Zealand. There was no sign of any recovery in business to the Far East in the year. During the year we have invested heavily on new 'point of sale' display materials, which should continue to reap benefits in the future for us. The earlier and substantial investments made at our Castlemaine yarn spinning plant have all paid off well, with the last new equipment installed in October 1999 contributing well to this division's result late in the year. -6- Canada Our Canadian associate company, Colin Campbell & Sons, had a difficult trading period to contend with in the earlier part of the year, which they came through well. The company's core market of Western Canada was difficult as the British Columbian economy faltered, however, despite this Campbell's creditably managed to record a result similar to that of the previous year. Campbell's are currently expanding their successful formula of the 'Studio Line' back east into the Prairie Provinces and then hopefully on into the larger Ontario market. The Group is particularly grateful for the stewardship of John Campbell, the company's President, whose vision is in no small part responsible for the continued success of this operation. Outlook UNITED KINGDOM Whilst we are aware from some of our competitors that the market in the UK has turned down for them since Christmas and has remained difficult since then, we have enjoyed a strong first quarter to the year 2000 (the last three months of our financial year) and have also made an encouraging start to the new financial year. Strong new products introduced in February and March have been well received by the trade and we have further new product introductions planned for later this year, which we hope will continue to enable us to increase both turnover and margin. Benefits expected from the single site operation in Kidderminster should likewise under-pin our performance this year. At Westwoods we are investing in a new 72 spindle Gaudino spinning frame and modifications to a Tatham card, which will increase capacity and improve yarn quality in the second half of this financial year. AUSTRALIA Down-under, the market in the second quarter of the year is anticipated to be adversely affected by a post GST fall-out and a down turn whilst the Sydney Olympics take place. However, the Group has authorised a further and significant tranche of investment totalling A$6.6 million (£2.4 million) at our Castlemaine spinning mill, to ensure maximum quality, efficiency and flexibility with yarn supply to our own carpet operation, and to take advantage of government investment incentives. This investment will not, however, be completed and fully operational until late 2000 and should start to bring benefits to the Group from the last quarter. -7- Victoria P.L.C. Preliminary Results for the year ended 1 April 2000 REVIEW BY THE GROUP FINANCE DIRECTOR, MARK LEE Operating results Group sales increased by 2.3% to £35.6 million in the 52 weeks to 1 April 2000 as compared to £34.8 million in the 53 weeks to 3 April 1999. Sales were up 8.1% in Australia, in local currency, and 1.5% in the UK. Margins were also increased with gross margin reaching 29.4% (1999: 28.1%) and operating profit margin reaching 6.8% (1999: 5.5%). As a result, operating profits, before exceptional income, were £0.5 million higher at £2.42 million, compared to £1.91 million in 1999. Exceptional income The year's results also benefited from two items of exceptional income. The sale of the first of the Group's surplus properties and the result of an insurance claim together contributed exceptional profits of £0.36 million. Interest The interest charge for the year was £0.36 million, down from £0.45 million in 1999. The interest charge was covered 6.8 times by operating profits compared to 4.3 times in the previous year. Taxation The tax charge reduced marginally to 32.1% (1999: 32.8%). Earnings per share Earnings per share, excluding exceptional items, increased by 39% to 20.54 pence per share. The exceptional income added a further 3.92 pence per share. Dividend The proposed final dividend of 5.5 pence per share represents an increase of 22% on the previous year. Cash flow and investment Operating cash flow of £2.35 million was lower this year due to a significant increase in debtors and pre-payments. Trade debtors increased by £1.2 million due to the strength of trading in the final two months of the year, and pre-payments included £0.61 million of deposits paid for capital equipment to be installed at the Castlemaine spinning plant in the new financial year. Capital expenditure in the year totalled £4.05 million, including £2.08 million at Kidderminster to facilitate the consolidation of operations onto the single site, £0.32 million on the new automated cutting board, £0.46 million on state of the art winders at Westwood Yarns, and £0.54 million in Australia. -8- After tax and interest payments, there was a net cash out-flow of £2.0 million, equivalent to the amount invested in the new buildings at Kidderminster. Balance sheet Net assets increased in the year to £18.1 million (1999: £17.1 million). The net cash flow for the year was funded from borrowing facilities, leaving year-end net debt of £5.46 million and gearing of 30%. Post balance sheet events The sale of the Green Street property in April 2000 provided a net cash inflow of £2.93 million and a profit on disposal of £2.16 million. A special interim dividend of 15 pence per share, announced in April 2000, will return £1.03 million to shareholders. The proceeds of the disposal have been applied to reduce gearing and the proforma effect of the sale and the special dividend, if they had taken place by the balance sheet date, would have been to reduce borrowings to £3.56 