RNS No 3468r
VICTORIA PLC
3rd June 1998
VICTORIA P.L.C.
1998 Preliminary Results
Improved Performance unlines strength of the Group's
Developing Strategy
Turnover #35.73 million
Profit before tax #1.01 million +61%
Earnings per share 10.71p +41%
Dividend per share 3.5p + 40%
Trading base and market position strengthened
Major success with new products launched
Substantial capital expenditure across the Group
Within carpet production cost efficiency and
quality improved through introduction of 'state of the
art' high speed tufters
Westwood Yarns remain one of UK's foremost
spinners
Australia - rebuilt Castlemaine spinning mill
fully commissioned and meeting quality and profit
objectives
"Sterling's strength over the past six months has given
Continental manufacturers and spinners an opportunity
to make a concerted attack on the UK carpet market as
well as making it more difficult for us to gain export
orders. Moreover, the prospects in our domestic market
are particularly difficult to predict at this time with
some major retailers recently announcing difficult
trading conditions.
"However, our capital expenditure programme is bearing
fruit and we are also experiencing increasing sales for
our new product ranges. Both of these factors, coupled
with a belief that we will see an improvement from
Australia, gives the Board confidence to believe that
trading performance will continue to improve during the
current year despite the difficult market conditions."
Bob Gilbert, Chairman
Enquiries:-
Bob Gilbert, Chairman
Alan Bullock, Group Managing Director
Mark Lee, Group Finance Director
Tel: 01562 823400
VICTORIA P.L.C.
Preliminary Results
for the year ended 28 March 1998
STATEMENT BY THE CHAIRMAN, BOB GILBERT
Introduction
Throughout the year, the Group has remained well focused on
the strategic plan the Board started to implement in 1997, and
these efforts have resulted in a much improved performance,
strengthening our trading base and position in the market.
Results
I am pleased to announce the Group's results for the 12 months
ended 28 March 1998. Net profit before tax and exceptional
items increased by 61% to #1.01 million (1997: #0.62 million).
Operating profit increased by 59% to #1.45 million (1997:
#0.91 million). Turnover was marginally down from #36.76
million in 1997 to #35.73 million in the year
under review. This was mainly due to exchange rate
differences on consolidating results from our Australian
subsidiary, where we have seen a 20% decline in the value of
the Australian Dollar against Sterling.
These results were achieved in a mixed market, which saw the
UK carpet market grow in real terms for the first time in some
years. This growth was not however as great as we had hoped
for given the prospect of an improving housing market,
windfall receipts from building societies, and talk of a
consumer led boom.
Against the backdrop of a succession of interest rate rises,
strengthening Sterling and disappointing retail sales in
general, the improved performance of the Group underlines the
inherent strength in our developing strategy.
Dividend
In view of these improved results, and the Board's future
expectations, we are pleased to be able to recommend an
improved dividend of 3.5p per share, an increase of 40%. This
will be paid on 13 July 1998 to shareholders on the register
at 19 June 1998.
People
We have had three changes to the Board since my last report.
Mel Lloyd resigned on 31 March 1998 and Mark Lee joined us as
Finance Director on 1 May. Mark, a chartered accountant
and graduate engineer, brings with him a great deal of
experience from a career in merchant banking and latterly with
Arthur Andersen. I am confident that his skills will enable
him to make a significant contribution to our business.
After many years as a loyal servant to the Group, Peter Anton
retired as a non-executive director on 31 March 1998. Peter
commenced working with Victoria Carpets in 1952 and progressed
through a number of senior positions both within our carpet
subsidiaries and the Group before becoming a non-executive
director in 1978. My Board colleagues join with me in wishing
him a long and happy retirement and thank him for his
contribution to the Group over the years.
Once again, I would like to thank all of our employees for
their hard work and support over the past year. Their ability
to adapt to meet the challenges that our industry is facing is
commendable.
Outlook
Sterling's strength over the past six months has given
Continental manufacturers and spinners an opportunity to make
a concerted attack on the UK carpet market as well as making
it more difficult for us to gain export orders. Moreover, the
prospects in our domestic market are particularly difficult to
predict at this time with some major retailers recently
announcing difficult trading conditions.
However, our capital expenditure programme is bearing fruit
and we are also experiencing increasing sales for our new
product ranges. Both of these factors, coupled with a belief
that we will see an improvement from Australia, gives the
Board confidence to believe that trading performance will
continue to improve during the current year despite the
difficult market conditions.
VICTORIA P.L.C.
Preliminary Results
for the year ended 28 March 1998
OPERATING REVIEW BY ALAN BULLOCK, GROUP MANAGING DIRECTOR
United Kingdom
The UK operation showed a 30% improvement in profitability in
the year, rising from #0.62 million before tax in 1997 to
#0.81 million in the year under review.
