WGB.L Regulatory News (WGB)

WALKER GREENBANK PLC

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

Interim Results for the 6 months ended 31 July 2016

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings Group whose brands include Sanderson, Morris & Co., Harlequin, Zoffany, Scion and Anthology, is pleased to announce its interim results for the six month period ended 31 July 2016.

Highlights

· These interim results include the recognition of £7.90 million of insurance reimbursements following the flood at Standfast & Barracks of which

- £4.56 million is for exceptional costs and

- £3.33 million is a contribution to loss of profits and exceptional gains for plant and equipment replacement leading to an increased profit before tax of £4.94 million (H1 2015: £2.89 million).

· Full production restored at the Standfast & Barracks factory, which is benefiting from new, replacement printing machines including faster, higher capacity digital printers. 

· Group sales down 8.7% to £41.83 million (H1 2015: £45.83 million).

· Adjusted profit before tax* after insurance proceeds up 2.7% at £3.78 million (H1 2015: £3.68 million). 

· Earnings per share up 62.1% at 6.55 pence (H1 2015: 4.04 pence).

· Adjusted earnings per share* down 13.6% at 4.62 pence (H1 2015: 5.35 pence).  

· Interim dividend up 25.0% to 0.55 pence per share (H1 2015: 0.44 pence per share).

Post Balance Sheet Event - Proposed acquisition of Clarke & Clarke, announced today

· Proposed earnings-enhancing acquisition of Clarke & Clarke, a UK-based designer and worldwide distributor of interior fabrics and wallcoverings with the brands Clarke & Clarke and Studio G, for an initial cash consideration of £25.0 million and a four year performance linked earn-out of up to £17.5 million payable in new ordinary shares in Walker Greenbank, giving a total potential consideration of up to £42.5 million.

· Conditional placing of new ordinary shares in the Company to raise £17.0 million to part-fund the initial cash consideration of this acquisition.

* Adjusted for accounting charges relating to share-based incentives, defined benefit pension charge and exceptional gain on property, plant and equipment, see note 7.

Terry Stannard, the Chairman of Walker Greenbank, said: "Our fabric-printing factory is back to full production and sales of printed fabric are on an improving trend though the effects of the flood remain evident in current trading. These effects will be mitigated by our insurance policy.

"Brand sales in the first nine weeks of the second half are up 0.7% in reportable currency (down 3.7% in constant currency) compared with the same period last year. Subject to the key Autumn selling period and anticipated insurance payments, the Board is confident of delivering its pre-flood expectations for the full year."

Analyst meeting

A meeting for analysts will be held at 10.00 a.m. today, 12 October 2016, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. For further details, contact Buchanan on 020 7466 5000.

For further information:

Notes for editors:

About Walker Greenbank

Walker Greenbank PLC is a luxury interior furnishings Group that designs, manufactures and markets wallpapers and fabrics together with a wide range of ancillary interior products. The Group's brand portfolio - comprising Sanderson, Morris & Co, Harlequin, Zoffany, Scion and Anthology - spans heritage and contemporary design and its products are sold in more than 85 countries worldwide. The Group derives significant licensing income from the use of its designs in lifestyle products such as bed linen, rugs and tableware.

The Group employs more than 600 people and has showrooms in London, New York, Paris, Amsterdam and Dubai along with partnership showrooms in Moscow and in Shenzhen, China. Its UK manufacturing base, which includes a wallpaper factory in Loughborough and a fabric printing factory in Lancaster, manufactures product both for the Group and for other wallpaper and fabric brands. Continued investment in manufacturing has allowed the Group to offer a wide range of printing techniques.

Walker Greenbank trades on the AIM market of the London Stock Exchange under the ticker symbol WGB.

For further information please visit: www.walkergreenbank.com/

CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT

Overview

During the half year, management maintained its strategic focus on developing the Group's product offering, manufacturing capabilities, market penetration and international expansion.

We also continued to seek acquisitions to complement our organic growth initiatives and, as notified separately today, we are very pleased to announce the conditional acquisition of Clarke & Clarke, a fabrics and wallcovering business with two international brands, Clarke & Clarke and Studio G. The acquisition, which marks an exciting next step in our growth strategy, is expected to be materially earnings enhancing in the year ending 31 January 2018.

