Final Results
International Greetings PLC
28 June 2006
INTERNATIONAL GREETINGS PLC
International expansion and product diversification
underpin solid results and future growth
International Greetings PLC ('International Greetings', 'the Company' or 'the
Group') (AIM: IGR), the global designer and manufacturer of greetings products,
film and television character based licensed stationery, books and gifts, today
announces preliminary results for the year ended 31 March 2006.
Financial Highlights:
• Turnover improved 37% to £196.6m (2005: £143.7m)
• Adjusted profit before tax* increased 30% to £18.0m (2005: £13.8m)
• European sales grew 29% to £22.7m (2005: £17.6m)
• US sales increased 34% to £47.2m (2005: £35.1m)
• Total overseas sales rose 36% to £74.1m (2005: £54.7m)
• Adjusted earnings per share* increased 18% to 28.9p (2005: 24.5p)
• Final dividend per share of 7p, increases the year's total dividend
20% to 9p (2005: total dividend: 7.5p)
Operational Highlights:
• Completion of the acquisition and integration of Anker International in May 2005
• Chinese manufacturing facility relocated to new purpose-built complex,
increasing in-house production and ability to monitor quality control
Post Period Events
• April 2006, acquisition of Alligator Books, for an initial £2.5m
• Board restructure - Keith James to assume chairman's role in September 2006
Commenting on the results, Nick Fisher, Joint Chief Executive, said: 'These
results reflect our recent drive to establish efficient, low cost manufacturing
and distribution bases, and our expansion programmes in the US and European
markets.
'These initiatives, together with our latest acquisitions, further underpin our
strategy to diversify the Group's activities, and increase our product offering
to existing and new customers, whilst ensuring the success of our business for
the future.'
Adjusted to exclude exceptional items of £3,310,000 (2005: £738,000), profit on
disposal of fixed assets of £1,838,000 (2005: £nil) and amortisation of goodwill
of £1,031,000 (2005: £443,000)
For further information:
Nick Fisher, Joint Chief Executive, International Greetings: 01707 630 630
Richard Sunderland/Rachel Drysdale, Tavistock Communications: 020 7920 3150
CHAIRMAN'S STATEMENT
I am delighted to report another significant year of progress for International
Greetings. The Group's existing businesses have performed well during the year
with growth in both profit and turnover. We also completed the purchase of Anker
International in May last year which, with a total cost of £35.4m, is our
largest acquisition to date. This acquisition has been a major development for
the Group, not only increasing turnover significantly, but also enhancing our
trading profile. It has taken the Group into new market sectors, extended our
product categories and reduced our seasonality of sales. Anker has fulfilled
expectations since it was acquired and we are encouraged by its performance.
Adjusted profit before tax* for the year ended 31 March 2006 increased by 30%
to £18.0m with turnover increasing by 37% to £196.6m. The success of our focus
on international expansion in recent years is again reflected in these figures
with sales in the US increasing 34% to £47.2m and sales in Europe growing 29% to
£22.7m. Total overseas sales now account for £74.1m or 38% of turnover, an
increase of 36% over last year's £54.7m.
Adjusted earnings per share* increased by 18% to 28.9p and in line with our
policy of increasing shareholder returns and reflecting our continued confidence
in our business, we are recommending a final dividend of 7p per share. This
makes a total for the year of 9p, an increase of 20% over last year.
Since the year end, we have made a further acquisition. Alligator Books,
acquired in April, creates and publishes children's licensed and generic books,
which it sells primarily in the UK, and we are delighted to have entered into
the mainstream publishing market. This acquisition met all of our criteria,
including introducing another new product category into the Group's portfolio.
After 10 years as chairman, I have decided to step down following the Company's
Annual General Meeting in September, but will remain on the Board as a
non-executive director. Keith James, currently a non-executive director, will
assume the position of chairman at that time. With his breadth of business
experience, together with his newly acquired knowledge of our business since
joining the board, I know that International Greetings will be in safe hands. He
looks forward to leading the Group during its next level of corporate
development and I wish him future success in the role.
