WGB.L Regulatory News (WGB)

3 Oct 2006 07:01

Walker Greenbank PLC03 October 2006 For immediate release 3 October 2006 WALKER GREENBANK PLC ("Walker Greenbank" or "the Company") Interim Results for the Six months ended 31 July 2006 Walker Greenbank plc (AIM: WGB), the wallpaper, textiles and furnishingsbusiness whose brands include Sanderson, Morris & Co, Harlequin and Zoffany, ispleased to announce its interim results for the 6 month period ended 31 July2006. Highlights • Successful recovery continues - pre-tax profit of £1.86 million (H1 2005: loss of £1.44m), marking the Company's first interim pre-tax profit since 2000 • Pre-exceptional pre-tax profit of £0.59 million (H1 2005: loss of £0.16m) • Brand portfolio and UK factories performed strongly, supported by the improving market conditions in the mid to premium sector • Turnover at continuing operations up 12% at £25.8 million (H1 2005: £23.0m) • Pension deficit further reduced - liability of £5.97 million at 31 July 2006 (H1 2005: liability of £11.0m). Liability at 31 January 2006: £7.98m • Basic and diluted earnings per share of 3.26p (H1 2005: loss of 2.62p) • Trading in the current half year has started strongly Ian Kirkham, the Chairman of Walker Greenbank, said: "The Group hasre-established itself as a profitable and sustainable business. With two monthsof the second half of our financial year now completed it is evident that theGroup will have a successful year and we enter the key autumn sales period withgrowing confidence." A briefing for analysts will be held at 10.00am today (3 October 2006) at theoffices of Buchanan Communications, 45 Moorfields, London EC2Y 9AE. For further information: Walker Greenbank plc 08708 300077 Ian Kirkham, ChairmanJohn Sach, Chief Executive Teather & Greenwood 020 7426 9000 Mark DickensonRobert Naylor Buchanan Communications 020 7466 5000 Mark Court/Suzanne Brocks/Catherine Breen CHAIRMAN'S STATEMENT Overview The first half results have shown considerable growth compared with the sameperiod last year and continue to gather pace. Having reported a full yearoperating profit for the first time in six years at the year end, I am nowpleased to report that the first half of this year has seen the Group return itsfirst interim profit before and after tax since 2000. The results haveadditionally benefited from the final stage of the pension liability reductionexercise initiated in 2005 with a £1.3 million exceptional credit to the Profitand Loss Account. The Board's strategy of re-establishing the Group as a profitable and cashgenerative business has now been achieved and the Group can look forward to anexciting future. All our brands have grown compared with the same period last year on a like forlike basis led by Harlequin, our mid-market brand, which has continued its rapidsales growth, gaining market share from its competitors and more than doublingits profits. Following substantial investment in product since its acquisition,Sanderson has accelerated its growth leading to improved profitability.Harlequin and Sanderson continue to be among the leading suppliers of homefurnishings to retailers. Our Zoffany brand continues to re-establish itself asa leading brand at the premium end of the market and has achieved underlyingsales growth in line with our expectations. Results from our business in theUnited States disappointed with underlying sales growing more slowly thananticipated. The management team has been strengthened and we enter the secondhalf of the year in better shape. Following a number of very difficult years at our two manufacturing sites, bothAnstey, our wallpaper factory, and Standfast, our fabric printing factory, havedelivered a substantial improvement in their operating results. The continuedreturn to popularity of wallpaper at the premium end of the market has helpedAnstey to deliver a significant growth in both revenue and profits. Standfastcontinues to win market share and maintain a healthy order book and it also hasachieved significant growth in both revenue and profits. Both sites arebenefiting from the continued success of the Group's brands. Results The operating profit for the continuing operations before exceptional items forthe period was £1,015,000 (2005: £235,000), on sales up 12%. The profit onordinary activities before tax was £1,863,000 (2005: £1,443,000 loss). This wasafter crediting the Profit and Loss Account with an exceptional profit of£1,276,000 arising