SANDERSON DESIGN GROUP PLC

Earnings Release • Oct 1, 2014

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RNS Number : 0838T

Walker Greenbank PLC

01 October 2014

A meeting for analysts will be held at 10am today, 1 October 2014, at the offices of Buchanan, 107 Cheapside, London EC2V 6DN. For further details, contact Buchanan on 020 7466 5000

For immediate release	1 October 2014

WALKER GREENBANK PLC

("Walker Greenbank" or "the Company")

Interim Results for the 6 months ended 31 July 2014

Walker Greenbank PLC (AIM: WGB), the luxury interior furnishings group whose brands include Sanderson, Morris & Co., Harlequin, Zoffany, Scion and Anthology, is pleased to announce its interim results for the six month period ended 31 July 2014.

Highlights

·      Sales up 5.4% at  £41.1 million (H1 2013: £39.1 million),  led by strong growth of 10% in UK Brand sales and encouraging overseas sales growth of 7.4% in constant currency

·      Unadjusted profit before tax up 12.7% at £2.30 million (H1 2013: £2.04 million)

·      Adjusted profit before tax* up 7.1% at £3.28 million (H1 2013: £3.06 million)

·      Record performance from Manufacturing with sales up 8.4% at £17.2 million including digital fabric printing sales up 39.7% at £2.4 million

·      Licensing income up 2.4% in constant currency at £0.98 million

·      Adjusted earnings per share* up 24.7% at 5.15p (H1 2013: 4.13p).

·      Interim dividend up 25.0% to 0.35p per share (H1 2013: 0.28p per share)

* Adjusted for accounting charges relating to share-based incentives and defined benefit charge

Terry Stannard, the Chairman of Walker Greenbank, said: "Total Brand sales in the first eight weeks of the second half are up an encouraging 5.4% in reportable currency (7.0% in constant currency) compared with the same period last year. This is a robust performance ahead of our key autumn selling period and reflects strong trading in the UK, where Brand sales are up 8.6%, and in overseas markets, where Brand sales are on an improving trend up 4.7% in constant currency. Manufacturing also continues to perform strongly. We remain confident of meeting market expectations for the full year and beyond."

For further information:

Walker Greenbank PLC	+44 (0) 844 543 4668
John Sach, Chief Executive
Mike Gant, Chief Financial Officer
Investec Bank plc	+44 (0) 20 7597 5970
Garry Levin / David Anderson - Nominated Adviser Henry Reast - Corporate Broking
Buchanan	+44 (0) 20 7466 5000
Mark Court / Fiona Henson / Sophie Cowles

Notes for editors:

About Walker Greenbank

Walker Greenbank PLC is a luxury interior furnishings company that designs, manufactures and markets wallpapers and fabrics together with a wide range of ancillary interior products. The Company's brand portfolio - comprising Sanderson, Morris & Co, Harlequin, Zoffany, Scion and Anthology - spans heritage and contemporary design and its products are sold in more than 75 countries worldwide. The Company derives significant licensing income from the use of its designs in lifestyle products such as bed linen, rugs and tableware.

The Company employs more than 600 people and has showrooms in London, New York, Paris, Amsterdam and Dubai along with partnership showrooms in Moscow and in Shenzhen, China. Its UK manufacturing base, which includes a wallpaper factory in Loughborough and a fabric printing factory in Lancaster, manufactures product both for the Company and for other wallpaper and fabric brands. Continued investment in manufacturing has allowed the Company to offer a wide range of printing techniques.

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/

CHAIRMAN'S STATEMENT

Overview

I am pleased to report another successful trading period for Walker Greenbank as we continue to deliver against our growth strategy. Total Brand sales for the first half increased by 5.3% in reportable currency (7.4% in constant currency) compared with the same period last year. We are particularly encouraged by our performance in the UK, our largest market, where Brand sales have grown by 10.0% compared with the same period last year reflecting strong retail sales and a resurgence in the contracts market.

Our overseas Brand sales, whilst down 1.2% in reportable currency owing to the strength of Sterling, are also encouraging, up 3.6% in constant currency in the first half.  

Western Europe, our second biggest market, has performed strongly with Brand sales up 12.2% in constant currency helped by strong double-digit growth in Spain, Portugal, Benelux and Southern Ireland.

Sales in the US, our third largest market, were up 3.0% in constant currency. The major extension of our flagship New York showroom was completed in August and, whilst the disruption impacted sales in the second quarter, we are confident that the investment in this showroom will enable us to materially grow our presence in this key market.

Sales in the Middle East, where we have benefited from the opening of a new showroom in Dubai in the second half of last year, were up 31.9% in constant currency and sales in Australasia were up 16.6% in constant currency. The Far East has been impacted by Sterling, by an exceptional prior year comparator and by the consumption tax increase in Japan, leading to a year on year sales decrease of 15.7%. However, we are pleased with our progress in China, where sales are up 10.8%.

Licensing income in the first six months is down 3.7% in reportable currency but up 2.4% in constant currency, reflecting the weakness of the Yen and a strong comparator last year following the 150th anniversary of Morris & Co. We remain confident about the future potential for this important income stream.

