WGB.L Regulatory News (WGB)

26 May 2005 07:30

Walker Greenbank PLC26 May 2005 WALKER GREENBANK PLC 26 May 2005 PRELIMINARY RESULTS FOR THE YEAR TO 31 JANUARY 2005 Reduced loss before tax £0.8m (2004: £4.1m)Operating loss before exceptional items £2.1m (2004: £3.2m)Reduced losses per share 1.48p (2004: 7.61p)Net debt reduced to £10.7m (2004: £11.6m)Brands performing strongly in an extremely challenging marketplaceGroup traded profitably in first quarter of the new year, for the first time in6 years Ian Kirkham, Chairman of Walker Greenbank PLC, said: "I am pleased to announce that the Group has traded profitably in the firstquarter of the new year for the first time in 6 years. This is a veryencouraging step forward as the Group begins its rehabilitation to a profitableand cash generative business. Provided our markets remain stable we areconfident of returning the Group to a full year operating profit". Enquiries: Ian Kirkham, Chairman, orJohn Sach, Group Chief Executive Tel: 01908 658078Walker Greenbank PLC Ian Seaton, Bankside Consultants Tel: 020 7444 4157 Notes to editors: Walker Greenbank PLC designs, manufactures, markets and distributeswallcoverings, furnishing fabrics and associated products. The Brands business, which consists of Zoffany, Harlequin and Sanderson brands,is recognised worldwide, selling a full range of these items. The manufacturingbusiness consists of fabric printing at Standfast and wallcoverings manufactureat Anstey which is undertaken for both the brands business and third partycustomers. CHAIRMAN'S STATEMENT Overview This year considerable progress has been made towards returning the Group toprofitability, although the overall result for the year is disappointing. Following the full integration of the Sanderson brand during the first half ofthe year, which included the transfer of all external manufacturing, warehousingand computer systems to in-house facilities, and the amalgamation of theSanderson and Zoffany brands to one site in America, considerable benefits havebeen seen in the second half. Overall the Group has performed significantlybetter in the last 5 months of the year compared to the same period last year. The Sanderson brand has taken longer to reinvigorate, following its purchasefrom receivership, than we had first hoped. We have, however, investedconsiderably in stock and have launched a significant amount of new product. Themajority of those product launches took place in the latter part of the year,culminating in the introduction in January 2005 of Sanderson's "Options"collection, the flagship range that historically has been re-launched everythree years. We are currently seeing the full impact of those new launches inthe early part of the new year. Despite this progress, the continuing difficult market conditions led the Groupto take further action in the second half of the year with the aim ofaccelerating the drive to Group profitability in 2005/06. These measures have included bringing all the Group's brands under theleadership of one Managing Director who has joined the Board. This has allowedfor reorganisation and resulted in significant cost reduction, the full benefitof which we are now experiencing. Further benefits from this leaner structurehave been the reduction of central costs within the Group. Additionally, a reorganisation at Anstey, our wallpaper factory, has reduced thecost base to a level at which the business can perform economically as aproducer at the premium end of the market, an area that shows signs of recoveryafter many years of decline. Results The operating loss for the year was £2,722,000 (2004: £3,159,000). This wasafter incurring exceptional one-off final integration costs relating to theacquisition of Sanderson of £670,000 .The loss on the ordinary activities beforetax was £807,000 (2004 : £4,050,000) following the successful sale of the WarnerArchive of designs and the sale and leaseback of the Group's freehold propertyin Milton Keynes for an aggregate profit of £2,931,000. The loss per share forthe year fell to 1.48p from 7.61p in 2004. Turnover increased 6% to £50,611,000 from £47,795,000 in 2004 following the fullyear benefit of the Sanderson acquisition. The other finance charge for the year was £205,000 (2004: £402,000) following areduction in the pension deficit between 31 January 2003 (£11,839,000) and 31January 2004 (£10,768,000). Balance Sheet During the year the Group realised £4,564,000 from the sale and leaseback of itsMilton Keynes site, together with £1,672,000 and £675,000 respectively from thesale of the Warner Archive of designs and the sale of Sanderson's in storeretail concessions. The Group's net indebtedness finished the year at £10,746,000 (2004:£11,633,000). The cash outflow from operating activities was £4,060,000 (2004:£917,000). This