WGB.L Regulatory News (WGB)

WALKER GREENBANK PLC

("Walker Greenbank" or "the Company")

Interim Results for the 6 months ended 31 July 2011

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings Group whose brands include Sanderson, Morris & Co., Harlequin and Zoffany, is pleased to announce its interim results for the six month period ended 31 July 2011.

Highlights

·; Half year revenue up 11% to £37.4m (2010: £33.7m), with all brands performing well

·; Strong revenue growth in export markets including Russia, Japan and China

·; Profit from operations (before exceptional gain in 2010) up14% to £2.35m (2010: £2.06m)

·; Profit before tax of £2.04m (2010: £2.31m), up 13% before exceptional gain in 2010

·; Earnings per share of 2.61p (2010: 2.72p), up 26% before exceptional gain in 2010

·; Interim dividend increased to 0.20p (2010: 0.15p)

Terry Stannard, Walker Greenbank's Chairman, said: "With an expanding international customer base and strong product offering we have delivered excellent first half results and increased our interim dividend to 0.20p per share. Whilst there is uncertainty in the global economic environment, we continue to trade ahead of last year and are achieving strong growth in export markets. We enter the autumn selling period with confidence of achieving another strong full year performance."

CHAIRMAN'S STATEMENT

Overview

I am delighted to report that the half year to 31 July 2011 represents another period of excellent progress at Walker Greenbank. Our continued investment - especially in product, manufacturing and international expansion - has been rewarded by significant growth in revenue and operating profit.

International sales have been particularly encouraging, with impressive growth in markets including Russia, Japan, and China, which represent new and exciting opportunities for the Company. We are still at an early stage in expanding in some of these markets but it is clear that the unique heritage of our Sanderson and Morris & Co brands in particular offer great potential. All our brands, which are currently sold in more than 75 countries worldwide, have growing international sales.

Morris & Co has attracted particular attention this year as we are celebrating its 150th anniversary. Our retrospective collections launched earlier this year, which revisit some of William Morris's most celebrated designs, together with other initiatives associated with the anniversary, have resulted in Morris & Co sales up 29.7% in the half year.

Harlequin's highly contemporary Momentum collection, which was launched in the first half, has rapidly become the best selling collection ever launched by the brand. One of the key attractions of Momentum is the special textured effect wallpapers printed on the scatter machine installed last year at our wallpaper factory in Loughborough.

Our UK manufacturing base is a key asset that differentiates us from our industry peers, many of whom are also our manufacturing customers. We have continued to invest in our factories, for example by increasing the digital printing capacity at our fabric printing factory in Lancaster. Also, we are currently commissioning our first digital printer at our wallpaper factory, which will allow us to print large scale bespoke designs. Total manufacturing revenues were up 11% in the half year, with third party revenues up 24%.

Our focus is on maximising sales through new product launches, international expansion, licensing and "stretching" our mid-market brands into new areas. For example, we recently announced a collaboration with Clarissa Hulse, the highly respected UK textile designer, who has developed a distinctive new collection for Harlequin, broadening the appeal of the brand.

We have also extended our licensing activities so that our designs can appear throughout the home, from wallpapers and fabrics through tableware, lampshades, floorcoverings, bathroom towels and other home accessories.

Financials

Revenue increased 11.1% to £37.4 million, from £33.7 million. The operating profit for the half year was up 14.0% at £2.35 million (H1 2010/11: £2.06 million, before an exceptional gain of £0.50 million from a loss of profits claim). Profit before tax was £2.04 million (H1 2010/11: £2.31 million). The profit after tax fell to £1.47 million (H1 2010/11: £1.54 million which included the benefit of the loss of profits claim of £0.50 million).

Earnings per share decreased to 2.61p (H1 2010/11: 2.72p) but was up 26.1% on adjusted Earnings per share before exceptional items (2010: 2.07p).

The Group's net indebtedness at the half year was £4.76 million (31 July 2010: £3.42 million). The cash outflow from operating activities in the six month period was £1.37 million (2010: Inflow £1.05 million), as working capital increased due to investment in product within the Brands and growth in revenues. There has also been substantial investment in Manufacturing. 

Dividend

The Company's financial profile has been transformed in the past few years and we are now able to invest in the business at the same time as delivering a progressive dividend policy. At the half year last year we paid an interim dividend for the first time in 13 years. Today, we are announcing an increase in the interim dividend to 0.20p per share, underlining the financial strength of the Company. The dividend will be payable on 11 November2011 to shareholders on the register on 14 October 2011.

People

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

Outlook

With an expanding international customer base and strong product offering we have delivered excellent first half results and increased our interim dividend to 0.20p per share. Whilst there is uncertainty in the global economic environment, we continue to trade ahead of last year with strong growth in export markets. We enter the autumn selling period with confidence of achieving another strong full year performance.