from the successful final phase of the pension liabilityreduction exercise. The earnings per share for the period was 3.26p (2005: loss per share 2.62p). The cash inflow in the period from operating activities was £543,000 (2005:£814,000). This was after payments associated with the pension liabilityreduction exercise of £894,000. The underlying cash inflow prior to this was£1,437,000, which was generated as a direct result of the improved operatingprofitability of the Group. Pensions The final stage of the pension liability reduction exercise was completed in theperiod with the final deadline for acceptance of the Company's offer beingApril. Following the adoption of the latest mortality tables at the year end,the impact of this final phase was further enhanced leading to a reduction inthe FRS17 deficit of £1.6 million. Your Board continues to seek possible ways tofurther reduce the impact of the pension deficit. Dividend The Directors do not recommend the payment of a dividend at this point in theGroup's recovery, but remain conscious of the need to return to the dividendlist. People I would like to take this opportunity to thank all our employees who havecontributed to the successful turnaround of the Group's fortunes. Outlook The Group has re-established itself as a profitable and sustainable business.Our brands continue to take market share and to exploit the reasonably buoyantsector of the mid to premium end of the market. The change in market conditionsand continued success of our brands has greatly benefited our manufacturingsites. We see these conditions continuing in the foreseeable future helping usto continue to grow the profitability of the Group. We will also continue to evaluate potential acquisitions as they arise usingstrict criteria with a view to identifying synergistic benefits with ourexisting operations. The Directors' belief in the Company's prospects is underlined by the number ofshares that the Directors hold, which has increased during the period underreview and which demonstrably aligns the Directors' interests with those of allother shareholders. With two months of the second half of our financial year now completed it isevident that the Group will have a successful year and we enter the key autumnsales period with growing confidence. Ian Kirkham Chairman 2 October 2006 CHIEF EXECUTIVE'S REVIEW The Brands Harlequin The Harlequin brand has increased the strong growth trend established last yearwith sales growing by 35% compared with the same period last year. The growth isacross all markets with export sales showing the strongest improvement of 48%and the UK 29%. The growth is broad based with all key product categories -wallpaper, printed fabric and woven fabric - growing strongly. This performancefurther strengthens Harlequin's position as the leading mid-market contemporarybrand in the UK and further re-enforces its position as one of the leading homefurnishings suppliers to the John Lewis Partnership. Harlequin continues toexpand its product range and all its recently launched collections haveperformed extremely strongly. Indulgence, the follow up wallpaper collection tothe highly successful Decadence wallpaper range, is showing all signs ofbecoming the single best-selling product within the brand's portfolio. Sales tothe USA have increased 168% following the successful re-launch of Harlequin intocertain states last year. Harlequin is now available in 15 states in total.The continued investment in excellent product and sampling and patterningsupport has fuelled the 35% sales growth and helped Harlequin to more thandouble its profits compared with the same period last year. Zoffany Zoffany continues to refocus on its core values and to re-establish itself againas one of the UK's leading premium end brands. Its range launches have continuedto improve and its underlying sales have grown compared with last year afteradjusting for a large contract order to the InterContinental London Park Lanehotel in the same period last year. Underlying sales in the UK are downslightly by 3%, but sales in export markets are ahead by 15%. With the overallsales down 5%, profits are slightly behind last year in line with our internalexpectations. Arthur Sanderson & Sons incorporating the Morris & Co brand Following its acquisition in 2003 and subsequent investment in product over thepast 2 years, we are now experiencing increasing momentum in Sanderson's salesgrowth. Sales