16 Apr 2009 07:00
A briefing for analysts will be held at 10am this morning, 16 April 2009, at the offices of Buchanan Communications, 45 Moorfields, London EC2Y 9AE.
| For immediate release | 16 April 2009 |
WALKER GREENBANK PLC
("Walker Greenbank" or "the Company")
Preliminary Results for the 12 months ended 31 January 2009
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 2009.
Highlights
| Revenue up 2% to £63.70 million (2008: £62.45 million) supported by the continued progress of the Sanderson brand | |
| Operating profit down 10% to £3.56 million (2008: £3.96 million) | |
| Profit before taxation down 10% to £2.79 million (2008: £3.10 million) | |
| Earnings per share of 2.96p (2008: 14.49p). Adjusted earnings per share 4.97p (2008: 5.44p) after excluding the impact of deferred tax | |
| Gearing reduced to 31% (2008: 35%) with Shareholders' Funds of £19.91 million (2008: £20.80 million) and interest cover improved to 5.1 times (2008: 4.0 times) | |
| Net debt to EBITDA ratio improved to 1.1 (2008: 1.3) |
Terry Stannard, the Chairman of Walker Greenbank, said: "Over the past five years the Group has established itself as a leader in its field increasing revenue and profits significantly, generating cash and building a strong balance sheet. In the current uncertain global environment in which we operate we have focused on reducing our cost base, improving manufacturing efficiency and reducing net debt. In addition we continue to invest in the strength of our exceptional brand portfolio.
"With 10 weeks of the current financial year complete, total revenues are 15% below the same period last year. Our brand revenues are 10% below last year and manufacturing revenues to third parties are 28% below, reflecting an element of destocking. Revenues in the first half will therefore be significantly down on a buoyant period last year, though the impact of this reduction will to some extent be mitigated by our focus on costs and efficiency. With a clear strategy and a robust balance sheet we believe that the Group is well positioned to take advantage of an upturn in its markets."
For further information:
| Walker Greenbank PLC | 08708 300077 |
| John Sach, Chief Executive | |
| Alan Dix, Finance Director | |
| Julian Wilson, Company Secretary | |
| Arden Partners plc | 020 7398 1600 |
| Chris Hardie / Adrian Trimmings | |
| Buchanan Communications | 020 7466 5000 |
| Mark Court / Miranda Higham |
CHAIRMAN'S STATEMENT
Overview
The year started well with a continuation of the strong growth momentum of recent years but performance was impacted by the economic downturn as the year progressed. Total revenues increased by 2% for the year with growth of 7% at the half year and a decline of 3% in the second half. In challenging market conditions our performance was supported by successful design innovation and our strong portfolio of brands including Sanderson and Harlequin positioned at the mid market and Morris & Co and Zoffany at the upper end of the interior furnishings market. Revenues from these brands have grown year on year by 5%.
Approximately half our manufacturing output was to third parties and this business declined by 9% in contrast to production for our own brands which increased by 4%.
We have strengthened our balance sheet during the year reducing net debt at the year end to £6,218,000 from £7,289,000 in 2008.
The current economic environment is clearly unfavourable. However many global opportunities are available to us in the medium term and a clear strategy to develop the Group for a strong future and to manage the downturn is set out in the Chief Executive's Review.
Financials
Revenue increased 2% to £63,698,000, from £62,448,000 over the same period last year. The operating profit for the year decreased 10% to £3,561,000 (2008: £3,961,000). The profit before tax decreased 10% to £2,787,000 (2008: 3,099,000). The profit after tax declined to £1,622,000 (2008: £8,171,000), due almost entirely to non-cash deferred tax movements as a consequence of the recognition for the first time last year of a deferred tax asset. This related predominantly to historical corporation tax losses.
The earnings per share were 2.96p (2008: 14.49p). An adjusted earnings per share that excludes the deferred tax movements and reflects the cash tax of the Group is 4.97p (2008: 5.44p)
Interest cover increased to 5.1 times, compared with 4.0 times last year.
The Group's net indebtedness at the year end reduced to £6,218,000 (2008: £7,289,000). This represents a reduction in gearing to 31% (2008: 35%). The cash inflow from operating activities was £2,830,000 (2008: £3,542,000), reflecting higher stock levels as a result of extensive brand product launches during the year. At the year end, the Group had available banking facilities of £12,773,000 (2008: £14,183,000) representing headroom of £6,555,000 (2008: £6,894,000).
Dividend
The Directors do not recommend the payment of a dividend at this point in time. In this current economic environment we remain focused on continued cash generation and reduction in net debt.
People
On the 31 January 2009, Ian Kirkham retired from the Board. He has served as Non-Executive Chairman for a period of five years and during that time has overseen the transformation of the Group's fortunes. I would like to offer our grateful thanks to Ian on behalf of the Board.
Following Ian's retirement, I am delighted to have become Chairman at the start of the 2009/10 financial year.
On 17 December 2008, Fiona Goldsmith joined the Board as a Non-Executive Director. Her extensive financial background across a variety of business sectors will be of great value to the Group in future years.
