Interim Results
Walker Greenbank PLC
03 October 2006
For immediate release 3 October 2006
WALKER GREENBANK PLC
('Walker Greenbank' or 'the Company')
Interim Results for the Six months ended 31 July 2006
Walker Greenbank plc (AIM: WGB), the wallpaper, textiles and furnishings
business whose brands include Sanderson, Morris & Co, Harlequin and Zoffany, is
pleased to announce its interim results for the 6 month period ended 31 July
2006.
Highlights
• Successful recovery continues - pre-tax profit of £1.86 million (H1 2005:
loss of £1.44m), marking the Company's first interim pre-tax profit since
2000
• Pre-exceptional pre-tax profit of £0.59 million (H1 2005: loss of £0.16m)
• Brand portfolio and UK factories performed strongly, supported by the
improving market conditions in the mid to premium sector
• Turnover at continuing operations up 12% at £25.8 million (H1 2005:
£23.0m)
• Pension deficit further reduced - liability of £5.97 million at 31 July
2006 (H1 2005: liability of £11.0m). Liability at 31 January 2006: £7.98m
• Basic and diluted earnings per share of 3.26p (H1 2005: loss of 2.62p)
• Trading in the current half year has started strongly
Ian Kirkham, the Chairman of Walker Greenbank, said: 'The Group has
re-established itself as a profitable and sustainable business. With two months
of the second half of our financial year now completed it is evident that the
Group will have a successful year and we enter the key autumn sales period with
growing confidence.'
A briefing for analysts will be held at 10.00am today (3 October 2006) at the
offices of Buchanan Communications, 45 Moorfields, London EC2Y 9AE.
For further information:
Walker Greenbank plc 08708 300077
Ian Kirkham, Chairman
John Sach, Chief Executive
Teather & Greenwood 020 7426 9000
Mark Dickenson
Robert Naylor
Buchanan Communications 020 7466 5000
Mark Court/Suzanne Brocks/Catherine Breen
CHAIRMAN'S STATEMENT
Overview
The first half results have shown considerable growth compared with the same
period last year and continue to gather pace. Having reported a full year
operating profit for the first time in six years at the year end, I am now
pleased to report that the first half of this year has seen the Group return its
first interim profit before and after tax since 2000. The results have
additionally benefited from the final stage of the pension liability reduction
exercise initiated in 2005 with a £1.3 million exceptional credit to the Profit
and Loss Account.
The Board's strategy of re-establishing the Group as a profitable and cash
generative business has now been achieved and the Group can look forward to an
exciting future.
All our brands have grown compared with the same period last year on a like for
like basis led by Harlequin, our mid-market brand, which has continued its rapid
sales growth, gaining market share from its competitors and more than doubling
its profits. Following substantial investment in product since its acquisition,
Sanderson has accelerated its growth leading to improved profitability.
Harlequin and Sanderson continue to be among the leading suppliers of home
furnishings to retailers. Our Zoffany brand continues to re-establish itself as
a leading brand at the premium end of the market and has achieved underlying
sales growth in line with our expectations. Results from our business in the
United States disappointed with underlying sales growing more slowly than
anticipated. The management team has been strengthened and we enter the second
half of the year in better shape.
Following a number of very difficult years at our two manufacturing sites, both
Anstey, our wallpaper factory, and Standfast, our fabric printing factory, have
delivered a substantial improvement in their operating results. The continued
return to popularity of wallpaper at the premium end of the market has helped
Anstey to deliver a significant growth in both revenue and profits. Standfast
continues to win market share and maintain a healthy order book and it also has
achieved significant growth in both revenue and profits. Both sites are
benefiting from the continued success of the Group's brands.
Results
The operating profit for the continuing operations before exceptional items for
the period was £1,015,000 (2005: £235,000), on sales up 12%. The profit on
ordinary activities before tax was £1,863,000 (2005: £1,443,000 loss). This was
after crediting the Profit and Loss Account with an exceptional profit of
£1,276,000 arising from the successful final phase of the pension liability
reduction exercise.
The earnings per share for the period was 3.26p (2005: loss per share 2.62p).