are up 12% compared with the same period last year. As withHarlequin, the sales growth has been broad based showing consistent growth inall major markets. Licensing income grew 7% with the key markets of Japan andAustralasia performing well and helped by the continued exploitation of theSanderson name across a number of product categories. The continued investmentin product and sampling and patterning support has helped the sales growth andincreased profitability by 14% compared with the same period last year. Manufacturing Anstey Following the refocusing of the business into a producer at the premium end ofthe market, Anstey has continued its transformation into a profitable business.Helped by the continued trend back towards wallpaper at the mid to premium endof the market Anstey has increased overall sales by 12%. External third partysales have grown 16% and Group sales have grown 10%. This higher activityassisted by continued improvement in factory efficiencies and tightly controlledoverheads has enabled the business to generate a 2.4% return on sales comparedwith a small loss for the last half year. Standfast Standfast has experienced stable market conditions over the past 12 months withno repeat of the difficult first quarter of last year. Activity was 32% ahead ofthe same period last year with both external and Group sales showing stronggrowth. Sales to Group companies were particularly strong driven by the brands'larger autumn fabric offer. There has been a significant increase in investmentin the last six months both in terms of capital equipment and the level ofpreventive maintenance. The higher activity and improved factory loadings haveincreased efficiencies and margins enabling Standfast to reverse a loss for thesame period last year into a positive contribution of 4%. Overseas USA Sales in the USA are down 10%, but this is primarily due to the exit of lowermargin third party business during the second half of last year. Sanderson andMorris sales have grown by 11% but Zoffany sales declined by 14%. The re-launchof the Harlequin brand last year has helped achieve more than a doubling ofrevenue. Margins have improved with the exit from the lower margin third partybusiness, however, with increased patterning and sampling expenditure in thefirst half supporting our long term confidence in the brands, the overall resultwas a small loss. Europe The distribution businesses for Zoffany in Rome and Zoffany and Sanderson inParis, whilst relatively small, have performed profitably and ahead of bothexpectations and the same period last year. John Sach Chief Executive 2 October 2006 Unaudited Consolidated Profit and Loss Account For the six months ended 31 July 2006 6 months to 31 July 2006 Before Exceptional Total 6 months to Year to 31 exceptional items 31 July January items 2005 2006 (restated) note £000 £000 £000 £000 £000 Turnover- Continuing operations 1 25,803 - 25,803 23,032 46,361- Discontinued operations - - - 2,031 2,031 25,803 - 25,803 25,063 48,392 Operating profit- Continuing operations 1,015 - 1,015 235 758- Discontinued operations - - - 185 184- Exceptional items 2 - 1,276 1,276 - 4,076 1,015 1,276 2,291 420 5,018 Profit on sale of subsidiary 3 - - - 532 532Pension provision (FRS 17) release on sale of subsidiary 3 - - - 95 95Goodwill previously written off to reserves 3 - - - (1,908) (1,908) Net loss on sale of subsidiary - - - (1,281) (1,281) Profit/(loss) on ordinary activities before interest 1,015 1,276 2,291 (861) 3,737 Net interest payable (429) (464) (872)Amortisation of issue costs (33) (33) (66) (462) (497) (938)Other finance charge 4 34 (85) (174) Profit/(loss) on ordinary activities before taxation 1,863 (1,443) 2,625 Taxation 5 (23) (36) (80) Profit/(Loss) on ordinary activities after taxation 1,840 (1,479) 2,545 Dividends 6 - - - Profit/(Loss) retained for the period 1,840 (1,479) 2,545 Profit/(Loss) per share- Basic and diluted 3.26p (2.62p) 4.51p- Basic and diluted from continuing operations 7 3.26p (0.67p) 6.46p- Basic and diluted from discontinued operations - (1.95p) (1.95p) Dividend per ordinary share 6 - - - Unaudited Consolidated Balance Sheet As at 31 July 2006 As at As at As at 31 July 2006 31 July 2005 31 Jan 2006 note £000 £000 £000 Fixed assets Intangible assets 4,839 4,878 4,859Tangible assets 9,870 10,718 10,205 14,709 15,596 15,064 Current assets Stocks 12,620 11,594 11,539Debtors 10,781 11,078 9,137Cash at bank and in hand 1,702 1,630 