RNS No 4457n
VICTORIA PLC
8 June 1999
VICTORIA P.L.C.
leading independent manufacturers of quality carpets and
carpet yarns
1999 Preliminary Results
Investments made throughout the Group and successful new
products lead to a substantial improvement in earnings
* Operating Profit #1.91 million +31%
* Profit before Tax #1.50 million +50%
* Earnings per Share 14.73 pence +38%
* Dividend 4.5 pence +29%
* Customer base and product portfolio significantly
strengthened
* Consolidation of UK carpet manufacturing on to one site
to be completed by late 1999 which will bring further
significant cost benefits 2000 and beyond.
"By building upon the strong foundations laid over the
past two years and pursuing our clearly defined strategy
the Group has again made further significant progress
during the year despite testing conditions faced in many
of our markets.."
"Whilst currently difficult trading conditions in the UK
still prevail, I am confident that the considerable
investments we have made in both plant, equipment and new
product ranges are all bearing fruit and that there is
still good scope for organic growth and further
improvements in profitability.
"The Group is well placed to make further significant
progress in the current year."
Bob Gilbert, Chairman
FULL STATEMENT ATTACHED
Enquiries:- Fiona Tooley
Alan Bullock, Group Managing Director Citigate Dewe Rogerson
Mark Lee, Group Finance Director Today: 0171-638-9571
Victoria P.L.C. Thereafter:0121-631 2299
Today: 0171-638 9571 (9.00am - 12.30pm) Mobile: 0385 703523
0171-638 7275 (12.30pm - 2.30pm)
Thereafter: 01562 823400
Mobile: 0385 325701 (Alan Bullock)
Mobile: 07887 753206 (Mark Lee)
Victoria P.L.C.
1999 Preliminary Results
STATEMENT BY THE CHAIRMAN, BOB GILBERT
Introduction
By building upon the strong foundations laid over the past two
years and pursuing our clearly defined strategy the Group has
again made further significant progress during the year
despite testing conditions faced in many of our markets.
In the United Kingdom we have strengthened our position as one
of the country's leading independent, quality carpet
manufacturers and in Australia the company has consolidated
its position too, producing up to a third of the Group's
profits.
Victoria is committed to delivering shareholder value, whilst
continuing to invest for the long term benefit of its business
and its employees.
We are continuously striving to improve performance, by
understanding the customers' requirements, providing a
consistently high level of service and value for money
products, with the objective of becoming the customers'
preferred supplier.
The successful result we are able to deliver in 1999 is in no
small part due to this philosophy, coupled with hard work,
dedication and ingenuity of all our employees.
Results
The Group's turnover was down by 3% in the year from
#35.73 million in 1998 to #34.80 million, as we concentrated
on improving our margin by strengthening our customer base and
product portfolio. As a result our operating profit rose by
31% in the year to #1.91 million (1998 #1.45 million). Net
profit before tax increased by 50% from #1.01 million in 1998
to #1.50 million in the period. Earnings per share increased
by 38% to 14.73p per share (1998 10.71p).
Notwithstanding a capital expenditure programme of
#1.06 million during the year, Group borrowings reduced to
#3.49 million, whilst shareholders' funds increased to
#17.1 million. Gearing has therefore reduced from 38% to 20%.
Good performances were recorded in all of our core businesses,
despite difficult trading conditions in the UK, where High
Street sales for big ticket consumer products such as carpet
turned down in December 1998.
Our strategy of concentrating on the Independent Retail
sector, which has weathered the down-turn much better than the
large groups, has been vindicated and we have continued to
develop our market share at a pace in this sector.
Exports from the UK have remained difficult throughout the
year, affected both by the strength of Sterling and the poor
state of the economies in many of our overseas markets.
Nevertheless exports from the UK still form a fundamental part
of our future and remain a significant part of our turnover
from the UK at #4.40 million in the year (1998 #5.28 million).
Our Australian operations made a strong recovery in the period
with profits now flowing through well from the substantial
investments made in yarn spinning at Castlemaine. The carpet
manufacturing operation at Dandenong has also made good
progress with the market for better quality woollen carpets
improving.
Dividend
In the light of this excellent performance, the Board is
pleased to continue with its progressive dividend policy in
recommending a final dividend of 4.5 p per share, an increase
of 29%. Subject to approval at the Annual General Meeting on
19 July 1999, this dividend will be paid on 26 July 1999 to
shareholders on the register at 2 July 1999.
