TIDMWGB
RNS Number : 9829B
Walker Greenbank PLC
14 October 2020
For immediate release 14 October 2020
WALKER GREENBANK PLC
("Walker Greenbank", the "Company" or the "Group")
Interim Results for the six months ended 31 July 2020
Walker Greenbank PLC (AIM: WGB), the luxury interior design and
furnishings group, announces its interim results for the six-month
period ended 31 July 2020.
Financial Highlights
Six months ended 31 July 2020 2019
Revenue GBP38.8m GBP55.9m
Adjusted underlying profit before GBP0.4m GBP4.9m
tax*
Adjusted underlying EPS* 0.54p 5.54p
Statutory (loss) / profit before tax (GBP0.9m) GBP3.5m
Statutory (loss) / profit after tax (GBP0.8m) GBP2.6m
Net funds/(debt) excluding impact GBP4.5m GBP0.9m
of IFRS16 'Leases'
Net (debt) including impact of IFRS16 (GBP2.6m) (GBP7.7m)
'Leases'
The interim results reflect the impact of Covid-19 on the Group,
including the temporary closure of manufacturing sites and the
effect of UK and international lockdowns on market demand:
-- Group revenue down 30.6 % at GBP38.8 million (H1 2019: GBP55.9 million)
-- Adjusted underlying profit before tax* of GBP0.4 million (H1
2019: GBP4.9 million) including GBP3.2 million furlough grants from
UK and US governments
-- Resilient performance from core licensing income, down 7.2%
in both reportable and constant currency
-- Measures taken to improve liquidity resulted in cash headroom
against available banking facilities of GBP19.5 million at 31 July
2020 compared with GBP13.8 million at 31 January 2020
-- Net debt following the adoption of IFRS 16 'Leases' reduced
to GBP2.6 million (H1 2019: GBP7.7 million on an equivalent basis).
Excluding the impact of IFRS 16 net funds increased to GBP4.5
million (H1 2019: net funds of GBP0.9 million)
-- An interim dividend is not being proposed (H1 2019: 0.52p);
the Board remains committed to future dividend payments when
conditions allow
-- Better than expected trading performance in July, August and
September 2020; given the ongoing impact of Covid-19, the outlook
remains cautious at the start of the autumn selling period
Strategic and Operational Highlights
-- Continued progress on the strategic development of the
Company, particularly focused on efficiency, agility and
productivity
-- Walker Greenbank plc to be renamed Sanderson Design Group plc
to better convey the activities of the Group. The new name, which
is expected to change in December this year, highlights design as
being at the heart of all we do and leverages the international
recognition of the Sanderson brand as well as helping drive
internal efficiencies
-- Exciting collaborations include a licensing deal between the
Scion brand and major retailer NEXT for a range of homeware,
nursery and fashion items; Zoffany's Palladio collection of
wallpapers, and Morris & Co's Queen Square collaboration with
Ben Pentreath
-- Year-to-date efficiency and cost-savings expected to deliver
a saving of GBP1.2 million in the current financial year with
annualised savings of GBP3.0 million
*Excludes accounting charges relating to the LTIP, defined
benefit pension charge and non-underlying items, see note 7 to the
financial statements below .
Dianne Thompson, Non-executive Chairman of Walker Greenbank,
said: " The first half results reflect both the impact of Covid-19
on the business and its end markets as well as the exceptional
commitment and adaptability of all our colleagues at the Company,
for which I thank them.
"At the start of our key autumn selling period, we remain
cautious on the outlook for the months ahead. The Board believes
that the actions taken by the leadership team have given the
business a strong foundation on which to withstand the impact of
Covid-19 and to build for future growth. "
Analyst conference call
A conference call for analysts and institutional investors will
be held at 11 a.m. today, 14 October 2020. For dial-in details,
please contact Buchanan at walkergreenbank@buchanan.uk.com .
For further information:
Walker Greenbank PLC c/o Buchanan +44 (0) 20 7466
5000
Lisa Montague, Chief Executive Officer
Michael Williamson, Chief Financial
Officer
Caroline Geary, Company Secretary
Investec Bank plc (Nominated Adviser
and Broker) +44 (0) 20 7597 5970
David Anderson / Alex Wright
Henry Reast
Buchanan +44 (0) 20 7466 5000
Mark Court / Toto Berger / Charlotte
Slater
walkergreenbank@buchanan.uk.com .
Notes for editors:
About Walker Greenbank
Walker Greenbank PLC is a luxury interior furnishings company
that designs, manufactures and markets wallpapers, fabrics and
paints. In addition, the Company derives licensing income from the
use of its designs on a wide range of products such as bed and bath
collections, rugs, blinds and tableware.
Walker Greenbank's brands include Zoffany, Sanderson, Morris
& Co., Harlequin, Scion, Anthology, Clarke & Clarke and
Studio G.
The Company has a strong UK manufacturing base comprising Anstey
wallpaper factory in Loughborough and Standfast & Barracks a
fabric printing factory, in Lancaster. Both sites manufacture for
the Company and for other wallpaper and fabric brands.
Walker Greenbank employs approximately 600 people and its
products are sold in more than 85 countries worldwide. It has
showrooms in London, New York, Chicago, Paris, Amsterdam, Moscow
and Dubai.
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/
CHIEF EXECUTIVE OFFICER'S STRATEGY AND OPERATIONAL REVIEW
INTRODUCTION
Whilst our results for the six months ended 31 July 2020 have
been impacted by Covid-19 and the temporary measures taken by UK
and international Governments to stem the spread of the virus, we
have come through the crisis with a better performance than
anticipated in our scenario planning. Trading in July, August and
September 2020 was ahead of our expectations set at the onset of
the pandemic, with the business both fulfilling delayed orders and
demand returning more strongly than expected. However, we are now
at the start of our key autumn selling period and, owing to
Covid-19, and the potential for further restrictive measures being
implemented, we remain cautious in our outlook for the remainder of
the year.
In February 2020, the first half of the year started well but
the temporary closure of our factories in March 2020, and Covid-19
lockdowns across our target markets, had an immediate impact on
both supply and demand. We acted decisively to protect the health
and safety of our employees across manufacturing, distribution,
sales, marketing, design and support services. We also took
significant operational and financial measures to protect the
liquidity of the Group. In terms of our customers, we ensured that
warehouses in Milton Keynes and New Jersey, whilst adhering to
local social distancing and other guidelines, remained open
throughout, enabling us to mitigate the negative impact of lockdown
on sales.
With the phased reopening of our factories in May 2020, and the
progressive relaxation of lockdown measures worldwide, trading
improved from a low in April 2020 and gained momentum towards the
half year end, as set out in our trading update on 11 August
2020.
A key priority throughout the pandemic has been the health and
wellbeing of our colleagues, customers and suppliers. We have
followed all relevant government guidance on Covid-19 in our
factories and other locations and remain committed to continuing to
do so.
Up until 31 July 2020 we have received GBP2.7 million grant
income from the UK Government through the Coronavirus Job Retention
Scheme ("CJRS") and a further GBP0.5 million received in the US.
These funds have enabled us to support furloughed colleagues and
protect employment in the business.
Our better than expected performance in recent months means that
we are repaying the 20% pay reduction introduced in response to
Covid-19, to all employees apart from Directors and members of the
Group Leadership Team, with salaries being moved back up to 100%
from 1 July 2020. I would again like to thank all of the Company's
staff for their dedication and resilience throughout the challenges
brought by Covid-19 and for their ongoing support.
