WALKER GREENBANK PLC

("Walker Greenbank" or "the Company")

 

Preliminary Results for the year ended 31 January 2016

 

 

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings group whose brands include Sanderson, Morris & Co., Harlequin, Zoffany, Scion and Anthology, is pleased to announce its preliminary results for the 12 month period ended 31 January 2016.

 

Highlights

 

·      Sales up 5.4% to £87.8 million (2015: £83.4 million)

·      Unadjusted profit before tax up 15.9% at £7.34 million (2015: £6.33 million)
 

·      Adjusted profit before tax* up 10.0% at £8.95 million (2015: £8.13 million)

 

·      Majority of production on track to be restored at Standfast & Barracks following flood by the end of April 2016. Financial results include insurance proceeds for loss of profits of £1.4 million for the period

 

·      Successful development of the fourth collection from the international contemporary Anthology brand including an exciting range of innovative wide-width fabrics

 

·      UK and global licensing partnerships signed in existing and new product areas

 

·      Adjusted earnings per share* up 7.1% at 12.47p per share (2015: 11.64p per share)

 

·      Final dividend up 25.0% to 2.45p per share (2015: 1.96p per share), giving a total dividend up 25.1% at 2.89p per share (2015: 2.31p per share)

 

·      Refinancing completed with a five year, £12.5 million rolling credit facility and £10 million accordion

 

 

* Excludes accounting charges relating to share-based incentives and defined benefit pension charge

 

Terry Stannard, the Chairman of Walker Greenbank, said: "Whilst sales continue to be impacted by last year's flood at Standfast & Barracks the consequential loss of profits will be mitigated by our insurance policy. We remain on track to have reinstated the majority of production at the factory by the end of April 2016.

 

"In the first 9 weeks of the current year, Brand sales are up 0.9% in reportable currency, down 0.7% in constant currency, reflecting the impact of the flood and strong comparators last year, particularly in UK contract sales. Brand sales in the UK are down 3.8% in the first 9 weeks whereas overseas Brand sales are up 8.7% in reportable currency, up 4.1% in constant currency.

 

"Our new product launches and contract pipeline mean we are confident of the trading outlook in the year ahead. We are particularly encouraged by the launch of the fourth collection from the Anthology brand, which for the first time includes an extensive range of contract-quality woven fabrics, by the launch of the Woodland Walk collection from Sanderson and by a strong trading start from our wallpaper factory in Loughborough."

 

Analyst meeting

 

A meeting for analysts will be held at 10am today, 13 April 2016, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. For further details, contact Buchanan on 020 7466 5000.

 

 

For further information:

 

Walker Greenbank PLC	+44 (0) 844 543 4668
John Sach, Chief Executive
Mike Gant, Chief Financial Officer
Investec Bank plc	+44 (0) 20 7597 5970
Garry Levin / David Anderson - Nominated Adviser Henry Reast - Corporate Broking
Buchanan	+44 (0) 20 7466 5000
Mark Court / Helen Chan / Sophie Cowles

 

 

Notes for editors:

 

About Walker Greenbank

 

Walker Greenbank PLC is a luxury interior furnishings company that designs, manufactures and markets wallpapers and fabrics together with a wide range of ancillary interior products. The Company's brand portfolio - comprising Sanderson, Morris & Co, Harlequin, Zoffany, Scion and Anthology - spans heritage and contemporary design and its products are sold in 85 countries worldwide. The Company derives significant licensing income from the use of its designs in lifestyle products such as bed linen, rugs and tableware.

 

The Company employs more than 600 people and has showrooms in London, New York, Paris, Amsterdam and Dubai along with partnership showrooms in Moscow and in Shenzhen, China. Its UK manufacturing base, which includes a wallpaper factory in Loughborough and a fabric printing factory in Lancaster, manufactures product both for the Company and for other wallpaper and fabric brands. Continued investment in manufacturing has allowed the Company to offer a wide range of printing techniques.

 

Walker Greenbank trades on the AIM market of the London Stock Exchange under the ticker symbol WGB.

 

For further information please visit: www.walkergreenbank.com/

 

 

 

 

CHAIRMAN'S STATEMENT

 

Overview

 

I am pleased to report that the Group continues to make good progress reflecting the success of our continued strategic focus on developing our product offering, manufacturing capabilities, market penetration and international expansion.

 

The adjusted profit before tax for the year was £8.95 million (2015: £8.13 million), an increase of 10.0%. The reported financial results have been impacted by the serious flood in December 2015 at Standfast & Barracks, our fabric printing business. The Group is fully insured for this flood, and its impact was mitigated by an exceptional gain of £1.407m as a result of an interim insurance payment for loss of profits. This has helped underpin the Group's delivery of another strong increase in profitability and a 25.1% increase in the total dividend for the year.

 

Total Brand sales were up 4.9% during the year to £67.9 million. The UK, our largest market, increased sales by 3.9% to £40.0 million, with both retail and contract divisions performing well.

 

Overseas Brand sales were up 7.2% in reportable currency, 8.9% in constant currency. Sales in the US, which is now the Group's second largest market, were up 20.1% in reportable currency, 11.9% in constant currency. In Western Europe, our third largest market, Brand sales were down 0.8% in reportable currency, but up 10.4% in constant currency with strong sales growth in most regions. Sales in the Rest of the World grew 5.5% in constant currency. 

 

During the year we have continued to make significant progress with market penetration through the development of the fourth collection from the Anthology brand. The wallpapers in this collection have been complemented for the first time for Anthology by an exciting range of innovative wide-width fabrics. We also progressed with our digital sales and marketing strategy, including e-commerce development.    

