WGB.L Regulatory News (WGB)

WALKER GREENBANK PLC

("Walker Greenbank", "the Group" or "the Company")

Interim Results for the 6 months ended 31 July 2013

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings group whose brands include Sanderson, Morris & Co., Harlequin, Zoffany and Scion, is pleased to announce its interim results for the six month period ended 31 July 2013.

Highlights

· Sales of £39.1 million (H1 2012: £38.3 million), with strong overseas brand sales notably in the US, Western Europe and the Far East.

· Licensing income up 26% at £1.01 million (H1: 2012: £0.80 million), driven by Sanderson in Japan and our bedding licensees in the UK and Australia.

· Record performance from manufacturing with sales up 4.0% at £15.9 million

o digital fabric printing sales up 121% to £1.7 million after significant investment 

o custom built £1.75 million hybrid rotary/gravure machine successfully commissioned enhancing the Group's wallpaper printing capabilities

· Adjusted profit before tax* up 13.3% at £3.06 million (H1 2012: £2.70 million)

· Adjusted earnings per share* up 17.6% at 4.47p (H1 2012: 3.80p). 

· Unadjusted profit before tax of £2.04 million (H1 2012: £1.94 million)

· Interim dividend up 21.7% to 0.28p per share (H1 2012: 0.23p per share) 

*Adjusted for accounting charges relating to share-based incentives and defined benefit charge

Terry Stannard, the Chairman of Walker Greenbank, said: "Total brand sales in the 8 weeks since the half year are up 3.8% compared with the corresponding period last year. It is encouraging to note that brand sales in the UK are up 2.6% in September on an improving trend, giving us confidence as we enter the key autumn selling period. Manufacturing continues to perform strongly and our licence income continues to build. We remain confident of meeting market expectations for the full year."

For further information:

CHAIRMAN'S STATEMENT

Overview

I am pleased to report further progress in Walker Greenbank's trading performance and continued advances in the delivery of its strategy to extend the worldwide reach and range of the Group's products. Our worldwide brand sales grew 2.2% compared with the same period last year.

Brands sales growth of 7.4% in the US, our largest market outside of the UK, is particularly encouraging and the territory continues to represent good opportunity for market share growth. Initiatives to build US sales include substantially extending our flagship showroom in New York, which will be completed in the second half of the current financial year.

We have achieved growth of 6.5% in Western Europe, our second largest market outside of the UK, for the first time since the Eurozone crisis.

Outside of the US and Western Europe we have continued to develop our Rest of the World business where we have seen sales growth of 5.8%, helped by double digit growth in the Far East, Middle East and Australasia. Our overseas brands sales now represent 42% of our total brand sales.

Our UK brand sales experienced a small decline of 1.7% largely attributable to our Zoffany brand. It is encouraging that UK brand sales are up 1.1% since the half year on an improving trend, with sales growth of 2.6% in September.

The heritage, brand recognition and design excellence of our brands offers significant opportunities to extend our range of products through new licence arrangements. Licence income has grown 26% in the first half, driven by Sanderson and Morris & Co. in Japan and strong performance from our UK and Australian bedding licensees.

We continue to invest in our manufacturing base, which represents a key asset that differentiates us from others in our industry. This investment has helped grow manufacturing sales and profits to record levels. We have recently completed our most significant investment with the purchase of a £1.75 million custom built hybrid rotary/gravure printing machine for our wallpaper factory in Loughborough which was successfully commissioned on time and on budget as announced on 4 September 2013. This will not only increase capacity and improve efficiencies but allow the development of textured products which are a new opportunity for Walker Greenbank particularly for overseas markets.

Financials

Sales in the half year increased 2.0% to £39.1 million, from £38.3 million. Operating profits before an accounting charge relating to the Long Term Incentive Plan (LTIP) have risen 12.7% from £2.79 million to £3.15 million. The profit from operations grew 7.6% to £2.56 million (2012: £2.38 million).

The interest charge has reduced from £93,000 to £90,000, however the defined benefit pension charge has risen from £350,000 to £430,000.

Profit before tax before the LTIP accounting charge and the defined benefit charge increased 13.3% to £3.06 million (2012: £2.70 million). Profit before tax after the two charges was £2.04 million (2012: £1.94 million).