Finally, I would like to thank all the staff of International Greetings and
everyone associated within the Group who have helped me in my role for the last
decade. It has been both a pleasure and privilege to serve as chairman of the
Company.
John Elfed Jones CBE DL
Chairman
*Adjusted to exclude exceptional items of £3,310,000 (2005: £738,000), profit on
disposal of fixed assets of £1,838,000 (2005: £nil) and amortisation of goodwill
of £1,031,000 (2005: £443,000)
CHIEF EXECUTIVE'S REPORT
Once again we have experienced a very active year due to our consistently
expanding business and the dynamic environment in which we operate. The Group is
now truly an international business, supported by our core strengths of best
design and product development, combined with efficient manufacturing and
distribution.
UK
During the past year, we have continued to rationalise our manufacturing and
distribution activities in the UK in order to maintain our competitiveness.
Following last year's relocation of card manufacturing to Latvia, additional
manufacturing equipment has been moved from the UK to Latvia this year. This has
resulted in redundancies and exceptional costs of closure during the year, but
was necessary in order to ensure we operate an efficient low cost manufacturing
base for the future.
The acquisition of Anker last year has significantly expanded the Group's UK
operations. It has performed well since acquisition and we have recently taken
the opportunity to merge our Copywrite licensed stationery division into Anker.
Although this has resulted in one-off exceptional costs during the current year,
we believe we will generate future cost savings as well as creating many new and
exciting opportunities for the merged business.
Our strategy for growth in the UK, a highly competitive and difficult market, is
to focus on those sales opportunities that provide us with the best return and
strategic long term benefits. These opportunities will be coupled with
acquisitions which will provide not only immediate benefits but also
opportunities for the further diversification of our activities. We are
confident this strategy will ensure we continue to be in the best competitive
position and are able to take advantage as and when UK market conditions
improve.
The acquisition of Alligator Books in April this year extends the Group's UK
business into children's licensed books and fun learning products. Alligator
distributes an extensive range of fiction and non-fiction books and recently
acquired from Chrysalis the world-wide publishing rights of 80 non-fiction
illustrated reference books that made up its children's book division. We
believe that as part of International Greetings, we can significantly expand
this business in the future, not only in the UK, but also in our other
geographical markets.
Europe
Following a period of acquisition and investment in Europe in recent years, a
highly focused European division has now been created. We have restructured the
European sales teams within our existing business, which will provide orders for
delivery from our manufacturing and distribution centre based in Holland. We
have achieved growth in European sales this year of 29% and are looking to
continue expansion by a strong sales and marketing effort across all Group
product categories in all European territories.
US
We remain committed to our expansion programme in the US market. Our efforts are
focussed on both our traditional supply channel to the department store and
independent sector, together with a continued push into the mass market and
own-brand sector for both seasonal and everyday products. We are also actively
ensuring that all of the Group's product categories are being offered to the
full breadth of US retailers identifying all sales opportunities available to
us. The Anker ranges, including the high quality Pepper Pot stationery brand,
are also being offered to the speciality retailer sector. The success of this
strategy is reflected in the growth of the US business this year, which has seen
like-for-like turnover increase by 22% to $50.5m and like-for-like operating
profit increase 18% to $3.1m. Overall, the Group's sales in the US now account
for 24% of total sales.
Far East
With the ever increasing importance of the Far East to the Group's business, we
have further extended our presence in this region.
Our Chinese manufacturing facility has recently been relocated to a new larger
purpose-built complex. This extra capacity will allow us to produce many more of
our product categories in-house under our direct control, ensuring standards of
product quality, productivity and on-time delivery to our customers is
maintained. At peak production we expect to employ some 1,300 people in the
facility.
We have also relocated the trading, sourcing and administration activities of
our Hong Kong operation into a new office suite of 10,000 sq feet. The
facilities include a new showroom displaying all the Group's products available
for sale in the global market place. We have also employed additional support
staff to ensure that all out-sourced products match the production and quality
criteria of our own in-house manufactured goods.