The cash inflow in the period from operating activities was £543,000 (2005:
£814,000). This was after payments associated with the pension liability
reduction exercise of £894,000. The underlying cash inflow prior to this was
£1,437,000, which was generated as a direct result of the improved operating
profitability of the Group.
Pensions
The final stage of the pension liability reduction exercise was completed in the
period with the final deadline for acceptance of the Company's offer being
April. Following the adoption of the latest mortality tables at the year end,
the impact of this final phase was further enhanced leading to a reduction in
the FRS17 deficit of £1.6 million. Your Board continues to seek possible ways to
further reduce the impact of the pension deficit.
Dividend
The Directors do not recommend the payment of a dividend at this point in the
Group's recovery, but remain conscious of the need to return to the dividend
list.
People
I would like to take this opportunity to thank all our employees who have
contributed to the successful turnaround of the Group's fortunes.
Outlook
The Group has re-established itself as a profitable and sustainable business.
Our brands continue to take market share and to exploit the reasonably buoyant
sector of the mid to premium end of the market. The change in market conditions
and continued success of our brands has greatly benefited our manufacturing
sites. We see these conditions continuing in the foreseeable future helping us
to continue to grow the profitability of the Group.
We will also continue to evaluate potential acquisitions as they arise using
strict criteria with a view to identifying synergistic benefits with our
existing operations.
The Directors' belief in the Company's prospects is underlined by the number of
shares that the Directors hold, which has increased during the period under
review and which demonstrably aligns the Directors' interests with those of all
other shareholders.
With two months of the second half of our financial year now completed it is
evident that the Group will have a successful year and we enter the key autumn
sales period with growing confidence.
Ian Kirkham
Chairman
2 October 2006
CHIEF EXECUTIVE'S REVIEW
The Brands
Harlequin
The Harlequin brand has increased the strong growth trend established last year
with sales growing by 35% compared with the same period last year. The growth is
across all markets with export sales showing the strongest improvement of 48%
and the UK 29%. The growth is broad based with all key product categories -
wallpaper, printed fabric and woven fabric - growing strongly. This performance
further strengthens Harlequin's position as the leading mid-market contemporary
brand in the UK and further re-enforces its position as one of the leading home
furnishings suppliers to the John Lewis Partnership. Harlequin continues to
expand its product range and all its recently launched collections have
performed extremely strongly. Indulgence, the follow up wallpaper collection to
the highly successful Decadence wallpaper range, is showing all signs of
becoming the single best-selling product within the brand's portfolio. Sales to
the USA have increased 168% following the successful re-launch of Harlequin into
certain states last year. Harlequin is now available in 15 states in total.
The continued investment in excellent product and sampling and patterning
support has fuelled the 35% sales growth and helped Harlequin to more than
double its profits compared with the same period last year.
Zoffany
Zoffany continues to refocus on its core values and to re-establish itself again
as one of the UK's leading premium end brands. Its range launches have continued
to improve and its underlying sales have grown compared with last year after
adjusting for a large contract order to the InterContinental London Park Lane
hotel in the same period last year. Underlying sales in the UK are down
slightly by 3%, but sales in export markets are ahead by 15%. With the overall
sales down 5%, profits are slightly behind last year in line with our internal
expectations.
Arthur Sanderson & Sons incorporating the Morris & Co brand
Following its acquisition in 2003 and subsequent investment in product over the
past 2 years, we are now experiencing increasing momentum in Sanderson's sales
growth. Sales are up 12% compared with the same period last year. As with
Harlequin, the sales growth has been broad based showing consistent growth in
all major markets. Licensing income grew 7% with the key markets of Japan and
Australasia performing well and helped by the continued exploitation of the
Sanderson name across a number of product categories. The continued investment
in product and sampling and patterning support has helped the sales growth and
increased profitability by 14% compared with the same period last year.
Manufacturing
Anstey
Following the refocusing of the business into a producer at the premium end of
the market, Anstey has continued its transformation into a profitable business.
