Annual Report • Apr 2, 2011
Annual Report
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2011
Annual Report and Accounts for the year ended 2 April 2011
Victoria PLC is a successful and well established manufacturer, supplier and distributor of design-led carpets, carpet tiles and other floorcoverings, targeting the mid to high-end markets in which we operate.
Victoria Carpets' Imperial Velvet used in Westminster Abbey for the recent Royal Wedding. ©Copyright Press Association
The Group has grown revenue in its core markets in the UK and Australia. Overall, revenue increased by 12.0%, benefitting from a 12.8% strengthening of the Australian Dollar.
£1.92m up 76.8%
Group Profit Before Tax (£m)
2011 2010 2009
| 2011 | 70.50 | |
|---|---|---|
| 2010 | 62.97 | |
| 2009 | 62.15 | |
Gross margin recovery in Australia and a strong second half in the UK enabled Group profit before tax (PBT) to increase by 76.8% to £1.92m.
The improvement in profitability enabled the Group to achieve earnings per share (EPS) (basic adjusted) growth in-line with our stated objective of delivering long term shareholder value.
1.09
1.46
1.92
The continued focus on working capital management and cost control has allowed the Group to invest in new product ranges, whilst continuing to reduce net debt.
40 Statement of Directors' Responsibilities
43 Consolidated and Company Statements of Comprehensive Income
overnance Our Performance Our Business
74 Five Year Record
16 Finance Review:
31 Directors' Report
£25.04m
Revenue
£4.06m
Average number of employees 8
Average number of employees 16
Victoria has strong brand recognition in the residential carpet market, selling primarily to the Independent Retail trade through all of the nation's major buying groups. Additionally, the company is now building upon its strong position in the residential sector by expanding into the contract carpet market with both Tufted broadloom and modular carpet tiles.
Production facilities Showrooms
2 Showrooms 2 Production Facilities
1 Showroom
3 Production Facilities
Colin Campbell is a trade-only designer showroom catering to the A&D community in Western Canada, with showrooms in Vancouver, Calgary and Edmonton. The company has aligned partners in most major cities in Canada also offering its exclusive floorcovering products to high wealth consumers in both the residential and commercial markets.
Nature's Carpet® is a range of totally "green" carpets. It is made from sustainable resources and is bio-degradable. Made using 100% un-dyed Wools, with no dyes or other chemical additives, it is tufted into a natural jute and cotton backing and finished with natural latex. The carpet is therefore non-allergenic.
"Improving quality is driven by our innovation and market insight. Our quality approach is essential in generating value for shareholders."
"Victoria's aim is to be the leading quality floorcovering brand in Australasia and the United Kingdom"
Victoria PLC, from a Shareholder's perspective, is a well managed and well invested business which has a strong balance sheet with £39.76m of net assets. Whilst we are often considered to be a UK stock, we in fact derive over 64% of our revenues from overseas and are not totally dependent on the UK economy.
In each of the key markets in which Victoria trades, it has an excellent reputation for offering innovative and value for money products of high quality.
We try to meet and surpass our customers' expectations and always look to develop long term relationships with our customers.
Victoria does not have to manufacture all of the products we choose to market. This offers prospective suppliers who make "best of brand" flooring products, the opportunity of working with us to bring great products to our customers through shared values and enduring relationships.
Our aim is to be seen as an employer of choice, where people want to work and deliver their best for the Group.
In Australia, there was a discernable shift in the market towards synthetic products and new ranges were launched.
In the UK, a new generation of synthetic carpets marketed as EASICARETM were launched during the year.
In June 2010, the UK entered the insurance replacement market as a key supplier to the leading insurance replacement specialist.
This year saw the introduction of carpet tile ranges in Australia which have started well.
New broadloom ranges have been introduced to meet the needs of the commercial marketplace.
In the UK, the Group provides warehousing and logistics services for both major retailers and buying groups.
The Group also provides IT solutions for retailers to enable them to check stock on-line or to trade on-line.
with Alan Bullock
Alan bullock
A Victoria has really good brand recognition and great customer relationships. Our drive now is to take a wider assortment of flooring products to market through our existing and expanded channels.
Our aim is to make Victoria the leading quality flooring brand in Australasia and the United Kingdom.
A Firstly, the Australian economy did not suffer the set backs seen in many parts of the world due to the global financial crisis and their economy did not enter recession.
Secondly, we have a great management team in Australia who have invested heavily in new plant and equipment and have created exciting new ranges that have undoubtedly helped us to take market share.
A I feel that trade may remain challenging for as long as two or more years and, as such, we have planned on that basis. Our growth will come from taking market share from the competition by offering well styled and fashionable, value for money products that will tempt the consumer into spending their hard earned cash. We also plan to take an expanded product offer to market through both existing and new channels to market in the future.
A Yes, we introduced during the year a new programme of carpet tiles, giving us entry into the commercial contract market with tiles for the first time. Styled specifically for the Australian market and being competitively priced, they have been well received.
A UK exports during the year were £1.77m, which represents 7.5% of total UK sales. The biggest export region was the EU, with France being the biggest market.
A The Group sells Nature's Carpet® into the UK and North American markets. Nature's Carpet® is a range of ultra low toxicity and bio-degradable floorcoverings. The range meets the high standards demanded by both environmentally conscious individuals and those with high sensitivity to toxins.
A We estimate that the UK market is currently split 60:40 in favour of synthetic carpets. This is why Victoria launched its EASICARETM collection of Polypropylene carpets in October 2010. Victoria will continue to offer both wool and synthetic carpets in the UK.
"Victoria is determined to become the leading quality flooring supplier in both Australia and the UK and we have firm plans now in place to ensure we achieve this goal"
Nikki Beckett
I am pleased to present a positive set of results, which has seen the Group increase its sales and operating profit in a year that has been characterised by continuing challenging market conditions.
Victoria has a clear plan which is being well executed. Currently, we are focused on both our short term trading and delivering against our longer term objectives.
Group revenue increased by 12.0% in the year ended 2 April 2011, from £62.97m to £70.50m and, in constant currency terms, was ahead of the prior year by 3.3%. Revenue in our core markets of Australia and the UK advanced by 2.1% and 9.0% respectively in local currency terms but, as previously reported, trading has continued to decline in the Republic of Ireland, with further action now having been taken to address the situation in the new financial year. Ireland is being closed as a separate trading entity and we will sell into the market via an agency distribution network. This is detailed further in the Group Managing Director's Review.
Group operating profit increased by 35.8% from £1.78m to £2.42m, whilst profit before tax increased by 76.8% from £1.09m to £1.92m.
Group net debt was further reduced in the period under review, down by 13.0% from £7.14m to £6.21m.
The Group remains very well invested in modern plant and equipment throughout its operations and, with modest capital expenditure plans, it is likely to remain cash generative. Gearing remains relatively low at 13.5%.
Basic adjusted earnings per share (defined in note 8) have risen by 103.0%, from 9.04p to 18.35p, and the Board are pleased to declare a final dividend of 6.0p, up by 11.1% from 5.4p last year. This, together with the interim dividend of 3.0p, will bring the total dividend for the year to 9.0p, an increase of 12.5% over the prior year.
The proposed final dividend, which is subject to shareholder approval at the Annual General Meeting to be held on 2 August 2011, will be paid on 11 August 2011 to all members on the register at the close of business on 24 June 2011. The shares will be marked as ex-dividend on 22 June 2011.
We were delighted to welcome Peter Jensen to the Board in September 2010. Peter will be a great asset to the business and is already bringing his extensive marketing experience gained at SmithKlineBeecham PLC to bear at Victoria. We are all looking forward to continuing working with him in the future.
The continued success of the Group is the direct result of a team commitment by its employees at all levels of the business. I take this opportunity to express my thanks on behalf of all stakeholders to everyone in the Group for the dedication and effort they have put into achieving this year's result.
The business has made a good start to its new financial year. Our product offering is fresh and receiving good feedback from the trade. However, we are expecting trading conditions in the year ahead to be tough, with raw material price increases remaining a challenge. Consumers are cautious about the future and their confidence is still at a low level; therefore, discretionary spending is likely to stay under pressure on big ticket items, including carpets.
The quality of revenues in the UK have improved as a consequence of the Group's entry into the insurance replacement market; reducing the dependence we have on consumer sentiment.
Whilst the short term economic environment is likely to remain difficult, we are confident that the Group is very well placed to deliver against its long term objectives.
Victoria is determined to become the leading quality flooring supplier in both Australia and the UK and we have firm plans now in place to ensure we achieve this goal. We look forward to updating stakeholders of our progress.
Nikki Beckett Chairman 14 June 2011
"We remain focused on delivering great products of exceptional value to our customers. Quality underpins everything we do and our reputation for exceptional quality and consistently high levels of service continues to set us apart from our competitors"
Alan Bullock
The Group has traded well in what has been a challenging global environment and in a market which has had to face unprecedented raw material price inflation. Despite this, we have seen growth in both sales and market share in each of our two principal regions of operation, Australia and the United Kingdom.
Market conditions in the Republic of Ireland have been radically affected by the state of the local economy, which has led to the Group making trading losses in Ireland in each of the past two years. Clearly, this was unacceptable and, following a careful review, the Group has moved early in the new financial year to a completely new business model in Ireland. This allows us to retain a strong brand presence whilst stopping the losses going forward.
I am satisfied with the overall trading result of the Group for the year and the good progress that has been made towards the strategic objectives we have set for the future growth of our business.
Our Australian business has delivered a strong performance in the year, rebounding well from the margin erosion seen in the prior year. I am pleased to report on revenues up by 2.1% in local currency terms from A\$69.36m to A\$70.80m. There was also good margin improvement thanks to better spinning mill capacity utilisation and reduced raw material prices, reflecting the strength of the Australian Dollar. Operating profit was up 21.1% from A\$4.79m to A\$5.80m.
The Australian economy has proven far more resilient than most during the global economic downturn, although consumer sentiment has remained fairly low. A positive GDP growth, strong Australian Dollar, reasonably steady interest rates and a tight labour market would suggest that retail sales, including those of consumer durables, should have been at higher levels than those experienced during the past year. There can be little doubt that one of the legacies of the global financial crisis is heightened consumer caution about personal debt levels.
Whilst overall sales and production levels did not change significantly, there was a discernable shift in the sales mix.
Synthetic carpet ranges continue to grow in the Australian and New Zealand markets and our strategic move to
enter the commercial market segment with new broadloom and carpet tiles has proven to be a successful area for growth. The challenge of managing the growing consumer preference for synthetic carpets over wool has been met with a series of marketing initiatives and product innovation in our wool range product offering. These actions, coupled with the launch of commercial ranges, have enabled spinning mill volumes to be maintained. Nevertheless, we have seen a small reduction in the sale of wool carpets in the residential sector.
In the second half of the year, both Australia and New Zealand suffered major natural disasters.
In Australia, the States of Queensland and Victoria suffered severe flooding. The Queensland floods in December 2010 and January 2011 resulted in 75% of the State being declared a disaster zone. More than 70 towns and over 200,000 people were affected and the damage bill is estimated to be at least A\$2 billion. The extent of the devastation and the degree of under-insurance are still being assessed but, in both States, there is likely to be a significant replacement market that may translate into increased demand over the next year or so.
In New Zealand, the tragedy of the Christchurch earthquake in February 2011 has been well documented. It may, however, be quite some time before rebuilding activity commences in the region but this will eventually increase demand for replacement floorcoverings.
In the meantime, the local economies of Queensland and the South Island of New Zealand have suffered major downturns and are likely to remain depressed until significant building activity commences.
During the latter part of the year, significant cost increases were experienced in both wool fibre and synthetic yarns. Wool price increases have been caused by the reduction in sheep being reared in New Zealand and the effects of foot and mouth disease in the UK, which reduced flocks. This reduced supply has been coupled with strong demand for wool from the burgeoning economies in both India and China.
Synthetic yarn price increases are oil related. A strong Australian Dollar has mitigated the impact of the synthetic increases and to date we have managed the challenge of recovering the increased wool cost in a highly competitive market with minimal adverse effect.
Increased imported yarn stocks, additional commercial broadloom ranges and the introduction of carpet tiles combined to lift inventories by A\$2.48m at the year-end. Despite this, strong cash flow generation from operations and modest capital expenditure of A\$1.26m enabled borrowings to be reduced by A\$2.58m in the year to just A\$0.31m. This is a gearing rate of less than 1%.
The outlook for the Australian economy in 2011 fiscal year is for an overall growth in GDP of 3.0% to 3.5% but with significant sectoral differences. Expectations are for mining and agriculture to perform strongly, whilst retail, manufacturing and construction are forecast to remain flat.
Signs of recovery from the flood-induced slowdown in Q1 2011 are starting to emerge and recent economic surveys indicate improving business and consumer confidence. Personal saving rates are at historic highs and consumers remain cautious; however, demand is expected to grow as household incomes are anticipated to rise during the coming year.
On balance, we anticipate modest growth in the Australian residential and commercial markets in the coming financial year.
The New Zealand market is different in that it was softening considerably prior to the Christchurch earthquake and has eased further since. We anticipate little if any improvement in this market during the next year.
With "state of the art" equipment, a strong balance sheet and a highly experienced management team in Australia, we are well placed and ready to take full advantage of any growth opportunities.
| New South Wales | 25.2% |
|---|---|
| Victoria | 29.5% |
| Queensland | 16.5% |
| New Zealand | 11.5% |
| Western Australia | 9.1% |
| Other | 8.2% |
Our Business
United Kingdom Operations
The UK operations have probably had to face one of the most difficult trading periods of the past twenty years and the year under review has certainly been a story of two halves.
The UK economy over the past three years has barely left recession. The economy has remained stubbornly sluggish and, with the housing market still stagnant, consumers have remained unconvinced of any economic recovery. The much heralded public spending cut backs and a higher tax take have yet to fully impact but, nonetheless, have played a part during the year of sapping consumer confidence and reducing discretionary spend on luxury big ticket items such as home furnishings and floorcoverings.
Additionally, we have also had to contend with rapidly rising raw material prices which, due to the fragile state of the market, proved challenging to pass onto customers and consumers in the first half of our financial year. The second half of the year saw improved trading, resulting in the UK operation posting a pre-tax profit for the full year of £0.30m, compared to £0.24m in the prior year.
Revenues in the UK were up in the year by 9.0% from £22.97m to £25.04m despite the harsh winter which severely impacted High Street trading pre-Christmas and in the first quarter of 2011. In the last quarter of the financial year, Victoria witnessed sales growth of 25.4%
in like for like sales; a much stronger finish to the year than had been expected.
This is a creditable performance and can be attributed to the success of new product introductions made in the latter stages of the first half-year, in particular the new generation of synthetic carpets marketed under the EASICARE™ banner and growing traction in the insurance replacement market which we entered into in June 2010.
Victoria has undoubtedly gained market share in the UK during the year; however, UK sales margin has been eroded due to the increases in raw material costs that could not be passed on fully during the year.
The magnitude of raw material price increases to manufacturers has now meant that all suppliers have been forced to pass on the increases to their customers and in turn there has now been greater acceptance of the increases from the retail trade. Victoria's carpet prices were increased in October 2010 and again in April 2011. This has started to see a restoration of margins. Whilst raw material prices have continued to increase, Victoria has forward contracts in place and price escalation clauses built into some of its major contracts, which should help to avoid further margin erosion.
During the year, Victoria has been actively involved in negotiating an agreement to supply a new programme of carpet
ranges for the John Lewis Partnership. This will give us a significant product presence in all of the 30 John Lewis department stores with effect from 1 April 2011. New format carpet departments within these stores and increased promotional activity should assist John Lewis in gaining additional market share in the mid to high-end floorcovering sector, which in turn will benefit our business.
Victoria has also been active during the year in developing a multi-channel e-commerce selling platform, which we hope to be able to offer to our retailers in the near future.
Victoria's sales emphasis has remained clearly focused on its Independent Retailers and our sales mix over the past year has increased in this sector by 19.0% and now accounts for 71.0% of our UK sales. Sales to the Contract sector increased by 20.7% and Export sales by 5.4%.
The excellent Victoria Carpets brand is very well respected in the UK by both its suppliers and customers. The quality of Victoria Carpets' products was recognised with the use of its Imperial Velvet range, which was installed at Westminster Abbey for the recent Royal Wedding.
Our business also has good channels to market in both the Residential and Contract sectors. Recognising this, there are now plans to expand the product portfolio that we market and sell through these channels and we have identified several areas of potential future growth. Strategies are being developed to accelerate entry into a wider flooring product offer and we look forward to detailing our plans later in the year.
Shareholders will be aware that for some considerable time the Group has been looking to obtain planning consent on its redundant 6.25 acre sports field in Kidderminster. A planning decision on this site has been dependent on the sale of another site in Kidderminster whose owner needs the funding from the sale of their site to acquire part of our site. This other party's planning application was refused during 2010 but the decision
Victoria Carpets is proud to have an association of over 30 years with the John Lewis Partnership.
John Lewis is one of Victoria's largest customers and we believe that we are one of their key suppliers of carpet.
As well as supplying carpet to John Lewis, we manage the warehousing and distribution of all John Lewis branded carpet direct to their stores. A service that is also available and utilised by one of the UK's leading Independent Retail buying groups.
We share the same values and policies and have recently increased our presence in their newly reorganised carpet departments.
is now being appealed and we are hopeful of adjudication on this planning application in July 2011.
Looking forward to the new financial year in the UK, we have made a good start to the year but are mindful that the increasing pressure on consumers' disposable incomes and higher commodity prices will make overall trading uncertain and therefore we must be cautious about the outlook.
This aside, we remain focused on delivering great products of outstanding value to our customers. Quality underpins everything we do and our reputation for exceptional quality and consistently high levels of service continues to set us apart from our competitors. Our successful move into the insurance replacement market should underpin trading and our plans to bring innovative new floorcovering products to our customers should allow us to capture greater market share and subsequently deliver increased value to our shareholders.