Maintaining a robust level of liquidity has been a key priority.
At the half year end, the Company's cash headroom against its
banking facilities was GBP19.5 million compared with GBP13.8
million at 31 January 2020 as a result of operational strong cash
generation and decisive actions taken by management.
STRATEGY UPDATE
Whilst Covid-19 impacted our sales and operations in the first
half, it has accelerated the strategic development of the Company
by concentrating our focus on improving the efficiency, agility and
productivity of the business and by propelling innovation.
Elevating the Company and the Brands
During the coming weeks, we intend to rename the business
Sanderson Design Group plc, highlighting design as being at the
heart of all we do and leveraging the unrivalled international
recognition of the Sanderson brand in the world of interiors.
Sanderson Design Group conveys our rich heritage and the collective
purpose across our brands and manufacturing units: "To bring the
beautiful into people's homes and lives."
Walker Greenbank currently has a multi-layered corporate
structure of holding companies, trading names, brands and
sub-brands. Simplifying this structure reduces complexity and
enhances communication of our valuable brands, in line with our
strategic priority.
The new name will become a platform to elevate the Company's
brands and other assets. For example, our unique and valuable
archive of more than 50,000 historic documents, mainly from the
Arts & Crafts period, will be renamed the Sanderson Design
Group Archive, which over time we intend to monetise as an
important industry resource.
The timing of the Group's name change reflects imminent
improvements to our existing website, for example to enhance
navigation, to engage consumers with the beauty of our brands and
to enhance the service for our trade customers.
Importantly, we have ensured that the name change is a
cost-effective exercise. Further details of the timing of the name
change from Walker Greenbank to Sanderson Design Group will be
announced shortly.
New Collections and Collaborations
Innovation, in part as a result of Covid-19, led us to launch
our first digital pattern book in July 2020 for Harlequin's new
children's collection, the Book of Little Treasures. Sales of the
collection in the first weeks following launch have been much
higher than we would usually expect and we have been sending out
far more samples from the collection than with a traditional
pattern book launch. The cost of sending out these samples is much
lower than the costs associated with traditional pattern books and
there is also valuable feedback from the sampling process in that
we can see which of the designs and colourways are the most
popular; if we create a pattern book at a later date, we will
benefit from knowing which designs to focus on.
The experience of digitally launching the Book of Little
Treasures and Queen Square has convinced us that all collection
launches in future will have a four week digital pre-launch so we
can benefit from initial feedback.
During the half year, we have been pursuing our strategy of
collaboration both in licensing and with designers.
A design collaboration that has been very well received is
Morris & Co's Queen Square collection with Ben Pentreath, the
interior designer, architect and William Morris enthusiast. The
collection reinvents original designs in completely new colourways
whilst remaining faithful to Morris & Co's traditional
manufacturing techniques. Also launched digitally last month,
initial sampling demand has been ahead of expectations and again
the sampling process has provided valuable insights into customers,
designs and colourways.
We have also recently launched Zoffany's Palladio collection, an
exciting screen-printed wallpaper collection that draws on the
original Palladio wallpapers launched in the 1950s that
subsequently became part of the Sanderson archive.
The Palladio collection includes a completely new design, called
Precarious Pangolins, by the influential designer Sam Wilde. The
design adds a contemporary dimension to the collection and
continues the tradition established in the 1950s of talented new
designers creating Palladio wallpapers. Launched just a few weeks
ago, initial feedback indicates that the Palladio collection has
been well received by designers and architects.
In March 2020, we announced that the Scion brand had signed a
licensing agreement with major retailer NEXT, further details of
which are provided in the Operational Review below.
Operational Effectiveness
In April 2020 we took the decision to furlough 510 employees in
the UK, out of a total of 627 UK employees, following the
nationwide lockdown announced on 23 March 2020. It was particularly
unclear at that time how Covid-19 would affect demand for our
products and services with retail outlets being forced to
close.
We took decisive action to protect all our employees, customers
and suppliers. From April 2020 onwards we have been bringing
employees back to work once it was clear that it was safe and
secure to do so. We undertook a similar program for our 50
employees in overseas locations. As at 13 October 2020 we have 13
employees who remain as furloughed in the UK and we look forward to
their return to work in due course.
Many of us, outside of the factories, were able to work from
home and this has been a positive experience in developing a new
and effective way of collaborating both within the organisation and
with our customers and positions us well in the event of further
local or national restrictive measures.
During the current financial year, we have continued to identify
efficiencies, better ways of operating and cost savings, following
the delivery of GBP2 million of annual cost savings in the previous
financial year. In August 2020 we completed a consultation and
restructuring process that resulted in a reduction of 68 roles
across the Group, which now has approximately 600 staff. We are
grateful to our dedicated and hardworking colleagues some of whom
have left the business as a result of the restructuring process.
The consultation and restructuring were undertaken following the
effect of Covid-19 on our business and the consequent reduction in
demand and revenue. The business has restructured in order to
provide leaner and more agile operations enabling us to manage more
effectively, if there are significant shifts in demand or
disruptive effects from further external factors.
It is expected that the cost savings implemented this year will
deliver a saving of GBP1.2 million in the current financial year.
Going forwards, the restructuring is expected to deliver annualised
savings of GBP3.0 million.
OPERATIONAL REVIEW
The Company's sale performance to date during the pandemic has
been more resilient than expected at the start of the pandemic.
From a low in April 2020, trading has progressively improved and
has been ahead of our expectations in July, August and September.
Sales in the 12 weeks to the end of June 2020 were 52.2% behind
last year and this has improved notably to 0.8% behind for the 12
weeks to the end of September 2020.
Segmental review
Brands
Half year ended 31 Change
July
2020 2019 Reported Constant
Currency
----------- ---------- --------- ----------
Total Brand sales GBP32.4m GBP46.3m (30.0%) (29.9%)
----------- ---------- --------- ----------
Comprising:
----------- ---------- --------- ----------
Licensing GBP1.3m GBP3.2m (59.4%) (59.4%)
----------- ---------- --------- ----------
UK Brand product GBP15.5m GBP22.2m (30.2%) n/a
sales
----------- ---------- --------- ----------
International Brand
product sales GBP15.6m GBP20.9m (25.4%) (25.0%)
----------- ---------- --------- ----------
* North America GBP5.4m GBP8.1m (33.3%) (34.1%)
----------- ---------- --------- ----------
* Northern Europe GBP5.7m GBP6.5m (12.3%) (12.3%)
----------- ---------- --------- ----------
* Rest of the World GBP4.5m GBP6.3m (28.6%) (26.2%)
----------- ---------- --------- ----------
Total Brand product
sales GBP31.1m GBP43.1m (27.8%) (27.7%)
----------- ---------- --------- ----------
The Brands segment comprises Sanderson, Morris & Co.,
Harlequin, Zoffany, Scion, Anthology, Clarke & Clarke and
Studio G. It includes licensing income derived from the brands as
well as global trading from our brands, including our overseas
operations in the US, France, Russia and Germany.
The segmental impact of Covid-19 across our Brand sales is
demonstrated in the table above, which shows that Total Brand sales
decreased by 30.0% in reportable currency, compared with the same
period last year, to GBP32.4 million, down 29.9% in constant
currency.
In the UK, our largest market, brand product sales were down
30.2% whereas in Northern Europe they were down just 12.3% in
reportable currency, reflecting the strength of the Morris &
Co. brand in Scandinavia. In North America, brand product sales
were down 33.3% in reportable currency.