This result starts to reflect the implementation of the
Company's strategic plan, which is:
To maintain our current strength with selected major
retail groups.
To target and support the independent retail sector
To provide value-for-money, middle-to-upper market niche
products, supported by consistently excellent service and
attractive in-store displays.
During the year three key products aimed at the independent
sector, identified as essential to improve sales and
profitability, were launched. These ranges have proven a
major success with the full impact of their benefits now
feeding fully through to the bottom line. Further new
products are planned for later this year, which will continue
to strengthen our market position.
There is no doubt that customer service is a point of
differentiation between one carpet manufacturer and another.
Improved levels of customer service with the introduction of
our liveried and dedicated delivery fleet operating to our
main core sales areas, have further enabled the company to
grow its business to the independent sector by over 6% in the
year.
Export sales have declined slightly in the year, but at #5.3
million they still account for around 21% of UK turnover.
Despite the strength of Sterling we have managed to maintain
our strong foothold in certain key export markets, in
particular remaining a major supplier to the hospitality
market.
On the carpet production side, the introduction of new 'state
of the art' high speed tufters from the United States was
successfully completed with minimum disruption, enabling us to
make the latest new products in multiple widths, quickly, cost
efficiently and in a way that meets all quality requirements.
In the traditional woven part of our business too, the
introduction of new work practices and modern technology has
allowed us to improve quality and reduce costs.
Westwood Yarns, our yarn spinning division based in Holmfirth,
has performed very well throughout the year, producing a
significant amount of the high quality dry woollen spun yarn
that has gone into our new generation of carpets. The heavy
investment the Group has made in Westwoods over recent years
provides us with an advantage over many of our competitors.
Continued investment will be made to keep Westwoods at the
forefront of dry woollen spinning technology, and remain one
of the UK's foremost spinners.
Australia
In Australia business conditions remain little changed from
last year, with the carpet market experiencing no growth
during the year. The impact of the Asian economic turmoil
also had an effect. Despite this, our Australian company's
sales grew by 11% attributable to the release of competitive
new products and continued growth in its export markets.
The rebuilt Castlemaine spinning mill was commissioned mid-
year, with the very latest carding and spinning equipment.
New automatic winding equipment is due to be installed
shortly, and additional carding and spinning equipment has
been purchased for installation later this year. The mill is
now working 168 hours per week and is fully meeting quality
and profit objectives.
With innovative product development, and concentration on
those market niches where we excel, we expect a continuing
improvement in our Australian business. Significant
improvements however, are largely dependant on growth
returning to the floor-covering market in that country and the
evolution of a more stable market place.
FINANCIAL REVIEW BY MARK LEE, GROUP FINANCE DIRECTOR
Operating Performance
The operating result strengthened appreciably over 1997 in
local currency terms. The UK businesses produced an operating
profit of #1.22 million compared to #0.89 million in 1997,
whilst maintaining turnover within a fraction of last year.
This represents an increase in operating margin from 3.5% to
4.8%, as the results of the investment in plant and machinery
and new product ranges started to show through. The
Australian operations, which were severely affected last year
by the fire, increased turnover by 11% to A$26.3 million and
returned to operating profit.
Sterling
The strength of Sterling in the year affected the results both
in terms of translating the Australian results and, at an
operational level, in making UK products less price-
competitive in export markets and foreign manufactured
products more attractive to UK customers. The 20%
appreciation of Sterling against the Australian dollar meant
that despite our Australian turnover growing 11% from A$23.7
million to A$26.3 million, this is recorded in the Group
accounts as a fall from #11.4 million to #10.5 million.
Shareholder Returns and Dividends
Profit attributable to shareholders rose by 41% to #0.74
million. Earnings per share are 10.71p (1997: 7.59p before
exceptional credit). The dividend of 3.5p per share,
totalling #0.24 million is three times covered by earnings.
Capital Expenditure
Total capital expenditure remained considerable in the year,
with #1.4 million invested across the three major operating
subsidiaries. In Australia, we completed the rebuilding of
the Castlemaine spinning mill, whilst in the UK, Westwoods
invested further in additional plant and Victoria Carpets
completed its investment in the new high speed tufters. For
the second consecutive year, capital expenditure exceeded the
depreciation charge.
Cashflow and Financing
Retained profit and depreciation for the year amounted to
#1.61 million. The capital expenditure during the year and
the working capital requirements of launching the new product
ranges were met from this cashflow and an increase of #1.28
million in borrowings. Balance sheet gearing (net debt to
shareholders' funds) increased from 32% at the start of the
year to 38% at the year end. Net interest remained 2.8 times
covered by operating profit before exceptional items.
Taxation
The tax charge for the year rose to a more normal level of
26.9% compared to last year's exceptionally low 16.4%
(excluding the exceptional item). As Group profit increases,
there is less advantage from the small companies' rate of tax
in the UK and an increasing proportion of profits are taxed at
the full UK corporation tax rate, currently 31%.