All trading divisions within the Group have the opportunity to benefit from this
facility and, where feasible, orders from different trading regions will be
consolidated to achieve manufacturing efficiencies and cost savings.
Design and Licensing
A key to our continued success is the strong commitment to the design and
development of our products.
During the year we have re-evaluated the design processes carried out throughout
the Group. This has culminated in the creation of a highly focused operating
structure to maximise the quality of design in each of our product categories.
In addition, a separate licensed studio has been formed to provide all of the
Group's trading divisions with the specialist design techniques utilised in this
area of intellectual property. The Alligator acquisition has further
strengthened our status within the licence industry and will improve our ability
to obtain additional licences for the future.
Following this year's results announcement are the launches of Disney's new
Pixar film 'Cars' and 'Pirates of the Caribbean II', for both of which we have
designed and created new ranges of products.
Conclusion
Our business has now been operating for over 25 years. We have the knowledge,
experience and ambition to continue to grow our business, and have created an
operating model that is flexible enough to adapt to the different and
ever-changing market conditions across all the geographical territories in which
we operate.
Acquisitions will continue to be an important part of our future strategy to
create a more diverse business by introducing new product categories to our
portfolio and extending the Group's international business.
We would also like to thank our outgoing chairman, John Elfed Jones, for his
invaluable support and guidance over what has been a very successful ten years
for the Company and welcome Keith James into the chair.
Anders Hedlund and Nick Fisher
Joint Chief Executives
FINANCE REVIEW
Group Performance
Turnover for the year to 31 March 2006 amounted to £196.6m, an increase of 37%
over last year. Excluding £34.8m attributable to the acquisition of Anker, Group
turnover amounted to £161.7m, an increase of 13% over last year. US sales
increased by 34% to £47.2m whilst European turnover rose 29% to £22.7m. Total
overseas sales increased 36% to £74.1m and represented 38% of total turnover.
Excluding Anker's sales, which are primarily made in the UK, overseas sales
represented 44% of the Group's total. This growth in the Group's overseas sales
over recent years represents a significant strategic development as the Group's
expansion and diversification into new markets continues.
Operating profit increased from £12.7m to £15.4m. Excluding Anker and
exceptional items, operating profit increased from £13.4m to £14.4m. The
exceptional items of £3.3m relate primarily to a number of restructuring changes
made to the Group's operations during the year in order to maintain our
competitiveness. These restructuring changes included the relocation of
production operations overseas, the integration and relocation of Copywrite's
operations into Anker and the merging of Hoomark's UK sales operation into the
Group's UK division.
Net interest payable increased from £36,000 to £1.8m, £1.0m of which arose as a
result of the acquisition of Anker. Other significant factors in this increase
were the full year effect, for the first time, of the £5.1m purchase of our new
factory and distribution facility in Holland, in November 2004, and the £4.5m
purchase of the Napier Christmas cracker business in January 2005.
The profit on disposal of fixed assets of £1.8m arose on the sale of the
freehold interest in property owned by Anker. Net profit before taxation
increased by 23% to £15.5m, with adjusted profit before tax* for the year
increasing 30% to £18m.
Earnings Per Share and Dividend
Adjusted basic earnings per share* for the year ended 31 March 2006 were
28.9p, an increase of 18% over last year. Basic earnings per share were 27.1p,
an increase of 21% over last year.
The final dividend proposed for the year of 7p (2005: 5.75p) makes a total
dividend for the year of 9p, an increase of 20% and is covered three times by
basic earnings per share.
Treasury Operations
The Board continues to assess and manage the risks associated with the treasury
function as the business develops. The Group's business has a strong seasonal
focus, resulting in large variations in working capital, with net funds for
certain periods of the year and net borrowings in other periods. As a result,
the Board considers that long term reduction of exposure to fluctuations in
interest rates on working capital is unlikely to be economically viable.
A significant proportion of the Group's purchases are denominated in US$. The
effect of exchange rate fluctuations is reduced through a combination of
measures including hedging and forward exchange contracts.