We are proud to be a British manufacturer and continue to invest in our manufacturing capability which represents a key asset that differentiates us from others in our industry. Our significant investments last year in our hybrid rotary/gravure machine and extending our digital printing capability at both factories have helped deliver another strong performance from our manufacturing sites with total sales growing 8.4% over the first six months.

We made significant progress with our growth strategy during the half year, particularly in market penetration through the launch of the Anthology brand. The Anthology collections, of innovative contemporary wallpapers, mark the first time that Walker Greenbank has designed product specifically for overseas markets.

We also progressed our digital strategy by launching updated and industry-leading websites for each of our brands and also by launching a completely new website, Style Library, which showcases all of the Group's products on one highly functional website.

The websites are scalable for future business growth and are integrated into the Group's central IT system, thereby allowing B2B e-commerce. The Group is in the trial stage of introducing e-commerce in the US, where the physical distance and multiple time zones potentially make B2B e-commerce attractive.

Financials

Total sales in the half year increased 5.4% to £41.1 million, from £39.1 million. Operating profits before an accounting charge relating to the Long Term Incentive Plan (LTIP) have risen 6.9% from £3.15 million to £3.37 million. The profit from operations grew 9.1% to £2.79 million (2013: £2.56 million).

The interest charge has increased slightly from £90,000 to £92,000. The defined benefit pension charge has fallen from £430,000 to £400,000 driven by a reduction in the service cost as the prior year included costs associated with the triennial valuation.

Profit before tax, and before the LTIP accounting charge and defined benefit charge, increased 7.1% to £3.28 million (2013: £3.06 million). Profit before tax after the two non-cash charges increased 12.7% to £2.30 million (2013: £2.04 million).

The effective tax rate has reduced to 13.3% (2013: 22.7%) due to the recognition of deferred tax on LTIPs. The Group estimates that the brought forward UK corporation tax losses within the main UK entity, Abaris Holdings, will be fully utilised in the year to January 2015 and the Group will become liable to pay UK corporation tax thereafter. However, the cash flow impact of these payments will not be until the 2016 financial year.

Profit after tax was £2.0 million (2013: £1.58 million) and adjusted earnings per share were up 24.7% at 5.15p (2013: 4.13p), after removing the LTIP accounting charge and defined benefit charge.

The Group maintains a strong balance sheet with indebtedness at the half year of £2.26 million, a slight increase of £0.10 million over the last 12 month period despite the significant level of capital investment undertaken by the Group (31 January 2014: net funds £1.49 million).

Dividend

The Board has declared an interim dividend of 0.35p per share which represents an increase of 25.0% on the prior year reflecting the Board's confidence in the current financial position and future financial performance of the Group. The interim dividend will be payable on 7 November 2014 to shareholders on the register as at 17 October 2014.

People

On behalf of the Board I would like to thank all our management and employees for their continuing contribution to another successful half year performance.

Outlook

Total Brand sales in the first eight weeks of the second half are up an encouraging 5.4% in reportable currency (7.0% in constant currency) compared with the same period last year. This is a robust performance ahead of our key autumn selling period and reflects strong trading in the UK, where Brand sales are up 8.6%, and in overseas markets, where Brand sales are on an improving trend up 4.7% in constant currency. Manufacturing also continues to perform strongly. We remain confident of meeting market expectations for the full year and beyond.

Terry Stannard

Non-Executive Chairman

1 October 2014

CHIEF EXECUTIVE'S STRATEGIC REVIEW

Overview

We have reported another strong set of results for the first six months of the year and I am encouraged by the progress we have made in implementing our strategy, comprising:

·      Market penetration - to continue to develop our brands in the UK and internationally through the development of new product categories and extension of  market positions;

·      International expansion - to focus on the distribution and marketing of our brands in the important US, European, and Asia Pacific markets where we see significant potential to grow our existing market share and to invest in the exciting growth opportunities in other international markets;

·      Lifestyle product extension - to profit from the global recognition of the Group's heritage brands, Sanderson and Morris & Co, and the contemporary design excellence of the Harlequin and Scion brands, by broadening the product range and exploiting the considerable licensing opportunities;

·      To continue to promote our British manufacturing capability through investment in innovative printing techniques and market leading facilities that provide quality, added value products to our customers worldwide; and

·      Acquisitions - to actively evaluate acquisition opportunities that fit synergistically with our current brand portfolio with the objective of further advancing our earnings growth.

The Brands

This segment incorporates global trading from our internationally recognised brands including our overseas subsidiaries in the US and France.

Our total Brand sales for the first half have increased by 5.3% in reportable currency to £30.8 million (7.4% in constant currency) compared with the same period last year as they continue to benefit from our sustained investment in design, marketing and new product launches.

It is very encouraging to report that Brand sales in the UK, our largest market, have grown by 10.0% to £18.7 million in the first six months driven by our growth strategy and the steady improvement in the UK economy, and consumer confidence, together with a resurgence in the contracts market.

