Final Results
4imprint Group PLC
13 March 2003
Press Release 13 March 2003
4imprint Group plc
Preliminary Results for the year ended 28 December 2002
4imprint Group plc, the leading global distributor of imprinted promotional
products, today reports its unaudited Preliminary Results for the year ended 28
December 2002.
Financial highlights
• Pre-tax profits before exceptional items and goodwill amortisation up by
7% from £2.44 million to £2.61 million
• Dividend for year maintained at 2.25 pence per share
• Strong year-end net cash position of £4.83 million
• Turnover maintained by UK Corporate Programmes and more than tripled in US
Corporate Programmes
• European Premiums group produced outstanding performance
• MFR pension fund contributions to be increased from £0.12 million to £1.44
million per annum from May 2003
Operational highlights
• Several account wins, including Barclays, Cessna and Toro. Appointed
preferred supplier to GlaxoSmithKline - Consumer Division, Kimberly-Clark
Europe and Campbell's.
• European Premiums unit's best year since joining Group
• US Premiums team topped the US$1 million revenue mark from a standing
start
• US Partner Services franchise operation maintains ongoing programme of
reducing the overall numbers but increasing the quality of the remaining
owners in the network
Commenting on the Results, Dick Nelson, Chief Executive of 4imprint Group plc,
said:
'An excellent performance from our European Premiums unit, combined with
consistent bottom-line results in our US Direct Marketing Group enabled us to
more than offset weakness in our Manchester operation and achieve a 7% increase
in profit before tax, exceptional items and goodwill amortisation to £2.61
million, up from £2.44 million the prior year.
'We believe it will be difficult to expect any significant rebound in the
general advertising markets for as long as the current geo-political uncertainty
remains. However, the Group has managed to maintain its turnover and increase
profits before exceptional items and goodwill amortisation over the past twelve
very challenging months. Aside from the increase in pension costs, we expect to
show additional progress in 2003.'
- Ends -
www.4imprint.com www.4imprint.co.uk
For further information, please contact:
4imprint Group plc
Dick Nelson, Chief Executive Tel: +44 (0) 20 7444 4140
Email: dnelson@4imprint.com (today only)
Issued by:
Bankside
Henry Harrison-Topham / Russell Elliott Tel: +44 (0) 20 7444 4140
Email: henry.ht@bankside.com
Chairman's Statement
Advertising and marketing businesses worldwide have continued to experience a
tough environment throughout 2002. I am pleased to report that, despite these
difficulties, sales were increased marginally and profit before goodwill
amortisation, exceptional items and tax was ahead of 2001. We ended the year
with an increased net cash balance of £4.83 million and we are proposing a final
dividend of 1.25 pence per share, to give a total of 2.25 pence per share for
the year (2001 - 2.25 pence per share).
The pattern of business in 2002 was an encouraging increase in sales to large
international companies, where we have continued to win significant new
contracts. We have seen a particularly good performance in PPI, our European
Premiums unit based in London, while sales at the smaller end of our target
markets have declined a little. Our CEO Dick Nelson has provided a much fuller
analysis in his report.
In the Interim Results on 24 September 2002, we announced that we were
experiencing difficulties in collecting monies owed by certain franchise owners
in our AIA operation in the US. An exceptional provision of £2.37 million was
made predominantly against potentially unrecoverable debts and a thorough review
of franchise performance and control systems was conducted. Consequent changes
to improve controls and raise the overall quality of the Franchise Owner base
were implemented during 2002. We have now recruited David Woods, a highly
experienced and well-reputed Chief Executive from within the promotional
products industry, to run this operation for us. I am satisfied that future
prospects in this business are much improved.
Our Final Salary Pension Fund, closed to new entrants, is a legacy of former
activities in the printing industry. For many years the fund was in substantial
surplus, but falls in the stock market over the last two years have contributed
to a deficit under FRS17 of £11.56 million after deferred tax (2001 - £2.40
million). We continue to keep the situation under review with our pension
advisers and the trustees. The short-term impact of this deficit upon the Group
will be an increase under MFR (Minimum Funding Requirement), with effect from
May 2003, in our contributions and pension charge from £0.12 million to £1.44
million (before tax relief) on an annualised basis. Future contributions would
be mitigated by any recovery in the value of the equity element of the
investment portfolio. Further details are set out in the notes to the accounts.