Finally I would like to offer sincere thanks to all of our management and employees for their loyalty and commitment during the year.
Outlook
Over the past five years the Group has established itself as a leader in its field increasing revenue and profits significantly, generating cash and building a strong balance sheet. In the current uncertain global environment in which we operate we have focused on reducing our cost base, improving manufacturing efficiency and reducing net debt. In addition we continue to invest in the strength of our exceptional brand portfolio.
With 10 weeks of the current financial year complete, total revenues are 15% below the same period last year. Our brand revenues are 10% below last year and manufacturing revenues to third parties are 28% below, reflecting an element of destocking. Revenues in the first half will therefore be significantly down on a buoyant period last year, though the impact of this reduction will to some extent be mitigated by our focus on costs and efficiency. With a clear strategy and a robust balance sheet we believe that the Group is well positioned to take advantage of an upturn in its markets.
Terry Stannard
Non-Executive Chairman
16 April 2009
CHIEF EXECUTIVE'S REVIEW
Strategy
Despite the turbulent economic conditions in which we are trading, we remain committed to the five key elements of our growth strategy which is supported by the Group's cash generation and a robust balance sheet. In addition we benefit from world renowned brands all of which can be expected to return to strong growth on any upturn in the trading environment. The key elements of the strategy comprise:
| UK growth - to continue to exploit the medium term organic growth opportunities that exist for our Group in the UK retail market; | |
| Geographic expansion - to invest in marketing and distribution in the North American market, where our Group is currently immature relative to our peers, and to focus on the distribution and marketing of our brands in Europe and the Rest of the World, where again as a Group we are presently underdeveloped; | |
| Contract sales - to drive the expansion of our developing contracts business through further investment in people and contract specific product supported by the strength of our brand names and our manufacturing capability, predominantly focusing at the mid to upper end of the contract market; | |
| Licensing income - to exploit the global recognition of the Sanderson and Morris & Co brand names and to develop further the licensing opportunities that exist for Harlequin in the UK; | |
| Acquisitions - to evaluate acquisition opportunities that may fit with our current brand portfolio and potentially provide synergistic and earnings enhancing opportunities. |
Overview
Our brand sales have remained flat in the UK retail market. In mainland Europe, retail sales have grown 10% due to the strength of the Euro, although this equates to a 4% decline in constant currency. In the Rest of the World sales have grown by 16%. Sales in our US retail business, which remains a relatively small part of our Group, have increased 3% due to the strength of dollar, but fallen 7% in constant currency. Within our brand segment our Contract business continues to benefit from strong investment and has delivered 17% year on year growth. Our licence business has grown 21% reflecting the strength of our brands and their potential to stretch into adjacent categories. Finally, our manufacturing units have suffered from the overall decline in the market with their third party sales falling 9%.
The Brands
Total sales have grown year on year by 5% reflecting no growth in sales in the second half due to a much tougher trading environment, sales having been up 10% at the half year. Over recent years we have strongly increased our investment in our product launches across all our brands and this has helped protect our market share in a much tougher trading environment. We have a strong portfolio of brands covering a wide variety of market segments in the mid to upper end of the interior furnishings market, supported by a wide offering of product. We are however conscious of the tougher market in which we operate and, going forward, will keep tight control of the amount of product we launch to reduce cost while the current economic environment prevails.
Harlequin
Despite increasingly tough market conditions in the second half, it is pleasing to report that Harlequin has managed to maintain its sales at the same level as last year having been 7% up at the half year and to continue its position as the leading mid-market contemporary brand in the UK. Overall both the UK market and export markets were essentially flat. However, within our export markets, Europe was down year on year by 7% and by 14% in constant currency. This was offset by growth in the emerging markets of the Far East, Middle East and Australia where overall sales were up 21%. Woven product continued to grow, up 4% on the same period last year, whilst wallpaper sales declined by 4% and printed fabrics declined by 8%.
Continued commitment and investment in our Contract business has helped grow year on year sales by 19%. Harlequin has also grown its licensing income principally with the development of a range of product lines in the John Lewis Partnership. More than half of Harlequin's sales are from woven product which is sourced primarily from Europe. For this product category the gross margins have declined due to the strengthening of the Euro which has led to a fall in profits.
Zoffany
Having established Zoffany as a leading brand at the premium end of the market and having invested heavily in new product over recent years, we reported last year that the design community had shown increasing interest in the older collections of Zoffany and that this had reinvigorated the sales of those collections. This year we have experienced an accelerating decline of those older collections but in their place our newer collections have performed well.
Overall year on year sales have declined 1% having been up 7% at the half year. UK sales declined 2% but export markets continued to see overall growth of 5%, with Europe growing 6%, representing an 11% decline in constant currency and the Rest of the World up 5% helped by strong growth from the Middle East and Australasia. Woven fabric, which now represents more than half of Zoffany's sales, grew 2% with both wallpaper and printed fabrics having declined by 1% each. Zoffany's Contract business has grown year on year 2%. The strong Euro has led to a decline in margins and this combined with additional stock provisioning due to the faster decline of the older collections has led to a reduction in profits.
