12 Apr 2011 07:00
A briefing for analysts will be held at 10am this morning, 12 April 2011, at the offices of Buchanan Communications, 45 Moorfields, London EC2Y 9AE.
For immediate release | 12 April 2011 |
WALKER GREENBANK PLC
("Walker Greenbank" or "the Company")
Preliminary Results for the year ended 31 January 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 preliminary results for the 12 month period ended 31 January 2011.
Highlights
·; Revenues increased 13.9% to £68.78 million (2010: £60.38 million)
·; Robust growth in UK and international markets, with brand sales in the Rest of the World up 21.1% led by the Far East
·; All brands performed well, with Sanderson growing 17.2% during its 150th anniversary year
·; Operating profits before exceptional gain increased 77.3% to £4.47 million (2010: £2.52 million)
·; Profit before tax increased 188% to £4.46 million (2010: £1.55 million); earnings per share growth of 155% to 5.36p (2010: 2.10p)
·; Final dividend of 0.80p proposed (2010: 0.50p), an increase of 60%
o Total dividend of 0.95p (2010: 0.5p)
Terry Stannard, the Chairman of Walker Greenbank, said: "Our impressive performance during the year to 31 January 2011 reflects the strength of our brands and strategic importance of our manufacturing capability amid positive trends in the luxury interior goods market.
"The current year has started well, with our worldwide brand sales up 8% in the first 10 weeks of the year compared with the same period last year. We are confident of a positive outcome for the year."
For further information:
Walker Greenbank PLC | 08708 300077 |
John Sach, Chief Executive | |
Alan Dix, Finance Director | |
Seymour Pierce Limited | |
Mark Percy / Catherine Leftley - Corporate Finance Marianne Woods / Katie Ratner - Corporate Broking | 020 7107 8032 020 7107 8096 |
Buchanan Communications | 020 7466 5000 |
Mark Court / Suzanne Brocks |
CHAIRMAN'S STATEMENT
Overview
I am delighted to report that the excellent progress achieved in the first half of the year continued throughout the second half, giving an impressive outcome for the year. The Company's brands achieved their highest-ever level of sales during the autumn selling period, reflecting the strength of our recent product launches, the desirability of our brands and the positive trends in the luxury interior goods market.
Revenue and profits continued to grow during the second half, and our balance sheet strengthened further. Net debt reduced despite our continued investment in the business and return to dividend payments.
Revenues for the year grew by 13.9% to £68.78 million with all segments of the Group achieving growth over last year. Gross margins improved from 59.7% to 60.2%, which, combined with continued investment in product and marketing, has led to an increase of 77% in operating profit before exceptional items of £4.47 million.
Our Brands segment grew by 11.7% with all of our brands performing well, including a significant improvement in Zoffany. Sanderson led the way with growth of 17%, following strong investment in product during its 150th anniversary year. In our largest market, the UK, retail income grew by 13%. In the Rest of the World it grew by 21%, led by the Far East. Our global licence income grew 30% led by Japan and Australasia and with a significant improvement from our UK bedlinen licencee.
The Overseas segment includes our North American and French operating companies. Both these businesses achieved growth over last year and, following the disposal of our Italian business to our Italian distributor B&B Distribuzionne in December 2009, sales in Italy have grown significantly. Investment in marketing has increased substantially in the USA, following a very cautious approach the previous year.
The Manufacturing segment grew 30% over last year with third party revenues growing by 28% as customers continued to invest in new product and built stock levels.
Financials
Revenue increased 13.9% to £68.78 million from £60.38 million. The operating profit for the year grew 106% to £4.97 million (2010: £2.42 million) which included the benefit of an insurance settlement of £0.50 million from a loss of profits claim. Profit before tax grew 188% to £4.46 million (2010: £1.55 million). The profit after tax increased 158% per cent to £3.03 million (2010: £1.17 million).
Earnings per share were 5.36p (2010: 2.10p) an increase of 155%.
The Group's net indebtedness at the year end reduced to £1.82 million (2010: £3.11 million). This represents a reduction in gearing to 8% (2010: 17%). The cash inflow from operating activities was £4.26 million (2010: £4.34 million), reflecting strong operating profits with lower interest costs but a significant investment in product. Following a negotiation and extension of the Group's banking facilities for a further three years the Group's headroom increased to £10.56 million (2010: £9.28 million).
Dividend
During the year, the Group has paid a final dividend for the year to 31 January 2010 and an interim dividend of 0.15p. The Group will continue to invest in the future growth of the business and continue to pay dividends. The Directors recommend the payment of a final dividend of 0.80 pence per share (2010: 0.50p) which will be payable on 6 August 2011 to shareholders on the register on 9 July 2011. This brings the total dividend for the year to 0.95p (2010: 0.50p).
People
On behalf of the Board, I would like to thank all of our management and employees for their contribution to an extremely successful year.
Outlook
Our impressive performance during the year to 31 January 2011 reflects the strength of our brands and strategic importance of our manufacturing capability amid positive trends in the luxury interior goods market.
The current year has started well, with our brand sales up 8% in the first 10 weeks of the year compared with the same period last year.
We remain focused on winning further market share in established markets and on developing our sales overseas, where the heritage of our brands has significant appeal. We are encouraged by sales last year in countries including Russia and China, which underlines our international potential.
