Final Results

RNS Number : 4719P

St. Ives PLC

04 October 2011

 



4 October 2011                                              

ST IVES plc

Preliminary Results for the 52 weeks ended 29 July 2011

St Ives plc, the UK's leading marketing services and print group, announces preliminary results for the 52 weeks ended 29 July 2011.

Group Financial Highlights

·   Underlying* revenue up 1.8% to £296.8m (2010: £291.4m)

·   Revenue up 2.0% to £297.2m (2010: £291.5m)

·   Underlying* profit before tax up 17.4% to £20.9m (2010: £17.8m)

·   Profit before tax up 28.3% to £16.9m (2010: £13.2m)

·   Underlying* earnings per share up 22.1% to 14.45p (2010: 11.83p)

·   Earnings per share up 21.6% to 13.22p (2010: 10.87p)

·   Total dividends 5.25p per share (2010: 3.50p per share)

·   Balance sheet further strengthened, with net cash of £16.3m (2010: net debt £2.7m)

    All figures for revenue, profit and earnings per share are based on continuing operations.

* Before non-underlying items which comprise restructuring costs, provision releases, operating results of non-continuing operations, amortisation of acquired intangibles and other one-off items.

Operational Highlights

·   Significant further progress in reshaping the group

·   Disposal of the Magazine printing business in April reduced exposure to commodity print

·   Acquisition of Tactical Solutions in February, and Response One and Pragma since the year end, enhance our marketing services offering

·   Continued investment in organically grown marketing services

·   Further successful cost reduction initiatives across print segment, and investment in digital production

·   Winning additional market share: new contracts include HSBC, RAC and Hachette.

Commenting on the results, Chief Executive, Patrick Martell said:

'The last year has seen significant and important strides forward for St Ives. We have continued to reposition the group by strengthening our position in marketing services whilst successfully moving away from commoditised print markets. The sale of the magazine printing business and the acquisition of three further marketing services businesses have significantly changed the shape of the Group.

'We have also made further encouraging financial progress despite very tough trading conditions and we have again strengthened the balance sheet.

'We remain focused on using our strong financial position to acquire businesses and invest to reinforce our enhanced marketing services offering, which will become an increasingly significant growth driver for the group. Our book business has continued to perform well and we have made further investments to extend the range and effectiveness of its offering to our publishing customers.'

For further information contact:

St Ives plc Patrick Martell, Chief Executive Matt Armitage, Finance Director	020 7928 8844
MHP Communications John Olsen Ian Payne Giles Robinson	020 3128 8100

Business Review

We are pleased to report further significant financial progress, the continued development of our marketing services capabilities and the ongoing success in repositioning the business away from commoditised print markets.

We have again taken action to reduce our costs and improve efficiencies in our print operations whilst investing for growth in our marketing services businesses. Further to the recent acquisition of Tactical Solutions we are delighted to have announced the acquisition of Response One and Pragma Consulting. As with our previous acquisitions they are strong businesses with excellent management teams, have potential to grow and are a great fit with our strategic reshaping.

We finished the year with a cash balance of £16.3 million despite the cash cost of the ongoing restructuring and the acquisition of Tactical Solutions. In addition, we are pleased to have once again further strengthened the balance sheet with net assets increasing by
£6.7 million to £136.6 million.

The board recommends a final dividend of 3.50p making a full year dividend of 5.25p
(3.50p in 2010). If approved, the final dividend will be paid on 23 December 2011 to shareholders on the register at 2 December 2011, with an ex-dividend date of 30 November 2011.

Trading conditions during the year continued to be very tough as the economic climate remained subdued. Underlying Group revenue of £296.8 million was 1.8% higher compared to the previous year as our marketing services segment offset the decline in print revenues. We have made further significant progress in improving the underlying operating profits of the business to £21.3 million (2010 - £18.8 million) and we are pleased that progress has been made in both reporting segments due to the actions taken to reduce costs and improve manufacturing efficiencies in the print operations and the investment made to grow our marketing services segment.

Key financial performance indicators

The board uses a range of key performance indicators ('KPIs') to measure past performance and as a basis for future planning. The most significant KPIs used by the Group are financial which are set out below and reflect the priorities and focus of the board. Those KPIs in respect of environmental and employee matters are referred to in the report on Corporate and Social Responsibility included within the consolidated financial statements.

	2011	2010
Underlying revenue growth	1.8%	(6.5%)
Underlying operating margin*	7.2%	6.4%
Cash conversion**	83%	167%
Underlying earnings per share*	14.45p	11.83p
Dividends per share	5.25p	3.50p

* Continuing operations before non-underlying items.