Property
It has always been one of the strategic aims of the Group to
consolidate our carpet manufacturing operations in the UK on
to one location in Kidderminster at our Worcester Road site.
On 25 May 1999 we gave a letter of intent to Wrekin
Construction for a construction contract which will enable the
necessary construction work to commence. The Board has
already approved expenditure of around #1.9 million for the
necessary production facilities and a new Head Office at
Worcester Road to enable this relocation to take place. We
are confident that this is a sound capital investment based
upon the manufacturing efficiencies which will come from
single site operation.
You will recall that we announced in December 1998 that we had
signed a conditional contract for the sale of the Green Street
property to Morbaine Limited for #3 million. We are still
waiting to hear that certain planning conditions have been
satisfied and when those conditions are met, we shall convene
an Extraordinary General Meeting to obtain the necessary
shareholder approval to enable the transaction to be
finalised. We will at that stage also inform shareholders of
our intentions relating to the utilisation of the proceeds of
sale.
The Group's portfolio of freehold properties includes further
sites which are surplus to our long-term requirements and
opportunities for additional disposals remain under active
review.
Prospects
Whilst currently difficult trading conditions in the UK still
prevail, I am confident that the considerable investments we
have made in both plant, equipment and new product ranges are
all bearing fruit and that there is still good scope for
organic growth and further improvements in profitability.
In Australia, the market which has shown recent signs of
recovery, is anticipated to continue to improve during 1999 as
the Millennium approaches. Profits from the investments we
made earlier in the year at our yarn spinning division in
Castlemaine should also continue to flow through as we bring
more yarn supply in-house.
The Group is well placed to make further significant progress
in the current year.
Victoria P.L.C.
1999 Preliminary Results
OPERATING REVIEW BY THE GROUP MANAGING DIRECTOR, ALAN BULLOCK
United Kingdom
The improvement in the UK has been significant with the
previously made investments in state of the art equipment,
point of sale display materials and new product ranges all now
bearing fruit. We have made very good progress in the year
despite the very testing market conditions which we estimate
may have seen the market down by around 10% compared to the
previous year.
Against this back-drop, the UK operation showed a 22.7%
improvement in profitability for the year, rising from #0.81
million in 1998 to #1.00 million in the year being reported.
In carpet manufacturing the new products introduced over the
past 18 months as part of our strategy to target the
Independent Retailers have all continued to sell well. Our
"Duchess" range is now recognised to be the leading 80% wool,
20% nylon velvet in the market and the "Firm Twist" collection
can claim a similar accolade in the 50% wool, 50%
polypropylene twist pile sector.
Further new products launched in the past 6 months, "Natural
Look" and "Chateau Royale" are already proving popular and in
the early part of the current year, the new ranges of "Tudor
Twist" and "Sovereign" have been launched to capitalise
further on our growing success. We will continue to invest in
point of sale presentation materials to enable us to "brand"
our products whenever possible.
Our progressive and consistent strategy of understanding our
customers' requirements, continuously improving our
performance and delivering value for money products of
differentiation have all contributed to our growing sales to
the Independent Retailers, which now account for over 47% of
UK sales.
Our sales to some of the larger groups have, however, declined
in the year, which is perhaps reflective of the well published
problems this sector has been experiencing in difficult market
conditions.
Export sales have also declined in the year from #5.28 million
to #4.40 million (down 16.7%). This is due to a combination of
the strength of Sterling, poor market conditions and increased
competition from other UK manufacturers seeking to make up
lost ground from poor sales in the UK in overseas markets. We
have, however, grown our business in certain key European
markets and have plans for new products targeted at the export
sector, which will, hopefully restore our fortunes. The
continued strength of Sterling does, however, remain a
concern.
On the carpet production side of our business, we continue to
strive to drive costs down in our manufacturing operations and
we look forward to completing the consolidation of our
production facilities and finished goods storage on to one
site in Kidderminster later in 1999.
We are also, as part of this consolidation, extending our
Worcester Road factory with 42,600 sq ft of additional factory
and warehouse space, a new 8,000 sq ft hank dyehouse and 8,500
sq ft office and administration accommodation. It is
anticipated that this will bring both greater management
control and significant cost savings.
Westwood Yarns, our spinning division based at Holmfirth, has
once more performed and contributed well throughout what was a
very difficult year for them. Sales of yarn to other carpet
manufacturers did fall away during the year as their
businesses suffered with the down-turn in the market.