We are confident of a positive outcome for the year.
Terry Stannard
Non-Executive Chairman
11 April 2011
CHIEF EXECUTIVE'S REVIEW
Strategy
It is extremely pleasing to report that our continued commitment to product investment, design excellence and manufacturing capability has led to the best trading performance by the Group in more than ten years.
Whilst mindful of the uncertainties in the global economy we remain committed to the five key elements of our growth strategy, which comprise:
·; Geographic expansion - to focus on the distribution and marketing of our brands in the European and North American markets where our Group is currently immature relative to its peers, and to invest in the exciting growth opportunity for luxury interiors goods that presents itself in the Rest of the World;
·; Organic growth - to continue to grow our influential mid market brands in the UK retail market through expansion of the product range and extension of their market positions;
·; Licensing income - to profit from the global recognition of the Group's heritage brands, Sanderson and Morris & Co, and the contemporary design excellence of the Harlequin brand by exploiting the considerable product licensing opportunities that exist;
·; Contract sales - to drive the expansion of the unique opportunity our contracts business presents through further investment in contract specific product supported by the strength of our brand names, our ability to competitively source product and our manufacturing capability, predominantly focusing at the mid to upper end of the contract market; and
·; Acquisitions - to evaluate acquisition opportunities that fit with our current brand portfolio and further advance our earnings growth ambitions.
Overview
Following two disruptive years due to the global recession, I am pleased to report we are now fully back on track and successfully delivering our strategy for growth.
Retail revenues in our non UK markets have grown 9.3%, which has been led by growth of 21.1% in Rest of the World, particularly driven by the Far East, Australasia and emerging South American markets. European revenues have grown 3.2%, within this Eastern European and Scandinavian markets have made significant progress but have been held back by flat Western European revenues. North American retail revenues have grown 11.9% compared with particularly poor comparators last year but some isolated regional markets in the USA continued to be difficult.
Our continued investment in design, marketing and depth of product launch, supported by our commitment to customer service through increased stock holding, has helped grow our UK retail business a further 13.1% to £27.96 million. The success of our investment in product and marketing is ably demonstrated by Sanderson, which during its 150th anniversary year delivered strong revenue growth of 17.2%.
Global Licensing income has grown 30%. Our overseas licence income has grown strongly driven in particular by Japan and Australasia. Having addressed issues with our UK bed-linen licencee in the latter part of the previous year bed-linen revenues have grown to record levels. The luxury and heritage nature of the Group's brands has led to the signing of a number of new licence arrangements.
Our contract revenues declined slightly during the year. This was due to a relatively quiet market and two major contracts last year. We remain committed to and confident about the potential of this market segment and are delighted with our recent announcement of the award of a substantial contract in the Middle East.
Manufacturing for third party customers has benefited from customers restocking in the early part of the year and an overall strengthening market for wallpaper and printed fabrics. We continue to invest in our production capability and customer support and this helped grow annual revenues 27.8% to £15.25 million.
The Brands
Walker Greenbank has continued its investment in extensive product development and commitment to customer service within its four premium interior furnishing brands. The brands have achieved growth of 11.7% over last year. Following the significant marketing exposure during its 150th anniversary year, Sanderson has led the way with growth of 17.2%. The market's continued demand for colour and design has seen our fabric printing and wallpaper sales grow 18.6% and 11.6% respectively, nearly all of which is sourced from our own manufacturing resource. Sales of woven fabrics, which are sourced externally, have grown 9.8%.
The Brands' operating profits before exceptional items grew 14.4% to £5.28 million with the investment in product and marketing at record levels.
Harlequin
Harlequin has grown its overall revenues 8.7% over the same period last year, maintaining its position as the UK's leading mid-market contemporary brand. Its export markets have grown the fastest, driven by particularly strong growth in the Far East, Russia, the Middle East and Sweden. Harlequin continues to develop its licensing income stream from a variety of products and leads the branded interior furnishings offer within the John Lewis Partnership. The year has also seen a substantial investment in the expansion of Harlequin's design studio which will add additional scope to broaden its product range.
Arthur Sanderson & Sons incorporating the Morris & Co brand
There has been particular investment both in product and marketing during Sanderson's 150th anniversary year. A retrospective collection named Vintage Fabrics and Wallpapers, which reinterprets iconic Sanderson designs from 1890s to the 1980s, was launched. We also held a successful exhibition in London, 'Very Sanderson - 150 years of English Decoration' which attracted considerable interest from the design community, and also collaborated on a book, 'Sanderson: the Essence of English Decoration'. These, and other activities, have raised the profile of the Sanderson brand, which is widely acknowledged as the world's most recognised interior decoration brand. Revenues grew 17.2% to £17.86 million, carrying on the momentum gained in the first half with strong growth both in the UK and export markets. Morris & Co will be celebrating its 150th anniversary in 2011.
Zoffany
Zoffany is positioned at the upper end of the premium market and has seen overall revenues grow by 8.8% to £9.44 million driven by the success of its latest collections and a relatively buoyant UK market. Export markets in total are ahead of last year helped by strong performances in the Far East, in particular China, Taiwan, and Australasia but restrained by weak European and US markets.
