Final Results
4imprint Group PLC
21 February 2005
Press Release 21 February 2005
4imprint Group plc
Preliminary Results for the 53 weeks ended 31 December 2004
4imprint Group plc announces today its unaudited preliminary results for the 53
weeks ended 31 December 2004.
Highlights
• Pre tax profit before exceptional items, goodwill amortisation and
impairment and pension charges was £5.37m compared with a loss of
£2.39m in 2003.
• Pre tax profit was £3.41m compared with a loss of £10.83m in 2003.
• Net cash increased by £5.09m to £12.75m at the end of 2004.
• Proposed share buy back programme to return up to £10m to
shareholders.
• Taxation benefit of £2.75m produced post tax profits of £6.16m
producing an EPS of 21.53p (2003: loss per share of 28.34p).
• Strong growth in the US Direct Marketing division, the core US web
and catalogue trading company.
• AiA, the US Franchise business, achieves near £1m operating profit
through restructuring and strong controls.
• A final dividend of 3.5p is proposed bringing the total for the
period to 5.25p (2003: Final dividend 3p, total dividend 4p).
Commenting on the results, Ken Minton, Executive Chairman said:
'The benefits of the major restructuring programme carried out in the Group are
evident in the results and the second half was particularly strong. Cash
generation was impressive and the proposed share buy back programme will benefit
shareholders. The Group expects to make further progress in 2005.'
-Ends-
For further information, please contact:
4imprint Group plc
Ken Minton, Chairman Tel: +44 (0) 161 272 4000
Chairman's Statement
Shareholders will be pleased to see that the recovery in the performance of
their company, already evident in the interim results, continued and
strengthened in the second half of 2004.
Turnover at £93.59m was marginally below that of 2003, but this masks a very
strong performance in our principal business divisions, offset by elimination of
low margin activities.
Operating profit before exceptional items, goodwill amortisation and pension
charges was £5.08m. This excellent performance was achieved through very strong
performances at the European Direct Marketing and Corporate Programmes division
where operating profits were almost double those of 2003; in US Direct Marketing
where operating profits were almost three times those of 2003 and at the US
Franchising division where operating profits of near £1m were achieved, compared
with the substantial loss of 2003, reflecting the achievements of the management
of that division in bringing the business onto a strongly controlled and sound
footing. The European Premium Promotions division suffered from a strong
competitive environment and reduced spend by some major clients; and operating
profits were lower than last year. Here, we have carried out significant
restructuring and refocusing to bring back profitability to desired levels. At
the Corporate level, major changes have been made in the overhead structure, and
ongoing costs have been significantly reduced.
After exceptional operating charges and pension charges, operating profit
before goodwill amortisation was £3.40m and this figure reduced to £3.12m after
goodwill amortisation. Net interest income was £0.29m, bringing Pre tax profits
before exceptionals, goodwill amortisation and pension charges to £5.37m and
after exceptionals, goodwill amortisation and pension charges to £3.41m.
The taxation credit of £2.75m comprises principally a previous years
adjustment of £1.95m and a deferred tax credit of £0.76m. After tax profit
increased to £6.16m compared with a post tax loss of £8.14m in 2003. Earnings
per share were 21.53p compared with a loss per share of 28.34p in 2003.
The intrinsic cash generating feature of the 4imprint business was clearly
demonstrated by a net cash inflow for the year of £5.09m which arose from the
strong operating performance and reduction in working capital, producing a net
cash balance of £12.75m at the year end.
Share Buy Back
The Board intends that substantial growth of shareholder value shall be the
key objective in the strategic development of the Group. The Board has
considered carefully the forward cash generation of the Group, its needs for
cash to support its growth, and its responsibility for pensions and other
requirements. As a result, the Board believes it should return a substantial
portion of its current net cash resource to Shareholders.
The Board has therefore decided to seek Shareholders' approval at its AGM on 6
April to undertake a share buy back programme, involving a return of up to £10m
to Shareholders through this mechanism. Details of how this will be done will be
communicated to Shareholders in due course.