Although the Eurozone appears to be recovering  more slowly, and despite the impact of currency, Western Europe, our second biggest market, has performed strongly with brand sales up 6.9%, 12.2% in constant currency, to £3.6 million, driven by Southern Ireland, Benelux, and Spain. Other highlights include sales in Australasia, up 16.6% to £0.5 million, and growth of 31.9% to £0.6 million in the Middle East, where we opened a new showroom in Dubai in the second half of last year.

Sales in the US, our third largest market, have been adversely impacted by the strength of Sterling and are down 6.9% in reportable currency, but up 3.0% in constant currency, at £3.4 million in the first half. The extension and complete redesign of our New York Showroom was completed in August. An official opening event sponsored by Hearst Media Group on 14 October 2014 will celebrate this exciting new space with leading designers, suppliers and commercial partners in attendance. Whilst the work has taken longer to complete than originally envisaged, and it has adversely affected sales in this important area of the market in the second quarter, we are nevertheless delighted with the new look and feel of the showroom and are confident that this will enable us to drive sales in this key market.

Growing our global licensing income continues to be an important part of our strategy although in the first half our growth has been adversely affected by the impact of foreign currency exchange movements and the temporary effect of a change to one of our licensee arrangements in the Far East. Set against an exceptionally strong comparator period following the 150th anniversary of Morris & Co. income decreased 3.7% in reportable currency to £0.98m. However this was an increase of 2.4% on a constant currency basis.

Harlequin incorporating Scion & Anthology

Harlequin has grown its worldwide sales 7.3% to £13.9 million compared with the same period last year. It continues to be the UK's leading mid-market brand achieving growth of 6.7% in a recovering UK consumer market. Export sales have grown 16.5% in the first half despite the impact of currency.  Southern Ireland was the largest market in Europe for the Harlequin group in the first half, with sales almost doubling versus the prior year following a change in distribution. 

The Scion brand, which was launched in the early part of 2013 continues to grow well. Its recently launched and most substantial third collection, Spirit and Soul, which included three woven ranges for the first time, was hailed by customers as its strongest yet. This praise is being supported by its initial sales figures. The Anthology brand was launched in April 2014 with two luxury collections of wallcoverings and sales have already exceeded expectations. The product was predominantly produced on Anstey's new hybrid rotary/gravure machine and was aimed for the first time specifically at overseas markets.

The opening of a dedicated office and new showroom in Dubai is already paying dividends, with Harlequin showing growth of 40.1% growth in the first half, and the Brands overall, 31.9%. Harlequin also moved to a substantially larger showroom in Chelsea Harbour.

Arthur Sanderson & Sons incorporating the Morris & Co brand

Sales at Sanderson grew by 5.3% to £11.0 million compared with the same period last year. Recent collections (notably Aegean and Voyage of Discovery) have driven UK growth of 18.1%. Export markets were down 12.1% in reportable currency affected by the Far East which, in the first half of 2013 had exceptional growth of over 50% due in part to major stock orders and a one-off special production, neither of which repeated this year. This, coupled with a consumption tax increase in Japan in April has resulted in sales in this region declining by 32.7%. In addition, sales to Eastern Europe have declined by 10.7% due to the political and economic uncertainty in the region.

Zoffany

Encouragingly, Zoffany, which is positioned at the upper end of the premium market has delivered sales growth of 4.2% to £5.6 million compared with the same period last year, with strong performances from recent collections reflecting the focus on design strategy and direction to position the Zoffany brand for sustained growth. Sales to export markets have grown by 5.8% in reportable currency, due to strong performances in the Middle East and Australasia, driven again by recent collections.

Warehouse

The transfer of wallpaper storage and distribution to a new additional warehouse was successfully completed in May, and has had an immediate impact on further enhancing our service levels.  The additional cost in the first half was £0.29 million, of which £70k related specifically to one-off moving costs.

Manufacturing

Continued significant investment in our wallpaper and fabric printing factories has helped deliver another strong performance with sales and profitability both increasing on record levels last year. Total sales grew 8.4% to £17.2 million leading to an increase in profits of 6.1% to £1.6 million.

Anstey

Anstey, our wallpaper manufacturer, has seen sales in the first half grow by 14.6% to £9.1 million compared with the same period last year. Third party sales in the UK were up 10.3% and third party export sales were up 33.4% whilst sales to our own group brands grew by 15.5%.

Last year's additional investment in digital printing and the £1.75 million investment in a hybrid rotary/gravure printing machine have both gone well and contributed to this strong growth, with new and innovative collections being successfully developed with our customers. Anstey is continuing its investment in digital print with a fourth machine, a state of the art high speed digital printer and correlated digital sampling machine installed since the half year. This will provide much needed capacity to keep up with expected demand, and will also maintain our leading position in this developing market. Investment has also been made in dedicated finishing equipment for digital product to create a market leading fully finished service.

Standfast

Overall sales at Standfast & Barracks, our fabric printing factory, were 2.1% higher to £8.1 million than the same period last year. Third party sales are down 0.2% with sales to our own brands increasing 5.0% year on year. An additional high speed digital print machine was commissioned in December 2013 and another machine is planned for late 2014. Digital sales have increased by 39.7% year on year and now represent nearly 30% of total revenue. This continued investment in technology and innovation, together with our extensive historic archives, has helped create the platform to investigate other market opportunities such as upper end apparel.