Profit after tax was £1.58 million (2012: £1.42 million) and adjusted earnings per share were up 17.6% at 4.47p (2012: 3.80p), after removing the LTIP accounting charge and defined benefit charge.

The Group maintains a strong balance sheet with indebtedness at the half year of £2.19 million, a reduction of £0.50 million over the last 12 month period despite the significant level of capital investment undertaken by the Group (31 January 2013: net funds £1.16 million).

Dividend

The Board has declared an interim dividend of 0.28p per share which represents an increase of 21.7% on the prior year reflecting the Boards confidence in the current financial position and future financial performance of the Group. The interim dividend will be payable on 22 November 2013 to shareholders on the register as at 25 October 2013

People

On behalf of the Board I would like to thank all our management and employees for their continuing enthusiasm, commitment and support.

Outlook

Total brand sales in the 8 weeks since the half year are up 3.8% compared with the corresponding period last year. It is encouraging to note that brand sales in the UK are up 2.6% in September on an improving trend, giving us confidence as we enter the key autumn selling period. Manufacturing continues to perform strongly and our licence income continues to build. We remain confident of meeting market expectations for the full year.

Terry Stannard

Non-Executive Chairman

30 September 2013

CHIEF EXECUTIVE'S REVIEW

Introduction

It is encouraging to report further progress in the Group's trading performance with both sales and operating profits increasing over the same period last year. Our substantial investment in the brands' product ranges, the stretching of their market positions through the launch of new sub-brands and the significant investment in our manufacturing capabilities have all helped drive this trading performance.

We have significantly grown our licence income reflecting the continued development of licencing arrangements and our growing range of product categories.

The Brands

The brands segment incorporates global trading from our internationally recognised brands including our overseas subsidiaries in the US and France.

The brands segment has grown sales by 2.2% over the same period last year to £30.2 million. Trading conditions in our largest market, the UK, have remained challenging and have led to a small sales decline of 1.7% to £17.0 million in the first half. However, this decline has been more than offset by gains in our export markets which have grown by 6.5% to £12.2 million and now represent 42% of brand sales. The US market, our second largest market, has shown continued progress by growing 7.4% over the same period last year (3.7% in constant currency). Encouragingly, our third most significant market, Western Europe, has improved during the past nine months with sales growing by 6.5% in the first half (2.6% in constant currency). We continue to develop the considerable opportunities to grow the brands in the Rest of the World where sales have grown 5.8%.

The significant potential to develop licensing opportunities through the extension of product categories across our brands has helped to grow licence income 26% to just over £1.0 million in the six month period.

The brands' operating profits have increased by 11.3% to £2.83 million.

Harlequin & Scion

Harlequin has grown its worldwide sales 3.3% to £12.9 million compared with the same period last year. It continues to be the UK's leading mid-market brand, achieving further growth of 0.7% in the UK. It has cemented its position as the Group's number one brand in the US, growing 18.1% compared with the same period last year. Sales in Western Europe continue to improve growing 18.4% in the first half. Elsewhere there has been a small sales decline of 2.9% to £1.85 million.

The Scion brand, which was launched in the early part of last year, continues to grow its brand presence with the launch of its second extensive collection, Wabi Sabi, in February. Its simple contemporary designs are proving to be ideally suited to licensed product and to date successful ranges of rugs, bed-linen and towels have been launched.

Sanderson, incorporating the Morris & Co brand

Sales at Sanderson grew 3.8% over the same period last year to £10.5 million. The largest market, the UK, has declined by 1.9%, however in export markets sales grew by 10.8% with the USA, its second biggest export market, increasing 12.0%. The largest export market, Western Europe, experienced a small decline of 0.6% with countries such as Italy and Spain declining by more than 20%. Ireland, which historically has been a significant market for Sanderson, grew 47%. The strength of the Sanderson and Morris & Co brands in the Far East, and specifically Japan, continues to be important with sales in the region growing 51% over the same period last year.

The Sanderson and Morris & Co brands have the heritage and global brand recognition, as well as an extensive archive of designs, to attract licensing opportunities, leading to an increase in licence income of 18.2% in the first half. Income from Japan continues to grow but it has been new bedding launches in the UK and Australian licensees that have driven growth. New licensees, such as the international ceramics company Portmeirion and Brink & Campman rugs, have also progressed well during the period.