Balance Sheet and Cash Flow
Net debt at 31 March 2006 amounted to £10.7m, compared to net funds of £3.8m
last year. The cost of acquiring Anker accounted for £13.1m of this £14.5m
movement. The sale of Anker's property, which has subsequently been leased back,
generated a net cash inflow of £18.8m and resulted in an overall cash inflow
from capital expenditure of £7.8m. This was offset by increases in stock and
debtors of £9.7m and £5.7m respectively, which were attributable to a number of
factors including the Anker acquisition, increased working capital to facilitate
the high growth rates being achieved in our overseas markets and a debtor of
£3.7m in relation to an outstanding insurance claim.
The £35.4m cost of the Anker acquisition was funded by £12.9m paid in cash,
£12.5m paid by the issue of new ordinary shares during the year, with a further
cash payment due of £10m, which has been paid subsequent to the year end.
Shareholder funds increased by £22.1m to £75.7m and with year-end gearing of 14%
and interest covered 8.6 times by operating profit, the Group's financial
position remains strong.
Mark Collini
Finance Director
*Adjusted to exclude exceptional items of £3,310,000 (2005: £738,000), profit on
disposal of fixed assets of £1,838,000 (2005: £nil) and amortisation of goodwill
of £1,031,000 (2005: £443,000)
Consolidated profit and loss account
for the year ended 31 March 2006
Note Continuing operations
Excluding acquisition Acquisition
Pre-exceptional Exceptional Pre-exceptional Exceptional Total Total
item item item item (Restated-
see Note 1)
2006 2006 2006 2006 2006 2005
£000 £000 £000 £000 £000 £000
Group turnover
including share of
joint venture turnover 161,706 - 36,433 - 198,139 143,689
Less: Share of joint
venture turnover - - (1,585) - (1,585) -
-----------------------------------------------------------------------------------
Group turnover 2 161,706 - 34,848 - 196,554 143,689
Cost of sales (111,834) - (23,287) - (135,121) (99,220)
-----------------------------------------------------------------------------------
Gross profit 49,872 - 11,561 - 61,433 44,469
Distribution expenses (14,005) - (2,476) - (16,481) (14,017)
Administrative expenses (21,462) (3,053) (4,747) (257) (29,519) (17,799)
-----------------------------------------------------------------------------------
Operating profit 2 14,405 (3,053) 4,338 (257) 15,433 12,653
Share of operating profit
of joint venture - - 7 - 7 -
-----------------------------------------------------------------------------------
14,405 (3,053) 4,345 (257) 15,440 12,653
------------------------------------------------------------
Profit on disposal of
fixed assets 1,838 -
Net interest payable (1,801) (36)
-----------------------
Profit on ordinary
activities before
taxation 2-3 15,477 12,617
Tax on profit on ordinary
activities 4 (3,146) (3,098)
-----------------------
Profit for the
financial year 12,331 9,519
-----------------------
Earnings per share 7
Basic 27.1p 22.4p
Diluted 26.6p 22.1p
=======================
Consolidated statement of total recognised gains and losses
for the year ended 31 March 2006
2006 2005
£000 £000
Profit for the financial year 12,331 9,519
Currency translation differences arising on foreign currency net investments 914 (160)
-----------------------
Total recognised gains and losses relating to the financial year 13,245 9,359
=======================
Consolidated balance sheet
at 31 March 2006
Note 2006 2005
(Restated-see Note 1)
£000 £000 £000 £000
Fixed assets
Intangible assets - goodwill 21,339 5,113
Tangible assets 37,134 30,853
Investments in joint venture
- share of gross assets 769 -
- share of gross liabilities (596) -
-------- --------
58,646 35,966
Current assets
Stocks 40,008 24,178
Debtors 29,863 16,477
Investments - unquoted 65 -
Cash at bank and in hand 11,825 6,490
-------- --------
81,761 47,145
Creditors: amounts falling due
within one year (56,382) (23,452)
-------- --------
Net current assets 25,379 23,693
-------- --------
Total assets less current
liabilities 84,025 59,659
Creditors: amounts falling due
after more than one year (6,352) (5,690)
Provisions for liabilities
and charges (1,950) (380)
-------- --------
Net assets 75,723 53,589
======== ========
Capital and reserves
Called up share capital 2,308 2,140