In December 2002, Nicholas Wrigley retired from the Board as a non-executive
director after seven years with the Group. His experience of the City has been
of great value to us, especially during the period of re-organisation of our
activities. The whole Board joins me in offering him our thanks and good wishes
for the future. I am pleased to welcome Peter Evans, a former senior partner
with KPMG, to take his place. I would also like to record special thanks to our
Group Finance Director Craig Slater, who has taken the added responsibility of
leading the team at our Manchester based operation in recent months. As a
result, we have now strengthened our Central Finance Department by the promotion
of David Seekings to Company Secretary. David, based in Oshkosh, is also Chief
Financial Officer for our US operations and previously served as Group Financial
Controller at our Head Office.
Finally I would like to thank all of our staff for their continuing efforts
throughout this difficult time for the business. Their many achievements are
reflected in our growing list of top-class clients and our underlying financial
strength.
Rodger Booth
Chairman
13 March 2003
Chief Executive's Review
Introduction
An excellent performance in our European Premiums unit, combined with consistent
bottom-line results in our US Direct Marketing group, enabled us to more than
offset weakness in our Manchester-based Broadway operation. Consequently, we
achieved a 7% increase from £2.44 million to £2.61 million in profits before
tax, exceptional items and goodwill amortisation.
As reported in our Interim Results, we identified areas of control weaknesses in
AIA, which resulted in the recognition of an exceptional provision of £2.37
million. Following a thorough review of the business, we implemented
substantial changes to the control environment, the management and the
recruitment emphasis to tighten procedures and raise the quality of our
Franchise Owner base.
As a result of the closure of our Woking facility and its problematic
integration into our Manchester business, performance at Broadway was below
expectations, which led to a fundamental review of the operation. Under the
direction of Craig Slater, Group Finance Director and interim Managing Director
of Broadway, the structure and strategy of this unit have now been clarified and
we expect improved results in 2003.
The Oshkosh operation continues to develop as the resource centre for the US
operations and will house most of the AIA back office functions by mid-year
2003. Here, excellent top line performance in the US Corporate Programmes group
offset a decrease in Direct Marketing sales during 2002.
We continue to focus on tight cash management across all of our businesses and
this, in conjunction with the more rigorous approach adopted towards Franchise
Owner recruitment in AIA, has enabled us to produce a strong net cash position
by the year-end of £4.83 million (2001: £3.30 million).
Corporate Programmes
Our Corporate Programmes channel designs, sources, manufactures,
warehouses and distributes products for major clients, which include Barclays,
Cessna, British Airways and Union Pacific.
The UK Corporate Programmes group maintained its turnover in 2002 despite the
fact that many large companies were looking to reduce their advertising spend.
While the emphasis was primarily on overcoming operational challenges associated
with the integration of the Woking facility into Manchester, we had several
account wins in the year including Barclays, Sport England and The Number.
US Corporate Programmes revenue more than tripled over the prior year as the
investment made in this channel began to produce results. We had over a dozen
wins including Cessna, BearingPoint (formerly KPMG Consulting), VNU (parent
company of ACNielsen), Airgas, Toro and Wellmark. The US team continues to
carry out our strategy of using AIA certified franchise owners to service large
corporate clients at a local level, with the Oshkosh facility providing
merchandising, marketing, technology and fulfilment support. Currently, around
60% of the orders we receive from our corporate programme clients are sourced
via the Internet stores we create for them. As noted at the Interims, we have
invested significant resources to build this channel over the past two years and
expect it to make a positive contribution in 2003.
Direct Marketing
Our Direct Marketing group reaches customers and prospects via eight
million catalogues, more than a quarter of a million product mailings, hundreds
of thousands of e-mails and tens of thousands of telephone calls.
In response to the weakness in both the UK and US advertising markets, we chose
to take a more conservative approach to prospecting in 2002 and reduced our
catalogue mailings accordingly. As expected, turnover was down in both direct
marketing units compared to the prior year. The team further expanded the
e-mail marketing programme launched last year and was therefore able to limit
the decrease in the channel's turnover, compared to 2001, to 15% even though we
mailed 25% fewer catalogues. Orders received via the Internet still account for
approximately 20% of the Direct Marketing group's total intake. Our 2003 plan
calls for increased mailings in both the UK and the US, as well as an expansion
of our outbound telemarketing activity to existing customers in the US based on
the success of the tests we conducted last year. This channel remains highly
profitable and cash generative overall.
