Final Results
Victoria PLC
18 June 2002
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Tuesday, 18 June 2002 Embargoed: 7.00am
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
'Victoria's market position and financial strength have enabled it to take best
advantage of difficult market conditions both in the UK and abroad'
• Sales maintained at £35 million
• Profits before tax £1.56 million
• Earnings per share 16.16 pence
• Balance sheet strengthened with net assets at £20.8 million
• Borrowings reduced - gearing at 13.4%
• Dividend increased by 7.7% to 7.0 pence
• Continuing investment in facilities, products and services and focusing on
the quality end of the market ensure Victoria remains one of the leading UK
players in the carpet industry
• 'Green light' for a further £2 million investment in state of the art
environmentally friendly Tufted backing line, due to be commissioned early
2003. Investment will drive organic growth and offer significant commercial
advantage
'In the UK, whilst we cannot rely on any significant improvement in the
residential carpet market, we can expect to see a good return from the two major
range enhancements made in March and April 2002. Likewise, we have other
exciting and new product launches planned in the first half of the new financial
year which should enable us to continue to gain market share. Exports from the
UK will continue to be difficult until the hotel and leisure sectors start to
see a more sustained recovery.
'The strong level of sales we are currently enjoying in Australia is likely to
return to more normal levels as government incentives for first time home buyers
come to an end and interest rates start to rise. However, we are likely to
remain busy throughout much of the first half year as we rebuild our stock
levels. The higher than normal investment in new ranges we made during the year
should continue to benefit sales strongly in 2002/3.
'Overall, we anticipate seeing a return to growth and an improvement in
profitability in the current year.'
R M Gilbert, Chairman
FULL STATEMENT ATTACHED
Enquiries:
Alan Bullock, Group Managing Director
Mark Lee, Group Finance Director Fiona Tooley
Victoria P.L.C. Citigate Dewe Rogerson
Today: 01562 749640 Today: 020 7282 8000
Thereafter: 01562 749300 Thereafter: 0121 455 8370
Mobile: 07887 753206 (Mark Lee) Mobile: 07785 703523
-2-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
STATEMENT BY THE CHAIRMAN, R M GILBERT
I am pleased to report that Victoria has remained firmly profitable, in a year
when the world headlines have been dominated by news of economic weakness and
terrorism.
The excellent market position and financial strength we have achieved over the
last few years have provided the Group with the ability to take best advantage
of the difficult market conditions both in the UK and abroad.
Also, this has been a year of unprecedented turbulence in the carpet industry,
particularly in the UK, with a number of the weaker players leaving the market.
What appears to characterise these businesses is under-investment in modern
manufacturing processes and products.
We feel that our strategy of continued investment in our facilities, products
and services, while remaining in the quality end of the market, has been proven
wholly right by this testing time.
Results and dividends
Sales for the year to March 2002 were £35.0 million (2001: £35.3 million).
Profits before tax were £1.56 million (2001: £2.20 million before exceptional
income), and earnings per share were 16.16 pence (2001: 21.75 pence before
exceptional income).
Our balance sheet is strengthened further with net assets standing at £20.8
million at the year end, and borrowings down to £2.79 million, leaving net
gearing of only 13.4%.
The Directors reaffirm their commitment to a progressive dividend policy, and
despite the lower profits in the year, are pleased to propose an increase in the
dividend to 7.0 pence per share, a 7.7 % increase over last year's level of 6.5
pence. If approved at the AGM on 16 July 2002, the dividend will be paid on 22
July 2002 to shareholders on the register on 5 July 2002.
Markets and operations
In Australia, market conditions started the year depressed, but improved during
the second half year, and labour difficulties encountered by some of our
competitors, coupled with our exciting array of new products, enabled our
business to perform strongly.
The UK market remained relatively quiet throughout the year, with a weak autumn
trading season after the shocks of September 11th and the more general economic
slowdown. Exports from the UK ended the year only slightly below the level
achieved the previous year, although these were stronger in the first half year
before falling off significantly as reduced levels of travel and tourism
affected the amount of refurbishment work carried out by hotel customers. Our UK
business activity remained at comparable levels to the previous year, which we
believe means that we have increased our market share.
We were pleased to win the contract from the John Lewis Partnership to
warehouse, cut and distribute all of their own label carpet, and also to achieve
the prestigious award from Greendale Carpets, the UK's biggest buying group, as
their non-woven carpet supplier of the year. Each of these awards bears
testament to the importance we attribute to customer service.