The Board
Two of my Board colleagues, Edward Bramson, who was my predecessor as Chairman,
and Matthew Peacock who is a Non-Executive Director have expressed their desire
to resign from the Board and will leave the Group after the AGM on the 6 April
2005. Edward and Matthew who are both principals of the specialist turnround
Group, Hanover Investors, were responsible for executing the major changes in
the management of 4imprint and setting the Group on the way to recovery. We are
grateful to both, for the enormous contribution they have made to the Group's
recovery. The Board also welcomes two new Executive Directors; Gillian Davies
who in December last year was appointed Group Finance Director and Andrew Scull
who in November last year was appointed Corporate Services Director and Legal
Counsel. We are delighted to have them on the Board.
People
The 4imprint Group has been through a necessary process of major change over
the recent past. The fact that these changes are now bringing renewed health
and prosperity to the Group is a tribute to all employees who have responded so
well to these challenges. We are grateful, on Shareholders' behalf, to everyone
in 4imprint, for all that has been achieved.
Dividend
The Board is recommending a final dividend of 3.5p, which will bring the total
dividend for the period to 5.25p (2003: Final dividend 3p, total dividend 4p).
Outlook
The general trading climate for the Group's business at the start of this year
is similar to that which prevailed during the second half of last year. Against
that background, and with a full year's benefit from operating changes made in
2004, the Board expects the Group to achieve further progress in 2005.
Ken Minton
Executive Chairman
21 February 2005
Finance Director's Report
Turnover and operating profit
Group turnover for the period was £93.59 million, 99% of 2003, although, at
constant currency, results would be 105% of 2003.
2004 operating profit before exceptional items, goodwill amortisation and
pension charges (both ongoing defined contribution charges and charges arising
from the revaluation of the defined benefit scheme in 2004) increased to £5.08m
from a loss of £2.40m in 2003. There has been a strong performance from all
businesses with a combination of increased sales, margin focus, exiting
unprofitable business and tight cost control. At constant currency, operating
profit of the US businesses would have been £0.39m higher. The Group's pension
fund triennial valuation was completed during the year and this has resulted in
a £0.91m charge to operating profit (2003: £0.02m credit), ongoing defined
contribution pension charges are £0.24m (2003: £0.25m).
In each company turnover and operating profit are recognised upon delivery of
goods to the customer. Turnover for the franchise division is the fee income
received from the franchisee on the sale of goods.
Exceptional items
The exceptional items include the costs of a product recall in the European
Premium Promotions division (£0.27m), scaling down its French office and
restructuring its UK business (£0.09m), as well as restructuring the UK Direct
Marketing and Corporate Programmes division (£0.17m).
Segment reporting
Results are presented in four segments which represent the four separate
divisions of the Group. Each division has its own management team, is managed as
a separate profit entity and is self contained with the exception of the US
Direct Marketing and US Franchising divisions which share premises and systems.
Each segment has a different market place or route to market and different
risks, rewards and fixed and working capital demands.
Interest
Interest income increased to £0.29m from £0.01m in the previous year. Interest
income includes interest on the deferred consideration arising on the sale of a
US supplier business in 1999, as well as interest payable on a US dollar loan
held in the UK as a hedge against the US dollar deferred consideration. The
majority of the Group's cash balance is held and invested in the UK.
Taxation
The Group tax credit of £2.75m arose from the resolution of prior year tax
issues resulting in a credit of £1.95m and recognition of deferred tax assets in
line with FRS 19. Excluding these items the Group effective tax rate for the
year would be 25.8%. The Group's long term underlying tax rate is expected to be
between 30% and 34%; however it is expected that the 2005 rate will benefit from
the recognition of a deferred tax asset on US goodwill.
Pensions
2004 2003
£'000 £'000
Pension charges are made up as follows:
Defined contribution plans 247 254
Defined benefit scheme 907 (16)
1,154 238
Most current employees are members of defined contribution schemes and the
regular ongoing contribution to these schemes is £0.25m (2003: £0.25m).
