Interim Results

WALKER GREENBANK PLC 9 September 1999 Profits recovery at Walker Greenbank Interim report for the six months ended 31 July 1999 * The new management team has led the business to a profits recovery in the first six months of the year. * In difficult market conditions, Zoffany has taken market share and Harlequin has recovered well with a series of strong new collections. * The US operations continue to perform strongly with sales growth of 14%. * Management is taking action to stem European losses. * The balance sheet remains strong with net assets per share well above the current share price. Aidan Connolly, Chief Executive, Walker Greenbank plc said: 'This is a transitional year for the group as the measures we have taken begin to take effect and we can demonstrate real progress in the UK and USA. We are confident that our improved performance will continue as we maintain our tight grip on margins and costs and focus on profit opportunities as they arise.' For further information contact: Aidan Connolly, Chief Executive Walker Greenbank plc 0171 638 9571 (today only) 01442 234 666 (thereafter) John Rudofsky Citigate Dewe Rogerson 0171 638 9571 Chairman's Statement Results I am pleased to present my first set of results as Chairman for the half year ended 31 July 1999. This is a transitional year for the Group and we are making steady progress transforming our prospects for future growth. In difficult market conditions, sales have fallen almost 5% against the same period last year, but our underlying profit, excluding exceptionals, has improved from £362,000 to £908,000. Our earnings per share for the period was 0.13p, against 0.39p for last year, but last year's number was inflated by the profits earned in businesses now sold and would have been negative on a strict like for like basis. As last year, we will not be paying an interim dividend and will consider the final dividend in the light of the results for the full year. Business Review UK At the top end, Zoffany has continued to gain market share. This has been partly offset by a further fall in sales of Warner Fabrics. In the mid-market, Harlequin has seen a significant return to profitability following operational improvements. Our Contract Fabrics business has seen a substantial increase in profitability, due to its focus on servicing profitable accounts with a rationalised product range. Europe Our wholly owned operations continue to cause us concern. As foreshadowed, our review of these operations has led to an exceptional cost in the period. We have closed part of these operations which have produced persistent losses in recent years. The exceptional costs of £1,084,000 include a goodwill write back of £570,000 relating to this closure. USA Sales in our US operations increased 14% over the same period last year and the business has produced excellent profits. The effects of increases in US interest rates have not yet begun to feed through and may affect consumer confidence in this important market. Re-organisation of Capital We have now completed the re-organisation of capital which began last summer. After our AGM, the company purchased for 1p the entire deferred share capital of the company which had been created as a result of the 'B' Share Scheme in August 1998. Corporate Governance In keeping with best corporate practice, I have decided to ensure that the key committees of the board have separate leadership from the group board. Accordingly, I have asked Sir Malcolm Field to chair the two principal sub-committees of the board - the audit and remuneration committees. Approaches to the Company As we have already announced we were approached with proposals, which may or may not have led to an offer being made for the shares of the company, from the same party in July and again in August. In the view of the Board the initial and the revised terms indicated were wholly inadequate and were accordingly rejected. Outlook We anticipate that the improvement in performance shown in this first half will continue in the second half. Our margins and costs remain under control and the expected improvement in the economic climate offers us opportunities for increasing sales. Unaudited Consolidated Profit and Loss Account For the six months ended 31 July 1999 6 mths 6 mths Year to 31 31 31 Jul '99 Jul '98 Jan '99 Restated (note 7) note £000 £000 £000 Turnover Continuing Operations 25,265 26,532 52,450 Discontinued operations - 20,464 21,910 ----- ----- ----- 1 25,265 46,996 74,360 Group operating profit Continuing operations 3 908 (1,947) (2,046) Discontinued operations - 2,901 2,212 ----- ----- ----- 908 954 166 Share of associated undertaking's operating loss 4 (65) - (19) ----- ----- ----- Operating profit 843 954 147 Closure of overseas operations (including £570,000 of goodwill) 2 (1,084) - - Profit on sale of discontinued operations - - 32,896 Amounts written off investments - - (317) ----- ----- ----- (Loss)/profit on ordinary activities before interest (241) 954 32,726 Net interest receivable/ (payable) 398 (200) 396 ----- ----- ----- Profit on Ordinary activities before taxation 157 754 33,122 Taxation on profit on ordinary activities 5 (81) (267) (556) ----- ----- ----- Profit after taxation 76 487 32,566 Dividends (including non-equity) - (32) (1,140) ----- ----- ----- Retained profit for the period 76 455 31,426 ----- ----- ----- Earnings per share Basic and diluted 7 0.13p 0.39p 36.92p Dividend per ordinary share 6 - - 2.00p Unaudited Consolidated Balance Sheet As at 31 July 1999 As at As at As at 31 Jul 31 Jul 31 Jan '99 '98 '99 note £000 £000 £000 Fixed assets Goodwill 8 198 - - Tangible assets 12,547 25,655 12,073 Walker Greenbank PLC shares 2,023 3,070 2,023 Investment in associated undertaking 4 - - 169 ----- ----- ----- 14,768 28,725 14,265 Current assets Stocks 13,307 19,889 12,212 Debtors 12,198 26,611 12,793 Cash at bank and in hand 10 15,958 2,610 19,140 ----- ----- ----- 41,463 49,110 44,145 Creditors: amounts falling due within one year (11,608) (28,162) (14,209) ----- ----- ----- Net current assets 29,855 20,948 29,936 ----- ----- ----- Total assets less current liabilities 44,623 49,673 44,201 Creditors: amounts falling due after more than one year (1,033) (1,446) (1,153) Provisions for Liabilities and charges (243) (357) (261) ----- ----- ----- Net assets 43,347 47,870 42,787 ----- ----- ----- Capital and reserves (including non- equity interests) Share capital 590 18,207 1,593 Share premium account 457 24,652 457 Profit and loss account 948 5,534 388 Other reserves 41,352 (523) 40,349 ----- ----- ----- Shareholders' funds 9 43,347 47,870 42,787 ----- ----- ----- Unaudited Group Cash Flow Statement For the six months ended 31 July 1999 6 6 Year mths to mths to to 31 Jul 31 Jul 31 Jan 1999 1998 1999 note £000 £000 £000 Net cash inflow from operating activities 235 784 3,845 Returns on investment and servicing of finance Net interest received/(paid) 302 (120) 400 Interest element of finance lease payments (35) - (19) Dividends paid on non-equity shares - (64) (64) Dividend income (Employee Share Option Plan) - - 107 ----- ----- ----- 267 (184) 424 Taxation (96) (99)(1,979) Capital expenditure and financial investment Purchase of tangible fixed assets (1,803) (2,547) (3,725) Purchase of Walker Greenbank PLC shares - - (520) Proceeds from share repurchase (Employee Share Option Plan) - - 1,250 Proceeds from disposal of tangible fixed assets 56 52 54 ----- ----- ----- (1,747) (2,495)(2,941) Acquisitions and disposals Proceeds from sale of discontinued operations less exceptional disposal costs - - 63,547 Purchase of associated undertaking - - (201) ----- ----- ----- - - 63,346 Equity dividends paid (1,180) (2,874)(2,909) Cash (outflow) /inflow before use of liquid resources and financing (2,521) (4,868) 59,786 Management of liquid resources Bills of exchange receivable 47 49 19 Financing Repurchase of ordinary share capital - - (40,885) Issue of ordinary share capital - - 77 Proceeds from finance leases - - 1,200 Principal repayments of finance lease obligations (105) - (50) Repayment of borrowings (262) (264) (815) ----- ----- ----- (367) (264)(40,473) ----- ----- ----- (Decrease)/ increase in cash and cash equivalents 10 (2,841) (5,083) 19,332 ----- ----- ----- ----- ----- ----- Notes to the Accounts 1 Segmental Analysis Turnover Cont Dis- Turnover Grp ops ops Grp 6 mths 6 mths 6 mths 6 mths to to to to 31.7.99 31.7.98 31.7.98 31.7.98 a.Classes of Business £000 £000 £000 £000 Fabrics, wallcoverings and other businesses 25,265 26,532 20,464 46,996 ===== ===== ===== ===== b.Geographical Segments UK 14,467 15,148 15,425 30,573 Continental Europe 6,547 7,478 3,101 10,579 N America 3,429 2,996 235 3,231 Rest of the World 822 910 1,703 2,613 ----- ----- ----- ----- 25,265 26,532 20,464 46,996 ===== ===== ===== ===== 2 Closure Of Overseas Operations During the period a cost of £1,084,000 was incurred representing the estimated cost of closure of part of the group's overseas operations. This amount includes £570,000 of goodwill previously written off direct to reserves. This exceptional cost has had the effect of reducing the group's tax charge by £278,000 in the period. 3 Exceptional Operating Items (Prior Year) In the six months to 31 July 1998, exceptional costs totalling £2,309,000 were incurred by the continuing operations. An exceptional re-organisation cost of £400,000 was incurred when Cole & Son and Warner Fabrics were brought under the management of Zoffany. A further £1,348,000 cost was incurred as a result of a permanent diminution in the carrying value of the consumer division's visualiser project, and a provision of £561,000 was also made against the carrying value of stock held by the commercial fabrics business. 