Interim Results
Walker Greenbank PLC
14 October 2003
14 October 2003
WALKER GREENBANK PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2003
• In the continuing operations, operating losses reduced despite a fall in
sales to £21m (2002: £25m)
• Post balance sheet acquisition of Sanderson in August 2003 represents an
important turning point for the group
• Debt improved by £2.5m to £4.8m in the period
• Indebtedness at its lowest level since January 2001
• Sanderson acquisition will deliver substantial synergistic benefits
Ian Kirkham, Chairman of Walker Greenbank PLC, said:
'The reduction in costs made in the previous years has protected the group
through a difficult period of trading in a very depressed market. In addition,
the policy of generating cash from careful working capital management together
with the disposal of non-core assets placed the group in a position to make a
significant acquisition. The full benefit arising from the purchase of Sanderson
will not be achieved until the second half of 2004 although early synergistic
gains will help to reduce losses in the second half and assist in moving the
business towards profitability next year.'
Enquiries:
David Medcalf, Group Chief Executive or John Sach,
Group Finance Director Tel: 01908 658078
Walker Greenbank PLC
Ian Seaton, Bankside Consultants Tel: 020 7444 4157
Notes to editors:
Walker Greenbank PLC designs, manufactures, markets and distributes
wallcoverings, furnishing fabrics and associated products. The Zoffany and
Harlequin brands are recognised worldwide, selling a full range of these items.
The group's manufacturing base includes fabric printing at Standfast and
wallcoverings manufacture at Anstey. In August 2003 it bought from the Receivers
Arthur Sanderson & Sons for £5.5 million cash. Arthur Sanderson & Sons owns the
brands of Sanderson and Morris which are world renowned for the design and
quality of co-ordinated fabrics, wallcoverings and associated products.
CHAIRMAN'S STATEMENT
Overview
This year has marked an important turning point for the group. Although the
foundations for restructuring were laid in prior years by our significant cost
reduction and cash generation programmes, the business required re-shaping and,
in particular, needed additional brand sales to build its critical mass. I am
glad to report that we have taken some important steps in this process. In May,
the disposal of Riverside was completed realising cash from a business that we
deemed to be non-core. This disposal has enabled us to acquire the Sanderson
business in August 2003.
Arthur Sanderson & Sons is a world-renowned brand that perfectly complements the
group's existing business. It is a business that will make an important
contribution to the profitability of the group. Once the downstream and
synergistic benefits are fully realised I am confident that the performance of
the group will be substantially improved. It is difficult to estimate at the
moment when all the anticipated savings will be achieved in full, however, even
at this early stage, our factories are already benefiting from an increase in
orders from Sanderson.
The existing business has seen a further decline in market conditions. The
Zoffany and Harlequin brands have suffered a downturn of approximately 4%
against the same period last year and the factories have remained at the same
low level as the second half of last year. Regrettably, the interior furnishings
and decorating market remains flat. However, owing to the cost savings made in
earlier years, the loss from the continuing operations has not increased and, in
line with our strategy, we achieved a positive cash inflow and reduced our
indebtedness.
Results
In the continuing operations the operating loss for the period was £1,365,000
(2002: £1,393,000) on turnover of £20.8 million (2002: £24.8 million). During
the period, the Riverside business was sold for £2.6 million after related
costs. The loss on disposal was fully anticipated at the end of the last
financial year with provisions made for the impairment of the assets included in
this disposal. As a consequence, there was no loss on disposal reported in the
period under review. The loss per share for the period was 3.08p (2002: loss per
share 0.68p). There will be no interim dividend.
