Interim Results
Victoria PLC
23 November 2005
Issued by Citigate Dewe Rogerson Ltd, Birmingham
Date: Wednesday, 23 November 2005
Embargoed: 7.00am
VICTORIA P.L.C.
Interim Results for the half-year ended 1 October 2005
FINANCIAL HIGHLIGHTS Notes Half-year ended
-----------------------
1 October 2 October
2005 2004
--------------------------------------------------------------------------------------
REVENUE FROM CONTINUING OPERATIONS £26.02m £25.43m +2.3%
--------------------------------------------------------------------------------------
OPERATING PROFIT FROM CONTINUING OPERATIONS £1.35m £1.79m -24.6%
--------------------------------------------------------------------------------------
PROFIT BEFORE TAXATION FROM CONTINUING OPERATIONS £0.99m £1.41m -29.8%
--------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS 10.07p 14.13p -28.7%
--------------------------------------------------------------------------------------
FREE CASH FLOW 7b £1.03m £(0.85)m
--------------------------------------------------------------------------------------
NET ASSETS £27.51m £26.37m
--------------------------------------------------------------------------------------
NET BORROWINGS £11.86m £12.73m
--------------------------------------------------------------------------------------
'In H1, in both value and volume terms, the Group has managed to gain market
share from our competitors although margins have been adversely affected by both
intense competition and escalating cost pressures brought about by higher oil
and energy prices.'
'....we anticipate that the benefits of our investments in new range
introductions, which have been well received by the trade in both Australia and
the UK, should now start to feed through. Subject to the footfall in retail
shops and no further market deterioration, we believe that these products should
further underpin trade in the second half-year.'
Bob Gilbert, Chairman
FULL STATEMENT ATTACHED
Enquiries:
Alan Bullock, Group Managing Director
Mark Lee, Group Finance Director Fiona Tooley/Katie Dale
Victoria P.L.C. Citigate Dewe Rogerson
Today: +44 (0)20 7638 9571 (up to 12noon) Today: +44 (0)20 7638 9571 (up to 12noon)
Thereafter: +44 (0)1562 749640 Thereafter: +44 (0)121 455 8370
Mobile: +44 (0)7785 325701 (AB) Mobile: +44 (0)7770 788624 (KD)
This announcement, together with other information on Victoria P.L.C. may be
found at: www.victoria.plc.uk.
-2-
VICTORIA P.L.C.
Interim Results for the half-year ended 1 October 2005
STATEMENT BY THE CHAIRMAN, BOB GILBERT
Introduction
In October, the Group provided shareholders with a trading update which
reflected the effect on our business of the downturn in economic conditions and
consumer spending.
During the first six months of this financial year, the Group has faced
increasingly challenging market conditions in each of its three principal
trading areas, the UK, Ireland and Australia. Within the UK, the market is
estimated to be down by as much as 10%, and we have experienced what have
possibly been the most difficult trading conditions of the past decade.
Despite this, in both value and volume terms, the Group has managed to gain
market share from our competitors although margins have been adversely affected
by both intense competition and escalating cost pressures brought about by
higher oil and energy prices.
Financial Results
Companies listed on security exchanges within the European Union are required to
adopt International Financial Reporting Standards (IFRS) for accounting periods
beginning on or after 31 December 2004. Consequently, the interim accounts for
2005 are the first time the Group has reported under IFRS. Unless otherwise
stated, all figures included in this commentary and all amounts in the 2005
Interim Accounts (including comparatives for the six months ended October 2004),
have been prepared using accounting policies consistent with IFRS.
In the six months to 1 October 2005, Group revenues from continuing operations
were £26.02 million, an increase of 2.3% over the comparable period (2004:
£25.43 million).
Operating profit from continuing operations was £1.35 million and represented a
decline of 24.6% from the £1.79 million reported for the first half of 2004/5.
Compared to the first six months of 2004/5, the movement in exchange rates
benefited the translation of Australian revenues and earnings by 6.1%.
Finance costs, consisting of interest payable of £0.42 million (2004: £0.46
million), remained broadly unchanged.
