Final Results
4imprint Group PLC
27 February 2007
27 February 2007
4imprint Group plc
Preliminary Results for the period ended 30 December 2006.
4imprint Group plc announces today its results for the period ended 30 December
2006.
Highlights
• Sales are £119.52m, 24% ahead of prior year.
• Operating profit before exceptional items at £7.54m is 32% ahead of
prior year.
• Profit before tax and exceptional items at £7.72m is 30% ahead of
prior year.
• Profit before tax at £7.34m is 30% ahead of prior year.
• Basic EPS from continuing operations is 20.29p compared to 15.35p in
2005, an increase of 32%.
• Final proposed dividend of 6.25p per share, an increase of 39% on
prior year. Total dividend, paid and proposed, 36% ahead of 2005.
• US Direct Marketing sales were over $100m, 41% ahead of prior year.
Commenting on the results, Ken Minton, Executive Chairman, said
'4imprint continued to progress during 2006 with a strong performance from all
sectors. The acquisition of Supreme further enriches the Group's business and we
look forward to another year of progress in 2007'
- Ends -
For further information, please contact:
Ken Minton
Chairman
4imprint Group plc
Tel. + 44 (0) 207 299 7201
Chairman's Statement
In my half year statement to Shareholders on the 2nd August 2006, I advised that
the outlook for their Company was encouraging, and that the Group expected to
continue to progress during the second half. Shareholders will be pleased to
learn that the envisaged progress has been achieved and that 4imprint has had a
successful 2006.
Sales of continuing businesses at £119.52m were 24% ahead of the previous year.
Operating profit from continuing businesses before exceptional charges, defined
benefit pension charges and share option charges at £8.60m, was 28% ahead of
2005.
After defined benefit pension costs of £0.32m and share option charges of
£0.74m, operating profit before exceptional costs was £7.54m, 32% ahead of 2005.
Exceptional costs were £0.38m compared with £0.32m in 2005, and thus Group
operating profit was £7.16m and compares with £5.39m in 2005, an increase of
33%.
Net finance income for the period was £0.17m compared with £0.25m in 2005,
producing pre tax profit after exceptional charges of £7.34m compared with
£5.64m in 2005.
The tax charge at 32% (2005: 30%) results in 2006 profit after tax from
continuing operations of £4.99m compared with £3.95m last year, an increase of
26%.
Basic earnings per share for continuing operations at 20.29p compare with 15.35p
in 2005, a 32% increase, reflecting also the lower level of shares in issue
after the share buy back programme of 2005.
On 27 November, the Group completed a most important acquisition, the purchase
of Supreme, a UK based specialist manufacturer, printer and trader of
promotional products. Supreme is a fine company with first class management,
employees and manufacturing facilities. The acquisition is particularly
important because it allows us to merge the European Division's Trade Sector
(called Product Source) with Supreme to create the foremost manufacturer/
wholesaler of promotional products in the UK. The combined companies will have
annual revenues in excess of £25m and operating profits of around £3m per annum.
Synergies arising from the merger are expected to be in excess of £1.5m per
annum and a programme to achieve these is now underway and expected to be
broadly complete by the fourth quarter of this year.
As a result of the acquisition of Supreme, and the merger of the European
Division's Trade Sector with Supreme, the format of segmental reporting of the
Group's business has been changed.
The Group now has three divisions comprising:-
(a) The European Division which comprises Direct Marketing, Corporate
Programmes, Premium Promotions, Field Sales, and the German Kreyer
business.
(b) The US Division which comprises Direct Marketing and Corporate Programmes.
(c) The Trade Division which comprises the merged Supreme/Product Source/MT
Golf wholesale business.
The performance of all three divisions during 2006 has been excellent.
The European Division achieved sales of £50.82m, an increase of 15% over 2005,
while divisional operating profit before exceptional items at £3.23m was 17%
ahead. Particularly noteworthy, were the results from the Direct Marketing
business, where sales grew by 38%, Premium Promotions where profit increased
significantly from 2005 and the Kreyer business where sales and profit were
substantially ahead of last year.
The US Division had another excellent year with sales at $111.59m, 34% ahead of
2005. The Direct Marketing business achieved sales in excess of $100m; up 41% on
last year. The Division's strategy to focus on, and invest in, this rapidly
growing business has continued and has been rewarded by sustained growth of new
customers and their retention. Commitment to the highest standards of customer
service, coupled with a wide and competitively priced product range remains the
hallmark of this business. The small and separate Corporate Programmes business
also had a good year.
The Trade Division performed well with total sales at £13.14m, 25% ahead of last
year, though this growth was enhanced by the first time inclusion of £1.22m of
sales from Supreme for the period from acquisition to the period end. Divisional
profit at £1.48m was ahead of last year, also helped by inclusion of £0.13m of
operating profit from Supreme for the period since acquisition.
