Half Yearly Report

RNS Number : 4815Q

4imprint Group PLC

04 August 2010

 



4 August 2010

4imprint Group plc

Interim Results for the period ended 3 July 2010

4imprint Group plc announces today its interim results for the period ended 3 July 2010.

Highlights

·      Group revenue increased to £95.18m, up 18% (half year 2009 £80.96m)

·      Underlying operating profit* was £4.46m, an increase of 193% (half year 2009: £1.52m)

·      Operating profit was £3.03m (half year 2009: £0.63m loss)

·      Interim dividend 4.70p per share, an 11% increase (half year 2009: 4.25p)

·      Net debt at £4.49m

·      Underlying earnings per share 13.94p (half year 2009: 3.70p)

·      Basic earnings per share 9.23p (half year 2009: (2.23)p)

·      Direct Marketing Division revenue was £62.78m (half year 2009: £53.71m)

·      Direct Marketing Division underlying operating profit was £3.57m (half year 2009: £1.08m)

Ken Minton, Executive Chairman said:

"Despite the ongoing challenges of the wider economy, we have delivered a strong set of results with market share increasing, tight cost control and have successfully implemented efficiency initiatives. We remain optimistic that as the market recovers, we are well positioned to benefit".

* Operating profit before IAS 38 marketing cost adjustment, defined benefit pension costs, share option costs and exceptional items

- Ends -

For further information, please contact:

Ken Minton

Executive Chairman

4imprint Group plc

Tel. + 44 (0) 20 7299 7201

Gillian Davies

Group Finance Director

4imprint Group plc

Tel. + 44 (0) 20 7299 7201

Executive Chairman's Statement

Group summary

The markets we serve have shown steady but modest recovery. It is therefore pleasing to report that the Group has not only grown its revenue at a considerably faster rate than the markets it serves, but through tight control of costs has ensured that the profitability of its business has been significantly increased.

Group revenue in the first half at £95.18m was 18% ahead of the same period last year. Underlying operating profit* at £4.46m was almost three times the level of the first half 2009. All three Divisions grew revenue and profit. The North American Direct Marketing business showed a very strong performance with revenue 20% ahead in US Dollars and underlying operating profit more than three times that of the first half 2009.

Group operating profit was £3.03m. After net interest charge of £0.23m, pre tax profit was £2.80m compared with a loss of £0.81m last year. After a tax charge of 15%, half year post tax profit was £2.38m compared with a loss of £0.57m for 2009. The Board has declared a dividend of 4.70p an increase of 11%, reflecting the Board's underlying confidence in the business.

Divisional performances

(a) Direct Marketing Division - "4imprint"

This Division had an excellent first half with revenue 17% ahead of last year at £62.78m, further increasing its market share. Underlying operating profit was £3.57m, more than three times the first half of 2009. North American prospecting investment was maintained at a similar level to last year but profitability was much increased, driven by stronger response rates. Sales to existing customers were strong though average order values were a little lower than in 2009 reflecting the cautious mood of the US market. Costs were tightly controlled, with headcount held at last year's level. The UK business had an excellent first half with revenue 14% ahead of the first half of 2009 and traded profitably.

(b) End User Division - "Brand Addition"

End User Division revenue was £25.33m, 24% ahead of the first half of 2009. Underlying operating profit at £1.52m was 12% ahead. Revenue growth was strong and reflects the success the Division has achieved in winning new contracts from several major international clients. Operating margin was lower than last year reflecting the business mix and also exchange rate effects. However strong control of costs, coupled with a reputation for high grade service and customer support, is underpinning the profitable growth of this division.

(c) Trade Division - "SPS"

Total revenue in the Trade Division was £8.89m in the first half, 7% ahead of last year in a UK market which is still subdued. Underlying operating profit at £0.17m compares with a loss of £0.16m last year. Significant initiatives to further reduce costs were taken during the first half, the benefit of which should become evident in the second half and into 2011. Additional investment in sales and product development is being made, particularly in the "Supreme" range of manufactured products.

Outlook

The markets we serve are recovering but the Board remains cautious about the strength and durability of this recovery. However, the initiatives we have taken and the opportunities which exist in each Division, leave us well positioned to secure further progress in the second half.

Finally, as Shareholders are aware, I retire from the Chairmanship and the Board on 31 August 2010, when John Poulter, my successor as Chairman, will take over.