Overseas
USA
The US revenue has grown 7.5%, equating to 5.0% in constant currency, over weak comparatives last year. In general, encouraging progress has been made in the majority of our key regional markets but held back by the poor performance of Los Angeles, Atlanta and Dallas showroom partners. We have addressed two of these issues with changes in our showroom partners in the early part of the current year and remain confident about the medium term potential of the North American market.
Europe
Our French distribution business encouragingly grew 11.3% following investment in our Paris showroom and greater management focus.
The Group's Italian distribution business in Rome for Harlequin and Zoffany was sold in December 2009 to B&B Distribuzionne in Milan, which has distributed Sanderson successfully for many years. Since that disposal significant growth has been achieved in the Italian market.
Manufacturing
Our manufacturing business has performed very strongly with high demand throughout the year. The business has benefited from customers restocking in the early part of the year followed by increasing investment in new collections as market confidence grew throughout the year. Total revenue increased by 30% to £28.78 million with growth evenly spread between third party customers and our own brands. Strong factory throughput and increasing factory efficiency following significant capital investment has led to a near fourfold increase in profitability.
Anstey
Anstey, our wallpaper printing business, had a very successful year with revenues growing by 36% to £13.03 million. Sales in the UK are up 38% and sales to our export markets are up 82%. This has been driven by third party growth of 42% helped by new customers commissioning wallpaper at our factory and supported by internal brand growth of 31%.
The investment made in a scatter machine in the first half of the year has given us the capability to add glass beads and other particles to wallpaper, offering our customers a wider range of exciting new textured effects. This was commissioned in the second half and Harlequin led the way with the recent launch of the Momentum collection utilising this technique. Third party customers are also progressing with design developments.
Standfast
Standfast, our fabric printing factory, achieved strong revenue growth of 26% to £15.75 million. Third party revenue grew 20% broadly split between home and export markets. Revenue from our own brands grew 35% following the continued revival of interest in printed fabrics. This is ably demonstrated by the success of Harlequin and Sanderson print collections launched in the past 12 months which are proving to be the most successful for a number of years. Standfast has also benefited from new customers printing with the factory for the first time.
Standfast is currently commissioned its third digital printer to meet the increasing demand for digital printing, which allows customers the flexibility of high value, short print runs and large scale designs. The continued demand for digital printing will lead to further investment to increase production speeds and capacity.
Summary
Our on-going investment in product design, marketing, customer service and manufacturing capability has helped us deliver the strongest revenues and profits for over ten years. With the growing strength of our balance sheet we remain committed to this investment programme to further develop the business.
Our focus is firmly on geographic expansion and on the exploitation of our luxury interior brands. Our objective is to achieve global revenue growth and to benefit from an enhanced return on sales through the operational gearing in the business. We remain confident of continued progress.
John Sach
Group Chief Executive
11 April 2011
FINANCIAL REVIEW
Income Statement and Exceptional Items
The Chairman's Statement and Chief Executive's Review provide an analysis of the key factors impacting the revenue and operating profit. In addition to the information on our brands and production facilities included in these reports, the Group has included in note 2 of this announcement, further information on our segments.
Exceptional items are both material and their nature is sufficient to warrant separate disclosure and identification. During the year a full and final payment of £500,000 was received for a 'loss of profits claim' which arose from the disruption to collection launches in 2009 as a consequence of the loss of marketing material products held at a third party's premises which were destroyed in a fire in January 2009. In the previous year 'Redundancy expenses' of £322,000 were incurred to reduce the cost base of the Group during the economic downturn and 'Net income from an insurance recovery' of £225,000 for marketing material products destroyed in the fire noted above.
Interest
The net interest charge for the year was £146,000 (2010: £263,000) including amortisation of debt issue costs capitalised. The reduced cost reflects the reduced average level of borrowings during the year and the reduction in interest rates over the year but there was a receipt of £86,000 as a consequence of a successful Fleming claim for the recovery of VAT.
Net Defined Benefit Pension
The charge during the year was £364,000 (2010: £600,000). This is a consequence of an increase in asset values at the start of the financial year compared with that at the beginning of the previous year, leading to an increase in the expected return on assets combined with a net settlement gain arising from the two remaining deferred members of the Walker Greenbank Senior Management Scheme accepting enhanced transfer values during the year and the effective closure of the scheme.
Current Taxation
There is a small corporation tax charge of £13,000 arising from withholding tax suffered on overseas licence income.
Deferred Taxation
Due to the substantial brought forward corporation tax losses (£16.2 million), the Group does not anticipate paying UK corporation tax in the immediate future. However, as the majority of the corporation tax losses have now been recognised as a deferred tax asset, in the current and future years there will be a deferred tax charge in the Income Statement until such time as the losses have been fully utilised at which point the Group will incur and pay UK corporation tax.
The Group also continues to recognise the deferred tax asset arising from the pension deficit. As the pension deficit has decreased during the year a decrease in the associated deferred tax asset has been recognised in the Statement of Comprehensive Income.
Earnings per share ('EPS')
The basic and diluted EPS was 5.36p (2010: 2.10p).
Operating Cash Flow and Net Debt
The Group generated net cash inflow from operating activities during the year of £4,260,000 (2010: £4,338,000) reflecting the strong operating profits and lower interest costs and the continued investment in product.