Within the Brands, Clarke & Clarke continued to perform
well, positioned at the more affordable end of our premium target
markets. Morris & Co. has also continued strongly, reflecting
the sustained revival of consumer interest in the Arts & Crafts
movement, particularly in Scandinavia.
Kravet Inc., the industry leader in the US to the trade home
furnishings industry, has been distributing the Clarke & Clarke
brands in the US since August 2019. We continue to be pleased with
the progress made and are confident in the future of this
partnership.
Licensing
Licensing income in the first six months was down 59.4% in
reportable and constant currency, to GBP1.3 million, largely
reflecting the introduction of IFRS 15 last year and the
recognition of fixed minimum guaranteed licensing income in the
comparator period. Excluding the recognition of fixed minimum
guaranteed licensing income under IFRS 15 and income from apparel
contracts, core licensing income was down approximately 7.2% in
reportable and constant currency, compared with the corresponding
period last year.
In March 2020, we announced that the Scion brand had signed a
licence with major retailer NEXT for a range of homeware, nursery
and fashion items both online and in some NEXT stores. Structured
in part as a licensing deal and in part as a wholesale supply
agreement, a substantial number of products under this partnership
can already be viewed on NEXT's website. The teams work well
together and positive feedback from customers has prompted
consideration of expanding the scope of this relationship.
Manufacturing
The Company's two manufacturing businesses, Standfast and
Anstey, were both temporarily closed in March 2020 owing to
Covid-19. As a result, we lost two months of production,
representing approximately GBP7 million of lost or postponed
revenue. We responded quickly when we were able to reopen the
factories, with a phased reopening beginning towards the end of May
2020.
Total manufacturing sales decreased 38.5% in the first half to
GBP10.5 million compared with the same period last year, with total
third-party sales down 32.5%.
Manufacturing has started well in the second half year with both
factories having strong third party order books and sales.
CURRENT TRADING AND OUTLOOK
Whilst our results for the six months ended 31 July 2020 have
been impacted by Covid-19, we have come through the first wave of
the coronavirus with a better performance than anticipated in our
scenario planning, carried out at the onset of the pandemic.
Trading has been ahead of our expectations in July, August and
September 2020, with the business both fulfilling delayed orders
and demand returning more strongly than expected. We are now at the
start of our key autumn selling period and, owing to Covid-19, we
remain cautious in our outlook for the remainder of the year. We
have a clear strategy and, with the decisive action taken to
improve liquidity and reduce costs, we are confident of emerging as
a leaner and more agile business when the pandemic recedes.
FINANCIAL REVIEW
Overview
The Company achieved an adjusted underlying profit before tax of
GBP0.4 million in the first half despite a decrease in revenues of
GBP17.1 million. This is a good result in the difficult
circumstances, reflecting improvements in cost control and
efficiencies, as well as government support instigated in the
lockdown period.
The reduction in gross profit, resulting from the decrease in
revenues, was offset by a reduction in distribution expenses of
GBP3.4 million and in administrative costs of GBP4.9 million, a
total reduction in operating costs of GBP8.3 million. The staff
cost reductions in cost of sales, distribution and overheads
included the benefit of GBP3.2 million received in government
support.
The Group accounts for government grants on an accruals basis
and has elected to present receipts relating to government grants
as a deduction in reporting the related expense.
Working capital, capital expenditure, distribution and
administrative costs have all been managed to improve liquidity and
the efficiencies achieved will help the Group going forwards to
deal with any further shocks, such as future potential
lockdowns.
Statutory loss before tax of GBP0.9 million (H1 2019: profit of
GBP3.5 million) included non-underlying charges of GBP0.9 million
(H1 2019: GBP1.1 million). These are analysed below:
H1 2020 H1 2019
GBP000 GBP000
--------------------------------------------------- -------- --------
Statutory (loss) / profit before tax* (907) 3,502
--------------------------------------------------- -------- --------
Amortisation of acquired intangible assets 508 508
Restructuring and reorganisation costs 362 694
--------------------------------------------------- -------- --------
Anstey net other income - (144)
--------------------------------------------------- -------- --------
Total non-underlying charges included in profit
before tax 870 1,058
--------------------------------------------------- -------- --------
Underlying (loss) / profit before tax* (37) 4,560
LTIP accounting charge* 106 13
Net defined benefit pension charge 296 359
Adjusted underlying profit before tax 365 4,932
--------------------------------------------------- -------- --------
* The LTIP charge for the six months ended 31 July 2019 has been
adjusted from GBPnil to a GBP13,000 charge to correct the
accounting for the prior period.
Acquisition related costs incurred were in respect of the
acquisition of Clarke & Clarke, which completed on 31 October
2016. This comprises the amortisation of intangible assets of
GBP0.5 million.
Restructuring and reorganisation costs of GBP0.4 million reflect
the planned rationalisation of certain operational and support
functions . These comprise of employee severance costs associated
with the reorganisation process.
The net underlying interest charge decreased to GBP0.15 million
as a result of the higher level of net funds excluding the impact
of IFRS 16.
Adjusted underlying profit before tax, excluding the LTIP
accounting charge, defined benefit charge and non-underlying items,
decreased 91.8% to GBP0.4 million (H1 2019: GBP4.9 million).
Adjusted earnings per share were down 90.3% at 0.54 pence (H1
2019: 5.54 pence), after removing the LTIP accounting charge,
defined benefit charge and other non-underlying items.
Statutory loss after tax was GBP0.8 million (H1 2019: profit of
GBP2.6 million) and basic (loss) / earnings per share was down
129.9% at (1.10) pence (H1 2019: 3.68 pence*).
Cash flow and balance sheet
In response to Covid-19, the Group enhanced its liquidity
management and, as result, the net cash position of the business
has improved despite the loss of sales.
We continue to have a very good relationship with our principal
bankers, Barclays Bank, and secured an additional GBP2.5 million
overdraft facility in April 2020 to further extend headroom, which
was GBP19.5 million at the half year end.
The cash generated from operations in the period was GBP5.1
million, compared with GBP3.6 million in the corresponding
six-month period, which reflected the significant improvement in
working capital management in inventories and trade receivables,
receipt of furlough grants and cost reductions achieved across the
Group which is also the result of lower sales.
A working capital inflow during the period of GBP2.3 million (H1
2019: outflow of GBP3.0 million) reflected a significant decrease
in finished goods inventory as a result of better inventory
management; and a reduction in trade receivables driven by lower
sales and improvements in credit management. We will continue to
manage working capital closely and with the recovery in revenues
and production we expect working capital movements to normalise
throughout the rest of the year. We have seen no material
deterioration in bad debt rates or any extension in the time it has
taken customers to settle their accounts. We have made a concerted
effort to reduce risk around our customers and receivables and have
relatively little bad debt experience.
The additional inventory provision of approximately GBP0.9
million initially anticipated as a result of the Covid-19 pandemic
driven by reduced sales volumes has not fully materialised as sales
performance to date during the pandemic has been more resilient
than we first expected and therefore, only an additional GBP0.5
million has been recognised in the period.
Inventory has been reduced to GBP23.4 million from GBP28.8
million in the corresponding period last year, as a result of
tighter procurement of finished goods and our long term strategy to
reduce inventory levels. Trade and other receivables were reduced
to GBP17.1 million from GBP21.1 million in the corresponding period
last year, reflecting the improvement in working capital management
and reduction in sales volumes.