Ken Minton

Executive Chairman

4 August 2010

* Operating profit before IAS 38 marketing cost adjustment, defined benefit pension costs, share option costs and exceptional items

Finance Director's Report

Group results

	Half year 2010	Half year 2009 restated
	£m	£m
Revenue	95.18	80.96
Underlying operating profit*	4.46	1.52
Operating profit/(loss)	3.03	(0.63)
Profit/(loss) before tax	2.80	(0.81)

* Operating profit before IAS 38 marketing adjustment, defined benefit pension costs, share option costs and exceptional items.

Underlying operating profit

	Half year 2010	Half year 2009 restated
	£m	£m
Direct Marketing Division	3.57	1.08
End User Division	1.52	1.35
Trade Division	0.17	(0.16)
Head office	(0.80)	(0.75)
Total	4.46	1.52

Underlying operating profit increased in all Divisions as a result of increased revenue and tight control of costs.

IAS 38 marketing adjustment

As outlined in its 2009 Annual Report the Group has adopted the amendment to IAS 38 "Intangible assets" for the first time in these financial statements. The amendment requires the expense for mail order catalogues and related marketing expenses to be recognised when the Group has access to the catalogues rather than when the catalogues are distributed. This adjustment principally results in a reallocation of costs between the first half and the second half of the year and has no impact on cash flow. Additionally at the end of the year catalogues which the Group has access to relating to the following year are expensed instead of being included in prepayments.

In 2010, half year operating profit was reduced by £0.82m. In 2009, half year operating profit was reduced by £1.08m. Full year 2009 operating profit increased by £0.26m (as the adjustment for 2009 catalogues expensed in 2008 was higher than the adjustment for 2010 catalogues expensed in 2009).

Defined benefit pension scheme

The Group sponsors a defined benefit scheme, closed to new members, with two active members, 1,170 pensioners and 1,042 deferred members at 5 April 2010 (the date of the triennial actuarial valuation).

The charge to the income statement in the period is £0.31m (H1 2009: £0.62m) and the deficit is £23.01m, as set out in note 9. Assets were £73.11m, and liabilities were £96.12m at a discount rate of 5.4% (FY 2009: 5.8%). Cash contributions to the scheme are £0.21m per month (H1 2010 £1.26m; H1 2009: £1.22m).

The triennial actuarial valuation at 5 April 2010 carried out by the pension fund Trustee should be finalised in the second half of 2010.

Share option charge

The Group charged £0.14m (half year 2009: £0.30m) to operating profit. In 2010 this charge is in respect of employee share options schemes. The charge is a non cash item.

Exceptional items

The exceptional charge of £0.15m in the half year period related to a further cost reduction exercise in the Trade Division.

Taxation

The taxation charge for the period was £0.42m at a rate of 15%. Cash tax recovery in the period was £0.14m and tax paid was £0.05m.

Earnings per share

Basic earnings per share were 9.23p (restated half year 2009: (2.23)p; restated full year 2009: 9.39p) Underlying basic earnings per share were 13.94p. (See note 7).

Dividend

The Board has declared a dividend of 4.70p (half year 2009: 4.25p), an increase of 11%.

Cash flow

The Group's net debt at 3 July 2010 was £4.49m (27 June 2009: £7.91m; 2 January 2010: £3.13m). The principal components of the cash flow movement are as follows:

	£m
Operating profit before exceptional items	3.18
Non-cash items:
Depreciation, share option and IAS19 pension charges	1.51
Defined benefit pension contribution	(1.26)
Cash exceptional items	(0.31)
Operating working capital	(1.06)
Capital investment	(1.02)
Tax, dividends and interest	(2.31)
Exchange	(0.09)
Movement in net debt for the half year	(1.36)
Opening net debt at 3 January 2010	(3.13)
Closing net debt at 3 July 2010	(4.49)

Net debt includes cash of £6.12m; UK borrowings at £6.50m and US borrowings at £4.11m. The Group had available headroom of £6.48m on its UK and US facilities and cash of £6.12m, in total available funding of £12.60m.

Exchange rates

The average US dollar exchange rate for the period for translating US profit was $1.5240 (half year 2009: $1.4902) and for Euros was €1.1508 (half year 2009: €1.1664) to the pound.  The exchange rate at the balance sheet date, used to translate assets and liabilities in US dollars, was $1.5189 (June 2009: $1.6516) and for Euros was €1.2053 (June 2009: €1.1739).

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 pensions, deferred taxation, inventory provisions and trade receivables provisions . Full details are given in the Group's published Annual Report for the period ended 2 January 2010.

