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 Â£26.02m Â£25.43m +2.3% -------------------------------------------------------------------------------------- OPERATING PROFIT FROM CONTINUING OPERATIONS Â£1.35m Â£1.79m -24.6% -------------------------------------------------------------------------------------- PROFIT BEFORE TAXATION FROM CONTINUING OPERATIONS Â£0.99m Â£1.41m -29.8% -------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS 10.07p 14.13p -28.7% -------------------------------------------------------------------------------------- FREE CASH FLOW 7b Â£1.03m Â£(0.85)m -------------------------------------------------------------------------------------- NET ASSETS Â£27.51m Â£26.37m -------------------------------------------------------------------------------------- NET BORROWINGS Â£11.86m Â£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 Â£26.02 million, an increase of 2.3% over the comparable period (2004: Â£25.43 million). Operating profit from continuing operations was Â£1.35 million and represented a decline of 24.6% from the Â£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 Â£0.42 million (2004: Â£0.46 million), remained broadly unchanged. Income from the Associated Company in Canada was slightly lower at Â£0.06 million (2004: Â£0.07 million). Profit before tax from continuing operations fell by 29.8% to Â£0.99 million (2004: Â£1.41 million) and with an effective tax rate of 29.2% (2004: 30.6%), profit after tax on the same basis was Â£0.70 million (2004: Â£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 Â£1.03 million (2004: Â£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 : Â£1 at 2 April 2005 to A$2.3167 : Â£1 at 1 October 2005. The Group has approximately 26% of its borrowings in A$, as a match against its Australian-based assets, and the strengthening A$ over the period resulted in reported Sterling net debt increasing by Â£0.18 million. continued... -3- In total, net debt reduced by Â£0.06 million in the six month period to Â£11.86m at 1 October 2005. The reduction was due to the free cash inflow of Â£1.03 million, partially offset by the Â£0.18 million increase in foreign debt due to movements in exchange rates, and dividend payments of Â£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 Â£12.42 million, compared to Â£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 Â£1.64 million to Â£1.21 million due in part to a Â£0.10 million reduction in income from Government grants. After finance charges similar to last year, profit before tax was Â£1.08 million (2004: Â£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 Â£0.06 million compared to Â£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 Â£'000 (restated) (restated) Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'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 Â£'000 Â£'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 Â£'000 pence Â£'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 Â£nil (2004: Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Items movement 1 October 2005 Â£'000 Â£'000 Â£'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 This information is provided by RNS The company news service from the London Stock Exchange

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