million and reduce gearing to 18.5%. Year 2000 The investment in new computer systems during the year enabled the Group to avoid any disruption from the effects of the Millennium date change. -9- Victoria P.L.C. Preliminary Results GROUP PROFIT & LOSS ACCOUNT 52 weeks ended 53 weeks ended 1 April 3 April 2000 1999 £000 £000 Turnover 35,610 34,800 Cost of sales 25,145 25,033 Gross profit 10,465 9,767 Distribution costs 5,975 5,850 Administrative 2,397 2,279 expenses Other operating 329 272 income Operating profit 2,422 1,910 Exceptional items 363 - Interest payable 355 446 and similar charges Share of profits 41 40 of associated undertaking Profit on ordinary 2,471 1,504 activities before taxation Taxation 793 493 Profit after 1,678 1,011 taxation Dividends paid and 377 309 proposed Retained profit 1,301 702 Earnings per share 24.46p 14.73p - basic Earnings per share 24.25p 14.63p - diluted Earnings per share 20.54p 14.73p - excluding exceptional items -10- Victoria P.L.C. Preliminary Results STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES 2000 1999 £000 £000 Profit after taxation 1,678 1,011 Currency translation differences on foreign currency net (251) (124) investments Total gains relating to the year 1,427 887 Total gains recognised since last annual report 1,427 887 NOTE OF HISTORICAL COST PROFITS AND LOSSES 2000 1999 £000 £000 Reported profit on ordinary activities before taxation 2,471 1,504 Realisation of property revaluation gains of previous 269 - years Historical cost profit on ordinary activities before 2,740 1,504 taxation Historical cost profit for the year retained after 1,570 702 taxation and dividends -11- Victoria P.L.C. Preliminary Results GROUP BALANCE SHEET Group 1 April 3 April 2000 1999 £000 £000 Fixed assets Tangible assets 14,749 12,379 Investments 230 215 14,979 12,594 Current assets Stock 9,320 9,135 Debtors 7,291 5,714 Cash at bank and in hand 263 169 16,874 15,018 Less: Current liabilities Creditors - amounts falling due within one year 10,586 8,457 Net current assets 6,288 6,561 Total assets less current liabilities 21,267 19,155 Less: Creditors - amounts falling due after more than one year 2,355 1,391 Provisions for liabilities and charges - deferred taxation 789 691 Net assets 18,123 17,073 Capital and reserves (equity) Share capital 1,715 1,715 Share premium 749 749 Revaluation reserve 2,705 3,005 Profit and loss account 12,954 11,604 Total shareholders' funds 18,123 17,073 -12- Victoria P.L.C. Preliminary Results GROUP CASH FLOW STATEMENT 52 weeks ended 53 weeks ended 1 April 2000 3 April 1999 £000 £000 £000 £000 Net cash inflow from 2,346 4,558 operating activities Returns on investment and servicing of finance Interest paid (235) (336) Interest element of finance lease and hire (120) (110) purchase payments (355) (446) Taxation UK Corporation Tax (384) (219) paid Overseas tax paid (9) - (393) (219) Capital expenditure and financial investment Payments to acquire (4,054) (1,055) tangible fixed assets Receipts from sales of 116 79 tangible fixed assets Redemption of shares 19 12 in associated undertaking Receipts from 631 exceptional items (3,288) (964) (1,690) 2,929 Equity dividends paid (309) (240) (1,999) 2,689 Financing Repayment of secured - (168) loan Increase/(decrease) in 489 (93) long term loans Capital element of finance lease and hire (470) (547) purchase payments Receipts from 1,045 80 financing of assets 1,064 (728) (Decrease)/increase in 23 (935) 1,961 cash -13- Victoria P.L.C. Preliminary Results NOTES TO THE ACCOUNTS 1 Analysis of Group turnover and profit The turnover, contribution to profit and net assets are geographically spread as follows: 52 weeks ended 1 April 2000 53 weeks ended 3 April 1999 Profit on Profit on ordinary Net ordinary Net Turnover activities assets Turnover activities assets £000 £000 £000 £000 £000 £000 United 23,839 1,584 11,038 23,482 996 10,196 Kingdom Australia 11,771 846 6,855 11,318 468 6,662 Canada - 41 230 - 40 215 35,610 2,471 18,123 34,800 1,504 17,073 The Group's turnover and profits were derived from continuing operations during the current and previous years. No operations have been acquired during these two years. 2 Earnings per share The calculation of earnings per share is based on the following earnings and number of shares: 2000 1999 Earnings (£'000) - basic 1,678 1,011 - net interest on option proceeds 5 5 - diluted 1,683 1,016 - excluding exceptional items 1,414 1,016 Number of shares (thousands) - in issue throughout the year 6,861 6,861 - issuable under options 83 83 - diluted 6,944 6,944 3 Post balance sheet events (a) Disposal of Green Street property The disposal of the Company's property at Green Street, Kidderminster, which was approved by shareholders at the Extraordinary General Meeting on 9 December 1999, became unconditional on 7 April 2000 and was completed on 26 April 2000 with the receipt of the remaining net sale proceeds of £2,930,000. The profit on disposal of £2,164,000, before any tax which may be payable, will be included in the Group's interim accounts for the six months to September 2000. -14- (b) Special Interim Dividend Following the completion of the sale of the Green Street property, the Directors declared a special interim dividend of 15 pence per share (total £1,029,000) to be paid on 20 July 2000 to shareholders on the Register at 23 June 2000. 4 The Report & Accounts will be posted to shareholders on 16 June 2000 and further copies will be available from the Company's Registered Office: Worcester Road, Kidderminster, Worcestershire DY10 1HL. 5 The Annual General Meeting is being held at the Registered Office of the Company, Worcester Road, Kidderminster on 13 July 2000 at 2.30 p.m.

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