Income from the Associated Company in Canada was slightly lower at £0.06 million
(2004: £0.07 million).
Profit before tax from continuing operations fell by 29.8% to £0.99 million
(2004: £1.41 million) and with an effective tax rate of 29.2% (2004: 30.6%),
profit after tax on the same basis was £0.70 million (2004: £0.98 million).
Basic earnings per share from continuing operations of 10.07 pence were 28.7%
lower than the equivalent figure in 2004 of 14.13 pence.
Cash Flow and Borrowings
Free cash flow (net cash flow from operating activities after net capital
expenditure, interest and tax but before acquisitions, disposals, share issues
and dividend payments) was £1.03 million (2004: £0.85 million outflow). The
improved cash flow was largely due to the elimination of losses from the
discontinued Axminster weaving activity and sale of this plant.
The Australian dollar (A$) strengthened from A$2.4441 : £1 at 2 April 2005 to
A$2.3167 : £1 at 1 October 2005. The Group has approximately 26% of its
borrowings in A$, as a match against its Australian-based assets, and the
strengthening A$ over the period resulted in reported Sterling net debt
increasing by £0.18 million.
continued...
-3-
In total, net debt reduced by £0.06 million in the six month period to £11.86m
at 1 October 2005. The reduction was due to the free cash inflow of £1.03
million, partially offset by the £0.18 million increase in foreign debt due to
movements in exchange rates, and dividend payments of £0.80 million.
United Kingdom and Ireland
On a continuing business basis, sales were marginally higher than for the same
period last year. Revenues from the continuing activities of the UK Carpet
operations were 4.3% higher at £12.42 million, compared to £11.09 million in
2004.
During the period, we have concentrated on achieving organic growth through an
increased investment in new ranges, patterning and in-store point of sale
display material. The cost of this investment, as is normal for the Company, has
been borne in full in the period, and should bring longer term benefits going
forward.
In total, Victoria Carpets UK has launched nine new products in the period under
review. This extension to the product range should start to have a positive
impact in the second half of the financial year and thereafter. The Company will
continue to focus on bringing new, innovative and fashionable products to the
market, and there are several key ranges planned for launch in the second half
of this year, which are important to the Company's success.
Operationally, at Victoria Carpets, the removal and disposal of the Axminster
plant went well with the additional space that this move created enabling us to
operate even more efficiently at our facility in Kidderminster.
At Westwood Yarns in Holmfirth, we are well into the process of installing an
additional three metre card, which will not only assist us to operate more
cost-effectively but will also allow us to increase
yarn capacity as and when it is required. There is also a series of small plant
additions and initiatives that are being put in place, aimed at further
improving yarn quality and plant efficiency.
In Ireland, market conditions have been equally challenging to those we have
faced in the UK. Munster Carpets, which is firmly focused on the contract
market, has had a quieter period but, as we go into the second half we are
witnessing a better order book. Despite tough trading conditions, Navan Carpets
continues to make good progress and in particular, we have concentrated on
extending our existing range of products. This, together with the significant
amount of point of sales display material distributed in the last 18 months, is
starting to pay dividends with sales levels building well.
Australia
Our Australian business has, without doubt, also had to face a downturn in
economic conditions, as well as intense competition from both domestic and
overseas suppliers. Considering this difficult environment, we have done well to
restrict the decline in sales in the period under review to 3.5% in local
currency. We believe this reflects a further gain in market share from our
competitors, albeit recently at the expense of margin.
Operating profits fell from £1.64 million to £1.21 million due in part to a
£0.10 million reduction in income from Government grants. After finance charges
similar to last year, profit before tax was £1.08 million (2004: £1.50 million).
With carpet sales maintained at close to last year's levels, our two Australian
spinning mills have remained fairly busy and, coupled with operating efficiency
gains, the spinning mills contributed profits at slightly higher levels than
last year.
We have also continued to further modernise both our carpet manufacturing plant
and spinning mills. This has not only enabled us to manufacture the style of
products demanded by today's consumer, but also to produce them in the most
cost-efficient manner possible.
continued...