 

Licensing income of £2.0 million was down 1.8% in reportable currency, impacted by the weakness of the Yen, but up 3.1% in constant currency. We remain confident about the future potential for this important strategic contributor to our growth. 

 

Walker Greenbank's UK manufacturing base comprises our Loughborough-based wallpaper printing business, Anstey Wallpaper Company, and our Lancaster-based fabric printing business, Standfast & Barracks. This manufacturing capability is a key asset that differentiates us from others in our industry and puts us at the forefront of innovation in printing techniques.

 

Anstey progressed well in the year with an expected reduction in internal sales more than offset by strong growth in sales to third party customers in both the UK and international markets.

 

The flood at Standfast & Barracks caused significant disruption to our fabric printing activities. The combined efforts of our insurers and our own management team have minimised the disruption. Whilst the flood was close to the year end, it inevitably has had an impact on factory and brand sales. An interim insurance payment of £8.0 million was received after the financial year end and the majority of the factory's total printing capacity will be back on stream by the end of April 2016.

 

Financials

 

The financial results have been impacted by the flood at Standfast & Barracks. This has been mitigated by an exceptional gain of £1.407 million as a result of an interim insurance payment for loss of profits.

 

Total sales increased 5.4% to £87.8 million (2015: £83.4 million). The operating profit before an accounting charge relating to the Long-Term Incentive Plan ('LTIP') rose 9.4% to £9.13 million (2015: £8.34 million). The profit from operations was up 11.8% to £8.20 million (2015: £7.34 million). The interest charge incurred during the year decreased from £208,000 to £179,000 due to lower average borrowings whilst the defined benefit pension charge has reduced from £798,000 to £685,000 driven by a reduction in the service cost.

 

The profit before tax after the two non-cash charges relating to the LTIP accounting charge and the net defined benefit charge was £7.34 million (2015: £6.33 million). The profit after tax was £5.88 million (2015: £5.11 million) and basic adjusted earnings per share were up 7.1% after removing the LTIP accounting charge and net defined benefit charge.

 

The cash inflow from operating activities was £6.32 million a significant improvement on last year (2015: £3.26 million), driven by improved working capital management. The Group has continued to invest with capital expenditure of £2.51 million (2015: £3.25 million).

 

Dividend

 

The Directors recommend the payment of a final dividend of 2.45p per share (2015: 1.96p) which will be payable on 5 August 2016 to shareholders on the register on 15 July 2016. This brings the total dividend for the year to 2.89p per share (2015: 2.31p) an increase of 25.1%, which reflects Directors' confidence in the future prospects and the financial strength of the Group.

 

People

 

On behalf of the Board, I would like to thank all of our management and employees for their contribution to another successful year. I would like to say a particular thank you to all of the team at Standfast & Barracks for their energy and commitment following the factory flooding.

 

During the year, we strengthened the operational management and organisational structure of the Group by appointing a Group Design Director, a Group Marketing Director and a Group Licensing Director. In March this year, we appointed a Managing Director of Manufacturing.

 

Outlook

 

Whilst sales continue to be impacted by last year's flood at Standfast & Barracks the consequential loss of profits will be mitigated by our insurance policy. We remain on track to have reinstated the majority of production at the factory by the end of April 2016.

 

In the first 9 weeks of the current year, Brand sales are up 0.9% in reportable currency, down 0.7% in constant currency, reflecting the impact of the flood and strong comparators last year, particularly in UK contract sales. Brand sales in the UK are down 3.8% in the first 9 weeks whereas overseas Brand sales are up 8.7% in reportable currency, up 4.1% in constant currency.

 

Our new product launches and contract pipeline mean we are confident of the trading outlook in the year ahead. We are particularly encouraged by the launch of the fourth collection from the Anthology brand, which for the first time includes an extensive range of contract-quality woven fabrics, by the launch of the Woodland Walk collection from Sanderson and by a strong trading start from our wallpaper factory in Loughborough.

 

 

Terry Stannard

Non-Executive Chairman

13 April 2016

 

 

CHIEF EXECUTIVE'S STRATEGIC REVIEW

 

 

I am pleased to report that the Group continues to make good progress through the implementation of its strategy, which comprises:

 

·      International expansion;

 

·      Market penetration;

 

·      Lifestyle product extension;

 

·      British manufacturing capability; and

 

·      Acquisitions.

 

 

The Brands

 

This segment incorporates global trading from our internationally recognised brands and includes our overseas subsidiaries in the US and France.

 

Total Brands sales increased by 4.9% compared with last year to £67.9 million as a result of continued investment in design, marketing and distribution, and from new product launches. This has led to a 9.4% increase in operating profits to £8.1 million.

 

In the UK, Brands sales increased 3.9% to £40.0 million with both the retail and contract divisions performing well.  

 

Sales in the US increased by 20.1% in reportable currency, 11.9% in constant currency to £8.5 million driven by increased investment with key strategic partners and a positive impact from our extended and refurbished flagship showroom in New York. With the US our second largest market by sales we have increased our investment in dedicated sales managers including an experienced national Contract Sales Manager.

 

Brand sales in Western Europe were down 0.8% in reportable currency but grew 10.4% in constant currency to £7.0 million with the majority of markets showing growth. Other highlights include sales in the Far East, up 8.2% in constant currency to £3.2 million and growth in the Middle East, up 5.7% in constant currency to £1.2 million.

 

Global licensing income is a key part of our strategy and an important income stream for the Group. Income was down 1.8% in reportable currency as a result of the weakness of the Japanese Yen, but up 3.1% to £2.0 million in constant currency. Our existing licensees are all committed to range extensions for 2016, and contracts have been signed with a number of new licensees covering existing and new product areas. We are also developing licence partnerships in the important US market.  2016 will see exciting new developments with our UK ceramic partners and the continuing extension of our product offerings including giftware, blinds, kitchenware and kitchen textiles across four of our brands. We therefore anticipate increased activity in licensing through 2016 and beyond, led by the appointment last year of a dedicated Licensing Director.

