Interim Results

Victoria PLC 24 November 2004 Issued by Citigate Dewe Rogerson Ltd, Birmingham Date: Wednesday, 24 November 2004 Embargoed: 7.00am Victoria P.L.C. Interim Results for the six months ended 2 October 2004 2004 2003 Turnover £26.82m £25.48m Operating profit £1.09m £2.45m Profit before tax £0.79m £2.22m Earnings per share 7.81p 22.08p UK turnover 6% lower with home market sales down 7% Westwood Yarns, our UK spinner showed good increase in profitability benefiting from additional capacity installed in 2003 Munster Carpets saw strong pick-up in sales and operating profits rose strongly and steady progress at Navan Carpets - several new products already introduced Australian operation increased carpet sales in both contract and residential markets despite increased competition '...the first six months have been challenging for the Group. Difficult trading conditions in all of our main markets coupled with operational issues experienced in the period in our UK Axminster carpet manufacturing division combined to deliver a downturn in profitability. 'Overall, we believe that the Group is on track to meet market forecasts for the full year and, in the absence of unforeseen circumstances, we would expect to maintain the level of final dividend paid last year.' Bob Gilbert, Chairman FULL STATEMENT ATTACHED Enquiries: Alan Bullock, Group Managing Director Mark Lee, Group Finance Director Fiona Tooley/Katie Dale Victoria P.L.C. Citigate Dewe Rogerson Today: 020 7282 8000 Today: 020 7282 8000 Thereafter: 01562 749300 Thereafter: 0121 455 8370 Mobile: 07785 325701 (AB) Mobile: 07785 703523 (FMT) www.victoria.plc.uk -2- Victoria P.L.C. Interim Results for the six months ended 2 October 2004 STATEMENT BY THE CHAIRMAN, BOB GILBERT Introduction Overall, the first six months have been challenging for the Group. Difficult trading conditions in all of our main markets coupled with operational issues experienced in the period in our UK Axminster carpet manufacturing division combined to deliver a downturn in profitability. Although Group turnover for the six months ended 2 October 2004 was £26.8 million, 5.2% higher than last year, operating profits halved to £1.09 million from £2.45 million at the interim stage last year. Pre-tax profits were £0.79 million against £2.22 million in 2003 and earnings per share were 7.81 pence (2003: 22.08 pence). United Kingdom We had expected the UK residential market to remain difficult; however, we had not anticipated such a quiet retail market as was seen during the Summer months, particularly in July and August which were significantly below the traditional trading levels of this period. Five successive rises in interest rates and the ensuing concern over house prices appear to have succeeded in cooling the housing market which in turn has dampened consumer confidence - a key ingredient in the carpet purchase decision. Whilst historically our product portfolio, excellent point-of-sale display and consistent levels of high service have helped protect us from the worst of market downturns, we cannot be immune from the poor trade on the high street which the whole industry has experienced during the summer period. UK turnover was 6% lower at £12.29 million, with home market sales down by 7% and external export sales up by 5%. UK profitability was not only affected by this reduced turnover, but also by the ongoing difficulties we have already reported in the Axminster weaving department. We are taking firm action to return the Axminster department to health. The refurbishment of the Navan looms has been completed and we are now achieving our production targets. We remain focussed on the other components of this turnaround and we are currently meeting our weekly targets on order intake, order pricing, labour productivity and quality. Westwood Yarns, our UK spinner, showed a good increase in profitability, clearly benefiting from the additional capacity installed in August 2003. With profitability increasing and production up by 7%, this more than justified the investment made. Ireland The Irish economy went through a much slower period of growth during 2003. Since then, with consumer confidence and spending subdued, the residential carpet market has remained quiet, although the commercial contract market has been more buoyant. Munster Carpets, recognised as a leading supplier into the Irish contract comm ercial sector, saw a strong pick-up in sales which more than doubled from the first half of last year. Operating profits also rose strongly and are now ahead of the initial expectations that we had when we acquired the business in 2002. Steady progress is being made at Navan Carpets in rebuilding the business that we acquired out of liquidation in July 2003. A thorough rationalisation of the product portfolio is under way and several new products have already successfully been introduced. The effect of significant investment in point-of-sale display is also now starting to be seen. However, the impact of the quiet residential market during the period affected sales which has resulted in the Navan division producing a small operating loss. continued... -3- Australia The Australian economy has fallen back from its recent peaks. The housing market has slowed and consumer confidence has been lower, with a noticeable reduction seen in consumer spending. This has resulted in increased competition between manufacturers to achieve sales to the carpet retailers. Despite the more difficult conditions, our Australian operation increased carpet sales by 4.8% in local currency. Sales to the contract residential sector held up well and sales to retailers were maintained. Margins were, however, affected by the level of competition in the slowing residential market. Export sales improved, but margins were affected