Terry Stannard

Non-Executive Chairman

3 October 2011

CHIEF EXECUTIVE'S REVIEW

Introduction

It is very encouraging to report that the Group continues to increase revenues and is successfully delivering its strategy for growth. Our commitment to investment in the brands' product ranges and in manufacturing capability has ensured that the Group continues to make successful progress in generally difficult market conditions.

Revenues from all four of our brands increased in the first half of the year compared with the same period last year. It is particularly pleasing to note that the sales momentum seen last year continued into the first quarter of this year and then gathered pace during the second quarter.

Manufacturing has had a strong first half with external customers placing more of their collections with our factories than previously. New customers, especially from overseas, have also been placing orders at our factories. We believe we are winning market share because of the comprehensive range of printing techniques we offer, our focus on quality, customer service and our continued investment in our factories.

The overall increase in revenues of 11.1% resulted in an increase of 14.0% in operating profits.

Brand retail revenues in the UK rose by 5.6% driven by strong performance from all our brands. European retail revenues grew 14.2%, with the growth from Scandinavia and Eastern Europe stronger than that of Central Europe. The US market remains difficult and in reportable currency retail revenues declined by 3.8%; however in local currency 3.6% growth was achieved. Revenues in the Rest of the World continued to grow strongly, up 20.6%, driven by the Far East. Our contracts division has grown 4.0% with significant orders from the Middle East.

Licensing income increased by 15.3% in the first half and we continue to explore new opportunities to license our brands.

The Brands

The Brands segment includes trading from our four internationally recognised brands of Harlequin, Sanderson, Morris & Co. and Zoffany. This segment includes worldwide revenues except for our overseas subsidiaries in the US and France which are reported in the Overseas segment.

The Group's continued investment in extensive product development and commitment to customer service within its four premium interior furnishing brands has helped to grow the Brands revenues by 8.7% to £25.6 million in the first half. Wallpaper and printed fabric sales have grown 12% and 4% respectively all of which are sourced from our own manufacturing resource. Sales of woven fabrics, which are sourced externally, have grown 9%. The Brands operating profits before exceptional items increased by 15% to £2.71 million.

Harlequin

Harlequin reinforced its position as the UK's leading mid-market brand by achieving half year revenues of £11.1 million, up 10% on the first half last year. The significant investment in the very contemporary Momentum collection has stretched the Harlequin brand to a higher price point in the market and helped fuel significant second quarter growth. Export sales have grown 14%, helped by a particularly strong performance in Scandanavia and significant contract sales in the Middle East.

Harlequin continues to further develop its licensing income stream, increasing revenues by more than 50%. We recently announced the launch of an extensive Harlequin lighting collection under a licensing agreement with Elstead Lighting, a UK company with worldwide distribution. This stylish collection, which is expected to be widely available from the beginning of next year, is another step in building Harlequin into a lifestyle brand.

Harlequin recently launched the innovative Kalianthi Collection of fabrics and wallpapers through a collaboration with Clarissa Hulse, one of the UK's most respected textile designers, further stretching the appeal of the Harlequin brand. The Demeter Stripe wallpaper from this collection recently won Best Wallpaper in Homes & Gardens Fabric Awards 2011. The judges' commented that "Clarissa Hulse's unique design is an extremely exciting departure".

Sanderson, incorporating the Morris & Co brand

Overall revenues of £9.5 million are up 9% over the same period last year. This has been driven by strong second quarter sales, helped by a substantial product launch of Morris & Co. in celebration of its 150th anniversary. The collection has received universal acclaim from around the world leading to export sales growth of 17%. Export sales are generally ahead in all markets but with particularly strong growth in the Far East and Russia up 25% and 51% respectively.

Sanderson is widely acknowledged as the world's most recognised interior decoration brand, which has helped us to exploit its licensing income stream where revenues were up 13% at £0.57 million.

Zoffany

Overall revenue has grown 7% to £4.9 million. The growth has been led by a strong performance in export markets where revenue grew 22%. There were substantial contract revenues in the Middle East, with significant sales to the Jumeirah Creekside hotel in United Arab Emirates and MOI hotel in Saudi Arabia. Sales in the Far East and Eastern Europe are also significantly ahead of last year. Zoffany is positioned at the upper end of the premium market and has suffered from challenging UK and Western Europe market conditions where sales remain flat on last year.

Overseas

Our Overseas segment includes our two wholly owned subsidiaries in New York and Paris.

The US market continues to be particularly challenging and sales have remained flat in the first half in local currency. We have made changes in our showroom partners in the significant markets of Los Angeles and Atlanta, but these changes will take time to improve sales. Despite continued tough trading conditions we remain confident about the medium term potential of the North American market for the Group.

