Final Results
Walker Greenbank PLC
25 April 2002
25 April 2002
Walker Greenbank PLC
Preliminary results for the year ended 31 January 2002
• Poor market conditions lead to lower sales of £61.1 million (2001:
£64.1 million) and a loss before exceptional operating costs of £3.5 million
(2001: loss £1.9 million).
• Loss before taxation increases to £6.1 million (2001: £5.2 million).
• Significant cost reductions have been achieved in the group's
restructuring programme. Site consolidation completed and two surplus
properties sold.
• Decline in results arrested and a significant improvement in the trading
performance has been experienced in the new financial year.
Ian Kirkham, Chairman of Walker Greenbank PLC said:
'The new management team has been in place for a year and whilst the performance
of the group was clearly unsatisfactory, a substantial amount of positive change
has been implemented. The trading results of the first months of this year are
markedly better than the corresponding period last year.'
For further information contact:
David Medcalf, Chief Executive John Rudofsky
Walker Greenbank PLC Helsen Communications
07718 743876 020 8786 6699
John Sach, Group Finance Director
Walker Greenbank PLC
01908 658002
Walker Greenbank PLC
Preliminary results for the year ended 31 January 2002
Chairman's introduction
This has been a difficult year for Walker Greenbank. A great deal of work has
gone into restructuring the business units while our markets have experienced
inconsistent and unpredictable demand.
The new management team has been in place for a year and whilst the performance
of the group was clearly unsatisfactory, a substantial amount of positive change
has been implemented in readiness for the coming year.
I join at an interesting time. David Medcalf the Group Chief Executive and I
have previously worked successfully together in similar market circumstances and
I look forward to meeting the challenge of restoring the group's fortunes.
Shareholders have had a poor return and our prime objective will be to build on
the foundations put in place in the last year and to begin to deliver
shareholder value.
I am conscious of the fact that shareholders have been promised better results
on a number of occasions in recent years. I am also acutely aware of the very
short period of time I have been with the group. However, the trading results of
the first months of this year are markedly better than the corresponding period
last year. The challenge to all employees within Walker Greenbank will be to
achieve consistent month by month improvements in all areas of our business and
to provide a platform for profitable growth.
Ian Kirkham, Chairman
Chief Executive's review
Overview
Despite a huge effort to deliver improvement and to implement positive change it
is disappointing to report an unsatisfactory set of trading results. We had
achieved significant cost reductions in the previous year but these have not
been sufficient to compensate for the further decline in market conditions. The
task to restore the group to profitability at these lower volumes required us to
make further cost reductions and structural changes. This resulted in a second
year of high exceptional costs and disrupted performance.
Much has been made in the public arena of the massive impact on business of the
foot and mouth crisis and the catastrophic events of last September. Both of
these events occurred at times which had the maximum negative impact on our
results being the weeks leading up to our strong Spring and Autumn trading
peaks. Our manufacturing base, which acts as a barometer of consumer demand in
the marketplace, was disrupted disproportionately as customers strove to empty
the supply pipeline by limiting or delaying their order commitments.
Financial results
The principal features of our results and of trading last year were:
• Sales were down £3 million at £61.1million from £64.1million in 2001
• The operating loss before exceptional operating costs was £3.5 million
(2001: £1.9 million).
• The exceptional operating costs amounting to £2.6 million arose
principally from redundancy costs incurred across UK operations to bring
costs in line with lower turnover levels and the cost of closing the Strines
factory and transferring it to Standfast.
• The integration of the Strines business was completed at the end of 2001.
• The consolidation of our weaving operations onto one site at Silsden
and our wallcovering operations onto one site at Loughborough continued
throughout the year and were completed in January 2002 with the
implementation of further redundancy programmes.
• Two surplus freehold properties were sold in the year generating
£950,000 of cash and a profit on disposal of £320,000.
• The opportunity was taken in July 2001 to buy the trade and assets of
the Brushstrokes stencils and accessories business from the receiver for
£250,000.
• The loss before tax after interest and other items amounted to £6.7
million compared to £5.5 million in 2001. The basic loss per share was
11.76p (2001: 9.60p).
• Cash outflow from operating activities during the period amounted to
£1.4 million compared with £0.9 million for the previous year.