Arthur Sanderson & Sons incorporating the Morris & Co brand
Significant investment in product and marketing over recent years has helped Sanderson to exploit the unrivalled global recognition of the Sanderson and Morris & Co brand names and to grow its sales this year by 15%, having been up 25% at the half year. The growth continues to be broad-based with all geographic markets growing strongly. The UK market delivered year on year sales growth of 9% whilst overseas markets were up 31%. This impressive export sales growth was driven by European markets up 32%, 17% in constant currency and the Rest of the World up 28%. The growth has been led by woven fabric, up by 22%, with wallpaper up 19% and printed fabrics up 4%. The growth has been supported by strong progress in its Contract business up 34%. Gross margins improved as the strengthening Euro benefited margins with Sanderson selling more in Europe than it purchases. This margin gain combined with the sales growth has helped to improve profits significantly.
Overseas
USA
Sales in our US business have increased year on year by 7% however they have fallen in constant currency by 4% due to the strengthening dollar. Sales at the half year in local currency were broadly flat. The US still forms a relatively small part of the overall Group but we firmly believe in the medium to long term potential for the Group in this market. However economic conditions are becoming increasingly challenging and whilst this prevails we will remain tightly focused on the level of investment in marketing, patterning and sample support. Lower sales have led to a continued loss.
Europe
The Group's distribution businesses in Rome, for Zoffany and Harlequin, and in Paris, for Zoffany and Sanderson, remain relatively small. Both these markets saw challenging trading conditions but the appointment of an experienced Export development director at towards the end of last year brought improvements to both operations. Combined revenues have increased by 14%, representing a decline of 3% in constant currency.
Manufacturing
We have two freehold printing facilities in the UK: Anstey, our wallpaper factory in Loughborough; and Standfast, our fabric printing factory in Lancaster. Both factories offer highly specialised printing, and their UK location brings benefits including the ability to print very short runs and easy accessibility for UK designers to visit the factories' during the printing process. In addition to printing the wallpaper and fabrics for the Group's own brands, the factories print for third party customers.
Anstey
Anstey continues to benefit from the demand for wallpaper and its unique position as market leader in the UK for wallpaper manufacture at the mid to premium end of the market. Overall sales have grown year on year by 4% sales having been up at the half year by 5%. Sales to Group company brands have grown 5% representing 51% of the overall sales, whilst external third party sales have grown 2%, reflecting the relative success of our brands in difficult markets. Margins have fallen slightly due to increased energy costs and overall profitability has slightly improved over the same period last year. We remain focused on improving factory efficiency and service to our customers.
Standfast
Standfast has suffered particularly difficult trading conditions with overall sales falling 9% over the same period last year, sales were down 3% at the half year. Sales to Group company brands which represent 41% of the overall sales were up 3%, whilst external third party sales fell 16%, suggesting our Group brands are performing well in very difficult market conditions. Standfast has suffered margin decline due to less production throughput in the factory and increased energy costs, two factors which combined with the sales fall has led to a loss in the year.
At the beginning of the second half of the year management took action to reduce the cost base of this business in order to reflect the lower level of volume activity, resulting in a redundancy cost of £146,000.
Summary
All of our brands continue to perform competitively in a difficult market. The considerable investment we have made in product and marketing in recent years places us in a strong position to withstand the current economic environment and ultimately exploit the continuing and new business opportunities that exist within the Group. We remain confident about the progress the Group will make in the medium term given the global recognition of its brands and the robustness of the Group's finances.
John Sach
Group Chief Executive
16 April 2009
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, information on our business segments.
Disposals
There were no major disposals during the year.
Interest
The net interest charge for the year was £695,000 (2008: £981,000) including amortisation of debt issue costs capitalised. The reduced cost reflects the reduction in interest rates over the year.
Net Defined Benefit Pension
The charge during the year was £79,000 (2008: income £119,000). This is a consequence of the increase in corporate bond rates from the start of the financial year compared with that at the beginning of the previous year. The charge is also impacted if the pension deficit increases which will be the case in the coming year.
Current Taxation
There is a small corporation tax charge arising from the taxable profits at the Italian subsidiary and overseas licence income. The Group continues to review the overseas tax position to ensure every opportunity is considered to minimise the amount incurred.
Deferred Taxation
Due to the substantial nature of corporation tax losses £21.3 million (2008: £23.7 million) the Group does not anticipate incurring or 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.
There is a one off deferred tax charge of £320,000 arising from the phasing out of Industrial Building Allowances in the Finance Act 2008.
The Group also continues to recognise the deferred tax asset arising from the Pension Deficit. As the Pension Deficit has increased during the year an increase in the associated deferred tax asset has been recognised.
