REG - Victoria PLC - Preliminary Results <Origin Href="QuoteRef">VCP.L</Origin> - Part 3
26/07/2016 07:06
- Part 3: For the preceding part double click ID:nRSZ1869Fb
employer over the financial period were £nil, (2015: £nil) in respect of the Main Scheme and
£nil (2015: £nil) in respect of the Executive Scheme.
Contributions to the Executive and Main Schemes are made in accordance with the Schedule of Contributions. Future
contributions are expected to be an annual premium of £95,000 in respect of the Main Scheme and £126,000 contributions
payable to the Executive Scheme. These payments are in line with the certified Schedules of Contributions until they are
reviewed on completion of the triennial valuations of the schemes as at 1 August 2018.
As both schemes are closed to future accrual there will be no current service cost in future years.
Amounts recognised in income in respect of these defined benefit schemes are as follows:
2016
£000
Administrative expenses 166
Net interest expense 64
Components of defined benefit costs recognised in profit or loss 230
The net interest expense has been included within finance costs. The remeasurement of the net defined benefit liability is
included in the statement of comprehensive income.
Amounts recognised in the Consolidated Statement of Comprehensive Income are as follows:
2016
£000
The return on plan assets (excluding amounts included in net interest expense) (40)
Actuarial gains and (losses) arising from changes in demographic assumptions 314
Actuarial losses arising from changes in financial assumptions (877)
Actuarial (losses) and gains arising from experience adjustments 451
Effect of the asset ceiling (excluding amounts included in net interest cost) ----
Remeasurement of the net defined benefit liability (152)
The amount included in the Consolidated Balance Sheet arising from the Group's obligations in respect of its defined
benefit retirement benefit schemes is as follows:
2016
£000
Present value of defined benefit obligations (25,945)
Fair value of plan assets 22,600
Net liability arising from defined benefit obligation (3,345)
Deferred tax applied to net obligation 636
The Group expects to make a contribution of £221,000 (2015: nil) to the defined benefit schemes during the next financial
period.
7 Share capital
2016 2015
£000 £000
Allotted, called up and fully paid
18,193,169 Ordinary shares of 25p each (2015: 14,556,579) 4,548 3,639
The Company has one class of Ordinary shares which carry no right to fixed income.
The Company issued 3,636,590 fully paid ordinary shares of 25p each during the year ended 2 April 2016. Of this total,
2,906,856 shares were placed to fund the acquisition of Interfloor Group Limited in September 2015. A further placing of
711,035 shares was undertaken in October 2015 to satisfy significant institutional demand identified in response to this
acquisition. A further 15,384 shares were issued to a vendor of Globesign Limited in lieu of an element of deferred
earn-out payment; 1,860 shares issued to a manager in lieu of bonus entitlement and 1,455 shares issued in connection with
the retailer incentive scheme.
8 Acquisition of subsidiaries
(a) Quest Flooring
On 7 August 2015, the Group acquired the entire issued share capital of Quest Carpet Manufacturers Pty Limited and Quest
Carpet Manufacturers Unit Trust (together "Quest Carpets"). Quest carpets was acquired is a new holding company established
in Australia, quest Flooring Pty Limited.
The principle activity of Quest Carpets is the design, manufacture and distribution of carpets across Australia and New
Zealand. The business operates from facilities in Dandenong, near Melbourne, Australia and employs a workforce of 89
people.
Quest Carpets is highly complementary to the Group's existing business in Australia. The acquisition is expected to be
immediately accretive to the underlying earnings per share of the Company.
The Group results for the year ended 2 April 2016 included A$42.0m (£20.6m1) of revenue and A$4.1m (£2.0m1) of profit
before tax from Quest Carpets. If the acquisition had been completed on the first day of the financial year, Group
revenues for the period would have been A$23.2m (£11.5m1) higher and Group profit before tax would have been A$3.2m
(£1.6m1) higher.
1. Applying the average GBP to AUD exchange rate over the financial year of 2.0327.
Consideration
(i) Initial cash consideration of A$15.3m (£7.1m2).
(ii) Non-contingent deferred consideration of A$10.5m payable in three equal annual instalments of A$3.5m
commencing in June 2016. This deferred consideration had a present value in Sterling as at the acquisition date of
£4.5m2.