Cash management
The Group started the year with net cash of £9.01m. Inflow from operating profit
after exceptional items, depreciation and a £0.53m deferred payment from the AiA
disposal, amounted to £10.13m. Principal outflows were tax, dividends and
defined benefit pension scheme payments amounting to £4.26m. Capital and working
capital invested, excluding the Supreme acquisition, is £5.29m. Cash outflow on
the acquisition of Supreme and other small inflows and outflows totalled £9.84m.
The Group thus ended the year with net debt of £0.25m.
Dividend
The Board is recommending a final dividend of 6.25p which will bring the total
dividend paid and proposed to 9.50p (2005: final dividend 4.50p, total dividend
7.00p).
People
As I said in my annual statement last year, the Group relies a great deal on its
employees whose skills and efforts are so important to creating and securing the
fortunes of the Group. I welcome on behalf of the Board, everyone employed at
Supreme and I thank all employees of the Group for their contribution to the
success achieved in 2006.
Outlook
Sales since the start of the year have been encouraging across most of the
Group's businesses. The Board expects that the Group will make good progress
during 2007, underpinned by the acquisition of Supreme and the related synergies
which are expected to start to contribute from late summer onwards.
Ken Minton
Executive Chairman
27 February 2007
Finance Director's Report
• Sales were 24% ahead of prior year
• Operating profit before exceptional items was 32% ahead of prior year
• Profit before tax and exceptional items was £7.72m
4imprint results are reported in three divisions:
• US Division
• European Division
• Trade Division
The newly formed Trade Division included the results of the Product Source and
MT Golf business (previously reported in the European Division) and the results
of the Supreme business (acquired on 27 November 2006).
Sales
Sales from continuing operations were £119.52m, 24% ahead of prior year. Sales
growth in the US Division was 34% in US dollars, with the Direct Marketing
business 41% ahead. The European Division grew total sales by 15% and in the
newly created Trade Division, total sales were 25% ahead (13% excluding the
Supreme acquisition but including the benefit of the MT Golf acquisition).
Operating profit
Operating profit before exceptional items was £7.54m, 32% ahead of £5.70m in
2005. Operating profit in the US Division was £4.91m, 33% ahead of prior year
($9.12m: 36% ahead), European Division operating profit before exceptional items
was £3.23m, (17% ahead) and the newly formed Trade Division operating profit
before exceptional items was £1.48m. Head Office costs were £1.02m compared to
£0.99m in 2005.
Exceptional items
The exceptional charge in 2006 of £0.38m comprised three items:
i) Exceptional costs of £0.14m related to professional fees for a one off
Group restructuring exercise to create further distributable reserves in
the holding company;
ii) Exceptional costs of £0.07m related to an OFT fine for a breach of
competition law and associated legal costs, relating to the supply of
stock check pads by a former Group company for the period 20 April 2000
to 2 July 2000;
iii) Exceptional costs of £0.17m related to reorganisation costs of the
Manchester based Broadway business.
Pensions
2006 2005
Pension charges £'000 £'000
Defined contribution plans 365 283
Closed defined benefit scheme 325 498
690 781
The Company closed defined benefit scheme had 5 active members, 1,472 deferred
pensioners and 1,010 pensioners at 5 April 2006, the date of the last scheme
accounts. The balance sheet liability relating to the scheme reduced by £2.49m,
to £18.44m, in the period.
Pension scheme assets at 30 December 2006 were £81.91m, an increase of £4.82m.
The actual return on assets in the period was £6.74m.
Pension scheme liabilities at 30 December 2006 were £100.35m, an increase of
£2.32m in the period. The post retirement mortality assumptions have been
strengthened to the 'PA92 (C=2020)' standard tables, increasing the liability by
£4.33m.
Company cash contributions to the defined benefit scheme were £1.50m.
Most employees are members of defined contribution plans which had a cost of
£0.37m.
Share option charges
In line with IFRS 2 'Share-based payments', the Group charged £0.74m (2005:
£0.50m) to operating profit for SAYE, Executive Directors and Senior Management
schemes.
Taxation
The tax charge on continuing operations was £2.35m, an effective tax rate of
32%,(2005: £1.69m; 30%). The charge was made up of a current tax charge of
£0.95m, which principally constituted tax due in overseas subsidiaries, and a
deferred tax charge of £1.40m, which principally related to the full utilisation
of US Division losses previously recognised on the balance sheet. Tax taken
directly to reserves included a credit of £0.95m for share options and a debit
of £0.55m for pensions.