Trade and other payables were GBP16.8 million, compared with
GBP22.4 million in the corresponding period last year. This
reflected the Company's efforts to continue to pay suppliers in
accordance with their terms of trade and the reduction in operating
costs referred to earlier.
Capital expenditure in the period was GBP0.4 million, which
reflects the Group's strategy to suspend non-essential expenditure
with a view to conserving cash in light of the Covid-19 pandemic.
We actively managed down capital expenditure during the lockdown
period and we will continue to monitor investment needs closely
going forwards.
The Group's reported net debt (including IFRS 16) at the half
year decreased to GBP2.6 million (H1 2019: GBP7.7 million).
Excluding the impact of IFRS 16, the Group had net funds at the end
of July 2020 of GBP4.5 million (H1 2019: GBP0.9 million) reflecting
the need to preserve liquidity and optimise cash in response to the
health and economic threats of Covid-19.
The retirement obligation has increased from GBP5.7 million at
the end of January 2020 to GBP9.2 million, reflecting the effects
of reduced asset values and increasing liabilities due to lower
bond yields.
DIVID
Covid-19 continues to have a major impact on people, businesses
and economies worldwide. Against this back drop the Board has
decided that it would not be appropriate to pay an interim dividend
for the six months ended 31 July 2020. The Board remains committed
to future dividend payments to shareholders and will keep the final
full year dividend under review, with any decision to be announced
alongside the full year results in April 2021.
Unaudited Consolidated Income Statement
For the six months ended 31 July 2020
6 months to 31 July 6 months to 31 July
2020 2019
--------------------------------------- ---------------------------------------
Non-underlying Non-underlying
(note (note
Underlying 7) Total Underlying 7) Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ------- ----------- --------------- --------- -----------
Revenue 2 38,842 - 38,842 55,932 - 55,932
Cost of sales (15,924) - (15,924) (20,405) - (20,405)
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Gross profit / (loss) 22,918 - 22,918 35,527 - 35,527
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Net operating expenses:
Distribution and selling
expenses (8,533) - (8,533) (11,950) - (11,950)
Administration expenses* (16,647) (870) (17,517) (21,503) (1,202) (22,705)
Net other income 5 2,374 - 2,374 2,694 144 2,838
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Profit / (loss) from
operations* 112 (870) (758) 4,768 (1,058) 3,710
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Net finance costs (149) - (149) (208) - (208)
Profit / (loss) before
tax* (37) (870) (907) 4,560 (1,058) 3,502
Tax income / (expense) 8 72 51 123 (1,082) 190 (892)
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Profit / (loss) for
the period attributable
to owners of the
parent* 35 (819) (784) 3,478 (868) 2,610
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Earnings per share
- Basic* 9 (1.10)p 3.68p
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Earnings per share
- Diluted* 9 (1.10)p 3.68p
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Adjusted earnings
per share
- Basic 9 0.54p 5.54p
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
Adjusted earnings
per share
- Diluted 9 0.53p 5.54p
------------------------- ------- ----------- --------------- --------- ----------- --------------- ---------
* see note 15 for explanation of adjustment for the six months
ended 31 July 2019.
Unaudited Consolidated Statement of Comprehensive Income
For the six months ended 31 July 2020
6 months 6 months
to to
31 July 31 July
2020 2019
GBP000 GBP000
(Loss) / profit for the period* (784) 2,610
Items that may be reclassified subsequently
to profit or loss:
Currency translation (losses) / gains (31) 71
Total items that may be reclassified
subsequently to profit or loss (31) 71
-------------------------------------------------- --------- ---------
Items that will not be reclassified subsequently
to profit or loss:
Re-measurement of defined benefit pension
schemes (3,724) 3,917
Corporation tax credits recognised in 70 -
equity
Deferred tax relating to pension scheme
liability 708 (666)
-------------------------------------------------- --------- ---------
Total items recognised directly in equity (2,946) 3,251
-------------------------------------------------- --------- ---------
Total comprehensive income for the period
attributable to
the owners of the parent* (3,761) 5,932
-------------------------------------------------- --------- ---------
* see note 15 for explanation of adjustment for the six months
ended 31 July 2019.
Unaudited Consolidated Balance Sheet
As at 31 July 2020
As at As at As at
31 July 31 July 31 January
2020 2019 2020
Note GBP000 GBP000 GBP000
--------------------------------- ----- --------- --------- ------------
Non-current assets
Intangible assets 29,051 30,291 29,815
Property, plant and equipment 13,123 14,679 14,101
Right-of-use assets 7,008 8,793 8,392
Deferred income tax assets 147 - -
--------------------------------- ----- --------- --------- ------------
49,329 53,763 52,308
--------------------------------- ----- --------- --------- ------------
Current assets
Inventories 23,383 28,807 28,456
Trade and other receivables 17,068 21,077 20,543
Cash and cash equivalents 10 4,549 2,460 3,055
--------------------------------- ----- --------- --------- ------------
45,000 52,344 52,054
--------------------------------- ----- --------- --------- ------------
Total assets 94,329 106,107 104,362
--------------------------------- ----- --------- --------- ------------
Current liabilities
Trade and other payables (16,785) (22,380) (22,940)
Lease liabilities (2,130) (2,589) (2,810)
Borrowings 10 - (1,538) (1,719)
------------
(18,915) (26,507) (27,469)
--------------------------------- ----- --------- --------- ------------
Net current assets 26,085 25,837 24,585
--------------------------------- ----- --------- --------- ------------
Non-current liabilities
Lease liabilities (5,036) (6,077) (5,603)
Deferred income tax liabilities - (1,510) (802)
Retirement benefit obligation (9,209) (5,186) (5,659)
------------
(14,245) (12,773) (12,064)
------------
Total liabilities (33,160) (39,280) (39,533)
------------
Net assets 61,169 66,827 64,829
--------------------------------- ----- --------- --------- ------------
Equity
Share capital 710 710 710
Share premium account 18,682 18,682 18,682
Retained earnings 1,866 7,266 5,495
Other reserves 39,911 40,169 39,942
--------------------------------- ----- --------- --------- ------------
Total equity attributable to
owners of the parent 61,169 66,827 64,829
--------------------------------- ----- --------- --------- ------------
Unaudited Consolidated Cash Flow Statement
For the six months ended 31 July 2020
6 months 6 months
to to
31 July 31 July
2020 2019
Note GBP000 GBP000
------------------------------------------- ----- --------- ---------
Cash flows from operating activities
Cash generated from operations 11 5,057 3,555
Interest paid (209) (266)
Corporation tax refunds / (paid) 59 (402)
Net cash generated from operating
activities 4,907 2,887
------------------------------------------- ----- --------- ---------
Cash flows from investing activities
Interest received 4 -
Purchase of intangible assets (110) (337)
Purchase of property, plant and equipment (315) (839)
Net cash used in investing activities (421) (1,176)
------------------------------------------- ----- --------- ---------
Cash flows from financing activities
Payment of lease liabilities (1,371) (1,291)
Net cash used in financing activities (1,371) (1,291)
------------------------------------------- ----- --------- ---------
Net increase in cash and cash equivalents 3,115 420
Cash and cash equivalents and bank
overdraft at beginning
of period 1,336 434
Effect of exchange rate fluctuations
on cash held 98 68
Cash and cash equivalents and bank
overdraft at end of
period 10 4,549 922
------------------------------------------- ----- --------- ---------
Unaudited Consolidated Statement of Changes in Equity
For the six months ended 31 July 2020
Attributable to equity owners of the parent company
----------------------- -------------------------------------------------------------------------------
Other reserves
-----------------------------------
Foreign
Share currency
Share premium Retained Capital Merger translation Total
capital account earnings reserve reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- --------- ---------- --------- --------- ------------- --------
Balance at 1 February
2020 710 18,682 5,495 43,457 (2,950) (565) 64,829
Loss for the period - - (784) - - - (784)
Other comprehensive
income:
Re-measurement
of defined benefit
pension schemes - - (3,724) - - - (3,724)
Corporation tax
credits recognised
in equity 70 70
Deferred tax relating
to pension scheme
liability - - 708 - - - 708
Currency translation
differences - - - - - (31) (31)
Total comprehensive
income - - (3,730) - - (31) (3,761)
Transactions with
owners, recognised
directly in equity:
Long-term incentive
plan charge - - 101 - - - 101
Balance at 31 July
2020 710 18,682 1,866 43,457 (2,950) (596) 61,169
----------------------- --------- --------- ---------- --------- --------- ------------- --------
Attributable to equity owners of the parent company
----------------------- -------------------------------------------------------------------------------
Other reserves
-----------------------------------
Foreign
Share currency
Share premium Retained Capital Merger translation Total
capital account earnings reserve reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- --------- ---------- --------- --------- ------------- --------
Balance at 1 February
2019 710 18,682 1,392 43,457 (2,950) (409) 60,882
Profit for the
period* - - 2,610 - - - 2,610
Other comprehensive
income:
Re-measurement
of defined benefit
pension schemes - - 3,917 - - - 3,917
Deferred tax relating
to pension scheme
liability - - (666) - - - (666)
Currency translation
differences - - - - - 71 71
Total comprehensive
income* - - 5,861 - - 71 5,932
Transactions with
owners, recognised
directly in equity:
Long-term incentive
plan charge* - - 13 - - - 13
Balance at 31 July
2019 710 18,682 7,266 43,457 (2,950) (338) 66,827
----------------------- --------- --------- ---------- --------- --------- ------------- --------
* see note 15 for explanation of adjustment for the six months
ended 31 July 2019.