As expected, trading in the six months to 31 July 2016 was impacted by the flood in December 2015 at Standfast & Barracks, the Company's fabric printing business in Lancaster. The financial effect of the flood has been mitigated by our comprehensive insurance policy and, as at the date of this announcement we have received £12.05 million in insurance payments.

The adjusted profit before tax for the first six months of the year was £3.78 million (2015: £3.68 million), an increase of 2.7%.

These financial results include the recognition of £7.90 million of insurance reimbursements following the flood at Standfast & Barracks of which £4.56 million is for exceptional costs and £3.33 million is a contribution to loss of profits and exceptional gains for plant and equipment replacement. Future insurance receipts are expected to cover loss of profits for our Brands business for the current period and up to a period of two years following the flood.

The primary effect of the flood was to halt production at Standfast & Barracks for a period of about 16 weeks, thereby removing the Group's internal capacity to print fabric for its own brands and for third-party customers.

Full production is restored at the factory, which continues to work to clear a backlog of orders.

Whilst our Brand sales in the half year have been affected by the lack of printing capacity, we have been very pleased with the performance of recent launches including the Woodland Walk collection from Sanderson and the Pure collection from Morris & Co.

Total Brand sales for the first half decreased by 2.0% in reportable currency, 4.7% in constant currency to £33.84 million compared with the same period last year. In the UK, our largest market, Brand sales decreased by 6.9% to £18.76 million compared with the same period last year.

Overseas Brand sales were up 4.0% in reportable currency, down 1.7% in constant currency, to £13.97 million. Sales in the US, which is now the Group's second largest market, grew 2.5% in reportable currency, down 6.5% in constant currency, to £4.49 million.

Brand sales in Western Europe were up 14.3% in reportable currency, up 5.7% in constant currency, to £4.17 million with growth in almost every territory. Sales in the Rest of the World were down 2.9% in constant currency compared with the same period last year.

We have continued to make progress with our market penetration strategy during the half year through the launch of the fourth collection from the Anthology brand, which for the first time includes an extensive range of woven fabrics.

Licensing income in the first six months was up 16.3% in reportable currency, 6.5% in constant currency, to £1.11 million. We are making exciting progress in licensing with the recent launch of the first footwear range from a licensing agreement between Sanderson and the well-known US brand Sperry. This, together with recently signed new bed linen licensing agreements in the US and in China, is a very positive step in our licensing strategy and continues to take the Company's brands further into lifestyle products and geographical territories.

We believe that our vertically integrated high quality British manufacturing with innovative printing techniques differentiates us from others in our industry. However, the flood at our fabric printing business had a significant impact on the performance of our manufacturing activities, with the result that total manufacturing sales fell 19.8% over the first six months when compared with the same period last year.

Two interim insurance payments of £11.25 million in aggregate were received during the first half with a further £0.80 million received in August 2016. Further interim insurance payments will be received in due course.

The Brands

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

Harlequin incorporating Scion & Anthology

Harlequin has seen a reduction in worldwide sales of 3.1% to £15.56 million in reportable currency compared with the same period last year. It continues to be the UK's leading mid-market contemporary brand, however, sales were down 8.7% in the UK particularly impacted by the flood at Standfast & Barracks. Export sales grew 6.6% in the first half, positively impacted by currency movements. In the US, Harlequin is up 6.2% in reportable currency but is down 3.1% in constant currency. Sales in Western Europe grew 21.1% in reportable currency, 11.9% in constant currency when compared with the same period last year.

The Scion brand, launched in February 2012, continues to grow well with its fourth collection, Levande, and its first children's collection, Guess Who. Scion continues to be a valuable brand for licensing partners where the contemporary and graphic nature of the designs translates particularly well. Two of the brand's animal images, Mr Fox and Spike the Hedgehog, have been very successful on licensed product such as bedding, tableware and towelling.

The Anthology brand continues to perform strongly. Anthology 04, which has been complemented by an exciting range of innovative wide-width woven fabrics, has generated strong sales growth.