Discontinued operations
Discontinued operations income of £4.01m in 2005 related to the profit on
disposal in 2005 of the US Franchising business (£2.86m); profit in 2005 to the
date of disposal of the US Franchising business (£0.77m) and profit attributable
to the disposal of a US supplier business in 1999 (£0.38m).
During 2006, £0.53m of deferred consideration was received relating to the sale
of the US Franchising business.
All activities in 2006 represented continuing operations.
Acquisitions
The Group acquired Supreme Holdings Limited ('Supreme') on 27 November 2006, for
consideration of £5.00m together with net debt repayment of £6.70m; satisfied as
follows:
i) 1.52m cash paid on 28 November 2006;
ii) 1.00m cash deferred until 1 July 2008 with an interest cost of £0.09m;
iii) An in specie dividend of £2.48m comprising the trade receivables as
at 27 November 2006 of Pramic Limited (the trading company of the
Supreme Group);
iv) £7.22m borrowings were repaid on acquisition and cash of £0.52m was
acquired.
Costs of acquisition were £0.84m and provisional net assets acquired were £0.35m
resulting in goodwill of £3.01m. The provisional net assets acquired were stated
after £1.06m of fair value adjustments to align the acquiree's balance sheet
with 4imprint Group accounting policies (see note 10).
Earnings per share
Basic earnings per share for continuing operations were 20.29p, an increase of
32% (4.94p) over prior year. Due to the share buy back in 2005, the average
number of shares in issue has decreased compared to 2005, contributing 0.90p to
the increase.
Dividends
The Board proposes a final dividend of 6.25p which together with the interim
dividend of 3.25p gives 9.50p (2005: 7.00p) for the period.
Cash flow
The Group's net debt at 30 December 2006 was £0.25m, the opening cash position
was £9.01m.
The principal components of the £9.26m outflow are as follows:
£m
Cash generated from operating profit (after £1.50m contribution to the defined
benefit pension scheme)
8.11
Working capital
• Investment in trading working capital (3.85)
• Increase in trade receivables due to Supreme acquisition (1.20)
Supreme acquisition (including repayment of net debt and costs of acquisition) (8.76)
Capital investment (1.44)
Tax, dividends and interest (2.62)
Other items 0.50
(9.26)
Balance sheet and Shareholders' funds
Equity Shareholders' funds increased by £4.12m, to £20.08m. Profit, net of
dividends paid in the period, was £3.08m and movements relating to employee
share options, pensions and exchange taken directly to reserves represented an
increase of £0.83m.
Exchange and cash management
The average exchange rate through the period used to translate the income
statements of principal overseas subsidiaries for US dollars was $1.8581 (2005:
$1.8144) and for Euros was €1.4660 (2005: €1.4651) to the pound.
The exchange rate at the balance sheet date, used to translate assets and
liabilities in US dollars was $1.9572 (2005: $1.7168) and for Euros was €1.4842
(2005: €1.4554). This resulted in a decrease of US dollar denominated overseas
subsidiaries assets of £2.22m and a decrease of Euro denominated overseas
subsidiary assets of £0.02m.
The Group does not currently hedge the translation exposure of profits and
assets of its overseas subsidiaries.
Critical accounting policies
Critical accounting policies are those that require significant judgements or
estimates and potentially result in materially different results under different
assumptions or conditions. It is considered that the Group's critical accounting
policies are limited to pension, exceptional items and taxation. Further details
are given in note 1.
Treasury policy
Treasury policy is centrally to manage the financial requirements of the
Divisions which arise in relation to business needs. The Group operates cash
pooling arrangements on currency accounts for its US operations and separately
for its UK and European operations. The Group matches currency requirements in
its UK Divisions with currency cash flows arising in its subsidiaries and
actively seeks to hold the majority of cash or borrowings in the UK.
Gillian Davies
Group Finance Director
27 February 2007
Operating Review
US Division
2006 2005
US$'000 £'000 US$'000 £'000
Sales 111,585 60,053 82,965 45,726
Operating profit 9,123 4,910 6,692 3,688
The US Division, based in Oshkosh, Wisconsin, has two routes to market: the core
Direct Marketing business serving the US and Canada, and a small Corporate
Programmes business that services large accounts with their promotional product
needs.
The Direct Marketing business accounts for just over 90% of US sales. The growth
trajectory outlined in the half year report continued into the second half of
the year, with Direct Marketing sales up 42% over 2005 in the second half and
41% for the full year, breaking the $100m mark for the first time. Sales in
Canada, which still represent a relatively small portion of the total, nearly
doubled over prior year as our marketing strategy had another year to take hold.