-4-
Canadian Associate
Market conditions have been favourable in the Western Canadian economy, buoyed
by both the oil industry and the prospect of the Winter Olympics in 2010.
Colin Campbell & Sons, our Associate Company in Canada, increased revenues by
8.9% with growth across all parts of its business. Recent investments in the
infrastructure and sampling required to support the growth in this business
have, however, increased costs in the period, and consequently profits were
marginally lower at £0.06 million compared to £0.07 million last year.
Prospects
As widely reported, the market conditions in both the UK and Australia remain
depressed and offer limited forward visibility, with little sign at present of
consumers returning to the buying pattern that we have enjoyed over recent
years. Against this backdrop, we must assume that, as we indicated in our
trading update, these markets will remain extremely challenging for at least the
remainder of this financial year.
Despite this somewhat negative outlook, we anticipate that the benefits of our
investments in new range introductions, which have been well received by the
trade in both Australia and the UK, should now start to feed through. Subject to
the footfall in retail shops and no further market deterioration, we believe
that these products should further underpin trade in the second half-year.
Overall, the Group is well placed to deal with the prevailing market conditions
and to exploit fully the upturn in the retail market when it re-emerges.
-5-
VICTORIA P.L.C.
Consolidated Income Statement
For the half-year ended 1 October 2005 (unaudited)
Notes Half-year Half-year Year
ended ended ended
1 October 2 October 2 April
2005 2004 2005
£'000 (restated) (restated)
£'000 £'000
--------------------------------------------------------------------------------
Continuing operations
Revenue 3 26,019 25,429 49,444
Cost of sales (18,619) (17,828) (34,333)
------------------------------------
Gross profit 7,400 7,601 15,111
Distribution costs (5,123) (4,992) (9,651)
Administrative expenses (1,492) (1,225) (2,777)
Other operating income 563 401 1,047
------------------------------------
Operating profit 3 1,348 1,785 3,730
Share of results of
associated Company 57 72 60
Finance costs (418) (444) (764)
------------------------------------
Profit before tax 987 1,413 3,026
Tax 4 (288) (432) (885)
------------------------------------
Profit for the period from
continuing operations 699 981 2,141
Discontinued operations
Profit/(loss) for the
period from discontinued
operations 5 - (436) (1,311)
------------------------------------
Profit for the period 699 545 830
====================================
Attributable to:
Equity holders of the
parent 699 545 830
====================================
Earnings per share
From continuing operations
Basic 6 10.07p 14.13p 30.83p
====================================
Diluted 6 10.07p 14.13p 30.83p
====================================
From continuing and discontinued
operations
Basic 6 10.07p 7.85p 11.95p
====================================
Diluted 6 10.07p 7.85p 11.95p
====================================
The comparative figures for the half-year ended 2 October 2004 and the year
ended 2 April 2005 have been restated to reflect the adoption of International
Financial Reporting Standards. The details of this restatement are provided in
the document 'Adoption of International Financial Reporting Standards (IFRS),
Restatement of Financial Information' which was issued by the Company on 11
November 2005 and is available on the Company's web-site www.victoria.plc.uk or
from the Company's Registered Office.
-6-
Victoria P.L.C.
Consolidated Statement of Recognised Income and Expense
For the half-year ended 1 October 2005 (unaudited)
Half-year Half-year Year
ended ended ended
1 October 2005 2 October 2004 2 April 2005
£'000 £'000 £'000
--------------------------------------------------------------------------------
Exchange differences on
translation of foreign
operations 704 (346) (89)
-------------------------------------------
Net (loss)/ income recognised
directly in equity 704 (346) (89)
Profit for the period 699 545 830
-------------------------------------------
Total recognised income and
expense for the period 1,403 199 741
===========================================
Attributable to:
Equity holders of the parent 1,403 199 741
===========================================
The comparative figures for the half-year ended 2 October 2004 and the year
ended 2 April 2005 have been restated to reflect the adoption of International
Financial Reporting Standards. The details of this restatement are provided in
the document 'Adoption of International Financial Reporting Standards (IFRS),
Restatement of Financial Information' which was issued by the Company on 11
November 2005 and is available on the Company's web-site www.victoria.plc.uk or
from the Company's Registered Office.