**Operating profit from continuing operations converted to underlying free cash flow, measured as net cash generated from operating activities before non-underlying items, interest and tax less net cash used in investing activities before non-underlying items.

Print

Our Print operations represented 95.3% of Group external sales for the year. This comprises the Books; Exhibition and Events; Point of Sale and Direct Response and Commercial print businesses.

	2011 £'000	2010 £'000
Print total revenue before non-underlying items	282,736	290,541
Print operating profit before non-underlying items	20,870	18,966

Books

The Group's book business accounted for 27.3% of the Print segment revenues. Sales were down by 3.3% compared to the previous year at £77.1 million (2010 - £79.7 million) but once again we benefited from increased market share and growth in our added value and distribution services. Actions taken to improve manufacturing efficiencies and reduce costs mitigated the impact of lower revenues and the business continues to perform very well.

The investments into digital print and print-on-demand continue to be very successful and we are delighted to have made a further strategic and unique investment in digital production. Working with our technology partners, we have invested in an integrated digital system which significantly extends the run length at which digital production is a better solution than conventional manufacture.

Our strategy is to provide services that enable our customers to profitably produce physical books in smaller quantities, ensure their availability, deliver them directly and in so doing minimise the risk associated with holding stock. We continue to assess the impact upon volumes from eBook sales which remain at levels lower than those reported in the US. We are very confident that our ongoing investment in this business will ensure we remain the market leader, are able to respond to the dynamic changes in this market place and continue to increase our market share. We have renewed a number of our contracts during the year including that with Hachette.

Being able to provide extensive conventional and digital production, an integrated warehouse facility and post production services from a single point enables us to provide a unique service whilst reducing the cost and time of fulfilment. As a result of our superior levels of service and reliability, we have again produced the majority of the bestselling books which included the following titles:

For Penguin 'How hard can it be?' by Jeremy Clarkson and 'Life and Laughing' by Michael Macintyre; for Hodder 'One Day' by David Nicholls; for Headline 'The Family' by Martina Cole; for Little, Brown 'Post Mortuary' by Patricia Cornwell; for Transworld 'Madeleine' by Kate McCann; for HarperCollins 'The Corrections' by Jonathan Franzen; for Bloomsbury 'The Finkler Question' (Booker prize winner) by Howard Jacobson; for Random House 'A journey' by Tony Blair; and for Orion 'The Tiger's Wife' (Orange prize winner) by Téa Obreht.

Exhibitions and Events

Sales for the exhibitions, events and outdoor media business represented 12.3% of Print segment sales.

Sales of £34.8 million (2010 - £31.3 million) were 11.4% ahead of last year but the margins were impacted by the short-term cost and disruption caused by the move of our principal site from Wandsworth to Chessington. The move has been completed successfully and the business is well placed to benefit from this new facility and ahead of the increased activity associated with the 2012 London Olympics. In addition to the new facility, we have invested in additional digital output and implemented a new IT system for the business.

Point of Sale

Point of sale material for the UK retailers and international brands represented 30.3% of Print segment sales at £85.7 million (2010 - £81.8 million). Demand continued to be resilient albeit the pressure on margins remained intense. We have invested in additional digital output capacity during the year and remain the market leader.

Direct Response and Commercial

Direct response and commercial printing accounted for 30.1% of sales in the Print segment. Market conditions continued to be extremely challenging and excess capacity and a trend to marketeers spending on alternative media again exerted downward pressure on prices. As a result we have taken action to reduce our costs, improve efficiencies and reduce capacity.

Sales in the direct response and commercial businesses fell significantly compared to the previous year at £85.1 million (2010 - £97.8 million). The impact upon operating profit was mitigated by the actions taken to reduce costs. We continue to keep this business under close review given its exposure to commoditised print markets.

Marketing Services

Marketing Services accounts for approximately 4.7% of external sales and includes our data management business, Occam, our recently acquired field marketing business, Tactical Solutions, and our organically grown consultancy offerings.

	2011 £'000	2010 £'000
Marketing Services total revenue	14,054	888
Marketing Services operating profit before non-underlying items	450	(216)

Data Management

Occam is a leading supplier of marketing management software and innovative data-driven solutions for direct marketing. Occam represented 48.5% of Marketing Services sales at £6.8 million (2010 - £0.9 million) of revenue. We have invested significantly in this business during the financial year to ensure that we have a stronger base both in terms of people and infrastructure that will support our growth plans. We have recently secured new contract wins with the RAC, Albemarle & Bond and a partnership agreement with IBM as a reseller.