The growth in the Direct Marketing business is underpinned by continued
investment in an integrated marketing approach. Orders from new customers were
up by 49% over 2005, driven by a variety of prospecting initiatives including
increased catalogue mailings and search engine marketing initiatives. This
success in attracting new customers resulted in a rapidly expanding customer
base which is served in a variety of ways including telephone-based account
management, print pieces, email and our popular 'Blue BoxTM' mailings featuring
product samples, offers and educational materials. Ongoing development of our
market leading website, www.4imprint.com, supports both acquisition and
retention marketing activities.
Throughout 2006 we continued to invest in the expansion of existing product
lines and in the development of new offerings. Examples include the launch of a
24 hour service and several exclusive products. These competitive offerings are
supported through strong relationships with key suppliers, who work closely with
our merchandising, vendor relations and marketing teams.
The Corporate Programmes business is characterised by stable, mutually
productive client relationships with a limited list of large companies. The
services we provide to these organisations are tailored to their specific
requirements and involve a variety of products and services. The business had a
successful year, with sales and operating profit essentially in line with 2005
on a slightly smaller account base. The reduction in the client list came as the
result of our reorganisation of this business undertaken in 2004 and 2005.
Divisional US dollar operating profit increased by 36% over 2005, showing a
consistent return on sales to complement the growth pattern. As in prior years,
the US Division was strongly cash generative, taking advantage of the favourable
working capital characteristics of the Direct Marketing business model.
European Division
2006 2005
£'000 £'000
External and inter division sales 50,818 44,011
External sales 50,388 43,583
Operating profit before exceptional items 3,226 2,765
Operating profit 3,056 2,485
The UK based business, which accounts for more than 80% of this Division's
sales, comprises:-
a) Direct Marketing - uses an integrated catalogue-web-customer service
marketing approach. The strategy of rapidly developing this division in line
with the US Direct Marketing business has continued with sales 38% ahead of
prior year. During the year, further investment in prospect catalogues, search
engine marketing initiatives and a widening product range resulted in orders
from new customers 78% ahead of prior year. Additional focus on customer
retention led to orders received from existing customers to be 22% ahead of
prior year.
b) Corporate Programmes - services its client base of large companies by
providing sophisticated design, product development and additional support
functions including warehousing, distribution and product range consultancy,
delivering a fully out-sourced solution for specific corporate promotional
programmes. Sales have increased by 13% over prior year. The investment in
people and systems throughout the year has led to a number of new contract wins
that will generate further organic growth in this division.
c) Premium Promotions - specialises in the supply of bespoke products to a range
of blue chip clients. Sales were in line with prior year as the business
continues to develop its customer base towards market sectors that are able to
consistently offer sustainable growth opportunities. This, together with the
division's integration into the wider European business in 2005 generated the
expected cost savings and resulted in a significantly improved profit
performance over prior year.
d) Field Sales - supplies promotional merchandise to a range of corporate
entities on a preferred supply or 'ad hoc' basis through a number of sales
account managers. Sales have increased by 18% over prior year as the division
has benefited from the 2005 reorganisation and the first full year's
contribution from the division's Irish distributor. The margin benefit generated
from these sales led to improved profit performance over prior year.
Kreyer Promotions, in Germany, operates in both the Corporate Programmes and
Field Sales areas. The division had an excellent year with sales 32% ahead of
prior year. This coupled with robust cost controls resulted in a significant
improvement in Kreyer's profits.
Trade Division
2006 2005
£'000 £'000
External and inter division sales 13,137 10,512
External sales 9,078 7,172
Operating profit before exceptional items 1,480 1,229
Operating profit 1,480 1,194
The Trade Division comprises the Manchester based Product Source business, the
Manchester based MT Golf business which was acquired in August 2005 and the
Blackpool based Supreme business which was acquired in November 2006. This
combined business is the largest UK based trade supplier in the UK promotional
products industry.
The Division supplies a wide range of promotional products to gift distributors
in the UK and overseas, including 4imprint end user businesses. It provides
bespoke engraving and printing facilities through its own in-house production
facilities. MT Golf adds a further dimension to this business supplying
personalised golf products to gift distributors and the sports club market. The
Supreme business designs, manufactures and prints promotional products in house
and has two main product lines - injection moulded plastic products and paper
based products.
Excluding the impact of the Supreme acquisition, total sales have increased by
13% and operating profit before exceptional items by 10%; this includes a full
year contribution from MT Golf which is producing net returns in line with that
expected on acquisition. Total sales in the period from acquisition for Supreme
were £1.22m and operating profit was £0.13m.
