Annual Report and Accounts for the 52 weeks ended 29 March 2014 www.victoriaplc.com stock code: VCP 23346.02 27 August 2014 8:35 AM Proof 8 23346.02 27 August 2014 8:35 AM Proof 8 Mission Statement To create wealth for our Shareholders 23346.02 27 August 2014 8:35 AM Proof 8 Welcome to Victoria PLC Contents Victoria PLC is a manufacturer, supplier and distributor of design- led carpets, carpet tiles and other floorcoverings, targeting the mid to high-end markets in which we operate. Group Financial Highlights Continuing operations Revenue Operating profit/(loss) before exceptional items Finance costs Profit/(loss) before tax and exceptional items Exceptional items Profit/(loss) before tax Tax Profit/(loss) after tax Net debt 2014 £m 71.39 2.58 (0.53) 2.05 0.23 2.28 (0.67) 1.61 1.48 2013 £m 70.91 (0.50) (0.46) (0.96) (2.38) (3.34) 0.74 (2.60) 7.51 Strategic Report Our Business and Performance Group Financial Highlights Chairman’s Statement Operating and Financial Review Our Governance Directors Directors’ Report Corporate Governance Statement Statement of Directors’ Responsibilities Our Financials Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated and Company Balance Sheets Consolidated and Company Statements of Changes in Equity Consolidated and Company Statement of Cash Flows Significant Accounting Policies Notes to the Accounts Five Year Record Shareholder Information Glossary 01 02 04 09 10 13 14 15 16 16 17 18 19 20 26 51 52 53 Principal Subsidiaries and their Directors IBC See further information online: www.victoriaplc.com Use you phone’s QR code app to go to our website BY APPOINTMENT TO HER MAJESTY THE QUEEN CARPET MANUFACTURERS VICTORIA CARPETS LTD KIDDERMINSTER 01 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.com Chairman’s Statement I am pleased to advise shareholders that the financial year for 2014 marked a significant improvement in Victoria’s financial position: • Group revenues grew by 0.7% (6.8% in constant currency terms) from £70.91m to £71.39m • Group operating profit before exceptional items from continuing operations increased from a loss of £0.50m to a profit of £2.58m, as a result of continued improvements in like-for-like group profitability and the acquisition of the Globesign group (‘Westex’) • Group profit before tax and exceptional items from continuing operations increased from a loss of £0.96m to a profit of £2.05m • After exceptional items, the Group recorded a profit before tax from continuing operations of £2.28m, compared with a £3.34m loss before tax in the prior year • Group debt as at year end was £1.48m, compared with £7.51m in 2013, reflecting the successful restructuring of the Group Review: There are number of factors that have contributed to our change in fortunes but I would like to highlight a few specific actions over the period: end of 2013 to £1.48m as at the end of 2014 – even after the payment of £16.00m to the shareholders of Westex. • Although Victoria has long owned its factories, it is difficult to see any genuine competitive advantage in ownership of the land and buildings. Victoria is a carpet manufacturer, not a property investor, and the Board has formed the view that the capital locked up in real estate is generally better employed in carpet manufacturing and distribution operations. There will be circumstances where it is worthwhile to retain ownership of the real estate, but during 2014 we have sold our operational real estate in Australia and the Company’s property at Kidderminster, by way of sale and lease back. • In last year’s report to shareholders I outlined the proposed rationalisation of the Company’s spinning mills in Australia to one site at Bendigo and this consolidation has now been completed. Costs associated with this move totalled £0.78m in 2014 but it has significantly improved operating efficiencies in Australia, ensuring we remain competitive. • Much of the underlying improvement has come from a • As part of our strategy to dispose of non-core and relentless day-to-day focus on costs, margins, and sales growth. The success of this is a credit to the Group’s employees who have needed to adjust in a relatively short time to a new culture and I would like to thank them for their efforts and focus. I would also like to take this opportunity to sincerely thank our retailers whose loyal support and business has been vital to our plans. • We were very pleased to acquire Westex during 2014. Westex is arguably the UK’s premium tufted carpet manufacturer, and is run by talented and committed individuals who, I am delighted to say, have committed to remain at the business for a minimum of five years. In 2014, Westex generated profits of £4.53m although the contribution to Victoria’s profit before tax was £1.17m, reflecting the fact that we owned the business for just three months of the financial year. • Our ongoing focus on generating cash has significantly reduced the Group’s debt levels – from £7.51m at the underperforming assets we have successfully sold the Canadian interior decorating retailer, Colin Campbell, realising a small premium to the carrying value. The business had never generated a meaningful return to Victoria and it did not have any strategic value so in 2013 we bought out the other 50% shareholder, which enabled us to deal freely with the business – a move which resulted in us being able to achieve a sale. Post balance sheet date the Board was delighted to deliver on its commitment to shareholders at the time of its appointment and be able to pay a special dividend of £2.92 per share in July – bringing the total payment to shareholders since they approved the Contract for Differences (“CFD”) to £3.00 per share. This act also enabled the CFD to be terminated and remove any uncertainty around this arrangement. 100% of the proceeds of the CFD were reinvested into Victoria demonstrating my commitment to, and confidence in, the future of the business. 02 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 3. Existing UK incorporates Victoria Carpets Limited and Westwood Yarns Limited Our Mission I would like to finish this report by highlighting Victoria PLC’s commitment to create wealth for shareholders. It is the benchmark against which all management and board decisions are measured. The means by which we do this is by the manufacture and distribution of some of the finest floor coverings in the UK and Australia, but the objective is to reward shareholders for their investment in, and support for, Victoria PLC. I am pleased to say that over the last 18 months many of the Group’s management have bought shares (most of them for the first time) on market with their own cash reflecting their belief in Victoria PLC. Their personal investment ensures they think and act in the best interests of shareholders because they are shareholders. In summary, with the reshaping of the business that has already occurred, together with the improving market conditions and other opportunities that we see, I am optimistic about the Group’s future. Geoffrey Wilding Executive Chairman 28 August 2014 Dividend The very large dividend paid in July 2014 has led to the decision that a final dividend will not be paid this year. However the board would like to send a clear signal to shareholders of the Company’s commitment to paying dividends as part of its plan to create wealth for shareholders and it is intended to recommence dividends next year. Board Changes As announced in May 2014, the Board of Victoria was further strengthened with the appointment of Terry Danks, the existing Company Secretary of the Group and Finance Director of Victoria Carpets Limited. Outlook We are encouraged by the improving UK residential property market. Although new homes are a useful source of revenue, by far the most important driver of carpet sales is home-owners redecorating/refurbishing their homes. Consumer confidence and home sales are the underlying factors for this activity. After a very difficult couple of years there are also promising signs of economic improvement in Australia, which will, in time, translate into consumer confidence and increasing demand for carpet. To help shareholders understand the underlying earnings of Victoria I have set out in the table below a summary of the operating profits of each component of the Group. EBIT £000’s Existing UK Westex Australia (A$) Australia (£) PLC Total Notes: 2012 308 3,341 4,786 3,134 (859) 5,924 2013 (1,820) 3,698 3,104 2,027 (705) 3,200 2014 403 4,538 2,876 1,686 (682) 5,945 1. Westex earnings are for the 12 months ending 28 February of each year (their former balance sheet date); all other earnings are for Victoria’s financial year 2. All numbers exclude exceptional items 03 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comStrategic Report - Our Business and Performance Image: Victoria UK: Strathmore Operating and Financial Review significant increases in house prices in both Australia and New Zealand with many major cities showing double digit growth over the past 12 months. This activity has boosted approval and commencements in new building construction in 2014, and driven the turnover and clearance rates of existing properties. Most recent data indicates that building and property activity levels are now moderating heading into 2015. Sales in the period of A$65.40m were below prior year by 1.1% (A$66.14m), impacted by tough economic conditions and the competitive trading environment. Whilst reported operating profit has reduced by A$0.23m to A$2.88m on lower sales, the like for like operating profit, after adjusting for property leasing costs during the period was in line with prior year. Cost saving initiatives across the business also delivered and contributed to the underlying operating profit, offsetting additional costs in third party logistics following the failure of a long term partner. The exit from and closure of the Castlemaine Mill freed up key assets to be transferred to the Bendigo Mill, increasing that plant’s capacity and reducing operating costs by year end. The company completed sale and leasebacks of the manufacturing facility in Dandenong and spinning mill at Bendigo realising cash of A$10.50m in the financial year. The sale of the Castlemaine mill was completed post year end in May 2014 for A$1.0m. The company has achieved a significant reduction in working capital, with inventory reduced by A$4.29m (20.9%). Canada As noted in the Chairman’s Statement, the Group disposed of its Canadian operation Colin Campbell at the end of the financial period. The Canadian operation contributed operating profit of £5k in the period and £77k in prior year. The sale of the business in March 2014 realised a £111k profit. Operational Review United Kingdom Whilst the improving UK economic position has been well documented during this financial period, market conditions remain highly competitive and consumers remain cautious over spend on high value items after a sustained period of below inflationary wage growth. With the market trend towards less expensive products, Victoria launched a number of product ranges in the financial period to reflect this. The UK achieved like for like sales growth of 1.7% from £27.73m to £28.21m, which excludes the impact of the acquisition of Westex. The UK underlying operating performance (excluding Westex) has improved from an operating loss of £1.82m in 2013 to an operating profit of £0.40m in 2014. The turnaround in performance is driven by an improvement in gross margin and a continued focus on reducing the cost base, including the full year benefit of cost saving initiatives undertaken in the second half of 2013. The UK completed a sale and leaseback of the manufacturing facility in Kidderminster in March 2014, receiving cash of £5.80m. The acquisition of Westex in December 2013 has contributed sales of £4.83m and an operating profit of £1.17m in the period post acquisition. The annual operating profit of Westex over the past three years is shown within the Chairman’s