Principal risks

The Group reported in its Annual Report for the period ended 2 January 2010 that its activities expose it to a number of operational and financial risks. These principal risks, as set out in the Directors' Report and note 20 of the 2009 Annual Report, remain unchanged at the date of the Interim Report.

The principal risks are: macroeconomic conditions; market competitors and new products; operational risks; purchase of material and services; potential litigation and complaints; changes in law or regulation; and changes in accounting standards.

Gillian Davies

Group Finance Director

4 August 2010

Operating Review

Direct Marketing Division - "4imprint"

	Half year 2010	Half year 2009	Full year 2009
	£'000	£'000	£'000
External revenue	62,777	53,712	111,138
Underlying operating profit	3,574	1,077	3,557

The Direct Marketing Division has its principal office in Oshkosh, Wisconsin, USA. This central location serves customers in the USA and Canada. Activities in the UK and Ireland are coordinated from our office in Manchester, England.

The Direct Marketing Division rebounded strongly in the first half of 2010 as improving economic conditions combined with our strategy of continued investment in the growth of our customer file throughout 2009 drove an increase in revenue of 17% over prior year. In underlying currency, revenue in North America increased by 20%, while the European business saw revenue increase by 14% over 2009. Underlying operating profit for the Division more than tripled, improving over the first half of 2009 by £2.5m, driven by stable gross margin, recovering yield on our marketing expenditure and a steady cost base.

Our direct approach to customers consists of two distinct but complementary marketing disciplines: new customer acquisition and existing customer retention.

In the first half of 2010, our cost to acquire a new customer order decreased substantially in the North American business compared to the same period in 2009 and another key prospecting metric, our response rate (defined as the number of orders received from newly acquired customers divided by catalogues mailed), improved materially as well. They represent a significant swing in prospecting productivity and therefore were key factors in the recovery of the yield on marketing spend. Overall, orders from first-time buyers are up 17% over the first half of last year.

Once acquired, we employ a variety of methods to secure additional business from these 'existing customers'. The cost to generate an order from an existing customer is much less than the cost to acquire their first order, and therefore our ability to produce additional orders from a growing customer file is an important component to our growth. 

We measure the effectiveness of our customer retention activities through a variety of metrics including the cost to acquire an existing customer order, and the percentage of customers acquired in a given period that order again in subsequent periods (and the value of these subsequent purchases). Both of these metrics improved in the first half of 2010, helping to drive an increase in existing customer orders of 34%.

In the first half of 2010 average order values stabilised following a decline in 2009. This feeling of stability is echoed in other areas of the business and across our leading edge performance indicators, giving confidence that further progress will be made as we place renewed emphasis on innovation in our merchandising and the development of our marketing techniques. 

The UK Direct Marketing operation turned a modest profit in the first half, an important milestone demonstrating the progress being made in the development of this business.

Working capital requirements for the Direct Marketing Division are modest, and capital investment is confined largely to IT infrastructure and development of systems efficiency.  Consequently, operating cash flow in the first half was healthy and the business remains highly cash generative.

Operating Review (continued)

End User Division - "Brand Addition"

	Half year 2010	Half year 2009	Full year 2009
	£'000	£'000	£'000
External and inter divisional revenue	25,327	20,389	44,219
External revenue	25,104	20,103	43,594
Underlying operating profit	1,523	1,356	3,370

Brand Addition supplies branded promotional products to medium and large businesses, based in Europe, which seek to increase their revenues through consumer promotion campaigns and to enhance their brand profile via corporate marketing activity.

Brand Addition provides not only the products, but also related services such as design and logistics, to ensure a comprehensive service. Clients are served from operations in Manchester, London, Hagen (Germany), Hong Kong and Guangzhou (China).

Total revenue in the first half of 2010, at £25.33m, was 24% ahead of the same period in 2009. This significant increase in revenue was secured through new contracts with several major clients and some improvement in demand from existing customers. Underlying operating profit at £1.52m was 12% ahead of the first half of 2009, reflecting business mix and exchange rate pressures.

Whilst the growth in the first half of 2010 required some investment in working capital, the business remained cash generative.

Operating Review  (continued)

Trade Division - "SPS"

	Half year 2010	Half year 2009	Full year 2009
	£'000	£'000	£'000
External and inter divisional revenue	8,892	8,347	16,847
External revenue	7,303	7,146	14,356
Underlying operating profit/(loss)	168	(164)	(56)

The Trade Division is based in Blackpool and supplies promotional and advertising products to distributors who sell these products to end users. It is one of the largest trade supply companies in the UK with specialist manufacturing, an extensive range of printing technologies, laser engraving and embroidery, plus expertise in worldwide sourcing of products, particularly from China.