Premiums
Our Premiums group designs, sources and arranges offshore
manufacturing of large one-off imprinted promotional product orders most often
used by larger companies in consumer promotions.
The European Premiums group, with sales offices in London, Bristol and Paris,
and a buying office in Hong Kong, had its best year since joining the Group.
The group expanded existing client relationships, which included better than
expected results from their airline amenity kit business, and capitalised on a
revitalised new account development initiative that began at the end of 2001.
As forecast, there was only a slight lift from the Football World Cup; however
we do expect something more from the EURO 2004 football competition. In
addition, the team has secured preferred supplier status with several major
clients in the year, including Diageo, Weetabix, BBC and United Biscuits.
From a standing start at the beginning of the year the US Premium team crossed
the million-dollar revenue mark and is looking for a solid increase in 2003 as
more AIA franchise owners are becoming interested in selling Premiums.
Partner Services
Our Partner Services group leverages our bespoke enterprise
operating systems and industry-leading supply chain management processes into
other channels of distribution.
As reported in the Interim Results, we identified areas of control weaknesses in
AIA, our US franchise operation, which led to an exceptional provision
predominantly against bad debt of £2.37 million during the second quarter of
2002. A fundamental review of the operation was completed, which resulted in a
number of changes including the installation of David Woods, an industry
veteran, as CEO of AIA. David joined us at the beginning of February 2003 and
will be responsible for all operational aspects of the business except for
recruiting, which will remain under founder Dan Carlson's direction.
System Wide Billings in AIA increased to US$120 million (US$110 million in
2001), while operating expenses were held at a similar level to prior year. The
transition of owners to the OASIS system slowed slightly in the last quarter as
franchisees found it challenging to service customers in the busy holiday gift
season and also have the time to prepare for conversion to the new system.
Momentum has returned to this effort which we now anticipate will be largely
completed by the end of the first quarter of 2003. At present, over 75% of our
sales are conducted on the new system.
In keeping with our plan that was also announced in the Interims to enhance the
quality of the franchise owner business, we have raised the standards for
joiners and have begun to remove from the network those owners who are under
performing or non-compliant. As expected, although we added 121 new owners in
2002, there was a net decrease in the total of active franchisees in the system
over the last couple of months. This reduction in quantity and increase in the
quality will continue through much of 2003.
The UK Field Sales group had a challenging year in 2002, but progress is being
made as we are now serving smaller clients with our Direct Marketing team,
thereby allowing our field salespeople to focus on medium and larger accounts.
Our recent appointment as preferred supplier by GlaxoSmithKline - Consumer
Division is further evidence of the success of this strategy.
Outlook
We believe it will be difficult to expect any significant rebound in the general
advertising markets for as long as the current geo-political uncertainty
remains. However, the Group has managed to maintain its turnover and increase
profits before exceptional items and goodwill amortisation over the past twelve
challenging months. Aside from the increase in pension costs referred to above,
we expect to show additional progress in 2003.