In addition the Group has liabilities for the defined benefit scheme which has
been closed to new members for 4 years. Membership of the scheme is 6 active,
1,539 deferred and 1,018 pensioners at the date of the last valuation.
The Trustee Company Directors together with the actuaries and in consultation
with the Company have finalised the results of the April 2004 actuarial
valuation, the details of which are included in the notes to the accounts. The
valuation resulted in a pre tax deficit of £11.3m compared to a pre tax surplus
of £0.8m at the last valuation in April 2001. The principal factors causing the
deficit are the investment experience over the period together with an update in
mortality assumptions.
The Company has accounted for pensions on a SSAP 24 basis in 2004. The SSAP 24
profit and loss account charge is £0.91m, representing a regular cost of £0.24m
and a charge relating to the actuarial deficit of £0.67m. Contributions by the
Company of £1.44m have been made in the period, resulting in a total pension
prepayment at the end of the period of £1.66m (increased from £1.13m in 2003).
Following the valuation, the Company and the Directors of the Trustee Company
will agree a revised schedule of contributions.
On an FRS 17 basis, the pension scheme deficit is £12.59m, net of deferred
taxation. Following the adoption of International Financial Reporting Standards
in 2005, any deficit calculated on an IAS 19 basis will be included in the
Company's Balance Sheet, with a corresponding reduction in reserves.
Earnings per share and dividends
Earnings per share are 21.53p (2003: loss per share 28.34p).
The Board has proposed a final dividend for the year of 3.5p (2003: 3p),
bringing the total dividend for the period to 5.25p (2003: 4p) an increase of
31%.
Cash flow
The Group generated cash in the period of £5.09m resulting in a closing cash
balance of £12.75m. Strong cash generation was due to improved operating
profit, reduction in working capital around the Group and sales growth in
businesses which require a relatively low working capital investment.
Growth in the Direct Marketing businesses has a low working capital requirement
whereas growth in the Corporate Programmes or US Franchising businesses
necessitates heavier investment in working capital.
A share buy back programme to return cash of up to £10m to shareholders has been
proposed.
Balance sheet and shareholders' funds
Shareholders' funds increased to £34.88m (2003: £31.69m) due to strong
profitability and relatively low fixed and working capital investment.
In respect of the US franchising business, the turnover includes only royalty
revenues earned on sales of goods to customers, whereas working capital balances
include the full outstanding liabilities in relation to the sales as well as the
full outstanding debt due from the franchise owners.
Current debtors include £1.67m of deferred consideration due to the Company in
respect of the disposal of a US supplier business in 1999.
Exchange and cash management
The average US dollar exchange rate during the course of the year was $1.8312
(2003: $1.6425) to the pound. The exchange rate at the balance sheet date was
$1.9031 (2003: $1.7757). This resulted in a reduction of US dollar denominated
assets of £0.64m.
The Group does not currently hedge the translation exposure of profits and
assets of its US subsidiaries.
Treasury policy is centrally to manage the financial requirements and risk of
the divisions that arise in relation to business needs. The Group operates cash
pooling arrangements on currency accounts for its US operations and separately
for its UK and European operations to maximise interest income and actively
holds the majority of cash in the UK on deposit.
Accounting standards
During the year the Group adopted UITF Abstract 38 'Accounting for ESOP trusts'.
This led to a reclassification of interests in own shares from fixed asset
investments to profit and loss reserves.
The Group will adopt International Financial Reporting Standards (IFRS) in 2005.
The principal impact on the Group will be as a result of the adoption of IAS 19
'Employee benefits', IFRS 2 'Share based Payment' and IAS 10 'Events after the
balance sheet date' together with the associated tax implications. The 2004
results and Balance Sheet will be restated on an IFRS basis for inclusion in the
2005 half year accounts.
Gillian Davies
Group Finance Director
21 February 2005
Operating Review
European Premium Promotions
2004 2003
£'000 £'000
Turnover 13,328 15,854
Operating profit pre exceptional items, goodwill 932 1,589
amortisation and pension charges
Operating profit 410 1,423
This division comprises the Product Plus International company based in London,
which specialises in the supply of promotional products and services to a range
of blue chip clients.