Statement. As a result of the above, the UK recorded a profit before tax and exceptional items of £1.57m compared to a loss before tax and exceptional items of £2.03m in 2013. Australia The Australian economy continues to be impacted by the slowdown in the resources sector and a softening in prices as a result of slowing growth in key markets of China and India. The retail and building & construction sectors are showing progress whilst manufacturing and service sectors continue to struggle. The direction of the Australian Dollar is critical to the health of the manufacturing sector and to competitiveness in the resources sector and overall unemployment rates. There has been considerable volatility in both the Australian Dollar and New Zealand Dollar during the year and experts are divided over their future direction. The continued low interest rate environment has fostered 04 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Image: Victoria UK: Strathmore Financial Review The Group’s financial performance for the year end 29 March 2014 is summarised as follows: Revenue Operating profit/(loss) before exceptional items from continuing operations Finance Costs Profit/(loss) before tax and exceptional items from continuing operations Exceptional items Profit/(loss) before tax from continuing operations Tax Profit/(loss) after tax from continuing operations Profit/(loss) from discontinued operations Profit/(loss) for the period Net debt Exceptional Items The exceptional items for the year end 29 March 2014 are summarised below: 2014 £m 71.39 2.58 (0.53) 2.05 0.23 2.28 (0.67) 1.61 0.12 1.73 1.48 Profit on sale of properties Contract for Differences Restructuring of Australia’s spinning mills Acquisition costs Move to AIM Incentive plan General Meeting costs Write off of certain intangible assets 2013 £m 70.91 (0.50) (0.46) (0.96) (2.38) (3.34) 0.74 (2.60) (0.18) (2.78) 7.51 2014 £m 3.30 (1.63) (0.78) (0.66) – – – – 0.23 % Change 0.7% 618.3% 15.2% 312.9% 109.7% 168.3% 190.8% 161.9% 158.2% 162.1% -80.3% 2013 £m – – (0.87) – (0.23) (0.23) (0.60) (0.44) (2.37) The Group sold its carpet manufacturing facilities in both Australia and the UK during the year and the spinning mill in Bendigo, Australia. These properties are now under operating leases varying from 10 to 20 year terms. The property sales realised a profit of £3.30m, which is recorded in other operating income. The Contract for Differences charge of £1.63m represents the fair value assessment of the contract at the year-end date and associated professional fees in the period. The fair value calculation was based on the principles of the contract and the market capitalisation as at the year end. Also taken into account were a number of conditions still to be met before the contract could be exercised. The conditions were eventually satisfied in July 2014 resulting in the issue of 7,087,730 ordinary shares for the benefit of Geoffrey Wilding as disclosed in the Directors’ Report. The smaller of the two spinning mills in Australia was closed in the first half period to meet reduced volume requirements for woollen yarns as a result of the continuing consumer trend away from wool to synthetic carpets. Acquisition costs in the period relate to professional fees associated with the acquisition of Westex in December 2013. 05 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comStrategic Report - Our Business and Performance Operating and Financial Review continued Taxation The tax charge in the year was £0.67m (2013: tax credit of £0.74m), equivalent to an effective tax rate of 28.0%. The Group’s tax rate is above the prevailing UK standard rate of 23% impacted by a number of factors including a higher standard rate of 30% in Australia and expenses that are not deductible in determining taxable profit. A full reconciliation of factors impacting the tax rate in the period is detailed in Note 6 of the financial statements. Cash Flow and Debt Operating profit/(loss) from continuing operations and before exceptional items Depreciation and non-cash items Foreign exchange Movement in working capital Operating cash flow (before exceptional items) EBITDA* 2014 £m 2.58 2.55 0.06 4.32 9.51 5.14 2013 £m (0.50) 2.77 0.12 2.12 4.51 2.33 Operating cash flow conversion % (against EBITDA*) 185.1% 193.7% * Earnings before interest, tax, depreciation, amortisation and exceptional items. The Group generated significant operating cash flows in the period (before exceptional items) relative to EBITDA (before exceptional items), driven by a continued focus on reducing working capital levels. In particular, underlying inventories levels have decreased year on year by £4.86m after excluding the impact of the additional inventory on the Group balance sheet following the acquisition of Westex in the period. Operating cash flow (before exceptional items) Interest paid Corporation tax paid Capital Expenditure Free cash flow (before exceptional items) Proceeds on disposal of property, plant and equipment Acquisition of Westex Dividends paid Restructuring of Australia’s spinning mills Dividends and sales proceeds from Colin Campbell General Meeting, AIM and Incentive Plan costs Other items Net cash flow Opening net debt Closing net debt 2014 £m 9.51 (0.53) (0.40) (0.53) 8.05 11.70 (12.84) (0.56) (0.78) 0.50 – (0.04) 6.03 (7.51) (1.48) 2013 £m 4.51 (0.46) (0.51) (0.85) 2.69 0.10 – (0.63) (0.87) – (1.06) 0.01 0.24 (7.75) (7.51) Victoria UK: Rustic Jewels Capital expenditure was relatively modest at £0.53m (2013: £0.85m) and significantly below depreciation levels. The Group is well invested with modern plant and equipment and capital expenditure requirements are expected to remain below depreciation levels in the new financial period. The net cash inflow of £11.70m in the period on disposal of property, plant and equipment principally relates to the sale and leaseback of the properties noted earlier in this section. The net cash outflow arising in respect to the acquisition of Westex was £12.84m, comprising an initial cash consideration of £16.00m and £0.66m of associated professional fees, partly offset by £3.82m opening cash in Westex. Net debt levels reduced by £6.03m during the financial year to £1.48m (2013: £7.51m). 06 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Future funding The Group’s annual renewal of its Australia facilities took place in November 2013 and there are no problems anticipated in renewing these facilities on similar terms in November 2014. The Group’s UK facilities comprise a committed 3 year revolving credit facility expiring in July 2015, a new term loan facility to finance the Westex acquisition expiring in December 2016 and an overdraft facility. The facilities are subject to financial covenants measured against Group results and all lending covenants were satisfied at all quarterly test dates throughout the year. There are no problems anticipated in renewing the 3 year revolving credit facility which expires in less than 12 months from the date of this report. 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. Going concern 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 Chairman’s Statement and the Operating and Financial Review. In addition, note 26 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, projections and funding requirements, 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 Directors are of the view that the Group is well placed to manage its business risks. Accordingly, the Directors continue to adopt the going concern basis in preparing the Annual Report and Accounts. Accounting standards 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. Victoria UK: Rustic Jewels 07 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comStrategic Report - Our Business and Performance Operating and Financial Review continued Key performance indicators (KPI’s) The KPI’s monitored by the Group Board are set out in the table below for the year ended 29 March 2014. Sales growth (constant currency) Operating margin (pre exceptional items) Return on operating assets (pre exceptional items) Earnings/(loss) per share (basic adjusted) Net debt to EBITDA* Interest cover (against EBITDA*) * Earnings before interest, tax, depreciation, amortisation and exceptional items. Principal risks and uncertainties The principal risks facing the business are set out as follows: 2014 6.8% 3.6% 7.1% 27.1p 2013 -7.9% -0.6% -0.9% -11.0p 2012 4.6% 3.5% 5.6% 23.7p 0.3 times 9.7 times 3.3 times 4.8 times 1.4 times 12.1 times Competition The Group companies operate in mature and highly competitive markets, resulting in pressure on pricing and margins. Management regularly review competitor activity to devise strategies to protect the Group’s position as far as possible. Global Economic conditions The operating and financial performance of the Group is influenced by economic conditions in the geographic areas it operates, particularly the UK, Eurozone, Australia and the USA. The Group remains focussed on driving operational efficiency improvements, cost reductions and ongoing product development to adapt to the current market and economic conditions. Key input prices Material adverse changes in certain raw material prices, in particular wool prices, could affect the Group’s profitability. These prices are closely monitored and forward contracts placed to help manage shorter term volatility. Geoffrey Wilding Executive Chairman 28 August 2014 08 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Directors Geoffrey Wilding Executive Chairman Alexander Anton Non-executive Director Geoff Wilding BSc is a former investment banker. He set up his own investment company in New Zealand in 1989. He is also a director of Chorus Law Limited. Geoff was appointed Executive Chairman at the General Meeting on 3 October 2012. Alexander Anton, a member of the founding family of Victoria, was appointed to the main Board in 1995 and is a former Chairman. He is currently a Trustee of The Queen’s Club, London and Chairman of Legacy Portfolio. Alexander was appointed to the Board at the General Meeting on 3 October 2012. Andrew Harrison Non-executive Director Terry Danks Executive Director Andrew Harrison has more than 20 years experience as a solicitor in private practice, specialising in company law. He has advised on a wide variety of corporate transactions, including management buy-outs and buy-ins, corporate acquisitions and disposals and listed company take-overs. Andrew was appointed to the Board at the General Meeting on 3 October 2012 and is the Senior Independent Non-executive Director. Appointed as Company Secretary to Victoria PLC in 1993 and appointed to the Board in May 2014. Terry joined Victoria Carpets in 1985 as Chief Accountant and has been responsible for both the accounting and IT function within that company. Terry was subsequently appointed as Finance Director of Victoria Carpets in 1989. Terry has a breadth of experience and knowledge of the industry and his high standards of financial control are invaluable to the Group. 09 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Governance Alexander Anton is also deemed by the Panel on Takeovers and Mergers to form part of the concert party formed in December 2011. At 29 March 2014 the concert party held 22.5% of the issued shares in the Company. In accordance with the Company’s Articles of Association, the Director retiring by rotation at the 2014 Annual General Meeting is Andrew Harrison who, being eligible, offers himself for re -election pursuant to Article 86. Also in accordance with the Company’s Articles of Association, Terry Danks who was appointed on 15 May 2014 offers himself for election. 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, with the exception of: — A contract for differences (‘CFD’) between the Company and Geoffrey Wilding which received shareholder approval at a General Meeting on 20 February 2013. This was entered into on 19 April 2013 and remained in force at the year end. — The CFD was subsequently terminated on 29 July 2014 (detailed further in Post Balance Sheet Events section below). 