Interim Results
Walker Greenbank PLC
12 September 2005
For immediate release 12 September 2005
WALKER GREENBANK PLC
('Walker Greenbank' or 'the Group')
Interim Results for the six months ended 31 July 2005
Walker Greenbank PLC (AIM: WGB), the wallpaper, textiles and furnishings
business whose brands include Sanderson, Morris & Co, Harlequin and Zoffany, is
pleased to announce its interim results for the six months ended 31 July 2005.
Highlights
• Significant progress in the Group's turnaround
• Operating profit of £387,000 (H1 2004: operating loss £1.47 million)
- first operating profit for six years
• Underlying sales (excluding disposed of activities) up 2.6% at £23.5
million
• Pre-tax loss before exceptionals of £162,000, after exceptionals loss
of £1,443,000.
(H1 2004: pre-tax loss of £1.94 million before exceptionals, profit of
£0.99 million after exceptionals)
• Cash flow from operating activities positive at £814,000 (H1 2004:
cash outflow of £3.35 million)
• Disposal of non-core Norwegian subsidiary for net proceeds £1.5
million
Ian Kirkham, Walker Greenbank's Chairman, said:
'The Board continues to execute its recovery plan designed to lift profitability
and generate free cash flow. We are actively embarking on a pension liability
reduction exercise which should further strengthen the balance sheet. The Board
expects further progress in the remainder of the year and views the future with
more confidence than for some time.'
For further information:
Walker Greenbank PLC 01908 658078
Ian Kirkham, Chairman
John Sach, Chief Executive
Teather & Greenwood 020 7426 9000
Mark Dickenson
Robert Naylor
Buchanan Communications 020 7466 5000
Mark Court/Suzanne Brocks/Elly Williamson
CHAIRMAN'S STATEMENT
OVERVIEW
The first half of the year has shown a considerable turnaround in the Group's
performance, with a return to operating profitability for the first time in six
years. This is a very significant achievement and one that underlines the
progress made in the Board's strategy to re-establish the Group as a profitable
and cash generative business. It also highlights the underlying strength of the
Group's brands.
The Group is benefiting from the full impact of the integration into the Group
of Sanderson, which was acquired in August 2003, and the considerable cost
savings that have been achieved through amalgamation of all the Group's brands
under the control of one managing director.
Last year's substantial investment in stock and the design of new collections at
Sanderson - culminating in the launch early this year of the flagship range
Options - have resulted in a considerable improvement in Sanderson's
profitability compared with the same period last year. The sale of the Sanderson
bedding concessions in the first half of last year has also proved successful,
with the licensing income received being well ahead of our expectations.
The refocusing of Zoffany, our premium end brand, back to its traditional core
values continues following the appointment of a new design director in the
second half of last year.
Harlequin, our mid-market brand, continues to grow from strength to strength
with a doubling of profits compared with the same period last year. It is a
leading home furnishings brand in the John Lewis Partnership.
Following the reorganisation and cost reduction at Anstey, our wallpaper
factory, in the second half of last year there has been a significant reduction
in losses. Anstey has been refocused into a producer at the premium end of the
market and has benefited from the beginnings of a return to popularity of
wallpapers at the upper end of the market.
In line with the Group's strategy of disposing of non-core assets the sale of
Borge Holding AS was successfully completed in June.
RESULTS
The operating profit for the period was £387,000 (2004: £1,466,000 loss), on
sales down 3.6% on a continuing basis. The underlying sales were up 2.6%, when
adjusting for the sale of Sanderson retail and the exit of Anstey's low margin
Cirka business part way through last year, were up. The loss on ordinary
activities before tax was £1,443,000 (2004: £989,000 profit). This was, however,
after charging the Profit and Loss account in the current year with an
exceptional loss on the sale of Borge Holding AS of £1,281,000 which included
£1,908,000 for goodwill previously written off to reserves. Last year's pre-tax
profit of £989,000 included an exceptional profit of £2,931,000 arising from the
sale of the Warner Archive and a freehold property in Milton Keynes. The loss
per share was 2.62p (2004: profit 1.80p). The underlying loss per share was
0.35p after adjusting for the sale of Borge Holding AS.
