Walker Greenbank - Preliminary Results

RNS Number:0201S
Walker Greenbank PLC
10 April 2008

For immediate release 10 April 2008

A briefing for analysts will be held at 10am on the morning of the results, 10
April 2008, at the offices of Buchanan Communications, 45 Moorfields, London
EC2Y 9AE. Please phone 020 7466 5000 for further details.

WALKER GREENBANK PLC

("Walker Greenbank" or "the Company")

Preliminary Results for the 12 months ended 31 January 2008

Walker Greenbank plc (AIM: WGB), the luxury interior furnishings Group whose
brands include Sanderson, Morris & Co., Harlequin and Zoffany, is pleased to
announce its preliminary results for the 12 month period ended 31 January 2008.

Highlights

• The Group's organic growth strategy delivers another year of excellent
progress
• Revenue up 15% to £62.45 million (2007: £54.37 million)
• Operating profit up 60% to £3.96 million (2007: £2.48 million before
exceptional credit)
• Profit before taxation up 119% to £3.10 million (2007: £1.42 million
excluding exceptional credit of £1.28 million)
• Earnings per share of 14.49p (2007: 4.67p). Adjusted earnings per share
5.44p after excluding deferred tax credit of £5.10 million (2007: 2.41p
after excluding exceptional credit of £1.28 million)
• Gearing reduced to 35% (2007: 66%) with Shareholders' Funds increased to
£20.80 million (2007: £12.94 million)

Ian Kirkham, the Chairman of Walker Greenbank, said: "We are confident that our
strategy will deliver growth in both revenue and profits in the coming years.
Two months of our current financial year are now completed, during which time
the Group has continued to trade strongly. We remain confident of a very
satisfactory outcome for the year."

For further information:
Walker Greenbank PLC 08708 300077
John Sach, Chief Executive
Alan Dix, Finance Director
Julian Wilson, Company Secretary

Landsbanki Securities (UK) Limited 020 7426 9000
Mark Dickenson / Tom Hulme

Buchanan Communications 020 7466 5000
Mark Court / Suzanne Brocks / Miranda Higham

CHAIRMAN'S STATEMENT

Overview

It gives me great pleasure to report another year of excellent progress. The
sustained strength of our brands, the quality of our niche manufacturing and
favourable market conditions have resulted in revenue growth of 15%. Operational
gearing has translated this growth into a 60% increase in operating profit to
£3,961,000 before exceptional items.

We have made considerable progress in delivering our key strategic organic
growth objectives. Our brand sales have grown 17% in the UK retail markets and
have added 17% in Europe and the Rest of the World. Our US business, which is
still a relatively small part of our Group, has grown 2%, equivalent to 13% in
local currency. Particularly encouraging is the 58% increase achieved in our
fledgling contracts business. Finally our manufacturing units have continued to
gain market share, growing their third party revenues by 8%.

All our brands, which include Harlequin, Sanderson (including Morris & Co.) and
Zoffany, have performed strongly. Our Harlequin brand has further reinforced its
position as the pre-eminent brand in the mid-market. Continued heavy investment
in new product and marketing has helped both revenue and profits to grow
further. Sustained investment in product and marketing since we acquired
Sanderson, our globally recognised brand, has helped to accelerate its revenue
growth and achieve a substantial improvement in profits. Having successfully
re-established Zoffany as a leading brand in the premium end of the market,
focused product investment in this and prior years has helped achieve strong
revenue growth and a substantial improvement in profits. Continued investment in
our Manhattan-based business in the United States has helped to increase
revenues in local currency. However, the weak dollar and testing market
conditions mean that the business continues to make a small loss. We remain
confident that there is considerable medium to long term growth potential for
the Group in this important market.

Anstey, our wallpaper factory in Loughborough, continues to benefit from the
growing popularity of wallpaper. The limited manufacturing capacity at the mid
to premium end of the market and high barriers to entry, combined with its
continued commitment to investment in factory efficiency and improved service to
our customers, have helped the business grow its revenue and improve profits
threefold. Standfast, our fabric printing factory based in Lancaster, continues
to invest in factory efficient capital equipment, however slightly tougher
market conditions have led to a small fall in revenue and profits over the same
period last year.

Financials

The financial results have been prepared under International Financial Reporting
Standards (IFRS) and the effect on the Group's results of adopting these
standards has been minimal.