Earnings per share ('EPS')
Last year the Group recognised a deferred tax asset of £5,101,000 as the Group was, and remains, confident of utilising historical corporation tax losses as a result of foreseeable sustainable future profits. The impact of deferred tax in both years has been removed in the analysis of adjusted EPS discussed below, to enable better comparison of the underlying performance of the Group.
The basic and diluted EPS was 2.96p (2008: 14.49p). The adjusted EPS was 4.97p for the current year (2008: 5.44p), and is calculated as follows:
| 2009 | 2008 | |
| £000 | £000 | |
| Profit after tax per the accounts | 1,622 | 8,171 |
| Exclude the impact of deferred tax | 1,108 | (5,101) |
| Adjusted Profit after tax | 2,730 | 3,070 |
| Adjusted EPS | 4.97p | 5.44p |
The number of shares in issue remained constant, however, on 1 July 2008 275,000 shares were purchased and brought into Treasury. The weighted average number of shares reduced to 54,880,000 for the year ended 31 January 2009 from 56,397,000 in the year ended 31 January 2008.
Operating Cash Flow
The Group generated net cash inflow from operating activities during the year of £2,830,000 (2008: £3,542,000) reflecting higher stock levels as a result of extensive brand product launches during the year.
The Group paid interest of £704,000 (2008: £956,000) and capital expenditure of £1,687,000 (2008: £1,674,000). Due to the timing of actual payments the additions in the fixed asset notes were £1,500,000 (2008: £1,797,000). The depreciation and amortisation charge during the period of £1,846,000 (2008: £1,822,000) continue to be greater than required capital expenditure.
The Group made additional payments to the Pension schemes of £1,052,000 (2008: £1,059,000) to reduce the deficit, part of the ongoing planned reduction, along with £275,000 (2008: £231,000) of regular contributions to fund scheme expenses.
The Group purchased 275,000 shares at a cost of £83,000 in July 2008.
Net debt in the Group has reduced by £1,071,000 to £6,218,000 (2008: £7,289,000).
Net debt to EBITDA ratio improved to 1.1 (2008: 1.3) and is set out below;
| 2009 | 2008 | |
| EBITDA | £000's | £000's |
| Profit after tax | 1,622 | 8,171 |
| Interest | 774 | 862 |
| Tax | 1,165 | (5,072) |
| Depreciation and Amortisation | 1,846 | 1,822 |
| EBITDA | 5,407 | 5,783 |
| Net Debt | 6,218 | 7,289 |
| Net Debt : EBITDA | 1.1 | 1.3 |
Pension Deficit
The pension deficit has increased this year. The key factors affecting the movement in the deficit have been; firstly ongoing contributions of £1,327,000 from the Company to reduce the deficit; secondly a reduction in the liabilities of the scheme arising predominantly from the increase in discount rates during the year and lastly the significant reduction in scheme assets due to the current economic climate. The impact of these factors is shown as follows:
| 2009 | |
| £000 | |
| Deficit at beginning of period | (3,409) |
| Scheme expenses | (275) |
| Other finance income | 196 |
| Contributions | 1,327 |
| Actuarial loss on scheme assets | (7,458) |
| Actuarial gains from the change in discount factor | 5,458 |
| Gross deficit at the end of the year | (4,161) |
Long-Term Incentive Plan
There have not been any further awards during the year under the Long-Term Incentive Plan ("LTIP"). There has been a charge of £373,000 (2008: £429,000) in the Income Statement for current awards.
Gearing
The gearing level for the Group fell during the year to 31% at 31 January 2009 (2008: 35%).
Funding
The Group utilises facilities provided by Barclays Bank Plc. The facilities were put in place on 17 July 2007 replacing previous facilities from another provider. There is a 10 year term property facility of £3,400,000 (2008: £3,800,000) at the year end.
There is also a facility linked to working capital which allows the Group to manage its cash more effectively during the seasonal fluctuations in working capital associated with the industry in which the Group operates. This facility has an initial 3 year term. The borrowings at the end of the year under this facility were £3,868,000 (2008: £5,506,000). The available facility at the end of the year was £9,373,000 (2008: £10,383,000) of which £3,000,000 (2008: £3,000,000) is from a stock facility which is effectively permanently available due to the level of stocks in the Group. The remainder of the working capital facility arises from trade debtors and fluctuates with the level of trade debtors. The total facilities have a current limit of £16.4m.
All of the Group bank facilities remain secured by first fixed and floating charges over the Group's assets.
Going Concern
The directors are confident, after having made appropriate enquiries that the Group and Company have adequate resources to continue in the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the accounts.
Treasury Policy
The Group's treasury policy is controlled centrally in accordance with procedures approved by the Board. It is run prudently as a central Group function, providing services to the other Group companies and adopts a risk averse strategy.
The main risks covered by this policy are interest rate risk, foreign currency risk and liquidity risk.
Interest rate risk
The Group has continued to maintain its debt in floating rate instruments in order to benefit from the lower rates available and the increasing reduction in borrowings. This policy remains constantly under review to ensure interest cost is minimised. The viability of hedging instruments that would limit the impact of interest rate movements will continue to be reviewed based on the Board's perception of future rate increases and the reducing level of borrowings.