We continue to invest to build this business and our overall capabilities within the market for data driven insight and business intelligence. We are delighted with the acquisition of Response One, completed on 14 September 2011, which will add further scale and capability in this growing market. Established in 1998, Response One is one of the UK's leading and fastest growing data marketing businesses. The business helps its clients to design and deliver effective customer and prospect communications through more intelligent use of data. Principal services include specialist media buying and sales; improving data quality and insight; and strategic campaign planning; and print management. By integrating these services into one solution, Response One has created a unique offering that has transformed multi-channel marketing activities for organisations across the UK.

Field Marketing

Tactical Solutions was acquired in February 2011 and represented 51.5% of Marketing Services revenue at £7.2 million. The business is one of the UK's leading and fastest growing field marketing companies working with major brands and retailers to drive sales in store. Its ability to deploy a nationwide team of highly skilled sales professionals enables the business to deliver measureable return on investment for its clients within the retail and FMCG sector.

Consultancy Services

Our acquisition of Pragma on 20 September 2011, a leading high growth consultancy specialising in retail and consumer markets, is a further step to extend our services within these markets. We believe there are opportunities for the Group to provide products and services that help drive sales by understanding, predicting and influencing consumer behaviour. Pragma are unique in combining rigorous analytical work with innovative ideas and commercial implementation skills. Their key strength is in understanding how customers behave and what motivates them to buy.

Pragma will add significant strength to our organically grown consultancy offerings where we have invested during this financial year.

Balance sheet

The balance sheet has been further strengthened during the year and the Group continues to be very well invested; as a result, capital expenditure was again lower than depreciation at £8.9 million. Underlying cash flow remains robust and the year ended with a positive cash balance of £16.3 million (2010 - net debt £2.7 million), an excellent performance given the impact on cash of funding the cost reduction actions and the acquisition of Tactical Solutions, partially offset by the proceeds on the sale of the Magazine printing business.

We disposed of our sites in Edenbridge and our London head office during the year and continue to hold a surplus property for sale in Crayford.

The Group's strong financial position, even after the recent acquisitions of Response One and Pragma, ensures we have the necessary flexibility to invest to improve our business and take advantage of further suitable acquisition opportunities to deliver our strategy.

Strategy

Our results this year show that we have made further progress in restructuring our current business, developing our marketing services segment, and improving efficiencies in our existing print businesses. We have invested in those businesses where we will continue to generate acceptable margins and exited markets where we do not believe it will be possible to generate a satisfactory return on investment, thereby reducing our exposure to commoditised markets. Most importantly we are making significant progress in building a different business model and revenue stream in marketing services following the acquisition of Occam, Tactical Solutions, Response One and Pragma in addition to our ongoing investment to build our organically grown non-print offerings. Our businesses are well invested and given the changed business model, capital expenditure going forward will remain at these lower levels.

The Group benefits from strong relationships with blue chip organisations across a number of markets. Within the Print segment we continue to invest to extend the offering to our book publishers beyond just manufacture, to enable us to produce only in quantities that need to be printed and made available for sale, when and where required. In addition, we have invested in print to support our marketing services offering but not where print is differentiated by price alone.

We will continue to build upon our offering of non-print services both through acquisition and organic development. We are very pleased with the quality and range of our services that provide efficient and effective execution of marketing campaigns across a number of markets and for blue chip organisations. Our ability to provide products, services and insight that influence consumer behaviour and drive sales is essential to being able to demonstrate a return on investment to marketeers, retailers and brand owners.

The recently won contract with HSBC supports our decision to invest in building a Group sales team able to provide a range of services from a single point.

Outlook

The Group has made good progress in improving the performance of those print businesses that support our marketing services offering whilst reducing its exposure to commoditised markets. Through acquisition we have, and will continue to build, a significant and broad offering that drives the effectiveness of multi channel marketing across a range of markets. Trading conditions within our traditional print markets, as a result of both cyclical and structural changes, remain extremely difficult and we do not expect these pressures to ease in the foreseeable future. We will keep the cost base and performance of these businesses under review and will not hesitate to take further action if required.

We are very pleased with our progress and performance in the current economic climate as we continue to invest to reposition the business for the future. We start the new financial year having again improved our financial performance and have made good progress in executing our strategy. We are confident that the actions we have taken to date and the strategy we are pursuing will ensure the Group continues to prosper. Our financial strength will enable us to continue to invest and reposition the business despite the current economic conditions and in the face of ongoing structural changes to our traditional businesses.

We believe that within the next three years 30 to 40% of the Group's profit will derive from our marketing services segment and that, despite the challenging climate, we will be able to continue to invest for the long term benefit of our shareholders.

