Half-Year Results

RNS Number : 2651S

Victoria PLC

29 November 2012

 



29 November 2012

Victoria PLC

('Victoria,' the 'Company,' or the 'Group')

Half-Year Results

for the 26 weeks ended 29 September 2012

Summary:

·     Group Revenue declined 7.8% to £35.99m

·     Group loss before tax and exceptional items* of £0.07m

·     Net debt increased in the half-year to £8.35m

·     Half-Year Dividend of 2.00 pence

·     Challenging economic and tough market conditions throughout the period for both the Australian and UK businesses

·     Strategy formulated to reverse recent fortunes

·     Proposed move to AIM

*  Refer to Note 4 of this announcement.

For more information contact:

Victoria PLC Geoff Wilding	[phone]
Seymour Pierce Jonathan Wright (Corporate finance) Tom Sheldon  (Corporate finance) Richard Redmayne (Corporate broking) Jacqui Briscoe (Corporate broking)	[phone]
MHP Nick Denton                                        Vicky Watkins	[phone]

Chairman's Statement

Overview

Victoria is facing some real challenges. The Group is experiencing strong economic headwinds in each of its major markets, has a cost structure that is too high for its current level of business, limited competitive advantages, excessive debt levels in the UK, surplus production capacity (in a sector with abundant surplus production capacity), and a considerable oversupply of stock in the UK.

These issues are reflected in the financial results for the first half-year:

·     Group revenues declined by 7.8% (6.6% in constant currency terms) in H1 from £39.02m to £35.99m

·     Group operating profit before exceptional items fell 94.3% from £1.85m to £0.11m

·     Group profit before tax and exceptional items decreased from £1.72m to a loss of £0.07m

·     After exceptional items, the Group recorded a loss before tax of £1.53m, compared with a £1.27m profit before tax in the prior year H1.

·     Net debt increased at the half year to £8.35m from the year-end position of £7.75m.

Despite these issues, and the consequential poor results, we should remember that Victoria is well known for producing superb quality carpets, has an enviable reputation for service, and employs some talented and committed people.  Since our appointment on 3 October, we have begun to build on these foundations to address the key issues facing the business.

Our plans for the Group will take time to impact the financial results and it is our view that, at best, the Group will break even (before exceptional items) for the full year. Furthermore, in restructuring the Group, it is likely that exceptional items and provisions will be incurred in the second half of the current year that will materially impact the Group's present net asset value.

We appreciate the possible impact this could have on the share price of Victoria PLC in the short term; however, it is our view that the interests of all shareholders are best served by unequivocally facing up to the realities confronting Victoria and dealing with them now. Be assured we are totally committed to creating value for all shareholders.

Half year dividend

We declare an interim dividend of 2.00p per share (2011: 3.50p), payable on 20 December 2012 to shareholders on the register as at 7 December 2012.

Proposed move to AIM

In the Annual Report and Accounts for the year end 31 March 2012, the Company advised Shareholders of the proposal to seek shareholder approval to move to AIM.  The process of making this move was suspended earlier in the year by the previous board.  Following our recent appointment, the process has recommenced and a circular is being sent to shareholders shortly concerning this proposal.  

Sports ground

As referred to in the Company's trading update of 1 October 2012, the Company has agreed to sell its sports ground in Kidderminster to Wyre Forest District Council for £850,000.  The land has an existing use value in the balance sheet of £80,000.

The sale is subject to completion of due diligence and the grant of outline planning consent for the Council's own proposed leisure facility. It is expected that a conditional exchange will be completed before the end of 2012 and proceeds from the sale are expected to be received early in the next financial year.

Outlook

Trading continues to be difficult in both the UK and Australia and confidence in the general economic and commercial environment remains fragile.

Although the remainder of the current financial year will be challenging, we believe we have adopted an appropriate strategy for Victoria and look forward to reporting improved results to shareholders in the future.