Tight cash control has been maintained during the period in line with our
strategy of achieving positive cash inflow and reducing the group's
indebtedness. After adjusting for the cash flow in the discontinued operations,
the underlying cash inflow from operating activities in the continuing business
for the period was £1,063,000 (2002: £303,000 outflow). This has been achieved
by carefully reducing stock levels and maintaining strict credit control
procedures. When compared to the same period last year stock levels have been
reduced from £14.9 million to £9.4 million; £2.9 million of this reduction is in
the continuing operations. I am delighted to report that as a result of these
measures and the benefits of disposal proceeds, the group's total indebtedness
at the end of the period was £4.8 million (January 2003: £7.3 million),
representing the lowest indebtedness for the group since January 2001. When
compared to the indebtedness in July 2002 of £8.3 million, this represents a
cash generation of £3.5 million in the last 12 months, despite the trading
losses reported.
Operating Review
The brands
Following the cost reductions made in Zoffany in the second half of last year,
the business reported a significantly improved profit for the period when
compared to the same period last year. It is disappointing that the increase in
sales anticipated for this year has not yet materialised and it would appear
that, as in prior years, the market has weakened again albeit at a slower rate.
In the forthcoming period, additional investment in strategic initiatives for
the brand, with the promotion of the breadth of new products now offered and
strengthening of relationships with customers and suppliers, is expected to lead
to further growth of the brand.
The new management team at Harlequin has successfully introduced a range of
collections which are its strongest for many years. As a result, Harlequin has
bucked the downward trend in the UK market and held onto the same level of sales
in this market, although lower export sales has resulted in total sales
declining by 4%. During the period the Harris Fabrics business was integrated
into Harlequin, resulting in overhead savings and an opportunity for expanding
the businesses as a whole. Despite being a significantly smaller business to
Harlequin, Harris Fabrics offers opportunities for increased sales in the
contract market where Harlequin traditionally has had a limited exposure.
Manufacturing
The weaker market conditions experienced in the second half last year have
continued for both the Standfast and Anstey factories into this year. This
position had been largely anticipated and to prevent significant potential
future losses a redundancy programme was implemented at Standfast at the end of
last year. This has successfully resulted in a break-even position for Standfast
in the first half, reversing the losses of the prior year and compensating for
the decline in sales year on year. The business has also now started to re-build
its sales of camouflage printing. This is a technically very demanding business
but, when properly executed, offers significant opportunities for growth.
Third party sales in the Anstey factory fell 9% against the same period last
year, reflecting the marketplace rather than a loss of customers. The results of
the factory were further reduced by the decision in its Cirka business not to
invest in buying space with the DIY multiples in a very depressed market.
Overall, the Anstey business had a disappointing start to the year, however, it
is expected that the second half will be stronger with some of the delayed
prints in the first half now scheduled for production before the year end. Both
Standfast and Anstey will also benefit greatly from the acquisition of
Sanderson.
Overseas
Sales of the Zoffany brand in the group's US subsidiary increased by 2% over the
same period last year, continuing the strong performance of the brand in that
market. However, as a result of the weaker US dollar increasing import costs and
proportionally higher overheads being carried following the disposal of the TWIL
business at the end of the last year, the profit in the period has not reached
the same level as last year. Currently, the freehold building, which the
business occupies in Atlanta, is for sale and when sold will give the business
the opportunity to reduce overheads. The operations in Norway and Italy both
reported sales and profits slightly down on last year.
Acquisitions and disposals
On 29 August 2003, the group acquired the trade and assets of Arthur Sanderson &
Sons from the Receivers for £5.5 million paid in cash at completion. The assets
purchased included all of the stocks and fixed assets, including a freehold
property at Darwen, Lancashire and the two subsidiaries located in the US and
France. An extensive and highly valued archive of designs including those of the
acclaimed Victorian designer, William Morris, was also purchased. In addition to
its ongoing trading performance the business currently generates annual
licensing revenues of approximately £1 million, mainly from the Far East and
Australia.
As reported in my full year statement, the trade and assets of the group's
business trading as Riverside was sold on 20 May 2003 for £2,801,000, before
related costs. This business has been classed as discontinued for the purposes
of reporting the group's performance in these financial statements.