Cash inflow in the period from operating activities was £814,000 (2004: cash
outflow £3,347,000). This was as a direct result of a return to operating
profitability and tight control of working capital. This was further enhanced by
the net sale proceeds from the sale of Borge Holding AS of £1,498,000, leading
to a net cash inflow for the period of £1,378,000.
PEOPLE
During the period, Peter Harkness resigned as a Non-Executive Director after
four and a half years' service. I wish him every success in his recently
acquired business.
In July, Alan Dix was appointed Group Finance Director after spending seven
months as Finance Director designate. I look forward to the added contribution
Alan's appointment will bring.
I would like to take this opportunity to thank all of our employees, whose
energy, ability and commitment have helped to restore the Group's fortunes.
OUTLOOK
The operating profit recorded in the first half of the year is welcome news for
all stakeholders in the Group. The Board continues to execute its recovery plan
designed to lift profitability and generate free cash flow. We are actively
embarking on a pension liability reduction exercise which should further
strengthen the balance sheet. The Board expects further progress in the
remainder of the year and views the future with more confidence than for some
time.
Ian Kirkham
Chairman
12th September 2005
CHIEF EXECUTIVE'S REVIEW
THE BRANDS
The Harlequin brand continues to grow strongly, taking market share from its
competitors in a challenging market. Sales have grown 9% compared with the same
period last year. The majority of the growth has come from the UK, supported by
a continuing expansion of its weave collections and the first rise in wallpaper
sales for several years. One of our recently launched wallpaper ranges,
Decadence, aimed at the mid to upper end of the market, is now the second
strongest selling collection in the brands portfolio. Harlequin was re-launched
in the US at the start of the year on the strength of its recent product offer.
The US is an area of potentially significant growth in the future. With margins
being pushed slightly up and overheads reduced, Harlequin's profit has doubled
compared with the same period last year.
Zoffany overall has seen sales grow 1% compared with last year. Sales in the UK
have dipped slightly whilst export sales have grown. Although sales have not
grown significantly there has been an improvement in margins. With the
appointment of a new, highly regarded design director in the second half of last
year, and the refocus of the brand on its core values, sales are expected to
continue to grow over the coming years. Zoffany will also benefit from the
appointment made in the first half the year of a group contracts director,
enabling us to build on recent successes such as the completion of a £250,000
contract with the Inter Continental Park Lane hotel in the first half. The
business reorganisation that took place in autumn last year brought the back
office activities of Sanderson and Zoffany together on one site at Denham, which
has led to significant cost savings and efficiencies. The combination of
slightly improved margins and the cost reductions has led to more than a
doubling of the profit.
Arthur Sanderson & Sons, incorporating the Morris & Co brand, has achieved sales
growth of 7% compared with the same period last year, helped by the very
successful launch of Options 9, the latest in the series of Options collections.
The UK has seen the strongest year on year growth, with sales up 13%, this being
the market where Options 9 was launched first. Licence income has grown by 19%
supported primarily but not exclusively by the bedding licence agreement entered
into after the sale of the retail concessions last year. The combination of
increased revenues, improved licence income, slightly higher margins and
significant cost reductions following the back office reorganisation has
resulted in a near three fold increase in profit.
MANUFACTURING
Anstey
As a direct result of the refocusing of the business to a producer at the
premium end of the market, sales reduced year on year by 8%. This, combined with
the reorganisation that took place in the second half of last year and the
recovery in interest in wallcoverings at the top end of the market, has seen
margins improve and costs reduce. As a consequence, the substantial losses of
last year have been significantly reduced as the business moves towards
breakeven.