(iii) In addition, there are contingent payments in relation to rental property that was retained by the vendors
and leased back to the business, which has been treated as contingent consideration for the purpose of assessing the total
cost of the acquisition and goodwill created. These payments are made annually over three years commencing in July 2016
and are equal to 50 per cent. of the EBITDA generated by Quest Flooring for that year to 30 June in excess of A$7.0m.
2. Applying the GBP to AUD exchange rate at the time of the acquisition of 2.1388.
The fair value of the total consideration above is £12,018,000. The fair value of the acquired assets and liabilities was
a net assets position of £581,000. In addition, separately identified intangible assets with a fair value of £6,624,000
were acquired, with an associated deferred tax liability of £1,987,000. As a result, goodwill of £6,800,000 was recognised
on consolidation.
Transaction costs of £251,000 relating to the acquisition of Quest Flooring have been recognised as an expense and included
within administrative expenses in the Income Statement.
(b) Interfloor Group Limited
On 11 September 2015, the Group acquired the entire issued share capital of Interfloor Group Limited ("Interfloor Group").
The principle activity of Interfloor Group is the design, manufacture and distribution of carpet underlay and related
accessories. The business operates in the UK from facilities in Haslingden in Lancashire, England, and Dumfries in
Scotland, and employs a workforce of more than 300 people.
The acquisition of Interfloor Group will provide a number of commercial, operational and financial benefits to the Group.
The acquisition is expected to be immediately accretive to the underlying earnings per share of the Company.
The Group results for the year ended 2 April 2016 included £41.1m of revenue and £6.0m of profit before tax from Interfloor
Group. If the acquisition had been completed on the first day of the financial year, Group revenues for the period would
have been £30.8m higher and Group profit before tax would have been £4.7m higher.
Cash consideration of £14,024,000 was paid on completion of the acquisition, with no deferred or contingent consideration
payable. The fair value of the acquired assets and liabilities was a net liabilities position of £34,976,000. In
addition, separately identified intangible assets with a fair value of £29,327,000 were acquired, with an associated
deferred tax liability of £5,572,000. As a result, goodwill of £25,245,000 was recognised on consolidation.
Transaction costs of £721,000 relating to the acquisition of Interfloor Group have been recognised as an expense and
included within administrative expenses in the Income Statement.
(c) A&A Carpets Limited
On 19 June 2015, the Group acquired the entire issued share capital of Stott Holdings Limited and its subsidiary, A & A
Carpets Limited (together "A&A Carpets"), a flooring distribution business. The acquisition further enhances the Group's
marketing and distribution operations in the UK.
Cash consideration of £600,000 was paid, with transaction costs of £24,000 recognised within administrative expenses. The
fair value of the acquired assets and liabilities was a net assets position of £643,000. No separately identifiable
intangible assets were acquired. As a result, negative goodwill of £43,000 was recognised in the year as a non-underlying
income.
9 Discontinued operations
On October 2 2015, the Group disposed of its wholly owned subsidiary, Westwood Yarns Limited. The Group received cash
consideration of £0.43m and recognised a net loss on disposal of £1.85m (non-cash item).
Income statement of discontinued operations
53 weeks 52 weeks
ended ended
2 April 28 March
2016 (1) 2015
£000 £000
Revenue 5,152 10,731
Intercompany revenue (4,609) (9,429)
Net revenue 543 1,302
Operating expenses (774) (1,489)
Depreciation (124) (245)
Operating loss (355) (432)
finance costs (2) ----
Loss before tax (357) (432)
Tax 72 86
Loss on disposal (1,847) ----
Loss for the financial year from discontinued operations (2,132) (346)
(1) Westwood Yarns Limited results in the year ended 2 April 2016 are only included up to the 2 October 2015 - the date of
disposal of the business.
10 Analysis of net debt
At Cash flow Capital expenditure under finance leases/HP Acquisitions Other Exchange movement At
28 March non-cash 2 April
2015 changes 2016
re-stated
£000 £000 £000 £000 £000 £000 £000
Cash 2,392 10,593 ---- ---- 5,951 142 19,078
Bank overdraft (10,894) 16,845 ---- ---- (5,951) ---- ----
Cash and cash equivalents (8,502) 27,438 ---- ---- ---- 142 19,078
Finance leases and hire purchase agreements
- Payable less than one year (825) 650 ---- (83) (326) (12) (596)
- Payable more than one year (388) ---- (451) ---- 326 ---- (513)
Bank loans
- payable less than one year (6,689) 6,689 ---- ---- ---- ---- ----
- payable more than one year (9,712) (3,181) ---- (54,632) ---- (1,755) (69,280)
BGF loan
--payable less than one year ---- ---- ---- ---- ---- ---- ----
--payable more than one year (9,542) ---- ---- ---- (254) ---- (9,796)
Net debt (35,658) 31,596 (451) (54,715) (254) (1,625) (61,107)
Prepaid finance costs 556 1,065 ---- ---- (554) ---- 1,067
Net debt including prepaid finance costs (35,102) 32,661 (451) (54,715) (808) (1,625) (60,040)
The BGF loans relates to the debt component of the BGF loan and option instruments. Further details are provided in Note
11(a).