-7-
Victoria P.L.C.
Consolidated Balance Sheet
For the half-year ended 1 October 2005 (unaudited)
1 October 2005 2 October 2004 2 April 2005
£'000 £'000 £'000
--------------------------------------------------------------------------------
Non-current assets
Goodwill 64 65 64
Other intangible assets 468 503 484
Property, plant and equipment 24,321 24,642 23,813
Investment property 180 180 180
Interests in associates 431 351 348
-------------------------------------------
Total non-current assets 25,464 25,741 24,889
-------------------------------------------
Current assets
Inventories 16,362 15,287 14,686
Trade and other receivables 9,870 10,466 9,648
Cash and cash equivalents 772 838 369
-------------------------------------------
Total current assets 27,004 26,591 24,703
-------------------------------------------
Non-current assets classified
as held for sale - - 304
-------------------------------------------
Total assets 52,468 52,332 49,896
-------------------------------------------
Current liabilities
Trade and other payables 9,017 8,836 7,549
Tax liabilities 732 739 644
Hire purchase and finance
lease obligations 859 994 1,131
Bank overdrafts and loans 6,235 6,460 6,196
-------------------------------------------
Total current liabilities 16,843 17,029 15,520
-------------------------------------------
Non-current liabilities
Bank loans 3,635 3,516 2,801
Deferred tax liabilities 1,362 1,466 1,367
Hire purchase and finance
lease obligations 1,904 2,598 2,158
Other payables 1,211 1,358 1,145
-------------------------------------------
Total non-current liabilities 8,112 8,938 7,471
-------------------------------------------
Total liabilities 24,955 25,967 22,991
-------------------------------------------
Net assets 27,513 26,365 26,905
===========================================
Equity
Issued share capital 1,736 1,736 1,736
Share premium account 829 829 829
Retained earnings 24,948 23,800 24,340
-------------------------------------------
Equity attributable to equity
holders of the parent 27,513 26,365 26,905
-------------------------------------------
Total equity 27,513 26,365 26,905
===========================================
The comparative figures for the half-year ended 2 October 2004 and the year
ended 2 April 2005 have been restated to reflect the adoption of International
Financial Reporting Standards. The details of this restatement are provided in
the document 'Adoption of International Financial Reporting Standards (IFRS),
Restatement of Financial Information' which was issued by the Company on 11
November 2005 and is available on the Company's web-site www.victoria.plc.uk or
from the Company's Registered Office.
-8-
Victoria P.L.C.
Consolidated Cash Flow Statement
For the half-year ended 1 October 2005 (unaudited)
Notes Half-year Half-year Year
ended ended ended
1 October 2 October 2 April
2005 2004 2005
£'000 £'000 £'000
--------------------------------------------------------------------------------
Net cash from operating
activities 7a) 1,763 413 1,872
---------------------------------------
Investing activities
Purchases of property,
plant and equipment (1,130) (1,303) (1,962)
Proceeds on disposal of
property, plant and
equipment 398 45 158
---------------------------------------
Net cash used in investing
activities (732) (1,258) (1,804)
---------------------------------------
Financing activities
Increase / (decrease) in
long term loans 727 1,111 340
Receipts from financing of
assets 60 80 124
Payment of finance lease
and HP liabilities (644) (725) (1,093)
Dividends paid (799) (799) (799)
---------------------------------------
Net cash from/(used in)
financing activities (656) (333) (1,428)
---------------------------------------
Net increase/(decrease) in
cash and cash equivalents 375 (1,178) (1,360)
Cash and cash equivalents
at beginning of period (5,827) (4,435) (4,435)
Effect of foreign exchange
rate changes (11) (9) (32)
---------------------------------------
Cash and cash equivalents
at end of period 7c) (5,463) (5,622) (5,827)
=======================================
-9-
Victoria P.L.C.
