Half-Year Results

RNS Number : 2651S
Victoria PLC
29 November 2012
 



 

 

 

29 November 2012

Victoria PLC

 

('Victoria,' the 'Company,' or the 'Group')

 

Half-Year Results

for the 26 weeks ended 29 September 2012

 

Summary:

 

·     Group Revenue declined 7.8% to £35.99m

 

·     Group loss before tax and exceptional items* of £0.07m

 

·     Net debt increased in the half-year to £8.35m

 

·     Half-Year Dividend of 2.00 pence

 

·     Challenging economic and tough market conditions throughout the period for both the Australian and UK businesses

 

·     Strategy formulated to reverse recent fortunes

 

·     Proposed move to AIM

 

 

*  Refer to Note 4 of this announcement.

 

For more information contact:

 

Victoria PLC

Geoff Wilding

+44 (0) 1562 749 300

 

Seymour Pierce

Jonathan Wright (Corporate finance)

Tom Sheldon  (Corporate finance)

Richard Redmayne (Corporate broking)

Jacqui Briscoe (Corporate broking)

 

 

+44 (0) 20 7107 8000

 

 

 

MHP

Nick Denton                                       

Vicky Watkins                        

 

+44 (0) 20 3128 8100

 

 

Chairman's Statement

 

Overview

Victoria is facing some real challenges. The Group is experiencing strong economic headwinds in each of its major markets, has a cost structure that is too high for its current level of business, limited competitive advantages, excessive debt levels in the UK, surplus production capacity (in a sector with abundant surplus production capacity), and a considerable oversupply of stock in the UK.

 

These issues are reflected in the financial results for the first half-year:

 

·     Group revenues declined by 7.8% (6.6% in constant currency terms) in H1 from £39.02m to £35.99m

 

·     Group operating profit before exceptional items fell 94.3% from £1.85m to £0.11m

 

·     Group profit before tax and exceptional items decreased from £1.72m to a loss of £0.07m

 

·     After exceptional items, the Group recorded a loss before tax of £1.53m, compared with a £1.27m profit before tax in the prior year H1.

 

·     Net debt increased at the half year to £8.35m from the year-end position of £7.75m.

 

Despite these issues, and the consequential poor results, we should remember that Victoria is well known for producing superb quality carpets, has an enviable reputation for service, and employs some talented and committed people.  Since our appointment on 3 October, we have begun to build on these foundations to address the key issues facing the business.

 

Our plans for the Group will take time to impact the financial results and it is our view that, at best, the Group will break even (before exceptional items) for the full year. Furthermore, in restructuring the Group, it is likely that exceptional items and provisions will be incurred in the second half of the current year that will materially impact the Group's present net asset value.

 

We appreciate the possible impact this could have on the share price of Victoria PLC in the short term; however, it is our view that the interests of all shareholders are best served by unequivocally facing up to the realities confronting Victoria and dealing with them now. Be assured we are totally committed to creating value for all shareholders.

 

Half year dividend

We declare an interim dividend of 2.00p per share (2011: 3.50p), payable on 20 December 2012 to shareholders on the register as at 7 December 2012.

 

Proposed move to AIM

In the Annual Report and Accounts for the year end 31 March 2012, the Company advised Shareholders of the proposal to seek shareholder approval to move to AIM.  The process of making this move was suspended earlier in the year by the previous board.  Following our recent appointment, the process has recommenced and a circular is being sent to shareholders shortly concerning this proposal.  

 

Sports ground

As referred to in the Company's trading update of 1 October 2012, the Company has agreed to sell its sports ground in Kidderminster to Wyre Forest District Council for £850,000.  The land has an existing use value in the balance sheet of £80,000.

 

The sale is subject to completion of due diligence and the grant of outline planning consent for the Council's own proposed leisure facility. It is expected that a conditional exchange will be completed before the end of 2012 and proceeds from the sale are expected to be received early in the next financial year.

 

Outlook

Trading continues to be difficult in both the UK and Australia and confidence in the general economic and commercial environment remains fragile.

 

Although the remainder of the current financial year will be challenging, we believe we have adopted an appropriate strategy for Victoria and look forward to reporting improved results to shareholders in the future.