• Net assets were 55p per share at the balance sheet date and the net
gearing level was 25%. The balance sheet continues to be underpinned by
approximately £10.0 million of freehold properties and substantial other
tangible and current assets.
• In view of the financial performance no dividend will be proposed. The
dividend will be restored following a return to profitability.
Divisional review
The group's top-end brand Zoffany, reported a small increase in world-wide sales
compared to the previous year despite the economic difficulties cited above.
Profitability has also improved significantly following the redundancy programme
in January 2001 and further cost savings in the year. We have also now
untangled the combination of Cole and Sons, Warner Fabrics and Zoffany, which
was managed on a unified basis by the Zoffany management team. This proved
ineffective and the disposal of Warner in September 2001 completed this change
of strategy. Since the change, the focus on the Zoffany brand has improved
considerably and following recent launches of their new collections in the US
and the UK we have seen an uplift in sales.
The group's other core brand, Harlequin saw sales fall year on year, being more
exposed than Zoffany to weaker levels of confidence in the middle marketplace.
The strategy for Europe was also adjusted in the year following lower than
expected sales in this important territory. This change along with a now more
established management team, and coupled with tight control of costs, stronger
product offerings and investment in marketing and promotions, has led to a
strong start to the new year. A complete review was carried out in the early
part of last year on the direct costs of the business and this combined with
better margins has produced a significant turnaround in profitability compared
to the previous year. This improvement is expected to continue going forward.
Cirka had a more testing year with sales lower than in the previous year and
profits down significantly following intensive pressure from the multiple DIY
customers that represent the majority of the sales of this brand. New
management was appointed during the year and a new strategy has been adopted,
the benefits of which, will not be experienced until next year. To complement
the Cirka brand, the Brushstrokes stencils and accessories business was acquired
in July 2001. The full benefit of this purchase could not be harnessed until
the business was moved from Oxford into our Loughborough premises, which took
place in December. Having now completed this process, overheads have been
reduced and we anticipate a solid return on our investment.
Manufacturing
We now believe that all of the synergistic benefit from combining Weavestyle,
which was acquired last year and our contract fabrics business, has been
achieved. Unfortunately, this came too late to improve the results in the year.
In January 2002, following a consultancy project to maximise factory
efficiency a redundancy programme was carried out. This has left the combined
operation on a firm footing to go forward and take maximum benefit from the
expected increase in sales next year, following a period when the contract
textiles business serviced by this company was so dramatically affected by the
events of last September.
The core Standfast business saw a significant downturn in the market at the end
of the previous year that continued throughout the year. The market it serves
has seen a substantial reduction in demand, which has prompted consolidation
across the industry. We have taken advantage of this situation and following
the acquisition of Strines Textiles in June 2001, our factory output has risen
well above the breakeven levels previously difficult to achieve and maintain.
Consequently, Standfast is now one of a small number of Vat fabric printers
remaining in the UK, and has also become a registered supplier of camouflage
fabrics. The large orders in this area of the market expected at acquisition
were starting to be printed at the end of the year and have continued into the
early part of the new year.
The greatest area of difficulty for the group last year was the Anstey
wallcoverings factory. Unfortunately, the redundancy programme in January 2001
proved insufficient to bring the business back to profitability following a
continued decline in its core markets. New management was appointed in the
latter part of the year and further redundancies were made in January 2002. A
clear plan has been devised to maximise the potential from the factory and in
early 2002 we are finally seeing margins improve on levels previously achieved.
Unfortunately, there are no signs of a significant recovery in the world-wide
market for wallcoverings and this may result in this part of the group failing
to show a positive contribution in the coming year. Every effort is being taken
to explore new avenues and markets.
Overseas
Despite the difficulties in the US market following the events of last September
we have managed to secure growth in the last quarter. The benefits of improved
management and stronger product ranges have combined to generate a strong
improvement in trading which has continued into the new year. Consequently, we
expect to significantly increase profitability going forward. Our operations in
Norway and Italy have continued to perform well and made a positive contribution
to the group.
Outlook
Whilst 2001 was probably the most challenging year in the group's history, I
believe we have now adjusted to the fundamental shift in market conditions we
have witnessed over the past two years. Although the process has been costly
and disruptive, the group has now arrested the decline in its results. After
only two months into the new financial year we can clearly see a significant
improvement in performance and I firmly believe that the right strategy and
people are in place to ensure this continues.