Total revenue in the first half of 2010 at £8.89m was 7% ahead of the same period last year, in a UK market which is recovering slowly from the economic downturn and which remains very competitive. Operating margin in the Product Source sector, which relies on significant purchases from China has been pressurised by adverse exchange rate movements and price increases in China. The Supreme product sector, which manufactures much of its product range has not been similarly exposed. These price pressures have been partly mitigated by a sustained drive to cut costs.

Underlying operating profit before depreciation for the first half of 2010 was £0.55m, compared with £0.22m in the first half of 2009. Underlying operating profit was £0.17m compared with a loss of £0.16m in the same period last year.

The increase in profitability and improved working capital management resulted in significant improvement in cash flow over the prior year.

Further initiatives are being implemented to drive sales of the Supreme manufactured product range, including new product development. In addition, changes in operating structures are being implemented which will reduce costs even further. The benefits of these actions should be seen in the second half and into 2011.

Condensed Consolidated Income Statement (unaudited)

		Half year 2010	Half year 2009 restated	Full year 2009 restated
	Note	£'000	£'000	£'000
Revenue	4	95,184	80,961	169,088
Operating expenses		(92,152)	(81,589)	(165,948)
Operating profit/(loss)	4	3,032	(628)	3,140
Operating profit/(loss) before exceptional items	4	3,185	(488)	3,911
Exceptional items	5	(153)	(140)	(771)
Operating profit/(loss)	4	3,032	(628)	3,140
Finance income		10	1	28
Finance costs		(246)	(181)	(343)
Profit/(loss) before tax		2,796	(808)	2,825
Taxation	6	(419)	243	(424)
Profit/(loss) for the period		2,377	(565)	2,401
Earnings/(loss) per share
Basic	7	9.23p	(2.23)p	9.39p
Diluted	7	9.05p	(2.21)p	9.29p

All operations are continuing operations in the current and prior periods.

Condensed Consolidated Statement of Comprehensive Income (unaudited)

		Half year 2010	Half year 2009 restated	Full year 2009 restated
	Note	£'000	£'000	£'000
Profit/(loss) for the period		2,377	(565)	2,401
Other comprehensive income:
Exchange gains/(losses) offset in reserves		322	(1,287)	(1,123)
Actuarial losses taken to reserves	9	(1,507)	(5,726)	(6,701)
Tax relating to components of other comprehensive income		422	1,603	1,876
Other comprehensive income net of tax		(763)	(5,410)	(5,948)
Total comprehensive income for the period		1,614	(5,975)	(3,547)

Condensed Consolidated Balance Sheet (unaudited)

		At 3 July 2010	At 27 June 2009 restated	At 2 Jan 2010 restated
	Note	£'000	£'000	£'000
Non current assets
Property, plant and equipment		13,246	13,321	13,063
Goodwill		9,084	9,084	9,084
Intangible assets		1,744	1,707	1,730
Investments		9	9	10
Deferred tax assets		7,718	7,960	7,558
		31,801	32,081	31,445
Current assets
Inventories		7,614	8,248	7,022
Trade and other receivables		27,924	22,309	23,207
Cash and cash equivalents	10	6,121	1,948	5,613
		41,659	32,505	35,842
Current liabilities
Trade and other payables		(25,562)	(19,503)	(21,390)
Current tax liabilities		(150)	(150)	(150)
Borrowings	10	(1,435)	(6,425)	(6,196)
		(27,147)	(26,078)	(27,736)
Net current assets		14,512	6,427	8,106
Non current liabilities
Retirement benefit obligations	9	(23,012)	(22,071)	(22,450)
Borrowings	10	(9,178)	(3,435)	(2,543)
		(32,190)	(25,506)	(24,993)
Net assets		14,123	13,002	14,558
Shareholders' equity
Share capital		9,939	9,939	9,939
Share premium reserve		38,016	38,016	38,016
Capital redemption reserve		208	208	208
Cumulative translation differences		350	(136)	28
Retained earnings		(34,390)	(35,025)	(33,633)
Total equity		14,123	13,002	14,558

Condensed Consolidated Statements of Changes in Shareholders' Equity (unaudited)