People
Service, closely linked with quality, can only be delivered by people. I would
therefore like to pay great tribute to every person in our business who has
delivered the quality and service that have been so appreciated by the Board and
all our customers throughout the year.
continued...
-3-
Strategy
During the year we completed a review of our strategy. The last review was
undertaken when I became Chairman 5 years earlier, and the strategy we laid out
then has been fully implemented by the management team.
The review confirmed our strategy to focus on developing the existing operations
of the Group organically. Having moved away from high volume low margin
business, the majority of our sales are now to customers who value our service
as much as our products.
To take the Group forward, we are now concentrating on building up sales to our
excellent customer base. We will continue to invest in products and plant to
achieve this next stage in our development.
Outlook
In the UK, whilst we cannot rely on any significant improvement in the
residential carpet market, we can expect to see a good return from the two major
range enhancements made in March and April 2002. Likewise, we have other
exciting and new product launches planned in the first half of the new financial
year, which should enable us to continue to gain market share. Exports from the
UK will continue to be difficult until the hotel and leisure sectors start to
see a more sustained recovery.
The strong level of sales we are currently enjoying in Australia is likely to
return to more normal levels as government incentives for first time home buyers
come to an end and interest rates start to rise. However, we are likely to
remain busy at least throughout much of the first half year as we rebuild our
stock levels. The higher than normal investment in new ranges we made during the
year should continue to benefit sales strongly in 2002.
Overall, we anticipate seeing a return to growth and an improvement in
profitability in the current year.
-4-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
OPERATING REVIEW BY THE GROUP MANAGING DIRECTOR, ALAN BULLOCK
Market overview
The past twelve months has proven to be something of a 'water-shed' for the
Carpet Industry in nearly all countries of the world with the production and
consumption of wall-to-wall textile floor coverings declining.
For the first eight months of 2001 demand for residential carpets was sluggish
as the main global economies displayed recessionary tendencies. This already low
level of business confidence was then severely damaged by the terrorist events
in the United States of 11th September 2001, which damaged the contract carpet
market too.
Additionally the fashion trend towards the use of more wood and laminate
flooring continued to depress demand for wall-to-wall carpets.
The volume manufacturers, particularly in Belgium and the UK, were badly
affected and there is a move towards reducing capacities and to producing better
quality carpets. Consumers too are becoming increasingly aware that very low
price carpets are not necessarily good value.
Against this backdrop, we believe that Victoria has enjoyed a satisfactory
result doing significantly better than many of our competitors and continuing to
take market share. The trend towards better quality carpeting suits us too as
this is the area in which we excel.
All areas of the Group's operation were profitable.
UNITED KINGDOM
Carpet manufacture
The past twelve months for carpet manufacturers in the UK have been particularly
challenging. There has been a steady stream of bad news from the Industry, with
many of the weaker players in both carpet manufacturing and associated supply
industries exiting the trade.
We estimate that the volume of carpet manufactured in the UK decreased by over
8% in 2001 and has continued to decline in the first quarter of 2002.
The major weavers have found the market especially tough, squeezed by both a
strongly declining demand for patterned Axminster residentially and radically
reduced demand from the hospitality market as a result of the reduced levels of
travel caused by terrorism.
In the short-term, the flood of 'fire-sale' stock from mills either exiting the
market or chasing volume whilst demand has weakened has affected us during the
year. However, in the longer term, the reduction in capacity will benefit the
stronger manufacturers such as Victoria.
There is now growing evidence that some major buyers are questioning their past
buying policies and are looking for longer term, quality suppliers. We believe
that Victoria's reputation for product innovation, quality, reliability and
consistently high levels of service will be attractive.
Pleasingly, sales to our key target market - the Independent Retailers - was
maintained during the year and still account for over 60% of our UK sales.
continued...
-5-
As reported in our Interim Accounts, on 4 September 2001 Victoria Carpets
started a long term contract to warehouse, cut, wrap and distribute all of the
'Jonelle' brand of carpets for the John Lewis Partnership.
The contract has started extremely well and the high levels of service we have
been able to provide to John Lewis have enabled them to grow the sales of
Jonelle carpets significantly.
Victoria Carpets continued to invest heavily in new products and merchandising
during the year. There were 5 new ranges introduced in the first half of the
year and our award winning Tudor Twist range, was doubled in size by extending
the colour range from 20 to 40 colours.
Due to the importance of this range to us, we wanted to get the new range of
colours out into the market as early as possible and, therefore, Tudor Twist's
sampling was done in March, right at the end of our financial year. Although
there is no benefit to sales or profitability in the year being reported,
strategically, we believe that this was the correct action to take.