UK carpet sales by channels of distribution
| Independent retailers | 71.4% |
|---|---|
| Major Groups | 12.6% |
| Wholesalers | 4.5% |
| Contract | 6.9% |
| Export | 4.6% |
The extent of the financial crisis and its effect on the Irish economy are on-going and well reported across all media. Despite our best attempts over the past year to "right-size" our business in Ireland, the deepening crisis we believe has yet to see the market reach the bottom.
The Group's Irish revenue declined by 22.3% in the year, down from €3.68m to €2.86m and recorded a pre-tax loss of €0.79m, compared to a loss of €0.59m in the prior year.
As announced to shareholders in the Group's Interim Management Statement in February 2011 and our Trading update in May 2011, the Group could see little likelihood of any improvement in market conditions in the near future; as such, a decision was taken to close the trading entity we have in Ireland.
By the end of June 2011, the end of the first quarter of the new financial year, the complete stocking and administrative functions in Ireland will have been closed and transferred back to the Group's UK operation. Sales in Ireland will be maintained and developed by Victoria Carpets under a new trading model, whereby we have offered agency agreements to some of the existing Irish sales employees. We will remain active in the Irish market through the continuing use and promotion of the two regionally established and well known brands of Munster and Navan Carpets.
Whilst there will be some material nonrecurring costs associated with this action, the underlying future sales to Ireland are expected to be profitable.
I would also like to take this opportunity of thanking our Irish employees who have worked tirelessly on the Group's behalf during the financial crisis in Ireland.
| Munster | 22.5% |
|---|---|
| Navan | 77.5% |
Colin Campbell, ("Campbell"), the Group's Canadian Associate company, whilst achieving an improved performance in comparison with the prior year, nonetheless, contributed a small operating loss to the Group position in the financial year.
The Western Canadian economy, in which Campbell principally operates, has been inconsistent in its slow recovery. As a resource dependent economy, Canada has benefitted from stronger commodity markets; however, as new home construction continues in the Vancouver area, there has been a greater focus on 'value' products. The Canadian consumer is more debt laden than in the past, thereby restricting their desire to spend.
Campbell's prime business is as a trade-only showroom, supplying high quality floorcoverings to interior designers and architects who are dealing with both high-end residential and leading commercial clients. This part of the business saw a reduction in revenue in the year but an improvement in gross margin.
In addition to the showroom and commercial supply business, Campbell distributes a select range of carpets to retailers in Western Canada. This includes an environmentally friendly
range of carpets called Nature's Carpet®, which is distributed both in Canada and the USA, and are eco friendly, being made only from renewable resources.
The distribution business also saw both a reduction in revenues and an improvement in gross margin.
Campbell's sales decreased by 10.5% from C\$7.19m to C\$6.43m, whilst the improvement in gross margin and reduced overheads enabled a reduction in the operating loss of the business, from C\$0.20m to C\$0.09m.
Colin Campbell is anticipating that the Canadian economy will continue with modest growth in 2011. With solid progress on gross margin and overheads already achieved over the past year, the business is now well positioned to seek growth in overall revenue.
In summary, our overall business is doing well in what continue to be challenging trading conditions. Our plans to expand the Group's retail and commercial product offering and to continue to develop new channels to market provides us with confidence that we can weather any uncertainty in market conditions.
Alan Bullock Group Managing Director 14 June 2011
| Showroom | 57.2% |
|---|---|
| Distribution | 20.7% |
| Commercial | 22.1% |
"The Group has remained focused on profitability, cost control and tight working capital management. The Group has strengthened its financial position whilst continuing to invest in product and programmes aimed at delivering future growth"
Ian Davies
| 2011 | 2010 | |
|---|---|---|
| £m | £m | |
| Revenue | 70.50 | 62.97 |
| Operating profit | 2.42 | 1.78 |
| Finance costs | (0.47) | (0.56) |
| Share of associate | ||
| result | (0.02) | (0.13) |
| Profit before tax | 1.92 | 1.09 |
| Net debt | 6.21 | 7.14 |
As described in detail within the Group Managing Director's Review, economic and market conditions have remained challenging in the current financial period across all the territories in which we operate. The Group has, however, achieved year on year growth in pre-tax profit of 76.8% to £1.92m against this difficult backdrop. The Group was cash generative in the period and reduced net debt by £0.93m to £6.21m.
The Group achieved revenue growth of 12.0% to £70.50m (2010: £62.97m), in part benefitting from the Australian Dollar strengthening against Sterling by 12.8% in the period. In constant currency terms, revenue was ahead of prior year by 3.3%.
| % | |||
|---|---|---|---|
| 2011 | 2010 change | ||
| Average rates | |||
| Australian Dollar 1.6460 | 1.8881 -12.8% | ||
| Euro | 1.1688 | 1.1280 | 3.6% |
| Canadian | |||
| Dollar | 1.5831 | 1.7396 | -9.0% |
Overseas subsidiaries represented 64.5% of Group revenue (2010: 63.5%), with Australia representing 61.0% (2010: 58.3%) and Ireland 3.5% (2010: 5.2%).
The movement in average exchange rates in the period benefitted Group revenue by £5.43m, comprising a gain of £5.52m from the movement in the Australian
Dollar and a loss of £0.09m from a 3.6% weakening in the Euro against Sterling.
The overall gross margin for the Group was 28.2%, a marginal reduction from prior year (2010: 28.4%). The UK experienced a margin reduction of 3.3%, impacted by circa 68.0% increase in wool prices during the period. Ireland margins were 7.6% below prior year, driven by a shift in consumer demand towards lower value, lower margin product. Australia, however, experienced margin improvement of 2.6%, aided by more efficient utilisation of the spinning mills and lower costs on imported raw materials due to the relative strength of the Australian Dollar.
Group operating profit increased by 35.8% to £2.42m (2010: £1.78m). In local currency terms, operating profits increased by 21.1% and 24.5% in Australia and the UK respectively. Ireland reported an operating loss of £0.68m (2010: £0.52m operating loss).
Finance costs reduced by 16.5% to £0.47m (2010: £0.56m), primarily reflecting a 15.7% reduction in average borrowings year on year. The average interest rate on borrowings was in line with the prior year at 5.6%.
Interest was covered 11.4 times by EBITDA (2010: 8.0 times) and 5.1 times by operating profit (2010: 3.2 times).
Group profit before taxation for the year increased by 76.8% to £1.92m (2010: £1.09m). On a constant currency basis, profit before taxation was ahead of prior year by 36.3%.
The total tax charge for the period was £0.72m (2010: £0.46m), comprising a current tax charge of £1.17m (2010: £0.77m) and deferred tax credit of £0.45m (2010: a credit of £0.31m).
The underlying effective corporation tax rate was 37.2% (2010: 42.3%). The effective tax rate is above the UK standard rate of 28%, primarily due to a reported loss in Ireland with tax credits only available at the standard
rate of tax of 12.5% in this jurisdiction. In addition, the deferred tax asset balance of £0.11m in Ireland relating to brought forward losses was written off in the period as a result of the planned restructuring in the next financial period.
A deferred tax credit of £0.12m arose in the period in respect of the UK deferred tax liability as a result of the tax rate reduction from 28% to 26%, which was substantively enacted during the period with effect from 1 April 2011.
Basic adjusted earnings per share were 18.35p, 103.0% above prior year (2010: 9.04p); earnings were adjusted for a goodwill impairment charge of £0.07m in 2011. Basic earnings per share were 17.41p (2010: 9.04p).
The diluted adjusted earnings per share were 16.61p (2010: 7.87p).
An interim dividend of 3.00p was paid in December 2010, and a final dividend of 6.00p is proposed, resulting in a total dividend for the year of 9.00p. This represents a 12.5% increase on the prior year total dividend of 8.00p.
The value of the interim dividend was £0.21m and the value of the proposed final dividend is £0.42m. (Total: £0.63m.) The value of the total dividend paid in respect of the year ended 3 April 2010, was £0.56m.
Earnings and Dividends per share (pence)
The net book value of property, plant and equipment decreased by £0.92m to £26.54m (2010: £27.46m). Currency movements contributed an increase to net book value of £1.07m (2010: £3.39m), which was more than offset by the depreciation charge in the period of £2.87m (2010: £2.72m).
Capital expenditure in the year of £0.95m was 33.1% of the annual depreciation charge. Whilst capital expenditure is anticipated to increase in the new financial period, it is likely to remain below the normal annual depreciation level. The Group remains well invested with "state of the art" equipment.
Disposals during the year amounted to £0.26m (2010: £0.28m).
Fixtures, Vehicles and Equipment £0.8m
The Group's overall net assets value increased in the year by £2.50m to £39.76m (2010: £37.26m). The increase in net assets due to exchange differences arising on overseas operations was £1.73m.
The inventory balance has increased by £2.21m to £22.90m (2010: £20.69m), with currency movements accounting for £0.94m of the increase. On a constant currency basis, inventory has increased by £1.27m, primarily driven by stock building for new product launches taking place before and after the financial period end.
Trade debtors increased by £1.14m to £10.85m (2010: £9.71m) of which currency movements accounted for £0.41m of the increase. Trade debtor days were in line with the prior year at 56 days.
Current trade and other payables increased by £2.03m to £12.44m (2010: £10.41m), with the average credit period at 50 days (2010: 58 days).
| 2011 | 2010 | |
|---|---|---|
| £m | £m | |
| Operating profit | 2.42 | 1.78 |
| Depreciation and | ||
| other non-cash items 3.03 | 2.74 | |
| Foreign exchange | 0.12 | 0.22 |
| Working capital | (1.67) | 2.85 |
| Operating | ||
| cash flow | 3.90 | 7.59 |
| EBITDA* | 5.38 | 4.53 |
| Operating cash | ||
| flow conversion % | ||
| (against EBITDA) | 72.5% | 167.5% |
*earnings before interest, tax, depreciation and amortisation
The Group generated operating cash flows of £3.90m in the period (2010: £7.59m).
Operating cash flow is below prior year primarily due to absorption of working capital, which is driven by the growth in stocks for new range releases noted above. Operating cash flow conversion percentage, as measured against EBITDA, was 72.5% (2010: 167.5%), with the lower level of conversion reflecting an investment in working capital.
Operating Cash Flow (£m)
Operating cash flow less interest, tax and capital expenditure resulted in a cash inflow of £1.62m (2010: £6.28m cash inflow). Tax and capital expenditure outflows were above prior year levels by £0.48m and £0.56m respectively, whilst interest payments were marginally below prior year.
Group net debt reduced by 13.0% to £6.21m (2010: £7.14m). The average net debt during the period decreased by £1.59m to £8.51m (2010: £10.10m).
The ratio of net debt to EBITDA has improved to 1.15 times (2010: 1.58 times).
Net gearing remains low at 13.5% (2010: 16.1%).
The Group manages interest rate exposures in the UK through the use of derivative financial instruments and currently has one interest rate swap covering £2.00m maturing in July 2011.
The Group reviews currency exposures on a regular basis in respect of trading operations involving the export sale of goods or import of raw materials or capital equipment. The Group may manage potential currency exposures through the use of forward currency contracts where currency movements may be considered as volatile and the amounts involved significant. The principal currency exposure of the Group is in respect of the investment in its Australian subsidiary.
The Group's annual renewal of banking facilities was completed in the UK in September 2010 and in Australia in February 2011. The current facilities across the Group provide sufficient capacity in Australian Dollars, Sterling and Euros to cover all anticipated capital expenditure and working capital requirements in the year ahead.
The consolidated financial statements have been prepared on a going concern basis. The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Group Managing Director's Review.
The financial position of the Group is described in this financial review. In addition, note 25 to the financial statements includes details of the Group's financial instruments, hedging activities and its exposure to and management of credit risk, liquidity risk, currency risk and interest rate risk.
Having reviewed the Group's budgets and projections, and taking account of reasonable possible changes in trading performance, the Directors believe they have reasonable grounds for stating that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group will open its usual annual renewal negotiations with its bankers in due course. The Group has already held discussions with all its bankers about its future borrowing needs and no matters have been drawn to its attention to suggest that renewal may not be forthcoming on acceptable terms.
The restructuring of the Irish division noted earlier in the Group Managing Director's Review will occur during the next financial year.
As noted in the Group Managing Director's Review, the Group plans to continue to supply into Ireland as an export market from the UK operations. The Irish division currently accounts for 3.5% of the Group's revenue and the planned restructuring does not materially impact on the Group's ability to operate within its existing facilities or to continue operating on a going concern basis.
The Directors are of the view that the Group is well placed to manage its business risks despite the current challenging economic and market conditions. Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and Accounts.
The financial statements have been produced in accordance with International Financial Reporting Standards (IFRS), as endorsed and adopted for use in the EU. There have been no changes to IFRS this year that have a material impact on the Group's results. There have been no changes in the accounting policies of the Group and its subsidiaries this year.
The Board of Victoria PLC and the Divisional Management boards monitor a range of financial and non-financial performance indicators on a monthly basis so as to measure performance against expected targets.
The KPI's monitored by the Group Board are set out in the table below.
| KPI | Description | Performance |
|---|---|---|
| Financial KPIs | Group | |
| Sales growth (constant currency) | Overall sales growth achieved year on year afer adjusting for the impact from currency movements (Australian Dollar and Euro) in the period. This is used to assess the underlying trading performance of the Group. |
2011: +3.3% 2010: -6.9% 2009: -3.6% |
| Operating margin | Calculated as total operating profit divided by revenue. This is used to assess the underlying trading performance of the Group. |
2011: 3.4% 2010: 2.8% 2009: 3.6% |
| Return on operating assets | Calculated as operating profit (including share of associate company) divided by the operating asssets employed. This is used to assess the profitability achieved from the Group's operating base. |
2011: 5.2% 2010: 3.7% 2009: 5.1% |
| Earnings per share (basic adjusted) |
Calculated as profit for the period divided by the total number of shares in issue, adjusted for any non recurring items in the period. This is used to assess the underlying financial performance of the Group as a whole. |
2011: 18.3p 2010: 9.0p 2009: 15.0p |
| Net debt to EBITDA | Calculated as net debt divided by EBITDA (earnings before interest, tax, depreciation and amortisation). Used to assess the financial position of the Group and its ability to fund future growth. |
2011: 1.2 times 2010: 1.6 times 2009: 2.5 times |
| Interest cover | Represents the number of times EBITDA covers net interest payments. Used to assess the financial position of the Group and its ability to fund future growth. |
2011: 11.4 times 2010: 8.0 times 2009: 6.0 times |
| Non-Financial KPIs | Description | Group |
| Voluntary employee turnover | Number of permanent employee resignations as a percentage of total permanent employees. This is used to montior our objective to be recognised as an employer of choice. |
2011: 4.7% 2010: 5.3% 2009: 5.5% |
| Absenteeism | Calculated as unauthorised leave expressed as a percentage of total available work days. Our aim is to keep this to a minimum to ensure operational effectiveness. |
2011: 4.3% 2010: 3.1% 2009: 3.3% |
| Kwh per square metre of carpet | Represents the energy consumption (in kilowatt hours) for every square metre of carpet manufactured. Measured as part of the Group's objective to improve energy efficiency and reduce carbon emissions. |
2011: 1.50 kWh/m2 2010: 1.53 kWh/m2 2009: 1.61 kWh/m2 |
| Kwh per Kg of yarn spun | Represents the energy consumption (in kilowatt-hours) for every Kilogram of yarn produced. Measured as part of the Group's objective to improve energy efficiency and reduce carbon emissions. |
2011: 5.74 kWh/kg 2010: 5.16 kWh/kg 2009: 5.68 kWh/kg |
There are a number of potential risks and uncertainties which could have a material impact on the Group. The Directors continue to develop processes for identifying, understanding and evaluating the risks faced by the organisation. The Directors recognise that the management of significant risks is necessary in order that the Group achieves its objective of creating long term returns for its shareholders.
At both Group and subsidiary level, risks are categorised across four key areas: Financial, operational, organisational and external. For each key risk, each business reviews the likelihood of its occurrence, its potential effect on the company's performance and identifies management responsibility for the risk, control measures in place and any mitigating actions that are required.
Listed in the table below are examples of key risks being managed by the business and mitigating actions or controls:
| Risk Area | Description | Potential impact | Mitigation |
|---|---|---|---|
| Finance | Interest rates — exposure to market rate. |
Increased borrowing costs. | Hedging policy See 'Hedging' above/page 19. |
| Foreign exchange — exposure to market rates. |
Unexpected impact on material or investment cost. |
Use of forward contracts See 'Hedging' above/page 19. |
|
| Funding — lack of available funds. |
Inability to pursue capital expenditure or provide sufficient working capital. |
Debt capacity See 'future funding' above/page 19. |
|
| Operational | Customer satisfaction — Insufficient quality or on time delivery. |
Failure to retain and grow key customers' accounts. |
Pro-active service and quality management; regular customer meetings; own fleet (UK); third party service provider (Australia). |
| Equipment — breakdown of key plant. |
Inability to produce carpet in accordance with production plan. |
Maintenance programme and reciprocal breakdown agreements. |
|
| Organisational | People — loss of key staff. | Failure to retain and develop key management. |
Service agreements; regular line management reviews; training and development plans. |
| Health & Safety — personal injury to employees. |
Loss of availability of employees. | Designated health & safety officers, health & safety procedures, first aiders on duty. |
|
| External | Regulations — breach of applicable rules. |
Unexpected impact on sales and profit. |
Internal controls, ongoing training, insurance. |
| Customer concentration and relationships. |
Loss of major customer would impact sales and profitability. |
No single entity has more than 25% of any individual region's revenue. |
|
| Increase in material or energy costs. |
Significant impact on costs and profit. |
Monitoring of raw material price; forward pricing agreements; proactive energy efficiency. |
|
| Market — major downturn. | Inability to maintain sales growth. | Geographic spread and mix of business, widen channels to market. |
Rug supplied by Colin Campbell at Olympic Village, Vancouver.
This review has been prepared to provide a fair review of the business of the Group and to describe the principal risks and uncertainties it faces. In doing so, it aims to provide a balanced and comprehensive analysis of the development and performance of the business during the past financial year.