Geoff Wilding

Chairman

Condensed Consolidated Income Statement

For the 26 weeks ended 29 September 2012 (unaudited)

				26 weeks ended 29 Sep 2012	26 weeks ended 1 Oct 2011	52 weeks ended 31 Mar 2012
			Notes	£000	£000	£000
Continuing operations
Revenue			3	35,985	39,016	77,126
Cost of sales				(26,596)	(28,221)	(56,787)
Gross profit				9,389	10,795	20,339
Distribution costs				(7,197)	(6,926)	(14,070)
Administrative expenses				(3,694)	(2,690)	(4,730)
Other operating income				147	218	384
Operating (loss)/ profit				(1,355)	1,397	1,923
Analysed between:
Operating profit before exceptional items			3	106	1,848	2,583
Exceptional items			4	(1,461)	(451)	(660)
Share of results of associated company				74	95	85
Finance costs				(245)	(219)	(461)
(Loss)/profit before tax			3	(1,526)	1,273	1,547
Taxation			5	413	(471)	(461)
(Loss)/profit for the period				(1,113)	802	1,086
Attributable to:
Equity holders of the parent				(1,113)	802	1,086
Earnings per share -	pence	basic	6	(15.83)	11.55	15.64
		diluted	6	(14.77)	10.45	14.12

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 29 September 2012 (unaudited)

	26 weeks ended 29 Sep 2012	26 weeks ended 1 Oct 2011	52 weeks ended 31 Mar 2012
	£000	£000	£000
Exchange differences on translation of foreign operations	(212)	(952)	72
Other comprehensive (loss)/income for the period	(212)	(952)	72
(Loss)/profit for the period	(1,113)	802	1,086
Total comprehensive (loss)/income for the period	(1,325)	(150)	1,158
Attributable to:
Equity holders of the parent	(1,325)	(150)	1,158

Condensed Consolidated Balance Sheet

As at 29 September 2012 (unaudited)

	As at 29 Sep 2012	As at 1 Oct 2011	As at 31 Mar 2012
	£000	£000	£000
Non-current assets
Intangible assets	742	778	742
Property, plant and equipment	24,132	25,368	24,978
Investment property	180	180	180
Investment in associated company	636	559	558
Deferred tax asset	805	823	812
Total non-current assets	26,495	27,708	27,270
Current assets
Inventories	25,435	26,066	25,966
Trade and other receivables	12,215	12,562	11,676
Current tax asset	216	----	----
Cash at bank and in hand	1,576	769	806
Total current assets	39,442	39,397	38,448
Total assets	65,937	67,105	65,718
Current liabilities
Trade and other payables	14,661	14,865	13,467
Current tax liabilities	----	426	31
Financial liabilities	9,567	7,851	8,165
Total current liabilities	24,228	23,142	21,663
Non-current liabilities
Trade and other payables	2,040	2,387	2,253
Other financial liabilities	355	931	388
Deferred tax liabilities	773	1,395	1,094
Total non-current liabilities	3,168	4,713	3,735
Total liabilities	27,396	27,855	25,398
Net assets	38,541	39,250	40,320
Equity
Issued share capital	1,758	1,736	1,736
Share premium	829	829	829
Retained earnings	35,764	36,500	37,575
Share-based payment reserve	190	185	180
Total equity	38,541	39,250	40,320

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks ended 30 September 2012 (unaudited)