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 anticipated cash flows. There is a hedging reserve of £812,000 (2008: £110,000) at the end of the year.
The fluctuation in exchange rates during the year has benefited the trading at the US subsidiary but conversely the strengthening Euro has impacted negatively at the brands as more product is sourced in Euro than sold.
Liquidity Risk
The Group ensures that it has adequate facilities available to cover both its short term and medium term commitments. The facility available at the end of the year was £12,773,000 (2008: £14,183,000) which represents an additional borrowing capacity of £6,555,000 (2008: £6,894,000)
Credit Risk
The Group seeks to obtain credit insurance on all its significant overseas customers. However, credit insurers have been taking a much more conservative position in recent months on the level of credit insurance provided or the insurance has even been removed. The aging profile of trade debtors shows that customers do pay to terms or soon thereafter. Where credit insurance has been removed and the customer has kept to terms internal credit limits are set and strictly adhered to, otherwise internal credit limits are reduced and then strictly adhered to.
Alan Dix
Group Finance Director
16 April 2009
Unaudited Consolidated Income Statement
Year ended 31 January 2009
| Note | 2009 £000 | 2008 £000 | |
| Revenue | 63,698 | 62,448 | |
| Operating profit | 3 | 3,561 | 3,961 |
| Net defined benefit pension (charge)/income | 5 | (79) | 119 |
| Net finance costs | 4 | (669) | (906) |
| Amortisation of issue costs | 4 | (26) | (75) |
| (774) | (862) | ||
| Profit before taxation | 2,787 | 3,099 | |
| Deferred tax - exceptional | 6 | (320) | 5,101 |
| Deferred tax - other | 6 | (788) | - |
| Current taxation | 6 | (57) | (29) |
| Total tax (charge)/credit | (1,165) | 5,072 | |
| Profit for the year | 1,622 | 8,171 | |
| Earnings per share - Basic and diluted | 8 | 2.96p | 14.49p |
All results arise from continuing operations.
Unaudited Consolidated Statement of Recognised Income and Expense
Year ended 31 January 2009
| 2009 £000 | 2008 £000 | |
| Actuarial losses on scheme assets (note 11) | (7,458) | (1,364) |
| Changes in actuarial mortality assumptions (note 11) | - | (2,868) |
| Other actuarial gains on scheme liabilities (note 11) | 5,458 | 4,932 |
| Currency translation differences | (350) | 27 |
| Cash flow hedges | (702) | (110) |
| Reduction in deferred tax relating to pension liability due to rate reduction | - | (110) |
| Recognition/(reduction) of deferred tax asset relating to pension scheme liability | 211 | (573) |
| Net expense recognised directly in equity | (2,841) | (66) |
| Profit for the year | 1,622 | 8,171 |
| Total recognised (expense)/income for the year | (1,219) | 8,105 |
Unaudited Consolidated Balance Sheet
As at 31 January 2009
| Note | 2009 £000 | 2008 £000 | |
| Non-current assets | |||
| Intangible assets | 5,877 | 5,833 | |
| Property, plant & equipment | 8,734 | 8,991 | |
| Deferred income tax assets | 7 | 5,158 | 6,055 |
| Trade and other receivables | 12 | 253 | |
| 19,781 | 21,132 | ||
| Current assets | |||
| Trade and other receivables | 12,552 | 13,475 | |
| Inventories | 13,887 | 12,546 | |
| Cash and cash equivalents | 9 | 1,050 | 2,017 |
| 27,489 | 28,038 | ||
| Total assets | 47,270 | 49,170 | |
| Current liabilities | |||
| Trade and other payables | (15,118) | (15,546) | |
| Derivative financial instruments | (812) | (110) | |
| Borrowings | 9 | (400) | (400) |
| (16,330) | (16,056) | ||
| Net current assets | 11,159 | 11,982 | |
| Non-current liabilities | |||
| Borrowings | 9 | (6,868) | (8,906) |
| Retirement benefit obligation | 11 | (4,161) | (3,409) |
| (11,029) | (12,315) | ||
| Total liabilities | (27,359) | (28,371) | |
| Net assets | 19,911 | 20,799 | |
| Equity | |||
| Share capital | 12 | 590 | 590 |
| Share premium account | 12 | 457 | 457 |
| Foreign currency translation reserve | 12 | (340) | 10 |
| Retained earnings | 12 | (20,491) | (20,655) |
| Other reserves | 12 | 39,695 | 40,397 |
| Total Equity | 19,911 | 20,799 |
Unaudited Consolidated Cash Flow Statement
Year ended 31 January 2009
| Note | 2009 £000 | 2008 £000 | |
| Cash flows from operating activities | |||
| Cash generated from operations | 10 | 3,536 | 4,623 |
| Interest paid | (704) | (956) | |
| Debt issue costs | - | (123) | |
| Interest received | 35 | 5 | |
| Income tax paid | (37) | (7) | |
| 2,830 | 3,542 | ||
| Cash flows from investing activities | |||
| Purchase of intangible fixed assets | (420) | (365) | |
| Purchase of property, plant & equipment | (1,267) | (1,309) | |
| Proceeds on sale of property, plant and equipment | 7 | 3 | |
| (1,680) | (1,671) | ||
| Cash flows from financing activities | |||
| Purchase of treasury shares | (83) | (612) | |
| Proceeds from borrowings | - | 11,296 | |
| Repayment of borrowings | - | (11,296) | |
| Net repayment of borrowings | (2,064) | (1,315) | |
| (2,147) | (1,927) | ||
| Net (decrease)/increase in cash, cash equivalents and bank overdrafts | (997) | (56) | |
| Cash, cash equivalents and bank overdrafts at beginning of year | 2,017 | 2,065 | |
| Exchange gains on cash and bank overdrafts | 30 | 8 | |
| Cash, cash equivalents and bank overdrafts at end of year | 9 | 1,050 | 2,017 |
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) and the accounting policies are consistent to those set out in the Annual Report for the previous year ended 31 January 2008.