	Share capital	Share premium reserve	Capital redemption reserve	Cumulative translation differences	Retained earnings
					Own shares	Profit and loss	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 28 December 2008	9,846	38,016	208	1,151	(519)	(27,143)	21,559
Changes to accounting policies (note 3)						(786)	(786)
At 28 December 2008 (restated)	9,846	38,016	208	1,151	(519)	(27,929)	20,773
Total comprehensive income for the period*				(1,287)		(4,688)	(5,975)
Shares issued	93						93
Own shares utilised					451	(451)	-
Own shares purchased					(93)		(93)
Employee share options*						243	243
Deferred tax on employee share options						(14)	(14)
Dividends						(2,025)	(2,025)
At 27 June 2009	9,939	38,016	208	(136)	(161)	(34,864)	13,002
Total comprehensive income for the period*				164		2,264	2,428
Employee share options*						227	227
Dividends						(1,099)	(1,099)
At 2 January 2010	9,939	38,016	208	28	(161)	(33,472)	14,558
Total comprehensive income for the period				322		1,292	1,614
Employee share options						140	140
Dividends						(2,189)	(2,189)
At 3 July 2010	9,939	38,016	208	350	(161)	(34,229)	14,123

* restated

Condensed Consolidated Cash Flow Statement (unaudited)

		Half year	Half year	Full year
		2010	2009	2009
	Note	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	11	2,063	822	7,633
Net tax recovered		91	85	73
Finance income		10	1	28
Finance costs		(227)	(191)	(340)
Net cash generated from operating activities		1,937	717	7,394
Cash flows from investing activities
Purchases of property, plant and equipment		(680)	(1,438)	(1,679)
Purchases of intangible assets		(342)	(249)	(633)
Net cash used in investing activities		(1,022)	(1,687)	(2,312)
Cash flows from financing activities
Proceeds from borrowings		7,807	797	-
Repayment of borrowings		(6,037)	-	(174)
Capital element of finance lease payments		(65)	(52)	(126)
Proceeds from issue of ordinary shares		-	-	93
Purchase of own shares		-	-	(93)
Dividends paid to Shareholders		(2,189)	(2,025)	(3,124)
Net cash used in financing activities		(484)	(1,280)	(3,424)
Net movement in cash, cash equivalents and bank overdrafts		431	(2,250)	1,658
Cash, cash equivalents and bank overdrafts at beginning of the period		5,613	4,411	4,411
Exchange gains/(losses) on cash, cash equivalents and bank overdrafts		77	(452)	(456)
Cash, cash equivalents and bank overdrafts at end of the period		6,121	1,709	5,613
Analysis of cash, cash equivalents and bank overdrafts
Cash at bank and in hand	10	6,121	1,948	5,613
Bank overdrafts	10	-	(239)	-
		6,121	1,709	5,613

Notes to the Interim Financial Statements

1 General information

4imprint Group plc is a public limited company incorporated and domiciled in the UK and listed on the London Stock Exchange. Its registered office is 7/8 Market Place, London, W1W 8AG.

The condensed consolidated interim financial statements were authorised for issue in accordance with a resolution of the Directors on 3 August 2010.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the period ended 2 January 2010 were approved by the Board of Directors on 25 February 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The financial information contained in this report is unaudited.

2 Basis of preparation

These condensed consolidated interim financial statements for the half year ended 3 July 2010 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and IAS 34 'Interim Financial Reporting', as adopted by the European Union, and should be read in conjunction with the Group's financial statements for the period ended 2 January 2010, which were prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

3 Accounting policies

The accounting policies applied in these condensed consolidated interim financial statements are consistent with those of the annual financial statements for the period ended 2 January 2010, as described in those annual financial statements except as noted below.

The tax charge for the interim period is accrued based on the best estimate of the tax charge for the full financial year.

IAS 38 'Intangible Assets': Following an amendment to IAS 38 an expense will now be recognised for mail order catalogues and other related marketing expenses when the Group has access to the catalogues, rather than when the catalogues are distributed to customers as was the previous policy.

The impact on reported profit for the half year ended 27 June 2009 was to increase operating expenses by £1,084,000, which has the impact of reducing profit after tax by £759,000 (2009 full year: decrease in operating expenses of £264,000 and increase in profit after tax of £224,000). Net assets at 27 June 2009 are reduced by £1,403,000 as a result of this change of policy (2009 full year: £496,000 decrease).