Patrick Martell

Chief Executive

4 October 2011

Financial Review

Overview of revenue

Underlying revenue for the Group from continuing operations increased by £5.4 million (1.8%) to £296.8 million. Revenue of £7.2 million is included for Tactical Solutions, acquired 9 February 2011.

Revenue from the Print segment decreased by £7.8 million (2.7%). Revenue decreased by 3.3% in the Books business but market share increased. Exhibitions and Events revenue increased by 11.4% although this growth slowed towards the end of the financial year as general economic sentiment deteriorated. Revenue for the Point of sale business increased by £3.9 million (4.8%) but Direct Response and Commercial revenue declined by 13.0%, partly due to planned reductions in capacity and the removal of less profitable work from the overall mix.

Revenue for the Marketing Services segment increased significantly due to the acquisition of Occam at the end of the previous financial year and the acquisition of Tactical Solutions during the year.

From a geographical point of view, 95.8% of our Print and Marketing Services' revenue is generated within the UK.

Gross profit margin and underlying profitability

Underlying gross profit margin has increased from 25.5% to 26.8%. Despite the revenue decline within the Print segment gross margins in the segment have been maintained due to improved work mix, lower levels of outsourced work, improved production efficiencies, successful procurement initiatives and the labour cost reductions resulting from restructuring activities. Gross margins within the Marketing Services segment are significantly higher than those within the Print segment and therefore the growth of this segment has lead to the overall improvement in margin at the Group level.

Underlying sales and administrative overheads increased by £2.4 million driven by acquisition related overheads of £4.5 million partially offset by headcount related overhead reductions within the Print segment of £2.1 million.

As a result of these management actions, underlying profit before taxation for the Group from continuing operations increased from £17.8 million to £20.9 million (6.1% to 7.0% of revenue).

Non-underlying items

The Group has undergone further restructuring during the year in order to mitigate the effects of the economic downturn, remove excess capacity and improve operating performance.

The £4.0 million net charge (2010 - £4.6 million), before tax, primarily relates to: the costs associated with the relocation of our principal exhibitions and events site to Chessington of £1.5 million; redundancy, asset impairment and other re-structuring related costs within our head office and the Books, Point of Sale and Direct Response and Commercial businesses of £5.0 million; transaction costs associated with the acquisition of Tactical Solutions of £0.6 million; and the amortisation of acquired intangibles for Occam and Tactical Solutions of £1.1 million; partially offset by gains of £4.2 million on the sale of our previous head office and properties at Edenbridge site.

Balance sheet

The balance sheet has strengthened with net assets increasing to £136.6 million
(2010 - £129.9 million). The movement reflects the loss after taxation of £4.8 million; dividends of £3.6 million; actuarial gains on the defined benefits pension scheme (net of deferred tax) of £12.0 million; and the impact of the issue of shares of £3.1 million.

Net debt

Net debt decreased during the year from £2.7 million to a cash balance of £16.3 million. The major contributing factors to the movement are an improvement in underlying profitability, a further reduction in capital expenditure, and the proceeds of disposal of excess property and non-core activities, partially offset by acquisition-related cash requirements.

The Group maintains a £55.0 million committed revolving multicurrency credit agreement which expires 31 October 2012.

Capital expenditure and depreciation

Capital expenditure in cash flow terms on property, plant and equipment, together with additions to intangible assets, other than in the context of acquisitions, was £8.9 million (2010 - £12.1 million) and cash receipts from asset disposals were £9.3 million
(2010 - £4.6 million). Depreciation, amortisation and impairments charged in the year was £35.0 million (2010 - £20.2 million) including a £13.5 million impairment charge in respect of the Magazine printing business disposed of in the period. Our businesses are very well invested and we are therefore able to operate at reduced levels of capital expenditure versus historic levels without any deterioration in our competitive advantage. We will, however, continue to invest in those businesses that present opportunities for growth.

Acquisitions

On 9 February 2011, the Group acquired Tactical Solutions (UK) Limited, one of the UK's leading field marketing companies. The total consideration payable for the business is £18.6 million.

Subsequent to the end of the financial year the Group acquired Response One Holdings Limited for a maximum consideration of £19 million and Pragma Holdings Limited for a maximum consideration of £6.3 million.

Disposal

On 6 April 2011, the Group disposed of its magazine printing business for £18.8 million, net of selling costs. The impairment of property, plant and machinery associated with the disposal, before tax, was £13.5 million. The business has been treated as a discontinued operation.

Tax

The Group's tax rate on profit before non-underlying items was 27.6% (2010 - 31.5%).

Dividends

The board is recommending a final dividend of 3.50p, bringing the total dividends for the year to 5.25p, resulting in an underlying dividend cover of 2.8 times.