 

Group-wide initiatives during the year included the development and pilot launch of a new CRM system. We also progressed our digital sales and marketing strategy, including e-commerce development.

 

Harlequin incorporating Scion & Anthology

Harlequin has grown its worldwide sales 9.3% in reportable currency over the same period last year to £31.7 million and remains the UK's leading mid-market contemporary brand. Sales in the UK have increased 7.9% driven by the success of its Amazilia, Purity and Momentum collections. In the US, Harlequin has seen significant growth, up 29.3% in reportable currency, 20.6% in constant currency and sales in Western Europe have grown 3.8% year on year in reportable currency, 14.6% in constant currency.

 

The Scion brand launched in February 2012 continues to grow well. The brand successfully launched its fourth collection, Levande, in Spring 2015 and this was followed in the Autumn by the introduction of Guess Who?, the brand's first children's collection. This cutting edge brand is accessibly priced making it a success with young, aspirational and fashion-aware customers. Scion has also become quickly established as a valuable brand for licensing partners where the contemporary and graphic nature of the designs translates particularly well.

 

The Anthology brand was launched relatively recently, in April 2014, and sales since launch have exceeded expectations. With the first three wall covering collections recently joined by a fourth, and also a full range of specialist fabrics suitable for both contract and residential applications, we anticipate further strong growth of this cutting edge brand through 2016 and beyond.

 

Arthur Sanderson & Sons incorporating the Morris & Co brand

Sales were down 0.9% compared with the same period last year at £21.5 million in reportable currency. Sales in the UK have decreased by 2.1%. Sales in the Far East and Middle East have grown driven by the success of its Voyage of Discovery and Abracazoo collections, up 12.6% and 5.3% in reportable currency respectively. Sales in the US are up 7.7% in reportable currency, 0.4% in constant currency, sales in Western Europe are down 6.4% in reportable currency, up 3.5% in constant currency. As we enter 2016, Sanderson's latest collection, Woodland Walk, looks set to become the best selling collection for several years, universally appreciated by all markets as quintessentially Sanderson. With another strong collection in final development for a summer launch we expect an excellent performance from this revered brand through 2016.

 

The Morris & Co brand enjoyed a very positive sales performance last year driven by the Archive III collections. To follow this and build upon the positive momentum through 2016 we are launching two new collections that interpret Morris' iconic designs in new and exciting ways that will work equally well in both traditional and contemporary settings.

 

Zoffany

Zoffany is positioned at the upper end of the premium market. Total sales have grown by 4.7% compared with the same period last year to £11.7 million in reportable currency driven by sales of the Jaipur, Constantina and Woodville collections. Sales in the UK have grown 4.4%. Sales in the US are up 12.8% in reportable currency, 5.0% in constant currency and sales in Western Europe were up 4.0% in reportable currency, 14.9% in constant currency. For 2016 we have focused great attention on bringing innovative new thinking to Zoffany's launches with a huge amount of work directed towards refreshed colourations that will define the brand going forwards.

 

Manufacturing

 

Our manufacturing capabilities are one of the Group's key assets and an integral part of our growth strategy. The flood at our fabric printing business, Standfast & Barracks, had a significant impact on our manufacturing activities, with the result that total manufacturing sales fell 2.1% to £34.3 million leading to a decrease in profits of 32.1% to £2.5 million.

 

The flooding masks an otherwise strong underlying trading performance in manufacturing and the shortfall has been mitigated by the interim insurance payment.

 

Anstey Wallpaper Company

Sales at Anstey, our wallpaper printing business, grew 1.7% to £18.6 million. Third party sales in the UK were up 13.5% and third party export sales were up 19.5%. Internal sales to our own Group brands fell by 14.5% reflecting the level of new product launches in the prior year.

 

Third party sales have continued their strong growth following last year's additional investment in digital printing and correlated digital sampling together with finishing equipment for digital product.

 

Standfast & Barracks

Standfast, our fabric printing factory, has seen a decrease in annual sales of 6.3% to £15.7 million as a direct result of the flood in December 2015 caused by Storm Desmond. Third party sales in the UK grew by 0.3% with sales to our own Group brands decreasing 12.9%.

 

As a result of the flood, Standfast has experienced a period of significantly disrupted production and loss of stock, machinery and profits. Following the financial year-end we received £8.0 million insurance receipts covering costs plus business interruption losses and interim cashflow requirements, with further business interruption reimbursements expected to cover future loss of profits up to a period of two years following the flood.

 

Progress towards restoring production at Standfast & Barracks continues to proceed on track. The initial priority was to restart digital printing and it was agreed with the Company's insurers that three of the digital printing machines would be replaced rather than repaired. One of the machines has been replaced on a like for like basis and the other two are being replaced with next generation digital printers with higher throughput and additional capabilities.

 

In March 2016, we appointed Paul Mullan, a highly experienced operations manager, in the newly created role of Managing Director of Manufacturing. Paul has responsibility for the Group's two factories and his role includes the development of a medium to long term growth strategy for the Group's manufacturing operations.

 

Summary

 

We continue to grow our brands both in the UK and internationally through continuing investment in design, marketing and distribution, and new product launches. Sales have also been boosted by the continuing success of our international brand Anthology and we are excited by the recent launch of complementary fabrics.

 

We are committed to investing in our British wallpaper and fabric printing factories to further enhance the innovative, added value techniques that we are able to offer customers. We have made some key senior appointments which will drive growth in 2016 and help to further develop and deliver our strategic priorities.