Share premium account 2,386 2,704
Potential issue of shares 6(a) 1,052 926
Other reserves 13,964 21
Profit and loss account 56,013 47,798
-------- --------
Equity shareholders' funds 8 75,723 53,589
======== ========
Consolidated cash flow statement
for the year ended 31 March 2006
Note 2006 2005
£000 £000
Net cash inflow from operating
activities 10 2,706 14,398
Returns on investments and
servicing of finance 11 (1,232) (54)
Taxation (5,980) (3,600)
Capital expenditure 11 7,809 (8,793)
Acquisitions and disposals 11 (13,078) (5,984)
Equity dividends paid (3,578) (2,872)
-------- --------
Cash outflow before financing (13,353) (6,905)
Financing 11 (630) (1,180)
-------- --------
Decrease in cash in the year (13,983) (8,085)
======== ========
Reconciliation of net cash flow to movement in net (debt)/funds
for the year ended 31 March 2006
Note 2006 2005
£000 £000
Decrease in cash in the year (13,983) (8,085)
Cash outflow from debt and lease
financing 12 462 1,541
-------- --------
Change in net funds resulting
from cash flows (13,521) (6,544)
Translation differences 12 (1,013) 66
-------- --------
Movement in net funds in the year (14,534) (6,478)
Net funds at beginning of year 3,790 10,268
Net (debt)/funds at end of year 12 (10,744) 3,790
======== ========
Notes
1 Basis of preparation
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 March 2006 or 2005.
Statutory financial statements for 2005 have been delivered to the registrar of
companies, and those for 2006 will be delivered following the company's annual
general meeting. The auditors have reported on those accounts; their reports
were unqualified and did not contain statements under section 237(2) or (3) of
the Companies Act 1985.
The financial information has been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules. In this
financial information the following new standards have been adopted for the
first time:
• FRS 21 'Events after the balance sheet date'
• FRS 22 'Earnings per share'
• FRS 25 'Financial instruments: presentation and disclosure' - presentation
requirements only
• FRS 28 'Corresponding amounts'
FRS 28 'Corresponding amounts' has had no material effect as it imposes the same
requirements for comparatives as hitherto required by the Companies Act 1985.
Following adoption of FRS 21 'Events after the balance sheet date' the
comparative figures as at 31 March 2005 and the opening reserves figures as at 1
April 2004 have been restated to exclude the proposed dividend of £2,461,000 and
£2,112,000 respectively.
FRS 22 dictates the measures of earnings per share which can be shown on the
face of the profit and loss account to ensure consistency in the presentation of
financial information.
The adoption of the presentation elements of FRS 25 means that dividends are no
longer shown as an expense in the profit and loss account - they are instead
presented as a movement on shareholders' funds (see note 8).
2 Segmental analysis
(a) Geographical area of operation
UK, Europe & Far East USA Group
2006 2005 2006 2005 2006 2005
£000 £000 £000 £000 £000 £000
Turnover 167,344 121,675 29,210 22,014 196,554 143,689
==================================================================================
Operating profit
before exceptional
items 16,947 12,003 1,796 1,388 18,743 13,391
Exceptional items
(see below) (3,310) (738) - - (3,310) (738)
----------------------------------------------------------------------------------
Operating profit
after exceptional items 13,637 11,265 1,796 1,388 15,433 12,653
Share of operating
profit of joint
venture 7 - - - 7 -
----------------------------------------------------------------------------------
13,644 11,265 1,796 1,388 15,440 12,653
Profit on disposal of
fixed assets 1,838 - - - 1,838 -
Net interest (1,108) 279 (693) (315) (1,801) (36)
----------------------------------------------------------------------------------
Profit on ordinary
activities before
taxation 14,374 11,544 1,103 1,073 15,477 12,617
==================================================================================
Net assets
(restated-note 1) 68,338 47,305 7,385 6,284 75,723 53,589
==================================================================================
The above results relate entirely to continuing operations.