 

Geoff Wilding

Chairman

 

 

Condensed Consolidated Income Statement

For the 26 weeks ended 29 September 2012 (unaudited)

 

 


 

26 weeks ended

29 Sep 2012

 

26 weeks ended

1 Oct 2011

 

52 weeks

ended

31 Mar 2012







Notes

£000

£000

£000

Continuing operations





Revenue

3

35,985

39,016

77,126






Cost of sales


(26,596)

(28,221)

(56,787)






Gross profit


9,389

10,795

20,339






Distribution costs


(7,197)

(6,926)

(14,070)






Administrative expenses


(3,694)

(2,690)

(4,730)






Other operating income


147

218

384

Operating (loss)/ profit


(1,355)

 

1,397

1,923

Analysed between:





Operating profit before exceptional items

3

106

 

1,848

2,583

Exceptional items

4

(1,461)

(451)

(660)

Share of results of associated company


74

 

95

85

Finance costs


(245)

 

(219)

(461)

(Loss)/profit before tax

3

(1,526)

1,273

1,547

Taxation

5

413

 

(471)

(461)

(Loss)/profit for the period


(1,113)

802

1,086

Attributable to:





Equity holders of the parent


(1,113)

802

1,086






Earnings per share -

pence

basic

6

(15.83)

11.55

15.64



diluted

6

(14.77)

10.45

14.12

 

 

 

Condensed Consolidated Statement of Comprehensive Income

For the 26 weeks ended 29 September 2012 (unaudited)

 

 

 


26 weeks

ended

29 Sep 2012

26 weeks

ended

1 Oct 2011

52 weeks

ended

31 Mar 2012


£000

£000

£000





Exchange differences on translation of foreign operations

 

(212)

(952)

72

Other comprehensive (loss)/income for the period

 

(212)

(952)

72

(Loss)/profit for the period

(1,113)

802

1,086

Total comprehensive (loss)/income for the period

 

(1,325)

(150)

1,158

Attributable to:




Equity holders of the parent

 

(1,325)

(150)

1,158

 



 

Condensed Consolidated Balance Sheet

As at 29 September 2012 (unaudited)

 

 


As at

29 Sep 2012

As at

1 Oct 2011

As at

31 Mar 2012


£000

£000

£000





Non-current assets




Intangible assets

742

778

742

Property, plant and equipment

24,132

25,368

24,978

Investment property

180

180

180

Investment in associated company

636

559

558

Deferred tax asset

805

823

812

Total non-current assets

26,495

27,708

27,270





Current assets




Inventories

25,435

26,066

25,966

Trade and other receivables

12,215

12,562

11,676

Current tax asset

216

----

----

Cash at bank and in hand

1,576

769

806

Total current assets

39,442

39,397

38,448

Total assets

65,937

67,105

65,718





Current liabilities




Trade and other payables

14,661

14,865

13,467

Current tax liabilities

----

426

31

Financial liabilities

9,567

7,851

8,165

Total current liabilities 

24,228

23,142

21,663





Non-current liabilities 




Trade and other payables

2,040

2,387

2,253

Other financial liabilities

355

931

388

Deferred tax liabilities

773

1,395

1,094

Total non-current liabilities

3,168

4,713

3,735





Total liabilities

27,396

27,855

25,398

Net assets

38,541

39,250

40,320





Equity




Issued share capital

1,758

1,736

1,736

Share premium

829

829

829

Retained earnings

35,764

36,500

37,575

Share-based payment reserve

190

185

180

Total equity

38,541

39,250

40,320

 

 



 

Condensed Consolidated Statement of Changes in Equity

For the 26 weeks ended 30 September 2012 (unaudited)

 

 

 


Share

Share

Retained

Share based

Total


capital

premium

earnings

payment

equity





reserve



£000

£000

£000

£000

£000

At 3 April 2011

1,736

829

37,067

130

39,762

Profit for the period

---- 

----

802

----

802

Other comprehensive loss for the period 

----

----

(952)

----

(952)

Dividends paid

----

----

(417)

----

(417)

Movement in share-based payment reserve

----

----

----

55

55

At 1 October 2011

1,736

829

36,500

185

39,250







At 3 April 2011

1,736

829

37,067

130

39,762

Profit for the period

----

----

1,086

----

1,086

Other comprehensive income for the period

----

----

72

----

72

Dividends paid

----

----

(660)