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 2009. The audit of the statutory accounts for the year ended 31 January 2009 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.
This preliminary announcement was approved for release by the Board on 15th April 2009.
2. Segmental Analysis
Walker Greenbank is a luxury interior furnishing Group. The Group manages its operations as two segments which are the brands and manufacturing. Segmental information is also presented in respect of the Group's geographical segment. This is the basis on which the Group presents its results:
Year ended 31 January 2009
| Brands £000 | Manufacturing £000 | Eliminations & unallocated £000 | Total £000 | |
| Revenue - External | 50,735 | 12,963 | - | 63,698 |
| Revenue - Internal | - | 10,992 | (10,992) | - |
| Total Revenue | 50,735 | 23,955 | (10,992) | 63,698 |
| Operating profit | 5,082 | 785 | (2,306) | 3,561 |
| Financial costs | - | - | (695) | (695) |
| Net pension charge | - | - | (79) | (79) |
| Profit before tax | 5,082 | 785 | (3,080) | 2,787 |
| Tax | - | - | (1,165) | (1,165) |
| Profit for the year | 5,082 | 785 | (4,245) | 1,622 |
Notes to the Accounts continued
2. Segmental Analysis continued
Year ended 31 January 2008
| Brands £000 | Manufacturing £000 | Eliminations & unallocated £000 | Total £000 | |
| Revenue - External | 48,206 | 14,242 | - | 62,448 |
| Revenue - Internal | - | 10,570 | (10,570) | - |
| Total Revenue | 48,206 | 24,812 | (10,570) | 62,448 |
| Operating profit | 4,624 | 1,486 | (2,149) | 3,961 |
| Financial costs | - | - | (981) | (981) |
| Net pension income | - | - | 119 | 119 |
| Profit before tax | 4,624 | 1,486 | (3,011) | 3,099 |
| Tax | - | - | 5,072 | 5,072 |
| Profit for the year | 4,624 | 1,486 | 2,061 | 8,171 |
| Revenue by geographical location of customer: | 2009 £000 | 2008 £000 |
| United Kingdom | 41,026 | 41,540 |
| Continental Europe | 10,987 | 9,710 |
| United States of America | 7,893 | 7,927 |
| Rest of the World | 3,792 | 3,271 |
| 63,698 | 62,448 |
3. Analysis of Operating Profit
| 2009 £000 | 2008 £000 | |
| Turnover | 63,698 | 62,448 |
| Cost of sales | (25,567) | (25,362) |
| Gross profit | 38,131 | 37,086 |
| Net operating expenses | (34,570) | (33,125) |
| Operating profit | 3,561 | 3,961 |
Notes to the Accounts continued
4. Net finance costs
| 2009 £000 | 2008 £000 | |
| Interest expense: | ||
| Interest payable on bank borrowings | (685) | (875) |
| Interest and similar charges payable | (19) | (36) |
| Total interest expense | (704) | (911) |
| Interest income: | ||
| Interest receivable on bank deposits | 35 | 5 |
| Net finance costs | (669) | (906) |
| Amortisation of issue costs of bank loan | (26) | (75) |
| Total finance costs | (695) | (981) |
5. Net defined benefit pension costs
| 2009 £000 | 2008 £000 | |
| Expected return on pension scheme assets | 2,829 | 2,721 |
| Interest on pension scheme liabilities | (2,633) | (2,371) |
| Scheme expenses met by group | (275) | (231) |
| Net (charge)/ income | (79) | 119 |
Notes to the Accounts continued
6. Tax
| 2009 £000 | 2008 £000 | |
| Overseas tax - current tax | (57) | (29) |
| (57) | (29) | |
| Deferred tax - Ordinary | (788) | - |
| Deferred tax - exceptional | (320) | 5,101 |
| Deferred tax | (1,108) | 5,101 |
| Tax (charge)/credit for the year | (1,165) | 5,072 |
| 2009 £000 | 2008 £000 | |
| Profit on ordinary activities before tax | 2,824 | 3,099 |
| Tax on profit on ordinary activities at standard rate 28% (2008: 30%) | (791) | (930) |
| Non deductible expenditure | (48) | (73) |
| Utilisation of losses and origination and reversal of temporary differences during the year | - | 974 |
| Utilisation of parent losses and reversal of temporary differences not previously recognised as assets | (6) | - |
| Impact of phasing out of Industrial Building Allowances | (320) | - |
| Recognition of deferred tax asset at end of year | - | 5,101 |
| Tax credit/(charge) for year | (1,165) | 5,072 |
Factors affecting current and future tax charges
The Finance Bill 2008 announced the phasing out of the relief for Industrial Building Allowances by 31 March 2011. An additional deferred tax liability of £320,000 has been recognised as a consequence, and is classified as an exceptional item.