Income statement for the period ended 30 December 2006
2006 2005
Note £'000 £'000
Sales 2 119,519 96,481
Operating expenses (112,355) (91,093)
Operating profit 2 7,164 5,388
Operating profit before exceptional items 7,541 5,703
Exceptional items 4 (377) (315)
Operating profit 2 7,164 5,388
Finance costs (44) (47)
Finance income 218 300
Profit before tax 7,338 5,641
Taxation 5 (2,348) (1,691)
Profit for the period from continuing operations 4,990 3,950
Profit for the period from discontinued operations - 4,012
Profit attributable to equity Shareholders 4,990 7,962
Earnings per share for all operations
Basic 7 20.29p 30.94p
Diluted 7 19.44p 29.46p
Earnings per share from continuing operations
Basic 7 20.29p 15.35p
Diluted 7 19.44p 14.62p
Balance sheet at 30 December 2006
Note 2006 2005
£'000 £'000
Non current assets
Property, plant and equipment 10,315 1,370
Goodwill 9,084 4,341
Intangible assets 1,616 3,556
Investments 7 8
Deferred tax assets 6,149 8,921
27,171 18,196
Current assets
Inventories 8,409 5,663
Trade and other receivables 23,748 19,864
Cash and cash equivalents 2,115 9,103
34,272 34,630
Current liabilities
Trade and other payables 18,710 14,737
Current tax 857 823
Borrowings 2,364 91
Provisions - 285
21,931 15,936
Net current assets 12,341 18,694
Non current liabilities
Retirement benefit obligations 3 18,436 20,930
Deferred consideration 1,000 -
19,436 20,930
Net assets 20,076 15,960
Shareholders' equity
Share capital 8 9,766 9,634
Share premium reserve 8 37,757 37,684
Capital redemption reserve 8 208 208
Cumulative translation differences 8 (1,750) (210)
Retained earnings 8 (25,905) (31,356)
Total equity 20,076 15,960
The US dollar to sterling exchange rate at the balance sheet date was $1.9572
(2005: $1.7168).
Cash flow statement for the period ended 30 December 2006
2006 2005
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 9 3,052 4,662
Tax paid (848) (179)
Finance income 167 409
Finance costs (23) (47)
Net cash generated from operating activities 2,348 4,845
Cash flows from investing activities
Acquisition of subsidiary 10 (2,058) (1,975)
Cash acquired with subsidiary 10 520 -
Proceeds on disposal of subsidiary 526 5,263
Deferred consideration on disposal of US supplier
business in 1999 - 1,653
Purchases of property, plant and equipment (822) (457)
Purchases of intangible assets (643) (544)
Proceeds from sale of property, plant and equipment 27 131
Net cash (used in)/generated from investing activities (2,450) 4,071
Cash flows from financing activities
Repayment of borrowings on acquisition 10 (7,219) -
Repayment of borrowings - (2,015)
Proceeds from issue of ordinary shares 205 98
Purchase of own shares for cancellation - (9,898)
Purchase of own shares - (933)
Dividends paid to Shareholders (1,911) (1,608)
Net cash used in financing activities (8,925) (14,356)
Net decrease in cash and bank overdrafts (9,027) (5,440)
Cash and bank overdrafts at beginning of the period 9,012 14,666
Exchange losses on cash and bank overdrafts (234) (214)
Cash and bank overdrafts at end of the period (249) 9,012
Analysis of cash and bank overdrafts
Cash at bank and in hand 2,115 9,103
Bank overdraft (2,364) (91)
(249) 9,012
1 Basis of preparation
The consolidated financial statements of 4imprint Group plc are prepared in
accordance with International Financial Reporting Standards ('IFRS') and IFRIC
interpretations endorsed by the European Union (EU) and with those parts of the
Companies Act 1985 applicable to those companies reporting under IFRS.
The consolidated financial statements are prepared under the historical cost
convention.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The critical accounting policies used are given below:
Pensions
The Group accounts for pension and other post retirement benefits in accordance
with IAS 19. The actuarial evaluation of these assets and liabilities is based
on assumptions in respect of inflation, future salary increases, discount rates,
returns on equities and bonds and mortality rates.
Exceptional items
The Group presents certain items separately as 'exceptional'. These are items
which in management's judgement, need to be disclosed by virtue of their size
and occurrence.
Taxation
The Group is required to estimate the income tax in each of the jurisdictions in
which it operates. This requires an estimation of current tax liability together
with an assessment of the temporary differences which arise as a consequence of
different accounting and tax treatments. These temporary differences result in
deferred tax assets and liabilities which are included within the balance sheet.
Deferred tax assets and liabilities are measured using tax rates expected to
apply when the temporary differences reverse.
The Group operates in a number of countries in the world and is subject to
several tax jurisdictions and rules. As a consequence the Group is subject to
tax audits, which by their nature are often complex and can require several
years to conclude. Management's judgement is required to determine the total
provision for income tax. Amounts are accrued based on management's
interpretation of country specific tax law and likelihood of settlement.
