Final Results

ST IVES PLC 12 October 1999 ST IVES plc - PRELIMINARY RESULTS 1999 1998 Change (restated) . Turnover £452m £368m +22.7% . Profit before tax £60.1m £51.1m +17.5% . Earnings per share 39.87p 34.35p +16.1% . Total dividends per share 14.70p 12.70p +15.7% Miles Emley, Chairman, commented: 'This excellent result is mainly due to the improved performance of our UK businesses. The immediate outlook remains positive and we look forward to a successful outcome to the new financial year with confidence.' Enquiries to: Miles Emley, Chairman St Ives plc Brian Edwards, Managing Director 0171 928 8844 Cary Martin Citigate Dewe Rogerson Penny Cross 0171 638 9571 Duncan Murray Results & Dividend The results for the year ended 30 July 1999 show substantial further progress. Turnover of £452.2million (1998 - £368.5million) represents an increase of over 22 per cent over the previous year. Profit before tax was £60.1million (1998 - £51.1million as restated) an increase of 17.5 per cent. Basic earnings per share were 39.87p compared with 34.35p for the prior year, an increase of 16.1 per cent. This excellent result is mainly due to the improved performance of our UK businesses, taken as a whole, and includes the first full year's contribution from Hunters Armley. A final dividend of 10.45p is proposed, making a total for the year of 14.7p (1998 - 12.7p) an increase of 15.7 per cent. Books Sales of both cased and paperback books were ahead of the previous year and were particularly strong in the trade and general market. We now serve a broader spread of UK trade publishing customers than for many years. New production control systems, together with full digital pre-press capability, have enabled us to enhance the level of service provided to our customers, and a suitable mix of work has made it possible to achieve greater productivity and improve utilisation and efficiency. Direct Response and Commercial In the UK these markets, which are served by most of our manufacturing sites, continue to grow and, following the acquisition of Hunters Armley, now account for more of our business than any other. As is usual, the second half of the year was less busy than the first. In Germany, the market remains extremely competitive, as a result of a combination of flat demand and the introduction of new capacity throughout the industry. The effect of these conditions is exacerbated by the strong seasonal bias of demand towards the first half of our financial year. Conditions in the US markets also continue to be highly competitive, despite continuing growth. Progress has been made at both our sites in extending the range of customers both locally and nationally. Financial Although levels of underlying activity in the domestic market were not exceptional, we undertook a number of very large projects for both domestic and international corporate financial customers. These included work for BP Amoco, Vodafone, BTR Siebe and Halifax, which kept us extremely busy throughout most of the year. We have further enhanced our reputation as the leading printer of Annual Reports and Accounts and other high quality corporate print and have achieved a more even utilisation of the relevant capacity throughout the year. Magazines The UK magazine market has been steady. As usual, paginations were reduced during the second half of the year, although volumes in shorter run titles were more robust than those of some less specialist magazines. We have grown our market share by winning new work from publishers such as The Telegraph, EMAP and Future Publishing. We have benefited from the continuing trend in favour of perfect bound products following our recent investment in perfect binding lines at Caerphilly and Roche. Conditions in the US magazine market were also steady during the year. For much of the first half of the year we were operating at full capacity, which has been increased at the beginning of the current financial year by the commissioning of a new replacement press. Our plant in Florida became ISO9002 qualified and won a total of 27 print awards at state and national level. Multimedia Although our volumes have been maintained, growth in the recorded music market remains restrained, and we have experienced some pressure on prices. Progress has been made in extending the range of customers, especially in Holland, and our recently established factory in Blackburn had a successful year in meeting the demanding service requirements of its customers. Balance Sheet Our business continues to generate a strong cashflow. Net cash resources of £43.9million (1998 - £4.4million) at the year end were higher than expected, in part because of the short term timing of payments. Shareholders' funds have grown to £186.6million from £158.3million at the end of the prior year. The pre-tax return on average capital employed (after adding back goodwill previously written off to reserves) was 26.6 per cent (1998 - 25.9 per cent), considerably in excess of our cost of capital. Investment We have started the new financial year with more extensive capital expenditure plans than for some time, reflecting a number of factors: the growth of our business and its position of leadership in many of the markets which we serve; our determination to retain the competitive advantage which modern, flexible equipment affords; and our recognition that the development of competing media and distribution channels makes continuous reduction in our costs of production more important than ever. We already have digital pre-press equipment available to