IFRS 2 'Share-based payments': A clarification to the interpretation of this standard requires that cancellations of options by employees are to be treated in the same way as cancellations by the employer and that the full remaining cost of the options are expensed at the time of cancellation. As a result of this clarification, operating expenses for the half year ended 27 June 2009 have increased by £10,000 (2009 full year: £111,000), which reduces profit after tax by £7,000 (2009 full year: £94,000). There is no net impact on net assets.

Notes to the Interim Financial Statements

3 Accounting policies continued

As a result of these changes in accounting policy, the comparative amounts have been restated, as follows:

	Half year 2009	Full year 2009
	£'000	£'000
Profit for the period as previously reported	200	2,271
(Increase)/decrease in operating expenses	(1,094)	153
Deferred tax impact of the above	329	(23)
(Loss)/profit for the period as restated	(565)	2,401

	Full year 2008	Half year 2009	Full year 2009
	£'000	£'000	£'000
Net assets as previously reported	21,559	14,405	15,054
Reduction in trade and other receivables	(1,169)	(2,044)	(831)
Increase in deferred tax asset	383	641	335
Net assets as restated	20,773	13,002	14,558

IAS 1 'Presentation of Financial Statements' (Revised 2007): IAS 1 (revised) requires the presentation of a statement of changes in equity as a primary statement separate from the Income Statement and Statement of Comprehensive Income. As a result, a Consolidated Statement of Changes in Shareholders' Equity has been included in the primary statements rather than in the Notes to the Interim Financial Statements.

IFRS 8 - 'Operating Segments': The reporting requirements of IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The adoption of this standard in the current reporting period has not impacted on the reported numbers, or segments.

The adoption of other mandatory new or revised standards, as listed in the 2009 Annual Report, in the period has not impacted on the Group Financial Statements.

4 Segmental analysis

The chief operating decision maker has been identified as the Executive Committee, and the segmental analysis is presented based on the Group's internal reporting to the Executive Committee.

The Group is reported in three primary business segments:

Revenue	Total			Inter-segment			External
	Half year 2010 £'000	Half  year 2009 £'000	Full Year  2009 £'000	Half year 2010 £'000	Half year 2009 £'000	Full  year  2009 £'000	Half year  2010 £'000	Half  year 2009  £'000	Full year  2009 £'000
Direct Marketing Division	62,777	53,712	111,138	-	-	-	62,777	53,712	111,138
End User Division	25,327	20,389	44,219	(223)	(286)	(625)	25,104	20,103	43,594
Trade Division	8,892	8,347	16,847	(1,589)	(1,201)	(2,491)	7,303	7,146	14,356
Total	96,996	82,448	172,204	(1,812)	(1,487)	(3,116)	95,184	80,961	169,088

Notes to the Interim Financial Statements

4 Segmental analysis continued

Inter segment revenues are on an arms-length basis.

Operating profit	Operating profit/(loss) before exceptional items			Exceptional items			Operating profit/(loss)
	Half  year 2010 £'000	Half year 2009 restated £'000	Full  Year  2009 restated £'000	Half year  2010 £'000	Half year 2009 £'000	Full year 2009 £'000	Half year  2010 £'000	Half year 2009 restated £'000	Full year 2009 restated £'000
Direct Marketing Division	3,574	1,077	3,557	-	-	-	3,574	1,077	3,557
End User Division	1,523	1,356	3,370	-	(140)	(187)	1,523	1,216	3,183
Trade Division	168	(164)	(56)	(153)	-	-	15	(164)	(56)
Head office	(807)	(747)	(1,419)	-	-	(584)	(807)	(747)	(2,003)
Underlying operating profit	4,458	1,522	5,452	(153)	(140)	(771)	4,305	1,382	4,681
IAS 38 marketing cost adjustment*	(821)	(1,084)	264	-	-	-	(821)	(1,084)	264
Defined benefit pension charge	(312)	(624)	(1,268)	-	-	-	(312)	(624)	(1,268)
Share option charge	(140)	(302)	(537)	-	-	-	(140)	(302)	(537)
Total	3,185	(488)	3,911	(153)	(140)	(771)	3,032	(628)	3,140

Net finance costs totalling £236,000 (half year 2009: £180,000, full year 2009: £315,000), and taxation charge of £419,000 (half year 2009: £243,000 credit, full year 2009: £424,000) cannot be separately allocated to individual segments.