	Share	Share	Retained	Share based	Total
	capital	premium	earnings	payment	equity
				reserve
	£000	£000	£000	£000	£000
At 3 April 2011	1,736	829	37,067	130	39,762
Profit for the period	----	----	802	----	802
Other comprehensive loss for the period	----	----	(952)	----	(952)
Dividends paid	----	----	(417)	----	(417)
Movement in share-based payment reserve	----	----	----	55	55
At 1 October 2011	1,736	829	36,500	185	39,250
At 3 April 2011	1,736	829	37,067	130	39,762
Profit for the period	----	----	1,086	----	1,086
Other comprehensive income for the period	----	----	72	----	72
Dividends paid	----	----	(660)	----	(660)
Movement in share-based payment reserve	----	----	----	50	50
Deferred tax on share option scheme	----	----	10	----	10
At 31 March 2012	1,736	829	37,575	180	40,320
At 1 April 2012	1,736	829	37,575	180	40,320
Loss for the period	----	----	(1,113)	----	(1,113)
Other comprehensive loss for the period	----	----	(212)	----	(212)
Dividends paid	----	----	(486)	----	(486)
Movement in share-based payment reserve	----	----	----	32	32
Issue of share capital in connection with exercise of share options under LTIP plan	22	----	----	(22)	----
At 29 September 2012	1,758	829	35,764	190	38,541

Condensed Consolidated Statement of Cash Flows

For the 26 weeks ended 29 September 2012 (unaudited)

		26 weeks ended 29 Sep 2012	26 weeks ended 1 Oct 2011	52 weeks ended 31 Mar 2012
	Notes	£000	£000	£000
Net cash inflow/(outflow)  from operating activities	8a	517	(185)	885
Investing activities
Purchases of property, plant and equipment		(652)	(898)	(1,464)
Acquisition of intangible assets		----	(400)	(400)
Proceeds on disposal of property, plant and equipment		15	103	85
Net cash used in investing activities		(637)	(1,195)	(1,779)
Financing activities
Repayment of loans		----	(312)	(973)
Receipts from financing of assets		67	195	321
Repayment of obligations under finance leases/HP		(246)	(440)	(872)
Dividends paid		(486)	(417)	(660)
Net cash used in financing activities		(665)	(974)	(2,184)
Net decrease in cash and cash equivalents		(785)	(2,354)	(3,078)
Cash and cash equivalents at beginning of period		(6,920)	(3,866)	(3,866)
Effect of foreign exchange rate changes		2	(47)	24
Cash and cash equivalents at end of period	8b	(7,703)	(6,267)	(6,920)

Notes to the Condensed Half-year Financial Statements

For the 26 weeks ended 29 September 2012 (unaudited)

1.   General information

These condensed consolidated financial statements for the 26 weeks ended 29 September 2012 have not been audited or reviewed by the Auditor.  They were approved by the Board of Directors on 28 November 2012.

The information for the 52 weeks ended 31 March 2012 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The Auditor's report on those accounts was unqualified and did not include a reference to any matter to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

2.   Basis of preparation and accounting policies

These condensed consolidated financial statements should be read in conjunction with the Group's financial statements for the 52 weeks ended 31 March 2012, which were prepared in accordance with IFRSs as adopted by the European Union.

The accounting policies and basis of consolidation of these condensed financial statements are consistent with those applied and set out on pages 64 to 71 of the Group's audited financial statements for the 52 weeks ended 31 March 2012.

Accounting standard IAS 12 (amended) "Deferred Tax:  Recovering of Underlying Assets" became effective for the Group in the current reporting period.  The amended standard has not had a material impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.

Having reviewed the Group's projections, and taking account of reasonably possible changes in trading performance, the Directors believe they have reasonable grounds for stating that the Group has adequate resources to continue in operational existence for the foreseeable future.

The Directors are of the view that the Group is well placed to manage its business risks despite the current challenging economic and market conditions.  Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements of the Group.

3.   Segmental information

The Group is organised into two operating divisions:  The UK & Ireland and Australia.  The Group's share of the Canadian Associate result is also presented separately.