Standfast
Activity levels have reduced by 6% compared with the same period last year. The
early part of this year proved to be very difficult with the market suffering a
sharp decline in demand resulting in activity levels at the factory reducing by
12% in the first quarter. The factory responded with a reduced working week for
a period of time to control costs but significant losses were incurred during
this quarter. Activity levels have recovered during the second quarter to the
extent that only a small loss was incurred in this period. The order book at the
half-year has significantly recovered, which should help the business reach
breakeven in the second half. The business is, however, in common with other
manufacturers, facing significantly increasing energy costs that it has no
alternative but to pass on to customers.
OVERSEAS
USA
Sales reduced by 1% in local currency compared with the same period last year,
following the cessation of low margin third-party business. Consequently margins
have risen and this, combined with the overhead reduction following the
amalgamation of the Sanderson and Zoffany businesses last year, has led to more
than a doubling of profitability for the operation.
Europe
The sale of Borge Holding AS in Norway took place in June 2005. The revenues and
profits have been shown as discontinued activities in the Profit and Loss
statement. The distribution businesses for Zoffany in Rome and Sanderson in
Paris, whilst relatively small, have performed in line with expectations.
FUNDING
The Group changed its principal funder in the UK in July 2004 to Burdale
Financial Ltd, part of the Bank of Ireland. The funding mechanism allows the
Group to vary its borrowings as working capital fluctuates due to the seasonal
nature of its business. Burdale Financial agreed a £1m increase in the facility
in April 2005 which added to the headroom of the business at a critical time in
its turnaround process.
John Sach
Chief Executive
12th September 2005
Unaudited Consolidated Profit and Loss Account
For the six months ended 31 July 2005
6 months to 31 July 2005
Before Exceptional Total 6 months to Year to
exceptional items 31 July 31 Jan
items 2004 2005
note £000 £000 £000 £000 £000
Turnover - continuing 1 23,540 - 23,540 24,422 46,013
operations
- discontinued 2,031 - 2,031 2,041 4,598
operations
25,571 - 25,571 26,463 50,611
Operating profit/ - continuing 202 - 202 (1,612) (3,087)
(loss) operations
- discontinued 185 - 185 146 365
operations
387 - 387 (1,466) (2,722)
Profit on sale of subsidiary 2 - 532 532 - -
Pension provision (FRS 17) release on sale 2 - 95 95 - -
of subsidiary
2 - (1,908) (1,908) - -
Goodwill previously written off to reserves
Net loss on sale of subsidiary - (1,281) (1,281) - -
Profit on sale of Warner Archive - - - 1,470 1,470
Profit on sale of property - - - 1,461 1,461
Profit/(loss) on ordinary activities 387 (1,281) (894) 1,465 209
before interest
Net interest payable 3 (464) - (464) (368) (811)
Other finance charge (85) - (85) (108) (205)
(Loss)/profit on ordinary activities (162) (1,281) (1,443) 989 (807)
before taxation
Taxation 4 (36) - (36) 25 (27)
(Loss)/profit on ordinary activities after (198) (1,281) (1,479) 1,014 (834)
taxation
Dividends 5 - - - - -
(Loss)/profit retained for the period (198) (1,281) (1,479) 1,014 (834)
(Loss)/earnings per share
- Basic and diluted 6 (2.62p) 1.80p (1.48p)
Dividend per ordinary share 5 - - - - -
Unaudited Consolidated Balance Sheet
As at 31 July 2005
As at As at As at
31 July 2005 31 July 2004 31 Jan 2005
note £000 £000 £000
Fixed assets
Intangible assets 4,878 4,468 4,898
Tangible assets 10,718 12,096 11,376
15,596 16,564 16,274
Current assets
Assets held for resale - 325 -
Stocks 11,594 12,634 12,879
Debtors 11,078 12,430 11,346
Cash at bank and in hand 1,630 498 1,149