 

We will continue to focus on delivering against our strategy and the Board remains confident of our future growth prospects.

 

 

John Sach

Group Chief Executive

13 April 2016

 

 

 

 

CHIEF FINANCIAL OFFICER'S REVIEW

 

Net other income

The substantial flooding at Standfast & Barracks resulted in extensive stock and machinery damage as well a period of disrupted printing. We have recovered the costs of stock, machinery loss and other incremental costs together with business interruption losses from our insurance providers for the period to 31 January 2016. The insurance claim in respect of losses for future financial years is ongoing.

 

To date £8,000,000 cash has been received, after the financial year end as an interim payment from our insurers of which £4,683,000 has been recognised and included within other receivables as at 31 January 2016. In the Income Statement, the £4,683,000 which has been recognised is included within a separate line titled 'net other income', net of related inventory loss, property, plant and equipment impairment and other incremental costs incurred of £3,276,000.

 

Long-Term Incentive Plan ('LTIP')

There was a new award of shares during the financial year under the Long-Term Incentive Plan ("LTIP") with vesting conditions half based on Total Shareholder Return ('TSR') with an adjusted profit before tax floor and half based on Earnings Per Share ('EPS') growth. There has been a charge of £924,000 (2015: £1,005,000) in the Income Statement relating to LTIP awards. The charge in the year is lower than last year driven by a reduction in the expected number of shares that will vest in future awards and a decrease in the share price compared with the prior year and the associated National Insurance element.

 

Interest

The net interest charge for the year was £179,000 (2015: £208,000) including amortisation of capitalised debt issue costs reflecting slightly lower borrowings as a result of reduced working capital.

 

Net Defined Benefit Pension

The Group operates two defined benefit schemes in the UK for its employees. These comprise the Walker Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme which are both closed to new members and to future service accrual from 30 June 2002 and 1 July 2005 respectively.

 

The charge during the year was £685,000 (2015: £798,000). The decrease reflects a reduction in service cost and a reduction in the net interest on the net defined benefit liability.

 

Current Taxation

There was a corporation tax charge of £1,410,000 (2015: £596,000) as the main UK entity, Abaris Holdings Limited is now in a tax paying position having fully utilised brought forward UK corporation tax losses in the prior year.

 

Deferred Taxation

There was a deferred tax charge of £56,000 (2015: £628,000) as the brought forward UK corporation tax losses within the main UK entity, Abaris Holdings Limited, have become fully utilised as at end of January 2015.

 

The Group also continues to recognise the deferred tax asset arising from the pension deficit and LTIP.

 

Earnings per share ('EPS')

Basic reported EPS for the year was 9.79p (2015: 8.60p). The Group also reports an adjusted EPS which removes the impact of the LTIP accounting charge, net defined benefit pension charge as these can fluctuate due to external factors outside of the control of the Group. A better understanding of the underlying performance of the business is given after adjusting for these items. The adjusted basic EPS was 12.47p (2015: 11.64p).

 

Operating Cash Flow and Net Debt

The Group generated net cash inflow from operating activities during the year of £6,324,000 (2015: £3,255,000) driven by improved working capital management.

 

Capital expenditure was £2,510,000 (2015: £3,230,000) and includes investment in a wide width finishing machine for digital products at Anstey and development costs relating to the design of new collections for the Brands. The depreciation and amortisation charge during the period was £2,638,000 (2015: £2,349,000). There was also a property, plant and equipment impairment in respect of the flood of £988,000 (2015: £nil).

 

The Group made additional payments to the Pension schemes of £1,307,000 (2015: £1,240,000) to reduce the deficit, part of the ongoing planned reduction, along with £380,000 (2015: £425,000) of pension fund scheme expenses. 

 

Income tax and national insurance of £967,000 (2015: £1,584,000) that arose on the vesting of an LTIP award was paid during the year.

 

The Group had net funds at the year end of £2,306,000 (2015: £2,000) including flood related payments of £940,000. Average debt during the year varies due to the timing and seasonality of revenues and investment in product. The average monthly net debt reduced by £235,000 to £3,921,000 (2015: £4,156,000).

 

The Group utilises facilities provided by Barclays Bank Plc. There is a term property facility of £600,000 (2015: £1,000,000) at the year end expiring in July 2017. In December 2015, the Group entered into a new £12.5 million multi-currency revolving credit facility with Barclays Bank PLC for a five year period and cancelled the existing receivables facilities. The agreement also includes a £10 million accordion facility option to further increase available funds which provides substantial headroom for future growth. There were no borrowings at the end of the year for the revolving facility. Under these facilities there was borrowing headroom of £15,405,000 (2015: £11,582,000). The total facilities have a current limit of £13.10 million (2015: £16.50 million).

 

All of the Group bank facilities remain secured by first fixed and floating charges over the Group's assets.

 

Pension Deficit

The pension deficit has decreased this year. The decrease in liabilities is a result of a higher discount rate being applied due to an increase in the bond rates. The impact of these factors is shown as follows:

 

	2016
	£000
Deficit at beginning of the year	(10,352)
Scheme expenses	(380)
Interest cost	(2,134)
Expected return on plan assets	1,829
Contributions	1,687
Return on scheme assets	(3,623)
Actuarial gain from the change in discount factor	5,448
Actuarial gain from the change in demographic assumption	1,298
Experience adjustments on benefit obligation	1,914
Gross deficit at the end of the year	(4,313)

 

Dividends

During the year, the Group has paid a final dividend for the year to 31 January 2015 of 1.96p per share and an interim dividend of 0.44p per share.