The review contains certain forward looking statements which have been made by the Directors in good faith based on the information available to them up to the time of their approving this report. As such, statements should be treated with caution due to inherent uncertainties, including both economic and business risk factors underlying any such financial information.
In preparing this review, the Directors have sought to comply with the guidance set out in the Accounting Standards Board's Reporting Statement.
This review has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Victoria PLC and its subsidiary undertakings when viewed as a whole.
The past year has been one in which Victoria has seen continued tough market conditions.
The Group has remained focused on profitability, cost control and tight working capital management. The Group is well invested with "state of the art" manufacturing equipment and facilities and has strengthened its financial position whilst continuing to invest in product and programmes aimed at delivering future growth.
Ian Davies Group Finance Director 14 June 2011
Appointed to the Board on 1 October 2007 and subsequently appointed Chairman in January 2010. Nikki founded NSB Retail Systems in 1994 and took NSB public in 1997. Nikki was Group Chief Executive Officer until she left that Board in March 2007. She is also the Senior Independent Director of Kiala SV.
Chairman ▲ n ◆
was appointed Managing Director of Victoria Carpets UK in 1995.
▲ n ◆
Appointed to the Board of Victoria PLC in March 2007. Prior to this, Ian spent ten years in the aerospace sector where he had become Financial and Commercial Director of Umeco plc's International Components Division. He had previously worked in the automotive and electronics sectors. He is a chartered accountant and an engineering graduate.
n
Executive Director
Appointed to the Board in August 2006. Barry joined the Victoria Carpet Company in Australia in 1996 as Financial Director and was subsequently appointed Managing Director of the Australian subsidiary in 2004.
▲ ◆
Senior Independent Non-executive Director
Appointed to the Board on 1 September 2010.
Peter spent 20 years with SmithKline Beecham Plc in a variety of senior management positions including the role of President of Worldwide Supply Operations and Chairman of Consumer Healthcare Europe.
Peter has held a number of Non-executive roles, including: Genetix Group Plc; Celsis International Plc; Domino Printing Sciences Plc and Glenmorangie Plc.
▲ n ◆
Terry Danks Company Secretary, Victoria PLC Finance Director, Victoria Carpets UK
Appointed as Company Secretary to Victoria PLC in 1993. Terry joined Victoria Carpets UK in 1985 as Chief Accountant, responsible for both the accounting and IT functions within the company since that date. Terry was subsequently appointed Finance Director of Victoria Carpets Limited in 1989. He has a breadth of experience and knowledge of the Industry and his high standards of financial control are invaluable to the Group.
Wragge & Co LLP 55 Colmore Row Birmingham B3 2AS
Citigate Dewe Rogerson 1 Wrens Court Lower Queen Street Birmingham B72 1RT
Arden Partners plc Arden House Highfield Road Edgbaston Birmingham B15 3DU
Deloitte LLP Four Brindleyplace Birmingham B1 2HZ
Capita Registrars Ltd The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Barclays Bank PLC P.O. Box 3333 1 Snow Hill Queensway Birmingham B3 2WN
Company Secretary Terry Danks
Worcester Road Kidderminster Worcestershire DY10 1JR
Shaun joined the company in July 2001 as National Sales Manager having held a similar position in Tomkinson Carpets for some years. He has been instrumental in establishing a strong sales infrastructure at Victoria Carpets and has been focused on developing key client relationships and a service culture throughout the company. Shaun was appointed Sales & Marketing Director in January 2004 and is now also involved in the development of the company's innovative and exciting product ranges.
Operations Director — Victoria Carpets UK
Neil is a graduate in textile engineering from Leeds University and has had extensive experience in the carpet industry having previously worked for over 14 years with Brintons Ltd, which he joined as a graduate trainee. His experience covers logistics and supply chain management and he has developed a sound understanding in the management of relationships between costs, customer service, inventory and manufacturing and purchasing efficiencies.
Trevor joined Westwood Yarns in December 2005. He was previously Operations Director with Riverstone Spinning and has been involved in the textile industry all his career to date. Trevor is focused on quality of yarn production and his hands on approach and enthusiasm are a valuable asset to the business. He is also responsible for materials buying at Westwood.
Neil has been involved in the dyeing and textile spinning industry for most of his career and has gained a wealth of experience including the buying of wools. Neil has been a Director with Westwood Yarns since 1991.
Sean Kelly
Managing Director — Munster & Navan Carpets
Sean joined the Group when it acquired Munster Carpets in 2002 and at that time he was appointed as Managing Director. Sean has been involved in the carpet industry most of his career with extensive experience in both the retail and contract sectors. Prior to working for Munster, Sean was employed by Ulster Carpet Mill where he worked as both Residential and Contract Sales Manager for Ireland.
Michael Oakley has been Non-executive Chairman since he retired from the Board in an executive capacity in August 2006. Michael served for 12 years on the Group PLC Board and 27 years in total with our Australian business as both Managing Director and then Executive Chairman. He is still involved with the Carpet Institute of Australia as its President and brings a wide breadth of experience to our Australian Board. His continued stewardship is of great value to the business.
Joined the Board in February 2005. Michael is Group Vice-President of ITW Construction Products with responsibility for the Construction Products Group operations in Australia, New Zealand and Asia. Prior to joining ITW, he was Managing Director of Selleys Chemical Company, having previously held general management and senior marketing positions with Dulux and James Hardie Industries.
Anne has been in charge of sales and marketing for Victoria Carpets Pty, our Australian operation, since she joined us in 1999. Anne has over twenty years of sales and marketing experience in total in Australasia. She has played a major role in formulating the company's sales and marketing strategy that has propelled Victoria Carpets to the number two player in the Australian market over the past few years and is actively involved in the small but highly effective management team running our Australian business.
Chris joined Campbell in May 2009 as Vice President Finance & General Manager, becoming President of the company in 2010. Chris spent the previous three years managing the finance function of a property development company in Vancouver and prior to that, he held supervisory positions with KPMG in the Vancouver and Cayman Islands offices. He is a chartered accountant.
Employee resignations as a % of total employees
March 2011
| Directors | 13 |
|---|---|
| Sales and Marketing | 81 |
| Production | 424 |
| Logistics | 46 |
| Maintenance | 42 |
| Finance, IT and Administration | 45 |
Victoria is committed to good practice and ethical behaviour and we fully recognise our responsibilities to all of our stakeholders. Our social, ethical and environmental policies are regularly reviewed and improved upon where possible and appropriate.
Our aim is to be seen as an employer of choice, where people want to work and deliver their best for the Group. We have a low level of employee turnover, with the average length of service currently more than nine years.
Summaries of key policies are as follows:
Victoria is committed to achieving equality in all our employment policies, procedures and practices. We value our employees highly and respect human rights and dignity. Victoria recognises the advantages of a diverse workforce and we do not tolerate any harassment of, or discrimination against, employees or potential employees, irrespective of their race, creed, colour, sexual orientation, nationality, ethnic origin, religion, disability, age, gender or marital status.
We demand the highest ethical standards from ourselves, our representatives and our business partners.
As part of our intention that Victoria is seen as an employer of choice; within the UK, we have adopted a flexible approach to part time and non-standard hours of work for those employees who are returning to work after maternity leave or who become carers for close family members, wherever possible. In all cases, we ensure that maternity and paternity leave policies are met.
The Group recognises the importance of employee development and acknowledges the indirect impact this investment has on customer facing service and product.
Our aim remains consistently to ensure continued focus of energies on the creation of an organisation which realises the benefits to be gained by internal development of our most precious commodity: Our people.
Victoria continues to provide development training in all vocational disciplines and we continually review our training schedule as the operational environment and customer demand develops.
Westwood Yarns was awarded the "Training Company of the Year" in both 2009 and 2010 by The Huddersfield Textile Centre of Excellence in recognition of it's commitment to training and development of it's employees.
Across our three sites In Australia, employees have undertaken training in a variety of courses including:
Victoria is committed to continual improvement in the welfare of our employees and the prevention of injury and ill health. We further recognise equal responsibility to all other persons who work under the control of the Group who may be affected by its activities or omissions. Occupational Health and Safety (OH&S) ranks equally with all other Group objectives, such as production, quality and the environment, and is integrated into the fabric of our business system.
In the UK, the Group continues to control its activities in line with the principles of BSI 18001:2007. Legislative compliance is not enough and the Group continues to push towards best practice in its quest for excellence, generating a positive OH&S performance. Continual improvement
in OH&S, the provision of resources to facilitate this continuum and making safety everyone's business is at the heart of our intent.
Training and the generation of a 'learning organisation' culture is now gaining gravitas, with evidence of tangible benefit already being seen at the operational level.
The integration of our OH&S management system into the mapped business processes is now being driven forward. The promotion of a business model that includes, at its heart, the requirement for safe practice in all that we do is pivotal to our philosophy. Customer demand and expectation sits at the core of all we do and remains the focus for design of our business processes across the full sales, marketing, distribution and operational spectrum. Occupational Health and Safety ranks equally with all other Group objectives such as production, quality and the environment.
Our relationships with our suppliers, agents and representatives, regulators – even competitors – reflect Victoria's commitment to acting responsibly. These relations must always be built on principled conduct, respect, sound business decisions and our commitment to our customers, investors and employees. Victoria's continued success is tied with that of our business partners and the respect of our competitors.
Naturally, our customers are of paramount importance to us. We aim to retain customers and to establish long and lasting relationships with them, built on mutual respect and trust. The directors meet customers on a regular basis, which provides both parties with an excellent opportunity to build on relationships and to have a frank exchange of views. We focus heavily on customer service and recognise the importance of consistent on time deliveries, reliable product guarantees and our reputation for quality products. Relationships with our customers are strengthened by involving customers
in our business and they are actively encouraged to visit our manufacturing facilities and to take part in various training courses we hold and to contribute to product development ideas.
Each Group company is expected to use a procurement process that is fair and seeks the best value for the cost of purchases. Victoria strives to ensure that how we acquire these goods and services enhances the Group's success and demonstrates respect for our many potential and current suppliers.
Victoria endeavours to forge strong relationships with our suppliers which are built on honesty, fairness and mutual respect. This has proved extremely beneficial in the current challenging environment. We encourage our suppliers to be honest about any issues they face and we work together to make realistic improvements or overcome any hurdles that we might face.
Relationships with competitors present the most sensitive territory in competition law. At Victoria, fair competition means acting honestly and responsibly whilst competing vigorously to serve our customers and deliver returns to our shareholders. We adhere to fair competition and anti-trust laws and regulations in the countries in which we operate.
We take our responsibilities to the environment seriously and are committed to establishing our genuine green credentials amongst our shareholders and customer base.
The focus on environmental and sustainable business practices continues to escalate and the Australian operation is being proactive to ensure Victoria has the necessary resources and skills to meet the challenges ahead. ISO 14001 accreditation is the cornerstone of Victoria's environmental program and initiatives instigated from the ISO principles have seen improvements in waste reduction, efficiency and resource usage.
In recognising the growing importance of Environmental and Sustainability practices across the Australian operations an Environmental Management position has been appointed to drive initiatives to continuously improve our environmental impact.
The waste and cardboard recycling programme of SDN yarns at the Dandenong carpet factory has reduced landfill by 2,200m3 per annum.
The finishing line water reclamation project is near completion and will achieve the targeted reductions in prescribed waste.
We are currently in consultation with a local manufacturer to recycle carpet scrap into industrial sheeting that will further reduce landfill by an estimated 350 tonnes per annum.
We are working with a local manufacturer to use waste stretchwrap as a raw material that is completely recycled to produce new stretchwrap that will be purchased back at reduced costs: An excellent example of closedloop sustainability. This will further reduce landfill by an estimated 200 tonnes per annum.
The tank-farm bunding project at Dandenong is completed and will prevent storm water contamination in the event of a latex spill.
A take-back programme to recycle carpet tiles is in development stage. This will allow Victoria to attain the ratings in the Environmental Certification Scheme that are required by Australian Green Building Council in the commercial market segment.
Energy efficiency is a foremost issue throughout the Group, not only as a target for reducing costs but equally as an environmental issue. The Group is continually looking at methods to reduce heating and lighting costs and in making improvements to our production processes in order to further reduce our total energy consumption.
In the UK, we have identified areas within our factory where we have been able to conserve heat and energy simply by closing off various internal and external doors, with no impact to our operation. We are also continuing with the replacement of 500W factory lights with more efficient 100W low-energy ones which provide the same light output.
In addition to recycling all cardboard, plastic and most electrical and metal waste, all backing line waste and changeover waste is now recycled into carpet underlay, saving approximately 100 tonnes per year of landfill. We have also been able to save an anticipated 20 tonnes per year of Yarn waste in our Tufting manufacture, a reduction of 25%.
The Company continues to be eligible for the Climate Change Levy (CCL) rebate scheme. The Company has also been required to register for the new Climate Reduction Commitment (CRC), but Goup energy usage falls below the threshold at which the Company would be required to take part in the proposed "league tables" of carbon reduction performance. The fact that the UK companies have Climate Change Agreements (CCA's) already in place in the form of their CCL rebate schemes means that, now registration for the CRC is complete, we are able to continue to concentrate our efforts on carbon reduction though the CCL rebate scheme. We continue to implement energy saving ideas both in the factory and in the engineering of our
product specifications to reduce energy usage, and several initiatives are currently underway.
Video conferencing is used on a regular basis between the Group's sites located across the World to promote communication between our companies and to avoid unnecessary travel.
Nature's Carpet® is Victoria's response to increasing consumer demand for biodegradable ultra low toxicity products. The range includes Tufted and traditional woven Wilton carpet, carpet tiles and a wool underlay, all of which meet the high standards demanded by both the environmental movement and by individuals with high sensitivity to chemical toxins. Nature's Carpet® is currently sold throughout North America & Canada through retail flooring stores and green building centres and has been trialled exclusively in the UK for the past 6 months with John Lewis. Nature's Carpet. should also soon be available throughout the UK.
Victoria encourages employee involvement in charitable causes. In the UK, Victoria promotes a Give As You Earn scheme where employees can make regular donations through payroll to registered charities such as Dr Barnardos, Save the Children Fund, Midlands Society for the Blind and the Furnishing Industry Trust (FIT), one of the major carpet
industry charities which supports needy retired employees within the trade.
As well as giving through payroll, employees throughout the Group regularly support other charities by holding various "event" days. At Christmas, employees can elect to donate to local charities rather than sending Christmas cards within the Company. The Company also supports employees who take part in sponsored activities on behalf of local.
There were no contributions to political organisations during the financial year ended 2 April 2011 (2010: £Nil).
Victoria recognises the importance of our contribution to the local communities in which we operate and have forged strong links with these communities; in many instances, employing several generations of the same families within our operations.
Victoria has benefitted greatly from our communities and we therefore believe that we have a strong responsibility to support and contribute to these communities, which we do in a number of ways:
Many of the young players go on to play County Cricket, including England cricketer, Steve Davies, who started his career playing for Victoria Carpets and Kidderminster Victoria as a youngster.
The Directors present their report and the audited accounts for the Group for the financial year ended 2 April 2011.
The Group's principal activities are the manufacture and sale of carpets and carpet yarns. A review of the business during the financial year and its future development is included in the Chairman's Statement and the Business Review on pages 8 to 22. Details of the Company's subsidiary companies are set out in note 13 to the accounts.
The results include those of Victoria PLC and its subsidiaries for the full year and are set out in the accounts on pages 42 to 73.
| £000 | |
|---|---|
| Profit attributable to shareholders 1,209 | |
| Total dividend paid in the | |
| financial year | 583 |
| Retained profit | 626 |
The Directors recommend the payment of a final dividend for the financial year ended 2 April 2011 of 6 pence per Ordinary Share on Thursday, 11 August 2011 to members on the Register at the close of business on Friday, 24 June 2011, with the ex-dividend date being Wednesday, 22 June 2011.
Movements in fixed assets are shown in notes 10 to 13 to the financial statements.
The financial risk management objectives and policies of the Group and its exposure to credit, liquidity and market risks in relation to financial instruments are set out in note 25 to the accounts.
Those persons who were the Directors of the Company at any point during the year are listed on pages 24 and 25 together with the continuing Directors' biographical details, and their interests in the shares of the Company are shown in the Directors' Remuneration Report on page 39.
In accordance with the Company's Articles of Association, the Director retiring by rotation at the 2011 Annual General Meeting is Ian Davies, who, being eligible, offers himself for reelection pursuant to Article 86. Also, since he was appointed after the date of the 2010 Annual General Meeting, Peter Jensen offers himself for election pursuant to Article 81. Details of all of the Executive Directors' service contracts and the Chairman's letter of appointment are set out in the Directors' Remuneration Report on pages 37 to 39. No Director, either during or at the end of the financial year, was materially interested in any significant contract with the Company or any subsidiary undertaking.
The Company has made qualifying third party indemnity provisions for the benefit of its Directors which were made during the year following approval at the 2005 AGM and which remain in force at the date of this report.
The Company's share capital comprises a single class of ordinary shares and as at 2 April 2011 there were in issue 6,943,556 (2010: 6,943,556) fully paid ordinary shares of 25 pence each.
Throughout the year, the ordinary shares were listed on the official list of the UK Listing Authority and remain so at the date of this report. There are no specific restrictions on the size of a shareholding or on the transfer of shares (apart from where a share is not fully paid up). The Directors are not aware of any agreements between holders of the Company's ordinary shares which may result in restrictions on the transfer of shares or on voting rights.
At the 2010 Annual General Meeting, the Directors were granted authority to purchase up to 347,177 ordinary shares in the market. The authority was not utilised during the year. This authority is normally renewed annually and approval will be sought from shareholders at the 2011 Annual General Meeting to renew the authority over 5% of the issued share capital of the Company for a further year.
The rights attaching to the ordinary shares are set out in the Company's articles of association. The articles of association may only be amended with the approval of the Company's shareholders by a special resolution at a general meeting of the shareholders.