The Group paid net interest of £121,000 (2010: £239,000) and capital expenditure of £2,453,000 (2010: £1,067,000). The depreciation and amortisation charge during the period was £1,738,000 (2010: £1,786,000). The Group will continue to invest in the Manufacturing facilities and is part way through a major investment in a new IT system for the Brands. Capital expenditure will remain high during the next 12 months.
The Group made additional payments to the Pension schemes of £1,084,000 (2010: £1,063,000) to reduce the deficit, part of the ongoing planned reduction, along with £322,000 (2010: £289,000) of regular contributions to fund scheme expenses.
The Group purchased 350,000 shares at a cost of £178,000 in December 2010 to satisfy LTIP awards expected to vest in future periods.
Net debt in the Group has reduced by £1,297,000 to £1,817,000 (2010: £3,114,000) representing gearing of 8% (2010: 17%). The average level of debt during the year is higher due to the timing and seasonality of revenues and investment in product.
The Group utilises facilities provided by Barclays Bank PLC. There is a term property facility of £2,600,000 (2010: £3,000,000) at the year end expiring in July 2017. There is also a facility linked to working capital which allows the Group to more effectively manage seasonal fluctuations in working capital. This facility was renewed in March 2010 for a further 3 year term expiring in July 2013. The borrowings at the end of the year under the working capital facility were £1,161,000 (2010: £2,467,000), representing headroom of £10,559,000 (2010: £9,281,000). The headroom is set out below:
Utilisation | Availability | |
£000 | £000 | |
Property | 2,583 | 2,600 |
Inventory | - | 2,500 |
Receivables | 1,161 | 7,276 |
3,744 | 12,376 | |
Less: Cash and cash equivalents | (1,927) | |
Net Debt | 1,817 | (1,817) |
Headroom | 10,559 |
The total facilities have a current limit of £16.50m (2010: £16.50m).
All of the Group bank facilities remain secured by first fixed and floating charges over the Group's assets.
Pension Deficit
The pension deficit has decreased this year. The key factors affecting the movement in the deficit have been: contributions of £1,406,000 from the Company to reduce the deficit; an increase in the liabilities of the scheme arising predominantly from lower discount rates and higher inflation assumptions; an increase in scheme assets reflecting the improvement in the economic climate compared to the end of the previous financial year. The impact of these factors is shown as follows:
2011 | |
£000 | |
Deficit at beginning of period | (7,943) |
Scheme expenses | (322) |
Other finance expense | (108) |
Contributions | 1,406 |
Actuarial gain on scheme assets | 1,718 |
Settlement gain | 66 |
Actuarial losses on scheme liabilities | (1,559) |
Gross deficit at the end of the year | (6,742) |
Long-Term Incentive Plan
There has been a new award of shares during the year under the Long-Term Incentive Plan ("LTIP") with vesting conditions based on Total Shareholder Return with a Profit before Tax floor. There has been a charge of £697,000 (2010: £145,000) in the Income Statement relating to these awards. The charge is higher this year as the award made in May 2007 will now fully vest as the top range of the financial target of profit before tax has been met. Accruals had been made in the previous year based on achievement of the lowest range of the financial target which reflected internal projections at that time.
Disposals
There were no major disposals during the year.
Going Concern
The Directors are confident, after having made appropriate enquiries that the Group and Company have adequate resources to continue trading for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.
Foreign Currency Risk
All foreign currencies are bought and sold centrally on behalf of the Group. Regular reviews take place of the foreign currency cash flows and unmatched exposures are covered by forward contracts wherever economically practical.
The Group does not trade in financial instruments and hedges are only used for highly probable future cash flows. There is a hedging asset of £63,000 (2010: £175,000) at the end of the year in relation to US dollar and Japanese Yen contracts.
Credit Risk
The Group no longer seeks credit insurance as this was no longer considered a commercial solution to reducing credit risk. The Board reviews the internal credit limits of all major customers and reviews the credit risk regularly. The aging profile of trade debtors shows that payments from customers are close to terms however there have been specific expenses during the year. The current economic environment creates a significant level of risk and in addition to specific provisioning, a provision has been required of £253,000 (2010: £172,000) which is a collective assessment of the risk.