Trading conditions have been difficult throughout the period for the European
Premium Promotions business with strong competition and a lull in growth in
overall corporate spend in the sector. In the second half of the year the
business achieved sales of £6.8m, 73% of H2 2003 which included particularly
high client spend from two sectors. Total sales for the year are 84% of prior
year and, following tight cost control, operating profit pre exceptional items,
goodwill amortisation and pension charges is 59% of prior year.
The business has undertaken a full review of its profitability during 2004 and
as a result has downsized its French subsidiary, ensuring that customer service
is unaffected and support services are provided wherever possible from the UK.
It has also undertaken restructuring at its UK Head Office re-aligning its
Business Units to the key business segments they serve. The restructuring
resulted in a one off exceptional cost of £0.09m. Following this restructuring
the business is well placed to respond to the competitive landscape going
forward.
An exceptional charge of £0.26m in the year relates to the cost of a product
recall which is treated as exceptional due to its rare occurrence and size.
European Direct Marketing and Corporate Programmes
2004 2003
£'000 £'000
Turnover 35,727 34,844
Operating profit pre exceptional items, goodwill 1,886 1,008
amortisation and pension charges
Operating profit 1,505 776
The Manchester based business which accounts for over 85% of this division's
sales, comprises of the following divisions:
(a) Trade division - supplies a wide range of promotional products on a
regular basis to end users and intermediate suppliers of end users. It
provides bespoke printing and imprinting services through its own
'in house' laser printing facilities. The sector had an excellent year
with sales up 6% on 2003.
(b) Corporate Programmes division - this division builds on its product base
by providing sophisticated design and artwork and additional support
functions, including warehousing, distribution and product range
consultancy, for specific corporate promotional programmes for major
clients. The division generated flat sales as low value contracts were
terminated as part of the drive to improve the profitability of this
sector.
(c) Direct Marketing and Field Sales - both sales and profits increased in
this sector. In Direct Marketing, which uses catalogue and web selling
techniques, a major drive is being implemented to accelerate the growth
of this important area using the advanced skills and methods employed by
4imprint Inc in the US.
Kreyer Promotions, in Germany, increased its turnover by 10% as a result of
reinforced sales efforts and securing several new customers and there was a
corresponding increase in profitability. This was augmented by increased
purchasing from the Far East.
The European Direct Marketing and Corporate Programmes division's current cost
base and margin focus leave it well placed to move forward in 2005.
US Direct Marketing
2004 2004 2003 2003
US$'000 £'000 US$'000 £'000
Turnover 73,083 39,910 64,180 39,075
Operating profit pre pension charges 4,582 2,502 1,597 972
Operating profit 4,382 2,393 1,403 854
This division based in Oshkosh Wisconsin has two separate activities, the core
Direct Marketing business and a smaller Corporate Programmes business.
4imprint Inc's core business, which represents over 80% of its sales is the
Direct Marketing of promotional products covering US and Canada, using
sophisticated web and catalogue skills and technologies. It is one of the
foremost companies in the sector with a reputation for service and innovation.
It is growing strongly. Sales were up 17% on 2003 and total orders received
grew by 20%. New customer orders grew by 27% and orders placed through the web
grew by 60%. Overall a third of the total orders are made through the web.
4imprint Inc's strategy is to grow as a multichannel direct marketer integrating
direct mail, internet and telephone strategies to acquire and retain customers.
It is backed up by strong supplier relationships and procurement strategies.
The small Corporate Programmes business has been downsized to a focused unit
where 4imprint Inc's skills can be profitably used.
US Franchising
2004 2004 2003 2003
US$'000 £'000 US$'000 £'000
Turnover 8,471 4,626 8,377 5,100
Operating profit pre goodwill
amortisation and impairment and pension
charges 1,840 1,005 (7,684) (4,678)
Operating profit 1,802 984 (21,346) (12,183)
This division comprises the AiA promotional products franchising business, based
in Oshkosh Wisconsin.