A shareholder whose name appears on the Register of members may choose whether their shares are evidenced by share certificates (i.e. are held in certificated form) or held in electronic form in CREST (i.e. uncertificated).
If the Company is wound up the liquidator may, with the sanction of a special resolution of the Company, and any other sanction required by law, divide among the shareholders the whole or any part of the assets of the Company. He may, for such purposes, set such value as he deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders. The liquidator may also transfer the whole or any part of such assets to trustees to be held on trust for the benefit of the shareholders.
Subject to the restrictions set out below, a shareholder is entitled to attend (or appoint another person as his representative to attend i.e. his proxy) and to exercise all or any of his rights to speak and vote at any general meeting of the Company. A shareholder may also appoint more than one representative, provided that each such representative is appointed to exercise rights attaching to a different share or shares held by that shareholder. A representative need not also be a member of the Company. Voting by multiple corporate representatives at the 2011 Annual General Meeting will be operated in accordance with the guidance issued in 2008 by the Institute of Chartered Secretaries and Administrators on Proxies and Corporate Representatives at General Meetings.
To be valid, any form of proxy sent by the Company to shareholders or, where permitted, any proxy registered electronically in relation to any general meeting must be received at the address provided in the notice not later than 48 hours before the time fixed for holding the meeting (or any adjourned meeting).
Subject to any special terms regarding voting upon which any shares may for the time being be held, upon a show of hands every shareholder (or his representative) who is present in person at the general meeting shall have one vote and upon a poll every shareholder (or his representative) present in person shall have one vote for every share held by him on each resolution put to the meeting, save that, if a shareholder appoints more than one representative, the representatives appointed by that shareholder shall have only one vote between them.
If a person fails to give the Company any information requested by a notice served on him under section 793 of the Companies Act 2006 (which gives public companies the power to require information to be supplied in respect of a person's interests in the Company's shares) then the Company may, not earlier than 21 days later, and after warning that person, serve a disenfranchisement notice on the person (whether or not he was the person to whom the section 793 notice was addressed) registered as holder of the shares in respect of which the section 793 notice was given and having warned the holder that unless the information required by the notice is given within 14 days, the holder will not be entitled to receive notice of any general meeting or attend any such meeting and shall not be entitled to exercise, either personally or by proxy, the votes attaching to such share or shares in respect of which the disenfranchisement notice has been given unless and until the information required by the section 793 notice has been provided.
At every general meeting each resolution shall be decided in the first instance on a show of hands unless, on or before the declaration of the result of the show of hands, a poll is demanded by (a) the chairman of the meeting, (b) at least five shareholders present in person or by proxy having the right to vote on the resolution, (c) a member or members present in person or by proxy representing in aggregate not less than one-tenth of the total voting rights of all the members having the right to vote on the resolution, or (d) a member or members present in person or by proxy holding shares conferring the right to vote on the resolution on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right. On a poll, every shareholder (or his representative) present at the meeting has one vote for every ordinary share in respect of which he is the registered holder, save that, if a shareholder appoints more than one representative, the representatives appointed by that shareholder shall have only one vote between them.
In accordance with the Disclosure and Transparency Rules of the Financial Services Authority, in addition to the interests of the Directors (which are fully set out in the Directors' Remuneration Report on page 39), at 14 June 2011 (being the last practicable date before production of this report), the following material interests in more than 3% of the issued Ordinary Share capital had been notified to the Company:
| Fortress Finance Investment Inc 13.68% | |
|---|---|
| G S F Anton | 7.50% |
| C G F Anton | 4.65% |
| J R D Anton | 4.03% |
| Small Companies Dividend Trust 3.96% | |
| J H H Anton | 3.61% |
| P J Anton | 3.56% |
| N E Anton | 3.12% |
| G H Anton | 3.02% |
Employees are encouraged to attend training courses and there is regular consultation with employee representatives to ensure that employees are informed of all matters affecting them. Applications for employment by disabled persons are given full and fair consideration having regard to their particular aptitudes and abilities. Appropriate training within their capabilities is provided for disabled employees seeking career development. Employees who become disabled during their employment have continued in employment wherever possible.
To the extent the Directors consider applicable or material, the disclosures required by the Takeovers Directive have been included in note 19.
The Group does not have a written code or standard on payment practice. It negotiates settlement terms with each of its suppliers. Payments are then made to suppliers in accordance with those terms provided the supplier has carried out his agreed obligations in a satisfactory manner. The amount due to trade creditors on 2 April 2011 represented 50 days' purchases from suppliers (2010: 58 days).
The total charitable contributions made by the Group during the year amounted to £2,527 (2010: £3,423), principally to local charities serving the communities in which the Group operates. There were no political contributions. (2010: £nil)
The Directors are advised that the Company is not a 'close company' within the provisions of the Income and Corporation Taxes Act 1988.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.
The Group made the decision in May 2011 to close the Irish trading entity as commented on in detail within the Group Managing Director's Review.
In the case of each person who was a Director at the time when the Directors' Report was approved:
a) So far as the Director was aware, there was no information of which would be needed by the Auditor in connection with preparing its audit report of which the Auditor was unaware; and
b) she/he has taken all the steps that he ought to have taken as a Director in order to make herself/himself aware of any relevant audit information and to establish that the Company's Auditor was aware of that information.
The above is in accordance with the provisions of Section 418 of the Companies Act 2006.
Deloitte LLP has expressed its willingness to continue in office as Auditor and a resolution to reappoint it will be proposed at the forthcoming Annual General Meeting.
Notice of the 2011 Annual General Meeting to be held on 2 August 2011, together with a description of the business to be discussed at the AGM, is set out in the accompanying Circular. Most of the proposed resolutions 1 to 7 and 9 to 12 relate to standard matters that are dealt with at every AGM. Resolution 8 relates to the adoption of a proposed Performance Share Plan, to be known as the Victoria PLC 2011 Performance Share Plan (PSP).
By Order of the Board
Terry A Danks Secretary 14 June 2011
The Board is committed to the principles of corporate governance contained in the Combined Code on Corporate Governance that was issued in June 2008 by the Financial Reporting Council ("the Combined Code") for which the Board is accountable to Shareholders.
The Company is governed by English law and its Articles of Association. A General Meeting of shareholders must resolve upon any amendment to the Articles of Association by three quarters of the votes cast.
The Board reports here on how it applies the principles of good governance and complies with the Combined Code and explains where it does not.
Details of the Board and its standing committees are as follows:
The Board is committed to maintaining an appropriate balance between Executive and Non-executive Directors. A new Non-executive Director, Peter Jensen, was appointed in the year using an external search consultancy. It currently consists of three Executive and two Non-executive Directors, with Peter Jensen nominated as Senior Independent Director. A list of the individual Directors and their biographies and other significant commitments are set out on pages 24 and 25.
The Board meets monthly throughout the year. A formal schedule of matters reserved for the decision of the Board covers key areas of the Group's affairs.
The Board's primary role is to set the strategic direction of the Group as a whole, leaving day-to-day operational matters delegated to the two Executive boards which meet monthly: one for the UK and Ireland and one for the Australian operating division.
The Executive boards are attended by the Group Managing Director and the Group Finance Director. The Board of the Canadian associate meets independently and is chaired by the Group Finance Director.
Board papers are distributed the week before Board meetings and Board decisions are only taken when adequate information is available to the Board and are deferred when further information is required.
During the year, the Board met 9 times. Board meetings are usually held at the operating sites in order that the Board members have the opportunity to gain a direct appreciation of the Group's operations. Board meetings operate to a standing agenda ensuring that matters requiring regular or annual review are given sufficient time for debate and scrutiny.
In addition to the formal scheduled meetings, additional ad hoc Board and Committee meetings were held during the year to consider any time critical matters.
The Chairman seeks to ensure that the Board is supplied in a timely manner with information that is relevant, accurate and complete in order that the Board is able to carry out its duties. All Directors follow an induction programme on joining the Board and the Chairman seeks to ensure that all Directors regularly update and refresh relevant skills and knowledge.
The Directors have access to the advice and services of the Company Secretary and are empowered to take independent professional advice in the furtherance of their duties at the Company's expense, where necessary. The Company Secretary also provides advice and support to each of the Board's committees and to the Chairman on all corporate governance issues. The Group maintains insurance cover in respect of the liability of its Directors and officers to third parties.
In compliance with the requirements of the Combined Code, the Board reviewed the independence of each of Nikki Beckett and Peter Jensen who served during the year as Non-executive Directors. After careful consideration, the Board determined that both Nikki Beckett and Peter Jensen had demonstrated the required degree of independence, both in character and judgement, taking into account all the relevant circumstances.
In accordance with the Company's Articles of Association, the number nearest to (but no exceeding) one third of the total number of Directors is required to retire by rotation and, if appropriate, submit themselves for re-election. On this basis, a Director is required to retire by rotation and Ian Davies will be submitting himself for re-election at the 2011 Annual General Meeting (AGM).
In addition, Peter Jensen, having been appointed by the Board in September 2010, will also be submitting himself for election at the 2011 AGM.
The number of formal scheduled Board and Committee meetings attended by each Director during the financial year, were as follows:
| Audit N | ominations Remuneration | |||
|---|---|---|---|---|
| Board | Committee | Committee | Committee | |
| (9) | (2) | (3) | (3) | |
| Nikki Beckett | 9 | 2 | 3 | 3 |
| Peter Jensen | ||||
| (Appointed to the Board 01/09/2010) | 5/5* | 0/0 | 0/0 | 3 |
| Alan Bullock | 8 | 0 | 3 | 2 |
| Ian Davies | 9 | — | 2 | — |
| Barry Poynter | 9 | 0 | — | 3 |
* Actual attendance/maximum number of meetings a Director could attend as a Board/Committee member.
During the course of the year, reviews of the remuneration of the Chairman, the Non-Executive Directors and the Executive Directors were carried out.
The Board has established a procedure for Directors, if deemed necessary, to take independent professional advice at the Company's expense, in the furtherance of their duties and has secured appropriate insurance cover for the Directors.
All of the Executive Directors' service contracts and the letters of appointment for the Non-executive Directors are available for inspection during normal business hours at the Company's registered office address and will also be available for inspect at the 2011 Annual General Meeting.
Paragraph C.2 of the Combined Code states the principle: "The Board should maintain a sound system of internal control to safeguard Shareholders' investment and the Company's assets". Information on the power of the Company's Directors, including in particular any powers in relation to the issuing or buying back by the Company of its shares is detailed in the Directors' Report on pages 31 and 32.
The Board is responsible for the Group's system of internal control and for reviewing its effectiveness. This system is designed to manage rather than eliminate the risks of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Board has put in place a system under which there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. The system is regularly reviewed and accords with the guidance in the Turnbull Report.
The framework of the Group's system of internal control, which was in place for the whole of the financial year and up to the date of signing the accounts, includes:
● A comprehensive budgeting and financial reporting system with an annual business plan approved by the Board. Operating results, cash flow, working capital and future capital expenditure are reported monthly. This data is reviewed and assessed by reference to KPIs and internal targets.
During the year, the Board reviews the effectiveness of the system of internal control by a process of continuous monitoring. The Executive Directors of each business unit are responsible for ensuring that controls are operating effectively. Exceptions are reported to the two Executive Boards and, if sufficiently serious, to the Board, with any required improvements fed back for action. The Board keeps under review any need for an internal audit function and presently believes that such a function is not required and is inappropriate in a group of Victoria's current size and complexity.
| Chaired by: | Nikki Beckett |
|---|---|
| Other members: | Peter Jensen |
| Alan Bullock | |
| Barry Poynter |
The Audit Committee is appointed by the Board on the recommendation of the Nominations Committee, where possible from amongst the Nonexecutive Directors of the Group. As required by paragraph C.3.1 of the Combined Code, the Board satisfied itself that Nikki Beckett has recent and relevant financial experience.
The Audit Committee met twice during the year.
The Committee's responsibilities are set out in its terms of reference, which include the following:
● To review the adequacy of the Group's accounting, financial and operating controls and make recommendations as appropriate.
The Audit Committee is required to report its findings to the Board, identifying any matters in respect of which it considers that action or improvement is needed, and make recommendations as to the steps to be taken. The full terms of reference for the Audit Committee can be found on the Company's website: www.victoriaplc. com.
In order to seek to preserve auditor objectivity and independence, the Company has a policy regulating the provision of non-audit services by the Auditor. Excluding local taxation advice, this is subject to the approval of the Group Finance Director and the Audit Committee. Audit and non-audit fees paid or payable to the Auditor in the year under review are set out on page 56. Having considered the actual level of fees for the year, the Audit Committee has concluded that the nature and extent of non-audit fees in the year did not compromise the Auditor's objectivity or independence.
The Auditor was originally appointed in September 2004 and the lead audit partner was changed in July 2009.
| Chaired by: | Nikki Beckett |
|---|---|
| Other members: | Peter Jensen |
| Alan Bullock | |
| Ian Davies |
The Committee meets as required to review the structure, size and composition of the Board, and makes recommendations with regard to any changes that are considered necessary, both in the identification and nomination of new Directors and the continuation of existing Directors in office.
The Committee also advises the Board on succession planning for Executive board appointments, although the Board itself is responsible for succession generally. For full details of the Committee's terms of reference, please visit the Company's website: www.victoriaplc.com.
The Committee met three times during this financial year.
| Chaired by: | Peter Jensen |
|---|---|
| Other members: | Nikki Beckett |
| Alan Bullock | |
| Barry Poynter |
The Directors' Remuneration report on pages 37 to 39 includes details of the composition and policy of the Remuneration Committee and how it has contributed to the Board's compliance with the Code of Best Practice. No Director is involved in setting his/her own remuneration.
With effect from 1 October 2008, Section 175 of the Companies Act 2006 introduced a statutory duty on a Director to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company. This duty is not infringed if the situation cannot reasonably be regarded as likely to give rise to a conflict or if the conflict has been authorised by the Board. The Company's Articles of Association allow unconflicted Directors to authorise conflict situations in appropriate circumstances.
Procedures have been put in place for the disclosure of any such conflicts and, if appropriate, authorisation of the same. The procedures permit any authorisation to be granted subject to terms or conditions.
The Nominations Committee reviews any potential conflict of interest for any prospective Director and all continuing authorisations annually and makes recommendations to the Board
The Company maintains a register of any conflicts of interest of a Director, including the date of grant of the authorisation and any limitations or terms and conditions that apply. Any authorisations given by the Board are reviewed and may be renewed, varied or revoked at any time.
The Chairman and the Board seek to ensure that the views of major shareholders are understood by the Board. The Chairman maintains regular contact with major shareholders and offers a line of contact should the shareholders decide they need further understanding of their issues or concerns. The Group Managing Director and Group Finance Director meet regularly with the major shareholders and updates are provided to all Board meetings. (Details of substantial shareholders are set out in the Directors' Report on page 32.)
The Board recognises the Annual General Meeting (AGM) as an important opportunity to meet private shareholders. At its AGM, which is chaired by the Chairman, the Company complies with the provisions of the Code relating to the disclosure of proxy votes, the separation of resolutions and the attendance (when physically possible) of the Committee Chairmen. The Company's procedure is to arrange for the notice of the AGM and related papers to be posted to Shareholders at least twenty working days in advance to allow for consideration prior to the meeting.
The Board seeks to present a balanced and understandable assessment of the Company's position and prospects. Details are given in the Chairman's Statement and the Business Review.
The Company has applied the principles set out in Section 1 of the Combined Code throughout the year and has complied with the detailed provision set out therein with the following exceptions:
By Order of the Board
Terry A Danks Secretary 14 June 2011
The report is divided into two sections: unaudited information and audited information in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. The audited information commences on page 38.
The members of the Remuneration Committee during the year were as follows:
Peter Jensen (Chairman) (appointed 01/09/10) Nikki Beckett (Chairman until 31/08/10) Alan Bullock Barry Poynter
The Committee meets at least twice a year to review and determine the remuneration of the Executive Directors and the directors of subsidiary companies.
During the year, the Committee met three times, with each member attending the meeting(s) they were eligible to attend, with the exception of Alan Bullock who was only able to attend two out of the three meetings.
The Committee received material assistance from advice given by the Non-executive Directors of the Company's Australian subsidiary: Michael Oakley and Michael Davies.
Terms of Reference for the Committee can be found on the Company's website: www.victoriaplc.com.
The Directors' remuneration policy for the year ended 2 April 2011 and future years is to ensure that remuneration is sufficiently attractive to attract, retain and motivate Executive Directors and directors of subsidiary companies of a calibre that meets the Group's needs to achieve its performance against financial objectives and relevant competitors. Remuneration throughout the Group is designed to be competitive in the country of employment. The Committee gives full consideration to the requirements in Schedule A to the Combined Code. The principal components of remuneration, which will remain in operation for the next financial year and thereafter, for Executive Directors and directors of subsidiary companies, are:
Basic salary reflects the responsibility of the job and individual performance. The Company also provides a company car or car allowance and, in the UK, private health- care cover and death in service cover.
The remuneration policy of the Committee follows the principle of the Combined Code that the performance-related elements of remuneration should form a significant proportion of the total remuneration package of Executive Directors and directors of subsidiary companies and should be designed to align their interests with those of shareholders and to give these Directors keen incentives to perform at the highest levels.
The Group operates an annual bonus scheme for Executive Directors and directors of subsidiary companies. The scheme is designed to encourage performance which the Remuneration Committee considers would contribute most to increasing shareholder value.
For the financial year ended 2 April 2011, Directors' bonuses were awarded, at the discretion of the Remuneration Committee, in the range of 0 – 25% of basic salary. Bonuses are not pensionable.
The Group introduced the Victoria PLC 2008 Long Term Incentive Plan during the financial year ended 4 April 2009 following shareholder approval at the AGM in July 2008. The LTIP was established to incentivise the Executive Directors to deliver real and sustainable long-term value to shareholders through performance related pay directly aligned with shareholders' interests.