 

The Directors recommend the payment of a final dividend of 2.45p per share (2015: 1.96p) which will be payable on 5 August 2016 to shareholders on the register on 15 July 2016. This brings the total dividend for the year to 2.89p per share (2015: 2.31p), an increase of 25.1%.

 

Going Concern

The Directors are confident, after having made appropriate enquiries that the Group and Company have adequate resources to continue trading for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

 

Foreign Currency Risk

All foreign currencies are bought and sold centrally on behalf of the Group. Regular reviews take place of the foreign currency cash flows and unmatched exposures are covered using forward contracts and working capital exposures are hedged using currency swaps where deemed appropriate.

 

The Group does not trade in financial instruments and hedges are used for highly probable future cash flows and to hedge working capital exposures. There is a hedging liability of £26,000 (2015: £195,000 liability) at the end of the year in relation to US dollar forward contracts. There is no liability (2015: £nil) arising from US dollar and Euro swaps used to hedge working capital exposures. 

 

Credit Risk

The Group no longer seeks credit insurance as this is not a commercial solution to reducing credit risk. The Board reviews the internal credit limits of all major customers and reviews the credit risk regularly. The aging profile of trade debtors shows that payments from customers are close to terms however there have been specific expenses during the year. The current economic environment still presents a level of risk and in addition to specific provisioning against individual receivables, a provision has been required of £241,000 (2015: £223,000) which is a collective assessment of the risk against non specific receivables. 

 

 

Mike Gant

Chief Financial Officer

13 April 2016

 

 

 

 

Unaudited Consolidated Income Statement 

Year ended 31 January 2016

 

	Note	2016  £000	2015  £000
Revenue	2	87,839	83,373
Cost of sales		(35,875)	(32,674)
Gross profit		51,964	50,699
Net operating expenses:
Distribution and selling expenses		(13,125)	(14,035)
Administration expenses		(32,044)	(29,336)
Other operating (expense) / income		-	7
Standfast flood: Inventory loss, property, plant and equipment impairment and other incremental costs		(3,276)	-
Standfast flood: Insurance reimbursements		4,683	-
Net other income	3	1,407	7
Profit from operations		8,202	7,335
Net defined benefit pension charge	5	(685)	(798)
Finance costs	4	(179)	(208)
Total finance costs		(864)	(1,006)
Profit before tax		7,338	6,329
Tax expense	6	(1,466)	(1,224)
Profit for the year attributable to owners of the parent		5,872	5,105
Earnings per share - Basic	8	9.79p	8.60p
Earnings per share -  Diluted	8	9.52p	8.28p
Adjusted earnings per share - Basic	8	12.47p	11.64p
Adjusted earnings per share - Diluted	8	12.13p	11.20p

All of the activities of the Group are continuing operations.

 

Unaudited Consolidated Statement of Comprehensive Income

Year ended 31 January 2016

 

			2016 £000	2015 £000
Profit for the year			5,872	5,105
Other Comprehensive Income / (Expense):
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension schemes			5,037	(2,011)
Corporation tax credits recognised in equity			184	-
(Reduction) / increase of deferred tax asset relating to pension scheme liability			(1,114)	228
Total items that will not be reclassified to profit or loss			4,107	(1,783)
Items that may be reclassified subsequently to profit or loss:
Currency translation losses			(191)	(276)
Cash flow hedge gains / (losses)			169	(348)
Total items that may be reclassified subsequently to profit or loss			(22)	(624)
Other comprehensive income / (expense) for the year, net of tax			4,085	(2,407)
Total comprehensive income for the year attributable to the owners of the parent			9,957	2,698

 

 

Unaudited Consolidated Balance Sheet

At 31 January 2016

	Note	2016 £000	2015 £000
Non-current assets
Intangible assets		7,104	7,158
Property, plant and equipment		11,687	12,714
Deferred income tax assets	7	108	1,591
		18,899	21,463
Current assets
Inventories		18,104	22,004
Trade and other receivables	9	19,280	14,130
Cash and cash equivalents	10	2,902	971
		40,286	37,105
Total assets		59,185	58,568
Current liabilities
Trade and other payables		(18,966)	(20,115)
Derivative financial instruments		(26)	(195)
Borrowings	10	(400)	(400)
		(19,392)	(20,710)
Net current assets		20,894	16,395
Non-current liabilities
Borrowings	10	(196)	(569)
Retirement benefit obligation	12	(4,313)	(10,352)
		(4,509)	(10,921)
Total liabilities		(23,901)	(31,631)
Net assets		35,284	26,937
Equity
Share capital		602	598
Share premium account		457	457
Foreign currency translation reserve		(556)	(365)
Accumulated losses		(5,700)	(14,065)
Other reserves		40,481	40,312
Total equity attributable to owners of the parent		35,284	26,937

 

 

Unaudited Consolidated Cash Flow Statement

Year ended 31 January 2016

	Note	2016 £000	2015 £000
Cash flows from operating activities
Cash generated from operations	11	7,103	3,468
Interest paid		(149)	(181)
Corporation tax paid		(630)	(32)
Net cash generated from operating activities		6,324	3,255
Cash flows from investing activities
Purchase of intangible fixed assets		(548)	(420)
Purchase of property, plant and equipment		(1,962)	(2,830)
Proceeds from disposal of property, plant and equipment		-	20
Net cash used in investing activities		(2,510)	(3,230)
Cash flows from financing activities
EBT purchase of shares		-	(348)
Allotment of share capital		-	8
Debt issue costs		(100)	-
Repayment of borrowings		(400)	(400)
Dividends paid to Company's shareholders		(1,444)	(1,144)
Net cash used in financing activities		(1,944)	(1,884)
Net increase/(decrease) in cash and cash equivalents		1,870	(1,859)
Cash and cash equivalents at beginning of year		971	2,830
Effect of exchange rate fluctuations on cash held		61	-
Cash and cash equivalents at end of year	10	2,902	971