----

(660)

Movement in share-based payment reserve

----

----

----

50

50

Deferred tax on share option scheme

----

----

10

----

10

At 31 March 2012

1,736

829

37,575

180

40,320







At 1 April 2012

1,736

829

37,575

180

40,320

Loss for the period

----

----

(1,113)

----

(1,113)

Other comprehensive loss for the period

----

----

(212)

----

(212)

Dividends paid

----

----

(486)

----

(486)

Movement in share-based payment reserve

----

----

----

32

32

Issue of share capital in connection with exercise of share options under LTIP plan

22

----

----

(22)

----

At 29 September 2012

1,758

829

35,764

190

38,541

 

 

 

 



 

Condensed Consolidated Statement of Cash Flows

For the 26 weeks ended 29 September 2012 (unaudited)

 

 


26 weeks

ended

29 Sep 2012

26 weeks

ended

1 Oct 2011

52 weeks

ended

31 Mar 2012


Notes

£000

£000

£000

Net cash inflow/(outflow)  from operating activities

8a

517

(185)

885






Investing activities





Purchases of property, plant and equipment


(652)

(898)

(1,464)

Acquisition of intangible assets


----

(400)

(400)

Proceeds on disposal of property,

plant and equipment


15

103

85

Net cash used in investing activities


(637)

(1,195)

(1,779)






Financing activities





Repayment of loans


----

(312)

(973)

Receipts from financing of assets


67

195

321

Repayment of obligations under finance leases/HP


(246)

(440)

(872)

Dividends paid


(486)

(417)

(660)

Net cash used in financing activities


(665)

(974)

(2,184)






Net decrease in cash and cash equivalents


(785)

(2,354)

(3,078)






Cash and cash equivalents at beginning of period


(6,920)

(3,866)

(3,866)






Effect of foreign exchange rate changes


2

(47)

24

Cash and cash equivalents at end of period

8b

(7,703)

(6,267)

(6,920)

 

 

 

 

 



 

Notes to the Condensed Half-year Financial Statements

For the 26 weeks ended 29 September 2012 (unaudited)

1.   General information

These condensed consolidated financial statements for the 26 weeks ended 29 September 2012 have not been audited or reviewed by the Auditor.  They were approved by the Board of Directors on 28 November 2012.

 

The information for the 52 weeks ended 31 March 2012 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The Auditor's report on those accounts was unqualified and did not include a reference to any matter to which the Auditor drew attention by way of emphasis without qualifying the report and did not contain statements under Section 498(2) or 498(3) of the Companies Act 2006.

 

2.   Basis of preparation and accounting policies

These condensed consolidated financial statements should be read in conjunction with the Group's financial statements for the 52 weeks ended 31 March 2012, which were prepared in accordance with IFRSs as adopted by the European Union.

 

The accounting policies and basis of consolidation of these condensed financial statements are consistent with those applied and set out on pages 64 to 71 of the Group's audited financial statements for the 52 weeks ended 31 March 2012.

 

Accounting standard IAS 12 (amended) "Deferred Tax:  Recovering of Underlying Assets" became effective for the Group in the current reporting period.  The amended standard has not had a material impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.

 

Having reviewed the Group's projections, and taking account of reasonably possible changes in trading performance, the Directors believe they have reasonable grounds for stating that the Group has adequate resources to continue in operational existence for the foreseeable future.

 

The Directors are of the view that the Group is well placed to manage its business risks despite the current challenging economic and market conditions.  Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements of the Group.

 

3.   Segmental information

The Group is organised into two operating divisions:  The UK & Ireland and Australia.  The Group's share of the Canadian Associate result is also presented separately.