Summary

We have continued to grow our brands both in the UK and internationally on a constant currency basis during the first six months through our sustained investment in design, marketing and new product launches. The strong pound has had an impact on our international growth rates, however it is encouraging to see strong growth in our domestic market, the resurgence of demand in the contracts market, growth in our upper end premium brand, Zoffany, and the continued growth of Scion.

In addition to delivering strong growth, we have successfully launched Anthology, transformed our online presence with the launch of our new websites, opened our new additional warehouse, and completed the extension and redesign of our flagship showroom in New York. We have also continued to invest in our British manufacturing sites to further enhance the innovative, added value, techniques that we are able to offer our customers.

We will continue to focus on delivering against our strategy and the Board remains confident of our future growth prospects.

John Sach

Group Chief Executive

1 October 2014

Unaudited Consolidated Income Statement

For the six months ended 31 July 2014

			Note	6 months to 31 July 2014 £000	6 months to 31 July 2013 £000	Audited Year to 31 January 2014 £000
# Revenue			2	41,148	39,055	78,434
##### Profit from operations				2,793	2,561	6,543
Net defined benefit pension charge Finance costs			4	(400) (92)	(430) (90)	(868) (180)
Net finance costs				(492)	(520)	(1,048)
Profit before taxation				2,301	2,041	5,495
Tax expense			5	(306)	(463)	(451)
# Profit for the period				1,995	1,578	5,044
Earnings per share  - Basic			6	3.38p	2.71p	8.63p
Earnings per share  - Diluted (July 2013 Restated)			6	3.27p	2.56p	8.14p
Adjusted earnings per share  - Basic			6	5.15p	4.13p	11.30p
Adjusted earnings per share  - Diluted             (July 2013 Restated)			6	4.99p	3.90p	10.66p

Unaudited Consolidated Statement of Comprehensive Income

For the six months ended 31 July 2014

		### 6 months to 31 July 2014	### 6 months to 31 July 2013	Audited Year to 31 January 2014
		£000	£000	£000
# Profit for the period		### 1,995	1,578	5,044
# Other comprehensive (expense)/income:
# Items that will not be reclassified to profit or loss:
# Actuarial loss on scheme assets Actuarial loss on scheme liabilities		- ### -	- -	(1,580) (195)
# Reduction of deferred tax asset relating to pension scheme liability - (note 5)		### (76)	(265)	(53)
# Total items that will not be reclassified to profit or loss		### (76)	(265)	(1,828)
# Items that will be reclassified subsequently to profit or loss:
# Currency translation (losses)/gains		### (54)	(64)	99
# Cash flow hedges (losses)/gains		### (19)	(116)	90
# Total items that will be reclassified subsequently to profit or loss		### (73)	(180)	189
# Other comprehensive expense for the period, net of tax		### (149)	(445)	(1,639)
# Total comprehensive income for the period attributable to the owners of the parent		### 1,846	1,133	3,405

Unaudited Consolidated Balance Sheet

As at 31 July 2014

	Note	As at 31 July 2014 £000	As at 31 July 2013 £000	Audited As at 31 January 2014 £000
# Non-current assets
Intangible assets		7,216	7,028	7,289
Property, plant & equipment		12,203	10,847	11,690
Deferred income tax assets		1,544	1,291	2,163
		20,963	19,166	21,142
# Current assets
Inventories		19,080	17,497	18,428
Trade and other receivables		15,370	14,469	13,884
Derivative financial asset		134	27	153
Cash and cash equivalents		2,635	2,415	2,830
		37,219	34,408	35,295
Total assets		58,182	53,574	56,437
Current liabilities
Trade and other payables		(17,629)	(16,518)	(19,035)
Derivative financial liability		-	(60)	-
Borrowings	7	(400)	(400)	(400)
		(18,029)	(16,978)	(19,435)
# Net current assets		19,190	17,430	15,860
# Non-current liabilities
Borrowings	7	(4,498)	(4,208)	(942)
Retirement benefit obligation	9	(8,832)	(7,760)	(9,208)
		(13,330)	(11,968)	(10,150)
# Total liabilities		(31,359)	(28,946)	(29,585)
# Net assets		26,823	24,628	26,852
# Equity
Share capital		598	590	590
Share premium account		457	457	457
Foreign currency translation reserve		(143)	(252)	(89)
Accumulated losses		(14,730)	(16,621)	(14,766)
Other reserves		40,641	40,454	40,660
# Total equity attributable to owners of the parent		26,823	24,628	26,852

