WGB.L Regulatory News (WGB)

4 Oct 2007 07:00

Walker Greenbank PLC04 October 2007 For immediate release 4 October 2007 WALKER GREENBANK PLC ("Walker Greenbank" or "the Company") Interim Results for the six months ended 31 July 2007 Walker Greenbank plc (AIM: WGB), the designer, manufacturer and distributor offurnishing fabrics and wallpapers whose international business includes thebrands Sanderson, Morris & Co, Harlequin and Zoffany, is pleased to announce itsinterim results for the six month period ended 31 July 2007. Highlights • A further period of excellent progress with continued strong organic growth • Revenue up 17% to £30.81 million (H1 2006: £26.35 million) • Operating profit before exceptional credit in 2006 up 83% to £1.88 million (H1 2006: £1.02 million) • Profit before taxation (excluding exceptional credit of £1.28m in 2006) up 177% to £1.40m (H1 2006: £0.51m) • Gearing reduced to 59% at 31 July 2007 (31 July 2006 - 96%) • Continued successful investment in product reflected by two recent design awards from Homes & Gardens magazine for Best Wallpaper and Best Printed Fabric Ian Kirkham, the Chairman of Walker Greenbank, said: "The pace of our progressin the first half has positioned the Group a year ahead of our own internalprojections. With two months of the second half of our financial year nowcompleted, your Board remains confident of a successful outcome for the currentyear." For further information: Walker Greenbank PLC 08708 300077John Sach, Chief ExecutiveAlan Dix, Finance DirectorJulian Wilson, Company Secretary Landsbanki Securities (UK) Limited 020 7426 9000Mark DickensonTom Hulme Buchanan Communications 020 7466 5000Mark Court/Suzanne Brocks CHAIRMAN'S STATEMENT Overview I am pleased to report that the first half results reflect the excellentprogress we continue to make, as the business further exploits the considerableorganic growth opportunities that exist within the Group. Favourable marketconditions, combined with the strength of our brands and the quality of ourniche manufacturing, have driven revenue growth in the first half by 17% whilstoperating profits before exceptional items have increased by 83%. All ourbrands, which include Harlequin, Sanderson, Morris & Co and Zoffany, have madesignificant progress compared with the same period last year. Harlequin, our mid-market brand, continues to benefit from investment inproduct. This, supported by the strength of the product design and the launch inspring 2007 of an important programme of contract specific product, has helpedthe brand achieve double-digit revenue growth for the third year running and toincrease its profits substantially. Revenue growth at Sanderson, which includesMorris & Co, has continued to accelerate, rewarding the extensive investment inproduct since Sanderson/Morris & Co was acquired by the Group in 2003. Thisrevenue growth, supported by increased marketing expenditure, has helped todeliver a significant growth in profits during the period. At Zoffany, thestrategy that has been implemented during the past two years of focussing thebrand on its core, traditional design values has begun to deliver positiveresults with Zoffany achieving double-digit revenue growth along with asubstantial improvement in profitability. Our Manhattan-based business in the United States has made progress in theperiod following the strengthening of the management last year. The business hasachieved top line revenue growth but continues to make a small loss followingincreased investment in patterning, sampling and marketing support. We remainconfident that there is considerable medium to long-term growth potential forthe Group in this important market. Anstey, our wallpaper factory in Loughborough, has benefited from the sustainedgrowth in the popularity of wallpaper. The limited capacity at the mid topremium end of the market, and the wide variety of wallpaper printing techniquewe offer, has helped the business grow its revenue and improve its profits morethan four fold. Standfast, our fabric print factory based in Lancaster, hasmaintained market share. However, slightly tougher market conditions have led toa small fall in revenue and profits over the same period last year. Financials The financial results have been prepared under International Financial ReportingStandards (IFRS) and the effect on the Group's results of adopting thesestandards has been minimal. Revenue has increased 17% to £30,807,000 from£26,345,000 over the same period last year. The underlying operating profit,before exceptional items, for the half year increased 83% to £1,880,000 (2006:£1,025,000). The profit before tax was £1,402,000 (2006: £1,783,000). Lastyear's results included an exceptional credit from the pension deficit reductionexercise of £1,276,000. Profit after taxation was £1,687,000 (2006: £1,760,000)with a recognition of deferred tax arising from future taxable profits of£275,000 (2006: nil) The earnings per share for the period was 2.99p (2006: 3.12p). The underlyingearnings per