Revenues increased 15% to £62,448,000 from £54,369,000 last year. The underlying
operating profit for the year increased 60% to £3,961,000 (2007: £2,481,000).
Profit before tax increased 15% to £3,099,000 (2007: £2,694,000). Underlying
profit before tax after adjusting for an exceptional pension credit included in
last year of £1,276,000 increased 119%. Profit after tax increased to £8,171,000
(2007: £2,636,000) with the inclusion of a deferred tax credit of £5,101,000
(2007: Nil). This has been recognised as the Group is now confident of utilising
the historical taxable losses by delivering sustainable taxable profits into the
foreseeable future.

The earnings per share were 14.49p (2007: 4.67p) reflecting the recognition of
the deferred tax credit. An adjusted earnings per share that excludes the
benefit of the deferred tax credit would be 5.44p (2007: 2.41p). The exceptional
profit from the pension deficit reduction exercise of £1,276,000 has been
excluded in the adjusted 2007 earnings per share.

The Group's net indebtedness at the year end was £7,289,000 (2007: £8,604,000).
This represents a reduction in gearing to 35% (2007: 66%). The cash inflow from
operating activities was £3,542,000 (2007: £2,276,000). Shortly before the year
end, the Group purchased 1,415,093 of the Company's shares on the open market
for a total amount of £612,000 in order to satisfy awards made in May 2007 under
the long term incentive scheme.

Dividend

The Directors do not recommend the payment of a dividend at this point in time.
We remain focused on further cash generation, reducing our gearing and pension
deficit whilst remaining alert to both organic and acquisition growth
opportunities as they arise.

People

On 19 September 2007 Terry Stannard joined the Board as a Non-Executive
Director. His broad business experience, particularly of marketing and
international business, will be of great value to the Group in future years.

On 12 February 2008, Charles Gray, a Non-Executive Director, retired from the
Board. I would like to thank Charles for his input to Walker Greenbank's Board
and to wish him well for his retirement.

I would like to thank all our employees for their continued support. Their
commitment and enthusiasm have contributed significantly to the improvement in
shareholder value.

Outlook

Our Group is now firmly established as a profitable cash generative business,
with a strengthening balance sheet. Our premium end brands, supported by our
niche manufacturing, contribute to our position as a market leader in the luxury
interior furnishings market. We are particularly well positioned to take
advantage of the growing trend towards colour and design in both fabrics and
wallpaper.

John Sach in his Chief Executive Review highlights the range of strategic growth
opportunities the Group is pursuing to increase its presence in the world wide
luxury interiors furnishings market. We are confident that our strategy will
deliver growth in both revenue and profits in the coming years. Two months of
our current financial year are now completed, during which time the Group has
continued to trade strongly. We remain confident of a very satisfactory outcome
for the year.

Ian Kirkham
Non-Executive Chairman
10 April 2008

CHIEF EXECUTIVE'S REVIEW

I am delighted to provide a review of the Group's progress in the year to
January 2008, a transformational period in the Group's development. Looking
back, the year to January 2007 was a year in which we successfully achieved the
Group's recovery, fully restoring its financial stability and creating a solid
platform for future growth. The year to January 2008 was a year in which we
built on the recovery of 2007 by making excellent progress in executing our
strategy of delivering earnings growth by exploiting the organic growth and
other opportunities that exist within the Group as a result of the strength of
the Group's brand assets.

Strategy

The cornerstone of our strategy is our significant investment in the design and
marketing of exciting new product for our four brands. This commitment to our
brands has fuelled our sales growth to date and underpins our growth strategy,
which comprises five key elements:

•Organic growth - to continue to exploit the organic growth opportunities
that exist for our Group in the UK retail market;

•Geographic expansion - to invest in marketing and distribution in the
North American market, where our Group is currently immature relative to our
peers, and to focus on the distribution and marketing of our brands in
Europe and the Rest of the World, where again as a Group we are presently
underdeveloped;

•Contract sales - to drive the expansion of our fledgling contracts
business through further investment in people and contract specific product
supported by the strength of our brand names and our manufacturing
capability, predominantly focusing at the mid to upper end of the contract
market;

•Licensing income - to exploit the global recognition of the Sanderson and
Morris & Co. brand names to develop further licensing arrangements; and

•Acquisitions - to evaluate acquisition opportunities that may fit with
our current brand portfolio and potentially provide synergistic and earnings
enhancing opportunities.

The Brands

Harlequin

The Harlequin brand has continued its impressive financial performance, growing
its sales in the year by 16%, the third successive year of double digit sales
growth, further re-enforcing its position as the pre-eminent brand in the UK
mid-market. The sales growth was driven by woven product, up 24%, and wallpaper,
up 6%; printed fabric sales have remained essentially flat year-on-year. Sales
growth was broadly similar in both the home and export markets.