Executive Directors are eligible to participate in the Victoria PLC 2008 Long Term Incentive Plan (LTIP). It is intended that the LTIP will allow for the grant of options over shares worth up to a maximum of 125% of salary for Executive Directors of the Company and 95% of salary for executive directors of subsidiary companies. Options will normally vest and become exercisable on the third anniversary of the date of grant and remain exercisable until the tenth anniversary of the date of grant. The performance target
attached to the vesting of options is based on the Company's growth in adjusted earnings per share (EPS), (see note 8), in excess of the Retail Price Index (RPI). Options will vest, on a sliding scale between each step as follows:
| Annual Average | Proportion | |||
|---|---|---|---|---|
| EPS Growth | of option vesting | |||
| RPI +4% | 25% | |||
| RPI +10% | 50% | |||
| RPI +20% | 100% |
If the minimum performance conditions are not met, then those relevant options will lapse. There will be no re-testing provisions if the performance conditions are not met.
The performance criterion was chosen because EPS creates a clear line of sight for Executive Directors and directors of subsidiary companies to increase shareholder value. The Remuneration Committee will regularly review the performance conditions for future options to ensure that they are appropriate for the Group and the prevailing market.
Executive Directors participate in various defined contribution schemes.
Executive Directors, in line with Group policy, have notice periods of 12 months except following a change of control when the period of notice required from the employer is extended to 24 months. All newly appointed Directors are intended to have these same notice periods, but it is recognised that for some appointments a longer period may initially be necessary for competitive reasons, reducing to 12 months thereafter.
The services of Non-executive Directors are secured under contracts in the form of letters of appointment with a twelve month term. Their remuneration is reviewed periodically and determined by the full Board.
Details of the service contracts of the Executive Directors or contracts for services of the Non-executive Directors who served during the year are as follows:
c
The services of Nikki Beckett as Chairman and Non-executive Director are provided under a contractual letter of continuing appointment dated 15 September 2007. The appointment was renewed from 1 October 2009 for a further twelve months and subsequently amended by a further letter dated 29 January 2010 on taking on the role of Chairman. The appointment has since been renewed for a further 12 month period. The contract does not include any provision for early termination.
The services of Peter Jensen as Non-executive Director are provided under a contractual letter of continuing appointment dated 28 July 2010, with the appointment commencing with effect from 1 September 2010. The contract does not include any provision for early termination.
The Executive Directors are employed under service contracts which include the following terms:
| Notice period from the Company | |||||
|---|---|---|---|---|---|
| Date of U | nder normal F | ollowing a | |||
| Director | contract | circumstances | change of control | ||
| Alan Bullock | 25 February 1997 | 12 months | 24 months | ||
| Ian Davies | 19 March 2007 | 12 months | 24 months | ||
| Barry Poynter | 1 April 2001 | 12 months | 24 months |
The following chart shows the total Shareholder return on £100 worth of ordinary shares in Victoria PLC over the last five years.
The total shareholder return for the five year period to 1 April 2011 of 166.5% compares to the total returns provided by the FTSE Small Cap Ex Inv. Trusts Index of 87.9% and by the FTSE All Share Ex Inv. Trusts Index of 119.9%.
The emoluments of all Directors for the financial year ended 2 April 2011 were:
| Benefits | Total | Total | |||
|---|---|---|---|---|---|
| Salary/Fees | in kind | Bonus | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | £000 | |
| Executive | |||||
| Alan Bullock | 130 | 19 | 43 | 192 | 145 |
| Ian Davies | 130 | 22 | 33 | 185 | 151 |
| Barry Poynter | 238 | 26 | 76 | 340 | 240 |
| Non-executive | |||||
| Nikki Beckett | 60 | — | — | 60 | 36 |
| Peter Jensen | 20 | — | — | 20 | — |
| Alexander Anton (Resigned 28 January 2010) | — | — | — | — | 52 |
| 578 | 67 | — | 797 | 624 |
Each Director served for the full year with the exception of Peter Jensen whose service commenced on 1 September 2010.
The Directors of the Company who held office at 2 April 2011 had the following interests in the Ordinary Shares of the Company:
| 2 April 2011 | 3 April 2010 | ||||
|---|---|---|---|---|---|
| Non- | Non | ||||
| Beneficial | Beneficial | Beneficial | Beneficial | ||
| Alan Bullock | 28,750 | — | 28,750 | — | |
| Nikki Beckett | 29,200 | — | 29,200 | — | |
| Ian Davies | 13,500 | — | 13,500 | — | |
| Peter Jensen | — | — | — | — | |
| Barry Poynter | — | — | — | — |
The interests of the Directors in the shares of the Company and its subsidiaries have not changed between the year end and 14 June 2011 (being the last practicable date before production of this report).
| At 3 April | Granted Market price | Earliest date | Lapsed | Exercised | At 2 April | ||
|---|---|---|---|---|---|---|---|
| 2010 | in period | on issue (p) | of exercise | in period | 2011 | ||
| Victoria PLC 2008 Long Term Incentive Plan | |||||||
| Alan Bullock | 199,514 | 36,017 | 236.0 | 28/07/2012 | 100,000 | — | 135,351 |
| Ian Davies | 152,570 | 27,542 | 236.0 | 28/07/2012 | 76,471 | — | 103,641 |
| Barry Poynter | 201,973 | 49,460 | 236.0 | 28/07.2012 | 94,158 | — | 157,275 |
| Terry Danks | 76,863 | 13,427 | 236.0 | 28/07/2012 | 39,765 | — | 50,525 |
| Shaun Lewis | 70,268 | 12,275 | 236.0 | 28/07/2012 | 36.535 | — | 46,190 |
| Neil Glover | 67,458 | 11,784 | 236.0 | 28/07/2012 | 34,899 | — | 44,343 |
| Trevor Chippendale | 72,024 | 12,569 | 236.0 | 28/07/2012 | 37,261 | — | 47,332 |
| Anne Seymour | 113,214 | 27,771 | 236.0 | 28/07/2012 | 56,393 | — | 84,592 |
| Sean Kelly | 80,281 | 15,347 | 236.0 | 28/07/2012 | 37,528 | — | 58,100 |
The options granted in the period were conditional upon the 2009 options lapsing. The performance conditions in respect of the 2009 options were not satisfied and these options are shown in the "Lapsed" column. The total shown at 2 April 2011 represents the effective balance of share options carried forward.
Three Directors were members of money purchase schemes.
Contributions paid by the Group in respect of such schemes were:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Alan Bullock | 70 | 70 |
| Ian Davies | 19 | 19 |
| Barry Poynter | 21 | 18 |
| 110 | 107 |
On behalf of the Board
Peter Jensen Chairman of Remuneration Committee 14 June 2011
The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare accounts for each financial year. Under that law, the Directors are required to prepare the Group accounts in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under the IFRSs as adopted by the EU. Under company law, the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing these accounts, International Accounting Standard 1 requires that Directors:
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
By order of the Board
Alan R Bullock Ian G Davies Group Managing Group Finance Director Director 14 June 2011 14 June 2011
We have audited the accounts of Victoria PLC for the 52 week period ended 2 April 2011 which comprise the Consolidated Income Statement, the Consolidated and Company Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Statements of Cashflows and the related notes 1 to 28. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company accounts, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the accounts and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the accounts in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
An audit involves obtaining evidence about the amounts and disclosures in the accounts sufficient to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or error.
This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the accounts. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited accounts. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.
In our opinion:
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Birmingham, United Kingdom 14 June 2011
For the 52 weeks ended 2 April 2011
| Notes | 52 weeks ended 2 April 2011 £000 |
52 weeks ended 3 April 2010 £000 |
|
|---|---|---|---|
| Continuing operations Revenue |
1,2 | 70,503 | 62,973 |
| Cost of sales | (50,611) | (45,107) | |
| Gross profit Distribution costs Administrative expenses Other operating income |
19,892 (13,615) (4,337) 478 |
17,866 (12,837) (3,611) 362 |
|
| Operating profit Share of results of associated company Finance costs |
1 3 |
2,418 (22) (472) |
1,780 (127) (565) |
| Profit before tax Taxation |
1,4 6 |
1,924 (715) |
1,088 (460) |
| Profit for the period | 1,209 | 628 | |
| Attributable to: Equity holders of the parent |
1,209 | 628 | |
| Earnings per share — pence basic diluted |
8 8 |
17.41 15.76 |
9.04 7.87 |
For the 52 weeks ended 2 April 2011
| 52 weeks ended 2 April 2011 |
52 weeks ended 3 April 2010 |
|
|---|---|---|
| £000 | £000 | |
| Exchange differences on translation of foreign operations Deferred tax on share option scheme |
1,733 18 |
4,509 11 |
| Other comprehensive income for the period Profit for the period |
1,751 1,209 |
4,520 628 |
| Total comprehensive income for the period | 2,960 | 5,148 |
| Attributable to: Equity holders of the parent |
2,960 | 5,148 |
For the 52 weeks ended 2 April 2011
| 52 weeks | 52 weeks | |
|---|---|---|
| ended | ended | |
| 2 April | ||
| 2011 | 2010 | |
| £000 | £000 | |
| Deferred tax on share option scheme | 18 | 11 |
| Other comprehensive income for the period | 18 | 11 |
| Profit for the period | 443 | 685 |
| Total comprehensive income for the period | 461 | 696 |
| Attributable to: | ||
| Equity holders of the parent | 461 | 696 |
As at 2 April 2011
| Group | Company | ||||
|---|---|---|---|---|---|
| 2 April | 3 April | 2 April | 3 April | ||
| 2011 | 2010 | 2011 | 2010 | ||
| Notes | £000 | £000 | £000 | £000 | |
| Non-current assets | |||||
| Goodwill | 10 | — | 65 | — | — |
| Other intangible assets | 11 | 389 | 422 | — | — |
| Property, plant and equipment | 12 | 26,537 | 27,459 | 5,078 | 5,147 |
| Investment property | 13 | 180 | 180 | 180 | 180 |
| Investment in subsidiary undertakings | 13 | — | — | 3,321 | 3,321 |
| Investment in associated company | 13 | 487 | 510 | 56 | 56 |
| Deferred tax asset | 18 | 853 | 1,530 | — | 45 |
| Total non-current assets | 28,446 | 30,166 | 8,635 | 8,749 | |
| Current assets | |||||
| Inventories | 14 | 22,902 | 20,686 | — | — |
| Trade and other receivables | 15 | 11,821 | 10,244 | 4,958 | 5,083 |
| Cash at bank and in hand | 1,626 | 906 | — | — | |
| Total current assets | 36,349 | 31,836 | 4,958 | 5,083 | |
| Total assets | 64,795 | 62,002 | 13,593 | 13,832 | |
| Current liabilities | |||||
| Trade and other payables | 16 | 12,442 | 10,411 | 141 | 108 |
| Current tax liabilities | 613 | 1,153 | — | — | |
| Other financial liabilities | 17 | 6,360 | 5,145 | 3,707 | 3,801 |
| Total current liabilities | 19,415 | 16,709 | 3,848 | 3,909 | |
| Non-current liabilities | |||||
| Trade and other payables | 16 | 2,611 | 2,374 | — | — |
| Other financial liabilities | 17 | 1,497 | 2,952 | — | — |
| Deferred tax liabilities | 18 | 1,510 | 2,712 | 978 | 1,121 |
| Total non-current liabilities | 5,618 | 8,038 | 978 | 1,121 | |
| Total liabilities | 25,033 | 24,747 | 4,826 | 5,030 | |
| Net assets | 39,762 | 37,255 | 8,767 | 8,802 | |
| Equity | |||||
| Share capital | 19 | 1,736 | 1,736 | 1,736 | 1,736 |
| Share premium | 20 | 829 | 829 | 829 | 829 |
| Retained earnings | 20 | 37,067 | 34,690 | 6,115 | 6,237 |
| Share-based payment reserve | 20 | 130 | — | 87 | — |
| Total equity | 39,762 | 37,255 | 8,767 | 8,802 |
Company Registered Number (England & Wales) 282204
The financial statements on pages 42 to 73 were approved by the Board of Directors and authorised for issue on 14 June 2011.
They were signed on its behalf by:
Nikki Beckett Ian Davies Director Director
For the 52 weeks ended 2 April 2011
| Share-based | |||||
|---|---|---|---|---|---|
| Share | Share | Retained | payment | Total | |
| capital | premium | earnings | reserve | equity | |
| £000 | £000 | £000 | £000 | £000 | |
| At 4 April 2010 | 1,736 | 829 | 34,690 | — | 37,255 |
| Total comprehensive income for the period | — | — | 2,960 | — | 2,960 |
| Dividends paid | — | — | (583) | — | (583) |
| Transfer from accruals | — | — | — | 73 | 73 |
| Share-based payment charge | — | — | — | 57 | 57 |
| At 2 April 2011 | 1,736 | 829 | 37,067 | 130 | 39,762 |
| At 5 April 2009 | 1,736 | 829 | 30,001 | — | 32,566 |
| Total comprehensive income for the period | — | — | 5,148 | — | 5,148 |
| Dividends paid | — | — | (459) | — | (459) |
| At 3 April 2010 | 1,736 | 829 | 34,690 | — | 37,255 |
For the 52 weeks ended 2 April 2011
| Share-based | ||||
|---|---|---|---|---|
| Share | Share | Retained | payment | Total |
| capital | premium | earnings | reserve | equity |
| £000 | £000 | £000 | £000 | £000 |
| 1,736 | 829 | 6,237 | — | 8,802 |
| — | — | 461 | — | 461 |
| — | — | (583) | — | (583) |
| — | — | — | 73 | 73 |
| — | — | — | 14 | 14 |
| 1,736 | 829 | 6,115 | 87 | 8,767 |
| 1,736 | 829 | 6,000 | — | 8,565 |
| — | — | 696 | — | 696 |
| — | — | (459) | — | (459) |
| 1,736 | 829 | 6,237 | — | 8,802 |
For the 52 weeks ended 2 April 2011
| Group | Company | ||||
|---|---|---|---|---|---|
| 52 weeks | 52 weeks | 52 weeks | 52 weeks | ||
| ended | ended | ended | ended | ||
| 2 April | 3 April | 2 April | 3 April | ||
| 2011 | 2010 | 2011 | 2010 | ||
| Notes | £000 | £000 | £000 | £000 | |
| Net cash inflow from operating activities | 22 | 2,505 | 6,629 | 644 | 729 |
| Investing activities | |||||
| Purchases of property, plant and equipment | (948) | (384) | — | — | |
| Proceeds on disposal of property, plant and equipment | 62 | 39 | — | — | |
| Net cash used in investing activities | (886) | (345) | — | — | |
| Financing activities | |||||
| Decrease in long term loans | (971) | (4,971) | — | — | |
| Receipts from financing of assets | 202 | 125 | — | — | |
| Repayment of obligations under finance leases/HP | (725) | (722) | — | — | |
| Dividends paid | (583) | (459) | (583) | (459) | |
| Net cash used in financing activities | (2,077) | (6,027) | (583) | (459) | |
| Net (decrease)/increase in cash and cash equivalents | (458) | 257 | 61 | 270 | |
| Cash and cash equivalents at beginning of period | (3,474) | (3,785) | (3,750) | (4,020) | |
| Effect of foreign exchange rate changes | 66 | 54 | — | — | |
| Cash and cash equivalents at end of period | 23 | (3,866) | (3,474) | (3,689) | (3,750) |
The financial statements have been prepared in accordance with International Financial Reporting Standards. The financial statements have also been prepared in accordance with IFRS adopted for use in the European Union and therefore comply with Article 4 of the EU IAS regulation.
The financial statements have been prepared on the historical cost basis, except for financial instruments which are recorded at fair value in accordance with IAS39. Land and buildings were professionally valued at 4 April 2004 and this valuation was adopted as deemed cost on adoption of IFRS. The accounting policies have been applied consistently in the current and prior year. The principal accounting policies adopted are set out below.
The consolidated financial statements have been prepared on a going concern basis. The Finance Review on page 19 sets out the justification for this basis of preparation.
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets and liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets and liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the acquiree's identifiable assets and liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement.
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but does not have control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are not recognised.
Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets and liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognised immediately in the income statement.
Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Group's interest in the net fair value of the identifiable assets and liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the continued synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
The Group's policy for goodwill arising on the acquisition of an associate is described under 'Investments in associates' above.
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets' previous carrying amount and fair value less costs to sell.
The investment properties are valued on an historical cost basis, having been professionally valued at 4 April 2004 on adoption of IFRS, which is considered to be the deemed cost.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. Sales of goods are recognised when goods are despatched.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Dividend income from investments is recognised when the shareholders' rights to receive payment have been established.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.
Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs (see below).
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Sterling, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and options (see below for details of the Group's accounting policies in respect of such derivative financial instruments).
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations (including comparatives) are expressed in Sterling using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Government grants relating to property, plant and equipment are treated as deferred income, and released to profit or loss over the expected useful lives of the assets concerned. Other government grants, including those towards staff training costs, are recognised in profit or loss over the periods necessary to match them with the related costs and are deducted in reporting the related expense.
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state managed retirement benefit schemes are dealt with as payments to defined contribution plans where the Group's obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their deemed cost, being the fair value at the date of adoption of IFRS, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Depreciation on buildings is charged to profit or loss.
Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.
Fixtures and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, less any anticipated residual value, over their estimated useful lives.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.
The expected useful lives of assets are:
| Buildings | 50 years |
|---|---|
| Plant and equipment | 3 to 20 years |
| Motor vehicles | 4 to 5 years |
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Expenditure on research and development activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group's e-business development is recognised only if all of the following conditions are met:
Internally generated intangible assets are amortised on a straight-line basis over their estimated useful lives. Where no internally generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
The Group has applied the requirements of IFRS 2 Share-based payment. In accordance with IFRS 1, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested at 1 January 2005.
The Group issues equity settled share-based payments to certain employees. Equity settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of the shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured by use of the Black–Scholes model. The expected life used in the model has been adjusted, based on Management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The Group's financial assets fall into the categories discussed below, with the allocation depending to an extent on the purpose for which the asset was acquired. Although the Group occasionally uses derivative financial instruments in economic hedges of currency rate risk, it does not hedge account for these transactions. The Group has not classified any of its financial assets as held to maturity.