serve customers in all our markets. The utilisation of this equipment by our book publishing customers is now almost universal and a high proportion of the customers of our US and German businesses are also taking advantage of the enhanced quality, service and flexibility which these systems provide. The new financial year will see the coming on stream or commissioning of new, mainly replacement, web offset presses at our factories in Bungay, Plymouth and Roche and at both our factories in the USA; the installation of new sheetfed presses at Blackburn, Bradford, Romford and Westerham; the installation of new finishing equipment in Plymouth, Romford and at Cleveland in the USA; and, assuming that appropriate planning consents can be obtained, the building of new factories or extensions to existing sites at Bungay, Romford, Sydenham (for Displaycraft) and Cleveland. The outlay in respect of these and other investments is expected to exceed £100 million over the next two years. The benefits of some of the investment, for example in buildings, will be long term, but in any event most of the projects will not begin to generate a return until our next financial year (2000-01). Outlook We have continued to strengthen our competitive position in our principal markets. This has been achieved through consistent investment in people, systems and equipment to an extent unrivalled by our competitors. The investment planned for the coming years will further consolidate our position. Our commitment to customer service is of paramount importance in retaining and growing our business. Overall the immediate outlook for our businesses remains positive, although, as always, subject to changing economic conditions. We look forward to a successful outcome to the new financial year with confidence. CONSOLIDATED PROFIT AND LOSS ACCOUNT 52 weeks to 52 weeks to 30 July 31 July 1999 1998 (Restated) ----------- ----------- £'000 £'000 Turnover (note 2) 452,237 368,453 Cost of sales (331,477) (270,630) ----------- ----------- Gross Profit 120,760 97,823 Sales and distribution costs (21,528) (16,816) Administration expenses (40,684) (32,579) Other operating income 954 1,106 ----------- ----------- Operating profit (note 2) 59,502 49,534 Interest receivable 2,085 2,703 Interest payable (1,482) (1,088) ----------- ----------- Profit before taxation 60,105 51,149 Taxation (19,053) (16,210) ----------- ----------- Profit after taxation 41,052 34,939 Dividends (note 4) (15,207) (13,032) ----------- ----------- Retained profit 25,845 21,907 =========== =========== Earnings per share (note 5) 39.87p 34.35p =========== =========== Diluted Earnings per share (note 5) 39.63p 33.91p =========== =========== Dividend per ordinary share (note 4) 14.70p 12.70p =========== =========== Comparative figures for the 52 weeks to 31 July 1998 have been restated to reflect a change in accounting policy for provisions following the adoption of FRS12 'Provisions, Contingent Liabilities and Contingent Assets' (see notes 1 and 3) All transactions are derived from continuing activities. CONSOLIDATED BALANCE SHEET 30 July 31 July 1999 1998 (Restated) ----------- ----------- £'000 £'000 Tangible fixed assets 170,306 184,740 Current assets Stocks 14,692 13,936 Debtors 76,342 75,349 Cash at bank and in hand 64,233 31,291 ----------- ----------- 155,267 120,576 Creditors - due within one year (112,173) (117,917) ----------- ----------- Net current assets 43,094 2,659 ----------- ----------- Total assets less current liabilities 213,400 187,399 Creditors - due after more than one year (8,868) (9,901) Provisions and deferred taxation (14,982) (15,548) Deferred income (2,984) (3,662) ----------- ----------- 186,566 158,288 =========== =========== Capital and reserves Called up share capital 10,366 10,286 Share premium account 40,875 38,933 Capital redemption reserve 1,040 1,040 Profit and loss account 134,285 108,029 ----------- ----------- Equity shareholders' funds 186,566 158,288 =========== =========== SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 30 July 31 July 1999 1998 (Restated) ----------- ----------- £'000 £'000 Net cash inflow from operating activities 92,344 65,829 Returns on investments and servicing of finance 852 1,494 Tax paid (21,381) (14,125) Capital Expenditure (19,291) (24,969) Acquisitions (312) (28,774) Equity dividends paid (13,581) (12,142) ----------- ----------- Net cash inflow/(outflow) before financing 38,631 (12,687) Financing Issue of shares 2,022 1,669 Decrease in debt (4,395) (3,899) ----------- ----------- Increase/(decrease) in cash 36,258 (14,917) =========== =========== NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT Net cash inflow from operating activities Operating profit 59,502 49,534 Depreciation 29,537 25,370 Other non cash movements (1,694) (1,970) Changes in working capital 4,882 (7,508) Other items 117 403 ----------- ----------- 92,344 65,829 =========== =========== NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT continued 52 weeks to 52 weeks to 30 July 31 July 1999 1998 ----------- ----------- £'000 £'000 Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash in the year 36,258 (14,917) Cash outflow from decrease in debt and lease financing 4,395 3,899 ----------- ----------- Change in net funds resulting from cash flows 40,653 (11,018) Loans and finance leases acquired with subsidiary - (9,876) Loan notes issued on acquisition of subsidiary - (1,430) New finance lease (1,021) - Exchange adjustments (64) 66 ----------- ----------- Movement in net funds in the year 39,568 (22,258) Opening net funds 4,379 26,637 ----------- ----------- Closing net funds 43,947 4,379 =========== =========== Analysis of net funds 31 July Cash flow Other Exchange 30 July 1998 non cash movement 1999 changes ------- --------- -------- --------- -------- £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 31,291 32,888 - 54 64,233 Overdrafts (3,370) 3,370 - - - --------- 36,258 Debt due within one year (9,769) 1,255 (761) (104) (9,379) Debt due after one year (4,657) - 761 (10) (3,906) Finance leases (9,116) 3,140 (1,021) (4) (7,001) ------- --------- -------- --------- -------- 4,379 40,653 (1,021) (64) 43,947 ------- --------- -------- --------- -------- CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 52 weeks to 52 weeks to 30 July 31 July 1999 1998 (Restated) ----------- ----------- £'000 £'000 Profit after taxation 41,052 34,939 Exchange differences 35 472 ----------- ----------- Total recognised gains and losses relating to the year 41,087 35,411 Prior year adjustment 1,844 =========== ----------- Total recognised gains and losses since last Annual Report 42,931 =========== MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 52 weeks to 52 weeks to 30 July 31 July 1999 1998 (Restated) ----------- ----------- £'000 £'000 Opening shareholders' funds 156,444 148,797 Prior year adjustment 1,844 2,102 ----------- ----------- Opening shareholders' funds (as restated) 158,288 150,899 Total recognised gains and losses 41,087 35,411 Dividends (15,207) (13,032) Issue of ordinary shares 2,022 6,133 Goodwill adjustment 376 (21,123) ----------- ----------- Closing shareholders' funds 186,566 158,288 =========== =========== The total recognised gains and losses and the movement in shareholders' funds for the year ended 31 July 1998 have been restated as a result of the adoption of FRS12 (see notes 1 and 3). NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation The preliminary financial statements have been prepared in accordance with the accounting policies set out in, and are consistent with, the Group's Annual Report for 1999. The financial information set out in these statements does not comprise statutory accounts for the purposes of Section 240 of the Companies Act 1985. The abridged information for the fifty-two weeks to 30 July 1999 and for the fifty-two weeks to 31 July 1998 has been extracted from the Group's statutory accounts for the respective years. The abridged information in respect of the statutory accounts for the fifty-two weeks to 31 July 1998 has been amended to reflect the change in accounting policy for provisions following the adoption of FRS12. The Group's statutory accounts for the fifty-two weeks to 31 July 1998 have been filed with the Registrar of Companies. The Group's statutory accounts for the fifty-two weeks to 30 July 1999 will be sent to all shareholders before 27 October 1999. The auditors reports on the accounts of the Group for both years were unqualified and did not contain a statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. 2. Geographical analysis The geographical analysis of turnover and operating profit by origin is stated below: 52 weeks to 52 weeks to 30 July 31 July 1999 1998 (Restated) ----------- ----------- £'000 £'000 Turnover United Kingdom 351,925 266,672 United States of America 68,799 68,936 Rest of the World 31,513 32,845 ----------- ----------- 452,237 368,453 =========== =========== Operating profit United Kingdom 50,894 40,609 United States of America 6,708 5,679 Rest of the World 1,900 3,246 ----------- ----------- 59,502 49,534 =========== =========== The directors consider that the Group has only one class of business and consequently no further analysis of turnover or profit is given. 3. Effect of change in accounting policy The effect of adopting FRS12, and therefore not providing for estimated future expenditure required to sustain the operating capacity of plant and machinery and freehold premises, has decreased last year's profit before tax and retained profit by £655,000 and £458,000 respectively. The profit before tax and retained profit for the 52 weeks to 30 July 1999 would have been £686,000 and £475,000 lower respectively if FRS12 had not been adopted. As a result of the change in the Group's accounting policy in providing for repairs, following the adoption of FRS12, goodwill arising on the acquisition of Hunters Armley Group PLC has been reduced by £194,000. 4. Dividends The directors propose a final ordinary dividend of 10.45p (1998 - 8.95p) net per share. The payment date will be 3 December 1999 and the record date will be 22 October 1999. 5. Earnings per share The calculation of basic earnings per ordinary share is based on profits after taxation as disclosed in the profit and loss account of £41,052,000 (1998 - £34,939,000, restated) and on a weighted average of 102,958,104 (1998 - 101,721,690) ordinary shares in issue during the year. The calculation of the diluted earnings per share is based on profit after taxation as disclosed in the profit and loss account and on a diluted weighted average of 103,579,568 (1998 - 103,035,266) shares during the period. The difference between the number of shares used in the basic and diluted earnings per share calculation is 621,464 (1998 - 1,313,576) representing dilutive share options held but not yet exercised. Dilution has been restricted to share options where the individual option price is less than the average market value of shares during the period, which was 435.75p (1998 - 516.0p).

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