2004 has been a turnaround year for the division and the benefits of the
restructuring which commenced in 2003 are evident with a year end operating
profit before goodwill amortisation and pension charges of £1m following several
years of losses. In 2003 all of the goodwill of £7.05m relating to AiA was
written off, together with legacy balances due from Franchise owners totalling
£3.36m.
The operation has been successfully consolidated into Oshkosh, Wisconsin with
minimal disruption to Franchise Owners. The business has a strong management
team and is focused on tight financial controls as well as minimising the fixed
overhead cost base. Bad debt issues have been substantially reduced and the
business is on a sound footing to move forward.
A decision was taken not to add new franchisees during the year until the
reorganisation, relocation and improvements to the control systems were
complete. A change in US Financial Accounting Standards (requiring the
consolidation of franchisees' accounts for US reporting) makes it impractical
for the company to resume sales of new franchises. Therefore, going forward, the
business will continue to support its existing base of franchise holders and
will start to develop a new group of Independent Sales Representatives. This
approach will allow the division to maintain existing business and at the same
time will provide a platform for growth. It is anticipated that the new process
will commence later in 2005.
Ken Minton
Chairman
21 February 2005
Consolidated Profit and Loss Account (unaudited)
For the 53 weeks ended 31 December 2004
2004 2003
Note £'000 £'000
Turnover 2 93,591 94,873
Operating expenses (90,471) (105,716)
Operating profit/(loss) before exceptional items, goodwill 5,075 (2,403)
amortisation and impairment and pension charges
Exceptional operating expenses 3 (525) (421)
Goodwill amortisation and impairment (276) (7,781)
Pension charges 8 (1,154) (238)
Operating profit/(loss) 2 3,120 (10,843)
Net interest receivable 291 11
Profit/(loss) on ordinary activities before taxation 3,411 (10,832)
Taxation 4 2,748 2,696
Profit/(loss) on ordinary activities after taxation 6,159 (8,136)
Dividends 5 (1,495) (1,148)
Transfer to/(from) reserves 4,664 (9,284)
Earnings/(loss) per share
Basic 6 21.53p (28.34p)
Diluted 6 20.82p (28.10p)
All results relate to continuing activities.
Statement of Group Total Recognised Gains and Losses
for the 53 weeks ended 31 December 2004
2004 2003
£'000 £'000
Profit/(loss) on ordinary activities after taxation 6,159 (8,136)
Exchange adjustments offset in reserves (643) (2,532)
Total gains/(losses) for the financial period 5,516 (10,668)
No tax was payable on UK exchange gains in either period as this was covered by
losses brought forward for which no deferred tax asset was previously
recognised.
Reconciliation of Movements in Group Shareholders' Funds
for the 53 weeks ended 31 December 2004
2004 2003
(restated)
Note £'000 £'000
Profit/(loss) on ordinary activities after taxation 6,159 (8,136)
Dividends 5 (1,495) (1,148)
4,664 (9,284)
Other recognised losses relating to the period
- exchange adjustments (643) (2,532)
Movements arising from the exercise of share options 7 2
Shares issued in the period 48 -
Own shares purchased in the period (889) -
Net movement in shareholders' funds 3,187 (11,814)
Opening shareholders' funds 31,690 43,504
Closing shareholders' funds 34,877 31,690
The opening shareholders' funds were £31,697,000 (2003: £43,513,000) before the
reclassification of own shares from fixed asset investments to profit and loss
reserves following the adoption of UITF 38 'Accounting for ESOP Trusts'. The
effect of this reclassification was to reduce the 2004 and 2003 profit and loss
reserve by £889,000 and £7,000 respectively.