Following the launch of an extensive range of product specifically for the
contract market, and supported by the expansion of the contracts business,
contract sales have grown 92% in the year. Harlequin continues to increase its
product offer through the continual launch of new and innovative product. It is
also investing significantly in marketing and advertising to promote the
product. This investment combined with the sales growth and maintained margins
helped improve operating profit by 15%.

Zoffany

As reported in the first half, the focusing of the brand on its core and
traditional design values is now essentially complete. The brand has
re-established itself within the design community and its newly launched ranges
are performing strongly. The renewed recognition of the brand by the design
community has re-invigorated the sales of older collections, which, combined
with the strength of the new collections, has helped grow sales year on year by
24%. The growth has been led by wallpaper and woven fabric, both up 27%, with
printed fabric up only 1%. Sales in the UK were up 27% and export sales were up
20%, both helped by the Group's focus on contract sales, which were up 25%. The
sales growth and improving margins, combined with significant investment in
product development and marketing, has helped Zoffany improve from a break even
position last year to a 5% operating profit for the year to January 2008.

Arthur Sanderson & Sons incorporating the Morris & Co. brand

Following significant investment in product, sales of the Sanderson brand have
gathered momentum, underpinned by the brand's unrivalled global recognition.
Sales have grown 22% with growth across all product categories led by woven
fabric, up 49%, wallpaper up 17% and printed fabric up 9%. Geographically sales
were up equally in the UK and export markets, with both markets helped by a 31%
increase in contract sales. New licence arrangements have been signed in
tableware and stationery. However, licence income during the year fell due to
tougher trading conditions in Australasia and a lower sterling return from Japan
due to the weakness of the Yen. Overall, sales growth at Sanderson and Morris &
Co., along with significantly increased product development and marketing and
improving margins have helped to deliver a more than six-fold increase in
operating profit.

Manufacturing

We have two freehold printing facilities in the UK: Anstey, our wallpaper
factory in Loughborough; and Standfast, our fabric printing factory in
Lancaster. Both factories offer highly specialised printing, and their UK
location brings benefits including the ability to print very short runs and easy
accessibility for UK designers to visit the factories' during print work. In
addition to printing the wallpaper and fabrics for the Group's own brands, the
factories print for third party customers.

Anstey

Anstey has further consolidated its position as market leader in UK wallpaper
manufacture in the mid to premium end of the market. Its continued commitment to
investment in factory efficiency and improved service to its customers, combined
with limited competition and high barriers to entry, have helped grow Anstey's
overall sales 19%. Third party sales grew 38%, as more customers seek to satisfy
mounting consumer demand for wallpaper. Group sales grew 5% and third party
sales now account for half of Anstey's overall turnover. The growing turnover,
improved factory efficiencies and tight overhead cost control helped Anstey more
than treble its operating profit.

Standfast

Standfast has experienced challenging market conditions during the year. The
move in fashion trends in the interior design market towards colour and design
have not yet fed through into the print market. Fewer print collections this
year than last led to a reduction in Group revenue of 2%. Third party sales also
declined by 4%, giving an overall reduction in total sales of 3%. The lower
activity this year put pressure on factory throughput and led to a reduction in
margins and a subsequent decline in overall profits year on year. Whilst this
market remains difficult at the moment we are confident that fashion trends will
eventually redress this situation and we continue to invest in capital equipment
to improve factory efficiency.

Overseas

USA

Overall reported sales increased year on year by only 5%. However, when
adjusting for the currency movement due to the weakness of the dollar sales were
up 13%. This improvement was driven predominantly by Harlequin. The second half
of the year proved more difficult than the first, due to the well documented
economic conditions in the US. The US still forms a relatively small part of the
overall Group and despite testing market conditions we continue to invest
strongly in marketing, patterning and sample support, as we firmly believe in
the medium to long term potential of this market. This continued investment
means that we still continue to lose money in the US. However, it is important
to recognise that overall, with the sales from the UK to the US subsidiary and
the downstream manufacturing, the US business is still an important profit
contributor to the Group.

Europe

The Group's distribution businesses in Rome and Paris grew their combined
revenue 4% and returned a small operating profit. During the year, we employed
an experienced European development director and are currently strategically
reviewing the way we do business in this important marketplace. Relative to our
peer group our overall sales are low and we strongly believe that this market
offers great potential for the Group in the future.

Summary

All of our brands continue to perform strongly. The considerable investment we
have made in product and marketing in recent years places us in a strong
position to exploit both the continuing and new business opportunities that
exist within the Group. We remain confident about the future progress the Group
will make.