Alan Dix
Group Finance Director
11 April 2011
Unaudited Consolidated Income Statement
Year ended 31 January 2011
Note |
2011 £000 |
2010 £000 | |
Revenue | 68,778 | 60,378 | |
Profit from operations before exceptional items | 4,472 | 2,522 | |
Exceptional items | |||
- Redundancy expenses | 4 | - | (332) |
- Net proceeds from insurance recovery | 4 | - | 225 |
- Loss of profit claim | 4 | 500 | - |
Profit from operations | 3 | 4,972 | 2,415 |
Net defined benefit pension charge | 6 | (364) | (600) |
Net borrowing costs | 5 | (146) | (263) |
Net finance costs | (510) | (863) | |
Profit before taxation | 4,462 | 1,552 | |
Total tax charge | (1,434) | (379) | |
Profit for the year | 3,028 | 1,173 | |
Earnings per share - Basic and diluted | 9 | 5.36p | 2.10p |
Unaudited Consolidated Statement of Comprehensive Income
Year ended 31 January 2011
2011 £000 | 2010 £000 | |
Profit for the year | 3,028 | 1,173 |
Other Comprehensive Income/(Expense): | ||
Actuarial gains on scheme assets | 1,718 | 2,665 |
Changes in actuarial mortality assumptions | - | 495 |
Other actuarial losses on scheme liabilities | (1,559) | (7,694) |
Currency translation gains | 4 | 175 |
Cash flow hedges (losses)/gains | (112) | 987 |
(Reduction)/Recognition of deferred tax asset relating to pension scheme liability | (403) | 1,059 |
Other comprehensive expense for the year, net of tax | (352) | (2,313) |
Total comprehensive income/(expense) for the year attributable to the owners of the parent | 2,676 | (1,140) |
Unaudited Consolidated Balance Sheet
As at 31 January 2011
Note | 2011 £000 | 2010 £000 | |
Non-current assets | |||
Intangible assets | 5,973 | 5,687 | |
Property, plant & equipment | 8,768 | 8,160 | |
Deferred income tax assets | 8 | 3,982 | 5,806 |
18,723 | 19,653 | ||
Current assets | |||
Inventories | 15,630 | 13,238 | |
Trade and other receivables | 10 | 14,383 | 10,309 |
Derivative financial instruments | 63 | 175 | |
Cash and cash equivalents | 11 | 1,927 | 2,333 |
32,003 | 26,055 | ||
Total assets | 50,726 | 45,708 | |
Current liabilities | |||
Trade and other payables | (18,847) | (13,548) | |
Borrowings | 11 | (400) | (2,867) |
(19,247) | (16,415) | ||
Net current assets | 12,756 | 9,640 | |
Non-current liabilities | |||
Borrowings | 11 | (3,344) | (2,580) |
Retirement benefit obligation | 13 | (6,742) | (7,943) |
(10,086) | (10,523) | ||
Total liabilities | (29,333) | (26,938) | |
Net assets | 21,393 | 18,770 | |
Equity | |||
Share capital | 590 | 590 | |
Share premium account | 457 | 457 | |
Foreign currency translation reserve | (161) | (165) | |
Accumulated losses | (20,063) | (22,794) | |
Other reserves | 40,570 | 40,682 | |
Total Equity | 21,393 | 18,770 |
Unaudited Consolidated Cash Flow Statement
Year ended 31 January 2011
Note | 2011 £000 | 2010 £000 | |
Cash flows from operating activities | |||
Cash generated from operations | 12 | 4,456 | 4,592 |
Interest paid | (209) | (239) | |
Debt issue costs | (62) | - | |
Interest received | 88 | - | |
Income tax received | - | 50 | |
Income tax paid | (13) | (65) | |
4,260 | 4,338 | ||
Cash flows from investing activities | |||
Purchase of intangible fixed assets | (503) | (272) | |
Purchase of property, plant & equipment | (1,950) | (795) | |
Proceeds on sale of property, plant and equipment | 1 | - | |
(2,452) | (1,067) | ||
Cash flows from financing activities | |||
Purchase of treasury shares | (178) | (128) | |
Net repayment of borrowings | (1,666) | (1,845) | |
Dividends paid to company's shareholders | (368) | - | |
(2,212) | (1,973) | ||
Net (decrease) / increase in cash, cash equivalents and bank overdrafts | (404) | 1,298 | |
Cash, cash equivalents and bank overdrafts at beginning of year | 2,333 | 1,050 | |
Exchange losses on cash and bank overdrafts | (2) | (15) | |
Cash, cash equivalents and bank overdrafts at end of year | 11 | 1,927 | 2,333 |
Unaudited Consolidated Statement of Changes in Equity
Other Reserves | ||||||||
Share capital £000 | Share premium account £000 | Retained earnings £000 |
Capital reserve £000 |
Merger reserve £000 | Hedge reserve £000 |
Translation reserve £000 | Total £000 | |
Balance at 1 February 2010 | 590 | 457 | (22,794) | 43,457 | (2,950) | 175 | (165) | 18,770 |
Profit for the year | - | - | 3,028 | - | - | - | - | 3,028 |
Other comprehensive Income: | ||||||||
Actuarial gains on scheme assets | - | - | 1,718 | - | - | - | - | 1,718 |
Other actuarial losses on scheme liabilities | - | - | (1,559) | - | - | - | - | (1,559) |
Deferred tax relating to pension scheme liability | - | - | (403) | - | - | - | - | (403) |
Currency translation differences | - | - | - | - | - | - | 4 | 4 |
Cash flow hedging reserve - released to income statement | - | - | - | - | - | (175) | - | (175) |
Cash flow hedging reserve - recognised in equity during the year | - | - | - | - | - | 63 | - | 63 |
Total comprehensive income/(expense) | - | - | 2,784 | - | - | (112) | 4 | 2,676 |
Transactions with owners: | ||||||||
Dividends | - | - | (368) | - | - | - | - | (368) |