4 Associated Undertaking £000 At 1 February 1999 169 Goodwill transferred (note 8) (220) ---- (51) Share of loss for period (19) Exchange (2) ---- Share of net liabilities (72) Net liabilities written back to profit and loss account on liquidation (72) ---- At 31 July 1999 - ---- During the period the associated undertaking went into liquidation. A charge of £65,000 has been recognised in the profit and loss account comprising £19,000 for the share of the loss in the associate for the period to liquidation, £118,000 paid under a guarantee to the associate's bank less the release of the group's provision of £72,000 for the share of the net liabilities. 5 Taxation The tax charge for the six months ended 31 July 1999 has been based on the estimated tax rate before exceptional items for the full year of 29% (1998: 35%). 6 Dividends 6 mths to 6 mths to 31 Jul 99 31 Jul 98 £000 £000 Non-equity - preference shares - paid - (32) ==== ==== 7 Earnings Per Share Earnings is based on profit after taxation and preference dividends, amounting to £76,000 (1998: £455,000) and 56,457,016 ordinary shares (1998: 116,163,458 - as restated), being the weighted average number of the shares in issue during the period. The prior year weighted average number of shares has been restated for the changes in Financial Reporting Standard No. 14. Diluted earnings per share has also been reported for both years as required by this accounting standard. The earnings per share for the year ended 31 January 1999 was based on earnings amounting to £32,499,000 and the weighted average of 88,033,303 ordinary shares in issue during the year. 8 Goodwill £000 Cost At 1 February 1999 - Transferred from associated undertaking (note 4) 220 ---- At 31 July 1999 220 ---- Amortisation At 1 February 1999 - Amortisation for the period 22 ---- At 31 July 1999 22 ---- Net book amount at 31 July 1999 198 ---- Net book amount at 1 February 1999 - ---- Goodwill transferred from the associate continues to be recognised due to the value of the ongoing business continued by the group. 9 Shareholders' Funds On 27 May 1999, 1,003,312,400 deferred shares of 0.1 pence each were repurchased by the company for a total of 1 pence and cancelled. Consequently the non-equity deferred share capital of £1,003,000 representing non-equity shareholders' funds at 31 January 1999 has been transferred to other reserves within the equity shareholders' funds during the period. There was non-equity preference share capital of £247,000 and share premium account of £605,000 included in the non-equity shareholders' funds at 31 July 1998. These shares were converted in full before 31 January 1999. 10 Analysis Of Net Cash Other Ex- Non- Change 1.2.99 Cash cash move- 31.7.99 flow changes ment £000 £000 £000 £000 £000 Cash at bank and in hand 19,140 (3,155) - (27) 15,958 Overdrafts (315) 314 - 1 - ---- ---- ---- ---- ---- 18,825 (2,841) - (26) 15,958 Debt due within 1 year (1,497) 262 (12) (16) (1,263) Debt due after 1 year (86) - 12 1 (73) Finance leases (1,150) 105 - - (1,045) ---- ---- ---- ---- ---- (2,733) 367 - (15) (2,381) Current Asset investments 343 (47) - - 296 ---- ---- ---- ---- ---- 16,435 (2,521) - (41) 13,873 11 Preparation Of Interim Financial Information The interim financial statements have been prepared on a basis consistent with the accounting policies disclosed in the Annual Report and Accounts for the year ended 31 January 1999. The consolidated results for the year ended 31 January 1999 have been extracted from the financial statements for that year and do not constitute full statutory accounts for the group. The group accounts for the year ended 31 January 1999 received an unqualified audit report and did not include a statement under section 237 (2) or (3) of the Companies Act 1985 and have been filed with the Registrar of Companies. 12 Year 2000 All areas of the business are deemed to be directly or indirectly exposed to Year 2000 related problems and detailed risk assessments and risk mitigation strategies have been formalised. The directors believe that sufficient steps have now been taken to counter these problems but can not guarantee that the group will be unaffected by internal or external factors which are currently unforeseen. The costs incurred are not deemed to be significant and have been written off to the profit and loss account as incurred. 13 Interim Financial Statements Further copies of this interim statement are available from the registered office of Walker Greenbank PLC at 4 Brunel Court, Cornerhall, Hemel Hempstead, Hertfordshire HP3 9XX.

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