The bank loans and BGF loan are disclosed in the table excluding prepaid finance costs.
11 Change in accounting policy and prior year adjustment
(a) Business Growth Fund loan and equity warrants
There has been a change this year in the accounting treatment of the Business Growth Fund ('BGF') fully subordinated £10m
2022 unsecured loan note facility and associated equity warrants (the 'BGF loan and option'). The loan note facility was
previously treated as a £10m loan held on the balance sheet within 'other financial liabilities' along with accrued
interest (totalling £164,000 as at the prior year-end) in relation to a £2,133,560 redemption premium payable in 2019.
Linked to the loan note facility, BGF own warrants to acquire 746,000 shares in Victoria PLC at 286p per share, the total
cost to BGF of exercising these warrants being £2,133,560 (payable to the Company). As at 28 March 2015, a balance of
£60,000 was held in a share based payment reserve in relation to these warrants.
These instruments are now accounted for using split accounting which involves first determining the carrying amount of the
debt component. This is done by measuring the net present value of the discounted cash flows of interest and capital
repayments, ignoring the possibility of exercise of the equity warrants. The discount rate is the market rate at the time
of inception for a similar liability that does not have an associated equity instrument. On this basis the debt component,
held within 'other financial liabilities', had a fair value as at 28 March 2015 of £9,470,000, and the equity component,
held within 'other reserves', a fair value of £682,000. As at 2 April 2016, the fair value of the debt component had
increased to £9,796,000 due to the unwinding of the interest rate discount over time, with a £326,000 charge going to
finance costs in the income statement. This charge is split £146,000 within underlying interest charges and £180,000
within non-underlying finance costs, the latter amount being the additional non-cash annual charge associated with the
redemption premium. In addition, there is non-underlying finance income of £72,000 in the year relating to the difference
in the recognised liability as at 28 March 2015 under the two treatments (being the previous £60,000 share based payment
reserve and a difference of £12,000.in interest charge to that date).
Furthermore, in the prior year, prepaid finance costs, including those associated with the BGF loan and option, were
recognised within prepayments. These have now been offset against the relevant financial liability in the balance sheet.
Amortisation of these prepayments was previously included in the income statement within administration costs and are now
included within finance costs.
(b) New accounting policy in relation to sampling assets
A new accounting policy has been adopted this year in relation to expenditure on sampling assets. Sampling assets consist
of a variety of product samples and sample books, as well as point of sale stands designed to hold the samples. The cost
of these assets was previously expensed as incurred. Under the new policy, these assets are capitalised as fixed assets
and depreciated.
The Group places sampling assets with retail customers for the purpose of helping to generate future consumer sales, and
therefore sales for the Group. These assets are held by customers in their stores for a period of time until the
introduction of new colours or a new range by the Group, resulting in their replacement. As such, it has been deemed
appropriate to capitalise these assets on the Group's balance sheet to reflect their existence and expected future economic
benefit, and to depreciate to the income statement to match their cost against the revenue generated.
The Group's consolidated accounts and all subsidiary accounts have been prepared on the basis of this new accounting
policy, with a prior-year adjustment reflected in the comparable figures. This includes a fully retrospective adjustment
to reflect the Group's restated position and performance had this accounting policy been adopted historically. As such,
the restated depreciation charge in the year includes charges in relation to sampling assets acquired in previous financial
years.
Sampling assets have been classed as 'Fixtures, vehicles and equipment' and sit within this category.
The useful economic life of these assets has been prudently estimated to be 24 months, and all sampling assets are
depreciated on a straight-line basis over this time period.
The impact on the Group's consolidated income statement in the prior year is summarised below.