Reserve for long-term incentive plan | - | - | 493 | - | - | - | - | 493 |
Purchase of treasury shares | - | - | (178) | - | - | - | - | (178) |
Balance at 31 January 2011 | 590 | 457 | (20,063) | 43,457 | (2,950) | 63 | (161) | 21,393 |
Unaudited Consolidated Statement of Changes in Equity continued
Other Reserves | ||||||||
Share capital £000 | Share premium account £000 | Retained earnings £000 |
Capital reserve £000 |
Merger reserve £000 | Hedge reserve £000 |
Translation reserve £000 | Total £000 | |
Balance at 1 February 2009 | 590 | 457 | (20,491) | 43,457 | (2,950) | (812) | (340) | 19,911 |
Profit for the year | - | - | 1,173 | - | - | - | - | 1,173 |
Other comprehensive Income: | ||||||||
Actuarial gains on scheme assets | - | - | 2,665 | - | - | - | - | 2,665 |
Changes in actuarial mortality assumptions | - | - | 495 | - | - | - | - | 495 |
Other actuarial losses on scheme liabilities | - | - | (7,694) | - | - | - | - | (7,694) |
Deferred tax relating to pension scheme liabilities | - | - | 1,059 | - | - | - | - | 1,059 |
Currency translation differences | - | - | - | - | - | - | 175 | 175 |
Cash flow hedging reserve - released to income statement | - | - | - | - | - | 812 | - | 812 |
Cash flow hedging reserve - recognised in equity during the year | - | - | - | - | - | 175 | - | 175 |
Total comprehensive income/(expense) | - | - | (2,302) | - | - | 987 | 175 | (1,140) |
Transactions with owners: | ||||||||
Reserve for long-term incentive plan | - | - | 127 | - | - | - | - | 127 |
Purchase of treasury shares | - | - | (128) | - | - | - | - | (128) |
Balance at 31 January 2010 | 590 | 457 | (22,794) | 43,457 | (2,950) | 175 | (165) | 18,770 |
Unaudited Notes to the Accounts
1. | Basis of preparation |
The Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards adopted for use in the European Union (IFRS).
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS this announcement does not itself contain sufficient information to comply with IFRS. The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the year ended 31 January 2011. The audit of the statutory accounts for the year ended 31 January 2011 is at an advanced stage but is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. The statutory accounts for the year ended 31 January 2010 have been filed with the Registrar of Companies and contained an auditor's report which was (i) unqualified and (ii) did not contain a reference to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report, and (iii) did not contain any statement under section 498(2) or (3) of the Companies Act 2006.
This preliminary announcement was approved for release by the Board on 11 April 2011. | |
2. Segmental Analysis
The Group has identified its operating segments and applied aggregation criteria, as set out in IFRS 8, and has determined that the reportable segments of the Group are as follows:
- Brands - comprising the design, marketing, sales and distribution, and licensing 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 wall covering 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 the 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 IFRS 8. 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'.
Notes to the Accounts continued
2. Segmental Analysis continued
a. Reportable segment information
Year ended 31 January 2011
Brands £000 | Manufacturing £000 | Overseas £000 | Eliminations & unallocated £000 | Total £000 | |
Revenue - External | 46,918 | 15,253 | 6,607 | - | 68,778 |
Revenue - Internal | 1,303 | 13,529 | - | (14,832) | - |
Total Revenue | 48,221 | 28,782 | 6,607 | (14,832) | 68,778 |
Operating profit/(loss) before exceptional items | 5,282 | 2,519 | (557) | (2,772) | 4,472 |
Exceptional items (refer note 4): | |||||
- Loss of profit claim | 500 | - | - | - | 500 |
Profit/(loss) from operations | 5,782 | 2,519 | (557) | (2,772) | 4,972 |
Net borrowing costs | - | - | - | (146) | (146) |
Net pension charge | - | - | - | (364) | (364) |
Profit/(loss) before taxation | 5,782 | 2,519 | (557) | (3,282) | 4,462 |
Tax charge | - | - | - | (1,434) | (1,434) |
Profit/(loss) for the year | 5,782 | 2,519 | (557) | (4,716) | 3,028 |
Year ended 31 January 2010
Brands £000 | Manufacturing £000 | Overseas £000 | Eliminations & unallocated £000 | Total £000 | |
Revenue - External | 41,757 | 11,936 | 6,685 | - | 60,378 |
Revenue - Internal | 1,397 | 10,168 | - | (11,565) | - |
Total Revenue | 43,154 | 22,104 | 6,685 | (11,565) | 60,378 |
Operating profit/(loss) before exceptional items | 4,616 | 633 | 5 | (2,732) | 2,522 |
Exceptional items (refer note 4) | |||||
Redundancy expenses | (78) | (182) | (72) | - | (332) |
Net proceeds from insurance recovery | 225 | - | - | - | 225 |
Profit/(loss) from operations | 4,763 | 451 | (67) | (2,732) | 2,415 |
Net borrowing costs | - | - | - | (263) | (263) |
Net pension income | - | - | - | (600) | (600) |
Profit/(loss) before taxation | 4,763 | 451 | (67) | (3,595) | 1,552 |
Tax charge | - | - | - | (379) | (379) |
Profit/(loss) for the year | 4,763 | 451 | (67) | (3,974) | 1,173 |
Notes to the Accounts continued