share after adjusting for last year's exceptional credit have risenmore than three-fold to 2.99p from 0.86p. The cash inflow for the period from operating activities was £1,417,000 (2006:£642,000) reflecting the improvement in operating profits. Interest cover increased to 3.9 times compared with 2.0 times for the first halfof 2006 after excluding the exceptional credit in 2006. Net debt reduced by 15% to £8,482,000 compared with the same period last year(2006: £9,926,000). Gearing also reduced to 59% from the last half year of 96%and year end of 66%. Dividend The Directors do not recommend the payment of a dividend, but remain consciousof returning to the dividend list as soon as is prudent. People I would like to thank all our employees for their continued support. Theircommitment and enthusiasm have contributed significantly to the improvement inshareholder value. I am delighted to welcome Terry Stannard to the Board, as announced on 20thSeptember 2007. His broad business experience, particularly of internationalbusiness expansion and mergers and acquisition activity, will be of great value. Outlook As I commented at the full year results in April, the Group, represented by ourpremium brands and supported by our niche manufacturing, is well placed tobenefit from the interior fashion trend towards wallpaper, colour and design andto exploit the considerable organic growth opportunities that exist for theGroup. The pace of our progress in the first half has positioned the Group a year aheadof our own internal projections. With two months of the second half of ourfinancial year now completed, your Board remains confident of a successfuloutcome for the current year. Ian KirkhamNon-Executive Chairman3rd October 2007 CHIEF EXECUTIVE'S REVIEW The first half has seen continuing growth the revenue of all of our brands alongwith an impressive increase in profitability. This revenue and profits growthreflects both our investment in product during the past two years and thesustained return to popularity of wallpaper and colour in interior design. The Brands Harlequin It is pleasing to report that Harlequin has reinforced its position as theleading mid-market contemporary brand in the UK by delivering a further 24%revenue growth in the first half compared with the same period last year. Thegrowth has continued across all product categories - wallpaper, printed fabricand woven fabric - and across all geographical markets. The strongest growth, at33%, has been in woven fabric and includes the launch mid-way through the periodof an extensive range of contract specific product. The market trend towallpaper has been reflected in 17% growth. Printed fabric grew but at a moremodest 4%. The growth geographically has been equal, 24% in the UK and 24%overseas. The ongoing strength of product design supported by strong marketingand improving margins has led to profits improving 44% compared with the sameperiod last year. Zoffany Having spent the past two years focusing the Zoffany brand on its core andtraditional design values, it is pleasing to report that the improvement inrevenue that was reported in the second half of last year has continued togather momentum in the first half, with revenue increasing 23% compared with thesame period last year. The growth has been led by the UK, 29% up over the sameperiod last year. The new collections have performed strongly and the increasedinterest in the brand has been reflected with increased demand for oldercollections. The growth has been led by woven fabric, at 31%, with wallpaperagain strong at 17%. Printed fabric, which is the smallest part of the Zoffanyrange, declined by 11%. With margins remaining strong, the profitability hasimproved threefold over the same period last year. Arthur Sanderson & Sons incorporating the Morris & Co brand Following strong investment in product since the brand was acquired by the Groupin 2003, the revenue momentum that we experienced last year has gathered pacewith revenue increasing 20% over the same period last year. The growth has beenbroad based with all geographical markets growing well, the UK just under 20%and overseas markets just over 20%. The growth has been led by woven fabric upby 47%, with wallpaper up by 13% and printed fabrics up by 8%. With marginsstrengthening there was an increase in profits of 76% despite increasedmarketing expenditure. Manufacturing Anstey Anstey continues to benefit from strong demand, as the interior design trendtowards wallpaper is now firmly established. Anstey is now recognised as themarket leader in the UK in wallpaper manufacture at the mid to premium end ofthe market. Its experience and expertise combined with a market place wherethere is limited equivalent competition has helped grow the overall revenue by26% over the same period last year. To emphasise the change in the market andAnstey's pre-eminent position, external third party revenue grew by 43% over thesame period last year. The emphasis on improved factory efficiencies andadditional volume