REG - Victoria PLC - Preliminary Results <Origin Href="QuoteRef">VCP.L</Origin> - Part 3
25/07/2017 07:06
- Part 3: For the preceding part double click ID:nRSY9499Lb
- 202 - 108
Deferred and contingent consideration fair value adjustments - 3,805 - 4,226
Mark to market adjustment on foreign exchange forward contracts - (15) - 136
Mark to market adjustment on interest rate swap contracts - 4 - 36
Retranslation of foreign currency loans - (398) - -
Tax effect on adjusted items where applicable - (937) - (961)
Deferred tax charge in respect of non-qualifying sampling assets - 682 - -
Earnings for the purpose of basic and adjusted earnings per share from continuing operations 12,592 22,971 5,949 13,915
Loss attributable to ordinary equity holders of the parent entity from discontinued operations - - (2,132) -
Earnings for the purpose of basic and adjusted earnings per share 12,592 22,971 3,817 13,915
Weighted average number of shares
2017 2016
Number Number
of shares of shares
(000's) (000's)
Weighted average number of shares for the purpose of basic and adjusted earnings per share 90,968 82,445
Effect of dilutive potential ordinary shares:
BGF share options 3,080 2,800
Weighted average number of ordinary shares for the purposes of diluted earnings per share 94,048 85,245
The number of shares in issue increased by a factor of five on 12 September 2016 following approval of a five-for-one share split at the AGM on 9 September 2016. The weighted average number of shares in issue over the period has been determined on this new basis and the prior year has been restated accordingly.
The potential dilutive effect of the share options has been calculated in accordance with IAS 33 using the average share price in the period.
The Group's earnings per share are as follows:
2017 2016
Pence Pence
Earnings per share from continuing operations
Basic adjusted 25.25 16.88
Diluted adjusted 24.43 16.32
Basic 13.84 7.22
Diluted1 13.60 7.11
Loss per share from discontinued operations
Basic - (2.59)
Diluted1 - (2.50)
Earnings per share
Basic adjusted earnings per share from total operations 25.25 16.88
Diluted adjusted earnings per share from total operations 24.43 16.32
Basic earnings per share from total operations 13.84 4.63
Diluted1 earnings per share from total operations 13.60 4.60
1 Earnings for the purpose of diluted (basic) earnings per share have been adjusted to add back the Business Growth Fund ('BGF') redemption premium charge as this cost is only incurred if the BGF share options are not exercised.
5. Rates of exchange
The results of overseas subsidiaries have been translated into Sterling at the average exchange rates prevailing during the periods. The balance sheets are translated at the exchange rates prevailing at the period ends:
2017 2016
Average Year end Average Year end
Australia - A$ 1.7435 1.6448 2.0327 1.8526
Europe - E 1.1785 1.1777 - -
6. Retirement benefit obligations
Defined contribution schemes
The Group operates a number of defined contribution pension schemes. The companies and the employees contribute towards
the schemes.
Contributions are charged to the Income Statement as incurred and amounted to £3,265,000 (2016: £2,542,000), of which
£2,111,000 (2016: £1,742,000) relates to the UK schemes. The total contributions outstanding at year end was £nil (2016:
£nil).
Defined benefit schemes
The Group has two defined benefit schemes, both of which relate to Interfloor Limited.
Interfloor Limited sponsors the Final Salary Scheme ("the Main Scheme") and the Interfloor Limited Executive Scheme ("the
Executive Scheme") which are both defined benefit arrangements. The defined benefit schemes are administered by a separate
fund that is legally separated from the Group. The trustees of the pension fund are required by law to act in the interest
of the fund and of all relevant stakeholders in the scheme. The trustees of the pension fund are responsible for the
investment policy with regard to the assets of the fund.
The last full actuarial valuations of these schemes were carried out by a qualified independent actuary as at 31 July
2015.
The contributions made by the employer over the financial period were £95,000 (2016: £nil) in respect of the Main Scheme
and £126,000 (2016: £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:
2017 2016
£000 £000
Administrative expenses - 166
Net interest expense 116 64
Components of defined benefit costs recognised in profit or loss 116 230
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:
2017 2016
£000 £000
The return on plan assets (excluding amounts included in net interest expense) 2,999 (40)
Actuarial gains and (losses) arising from changes in demographic assumptions - 314
Actuarial losses arising from changes in financial assumptions (11,114) (877)
Actuarial (losses) and gains arising from experience adjustments 269 451
Remeasurement of the net defined benefit liability (7,846) (152)
The largest contributor to net actuarial losses in the year was the change in discount rate applied to the scheme liabilities, which reduced from 3.6% in 2016 to 2.5% in 2017. The discount rate is assessed by reference to expected returns on high quality corporate bonds, which reduced significantly during the period.
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:
2017 2016
£000 £000
Present value of defined benefit obligations (36,470) (25,945)
Fair value of plan assets 25,384 22,600
Net liability arising from defined benefit obligation (11,086) (3,345)
Deferred tax applied to net obligation 2,106 636
The Group expects to make a contribution of £221,000 (2016: £221,000) to the defined benefit schemes during the next financial period
7. Acquisition of subsidiaries
(a) Ezi Floor
On 3 October 2016 the Group acquired the business and assets of Ezi Floor Limited.
Ezi Floor benefits from a modern, well equipped, manufacturing facility near Bradford, Yorkshire, and is an efficient manufacturer and distributor of a range of underlay and underlay accessories for both the residential and contract markets. It sells to wholesalers, retail groups, and independent stores throughout the UK.