Helped by the continued trend back towards wallpaper at the mid to premium end
of the market Anstey has increased overall sales by 12%. External third party
sales have grown 16% and Group sales have grown 10%. This higher activity
assisted by continued improvement in factory efficiencies and tightly controlled
overheads has enabled the business to generate a 2.4% return on sales compared
with a small loss for the last half year.
Standfast
Standfast has experienced stable market conditions over the past 12 months with
no repeat of the difficult first quarter of last year. Activity was 32% ahead of
the same period last year with both external and Group sales showing strong
growth. Sales to Group companies were particularly strong driven by the brands'
larger autumn fabric offer. There has been a significant increase in investment
in the last six months both in terms of capital equipment and the level of
preventive maintenance. The higher activity and improved factory loadings have
increased efficiencies and margins enabling Standfast to reverse a loss for the
same period last year into a positive contribution of 4%.
Overseas
USA
Sales in the USA are down 10%, but this is primarily due to the exit of lower
margin third party business during the second half of last year. Sanderson and
Morris sales have grown by 11% but Zoffany sales declined by 14%. The re-launch
of the Harlequin brand last year has helped achieve more than a doubling of
revenue. Margins have improved with the exit from the lower margin third party
business, however, with increased patterning and sampling expenditure in the
first half supporting our long term confidence in the brands, the overall result
was a small loss.
Europe
The distribution businesses for Zoffany in Rome and Zoffany and Sanderson in
Paris, whilst relatively small, have performed profitably and ahead of both
expectations and the same period last year.
John Sach
Chief Executive
2 October 2006
Unaudited Consolidated Profit and Loss Account
For the six months ended 31 July 2006
6 months to 31 July 2006
Before Exceptional Total 6 months to Year to 31
exceptional items 31 July January
items 2005 2006
(restated)
note £000 £000 £000 £000 £000
Turnover
- Continuing operations 1 25,803 - 25,803 23,032 46,361
- Discontinued operations - - - 2,031 2,031
25,803 - 25,803 25,063 48,392
Operating profit
- Continuing operations 1,015 - 1,015 235 758
- Discontinued operations - - - 185 184
- Exceptional items 2 - 1,276 1,276 - 4,076
1,015 1,276 2,291 420 5,018
Profit on sale of subsidiary 3 - - - 532 532
Pension provision (FRS 17) release on sale of
subsidiary 3 - - - 95 95
Goodwill previously written off to reserves 3 - - - (1,908) (1,908)
Net loss on sale of subsidiary - - - (1,281) (1,281)
Profit/(loss) on ordinary activities before
interest 1,015 1,276 2,291 (861) 3,737
Net interest payable (429) (464) (872)
Amortisation of issue costs (33) (33) (66)
(462) (497) (938)
Other finance charge 4 34 (85) (174)
Profit/(loss) on ordinary activities before
taxation 1,863 (1,443) 2,625
Taxation 5 (23) (36) (80)
Profit/(Loss) on ordinary activities after taxation 1,840 (1,479) 2,545
Dividends 6 - - -
Profit/(Loss) retained for the period 1,840 (1,479) 2,545
Profit/(Loss) per share
- Basic and diluted 3.26p (2.62p) 4.51p
- Basic and diluted from continuing operations 7 3.26p (0.67p) 6.46p
- Basic and diluted from discontinued operations - (1.95p) (1.95p)
Dividend per ordinary share 6 - - -
Unaudited Consolidated Balance Sheet
As at 31 July 2006
As at As at As at
31 July 2006 31 July 2005 31 Jan 2006
note £000 £000 £000
Fixed assets
Intangible assets 4,839 4,878 4,859
Tangible assets 9,870 10,718 10,205
14,709 15,596 15,064
Current assets
Stocks 12,620 11,594 11,539
Debtors 10,781 11,078 9,137
Cash at bank and in hand 1,702 1,630 1,530
25,103 24,302 22,206
Creditors: amounts falling due within one year (12,376) (10,639) (10,403)
Net current assets 12,727 13,663 11,803
Total assets less current liabilities 27,436 29,259 26,867