24,302 25,887 25,374
Creditors: amounts falling due within one year (10,639) (20,010) (11,657)
Net current assets 13,663 5,877 13,717
Total assets less current liabilities 29,259 22,441 29,991
Creditors: amounts falling due after more than one year (10,396) (1,700) (11,310)
Provisions for liabilities and charges (344) (235) (342)
Net assets excluding pension liability 11 18,519 20,506 18,339
Pension liability (11,027) (10,642) (11,269)
Net assets 7,492 9,864 7,070
Capital and reserves
Share capital 590 590 590
Share premium account 8 457 457 457
Profit and loss account 8 (34,062) (31,690) (34,484)
Other reserves 8 40,507 40,507 40,507
Shareholders' funds 7,492 9,864 7,070
Unaudited Group Cash Flow Statement
For the six months ended 31 July 2005
6 months to 6 months to Year to
31 July 31 July 31 Jan
2005 2004 2005
note £000 £000 £000
Net cash inflow/(outflow) from operating activities 10 814 (3,347) (4,060)
Returns on investment and servicing of finance
Net bank interest paid (464) (345) (768)
Interest element of finance lease payments - (23) (43)
(464) (368) (811)
Taxation (114) (82) (278)
Capital expenditure
Purchase of tangible fixed assets (356) (703) (1,187)
Proceeds from assets held for resale - - 325
Proceeds from disposal of property - 4,564 4,564
(356) 3,861 3,702
Acquisitions and disposals
Net proceeds from disposal of operations 7 1,498 - -
Disposal of Warner Archive - 1,672 1,672
Sale of Sanderson retail division - 675 675
1,498 2,347 2,347
Equity dividends paid - - -
Cash inflow before use of liquid resources and financing 1,378 2,411 900
Financing
Proceeds from new loans 655 2,000 11,744
Principal repayments of finance lease obligations (251) (227) (463)
Repayment of loans (1,306) (4,387) (4,487)
(902) (2,614) 6,794
Increase/(decrease) in cash 9 476 (203) 7,694
Unaudited Statement of Total Recognised Gains and Losses
For the six months ended 31 July 2005
6 months to 6 months to Year to
31 July 2005 31 July 2004 31 Jan 2005
£000 £000 £000
(Loss)/profit for the financial period (1,479) 1,014 (834)
Currency translation differences (7) (32) 132
Actual less expected return on pension scheme assets - - 822
Experience losses arising on pension scheme liabilities - - (1,932)
Total recognised (losses)/profits since the last annual (1,486) 982 (1,812)
report
Notes to the Accounts
1 Segmental Analysis
Turnover Turnover
Continuing Continuing
Operations Operations
6 months to 6 months to
31 July 2005 31 July 2004
(a) Classes of Business £000 £000
(restated)
Fabrics 15,272 14,632
Wallcoverings 6,424 7,104
Others 1,844 2,686
23,540 24,422
The comparative classes of business have been restated to better reflect
the nature of the business.
(b) Geographical Segments - by destination
United Kingdom 15,059 16,363
Continental Europe 3,369 2,948
North America 3,973 3,972
Rest of the World 1,139 1,139
23,540 24,422
2 Loss on Sale Of Borge Holding AS and John O Borge AS
In June 2005, the wholly owned Norwegian subsidiaries Borge Holding AS and John O Borge AS were sold for a
consideration before costs of £1,881,000. A profit of £532,000 was generated on the sale before goodwill
previously written to reserves and the adjustment to FRS 17 provision. A net loss on sale of £1,281,000 has
been recorded.
3 Other Finance Charge
6 months to 6 months to
31 July 2005 31 July 2004
£000 £000
Expected return on pension scheme assets 1,134 1,073
Interest on pension scheme liabilities (1,219) (1,181)
(85) (108)
Notes to the accounts - continued
4 Taxation
6 months to 6 months to
31 July 2005 31 July 2004
£000 £000
UK Corporation tax at 30% (2004: 30%) - current year - -
Overseas taxation - current year 36 (25)
Tax on (loss)/profit on ordinary 36 (25)
activities
5 Dividends
The Directors do not recommend the payment of an interim dividend in the period (2004: £nil).