has contributed to a fundamental change in profitability. Standfast Our brands have seen only a small growth in printed fabrics revenue over thesame period last year and the activity levels at Standfast have reflected thiswith revenue 4% down through marginal de-stocking and third party revenue down6%. Margins have come under increased pressure and this combined with the loweractivity has resulted in a small decline in profits. Overseas USA After a decline in revenue last year, the US operation has grown its revenue by17% in local currency, and 11% after the impact of the change in exchange rates.All of the Group's brands have grown, with Harlequin continuing its strongexpansion with a more than doubling of its revenue. Sanderson and Morris hasaccelerated the growth of last year to 13%. Due to the timing of collectionlaunches, the US operation has not yet fully benefited from the new improvedZoffany collections but the previous year's decline in Zoffany revenue has beenreversed with growth of 6%. Margins have remained strong but with continuedinvestment in patterning and sampling the US operation continues to trade at asmall loss. Whilst there is clear potential in the USA market in the mediumterm, the weakness of the dollar will affect margins in the second half. Europe The Group's distribution businesses in Rome, for Zoffany and Harlequin, and inParis, for Zoffany and Sanderson, are relatively small but have grown theircombined revenue by 4%, returning a small profit. Summary We have entered the current half year in a strong position with all of ourbrands performing well. We are particularly pleased with our newly launchedcollections, which have attracted positive commentary from our industry. John SachGroup Chief Executive3rd October 2007 Walker Greenbank plcUnaudited Consolidated Income StatementFor the six months ended 31 July 2007 6 months to 6 months to Year to 31 July 31 July 31 Jan 2007 2006 2007 Note £000 £000 £000 Revenue 2 30,807 26,345 54,369 Profit from operations - Before exceptional items 1,880 1,025 2,481 - Exceptional items 3 - 1,276 1,276 Profit from operations 1,880 2,301 3,757 Finance income/(charge) 4 34 (56) (99)Finance costs (479) (429) (898)Amortisation of issue costs (33) (33) (66) Net finance costs (478) (518) (1,063) Profit before taxation 1,402 1,783 2,694 Taxation 5 285 (23) (58) Profit for the period 1,687 1,760 2,636 Earnings per share - Basic and diluted 6 2.99p 3.12p 4.67p Unaudited Consolidated Balance SheetAs at 31 July 2007 As at As at As at 31 July 2007 31 July 2006 31 Jan 2007 £000 £000 £000Non-current assets Intangible assets 5,878 6,035 5,969Property, plant & equipment 8,772 8,953 8,864Deferred income tax assets 1,637 - 1,637Trade and other receivables 259 270 265 16,546 15,258 16,735 Current assets Inventories 14,159 12,569 13,404Trade and other receivables 11,344 10,457 9,982Cash and cash equivalents 1,879 1,702 2,065 27,382 24,728 25,451 Total assets 43,928 39,986 42,186 Current liabilitiesBorrowings (400) (596) (596)Trade and other payables (14,232) (11,978) (13,056) (14,632) (12,574) (13,652) Net current assets 12,750 12,154 11,799 Non-current liabilities Borrowings (9,961) (11,032) (10,073)Retirement benefit obligation (4,866) (6,024) (5,518) (14,827) (17,056) (15,591) Total liabilities (29,459) (29,630) (29,243) Net assets 14,469 10,356 12,943 Equity Share capital 590 590 590Share premium account 457 457 457Foreign currency translation (15) (5) (17)Retained earnings (27,070) (31,193) (28,594)Other reserves 40,507 40,507 40,507 Total equity 10 14,469 10,356 12,943 Unaudited Consolidated Cash Flow StatementFor the six months ended 31 July 2007 6 months to 6 months to Year to 31 July 2007 31 July 2006 31 Jan 2007 note £000 £000 £000 Cash flows from operating activities Cash generated from operations 8 1,417 642 3,219Debt issue costs (71) - -Interest paid (549) (432) (913)Interest received 4 3 20Income tax paid (32) (62) (50) 769 151 2,276 Cash flows from investing activities Purchase of intangible fixed assets (166) (114) (276)Purchase of property, plant & equipment (569) (567) (1,168) (735) (681) (1,444) Cash flows from financing activities Proceeds from new borrowings 11,296 - -Repayment of borrowings (11,296) - -(Decrease)/increase in borrowings (218) 710 (282) (218) 710 (282) Net (decrease)/increase in cash, cash equivalents and bank overdrafts (184) 180 550 Cash, cash equivalents and bank overdrafts at beginning of period 2,065 1,528 1,528 Exchange losses on cash and bank overdrafts (2) (6) (13) Cash, cash equivalents and bank overdrafts at the end of the period 1,879 1,702 2,065 Unaudited Consolidated Statement of Recognised Income and ExpenseFor the six months ended 31 July 2007 6 months to 6 months to Year to 31 July 2007 31 July 2006 31 Jan 2007 £000 £000 £000 Actual less expected return on pension scheme assets - - (1,216)Experience gains and losses arising on pension scheme liabilities - - (13)Change in actuarial assumptions - - 1,203Currency translation differences 2 (5) (17)Reduction