by the stronger Australian dollar. Output from our two spinning mills was slightly below last year and led to reduced spinning profits in the period. Whilst our own yarn usage was maintained, outside sales of yarn from our Bendigo spinning mill fell, although there are now signs that this business is returning. Government grants were again received under the Strategic Investment Programme, although at a lower level than last year when SIP income was boosted by the acquisition of the Bendigo spinning mill. Australian turnover was 2.4% higher at £11.63 million (2003: £11.35 million) but pre-tax profit was 14.8% lower at £1.44 million (2003: £1.69 million). Canada The new strategy implemented by Campbells following the change of partner in February 2003 is continuing to produce improved results. The introduction of an Area Rug programme has added to sales and profits, and the new 'Urban Line' of products supplied to carpet retailers is meeting an enthusiastic response from both the retailers and consumers. Turnover in the period was up by 32% in local currency and the Group's share of pre-tax profits was £70,000 (2003: £27,000). Prospects It is fair to say that conditions remain challenging not only on the high street but also within all of the sectors and markets in which we operate. In the UK, we are now in the traditionally busier autumn period and, although activity has picked up, sales are still not up to the levels we were experiencing last year. Recent new range introductions have been well received in the market and we continue to focus on product development with a number of products at various stages of readiness for launch. Although we consider that the UK is likely to remain difficult for the rest of this year, we expect to see a turnaround in the Axminster department's performance, allowing the UK to improve on its first half year profitability. In Ireland, the strength of the contract commercial market appears to be solid and we expect Munster to continue to perform well. Investment in patterning, displays and new products should enable Navan to show further progress in the second half year. In Australia, our business has managed to meet its budget for the first half year and, with some improvement now being seen in outside orders for yarn, we expect to maintain this performance for the full year. Overall, we believe that the Group is on track to meet market forecasts for the full year and, in the absence of unforeseen circumstances, we would expect to maintain the level of final dividend paid last year. -4- Victoria P.L.C. Interim Results for the six months to 2 October 2004 GROUP PROFIT AND LOSS ACCOUNT Six months to Six months to Year to 2 October 27 September 3 April 2004 2003 2004 Unaudited Unaudited Audited £'000 £'000 £'000 Note ---------------------------------------------------------------------------------- Turnover 26,815 25,481 54,622 Cost of sales 19,579 17,814 38,808 ---------------------------------------------------------------------------------- Gross profit 7,236 7,667 15,814 Distribution costs 5,113 4,249 8,948 Administrative expenses 1,427 1,440 3,199 Other operating income 394 468 1,085 ---------------------------------------------------------------------------------- Operating profit 1,090 2,446 4,752 Interest payable and similar charges 374 258 586 Share of profits of associated undertaking 70 27 19 ---------------------------------------------------------------------------------- Profit on ordinary activities before taxation 786 2,215 4,185 Taxation 244 682 1,180 ---------------------------------------------------------------------------------- Profit after taxation 542 1,533 3,005 Dividends paid and proposed - - 799 ---------------------------------------------------------------------------------- Retained profit 542 1,533 2,206 ---------------------------------------------------------------------------------- Earnings per share - basic and diluted 2 7.81p 22.08p 43.28p ---------------------------------------------------------------------------------- Dividend per share 3 - - 11.50p ---------------------------------------------------------------------------------- -5- Victoria P.L.C. Interim Results for the six months to 2 October 2004 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months to Six months to Year to 2 October 2004 27 September 2003 3 April 2004 Unaudited Unaudited Audited £'000 £'000 £'000 ------------------------------------------------------------------------------- Profit after taxation 542 1,533 3,005 Currency translation differences on foreign currency (306) 482 673 net investments ------------------------------------------------------------------------------- Total gains relating to the period 236 2,015 3,678 ------------------------------------------------------------------------------- Total gains recognised since last annual report 236 2,015 3,678 ------------------------------------------------------------------------------- NOTE OF HISTORICAL COST PROFITS AND LOSSES Six months to Six months to Year to 2 October 2004 27 September 2003 3 April 2004 Unaudited Unaudited Audited £'000 £'000 £'000 ------------------------------------------------------------------------------- Reported profit on ordinary activities before taxation 786 2,215 4,185 ------------------------------------------------------------------------------- Historical cost profit on ordinary activities before 786 2,215 4,185 taxation ------------------------------------------------------------------------------- Historical cost profit for the period retained after 542 1,533 2,206 taxation and dividends ------------------------------------------------------------------------------- -6- Victoria P.L.C. Interim Results for the six months to 2 October 2004 CONSOLIDATED BALANCE SHEET 2 October 2004 27 