Consolidated Balance Sheet (unaudited)
at 31 December 2004
2004 2003
(restated)
£'000 £'000
Fixed assets
Intangible assets 4,065 4,341
Tangible assets 4,399 5,299
Investments 8 -
8,472 9,640
Current assets
Stocks 4,640 5,959
Debtors due within one year 26,763 28,523
Debtors due after more than one year 765 1,901
Cash at bank and in hand 15,310 10,128
47,478 46,511
Creditors: amounts falling due within (20,241) (23,194)
one year
Net current assets 27,237 23,317
Total assets less current liabilities 35,709 32,957
Provisions for liabilities and charges (832) (1,267)
Net assets 34,877 31,690
Capital and reserves
Called up share capital 11,063 11,044
Share premium account 37,659 37,630
Capital redemption reserve 208 208
Profit and loss account (14,053) (17,192)
Equity shareholders' funds 34,877 31,690
Interests in own shares have been reclassified from fixed asset investments to
the profit and loss reserve following the adoption of UITF Abstract 38 '
Accounting for ESOP Trusts'. The impact is to reduce reserves by £889,000 (2003:
£7,000).
The US dollar to sterling exchange rate at the balance sheet date was $1.9031
(2003: $1.7757).
Cash Flow Statement
for the 53 weeks ended 31 December 2004
2004 2003
Note £'000 £'000 £'000 £'000
Cash inflow from operating activities 7 7,835 4,545
Returns on investments and servicing of finance 198 11
Taxation 470 397
Capital expenditure (2,124) (1,395)
Equity dividends paid (1,367) (650)
Cash inflow before use of liquid resources and 5,012 2,908
financing
Financing (157) 2,090
Increase in cash in the period 4,855 4,998
Reconciliation of net cash flow to movement in
net cash
Increase in cash in the period 4,855 4,998
Movement in bank borrowings 201 (2,090)
Change in net cash resulting from cash flows 5,056 2,908
Translation difference 37 (84)
Movement in net cash in the period 5,093 2,824
Opening net cash 7,652 4,828
Closing net cash 12,745 7,652
1 Basis of Preparation
This preliminary announcement for the 53 weeks ended 31 December 2004 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 27 December 2003 except for the adoption of UITF
Abstract 38 'Accounting for ESOP Trusts' as detailed on the face of the balance
sheet. Those accounts carry an unqualified auditor's report and have been
delivered to the Registrar of Companies. The comparative results, restated for
UITF Abstract 38, for the 52 weeks ended 27 December 2003 are abridged and as
such do not represent statutory accounts. The full Annual Report & Accounts for
the 53 weeks ended 31 December 2004 will be posted to shareholders shortly and,
after adoption at the Annual General Meeting, delivered to the Registrar of
Companies.
2 Segmental Analysis
The analysis of turnover, operating profit and net assets by origin is as
follows:
OPERATING PROFIT/(LOSS)
BEFORE
EXCEPTIONAL ITEMS,
GOODWILL
AMORTISATION AND
IMPAIRMENT
TURNOVER NET ASSETS AND PENSION CHARGES
2004 2003 2004 2003 2004 2003
(restated)
£'000 £'000 £'000 £'000 £'000 £'000
EUROPE 7 50,698 15,176 15,620 1,698 2,122
US 44,536 44,175 7,948 9,289 3,377 (4,525)
DIVIDEND CREDITOR &
UNALLOCATED COSTS (992) (871) - -
TOTAL NET CASH 12,745 7,652
93,591 94,873 34,877 31,690 5,075 (2,403)
EXCEPTIONAL GOODWILL
OPERATING AMORTISATION AND
EXPENSES IMPAIRMENT PENSION CHARGES OPERATING PROFIT
/(LOSS)
2004 2003 2004 2003 2004 2003 2004 2003
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
EUROPE (525) - (276) (276) (1,024) (120) (127) 1,726
US - - - (7,505) (130) (118) 3,247 (12,148)
DIVIDEND - (421) - - - - - (421)
CREDITOR &
UNALLOCATED COSTS
TOTAL NET CASH (525) (421) (276) (7,781) (1,154) (238) 3,120 (10,843)
Unallocated liabilities relate to dividends due to be paid by the Group.
Unallocated exceptional operating expenses in 2003 related to the aborted EGM
costs and Chief Executive severance costs detailed in note 3. Neither these
costs nor liabilities have been allocated to the segments as this would be
misleading.