 

 Geographical segment information for revenue, operating profit and a reconciliation to Group net profit is presented below:

 



For the 26 weeks ended 29 September 2012


For the 26 weeks ended 1 October 2011


Revenue

Segmental operating

profit

 

Exceptional operating items

Finance

costs

Loss

before

tax*

Revenue

 

Segmental

operating

profit

Exceptional

operating

items

Finance

costs

Profit

Before

 tax*













£000

£000

£000

£000

£000

£000

£000

£000

£000

£000

UK & Ireland

13,763

(235)

----

(54)

(289)

13,817

210

(451)

(54)

(295)

Australia

22,222

(860)

(98)

(206)

25,199

2,026

----

(116)

1,910


35,985

517

(860)

(152)

(495)

39,016

2,236

(451)

(170)

1,615

Central costs

----

(411)

(601)

(93)

(1,105)

----

(388)

----

(49)

(437)

Share of results of Associate

----

 

----

----

74

----

 

----

----

----

95

Total continuing operations

35,985

106

 

 

(1,461)

(245)

(1,526)

39,016

 

 

1,848

(451)

(219)

1,273

Tax





413





(471)

(Loss)/profit after tax from continuing activities





(1,113)





 802

 

* The share of results of the Associate company is shown net of tax as required by IAS1.

 

Intersegment sales between the Group's subsidiaries were immaterial in the current and comparative periods.

 

4.   Exceptional items

 


26 weeks

ended

29 Sep 2012

26 weeks

ended

1 Oct 2011


£000

£000




(a) Restructuring of Australia's spinning mills

860

----

(b) Proposed move to AIM

177

----

(c)  Incentive Plan

144

----

(d)  Requisition costs

280

----

(e)  Ireland restructuring costs

----

451


1,461

451

 

All exceptional items are classified within administrative expenses.

 

(a)        Relate primarily to redundancy costs associated with "right-sizing" and reorganising the two Australian spinning mills to meet reduced volume requirements as a result of declining demand for woollen yarns.

 

(b)        Relate to costs incurred to date in the proposed move from the Official List to the AIM market of the London Stock Exchange.

 

(c)        Relate to professional fees in connection with a proposed incentive remuneration plan.  The remuneration plan was subsequently withdrawn.

 

(d)        Relate to professional fees in connection with the Requisition of the Company on 15 August 2012. 

 

(e)        Relate to closure costs associated with the restructuring, with the largest cost relating to redundancies.  The Irish business and brands are now being marketed and traded under a distribution model and reported within the UK operation.

 

5.   Tax


26 weeks

ended

29 Sep 2012

26 weeks

ended

1 Oct 2011


£000

£000

Current tax



- Current year overseas

(92)

586


(92)

586

Deferred tax

-  Current year movement

(321)

(115)


(321)

(115)

Total

(413)

471

 

The overall corporation tax rate is 27.1% (2011: 37.0%), representing the best estimate of the weighted average annual corporation tax rate expected for the full financial year.  The relatively high corporation tax rate in the prior year was due to Irish restructuring costs which could not be utilised for tax purposes.

 

6.   Earnings per share

The calculation of earnings per ordinary equity share in the parent entity is based on the following earnings and number of shares:


26 weeks

Ended

29 Sep 2012

Basic

26 weeks ended

29 Sept 2012

Adjusted    

26 weeks ended

1 Oct 2011

Basic

26 weeks ended

1 Oct 2011

Adjusted


£'000

£'000

£'000

£'000

(Loss)/profit attributable to ordinary equity

holders of the parent entity

(1,113)

(1,113)

802

802

Exceptional items (net of tax effect):





Restructuring of Australian Spinning Mills

----

602

----

----

Proposed move to AIM

----

136

----

----

Incentive Plan

----

111

----

----

Requisition costs

----

216

----

----

Ireland restructuring costs

----

----

----

424

Earnings for the purpose of basic,

 adjusted and diluted earnings per share

(1,113)

(48)

802

1,226

 

 





Weighted average number of ordinary

 shares ('000) for the purposes of basic

 and basic adjusted earnings per share


 7,033


6,944

Effect of dilutive potential ordinary shares:





Long Term Incentive Plan and Performance Share Plan ('000)


 503


728

Weighted average number of ordinary

 shares ('000) for the purposes of diluted

 earnings per share


 7,536


7,672

The Group's earnings per share are as follows:





Basic adjusted (pence)


(0.68) 


17.66

Diluted adjusted (pence)


(0.64) 


15.98

Basic (pence)


(15.83) 


11.55

Diluted (pence)


(14.77) 


10.45

 

 

 