* Under an amendment to IAS 38 'Intangible Assets' marketing and advertising costs are required to be expensed when an entity has access to or has taken delivery of the related item. Previously these costs were recognised when the items were despatched to customers and management continues to measure the performance of the business on this basis. The adjustment relates to the Direct Marketing Division £(911,000) (half year 2009: £(1,159,000); full year 2009: £281,000) and to the Trade Division £90,000 (half year 2009: £75,000; full year 2009: £(17,000)).

Segmental assets	Half year	Half year	Full year
	2010	2009	2009
		restated	restated
	£'000	£'000	£'000
Direct Marketing Division	20,955	17,015	17,289
End User Division	19,875	17,605	18,482
Trade Division	18,250	19,615	17,645
Unallocated assets	8,259	8,403	8,258
Cash	6,121	1,948	5,613
Total	73,460	64,586	67,287

Unallocated assets include head office items and tax.

 

Notes to the Interim Financial Statements

5 Exceptional items

	Half year	Half year	Full year
	2010	2009	2009
	£'000	£'000	£'000
Trade Division reorganisation costs	(153)	-	-
End User Division reorganisation costs	-	(140)	(187)
Termination costs and onerous contracts	-	-	(584)
	(153)	(140)	(771)

The Trade Division reorganisation in the period related to a cost reduction exercise to improve operating efficiencies.

The End User Division reorganisation costs in 2009 related to a cost reduction exercise, due to the worsening economic conditions in early 2009.

The termination and onerous contracts costs in 2009 related to a reduction in the Group overhead costs.

Cash expenditure on exceptional items in the period was £312,000 (half year 2009: £552,000, full year 2009: £829,000) including £184,000 in respect of prior years' exceptional items.

6 Taxation

The taxation charge for the period to 3 July 2010 has been calculated at 15% (half year 2009: 30%; full year 2009: 15%) of the profit before tax for the period. A net cash refund of £91,000 has been received in the period.

7 Earnings per share

Basic, underlying and diluted

The basic, underlying and diluted earnings per share are calculated based on the following data:

	Half year	Half year	Full year
	2010	2009 restated	2009 restated
	£'000	£'000	£'000
Profit/(loss) after tax	2,377	(565)	2,401
IAS 38 marketing cost adjustment	821	1,084	(264)
Defined benefit pension charge	312	624	1,268
Share option charge	140	302	537
Exceptional items	153	140	771
Tax relating to above items	(214)	(645)	(347)
Underlying operating profit after interest and tax	3,589	940	4,366
	Number 000's	Number 000's	Number 000's
Basic weighted average number of shares	25,750	25,390	25,574
Dilutive potential ordinary shares - employee share options	528	220	261
Diluted weighted average number of shares	26,278	25,610	25,835
Basic earnings per share	9.23p	(2.23)p	9.39p
Underlying basic earnings per share	13.94p	3.70p	17.07p
Diluted earnings per share	9.05p	(2.21)p	9.29p

The basic weighted average number of shares excludes shares held in the employee share trust. The effect of this is to reduce the average by 90,000 (half year 2009: 254,000; full year 2009: 171,000).

 

Notes to the Interim Financial Statements

8 Dividends

		Half year	Half year	Full year
		2010	2009	2009
		£'000	£'000		£'000
Dividends paid in the period		2,189	2,025		3,124
Dividends per share declared - Interim      - Final		4.70p -	4.25p -		4.25p 8.50p

The interim dividend for 2010 of 4.70p per ordinary share (interim 2009: 4.25p; final 2009: 8.50p) will be paid on 15 September 2010 to ordinary Shareholders on the register at the close of business on 13 August 2010.

9 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 defined benefit pension scheme which is closed to new members. The funds of the scheme are administered by a trustee company and are independent of the Group's finances.

During the period the financial position of the defined benefit pension scheme has been updated in line with the anticipated annual cost for current service, the expected return on scheme assets, the interest on scheme liabilities and cash contributions made to the scheme. The last full actuarial valuation was carried out by a qualified independent actuary as at 5 April 2007 and this has been updated on an approximate basis to 3 July 2010. A full actuarial valuation as at 5 April 2010 is currently being carried out and should be completed during the second half of the year.