The deferred tax credit of £5.1 million arose in 2008 from the recognition of deferred tax on losses incurred by the Group in prior years and temporary differences. Because of the nature and size of this item it has been disclosed as an exceptional item.
Following the recognition of deferred tax assets arising from losses and temporary differences the future effective tax rate will also be influenced by changes in deferred tax positions.
The Group does not anticipate the UK corporation tax will become payable on profits within the immediate future due to the availability of tax losses of approximately £21.3 million.
Notes to the Accounts continued
7. Deferred income tax
A net deferred tax asset of £5,158,000 (2007: £6,055,000) had been recognised in respect of tax losses and other temporary differences and £1,108,000 has been charged to the income statement during the year as some of the tax losses have been utilised and Industrial Buildings Allowances were phased out in the Finance Act 2008.
| 2008 £000 | 2008 £000 | |
| Taxable temporary differences on property, plant and equipment | (872) | (533) |
| Taxable temporary differences on intangible assets | (128) | (106) |
| Tax losses | 4,993 | 5,740 |
| 3,993 | 5,101 | |
| Pension scheme obligations | 1,165 | 954 |
| 5,158 | 6,055 |
The movements in the deferred tax asset on pension scheme obligations are recognised in the Statement of Recognised Income and Expense.
At the balance sheet date the Group has unused tax losses of £21.3 million (2008: £23.7million) available for offset against future profits. A deferred asset has been recognised in respect of £17.7 million (2008: £20.5 million) of such losses as the Group believes that realisation of the related tax benefit through future taxable profit is probable and can be readily accessed under existing tax legislation. No deferred tax has been recognised on the remaining £3.6 million (2008: £3.2 million) as these losses are not readily available for offset against the Group's future profits under existing tax legislation and therefore the realisation of these losses is not considered probable. The recognition of deferred tax assets on losses will be assessed at each reporting date.
Potential deferred tax assets at 31 January 2009 of £1,269,000 (2008: £1,068,000) relating to tax losses and deductible temporary differences have not been recognised as it is not considered probable that recovery of the potential deferred tax asset will arise under existing tax legislation.
| 2009 £000 | 2008 £000 | |
| Tax losses | 997 | 893 |
| Other deductible temporary differences | 272 | 175 |
| 1,269 | 1,068 |
Notes to the Accounts continued
8. Earnings per share
Basic earnings per share 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 share trust and those held in treasury, which are treated as cancelled.
Adjusted earnings per share is also presented as, in the opinion of the Directors, this provides additional information to shareholders on the results of the Group's activities. Adjusted earnings per share has been calculated to remove any charge or credit arising from deferred tax in the current and comparative periods. The impact on after tax profit of deferred tax during these periods has been significant, and varies from an exceptional credit of £5,101,000 in the comparative year following the first time recognition of historical corporation tax losses, to a charge for the current year of £1,108,000, including an exceptional charge of £320,000 (refer note 7), as the corporation tax losses are utilised and the impact of the removal of IBA's in the 2008 Finance Act takes effect. In the opinion of the Directors, the exclusion of the deferred tax charges or credits creates a more comparable earnings base on which to assess the performance of the Group.
| 2009 | 2008 | ||||||
| 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: | |||||||
| Basic earnings per share | 1,622 | 54,880 | 2.96 | 8,171 | 56,397 | 14.49 | |
| Adjusted: | |||||||
| Earnings attributable to ordinary shareholders | 1,622 | 54,880 | 2.96 | 8,171 | 56,397 | 14.49 | |
| Reversal of impact of deferred tax charge/(credit) | 1,108 | - | 2.01 | (5,101) | - | (9.05) | |
| Adjusted earnings per share | 2,730 | 54,880 | 4.97 | 3,070 | 56,397 | 5.44 |
On 1 July 2009 Walker Greenbank PLC purchased 275,000 ordinary shares of 1p each in the Company at 30p per ordinary share. Following this transaction Walker Greenbank's issued ordinary share capital with voting rights consists of 59,006,162 ordinary shares of which 1,690,093 ordinary shares are held in treasury, and a further 2,549,146 ordinary shares are held by the Walker Greenbank PLC Employee Benefit Trust. Shares held in treasury or by the Employee Benefit Trust are treated as cancelled when calculating Earnings per share. At 31 January 2009 the market value of the treasury shares was £173,235.