7.   Dividends



 26 weeks

 ended

29 Sep 2012

£'000


26 weeks

ended

1 Oct 2011

£'000

Amounts recognised as distributions to equity holders in the period:





Final dividend for the year ended 31 March 2012 paid during the year 7.0p per share (2011: 6.0p)


486 


417

Interim dividend declared for the year to 30 March 2013 2.0p per share (2011: 3.5p)


141 


243

 

8.   Notes to the cash flow statement

 

a)   Reconciliation of operating (loss)/profit to net cash inflow/(outflow) from operating activities

 


26 weeks ended

29 Sep 2012

26 weeks ended

1 Oct 2011

52 weeks ended

31 Mar 2012


£000

£000

£000

Operating (loss)/profit from continuing operations

(1,355)

1,397

1,923

Adjustments for:




- Depreciation charges

1,341

1,457

2,932

- Amortisation of intangible assets

26

6

42

- Share-based payment charge

32

55

47

- (Profit)/loss on disposal of property, plant and equipment

----

(20)

59

- Exchange rate difference on consolidation

(100)

10

4

Operating cash flows before movements in working capital

(56)

2,905

5,007

Decrease /(increase) in working capital

973

(2,080)

(2,239)

Cash generated from operations

917

825

2,768

Interest paid

(245)

(237)

(478)

Income taxes paid

(155)

(773)

(1,405)

Net cash inflow/(outflow) from operating activities

517

(185)

885

 

 

b)   Analysis of net debt

 


At

31 Mar 2012

Cash flow

Other

non-cash

changes

Exchange

movement

At

29 Sep 2012


£000

£000

£000

£000

£000

Cash

806

777

----

(7)

1,576

Bank overdrafts

(7,726)

(1,562)

----

9

(9,279)

Cash and cash equivalents

(6,920)

(785)

----

2

(7,703)

Finance leases and hire purchase agreements






 - Payable less than one year

(439)

246

(96)

2

(287)

 - Payable more than one year

(388)

(67)

96

3

(356)

Net debt

(7,747)

(606)

----

7

(8,346)

 

 

 

 

9.   Rates of exchange

The results of overseas subsidiaries and associated undertakings have been translated into Sterling at the average exchange rates prevailing during the periods.  The balance sheets are translated at the exchange rates prevailing at the period ends:

 



26 weeks

ended

29 Sep 2012

26 weeks

ended

1 Oct 2011

52 weeks

ended

31 Mar 2012

Australia (A$) - average rate


1.5465

1.5349

1.5270

Australia (A$) - period end


1.5555

1.6029

1.5423

Ireland (€) - average rate


1.2417

1.1362

1.1559

Ireland (€) - period end


1.2515

1.1611

1.1998

Canada (C$) - average rate


1.5898

1.5822

1.5870

Canada (C$) - period end


1.5833

1.6233

1.5969

 

 

10. Related party transactions

During the period, the Group had transactions with its associate, comprising sales of goods to the value of £459k (2011: £261k).  At 29 September 2012, the Group was owed £355k (2011: £286k).  All goods and services were provided at market rates.

 

11. Risks and uncertainties

The Board continuously assesses and monitors the key risks of the business.  The key risks that could affect the Group's medium term performance and the factors which mitigate these risks have not changed from those set out on page 25 of the Group's 2012 Annual Report, a copy of which is available on the Group's website - www.victoriaplc.com.  The Chairman's Statement includes consideration of uncertainties affecting the Group in the remaining six months of the year.

 

12. Information rights

Under Section 146 of the Companies Act 2006, registered shareholders of fully listed companies are able to nominate the underlying beneficial owners of their shares to receive information rights form 1 October 2007.  Companies are required to fulfil these requests from 1 January 2008.

 

Please note that beneficial owners of shares nominated by the registered holders of those shares are required to direct all communications to the registered holder of their shares rather than to the Company's Registrar, Capita Registrars, or the Company directly.

 

13. Statement of Directors' responsibilities

The Directors confirm that to the best of their knowledge, the condensed set of financial statements has been prepared in accordance with IAS34, "Interim financial reporting" as adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and loss of the Group and includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7R, 4.2.8R and 4.2.9R of the United Kingdom's Financial Services Authority.

 


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