On 14 July 2003, we announced our intention to dispose of the Warner Archive of
designs for £2 million. The disposal was contingent on Heritage Lottery backed
funding, upon which initial approval has now been granted. Completion will
depend on the final approval of the buyer's plans by the Lottery. The proposed
sale of the archive will significantly benefit the group's results.
Outlook
The reduction in costs made in the previous years has protected the group
through a difficult period of trading in a very depressed market. In addition,
the policy of generating cash from careful working capital management together
with the disposal of non-core assets placed the group in a position to make a
significant acquisition. The full benefit arising from the purchase of Sanderson
will not be achieved until the second half of 2004 although early synergistic
gains will help to reduce losses in the second half and assis in moving the
business towards profitability next year.
Walker Greenbank PLC
Unaudited Consolidated Profit and Loss Account
For the six months ended 31 July 2003
6 months to 6 months to 31 Year to
31 July July 31 Jan
2003 2002 2003
Note £000 £000 £000
1
Turnover - continuing 20,801 24,779 47,071
operations
- discontinued 1,580 5,182 11,190
operations
22,381 29,961 58,261
Operating - continuing (1,365) (1,393) (3,946)
(loss)/profit operations
- discontinued 70 168 144
operations
(1,295) (1,225) (3,802)
Profit on sale of property 2 - 175 175
Loss on disposal of discontinued 3 - - (3,825)
operations
Amounts written off investments - - (207)
Loss on ordinary activities (1,295) (1,050) (7,659)
before interest
Net interest payable (230) (304) (504)
Other finance (charge)/income 4 (167) 233 188
Loss on ordinary activities (1,692) (1,121) (7,975)
before taxation
Taxation 5 (48) 739 614
Loss on ordinary activities after (1,740) (382) (7,361)
taxation
Dividends 6 - - -
Deficit for the period (1,740) (382) (7,361)
Loss per share
- Basic and diluted 7 (3.08p) (0.68p) (13.04p)
Dividend per ordinary share 6 - - -
Unaudited Consolidated Balance Sheet
As at 31 July 2003
As at As at As at
31 July 2003 31 July 2002 31 Jan 2003
Note £000 £000 £000
Fixed assets
Goodwill 857 1,348 969
Tangible assets 16,249 20,553 17,239
Walker Greenbank PLC shares 602 809 602
17,708 22,710 18,810
Current assets
Assets held for resale 320 - 2,044
Stocks 9,370 14,887 11,045
Debtors 10,047 14,765 12,162
Cash at bank and in hand 938 1,304 496
20,675 30,956 25,747
Creditors: amounts falling due within one year (14,701) (20,911) (18,577)
Net current assets 5,974 10,045 7,170
Total assets less current liabilities 23,682 32,755 25,980
Creditors: amounts falling due after more than one year (802) (1,757) (1,278)
Provisions for liabilities and charges (106) (214) (121)
Net assets excluding pension liability 22,774 30,784 24,581
Pension liability 11 (11,861) (3,561) (11,839)
Net assets 10,913 27,223 12,742
Capital and reserves
Share capital 590 590 590
Share premium account 457 457 457
Profit and loss account (30,641) (14,331) (28,812)
Other reserves 40,507 40,507 40,507
Shareholders' funds 10,913 27,223 12,742
Unaudited Group Cash Flow Statement
For the six months ended 31 July 2003
6 months to 6 months to Year to
31 July 2003 31 July 2002 31 Jan 2003
Note £000 £000 £000
Net cash inflow from operating activities 10 436 220 2,289
Returns on investment and servicing of finance
Net bank interest paid (192) (209) (371)
Interest element of finance lease payments (42) (95) (150)
(234) (304) (521)
Taxation (94) (54) (138)
Capital expenditure
Purchase of tangible fixed assets (216) (574) (1,208)
Proceeds from disposal of properties - 175 175
Proceeds from disposal of tangible fixed assets - - 25
(216) (399) (1,008)
Acquisitions and disposals