Notes to the Interim Financial Statements
For the half-year ended 1 October 2005 (unaudited)
1. General Information
The information for the year ended 2 April 2005 does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. A copy of the
statutory accounts (reported under UK GAAP) for that year has been delivered to
the Registrar of Companies. The Auditors' report on those accounts was
unqualified.
These interim financial statements, which were approved by the Board of
Directors on 22 November 2005, have been prepared in accordance with IAS 34.
They have not been audited or reviewed by the Auditors.
2. Accounting policies
The Company issued an announcement on 11 November 2005 entitled 'Adoption of
International Financial Reporting Standards (IFRS), Restatement of Financial
Information'. This document can be viewed on the Company's website
www.victoria.plc.uk .
The document includes a description of the significant accounting polices to be
adopted under IFRS. These interim financial statements have been prepared using
those accounting policies and methods of computation.
3. Business segments
For management purposes, the Group is organised into three operating divisions
according to the geographical areas where they are managed. These divisions are
the basis on which the Group reports its primary segment information. The three
divisions are UK & Ireland, Australia and the Canadian Associate. The Axminster
weaving operations, previously reported within UK & Ireland, were discontinued
in March 2005. Note 5 provides further information on the discontinued
operations.
Segment information for revenue, operating profit and a reconciliation to entity
net profit is presented below.
Half-year ended 1 October 2005 Half-year ended 2 October 2004
Revenue Operating Finance Profit Revenue Operating Finance Profit
Profit Charges before Profit Charges before
tax tax
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
----------------------------------------------------------------------------------------------------
UK & Ireland 14,322 353 (183) 170 13,387 378 (130) 248
Australia 11,697 1,207 (128) 1,078 12,042 1,641 (137) 1,504
Canada - - - 57 - - - 72
--------------------------------------- -----------------------------------------
Sub total 26,019 1,560 (311) 1,305 25,429 2,019 (267) 1,824
Central - (212) (107) (318) - (234) (177) (411)
costs --------------------------------------- -----------------------------------------
Total
continuing
operations 26,019 1,348 (418) 987 25,429 1,785 (444) 1,413
================================ ================================
Tax (288) (431)
------ ------
Profit after
tax from
continuing
activities 699 981
Profit for the
period from
discontinued
operations - (436)
------ ------
Profit after
tax and
discontinued
operations 699 545
====== ======
continued...
-10-
4. Tax charge
Half-year Half-year
ended ended
1 October 2005 2 October 2004
£'000 £'000
--------------------------------------------------------------------------------
Current tax:
UK corporation tax (66) (253)
Foreign tax 347 557
---------------------------------
281 304
Deferred tax:
Current year 7 (59)
---------------------------------
288 245
=================================
Continuing operations 288 432
Discontinued operations - (187)
---------------------------------
288 245
=================================
Corporation tax for the interim period is charged at 29.2% (2004: 30.6%),
representing the best estimate of the weighted average annual corporation tax
rate expected for the full financial year.
5. Discontinued operations
There have been no disposals or discontinuations of business activities in the
six month period ended 1 October 2005.
In March 2005, the Group's discontinued its Axminster weaving activities, which
were located in the UK.
The results of the discontinued operations which have been included in the
consolidated income statement were as follows:
Half-year Half-year
ended ended
1 October 2005 2 October 2004
£'000 £'000
--------------------------------------------------------------------------------
Revenue - 1,796
Expenses - (2,419)
-------------------------------
Profit before tax - (623)
Attributable tax expense - 187
-------------------------------
Profit after tax - (436)
Loss on discontinuance of operations - -
-------------------------------
Net profit attributable to discontinued
operations - (436)
===============================
continued...
