23rd Nov 2005 07:01
Victoria PLC23 November 2005 Issued by Citigate Dewe Rogerson Ltd, BirminghamDate: Wednesday, 23 November 2005 Embargoed: 7.00am VICTORIA P.L.C. Interim Results for the half-year ended 1 October 2005 FINANCIAL HIGHLIGHTS Notes Half-year ended ----------------------- 1 October 2 October 2005 2004-------------------------------------------------------------------------------------- REVENUE FROM CONTINUING OPERATIONS £26.02m £25.43m +2.3%-------------------------------------------------------------------------------------- OPERATING PROFIT FROM CONTINUING OPERATIONS £1.35m £1.79m -24.6%-------------------------------------------------------------------------------------- PROFIT BEFORE TAXATION FROM CONTINUING OPERATIONS £0.99m £1.41m -29.8%-------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS 10.07p 14.13p -28.7%-------------------------------------------------------------------------------------- FREE CASH FLOW 7b £1.03m £(0.85)m-------------------------------------------------------------------------------------- NET ASSETS £27.51m £26.37m-------------------------------------------------------------------------------------- NET BORROWINGS £11.86m £12.73m-------------------------------------------------------------------------------------- "In H1, in both value and volume terms, the Group has managed to gain marketshare from our competitors although margins have been adversely affected by bothintense competition and escalating cost pressures brought about by higher oiland energy prices." "....we anticipate that the benefits of our investments in new rangeintroductions, which have been well received by the trade in both Australia andthe UK, should now start to feed through. Subject to the footfall in retailshops and no further market deterioration, we believe that these products shouldfurther underpin trade in the second half-year." Bob Gilbert, Chairman FULL STATEMENT ATTACHED Enquiries:Alan Bullock, Group Managing DirectorMark Lee, Group Finance Director Fiona Tooley/Katie DaleVictoria P.L.C. Citigate Dewe RogersonToday: +44 (0)20 7638 9571 (up to 12noon) Today: +44 (0)20 7638 9571 (up to 12noon)Thereafter: +44 (0)1562 749640 Thereafter: +44 (0)121 455 8370Mobile: +44 (0)7785 325701 (AB) Mobile: +44 (0)7770 788624 (KD) This announcement, together with other information on Victoria P.L.C. may befound at: www.victoria.plc.uk. -2- VICTORIA P.L.C. Interim Results for the half-year ended 1 October 2005 STATEMENT BY THE CHAIRMAN, BOB GILBERT IntroductionIn October, the Group provided shareholders with a trading update whichreflected the effect on our business of the downturn in economic conditions andconsumer spending. During the first six months of this financial year, the Group has facedincreasingly challenging market conditions in each of its three principaltrading areas, the UK, Ireland and Australia. Within the UK, the market isestimated to be down by as much as 10%, and we have experienced what havepossibly been the most difficult trading conditions of the past decade. Despite this, in both value and volume terms, the Group has managed to gainmarket share from our competitors although margins have been adversely affectedby both intense competition and escalating cost pressures brought about byhigher oil and energy prices. Financial ResultsCompanies listed on security exchanges within the European Union are required toadopt International Financial Reporting Standards (IFRS) for accounting periodsbeginning on or after 31 December 2004. Consequently, the interim accounts for2005 are the first time the Group has reported under IFRS. Unless otherwisestated, all figures included in this commentary and all amounts in the 2005Interim Accounts (including comparatives for the six months ended October 2004),have been prepared using accounting policies consistent with IFRS. In the six months to 1 October 2005, Group revenues from continuing operationswere £26.02 million, an increase of 2.3% over the comparable period (2004:£25.43 million). Operating profit from continuing operations was £1.35 million and represented adecline of 24.6% from the £1.79 million reported for the first half of 2004/5.Compared to the first six months of 2004/5, the movement in exchange ratesbenefited the translation of Australian revenues and earnings by 6.1%. Finance costs, consisting of interest payable of £0.42 million (2004: £0.46million), remained broadly unchanged. Income from the Associated Company in Canada was slightly lower at £0.06 million(2004: £0.07 million). Profit before tax from continuing operations fell by 