David Medcalf, Chief Executive
Group Profit and Loss Account
Year ended 31 January 2002
Before Exceptional Total 2002 Total 2001
exceptional items
items
£000 £000 £000 £000
Turnover 61,115 - 61,115 64,067
Operating loss (3,487) (2,600) (6,087) (5,269)
Profit on sale of properties - 320 320 -
(Loss)/profit on disposal of operations - (140) (140) 680
Fundamental restructuring of overseas operations - - - (123)
Amounts written off investments - (237) (237) (527)
Loss on ordinary activities before interest (3,487) (2,657) (6,144) (5,239)
Net interest payable (528) - (528) (248)
Loss on ordinary activities before taxation (4,015) (2,657) (6,672) (5,487)
Tax on loss on ordinary activities 31 - 31 67
Loss on ordinary activities after taxation (3,984) (2,657) (6,641) (5,420)
Dividends - - - (533)
Deficit for the year (3,984) (2,657) (6,641) (5,953)
Loss per share - Basic and diluted (11.76p) (9.60p)
Dividend per ordinary share - 1.00p
Balance Sheet
At 31 January 2002
2002 2001
£000 £000
Fixed assets
Goodwill 1,454 1,201
Tangible assets 21,666 24,036
Investment in - own shares 809 1,046
- in subsidiaries - -
23,929 26,283
Current assets
Asset held for resale - 292
Stocks 15,445 15,245
Debtors 15,091 16,935
Cash at bank and in hand 2,234 2,402
32,770 34,874
Creditors: due within one year (22,734) (19,234)
Net current assets 10,036 15,640
Total assets less current liabilities 33,965 41,923
Creditors: due after more than one year (2,445) (3,840)
Provisions for liabilities and charges (456) (352)
Net assets 31,064 37,731
Capital and reserves
Share capital 590 590
Share premium account 457 457
Profit and loss account (10,490) (3,823)
Other reserves 40,507 40,507
Equity shareholders' funds 31,064 37,731
Group Cash Flow Statement
Year ended 31 January 2002
2002 2002 2001 2001
£000 £000 £000 £000
Net cash outflow from operating activities (1,436) (931)
Returns on investment and servicing of finance
Interest received 105 216
Interest paid (338) (251)
Interest element of finance lease payments (256) (196)
Dividend income (Employee share Option Plan) - 57
(489) (174)
Taxation 96 164
Capital expenditure
Purchase of tangible fixed assets (1,388) (6,113)
Proceeds from assets held for resale 593 -
Proceeds from disposal of property 360 -
Proceeds from disposal of tangible fixed assets 22 9
(413) (6,104)
Acquisitions, disposals and fundamental restructuring
Acquisitions (575) (10,522)
Net proceeds from disposal of operations 307 2,689
Fundamental restructuring costs - (523)
(268) (8,356)
Equity dividends paid (590) (1,180)
Cash outflow before use of liquid resources and financing (3,100) (16,581)
Management of liquid resources - -
Financing
Proceeds from new loans 624 1,507
Proceeds from finance leases - 3,400
Principal repayments of finance lease obligations (1,063) (819)
Repayment of borrowings (314) (31)
(753) 4,057
Decrease in cash (3,853) (12,524)
Statement of Total Recognised Gains and Losses
Year ended 31 January 2002
2002 2001
£000 £000
Loss for the financial year (6,641) (5,420)
Reversal of surplus on revaluation of properties reclassified as asset held for - (222)
resale
Currency translation differences (26) 74
Total recognised gains and losses relating to the year (6,667) (5,568)
Note of Historical Cost Profit and Losses
Year ended 31 January 2002
2002 2001
£000 £000
Loss on ordinary activities before taxation (6,672) (5,487)
Difference between historical cost depreciation charge and actual depreciation - 4
charge
Historical cost loss on ordinary activities before taxation (6,672) (5,483)
Historical cost loss for the year after taxation and dividends (6,641) (5,949)
Reconciliation of Movements in Shareholders' Funds
Year ended 31 January 2002
2002 2001
£000 £000
Loss for the financial year (6,641) (5,420)
Dividends - (533)
Deficit for the year (6,641) (5,953)
Currency translation differences (26) 74
Revaluation reserve reversed on transfer of property for resale to current assets - (222)
Goodwill transferred to profit and loss account - 1,390
Net reduction to shareholders' funds (6,667) (4,711)
Opening shareholders' funds 37,731 42,442