Unless otherwise indicated, the carrying amounts of the Group's financial assets are a reasonable approximation of their fair values.
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (e.g. trade receivables) and deposits held at banks but may also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost less provision for impairment, where appropriate.
The effect of discounting on these financial instruments is not considered to be material.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable; the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the loss being recognised within distribution expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
This category comprises only "in the money" foreign exchange derivatives to the extent that they exist (see (b)(ii) for "out of the money" derivatives ). They are carried in the balance sheet at fair value with changes in fair value recognised in finance income or expense. Other than these derivative financial instruments, the Group does not have any assets held for trading nor has it designated any financial assets as being at fair value through profit or loss.
The fair value of the Group's foreign exchange derivatives is measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturity of the contracts.
The Group classifies its financial liabilities into one of two categories depending on the purpose for which the liability was incurred. Although the Group uses derivative financial instruments in economic hedges of currency risk, it does not hedge account for these transactions.
Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
These liabilities include the following items:
The fair value of the Group's financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using market rates of interest.
This category comprises only "out of the money" derivatives to the extent that they exist (see (a)(ii) for "in the money" derivatives). They are carried in the balance sheet at fair value with changes in fair value recognised in finance income or expense. Other than these derivative financial instruments, the Group does not have any liabilities held for trading nor has it designated any financial liabilities as being at fair value through profit or loss.
The methods used for calculating the fair value of the Group's interest rate and foreign exchange derivatives have been described in (a)(ii) above.
The Group's ordinary shares are classified as equity instruments. The Group is not subject to any externally imposed capital requirements. Share capital includes the nominal value of the shares. Any share premium attaching to the shares are shown as share premium.
The following revised and amended standards and interpretations, which have all been endorsed by the EU, have been adopted by the Group in these consolidated financial statements; their adoption has had no material impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.
IFRS 3 (revised) 'Business Combinations' focuses on what is given to the vendor as consideration on acquisition, rather than what is spent on achieving the the acquisition. It also focuses on changes in control as a significant economic event and places greater emphasis on the use of fair value. The main impact of the revisions to the Group's Financial Statements are that of expensing acquisition costs and not being able to adjust goodwill after the measurement date for changes in the fair value of any contingent consideration.
IAS 27 (revised) 'Consolidated and Separate Financial Statements' focuses on the accounting for non-controlling interests and the loss of control of a subsidiary.
At the date of authorisation of these financial statements, the following revised and amended standards and interpretations were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
IFRS 7 (amended) 'Financial Instruments: Disclosures'
IFRS 9 'Financial Instruments'
IAS 12 (amended) 'Income Taxes'
IAS 24 (amended) 'Related Party Disclosures'
IAS 32 (amended) 'Classification of Rights Issues'
IFRIC 14 (amended) 'Prepayments of a Minimum Funding Requirement'
IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments'
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.
For management purposes, the Group is organised into four operating divisions according to the geographical areas where they are managed. These divisions form the basis on which the Group reports its primary segment information, plus the Canadian associate. The three segments are UK, Ireland and Australia, to which is added the Canadian associate.
Geographical segment information for revenue, operating profit and a reconciliation to entity net profit is presented below.
| ncome statement | ||||||||
|---|---|---|---|---|---|---|---|---|
| For the 52 weeks ended 2 April 2011 | For the 52 weeks ended 3 April 2010 | |||||||
| Profit | Profit | |||||||
| Operating | Finance | before | Operating | Finance | before | |||
| R | evenue | profit | costs | tax* | Revenue | profit | costs | tax* |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| UK | 25,040 | 397 | (94) | 303 | 22,974 | 319 | (78) | 241 |
| Ireland | 2,448 | (675) | (13) | (688) | 3,265 | (517) | (6) | (523) |
| Australia | 43,015 | 3,526 | (264) | 3,262 | 36,734 | 2,537 | (342) | 2,195 |
| 70,503 | 3,248 | (371) | 2,877 | 62,973 | 2,339 | (426) | 1,913 | |
| Share of Canadian | ||||||||
| associate | (22) | (127) | ||||||
| Unallocated central | ||||||||
| expenses | (765) | (101) | (866) | (559) | (139) | (698) | ||
| Goodwill | ||||||||
| impairment | (65) | (65) | ||||||
| Total continuing | ||||||||
| operations | 70,503 | 2,418 | (472) | 1,924 | 62,973 | 1,780 | (565) | 1,088 |
| Tax | (715) | (460) | ||||||
| Profit after tax from | ||||||||
| continuing activities | 1,209 | 628 |
* The share of results of the associated company is shown net of tax as required by IAS1.
Intersegment sales between the UK and Ireland and Australia were immaterial in the current and comparative periods.
| As at 2 April | As at 3 April | |||
|---|---|---|---|---|
| 2011 | 2010 | |||
| Segment S | egment | Segment | Segment | |
| assets | liabilities | assets | liabilities | |
| £000 | £000 | £000 | £000 | |
| UK | 24,589 | 6,989 | 24,541 | 6,649 |
| Ireland | 1,161 | 876 | 1,629 | 618 |
| Australia | 38,286 | 12,259 | 35,087 | 12,453 |
| Investment in associated company | 487 | — | 510 | — |
| Unallocated central assets/liabilities | 272 | 4,909 | 235 | 5,027 |
| 64,795 | 25,033 | 62,002 | 24,747 |
The investment in associated company is held directly by the parent entity and does not relate specifically to any geographic segment.
| 52 weeks | 52 weeks | |
|---|---|---|
| ended | ended | |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Depreciation and amortisation | ||
| UK | 820 | 874 |
| Ireland | 38 | 40 |
| Australia | 2,030 | 1,830 |
| Goodwill impairment | 65 | — |
| Unallocated central | 9 | 9 |
| 2,962 | 2,753 |
No other significant non-cash expenses were deducted in measuring segment results.
| 52 weeks | 52 weeks | |
|---|---|---|
| ended | ended | |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Capital expenditure | ||
| UK | 182 | 87 |
| Australia | 766 | 297 |
| 948 | 384 |
No secondary segmental information is reported as the Directors consider that substantially all of the Group's operations relate to a single activity, that of the manufacture and sale of carpets.
| 52 weeks | 52 weeks | |
|---|---|---|
| ended | ended | |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Continuing operations | ||
| Sale of goods | 70,503 | 62,973 |
| Other operating income | 478 | 362 |
| 70,981 | 63,335 |
| 52 weeks | 52 weeks | |
|---|---|---|
| ended | ended | |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Interest on loans and overdrafts wholly repayable within five years | 409 | 436 |
| Movement in fair value of interest rate swap | (33) | 16 |
| Hire purchase and finance lease interest | 96 | 113 |
| 472 | 565 |
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| After charging/(crediting) | ||
| Net foreign exchange (gains)/losses | (207) | (253) |
| Depreciation of property, plant and equipment | 2,865 | 2,720 |
| Amortisation of intangible assets | 32 | 33 |
| Impairment of goodwill | 65 | — |
| Staff costs (see note 5) | 19,869 | 18,233 |
| Cost of inventories recognised as an expense | 50,611 | 45,107 |
| Loss / (profit) on sale of fixed assets | 13 | (10) |
| Government grants (see note 24) | (447) | (277) |
| Other operating lease rentals | 557 | 625 |
| Auditor's remuneration: | ||
| Fees payable to the Company's Auditor for the audit of the Company's annual financial statements | 26 | 26 |
| The audit of the Company's subsidiaries pursuant to legislation | 73 | 61 |
| Total audit fees | 99 | 87 |
| Other services pursuant to legislation | 6 | 14 |
| Tax services | 13 | 13 |
| Total non-audit fees | 19 | 27 |
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Wages and salaries | 17,313 | 15,868 |
| Share based payment | 57 | 33 |
| Social security costs | 1,216 | 1,150 |
| Other pension costs | 1,283 | 1,215 |
| 19,869 | 18,266 |
Average number employed (including executive directors of subsidiaries)
| 2011 | 2010 | |
|---|---|---|
| Directors | 12 | 12 |
| Sales and Marketing | 76 | 81 |
| Production | 435 | 442 |
| Logistics | 45 | 44 |
| Maintenance | 40 | 37 |
| Finance, IT and Administration | 39 | 38 |
| 647 | 654 |
The Group operates a number of money purchase pension schemes. The companies and the employees contribute towards the schemes.
The total pension cost for the Group was £1,283,000 (2010: £1,215,000), of which £381,000 (2010: £365,000) relates to the UK schemes. The total contributions outstanding at year end was £nil (2010: £56,000).
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Current tax | ||
| — Current year UK | — | — |
| — Current year overseas | 1,228 | 762 |
| — Adjustments in respect of prior years | (62) | 7 |
| 1,166 | 769 | |
| Deferred Tax (note 18) | ||
| — Current year | (371) | (301) |
| — Adjustments in respect of prior years | 36 | (8) |
| — Effect of rate change | (116) | — |
| (451) | (309) | |
| Total tax | 715 | 460 |
Corporation tax is calculated at 28 percent and 30 percent (2010: 28 percent and 30 percent) of the estimated assessable profit for the year in the United Kingdom and Australia respectively. Taxation for other jurisdictions is calculated at the prevailing rates in those jurisdictions.
The tax charge for the year can be reconciled to the profit per the income statement as follows:
| 2011 | 2011 | 2010 | 2010 | |
|---|---|---|---|---|
| £000 | % | £000 | % | |
| Profit before tax | ||||
| Continuing operations | 1,924 | 1,088 | ||
| Tax at the UK corporation tax rate of 28% | 539 | 28.0 | 305 | 28.0 |
| Tax effect of share of result of associate | 6 | 0.3 | 35 | 3.2 |
| Tax effect of items that are not deductible/non taxable | ||||
| in determining taxable profit | 32 | 1.7 | (4) | (0.3) |
| Effect of different tax rates of subsidiaries operating | ||||
| in other jurisdictions | 170 | 8.8 | 125 | 11.5 |
| Effect of change in rate | (116) | (6.0) | — | — |
| Tax losses not recognised for deferred tax | 110 | 5.7 | — | — |
| Adjustments to prior periods | (26) | (1.3) | (1) | (0.1) |
| Tax expense and effective tax rate for the year | 715 | 37.2 | 460 | 42.3 |
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Amounts recognised as distributions to equity holders in the period: | ||
| Final dividend for the year ended 3 April 2010 paid during the period of | ||
| 5.4p per share (2010: 4.0p) | 375 | 278 |
| Interim dividend for the year ended 2 April 2011 paid during | ||
| the period of 3.0p per share (2010: 2.6p) | 208 | 181 |
| 583 | 459 | |
| Proposed final dividend for the year ended 2 April 2011 of 6.0p per share | ||
| (2010: 5.4p) | 417 | 375 |
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.
The calculation of the basic, adjusted and diluted earnings per share is based on the following data:
| Basic A 2011 £000 |
djusted 2011 £000 |
Diluted 2011 £000 |
Basic 2010 £000 |
Adjusted 2010 £000 |
Diluted 2010 £000 |
|
|---|---|---|---|---|---|---|
| Profit attributable to ordinary equity holders of the parent entity Adjustment for goodwill impairment |
1,209 — |
1,209 65 |
1,209 — |
628 — |
628 — |
628 — |
| Earnings for the purpose of basic, adjusted and diluted earnings per share |
1,209 | 1,274 | 1,209 | 628 | 628 | 628 |
Weighted average number of shares
| 2011 | 2010 | |
|---|---|---|
| N | umber of | Number of |
| shares | shares | |
| (000) | (000) | |
| Weighted average number of ordinary shares for the purposes of basic earnings per share | 6,944 | 6,944 |
| Effect of dilutive potential ordinary shares: | ||
| Long-Term Incentive Plan | 728 | 1,034 |
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 7,672 | 7,978 |
The Group's earnings per share are as follows:
| 2011 | 2010 | |
|---|---|---|
| pence | pence | |
| Basic adjusted | 18.35 | 9.04 |
| Diluted adjusted | 16.61 | 7.87 |
| Basic | 17.41 | 9.04 |
| Diluted | 15.76 | 7.87 |
The results of overseas subsidiary and associated undertakings 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:
| 2011 | 2010 | |||
|---|---|---|---|---|
| A verage |
Year end | Average | Year end | |
| Australia — A\$ | 1.6460 | 1.5465 | 1.8881 | 1.6596 |
| Ireland — € | 1.1688 | 1.1333 | 1.1280 | 1.1289 |
| Canada — C\$ | 1.5831 | 1.5461 | 1.7396 | 1.5420 |
| Group | ||
|---|---|---|
| 2011 | 2010 | |
| At cost | £000 | £000 |
| At 4 April 2009, 3 April 2010 & 2 April 2011 | 65 | 65 |
| Accumulated impairment losses | ||
| At 3 April 2010 | — | — |
| Impairment losses for the year | 65 | — |
| At 2 April 2011 | 65 | — |
| Net Book Value | — | 65 |
| 2011 | 2010 | |
| £000 | £000 | |
| UK and Ireland | ||
| Munster Carpets | — | 65 |
The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. As at 2 April 2011, an impairment provision to write off the full value of goodwill was considered necessary as a result of the planned restructuring of the Irish business in the next financial period.
| Group Total £000 |
||
|---|---|---|
| Cost | At 5 April 2009 | 666 |
| Exchange differences | (12) | |
| At 3 April 2010 | 654 | |
| At 4 April 2010 | 654 | |
| Exchange differences | (1) | |
| A | t 2 April 2011 | 653 |
| Amortisation | At 5 April 2009 | 202 |
| Exchange differences | (3) | |
| Charges for the period | 33 | |
| At 3 April 2010 | 232 | |
| At 4 April 2010 | 232 | |
| Exchange differences | — | |
| Charges for the period | 32 | |
| A | t 2 April 2011 | 264 |
| Net book value At 2 April 2011 | 389 | |
| At 3 April 2010 | 422 | |
| At 4 April 2009 | 464 | |
The intangible assets were acquired with the trade and assets of Munster Carpets and Navan Carpets and relate to customer lists acquired and the brand names. They are amortised over 20 years.
No intangible assets were held by the Company.
| Group | |||||||
|---|---|---|---|---|---|---|---|
| Freehold | Fixtures, | Freehold | Fixtures, | ||||
| land and | Plant and vehicles and | land and vehicles and | |||||
| buildings | machinery | equipment | Total | buildings | equipment | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| Cost | |||||||
| At 5 April 2009 | |||||||
| Cost | 10,436 | 37,037 | 2,622 | 50,095 | 5,493 | 37 | 5,530 |
| Exchange differences | 905 | 5,161 | 362 | 6,428 | — | — | — |
| Additions | 7 | 177 | 200 | 384 | — | — | — |
| Disposals | — | (171) | (104) | (275) | — | — | — |
| At 3 April 2010 | 11,348 | 42,204 | 3,080 | 56,632 | 5,493 | 37 | 5,530 |
| At 4 April 2010 | 11,348 | 42,204 | 3,080 | 56,632 | 5,493 | 37 | 5,530 |
| Exchange differences | 323 | 1,871 | 137 | 2,331 | — | — | — |
| Additions | 24 | 612 | 312 | 948 | — | — | — |
| Disposals | — | (70) | (190) | (260) | — | — | — |
| At 2 April 2011 | 11,695 | 44,617 | 3,339 | 59,651 | 5,493 | 37 | 5,530 |
| Accumulated depreciation | |||||||
| At 5 April 2009 | 537 | 21,327 | 1,801 | 23,665 | 300 | 14 | 314 |
| Exchange differences | 38 | 2,779 | 217 | 3,034 | — | — | — |
| Charge for the year | 112 | 2,298 | 310 | 2,720 | 60 | 9 | 69 |
| Disposals | — | (171) | (75) | (246) | — | — | — |
| At 3 April 2010 | 687 | 26,233 | 2,253 | 29,173 | 360 | 23 | 383 |
| At 4 April 2010 | 687 | 26,233 | 2,253 | 29,173 | 360 | 23 | 383 |
| Exchange differences | 17 | 1,154 | 89 | 1,260 | — | — | — |
| Charge for the year | 116 | 2,469 | 280 | 2,865 | 60 | 9 | 69 |
| Disposals | — | (58) | (126) | (184) | — | — | — |
| At 2 April 2011 | 820 | 29,798 | 2,496 | 33,114 | 420 | 32 | 452 |
| Net Book Value | |||||||
| At 2 April 2011 | 10,875 | 14,819 | 843 | 26,537 | 5,073 | 5 | 5,078 |
| At 3 April 2010 | 10,661 | 15,971 | 827 | 27,459 | 5,133 | 14 | 5,147 |
| At 4 April 2009 | 9,899 | 15,710 | 821 | 26,430 | 5,193 | 23 | 5,216 |
Land and buildings were professionally valued at 4 April 2004 and this valuation was adopted as deemed cost on adoption of IFRS.
Included within fixed assets are the following:
| Group | |||||
|---|---|---|---|---|---|
| Fixtures, | |||||
| Plant and vehicles and | |||||
| machinery equipment |
|||||
| £000 | £000 | £000 | |||
| 732 | 775 | 1,507 | |||
| 254 | 300 | 554 | |||
| 57 | 129 | 186 | |||
| 2,880 | — | 2,880 | |||
| 995 | — | 995 | |||
| 128 | — | 128 | |||
| Cost at 3 April 2010 | 682 | 661 | 1,343 |
|---|---|---|---|
| Accumulated depreciation at 3 April 2010 | 123 | 215 | 338 |
| Depreciation charged in year | 50 | 97 | 147 |
| Being acquired under hire purchase agreements: Cost at 3 April 2010 |
4,455 | — | 4,455 |
| Accumulated depreciation at 3 April 2010 | 595 | — | 595 |
| Depreciation charged in year | 228 | — | 228 |
Capital expenditure authorised and committed at the period end:
| Group | ||
|---|---|---|
| 2011 £000 |
2010 £000 |
|
| Contracts placed | 355 | — |
The Company held no assets under finance lease or hire purchase agreements and had no capital commitments at either year-end.
| Group | Company | |||||
|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |||
| Note | £000 | £000 | £000 | £000 | ||
| Investment property | (a) | 180 | 180 | 180 | 180 | |
| Investment in subsidiaries | (b) | — | — | 3,321 | 3,321 | |
| Investment in associated company | (c) | 487 | 510 | 56 | 56 |
Investment properties were professionally valued at 4 April 2004 and this valuation was adopted as deemed cost on adoption of IFRS. The Directors consider this to approximate to the fair value of the investment property at 2 April 2011.