was principally driven by the operating loss and significantinvestment in new product in Sanderson in the latter part of the year. With areturn to operating profit combined with the Group's significant depreciationcharge and considerable investment having taken place in product during theyear, the Group should now be in a position to start to generate free cash flowin the future. During the year the pension deficit has risen to £11,269,000 (2004:£10,768,000). This is due principally to the increase in scheme liabilitiesfollowing a reduction in long term interest rates and the use of revisedmortality assumptions. We continue to examine ways of reducing this deficit andthe consequent impact that it has on the net assets of the Group. Dividend In view of the financial performance of the Group the directors do not recommendthe payment of a dividend. People John Sach who took on the role of Acting Chief Executive in November 2003, wasformally appointed to the role of Chief Executive in May 2004. Deputy Chairman Peter Gyllenhammar resigned from the Board in November 2004.Charles Gray, who brings to the Group considerable manufacturing experience wasappointed as a director in December 2004. Following his appointment as Managing Director of the Group's three brands,David Smallridge was appointed to the Board as Brands Director in December 2004.David has been with the Group for three years and has been responsible forturning Harlequin into a highly successful mid-market brand. Outlook Our brands are performing strongly in a marketplace that continues to beextremely challenging. Anstey, our wallpaper factory, has made significantprogress since it has restructured itself into a producer at the premium end ofthe market, an area that we consider has further potential as the minimalistfashion trend of recent years at last shows signs of slowing. Standfast, ourfabric printing factory, is suffering from a declining market place togetherwith considerably increased energy costs. Following the full integration of the Sanderson business within the Group, theheavy investment in new product and the considerable cost savings that have beenachieved through combining our three brands into one reporting structure, I ampleased to announce that the Group has traded profitably in the first quarter ofthe new year for the first time in 6 years. This is a very encouraging stepforward as the Group begins its rehabilitation to a profitable and cashgenerative business. Provided our markets remain stable we are confident ofreturning the Group to a full year operating profit. There remains much work to do. We are attempting to lessen the impact of theGroup's pension liabilities during the current year and continue the upwardtrend in our results. This will then position the Group with a sustainable andexciting future. On 24 May 2005, the Board announced that it had entered into a letter of intentfor the potential sale, subject to due diligence, of its wholly owned Norwegiansubsidiaries Borge Holdings AS and John O Borge AS, and that an application hadbeen made by the potential acquirer for Competition Authority clearance for thetransaction to proceed. IAN KIRKHAMCHAIRMAN Operating Review The Brands During the second half of the year the Group's brands were brought under theleadership of one Managing Director who has joined the Board. This has involvedtransferring Zoffany's Leeds based design studio and Rickmansworth back officeto the same site as Sanderson at Denham. Following the transfer, significant cost savings have been made by creating oneback office and one management structure. The Brands maintain clear distinctionby continuing to have separate design studios and frontline sales forces. Harlequin Harlequin has continued with the success of last year, broadening its productoffer through the launch of many successful new weave collections and thetargeting of new and competitive price points. The brand has consistently takenmarket share from its competitors in a challenging marketplace and sales havegrown year on year by 5%. Margins have increased and costs have reduced leadingto a significant growth in profit this year. Harlequin has cemented its positionas one of the best performing mid-market brands in the UK and its re-launch inAmerica at the start of the new year will further consolidate its continuinggrowth in profits. Zoffany Zoffany has had a difficult year with underlying sales falling 2%. Sales in theUK continue to be difficult whilst export sales, most particularly in Americabut also in the majority of other key markets, continue to grow. Zoffany'straditional market sector has undoubtedly suffered from the trend towardsminimalism of recent years but there are increasing signs that this trend isstarting to lose ground. There is also an ever increasing