Sampling & Marketing costs were, as a result of a heavy year's spend, around
£280,000 higher than normal.
Victoria Carpets continues actively to support the generic promotion of carpets
in the UK through the Carpet Foundation who have ambitious plans involving the
Independent Retail Buying Groups for a major marketing and advertising
initiative planned to start in the autumn of 2002.
Exports from the UK during the year were disappointingly down by 4.2% to £4.2
million. This is solely due to the events in the States and the effects these
had on demand from the hotel industry. Prior to September 2001 we were doing
very well in our export sales, which at that time were up on the previous year
by over 13%.
Yarn manufacture
Westwood Yarns, our yarn manufacturing plant in Holmfirth, West Yorkshire, once
again had a good year continuing to deliver high quality yarns and profitability
to the Group.
Our policy of keeping the Westwoods plant as 'state of the art' was continued
during the year when we added additional Superba heat-setting enabling us to
heat-set our full spinning capacity if required. This additional capacity came
on-stream in August 2001 and enabled Westwoods to remain busy through to the end
of the financial year.
AUSTRALIA
After a very difficult start to the fiscal year, the Australian operation made
solid gains to finish the year strongly. A reduction in the first half year
sales of 11% against the previous year, was reversed in the second half, with a
19% increase in sales, providing an annual sales growth for the year of 3%.
During the course of the year, a significant number of quality all wool,
textured loop pile tufted ranges were introduced to the market, and met with
outstanding acceptance. Substantial investments in sampling and point of sale
display units were also made (£220k over the previous year's spend). These,
coupled with the maintenance of excellent relationships with our major
customers, were instrumental in achieving the growth in sales evidenced in the
second half of the year.
The Castlemaine spinning operation was a substantial contributor to the
Australian Company's profits, achieving a 30% increase in tonnage production
over the previous year. This excellent result was partly due to recently
commissioned equipment operating for the full year, but also a result of
significant productivity improvements.
continued...
-6-
Quality of yarn from this modern and sophisticated spinning mill is also of the
highest order and the output from the mill now accounts for about 70% of our
total Australian yarn requirements.
During the year the Australian government withdrew the Export bounty paid to the
textile industry, which disadvantaged us. However the Company's investments in
new plant and equipment over recent years, has enabled us to process a
successful claim under the Australian Government's 'Strategic Investment
Programme', with a grant of A$ 1.27 million received during the year. This
programme to assist manufacturing in our industry sector in Australia continues
until 2005.
The profits for the Australian operation, taking into account the revenue
element of the Government SIP grant, showed an increase of £90,000 in sterling
terms, which was assisted by an improvement in the Australian Dollar exchange
rate, from A$ 2.91 to A$ 2.67.
CANADA
Despite the setback in the North America market following the events of 11
September 2001 our Canadian Associate Company managed to deliver a result almost
identical to the previous year. This is an excellent outcome given the
prevailing market conditions.
INVESTING FOR THE FUTURE
The group has continued to invest heavily in products, point of sale display
materials and service to its customers. In the past two years we have invested
over three times the level of depreciation in new plant and equipment aimed at
producing our products in the most cost efficient way possible.
Victoria Carpets in the UK is now about to embark on a £2 million investment to
replace its tufted equipment with the very latest technology. The new generation
backing line will be commissioned in early 2003 providing the opportunity to
manufacture wider widths of tufted carpet at high speed and in a more energy
efficient and environmentally friendly way than in the past.
We believe that this investment will drive the organic growth of the business in
the UK, offering a significant commercial advantage over competitors and
maintaining our position at the forefront of the quality end of the market.
-7-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
FINANCIAL REVIEW BY THE GROUP FINANCE DIRECTOR, MARK LEE
Summary of results
In a year of challenging market conditions, the Group has maintained its
turnover at £35.0 million (2001: £35.3 million) and has remained firmly
profitable with pre-tax profits of £1.56 million (2001: £2.20 million, before
exceptional income).
Strong cash generation has enabled the operating companies to invest £1.63
million in new capital equipment. At the same time, net borrowings have been
reduced by £1.54 million, to end the year at £2.79 million.
Review of activities
Victoria Carpets Limited experienced a slight fall in sales with turnover to
home markets 4.5% lower than the previous year and exports 4.2% lower. A large
part of the reduction, particularly in exports occurred in the second half of
the year after September 2001. Westwood Yarns increased its output volume and
sales in the year by approximately 2%, but with an increasing proportion of
production going to Victoria Carpets, external turnover was £0.6 million lower
than last year.