Notes to the unaudited interim financial statements
1. Basis of preparation of unaudited interim financial
statements
The interim financial statements have been prepared in
accordance with the accounting policies that the Group expects to
apply in its annual financial statements for the year ending 31
January 2021. The Group's accounting policies are based on
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and IFRS
Interpretations Committee ("IFRS IC") interpretations and the
Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under the
historical cost convention, as modified by the valuation of
derivative financial instruments at fair value through profit and
loss.
These interim financial statements for the six months ended 31
July 2020 have been prepared in accordance with IAS 34, 'Interim
financial reporting', as adopted by the European Union. The interim
financial statements should be read in conjunction with the annual
financial statements for the year ended 31 January 2020, which have
been prepared in accordance with IFRSs as adopted by the European
Union. All comparative information is for the six-month period
ended 31 July 2019, unless otherwise stated.
The accounting policies adopted in the preparation of these
interim financial statements to 31 July 2020 are consistent with
the accounting policies applied by the Group in its Annual Report
and Accounts as at, and for the year ended, 31 January 2020 as
required by the Disclosure Guidance and Transparency Rules ('DTR')
of the UK's Financial Conduct Authority, with the exception of the
adoption of new and amended standards as set out below.
Since the Group's previous annual financial report for the year
ended 31 January 2020, the Group has adopted IFRIC 23 Uncertainty
over Income Tax Treatments. The interpretation explains how to
recognise and measure deferred and current income tax assets and
liabilities where there is uncertainty over the tax position. In
particular it addresses;
-- how to determine the appropriate unit of account, and that
each uncertain tax treatment should be considered separately or
together as a group, depending on which approach better predicts
the resolution of the uncertainty,
-- that the entity should assume a tax authority will examine
the uncertain tax treatments and have full knowledge,
-- that the entity should reflect the effect of the uncertainty
in its income tax accounting when it is not probable that the tax
authorities will accept that treatment,
-- that the impact of the uncertainty should be measured using
either the most likely amount or the expected value method,
depending on which method better predicts the resolution of the
uncertainty,
-- that the judgements and estimates made must be reassessed
whenever circumstances have changed or there is new information
that affects the judgements.
The adoption of this interpretation did not have a material
impact on the Group's financial statements.
The interim financial statements do not represent statutory
accounts for the purposes of section 434 'Requirements in
connection with publication of statutory accounts' of the Companies
Act 2006. The financial information for the year ended 31 January
2020 is based on the statutory accounts for the financial year
ended 31 January 2020, on which the auditors issued an unqualified
opinion and did not contain a statement under section 498 'Duties
of auditor' of the Companies Act 2006 and have been delivered to
the Registrar of Companies. The interim financial statements for
the six-month period ended 31 July 2020 have not been audited.
Notes to the unaudited interim financial statements
(continued)
1. Basis of preparation of interim financial statements (
continued)
Critical accounting estimates and judgements
Going concern
A key accounting judgement for these interim financial
statements for the six months ended 31 July 2020 is the continued
adoption of the going concern basis of preparation in light of the
uncertainties caused by Covid-19.
For the accounts to 31 January 2020, published in June 2020, the
Company modelled an "Original" Management Base Case (MBC) trading
scenario on a "bottom up" basis with input from senior managers and
the Executive Directors, which showed sales for the year ending 31
January 2021 reducing by some 30% compared to the sales achieved in
the year ended 31 January 2020, with a gradual pick up as the
current year progressed and into 2021/2022. Given the continuing
uncertainty regarding the impact of Covid-19 (including potential
further waves of the pandemic) on the economy, consumer behaviour
and ultimately on the Company's performance, the Company also
modelled increasingly stressed scenarios compared to MBC (which
assumed 10% ("Mid Case") and 20% ("Low Case") sales reductions,
respectively, from MBC, along with increasingly conservative
assumptions in these scenarios regarding cash collections from
debtors). This scenario modelling showed that the Company retained
headroom against its banking facilities but that there could be
breaches of its leverage/interest cover covenants under stressed
scenarios. Therefore, agreement was sought and reached with the
Company's bank for covenants to be waived for a period.
Specifically, the bank agreed to waive the interest cover covenant
(ratio of operating profit to interest) for the tests arising in
October 2020, January 2021, April 2021 and July 2021 and the
leverage covenant condition (ratio of total net debt to EBITDA) for
October 2020, January 2021 and April 2021 provided the Company
maintains headroom against its banking facilities of at least GBP5m
between November 2020 and July 2021. Please see the disclosures in
the accounts for the year ended 31 January 2020 for more details
and Note 10 to these statements for a summary of our banking
facilities.
In light of trading since June 2020, the Original MBC trading
scenario for the year ending 31 January 2021 has been updated
("Updated MBC") with a latest bottom up scenario which shows sales
reducing by approximately 20% compared to the sales achieved in the
year ended 31 January 2020. The Updated MBC for the year ending 31
January 2021 and for the year ending 31 January 2022 has been
sensitised for 10% (Updated Mid Case) and 20% (Updated Low Case)
reductions in sales, consistent with the scenario modelling
conducted in June 2020. This scenario modelling indicates that,
even at the lowest point (October 2021) in the Updated Low Case,
the Company retains bank facility headroom of some GBP8m,
comfortably in excess of the afore-mentioned GBP5m liquidity
covenant and well within its banking facilities once the liquidity
covenant expires in July 2021. In addition, the scenario modelling
in all these cases indicates that the leverage and interest cover
covenants, once reinstated, should be met, except for a possible
breach under the Updated Low Case of the 31 October 2021 interest
cover covenant test. Management is confident, however, that in the
event of the Updated Low Case materialising (i.e. a 20% reduction
in sales for the next 13 months from Updated MBC), there are
specific cost reduction actions that would be taken in time to
avoid such a covenant breach.