The acquisition of Ezi Floor is highly complementary to the Group's existing businesses, with the addition of underlay and hard flooring ranges to the Groups' product portfolio which previously consisted of only broadloom carpet and carpet tiles. The acquisition is expected to be immediately accretive to the underlying earnings per share of the Company.
The Group results for the year ended 1 April 2017 includes contribution from Ezi Floor of £4.4m of revenue and £1.2m of underlying profit before tax (before amortisation of acquired intangibles, acquisition and reorganisation costs). If the acquisition had been completed on the first day of the financial year Group revenue and underlying profit before tax would have been higher by £5.0m and £1.1m respectively.
Consideration
The consideration for the acquisition comprises:
(i) Initial cash consideration of £6.5m;
(ii) Deferred cash consideration of £6.5m, payable in annual instalments over four years; and
(iii) Contingent cash consideration of a maximum of £6.5m, wholly dependent on improved EBITDA over the next four years.
The fair value of the total consideration above is £16,612,000. The fair value of the acquired assets and liabilities was a net assets position of £4,567,000. In addition, separately identified intangible assets with a fair value of £6,050,000 were acquired, with an associated deferred tax liability of £1,099,000. As a result, goodwill of £7,094,000 was recognised on consolidation.
Transaction costs amounting to £155,000 relating to the acquisition have been recognised as an expense and included in the administrative expenses in the Group Income Statement.
7. Acquisition of subsidiaries (cont'd)
(b) Dunlop Flooring
The Group acquired the net assets of Dunlop Flooring through a newly incorporated company in Australia namely Primary Flooring Pty Ltd. The new entity continues to trade under the Dunlop Flooring name.
Dunlop Flooring is the largest manufacturer and distributor of carpet underlay in Australia catering to both the domestic and commercial markets. The two manufacturing plants are located at Sunshine, near Melbourne and Wetherill Park, a suburb of Sydney.
Dunlop Flooring also sources, imports and distributes a range of hard flooring comprising laminates, engineered wood and luxury vinyl plank under the "Heartridge" brand name. Exclusive product ranges are also provided to key customers under the "Castleton" and "Invincible" brand names.
The acquisition of Dunlop Flooring is highly complementary to the Group's existing businesses in Australia with the addition of underlay and hard flooring ranges to the Groups' product portfolio which previously consisted of only broadloom carpet and carpet tiles. The acquisition is expected to be immediately accretive to the underlying earnings per share of the Company.
The Group results for the year ended 1 April 2017 includes contribution from Dunlop Flooring of A$8.7m (£5.0m1) of revenue and A$0.8m (£0.5m1) of underlying profit before tax (before amortisation of acquired intangibles, acquisition and reorganisation costs). If the acquisition had been completed on the first day of the financial year Group revenue and underlying profit before tax would have been higher by A$45.4m (£26.1m1) and A$4.7m (£2.7m1) respectively.
Cash consideration of A$36,398,000 (£22,395,0002) was paid on completion of the acquisition. There is no deferred or contingent consideration.
The fair value of the acquired assets and liabilities was a net assets position of £7,213,000. In addition, separately identified intangible assets with a fair value of £11,507,000 were acquired, with an associated deferred tax liability of £3,453,000. As a result, goodwill of £7,128,000 was recognised on consolidation.
Transaction costs amounting to £418,000 relating to the acquisition have been recognised as an expense and included in the administrative expenses in the Group Income Statement.
1 Applying the average exchange rate over the financial year of 1.74352 Applying the GBP to A$ exchange rate at the date of acquisition of 1.6252
7. Acquisition of subsidiaries (cont'd)
(c) Avalon and GrassInc.
On 13 February 2017 the Group acquired 100% of the equity of Avalon B.V and GrassInc. B.V.
Avalon and GrassInc. primarily supply artificial grass for domestic and landscaping purposes across Europe. This is a very high growth - and high margin - segment of the flooring market.
The acquisitions continue Victoria's strategy of growing its business with earnings-enhancing acquisitions, and then using available synergies to drive further increases in profits. The Board believes that the Acquisitions present an excellent strategic fit with Victoria's existing business and will have strong long term growth prospects as part of the Group.
The Group results for the year ended 1 April 2017 includes contribution from Avalon and GrassInc of E3.0m (£2.6m1) of revenue and E0.7m (£0.6m1) of underlying profit before tax (before amortisation of acquired intangibles, acquisition and reorganisation costs). If the acquisition had been completed on the first day of the financial year Group revenue and underlying profit before tax would have been higher by E16.7m (£14.2m1) and E3.3m (£2.8m1) respectively.
Consideration
The consideration for the acquisition comprises:
(i) Initial cash consideration of E11.2 million (£9.5m2);
(ii) Deferred cash consideration of E5.1 million (£4.3m2) payable in instalments over four years; and
(iii) Contingent cash consideration of up to approximately E8.8 million (£7.5m2) dependent on improved EBITDA and other criteria over the next four years.
The fair value of the total consideration above is £18,988,000. The fair value of the acquired assets and liabilities was a net assets position of £4,692,000. In addition, separately identified intangible assets with a fair value of £9,032,000 were acquired, with an associated deferred tax liability of £2,258,000. As a result, goodwill of £7,522,000 was recognised on consolidation.
Transaction costs amounting to £1,033,000 relating to the acquisitions have been recognised as an expense and included in the administrative expenses in the Group Income Statement.
1 Applying the average exchange rate over the financial year of 1.17852 Applying the GBP to E exchange rate at the date of acquisition of 1.1736
8. Basis of preparation
The results have been extracted from
the audited financial statements of the
Group for the 52 weeks ended 1 April
2017. 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 53 weeks
ended 2 April 2016, 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 53
weeks ended 2 April 2016.
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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