2. Segmental Analysis continued
The segmental revenues of the Group are reported to the CODM in more detail. One of the analyses presented is by strategic objectives of the Group although profitability measures on this basis are not reported to the CODM. These strategic objectives 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 by strategic objective: | 2011 £000 | 2010 £000 |
United Kingdom retail | 27,957 | 24,723 |
Continental Europe retail | 9,320 | 9,030 |
North America retail | 5,218 | 4,664 |
Rest of the World retail | 4,430 | 3,657 |
Contract (includes all global revenues) | 5,165 | 5,265 |
Licence | 1,435 | 1,103 |
Manufacturing | 15,253 | 11,936 |
68,778 | 60,378 |
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 sales to overseas subsidiaries, together with contract and license revenue:
Brand Revenue Analysis: | 2011 £000 | 2010 £000 |
Harlequin | 20,919 | 19,236 |
Sanderson incorporating Morris & Co | 17,863 | 15,243 |
Zoffany | 9,439 | 8,675 |
48,221 | 43,154 |
Revenue of the Manufacturing reportable segments - including revenues from internal sales to the group's Brands:
Manufacturing Revenue Analysis: | 2011 £000 | 2010 £000 |
Standfast | 15,751 | 12,511 |
Anstey | 13,031 | 9,593 |
28,782 | 22,104 |
Revenue of the Overseas reportable segments - revenue of the group's overseas subsidiaries from retail operations which includes contract and licence revenue:
Overseas Revenue Analysis: | 2011 £000 | 2010 £000 |
United States of America | 5,475 | 5,095 |
France | 1,132 | 1,017 |
6,607 | 6,112 | |
Italy | - | 573 |
6,607 | 6,685 |
Notes to the Accounts continued
2 Segmental Analysis continued
b. Additional entity-wide disclosures
Revenue by geographical location of customer: | 2011 £000 | 2010 £000 |
United Kingdom | 46,322 | 39,969 |
Continental Europe | 10,507 | 9,750 |
North America | 7,105 | 6,442 |
Rest of the World | 4,844 | 4,217 |
68,778 | 60,378 |
3. Analysis of profit from operations
2011 £000 | 2010 £000 | |
Revenue | 68,778 | 60,378 |
Cost of sales | (27,384) | (24,359) |
Gross profit | 41,394 | 36,019 |
Net operating expenses | (36,422) | (33,604) |
Profit from operations | 4,972 | 2,415 |
4. Exceptional items
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 current year, a full and final payment of £500,000 was received for a 'loss of profits claim' which arose from the disruption to collection launches in 2009 as a consequence of the loss of marketing material products held at third party's premises which were destroyed in a fire in January 2009. In the previous year 'Redundancy expenses' of £332,000 were incurred to reduce the cost base of the group during the economic downturn and 'Net income from an insurance recovery' of £225,000 for marketing material products destroyed in the fire noted above.
Notes to the Accounts continued
5. Net borrowing costs
2011 £000 | 2010 £000 | |
Interest expense: | ||
Interest payable on bank borrowings | (209) | (218) |
Amortisation of issue costs on bank loans | (25) | (24) |
Other interest and similar charges payable | - | (21) |
Total borrowing expense | (234) | (263) |
Interest income: | ||
Other interest receivable | 88 | - |
Net borrowing costs | (146) | (263) |
Other interest receivable includes £86,000 on VAT recovery.
6. Net defined benefit pension costs
| ||
2011 £000 | 2010 £000 | |
Expected return on pension scheme assets | 2,434 | 2,306 |
Interest on pension scheme liabilities | (2,542) | (2,617) |
Scheme expenses met by group | (322) | (289) |
Settlement gain | 66 | - |
Net charge | (364) | (600) |
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 period. A net settlement gain of £66,000 is included within net defined benefit costs.
Notes to the Accounts continued
7. Tax
| ||
2011 £000 | 2010 £000 | |
Current tax: | ||
- overseas, current tax | (13) | (18) |
- overseas, adjustment in respect of prior year | - | 50 |
Current tax | (13) | 32 |
Deferred tax: | ||
- ordinary | (1,339) | (422) |
- adjustment in respect of prior year | (2) | 11 |
- effect of change in corporation tax rate to 27% | (80) | - |
Deferred tax | (1,421) | (411) |
Tax charge for the year | (1,434) | (379) |
2011 £000 | 2010 £000 | |
Profit on ordinary activities before tax | 4,462 | 1,552 |
Tax on profit on ordinary activities at standard rate 28% (2010: 28%) | (1,249) | (435) |
Non deductible expenditure | (31) | (22) |
Parent and overseas losses and temporary timing differences not recognised | (72) | 17 |
Impact of change in corporation tax rate to 27% | (80) | - |
Adjustments in respect of prior years | (2) | 61 |
Tax charge for year | (1,434) | (379) |
Factors affecting current and future tax charges
The Group does not anticipate that UK corporation tax will become payable on profits within the immediate future due to the availability of tax losses of approximately £16.2 million (2010: £20.1 million).
Notes to the Accounts continued
8. Deferred income tax
A net deferred tax asset of £3,982,000 (2010: £5,806,000) has been recognised in respect of tax losses and other temporary differences.