John Sach
Group Chief Executive
10 April 2008

FINANCIAL REVIEW

(Extracted from the Finance Review)

Income Statement and Exceptional Items

The Chairman's Statement and Chief Executive Review provide an analysis of the
key factors contributing to the continued improvements in operating profit and
profit before taxation. In addition to the information on our brands and
production facilities included in these reports, the Group has included in note
2 of this announcement, information on our business segments, as required by
International Financial Reporting Standards (IFRS).

Both the 2008 and 2007 results are impacted by exceptional items. In the year to
January 2008 the Group has recognised a deferred tax asset of £5,101,000 as the
Group is confident of utilising historical corporation tax losses as a result of
foreseeable sustainable future profits. Last year there was an exceptional
profit of £1,276,000 arising from the pension deficit reduction exercise. Both
items have enhanced the basic earnings per share (EPS), but are removed in the
analysis of adjusted EPS discussed below, to enable better comparison of the
underlying performance of the Group.

Earnings per share ('EPS')

The basic and diluted EPS was 14.49p (2007: 4.67p). The underlying EPS was 5.44p
for the current year (2007: 2.41p), and is reconciled to basic and diluted as
follows:

2008 2007
£000 £000

Profit after tax per the accounts 8,171 2,636
Exclude exceptional benefit pension deficit reduction
exercise - (1,276)
Exclude the recognition of deferred tax (5,101) -
Adjusted Profit after tax 3,070 1,360

Adjusted EPS 5.44p 2.41p

The number of shares in issue remained constant, however, on 16 January 2008
700,000 shares were purchased and brought into Treasury and on 17 January 2008
715,093 shares were purchased and also brought into Treasury. The weighted
average number of shares reduced to 56,397,000 for the year ended 31 January
2008 from 56,457,000 in the year ended 31 January 2007.

Disposals

There were no major disposals during the year.

Interest

The interest charge for the year was £981,000 (2007: £964,000) including
amortisation of debt issue costs capitalised.

Net pension related income during the year was £119,000 (2007: charge £99,000).
This is a consequence of the significant reduction in the gross pension
liability compared with the previous year.

Current Taxation

There is a small corporation tax charge arising from the taxable profits at the
Italian subsidiary. The Group continues to review the overseas tax position to
ensure every opportunity is considered to minimise the amount incurred.

Deferred Taxation

During the year the Group has recognised a deferred tax credit of £5,101,000
predominantly arising from corporation tax losses incurred in prior years. The
asset has been recognised this year as the Group is now confident of a
sustainable future profit stream.

Due to the substantial nature of these corporation tax losses (£23 million) the
Group does not anticipate incurring or paying UK corporation tax for the
immediate future. However, as the majority of the corporation tax losses have
now been recognised as a deferred tax asset in future years there will be a
deferred tax charge in the Income Statement until such time as the deferred tax
asset has been fully utilised at which point the Group will incur and pay UK
corporation tax.

The Group also continues to recognise the deferred tax asset arising from the
Pension Deficit. As the Pension Deficit has reduced during the year the
reduction of the associated deferred tax asset has been recognised.

Operating Cash Flow

The Group generated net cash inflow from operating activities during the year of
£3,542,000 (2007: £2,276,000). It paid interest of £956,000 (2007: £913,000) and
capital expenditure of £1,674,000 (2007: £1,444,000). The depreciation and
amortisation charge during the period continued to be greater than required
capital expenditure.

The Group made additional payments to the Pension schemes of £1,059,000 (2007:
£898,000) to reduce the deficit, part of the ongoing planned reduction.

The Group purchased 1,415,093 shares at a cost of £612,000 in order to satisfy
awards made in May 2007 under the Long Term Incentive Plan.

Net debt in the Group has reduced by £1,315,000 to £7,289,000 (2007:
£8,604,000).

Pension Deficit

The pension deficit has reduced further this year. The key factors affecting the
movement in the deficit have been; firstly ongoing contributions of £1,290,000
from the Company to reduce the deficit; secondly a reduction in the liabilities
of the scheme arising from the increase in discount rates during the year and
lastly the adoption of PA92 with medium cohort mortality tables which has
increased the deficit. The impact of these factors is shown as follows:

2008
£000
Deficit at beginning of period (5,518)
Current service cost (231)
Other finance income 350
Contributions 1,290
Impact of mortality tables (2,868)
Actuarial gains primarily from the change in
discount factor 3,568
Gross deficit at the end of the year (3,409)

Long-Term Incentive Plan

A conditional award of shares was granted to the executive Directors and certain
employees under the Long-Term Incentive Plan ("LTIP") on 28 May 2007. There has
been a charge of £429,000 (2007: £143,000) in the Income Statement for this and
previous awards.