(b) Exceptional items
2006 2005
£000 £000
Restructuring costs (see (i) below) 2,906 738
Other (see (ii) below) 404 -
--------------------
3,310 738
====================
i) During the year ended 31 March 2006, the Group made a number of
restructuring changes to its operations in order to maintain competitiveness.
These consisted of (a) the relocation of UK production operations overseas
(including the cracker manufacturing operation forming part of the business and
assets of Napier Industries Ltd acquired in January 2005), (b) the relocation
and integration of the Copywrite licensed stationery division into Anker's
operations and (c) the integration of Hoomark's UK sales operation into the
Group's UK division. The cost of these restructuring changes, primarily
redundancy and other personnel related items, amounted to £2,906,000.
During the year ended 31 March 2005, the Group transferred the manufacturing of
greetings cards and tags from Hatfield to a new facility in Latvia. The
exceptional item of £738,000 represented the costs, primarily redundancy and
machinery re-location, associated with this transfer.
ii) These represent one-off product safety recall and rectification costs
incurred in connection with one of the Group's products.
(c) Geographical analysis of turnover by destination
2006 2005
£000 £000
UK 122,443 89,004
USA 47,191 35,132
Europe 2,665 17,637
Rest of world 4,255 1,916
----------------------
196,554 143,689
======================
3 Profit on ordinary activities before taxation
2006 2005
£000 £000
Profit on ordinary activities before taxation
is stated after charging/(crediting)
Auditors' remuneration - audit fees paid to the
company's auditor and
its associates 116 86
- non audit fees paid to
the company's auditor and
its associates 197 36
Hire of plant and machinery - rentals payable under
operating leases 410 343
Hire of other assets - operating leases 1,249 746
Release of deferred grant income (498) (554)
Depreciation - owned 5,469 4,217
- leased 276 255
Amortisation of goodwill 1,031 443
======================
Audit fees payable by the company for the year were £31,000 (2005: £21,000).
Non audit fees payable by the Group relate to advice given on taxation, and in
relation to the relocation of the Group's Chinese facility. The 2005 non audit
fees relate mainly to tax advice.
4 Taxation
2006 2005
£000 £000 £000 £000
Current tax
UK corporation tax on profits
of the year 2,885 2,240
Adjustments in respect of
previous periods 22 (235)
------- -------
2,907 2,005
Foreign tax
On profits of the year 1,369 1,237
Adjustments in respect of
previous periods 14 (51)
------- -------
1,383 1,186
------- -------
Total current tax 4,290 3,191
Deferred taxation
Origination and reversal of
timing differences (1,231) (95)
Adjustments in respect of
previous periods 87 2
------- -------
Total deferred tax (1,144) (93)
------- -------
Tax on profits on ordinary
activities 3,146 3,098
======= =======
Factors affecting tax charge for period
2006 2005
£000 £000
Profit on ordinary activities before tax 15,477 12,617
====== ======
Profit on ordinary activities multiplied by
standard rate of corporation tax in the UK of 30% 4,643 3,785
Effects of:
Current tax charge/(credit)
---------------------------
Difference between accounting and taxable profits
on sale of fixed assets 88 -
Goodwill arising on consolidation 265 85
Fair value adjustment arising on consolidation (202) -
Notional interest expense disallowed 120 -
Expenses not deductible for corporation tax purposes 191 147
Tax deductions for gains on employee share options (88) (155)
Difference between UK and overseas tax rates (427) (424)
Release of grant (142) (161)
Difference between capital allowances and depreciation (187) 167
Provisions not deductible until paid 82 1
Other timing differences (89) 32
Adjustments in respect of previous periods 36 (286)
---------------------
(353) (594)
---------------------
Total current tax 4,290 3,191
Deferred tax charge/(credit)
----------------------------
Credit in relation to the disposal of fixed assets (1,305) -
Origination and reversal of timing differences 336 (95)
Difference between UK and overseas tax rates (262) -
Adjustments in respect of prior periods 87 2