in deferred tax asset relating to pension liability due to tax rate reduction (110) - -(Reduction)/recognition of deferred tax asset relating to pension scheme liability (165) - 1,637 Net (expense)/income recognised directly in equity (273) (5) 1,594Profit for the period 1,687 1,760 2,636 Total recognised income for the period 1,414 1,755 4,230 Notes to the Accounts 1 Basis of preparation of interim statements The interim financial statements have been prepared in accordance with the accounting policies of the Group under IFRS as set out in the "Restatement of Financial Information under International Financial Reporting Standards" (IFRS), which was issued on 28 September 2007 and can be found on the Group's website. Theses standards and interpretations are subject to ongoing review and endorsement by the EU or possible amendment by interpretive guidance from the International Financial Reporting Interpretations Committee ("IFRIC") and are therefore still subject to change. The "Restatement of Financial Information for 2007" includes a reconciliation of equity at 31 July 2006 under UK GAAP to equity under IFRS and a reconciliation of the profit for the period to 31 July 2006 under UK GAAP to the profit for the period under IFRS. In preparing the interim financial statements, Walker Greenbank plc has not applied the following pronouncements for which adoption is not mandatory for the year ending 31 January 2008 and which have not yet been endorsed by the EU: IFRIC 11 'Group and treasury transactions' IFRIC 12 'Service concession agreements' IFRIC 13 'Customer loyalty programmes relating to IAS 18, Revenue' IFRIC 14 'The limit on a defined benefit asset, minimum funding requirements and their interaction' IFRS 8 'Operating segments' IAS 23 (revised 2007) 'Borrowing costs' The Group has chosen not to adopt IAS 34 'Interim financial statements' in preparing its 2007 interim financial statements. The interim financial statements are not statutory accounts for the purposes of S240 of the Companies Act 1985. The Financial Information for the year ended 31 January 2007 is based on the statutory accounts for the financial year ended 31 January 2007 restated for the effects of the adoption of IFRS as published on 28 September 2007. The statutory accounts, on which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The half-year figures, which are for the 6 month period ended 31 July 2007, have not been audited, but have been reviewed by the auditors. The auditors' review report is included with the interim financial statements. The Board approved the interim financial statements on 3 October 2007. 2 Segmental analysis Revenue Revenue 6 months to 6 months to 31 July 2007 31 July 2006 (a) Business Segment £000 £000 Design and manufacture of furnishings, fabrics and wallpaper 30,807 26,345 (b) Geographical Segments - by destination United Kingdom 20,118 16,994 Continental Europe 4,992 3,801 North America 4,375 3,860 Rest of the World 1,322 1,690 30,807 26,345 Notes to the Accounts continued 3 Exceptional items The final phase of the Group's offer to buy out the right to non-statutory pension increases from its active and deferred pensioners took place in April 2006. This has resulted in a reduction of the pension liability in the balance sheet of £1,562,000 and a benefit of £1,276,000 in the income statement, disclosed as an exceptional operating item. 4 Finance income/(charge) 6 months to 6 months to 31 July 2007 31 July 2006 £000 £000 Expected return on pension scheme assets 1,207 1,115 Interest on pension scheme liabilities (1,173) (1,171) 34 (56) 5 Taxation 6 months to 6 months to 31 July 2007 31 July 2006 £000 £000 UK Corporation tax at 30% (2006: 30%) - current year - - Overseas taxation - current year - (23) - prior year 10 - Deferred tax - current year 275 - - prior year - - Tax credit/(charge) on profit on ordinary activities 285 (23) The current year tax credit of £275,000 for the six months to 31 July 2007relates solely to the recognition of previously unrecognised tax losses. Theselosses have been recognised at 31 July 2007 due to the reduction in the deferredtax asset relating to the pension liability. The credit recognised in the income statement is equal to the charge recognisedin the statement of recognised income and expense, reflecting the fact there isno overall change in the amount of deferred tax asset being recognised. Due to the availability of substantial brought forward tax losses for offsetagainst current tax year taxable profits, there is no further taxation charge inthe period. Notes to the Accounts continued 6 Earnings per share The basic and diluted earnings per share are based on a profit after taxation of £1,687,000 (2006: £1,760,000) and 56,457,016 ordinary shares (2006: 56,457,016), being the weighted average number of the shares in issue during the period, excluding those held in the employee share trust, which are treated as cancelled. The basic and diluted earnings per share for the year ended 31 January 2007 were based