29.8% to £0.99 million(2004: £1.41 million) and with an effective tax rate of 29.2% (2004: 30.6%),profit after tax on the same basis was £0.70 million (2004: £0.98 million).Basic earnings per share from continuing operations of 10.07 pence were 28.7%lower than the equivalent figure in 2004 of 14.13 pence. Cash Flow and BorrowingsFree cash flow (net cash flow from operating activities after net capitalexpenditure, interest and tax but before acquisitions, disposals, share issuesand dividend payments) was £1.03 million (2004: £0.85 million outflow). Theimproved cash flow was largely due to the elimination of losses from thediscontinued Axminster weaving activity and sale of this plant. The Australian dollar (A$) strengthened from A$2.4441 : £1 at 2 April 2005 toA$2.3167 : £1 at 1 October 2005. The Group has approximately 26% of itsborrowings in A$, as a match against its Australian-based assets, and thestrengthening A$ over the period resulted in reported Sterling net debtincreasing by £0.18 million. continued... -3- In total, net debt reduced by £0.06 million in the six month period to £11.86mat 1 October 2005. The reduction was due to the free cash inflow of £1.03million, partially offset by the £0.18 million increase in foreign debt due tomovements in exchange rates, and dividend payments of £0.80 million. United Kingdom and IrelandOn a continuing business basis, sales were marginally higher than for the sameperiod last year. Revenues from the continuing activities of the UK Carpetoperations were 4.3% higher at £12.42 million, compared to £11.09 million in2004. During the period, we have concentrated on achieving organic growth through anincreased investment in new ranges, patterning and in-store point of saledisplay material. The cost of this investment, as is normal for the Company, hasbeen borne in full in the period, and should bring longer term benefits goingforward. In total, Victoria Carpets UK has launched nine new products in the period underreview. This extension to the product range should start to have a positiveimpact in the second half of the financial year and thereafter. The Company willcontinue to focus on bringing new, innovative and fashionable products to themarket, and there are several key ranges planned for launch in the second halfof this year, which are important to the Company's success. Operationally, at Victoria Carpets, the removal and disposal of the Axminsterplant went well with the additional space that this move created enabling us tooperate even more efficiently at our facility in Kidderminster. At Westwood Yarns in Holmfirth, we are well into the process of installing anadditional three metre card, which will not only assist us to operate morecost-effectively but will also allow us to increaseyarn capacity as and when it is required. There is also a series of small plantadditions and initiatives that are being put in place, aimed at furtherimproving yarn quality and plant efficiency. In Ireland, market conditions have been equally challenging to those we havefaced in the UK. Munster Carpets, which is firmly focused on the contractmarket, has had a quieter period but, as we go into the second half we arewitnessing a better order book. Despite tough trading conditions, Navan Carpetscontinues to make good progress and in particular, we have concentrated onextending our existing range of products. This, together with the significantamount of point of sales display material distributed in the last 18 months, isstarting to pay dividends with sales levels building well. AustraliaOur Australian business has, without doubt, also had to face a downturn ineconomic conditions, as well as intense competition from both domestic andoverseas suppliers. Considering this difficult environment, we have done well torestrict the decline in sales in the period under review to 3.5% in localcurrency. We believe this reflects a further gain in market share from ourcompetitors, albeit recently at the expense of margin. Operating profits fell from £1.64 million to £1.21 million due in part to a£0.10 million reduction in income from Government grants. After finance chargessimilar to last year, profit before tax was £1.08 million (2004: £1.50 million). With carpet sales maintained at close to last year's levels, our two Australianspinning mills have remained fairly busy and, coupled with operating efficiencygains, the spinning mills contributed profits at slightly higher levels thanlast year. We have also continued to further modernise both our carpet manufacturing plantand spinning mills. This has not only