---------------------
Total deferred tax (1,144) (93)
---------------------
Total tax charge for the period 3,146 3,098
=====================
5 Dividends paid
2006 2005
(Restated -
see note 1)
£000 £000
Final for year ended 31 March 2005
- 5.75p per share (2004: 5p) 2,652 2,126
Interim for year ended 31 March 2006
- 2p per share (2005: 1.75p) 926 746
----------------------
Dividends paid 3,578 2,872
======================
6 Acquisitions
(a) On 19 November 2003, the Group acquired 100% of the issued share capital of
Hoomark Gift-Wrap Partners BV. The purchase agreement provided for future
payments of deferred consideration, based on Hoomark's profits for the 3
years ended March 2007. At 31 March 2005, the future consideration payable
was estimated at £926,000, of which up to 100% was payable by the issuance
of new ordinary shares at the company's option. During the year ended
31 March 2006, £255,000 of this amount was paid in cash. Based on Hoomark's
results for the year ended 31 March 2006, and future projections, the
estimated future consideration has been increased by £381,000 including
£16,000 accounted for by exchange differences. Up to 100% of the total
unpaid consideration of £1,052,000 at 31 March 2006 may be payable by the
issue of new ordinary shares, at the company's option.
(b) On 27 May 2005, the Group acquired 100% of the issued share capital of Anker
International PLC, an international design, import and distribution
business for a total cost of £35.4m. £25.4m was paid on
completion, of which £12.5m was represented by the issue of 3,294,242
ordinary shares and £12.9m in cash. The remaining cost of
£10.0m plus £0.5m accounted for as notional interest payable
on the deferred purchase consideration, was paid in cash on 31 May 2006.
The book value and provisional fair value of assets purchased was as follows:
Book value Provisional fair Provisional fair
value value at date
adjustments of acquisition
£000 £000 £000
Tangible fixed assets 14,579 (473) 14,106
Investments 224 - 224
Stock 5,932 (642) 5,290
Debtors 6,379 - 6,379
Creditors (6,689) (784) (7,473)
Bank overdraft (31) - (31)
----------------------------------------------
20,394 (1,899) 18,495
====== =======
Goodwill (estimated useful
life of 30 years) 16,881
------
Total consideration 35,376
======
The latest available audited accounts of Anker International PLC were prepared
at 31 December 2004 and reflect turnover of £40.0m, operating profit of
£4.1m and interest payable of £0.3m, resulting in a profit before
taxation of £3.8m.
The provisional fair value adjustment to fixed assets represents an adjustment
to bring freehold property into line with market value. The provisional
adjustment to stock represents an adjustment to reflect the sterling value of
stock purchased in US$ at actual cost. The provisional adjustment to creditors
represents (a) an adjustment of £430,000 to decrease the sterling value of US$
denominated trade creditors to the rate of exchange prevailing at the date of
acquisition, (b) a provision of £1,278,000 in respect of onerous forward foreign
exchange contracts, being the difference between the contracted rate and the
prevailing spot rate at the date of acquisition and (c) the tax effect of
£64,000 in relation to the above adjustments to stock and trade creditors.
7 Earnings per share
2006 2005
Adjusted basic earnings per share excluding
exceptional items, profit on disposal of fixed
assets and goodwill 28.9p 24.5p
Loss per share on goodwill (2.2p) (0.9p)
Loss per share on exceptional items (5.1p) (1.2p)
Earnings per share on profit on disposal of fixed assets 5.5p -
-------------------
Basic earnings per share 27.1p 22.4p
===================
Diluted earnings per share 26.6p 22.1p
===================
The basic earnings per share is based on the earnings of £12,331,000 (2005:
£9,519,000) and the weighted average number of ordinary shares in issue of
45,536,856 (2005: 42,529,155). The calculation of diluted earnings per share is
based on 46,304,602 (2005: 43,088,426) ordinary shares. The difference of
767,746 (2005: 559,291) represents the dilutive effect of outstanding employee
share options which has been calculated in accordance with FRS 22.