Dick Nelson
Chief Executive Officer
13 March 2003
Consolidated Profit & Loss Account
(Unaudited)
For the 52 weeks ended 28 December 2002
Exceptionals Exceptionals
& goodwill Unaudited & goodwill Audited
amortisation Total amortisation Total
2002 2002 2002 2001 2001 2001
Note £'000 £'000 £'000 £'000 £'000 £'000
Turnover 2 94,625 - 94,625 93,973 - 93,973
Change in stocks of 1,116 - 1,116 (496) - (496)
finished goods
95,741 - 95,741 93,477 - 93,477
Operating expenses (93,373) - (93,373) (91,507) - (91,507)
excluding
exceptional costs and
goodwill amortisation
Exceptional operating 3 - (2,366) (2,366) - - -
expenses
Goodwill - (858) (858) - (954) (954)
amortisation
Operating expenses (93,373) (3,224) (96,597) (91,507) (954) (92,461)
after goodwill
amortisation
Operating 2 2,368 (3,224) (856) 1,970 (954) 1,016
profit/(loss)
Exceptional items 3 - 503 503 - (1,525) (1,525)
Interest 245 - 245 474 - 474
Profit/(loss) 2,613 (2,721) (108) 2,444 (2,479) (35)
before
taxation
Taxation 4 (793) 1,166 373 (42) - (42)
Profit/(loss) 1,820 (1,555) 265 2,402 (2,479) (77)
after
taxation
Dividends 5 (646) - (646) (646) - (646)
Transfer 1,174 (1,555) (381) 1,756 (2,479) (723)
to/(from)
reserves
Earnings per
share
Basic 6 6.34p 0.92p 8.37p (0.27)p
Diluted 6 6.34p 0.92p 8.37p (0.27)p
Dividend per 5 2.25p 2.25p
ordinary
share:
Reconciliation of Movement in Shareholders' Funds
For the 52 weeks ended 28 December 2002 Unaudited Audited
2002 2001
£'000 £'000
Profit/(loss) for the financial period 265 (77)
Dividends (646) (646)
(381) (723)
Tax on exchange adjustments on foreign currency net investments (249) -
Exchange adjustments on foreign currency net investments (1,572) 593
Net movement in shareholders' funds (2,202) (130)
Opening shareholders' funds 45,715 45,845
Closing shareholders' funds 43,513 45,715
Consolidated Balance Sheet
At 28 December 2002
Unaudited Audited
2002 2001
£'000 £'000 £'000 £'000
Fixed assets
Intangible - goodwill 12,934 17,633
Tangible 6,644 7,363
Investments 9 9
19,587 25,005
Current assets
Stocks 6,269 5,295
Debtors 33,872 43,736
Cash 9,268 25,360
49,409 74,391
Current liabilities
Loans & overdrafts 4,440 22,064
Trade creditors 11,004 12,572
Corporation tax 3,203 5,134
Other creditors 4,986 4,382
Dividends 366 365
(23,999) (44,517)
Net current assets 25,410 29,874
Total assets less current liabilities 44,997 54,879
Creditors due after more than one year - (5,178)
Provisions for liabilities and charges (1,484) (3,986)
NET ASSETS 43,513 45,715
Capital and reserves
Ordinary share capital 11,044 11,044
Share premium 37,630 37,630
Capital redemption reserve 208 208
Revaluation reserve 37 43
Profit & loss account (5,406) (3,210)
EQUITY SHAREHOLDERS' FUNDS 43,513 45,715
NET CASH 4,828 3,296
Consolidated Cashflow
For the 52 weeks ended 28 December 2002
Unaudited Audited
Note 2002 2001
£'000 £'000
Cash inflow from operating activities 7 3,293 2,872
Returns on investments and servicing of finance 245 402
Taxation (130) (314)
Capital expenditure (2,072) (4,654)
Acquisitions (153) (10,468)
Disposals - (747)
Equity dividends paid (645) (3,782)
Cash inflow/(outflow) before the use of liquid resources and financing 538 (16,691)
Financing
Issue of shares - 67
(Repayment)/increase of loans (19,655) 13,046
(19,655) 13,113
Decrease in cash in the period (19,117) (3,578)
Reconciliation of net cash flow to movement in net debt
Decrease in cash in the period (19,117) (3,578)
Cash inflow/(outflow) from movement in debt and lease financing 19,655 (13,046)
Change in net debt resulting from cashflows 538 (16,624)
Translation difference 994 (77)
Cash inflow/(outflow) in the period 1,532 (16,701)
Opening net cash 3,296 19,997
Closing net cash 4,828 3,296
Notes to the Financial Statements
1 Basis of preparation
This preliminary announcement for the 52 weeks ended 28 December 2002 has
not been audited and does not constitute statutory accounts within the
meaning of S240 of the Companies Act 1985. The financial information has
been prepared on the basis of the accounting policies set out in the
Group's Annual Report Accounts for the 52 weeks ended 29 December 2001.
Those accounts carry an unqualified auditor's report and have been
delivered to the Registrar of Companies. The comparative results for the
52 weeks ended 29 December 2001 are abridged and as such do not represent
statutory accounts. The full Annual Report & Accounts for the 52 weeks
ended 28 December 2002 will be posted to shareholders shortly and, after
adoption at the Annual General Meeting, delivered to the Registrar of
Companies.