September 2003 3 April 2004 Unaudited Unaudited Audited £'000 £'000 £'000 -------------------------------------------------------------------------------- Fixed assets Intangible assets - Goodwill 566 594 563 Tangible assets 23,479 22,670 23,592 Investment in associated undertaking 354 306 306 -------------------------------------------------------------------------------- 24,399 23,570 24,461 Current assets Stock 15,287 13,464 14,908 Debtors 10,466 10,285 9,795 Cash 838 42 308 -------------------------------------------------------------------------------- 26,591 23,791 25,011 Less: Current liabilities Creditors due within one year 16,953 14,963 16,052 -------------------------------------------------------------------------------- Net current assets 9,638 8,828 8,959 -------------------------------------------------------------------------------- Total assets less current liabilities 34,037 32,398 33,420 Less: Creditors due after one year 7,472 7,139 7,033 Provisions for liabilities and charges 997 793 1,056 -------------------------------------------------------------------------------- Net assets 25,568 24,466 25,331 -------------------------------------------------------------------------------- Capital and reserves (equity) Share capital 1,736 1,736 1,736 Share premium account 829 829 829 Revaluation reserve 2,120 2,126 2,144 Profit and loss account 20,883 19,775 20,622 -------------------------------------------------------------------------------- Total shareholders' funds 25,568 24,466 25,331 -------------------------------------------------------------------------------- -7- Victoria P.L.C. Interim Results for the six months to 2 October 2004 CONSOLIDATED CASH FLOW STATEMENT Six months to Six months to Year to 2 October 27 September 3 April 2004 2003 2004 Unaudited Unaudited Audited £'000 £'000 £'000 Note -------------------------------------------------------------------------------- Net cash inflow from operating activities 4 1,291 2,417 4,460 -------------------------------------------------------------------------------- Returns on investment and servicing of finance Interest paid (251) (163) (357) Hire purchase interest (123) (95) (229) -------------------------------------------------------------------------------- (374) (258) (586) -------------------------------------------------------------------------------- Taxation UK corporation tax refund / (paid) 184 (118) (271) Overseas tax paid (688) (514) (985) -------------------------------------------------------------------------------- (504) (632) (1,256) -------------------------------------------------------------------------------- Capital expenditure and financial investment Payments to acquire tangible fixed assets (1,303) (1,470) (3,303) Receipts from sales of tangible fixed assets 45 37 70 -------------------------------------------------------------------------------- (1,258) (1,433) (3,233) -------------------------------------------------------------------------------- Acquisitions Payments to acquire the assets of a trade or business - (1,507) (1,446) -------------------------------------------------------------------------------- Equity dividends paid (799) (625) (625) -------------------------------------------------------------------------------- Financing Increase in/(repayment of) long-term loans 1,111 (406) (457) Capital element of finance lease and hire purchase (725) (552) (923) payments Receipts from financing of assets 80 905 1,375 -------------------------------------------------------------------------------- 466 (53) 5 -------------------------------------------------------------------------------- Increase / (decrease) in cash (1,178) (2,091) (2,691) -------------------------------------------------------------------------------- -8- Victoria P.L.C. Interim Results for the six months to 2 October 2004 NOTES TO THE INTERIM STATEMENTS 1. Basis of preparation The results for the year ended 3 April 2004 are extracts from the Group report and accounts as filed with the Registrar of Companies. These were audited and reported upon without qualification under section 235 of the Companies Act 1985. 2. Earnings per share The earnings per share for the 6 month period to 2 October 2004 are based on 6,943,556 shares in issue throughout the period. The same number of shares were in issue throughout the six months ended 27 September 2003 and the year ended 3 April 2004. 3. Dividends No interim dividend is proposed (September 2003: nil; March 2004: 11.5 pence). 4. Reconciliation of operating profit to net cash inflow from operating activities Six months to Six months to Year to 2 October 2004 27 September 2003 3 April 2004 Unaudited Unaudited Audited £'000 £'000 £'000 -------------------------------------------------------------------------------- Operating profit 1,090 2,446 4,752 Depreciation and amortisation charges 1,113 1,028 2,094 Loss/(Profit) on sale of fixed assets (4) (2) 13 (Increase) in working capital (793) (1,226) (2,657) Exchange rate difference on consolidation (115) 171 258 -------------------------------------------------------------------------------- Net cash inflow from operating activities 1,291 2,417 4,460 -------------------------------------------------------------------------------- 5. Exchange rates The results of overseas subsidiary and associated undertakings have been translated at the exchange rates prevailing at the period end: 2 October 2004 27 September 2003 3 April 2004 -------------------------------------------------------------------------------- Australia A$ 2.4818 = £1 A$ 2.4614 A$ 2.4099 Euro €1.4492 = £1 € 1.4458 € 1.5074 Canada C$ 2.2664 = £1 C$ 2.2469 C$ 2.4101 This information is provided by RNS The company news service from the London Stock Exchange

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