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. Directors’ Report The Directors present their Annual Report and the audited financial statements for the Group for the year ended 29 March 2014. Principal activities and business review The Group’s principal activities are the manufacture, distribution and sale of floorcoverings. A review of the business during the financial year and its future development is included in the Strategic Report on pages 2 to 8. Results and dividends The results include those of Victoria PLC and its subsidiaries for the full year and are set out in the financial statements on pages 16 to 50. Profit attributable to shareholders Total dividend paid in the financial year Retained Profit £000 1,725 563 1,162 A special dividend of £2.92 pence per share was paid to shareholders on 25 July 2014 following approval by shareholders at a General Meeting on 9 July 2014. Consequently the Directors do not recommend the payment of a final dividend for the financial year ended 29 March 2014. Financial risk management Details of the Group’s financial risk management policies are set out in Note 26. Directors and their interests The current Directors of the Company together with their biographical details are listed on page 9. The Directors of the Company who held office at 29 March 2014 had the following interests in the Ordinary shares of the Company: 29 Mar 2014 30 Mar 2013 Beneficial Non- beneficial Beneficial Non- beneficial Alexander Anton 71,075* 80,000 71,075* 80,000 Geoff Wilding Andrew Harrison — — — — — — — — * This includes 47,500 shares held in trust of which Alexander Anton is the beneficiary 10 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Directors’ emoluments The emoluments of all Directors for the financial year ended 29 March 2014 were: Executive Geoffrey Wilding Non-executive Alexander Anton Andrew Harrison Former Directors Alan Bullock (until 31 August 2012) Ian Davies (until 8 August 2012) Barry Poynter (until 31 August 2012) Katherine Innes Ker (until 3 October 2012) Sir Bryan Nicholson (until 8 August 2012) David Garman (8 August 2012 to 3 October 2012) Roger Hoyle (8 August 2012 to 31 August 2012) Salary/Fees £000 Benefits in kind £000 Bonus £000 Total 2014 £000 Total 2013 £000 65 35 35 — — — — — — — 135 — — — — — — — — — — — — — — — — — — — — — — 65 35 35 — — — — — — — 135 45 30 17 80 61 109 33 12 6 2 395 Directors’ pension entitlements None of the Directors who held office at 29 March 2014 were members of the money purchase schemes. Contributions paid by the Group in respect of such schemes in the prior year were: Alan Bullock (until 31 August 2012) Ian Davies (until 8 August 2012) Barry Poynter (until 31 August 2012) 2014 £000 — — — — 2013 £000 20 8 10 38 11 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Governance Auditor Each person who is a Director at the date of approval of this Annual Report confirms that: a. So far as the Director is aware, there is no relevant audit information of which the Company’s Auditor is unaware; and b. The Director has taken all steps that he ought to have taken as a Director in order to make himself aware of any such relevant audit information and to establish that the Company’s Auditor is aware of that information. The above is in accordance with the provisions of Section 418 of the Companies Act 2006. Nexia Smith & Williamson has expressed its willingness to continue in office as Auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. Annual General Meeting Notice of the 2014 Annual General Meeting to be held on 24 September 2014, together with a description of the business to be discussed at the AGM, is set out in the accompanying Notice. The proposed resolutions relate to standard matters that are dealt with at every AGM. On behalf of the Board Terry A Danks Director and Secretary 28 August 2014 Directors’ Report continued Employees 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. Taxation status The Directors are advised that the Company is not a ‘close company’ within the provisions of the Income and Corporation Taxes Act 1988. Going concern 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. Post balance sheet events (a) Special Dividend A special dividend of £2.92 pence per share was paid to shareholders on 25 July 2014, following approval by shareholders at a General Meeting on 9 July 2014. (b) Contract for Differences (‘CFD’) A CFD between the Company and Geoffrey Wilding was entered into on 19 April 2013, following shareholder approval at a General Meeting of the Company on 20 February 2013. The CFD was subsequently terminated further to satisfying the condition of returning £3 per share to shareholders. At a General Meeting held on 9 July 2014, shareholders approved the issue of 7,087,730 new shares in settlement of the liability under the CFD upon termination. The shares were issued on 29 July 2014 to Camden Holdings Limited, a company owned by The Camden Trust, of which Geoffrey Wilding is the settlor and discretionary beneficiary. As a result of this, Camden Holdings Limited own 50% of the enlarged ordinary share capital. (c) Castlemaine Spinning Mill The Castlemaine spinning mill, in Australia, was closed during the first half of the financial year and ceased production by the end of June 2013. The property is shown under the heading “Assets held for sale” in the accounts at 29 March 2014 and was subsequently sold after the year-end for its written down value. 12 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Corporate Governance Statement As an AIM listed group, Victoria PLC is not required to comply with the UK Corporate Governance Code. The Group applies certain principles of good governance it believes appropriate to a group of its size. On behalf of the Board Terry A Danks Director and Secretary 28 August 2014 13 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Governance Statement of Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Director’s Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors are required to prepare the Group financial statements 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 European Union. 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 financial statements the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state that the financial statements comply with IFRSs as adopted by the European Union subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements comply with the Companies Act 2006, and as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and 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, www.victoriaplc.com. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Terry A Danks Director and Secretary 28 August 2014 14 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Independent Auditor’s Report to the Members of Victoria PLC • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Reports for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Sancho Simmonds Senior Statutory Auditor, for and on behalf of Nexia Smith & Williamson Chartered Accountants and Statutory Auditor 25 Moorgate, London, EC2R 6AY, United Kingdom 28 August 2014 We have audited the financial statements of Victoria PLC for the 52 weeks ended 29 March 2014 which comprise the Consolidated Income Statement, the Consolidated 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 Cash Flows and the related notes 1 to 30. 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 financial statements, 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. Respective Responsibilities of Directors and Auditor As explained more fully in the Statement of Directors’ Responsibilities set out on page 14, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc. org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 29 March 2014 and the Group’s profit for the 52 week period then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; 15 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Governance Consolidated Income Statement For the 52 weeks ended 29 March 2014 Continuing operations Revenue Cost of sales Gross profit Distribution costs Administrative expenses Other operating income Operating profit/(loss) Analysed between: Operating profit/(loss) before exceptional items Exceptional items Finance costs Profit/(loss) before tax Taxation Profit/(loss) for the period from continuing operations Profit/(loss) for the period from discontinued operations Profit/(loss) for the period Earnings/(loss) per share — pence basic diluted Earnings/(loss) per share from continuing operations — pence basic diluted 52 weeks ended 29 March 2014 Notes £000 1 2 1 1,2 3 1,4 6 1,14 8 8 8 8 71,386 (50,544) 20,842 (13,804) (7,914) 3,688 2,812 2,581 231 (531) 2,281 (672) 1,609 116 1,725 24.52 24.52 22.87 22.87 52 weeks ended 30 March 2013 Re-stated £000 70,909 (53,679) 17,230 (14,041) (6,230) 168 (2,873) (498) (2,375) (465) (3,338) 738 (2,600) (182) (2,782) (39.56) (39.56) (36.97) (36.97) The prior year Consolidated Income Statement was re-stated due to the sale of Colin Campbell & Sons Limited, which is now shown separately under discontinued operations. Consolidated Statement of Comprehensive Income For the 52 weeks ended 29 March 2014 Exchange differences on translation of foreign operations Amounts which may be subsequently reclassified to profit or loss Profit/(loss) for the period Total comprehensive loss for the period 52 weeks ended 29 March 2014 £000 (5,078) (5,078) 1,725 (3,353) 52 weeks ended 30 March 2013 £000 1,597 1,597 (2,782) (1,185) 16 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Consolidated and Company Balance Sheets As at 29 March 2014 Non-current assets Goodwill Intangible assets Property, plant and equipment Investment property Investment in subsidiary undertakings Deferred tax asset Total non-current assets Current assets Inventories Trade and other receivables Current tax assets Cash at bank and in hand Assets held for sale Total current assets Total assets Current liabilities Trade and other payables Current tax liabilities Other financial liabilities Total current liabilities Non-current liabilities Trade and other payables Other financial liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Share premium Retained earnings Share-based payment reserve Total equity Group Company 29 March 2014 £000 30 March 2013 £000 29 March 2014 £000 30 March 2013 £000 Notes 10 11 12 13 13 19 15 16 12,14 17 18 17 18 19 20 21 21 21 2,735 4,953 18,681 180 — 1,441 27,990 21,203 13,964 — 15,192 547 50,906 78,896 17,496 1,162 5,406 24,064 7,716 11,267 1,210 20,193 44,257 34,639 1,772 909 31,958 — 34,639 — 248 23,778 180 — 1,323 25,529 20,866 11,163 361 1,091 389 33,870 59,399 9,624 — 7,709 17,333 1,954 890 749 3,593 20,926 38,473 1,758 829 35,724 162 38,473 — — — 180 27,126 285 27,591 — 16,177 — 13,151 — 29,328 56,919 3,128 — 5,267 8,395 6,804 9,733 — 16,537 24,932 31,987 1,772 909 29,306 — 31,987 — — 4,966 180 3,322 — 8,468 — 4,281 — — 56 4,337 12,805 229 — 4,246 4,475 — 500 471 971 5,446 7,359 1,758 829 4,669 103 7,359 Company Registered Number (England & Wales) 282204 The financial statements on pages 16 to 50 were approved by the Board of Directors and authorised for issue on 28 August 2014. They were signed on its behalf by: Geoffrey Wilding Executive Chairman 17 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Consolidated Statement of Changes in Equity For the 52 weeks ended 29 March 2014 At 31 March 2013 Profit for the period Other comprehensive loss for the period Transactions with owners: Dividends paid Movement in share based payment reserve Transfer of share based payment reserve to retained earmings Issue of share capital in connection with exercise of share options under LTIP plan At 29 March 2014 At 1 April 2012 Loss for the period Other comprehensive income for the period Transactions with owners: Dividends paid Movement in share-based payment reserve Deferred tax on share option scheme Issue of share