 

 

 

 

 

 

 

Unaudited Consolidated Statement of Changes in Equity

Year ended 31 January 2016

 

	Attributable to owners of the parent
				Other Reserves
	Share capital £000	Share premium account £000	Accumulated losses £000	Capital reserve £000	Merger reserve £000	Hedge reserve £000	Foreign currency translation reserve £000	Total equity £000
Balance at 1 February 2014	590	457	(14,766)	43,457	(2,950)	153	(89)	26,852
Profit for the year	-	-	5,105	-	-	-	-	5,105
Other comprehensive Income:
Remeasurements of defined benefit pension schemes	-	-	(2,011)	-	-	-	-	(2,011)
Deferred tax relating to pension scheme liability	-	-	228	-	-	-	-	228
Currency translation differences	-	-	-	-	-	-	(276)	(276)
Cash flow hedge	-	-	-	-	-	(348)	-	(348)
Total comprehensive income	-	-	3,322	-	-	(348)	(276)	2,698
Transactions with owners, recognised directly in equity:
Dividends	-	-	(1,144)	-	-	-	-	(1,144)
EBT purchase of shares	-	-	(348)	-	-	-	-	(348)
Allotment of share capital	8	-	-	-	-	-	-	8
Long-term incentive plan charge	-	-	629	-	-	-	-	629
Long-term incentive plan vesting	-	-	(1,584)	-	-	-	-	(1,584)
Related tax movements on long-term incentive plan	-	-	(174)	-	-	-	-	(174)

 

Balance at 31 January 2015

598

457

(14,065)

43,457

(2,950)

(195)

(365)

26,937

Unaudited Consolidated Statement of Changes in Equity continued

Year ended 31 January 2016

 

	Attributable to owners of the parent
				Other Reserves
	Share capital £000	Share premium account £000	Accumulated losses £000	Capital reserve £000	Merger reserve £000	Hedge reserve £000	Foreign currency translation reserve £000	Total equity £000
Balance at 1 February 2015	598	457	(14,065)	43,457	(2,950)	(195)	(365)	26,937
Profit for the year	-	-	5,872	-	-	-	-	5,872
Other comprehensive Income:
Remeasurements of defined benefit pension schemes	-	-	5,037	-	-	-	-	5,037
Corporation tax credits recognised in equity	-	-	184	-	-	-	-	184
Deferred tax relating to pension scheme liability	-	-	(1,114)	-	-	-	-	(1,114)
Currency translation differences	-	-	-	-	-	-	(191)	(191)
Cash flow hedge	-	-	-	-	-	169	-	169
Total comprehensive income	-	-	9,979	-	-	169	(191)	9,957
Transactions with owners, recognised directly in equity:
Dividends	-	-	(1,444)	-	-	-	-	(1,444)
Allotment of share capital	4	-	(4)	-	-	-	-	-
Long-term incentive plan charge	-	-	790	-	-	-	-	790
Long-term incentive plan vesting	-	-	(967)	-	-	-	-	(967)
Related tax movements on long-term incentive plan	-	-	11	-	-	-	-	11
Balance at 31 January 2016	602	457	(5,700)	43,457	(2,950)	(26)	(556)	35,284

 

 

Unaudited Notes to the Accounts

 

1.   Basis of preparation

 

The Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards adopted for use in the European Union (IFRS).

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS this announcement does not itself contain sufficient information to comply with IFRS. The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the year ended 31 January 2016. The unaudited financial information is prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board, and with the accounting policies set out in the Group's 2015 Annual Report and Financial Statements and as updated by the 2015 Interim Statement.

 

These financial statements will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. The statutory accounts for the year ended 31 January 2015 have been filed with the Registrar of Companies and contained an auditor's report which was (i) unqualified and (ii) did not contain a reference to any matters to which the auditors drew attention by way of emphasis of matter without qualifying their report, and (iii) did not contain any statement under section 498(2) or (3) of the Companies Act 2006.

 

This preliminary announcement was approved for release by the Board on 12 April 2016.

 

2.   Segmental Analysis

 

The Group has identified its operating segments and applied aggregation criteria, as set out in IFRS 8, and has determined that the reportable segments of the Group are as follows:

 

·      Brands  - comprising the design, marketing, sales and distribution, and licensing activities of Sanderson, Morris & Co, Harlequin, Zoffany, Anthology and Scion brands operated from the UK and its foreign subsidiaries in the US and France and

·      Manufacturing - comprising the wallcovering and printed fabric manufacturing businesses operated by Anstey and Standfast respectively.

 

This is the basis on which the Group presents its operating results to the board of directors, which is considered to be the Chief Operating Decision Maker ("CODM") for the purposes of IFRS 8. Additional revenue-only data is also reported to the CODM and is disclosed on the basis explained below. Other group-wide activities and expenses, predominantly related to corporate head office costs, defined benefit pension costs, long term incentive plan expenses, taxation and eliminations of intersegment items, are presented within 'Eliminations and unallocated'.