2011 £000 | 2010 £000 | |
Taxable temporary differences on property, plant and equipment | (776) | (581) |
Taxable temporary differences on intangible assets | (164) | (149) |
Other temporary differences | 38 | 40 |
Unutilised tax losses | 3,063 | 4,272 |
2,161 | 3,582 | |
Retirement benefit obligations | 1,821 | 2,224 |
3,982 | 5,806 |
9. | Earnings per share |
| Basic and diluted earnings per share is calculated by dividing the earnings attributable to ordinary equity shareholders by the weighted average number of shares outstanding during the year, excluding those held in the employee share trust ('EBT') and those held in treasury, which are treated as cancelled.
|
2011 | 2010 | ||||||
Earnings £000 |
Weighted average number of shares (000s) |
Per Share Amount Pence | Earnings £000 |
Weighted average number of shares (000s) |
Per Share Amount Pence | ||
Basic and diluted earnings per share | 3,028 | 56,491 | 5.36 | 1,173 | 55,977 | 2.10 | |
On 7th December 2010 Walker Greenbank PLC purchased 100,000 ordinary shares of 1p each in the Company at 50p per ordinary share. On 9th December 2010 Walker Greenbank PLC purchased 150,000 ordinary shares of 1p each in the Company at 51p per ordinary share and 100,000 ordinary shares at 50.50p Following these transactions Walker Greenbank's issued ordinary share capital with voting rights consists of 59,006,162 (2010: 59,006,162) ordinary shares of which 960,000 (2010: 610,000) ordinary shares are held in treasury and a further 1,852,445 (2010: 1,852,445) ordinary shares are held by the 'EBT' at a cost of £380,534 (2010: £380,534). At 31 January 2011 the market value of the treasury shares was £505,800.
Notes to the Accounts continued
10. Trade and other receivables
Current | 2011 £000 | 2010 £000 |
Trade receivables | 10,075 | 8,224 |
Less: Provision for impairment of trade receivables | (515) | (408) |
Net trade receivables | 9,560 | 7,816 |
Other receivables | 595 | 430 |
Marketing materials | 2,894 | 1,137 |
Prepayments | 1,334 | 926 |
14,383 | 10,309 |
11. | Analysis of net debt |
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|
|
|
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| 1 February 2010 £000 | Cash flow £000 | Working capital facilities (see note below) £000 | Current portion of term facilities £000 | Other non-cash changes £000 | Exchange movement £000 | 31 January 2011 £000 |
Cash at bank and in hand | 2,333 | (404) | - | - | - | (2) | 1,927 |
Borrowings due within 1 year | (2,867) | 400 | 2,467 | (400) | - | - | (400) |
Borrowings due after 1 year | (2,580) | 1,266 | (2,467) | 400 | 37 | - | (3,344) |
(5,447) | 1,666 | - | - | 37 | - | (3,744) | |
| |||||||
Net debt | (3,114) | 1,262 | - | - | 37 | (2) | (1,817) |
The working capital facilities provided by Barclays in place at the end of the previous financial year were renewed in March 2010 for another three year term. Other non-cash changes are capitalisation and amortisation of issue costs relating to the borrowings.
Notes to the Accounts continued
12. Cash generated from operations
31 January 2011 £000 | 31 January 2011 £000 | 31 January 2010 £000 |
31 January 2010 £000 | |
Profit from operations: | 4,972 | 2,415 | ||
Depreciation | 1,419 | 1,324 | ||
Amortisation | 319 | 462 | ||
Charge for long-term incentive plan recognised in equity | 493 | 127 | ||
Unrealised foreign exchange losses included in operating profit | 9 | 221 | ||
Defined benefit pension cash contributions | (1,406) | (1,352) | ||
Changes in working capital | ||||
(Increase)/decrease in inventories | (2,392) | 649 | ||
(Increase)/decrease in trade and other receivables | (3,962) | 2,062 | ||
Increase/(decrease) in trade and other payables | 5,004 | (1,316) | ||
(516) | 2,177 | |||
Cash generated from operations | 4,456 | 4,592 |
13. | Retirement benefit obligations
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The Group operates the following funded defined benefit pension schemes in the UK which offer pensions in retirement and death benefits to members: the Walker Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme. Pension benefits are related to the members' salary at retirement and their length of service. The schemes are closed to new members and the future accrual of benefits. This disclosure excludes any defined contribution assets and liabilities. The Company's contributions to the schemes for the year beginning 1 February 2011 are expected to be £1,460,000. The only remaining members of the WG Senior Management Pension Scheme transferred out during the year. The scheme is currently being wound up but there were no assets and liabilities at the year end. |
| |||
| 2011 £000 | 2010 £000 | ||
Deficit at beginning of year | (7,943) | (4,161) | ||
Scheme expenses met by group | (322) | (289) | ||
Other net finance expense | (42) | (311) | ||
Contributions payable | 1,406 | 1,352 | ||
Actuarial gains on scheme assets | 1,718 | 2,665 | ||
Changes in actuarial mortality assumptions | - | 495 | ||
Other actuarial losses on scheme liabilities | (1,559) | (7,694) | ||
Deficit at end of year | (6,742) | (7,943) | ||
14. Post Balance Sheet Event
The Directors have recommended the payment of a final dividend of 0.8 pence per share, at a total cost of £455,000, which is subject to the approval of shareholders at the annual general meeting on 22 June 2011.