Gearing

The gearing level for the Group fell during the year to 35% at 31 January 2008
(2007: 66%).

Funding

The Group utilises facilities provided by Barclays Bank Plc. The facilities were
put in place on 17 July 2007 replacing previous facilities from another
provider. There is a property facility available over a ten year period. There
is also a facility linked to working capital which allows the Group to manage
its cash more effectively during the seasonal fluctuations in working capital
associated with the industry in which the Group operates. This facility has an
initial 3 year term. The total facilities have a limit of £17.0m.

All of the Group bank facilities remain secured by first fixed and floating
charges over the Group's assets.

IFRS

The Group has adopted IFRS for the year ended 31 January 2008 and restated the
comparative results for the prior year. The impact of adopting IFRS has been
limited. A Restatement document was issued on 28 September 2007 giving full
details of the impact of the adoption.

Alan Dix

Group Finance Director

10 April 2008

Unaudited Consolidated Income Statement

For the year ended 31 January 2008

Note

2008 2007
£000 £000

Revenue 62,448 54,369
Profit from operations - before exceptional
items 3 3,961 2,481
- exceptional items 4 - 1,276
Operating profit 3,961 3,757

Net pension income / (charge) 6 119 (99)
Net finance costs 5 (906) (898)
Amortisation of issue costs 5 (75) (66)
(862) (1,063)
Profit before taxation 3,099 2,694
Deferred tax - exceptional 7 5,101 -
Current taxation 7 (29) (58)
Total tax credit/(charge) 5,072 (58)
Profit for the year 8,171 2,636
Earnings per share - Basic and diluted 9 14.49p 4.67p

Unaudited Consolidated Balance Sheet

As at 31 January 2008

Note 31 January 31 January
2008 2007
£000 £000

Non-current assets
Intangible assets 5,833 5,969
Property, plant & equipment 8,991 8,864
Deferred income tax assets 8 6,055 1,637
Trade and other receivables 253 265
21,132 16,735
Current assets
Inventories 12,546 12,135
Trade and other receivables 13,475 11,251
Cash and cash equivalents 10 2,017 2,065
28,038 25,451
Total assets 49,170 42,186
Current liabilities
Borrowings 10 (400) (596)
Derivative financial instruments (110) -
Trade and other payables (15,546) (13,056)
(16,056) (13,652)
Net current assets 11,982 11,799
Non-current liabilities
Borrowings 10 (8,906) (10,073)
Retirement benefit obligation 12 (3,409) (5,518)
(12,315) (15,591)
Total liabilities (28,371) (29,243)
Net assets 20,799 12,943
Equity
Share capital 13 590 590
Share premium account 13 457 457
Foreign currency translation reserve 13 10 (17)
Retained earnings 13 (20,655) (28,594)
Other reserves 13 40,397 40,507
Total Equity 20,799 12,943

Unaudited Consolidated Cash Flow Statement

For the year ended 31 January 2008

Note Year to Year to
31 Jan 2008 31 Jan 2007
£000 £000

Cash flows from operating activities
Cash generated from operations 11 4,623 3,219
Interest paid (956) (913)
Debt issue costs (123) -
Interest received 5 20
Income tax paid (7) (50)
3,542 2,276
Cash flows from investing activities
Purchase of intangible fixed assets (365) (276)
Purchase of property, plant & equipment (1,309) (1,168)
Proceeds on sale of property, plant and
equipment 3 -
(1,671) (1,444)
Cash flows from financing activities
Purchase of treasury shares (612) -
Proceeds from borrowings 11,296 -
Repayment of borrowings (11,296) -
Net repayment of borrowings (1,315) (282)
(1,927) (282)
Net (decrease)/increase in cash, cash
equivalents and bank overdrafts (56) 550
Cash, cash equivalents and bank overdrafts at
beginning of year 2,065 1,528
Exchange losses on cash and bank overdrafts 8 (13)
Cash, cash equivalents and bank overdrafts at
end of year 2,017 2,065

Unaudited Consolidated Statement of Recognised Income and Expense

For the year ended 31 January 2008

Year to Year to
31 Jan 2008 31 Jan 2007
£000 £000

Actuarial losses on scheme assets (note 12) (1,364) (1,310)
Changes in actuarial mortality assumptions (note 12) (2,868) -
Other actuarial gains on scheme liabilities (note 12) 4,932 1,284
Currency translation differences 27 (17)
Cash flow hedges (110) -
Reduction in deferred tax relating to pension
liability due to rate reduction (110) -
(Reduction)/recognition of deferred tax asset
relating to pension scheme liability (573) 1,637
Net (expense) / income recognised directly in equity (66) 1,594
Profit for the year 8,171 2,636
Total recognised income for the year 8,105 4,230

Notes to the Accounts

1. Basis of preparation

In previous years the Group prepared its consolidated financial statements under
UK GAAP. For the year ended 31 January 2008 the Group is required to prepare its
annual consolidated financial statements in accordance with International
Financial Reporting Standards adopted for use in the European Union (IFRS).