return of interest inwallpaper, an area of the market in which Zoffany has traditionally been verystrong. Despite margins remaining stable year on year, Zoffany has suffered adecline in profits this year. The design area has been strengthened with theappointment of a new design director. This combined with other key managementchanges will help improve the brand's profitability next year. Arthur Sanderson & Sons This has been a year of significant change for Sanderson as the process ofintegration into the Group has been completed. In May the warehousing activitywas transferred from a third party to the Group's in house facility at MiltonKeynes. The transfer also necessitated the migration of all business systemsfrom an outsourced supplier to the Group's IT system. This was achievedseamlessly with minimum disruption to the business. This has led to significantcost reductions, the full year effect of which will be seen in the current year.By the year end 95% of the entire brand's wallpaper and print requirements hadbeen transferred to the Group's in house manufacturing facilities. The brand hastaken longer to rebuild than had been hoped at the point of receivership. Thiswas due to the lack of any product development within the brand in the yearbefore receivership. We have now invested significantly in new product, withalmost two years worth of collections being launched in the second half of theyear culminating in the launch during January 2005 of Sanderson's "Options"collection, the flagship range that has historically been launched every threeyears. The brand is gaining momentum and we are confident that it will deliversignificant profit growth in the future. We are continuing to develop and grow significant licensing opportunitiespresented by the exploitation of the unique Sanderson and Morris archive. Wehave already developed exciting new product initiatives with existing partnersand see considerable further potential from concepts currently being developedwith new commercial partners worldwide. Manufacturing Anstey Anstey has suffered from a general decline in third party sales. This has beenmore than compensated by significant volumes being gained from the acquisitionof Sanderson and also from another major third party customer. Margins have beensqueezed in a very competitive market place. During the second half of the yearAnstey has restructured itself into a producer at the premium end of the market,an area that shows signs of recovery after many years of decline. Overall,losses have been significantly reduced and we are confident that this recoverywill continue. Standfast Standfast sales have increased year on year by 10% following the full yeareffect of the Sanderson acquisition. Margins have been squeezed, however, in anever more challenging market place and the business has suffered significantlyhigher energy costs. Despite these pressures the overall profitability of thebusiness has been maintained. Having overcome so many hurdles, the final quartersaw demand begin to weaken and this has continued into the new year. This willremain a major focus for the Board. Overseas USA Sales have grown by 27% following the full year effect of the acquisition ofSanderson. However, the business has suffered a small loss this year due toreduced margins caused by the weakness of the dollar and one-off integrationcosts incurred as a result of amalgamating the Sanderson and Zoffany businessesonto one site. This included the closure of Zoffany's Atlanta based head officeand warehouse and the transfer of all business activities to Sanderson'sfacility in New Jersey. Following recent significant price rises and the fullyear effect of the cost saving achieved following the integration, we areconfident that the US will return to profitability in the current year. Europe John O'Borge in Norway saw volumes decline year on year, but margins remainedrobust and with other operating efficiencies, the year on year profitcontribution improved. Despite its continued profitability, the business remainsa non core activity of the Group. The distribution businesses for Zoffany in Rome and Sanderson in Paris bothperformed in line with expectations, although they do not represent a large partof the Group. JOHN SACHGROUP CHIEF EXECTUVE Group Profit and Loss AccountYear ended 31 January 2005 Before Exceptional Exceptional Total items items 2005 2004 Note £000 £000 £000 £000 Turnover 1,2 50,611 - 50,611 47,975Operating loss 2 (2,052) (670) (2,722) (3,159)Profit on sale of properties 3 - 1,461 1,461 96Profit on sale of Warner Archive 4 - 1,470 1,470 -Profit on disposal of operations 4 - - - 85(Loss)/Profit on ordinary activities before interest (2,052) 2,261 209 (2,978)Net interest payable (811) (670)Other finance charge (205) (402)Loss on ordinary activities before