on a profit for the year, amounting to £2,636,000 and the weighted average of 56,457,016 ordinary shares in issue during the year. The adjusted earnings per share has been disclosed as in the opinion of the Directors this provides additional information to shareholders on the results of the Group's activities. The adjusted earnings per share can be reconciled to the basic earnings per share as follows: 6 months to 31 July 2007 6 months to 31 July 2006 Earnings Weighted Per share Earnings Weighted Per share Average amount Average amount £000 number of £000 number of shares pence shares pence (000's) (000's) Basic and diluted EPS: Earnings attributable to ordinary shareholders 1,687 56,457 2.99 1,760 56,457 3.12 Adjusted EPS: Earnings attributable to ordinary shareholders 1,687 56,457 2.99 1,760 56,457 3.12 Exceptional items - - - (1,276) 56,457 (2.26) Adjusted earnings per share 1,687 56,457 2.99 484 56,457 0.86 7 Analysis of net debt 1 February Cash Other 2007 flow non-cash Exchange 31 July £000 £000 changes movement 2007 £000 £000 £000 Cash at bank and in hand 2,065 (184) (2) 1,879 Borrowings due within 1 year (596) 196 (400) Borrowings due after 1 year (10,073) 22 90 (9,961) (10,669) 218 90 (10,361) (8,604) 34 90 (2) (8,482) Notes to the Accounts continued 8 Cash generated from operations 6 months to 6 months to 6 months to 6 months to 31 July 2007 31 July 2007 31 July 2006 31 July 2006 £000 £000 £000 £000 Operating profit 1,880 2,301 Depreciation 661 691 Amortisation 257 228 Accrual for long-term incentive plan 112 - Loss on disposal of property, plant & equipment - 24 Changes in working capital Increase in inventories (755) (1,060) Increase in trade and other receivables (1,356) (1,653) Increase in trade and other payables 1,236 2,784 Difference between pension charge (1,779) and cash contributions (618) Settlement of retirement benefit obligation - (894) (463) (1,659) Cash generated from operating activities 1,417 642 9 Retirement benefit obligations The Company operates the following funded pension schemes in the UK: the Walker Greenbank Pension Plan, the Abaris Holdings Limited Pension Scheme and the WG Senior Management Pension Scheme. The Walker Greenbank Pension Plan is the biggest scheme. All schemes contain defined benefits sections, however the Abaris Holdings Limited Pension Scheme also contains a defined contribution section, although this section is relatively small. The pension costs relating to the UK defined benefit schemes are assessed in accordance with the advice of an independent qualified actuary using the projected unit method. These schemes are subject to triennial actuarial reviews with the most recent ones having been April 2006 for both the Walker Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme. A valuation was undertaken at 31 January 2007 for the purposes of the Financial Reporting Standards no. 17 and International Accounting Standard no. 19. The assumptions applied for valuation of the defined benefit schemes is fully disclosed in the statutory accounts for the year ended 31 January 2007and continue to be applied in the half year to 31 July 2007. Notes to the Accounts continued 10 Consolidated statement of changes in equity Share Share Retained Translation Capital Merger Capital Premium Earnings Reserve Reserve Reserve Total £000 £000 £000 £000 £000 £000 £000 Balance at 1 February 2006 590 457 (32,953) - 43,457 (2,950) 8,601 Actual less expected return on pension scheme assets (1,216) (1,216) Experience gains and losses arising on pension scheme liabilities (13) (13) Change in actuarial assumptions 1,203 1,203 Deferred tax 1,637 1,637 Currency translation differences (17) (17) Accrual for long-term 112 112 incentive plan Net income/(expense) - - 1,723 (17) - - 1,706 recognised directly in equity Profit for the year 2,636 2,636 Balance as at 31 January 2007 590 457 (28,594) (17) 43,457 (2,950) 12,943 Share Share Retained Translation Capital Merger Capital Premium Earnings Reserve Reserve Reserve Total £000 £000 £000 £000 £000 £000 £000 Balance at 1 February 2006 590 457 (32,953) - 43,457 (2,950) 8,601 Currency translation (5) (5) differences Net income/(expense) - - - (5) - - (5) recognised directly in equity Profit for the period 1,760 1,760 Balance as at 31 July 2006 590 457 (31,193) (5) 43,457 (2,950) 10,356 Share Share Retained Translation Capital Merger Capital Premium Earnings Reserve Reserve Reserve Total £000 £000 £000 £000 £000 £000 £000 Balance at 1 February 2007 590 457 (28,594) (17) 43,457 (2,950) 12,943 Currency translation differences 2 2 Accrual for long-term incentive plan 112 112 Reduction in deferred tax asset due to tax rate (110) (110) reduction Reduction in deferred tax asset due to pension liability reduction (165) (165) Net income/(expense) - - (163) 2 - - (161) recognised directly in equity Profit for the period 1,687 1,687 Balance as at 31 July 2007 590 457 (27,070) (15) 43,457 (2,950) 14,469 This information is provided by RNS The company news service from the London Stock Exchange