Zoffany

Zoffany is positioned at the upper end of the premium market which has been the most challenging area of the market in the past 12 months. In light of this, the opportunity was taken to discontinue some older slow selling collections slightly early, which contributed to an overall decline of 5.6% in sales to £5.3m with Zoffany's two biggest markets, the UK and USA, declining 7.8% and 3.9% respectively.

All other markets taken as a whole, with the notable exception of Western Europe, where growth of 3.3% was recorded, have also seen a slight decline. Within the mix we have seen a number of individual territories delivering growth.

We have recently appointed a creative director to oversee the design strategy and direction of the Zoffany brand, with an emphasis on positioning the brand for sustained growth. On a positive note, Zoffany's sales since the half year are 2% ahead of the same period last year, with sales being driven by newer collections launched in the past 18 months.

Manufacturing

Continued significant investment in our wallpaper and fabric printing factories has helped deliver another strong performance with sales and profitability both increasing to record levels. Total sales grew 4.0% to £15.9 million leading to an increase in profits of 8.5% to £1.48 million.

Anstey

Anstey, our wallpaper factory, has seen overall sales of £8.0 million, level with the same period last year. Sales to our own group brands grew 3.2% with third party sales declining 3.4% on last year's external record sales performance.

Anstey has continued its investment in new innovative printing techniques. Recent investment in digital printing and the acquisition of a scatter machine has been followed by additional digital printing capacity and most significantly its £1.75 million investment in the first half in a hybrid rotary/gravure machine. This new custom built machine will increase much-needed gravure capacity and replace outdated rotary equipment leading to improvements in efficiencies. It will also allow a new textured wallpaper product to be created by combining the two print techniques. This capability is being used by Harlequin in its latest collection, Leonida, to be launched this autumn and by third party customers developing their own new products. The machine is also currently being used by Harlequin to develop wallpaper ranges specifically created for international markets for launch next year.

Standfast

Overall sales at Standfast, our fabric printing factory, were 8.8% higher than the same period last year with sales from third party customers increasing 6.1%. This was driven by strong export growth of 20.8% with the UK growing by 3.6%. Sales from our own brands grew 12.7%.

The investment made by Standfast in digital printing over the past five years has resulted in digital sales almost doubling in each period. In the first half sales have increased 121% and now represent 20% of Standfast sales. The increasing demand has encouraged the Group to bring forward its commitment to a second fast-run digital printer, which will now be commissioned in the second half of the year.

Eliminations and unallocated

The cost of the LTIP for Executive Directors and senior managers is included in this segment. As the share price has risen 44% in the first half the accounting charge associated with the LTIP has risen to £589,000 compared with £413,000 in the first half of last year.

Summary

We have continued to extend the reach and range of our brands both in the UK and overseas. It is pleasing that the strength and depth of our brands' designs have increased licence income 26%, and that our efforts to develop our international markets has led to encouraging sales growth of 6.5% in the first half and increased the proportion of international brand sales to 42%.

We have achieved sales growth in the majority of regions in which we operate and most particularly in the US and Western Europe, our second and third largest markets outside of the UK, where sales have grown 7.4% and 6.5% respectively. We are confident of making progress in the UK given an improving economy and our focus on product design, marketing and customer service. The strength of our brands, and our continued commitment to manufacturing, mean that we can look forward to the continuing growth of our business.

John Sach

Group Chief Executive

30 September 2013

Walker Greenbank PLC

Unaudited Consolidated Income Statement

For the six months ended 31 July 2013

Unaudited Consolidated Statement of Comprehensive Income

For the six months ended 31 July 2013

Unaudited Consolidated Balance Sheet

As at 31 July 2013

Unaudited Consolidated Cash Flow Statement

For the six months ended 31 July 2013

Unaudited Consolidated Statement of Changes in Equity

Unaudited Consolidated Statement of Changes in Equity (Continued)

Other Reserves

Unaudited Notes to the Accounts

2. Segmental analysis

Walker Greenbank PLC is a designer, manufacturer and distributor of luxury interior furnishings, fabrics and wallpaper. The Board of Walker Greenbank PLC predominantly manages the operations of the Group. The reportable segments of the group are as follows:

· Brands - comprising the design, marketing, sales, distribution, and licensing activities of Sanderson, Morris & Co, Harlequin, Zoffany and Scion brands operated from the UK and the Group's foreign based subsidiaries in France and the United States.