6 Earnings per Share
The basic earnings per share and diluted earnings per share are based on a loss after taxation of £1,479,000
(2004: profit of £1,014,000) and 56,457,016 ordinary shares (2004: 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 2005 were based on a loss
on ordinary activities after taxation, amounting to £834,000 and the weighted average of 56,457,016 ordinary
shares in issue during the year.
The adjusted loss per share has been disclosed as in the opinion of the Directors this provides additional
information to shareholders on the results of the Group's activities.
The adjusted loss per share can be reconciled to the basic loss per share as follows:
6 months to 6 months to
31 July 2005 31 July 2004
£000 £000
(Loss)/profit attributable to ordinary shareholders (2.62p) 1.80p
Exceptional items 2.27p (5.20p)
Adjusted earnings per share (0.35p) (3.40p)
Notes to the accounts - continued
7 Disposal of Operations 6 months to
31 July 2005
£000
Sale of John O Borge AS and Borge Holding AS:
The disposal comprised the following:
Tangible fixed assets 60
Stock 681
Debtors 745
Creditors (520)
Profit on disposal 532
Net cash inflow from the disposal of John O Borge AS and Borge Holding AS 1,498
8 Reserves
Other Reserves
-----------------------------------
Share premium Profit and Capital Merger Total
account loss account reserve reserve
£000 £000 £000 £000 £000
1 February 2005 457 (34,484) 43,457 (2,950) 40,507
Loss for the period - (1,479) - - -
Currency translation movements - (7) - - -
Goodwill previously set off to - 1,908 - - -
reserves
31 July 2005 457 (34,062) 43,457 (2,950) 40,507
Notes to the accounts - continued
9 Analysis of Net Debt
1 February Cash flow Other Exchange 31July
2005 non-cash Movement 2005
changes
£000 £000 £000 £000 £000
Cash at bank and in hand 1,149 476 5 1,630
Overdrafts - - - - -
1,149 476 - 5 1,630
Debt due within 1 year (400) (196) - - (596)
Debt due after 1 year (11,244) 847 - - (10,397)
Finance leases (251) 251 - - -
(11,895) 902 - - (10,993)
(10,746) 1,378 - 5 (9,363)
10 Reconciliation of Operating Profit/(Loss) to Net Cash Inflow/(Outflow) from Operating Activities
6 months to 6 months to 6 months to 6 months to
31 July 31 July 31 July 31 July
2005 2005 2004 2004
£000 £000 £000 £000
Operating profit 387 (1,466)
Depreciation and amortisation 974 1,198
Difference between pension charge
and cash contributions (232) (234)
Decrease/(increase) in stocks 604 (1,109)
Increase in debtors (452) (985)
Decrease in creditors (444) (298)
Decrease in provisions (23) (453)
427 (1,881)
Net cash inflow/(outflow) from operating
activities 814 (3,347)
Notes to the accounts - continued
11 Pensions
The Company operates the following funded pension schemes in the UK: the Walker Greenbank Pension Plan,
the Abaris Holdings Limited Pension Scheme and the WG Senior Management Pension Scheme. The Walker
Greenbank Pension Plan is the biggest scheme. All schemes contain defined benefits sections, however the
Abaris Holdings Limited Pension Scheme also contains a defined contribution section, although this section
is relatively small.
The pension costs relating to the UK defined benefit schemes are assessed in accordance with the advice of
an independent qualified actuary using the projected unit method. These schemes are subject to triennial
actuarial reviews with the most recent ones having been at 6 April 2003 for both the Walker Greenbank
Pension Plan and the Abaris Holdings Limited Pension Scheme. A valuation was undertaken at 31 January 2005
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 2005.
12 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 2005.
The consolidated results for the year ended 31 January 2005 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 2005 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.
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