Arthur Sanderson & Sons incorporating the Morris & Co brand

Sales at Sanderson were down 3.5% at £10.65 million in reportable currency. Sales in the US were up 3.7% in reportable currency, down 5.6% in constant currency. Sales in Western Europe were up 5.8% in reportable currency, down 2.0% in constant currency. Sanderson's latest collection, Woodland Walk, has been the best-selling collection for several years despite the effects of the flood.

Zoffany

Zoffany, which is positioned at the upper end of the premium market, has delivered sales growth of 2.4% to £6.14 million in reportable currency compared with the same period last year, with strong performances from recent collections reflecting the focus on design strategy and direction to position the Zoffany brand for sustained growth. Sales to export markets are up by 6.8% in reportable currency, which reflects the huge amount of work directed towards refreshed colourations.

Manufacturing

The flood at our fabric printing business has resulted in reduced sales and profitability. Total sales declined 19.8% to £14.96 million leading to a decrease in profits of £1.63 million to £0.17 million before receiving a contribution to loss of profits of £1.59 million from our insurer. The factory is back in full production and we are working in earnest to fulfil the backlog of printed fabric orders, both for the Company's own brands and third party customers, and in building up stocks of finished fabric at our Milton Keynes warehouse.

Anstey

Anstey, our wallpaper manufacturer, has seen sales in the first half grow by 3.0% in reportable currency to £9.30 million compared with the same period last year. The fall in third party sales in the UK of 15.3% have been offset by sales to our own Group Brands which have grown by 26.8% and third party export sales have remained constant.

Investment in digital printing and correlated digital sampling together with finishing equipment for digital product in prior years has contributed to the growth in sales. Digital printed sales now represent 8.6% of Anstey's total sales. These investments have continued to enhance capacity, capability and efficiency.

Standfast

Overall sales at Standfast & Barracks, our fabric printing factory, were 41.2% lower in reportable currency, at £5.66 million, compared with the same period last year as a direct result of the flood. Third party sales in the UK were down 49.7% with sales to our own Group Brands decreasing 35.5% compared with the first half last year.

During the half year we received, in aggregate, £11.25 million insurance receipts covering costs, business interruption losses and interim cash flow requirements, with further insurance receipts expected to cover future loss of profits up to a period of two years following the flood.

During the period, two new, next-generation digital printers with higher throughput and additional capabilities were commissioned at the factory.

Financials

Total sales in the half year decreased 8.7% to £41.83 million, from £45.83 million in the prior period. The profit from operations grew 56.2% to £5.29 million (2015: £3.39 million). Operating profits before an accounting charge relating to the Long Term Incentive Plan (LTIP) have risen 47.5% from £3.78 million to £5.58 million. The financial results include insurance reimbursements for loss of profits and exceptional gains arising from the replacement of plant and equipment of £3.33 million for the period.

The interest charge has decreased from £102,000 to £60,000 following the Group's refinancing in the previous financial year and reflects the Group's improved working capital management. The defined benefit pension charge has fallen slightly from £391,000 to £291,000 driven by an increase in the expected return on pension scheme assets. Following the EU referendum on 23 June 2016, there has been considerable market volatility and uncertainty which has impacted pension assumptions. If the pension deficit was remeasured at 31 July 2016 we would expect there to be an increase in the deficit.

Profit before tax after the two non-cash charges increased 70.6% to £4.94 million (2015: £2.89 million). Profit before tax, and before the LTIP accounting charge, defined benefit charge and exceptional gain on property, plant and equipment, increased 2.7% to £3.78 million (2015: £3.68 million). Earnings per share were up 62.1% at 6.55 pence (2015: 4.04 pence). Profit after tax was £3.95 million (2015: £2.42 million) and adjusted earnings per share were down 13.6% at 4.62 pence (2015: 5.35 pence), after removing the LTIP accounting charge, defined benefit charge and exceptional gain on property, plant and equipment.

The Group maintains a strong balance sheet with net funds at the half year of £2.53 million, following a significant inflow of £3.10 million over the last 12 month period (31 January 2016: net funds £2.31 million).

Dividend

The Board is pleased to announce an interim dividend of 0.55 pence per share which represents an increase of 25.0% on the prior half year reflecting the Board's confidence in the current financial position and future financial performance of the Group. The interim dividend will be payable on 18 November 2016 to shareholders on the register as at 21 October 2016.