Fortunately, Victoria Carpets was able to increase the
proportion of yarn it takes from Westwood and, whilst there
was some under utilisation of capacity, a strong performance
was yet again delivered.
Investments are planned here too enabling us to keep Westwoods
as one of the UK's foremost dry woollen spinners.
Australia
The Australian operation continued its sales and profit
growth, achieving its best result for some years.
The market in Australia and overseas, for quality wool
carpets, showed growth during the year, and there is good
reason to expect this trend to continue. The investment made
during the second half of the year, in our state-of-the-art
spinning mill at Castlemaine, Victoria assisted in the
improvement in productivity and profitability at our carpet
operations.
The management team in Australia has been strengthened by the
appointment during the year of a professional Marketing
Manager, and a new Manufacturing Manager at our Dandenong
carpet plant.
The outlook for business in Australia is most positive.
Market demand is strong, although there remains a tendency for
several significant producers to 'buy' market share at prices
approximating cost of production. The Australian government is
also actively supporting the industry with new proposals for
assistance with strategic investment. We are well positioned
to continue to improve on the good results now being achieved
in Australia.
Canada
Colin Campbell & Sons Ltd, our associated company in Canada
had an excellent result with its contribution to our Group
profit up from #34,000 to #40,000 (18%) in the year.
Campbells continues to be a valuable asset to the Group in the
distribution of our products to the high end designer and
contract carpet markets in Western Canada.
Victoria P.L.C.
1999 Preliminary Results
REVIEW BY THE GROUP FINANCE DIRECTOR, MARK LEE
Operating results
Group sales were #34.80 million. Australian sales increased by
7.8% whilst UK sales were 6.9% lower than the previous year,
as a result of the factors outlined in the Operating Review.
In the UK the emphasis has remained on developing better value
products and building sales with independent retailers. In
Australia, we have concentrated on increasing the proportion
of yarn produced in-house and this, together with progress in
margin on carpet manufacturing, has led to the considerable
increase in profitability there.
As a result of these factors, despite the depressed level of
activity on the UK high street during the year, we have been
able to raise operating profits by 31.4% from #1,454,000 to
#1,910,000.
One of our key measures is return on sales, and this year's
Group result shows a further increase in this measure with
operating profit margin up from 4.06% to 5.49% and pre-tax
profit margin up from 2.81% to 4.32%.
Interest and interest cover
The interest charge for the year was #0.45 million. The
reduction from the previous year's charge of #0.48 million was
due to a combination of lower borrowings, a lower interest
rate environment and improved treasury management. After the
increase in profitability, interest cover was 4.28 times,
compared to 3.01 times in the previous year.
Taxation
The tax charge for the year of #0.49 million represented an
effective rate of 32.8%. As forecast, the increase in
profitability has lifted the rate from the previous year's
level of 26.9%. This is due to a reduced benefit from the
smaller companies rate and the increasing proportion of
profits earned in Australia where the corporate tax rate is
36%.
Earnings per share
Earnings per share increased by 37.5% due to the strong
increase in profitability, held back slightly by the higher
tax charge.
Dividend
The directors are recommending a final dividend of 4.5p per
share. This represents an increase of 28.6% over last year's
total of 3.5p and maintains dividend cover at 3.27 times.
Cash flow
Adding back depreciation of #1.04 million to operating profits
gave a gross cash flow of #2.95 million (1998 #2.57 million).
Reductions in working capital, particularly from close control
of stock levels, added #1.71 million to give operating cash
flow of #4.56 million (1998 #0.69 million).
Capital expenditure was #1.06 million, of which #0.59 million
was on replacement of existing assets, and #0.47 million
represented investment in additional equipment which will add
to profitability in future periods.
After tax, interest and dividend payments, net cash flow of
#2.70 million was applied to the reduction of net borrowings.
Shareholders' funds
The balance sheet remains strong with net assets of
#17.07 million, or 249p per share (1998 #16.50 million and
240p per share).
Borrowings and gearing
The strong cash flow during the year reduced net borrowings
from #6.19 million at the start of the year to #3.49 million
at the year end. Net gearing reduced from 38% to 20%.
Year 2000 and Euro
The most significant result of the Group's Year 2000 review
was the need to modify or upgrade the computer systems of
Victoria Carpets in the UK. The decision was taken to remain
with the same supplier, but to completely update the whole
system at a capital cost of approximately #180,000. The
upgraded system will be Millennium compatible and Euro-ready.