capital in connection with exercise of share options under LTIP plan Share capital £000 1,758 — — 1,758 — — — 14 1,772 1,736 — — 1,736 — — — 22 Share premium £000 829 — — 829 — — — 80 909 829 — — 829 — — — — Retained earnings £000 35,724 1,725 (5,078) 32,371 (563) — 150 — 31,958 37,575 (2,782) 1,597 36,390 (627) — (39) — At 30 March 2013 1,758 829 35,724 Company Statement of Changes in Equity For the 52 weeks ended 29 March 2014 Share-based payment reserve £000 162 — — 162 — (12) (150) — — 180 — — 180 — (18) — — 162 Share capital £000 1,758 — 1,758 — — 14 1,772 1,736 — 1,736 — — — 22 1,758 Share premium £000 829 — 829 — — 80 909 829 — 829 — — — — 829 Retained earnings £000 4,669 25,097 29,766 (563) 103 — 29,306 5,802 (467) 5,335 (627) — (39) — 4,669 Share-based payment reserve £000 103 — 103 — (103) — — 113 — 113 — (10) — — 103 At 31 March 2013 Profit for the period Transactions with owners: Dividends paid Transfer of share based payment reserve to retained earnings Issue of share capital in connection with exercise of share options under LTIP plan At 29 March 2014 At 1 April 2012 Loss for the period Dividends paid Movement in share-based payment reserve Deferred tax on share option scheme Issue of share capital in connection with exercise of share options under LTIP plan At 30 March 2013 18 23346.02 27 August 2014 8:35 AM Proof 8 Total equity £000 38,473 1,725 (5,078) 35,120 (563) (12) — 94 34,639 40,320 (2,782) 1,597 39,135 (627) (18) (39) 22 38,473 Total equity £000 7,359 25,097 32,456 (563) — 94 31,987 8,480 (467) 8,013 (627) (10) (39) 22 7,359 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Consolidated and Company Statements of Cash Flows For the 52 weeks ended 29 March 2014 Notes 23 Net cash inflow/(outflow) from operating activities Investing activities Purchases of property, plant and equipment Dividend received from Colin Campbell & Sons Limited Proceeds from disposal of Colin Campbell & Sons Limited Proceeds on disposal of property, plant and equipment Acquisition of subsidiary, net of cash acquired, at Group level Net cash (used)/generated in investing activities Financing activities Increase in long term loans Issue of share capital Repayment of obligations under finance leases/HP Dividends paid Net cash generated/(used) in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of foreign exchange rate changes Cash and cash equivalents at end of period 24 Group Company 52 weeks ended 29 March 2014 £000 7,093 (531) 179 324 11,696 (12,176) (508) 10,488 94 (14) (563) 10,005 16,590 (6,475) (190) 9,925 52 weeks ended 30 March 2013 £000 1,611 52 weeks ended 29 March 2014 £000 13,263 52 weeks ended 30 March 2013 £000 (1,049) (850) — — 96 — (754) 500 — (327) (627) (454) 403 (6,920) 42 (6,475) — 179 324 5,600 (16,000) (9,897) 9,233 94 — (563) 8,764 12,130 (4,246) — 7,884 — — — 8 — 8 500 — — (627) (127) (1,168) (3,078) — (4,246) 19 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Significant Accounting Policies Basis of Accounting The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, IFRIC interpretations and the parts of the Companies Act 2006 that apply to companies reporting under IFRS. The financial statements have been prepared on the historical cost basis, except for certain 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. Basis of preparation The consolidated financial statements have been prepared on a going concern-basis. The Strategic Report on page 7 sets out the justification for this basis of preparation. Basis of consolidation 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 acquistion or up to the effective date of disposal, as appropriate. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual income statement and related notes. Business combinations and goodwill Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transfered to the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the asset transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in the business combination are measured initially at their fair values at the acquisition date. The Group measures goodwill at the acquisition date as: • The fair value of the consideration transferred; less • the net recognised amount of the identifiable assets acquired and liabilities assumed. Costs related to acquisition, other those associated with the issue of debt or equity securities that the Group incurs in connection with a business combination, are expensed as incurred. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. Segmental Reporting The Group’s internal organisation and management structure and its system of internal financial reporting to the Board of Directors are based on the geographical locations of its businesses. The chief operating decision-maker has been identified as the Board of Directors. Non-current assets held for sale 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. Investment Property The investment properties are valued on an historical cost basis, having been professionally valued at 4 April 2004 on adoption of IFRS, and is considered to be the deemed cost. Revenue recognition 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 20 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 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. Leasing 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. 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. Where sale and operating leaseback transactions are entered into, the transaction is treated as a disposal and any profit or loss is recognised immediately in the income statement. The determination of the treatment of the subsequent leasing arrangement is dependent on whether substantially all of the risks and rewards of ownership are transferred to the lessee. Foreign currencies 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 in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised 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. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of. Government grants 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. Retirement benefit costs 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. 21 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Significant Accounting Policies continued Property, plant and equipment 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. 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 Fixtures 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. Intangible assets i. Intangible assets acquired in a business combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their value at the acquisition date, which is regarded as their cost. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. Taxation 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 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. 22 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP ii. Amortisation of intangible assets Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. Amortisation commences from the date the intangible asset becomes available for use. iii. Derecognition of intangible assets An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised. iv. Impairment of tangible and intangible assets 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 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. Share-based payments 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 liability in respect of equity-settled amounts is included in equity. Exceptional Items Non-recurring transactions which are material by virtue of their size or incidence are disclosed as exceptional items. 23 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Significant Accounting Policies continued Financial instruments (a) Financial assets The Group’s financial assets fall into the categories discussed below, with the allocation depending 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. i. Loans and receivables 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. ii. Fair value through profit or loss 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. (b) Financial liabilities 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. 24 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP i. Financial liabilities measured at amortised cost These liabilities include the following items: • Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost. • Bank borrowings and loan notes are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost. Interest is recognised as a finance expense in the income statement. ii. Fair value through profit or loss 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. Also included within this category is a CFD, which is carried in the balance sheet at fair value with changes in fair value recognised in finance income or expense. (c) Share Capital The Group’s Ordinary shares are classified as equity instruments. Share capital includes the nominal value of the shares. Any share premium attaching to the shares are shown as share premium. Adoption of new and revised standards “IFRS 13, Fair value measurement” and “IAS 1 (Amendment) Presentation of financial statements” have been adopted in the year but they have only had a presentation and disclosure impact on these financial statements. Other than this, there have only been minor improvements to existing International Financial Reporting Standards and interpretations that are effective for the first time in the current financial year that have been adotped by the Group. These have had no impact on its consolidated results or financial position. Standards, amendments and interpretations that are expected to be effective for periods beginning on or after 1 April 2014 for standards, amendments subject to EU endorsement: • • • IFRS 10, Consolidated financial statements IFRS 12, Disclosure of interests in other entities IFRS 15, Revenue from contracts with customers (effective for periods beginning on or after 1 January 2017, subject to EU endorsement) • IAS27 (Revised), Separate financial statements The Directors are currently assessing the impact of these on the Group’s results, assets and liabilities. The Directors do not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements. 25 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts 1 Segmental information The Group is organised into two operating divisions, the sale of floorcovering products in the UK and Australia. Geographical segment information for revenue, operating profit/(loss) and a reconciliation to entity net profit/(loss) is presented below. Income statement For the 52 weeks ended 29 March 2014 Exceptional Segmental operating operating items profit £000 £000 Finance costs £000 Revenue £000 33,047 38,339 71,386 1,577 1,686 3,263 — 1,824 1,824 (9) (138) (147) Profit before tax* £000 1,568 3,372 4,940 For the 52 weeks ended 30 March 2013 Exceptional Segmental operating operating items (loss)/profit £000 £000 Finance costs £000 Revenue £000 27,729 (1,820) 43,180 70,909 2,027 207 (442) (1,082) (1,524) (206) (154) (360) Loss before tax* £000 (2,468) 791 (1,677) (682) (1,593) (384) (2,659) (705) (851) (105) (1,661) 71,386 2,581 231 (531) 2,281 70,909 (498) (2,375) (465) (3,338) (672) 1,609 738 (2,600) 5 111 116 77 (259) (182) 71,386 2,586 342 (531) 1,725 70,909 (421) (2,634) (465) (2,782) UK Australia Unallocated central expenses Total continuing operations Tax Profit/(loss) after tax from continuing activities Profit(loss) from discontinued operations* Profit/(loss) for the period * Profit/(loss) from discontinued operations relates to the Canadian operation Colin Campbell & Sons Limited, which was sold on 28 March 2014. The result is shown net of tax. Intersegment sales between the UK and Australia were immaterial in the current and comparative periods. Management information is reviewed on a segmental basis to profit/(loss) before tax. 26 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 1 Segmental information continued Balance Sheet UK Australia Assets held for sale Unallocated central assets/liabilities As at 29 March 2014 As at 30 March 