The amounts recognised in the income statement are:

	Half year	Half year	Full year
	2010	2009	2009
	£'000	£'000	£'000
Current service cost	19	31	28
Interest cost on scheme liabilities	2,719	2,627	5,274
Expected return on scheme assets	(2,426)	(2,034)	(4,034)
	312	624	1,268

The principal assumptions made by the actuaries at 3 July 2010 were:

	Half year	Half year	Full year
	2010	2009	2009
Rate of increase in pensionable salaries	4.1%	4.2%	4.4%
Rate of increase in pensions in payment and deferred pensions	3.1%	3.2%	3.4%
Discount rate	5.4%	6.3%	5.8%
Inflation assumption	3.1%	3.2%	3.4%
Expected return on scheme assets	6.3%	6.5%	6.8%

The mortality assumptions adopted at 3 July 2010 imply the following life expectancies at age 65:

	Half year	Half year	Full year
	2010	2009	2009
Male currently aged 40	22.5	21.8	21.5
Female currently aged 40	25.3	24.6	24.2
Male currently aged 65	21.3	20.6	20.3
Female currently aged 65	24.2	23.5	23.2

Notes to the Interim Financial Statements

9 Employee pension schemes continued

Analysis of the movement in the balance sheet liability:

	Half year	Half year	Full year
	2010	2009	2009
	£'000	£'000	£'000
At start of period	22,450	16,937	16,937
Total charged in the income statement	312	624	1,268
Contributions paid	(1,257)	(1,216)	(2,456)
Actuarial loss on the scheme liabilities	1,340	4,361	12,228
Actuarial loss/(gain) on scheme assets	167	1,365	(5,527)
At end of period	23,012	22,071	22,450

10 Analysis of net debt

	Half year	Half year	Full year
	2010	2009	2009
	£'000	£'000	£'000
Cash at bank and in hand	6,121	1,948	5,613
Current bank overdrafts	-	(239)	-
Cash, cash equivalents and bank overdrafts	6,121	1,709	5,613
Current finance leases	(132)	(118)	(124)
Current bank loans	(1,303)	(6,068)	(6,072)
	(1,435)	(6,186)	(6,196)
Non current finance leases	(377)	(468)	(416)
Non current bank loans	(8,801)	(2,967)	(2,127)
Net debt	(4,492)	(7,912)	(3,126)

The Group had the following undrawn committed floating rate borrowing facilities available at 3 July 2010:

		Half year 2010	Half year 2009	Full Year 2009
Borrowing facilities		£'000	£'000	£'000
Expiring within one year		4,976	4,613	8,025
Expiring in more than one year		1,500	3,083	-
		6,476	7,696	8,025

 

In January 2010 new facility agreements commenced with the Group's principal UK bankers, Lloyds TSB Bank plc. These comprise a £6m loan facility repayable on 31 December 2012, a £2m loan facility repayable £0.25m on 30 December 2010 and 2011 and £1.50m repayable on 31 December 2012, together with a £2m overdraft facility renewable annually on 31 December.

Notes to the Interim Financial Statements

11 Cash generated from operations

	Half year	Half year	Full year
	2010	2009 restated	2009 restated
	£'000	£'000	£'000
Operating profit	3,032	(628)	3,140
Adjustments for:
Depreciation charge	718	761	1,448
Amortisation of intangibles	339	324	643
Loss on disposal of property, plant and equipment	-	-	26
Decrease in exceptional accrual	(159)	(382)	(58)
Share option charge	140	243	470
IAS 19 pension charge for defined benefit scheme	312	624	1,268
Contributions to defined benefit pension scheme	(1,257)	(1,216)	(2,456)
Changes in working capital:
(Increase)/decrease in inventories	(628)	(63)	1,158
(Increase)/decrease in trade and other receivables	(4,323)	3,808	3,405
Increase/(decrease) in trade and other payables	3,889	(2,649)	(1,411)
Cash generated from operations	2,063	822	7,633

12 Capital commitments

The Group had capital commitments of £nil contracted but not provided for in these financial statements

(27 June 2009: £190,000, 2 January 2010: £nil).

13 Related party transactions

The Group did not participate in any related party transactions that require disclosure.

Statement of Directors' Responsibilities

The Directors confirm that, to the best of their knowledge, this condensed consolidated set of interim financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by rules 4.2.7R and 4.2.8R of the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Services Authority, namely:

·      An indication of the important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year.

·      Disclosure of material related party transactions and changes therein.

The names of the Directors of 4imprint Group plc are as listed in the Group's Annual Report for 2 January 2010, apart from Mr J. W. Poulter who was appointed as a Non-Executive Director and Chairman Designate on 1 May 2010. A list of current Directors of 4imprint Group plc is maintained on the Group website: www.4imprint.co.uk, in the investor relations section.

By order of the Board

Ken Minton		Gillian Davies
Executive Chairman		Group Finance Director

4 August 2010

 

END

 

 

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