-11-
6. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Number of shares
Half-year Half-year
ended ended
1 October 2005 2 October 2004
000's 000's
--------------------------------------------------------------------------------
Weighted average number of ordinary shares
for the 6,943,556 6,943,556
purposes of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options - -
----------------------------
Weighted average number of ordinary shares
for the 6,943,556 6,943,556
purposes of diluted earnings per share
============================
Earnings and earnings per share
Half-year ended Half-year ended
1 October 2005 2 October 2004
Earnings EPS Earnings EPS
£'000 pence £'000 pence
--------------------------------------------------------------------------------
Profit for the period from continuing
operations 699 10.07 981 14.13
Profit for the period from discontinued
operations - - (436) (6.28)
-------------------------------------
Profit for the period from continuing 699 10.07 545 7.85
and
discontinued operations
=====================================
Earnings per share
- basic continuing 10.07 14.13
- basic discontinued - (6.28)
-------- --------
- basic 10.07 7.85
======== ========
- diluted 10.07 7.85
======== ========
The effect of dilutive shares on the earnings for the purposes of diluted
earnings per share is £nil (2004: £nil).
The denominators used for all basic, diluted and adjusted earnings per share are
as detailed in the 'Number of shares' table above.
continued...
-12-
7. Notes to the cash flow statement
a) Reconciliation of operating profit to net cash from operating activities
Half-year Half-year Year
ended ended ended
1 October 2005 2 October 2004 2 April 2005
£'000 £'000 £'000
--------------------------------------------------------------------------------
Profit before tax from
continuing operations 987 1,413 3,026
Discontinued operations
profit before tax - (623) (1,842)
Adjustments for:
Depreciation of property,
plant and equipment 1,118 1,084 2,360
Amortisation of intangible
assets 13 10 27
(Profit) / loss on disposal
of property, plant (39) (4) (57)
and equipment
Exchange rate differences on
consolidation 296 (176) 68
Share of profits of
associated Company (57) (70) (61)
Interest expense 377 374 745
--------------------------------------------
Operating cash flows before
movements in working capital 2,695 2,008 4,266
Increase in working capital (424) (717) (644)
--------------------------------------------
Cash generated from
operations 2,271 1,291 3,622
Interest paid (377) (374) (745)
Income taxes (paid)/received (131) (504) (1,005)
--------------------------------------------
Net cash from operating
activities 1,763 413 1,872
============================================
b) Free cash flow
Free cash flow, a non statutory item, highlights the total net cash generated by
the Group prior to corporate activity such as acquisitions and disposals and
transactions with shareholders. It is derived as follows:
Half-year Half-year Year
ended ended ended
1 October 2005 2 October 2004 2 April 2005
£'000 £'000 £'000
--------------------------------------------------------------------------------
Net cash from operating
activities 1,763 413 1,872
Proceeds on disposal of
property, plant and equipment 398 45 158
Purchases of property, plant
and equipment (1,070) (1,223) (1,838)
- cash
- finance leases (60) (80) (124)
--------------------------------------------
Free cash flow 1,031 (845) 68
============================================
continued...
-13-
c) Analysis of net debt
At 2 April Cashflow Non Exchange At
2005 cash
£'000 £'000 Items movement 1 October 2005
£'000 £'000 £'000
--------------------------------------------------------------------------------
Cash 369 418 - (15) 772
Overdrafts (6,196) (43) - 4 (6,235)
-------------------------------------------------------
Cash and cash
equivalents (5,827) 375 - (11) (5,463)
Debt due within one - - - - -
year
Debt due after one
year (2,801) (727) - (107) (3,635)
Finance leases (3,289) 584 - (58) (2,763)
-------------------------------------------------------
Total (11,917) 232 - (176) (11,861)
-------------------------------------------------------
8. Exchange rates
The results of overseas subsidiary 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:
Half-year Half-year Year
ended ended ended
1 October 2005 2 October 2004 2 April 2005
--------------------------------------------------------------------------------
Australia - average rate 2.3822 2.5273 2.4892
Australia - period end 2.3167 2.4818 2.4441
Euro - average rate 1.4666 1.4890 1.4666
Euro - period end 1.4673 1.4492 1.4573
Canadian dollar - average rate 2.2146 2.4091 2.3589
Canadian dollar - period end 2.0532 2.2664 2.2940
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