2013 Segment assets £000 55,877 22,000 547 472 78,896 Segment liabilities £000 24,739 11,022 — 8,496 44,257 Segment assets £000 22,203 36,627 389 180 59,399 Segment liabilities £000 7,965 7,912 — 5,049 20,926 Assets held for sale relates to the Castlemaine spinning mill in Australia which was sold in May 2014. The prior year figure relates to the Canadian operation Colin Campbell & Sons Limited which was sold on 28 March 2014. Other segmental information Depreciation and amortisation UK Australia No other significant non-cash expenses were deducted in measuring segment results. Capital expenditure UK Australia 52 weeks ended 29 March 2014 £000 904 1,650 2,554 52 weeks ended 29 March 2014 £000 304 227 531 52 weeks ended 30 March 2013 £000 792 1,960 2,752 52 weeks ended 30 March 2013 £000 593 257 850 27 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 2. Exceptional Items from continuing operations (a) Contract for Differences (b) Profit on sale of properties (c) Restructuring of Australia’s spinning mills (d) Acquisition costs (e) Move to AIM (f) Incentive plan (g) General Meeting costs (h) Write off of certain intangible assets 52 weeks ended 29 March 2014 £000 (1,631) 3,297 (780) (655) — — — — 52 weeks ended 30 March 2014 £000 — — (869) — (233) (227) (604) (442) 231 (2,375) All exceptional items are classified within administrative expenses (except where noted). (a) Relates to the fair value of the Contract for Differences between the Company and Geoffrey Wilding signed in April 2013, including related professional fees of £26,000. The contract was terminated on 28 July 2014 and resulted in the issue of 7,087,730 new shares to Geoffrey Wilding (through Camden Holdings Limited) on 29 July 2014 as detailed in note 30 ‘Post balance sheet events’. (b) Relates to the profit from the sale and leaseback of Australia’s carpet manufacturing facility and spinning mill in Bendigo, and the profit from the sale and leaseback of the carpet manufacturing facility in Kidderminster, UK. This profit is included as part of other operating income. (c) Relate to costs associated with the “right-sizing” and reorganising the two spinning mills to meet reduced volume requirements as a result of declining demand for woollen yarns. The smaller of the two spinning mills was closed during the first half of the financial period and ceased production by the end of June 2013. The property is shown under the heading ‘assets held for sale’ in the accounts at 29 March 2014 and was subsequently sold after the year end for its written down value. (d) Relate to professional fees in connection with the acquisition of Globesign Limited in December 2013. (e) Relate to costs incurred in the move from the Official List to the AIM market of the London Stock Exchange. (f) Relate to professional fees in connection with a proposed incentive remuneration plan subsequently withdrawn. (g) Relate to costs in connection with various General Meetings of the Company, resulting in changes to the Board composition. (h) Relates to the write off of intangible assets held in relation to 1) the acquisition of certain assets of C&H Distribution and 2) the Munster brand in respect to the UK contract market where it is no longer used. Refer to Note 11 ‘Intangible assets’ for further detail. 28 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 3. Finance costs Interest on loans and overdrafts wholly repayable within five years Hire purchase and finance lease interest 4 Profit/(loss) on ordinary activities before taxation After charging/(crediting) Net foreign exchange losses/(gains) Depreciation of property, plant and equipment (see Note 12) Amortisation of intangible assets (see note 11) Staff costs (see note 5) Cost of inventories recognised as an expense (Profit)/loss on sale of fixed assets Government grants (see note 25) Operating lease rentals Auditors’ remuneration: Fees payable to the Company’s Auditor for the audit of the Company’s annual financial statements The audit of the Company’s subsidiaries pursuant to legislation Total audit fees Other services pursuant to legislation Tax services Total non-audit fees 5 Staff Costs Wages and salaries Social security costs Other pension costs Termination benefits 52 weeks ended 29 March 2014 £000 52 weeks ended 30 March 2013 £000 500 31 531 2014 £000 152 2,484 70 19,565 50,544 (3,324) (315) 495 16 69 85 54 13 67 2014 £000 17,300 1,242 1,023 — 19,565 426 39 465 2013 £000 (479) 2,700 52 18,795 53,679 13 (369) 555 16 54 70 — 6 6 2013 £000 16,203 1,134 1,160 298 18,795 Directors’ remuneration is included as part of the staff costs above. Directors’ remuneration is disclosed separately in the Directors’ Report on page 11 and forms part of these financial statements. Termination benefits in 2013 were in respect of former directors Mr A Bullock and Mr B Poynter. 29 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 5 Staff Costs continued Average number employed (including executive directors of subsidiaries) Directors Sales and Marketing Production Logistics Maintenance Finance, IT and Administration Pension costs 2014 11 68 378 53 33 42 585 2013 10 74 333 47 37 41 542 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 £1,023,000 (2013: £1,160,000), of which £345,000 (2013: £364,000) relates to the UK schemes. The total contributions outstanding at year end was £nil (2013: nil). 6 Tax Current tax — Current year UK — Current year overseas — Adjustments in respect of prior years Deferred tax (note 19) — Credit recognised in the current year — Adjustments in respect of prior years — Effect of rate change Total tax 2014 £000 168 1,243 (2) 1,409 (836) 30 69 (737) 672 2013 £000 — 165 (52) 113 (854) 12 (9) (851) (738) Corporation tax is calculated at 23% and 30% (2013: 24% and 30%) of the estimated assessable profit/(loss) for the year in the UK and Australia respectively. 30 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 6 Tax continued The tax charge/(credit) for the year can be reconciled to the profit/(loss) per the income statement as follows: Profit/(loss) before tax Tax at the UK corporation tax rate of 23% (2013: 24%) Tax effect of investment in Colin Campbell & Sons Limited (discontinued operation) Tax effect of items that are not deductible/non taxable in determining taxable profit Effect of different tax rates of subsidiaries operating in other jurisdictions Effect of change in rate Movement in deferred tax on revalued land no longer required Crystallisation of rollover gain on plant and machinery Profit on disposal of UK property non taxable Profit on sale of Colin Campbell & Sons Limited non taxable Tax adjustments in relation to share options Tax losses not recognised for deferred tax Adjustments to prior periods Tax expense/(credit) and effective tax rate for continuing operations 7 Dividends 2014 £000 2,397 551 (1) 591 234 69 (947) 29 (159) (14) (2) 293 28 672 2014 % 23.0 (0.0) 24.6 9.7 2.9 (39.5) 1.2 (6.6) (0.6) (0.1) 12.2 1.2 28.0 Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 30 March 2013 paid during the period 6.0p per share (2013: 7.0p) Interim dividend for the year ended 29 March 2014 paid during the period 2.0p per share (2013: 2.0p) Proposed final dividend for the year ended 29 March 2014 of 0.0p per share (2013: 6.0p) 2013 £000 (3,520) (845) 44 38 53 (9) (6) — — — 22 5 (40) (738) 2014 £000 422 141 563 — 2013 % 24.0 (1.3) (1.1) (1.5) 0.3 0.2 — — — (0.6) (0.1) 1.1 21.0 2013 £000 486 141 627 422 A special dividend of 292p per share was paid on 25 July 2014. The total value of the dividend paid was £20.7m. The special dividend is further detailed in note 30 ‘Post balance sheet events’. 31 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 8. Earnings/(loss) per share The calculation of the basic, adjusted and diluted earnings/(loss) per share is based on the following data: Profit/(loss) attributable to ordinary equity holders of the parent entity Exceptional items (net of tax effect): Profit on sale of Australia properties Profit on sale of UK property Contract for Differences Profit on sale of investment in Colin Campbell & Sons Limited Acquisition costs Restructuring of Australia’s spinning mills Move to AIM Incentive plan General Meeting costs Write off of certain intangible assets Impairment of investment in associate company Earnings for the purpose of basic and adjusted earnings per share Earnings for the purpose of basic and adjusted earnings per share from continuing operations Weighted average number of shares Basic 2014 £000 Adjusted 2014 £000 Basic 2013 £000 Adjusted 2013 £000 1,725 1,725 (2,782) (2,782) — — — — — — — — — — — (1,823) (693) 1,631 (111) 633 546 — — — — — — — — — — — — — — — — 1,725 1,609 1,908 (2,782) 1,792 (2,600) — — — — — 608 177 173 459 336 259 (770) (588) 2014 Number of shares (’000) 2013 Number of shares (’000) Weighted average number of ordinary shares for the purposes of basic and adjusted earnings per share 7,036 7,033 The Group’s earnings/(loss) per share are as follows: Basic adjusted and diluted adjusted Basic and diluted Basic adjusted and diluted adjusted from continuing operations Basic and diluted from continuing operations 2014 Pence 27.12 24.52 25.47 22.87 2013 Pence (10.95) (39.56) (8.36) (36.97) The issue of 7,087,730 new shares post year-end on the 29 July would have reduced the Group’s earnings per share by 50% had they been in place from the start of the financial period. The new share issue is further detailed in note 30 ‘Post balance sheet events’. 9 Rates of exchange The results of overseas subsidiaries have been translated into Sterling at the average exchange rates prevailing during the periods. The balance sheets are translated at the exchange rates prevailing at the period ends: Australia — A$ Canada — C$ 32 2014 Average Year-end 1.7057 1.6816 1.7988 1.8401 2013 Average 1.5317 1.5841 Year-end 1.4565 1.5427 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 10 Goodwill At cost 2014 £000 2,735 2013 £000 — The goodwill has been generated from the acquisition of Globesign Limited in December 2013 and is included within the UK segment. The group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amount of the goodwill has been determined based on a value in use calculation. The key assumptions for the value in use calculation are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The discount rate of 18.14% is estimated using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the market in which Globesign operates. The calculation uses cash flow projections extrapolated from the budget for the year ending 28 March 2015. A terminal value was calculated based on a terminal growth rate assumption of 2.5%. As at 29 March 2014 no impairment provision was considered necessary. Goodwill comprises intangible assets that do not qualify for separate recognition, in particular the existing workforce. None of the goodwill is expected to be tax deductible. 11 Intangible assets Cost At 1 April 2012 Exchange differences At 30 March 2013 At 31 March 2013 Additions (see Note 22) Exchange differences Intangible assets derecognised At 29 March 2014 Amortisation At 1 April 2012 Exchange differences Charges for the period Impairment At 30 March 2013 At 31 March 2013 Exchange differences Charges for the period Intangible assets derecognised At 29 March 2014 Net book value At 29 March 2014 At 30 March 2013 At 31 March 2012 Customer Relationships £000 Brand Names £000 C&H Distribution Limited £000 323 — 323 323 322 — 322 322 2,291 2,484 — (75) 2,539 147 — 16 36 199 199 — 40 (75) 164 2,375 124 176 — (75) 2,731 146 — 16 36 198 198 — 30 (75) 153 2,578 124 176 400 — 400 400 — — (400) — 10 — 20 370 400 400 — — (400) — — — 390 Group Total £000 1,045 — 1,045 1,045 4,775 — (550) 5,270 303 — 52 442 797 797 — 70 (550) 317 4,953 248 742 33 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 11 Intangible assets continued The intangible assets brought forward at 31 March 2012 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. The addition of £4,775,000 of intangibles in the current period is in respect of the acquisition of Globesign Limited in December 2013 and comprises £2,484,000 for the brand name (Westex Carpets) and £2,291,000 for the customer list. The brand name is being amortised over 35 years and the customer list over 20 years. The amortisation charge is included within administrative expenses in the Income Statement. 