Unaudited Consolidated Cash Flow Statement

For the six months ended 31 July 2014

	Note	6 months to 31 July 2014 £000	6 months to 31 July 2013 £000	Audited Year to 31 January 2014 £000
# Cash flows from operating activities
# Cash (outflow)/inflow generated from operations	8	(1,624)	(742)	6,165
# Interest paid		(80)	(42)	(152)
# Debt issue costs		-	(75)	(50)
# Income tax paid		(5)	(4)	(18)
Net cash (used)/generated from operating activities		(1,709)	(863)	5,945
# Cash flows from investing activities
Purchase of intangible fixed assets		(182)	(562)	(1,049)
Purchase of property, plant & equipment		(1,487)	(1,966)	(3,704)
Proceeds from disposal of property, plant & equipment		-	15	18
Net cash used in investing activities		(1,669)	(2,513)	(4,735)
# Cash flows from financing activities
Purchase of treasury shares		(348)	-	-
Net drawdown/(repayment) of borrowings	7	3,531	2,871	(400)
Dividends paid to Company's shareholders		-	-	(900)
Net cash generated/(used) in financing activities		3,183	2,871	(1,300)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(195)	(505)	(90)
# Cash, cash equivalents and bank overdrafts at beginning of period		2,830	2,920	2,920
# Cash, cash equivalents and bank overdrafts at the end of the period		2,635	2,415	2,830

Unaudited Consolidated Statement of Changes in Equity

				Other reserves
	Share capital £000	Share premium account £000	Retained earnings £000	Capital reserve £000	Merger reserve £000	Hedge reserve £000	Translation reserve £000	Total £000
Balance at 1 February 2014	590	457	(14,766)	43,457	(2,950)	153	(89)	26,852
Profit for the period	-	-	1,995	-	-	-	-	1,995
Other comprehensive income/(expense):
Currency translation differences	-	-	-	-	-	-	(54)	(54)
Deferred tax relating to pension scheme liability - (refer note 5)	-	-	(76)	-	-	-	-	(76)
Cash flow hedging reserve	-	-	-	-	-	(19)	-	(19)
Total comprehensive income/(expense)	-	-	1,919	-	-	(19)	(54)	1,846
Transactions with owners, recognised directly in equity:
Long term incentive plan charge	-	-	293	-	-	-	-	293
Long term incentive plan vesting	-	-	(1,584)	-	-	-	-	(1,584)
Purchase of treasury shares	-	-	(348)	-	-	-	-	(348)
Deferred tax arising on long-term incentive plan	-	-	(244)	-	-	-	-	(244)
Allotment of share capital	8	-	-	-	-	-	-	8
Balance at 31 July 2014	598	457	(14,730)	43,457	(2,950)	134	(143)	26,823

				Other reserves
	Share capital £000	Share premium account £000	Retained earnings £000	Capital reserve £000	Merger reserve £000	Hedge reserve £000	Translation reserve £000	Total £000
Balance at 1 February 2013	590	457	(17,247)	43,457	(2,950)	63	(188)	24,182
Profit for the period	-	-	1,578	-	-	-	-	1,578
Other comprehensive income/(expense):
Currency translation differences	-	-	-	-	-	-	(64)	(64)
Deferred tax relating to pension scheme liability- (refer note 5)	-	-	(265)	-	-	-	-	(265)
Cash flow hedging reserve - released to Income Statement	-	-	-	-	-	28	-	28
Cash flow hedging reserve	-	-	-	-	-	(144)	-	(144)
Total comprehensive income/(expense)	-	-	1,313	-	-	(116)	(64)	1,133
Transactions with owners, recognised directly in equity:
Long term incentive plan charge	-	-	249	-	-	-	-	249
Long term incentive plan vesting	-	-	(936)	-	-	-	-	(936)
Purchase of treasury shares	-	-	-	-	-	-	-	-
Balance at 31 July 2013	590	457	(16,621)	43,457	(2,950)	(53)	(252)	24,628

Unaudited Consolidated Statement of Changes in Equity (Continued)

Other reserves

	Share capital £000	Share premium account £000	Retained earnings £000	Capital reserve £000	Merger reserve £000	Hedge reserve £000	Translation reserve £000	Total £000
Balance at 1 February 2013	590	457	(17,247)	43,457	(2,950)	(63)	(188)	24,182
Profit for the year	-	-	5,044	-	-	-	-	5,044
Other comprehensive income:
Actuarial loss on scheme assets	-	-	(1,580)	-	-	-	-	(1,580)
Actuarial losses on scheme liabilities	-	-	(195)	-	-	-	-	(195)
Deferred tax relating to pension scheme liability	-	-	(53)	-	-	-	-	(53)
Currency translation differences	-	-	-	-	-	-	99	99
Cash flow hedging reserve - released to Income Statement	-	-	-	-	-	67	-	67
Cash flow hedging reserve	-	-	-	-	-	23	-	23
Total comprehensive income	-	-	3,216	-	-	90	99	3,405
Transactions with owners, recognised directly in equity:
Dividends	-	-	(900)	-	-	-	-	(900)
Long term incentive plan charge	-	-	467	-	-	-	-	467
Long term incentive plan vesting	-	-	(936)	-	-	-	-	(936)
Deferred tax arising on long-term incentive plan	-	-	634	-	-	-	-	634
Balance at 31 January 2014	590	457	(14,766)	43,457	(2,950)	153	(89)	26,852

