Luxury interior furnishings group Walker Greenbank has reported a decline in sales due to the company recovering from a flood suffered at its Standfast & Barracks factory.
According to its latest trading update for the six months ended 31 July 2016, group sales were down 8.7% to £41.83m from £45.83m, although stating that sales are on an upward trend following full production being restored to the damaged factory.
Walker Greenbank highlighted that included within the interim results is the recognition of £7.9m of insurance reimbursements following the flood, of which £4.56m relates to exceptional costs and £3.33m relating to a contribution to loss of profits and exceptional gains for plant and equipment replacement, leading to an increased profit before tax of £4.94m from £2.89m in 2015.
Adjusted profit before tax after insurance proceeds grew by 2.7% at £3.78m compared to £3.68m last year.
Walker Greenbank has also confirmed that it has entered into a conditional agreement with the acquisition of Clarke & Clarke, a UK-based designer and worldwide distributor of interior fabrics and wallcoverings with the brands Clarke & Clarke and Studio G, for an initial cash consideration of £25m and a four year performance linked earn-out of up to £17.5m payable in new ordinary shares in Walker Greenbank, giving a total potential consideration of up to £42.5m.
The initial consideration will be £25m in cash on a debt free/cash free basis payable at completion of the Acquisition with further ‘performance related earn-out consideration payable to the selling shareholders of Clarke & Clarke by issue of new ordinary shares of £0.01 each in the capital of the Company of up to 10 million Consideration Shares or such number of Consideration Shares which do not exceed, in aggregate, £17.5m in value’.
The deal is to be funded in part as to £17m by way of a placing of 8,947,369 new Ordinary Shares at 190.0 pence per share representing a 6.6% discount to the closing middle market price of 203.5 pence per share on 11 October 2016. The remaining £8m of the cash element of the consideration is being met through ‘drawdown under the Company’s existing bank facilities and the Company’s existing cash resources’. The Placing is being underwritten by Investec.
Terry Stannard, the chairman of Walker Greenbank, said: “Our fabric-printing factory is back to full production and sales of printed fabric are on an improving trend though the effects of the flood remain evident in current trading. These effects will be mitigated by our insurance policy.
“Brand sales in the first nine weeks of the second half are up 0.7% in reportable currency (down 3.7% in constant currency) compared with the same period last year. Subject to the key Autumn selling period and anticipated insurance payments, the Board is confident of delivering its pre-flood expectations for the full year.”
Commenting on the acquisition, John Sach, chief executive of Walker Greenbank, said: “We are delighted to acquire Clarke & Clarke and to welcome its two brands into our brand portfolio. Clarke & Clarke will add significantly to our product offering, customer base and US presence and also create collaborative opportunities. Clarke & Clarke has a strong track record of growth and its acquisition will be materially enhancing for Walker Greenbank in its first full financial year.”