Creditors: amounts falling due after more than
one year (11,032) (10,396) (10,289)
Provisions for liabilities and charges - (344) -
Net assets excluding pension liability 12 16,404 18,519 16,578
Pension liability (5,972) (11,027) (7,981)
Net assets 10,432 7,492 8,597
Capital and reserves
Share capital 590 590 590
Share premium account 9 457 457 457
Profit and loss account 9 (31,122) (34,062) (32,957)
Other reserves 9 40,507 40,507 40,507
Shareholders' funds 10,432 7,492 8,597
Unaudited Group Cash Flow Statement
For the six months ended 31 July 2006
6 months to 6 months to Year to
31 July 2006 31 July 2005 31 Jan 2006
note £000 £000 £000
Net cash inflow from operating activities 11 543 814 1,643
Returns on investment and servicing of finance
Net bank interest paid (429) (464) (866)
(429) (464) (866)
Taxation (62) (114) (184)
Capital expenditure
Purchase of tangible fixed assets (582) (356) (710)
(582) (356) (710)
Acquisitions and disposals
Net proceeds from disposal of operations 8 - 1,498 1,498
- 1,498 1,498
Equity dividends paid - - -
Cash (outflow)/inflow before use of liquid
resources and financing (530) 1,378 1,381
Financing
Proceeds from new loans - 655 655
Principal repayments of finance lease obligations - (251) (251)
Increase/(reduction) of loan facility 710 (1,306) (1,414)
710 (902) 1,010
Increase in cash 10 180 476 371
Unaudited Statement of Total Recognised Gains and Losses
For the six months ended 31 July 2006
6 months to 31 6 months to 31 Year to
July 2006 July 2005 31 Jan 2006
£000 £000 £000
Profit/(loss) for the financial period 1,840 (1,479) 2,545
Currency translation differences (5) (7) (27)
Actual less expected return on pension scheme assets - - 3,817
Experience losses arising on pension scheme liabilities - - 425
Change in actuarial assumptions - - (7,141)
Total recognised profits/(losses) since the last annual report 1,835 (1,486) (381)
Notes to the Accounts
1. Segmental Analysis
Turnover Turnover
Continuing Continuing
Operations Operations
6 months to 31 6 months to 31
July 2006 July 2005
(restated)
(a) Classes of Business £000 £000
Fabrics 17,912 15,272
Wallcoverings 7,127 6,424
Others 764 1,336
25,803 23,032
(b) Geographical Segments - by destination
United Kingdom 16,716 14,786
Continental Europe 3,768 3,334
North America 3,860 3,973
Rest of the World 1,459 939
25,803 23,032
Licence income has been reallocated to other operating income in the
prior year.
2. Exceptional Items
The final phase of the Group's offer to buy out the right to non-statutory
pension increases from its active and deferred pensioners took place in April
2006. This has resulted in a reduction of the FRS17 liability in the balance
sheet of £1,562,000 and a benefit of £1,276,000 in the profit and loss,
disclosed as an exceptional operating item.
3. Loss on Sale of Borge Holding AS and John O Borge AS
In June 2005, the wholly owned Norwegian subsidiaries Borge Holding AS and John
O Borge AS were sold for a consideration before costs of £1,881,000. A profit of
£532,000 was generated on the sale before goodwill previously written off to
reserves and the adjustment to FRS 17 provision. A net loss on sale of
£1,281,000 has been recorded.
4. Other Finance Charge
6 months to 6 months to
31 July 2006 31 July 2005
£000 £000
Expected return on pension scheme assets 1,205 1,134
Interest on pension scheme liabilities (1,171) (1,219)
34 (85)
Notes to the accounts continued
5. Taxation
6 months to 6 months to
31 July 2006 31 July 2005
£000 £000
UK Corporation tax at 30% (2005: 30%) - current year - -
Overseas taxation - current year 23 36
Tax on profit/(loss) on ordinary activities 23 36
6. Dividends
The Directors do not recommend the payment of an interim dividend in the period
(2005: £nil).
7. Earnings per Share
The basic earnings per share and diluted earnings per share are based on a
profit after taxation of £1,840,000 (2005: loss of £1,479,000) and 56,457,016
ordinary shares (2005: 56,457,016), being the weighted average number of the
shares in issue during the period.