In addition to the above scenarios, the Updated MBC has been
further sensitised to assess the level of sales reductions that
would be needed to cause a breach of the GBP5m liquidity covenant
(which exists to 31 July 2021) or the Group's committed banking
facilities in the period thereafter to 31 October 2021. These
sensitivities indicate that revenues for the next 13 months would
need to drop by in excess of 30% or 40% respectively, compared to
Updated MBC. Given the Group's experience over the past 6 months,
which has seen revenues recover strongly over the latest 3 months
after a sharp decline in the initial 3 months after the pandemic
hit, these possibilities are considered remote. Even if they did
materialise, management would act decisively, as it did earlier in
the year, to conserve cash (for example by reducing discretionary
spending and capital expenditure) to avoid a breach of either the
liquidity covenant or overall banking facilities.
Notes to the unaudited interim financial statements
(continued)
1. Basis of preparation of interim financial statements (
continued)
Given the unprecedented nature of the Covid-19 events, it is
impossible to predict future trading and cashflows with certainty.
However, the Group's performance over the past 6 months has been
better than originally expected and, combined with the actions
taken to protect the Group's cash position, show the Group's
resilience. The actual scenarios which materialise in the period
ahead will undoubtedly be different to the scenarios modelled. In
the event that the actual scenario is worse than modelled by the
Updated Low Case, it is implausible that management would not act
decisively to try to protect the business, particularly its cash
position, as it has done in the past 6 months. Having taken into
account all of the afore-mentioned comments, actions and factors in
relation to going concern and the potential impact of Covid-19, the
Directors consider 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 interim statements.
Other critical accounting estimates include retirement benefit
pension obligations, impairment of non-financial assets, deferred
tax recognition, business combinations, Covid-19 and long term
incentive plan payment awards.
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange risk and interest
rate risk), credit risk, liquidity risk and capital risk. The
interim financial statements do not include all risk management
information and disclosures required in the annual report and
accounts; they should be read in conjunction with the Group's
Annual Report and Accounts as at 31 January 2020. In particular,
information on the principal risks can be found on page 30 - 32 of
the Group's 2020 annual report which comprise of trading
environment; competition; foreign exchange; pension funding;
recruitment and retention of key employees; reputation;
acquisition; major incident such as a fire or flood; IT; and risks
resulting from the impact of Brexit and Covid-19. There have been
no changes in either the principal risks or risk management
policies since the year end.
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates. In preparing these interim
financial statements, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 January
2020, with the exception of changes in estimates that are required
in determining the provision for income taxes.
The Board approved the interim financial statements on 14
October 2020.
2. Segmental analysis
Walker Greenbank PLC is a designer, manufacturer and distributor
of luxury interior furnishings, fabrics and wallpaper. The
reportable segments of the Group are aggregated as follows:
-- Brands - comprising the design, marketing, sales and
distribution, and licensing activities of Sanderson, Morris &
Co., Harlequin, Zoffany, Anthology, Scion, Clarke & Clarke and
Studio G brands operated from the UK and its foreign subsidiaries
in the US, France, Russia and Germany;
-- 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.
Other Group wide activities and expenses, predominantly related to
corporate head office costs, defined benefit pension costs, long
term incentive plans expenses, taxation and eliminations of
intersegment items, are presented within 'Eliminations and
unallocated'.
Notes to the unaudited interim financial statements
(continued)
2. Segmental analysis (continued)
a) Principal measures of profit and loss - Income Statement
segmental information
Eliminations
Brands Manufacturing and unallocated Total
6 months to 31 July 2020 GBP000 GBP000 GBP000 GBP000
--------------------------------- -------- -------------- ----------------- --------
UK revenue 15,445 4,137 - 19,582
International revenue 15,597 2,330 - 17,927
Licence revenue 1,333 - - 1,333
---------------------------------- -------- -------------- ----------------- --------
Revenue - external 32,375 6,467 - 38,842
Revenue - internal - 4,071 (4,071) -
---------------------------------- -------- -------------- ----------------- --------
Total revenue 32,375 10,538 (4,071) 38,842
---------------------------------- -------- -------------- ----------------- --------
Profit / (loss) from operations 2,343 (437) (2,664) (758)
Net Finance costs - - (149) (149)
---------------------------------- -------- -------------- ----------------- --------
Profit / (loss) before
tax 2,343 (437) (2,813) (907)
Tax income / (expense) - - 123 123
---------------------------------- -------- -------------- ----------------- --------
Profit / (loss) for the
period 2,343 (437) (2,690) (784)
---------------------------------- -------- -------------- ----------------- --------
Business interruption reimbursements to cover loss of profits of
GBPnil (2019: GBP50,000) are included within 'Eliminations and
unallocated'. Tax charges have not been allocated to a segment.
Eliminations
Brands Manufacturing and unallocated Total
6 months to 31 July 2019 GBP000 GBP000 GBP000 GBP000
---------------------------------- -------- -------------- ----------------- --------
UK revenue 22,215 6,609 - 28,824
International revenue 20,893 2,977 - 23,870
Licence revenue 3,238 - - 3,238
----------------------------------- -------- -------------- ----------------- --------
Revenue - external 46,346 9,586 - 55,932
Revenue - internal - 7,557 (7,557) -
----------------------------------- -------- -------------- ----------------- --------
Total revenue 46,346 17,143 (7,557) 55,932
----------------------------------- -------- -------------- ----------------- --------
Profit / (loss) from operations* 5,615 1,038 (2,943) 3,710
Net Finance costs - - (208) (208)
----------------------------------- -------- -------------- ----------------- --------
Profit / (loss) before
tax 5,615 1,038 (3,151) 3,502
Tax expense - - (892) (892)
----------------------------------- -------- -------------- ----------------- --------
Profit / (loss) for the
period 5,615 1,038 (4,043) 2,610
----------------------------------- -------- -------------- ----------------- --------
* see note 15 for explanation of adjustment for the six months
ended 31 July 2019.
Notes to the unaudited interim financial statements
(continued)
2. Segmental analysis (continued)
b) Additional segmental revenue information
The segmental revenues of the Group are reported to the CODM in
more detail. One of the analyses presented is revenue by export
market for Brands.
6 months 6 months
to to
31 July 31 July
Brands international revenue by export 2020 2019
market GBP000 GBP000
North America* 5,450 8,102
Northern Europe* 5,655 6,517
Rest of the World* 4,492 6,274
---------------------------------------- --------- ---------
15,597 20,893
---------------------------------------- --------- ---------
*The geographical segments for the six months ended 31 July 2019
have been redefined in line with the Group's strategy.