enabled us to manufacture the style ofproducts demanded by today's consumer, but also to produce them in the mostcost-efficient manner possible. continued... -4- Canadian AssociateMarket conditions have been favourable in the Western Canadian economy, buoyedby both the oil industry and the prospect of the Winter Olympics in 2010. Colin Campbell & Sons, our Associate Company in Canada, increased revenues by8.9% with growth across all parts of its business. Recent investments in theinfrastructure and sampling required to support the growth in this businesshave, however, increased costs in the period, and consequently profits weremarginally lower at £0.06 million compared to £0.07 million last year. ProspectsAs widely reported, the market conditions in both the UK and Australia remaindepressed and offer limited forward visibility, with little sign at present ofconsumers returning to the buying pattern that we have enjoyed over recentyears. Against this backdrop, we must assume that, as we indicated in ourtrading update, these markets will remain extremely challenging for at least theremainder of this financial year. Despite this somewhat negative outlook, we anticipate that the benefits of ourinvestments in new range introductions, which have been well received by thetrade in both Australia and the UK, should now start to feed through. Subject tothe footfall in retail shops and no further market deterioration, we believethat these products should further underpin trade in the second half-year. Overall, the Group is well placed to deal with the prevailing market conditionsand to exploit fully the upturn in the retail market when it re-emerges. -5- VICTORIA P.L.C. Consolidated Income Statement For the half-year ended 1 October 2005 (unaudited) Notes Half-year Half-year Year ended ended ended 1 October 2 October 2 April 2005 2004 2005 £'000 (restated) (restated) £'000 £'000--------------------------------------------------------------------------------Continuing operationsRevenue 3 26,019 25,429 49,444 Cost of sales (18,619) (17,828) (34,333) ------------------------------------ Gross profit 7,400 7,601 15,111 Distribution costs (5,123) (4,992) (9,651) Administrative expenses (1,492) (1,225) (2,777) Other operating income 563 401 1,047 ------------------------------------ Operating profit 3 1,348 1,785 3,730 Share of results ofassociated Company 57 72 60 Finance costs (418) (444) (764) ------------------------------------ Profit before tax 987 1,413 3,026 Tax 4 (288) (432) (885) ------------------------------------ Profit for the period fromcontinuing operations 699 981 2,141 Discontinued operationsProfit/(loss) for theperiod from discontinuedoperations 5 - (436) (1,311) ------------------------------------ Profit for the period 699 545 830 ==================================== Attributable to: Equity holders of theparent 699 545 830 ==================================== Earnings per share From continuing operations Basic 6 10.07p 14.13p 30.83p ==================================== Diluted 6 10.07p 14.13p 30.83p ==================================== From continuing and discontinuedoperations Basic 6 10.07p 7.85p 11.95p ====================================Diluted 6 10.07p 7.85p 11.95p ==================================== The comparative figures for the half-year ended 2 October 2004 and the yearended 2 April 2005 have been restated to reflect the adoption of InternationalFinancial Reporting Standards. The details of this restatement are provided inthe document "Adoption of International Financial Reporting Standards (IFRS),Restatement of Financial Information" which was issued by the Company on 11November 2005 and is available on the Company's web-site www.victoria.plc.uk orfrom the Company's Registered Office. -6- Victoria P.L.C. Consolidated Statement of Recognised Income and Expense For the half-year ended 1 October 2005 (unaudited) Half-year Half-year Year ended ended ended 1 October 2005 2 October 2004 2 April 2005 £'000 £'000 £'000--------------------------------------------------------------------------------Exchange differences ontranslation of foreignoperations 704 (346) (89) ------------------------------------------- Net (loss)/ income recogniseddirectly in equity 704 (346) (89) Profit for the period 699 545 830 ------------------------------------------- Total recognised income andexpense for the period 1,403 199 741 =========================================== Attributable to: Equity holders of the parent 1,403 199 741 =========================================== The comparative figures for the half-year ended 2 October 