However the actual tax liabilities could differ from the provision made or
position recorded and in such events an adjustment would be required in the
subsequent period which could have a material impact.
Tax benefits are not recognised unless it is probable that the tax positions are
sustainable. Once considered to be probable, management reviews each material
tax benefit to assess whether a provision should be taken against full
recognition of the benefit on the basis of potential settlement through
negotiation. Deferred tax assets are not recognised where it is more likely than
not that the asset will not be realised in the future. This evaluation requires
judgements to be made including the forecast of future taxable income.
2 Segmental reporting
Primary reporting format - business segments
At 30 December 2006, the Group is reported in three primary business segments:
Gross segment sales Inter-segment sales External sales
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
European Division 50,818 44,011 (430) (428) 50,388 43,583
US Division 60,053 45,726 - - 60,053 45,726
Trade Division 13,137 10,512 (4,059) (3,340) 9,078 7,172
Total 124,008 100,249 (4,489) (3,768) 119,519 96,481
Inter-segment sales are made on an arms-length basis.
Operating profit/(loss) Exceptional items Operating
before exceptional items profit/(loss)
2006 2005 2006 2005 2006 2005
£'000 £'000 £'000 £'000 £'000 £'000
European Division 3,226 2,765 (170) (280) 3,056 2,485
US Division 4,910 3,688 - - 4,910 3,688
Trade Division 1,480 1,229 - (35) 1,480 1,194
Head Office (1,015) (986) (207) - (1,222) (986)
Operating profit before defined benefit
pension and share option charges 8,601 6,696 (377) (315) 8,224 6,381
Defined benefit pension charges (325) (498) - - (325) (498)
Share option charges (735) (495) - - (735) (495)
Total 7,541 5,703 (377) (315) 7,164 5,388
Net finance income totalling £174,000 (2005: £253,000) and taxation charge of
£2,348,000 (2005: £1,691,000) cannot be separately allocated to individual
segments. A review of the segments is included in the Operating Review.
3 Employee pension schemes
The Group operates defined contribution plans for the majority of its UK and US
employees. The regular contributions are charged to the income statement as
they are incurred.
The Group also operates a UK defined benefit scheme which is closed to new
members.
2006 2005
£'000 £'000
Net pension costs
Defined contribution plans 365 283
Defined benefit scheme
Current service cost 96 89
Net interest cost 229 409
690 781
In 2005 a defined contribution charge of £15,000 related to discontinued
operations, this has been excluded from the above table.
The whole of the above charge was included within operating expenses.
Defined benefit scheme
In the most recent actuarial review of the 4imprint Group plc defined benefit
scheme the principal assumptions made by the actuaries were:
2006 2005
Rate of increase in pensionable salaries 4.00% 3.90%
Rate of increase in pensions in payment and deferred pensions 3.00% 2.80%
Discount rate 5.30% 4.90%
Inflation assumption 3.00% 2.80%
Expected return on scheme assets 6.20% 5.89%
The post-retirement mortality assumptions have been updated to the 'PA 92 (C=
2020)' standard tables. The assumptions are such that both current non-pensioner
members who later retire and current pensioner members both at age 65 will live
on average for a further 19.8 years after retirement if they are male and a
further 22.8 years after retirement if they are female. This update in
assumptions increased the net liability by £4,330,000.
The amounts recognised in the balance sheet are determined as follows:
2006 2005
£'000 £'000
Present value of funded obligations (100,347) (98,023)
Fair value of scheme assets 81,911 77,093
Net liability recognised in the balance sheet (18,436) (20,930)
The major categories of plan assets as a percentage of total scheme assets are
as follows:
2006 2005
Equities 42% 40%
Bonds 31% 44%
Property 15% 14%
Cash 12% 2%
The amounts recognised in the income statement are as follows:
2006 2005
£'000 £'000
Current service cost 96 89
Interest cost 4,722 4,657
Expected return on scheme assets (4,493) (4,248)
Total included in staff costs 325 498
Changes in the present value of the defined benefit obligation are as follows:
2006 2005
£'000 £'000
Defined benefit obligation at start of period 98,023 86,379
Current service cost 96 89
Interest cost 4,722 4,657
Contributions by scheme participants 3 2
Actuarial (gains)/losses (3,398) 10,616
Adjustment due to change in mortality assumptions 4,330 -
Benefits paid (3,429) (3,720)
Defined benefit obligation at end of period 100,347 98,023
Changes in the fair value of scheme assets are as follows:
2006 2005
£'000 £'000
Fair value of assets at start of period 77,093 68,390
Expected return on assets 4,493 4,248
Actuarial gains 2,251 7,013
Contributions by employer 1,500 1,160
Contributions by scheme participants 3 2
Benefits paid (3,429) (3,720)
Fair value of assets at end of period 81,911 77,093
Analysis of the movement in the balance sheet liability:
2006 2005
£'000 £'000
At start of period 20,930 17,989
Total expense as above 325 498
Contributions paid (1,500) (1,160)
Actuarial (gains)/losses taken directly to equity (1,319) 3,603
At end of period 18,436 20,930
The actual return on scheme assets was £6,744,000 (2005: £11,261,000).