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:
6 months 6 months
to to
31 July 31 July
2020 2019
Brands revenue analysis GBP000 GBP000
--------------------------------------- --------- ---------
Harlequin, incorporating Anthology
and Scion 8,258 12,725
Sanderson, incorporating Morris &
Co. 10,133 12,120
Zoffany 3,523 4,854
Clarke & Clarke, incorporating Studio
G 8,859 13,158
Other brands 269 251
Licensing 1,333 3,238
32,375 46,346
--------------------------------------- --------- ---------
Revenue of the Manufacturing reportable segment - including
revenues from internal sales to the Group's Brands:
6 months 6 months
to to
31 July 31 July
2020 2019
Manufacturing revenue analysis GBP000 GBP000
Standfast 5,961 7,763
Anstey 4,577 9,380
-------------------------------- --------- ---------
10,538 17,143
-------------------------------- --------- ---------
Notes to the unaudited interim financial statements
(continued)
3 . Analysis of revenue by category
6 months 6 months
to to
31 July 31 July
2020 2019
GBP000 GBP000
Sale of goods 37,509 52,694
Licence royalty income 1,333 3,238
------------------------ --------- ---------
Total revenue 38,842 55,932
------------------------ --------- ---------
4. Seasonality and cyclicality
There is no material seasonality or cyclicality impacting the
interim financial statements.
5. Net other income
Net other income comprises consideration received from the sale
of marketing materials and additional services of GBP2,374,000
(2019: GBP2,644,000), and business interruption reimbursements to
cover loss of profits of GBPnil (2019: GBP50,000). In addition,
there was non-underlying net other income of GBPnil (2019:
GBP144,000) as per note 7.
6. Net defined benefit pension charge
6 months 6 months
to to
31 July 31 July
2020 2019
GBP000 GBP000
Expected return on pension scheme
assets 662 832
Interest on pension scheme liabilities (703) (944)
Scheme expenses met by the Group (255) (247)
Net defined benefit pension charge (296) (359)
---------------------------------------- --------- ---------
The Group paid contributions of GBP215,000 (2019: GBP671,000)
and scheme administration costs of GBP255,000 (2019: GBP247,000) to
the Group's two defined benefit schemes, further details of which
can be found in the 2020 Annual Report.
Notes to the unaudited interim financial statements
(continued)
7. Non-statutory profit measures
Underlying profit measures
The Group seeks to present a measure of underlying performance
which is not impacted by material non-recurring items or items
considered non-operational in nature. This measure of profit is
described as 'underlying' and is used by management to measure and
monitor performance. The excluded items are referred to as
'non-underlying' items.
Non-underlying items
The non-underlying items included in profit are as follows:
6 months 6 months
to to
31 July 31 July
2020 2019
GBP000 GBP000
--------------------------------------- ----- --------- ---------
(i) Acquisition related:
Amortisation of acquired intangible
assets (508) (508)
(ii) Restructuring and reorganisation
costs (a) (362) (694)
--------------------------------------- ----- --------- ---------
(iii) Anstey fire:
Incremental costs and property, - -
plant and equipment repairs
Insurance reimbursements - 144
---------------------------------------------- --------- ---------
(b) - 144
--------------------------------------------- --------- ---------
Total non-underlying items included
in profit before tax (870) (1,058)
---------------------------------------------- --------- ---------
Tax on non-underlying items 51 190
Total impact of non-underlying
items on profit after tax (819) (868)
---------------------------------------------- --------- ---------
(a) Restructuring and reorganisation costs relate to the
reorganisation of the Group and comprise of the rationalisation of
certain operational and support functions. These comprise of
employee severance costs of GBP362,000. In the prior period there
were employee severance costs of GBP284,000 associated with the
Clarke & Clarke Haslingden site exit together with a further
GBP410,000 in respect of professional fees and dual running costs
associated with the reorganisation process.
(b) Anstey fire-related net other income of GBPnil (2019:
GBP144,000) comprise of proceeds arising from the reimbursement of
repair costs in respect of plant and equipment and related costs
following a minor fire.
In addition to the non-underlying items detailed above, an
adjustment is made for the LTIP accounting charge and net defined
benefit pension charge in arriving at the 'Adjusted profit' and
'Adjusted earnings per share'.
Notes to the unaudited interim financial statements
(continued)
8. Tax expense
6 months 6 months
to to
31 July 31 July
2020 2019
GBP000 GBP000
Current tax:
- UK, current tax (118) (777)
- UK, adjustments in respect of prior
years - (222)
- overseas, current tax - (20)
--------------------------------------------------- --------- ---------
Corporation tax (118) (1,019)
--------------------------------------------------- --------- ---------
Deferred tax:
- current year 291 96
* adjustments in respect of prior years (50) 31
Deferred tax 241 127
--------------------------------------------------- --------- ---------
Total tax income / (expense) for the
period 123 (892)
--------------------------------------------------- --------- ---------
The deferred tax balance at 31 July 2020 included within these
interim financial statements has been calculated at a rate of 19%,
as this is the rate at which the balances are expected to
unwind.
A reduction in the UK corporation tax rate from 19% to 17%
(effective 1 April 2020) was substantively enacted on 6 September
2016, and the UK deferred tax asset/(liability) as at 31 January
2020 was calculated based on this rate. The March 2020 Budget
announced that a rate of 19% would continue to apply with effect
from 1 April 2020, and this change was substantively enacted on 17
March 2020.
A net deferred tax credit of GBP241,000 (2019: credit of
GBP127,000) arose in the period to 31 July 2020 on the profits for
the period and adjustments in respect of prior years.
Notes to the unaudited interim financial statements
(continued)
9. 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 period, 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.
6 months to 6 months to
31 July 2020 31 July 2019
-------------------------------- --------------------------------
Weighted Weighted
average Per average Per
number share number share
Earnings of shares amount Earnings of shares amount
GBP000 (000s) Pence GBP000 (000s) Pence
-------------------- --------- ----------- -------- --------- ----------- --------
Basic earnings
per share* (784) 70,984 (1.10) 2,610 70,984 3.68
Effect of dilutive
securities:
Shares under LTIP 545 -
-------------------- --------- ----------- -------- --------- ----------- --------
Diluted earnings
per share* (784) 71,529 (1.10) 2,610 70,984 3.68
-------------------- --------- ----------- -------- --------- ----------- --------
Adjusted basic
and diluted
earnings
per share:
Add back LTIP
accounting charge 106 13
Add back Net
defined
benefit pension
charge 296 359
Non-underlying
items (note 7) 870 1,058
Tax effects of
non-underlying
items and other
addbacks (106) (105)
Adjusted basic
earnings per share 382 70,984 0.54 3,935 70,984 5.54
-------------------- --------- ----------- -------- --------- ----------- --------
Adjusted diluted
earnings per share 382 71,529 0.53 3,935 70,984 5.54
-------------------- --------- ----------- -------- --------- ----------- --------
* see note 15 for explanation of adjustment for the six months
ended 31 July 2019.
Walker Greenbank's issued ordinary share capital with voting
rights consists of 70,983,505 (2019: 70,983,505) ordinary shares of
1p each of which no (2019: nil) ordinary shares are held in
treasury and no (2019: nil) 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.
Notes to unaudited the interim financial statements
(continued)
10. Analysis of net funds / (debt)
Other
1 February non-cash 31 July
2020 Cash flow changes 2020
GBP000 GBP000 GBP000 GBP000
--------------------------- ----------- ---------- ---------- --------
Cash and cash equivalents 3,055 1,396 98 4,549
Bank overdraft (1,719) 1,818 (99) -
--------------------------- ----------- ---------- ---------- --------
Cash and cash equivalents
and bank overdraft 1,336 3,214 (1) 4,549
Finance lease liabilities (8,413) 1,371 (124) (7,166)
--------------------------- ----------- ---------- ---------- --------
Net debt (7,077) 4,585 (125) (2,617)
--------------------------- ----------- ---------- ---------- --------
In October 2019, the Group renewed its committed GBP12,500,000
multi-currency revolving credit facility with Barclays Bank PLC for
a further five year period. The agreement also includes a
GBP5,000,000 uncommitted accordion facility option to further
increase available credit which provides substantial headroom for
future growth. The bank arrangement fee of GBP106,250 is amortised
over the life of the loan. Following full settlement of a five-year
variable rate term loan in July 2017, total facilities from
Barclays Bank PLC comprise of the revolving credit facility secured
on the Group's freehold property which may be drawn down in either
sterling or euro.