12 Property, plant and equipment Property, plant and equipment Group Freehold land and buildings £000 Plant and machinery £000 Fixtures, vehicles and equipment £000 Freehold land and buildings £000 Total £000 Company Fixtures, vehicles and equipment £000 3,464 60,219 5,506 Cost At 1 April 2012 Exchange differences Additions Disposals At 30 March 2013 At 31 March 2013 Exchange differences Acquisition Additions Transfers Assets transferred to ‘assets held for sale’ (See Note 14) Disposals At 29 March 2014 Accumulated depreciation At 1 April 2012 Exchange differences Charge for the year Disposals At 30 March 2013 At 31 March 2013 Exchange differences Charge for the year Transfers Assets transferred to ‘assets held for sale’ (See Note 14) Disposals At 29 March 2014 Net Book Value At 29 March 2014 At 30 March 2013 At 31 March 2012 11,780 283 — — 12,063 12,063 (795) 7,396 10 275 (955) (9,115) 8,879 942 19 122 — 1,083 1,083 (74) 258 231 (408) (815) 275 8,604 10,980 10,838 34 44,975 1,634 97 (257) 46,449 46,449 (5,574) 459 144 (275) — (149) 41,054 118 753 (808) 3,527 3,527 (400) 220 377 — — (195) 3,529 2,035 850 (1,065) 62,039 62,039 (6,769) 8,075 531 — (955) (9,459) 53,462 31,814 2,485 35,241 1,178 2,218 (251) 34,959 34,959 (4,125) 1,881 (231) — (108) 32,376 8,678 11,490 13,161 79 360 (705) 2,219 2,219 (270) 345 — — (164) 2,130 1,399 1,308 979 1,276 2,700 (956) 38,261 38,261 (4,469) 2,484 — (408) (1,087) 34,781 18,681 23,778 24,978 — — — 5,506 5,506 — — — — — (5,506) — 480 — 60 — 540 540 — 60 — — (600) — — 4,966 5,026 23346.02 27 August 2014 8:35 AM Proof 8 Total £000 5,543 — — (37) 5,506 5,506 — — — — — (5,506) — 516 — 60 (36) 540 540 — 60 — — (600) — — 4,966 5,027 37 — — (37) — — — — — — — — — 36 — — (36) — — — — — — — — — — 1 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 12 Property, plant and equipment continued Included within fixed assets are the following: Held under finance leases: Cost at 29 March 2014 Accumulated depreciation at 29 March 2014 Depreciation charged in year Held under finance leases: Cost at 30 March 2013 Accumulated depreciation at 30 March 2013 Depreciation charged in year There were no assets under hire purchase agreement at 29 March 2014 or 30 March 2013. Capital expenditure authorised and committed at the period end: Contracts placed Group fixtures, vehicles and equipment £000 650 257 118 729 220 143 2013 £000 6 Group 2014 £000 — The Company held no assets under finance lease or hire purchase agreements and had no capital commitments at either year end. 13 Fixed asset investments Investment property Investment in subsidiaries Group Company 2014 £000 180 — 2013 £000 180 — 2014 £000 180 27,126 2013 £000 180 3,322 Note (a) (b) a) Investment property Investment property relates to land, therefore no depreciation charge has been applied. b) Investment in subsidiaries 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. Victoria Carpets Limited Westwood Yarns Limited Globesign Limited Westex (Carpets) Limited The Victoria Carpet Company Pty Limited Country of incorporation and operation England England England England Australia Nature of business Carpet manufacture Yarn manufacture Holding Company Carpet manufacture Carpet manufacture 35 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 14 Assets held for sale (a) During the year, the Company acquired the remaining 50% interest in Colin Campbell & Sons Limited, which was subsequently sold on the 28 March 2014. Group Company Cost of investment Return of capital Share of post-acquisition profits (retained by Colin Campbell & Sons Limited) Impairment of investment in associate company Proceeds on disposal Profit on disposal (a) Investment in Colin Campbell & Sons Limited sold during the year (b) The Castlemaine mill in Australia was sold post year end for proceeds amounting to net book value 2014 £000 101 (45) 416 (259) 324 111 — 547 547 2013 £000 101 (45) 592 (259) — — 389 — 389 15 Inventories Raw materials Work-in-progress Finished goods 2014 £000 101 (45) — — 324 268 — — — 2013 £000 101 (45) — — — — 56 — 56 Group 2014 £000 4,296 1,957 14,950 21,203 2013 £000 6,454 673 13,739 20,866 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. 16 Trade and other receivables Amounts falling due within one year: Trade debtors Amounts owed by subsidiaries Amounts owed by associated company Other debtors Prepayments and accrued income Group 2014 £000 2013 £000 12,807 10,667 — — 14 1,143 13,964 — 106 55 335 Company 2014 £000 — 15,693 — — 484 2013 £000 — 4,213 — — 68 11,163 16,177 4,281 The average credit period taken on sale of goods is 54 days (2013: 55 days). No interest is charged on past due receivables. Amounts owed by subsidiaries to the Company are not considered to be impaired. The above amounts are stated net of an allowance (net of VAT) of £218,000 (2013: £212,000) made for estimated irrecoverable amounts from sale of goods. The movement of this allowance account during the year is summarised below: 36 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 16 Trade and other receivables continued Opening balance at 31 March 2013 Increase in provisions Written off against provisions Recovered amounts Exchange differences Closing balance at 29 March 2014 2014 £000 212 196 (159) (8) (23) 218 2013 £000 174 103 (64) (6) 5 212 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: 1–30 days overdue 31–60 days overdue > 60 days overdue Total An analysis of the age of impaired trade receivables is as follows: 1–30 days overdue 31–60 days overdue > 60 days overdue Total 2014 £000 1,241 117 216 1,574 2014 £000 99 4 118 221 2013 £000 2,687 78 94 2,859 2013 £000 185 19 197 401 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. 17 Trade and other payables Amounts falling due within one year: Trade creditors Amounts due to subsidiaries Other creditors Accruals Fair value of Contract for Differences Deferred income Group Company 2014 £000 9,554 — 3,827 2,213 1,605 297 17,496 2013 £000 5,075 — 2,269 1,910 — 370 9,624 2014 £000 — 32 1,000 491 1,605 — 3,128 2013 £000 — 32 — 197 — — 229 The Contract for Differences charge of £1.61m represents the fair value assessment of the contract as at the year end date. The CFD has been fair valued using a market approach at 29 March 2014, being the best estimate for future share price under the efficient market hypothesis. The calculation was based on the principles of the contract and the market capitalisation as at the year end. Also taken into account were a number of conditions still to be met before the contract could be exercised. The conditions were eventually satisfied in July 2014, resulting in the issue of 7,087,730 shares. Under IFRS 13 Fair Value Measurement of the CFD is classified under the fair value hierarchy as Level 3. The fair value of the CFD will be sensitive to future changes in the share price of the Company. 37 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 17 Trade and other payables continued Amounts falling due after one year: Other creditors Deferred income Group Company 2014 £000 6,875 841 7,716 2013 £000 550 1,404 1,954 2014 £000 6,804 — 6,804 2013 £000 — — — Other creditors (Group and Company) includes an estimate for contingent earn-out liability of £7,804,000 in connection with the acquisition of Globesign Limited, with £1,000,000 estimated as due within one year and £6,804,000 due after one year. Under IFRS 13 Fair Value Measurement this is classified under the fair value hierarchy as Level 3. Deferred income relates to government grants as shown in note 25. 18 Other financial liabilities Amounts falling due within one year: Group Company Bank loans and overdrafts Hire purchase and finance lease creditors Amounts falling due after more than one year: Bank Loans — Between one and two years — Between two and five years Hire purchase and finance lease obligations payable — Between one and two years — Between two and five years 2014 £000 5,267 139 5,406 Group 2014 £000 4,023 6,965 164 115 11,267 The loans falling due after more than one year are repayable as follows: — Between one and two years — Between two and five years Group 2014 £000 4,023 6,965 2013 £000 7,566 143 7,709 2013 £000 500 — 163 227 890 2013 £000 500 — 2014 £000 5,267 — 5,267 Company 2014 £000 2,768 6,965 — — 9,733 Company 2014 £000 2,768 6,965 2013 £000 4,246 — 4,246 2013 £000 500 — — — 500 2013 £000 500 — The directors consider that the carrying amounts of other financial liabilities approximate to their fair value. Bank borrowings in the United Kingdom are secured by way of debentures over the assets; however, the UK businesses were in a net cash position of £0.19m at the year-end (2013: net borrowings of £7.87m). Bank borrowings of the Australian subsidiary are secured by a general security agreement over its assets; the Australian company was in a net borrowing position of £1.25m at the year-end (2013: Net cash position of £1.00m). 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, Globesign Limited, Westex (Carpets) Limited and Barclays Bank PLC. At the 29 March 2014 the UK subsidiaries were in a net cash position under the Composite Accounting Agreement of £0.96m (2013: net debt position of £3.12m). 38 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 18 Other financial liabilities continued The average effective interest rate of borrowings is set out in note 26 ‘Financial instruments’. Operating lease arrangements The Group and Company as lessee Details of operating lease arrangements for the Group and Company are as follows: Minimum lease payments under operating leases recognised in income statement for the year. Group Company 2014 £000 668 2013 £000 555 2014 £000 1 At the balance sheet date, the Group and Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows: Minimum lease payments Within one year In the second to fifth years inclusive After five years Present value of minimum lease payments Within one year In the second to fifth years inclusive After five years Group Company 2014 £000 1,569 5,521 11,926 19,016 2013 £000 456 687 38 1,181 2014 £000 495 1,988 7,425 9,908 Group Company 2014 £000 1,382 3,695 3,544 8,621 2013 £000 401 483 18 902 2014 £000 436 1,290 1,655 3,381 2013 £000 — 2013 £000 — — — — 2013 £000 — — — — Operating lease payments represent rentals payable by the Group and Company principally for vehicles and certain of its properties. Leases of vehicles are usually negotiated for a term of 3 to 5 years and rentals are fixed for the term of the lease. Leases of land and buildings are usually negotiated for 5 to 20 years. 