The investment represents shares in subsidiaries at cost.
Victoria PLC owns directly or indirectly the whole of the allotted ordinary share capital of the following principal subsidiary companies.
| Country of incorporation and operation |
Nature of business |
|
|---|---|---|
| Victoria Carpets Limited | England | Carpet manufacture |
| Munster Carpets Limited* | Ireland | Carpet sales |
| Westwood Yarns Limited | England | Yarn manufacture |
| The Victoria Carpet Company Pty Limited | Australia | Carpet manufacture |
* Indirect shareholding.
Victoria PLC owns 50% of the common shares of Colin Campbell & Sons Limited, a carpet distributor incorporated in Canada, whose accounting period ended on 31 March 2011 (2010: 31 March).
| Group | Company | ||||
|---|---|---|---|---|---|
| 2011 £000 |
2010 £000 |
2011 £000 |
2010 £000 |
||
| Cost of investment | 101 | 101 | 101 | 101 | |
| Return of capital | (45) | (45) | (45) | (45) | |
| Share of post-acquisition profits (retained by associated company) | 431 | 454 | — | — | |
| 487 | 510 | 56 | 56 |
| Group | ||
|---|---|---|
| 2011 | 2010 | |
| £000 | £000 | |
| Raw materials | 6,658 | 5,311 |
| Work-in-progress | 898 | 1,016 |
| Finished goods | 15,346 | 14,359 |
| 22,902 | 20,686 |
The Company held no inventories at either year end. There is no material difference between the balance sheet value of inventories and their replacement cost.
Cost of sales in the Income Statement represents the amount of inventories recognised as an expense in the period.
Amounts falling due within one year:
| Group | Company | |||
|---|---|---|---|---|
| 2011 £000 |
2010 £000 |
2011 £000 |
2010 £000 |
|
| Trade debtors | 10,846 | 9,705 | — | — |
| Amounts owed by subsidiaries | — | — | 4,864 | 4,993 |
| Amounts owed by associated company | 210 | 179 | 88 | 88 |
| Other debtors | 390 | 1 | — | — |
| Prepayments and accrued income | 375 | 359 | 6 | 2 |
| 11,821 | 10,244 | 4,958 | 5,083 |
The average credit period taken on sale of goods is 56 days (2010: 56 days). No interest is charged on past due receivables.
The above amounts are stated net of an allowance (net of VAT) of £369,000 (2010: £244,000) made for estimated irrecoverable amounts from sale of goods. The movement of this allowance account during the year is summarised below:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Opening balance at 4 April 2010 | 244 | 191 |
| Increase in provisions | 235 | 154 |
| Written off against provisions | (112) | (104) |
| Recovered amounts | (10) | (17) |
| Exchange differences | 12 | 20 |
| Closing balance at 2 April 2011 | 369 | 244 |
An analysis of the age of trade receivables that are past due at the reporting date but not impaired can be seen in the table below:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| 1–30 days overdue | 1,831 | 1,609 |
| 31–60 days overdue | 251 | 205 |
| > 60 days overdue | 352 | 228 |
| Total | 2,434 | 2,042 |
An analysis of the age of impaired trade receivables is as follows:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Current | 6 | — |
| 1–30 days overdue | 116 | 58 |
| 31–60 days overdue | 112 | 21 |
| > 60 days overdue | 208 | 187 |
| Total | 442 | 266 |
The main factors in assessing the impairment of trade receivables are the age of the balance and the circumstances of the individual customer. The Directors consider that the carrying amount of all receivables, including those impaired, approximate to their fair value.
Amounts falling due within one year:
| Group | Company | |||
|---|---|---|---|---|
| 2011 £000 |
2010 | 2011 | 2010 | |
| £000 | £000 | £000 | ||
| Trade creditors | 6,894 | 7,152 | — | — |
| Amounts due to subsidiaries | — | — | 4 | 3 |
| Other creditors | 2,612 | 1,292 | — | 73 |
| Accruals and deferred income | 2,936 | 1,967 | 137 | 32 |
| 12,442 | 10,411 | 141 | 108 |
Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 50 days (2010: 58 days). The directors consider that the carrying amount of trade payables approximates to their fair value.
Amounts falling due after one year:
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | |
| Other creditors and deferred income | 2,611 | 2,374 | — | — |
| 2,611 | 2,374 | — | — |
Other creditors relate primarily to the deferred income of government grants as shown in note 24.
Amounts falling due within one year:
| Group | Company | |||||
|---|---|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |||
| £000 | £000 | £000 | £000 | |||
| Bank loans and overdrafts | 5,492 | 4,380 | 3,689 | 3,750 | ||
| Hire purchase and finance lease creditors | 850 | 714 | — | — | ||
| Fair value of interest rate swaps | 18 | 51 | 18 | 51 | ||
| 6,360 | 5,145 | 3,707 | 3,801 | |||
| Amounts falling due after more than one year: | ||||||
| Group | Company | |||||
| 2011 | 2010 | 2011 | 2010 | |||
| £000 | £000 | £000 | £000 | |||
| Loans — Secured commercial bills | ||||||
| — between one and two years | 970 | — | — | — | ||
| — between two and five years | — | 1,808 | — | — | ||
| Hire purchase and finance lease obligations payable | ||||||
| — Between one and two years | 386 | 761 | — | — | ||
| — Between two and five years | 141 | 383 | — | — | ||
| 1,497 | 2,952 | — | — |
The loans falling due after more than one year are repayable as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | |
| — Between one and two years | 970 | — | — | — |
| — Between two and five years | — | 1,808 | — | — |
The Directors consider that the carrying amounts of other financial liabilities approximate to their fair value.
Bank borrowings in the United Kingdom amounting to £5.09m (2010: £4.21m) are secured by charges over a freehold property. Bank borrowings of the Australian subsidiary are secured by a mortgage on certain freehold properties and a floating charge over its assets; however, the company was in a net cash position of £0.20m at the year-end (2010: Net borrowings of £0.91m).
The Company has guaranteed the bank borrowings of its UK subsidiaries and there is a Composite Accounting Agreement between the Company, Victoria Carpets Limited, Westwood Yarns Limited and Barclays Bank PLC. The Company has also guaranteed an overdraft facility provided by Barclays Bank PLC to Munster Carpets Limited of which £0.36m (2010: £0.19m) was outstanding at 2 April 2011.
The average effective interest rate of borrowings is set out in note 25 "Financial instruments".
The Company had no operating leases during the years ended 2 April 2011 and 3 April 2010. Details of operating lease arrangements for the Group are as follows:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Minimum lease payments under operating leases recognised in income for the year. | 557 | 625 |
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under noncancellable operating leases, which fall due as follows:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Within one year | 490 | 537 |
| In the second to fifth years inclusive | 656 | 755 |
| After five years | — | 4 |
| 1,146 | 1,296 |
Operating lease payments represent rentals payable by the Group principally for vehicles and certain of its properties. Leases of vehicles are usually negotiated for a term of 3-5 years and rentals are fixed for the term of the lease. Leases of land and buildings are usually negotiated for 5-15 years and rentals reviewed after 5 years.
| Group | Company | |
|---|---|---|
| £000 | £000 | |
| At 5 April 2009 | 1,608 | 1,105 |
| Exchange adjustment | (106) | — |
| Income statement | (309) | (18) |
| Deferred tax on share option scheme taken to equity | (11) | (11) |
| At 3 April 2010 | (1,182) | 1,076 |
| At 4 April 2010 | 1,182 | 1,076 |
| Exchange adjustment | (56) | — |
| Income statement (Note 6) | (451) | (80) |
| Deferred tax on share option scheme taken to equity | (18) | (18) |
| At 2 April 2011 | 657 | 978 |
The provision for deferred taxation is as follows:
| Group | Company | |||
|---|---|---|---|---|
| 2011 £000 |
2010 £000 |
2011 £000 |
2010 £000 |
|
| Capital Allowances | 1,775 | 2,175 | 662 | 722 |
| Liability on recovering value through sale | 513 | 536 | 370 | 399 |
| Deferred grant income | (719) | (643) | — | — |
| Tax losses | (351) | (345) | — | — |
| Other timing differences | (561) | (541) | (54) | (45) |
| 657 | 1,182 | 978 | 1,076 |
The provision is based on taxation rates of 26% in the UK and 30% in Australia (2010: 28% and 30% respectively).
Legislation reducing the main rate of corporation tax from 28% to 26% with effect from 1 April 2011 was substantively enacted during the period. Accordingly, current tax has been provided for at a rate of 28% and deferred tax has been provided for at a rate of 26% in these financial statements.
Further reductions to the main rate of corporation tax of 1% per annum to 23% by 1 April 2014 have been announced by the government but have not yet been substantively enacted, so their effect has not been reflected in these financial statements.
The proposed reductions of the main rate of corporation tax from 26% to 23% by 1 April 2014 are expected to be enacted separately each year. If the deferred tax liabilities of the UK were all to reverse after 2014, the effect of the reduction from 26% to 23% would be to reduce the net deferred tax liability by £0.17m. To the extent that the net deferred tax liability reverses more quickly than this, the impact of the rate reductions on the net deferred tax liability will be reduced.
The deferred tax balances shown on the balance sheet are:
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | |
| Deferred tax liabilities | 1,510 | 2,712 | 978 | 1,121 |
| Deferred tax assets | (853) | (1,530) | — | (45) |
| 657 | 1,182 | 978 | 1,076 |
| 2011 £000 |
2010 £000 |
|
|---|---|---|
| Allotted, called up and fully paid | ||
| 6,943,556 Ordinary shares of 25p each (2010: 6,943,556) | 1,736 | 1,736 |
The Company has one class of Ordinary shares which carry no right to fixed income.
The Group considers its capital to comprise its Ordinary share capital, share premium and accumulated retained earnings. In managing its capital, the Group's primary objective is to ensure its continued ability to provide a consistent return for its equity shareholders through a combination of capital growth and distributions.
In order to achieve this objective, the Group monitors its gearing to balance risks and returns at an acceptable level and also to maintain a sufficient funding base to enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt, the Group considers not only its short-term position but also its long-term operational and strategic objectives.
| (i) Share Premium and Retained Earnings | |
|---|---|
| ----------------------------------------- | -- |
| 52 weeks ended 3 April 2010 52 weeks ended 2 April 2011 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| At | At | At | |||||||
| 4 April | Income | Dividends | Other | 3 April | Income | Dividends | Other | 2 April | |
| 2009 Statement | paid movements | 2010 Statement | paid movements | 2011 | |||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| Group | |||||||||
| Share Premium | 829 | — | — | — | 829 | — | — | — | 829 |
| Profit and Loss | |||||||||
| Account | 29,450 | 628 | (459) | 11 | 29,630 | 1,209 | (583) | 18 | 30,274 |
| Adjustments | |||||||||
| arising out of | |||||||||
| consolidation: | |||||||||
| Goodwill | (1,533) | — | — | — | (1,533) | — | — | — | (1,533) |
| Exchange | |||||||||
| rates | 2,084 | — | — | 4,509 | 6,593 | — | — | 1,733 | 8,326 |
| Retained | |||||||||
| earnings | 30,001 | 628 | (459) | 4,520 | 34,690 | 1,209 | (583) | 1,751 | 37,067 |
| Company | |||||||||
| Share Premium | 829 | — | — | — | 829 | — | — | — | 829 |
| Retained | |||||||||
| earnings | 6,000 | 685 | (459) | 11 | 6,237 | 443 | (583) | 18 | 6,115 |
The profit of the Company for the year determined in accordance with the Companies Act 2006 was £443,000. (2010: profit of £685,000) The Company is exempt under Section 408 of the Companies Act 2006 from presenting its own Income statement.
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | |
| Balance at 3 April 2010 | — | — | — | — |
| Movement in year | 57 | — | 14 | — |
| Transfer from prior year accruals | 73 | — | 73 | — |
| Balance at 2 April 2011 | 130 | — | 87 | — |
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Profit on ordinary activities after taxation | 1,209 | 628 |
| Dividends | (583) | (459) |
| 626 | 169 | |
| Exchange differences on translation of foreign operations | 1,733 | 4,509 |
| Share based payment reserve | 130 | — |
| Deferred tax on share options | 18 | 11 |
| Net addition to shareholders' funds | 2,507 | 4,689 |
| Opening shareholders' equity | 37,255 | 32,566 |
| Closing shareholders' equity | 39,762 | 37,255 |
| Group | Company | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | |
| Operating profit from continuing operations | 2,418 | 1,780 | 461 | 773 |
| Adjustments for: | ||||
| — Depreciation charges | 2,865 | 2,720 | 69 | 69 |
| — Amortisation of intangible assets | 32 | 33 | — | — |
| — Goodwill impairment | 65 | — | — | — |
| — Share-based payment charge | 57 | — | 14 | — |
| — Loss/(profit) on disposal of property, plant and equipment | 13 | (10) | — | — |
| — Exchange rate difference on consolidation | 126 | 219 | — | — |
| Operating cash flows before movements in working capital | 5,576 | 4,742 | 544 | 842 |
| Decrease/ (increase) in working capital | (1,673) | 2,852 | 230 | 10 |
| Cash generated by operations | 3,903 | 7,594 | 774 | 852 |
| Interest paid | (505) | (549) | (134) | (123) |
| Income taxes paid | (893) | (416) | 4 | — |
| Net cash inflow from operating activities | 2,505 | 6,629 | 644 | 729 |
| At | Other | At | |||
|---|---|---|---|---|---|
| 3 April | non-cash | Exchange | 2 April | ||
| 2010 | Cash flow | changes | movement | 2011 | |
| £000 | £000 | £000 | £000 | £000 | |
| Cash | 906 | 654 | — | 66 | 1,626 |
| Bank loans payable less than one year and overdrafts | (4,380) | (1,112) | — | — | (5,492) |
| Cash and cash equivalents | (3,474) | (458) | — | 66 | (3,866) |
| Secured commercial bills | |||||
| — Payable more than one year | (1,808) | 971 | — | (133) | (970) |
| Finance leases and hire purchase agreements | |||||
| — Payable less than one year | (714) | 725 | (829) | (32) | (850) |
| — Payable more than one year | (1,144) | (202) | 829 | (10) | (527) |
| Net debt | (7,140) | 1,036 | — | (109) | (6,213) |
The Group's policy on Derivatives and Other Financial Instruments is set out in note 25 "Financial instruments".
During the year ended 2 April 2011, the Group's Australian operations benefited from government assistance under the SIP (Strategic Investment Programme) which was accounted for as follows:
| 2011 | 2010 | |
|---|---|---|
| £000 | £000 | |
| Deferred Income at 4 April 2010 | 2,144 | 1,282 |
| Total grant income in the year | 578 | 819 |
| Less: Grants related to income (taken to income and shown as Other Operating Income) | (41) | (75) |
| Less: Amortisation to deferred income by release through cost of production in the year | (447) | (277) |
| Exchange differences | 162 | 395 |
| Deferred income at 2 April 2011 | 2,396 | 2,144 |
| Presented in: | ||
| Current liabilities | 381 | 324 |
| Non-current liabilities | 2,015 | 1,820 |
| Deferred income at 2 April 2011 | 2,396 | 2,144 |
There are no unfulfilled conditions or other contingencies attaching to government assistance that has been recognised.
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout the financial statements.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.
The "financial instruments" which are affected by these risks comprise borrowings, cash and liquid resources used to provide finance for the Group's operations, together with various items such as trade debtors and trade creditors that arise directly from its operations, inter-company payables and receivables, and any derivatives transactions (such as interest rate swaps and forward foreign currency contracts) used to manage the risks from interest rate and currency rate volatility.
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives monthly reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:
The Group's principal financial assets are bank balances and cash, trade and other receivables and investments.
The Group's credit risk is primarily attributable to its trade receivables. Credit risk is managed locally by the management of each business unit. Prior to accepting new customers, credit checks are obtained from reputable external sources. The amounts presented in the balance sheet are net of allowance for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction on the recoverability of the cash flows.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.
The Company has no significant concentration of credit risk, other than with its own subsidiaries, the performances of which are closely monitored. The Directors confirm that the carrying amounts of monies owed by its subsidiaries approximate to their fair value.
Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
To achieve this aim, the cash position is continuously monitored to ensure that cash balances (or agreed facilities) meet expected requirements for a period of at least 90 days.
The Board monitors annual cash budgets and updated forecasts against actual cash position on a monthly basis. At the balance sheet date, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
The maturity of financial liabilities is detailed in note 17 'Other financial liabilities'.
Market risk arises from the Group's use of interest bearing and foreign currency financial instruments. It is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign exchange rates (currency risk).
The Group finances its operations through a mixture of retained profits, equity capital and bank facilities, including hire purchase and lease finance. The Group borrows in the desired currency at floating or fixed rates of interest and may then use interest rate swaps to secure the desired interest profile and manage exposure to interest rate fluctuations.
The annualised effect of a 50 basis point decrease in the interest rate at the balance sheet date on the variable rate debt carried at that date would, all other variables held constant, have resulted in an increase in post-tax profit for the year of £12,000. (2010: increase in post-tax profit £8,000). A 50 basis point increase in the interest rate would, on the same basis, have reduced profits by the same amount.