Notes to the Accounts continued
9. Analysis of net debt
| 1 February 2008 £000 | Cash flow £000 | Other non-cash changes £000 | Exchange movement £000 | 31 January 2009 £000 | |
| Cash and cash equivalent | 2,017 | (997) | - | 30 | 1,050 |
| Borrowings due within 1 year | (400) | - | - | - | (400) |
| Borrowings due after 1 year | (8,906) | 2,064 | (26) | - | (6,868) |
| (9,306) | 2,064 | (26) | - | (7,268) | |
| Net debt | (7,289) | 1,067 | (26) | 30 | (6,218) |
Other non-cash changes are amortisation of issue costs relating to the loan financing.
10. Cash generated from operations
| 31 January 2009 £000 | 31 January 2009 £000 | 31 January 2008 £000 | 31 January 2008 £000 | |
| Operating profit | 3,561 | 3,961 | ||
| Depreciation | 1,470 | 1,321 | ||
| Amortisation | 376 | 501 | ||
| Charge for long-term incentive plan recognised in equity | 414 | 363 | ||
| Loss/(profit ) on disposal of property, plant and equipment | 6 | (3) | ||
| Unrealised foreign exchange (gains) / losses included in operating profit | (499) | 2 | ||
| Changes in working capital | ||||
| Increase in inventories | (1,341) | (410) | ||
| Decrease/(increase) in trade and other receivables | 1,164 | (2,212) | ||
| (Decrease)/increase in trade and other payables | (288) | 2,390 | ||
| Defined benefit pension cash contributions | (1,327) | (1,290) | ||
| (25) | 662 | |||
| Cash generated from operating activities | 3,536 | 4,623 |
Notes to the Accounts continued
11. Retirement benefit obligations
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, the Abaris Holdings Limited Pension Scheme and the WG Senior Management 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 2009 are expected to be £1,356,000.
| 2009 £000 | 2008 £000 | |
| Deficit at beginning of year | (3,409) | (5,518) |
| Scheme expenses met by group | (275) | (231) |
| Other net finance income | 196 | 350 |
| Contributions payable | 1,327 | 1,290 |
| Actuarial losses on scheme assets | (7,458) | (1,364) |
| Changes in actuarial mortality assumptions | - | (2,868) |
| Other actuarial gains on scheme liabilities | 5,458 | 4,932 |
| Deficit at end of year | (4,161) | (3,409) |
12. 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 |
| 1 February 2007 | 590 | 457 | (28,594) | 43,457 | (2,950) | - | (17) | 12,943 |
| Actuarial losses on scheme assets | - | - | (1,364) | - | - | - | - | (1,364) |
| Changes in actuarial mortality assumptions | - | - | (2,868) | - | - | - | - | (2,868) |
| Other actuarial gains on scheme liabilities | - | - | 4,932 | - | - | - | - | 4,932 |
| Deferred tax | - | - | (683) | - | - | - | - | (683) |
| Currency translation differences | - | - | - | - | - | - | 27 | 27 |
| Hedging reserve | - | - | - | - | - | (110) | - | (110) |
| Net income/(expense) recognised in equity via SORIE | - | - | 17 | - | - | (110) | 27 | (66) |
| Profit for the year | - | - | 8,171 | - | - | - | - | 8,171 |
| Reserve for long-term incentive plan | - | - | 363 | - | - | - | - | 363 |
| Purchase of Treasury shares | - | - | (612) | - | - | - | - | (612) |
| 31 January 2008 | 590 | 457 | (20,655) | 43,457 | (2,950) | (110) | 10 | 20,799 |
Notes to the Accounts continued
12. 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 | |
| 1 February 2008 | 590 | 457 | (20,655) | 43,457 | (2,950) | (110) | 10 | 20,799 |
| Actuarial losses on scheme assets | - | - | (7,458) | - | - | - | - | (7,458) |
| Other actuarial gains on scheme liabilities | - | - | 5,458 | - | - | - | - | 5,458 |
| Deferred tax | - | - | 211 | - | - | - | - | 211 |
| Currency translation differences | - | - | - | - | - | - | (350) | (350) |
| Cash flow hedging reserve - released to income statement | - | - | - | - | - | 110 | - | 110 |
| Cash flow hedging reserve - recognised in equity during the period | - | - | - | - | - | (812) | - | (812) |
| Net income/(expense) recognised in equity via SORIE | - | - | (1,789) | - | - | (702) | (350) | (2,841) |
| Profit for the year | - | - | 1,622 | - | - | - | - | 1,622 |
| Reserve for long-term incentive plan | - | - | 414 | - | - | - | - | 414 |
| Purchase of treasury shares | - | - | (83) | - | - | - | - | (83) |
| 31 January 2009 | 590 | 457 | (20,491) | 43,457 | (2,950) | (812) | (340) | 19,911 |