2004 and the yearended 2 April 2005 have been restated to reflect the adoption of InternationalFinancial Reporting Standards. The details of this restatement are provided inthe document "Adoption of International Financial Reporting Standards (IFRS),Restatement of Financial Information" which was issued by the Company on 11November 2005 and is available on the Company's web-site www.victoria.plc.uk orfrom the Company's Registered Office. -7- Victoria P.L.C. Consolidated Balance Sheet For the half-year ended 1 October 2005 (unaudited) 1 October 2005 2 October 2004 2 April 2005 £'000 £'000 £'000--------------------------------------------------------------------------------Non-current assetsGoodwill 64 65 64Other intangible assets 468 503 484Property, plant and equipment 24,321 24,642 23,813Investment property 180 180 180Interests in associates 431 351 348 -------------------------------------------Total non-current assets 25,464 25,741 24,889 ------------------------------------------- Current assetsInventories 16,362 15,287 14,686Trade and other receivables 9,870 10,466 9,648Cash and cash equivalents 772 838 369 -------------------------------------------Total current assets 27,004 26,591 24,703 -------------------------------------------Non-current assets classifiedas held for sale - - 304 ------------------------------------------- Total assets 52,468 52,332 49,896 ------------------------------------------- Current liabilitiesTrade and other payables 9,017 8,836 7,549Tax liabilities 732 739 644Hire purchase and financelease obligations 859 994 1,131Bank overdrafts and loans 6,235 6,460 6,196 -------------------------------------------Total current liabilities 16,843 17,029 15,520 ------------------------------------------- Non-current liabilitiesBank loans 3,635 3,516 2,801Deferred tax liabilities 1,362 1,466 1,367Hire purchase and financelease obligations 1,904 2,598 2,158Other payables 1,211 1,358 1,145 -------------------------------------------Total non-current liabilities 8,112 8,938 7,471 -------------------------------------------Total liabilities 24,955 25,967 22,991 -------------------------------------------Net assets 27,513 26,365 26,905 ===========================================EquityIssued share capital 1,736 1,736 1,736Share premium account 829 829 829Retained earnings 24,948 23,800 24,340 -------------------------------------------Equity attributable to equityholders of the parent 27,513 26,365 26,905 -------------------------------------------Total equity 27,513 26,365 26,905 =========================================== The comparative figures for the half-year ended 2 October 2004 and the yearended 2 April 2005 have been restated to reflect the adoption of InternationalFinancial Reporting Standards. The details of this restatement are provided inthe document "Adoption of International Financial Reporting Standards (IFRS),Restatement of Financial Information" which was issued by the Company on 11November 2005 and is available on the Company's web-site www.victoria.plc.uk orfrom the Company's Registered Office. -8- Victoria P.L.C. Consolidated Cash Flow Statement For the half-year ended 1 October 2005 (unaudited) Notes Half-year Half-year Year ended ended ended 1 October 2 October 2 April 2005 2004 2005 £'000 £'000 £'000--------------------------------------------------------------------------------Net cash from operatingactivities 7a) 1,763 413 1,872 --------------------------------------- Investing activities Purchases of property,plant and equipment (1,130) (1,303) (1,962) Proceeds on disposal ofproperty, plant andequipment 398 45 158 --------------------------------------- Net cash used in investingactivities (732) (1,258) (1,804) --------------------------------------- Financing activities Increase / (decrease) inlong term loans 727 1,111 340 Receipts from financing ofassets 60 80 124 Payment of finance leaseand HP liabilities (644) (725) (1,093) Dividends paid (799) (799) (799) --------------------------------------- Net cash from/(used in)financing activities (656) (333) (1,428) --------------------------------------- Net increase/(decrease) incash and cash equivalents 375 (1,178) (1,360) Cash and cash equivalentsat beginning of period (5,827) (4,435) (4,435) Effect of foreign exchangerate changes (11) (9) (32) ---------------------------------------Cash and cash equivalentsat end of period 7c) (5,463) (5,622) (5,827) ======================================= -9- Victoria P.L.C. Notes to the Interim Financial Statements For the half-year ended 1 October 2005 (unaudited) 1. General Information The information for the year ended 2 April 2005 does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985. A copy of thestatutory accounts (reported under UK GAAP) for that year has been delivered tothe Registrar of Companies. The Auditors' report on those accounts wasunqualified. These interim financial statements, which were approved by the Board ofDirectors on 22 November 2005, have been prepared in accordance with IAS 34.They have not been audited or reviewed by the Auditors. 