4 Exceptional items
2006 2005
£'000 £'000
Group restructuring costs (143) -
OFT fine and related costs (64) -
European reorganisation charge (170) (444)
Product recall income - 129
(377) (315)
The Group restructuring costs comprise legal, accounting and tax fees relating
to a one-off project to restructure the legal entities within the Group to
create further distributable reserves in 4imprint Group plc (the Company).
The OFT fine was imposed in relation to breaches of competition law relating to
the supply of stock check pads by BemroseBooth Limited (a former group company)
and Achilles Paper Group Ltd. The period during which Bemrose Corporation plc
(now 4imprint Group plc) was involved in such supply was from 20 April 2000 to 2
July 2000. Legal costs of defence are also included in this charge.
The European reorganisation charge in 2006 relates to rationalisation of the
Manchester based business, and in 2005 related to the integration of the
European Premium Promotions Division into the European Direct Marketing and
Corporate Programmes Division (now combined as the European Division), and the
integration of MT Promotions Limited, acquired in the period, into the European
Division.
The product recall income in 2005 related to insurance income received net of
costs, in respect of a product recall in 2004, the cost of which was disclosed
separately in 2004 due to its rare occurrence and size.
5 Taxation
2006 2005
£'000 £'000
Analysis of charge in the period:
UK tax - current (96) -
Overseas tax - current 1,041 1,225
Deferred tax 1,403 466
Taxation 2,348 1,691
The tax for the year is different to the standard rate of corporation tax in the
UK (30%). The differences are explained below:
2006 2005
£'000 £'000
Profit before tax 7,338 5,641
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 30% 2,201 1,692
Effects of:
Adjustments in respect of foreign tax rates 235 222
Expenses not deductible for tax purposes 86 145
Timing differences and other differences (174) (368)
Taxation 2,348 1,691
6 Dividends
2006 2005
Equity dividends - ordinary shares £'000 £'000
Interim paid: 3.25p (2005: 2.50p) 809 616
Final paid: 4.50p (2005: 3.50p) 1,102 992
1,911 1,608
In addition, the Directors are proposing a final dividend in respect of the
period ended 30 December 2006, of 6.25p per share, which will absorb an
estimated £1.55m of Shareholders' funds. It will be paid on 23 April 2007 to
Shareholders who are on the register of members on 23 March 2007.
7 Earnings 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 potential dilutive ordinary
shares. The potential dilutive 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:
2006 2005
Weighted Weighted
average average
number number
Earnings of shares Pence per Earnings of shares Pence per
£'000 '000 share £'000 '000 share
Earnings attributable to 4,990 7,962
ordinary Shareholders
Ordinary shares in issue 25,343 26,217
Shares held by Employee Share
Trust (754) (481)
Basic EPS 4,990 24,589 20.29 7,962 25,736 30.94
Effect of dilutive share
options 1,084 (0.85) 1,291 (1.48)
Diluted EPS 4,990 25,673 19.44 7,962 27,027 29.46
Earnings per share from
continuing operations
Basic EPS 4,990 24,589 20.29 3,950 25,736 15.35
Diluted EPS 4,990 25,673 19.44 3,950 27,027 14.62
Earnings per share from
discontinued operations
Basic EPS - 24,589 - 4,012 25,736 15.59
Diluted EPS - 25,673 - 4,012 27,027 14.84
8 Statement of changes in Shareholders' equity
Retained earnings
Share Capital Cumulative Profit
Share premium redemption translation Own and Total
capital reserve reserve differences shares loss equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2005 11,063 37,659 208 (614) (889) (25,563) 21,864
Profit for the period 7,962 7,962
Exchange adjustments net of tax 413 413
Exchange adjustment
previously taken to
reserves, transferred to
income statement on
disposal of subsidiary (9) (9)
Shares issued 73 25 98
Own shares purchased (933) (933)
Own shares purchased and
cancelled (1,502) (8,396) (9,898)
Employee share options 498 498
Deferred tax on employee
share options taken to
reserves 294 294
Actuarial losses taken to
reserves (3,603) (3,603)
Deferred tax on pensions 882 882
taken to reserves
Dividends (1,608) (1,608)
Balance at 31 December 2005 9,634 37,684 208 (210) (1,822) (29,534) 15,960
Balance at 1 January 2006 9,634 37,684 208 (210) (1,822) (29,534) 15,960
Profit for the period 4,990 4,990
Exchange adjustments net (1,540) (1,540)
of tax
Shares issued 132 73 205
Own shares utilised 424 (424) -
Employee share options 650 650
Deferred tax on employee
share options taken to
reserves 459 459
Current tax deduction on
exercise of employee share 492 492
options
Actuarial gains taken to
reserves 1,319 1,319
Deferred tax on pensions
taken to reserves (548) (548)
Dividends (1,911) (1,911)
Balance at 30 December 2006 9,766 37,757 208 (1,750) (1,398) (24,507) 20,076
The cumulative goodwill written off to the reserves in respect of subsidiary
companies currently held amounts to £15,297,000 (2005: £15,297,000).