Acquisition in prior years (319) (250) (307)
Net proceeds from disposal of operations 8 2,889 62 81
2,570 (188) (226)
Equity dividends paid - - -
Cash inflow/(outflow) before use of liquid resources and 2,462 (725) 396
financing
Financing
Proceeds from new loans - 1,500 -
Proceeds from new finance leases 40 - -
Principal repayments of finance lease obligations (339) (279) (1,151)
Repayment of loans (159) (773) (1,225)
(458) 448 (2,376)
Increase/(decrease) in cash 9 2,004 (277) (1,980)
Unaudited Statement of Total Recognised Gains and Losses
For the six months ended 31 July 2003
6 months to 6 months to Year to
31 July 31 July 31 Jan
2003 2002 2003
£000 £000 £000
Loss for the financial period (1,740) (382) (7,361)
Currency translation differences (89) 184 181
Actual less expected return on pension scheme assets - - (7,741)
Experienced losses arising on pension scheme liabilities - - (577)
Total recognised losses relating to the period (1,829) (198) (15,498)
Prior year adjustment - (3,643) (3,643)
Total recognised losses since the last annual report (1,829) (3,841) (19,141)
Notes to the Accounts
1 SEGMENTAL ANALYSIS
Turnover Turnover
Continuing Continuing
Operations Operations
6 months to 6 months to
31 July 2003 31 July 2002
(a) Classes of Business £000 £000
Fabrics 11,477 12,790
Wallcoverings 7,571 10,137
Others 1,753 1,852
20,801 24,779
(b) Geographical Segments - by destination
United Kingdom 13,123 15,975
Continental Europe 4,003 4,036
North America 3,303 4,418
Rest of the World 372 350
20,801 24,779
Last year's comparatives include £952,000 of sales in TWIL, which was sold in January 2003 but not
treated as a discontinued operation on the grounds of materiality. TWIL's sales were all wallcoverings.
The turnover in the discontinued operations in both years related to fabric and was only sold in the
United Kingdom.
2 PROFIT ON SALE OF PROPERTY
In the prior year, an additional £175,000 was received in the period for the disposal of the group's property
at Anstey, Leicestershire. The property was sold for an initial consideration of £588,000 in the period ended
31 July 2001 that generated a profit on disposal of £272,000.
3 LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS
On 20 May 2003, the trade and assets of the business trading as Riverside was sold for £2,801,000. After
accounting for related costs and goodwill the loss on disposal was £3,507,000. This loss was fully
anticipated at 31 January 2003 with the creation of a provision for the impairment of these assets equal to
the amount of the loss. The provision was utilised in full in the period.
4 OTHER FINANCE (CHARGE)/INCOME
6 months to 6 months to
31 July 2003 31 July 2002
£000 £000
Expected return on pension scheme assets 946 1,252
Interest on pension scheme liabilities (1,113) (1,019)
(167) 233
5 TAXATION
6 months to 6 months to
31 July 2003 31 July 2002
£000 £000
UK Corporation tax at 30% (2002: 30%) - prior years - (622)
Overseas taxation - current year 48 102
Total current tax 48 (520)
Deferred tax - prior years - (219)
Total deferred tax - (219)
Tax on loss on ordinary activities 48 (739)
6 DIVIDENDS
The directors do not recommend the payment of an interim dividend in the period (2002: £nil).
7 EARNINGS PER SHARE
The basic earnings per share and diluted earnings per share are based on a loss after taxation of £1,740,000
(2002: loss of £382,000) and 56,457,016 ordinary shares (2002: 56,457,016), being the weighted average
number of the shares in issue during the period.
The basic loss per share and diluted loss per share for the year ended 31 January 2003 were based on a loss
on ordinary activities after taxation, amounting to £7,361,000 and the weighted average of 56,457,016
ordinary shares in issue during the year.