Following the Covid-19 pandemic, the Group enhanced liquidity on
a precautionary basis by obtaining a temporary overdraft facility
of GBP2,500,000 to April 2021, to complement the headroom in the
existing GBP12,500,000 revolving committed credit facility.
The total Barclays Bank PLC facilities are capped at
GBP20,000,000 (2019: GBP22,500,000); the net utilisation of the
facilities at 31 July 2020 was GBPnil (31 January 2020:
GBP1,719,000) as we have a set-off facility which enables us to
cash pool and set-off balances. The revolving credit facility bears
interest at a variable rate based on a margin above LIBOR (for
sterling loans) or the EURIBOR (for euro loans).
Under the Barclays Bank PLC facilities, the Group is subject to
compliance of two financial covenants, being interest cover and
leverage. Any non-compliance with covenants could, if not remedied
or waived, constitute an event of default with respect to any such
arrangements. The Group has reported to Barclays Bank PLC that it
was in full compliance with its covenants throughout each of the
periods presented.
In light of Covid-19, Management has modelled possible downside
scenarios to its base case trading forecast. Having taken into
account these models, together with the uncertainty around the
ramifications of the Covid-19 pandemic on the reported covenants,
formal agreement has been reached with Barclays Bank PLC to waive
the interest cover covenant condition for the tests arising in
October 2020, January 2021, April 2021 and July 2021 and to waive
the leverage covenant condition for October 2020, January 2021 and
April 2021. This has been replaced by a liquidity covenant
requirement that available headroom in the facility needs to remain
above GBP5,000,000 between 1 November 2020 and 31 July 2021.
Notes to the unaudited interim financial statements (continued)
11. Cash generated from operations
6 months 6 months
to to
31 July 31 July
2020 2019
GBP000 GBP000
-------------------------------------------- --------- ---------
(Loss) / profit before tax* (907) 3,502
Defined benefit pension charge 296 359
Net finance costs 149 208
Depreciation and impairment of property,
plant and equipment
(including right-of-use assets) 2,838 2,769
Amortisation 872 859
Insurance reimbursements - (144)
LTIP charge recognised in equity* 101 13
LTIP vesting - -
Unrealised foreign exchange gains included
in operating profit (150) (219)
Defined benefit pension cash contributions (470) (918)
-------------------------------------------- --------- ---------
Cash generated from operating activities
pre-insurance proceeds 2,729 6,429
Insurance proceeds relating to operating
activities - 144
-------------------------------------------- --------- ---------
Cash generated from operating activities
post-insurance proceeds 2,729 6,573
Changes in working capital
Decrease / (increase) in inventories 5,073 (787)
Decrease / (increase) in trade and other
receivables 3,510 (2,474)
(Decrease) / increase in trade and other
payables (6,255) 243
-------------------------------------------- --------- ---------
Cash generated from operations 5,057 3,555
-------------------------------------------- --------- ---------
* see note 15 for explanation of adjustment for the six months
ended 31 July 2019.
Notes to the unaudited interim financial statements
(continued)
12. Retirement benefit obligations
The Group sponsors the following funded pension schemes in the
UK: the Walker Greenbank Pension Plan and the Abaris Holdings
Limited Pension Scheme. The Walker Greenbank Pension Plan is the
biggest scheme. All schemes contain defined benefits sections,
which are closed to new members and the accrual of future benefits,
however the Abaris Holdings Limited Pension Scheme also contains a
defined contribution section, although this section is relatively
small.
The pension costs relating to the UK defined benefit schemes are
assessed in accordance with the advice of an independent qualified
actuary using the projected unit method. These schemes are subject
to triennial actuarial reviews with the most recent ones having
been April 2018. An updated funding valuation for IAS 19 financial
reporting purposes was completed as at 31 July 2020.
The assumptions applied for valuation of the defined benefit
schemes are fully disclosed in the annual financial statements for
the year ended 31 January 2020 and continue to be applied in the
half year ended 31 July 2020 with the exception of the discount
rate assumption which has been updated to 1.3% from 1.7% at the end
of January 2020 due to lower bond yields. The net defined benefit
pension charge recognised in the half year represents the relevant
proportion of the annual amounts expected to be recognised for the
year ending 31 January 2021 and are based on previous actuarial
estimates. The net retirement benefit obligation recognised at 31
July 2020 is based on the actuarial valuation under IAS 19
'Employee Benefits' at 31 July 2020 with actuarial losses for the
period being recognised together with the deferred tax effect of
movements in the net retirement benefit obligation which has also
been recognised in the half year. An updated funding valuation for
IAS 19 financial reporting purposes will be completed for the next
annual financial statements for the year ending 31 January 2021, at
which time any actuarial gains and losses arising throughout the
year will be recognised, including those arising from a change in
the underlying assumptions applied for valuation of the defined
benefit schemes.
13. Dividends
Covid-19 continues to have a major impact on people, businesses
and economies worldwide. Against this back drop the Board has
decided that it would not be appropriate to pay an interim dividend
for the six months ended 31 July 2020. During the prior year an
interim dividend of 0.52 pence per share, totalling GBP369,000 was
paid for the year ended 31 January 2020.
14. Related party transactions
Transactions between Group companies, which are related parties,
have been eliminated on consolidation and are therefore not
disclosed. Other transactions which fall to be treated as related
party transactions are those relating to the remuneration of key
management personnel, which are not disclosed in the interim
financial statements, and which will be disclosed in the Group's
next annual report; and transactions between the Group and the
Group's defined benefit pension plan, which are disclosed in note
6.
15. Explanation of adjustment for the six months to 31 July
2019
The LTIP charge for the six months to 31 July 2019 has been
adjusted from a GBPnil charge to a GBP13,000 charge to correct the
accounting for the prior year, with totals and subtotals amended
for this change. Amounts impacted have been identified throughout
the financial statements through the use of an asterisk on the
financial statement line and a footnote reference to this note.
This was due to an error in the LTIP calculation for LTIP 10 and
11. The statutory profit has been reduced by GBP13,000, reducing
basic and diluted EPS from 3.70p to 3.68p. The overall retained
earnings position at 31 July 2019 has not been impacted.
Notes to the unaudited interim financial statements
(continued)
Responsibility Statement
The Directors confirm that, to the best of their knowledge,
these interim financial statements have been prepared in accordance
with IAS 34 as adopted by the European Union and that the interim
management report includes as fair review of the information
required by Disclosure Guidance and Transparency Rules 4.2.7 and
4.2.8, namely:
-- An indication of the important events that have occurred
during the first half year and their impact on the interim
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related party transactions in the first half year
and any material changes in the related party transactions
described in the last annual report.
By order of the Board
Lisa Montague Michael Williamson
Chief Executive Officer Chief Financial Officer
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END
IR UOVWRRNURAAA
(END) Dow Jones Newswires
October 14, 2020 02:00 ET (06:00 GMT)
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