Unaudited Notes to the Accounts

# 1.	# Basis of preparation of interim 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 2015. The Group's accounting policies are based on International Financial Reporting Standards ("IFRS") adopted for use by the European Union ("EU") and interpretive guidance from the International Financial Reporting Interpretations Committee ("IFRIC"). These standards and interpretations are subject to ongoing review and endorsement by the EU or possible amendment by further interpretive guidance from IFRIC and are therefore still subject to change. The Group has chosen not to adopt IAS 34 'Interim Financial Reporting' in preparing these interim financial statements for the period to 31 July 2014 as it is not mandatory for AIM listed companies. The Group's accounting policies for the year ended 31 January 2015 will be set out in the annual report for that year. Since the Group's previous annual financial report for the year ended 31 January 2014 a number of authoritative pronouncements issued by the International Accounting Standards Board and IFRIC along with new or revised accounting standards are now effective for financial years ending 31 January 2015; none of these have any material impact on either the current or prior period financial statements. Additional authoritative pronouncements have been issued and will become effective in later years; these have not been adopted early by the Group. Further details of authoritative pronouncements effective for financial years ending 31 January 2015 and additional authoritative pronouncements that have been issued and will become effective in later years will be set out in the financial statements of the Group for the year ending 31 January 2015. The interim financial statements do not represent statutory accounts for the purposes of S434 of the Companies Act 2006. The financial information for the year ended 31 January 2014 is based on the statutory accounts for the financial year ended 31 January 2014, on which the auditors issued an unqualified opinion and did not contain a statement under section 498 of the Companies Act 2006, and have been delivered to the Registrar of Companies. The interim financial statements for the 6 month period ended 31 July 2014 have not been audited, but have been reviewed by the auditors. The auditors' review report is included following the interim financial statements. After making enquiries, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, the going concern basis has been adopted in preparing the interim statements. The Board approved the interim financial information on 1 October 2014.

2. Segmental analysis

Walker Greenbank PLC is a designer, manufacturer and distributor of luxury interior furnishings, fabrics and wallpaper. The Board of Walker Greenbank PLC predominantly manages the operations of the Group. The reportable segments of the group are as follows:

·      Brands - comprises the design, marketing, sales, distribution, and licensing activities of Sanderson, Morris & co, Harlequin, Zoffany, Anthology and Scion brands operating from the UK and its foreign subsidiaries in the US and France.

·      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 IFRS8. Additional revenue-only data is also reported to the CODM and is disclosed on the basis explained below. 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'.

**

Unaudited Notes to the Accounts (continued)**

2a. Principal measures of profit and loss - Income Statement segmental information

6 months to 31 July 2014			Brands £000	Manufacturing £000	Eliminations and unallocated £000	Total £000
UK Revenue			18,732	7,932	-	26,664
International Revenue			12,035	1,473	-	13,508
Licence Revenue			976	-	-	976
Revenue - External			31,743	9,405	-	41,148
Revenue - Internal			-	7,826	(7,826)	-
Total Revenue			31,743	17,231	(7,826)	41,148
Profit/(loss) from operations			3,075	1,567	(1,849)	2,793
Finance costs			-	-	(92)	(92)
Net defined benefit pension charge			-	-	(400)	(400)
Profit/(loss) before taxation			3,075	1,567	(2,341)	2,301
Tax charge			-	-	(306)	(306)
Profit/(loss) for the period			3,075	1,567	(2,647)	1,995

6 months to 31 July 2013			Brands £000	Manufacturing £000	Eliminations and unallocated £000	Total £000
UK Revenue			17,030	7,411	-	24,441
International Revenue			12,187	1,414	-	13,601
Licence Revenue			1,013	-	-	1,013
Revenue - External			30,230	8,825	-	39,055
Revenue - Internal			-	7,077	(7,077)	-
Total Revenue			30,230	15,902	(7,077)	39,055
Profit/(loss) from operations			2,827	1,477	(1,743)	2,561
Finance costs			-	-	(90)	(90)
Net defined benefit pension charge			-	-	(430)	(430)
Profit/(loss) before taxation			2,827	1,477	(2,263)	2,041
Tax charge			-	-	(463)	(463)
Profit/(loss) for the period			2,827	1,477	(2,726)	1,578

12 months to 31 January 2014			Brands £000	Manufacturing £000	Eliminations and unallocated £000	Total £000
UK Revenue			34,874	14,619	-	49,493
International Revenue			23,797	3,011	-	26,808
Licence Revenue			2,133	-	-	2,133
Revenue - External			60,804	17,630	-	78,434
Revenue - Internal			-	14,525	(14,525)	-
Total Revenue			60,804	32,155	(14,525)	78,434
Profit/(loss) from operations			6,590	3,062	(3,109)	6,543
Finance costs			-	-	(180)	(180)
Net defined benefit pension charge			-	-	(868)	(868)
Profit/(loss) before taxation			6,590	3,062	(4,157)	5,495
Tax charge			-	-	(451)	(451)
Profit/(loss) for the year			6,590	3,062	(4,608)	5,044

Unaudited Notes to the Accounts (continued)

2b.	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 in the Brands.