 Geographical segment information for revenue, operating profit and a reconciliation to Group net profit is presented below:

			For the 26 weeks ended 29 September 2012						For the 26 weeks ended 1 October 2011
	Revenue	Segmental operating profit		Exceptional operating items	Finance costs	Loss before tax*	Revenue	Segmental operating profit	Exceptional operating items	Finance costs	Profit Before  tax*
	£000	£000		£000	£000	£000	£000	£000	£000	£000	£000
UK & Ireland	13,763	(235)		----	(54)	(289)	13,817	210	(451)	(54)	(295)
Australia	22,222	752		(860)	(98)	(206)	25,199	2,026	----	(116)	1,910
	35,985	517		(860)	(152)	(495)	39,016	2,236	(451)	(170)	1,615
Central costs	----	(411)		(601)	(93)	(1,105)	----	(388)	----	(49)	(437)
Share of results of Associate	----	----		----	----	74	----	----	----	----	95
Total continuing operations	35,985	106		(1,461)	(245)	(1,526)	39,016	1,848	(451)	(219)	1,273
Tax						413					(471)
(Loss)/profit after tax from continuing activities						(1,113)					802

* The share of results of the Associate company is shown net of tax as required by IAS1.

Intersegment sales between the Group's subsidiaries were immaterial in the current and comparative periods.

4.   Exceptional items

	26 weeks ended 29 Sep 2012	26 weeks ended 1 Oct 2011
	£000	£000
(a) Restructuring of Australia's spinning mills	860	----
(b) Proposed move to AIM	177	----
(c)  Incentive Plan	144	----
(d)  Requisition costs	280	----
(e)  Ireland restructuring costs	----	451
	1,461	451

All exceptional items are classified within administrative expenses.

(a)        Relate primarily to redundancy costs associated with "right-sizing" and reorganising the two Australian spinning mills to meet reduced volume requirements as a result of declining demand for woollen yarns.

(b)        Relate to costs incurred to date in the proposed move from the Official List to the AIM market of the London Stock Exchange.

(c)        Relate to professional fees in connection with a proposed incentive remuneration plan.  The remuneration plan was subsequently withdrawn.

(d)        Relate to professional fees in connection with the Requisition of the Company on 15 August 2012. 

(e)        Relate to closure costs associated with the restructuring, with the largest cost relating to redundancies.  The Irish business and brands are now being marketed and traded under a distribution model and reported within the UK operation.

5.   Tax

	26 weeks ended 29 Sep 2012		26 weeks ended 1 Oct 2011
	£000		£000
Current tax
- Current year overseas		(92)	586
		(92)	586
Deferred tax -  Current year movement		(321)	(115)
		(321)	(115)
Total		(413)	471

The overall corporation tax rate is 27.1% (2011: 37.0%), representing the best estimate of the weighted average annual corporation tax rate expected for the full financial year.  The relatively high corporation tax rate in the prior year was due to Irish restructuring costs which could not be utilised for tax purposes.

6.   Earnings per share

The calculation of earnings per ordinary equity share in the parent entity is based on the following earnings and number of shares:

	26 weeks Ended 29 Sep 2012 Basic	26 weeks ended 29 Sept 2012 Adjusted	26 weeks ended 1 Oct 2011 Basic	26 weeks ended 1 Oct 2011 Adjusted
	£'000	£'000	£'000	£'000
(Loss)/profit attributable to ordinary equity holders of the parent entity	(1,113)	(1,113)	802	802
Exceptional items (net of tax effect):
Restructuring of Australian Spinning Mills	----	602	----	----
Proposed move to AIM	----	136	----	----
Incentive Plan	----	111	----	----
Requisition costs	----	216	----	----
Ireland restructuring costs	----	----	----	424
Earnings for the purpose of basic,  adjusted and diluted earnings per share	(1,113)	(48)	802	1,226
Weighted average number of ordinary  shares ('000) for the purposes of basic  and basic adjusted earnings per share		7,033		6,944
Effect of dilutive potential ordinary shares:
Long Term Incentive Plan and Performance Share Plan ('000)		503		728
Weighted average number of ordinary  shares ('000) for the purposes of diluted  earnings per share		7,536		7,672
The Group's earnings per share are as follows:
Basic adjusted (pence)		(0.68)		17.66
Diluted adjusted (pence)		(0.64)		15.98
Basic (pence)		(15.83)		11.55
Diluted (pence)		(14.77)		10.45