The Group has previously explained the effect of the transition to IFRS as set out
in the "Restatement of Financial Information under International Financial Reporting
Standards" (IFRS), which was issued on 28 September 2007 and can be
found on the Group's website. The "Restatement of Financial Information
under IFRS" includes a reconciliation of equity at 31 January 2007 under UK GAAP
to equity under IFRS and a reconciliation of the profit for the year to 31 January 2007
under UK GAAP to the profit for the period under IFRS.

While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition and measurement criteria of IFRS
this announcement does not itself contain sufficient information to comply
with IFRS. The financial information set out in this preliminary announcement
does not constitute the Company's statutory accounts for the year ended 31 January 2008.
The audit of the statutory accounts for the year ended 31 January 2008 is not yet complete.
These accounts will be finalised on the basis of the financial information presented
by the Directors in this preliminaryannouncement and will be delivered to the
Registrar of Companies following the Company's annual general meeting.

2. Segmental Analysis

Walker Greenbank is a luxury interior furnishing Group. The Group manages its
operations as two segments which are the brands and manufacturing. Segmental
information is also presented in respect of the Group's geographical segment.
This is the basis on which the Group presents its results:

Year ended 31 January 2008
Brands Manufacturing Eliminations & Total
unallocated
£000 £000 £000 £000

Revenue - External 48,206 14,242 - 62,448
Revenue - Internal 2,101 10,570 (12,671) -
Total Revenue 50,307 24,812 (12,671) 62,448

Operating profit 4,624 1,486 (2,149) 3,961
Financial costs - - (981) (981)
Net pension income - - 119 119
Profit before tax 4,624 1,486 (3,011) 3,099
Tax - - 5,072 5,072
Profit for the year 4,624 1,486 2,061 8,171

Notes to the Accounts continued

2. Segmental Analysis continued

Year ended 31 January 2007
Brands Manufacturing Eliminations & Total
unallocated
£000 £000 £000 £000

Revenue - External 41,217 13,152 - 54,369
Revenue - Internal 1,974 10,367 (12,341) -
Total Revenue 43,191 23,519 (12,341) 54,369

Operating profit 2,930 1,334 (1,783) 2,481
Exceptional Pension credit 1,276 1,276
Financial costs - - (964) (964)
Net pension costs - - (99) (99)
Profit before tax 2,930 1,334 (1,570) 2,694
Tax - - (58) (58)
Profit for the year 2,930 1,334 (1,628) 2,636

Revenue by destination: 2008 2007
£000 £000

United Kingdom 41,540 35,995
Continental Europe 9,132 7,750
North America 8,113 7,503
Rest of the World 3,663 3,121
62,448 54,369

3. Analysis of Operating Profit

Year to Year to
31 Jan 2008 31 Jan 2007
£000 £000

Turnover 62,448 54,369
Cost of sales (25,362) (23,006)
Gross profit 37,086 31,363
Net operating expenses:
Distribution costs (16,265) (13,272)
Administrative expenses (16,464) (15,565)
Other operating costs (396) (45)
Operating profit before exceptionals 3,961 2,481
Reduction of pension deficit following
settlement of liabilities - 1,276
Operating profit 3,961 3,757

Notes to the Accounts continued

4. Exceptional items

During the year ended 31 January 2007 the Group bought out the right to non
statutory pension increases from its active and deferred pensioners. This has
resulted in a reduction of the IAS 19 liability in the balance sheet of £1,562,000
and a benefit of £1,276,000 in the Income Statement.