19 Deferred taxation At 1 April 2012 Exchange adjustment Credit to Income statement (Note 6) Effect of rate change (Note 6) Deferred tax on share option scheme taken to equity At 30 March 2013 At 30 March 2013 Exchange adjustment Credit to Income statement (Note 6) Adjustment for acquisition of Globesign Limited Effect of rate change (Note 6) Deferred tax on intangible assets acquired At 29 March 2014 Group £000 Company £000 282 (44) (842) (9) 39 (574) (574) 157 (806) (32) 69 955 (231) 784 — (332) (20) 39 471 471 — (756) — — — (285) 39 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 19 Deferred taxation continued The provision for deferred taxation is as follows: Capital Allowances Liability on recovering value through sale Deferred grant income Tax losses Other timing differences Group Company 2014 £000 618 (188) (341) (838) 518 (231) 2013 £000 1,361 429 (532) (1,346) (486) (574) 2014 £000 (1) (77) — (207) — (285) 2013 £000 567 304 — (402) 2 471 The provision is based on taxation rates of 20% in the UK and 30% in Australia (2013: 23% and 30% respectively). Effect on UK deferred tax balances of Proposed changes in the UK corporation tax rate In the 2013 Budget, issued on 20 March 2013, the government announced that the main rate of corporation tax would be reduced to 20% with effect from 1 April 2015. This rate reduction was substantively enacted for financial reporting purposes on 2 July 2013. Accordingly, current tax has been provided for at a rate of 23% and deferred tax has been provided for at a rate of 20% in these financial statements. Deferred tax assets and liabilities The deferred tax balances shown on the balance sheet are: Deferred tax liabilities Deferred tax assets 20 Share capital Group Company 2014 £000 1,210 (1,441) (231) 2013 £000 749 (1,323) (574) 2014 £000 — (285) (285) 2014 £000 2013 £000 471 — 471 2013 £000 Allotted, called up and fully paid 7,087,730 Ordinary shares of 25p each (2013: 7,033,185) 1,772 1,758 The Company has one class of Ordinary shares which carry no right to fixed income. The Company issued 54,545 fully paid ordinary shares of 25p each during the year ended 29 March 2014, in connection with the exercise of share options under the Company’s Long Term Incentive Plan. These shares were settled in full at the option price. Capital risk management The Group considers its capital to comprise its Ordinary share capital, share premium, accumulated retained earnings and net debt. 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. The Group is subjected to two financial covenants in connection with its UK bank facilities. These covenants are tested quarterly and were not breached during the year and have not been subsequently. 40 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 21 Reserves i. Share Premium and Retained Earnings 52 weeks ended 30 March 2013 At 31 March 2012 £000 Income statement £000 Dividends paid £000 Other movements £000 52 weeks ended 29 March 2014 At 30 March 2013 £000 Income statement £000 Dividends paid £000 Other movements £000 At 29 March 2014 £000 Group Share Premium Profit and Loss Account Adjustments arising out of consolidation: 829 — — — 829 — — 80 909 30,710 (2,782) (627) (39) 27,262 1,725 (563) 150 28,574 Goodwill Exchange rates (1,533) 8,398 — — — — Retained earnings 37,575 (2,782) (627) — (1,533) 1,597 1,558 9,995 35,724 — — — — — (1,533) (5,078) 4,917 1,725 (563) (4,928) 31,958 Company Share Premium Retained earnings 829 5,802 — (467) — (627) — (39) 829 — 4,669 25,097 — (563) 80 103 909 29,306 The profit of the Company for the year determined in accordance with the Companies Act 2006 was £25,097,000 (2013: loss of £467,000). The Company is exempt under Section 408 of the Companies Act 2006 from presenting its own Income statement and Statement of Comprehensive Income. ii. Share-Based Payment Reserve Balance at 30 March 2013 Movement in Income Statement in year Issue of share capital through LTIP scheme- where net settled Exchange rates Transfer of share-based payment reserve to retained earnings Balance at 29 March 2014 Group Company 2014 £000 162 — — (12) (150) — 2013 £000 180 — (22) 4 — 162 2014 £000 103 — — — (103) — 2013 £000 113 — (10) — — 103 22 Acquisition of subsidiary On 13 December 2013, the Group acquired the entire issued share capital of Globesign Limited and its wholly owned subsidiary Westex (Carpets) Limited. The principal activity of Westex (Carpets) Limited is the manufacture and sale of carpets. The business operates from two dedicated manufacturing locations which include the spinning and dyeing of yarn and the manufacture of a wide range of carpet types and colours. The acquisition is expected to be accretive to underlying earnings per share of the Company. The Group results for the year ended 29 March 2014 included £4.83m of revenue and £1.17m profit before tax from Globesign Limited. Consideration (i) Initial cash consideration of £16.0m was transferred on acquisition. (ii) Deferred consideration of up to £8.0m at the end of the third anniversary of the acquisition if Globesign Limited generates an average EBITDA of £4.2m over the preceding three years. On account payments shall be made half yearly if certain targets are met. (iii) Deferred consideration at the end of each of the first, second and third anniversaries of the acquisition being 100 per cent of the profit after tax generated by Globesign Limited in excess of £2.7m. 41 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 22 Acquisition of subsidiary continued (iv) Deferred consideration at the end of the fourth and fifth anniversaries of the acquisition being 50 per cent of the sum by which profits after tax generated by Globesign Limited exceeds the greater of (i) the highest profit after tax achieved during the previous three years; and (ii) £2.7m. Net assets acquired Property, plant and equipment Inventories Trade and other receivables Deferred tax asset Cash Trade and other payables Current tax liabilities Fair value of net assets acquired Fair value adjustments Intangible assets (see Note 11) Deferred tax liability on intangible assets acquired Total identifiable net assets Goodwill (see Note 10) Total consideration Satisfied by: Cash Deferred consideration The deferred consideration of £7.80m was determined by applying a discounted cash flow model to estimated future earnings. Net cash outflow arising on acquisition: Cash consideration Cash and cash equivalents acquired Amounts recognised at acquisition £’000 8,075 5,023 2,985 32 3,824 (2,180) (510) 17,249 4,775 (955) 21,069 2,735 23,804 16,000 7,804 23,804 (16,000) 3,824 (12,176) Other than where fair value adjustments have been made, the book value of assets acquired are considered to approximate to their fair values. Transaction costs of £655,000 relating to the acquisition of Globesign Limited have been recognised as an expense and included within administrative expenses in the Income Statement. If the acquisition of Globesign Limited had been completed on the first day of the financial year, Group revenues for the period would have been £14.1m higher and Group profit before tax would have been £3.4m higher. 42 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 23 Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities Operating profit/(loss) from continuing operations Adjustments for: — Depreciation charges — Amortisation of intangible assets — Impairment of intangible assets — Fair value charge for Contract for Differences — (Profit)/loss on disposal of property, plant and equipment — Exchange rate difference on consolidation Operating cash flows before movements in working capital Decrease/(increase) in working capital Cash generated/(used) by operations Interest paid Income taxes paid Net cash inflow/(outflow) from operating activities 24 Analysis of net debt Group Company 2014 £000 2,812 2013 £000 2014 £000 (2,873) 24,163 2,484 2,700 70 — 1,605 (3,324) 55 3,702 4,317 8,019 (531) (395) 7,093 52 442 — 13 124 458 2,124 2,582 (465) (506) 1,611 60 — — 1,605 (693) — 25,135 (11,488) 13,647 (384) — 13,263 (1,049) 2013 £000 (714) 60 — — — (8) — (662) (282) (944) (105) — At 30 March 2013 £000 Cash flow £000 Other non-cash changes £000 Exchange movement £000 At 29 March 2014 £000 Cash Bank loans payable less than one year and overdrafts Cash and cash equivalents Finance leases and hire purchase agreements — Payable less than one year — Payable more than one year Bank loans payable more than one year Net debt 1,091 14,296 (7,566) (6,475) 2,294 16,590 (143) (390) (500) (7,508) 14 — (10,488) 6,116 — — — (37) 37 — — (195) 15,192 5 (190) 27 74 — (89) (5,267) 9,925 (139) (279) (10,988) (1,481) The Group’s policy on Derivatives and Other Financial Instruments is set out in note 26 ‘Financial instruments’. 43 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 25 Government Grants During the year ended 29 March 2014, the Group’s Australian operations benefited from government assistance under the SIP (Strategic Investment Programme) which was accounted for as follows: Deferred Income at 30 March 2013 Total grant income in the year Less: Amortisation to deferred income by release through cost of production in the year Exchange differences Deferred income at 29 March 2014 Presented in: Current liabilities Non-current liabilities Deferred income at 29 March 2014 2014 £000 1,774 — (315) (321) 1,138 297 841 1,138 2013 £000 2,042 — (369) 101 1,774 370 1,404 1,774 There are no unfulfilled conditions or other contingencies attaching to government assistance. 26 Financial instruments Background 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. A contract for differences was entered into during the year and was established to link the performance and reward of Geoffrey Wilding to the creation of wealth for all shareholders. Under the original terms of the agreement, this was to be settled in cash, but was subsequently settled post year end in shares (see Note 17) and therefore there is no on-going exposure to risk. General objectives, policies and processes 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: 44 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 26 Financial instruments continued Credit risk The Group’s principal financial assets are bank balances and cash, trade and other receivables and investments. The Group’s exposure to 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 low credit risk 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 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 18 ‘Other financial liabilities’. Market risk 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). a) Interest rate 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. Interest rate sensitivity 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 a increase in post-tax profit for the year of £16,000 (2013: decrease in post-tax loss of £28,000). A 50 basis point increase in the interest rate would, on the same basis, have reduced the profit for the year by the same amount. 45 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 26 Financial instruments continued Effective interest rate analysis 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 29 March 2014 As at 30 March 2013 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 cash equivalents Bank loans & overdraft Finance lease and HP Company Cash and cash equivalents Bank loans & overdraft 0.08 17,505 17,505 — — 0.94 1,091 1,091 — 2.99 (18,568) (8,835) (2,768) (6,965) 3.38 (8,066) (7,566) (500) — — 6.94 3.08 (418) (66) (180) (172) (1,481) 8,604 (2,948) (7,137) 7.51 4.03 (533) (129) (7,508) (6,604) (45) (545) (359) (359) 0.11 13,151 13,151 — — — — — — 3.70 (15,000) (5,267) (2,768) (6,965) 2.65 (4,746) (4,246) 3.70 (1,849) 7,884 (2,768) (6,965) 2.65 (4,746) (4,246) (500) (500) — — — Non-interest bearing liabilities Non-interest bearing liabilities falling due within one year Details of trade and other payables falling due within one year are set out in note 17. 2014 £000 17,496 2013 £000 9,624 b) Currency risk The main currency exposure of the Group arises from the ownership of the Australian subsidiary, which accounts for approximately 32% of the Group’s net assets. It is the Board’s policy not to hedge against movements in the Sterling/Australian exchange rate. 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. 46 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 26 Financial instruments continued Currency risk sensitivity 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 a increase in Group post-tax profit for the year of £255,000. (2013: decreased Group post-tax loss by £64,000). A 10% weakening in the exchange rate would, on the same basis, have decreased Group post-tax profit by £208,000 (2013: increased Group post-tax loss by £52,000). The effect of a 10% strengthening of the Australia Dollar against sterling at year end rates would have resulted in an increase to equity of £1,582,000 (2013: an increase of £3,190,000). A 10% weakening in the exchange rate would, on the same basis, have decreased equity by £1,294,000 (2013: decrease of £2,610,000). The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: Australian Dollar Liabilities 2014 £000 11,022 2013 £000 7,912 Assets 2014 £000 2013 £000 22,547 36,627 c) Trading It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. 