Events since the balance sheet date

On 12 October 2016, the Group agreed to conditionally acquire 100% of the issued share capital of Clarke & Clarke, a UK-based designer and worldwide distributor of interior fabrics and wallpapers. The Board believes that there is a strong strategic rationale for the acquisition, which will, among other things, accelerate the Group's market penetration and extend our reach into the US, whilst it is also expected to be materially enhancing earnings in the year ending 31 January 2018. The consideration includes an initial cash consideration of £25.0 million and a contingent consideration of up to £17.5 million, in aggregate, payable in the Company's shares linked to the performance of the acquired business over a four year period, giving a total potential consideration of up to £42.5 million. In order to finance the initial cash consideration, the Group has conditionally raised approximately £17.0 million (before expenses) through a placing of a total of 8,947,369 new shares with institutional and other investors whilst the remaining portion of the cash consideration is being funded from the Company's existing accordion tranche of its bank facilities and from the Company's existing cash resources. The proposed acquisition and placing are conditional upon the approval of shareholders.

Outlook

Our fabric-printing factory is back to full production and sales of printed fabric are on an improving trend though the effects of the flood remain evident in current trading. These effects will be mitigated by our insurance policy.

Brand sales in the first nine weeks of the second half are up 0.7% in reportable currency (down 3.7% in constant currency) compared with the same period last year. Subject to the key Autumn selling period and anticipated insurance payments, the Board is confident of delivering its pre-flood expectations for the full year.

Terry Stannard John Sach

Chairman Group Chief Executive

12 October 2016 12 October 2016

Unaudited Consolidated Income Statement

For the six months ended 31 July 2016

Unaudited Consolidated Statement of Comprehensive Income

For the six months ended 31 July 2016

Unaudited Consolidated Balance Sheet

As at 31 July 2016

Unaudited Consolidated Cash Flow Statement

For the six months ended 31 July 2016

Unaudited Consolidated Statement of Changes in Equity

For the six months ended 31 July 2016

1. Basis of preparation of interim financial statements

The interim financial statements have been prepared in accordance with the accounting policies that the Group expects to apply in its annual financial statements for the year ending 31 January 2017. The Group's accounting policies are based on International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and IFRS Interpretations Committee ("IFRS IC") interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the valuation of derivative financial instruments at fair value through profit and loss.

These interim financial statements for the six months ended 31 July 2016 have been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union. The interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 January 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.

The Group's accounting policies for the year ended 31 January 2017 will be set out in the annual report for that year. Since the Group's previous annual financial report for the year ended 31 January 2016, a number of authoritative pronouncements issued by the International Accounting Standards Board and IFRS IC along with new or revised accounting standards are now effective for financial years ending 31 January 2017. None of these have any material impact on either the current or prior period financial statements. Additional authoritative pronouncements have been issued and will become effective in later years; these have not been adopted early by the Group.

Further details of authoritative pronouncements effective for financial years ending 31 January 2017 and additional authoritative pronouncements that have been issued and will become effective in later years will be set out in the financial statements of the Group for the year ending 31 January 2017.

The interim financial statements do not represent statutory accounts for the purposes of section 434 'Requirements in connection with publication of statutory accounts' of the Companies Act 2006. The financial information for the year ended 31 January 2016 is based on the statutory accounts for the financial year ended 31 January 2016, on which the auditors issued an unqualified opinion and did not contain a statement under section 498 'Duties of auditor' of the Companies Act 2006, and have been delivered to the Registrar of Companies. The interim financial statements for the 6 month period ended 31 July 2016 have not been audited, but have been reviewed by the auditors. The auditors' review report is included following the interim financial statements.

After making enquiries, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, the going concern basis has been adopted in preparing the interim statements.

The Board approved the interim financial information on 12 October 2016.

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 - comprises the design, marketing, sales, distribution, and licensing activities of Sanderson, Morris & Co, Harlequin, Zoffany, Anthology and Scion brands operating from the UK and its foreign subsidiaries in the US and France;

· 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 IFRS 8 'Operating Segments'. Additionalrevenue-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'.