Victoria Carpets Australia, managed to increase turnover by 3.3% in local
currency and by 12.7% when translated into sterling at the year end rate of
A$2.67 to the pound (2001: A$2.91). The increase all arose in the second half of
the year, as the company enjoyed a strong recovery from the poor trading
conditions in the first half of the financial year.
Gross profit margins were improved both in Australia and in the UK, with the
gross profit margin for the group up by 1.3 percentage points from 28.7% to
30.0%. Other operating income was considerably higher than last year, as we
received the first revenues from the John Lewis warehousing contract and certain
revenue grants from the Australian government.
Distribution costs were significantly higher in the year, principally due to the
heavy investment made in the year in patterning for new ranges of carpets, both
in the UK and in Australia. Distribution costs also included the additional cost
of supporting the John Lewis operation, and an increased level of spending on
the sales and merchandising activities.
The operating profit for the year was £1.86 million, (2001: £2.37 million).
Interest costs of £0.34 million were slightly up on last year's £0.21 million.
Last year's average borrowings were relatively low due to the proceeds of the
property disposal being held until the special dividend was paid in July 2000.
After interest, the pre-tax profit was £1.56 million, compared to £2.20 million
in 2001.
Pensions
The winding up of the Group's only defined benefit pension scheme was completed
in November 2001. Accordingly, FRS17 will have no impact on the Group.
Taxation
The effective tax rate was 28.2%, (2001: 31.6% excluding exceptional items). The
Group has adopted FRS19 in preparing these accounts, as noted in the Accounting
Policies. This has not affected the amount of deferred tax provided in the year
or in the prior year.
continued...
-8-
Earnings per share and dividends
Earnings were 16.16p per share (2001: 21.75p, excluding exceptional items).
A final dividend of 7.0p is proposed for payment to shareholders on 22 July
2002. This represents an increase of 7.7 per cent on last year's final dividend
of 6.5p. The dividend is covered 2.31 times by earnings.
Balance sheet
The Group balance sheet continued to strengthen with net assets increasing to
£20.79 million (2001: £19.57 million). Net assets per share were 299p at 30
March 2002, compared to 282p at the start of the year.
Cash flow and borrowings
Net cash inflow from operating activities was £4.78 million (2001: £3.92
million). Interest, tax and dividends absorbed £1.39 million and net capital
expenditure was £1.60 million. The remainder was applied to reduce net
borrowings.
Net borrowings at the year-end were £2.79 million (2001: £4.33 million), leaving
net gearing at 13.4 per cent (2001: 22.1 per cent).
Treasury policy
Operating internationally, and financed by a combination of equity and debt,
both UK and overseas, the Group is exposed to risks relating to interest rates,
liquidity and foreign currency.
The 'financial instruments' which are affected by these risks comprise of
borrowings, cash and liquid resources used to provide finance for the Group's
operations, together with various items such as trade debtors and trade
creditors that arise directly from its operations, and any derivatives
transactions (such as interest rate swaps and forward foreign currency
contracts) used to manage interest rate and currency rates.
The following policies, established by the Board, have been applied throughout
the year under review:
a) Interest rate risk
The Group finances its operations through a mixture of retained profits
and bank facilities, including hire purchase and lease finance. The
Group borrows in the desired currency at floating or fixed rates of
interest and may then use interest rate swaps to secure the desired
interest profile and manage exposure to interest rate fluctuations.
At the year-end, 86% of the Group's borrowings were at fixed rates.
b) Liquidity risk
The Group's policy has, throughout the year, been that to ensure
continuity of funding, at least 50% of its borrowings should mature
after more than one year. At the year-end, 80% of the Group's net
borrowings were due to mature after one year and 63% were due to mature
after more than two years.
c) Currency risk
The main currency exposure of the Group arises from the ownership of the
Australian subsidiary, which accounts for approximately one third of the
Group's turnover, profits and net assets.
It is the Board's policy not to hedge against movements in the Sterling/
Australian exchange rate beyond the natural hedge of maintaining a
relatively high proportion of the Group's borrowings in Australian
dollars. At 30 March 2002, 66% (£1.83 million) of Group borrowings were
denominated in Australian dollars.
continued...
-9-
Other currency exposure derives from trading operations where goods are
exported or raw materials and capital equipment are imported. These
exposures may be managed by forward currency contracts, particularly
when the amounts or periods to maturities are significant and at times
when currencies are particularly volatile.
d) Trading
It is, and has been throughout the period under review, the Group's
policy that no trading in financial instruments shall be undertaken.