 

 

a)   Reportable segment information

 

 

Year ended 31 January 2016

			Brands £000	Manufacturing £000	Eliminations and unallocated £000	Total £000
UK revenue			39,971	16,528	-	56,499
International revenue			25,888	3,409	-	29,297
Licence revenue			2,043	-	-	2,043
Revenue - External			67,902	19,937	-	87,839
Revenue - Internal			-	14,392	(14,392)	-
Total revenue			67,902	34,329	(14,392)	87,839
Profit / (loss) from operations			8,080	2,482	(2,360)	8,202
Net borrowing costs			-	-	(179)	(179)
Net pension charge			-	-	(685)	(685)
Profit / (loss) before taxation			8,080	2,482	(3,224)	7,338
Tax charge			-	-	(1,466)	(1,466)
Profit / (loss) for the year			8,080	2,482	(4,690)	5,872

 

 

 

  

Year ended 31 January 2015

 

			Brands £000	Manufacturing  £000	Eliminations and unallocated £000	Total £000
UK revenue			38,468	15,802	-	54,270
International revenue			24,151	2,871	-	27,022
Licence revenue			2,081	-	-	2,081
Revenue - External			64,700	18,673	-	83,373
Revenue - Internal			-	16,401	(16,401)	-
Total revenue			64,700	35,074	(16,401)	83,373
Profit / (loss) from operations			7,387	3,658	(3,710)	7,335
Net borrowing costs			-	-	(208)	(208)
Net pension charge			-	-	(798)	(798)
Profit / (loss) before taxation			7,387	3,658	(4,716)	6,329
Tax charge			-	-	(1,224)	(1,224)
Profit / (loss) for the year			7,387	3,658	(5,940)	5,105

 

 

The segmental revenues of the Group are reported to the CODM in more detail. One of the analyses presented is Brands export revenues, an analysis of which is shown below:

 

Brands revenue by export market:	2016 £000	2015 £000
Western Europe	6,982	7,038
Scandinavia	1,959	1,762
Eastern Europe	2,105	2,256
Europe Total	11,046	11,056
Middle  East	1,161	1,026
Far East	3,207	2,957
USA	8,459	7,041
South America	394	361
Australasia	1,031	1,083
Other	590	627
	25,888	24,151

 

 

  

Revenue of the Brands reportable segment - revenue from operations in all territories where the sale is sourced from the Brands operations, together with contract and licence revenue:

 

Brand Revenue Analysis:	2016 £000	2015 £000
Harlequin, incorporating Anthology & Scion	31,676	28,982
Sanderson, incorporating Morris & Co	21,503	21,698
Zoffany	11,749	11,223
Other brands	931	716
Licensing	2,043	2,081
	67,902	64,700

 

Revenue of the Manufacturing reportable segment - including revenues from internal sales to the Group's Brands:

Manufacturing Revenue Analysis:	2016 £000	2015 £000
Standfast	15,681	16,744
Anstey	18,648	18,330
	34,329	35,074

 

 

 

b)   Additional entity-wide disclosures

 

Revenue by geographical location of customers:	2016 £000	2015 £000
United Kingdom	57,509	55,450
Continental Europe	12,551	12,206
United States of America	10,099	8,494
Rest of the World	7,680	7,223
	87,839	83,373

 

 

3.   Net other income

 

Net other income arising as a result of the flood at Standfast, the Group's fabric printing factory in December 2015 is composed as follows:

	2016	2015
	£000	£000
Inventory loss, property, plant & equipment impairments and other incremental costs	(3,276)	-
Insurance reimbursements	4,683	-
Net other income	1,407	-

 

The balance of £1.4 million represents a contribution towards loss of profits

 

  

 

4.   Finance costs

	2016 £000	2015 £000
Interest expense:
Interest payable on bank borrowings	(152)	(181)
Amortisation of issue costs of bank loans	(27)	(27)
Total finance costs	(179)	(208)

 

 

5.   Net defined benefit pension costs

	2016	2015
	£000	£000
Expected return on pension scheme assets	1,829	2,179
Interest on pension scheme liabilities	(2,134)	(2,552)
Scheme expenses met by Group	(380)	(425)
Net charge	(685)	(798)

 

 

6.   Tax

	2016 £000	2015 £000
Current tax:
- UK, current tax	1,278	582
.- UK, adjustments in respect of prior years	130	-
- overseas, current tax	2	14
Corporation tax	1,410	596
Deferred tax:
- current year	253	669
-       adjustments in respect of prior years	(84)	-
-       effect of change in corporation tax rate to 18% (2015: 20%)	(113)	(41)
Deferred tax	56	628
Tax charge for the year	1,466	1,224

 

 

Reconciliation of tax charge for the year	2016 £000	2015 £000
Profit on ordinary activities before tax	7,338	6,329
Tax on profit on ordinary activities at 20.16% (2015: 21.32%)	1,480	1,349
Non-deductible expenditure	23	21
Parent and overseas losses and temporary timing differences not recognised	(10)	(105)
Permanent differences in respect of share options	40	-
Adjustments in respect of prior years	46	-
Effect of movements of Deferred tax assets provided at 18% realised at the corporation tax rate of 20.16% (2015: 21.32%)	(113)	(41)
Tax charge for year	1,466	1,224

 

Factors affecting current and future tax charges

 

No overseas taxation is anticipated to become payable within the immediate future due to the availability of gross tax losses of approximately £1.3 million (2015: £1.5 million).

 

 

7.   Deferred income tax assets

 

A deferred tax asset of £108,000 (2015: £1,591,000) is recognised in respect of tax losses, future deductions for LTIP payments and other temporary differences.

	2016 £000	2015 £000
Taxable temporary differences on property, plant and equipment	(967)	(1,091)
Taxable temporary differences on intangible assets	(178)	(182)
Other temporary differences	42	45
Temporary differences on LTIP payments	435	749
Unutilised tax losses	-	-
	(668)	(479)
Retirement benefit obligations	776	2,070
	108	1,591

 

  

8.   Earnings per share

 

Basic earnings per share ('EPS') is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares outstanding during the year, excluding those held in the Employee Benefit Trust ('EBT') and those held in treasury, which are treated as cancelled. The adjusted basic earnings per share is calculated by dividing the adjusted earnings by the weighted average number of shares. As a consequence of the improved profitability of the Group, PBT performance criteria within LTIPs 7, 8 and 9 are now being met and as a consequence these LTIP awards are now dilutive.