Income statement
52 weeks ended 28 March 2015
Previous Impact of Re-stated
basis change in
accounting
policy
£'000 £'000 £'000
Revenue 127,003 - 127,003
Underlying operating profit 9,392 37 9,429
Non-underlying operating items (270) - (270)
Exceptional operating items (7,952) 895 (7,057)
Operating profit 1,170 932 2,102
Underlying interest charges (1,498) - (1,498)
Non-underlying finance costs (2,192) - (2,192)
Profit / (loss) before tax (2,520) 932 (1,588)
Taxation (1,658) - (1,658)
Profit / (loss) after tax from continuing operations (4,178) 932 (3,246)
Loss from discontinued operations (346) - (346)
Profit / (loss) for the period (4,524) 932 (3,592)
Operating profit on the previous basis includes a £79,000 adjustment in relation to amortisation of prepaid finance costs,
which was previously included within administration costs and has been reallocated to interest charges.
The change in operating profit in the year, as well as in the prior year, result from timing differences between the
acquisition of sampling assets and the aggregate depreciation profile. The reduction in exceptional operating items in the
prior year relates to the fact that the net book value of these assets under the new accounting policy on the Abingdon
Flooring acquired balance sheet is greater than the assessed goodwill arising from the acquisition at the time; with the
resultant difference being treated as an exceptional acquisition related income, as required by IFRS.
The impact on the Group's earnings per share in the prior year is summarised below.
Earnings per share
52 weeks ended 28 March 2015
Previous Impact of Re-stated
basis change in
accounting
policy
From continuing operations:
Basic earnings per share (35.23p) 7.86p (27.37p)
Diluted earnings per share (35.23p) 7.86p (27.37p)
Including discontinued:
Basic earnings per share (38.15p) 7.86p (30.29p)
Diluted earnings per share (38.15p) 7.86p (30.29p)
The impact on the Group's consolidated balance sheet and other key financial information in the prior year is summarised
below.
Balance sheet
As at 28 March 2015 As at 28 March 2014
Previous Impact of Re-stated Previous Impact of Re-stated
basis change in basis change in
accounting accounting
policy policy
£'000 £'000 £'000 £'000 £'000 £'000
Total assets 113,656 2,929 116,585 78,697 2,038 80,735
Total liabilities (93,205) - (93,205) (44,058) - (44,058)
Net assets 20,451 2,929 23,380 34,639 2,038 36,677
Total assets and liabilities on the previous basis as at both 28 March 2015 and 29 March 2014 include adjustments in
relation to the BGF loan and option and prepaid finance costs (see Note 11(a)).
The adjustment in total assets as at 28 March 2015 of £2,929,000 comprises an increase in fixed assets of £5,300,000
relating to the net book value of capitalised sampling assets, less a reduction in goodwill of £2,371,000 in relation to
the acquisitions of Whitestone and Abingdon as a result of recognising sampling assets in their respective acquired balance
sheets. Retained earnings as at 28 march 2015 also increase by £2,929,000.
The adjustment in total assets as at 29 March 2014 of £2,038,000 relates entirely to the net book value of capitalised
sampling assets, with an equivalent increase in retained earnings.
There is no impact from this accounting policy change on the Victoria PLC company only accounts.
12 Basis of preparation
The results have been extracted from the audited financial statements of the Group for the 53 weeks ended 2 April 2016.
The results do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Whilst the
financial information included in this announcement has been computed in accordance with the principles of International
Financial Reporting Standards ("IFRS") as adopted by the EU, IFRIC interpretations and Companies Act 2006 that applies to
companies reporting under IFRS, this announcement does not itself contain sufficient information to comply with IFRS. The
Group will publish full financial statements that comply with IFRS. The audited financial statements incorporate an
unqualified audit report. The Auditor's report on these accounts did not draw attention to any matters by way of emphasis
and did not contain statements under S498(2) or (3) Companies Act 2006.
Statutory accounts for the 52 weeks ended 28 March 2015, which incorporated an unqualified auditor's report, have been
filed with the Registrar of Companies. The Auditor's report on these accounts did not draw attention to any matters by way
of emphasis and did not contain statements under S498(2) or (3) Companies Act 2006. The accounting policies applied are
consistent with those described in the Annual Report & Accounts for the 52 weeks ended 28 March 2015.
The Annual Report & Accounts will be posted to shareholders in due course. Further copies will be available from the
Company's Registered Office: Worcester Road, Kidderminster, Worcestershire, DY10 1JR or via the website:
www.victoriaplc.com.
This information is provided by RNS
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