This upgrade is well underway and is due to be completed in
August 1999. All other modifications identified as being
required for Millennium compliance have been carried out.
Victoria P.L.C.
1999 Preliminary Results
GROUP PROFIT & LOSS ACCOUNT
53 weeks 52 weeks
ended ended
3 28
April March
1999 1998
#000 #000
Turnover 34,800 35,728
Cost of sales 25,033 26,452
Gross profit 9,767 9,276
Distribution costs 5,850 6,372
Administrative expenses 2,279 1,694
Other operating income 272 244
Operating profit 1,910 1,454
Interest payable and similar 446 483
charges
Share of profits of associated 40 34
undertaking
Profit on ordinary activities 1,504 1,005
before taxation
Taxation 493 270
Profit after taxation 1,011 735
Dividends paid and proposed 309 240
Retained profit 702 495
Earnings per share - basic 14.73p 10.71p
Earnings per share - diluted 14.63p 10.67p
STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES
1999 1998
#000 #000
Profit after taxation 1,011 735
Currency translation differences on foreign (124) (1,134)
currency net investments
Revaluation reserve increase - 1,713
Total gains relating to the year 887 1,314
Total gains recognised since last annual 887 1,314
report
There is no material difference between the results as
disclosed in the profit and loss account and the results on an
unmodified historical cost basis.
Victoria P.L.C.
1999 Preliminary Results
BALANCE SHEETS
Group
3 28
April March
1999 1998
#000 #000
Fixed assets
Tangible assets 12,379 12,472
Investments 215 196
12,594 12,668
Current assets
Stock 9,135 10,357
Debtors 5,714 6,032
Cash at bank and in hand 169 29
15,018 16,418
Less: Current liabilities
Creditors - amounts falling 8,457 10,092
due within one year
Net current assets 6,561 6,326
Total assets less current 19,155 18,994
liabilities
Less: Creditors - amounts
falling due 1,391 1,901
after more than
one year
Provisions for
liabilities and charges 691 598
- deferred taxation
Net assets 17,073 16,495
Capital and reserves
(equity)
Share capital 1,715 1,715
Share premium 749 749
Revaluation reserve 3,005 3,014
Profit and loss account 11,604 11,017
Total shareholders' funds 17,073 16,495
Victoria P.L.C.
1999 Preliminary Results
GROUP CASH FLOW STATEMENT
53 weeks 52 weeks
ended ended
3 April 1999 28 March1998
#000 #000 #000 #000
Net cash inflow from 4,558 686
operating activities
Returns on investment and
servicing of finance
Interest paid (336) (363)
Interest element of finance
lease and hire purchase (110) (120)
payments
(446) (483)
Taxation
UK Corporation Tax paid (219) (110)
Capital expenditure and
financial investment
Payments to acquire tangible (1,055) (1,356)
fixed assets
Receipts from sales of 79 49
tangible fixed assets
Redemption of shares in 12 13
associated undertaking
(964) (1,294)
2,929 (1,201)
Equity dividends paid (240) (169)
2,689 (1,370)
Financing
Debt due within one year
Repayment of secured (168) (407)
loan
(Decrease)/increase in long (93) 150
term loans
Capital element of finance
lease and hire purchase (547) (525)
payments
Receipts from financing of 80 707
assets
(728) (75)
Increase / (decrease) in 1,961 (1,445)
cash
Victoria P.L.C.
1999 Preliminary Results
NOTES TO THE ACCOUNTS
1 Analysis of Group turnover and profit
The turnover, contribution to profit and net assets are
geographically spread as follows:
1999 1998
Profit Profit
on on
ordinary Net ordinary Net
Turnover activi- assets Turnover activi- assets
ties ties
#000 #000 #000 #000 #000 #000
United Kingdom 23,482 996 10,196 25,225 812 9,766
Australia 11,318 468 6,662 10,503 159 6,533
Canada
- 40 215 - 34 196
34,800 1,504 17,073 35,728 1,005 16,495
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
The calculation of earnings per share is based on the
following earnings and number of shares:
1999 1998
Earnings (#'000)
- basic 1,011 735
- net interest on option 5 6
proceeds
- diluted 1,016 741
Number of shares (thousands)
- in issue throughout the 6,861 6,861
year
- issuable under options 83 83
- diluted 6,944 6,944
3 The Report & Accounts will be posted to shareholders on 11
June 1999 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 19 July 1999 at
the Company's Registered Office at 2.30pm.
END
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