Closing shareholders' funds 31,064 37,731
Notes to the accounts
1 SEGMENTAL ANALYSIS
Turnover
2002 2001
(a) Classes of business £000 £000
Fabrics 34,978 35,678
Wallcoverings 24,352 26,819
Other 1,785 1,570
61,115 64,067
Non-interest bearing
Turnover Loss before Operating net assets
taxation
2002 2001 2002 2001 2002 2001
(b) Geographical segments £000 £000 £000 £000 £000 £000
By origin:
United Kingdom 49,357 50,948 (7,071) (6,054) 37,462 41,833
Continental Europe 5,350 6,472 275 224 1,181 1,019
North America 6,408 6,647 124 343 1,429 1,148
61,115 64,067 (6,672) (5,487) 40,072 44,000
Turnover
2002 2001
£000 £000
By destination:
United Kingdom 43,011 44,002
Continental Europe 9,393 11,203
North America 8,002 7,469
Rest of the World 709 1,393
61,115 64,067
Non-interest bearing operating net assets are defined as tangible assets plus net current assets, but
excluding cash, borrowings, tax and dividends.
The businesses acquired in the year have not been analysed separately on the grounds of materiality.
2 ANALYSIS OF OPERATING LOSS
Total Total
2002 2001
£000 £000
Turnover 61,115 64,067
Cost of sales (34,949) (34,638)
Gross profit 26,166 29,429
Net operating expenses
Distribution costs (11,172) (11,752)
Administrative expenses (21,035) (23,010)
Other operating (costs) / income (46) 64
Operating loss (6,087) (5,269)
The operating loss included £2,600,000 of exceptional items. This comprised £1,183,000 for the costs of
closing the Strines factory and transferring the business to the group's existing factory operated by
Standfast including £480,000 of redundancy costs; £996,000 of further redundancies in the year, of which,
£247,000 was paid to a past director as compensation for loss of office, £211,000 of professional fees in
connection with the previously announced proposed offer for the company, £95,000 of costs resulting from
moving the Anstey factory and £115,000 for the provision for vacant leasehold property.
In the previous year the operating loss included £3,334,000 of exceptional items. This comprised
£1,193,000 of redundancies, £711,000 relating to inefficiencies arising from the consolidation of the
Anstey and Sileby manufacturing operations onto one site, £541,000 of costs incurred as a result of
problems with the group's new I.T. system, £589,000 of costs incurred directly as a result of the move of
the Anstey and Sileby operations and £300,000 of legal and professional fees incurred defending an action
brought by a telecoms provider and professional advice received in respect of the proposed offer for the
company.
3 PROFIT ON SALE OF PROPERTIES
During the year the group's property in Anstey, Leicestershire was sold for £643,000, net of expenses,
generating an exceptional profit of £351,000. Later in the year the property in Cowling, West Yorkshire
was sold for £360,000 net of expenses with a loss on disposal of £31,000. There is no tax effect on these
disposals.
4 (LOSS)/PROFIT ON DISPOSAL OF OPERATIONS
On 3 September 2001, the trade and certain of the assets of the businesses trading as Warner Fabrics were
sold. The proceeds were agreed at £453,000, of which £337,000 had been received in cash at 31 January
2002. After accounting for related costs the exceptional loss on disposal was £140,000.
In the previous year, the businesses trading as Cole & Son and John Perry were sold for £3,000,000 which
after accounting for related costs and goodwill resulted in a profit on disposal of £555,000. A further
£125,000 was recognised for deferred consideration from a previous disposal where the recoverability was
originally uncertain.
There is no tax effect on the disposals in both years due to capital losses brought forward from previous
periods.
The businesses disposed of have not been classed as discontinued operations on the grounds of materiality.
5 FUNDAMENTAL RESTRUCTURING
Costs of £123,000 were incurred in the prior year over and above those amounts provided at 31 January 2000
relating to the fundamental restructuring of the group's overseas distribution businesses in Holland,
Germany and France. There was no tax effect from this restructuring.