Adjusted basic earnings per share excluding exceptional items, profit on
disposal of fixed assets and goodwill is calculated after adjusting for
exceptional items of £3,310,000 (2005: £738,000), the profit on disposal of
fixed assets of £1,838,000 (2005: £nil), amortisation of goodwill of £1,031,000
(2005: £443,000), and the tax relief attributable to these items of £1,691,000
(2005: £269,000).
8 Reconciliations of movements in shareholders' funds
2006 2005
(restated-see
note 1)
£000 £000
Profit for the financial year 12,331 9,519
Dividends paid in the year (note 5) (3,578) (2,872)
----------------------
Retained profit for the financial year 8,753 6,647
Other recognised gains and losses relating to
the year (net) 914 (160)
New share capital subscribed 12,879 1,029
Potential issue of shares (note 6(a)) 126 (154)
Purchase of own shares (538) -
----------------------
Net addition to shareholders' funds 22,134 7,362
Opening shareholders' funds - as previously reported 51,128 44,115
Prior year adjustment - proposed dividend 2,461 2,112
----------------------
Closing shareholders' funds 75,723 53,589
9 Post balance sheet event
On 6 April 2006 the company acquired 100% of the issued share capital of
Alligator Books Limited, a publisher and distributor of children's books and
stationery, for an initial consideration of £2.5m, of which £2.25m
was paid in cash and £250,000 by the issue of 62,703 new ordinary shares.
Additional consideration may become payable, depending on the level of
profitability for the year ended 31 March 2007, in a mixture of cash and new
ordinary shares.
10 Reconciliation of operating profit to net cash inflow from operating
activities
2006 2005
£000 £000
Operating profit 15,433 12,653
Depreciation charge 5,745 4,472
(Increase) in stocks (9,650) (1,251)
(Increase) in debtors (5,715) (3,366)
(Decrease)/increase in creditors (2,833) 2,001
Deferred income (632) (554)
Goodwill amortisation 1,031 443
Utilisation of provision (673) -
----------------------
Net cash inflow from operating activities 2,706 14,398
11 Gross cash flows
Cash inflow/(outflow)
2006 2005
£000 £000
Returns on investment and servicing of finance
Interest paid (1,668) (662)
Interest received 455 649
Interest element of finance lease repayments (19) (41)
----------------------
Net cash (outflow) for returns on investment and
servicing of finance (1,232) (54)
======================
Capital expenditure
Purchase of tangible fixed assets (11,225) (11,262)
Disposal of tangible fixed assets 19,034 146
Grants received in relation to capital expenditure - 2,323
----------------------
Net cash inflow/(outflow) from capital expenditure 7,809 (8,793)
======================
Acquisitions and disposals
Acquisition of businesses - (5,978)
Acquisition of subsidiaries (13,047) (6)
Net overdraft acquired with subsidiary (31) -
----------------------
Net cash (outflow) for acquisitions and disposals (13,078) (5,984)
======================
Financing
New shares issued 379 361
Purchase of own shares (538) -
Repayment of amounts borrowed (99) (1,256)
Capital element of finance lease payments (363) (285)
Purchase of investments (9) -
----------------------
Net cash (outflow) from financing (630) (1,180)
======================
12 Analysis of changes in net (debt)/funds
At 1 April Cash flow Exchange Acquisition of Other At 31 March
2005 movement subsidiary changes 2006
£000 £000 £000 £000 £000 £000
Cash at bank and in hand 6,490 5,070 265 - - 11,825
Overdrafts (672) (19,022) (1,125) (31) - (20,850)
--------------------------------------------------------------------------------------
5,818 (13,952) (860) (31) - (9,025)
Debt due after one year (1,143) - (106) - 102 (1,147)
Debt due within one year (90) 99 (8) - (102) (101)
Finance leases (795) 363 (39) - - (471)
--------------------------------------------------------------------------------------
(2,028) 462 (153) - - (1,719)
--------------------------------------------------------------------------------------
Total net (debt)/funds 3,790 (13,490) (1,013) (31) - (10,744)
======================================================================================
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