2. Segmental analysis

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

Business interruption reimbursements to cover loss of profits of £1,593,000 (£2015: £nil) are included within 'Eliminations and unallocated'.

2. Segmental analysis continued

b) Additional segmental revenue information

The segmental revenues of the Group are reported to the CODM in more detail. One of the analysis 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:

3. Analysis of revenue by category

4. Net other income

Net other income arising as a result of the flood at Standfast, the Group's fabric printing factory in December 2015 is composed as follows:

The balance of £3,332,000 (2015: £nil) represents a contribution towards loss of profits of £1,593,000 and exceptional gains arising from the reimbursement of costs to replace plant and equipment of £1,739,000 impaired as result of the flood.

5. Net defined benefit pension charge

6. Income tax expense

No overseas taxation is anticipated to become payable within the immediate future due to the availability of gross tax losses of approximately £1.3 million (2015: £1.5 million).

The deferred tax balance at 31 July 2016 included within these interim financial statements has been calculated at a rate of 18%, as this is the rate at which the majority of the balances are expected to unwind.

A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016. The change announced is to reduce the main rate to 17% from 1 April 2020. Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 had already been substantively enacted on 26 October 2015.

As the change to 17% had not been substantively enacted at the balance sheet date, its effects are not included in these interim financial statements.

A deferred tax charge of £30,000 (2015: £27,000) arose in the period to 31 July 2016 on the profits for the period.

A deferred tax charge of £219,000 (2015: £469,000) has been recognised for movements in the deferred tax relating to the long-term incentive plan. The movements in deferred tax relating to the long-term incentive plan have been recorded in equity in accordance with the Group's accounting policy.

7. Earnings per share

Basic earnings per share ('EPS') is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the year, excluding those held in the Employee Benefit Trust ('EBT') and those held in treasury, which are treated as cancelled. The adjusted basic earnings per share is calculated by dividing the adjusted earnings by the weighted average number of shares. As a result of the improved profitability of the Group, PBT performance criteria within LTIPs 8 and 9 are now being met and as a consequence these LTIP awards are now dilutive.  

On 16 May 2016, 773,393 shares vested under the Company's Long Term Incentive Plan. To satisfy the vesting, 431,788 shares of 1 pence each were allotted at par value.

Following these transactions Walker Greenbank's issued ordinary share capital with voting rights consists of 60,604,309 (2015: 60,172,521) ordinary shares of which no (2015: nil) ordinary shares are held in treasury and 4,909 (2015: nil) ordinary shares are held by the Walker Greenbank PLC EBT. Shares held in treasury or by the EBT are treated as cancelled when calculating EPS.

On 18 May 2015, 1,090,326 shares vested under the Company's LTIP of which 188,272 shares were issued from the Walker Greenbank PLC EBT.

The market value of shares held by the EBT at 31 July 2016 was £9,352 (2015: nil). The total number of shares held in the EBT at the period end represented 0.01% (2015: 0%) of the issued shares.

8. Analysis of net funds

In December 2015, the Group entered into a new £12,500,000 multi-currency revolving credit facility with Barclays Bank PLC for a five year period and cancelled the existing Receivables facilities. The agreement also includes a £10,000,000 accordion facility option to further increase available credit which provides substantial headroom for future growth. A total bank arrangement fee of £100,000 was incurred in arranging the facility and will be amortised over the life of the loan. 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 five year profile and a revolving credit facility which may be drawn down in either sterling or euro. The term loan bears interest at variable rates based on a margin above the Bank of England base rate. The revolving credit facility bears interest at a variable rate based on a margin above LIBOR (for sterling loans) or the EURIBOR (for euro loans).

Under the Barclays Bank PLC facilities, the Group is subject to a financial covenant which applies to the term loan, being interest cover. The revolving credit facility is also subject to compliance of two financial covenants, being interest cover and leverage. Any non-compliance with covenants could, if not remedied or waived, constitute an event of default with respect to any such arrangements. The Group has reported to Barclays Bank PLC that it was in full compliance with its covenants throughout each of the periods presented.