		2016				2015
	Earnings £000	Weighted average number of shares (000s)	Per Share Amount Pence		Earnings £000	Weighted average number of shares (000s)	Per Share Amount Pence
Basic earnings per share	5,872	59,997	9.79		5,105	59,335	8.60
Effect of dilutive securities
Shares under LTIP		1,675				2,360
Diluted earnings per share	5,872	61,672	9.52		5,105	61,695	8.28
Adjusted basic and diluted earnings per share:
Add back LTIP accounting charge	924				1,005
Add back Net defined benefit pension accounting charge	685				798
Less Deferred tax arising on LTIP	-				-
Adjusted basic earnings per share	7,481	59,997	12.47		6,908	59,335	11.64
Adjusted diluted earnings per share	7,481	61,672	12.13		6,908	61,695	11.20

 

On 18 May 2015, 1,090,326 shares vested under the Company's Long Term Incentive Plan. To satisfy the vesting, 409,962 shares of 1 pence each were allotted at par value and a further 188,272 shares were issued from the Walker Greenbank PLC Employee Benefit Trust "EBT".

 

Following these transactions Walker Greenbank's issued ordinary share capital with voting rights consists of 60,172,521 (2015: 59,762,559) ordinary shares of which no (2015: nil) ordinary shares are held in treasury and no (2015: 188,272) ordinary shares are held by the Walker Greenbank PLC EBT. Shares held in treasury or by the EBT are treated as cancelled when calculating EPS.

 

On 22 May 2014, 1,849,663 shares vested under the Company's Long-Term Incentive Plan of which 997,008 shares were issued from the Walker Greenbank PLC Employee Benefit Trust.

 

The market value of shares held by the EBT at 31 January 2016 was £nil (2015: £376,544). The total number of shares held in the EBT at the year end represented 0% (2015: 0.3%) of the issued shares.

 

  

9. Trade and other receivables

Current	2016 £000	2015 £000
Trade receivables	10,463	10,292
Less: Provision for impairment of trade receivables	(398)	(371)
Net trade receivables	10,065	9,921
Other receivables	4,897	767
Marketing materials	1,346	1,482
Prepayments	2,972	1,960
	19,280	14,130

 

Other receivables include the recognition of £4,683,000 relating to insurance reimbursement in respect of the Standfast flood received after the year end.

 

 

10.  Analysis of net funds

	1 February 2015	Cash flow	Current portion of term facilities	Other non-cash changes	31 January 2016
	£000	£000	£000	£000	£000
Cash and cash equivalent	971	1,931			2,902
Borrowings due within one year	(400)	400	(400)	-	(400)
Borrowings due after one year	(569)	-	400	(27)	(196)
	(969)	400	-	(27)	(596)
Net funds	2	2,331	-	(27)	2,306

 

Other non-cash changes are capitalisation and amortisation of the issue costs relating to the borrowings.

 

In December 2015, the Group entered into a new £12,500,000 multi-currency revolving credit facility with Barclays Bank PLC for a five year period and cancelled the existing Receivables facilities. The agreement also includes a £10,000,000 accordion facility option to further increase available credit which provides substantial headroom for future growth.

 

 

11.  Cash generated from operations

 

	2016 £000	2016 £000	2015 £000	2015 £000
Profit before tax:		7,338		6,329
Defined benefit pension charge	685		798
Net borrowing costs	179		208
Depreciation and impairment of property, plant and equipment	3,024		1,798
Amortisation	602		551
(Gain) / Loss on disposal of property, plant and equipment	3		(17)
Charge for long term incentive plan recognised in equity	790		629
Long-term incentive plan vesting	(967)		(1,584)
Unrealised foreign exchange (gains)/ losses included in operating profit	(227)		(271)
Defined benefit pension cash contributions	(1,687)		(1,665)
Changes in working capital
Decrease/(increase) in inventories	3,900		(2,298)
Increase in trade and other receivables	(4,962)		(1,524)
(Decrease)/increase in trade and other payables	(1,575)		514
		(235)		(2,861)
Cash generated from operations		7,103		3,468

 

  

12.  Retirement benefit obligations

 

The Group operates two defined benefit schemes in the UK which both offer pensions in retirement and death benefits to members:  the Walker Greenbank Pension Plan and the Abaris Holdings Limited Pension Scheme.  Pension benefits are related to the members' final salary at retirement and their length of service.  The schemes are closed to new members and to future accrual of benefits.  This disclosure excludes any defined contribution assets and liabilities.

 

The Group's contributions to the schemes for the year beginning 1 February 2016 are expected to be £1,818,000.

 

	2016 £000	2015 £000
Deficit at beginning of year	(10,352)	(9,208)
Scheme expenses met by group	(380)	(425)
Other net interest (expense) / income	(305)	(373)
Contributions by employers	1,687	1,665
Return on assets, excluding interest income	(3,623)	8,081
Other actuarial  losses on scheme liabilities	8,660	(10,092)
Deficit at end of year	(4,313)	(10,352)

 

 

13.  Post Balance Sheet Event

 

Following the flooding at Standfast, the Group experienced a period of disrupted production and a loss of stock, machinery and profits. After the reporting period the Group has been reimbursed £8,000,000 as an interim payment of which £4,683,000 has been recognised and included within other receivables as at 31 January 2016 to cover the costs of stock and machinery loss and other incremental costs, along with business interruption losses. Further business interruption reimbursements are expected to cover future loss of profits up to a period of two years following the flood.