Following investment in our Paris showroom and greater management focus, it is very encouraging to report a sales increase of 29% over the same period last year.

Manufacturing

Manufacturing has performed strongly in the first half with overall revenues up 11% over the same period last year, leading to an increase in profits of 16% to £1.31 million.

Our investment in extending our manufacturing capabilities, a new scatter machine at Anstey, our wallpaper factory, and our third digital printer at Standfast, our fabric printing factory, has helped drive growth in third party revenues of 24%. Encouragingly both factories have been successful in winning new customers particularly in overseas markets, where revenue increased by 73%.

Anstey

Revenue at Anstey increased 13% to £6.8 million with external revenues up 27%. Sales in the UK increased 24% and export revenues grew 53% with a number of new customers commissioning wallpaper at our factory for the first time.

The investment in the scatter machine gives us the capability of adding glass beads and other particles to wallpaper, offering our customers a wider range of exciting new textured effects. Harlequin's recently launched Momentum collection has incorporated this technique extremely successfully. External customers are now utilising the scatter machine's effects in their collections. We have recently commissioned our first digital printer which further extends our manufacturing capability.

Standfast

Revenues at Standfast were up 10.1% overall, with revenues from third party customers up 22%. Strong export growth of 90% was achieved as overseas customers utilised the expanded digital printing capability that Standfast has been developing over the past few years. Revenues from third party UK customers grew 14% as established customers extended their ranges.

Substantial investment has continued at Standfast where we have upgraded our second flat bed printer from 12 to 24 colours. This significantly expands the printing capability for its customers.

Summary

Even though market conditions are generally difficult we have made excellent progress in the first half. We were particularly pleased by the momentum of growth in the second quarter. We remain confident of the quality and strength of our business, and of our strategy to take advantage of the growth opportunities available to us.

John Sach

Group Chief Executive

3 October 2011

For the six months ended 31 July 2011

For the six months ended 31 July 2011

Unaudited Consolidated Balance Sheet

As at 31 July 2011

For the six months ended 31 July 2011

Other Reserves

2. Segmental analysis

Walker Greenbank 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. There have been no changes to the reportable segments of the group since the year end, which are as follows:

·; Brands - comprising the design, marketing, sales and distribution, and licencing activities of Harlequin, Sanderson, Zoffany and Morris & Co brands operated from the UK in the retail and contract sectors of the market.

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

·; Overseas - comprising the marketing, sales and distribution operations of the Group's foreign based subsidiaries in Europe and United States.

This is the basis on which the Group presents its operating results to the Board of Directors of the parent company, 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'.

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

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

The segmental revenues of the Group are reported to the CODM in more detail. One of the analyses presented is by strategic objective of the Group although profitability measures on this basis are not reported. These are the external retail sales in each major geographical area, the contract sector revenues throughout the world including those in the Group's overseas subsidiaries, licence revenue and external manufacturing revenues.

Revenue of the Brands reportable segments - revenue from retail operations in all territories where the sale is sourced from the United Kingdom Brands operations, including 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:

Revenue of the Overseas reportable segments - revenue of the group's overseas subsidiaries from retail operations which also includes contract and licence revenue:

Items that are both material and whose nature is sufficient to warrant separate disclosure and identification are disclosed within the financial statements and classified within their relevant income statement category. In the previous year, a full and final payment has been received for a 'loss of profit claim' which arose from the disruption to collection launches in 2009 as a consequence of the loss of marketing products held at third party's premises which were destroyed in a fire in January 2009.

The charge to the long term incentive plan of £221,000 (2010: £135,000) although not considered an exceptional cost has been separately identified within this note to aid comparison and analysis.

The Group no longer has any remaining obligations in respect of The Walker Greenbank Senior Management Pension Scheme as the two remaining deferred members accepted enhanced transfer values during the previous year. A net settlement gain of £66,000 is included within net defined benefit costs of the year ended 31 January 2011.

Other than overseas taxation, there was no current tax arising in the year to 31 January 2011, 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 2011, 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 £485,000 (2010: £645,000) arose in the period to 31 July 2011 on the profits for the period. A further charge of £80,000 (2010: £120,000) arose due to the reduction in the corporation tax rate to 26% from 1 April 2011 which was substantively enacted on 1 April 2011. A further reduction to 25% was substantially enacted on 5 July 2011 and applies to all deferred tax assets unwinding after 1 April 2012. In addition it was announced that the rate will reduce by 1% per annum to attain a rate of 23% by 1 April 2014.

The total facilities from Barclays Bank Plc comprises: a variable rate Term Loan secured on the Group's freehold property which is being repaid on a ten year profile, and Receivables and Inventory Financing Agreements which provide three year variable rate loans secured on the eligible trade receivables and eligible inventories at any point in time (the working capital facilities). The working capital facilities may be drawn down in either sterling or Euro.