2. Accounting policies The Company issued an announcement on 11 November 2005 entitled "Adoption ofInternational Financial Reporting Standards (IFRS), Restatement of FinancialInformation". This document can be viewed on the Company's websitewww.victoria.plc.uk . The document includes a description of the significant accounting polices to beadopted under IFRS. These interim financial statements have been prepared usingthose accounting policies and methods of computation. 3. Business segments For management purposes, the Group is organised into three operating divisionsaccording to the geographical areas where they are managed. These divisions arethe basis on which the Group reports its primary segment information. The threedivisions are UK & Ireland, Australia and the Canadian Associate. The Axminsterweaving operations, previously reported within UK & Ireland, were discontinuedin March 2005. Note 5 provides further information on the discontinuedoperations. Segment information for revenue, operating profit and a reconciliation to entitynet profit is presented below. Half-year ended 1 October 2005 Half-year ended 2 October 2004 Revenue Operating Finance Profit Revenue Operating Finance Profit Profit Charges before Profit Charges before tax tax £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ----------------------------------------------------------------------------------------------------UK & Ireland 14,322 353 (183) 170 13,387 378 (130) 248Australia 11,697 1,207 (128) 1,078 12,042 1,641 (137) 1,504Canada - - - 57 - - - 72 --------------------------------------- -----------------------------------------Sub total 26,019 1,560 (311) 1,305 25,429 2,019 (267) 1,824 Central - (212) (107) (318) - (234) (177) (411)costs --------------------------------------- ----------------------------------------- Totalcontinuingoperations 26,019 1,348 (418) 987 25,429 1,785 (444) 1,413 ================================ ================================ Tax (288) (431) ------ ------ Profit aftertax fromcontinuingactivities 699 981 Profit for theperiod fromdiscontinuedoperations - (436) ------ ------ Profit aftertax anddiscontinuedoperations 699 545 ====== ====== continued... -10- 4. Tax charge Half-year Half-year ended ended 1 October 2005 2 October 2004 £'000 £'000--------------------------------------------------------------------------------Current tax:UK corporation tax (66) (253)Foreign tax 347 557 --------------------------------- 281 304 Deferred tax:Current year 7 (59) --------------------------------- 288 245 ================================= Continuing operations 288 432 Discontinued operations - (187) --------------------------------- 288 245 ================================= Corporation tax for the interim period is charged at 29.2% (2004: 30.6%),representing the best estimate of the weighted average annual corporation taxrate expected for the full financial year. 5. Discontinued operations There have been no disposals or discontinuations of business activities in thesix month period ended 1 October 2005. In March 2005, the Group's discontinued its Axminster weaving activities, whichwere located in the UK. The results of the discontinued operations which have been included in theconsolidated income statement were as follows: Half-year Half-year ended ended 1 October 2005 2 October 2004 £'000 £'000--------------------------------------------------------------------------------Revenue - 1,796Expenses - (2,419) ------------------------------- Profit before tax - (623) Attributable tax expense - 187 ------------------------------- Profit after tax - (436) Loss on discontinuance of operations - - ------------------------------- Net profit attributable to discontinuedoperations - (436) =============================== continued... -11- 6. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data: Number of shares Half-year Half-year ended ended 1 October 2005 2 October 2004 000's 000's--------------------------------------------------------------------------------Weighted average number of ordinary sharesfor the 6,943,556 6,943,556purposes of basic earnings per share Effect of dilutive potential ordinary shares: Share options - - ---------------------------- Weighted average number of ordinary sharesfor the 6,943,556 6,943,556purposes of diluted earnings per share ============================ Earnings and earnings per share Half-year ended Half-year ended 1 October 2005 2 October 2004 Earnings EPS Earnings EPS £'000 pence £'000 pence--------------------------------------------------------------------------------Profit for the period from continuingoperations 699 10.07 981 14.13 Profit for the period from discontinuedoperations - - (436) (6.28) ------------------------------------- Profit for the period from continuing 699 10.07 545 7.85anddiscontinued operations ===================================== Earnings per share- basic continuing 10.07 14.13- basic discontinued - (6.28) -------- --------- basic 10.07 7.85 ======== ========- diluted 10.07 7.85 ======== ======== The effect of dilutive shares on the earnings for the purposes of dilutedearnings per share is £nil (2004: £nil). The denominators used for all basic, diluted and adjusted earnings per share areas detailed in the "Number of shares" table above. continued... -12- 7. Notes to the cash flow statement a) Reconciliation of operating profit to net cash from operating activities Half-year Half-year Year ended ended ended 1 October 2005 2 October 2004 2 April 2005 £'000 £'000 £'000--------------------------------------------------------------------------------Profit before tax fromcontinuing operations 987 1,413 3,026 Discontinued operationsprofit before tax - (623) (1,842) Adjustments for: Depreciation of property, plant and equipment 1,118 1,084 2,360 Amortisation of intangible assets 13 10 27 (Profit) / loss on disposal of property, plant (39) (4) (57) and equipment Exchange rate differences on consolidation 296 (176) 68 Share of profits of associated Company (57) (70) (61) Interest expense 377 374 745 --------------------------------------------Operating cash flows beforemovements in working capital 2,695 2,008 4,266 Increase in working capital (424) (717) (644) -------------------------------------------- Cash generated fromoperations 2,271 1,291 3,622 Interest paid (377) (374) (745) Income taxes (paid)/received (131) (504) (1,005) --------------------------------------------Net cash from operatingactivities 1,763 413 1,872 ============================================ b) Free cash flow Free cash flow, a non statutory item, highlights the total net cash generated bythe Group prior to corporate activity such as acquisitions and disposals andtransactions with shareholders. It is derived as follows: Half-year Half-year Year ended ended ended 1 October 2005 2 October 2004 2 April 2005 £'000 £'000 £'000--------------------------------------------------------------------------------Net cash from operatingactivities 1,763 413 1,872 Proceeds on disposal ofproperty, plant and equipment 398 45 158 Purchases of property, plantand equipment (1,070) (1,223) (1,838) - cash - finance leases (60) (80) (124) --------------------------------------------Free cash flow 1,031 (845) 68 ============================================ continued... -13- c) Analysis of net debt At 2 April Cashflow Non Exchange At 2005 cash £'000 £'000 Items movement 1 October 2005 £'000 £'000 £'000--------------------------------------------------------------------------------Cash 369 418 - (15) 772 Overdrafts (6,196) (43) - 4 (6,235) -------------------------------------------------------Cash and cashequivalents (5,827) 375 - (11) (5,463) Debt due within one - - - - -year Debt due after oneyear (2,801) (727) - (107) (3,635) Finance leases (3,289) 584 - (58) (2,763) -------------------------------------------------------Total (11,917) 232 - (176) (11,861) ------------------------------------------------------- 8. Exchange rates The results of overseas subsidiary and associated undertakings have beentranslated into Sterling at the average exchange rates prevailing during theperiods. The balance sheets are translated at the exchange rates prevailing atthe period ends: Half-year Half-year Year ended ended ended 1 October 2005 2 October 2004 2 April 2005--------------------------------------------------------------------------------Australia - average rate 2.3822 2.5273 2.4892Australia - period end 2.3167 2.4818 2.4441Euro - average rate 1.4666 1.4890 1.4666Euro - period end 1.4673 1.4492 1.4573Canadian dollar - average rate 2.2146 2.4091 2.3589Canadian dollar - period end 2.0532 2.2664 2.2940 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Victoria