The analysis of turnover, operating profit and net assets by segment is as
follows:
OPERATING
PROFIT/(LOSS) BEFORE
EXCEPTIONAL ITEMS,
GOODWILL
AMORTISATION AND
IMPAIRMENT
TURNOVER NET ASSETS AND PENSION CHARGES
2004 2003 2004 2003 2004 2003
(restated)
£'000 £'000 £'000 £'000 £'000 £'000
EUROPEAN 13,328 15,854 3,984 4,344 932 1,589
PREMIUM PROMOTIONS
EUROPEAN DIRECT 35,727 34,844 8,615 10,964 1,886 1,008
MARKETING
& CORPORATE PROGRAMMES
US DIRECT MARKETING 39,910 39,075 3,659 4,936 2,502 972
US FRANCHISING 4,626 5,100 3,108 3,730 1,005 (4,678)
CENTRAL NET ASSETS AND 2,766 64 (1,250) (1,294)
UNALLOCATED COST/INCOME
TOTAL NET CASH 12,745 7,652
93,591 94,873 34,877 31,690 5,075 (2,403)
EXCEPTIONAL GOODWILL
OPERATING AMORTISATION AND
EXPENSES IMPAIRMENT PENSION CHARGES OPERATING PROFIT
/(LOSS)
2004 2003 2004 2003 2004 2003 2004 2003
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
EUROPEAN (357) - (120) (120) (45) (46) 410 1,423
PREMIUM
PROMOTIONS
EUROPEAN (168) - (156) (156) (57) (76) 1,505 776
DIRECT
MARKETING
& CORPORATE
PROGRAMMES
US DIRECT - - - - (109) (118) 2,393 854
MARKETING
US FRANCHISING - - - (7,505) (21) - 984 (12,183)
CENTRAL NET - (421) - - (922) 2 (2,172) (1,713)
ASSETS AND
UNALLOCATED
COST/ INCOME
TOTAL NET CASH
(525) (421) (276) (7,781) (1,154) (238) 3,120 (10,843)
A detailed review of the segments is given in the Operating Review.
Costs have been allocated in terms of resources required and do contain some
indirect costs which are not dependent on the level of business conducted.
Unallocated costs relate to the Head Office and ongoing defined contribution
charges for Head Office staff as well as the SSAP 24 charge for the defined
benefit scheme.
Unallocated assets/(liabilities) relate to taxation, Head Office working capital
and dividends, which were not allocated to the segments as this would be
misleading.
3 Exceptional operating expenses
2004 2003
£'000 £'000
Product recall costs 267 -
European restructuring costs 258 -
Aborted EGM costs - 209
Severance costs of Chief Executive - 212
Exceptional operating items 525 421
The operating exceptional in 2004 relates to the cost of a product recall in the
European Premium Promotions division which has been treated as exceptional due
to its rare occurrence and size, and to restructuring costs of £90,000 in the
European Premium Promotions division and £168,000 in the European Direct
Marketing and Corporate Programmes division.
The operating exceptional in 2003 related to costs incurred following the
requisition of an EGM by Hanover Partners iv LP. The requisition was withdrawn
on 10 October 2003. The severance costs related to the resignation of the Chief
Executive Officer on 15 December 2003.
4 Taxation
2004 2003
£'000 £'000
UK taxation:
Corporation tax at 30% (2003: 30%) - -
Adjustments in respect of previous years (1,945) (942)
(1,945) (942)
Overseas taxation:
Current tax (34) (405)
Adjustments in respect of previous years (10) 24
(44) (381)
Total current tax (1,989) (1,323)
Deferred tax
Current year (664) (888)
Adjustment in respect of previous years (95) (485)
(759) (1,373)
Tax credit (2,748) (2,696)
The effect on the tax credit for the year of the exceptional operating expenses
disclosed in note 3 is a credit of £157,000. Factors affecting the total tax
credit for the year have been the release of UK Corporation tax provisions
totalling £1,953,000 (see UK taxation above) and the recognition of deferred tax
assets of £1,571,000 (included in deferred tax above).