-10-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
GROUP PROFIT & LOSS ACCOUNT
52 weeks 52 weeks
ended ended
30 March 31 March
2002 2001
£000 £000
Turnover 35,000 35,320
Cost of sales 24,517 25,166
Gross profit 10,483 10,154
Distribution costs 6,824 5,727
Administrative expenses 2,467 2,258
Other operating income 665 204
Operating profit 1,857 2,373
Exceptional income - 2,164
Interest payable and similar charges 337 213
Share of profits of associated undertaking 43 43
Profit on ordinary activities before taxation 1,563 4,367
Taxation 441 858
Profit after taxation 1,122 3,509
Dividends paid and proposed 486 1,498
Retained profit 636 2,011
Earnings per share - basic 16.16p 50.66p
Earnings per share - diluted 16.16p 50.55p
Earnings per share - excluding exceptional items 16.16p 21.75p
-11-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES
2002 2001
£000 £000
Profit after taxation 1,122 3,509
Currency translation differences on foreign currency net investments 590 (667)
Total gains relating to the year 1,712 2,842
Total gains recognised since last annual report 1,712 2,842
NOTE OF HISTORICAL COST PROFITS AND LOSSES
2002 2001
£000 £000
Reported profit on ordinary activities before taxation 1,563 4,367
Realisation of property revaluation gains of previous years - 633
Historical cost profit on ordinary activities before taxation 1,563 5,000
Historical cost profit for the year retained after taxation and dividends 636 2,644
-12-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
BALANCE SHEETS
Group Company
30 March 31 March 30 March 31 March
2002 2001 2002 2001
£000 £000 £000 £000
Fixed assets
Tangible assets 16,430 15,805 4,520 4,514
Investments 287 252 3,377 3,377
16,717 16,057 7,897 7,891
Current assets
Stock 8,008 8,791 - -
Debtors 6,294 6,293 2,285 2,209
Cash at bank and in hand 307 51 - -
14,609 15,135 2,285 2,209
Less: Current liabilities 7,004 7,792 1,661 1,553
Creditors - amounts falling due within one year
Net current assets 7,605 7,343 624 656
Total assets less current liabilities 24,322 23,400 8,521 8,547
Less: Creditors - amounts falling due after 2,490 2,821 - -
more than one year
Provisions for liabilities and charges - 1,038 1,011 310 338
deferred taxation
Net assets 20,794 19,568 8,211 8,209
Capital and reserves (equity)
Share capital 1,736 1,736 1,736 1,736
Share premium 829 829 829 829
Revaluation reserve 2,061 1,996 1,267 1,267
Profit and loss account 16,168 15,007 4,379 4,377
Total shareholders' funds 20,794 19,568 8,211 8,209
-13-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
GROUP CASH FLOW STATEMENT
52 weeks ended 52 weeks ended
30 March 2002 31 March 2001
£000 £000 £000 £000
Net cash inflow from operating activities 4,783 3,916
Dividends received from associated undertaking - 13
Returns on investment and servicing of finance
Interest paid (147) (81)
Interest element of finance lease and hire purchase (190) (132)
payments
(337) (213)
Taxation
UK Corporation Tax paid (397) (451)
Overseas tax paid (209) (367)
(606) (818)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,633) (3,568)
Receipts from sales of tangible fixed assets 35 37
Receipts from exceptional items - 2,914
(1,598) (617)
2,242 2,281
Equity dividends paid (451) (1,423)
1,791 858
Financing
Issue of share capital - 101
(Decrease)/increase in secured loans (225) 206
(Decrease) in long term loans (280) (134)
Capital element of finance lease and hire purchase (705) (425)
payments
Receipts from financing of assets 54 1,344
(1,156) 991
Increase in cash 635 1,950
-14-
Victoria P.L.C.
Preliminary Results for the year ended 30 March 2002
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 30 March 52 weeks ended 31 March
2002 2001
Profit on Profit on
ordinary Net ordinary Net
Turnover activities assets Turnover activities assets
£000 £000 £000 £000 £000 £000
United Kingdom 22,982 827 13,101 24,659 3,721 12,856
Australia 12,018 693 7,406 10,661 603 6,460
Canada - 43 287 - 43 252
35,000 1,563 20,794 35,320 4,367 19,568
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. Exceptional income
There were no exceptional items in the year to 30 March 2002.
Exceptional income arising during the year to 31 March 2001 was related
to the profit on disposal of the Green Street property.
This information is provided by RNS
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