27 Key sources of estimation uncertainty 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 29 March 2014. 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 (£1,441,000; 2013: £1,323,000) 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 the UK and Australia’s ability to generate sufficient future taxable profits. Inventories (£21,203,000; 2013: £20,866,000) 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 £2,021,000 (2013: £1,831,000). During the year, provisions relating to these stocks increased by £16,000 (2013: an increase of £326,000). Globesign Limited deferred earn-out consideration Details of the deferred earn-out consideration are set out under note 22. Trade receivables Details of the provision made for non-recoverability of debts due to the Group from the sale of goods are set out under note 16. Contract for Differences The fair value of the CFD at year end was £1.61m. Details of the approach taken to fair value the CFD are set out under note 17. 47 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 28 Share-based payments Victoria PLC 2008 Long Term Incentive Plan and 2011 Performance Share Plan The Group had a Long Term Incentive Plan (LTIP) which was established in 2008 and Performance Share Plan (PSP) established in 2011 which entitle Executive Directors to purchase shares in the Company subject to achievement of specific performance conditions. The following table shows the final LTIP position for the period ended 29 March 2014, with the scheme now having finished. At 30 March 2013 Granted in period Market price on issue (p) Earliest date of exercise Expired or forfeited in period Exercised in period At 29 March 2014 Victoria PLC 2008 Long Term Incentive Plan Alan Bullock Terry Danks Shaun Lewis LTIP: At start of period Forfeited during the period Exercised during the period Expired during the period Outstanding at end of the period Exercisable at end of the period 76,436 28,495 26,050 — — — — 28/07/2012 76,436 — 28/07/2012 — 28/07/2012 — — — 28,495 26,050 — — — Number of shares 2014 Weighted average exercise price (p) 2013 2014 2013 130,981 669,430 170.8 189.3 (76,436) (54,545) — — — — (236,616) (301,833) 130,981 130,981 — — — — — — — — 170.8 170.8 The 54,545 of share options exercised in the period were settled in full, resulting in the issue of 54,545 ordinary shares. The following table shows the final PSP position for the period ended 29 March 2014, with the scheme now deemed to have finished. At 30 March 2013 Granted in period Market price on issue (p) Earliest date of exercise Expired or forfeited in period Exercised in period At 29 March 2014 Victoria PLC 2011 Performance Share Plan Anne Seymour 15,332 — — 07/12/2014 15,332 — — PSP: At start of period Granted during the period Forfeited or expired during the period Outstanding at end of the period Exercisable at end of the period The total stock option charge in the year is £nil (2013: £nil). Number of shares 2014 Weighted average exercise price (p) 2013 2014 2013 15,332 77,379 — (15,332) — — — (62,047) 15,332 — 0.0 — — — — 0.0 — — 0.0 — 48 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP 28 Share-based payments continued The fair value of the LTIP and PSP rights were calculated at the date of grant using the Black-Scholes model. The inputs into the Black-Scholes are as follows: Number of share options awards Exercise price Expected volatility Expected life Risk-free interest rate Expected dividend yields Dec 11 PSP award Dec 10 LTIP award Jul 09 LTIP award 77,379 206,192 521,338 0.00 41% 5 years 1.1% 5% 236.0 41% 5 years 2.6% 5% 170.8 41% 5 years 2.6% 5% 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. 29 Related parties Transactions between the Company and its subsidiaries have been eliminated on consolidation. Identity of related parties The Group has a related party relationship with its Directors and executive officers. The Company has a related party relationship with its subsidiaries and its directors and executive officers. Transactions with key management personnel Key management personnel are considered to be the directors of the Company and its subsidiaries. As at 29 March 2014, the key management personnel, and their immediate relatives controlled 2.00% 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. Short-term employee benefits Post-employment benefits Termination benefits Group 52 weeks 29 March 2014 £000 1,033 112 — 1,145 52 weeks 30 March 2013 £000 1,107 149 298 1,554 Termination benefits in the period ended 30 March 2013 were in respect of former directors Mr A Bullock and Mr B Poynter. 49 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Notes to the Accounts continued 29 Related parties continued Transactions with subsidiary undertakings: Dividend income — The Victoria Carpet Company Pty Limited Dividend income — Victoria Carpets Limited Dividend income — Globesign Limited Rental income — Victoria Carpets Limited Amounts due from subsidiary undertakings Amounts due to subsidiary undertakings 30 Post balance sheet events (a) Special Dividend Company 52 weeks 29 March 2014 £000 14,393 2,000 10,000 80 As at 29 March 2014 £000 15,693 32 52 weeks 30 March 2013 £000 842 — — 80 As at 30 March 2013 £000 4,213 32 A special dividend of £2.92 pence per share was paid to shareholders on 25 July 2014, following the approval by shareholders at a General Meeting on 9 July 2014. (b) Contract for Differences A CFD between the Company and Geoffrey Wilding was entered into on 19 April 2013, following shareholder approval at a General Meeting of the Company on 20 February 2013. The CFD was subsequently terminated further to satisfying the condtion by returning £3 per share to shareholders. At a General Meeting held on 9 July 2014, shareholders approved the issue of 7,087,730 new shares in settlement of the liability under the CFD upon termination. Following this share issue, the percentage of the Company owned by Geoffrey Wilding (through Camden Holdings Limited) is 50%. The proportion of the cost recognised in the financial period was approximately 15%. (c) Castlemaine Spinning Mill The Castlemaine spinning mill, in Australia, was closed during the first half of the financial year and ceased production by the end of June 2013. The property is shown under the heading ‘Assets held for sale’ in the financial statements at 29th March 2014 and was subsequently sold after the year-end for its written down value. 50 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Five Year Record Results of continuing operations Revenue EBITDA (note a) Depreciation and amortisation Operating profit/(loss) (Pre Exceptional items) Finance costs Profit/(loss) before tax and exceptional items Exceptional items Profit/(loss) before tax Tax Profit/(loss) from continuing operations Profit/(loss) for the period from discontinued operations Profit/(loss) attributable to shareholders Dividend attributable to the period ASSETS EMPLOYED Operating assets Non-current assets Net current assets (note b) Non-current liabilities Financed by Share capital and premium Retained reserves Shareholders funds Net debt ANALYSIS Return on operating assets Return on shareholders funds Earnings per share (basic) Earnings per share (basic adjusted) Dividend per share attributable to the period Dividend cover (basic) Dividend cover (adjusted) % % p p p times times 52 weeks 29 March 2014 £000 52 weeks 30 March 2013 £000 52 weeks 31 March 2012 £000 52 weeks 2 April 2011 £000 52 weeks 3 April 2010 £000 71,386 5,135 (2,554) 2,581 (531) 2,050 231 2,281 (672) 70,909 2,331 (2,752) (421) (465) (886) (2,634) (3,520) 738 77,126 5,642 (2,974) 2,668 (461) 2,207 (660) 1,547 (461) 70,503 5,358 (2,962) 2,396 (472) 1,924 — 1,924 (715) 1,609 (2,782) 1,086 1,209 116 (182) — 1,725 141 (2,964) 563 1,086 729 26,549 17,056 (7,485) 36,120 2,681 31,958 34,639 1,481 36,120 7.15 6.59 24.5 27.1 2.0 11.41 13.53 24,206 23,155 (1,380) 45,981 2,587 35,886 38,473 7,508 45,981 (0.92 ) (9.15 ) (39.6) (11.0) 8.0 n.a n.a 26,458 24,144 (2,535) 48,067 2,565 37,755 40,320 7,747 48,067 5.55 3.84 15.6 23.7 10.5 1.49 2.26 — 1,209 625 27,593 21,668 (3,268) 45,993 2,565 37,197 39,762 6,231 45,993 5.21 4.84 17.4 18.3 9.0 1.93 2.04 62,973 4,406 (2,753) 1,653 (565) 1,088 — 1,088 (460) 628 — 628 556 28,636 19,366 (3,556) 44,446 2,565 34,690 37,255 7,191 44,446 3.72 2.92 9.0 9.0 8.0 1.13 1.13 51 Notes (a) Earnings before interest, tax, depreciation, amortisation and exceptional items. (b) Excluding net debt, but including fair value of financial instruments where applicable. 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Shareholder Information Corporate website The Annual Report, Company announcements and other information are available at www.victoriaplc.com. Shareholder queries If you have any queries 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 Overseas: +44 20 8639 3399 website: www.capitaregistrars.com Financial calendar Annual General Meeting Half year results Wednesday, 24 September 2014 November 2014 Dividend payments 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/ Unsolicited mail The Company is required by law to make its share register available on request to the public and organisations which may use it as a mailing list resulting in shareholders receiving unsolicited mail. Shareholders wishing to limit such mail should write to the Mailing Preference Service, DMA House, 70 Margaret Street, London, W1W 8SS or register online at www.mpsonline.org.uk Victoria PLC Registered office Worcester Road Kidderminster Worcestershire, DY10 1JR Company Registered No. (England & Wales) 282204 Advisors Auditor: Nexia Smith & Williamson – 25 Moorgate, London, EC2R 6AY Banker: Barclays Bank PLC – PO Box 3333, One Snow Hill, Snow Hill Queensway, Birmingham, B3 2WN Registrar: Capita Asset Services– The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU Solicitor: Brown Rudnick LLP – 8 Clifford Street, London, WS1 2LQ Stockbroker: Cantor Fitzgerald Europe – 1 America Square, 17 Crosswall, London, EC3N 2LB Public Relations: MHP Communications – 60 Great Portland Street, London, W1W 7RT 52 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Glossary CFD EBIT EBITDA Contract for Differences Earnings before interest and tax Earnings before interest, tax, depreciation, amortisation and exceptional items Exceptional Items Non-recurring transactions which are material by virtue of their size or incidence IAS IFRS LTIP KPIs PBT PSP International Accounting Standards International Financial Reporting Standards Long Term Incentive Plan Key Performance Indicators used to assess business performance Profit before taxation Performance Share Plan 53 23346.02 27 August 2014 8:35 AM Proof 8 www.victoriaplc.comOur Financials Shareholder Notes 54 23346.02 27 August 2014 8:35 AM Proof 8 Victoria PLC Annual Report and Accounts 2014Stock Code: VCP Principal Subsidiaries and their Directors Victoria Carpets Limited Manufacture, distribution and sale of carpets Kidderminster, UK Neil Glover (Chief Operating Officer) Terry Danks Jonathan Stone The Victoria Carpet Company Pty Limited Manufacture and sale of carpets Dandenong, Australia Michael Oakley (Non-executive Chairman) Phil Smith (Managing) Anne Seymour Michael Davies (Non-executive) Warwick Whyte (Non-executive) Westwood Yarns Limited Manufacture and sale of carpet yarns Holmfirth, UK Trevor Chippendale (Managing) Terry Danks Westex (Carpets) Limited Manufacture and sale of carpets Cleckheaton, UK John Shirt (Joint Managing) John Snee (Joint Managing) Geoffrey Wilding 23346.02 27 August 2014 8:35 AM Proof 8 slugline Strategic Report - Our Business and Performance Victoria PLC Worcester Road Kidderminster Worcestershire DY10 1JR Tel: +44 (0)1562 749300 Fax: +44 (0)1562 749649 www.victoriaplc.com 23346.02 27 August 2014 8:35 AM Proof 8 23346.02 27 August 2014 8:35 AM Proof 8
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