5 Dividends
2004 2003
£'000 £'000
Equity dividends - ordinary shares
Interim 1.75p (2003: 1.00p), paid 8 November 2004 503 287
Final 3.5p (2003: 3.00p), proposed to be paid 8 April 2005 992 861
1,495 1,148
The final dividend per ordinary share in respect of 2004 of 3.5p is proposed to
be paid on 8 April 2005 to the shareholders on the register at close of business
on 11 March 2005.
6 Earnings/(loss) per share
Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of ordinary
shares in issue during the period, excluding those held in the Employee Share
Trust which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The dilutive potential ordinary shares relate to those share options
granted to employees where the exercise price is less than the average market
price of the Company's ordinary shares at the balance sheet date.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below:
2004 2003
Weighted Weighted
average average
number number
Earnings of shares Pence per Earnings of shares Pence per
£'000 '000 share £'000 '000 share
Profit/(loss) attributable to 6,159 (8,136)
shareholders
Ordinary shares in issue 28,742 28,713
Shares held by employee share (135) (3)
trust
Basic EPS 6,159 28,607 21.53 (8,136) 28,710 (28.34)
Effect of dilutive shares 980 (0.71) 242 0.24
Diluted EPS 6,159 29,587 20.82 (8,136) 28,952 (28.10)
7 Reconciliation of operating profit/(loss) to operating cash flows
2004 2003
£'000 £'000
Operating profit/(loss) 3,120 (10,843)
Depreciation charge 1,886 2,221
Amortisation of goodwill 276 736
US Franchising goodwill impairment - 7,045
Loss on disposal of tangible fixed assets 44 5
Decrease in stocks 1,261 162
Decrease in debtors 2,769 3,111
(Decrease)/increase in creditors (1,171) 2,906
Decrease in provisions (350) (798)
Net cash inflow from operating activities 7,835 4,545
8 Employee pension schemes
2004 2003
£'000 £'000
The net pension charges are made up as follows:
Defined contribution plans 247 254
Defined benefit schemes:
Regular cost 242 -
Part of actuarial deficit/(surplus) allocated to year 665 (16)
1,154 238
Defined Contribution Plans
The Group operates defined contribution plans for the majority of its UK and US
employees. The regular contributions are charged to the profit and loss account
as they are made.
Defined benefit scheme - SSAP 24 costs
The defined benefit scheme is closed to new members. The £242,000 (2003: £nil)
charge comprises the regular ongoing cost. The £665,000 charge (2003: £16,000
credit) represents the spreading of the actuarial deficit/(surplus) at the last
valuation.
Pension disclosures under FRS 17
The Group operates a defined benefit scheme in the UK, which is closed to new
members. A full actuarial valuation was carried out at 5 April 2004 and updated
to 31 December 2004 by a qualified independent actuary. The major assumptions
used by the actuary were:
2004 2003 2002
Rate of increase in salaries 3.70% 3.75% 3.50%
Rate of increase of pensions in payment 2.70% 2.50% 2.25%
Discount rate 5.50% 5.50% 5.75%
Inflation assumption 2.70% 2.50% 2.25%
The assets in the scheme and the expected rate of return were:
2004 2003 2002
Return £'000 Return £'000 Return £'000
Equities 7.50% 36,110 7.00% 35,029 7.00% 31,510
Bonds 5.00% 31,870 5.00% 30,305 5.00% 28,585
Other 6.00% 410 6.00% 682 6.00% 1,485
Total market value of 68,390 66,016
assets
61,580
Actuarial value of (86,379) (83,718) (78,091)
liability
Deficit in the scheme (17,989) (17,702) (16,511)
Related deferred tax 5,397 5,311 4,953
asset
Net pension liability (12,592) (12,391) (11,558)
Movement in deficit during the period
2004 2003
£'000 £'000
FRS 17 deficit in scheme at beginning of period after deferred tax credit (12,391) (11,558)
Movement in period:
Current service cost (75) (71)
Contributions 1,440 1,110
Net return on assets (565) (732)
Actuarial loss (1,087) (1,498)
Deferred tax movement 86 358
FRS 17 deficit in scheme at end of period after deferred tax credit (12,592) (12,391)
This information is provided by RNS
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