· Manufacturing - comprising the wallcovering and printed fabric manufacturing businesses operated by Anstey and Standfast respectively.

This is the basis on which the Group presents its operating results to the Board of Directors which is considered to be the Chief Operating Decision Maker (CODM) for the purposes of IFRS8. Additional revenue-only data is also reported to the CODM and is disclosed on the basis explained below. Other group wide activities and expenses, predominantly related to corporate head office costs, defined benefit pension costs, long term incentive plans expenses, taxation and eliminations of intersegment items, are presented within 'Eliminations and unallocated'.

Unaudited Notes to the Accounts (Continued)

2a. Principal measures of profit and loss - Income Statement segmental information

Unaudited Notes to the Accounts (Continued)

The segmental revenues of the Group are reported to the CODM in more detail. One of the analyses presented is revenue by export market in the brands.

Revenue of the Brands reportable segments - revenue from operations in all territories where the sale is sourced from the United Kingdom and overseas subsidiary operations, excluding internal sales to overseas subsidiaries, together with contract and license revenue:

Revenue of the Manufacturing reportable segments - including revenues from internal sales to the Group's Brands:

The charge to the long term incentive plan of £589,000 (2012: £413,000) although not considered an exceptional cost has been separately identified within this note to aid comparison and analysis.

Unaudited Notes to the Accounts (Continued)

The accounting standard IAS 19 (Revised) has become effective. The impact on the Group's results is not significant and therefore prior period results have not been restated. The impact has been to reduce the expected return on scheme assets by £30,000 in the period.

Other than overseas taxation, there was no current tax arising in the year to 31 January 2013, as taxable profits arising in the year were offset against available losses from prior years. Because of the previous recognition of deferred tax assets relating to losses of prior years, the Group's taxable profits earned in the six months to 31 July 2013, and in future periods, will result in deferred tax charges being recognised as losses are utilised and as temporary differences originate and reverse. The tax at the half year has been based on a forecast full year effective tax rate.

A deferred tax charge of £448,000 (2012: £424,000) arose in the period to 31 July 2013 on the profits for the period. A further charge of £10,000 (2012: £86,000) arose due to the reduction in the corporation tax rate to 21% which was substantively enacted on 2 July 2013 and due to take effect from 1 April 2014.

A further reduction in the tax rate of 1% to 20% was also substantively enacted on 2 July 2013 that takes effect from 1 April 2015. This further reduction would result in a decrease in the deferred tax balance at 31 July 2013 of £16,000.

Unaudited Notes to the Accounts (Continued)

6 Earnings per share

The basic and diluted earnings per share for the half year are based on a profit for the period of £1,578,000 (2012: £1,423,000) and 58,161,000 ordinary shares (2012: 57,571,000), being the weighted average number of the shares in issue during the period, excluding those held in the Employee Benefit Trust ('EBT') and in treasury, which are treated as cancelled.

On 20 May 2013, 1,003,305 shares vested under the Company's Long Term Incentive Plan and these were issued from the Walker Greenbank PLC Employee Benefit Trust.

On 18 May 2012, 960,000 ordinary shares were transferred out of the treasury into the Company's Employee Benefit Trust. Following the transfer the company no longer holds treasury shares.

On 28 May 2012, 191,921 ordinary shares were acquired by the Company's Employee Benefit Trust.

On the 28 May 2012, 1,001,546 shares vested under the Company's Long-Term Incentive Plan and these were issued from the Walker Greenbank PLC Employee Benefit Trust.

The basic and diluted earnings per share for the year ended 31 January 2013 were based on a profit for the year amounting to £3,962,000 and the weighted average of 57,501,000 ordinary shares in issue during the year.

7 Trade and other receivables

Unaudited Notes to the Accounts (Continued)

8 Analysis of net debt

In January 2013, the Group agreed terms to renew the Receivables facilities from Barclays Bank PLC and to cancel the existing inventory facility and replace it with a new £2.5million Committed facility. The total facilities from Barclays Bank PLC comprises: a variable rate term loan secured on the Groups freehold property which is being repaid on a 10 year profile, a Committed facility whose availability is determined by the level of finished goods held by the Brands and a Receivables financing agreement which provides three year variable rate floating loans secured on eligible trade receivables at any point in time (the working capital facilities). The working capital facilities may be drawn down in either sterling or euro.

9 Cash generated from operations

Unaudited Notes to the Accounts (Continued)