5. Finance costs

2008 2007
£000 £000
Interest expense:
Interest payable on bank borrowings (875) (901)
Interest and similar charges payable (36) (17)
Total interest expense (911) (918)
Interest income:
Interest receivable on bank deposits 5 20
Net finance costs (906) (898)

Amortisation of issue costs of bank loan (75) (66)
Total finance costs (981) (964)

6. Net pension costs

2008 2007
£000 £000

Expected return on pension scheme assets 2,721 2,408
Interest on pension scheme liabilities (2,371) (2,327)
Service costs (231) (180)
Net income/(charge) 119 (99)

Notes to the Accounts continued

7. Tax

2008 2007
£000 £000

Overseas tax - current tax (29) (58)
(29) (58)

Deferred tax - exceptional 5,101 -
5,072 (58)

2008 2007
£000 £000

Profit on ordinary activities before tax 3,099 2,694

Tax on profit on ordinary activities at standard
rate 30% (2007: 30%) (930) (808)
Non deductible expenditure (73) (146)
Utilisation of losses and origination and reversal
of temporary differences during the year 974 896
Recognition of deferred tax asset at end of year 5,101 -
Tax credit/(charge) for year 5,072 (58)

Factors affecting current and future tax charges

The deferred tax credit of £5.1 million arises from the recognition of deferred
tax on losses incurred by the Group in prior years and temporary differences.
Because of the nature and size of this item it has been disclosed as an
exceptional item.

A reduction in the mainstream UK tax rate to 28% from 1 April 2008 should result
in a reduction in the Group's future effective tax rate. Following the
recognition of deferred tax assets arising from losses and temporary differences
the future effective tax rate will also be influenced by changes in deferred tax
positions.

The Group does not anticipate the UK corporation tax will become payable on
profits within the immediate future due to the availability of tax losses of
approximately £23 million.

The reduction in the mainstream UK tax rate to 28% from 1 April 2008 has been
taken into account in calculating the deferred tax balances, with the impact of
the change in tax rate recognised in the income statement or statement of
recognised income and expenses as appropriate.

The Finance Bill 2008 announced the phasing out of the relief for Industrial
Building Allowances by 31 March 2011. However, this has not yet been
substantively enacted therefore no accounting entries have been made in respect
of this potential change. An additional deferred tax liability of approximately
£0.3 million is likely to be recognised once this legislative change is
substantively enacted.

Notes to the Accounts continued

8. Deferred income tax

A net deferred tax asset of £6,055,000 (2007: £1,637,000) had been recognised in
respect of tax losses and other temporary differences and £5,101,000 has been
credited to the income statement during the year, as follows:

2008 2007
£000 £000

Taxable temporary differences on property, plant and
equipment (533) -
Taxable temporary differences on intangible assets (106) -
Tax losses 5,740 -
5,101 -
Pension scheme obligations 954 1,637

6,055 1,637

The movements in the deferred tax asset on pension scheme obligations are
recognised in the Statement of Recognised Income and Expense.

At the balance sheet date the Group has unused tax losses of £23 million (2007:
£25 million) available for offset against future profits. A deferred asset has
been recognised in respect of £20 million (2007: £nil) of such losses as the
Group believes that realisation of the related tax benefit through future
taxable profit is probable and can be readily accessed under existing tax
legislation. No deferred tax has been recognised on the remaining £3 million
(2007 : £25 million) as these losses are not readily available for offset
against the Group's future profits under existing tax legislation and therefore
the realisation of these losses is not considered probable. The recognition of
deferred tax assets on losses will be assessed at each reporting date.

Potential deferred tax assets at 31 January 2008 of £1,068,000 (2007:
£6,752,000) relating to tax losses and deductible temporary differences have not
been recognised as it is not considered probable that recovery of the potential
deferred tax asset will arise under existing tax legislation.

2008 2007
£000 £000

Tax losses 893 6,482
Other deductible temporary differences 175 270
1,068 6,752

9. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of shares outstanding
during the year, excluding those held in the employee share trust and those held
in treasury, which are treated as cancelled.

Notes to the Accounts continued

9. Earnings per share continued

2008 2007
Earnings Earnings

£000 Weighted Per £000 Weighted Per
average Share average Share
number Amount number Amount
of of
shares Pence shares Pence
(000s) (000s)
Basic:
Basic earnings per share 8,171 56,397 14.49 2,636 56,457 4.67

Adjusted:
Earnings attributable to
ordinary shareholders 8,171 56,397 14.49 2,636 56,457 4.67
Exceptional items: Deferred
tax (5,101) - (9.05) - - -
Exceptional items: Pension
reduction exercise - - - (1,276) - (2.26)
Adjusted earnings per share 3,070 56,397 5.44 1,360 56,457 2.41

On 16 January 2008 Walker Greenbank PLC purchased 700,000 ordinary shares of 1p
each in the Company at 42.25p per ordinary share and on the 17 January 2008
Walker Greenbank PLC purchased 715,093 ordinary shares of 1p each in the Company
at 43.5p per ordinary share. Following these transactions Walker Greenbank's
issued ordinary share capital with voting rights consists of 59,006,162 Ordinary
Shares of which 1,415,093 Ordinary Shares are held in treasury, and a further
2,549,146 Ordinary Shares are held by the Walker Greenbank PLC Employee Benefit
Trust . At 31 January 2007 the market value of the treasury shares was £576,650.