In respect of income-earning financial assets and interest bearing financial liabilities, the following table indicates their effective interest rates for the remaining contractual maturity based on the discounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.
| As at 2 April 2011 | As at 3 April 2010 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Effective Interest Rate % |
Total £000 |
0–1 years £000 |
1–2 years £000 |
2–5 years £000 |
Effective Interest Rate % |
Total £000 |
0–1 years £000 |
1–2 years £000 |
2–5 years £000 |
|||||
| Group | ||||||||||||||
| Cash and | ||||||||||||||
| equivalents | 0.97 | 1,626 | 1,626 | — | — | 0.99 | 906 | 906 | — | — | ||||
| Bank overdraft | ||||||||||||||
| and loans | 2.74 | (5,492) | (5,492) | — | — | 2.68 | (4,380) | (4,380) | — | — | ||||
| Commercial bills | 3.40 | (970) | — | (970) | — | 3.67 | (1,808) | (904) | (904) | — | ||||
| Finance lease | ||||||||||||||
| and HP | 6.22 | (1,377) | (553) | (239) | (585) | 5.65 | (1,858) | (664) | (246) | (948) | ||||
| 4.08 | (6,213) | (4,419) | (1,209) | (585) | 3.92 | (7,140) | (5,042) | (1,150) | (948) | |||||
| Company | ||||||||||||||
| Bank overdrafts | 2.65 | (3,689) | (3,689) | — | — | 2.65 | (3,750) | (3,750) | — | — |
An interest rate swap with a nominal value of £2.00m was taken out in July 2009 for a period of 2 years. The fixed rate payable is 2.65% for the period up until July 2011 against 3 month LIBOR receivable. The fair value of the swap entered into at 2 April 2011 was a liability of £18,030 compared to a liability of £50,574 at 3 April 2010. Net receipts or payments and movements in fair value are taken through the income statement as "finance costs".
Details of trade and other payables falling due within one year are set out in note 16.
The main currency exposure of the Group arises from the ownership of the Australian subsidiary, which accounts for approximately 66% of the Group's net assets. The Group has a less significant exposure to Euros arising from the ownership of the Irish subsidiary.
It is the Board's policy not to hedge against movements in the Sterling/Australian exchange rate beyond the natural hedge of maintaining a proportion of the Group's borrowings in Australian dollars.
Other currency exposure derives from trading operations where goods are exported or raw materials and capital equipment are imported. These exposures may be managed by forward currency contracts, particularly when the amounts or periods to maturities are significant and at times when currencies are particularly volatile.
The effect of a 10% strengthening of the Australian dollar against Sterling over the full year would, all other variables held constant, have resulted in an increase in Group post-tax profit for the year of £256,000. (2010: increase of £172,000). A 10% weakening in the exchange rate would, on the same basis, have decreased Group post-tax profit by £209,000 (2010: decrease £141,000).
The effect of a 10% strengthening of the Australian dollar against Sterling at year-end rates would have resulted in an increase to equity of £2,892,000 (2010: An increase of £2,515,000). A 10% weakening in the exchange rate would, on the same basis, have decreased equity by £2,366,000 (2010: A decrease of £2,058,000).
The effect of a 10% strengthening of the Euro against Sterling over the full year would, all other variables held constant, have resulted in a decrease in Group post-tax profit for the year of £79,000. (2010: decrease of £46,000). A 10% weakening in the exchange rate would, on the same basis, have increased Group post-tax profit by £64,000 (2010: increase £37,000).
The effect of a 10% strengthening of the Euro against Sterling at year-end rates would have resulted in an increase to equity of £30,000 (2010: An increase of £113,000). A 10% weakening in the exchange rate would, on the same basis, have decreased equity by £25,000 (2010: A decrease of £93,000).
The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:
| Liabilities | Assets | |||
|---|---|---|---|---|
| 2011 | 2010 | 2011 | 2010 | |
| £000 | £000 | £000 | £000 | |
| Euro | 876 | 618 | 1,161 | 1,629 |
| Australian dollar | 12,259 | 12,453 | 38,286 | 35,087 |
It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken.
In applying the Group's accounting policies, appropriate estimates have been made in a number of areas and the actual outcome may vary from the position described in the Group's and Company's balance sheets at 2 April 2011. The key sources of uncertainty at the balance sheet date that may give rise to a material adjustment to the carrying value of assets and liabilities within the next financial year are as follows:
Deferred tax assets are recognised at the balance sheet date based on the assumption that there is a high expectation that the asset will be realised in due course. This assumption is dependent on Australia's ability to generate sufficient future taxable profits.
A proportion of inventory is made up of stocks which are not expected to sell for the full normal selling price, either because they are remnants, come from discontinued ranges, or are below the required quality standard. This inventory is carried at a value which reflects the directors' best estimates of achievable selling prices. The carrying amount of inventories carried at fair value less costs to sell amounted to £821,000 (2010: £930,000). During the year, provisions relating to these stocks decreased by £43,000 (2010: a decrease of £213,000).
Details of the provision made for non-recoverability of debts due to the Group from the sale of goods are set out under note 15.
The Group has a Long-Term Incentive Plan (LTIP) which was established in 2008 and entitles Executive Directors to purchase shares in the Company subject to achievement of specific performance conditions. Details of the LTIP, including performance conditions, are set out in the Directors' Remuneration Report on Page 31.
| Weighted average | |||||
|---|---|---|---|---|---|
| Number of Shares | exercise price (p) | ||||
| 2011 | 2010 | 2011 | 2010 | ||
| LTIP: | |||||
| At start of period | 1,034,166 | 512,828 | 149.3 | 127.5 | |
| Granted during the period | 206,192 | 521,338 | 236.0 | 170.8 | |
| Exercised during the period | — | — | — | — | |
| Lapsed | (512,828) | — | — | — | |
| Outstanding at end of the period | 727,530 | 1,034,166 | 189.3 | 149.3 | |
| Exercisable at end of the period | — | — | — | — |
The options outstanding at 2 April 2011 had a weighted average exercise price of 189.3p and a weighted average remaining contractual life of 2 years. In the year ended 2 April 2011, options were granted in December 2010. The aggregate of the estimated fair value of the options granted in the current financial year is £118,000. In the year ended 3 April 2010, options were granted in July 2009. The aggregate of the estimated fair values of the options granted in the prior year is £217,000.
The total stock option expense recognised in the year is £57,000 (2010: £33,000).
The fair value of the LTIP rights are calculated at the date of grant using the Black–Scholes model. The inputs into the Black–Scholes are as follows:
| 2011 | 2010 | |
|---|---|---|
| Weighted average exercise price (pence) | 189.3 | 149.3 |
| Expected volatility | 40.8% | 40.8% |
| Expected life | 5 years | 5 years |
| Risk-free interest rate | 2.6% | 2.6% |
| Expected dividend yields | 5.0% | 5.0% |
Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous five years. The expected useful life in the model has been adjusted, based on Management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Transactions between the Company and its subsidiaries have been eliminated on consolidation.
The Group has a related party relationship with its associate and its Directors and executive officers.
The Company has a related party relationship with its associate, its subsidiaries and its directors and executive officers.
Key management personnel are considered to be the directors of the Company and its subsidiaries.
As at 2 April 2011, the key management personnel, and their immediate relatives controlled 1.2% of the voting shares of the Company.
The remuneration of the key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS24 Related Party Disclosures.
| Group | ||
|---|---|---|
| 52 weeks | 52 weeks | |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Short-term employee benefits | 1,521 | 1,289 |
| Post-employment benefits | 223 | 237 |
| Share based payments | 57 | 33 |
| 1,801 | 1,559 |
Transactions with associated company:
| Group | Company | ||||
|---|---|---|---|---|---|
| 52 weeks | 52 weeks | 52 weeks | 52 weeks | ||
| 2 April | 3 April | 2 April | 3 April | ||
| 2011 | 2010 | 2011 | 2010 | ||
| £000 | £000 | £000 | £000 | ||
| Management charges | — | 88 | — | 88 | |
| Dividend income | — | — | — | — | |
| Sale of goods | 261 | 239 | — | — | |
| 2 April | 3 April | 2 April | 3 April | ||
| 2011 | 2010 | 2011 | 2010 | ||
| £000 | £000 | £000 | £00 | ||
| Amounts due from associated undertakings | 210 | 179 | 88 | 88 |
Transactions with subsidiary undertakings:
| Company | ||
|---|---|---|
| 52 weeks | 52 weeks | |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Dividend income — The Victoria Carpet Company Pty Limited | 649 | 722 |
| Rental income — Victoria Carpets Limited | 658 | 658 |
| 2 April | 3 April | |
| 2011 | 2010 | |
| £000 | £000 | |
| Amounts due from subsidiary undertakings | 4,864 | 4,993 |
| Amounts due to subsidiary undertakings | 4 | 3 |
| 52 weeks | 52 weeks | 53 weeks | 52 weeks | 52 weeks | ||
|---|---|---|---|---|---|---|
| 2 April | 3 April | 4 April | 29 March | 31 March | ||
| 2011 | 2010 | 2009 | 2008 | 2007 | ||
| £000 | £000 | £000 | £000 | £000 | ||
| Results of continuing operations | ||||||
| Revenue | 70,503 | 62,973 | 62,150 | 61,701 | 55,426 | |
| EBITDA | 5,380 | 4,533 | 4,639 | 6,521 | 5,638 | |
| Depreciation and amortisation | (2,962) | (2,753) | (2,411) | (2,327) | (2,253) | |
| EBIT | 2,418 | 1,780 | 2,228 | 4,194 | 3,385 | |
| Share of results of associated company | (22) | (127) | 2 | 78 | 104 | |
| Finance costs | (472) | (565) | (768) | (763) | (727) | |
| Trading profit | 1,924 | 1,088 | 1,462 | 3,509 | 2,762 | |
| Profit before tax | 1,924 | 1,088 | 1,462 | 3,509 | 2,762 | |
| Tax | (715) | (460) | (1,073) | (972) | (754) | |
| Profit attributable to shareholders | 1,209 | 628 | 389 | 2,537 | 2,008 | |
| Dividend attributable to the period | 625 | 556 | 556 | 972 | 868 | |
| ASS ETS EMPLOYED |
||||||
| Operating assets | ||||||
| Non-current assets | 27,593 | 28,636 | 27,699 | 26,099 | 24,986 | |
| Net current assets (note a) | 21,668 | 19,366 | 19,464 | 16,667 | 16,121 | |
| Non-current liabilities | (3,268) | (3,556) | (3,129) | (2,593) | (2,435) | |
| 45,993 | 44,446 | 44,034 | 40,173 | 38,672 | ||
| Financed by | ||||||
| Share capital and premium | 2,565 | 2,565 | 2,565 | 2,565 | 2,565 | |
| Retained reserves | 37,197 | 34,690 | 30,001 | 29,998 | 26,418 | |
| Shareholders' funds | 39,762 | 37,255 | 32,566 | 32,563 | 28,983 | |
| Net borrowings | 6,231 | 7,191 | 11,468 | 7,610 | 9,689 | |
| 45,993 | 44,446 | 44,034 | 40,173 | 38,672 | ||
| ANAL YSIS |
||||||
| Return on operating assets | % | 5.21 | 3.72 | 5.06 | 10.63 | 9.02 |
| Return on shareholders' funds | % | 4.84 | 2.92 | 4.49 | 10.78 | 9.53 |
| Earnings per share (basic) | p | 17.4 | 9.0 | 5.6 | 36.5 | 28.9 |
| Earnings per share (basic adjusted) | p | 18.3 | 9.0 | 15.0 | 36.5 | 28.9 |
| Dividend per share attributable to the period | p | 9.0 | 8.0 | 8.0 | 14.0 | 12.5 |
| Dividend cover (basic) | times | 1.93 | 1.13 | 0.70 | 2.61 | 2.31 |
| Dividend cover (adjusted) | times | 2.04 | 1.13 | 1.87 | 2.61 | 2.31 |
(a) Excluding net debt, but including fair value of financial instruments where applicable.
The Annual Report, Company announcements and other information are available on the Group's website at: www.victoriaplc.com.
If you have any queries in relation to the following:
Or any other query relating to Victoria PLC shares, please contact the Company's registrars whose details are as follows:
Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU Telephone: 0871 664 0300 (calls cost 10p/minute plus network extras). Overseas: +44 20 8639 3399 www.capitaregistrars.com
Preliminary results Wednesday, 15 June 2011 Annual General Meeting Tuesday, 2 August 2011 Interim management statement 2 August 2011 Half year results November 2011 Interim management statement January/February 2012
Final dividend
Our registrars have the facility to pay shareholders' dividends directly into their bank accounts, instead of receiving the dividend payment by cheque. They are also able to convert dividend payments into local currency and send the funds by currency draft or, again, if preferred, pay them straight into a bank account.
More information on the above services can be obtained from Capita Registrars or downloaded from the Group's website: www.victoriaplc.com/victoriaplc/investors/downloads/
One-to-one meetings and group presentations are offered to analysts and institutional investors, usually following the announcement of the Group's results or trading announcements. These presentations are also posted on our website to allow all shareholders access to the material. We will always consider any additional requests for meetings or information, subject always to our obligation to ensure that information of a potentially price sensitive nature is first released via a stock exchange announcement.
Company announcements are posted on our website and e-mail alerts are sent out simultaneously to those who have registered on our distribution list.
— ex dividend Wednesday, 22 June 2011 — payable Thursday, 11 August 2011
— payable December 2011
In order to buy or sell shares in the Company, you will need to contact a stockbroker. Most high street banks offer a stockbroking service, as do the Company's corporate brokers: Arden Partners plc, who is regulated by the Financial Services Authority and is a member of the London Stock Exchange.
The Company's share price is listed in the Financial Times.
The current market price of the Company's shares can be viewed on the London Stock Exchange website: www.londonstockexchange.com (VCP) and share price information is also available on the Group's website at www.victoriaplc.com.
(as at 14 June 2011)
| Number of | Number of | % of | |
|---|---|---|---|
| Number of shares | holders | shares | total shares |
| 1–150 | 51 | 2,698 | 0.04% |
| 151–500 | 106 | 36,808 | 0.53% |
| 501–1,000 | 92 | 80,337 | 1.16% |
| 1,001–10,000 | 202 | 682,297 | 9.83% |
| 10,001–50,000 | 40 | 1,023,112 | 14.73% |
| 50,001–100,000 | 7 | 493,368 | 7.10% |
| 100,000+ | 17 | 4,624,936 | 66.61% |
| 515 | 6,943,556 | 100.00% |
Details of substantial shareholders with material interests in more than 3% of the issued Ordinary share capital of the Company are as set out on page 32 of the Directors' Report.
The Company's Articles of Association allow for electronic communications with its shareholders. It is the Company's intention to use a phased approach to adopting this form of communication with its shareholders. Please see the Company's website for future updates.
The Company is legally obliged to make its share register publicly available and, as a consequence, some shareholders may receive unsolicited mail. If you wish to limit the amount of unsolicited mail you receive, you can register free of charge with the Mailing Preference Service:
Mailing Preference Service (MPS) DMA house, 70 Margaret Street, London, W1W 8SS Tel: 0845 703 4599 www.mpsonline.org.uk
Shareholders with a small number of shares, the value of which makes them uneconomical to sell, may wish to consider donating them to charity through "ShareGift", a registered charity (1052686) who aggregates and sells these parcels of donated shares, giving the proceeds to a wide range of UK charities. A ShareGift donation form can be obtained from Capita Registrars, details of which are found above.
Further information about ShareGift can be found on their website: www.sharegift.org or by writing to: ShareGift, 17 Carlton House Terrace, London SW1Y 5AH. Telephone: 020 7930 3737
Worcester Road 282204 Kidderminster Worcestershire DY10 1JR
Victoria PLC Registered office Company Registered No. (England & Wales)
| AGM | Annual General Meeting |
|---|---|
| BSI18001:2007 | Occupational health and safety management systems |
| CIPD | Chartered Institute of Personnel and Development |
| Combined Code | The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability, audit and relations with shareholders |
| Corporate Governance | The system by which an organisation is directed and controlled |
| CSR | Corporate Social Responsibility |
| EBIT | Earnings before interest and tax |
| EBITDA | Earnings before interest, tax, depreciation and amortisation |
| EPS | Earnings Per Share — profit for the period divided by the total number of shares in issue |
| H1/H2 | First half/second half of the financial year |
| IAS | International Accounting Standards |
| IFRS | International Financial Reporting Standards |
| ISO14001 | An international standard for environmental management systems |
| LTIP | Long-Term Incentive Plan |
| KPIs | Key Performance Indicators used to assess business performance |
| Net Gearing | Debt as a percentage of debt plus equity |
| OH&S | Occupational Health & Safety |
| PBT | Profit before taxation |
| PSP | Performance Share Plan |
| Q1/Q2/Q3/Q4 | Quarters of the financial year |
| ROA | Return On Operating Assets — operating profit divided by the operating assets employed |
| A & D Community | Architect and Design Community |
Manufacture, distribution and sale of carpets Kidderminster, UK Alan Bullock (Chairman and Managing) Terry Danks Shaun Lewis Neil Glover
The Victoria Carpet Company Pty Limited
Sale of carpets Dublin, Ireland Sean Kelly (Managing) Alan Bullock Terry Danks
Manufacture and sale of carpets Dandenong, Australia Michael Oakley (Non-executive Chairman) Barry Poynter (Managing) Anne Seymour Alan Bullock Michael Davies (Non-executive)
Manufacture and sale of carpet yarns Holmfirth, UK Alan Bullock (Chairman) Trevor Chippendale (Managing) Neil Gledhill Terry Danks
Distributors of carpets and rugs Vancouver, Canada Ian Davies (Chairman) Chris Dragan (President) Alan Goldberg Ken Metrick Anne Seymour
| Preliminary results announcement | 15 June 2011 |
|---|---|
| Annual General Meeting | 2 August 2011 |
| Interim management statement | 2 August 2011 |
| Half-year results | November 2011 |
| Interim management statement | February 2012 |
Victoria PLC Worcester Road DY10 1JR
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