6 AMOUNTS WRITTEN OFF INVESTMENTS
The directors believe there is likely to be a shortfall between the cost of the shares held by the ESOP
and anticipated future proceeds and have decided to recognise this shortfall with an amount of £237,000
written off in the year (2001: £527,000).
7 TAXATION
2002 2001
£000 £000
UK corporation tax at 30% - current year - -
(2001:30%) - prior years - (319)
Overseas taxation - current year 126 284
- prior years (183) -
Total current tax (57) (35)
Deferred tax - current year 32 37
- prior years (6) (69)
Total deferred tax 26 (32)
Tax on loss on ordinary activities (31) (67)
The difference between the loss on ordinary activities at the corporation tax rate of 30% ruling in
the UK and the actual current tax shown above is explained below:
2002 2001
£000 £000
Loss on ordinary activities before taxation (6,672) (5,487)
Loss on ordinary activities multiplied by standard rate of corporation tax (2001) (1,646)
in the UK of 30% (2001:30%)
Adjustments in respect to prior years (183) (319)
Expenses not deductible for tax purposes 220 740
Utilisation of prior year losses (57) (757)
Capital allowances in excess of depreciation (27) (10)
Losses not recognised 1,996 1,984'
Other timing differences (5) (27)
Total current tax (57) (35)
8 LOSS PER SHARE
The basic loss per share and diluted loss per share are based on the loss on ordinary activities after
taxation, amounting to £6,641,000 (2001: £5,420,000) and the weighted average of 56,457,016 (2001:
56,457,016) ordinary shares in issue during the year.
9 DISPOSAL OF WARNER FABRICS
£000
Proceeds from sale 453
Deferred proceeds (116)
Professional fees and other related costs (30)
Net cash inflow 307
The disposal comprised the following:
Tangible fixed assets 10
Stock 553
563
Loss on disposal (140)
Deferred proceeds (116)
Net cash inflow 307
On 3 September 2001, the group sold the trade and assets of the Warner Fabrics business.
10 ACQUISITION OF STRINES TEXTILES
Fair Provisional
Book value fair
value adjustment value
£000 £000 £000
Assets acquired comprised:
Tangible fixed assets 125 - 125
Stock 450 - 450
575 - 575
Goodwill 426
Cost of acquisition 1,001
Satisfied by:
Cash 325
Deferred consideration 676
1,001
On 11 June 2001, the group completed its purchase of the trade and certain of the assets of Strines
Textiles, a fabric printing business based in the UK.
11 ACQUISITION OF BRUSHSTROKES
Fair Provisional
Book value fair
value adjustment value
£000 £000 £000
Assets acquired comprised:
Tangible fixed assets 8 - 8
Stock 242 - 242
Cash cost of acquisition 250 - 250
On 18 July 2001, the group purchased the trade and certain of the assets of Brushstrokes, the UK's leading
manufacturer of stencils for the DIY decorative market. No goodwill was recognised on this acquisition.
12 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2002 2002 2001 2001
£000 £000 £000 £000
Operating loss (6,087) (5,269)
Depreciation and amortisation 3,694 3,458
Loss on disposal of fixed assets 20 52
Increase in stocks (25) (481)
Decrease in debtors 2,009 779
(Decrease)/increase in creditors (1,047) 530
4,651 4,338
Net cash outflow from operating (1,436) (931)
activities
13 ANALYSIS OF NET DEBT
1 February Other Exchange 31 January
2001 Cash flow movements movement 2002
£000 £000 £000 £000 £000
Cash at bank and in hand 2,402 (185) - 17 2,234
Overdrafts (2,031) (3,668) - (8) (5,707)
371 (3,853) - 9 (3,473)
Debt due within one year (304) (310) (597) (11) (1,222)
Debt due after one year (1,269) - 597 (44) (716)
Finance leases (3,517) 1,063 - - (2,454)
(5,090) 753 - (55) (4,392)
(4,719) (3,100) - (46) (7,865)
14 CONTINGENT LIABILITY
In 1996, the company entered into an agreement with a communications conglomerate to supply the group with
data transmission services over its wide area network in the UK and Europe. The company received a claim
in the year ended 31 January 2001 under this contract relating to services purportedly supplied in 1998
amounting to £1,800,000. The directors continue to refute the claim and intend to defend it vigorously
and continue to believe that there is no need to make a provision.
This information is provided by RNS
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