The basic profit per share and diluted profit per share for the year ended 31
January 2006 were based on a profit on ordinary activities after taxation,
amounting to £2,545,000 and the weighted average of 56,457,016 ordinary shares
in issue during the year.
The adjusted profit/(loss) per share has been disclosed as in the opinion of the
Directors this provides additional information to shareholders on the results of
the Group's activities.
The adjusted profit/(loss) per share can be reconciled to the basic profit/
(loss) per share as follows:
6 months to 6 months to
31 July 2006 31 July 2005
Profit/(loss) attributable to ordinary shareholders 3.26p (2.62p)
Exceptional items (2.26p) 2.27p
Adjusted earnings per share 1.00p (0.35p)
Notes to the accounts continued
8. Disposal of Operations
6 months to 6 months to
31 July 31 July 2005
2006
£000 £000
Sale of John O Borge AS and Borge Holding AS:
The disposal comprised the following:
Tangible fixed assets - 60
Stock - 681
Debtors - 745
Creditors - (520)
Profit on disposal - 532
Net cash inflow from the disposal of John O Borge AS and Borge Holding AS - 1,498
9. Reserves
Other Reserves
Share premium Profit and Capital Merger Total
account loss account reserve reserve
£000 £000 £000 £000 £000
1 February 2006 457 (32,957) 43,457 (2,950) 40,507
Profit for the period - 1,840 - - -
Currency translation movements - (5) - - -
31 July 2006 457 (31,122) 43,457 (2,950) 40,507
Notes to the accounts continued
10. Analysis of Net Debt
1 February 2006 Cash flow Other non-cash Exchange 31July 2006
changes Movement
£000 £000 £000 £000 £000
Cash at bank and in hand 1,530 178 - (6) 1,702
Overdrafts (2) 2 - - -
1,528 180 - (6) 1,702
Debt due within 1 year (596) - - - (596)
Debt due after 1 year (10,289) (710) (33) - (11,032)
(10,885) (710) (33) - (11,628)
(9,357) (530) (33) (6) (9,926)
11. Reconciliation of Operating Profit to Net Cash Inflow from Operating
Activities
6 months to 6 months to 6 months to 6 months to
31 July 2006 31 July 2006 31 July 2005 31 July 2005
£000 £000 £000 £000
Operating profit 2,291 387
Depreciation and amortisation 903 974
Difference between pension charge
and cash contributions (1,689) (232)
Settlement of pension liabilities (894) -
Loss on disposal of fixed assets 24 -
(Increase)/decrease in stocks (1,081) 604
Increase in debtors (1,652) (452)
Increase/(decrease) in creditors 2,641 (444)
Decrease in provisions - (23)
(472) 427
543 814
Net cash inflow from operating activities
Notes to the Accounts Continued
12. Pensions
The Company operates the following funded pension schemes in the UK: the Walker
Greenbank Pension Plan, the Abaris Holdings Limited Pension Scheme and the WG
Senior Management Pension Scheme. The Walker Greenbank Pension Plan is the
biggest scheme. All schemes contain defined benefits sections, however the
Abaris Holdings Limited Pension Scheme also contains a defined contribution
section, although this section is relatively small.
The pension costs relating to the UK defined benefit schemes are assessed in
accordance with the advice of an independent qualified actuary using the
projected unit method. These schemes are subject to triennial actuarial reviews
with the most recent ones having been at 6 April 2003 for both the Walker
Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme. A
valuation was undertaken at 31 January 2006 for the purposes of the Financial
Reporting Standard no. 17.
The assumptions applied when valuing the defined benefit schemes and the
composition of the net deficit in these schemes is fully disclosed in the
statutory accounts for the year ended 31 January 2006.
13. 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 2006.
The consolidated results for the year ended 31 January 2006 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 2006
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.
Copies of the interim report will be posted to shareholders in due course and
will also be available at the Company's Registered and Head Office at Bradbourne
Drive, Tilbrook, Milton Keynes, Buckinghamshire MK7 8BE.
14. Restated Prior Year Consolidated Profit and Loss Account
Amortisation of issuing costs of arranging the loan have been recategorised from
administration to net interest payable.
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