9 Cash generated from operations
2006 2005
£'000 £'000
Operating profit 7,164 5,388
Adjustments for:
Depreciation charge 604 475
Profit on disposal of property, plant and equipment (1) (13)
Amortisation of intangibles 778 942
Share option charge 735 495
IAS 19 pension charge for defined benefit scheme 325 498
Contributions to defined benefit pension scheme (1,500) (1,160)
Changes in working capital:
Increase in inventories (1,162) (944)
Increase in trade and other receivables (5,195) (2,194)
Increase in trade and other payables 1,589 474
Decrease in provisions (285) (30)
Cash generated from continuing operations 3,052 3,931
Cash generated from discontinued operations - 731
Cash generated from total operations 3,052 4,662
On acquisition, trade receivables of Pramic Limited (the trading company of the
Supreme Group), amounting to £2,481,000, formed part of the consideration paid
to the Vendors.
This payment necessitated the funding of trade receivables of Pramic Limited,
during the period from the date of acquisition to 30 December 2006. Accordingly,
during that period, there was a £1,200,000 outflow in working capital, included
above, representing an increase in Pramic trade receivables.
10 Acquisition of Supreme Holdings Limited
The Group acquired Supreme Holdings Limited ('Supreme') on 27 November 2006. The
Blackpool based Supreme business designs, manufactures and prints injection
moulded plastic and paper based promotional products in house. Total
consideration was £5,000,000 (before repayment of debt) and was satisfied as
follows:-
(i) £1,519,000 cash paid on 28 November 2006;
(ii) £1,000,000 cash deferred until 1 July 2008 with an interest cost of
£90,000;
(iii) The trade receivables as at completion of Pramic Limited (the trading
company of the Supreme Group) which were £2,481,000.
In addition, £7.22m of borrowings were repaid on acquisition and £0.52m cash was
acquired.
The acquired business contributed total sales of £1,219,000 and operating
profits of £132,000 to the Group from 27 November 2006 to 30 December 2006. For
the period 1 January 2006 to 26 November 2006, Supreme's sales were £11,459,000,
operating profit was £1,340,000 and profit before tax was £872,000.
Calculation of goodwill on acquisition:-
£'000
Purchase consideration:
Cash paid 1,519
Deferred consideration 1,000
Costs of acquisition 840
Total purchase consideration 3,359
Less: provisional fair value of net assets acquired (354)
Goodwill 3,005
The value of assets and liabilities acquired is set out below:
Provisional Acquiree's
fair value carrying
value
£'000 £'000
Property, plant and equipment 8,855 9,132
Intangibles - software 40 40
Inventories 1,666 2,589
Other receivables 160 212
Cash and cash equivalents 520 520
Trade and other payables (2,269) (2,232)
Current tax (259) (259)
Borrowings (7,219) (7,219)
Deferred tax liability (1,140) (1,366)
Net assets acquired 354 1,417
The difference between the acquiree's carrying value and the fair value is due
to alignment with 4imprint Group accounting policies.
Receivables excludes the trade receivables of Pramic Limited (the trading
company of the Supreme Group) which were the subject of a £2,481,000 in specie
dividend to the vendor of the company at completion and formed part of the
consideration.
Cash flows in the period relating to the acquisition were as follows:-
£'000
Consideration 1,519
Costs of acquisition paid in the period 539
2,058
Cash and cash equivalents acquired (520)
Borrowings repaid on acquisition 7,219
Cash outflow 8,757
In addition, a cash outflow of £1,200,000 in trade receivables in the period is
due to an increase in the trade receivables of Pramic Limited, (the trading
company of the Supreme group), post acquisition.
This information is provided by RNS
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