taxation 1 (807) (4,050)Tax on loss on ordinary activities (27) (246)Loss on ordinary activities after taxation (834) (4,296)Dividends - -Loss for the year (834) (4,296)Loss per share - Basic and diluted 5 (1.48)p (7.61)pDividend per ordinary share - - All results are in relation to continuing activities of the Group. There is no material difference between the loss on ordinary activities aboveand their historical cost equivalent. Balance SheetAt 31 January 2005 Group Group Company Company 2005 2004 2005 2004 (restated) (restated) Note £000 £000 £000 £000Fixed assetsIntangible assets 4,898 4,182 - -Tangible assets 11,376 12,877 4,692 4,790Investment in subsidiaries - - 19,000 19,000 16,274 17,059 23,692 23,790Current assetsAssets held for resale - 3,428 - 3,428Stocks 12,879 12,018 - -Debtors 11,346 11,447 30,655 30,070Cash at bank and in hand 1,149 619 - - 25,374 27,512 30,655 33,498Creditors: amounts falling due within one year (11,657) (24,371) (7,886) (13,597)Net current assets 13,717 3,141 22,769 19,901Total assets less current liabilities 29,991 20,200 46,461 43,691Creditors: amounts falling due after more than one year (11,310) (444) (1,500) (89)Provisions for liabilities and charges (342) (308) (44) (151)Net assets excluding pension liability 18,339 19,448 44,917 43,451Pension Liability 10 (11,269) (10,768) - -Net assets 7,070 8,680 44,917 43,451Capital and reservesShare capital 590 590 590 590Share premium account 457 457 457 457Profit and loss account (34,484) (32,874) 1,982 516Other reserves 40,507 40,507 41,888 41,888Equity shareholders' funds 7,070 8,680 44,917 43,451 Group Cash Flow StatementYear ended 31 January 2005 Note 2005 2005 2004 2004 £000 £000 £000 £000 Net cash outflow from operating activities 7 (4,060) (917)Returns on investment and servicing offinanceInterest received 4 12Interest paid (772) (599)Interest element of finance lease payments (43) (92) (811) (679)Taxation (278) (267)Capital expenditurePurchase of tangible fixed assets (1,187) (569)Proceeds from assets held for resale 325 416Proceeds from disposal of property 4,564 -Proceeds from disposal of tangible fixed - 137assets 3,702 (16)Acquisitions and disposalsDisposal of Warner Archive 1,672 -Sale of Sanderson retail division 675 -Purchase of Arthur Sanderson & Sons - (5,736)Cash acquired on purchase of Arthur Sanderson & Sons - 193Net proceeds from sale of Riverside - 2,675Acquisition of Strines Textiles in the prior - (319)yearNet proceeds from disposal of TWIL in the prior year - 740 2,347 (2,447)Equity dividends paid - -Cash inflow/(outflow) before use of liquid 900 (4,326)resources and financingManagement of liquid resources - -ianFinancingProceeds from new loans 11,744 6,000Principal repayments of finance lease obligations (463) (585)Repayment of borrowings (4,487) (2,325) 6,794 3,090Increase/(decrease) in cash 8 7,694 (1,236) Statement of Total Recognised Gains and LossesYear ended 31 January 2005 Group Group 2005 2004 £000 £000 Loss for the financial year (834) (4,296)Actual less expected return on pension scheme assets 822 1,446Experience losses arising on pension scheme liabilities (1,932) (501)Currency translation differences 132 (109) Total recognised gains and losses since the last annual report (1,812) (3,460) Reconciliation of Movements in Shareholders' FundsYear ended 31 January 2005 Group Group 2005 2004 (restated) £000 £000 Loss for the financial year (834) (4,296)Dividends - -Loss for the year (834) (4,296) Other recognised gains and losses relating to the year (978) 836Goodwill previously set off to reserves in respect of the disposal of operations 202 - Net reduction to shareholders' funds (1,610) (3,460)Opening shareholders' funds 8,680 12,742Prior year adjustment (UITF 38) - (602) Closing shareholders' funds 7,070 8,680 Interest in own shares have been reclassified from fixed asset investments tothe profit and loss reserve following the adoption of UITF Abstract 38 "Accounting for ESOP Trusts". The impact is to reduce profit and loss reserves by£602,000 as a prior year adjustment in 2004. Notes to the Accounts 1 Segmental Analysis (a) Classes of business Turnover 2005 2004 £000 £000 Fabrics 29,499 28,797Wallcoverings 18,095 17,030Other 3,017 2,148 50,611 47,975 (b) Geographical Segments Turnover (Loss)/profit before Net assets taxation 2005 2004 2005 2004 2005 2004 (restated) £000 £000 £000 £000 £000 £000 By origin:United Kingdom 38,498 37,222 (993) (4,496) 6,045 7,536Continental Europe 5,614 5,619 210 192 936 832North America 6,499 5,134 (24) 254 89 312 50,611 47,975 (807) (4,050) 7,070 8,680 By destination:United Kingdom 30,887 30,458Continental Europe 10,185 9,538North America 8,024 7,175Rest of the World 1,515 804 50,611 47,975 2 Analysis of Operating Loss 2005 2004 £000 £000 Turnover 50,611 47,975Cost of sales (23,969) (23,373)Gross Profit 26,642 24,602 Net operating expenses:Distribution costs (8,992) (9,109)Administrative expenses (21,356) (19,237)Other operating income 984 585Operating loss (2,722) (3,159) The operating loss included £670,000 of items of a one-off non recurring naturerelating to the integration of the Sanderson business within the Group. Thiscomprised £191,000 redundancy costs incurred in combining the Zoffany andSanderson US operations, £295,000 redundancy costs relating to the combining ofthe Sanderson and Zoffany UK divisions onto one site, £127,000 removal costs andcosts of terminating a property lease at the Zoffany UK site, and £57,000 ofcost incurred in transferring Sanderson stock to the Group's warehouse atTilbrook. 3 Profit on Sale of Properties In February 2004, the land and buildings at Bradbourne Drive, Tilbrook, MiltonKeynes, were sold under a sale and leaseback agreement. A consideration beforecosts of £4,670,000 was received, and a profit of £1,461,000 was generated onthe sale. The tax effect of the disposal was nil. In the prior year, the Group'sfreehold property in Atlanta, USA was sold for £437,000 generating a profit ondisposal of £96,000 after related costs. The tax effect of this disposal was acharge of £26,000. 4 Profit on sale of Warner Archive/Profit on Disposal of Operations 2005 2004 £000 £000 a) Profit on sale of Warner Archive 1,470 - b) Release of provision against deferred consideration - 85 outstanding for the disposal of Cole & Sons 1,470 85 a) In May 2004, the Warner Archive of designs was sold for a considerationbefore costs of £2,000,000, generating a profit on disposal of £1,470,000. b) During the year ended January 2003, a further provision of £100,000 was madeagainst the deferred consideration that remained outstanding on the sale of Cole& Sons in a prior year. During the prior year, settlement of this dispute wasreached with £85,000 paid by the purchaser. 5 Loss Per Share The basic loss per share and diluted loss per share are both based on the losson ordinary activities after taxation, amounting to £834,000 (2004: £4,296,000loss) and the weighted average of 56,457,016 (2004: 56,457,016) ordinary sharesin issue during the year. 6 Acquisition of Arthur Sanderson & Sons On 29 August 2003, the trade and certain assets of Arthur Sanderson & Sons werepurchased for £5,500,000 paid in cash on completion. 2004 2005 2005 Provisional Adjustments to Final Fair Value Fair Value Fair Value £000 £000 £000Net assets acquired:Intangible assets 3,449 851 4,300Fixed Assets 852 53 905Stock 2,199 - 2,199Debtors 107 - 107Cash 193 - 193Creditors and accruals (864) - (864)Provisions (200) (904) (1,104) 5,736 - 5,736Goodwill - - -Net cash outflow from acquisition 5,736 5,736Satisfied by:Cash 5,500 5,500Acquisition expenses 236 236Net cash outflow 5,736 5,736 The adjustments to provisional fair values include additional provisions for anonerous contract, an adjustment for the excess consideration received for theBrookmill property sold in the year, and a legal claim. 7 Reconciliation of Operating Loss to Net Cash Outflow from Operating Activities 2005 2005 2004 2004 £000 £000 £000 £000 Operating loss (2,722) (3,159)Depreciation and amortisation 2,368 2,645Difference between pension charge and cash contributions (814) (528)Profit on disposal of fixed assets - (12)(Increase)/decrease in stocks (1,301) 746Decrease/(increase) in debtors 148 (2,391)(Decrease)/increase in creditors (1,011) 1,797Increase/(decrease) in provisions 123 (15)Fair value adjustment (851) - (1,338) 2,242Net cash outflow from operating activities (4,060) (917) 8 Analysis of Net Debt 1 February Other Exchange 31 January 2004 movements movement 2005 Cash flow £000 £000 £000 £000 £000 Cash at bank and in hand 619 541 - (11) 1,149Overdrafts (7,153) 7,153 - - - (6,534) 7,694 - (11) 1,149Debt due within one year (4,298) 3,898 - - (400)Debt due after one year (89) (11,155) - - (11,244)Finance leases (712) 463 - (2) (251) (5,099) (6,794) - (2) (11,895) (11,633) 900 - (13) (10,746) 9 Reconciliation of Net Cash Flow to Movement in Net Debt 2005 2004 £000 £000 Increase/(decrease) in cash in the year 7,694 (1,236)Increase in debt and lease financing (6,794) (3,090)Cash inflow/(outflow) from cash flows 900 (4,326)Exchange movement (13) (34)Movement in the year 887 (4,360)Net debt at 1 February 2004 (11,633) (7,273)Net debt at 31 January 2005 (10,746) (11,633) 10 Pensions Movement in deficit during the period 2005 2004 Group Group £000 £000 Deficit at beginning of period (10,768) (11,839)Movement in the period:Current service cost (226) (395)Contributions 1,040 923Other finance charge (205) (402)Actuarial (loss)/gain (1,110) 945Deficit at end of period (11,269) (10,768) This information is provided by RNS The company news service from the London Stock Exchange