Adjusted earnings per share have been calculated, as the Directors believe the
exceptional items of deferred tax in the year ended 31 January 2008 and the
benefit of the pension reduction exercise in the year ended 31 January 2007,
make it difficult to make a fair comparison between the basic earnings per
share.

10. Analysis of net debt

1 February Cash flow Other Exchange 31 January
2007 movement 2008
£000 non-cash
£000 changes £000 £000
£000
Cash at bank and in hand 2,065 (56) - 8 2,017

Borrowings due within 1 year (596) 196 - - (400)
Borrowings due after 1 year (10,073) 1,119 48 - (8,906)
(10,669) 1,315 48 - (9,306)

Net debt (8,604) 1,259 48 8 (7,289)

Other non-cash changes are amortisation of issue costs relating to the loan
financing.

Notes to the Accounts continued

11. Cash generated from operations

31 January 31 January
2008 2007
31 January 31 January
2008 £000 £000 2007
£000 £000

Operating profit 3,961 3,757
Depreciation 1,321 1,386
Amortisation 501 456
Charge for long-term incentive
plan 363 112
Exceptional pension credit - (1,276)
(Profit )/Loss on disposal of
property, plant and equipment (3) 11
Changes in working capital
Increase in inventories (410) (1,898)
Increase in trade and other
receivables (2,212) (1,198)
Increase in trade and other
payables 2,392 3,841
Pension cash contributions (1,290) (1,078)
Settlement of retirement - (894)
benefit obligation
662 (538)
Cash generated from operating 4,623 3,219
activities

12. Retirement benefit obligations

The Company operates the following funded defined benefit pension schemes in the UK
which offer pensions in retirement and death benefits to members: the Walker
Greenbank Pension Plan, the Abaris Holdings Limited Pension Scheme and the WG Senior
Management Pension Scheme. Pension benefits are related to the members' salary at
retirement and their length of service. The schemes are closed to new members and the
future accrual of benefits. This disclosure excludes any defined contribution assets
and liabilities. The Company's contributions to the schemes for the year beginning 1
February 2008 are expected to be £1,290,000.
2008 2007

Notes to the Accounts continued £000 £000

Deficit at beginning of year (5,518) (8,033)
Current service cost (231) (180)
Other net finance income 350 81
Contributions payable 1,290 1,078
Reduction of pension deficit following settlement of
liabilities - 1,562
Actuarial losses on scheme assets (1,364) (1,310)
Changes in actuarial mortality assumptions (2,868) -
Other actuarial gains on scheme liabilities 4,932 1,284
Deficit at end of year (3,409) (5,518)

13. Consolidated Statement of changes in equity

Other Reserves
Share Retained Hedge Total
premium earnings
Share account Capital Merger reserve Translation £000
capital £000 reserve reserve
£000 £000 reserve
£000 £000 £000 £000

1 February 2006 590 457 (32,953) 43,457 (2,950) - - 8,601
Actuarial losses on
scheme assets (1,310) (1,310)
Other actuarial
gains on scheme
liabilities 1,284 1,284
Deferred tax 1,637 1,637
Currency
translation
differences (17) (17)
Net income/
(expense) - - 1,611 - - - (17) 1,594
recognised directly
in equity
Profit for the year 2,636 2,636
Reserve for
long-term incentive
plan 112 112
31 January 2007 590 457 (28,594) 43,457 (2,950) - (17) 12,943

Notes to the Accounts continued

13. Consolidated Statement of changes in equity continued

Other Reserves
Share Retained Hedge Total
premium earnings Reserve
Share account Capital Merger Translation £000
capital £000 reserve reserve £000
£000 reserve
£000 £000 £000 £000

1 February 2007 590 457 (28,594) 43,457 (2,950) - (17) 12,943
Actuarial losses on
scheme assets (1,364) (1,364)
Changes in
actuarial mortality
assumptions (2,868) (2,868)
Other actuarial
gains on scheme
liabilities 4,932 4,932
Deferred tax (683) (683)
Currency
translation
differences 27 27
Hedging reserve (110) (110)
Net income/
(expense)
recognised directly
in equity - - 17 - - (110) 27 (66)
Profit for the year 8,171 8,171
Reserve for
long-term incentive
plan 363 363
Purchase of
treasury shares (612) (612)
31 January 2008 590 457 (20,655) 43,457 (2,950) (110) 10 20,799

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