8 DISPOSAL OF OPERATIONS
£000
Sale of Riverside:
The disposal comprised the following:
Freehold property 1,724
Goodwill* -
Tangible fixed assets* -
Stock* 350
Debtors 2,428
Creditors (1,701)
Fees and related expenses (155)
Net cash inflow from disposal of Riverside 2,646
Deferred proceeds from sale of TWIL received during
the period 243
Total net cash inflow 2,889
* The amounts shown are net of a provision for impairment made in the prior year of £3,507,000 in
anticipation of the loss on disposal.
The net consideration from the sale of Riverside was paid in cash at the date of completion.
9 ANALYSIS OF NET DEBT
Other
1 February non-cash Exchange 31 July
2003 Cash flow changes movement 2003
£000 £000 £000 £000 £000
Cash at bank and in hand 496 436 - 6 938
Overdrafts (5,754) 1,568 - - (4,186)
(5,258) 2,004 - 6 (3,248)
Debt due within 1 year (307) 159 (320) - (468)
Debt due after 1 year (405) - 320 (28) (113)
Finance leases (1,303) 299 - - (1,004)
(2,015) 458 - (28) (1,585)
(7,273) 2,462 - (22) (4,833)
10 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
6 months to 6 months to 6 months to 6 months to 31
31 July 2003 31 July 2003 31 July 2002 July 2002
£000 £000 £000 £000
Operating loss (1,295) (1,225)
Depreciation and amortisation 1,298 1,756
Difference between pension charge
and cash contributions (145) 151
Loss on disposal of fixed assets 4 -
Decrease in stocks 1,306 564
(Increase)/decrease in debtors (517) 269
Decrease in creditors (200) (1,272)
Decrease in provisions (15) (23)
1,731 1,445
Net cash inflow from operating activities 436 220
The cash outflow from operating activities in the discontinued operation was £627,000 in the period
(2002: £523,000 inflow).
At the end of the prior year the decision was taken to revise the useful life of the group's IT
platform introduced in December 1999 from 5 years to 8 years. This change had not been made at the
interim stage in the prior year and the effect on the full year was to reduce the depreciation
charge by £436,000.
11 PENSIONS
The group operates defined benefit and defined contribution schemes in the UK for all qualifying employees.
The major scheme, Walker Greenbank Pension Plan, is of the defined benefit type and the assets of each of
the schemes are held in separate trustee administered funds. In addition, there are defined benefit schemes
for all qualifying employees of Abaris Holdings Limited and John O Borge a.s.
The pension costs relating to the UK defined benefit schemes are assessed in accordance with the advice of
an independent qualified actuary using the projected unit method. These schemes are subject to triennial
actuarial reviews with the most recent ones having been at 6 April 2001 for both the major scheme and the
Abaris Holdings Limited Pension Scheme. The John O Borge a.s scheme was valued in accordance with the
Norwegian Financial Accounting Standard for Pension Benefits at 31 December 2002. These valuations were
rolled forward to 31 January 2003 for the purposes of the Financial Reporting Standard no. 17.
The assumptions applied when valuing the defined benefit schemes and the composition of the net deficit in
these schemes is fully disclosed in the statutory accounts for the year ended 31 January 2003.
12 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 in all to some £1,800,000. The directors continue to refute the claim and believe that there
is no need to make a provision.
13 POST BALANCE SHEET EVENT
On 29 August 2003 the trade and assets of Arthur Sanderson & Sons were purchased for £5.5 million. The
fair values of the assets purchased are currently being reviewed and will be fully disclosed in the
financial statements for the year ending 31 January 2004.
14 PREPARATION OF INTERIM FINANCIAL INFORMATION
The interim financial statements have been prepared on a basis consistent with the accounting policies
disclosed in the Annual Report and Accounts for the year ended 31 January 2003.
The consolidated results for the year ended 31 January 2003 have been extracted from the financial
statements for that year and do not constitute full statutory accounts for the group. The group accounts
for the year ended 31 January 2003 received an unqualified audit report and did not include a statement
under section 237 (2) or (3) of the Companies Act 1985 and have been filed with the Registrar of
Companies.
This information is provided by RNS
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