1,530 25,103 24,302 22,206 Creditors: amounts falling due within one year (12,376) (10,639) (10,403)Net current assets 12,727 13,663 11,803 Total assets less current liabilities 27,436 29,259 26,867 Creditors: amounts falling due after more than one year (11,032) (10,396) (10,289) Provisions for liabilities and charges - (344) - Net assets excluding pension liability 12 16,404 18,519 16,578 Pension liability (5,972) (11,027) (7,981)Net assets 10,432 7,492 8,597 Capital and reserves Share capital 590 590 590Share premium account 9 457 457 457Profit and loss account 9 (31,122) (34,062) (32,957)Other reserves 9 40,507 40,507 40,507Shareholders' funds 10,432 7,492 8,597 Unaudited Group Cash Flow Statement For the six months ended 31 July 2006 6 months to 6 months to Year to 31 July 2006 31 July 2005 31 Jan 2006 note £000 £000 £000 Net cash inflow from operating activities 11 543 814 1,643 Returns on investment and servicing of finance Net bank interest paid (429) (464) (866) (429) (464) (866) Taxation (62) (114) (184) Capital expenditure Purchase of tangible fixed assets (582) (356) (710) (582) (356) (710) Acquisitions and disposals Net proceeds from disposal of operations 8 - 1,498 1,498 - 1,498 1,498 Equity dividends paid - - - Cash (outflow)/inflow before use of liquid resources and financing (530) 1,378 1,381 Financing Proceeds from new loans - 655 655Principal repayments of finance lease obligations - (251) (251)Increase/(reduction) of loan facility 710 (1,306) (1,414) 710 (902) 1,010Increase in cash 10 180 476 371 Unaudited Statement of Total Recognised Gains and Losses For the six months ended 31 July 2006 6 months to 31 6 months to 31 Year to July 2006 July 2005 31 Jan 2006 £000 £000 £000 Profit/(loss) for the financial period 1,840 (1,479) 2,545 Currency translation differences (5) (7) (27) Actual less expected return on pension scheme assets - - 3,817 Experience losses arising on pension scheme liabilities - - 425 Change in actuarial assumptions - - (7,141)Total recognised profits/(losses) since the last annual report 1,835 (1,486) (381) Notes to the Accounts 1. Segmental Analysis Turnover Turnover Continuing Continuing Operations Operations 6 months to 31 6 months to 31 July 2006 July 2005 (restated) (a) Classes of Business £000 £000 Fabrics 17,912 15,272 Wallcoverings 7,127 6,424 Others 764 1,336 25,803 23,032 (b) Geographical Segments - by destination United Kingdom 16,716 14,786 Continental Europe 3,768 3,334 North America 3,860 3,973 Rest of the World 1,459 939 25,803 23,032 Licence income has been reallocated to other operating income in the prior year. 2. Exceptional Items The final phase of the Group's offer to buy out the right to non-statutorypension increases from its active and deferred pensioners took place in April2006. This has resulted in a reduction of the FRS17 liability in the balancesheet of £1,562,000 and a benefit of £1,276,000 in the profit and loss,disclosed as an exceptional operating item. 3. Loss on Sale of Borge Holding AS and John O Borge AS In June 2005, the wholly owned Norwegian subsidiaries Borge Holding AS and JohnO Borge AS were sold for a consideration before costs of £1,881,000. A profit of£532,000 was generated on the sale before goodwill previously written off toreserves and the adjustment to FRS 17 provision. A net loss on sale of£1,281,000 has been recorded. 4. Other Finance Charge 6 months to 6 months to 31 July 2006 31 July 2005 £000 £000 Expected return on pension scheme assets 1,205 1,134 Interest on pension scheme liabilities (1,171) (1,219) 34 (85) Notes to the accounts continued 5. Taxation 6 months to 6 months to 31 July 2006 31 July 2005 £000 £000 UK Corporation tax at 30% (2005: 30%) - current year - - Overseas taxation - current year 23 36 Tax on profit/(loss) on ordinary activities 23 36 6. Dividends The Directors do not recommend the payment of an interim dividend in the period(2005: £nil). 