		6 months to 31 July 2014	6 months to 31 July 2013	Audited Year to 31 January 2014
# Brands revenue by export market		£000	£000	£000
# Western Europe		3,619	3,387	6,713
# Scandinavia		827	921	1,805
# Eastern Europe		1,210	1,209	2,209
# Europe Total		5,656	5,517	10,727
# Middle East		575	436	858
# Far East		1,423	1,689	3,354
# USA		3,359	3,609	6,993
# South America and Canada		284	314	342
# Australasia		562	482	948
# Other		176	140	575
		12,035	12,187	23,797

Revenue of the Brands reportable segments - revenue from operations in all territories where the sale is sourced from the United Kingdom and overseas subsidiary operations, excluding internal sales to overseas subsidiaries, together with contract and license revenue:

		6 months to 31 July 2014	6 months to 31 July 2013	Audited Year to 31 January 2014
# Brand revenue analysis		£000	£000	£000
# Harlequin incorporating Scion & Anthology		13,887	12,946	26,101
# Sanderson incorporating Morris & Co		11,039	10,487	20,984
# Zoffany		5,567	5,342	10,742
# Other brands		274	442	844
# Licensing		976	1,013	2,133
		31,743	30,230	60,804

Revenue of the Manufacturing reportable segments - including revenues from internal sales to the Group's Brands:

		6 months to 31 July 2014	6 months to 31 July 2013	Audited Year to 31 January 2014
# Manufacturing revenue analysis		£000	£000	£000
# Standfast		8,136	7,968	15,358
# Anstey		9,095	7,934	16,797
		17,231	15,902	32,155

# 3	# Analysis of operating profit by function of expense
				6 months to 31 July 2014	6 months to 31 July 2013	Audited Year to 31 January 2014
				£000	£000	£000
Revenue				41,148	39,055	78,434
Cost of sales				(15,987)	(15,177)	(30,347)
Gross profit				25,161	23,878	48,087
Net operating expenses				(21,793)	(20,728)	(40,574)
Long term incentive plan charge for period				(575)	(589)	(970)
Operating profit				2,793	2,561	6,543

The charge to the long term incentive plan of £575,000 (2013: £589,000) although not considered an exceptional cost has been separately identified within this note to aid comparison and analysis.

Unaudited Notes to the Accounts (continued)

# 4	# Net defined benefit pension charge
		6 months to 31 July 2014	6 months to 31 July 2013	Audited Year to 31 January 2014
		£000	£000	£000
	# Expected return on plan assets	1,092	1,102	2,212
	# Interest on obligation	(1,279)	(1,268)	(2,545)
	# Scheme expenses	(213)	(264)	(535)
	# Net defined benefit pension costs	(400)	(430)	(868)

# 5	# Taxation				Audited
			6 months to 31 July 2014	6 months to 31 July 2013	Year to 31 January 2014
			£000	£000	£000
	# UK Corporation tax at 20% (2013: 21%)	# - current year	-	-	-
	# Overseas taxation	# - current year	(5)	(5)	(21)
		# - prior year	-	-	-
	# Deferred tax	# - current year	(301)	(448)	(415)
		# - prior year - change in rates in future years	- -	- (10)	1 (16)
	# Tax charge on profit on ordinary activities		(306)	(463)	(451)

Other than overseas taxation, there was no current tax arising in the year to 31 January 2014, as taxable profits arising in the year were offset against available losses from prior years. Because of the previous recognition of deferred tax assets relating to losses of prior years, the Group's taxable profits earned in the six months to 31 July 2014, and in future periods, will result in deferred tax charges being recognised as losses are utilised and as temporary differences originate and reverse. The tax at the half year has been based on a forecast full year effective tax rate.

A deferred tax charge of £301,000(2013: £448,000) arose in the period to 31 July 2014 on the profits for the period.

A deferred tax charge of £76,000 (2013: £100,000) has been recognised for movements in the deferred tax relating to the pension liability. A deferred tax charge of £Nil (2013: £165,000) arose due to the reduction in future corporation tax rates. The movements in deferred tax relating to the pension liability have been recognised in the Statement of Comprehensive Income in accordance with the Group's accounting policy.

Unaudited Notes to the Accounts (continued)

6

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 year, 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. As a result of the improved profitability of the Group, PBT performance criteria within LTIPs 5, 6, 7 and 8 are now being met and as a result these LTIP awards are now dilutive. The diluted EPS for the six months ended 31 July 2013 has been restated to reflect the fact that the awards in respect of the outstanding share options are dilutive.  

		6 months to 31 July 2014				6 months to 31 July 2013 (Restated)				Year to January 2014
	Earnings £000	Weighted average number of shares (000s)	Per Share Amount Pence		Earnings £000	Weighted average number   of shares (000s)	Per Share Amount Pence		Earnings £000		Weighted average number of shares (000s)		Per Share Amount Pence
Basic earnings per share	1,995	59,092	3.38		1,578	58,161	2.71		5,044		58,466		8.63
Effect of dilutive securities
Shares under LTIP		1,919				3,406					3,476
Diluted earnings per share	1,995	61,011	3.27		1,578	61,567	2.56		5,044		61,942		8.14
Adjusted basic and diluted earnings per share:
Add back LTIP accounting charge	575				589				970
Add back Net defined benefit pension accounting charge	400				430				868
Add/(less) Deferred tax arising on LTIP	72				(197)				(276)
Adjusted basic earnings per share	3,042	59,092	5.15		2,400	58,161	4.13		6,606		58,466		11.30
Adjusted diluted earnings per share	3,042	61,011	4.99		2,400	61,567	3.90		6,606		61,942		10.66