7.   Dividends

		26 weeks  ended 29 Sep 2012 £'000		26 weeks ended 1 Oct 2011 £'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 March 2012 paid during the year 7.0p per share (2011: 6.0p)		486		417
Interim dividend declared for the year to 30 March 2013 2.0p per share (2011: 3.5p)		141		243

8.   Notes to the cash flow statement

a)   Reconciliation of operating (loss)/profit to net cash inflow/(outflow) from operating activities

	26 weeks ended 29 Sep 2012	26 weeks ended 1 Oct 2011	52 weeks ended 31 Mar 2012
	£000	£000	£000
Operating (loss)/profit from continuing operations	(1,355)	1,397	1,923
Adjustments for:
- Depreciation charges	1,341	1,457	2,932
- Amortisation of intangible assets	26	6	42
- Share-based payment charge	32	55	47
- (Profit)/loss on disposal of property, plant and equipment	----	(20)	59
- Exchange rate difference on consolidation	(100)	10	4
Operating cash flows before movements in working capital	(56)	2,905	5,007
Decrease /(increase) in working capital	973	(2,080)	(2,239)
Cash generated from operations	917	825	2,768
Interest paid	(245)	(237)	(478)
Income taxes paid	(155)	(773)	(1,405)
Net cash inflow/(outflow) from operating activities	517	(185)	885

b)   Analysis of net debt

	At 31 Mar 2012	Cash flow	Other non-cash changes	Exchange movement	At 29 Sep 2012
	£000	£000	£000	£000	£000
Cash	806	777	----	(7)	1,576
Bank overdrafts	(7,726)	(1,562)	----	9	(9,279)
Cash and cash equivalents	(6,920)	(785)	----	2	(7,703)
Finance leases and hire purchase agreements
- Payable less than one year	(439)	246	(96)	2	(287)
- Payable more than one year	(388)	(67)	96	3	(356)
Net debt	(7,747)	(606)	----	7	(8,346)

9.   Rates of exchange

The results of overseas subsidiaries and associated undertakings have been translated into Sterling at the average exchange rates prevailing during the periods.  The balance sheets are translated at the exchange rates prevailing at the period ends:

		26 weeks ended 29 Sep 2012	26 weeks ended 1 Oct 2011	52 weeks ended 31 Mar 2012
Australia (A$) - average rate		1.5465	1.5349	1.5270
Australia (A$) - period end		1.5555	1.6029	1.5423
Ireland (€) - average rate		1.2417	1.1362	1.1559
Ireland (€) - period end		1.2515	1.1611	1.1998
Canada (C$) - average rate		1.5898	1.5822	1.5870
Canada (C$) - period end		1.5833	1.6233	1.5969

10. Related party transactions

During the period, the Group had transactions with its associate, comprising sales of goods to the value of £459k (2011: £261k).  At 29 September 2012, the Group was owed £355k (2011: £286k).  All goods and services were provided at market rates.

11. Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business.  The key risks that could affect the Group's medium term performance and the factors which mitigate these risks have not changed from those set out on page 25 of the Group's 2012 Annual Report, a copy of which is available on the Group's website - www.victoriaplc.com.  The Chairman's Statement includes consideration of uncertainties affecting the Group in the remaining six months of the year.

12. Information rights

Under Section 146 of the Companies Act 2006, registered shareholders of fully listed companies are able to nominate the underlying beneficial owners of their shares to receive information rights form 1 October 2007.  Companies are required to fulfil these requests from 1 January 2008.

Please note that beneficial owners of shares nominated by the registered holders of those shares are required to direct all communications to the registered holder of their shares rather than to the Company's Registrar, Capita Registrars, or the Company directly.

13. Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge, the condensed set of financial statements has been prepared in accordance with IAS34, "Interim financial reporting" as adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and loss of the Group and includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R, 4.2.8R and 4.2.9R of the United Kingdom's Financial Services Authority.

 

END

 

 

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