Year 2000
The Group has established a programme to address the IT issues
arising from the Millennium date.
The review of the Group's business and operations is set for
completion in mid-1998, and the full cost of ensuring
conformity will then be established. Initial assessments of
key areas of risk have been made by each Group company. Only
one area has been identified which requires significant
attention, and a review is underway to decide whether the
system concerned should be modified or replaced. The external
costs of modifying this system to ensure Millennium
compatibility are estimated to be approximately #50,000. Any
cost of modification would be charged in the year incurred.
The subsidiary concerned has the personnel resources to manage
the modifications.
VICTORIA P.L.C.
Preliminary Results
GROUP PROFIT & LOSS ACCOUNT
for the year ended 28 March 1998
1998 1997
#000 #000
Turnover 35,728 36,756
Cost of sales 26,452 28,147
Gross profit 9,276 8,609
Distribution costs 6,372 5,918
Administrative expenses 1,694 2,031
Add:- Other operating income 244 252
Operating profit 1,454 912
Exceptional income - 1,668
Interest payable and similar charges 483 321
Share of profits of associated undertaking 34 32
Profit on ordinary activities before 1,005 2,291
taxation
Taxation 270 163
Profit after taxation 735 2,128
Dividends paid and proposed 240 169
Retained profit/(loss) 495 1,959
Earnings per share 10.71p 31.02p
Adjusted earnings per share - 10.71p 7.59p
calculated to show earnings per share ________ ________
excluding the effect of exceptional income __ __
VICTORIA P.L.C.
Preliminary Results
GROUP BALANCE SHEET
As at
28 March 31
1998 March
#000 1997
#000
Fixed assets
Tangible assets 12,472 11,224
Investments 196 186
12,668 11,410
Current assets
Stock 10,357 10,018
Debtors 6,032 6,766
Cash at bank and in hand 29 6
16,418 16,790
Less: Current liabilities
Creditors - amounts falling due within
one year 10,092 10,291
Net current assets 6,326 6,499
Total assets less current liabilities 18,994 17,909
Less: Creditors - amounts falling due
after more than one year 1,901 1,895
Provisions for liabilities and
charges - deferred taxation 598 593
Net assets 16,495 15,421
Capital and reserves (equity)
Share capital 1,715 1,715
Share premium 749 749
Revaluation reserve 3,014 1,366
Profit and loss account 11,017 11,591
Total shareholders' funds 16,495 15,421
VICTORIA P.L.C.
Preliminary Results
GROUP CASH FLOW STATEMENT
Year ended Year ended
28 March 1998 31 March 1997
#000 #000 #000 #000
Net cash inflow from operating 686 2,641
activities
Exceptional items:
Excess insurance proceeds over book
value of assets - 1,668
Reorganisation costs (94)
Returns on investment and servicing
of finance (363) (234)
Interest paid
Interest element of finance (120) (87)
lease/H.P. payments
(483) (321)
Taxation
UK Corporation Tax paid (110) (97)
Overseas tax received - 25
(110) (72)
Capital expenditure and financial
investment
Payments to acquire tangible fixed (1,356) (3,359)
assets
Receipts from sales of tangible fixed 49 222
assets
Redemption of shares in associated 13 -
undertaking
(1,294) (3,137)
(1,201) 685
Equity dividends paid (169) (135)
(1,370) 550
Financing
Debt due within one year
Repayment of secured loan (407) (206)
Repayment of unsecured loan - (349)
Increase/(decrease) in long term 150 (491)
loans
Capital element of finance lease/H.P. (525) (288)
payments
Receipts from financing of assets 707 576
(75) (758)
(Decrease) in cash (1,445) (208)
VICTORIA P.L.C.
Preliminary Results
NOTES TO THE ACCOUNTS
for the year ended 31 March 1998
1 Analysis of Group turnover and profit
The turnover, contribution to profit and net assets are geographically
spread as follows:
1998 1997
Profit on Profit on
ordinary Net ordinary Net
Turnover activities assets Turnover activities assets
#000 #000 #000 #000 #000 #000
UK 25,225 812 9,766 25,369 617 8,256
Australia 10,503 159 6,533 11,387 1,642 6,979
Canada - 34 196 - 32 186
35,728 1,005 16,495 36,756 2,291 15,421
The Group's turnover and profits were derived from continuing
operations during the current and previous years. No
operations have been acquired during these two years.
2 Earnings per share has been calculated based on 6,860,556
shares in issue throughout the two years.
3 The Report and Accounts will be posted to shareholders on 5
June 1998 and further copies will be available from the
Company's Registered Office: Green Street, Kidderminster,
Worcestershire DY10 1HL.
4 The Annual General Meeting is being held on 6 July 1998 at
the Company's registered office at 2.30pm.
END
FR QLFFBVQKEBKE
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