7. Earnings per Share The basic earnings per share and diluted earnings per share are based on aprofit after taxation of £1,840,000 (2005: loss of £1,479,000) and 56,457,016ordinary shares (2005: 56,457,016), being the weighted average number of theshares in issue during the period. The basic profit per share and diluted profit per share for the year ended 31January 2006 were based on a profit on ordinary activities after taxation,amounting to £2,545,000 and the weighted average of 56,457,016 ordinary sharesin issue during the year. The adjusted profit/(loss) per share has been disclosed as in the opinion of theDirectors this provides additional information to shareholders on the results ofthe Group's activities. The adjusted profit/(loss) per share can be reconciled to the basic profit/(loss) per share as follows: 6 months to 6 months to 31 July 2006 31 July 2005 Profit/(loss) attributable to ordinary shareholders 3.26p (2.62p)Exceptional items (2.26p) 2.27pAdjusted earnings per share 1.00p (0.35p) Notes to the accounts continued 8. Disposal of Operations 6 months to 6 months to 31 July 31 July 2005 2006 £000 £000Sale of John O Borge AS and Borge Holding AS: The disposal comprised the following: Tangible fixed assets - 60Stock - 681Debtors - 745Creditors - (520)Profit on disposal - 532Net cash inflow from the disposal of John O Borge AS and Borge Holding AS - 1,498 9. Reserves Other Reserves Share premium Profit and Capital Merger Total account loss account reserve reserve £000 £000 £000 £000 £000 1 February 2006 457 (32,957) 43,457 (2,950) 40,507 Profit for the period - 1,840 - - - Currency translation movements - (5) - - - 31 July 2006 457 (31,122) 43,457 (2,950) 40,507 Notes to the accounts continued 10. Analysis of Net Debt 1 February 2006 Cash flow Other non-cash Exchange 31July 2006 changes Movement £000 £000 £000 £000 £000 Cash at bank and in hand 1,530 178 - (6) 1,702Overdrafts (2) 2 - - - 1,528 180 - (6) 1,702 Debt due within 1 year (596) - - - (596)Debt due after 1 year (10,289) (710) (33) - (11,032) (10,885) (710) (33) - (11,628) (9,357) (530) (33) (6) (9,926) 11. Reconciliation of Operating Profit to Net Cash Inflow from OperatingActivities 6 months to 6 months to 6 months to 6 months to 31 July 2006 31 July 2006 31 July 2005 31 July 2005 £000 £000 £000 £000 Operating profit 2,291 387Depreciation and amortisation 903 974Difference between pension charge and cash contributions (1,689) (232)Settlement of pension liabilities (894) -Loss on disposal of fixed assets 24 -(Increase)/decrease in stocks (1,081) 604Increase in debtors (1,652) (452)Increase/(decrease) in creditors 2,641 (444)Decrease in provisions - (23) (472) 427 543 814 Net cash inflow from operating activities Notes to the Accounts Continued 12. Pensions The Company operates the following funded pension schemes in the UK: the WalkerGreenbank Pension Plan, the Abaris Holdings Limited Pension Scheme and the WGSenior Management Pension Scheme. The Walker Greenbank Pension Plan is thebiggest scheme. All schemes contain defined benefits sections, however theAbaris Holdings Limited Pension Scheme also contains a defined contributionsection, although this section is relatively small. The pension costs relating to the UK defined benefit schemes are assessed inaccordance with the advice of an independent qualified actuary using theprojected unit method. These schemes are subject to triennial actuarial reviewswith the most recent ones having been at 6 April 2003 for both the WalkerGreenbank Pension Plan and the Abaris Holdings Limited Pension Scheme. Avaluation was undertaken at 31 January 2006 for the purposes of the FinancialReporting Standard no. 17. The assumptions applied when valuing the defined benefit schemes and thecomposition of the net deficit in these schemes is fully disclosed in thestatutory accounts for the year ended 31 January 2006. 13. Preparation of Interim Financial Information The interim financial statements have been prepared on a basis consistent withthe accounting policies disclosed in the Annual Report and Accounts for the yearended 31 January 2006. The consolidated results for the year ended 31 January 2006 have been extractedfrom the Financial Statements for that year and do not constitute full statutoryaccounts for the Group. The Group accounts for the year ended 31 January 2006received an unqualified audit report and did not include a statement undersection 237 (2) or (3) of the Companies Act 1985 and have been filed with theRegistrar of Companies. Copies of the interim report will be posted to shareholders in due course andwill also be available at the Company's Registered and Head Office at BradbourneDrive, Tilbrook, Milton Keynes, Buckinghamshire MK7 8BE. 14. Restated Prior Year Consolidated Profit and Loss Account Amortisation of issuing costs of arranging the loan have been recategorised fromadministration to net interest payable. This information is provided by RNS The company news service from the London Stock Exchange