2 Segmental analysis 2002 2001
Sales Operating Sales Operating
profit profit
£'000 £'000 £'000 £'000
ORIGIN
United Kingdom 49,376 1,029 49,980 1,063
Goodwill amortisation - (284) - (277)
49,376 745 49,980 786
United States 45,249 1,339 43,993 907
Goodwill amortisation - (574) - (677)
Exceptional item - (2,366) - -
45,249 (1,601) 43,993 230
TOTAL 94,625 (856) 93,973 1,016
All activity in the period relates to Promotional Marketing
3 Exceptional items 2002 2001
£'000 £'000
AIA review (2,366) -
Operating exceptional items (2,366) -
Release of provision created on disposal of businesses in prior year 503 -
Costs of fundamental reorganisation - (1,525)
Non-operating exceptional items 503 (1,525)
The operating exceptional in 2002 relates to provisions made predominantly
for amounts due from debtors in our Franchise operation, AIA. The
non-operating exceptional income in 2002 represents legal costs provided
for on a prior year disposal, which are no longer required. The 2001 item
relates to the completion costs of a fundamental reorganisation.
4 Taxation (credit)/charge 2002 2001
£'000 £'000
United Kingdom, current taxation at 30% (2001 - 30%) 21 (7)
Overseas (349) 548
Deferred tax (45) (499)
(373) 42
5 Dividends on ordinary shares 2002 2001
p p
Interim dividend (paid 11 November 2002) 1.00 1.00
Final dividend 1.25 1.25
2.25 2.25
The final dividend per ordinary share in respect of 2002 of 1.25p is
proposed to be paid on 29 May 2003 to shareholders on the Register at close
of business on 2 May 2002.
6 Earnings per share
The pre exceptional and goodwill amortisation earnings per share for the
period is based on the profit after tax before exceptionals and
amortisation of £1,820,000 (2001: Profit - £2,402,000) and weighted average
shares in issue of 28,709,000 (2001 : 28,709,000).
The earnings per share and diluted earnings per share for the period are
based on the profit after tax of £265,000 (2001 : Loss - £77,000) and
weighted average shares in issue of 28,709,000 (2001 : 28,709,000).
7 Reconciliation of operating (loss)/profit to operating cashflows
Unaudited Audited
2002 2001
£'000 £'000
Operating (loss)/profit (856) 1,016
Depreciation charge 2,399 1,922
Amortisation of goodwill 858 954
(Profit)/loss on sale of tangible fixed (19) 113
assets
Release of deferred profit on sale and - (35)
leaseback
Exceptional costs paid - (190)
(Increase)/decrease in stocks (1,108) 443
Decrease in debtors 4,078 5,224
Decrease in creditors (802) (6,474)
Expenditure against provisions (1,257) (101)
3,293 2,872
8 Pension disclosures under FRS17
The Group operates a defined benefit scheme in the UK. A full actuarial
valuation was carried out at 5 April 2001 and updated to 28 December 2002
for FRS17 purposes by a qualified independent actuary. The major
assumptions were (in normal terms):
28 Dec 2002 29 Dec 2001
Rate of increase in salaries 3.50% 4.00%
Rate of increase of pensions 2.25% 2.50%
in payment
Discount rate 5.75% 6.00%
Inflation assumption 2.25% 2.50%
The assets in the scheme and the expected rates of return were:
28 Dec 2002 29 Dec 2001
£'000 £'000
Equities 7.00% 31,510 7.00% 50,427
Bonds 5.00% 28,585 5.50% 17,317
Other 6.00% 1,485 6.00% 4,991
Total market value of assets 61,580 72,735
Actuarial value of liability (78,091) (76,166)
Deficit in the scheme (16,511) (3,431)
Related deferred tax asset 4,953 1,029
Net pension deficit under (11,558) (2,402)
FRS17
Movement in FRS17 deficit during the period
52 weeks to
28 Dec 2002
£'000
FRS17 deficit in scheme at (2,402)
beginning of period after
deferred tax credit
Movement in year:
Current service cost (110)
Contributions 120
Net return on assets 200
Actuarial loss (13,290)
Deferred tax movement 3,924
FRS17 deficit in scheme at end of year after deferred (11,558)
tax credit
The most sensitive of the major assumptions used by the actuary (in normal
terms) for FRS17 purposes is the discount rate. A movement of 0.25% in the
discount rate would impact the deficit, net of deferred tax, by £2.45m.
This information is provided by RNS
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