9. Cash generated from operations

10. Retirement benefit obligations

The Group operates the following funded pension schemes in the UK: the Walker Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme. The Walker Greenbank Pension Plan is the biggest scheme. All schemes contain defined benefits sections, which are closed to new members and the accrual of future benefits, 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 carried out as at 31 January 2016, based on membership data at 5 April 2015, updated to take account of benefit outgo since 5 April 2015, using actuarial assumptions at 31 January 2016.

The assumptions applied for valuation of the defined benefit schemes are fully disclosed in the annual financial statements for the year ended 31 January 2016 and continue to be applied in the half year ended 31 July 2016. The net defined benefit pension charge recognised in the half year represents the relevant proportion of the annual amounts expected to be recognised for the year ending 31 January 2017, and are based on previous actuarial estimates. The net retirement benefit obligation recognised at 31 July 2016 is based on the actuarial valuation under IAS 19 'Employee Benefits' at 31 January 2016 updated for movements in net defined benefit pension charge and contributions paid during the half year period which include additional payments to the pension scheme to reduce the deficit along with regular contributions to fund scheme expenses. The deferred tax effect of movements in the net retirement benefit obligation has also been recognised in the half year. An updated funding valuation for IAS 19 financial reporting purposes will be completed for the next annual financial statements for the year ending 31 January 2017, at which time any actuarial gains and losses arising throughout the year will be recognised, including those arising from a change in the underlying assumptions applied for valuation of the defined benefit schemes.

Following the EU referendum on 23 June 2016, there has been considerable market volatility and uncertainty which has impacted pension assumptions. If the pension deficit was remeasured at 31 July 2016 we would expect there to be an increase in the deficit.

11. Dividends

The directors paid on 5 August 2016, a final dividend of 2.45 pence per share (2015: 1.96 pence), a total of £1,485,000 (2015: £1,179,000) for the financial year ended 31 January 2016.

The directors have announced an interim dividend of 0.55 pence per share (2015: 0.44 pence), a total of £333,000(2015: £265,000) for the six months ended 31 July 2016, which will be payable on 18 November 2016 to shareholders on the register on 21 October 2016.

12. Events after the reporting period

Following the flooding at Standfast in December 2015, the Group experienced a period of disrupted production and a loss of stock, machinery and profits. After the reporting period, the Group has been reimbursed £800,000 as an interim payment against a balance of £1,329,000 which has been recognised and included within other receivables as at 31 July 2016 to cover approved property, plant and equipment spend. Further business interruption reimbursements are expected to cover future loss of profits up to a period of two years following the flood.

On 12 October 2016, the Group agreed to conditionally acquire 100% of the issued share capital of Clarke & Clarke, a company registered in the UK, for an initial cash consideration of £25,000,000 and a contingent consideration of up to £17,500,000, in aggregate, payable in the Company's shares linked to the performance of the acquired business over a four year period, giving a total potential consideration of up to £42,500,000.

In order to finance the initial cash consideration, a placing of a total of 8,947,369 new ordinary shares of 1p each in the Company was also announced on 12 October 2016. These shares, which will represent approximately 12.9% of the Company's issued ordinary share capital on admission to trading on AIM (excluding treasury shares), were placed at a price of 190.0 pence per share raising proceeds of approximately £17,000,000 million. The remaining portion of the cash consideration is being funded from the Company's existing accordion tranche of its bank facilities and from the Company's existing cash resources. The proposed acquisition and placing are conditional upon the approval of shareholders.

The Group is in the process of finalising the fair value of the consideration, the assets acquired and liabilities assumed, and expects to provide full disclosures required under IFRS 3 'Business Combinations' in its Annual Report & Accounts for the year ending 31 January 2017.

Independent review report to Walker Greenbank PLC

Report on the interim financial statements

Our conclusion

We have reviewed Walker Greenbank PLC's interim financial statements (the "interim financial statements") in the interim report of Walker Greenbank PLC for the 6 month period ended 31 July 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

What we have reviewed

The interim financial statements comprise:

• the consolidated balance sheet as at 31 July 2016;

• the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

• the consolidated statement of cash flows for the period then ended;

• the consolidated statement of changes in equity for the period then ended; and

• the explanatory notes to the interim financial statements.

The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the AIM Rules for Companies.

As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the AIM Rules for Companies and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statement involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

St Albans

11 October 2016

a) The maintenance and integrity of the Walker Greenbank PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.