On 22 May 2014, 1,849,663 shares vested under the Company's Long Term Incentive Plan of which 997,008 shares were issued from the Walker Greenbank PLC Employee Benefit Trust. Following these transactions Walker Greenbank's issued ordinary share capital with voting rights consists of 59,762,559 (2013: 59,006,162) ordinary shares of which no (2013: nil) ordinary shares are held in treasury and a further 188,272 (2013: 240,611) ordinary shares are held by the Walker Greenbank PLC EBT with a cost of £347,362 (2013: £49,427). Shares held in treasury or by the EBT are treated as cancelled when calculating EPS.

On 20 May 2013, 1,003,305 shares vested under the Company's Long-Term Incentive Plan and these were issued from the Walker Greenbank PLC Employee Benefit Trust.  

The market value of shares held by the EBT at 31 July 2014 was £395,371 (2013: £327,231). The total number of shares held in the EBT at 31 July 2014 represented 0.3% (2013: 0.4%) of the issued shares.   

Unaudited Notes to the Accounts (continued)

# 7	# Analysis of net debt
		1 February 2014 £000	Cash flow £000	Working capital facilities  (see note below) £000		Current portion of term loan facilities £000		Other non-cash changes £000		Exchange movement £000		31 July 2014 £000
	Cash at bank and in hand	2,830	(195)	-		-		-		-		2,635
	Borrowings due within 1 year	(400)	400	-		(400)		-		-		(400)
	Borrowings due after 1 year	(942)	(3,931)	-		400		(25)		-		(4,498)
		(1,342)	(3,531)	-		-		(25)		-		(4,898)
	Net debt	1,488	(3,726)	-		-		(25)		-		(2,263)

In January 2013, the Group agreed terms to renew the Receivables facilities from Barclays Bank PLC for a three-year period and to cancel the existing Inventory facility and replace it with a new £2.5million Committed facility for a three-year period. The total facilities from Barclays Bank PLC comprises: a variable rate Term loan secured on the Group's freehold property which is being repaid on a 10 year profile, a Committed facility whose availability is determined by the level of finished goods held by the Brands and a Receivables Financing Agreement which provides three year variable rate floating loans secured on eligible trade receivables at any point in time (the working capital facilities). The working capital facilities may be drawn down in either sterling or euro.

8	Cash generated from operations
			6 months to 31 July 2014 £000	6 months to 31 July 2013 £000	Audited  Year to 31 January 2014 £000
	Profit before tax		2,301	2,041	5,495
	Defined benefit pension charge		400	430	868
	Net borrowing costs		92	90	180
	Depreciation		958	921	1,774
	Amortisation		252	217	443
	Loss on disposal of fixed assets		-	-	15
	Charge for long-term incentive plan recognised in equity		293	249	467
	Long-term incentive plan vesting		(1,577)	(936)	(936)
	Unrealised foreign exchange (gains)/losses included in operating profit		(23)	(73)	114
	Defined benefit pension cash contributions		(776)	(908)	(1,673)
			1,920	2,031	6,747
	Changes in working capital
	Increase in inventories		(652)	(672)	(1,603)
	Increase in trade and other receivables		(1,486)	(1,686)	(1,074)
	Increase/(decrease) in trade and other payables		(1,406)	(415)	2,095
	Cash (outflow)/inflow generated from operations		(1,624)	(742)	6,165

Unaudited Notes to the Accounts (continued)

# 9	# Retirement benefit obligations The Group operates 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 2012. An updated funding valuation for IAS 19 financial reporting purposes was completed for the previous annual financial statements to 31 January 2014. The assumptions applied for valuation of the defined benefit schemes are fully disclosed in the annual financial statements for the year ended 31 January 2014 and continue to be applied in the half year to 31 July 2014. 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 2015, and are based on previous actuarial estimates. The net retirement benefit obligation recognised at 31 July 2014 is based on the actuarial valuation under IAS 19 at 31 January 2014 updated for movements in net defined benefit pension charge and contributions paid during the half year period which include additional payments to the Pension scheme to reduce the deficit along with the regular contributions to fund scheme expenses. The deferred tax effect of movements in the net retirement benefit obligation has also been recognised in the half year. A full valuation for IAS 19 financial reporting purposes will be completed for the next annual financial statements for the year ending 31 January 2015, at which time any actuarial gains and losses arising throughout the year will be recognised.
# 10	# Dividends The directors paid on 8 August 2014, a final dividend of 1.57p per share (2013: 1.25p), a total of £935,000 (2013: £735,000) for the financial year ended 31 January 2014. The directors have declared an interim dividend of 0.35p per share, a total of £209,000 (2013: £165,000) for the financial year ending 31 January 2015, which will be payable on 7 November 2014 to shareholders on the register on 17 October 2014.

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