The Group remains cash generative and was debt free at the end of the financial year. Retained earnings in the Group balance sheet at 30 July 2011 were £76.4 million
(2010 - £73.4 million).

Pensions

The deficit (on an IAS 19 basis) in the defined benefits pension scheme at the end of the year, excluding the related deferred tax asset, was £12.3 million (2010 - £32.9 million). The decrease of the deficit is due, primarily, to an increase in the value of the scheme assets.

The charge to underlying operating profit for this scheme was £0.2 million (2010 - £0.2 million) which represents the costs of administering the scheme. The income statement also includes a net financing credit of £0.6 million (2010 - £0.4 million charge) which reflects the expected return on assets of the scheme based on market rates available at the start of the financial year less the effect of the fact that the benefits are one year closer to being paid.

The Group contributes £2.2 million per annum in order to meet its obligations regarding the current level of deficit within the scheme. The next triennial valuation for the scheme is scheduled for April 2013.

Financial risk management and treasury policies

The main financial risks of the Group relate to interest rate, liquidity, foreign exchange and credit (in relation to its trade receivables).

The Group introduced an internal audit function in 2007. The Group's policy is to test all the business's trade cycles over a three-year period.

The Group's treasury function is responsible for managing the Group's exposure to financial risk and operates within a defined set of policies and procedures approved by the board.

The overall objective of the treasury policy is to use financial instruments to manage the financial risks that arise from the specific activities of the business. It follows, therefore, that the Group does not enter into speculative financial transactions for which there is no underlying business requirement.

Interest rate risk

The Group's borrowings are at floating interest rates. Interest as a proportion of profits before tax is relatively small and changes in interest rates have a low impact on profits. The Group keeps this situation under constant review.

Liquidity risk

The Group maintains a £55.0 million committed revolving multicurrency credit agreement which expires 31 October 2012. At the year end the Group had unused facilities of £55.0 million.

Foreign exchange risk

The Group's trading, including purchases of property, plant and equipment, is principally in Sterling. Currency risk management relating to transactional business, if significant, is dealt with by the use of currency derivatives, which are mainly foreign currency forward contracts.

Credit risk (trade receivables)

The majority of sales of the Group to its customers are made on credit. The Group maintains credit insurance covering its larger trade debtors. It is Group policy that all customers are granted credit subject to credit verification procedures. A rigorous system of credit control is applied and receivables are continually monitored. Bad debt provisions represented 3.6% (2010 - 4.6%) of gross trade debtors at the year end.

Matt Armitage

Finance Director

4 October 2011

Consolidated Income Statement

52 weeks to 29 July 2011

52 weeks to 30 July 2010†

	Note	Underlying £'000	Non-underlying* (note 3) £'000	Total £'000	Underlying £'000	Non-underlying* (note 3) £'000	Total £'000
Revenue	2, 3	296,790	454	297,244	291,430	39	291,469
Cost of sales		(217,284)	(4,645)	(221,929)	(217,002)	(2,758)	(219,760)
Gross profit		79,506	(4,191)	75,315	74,428	(2,719)	71,709
Selling costs		(24,160)	(276)	(24,436)	(21,944)	(142)	(22,086)
Administrative expenses		(34,207)	(3,842)	(38,049)	(34,003)	(3,375)	(37,378)
Other operating income		181	4,300	4,481	271	1,614	1,885
Profit/(loss) from operations	2, 3	21,320	(4,009)	17,311	18,752	(4,622)	14,130
Investment income		13,973	-	13,973	13,267	-	13,267
Finance costs		(14,388)	-	(14,388)	(14,222)	-	(14,222)
Profit/(loss) before tax		20,905	(4,009)	16,896	17,797	(4,622)	13,175
Income tax (charge)/credit	4	(5,764)	2,692	(3,072)	(5,607)	3,633	(1,974)
Profit/(loss) for the period from continuing operations		15,141	(1,317)	13,824	12,190	(989)	11,201
Loss from discontinued operations	4	(1,312)	(17,273)	(18,585)	(2,248)	(1,215)	(3,463)
Net profit/(loss) for the period		13,829	(18,590)	(4,761)	9,942	(2,204)	7,738
Attributable to:
Shareholders of the parent company		13,748	(18,551)	(4,803)	9,942	(2,204)	7,738
Non-controlling interests		81	(39)	42	-	-	-
		13,829	(18,590)	(4,761)	9,942	(2,204)	7,738
Basic earnings per share (p)
From continuing operations	6	14.45	(1.23)	13.22	11.83	(0.96)	10.87
From continuing and discontinued operations:	6	13.19	(17.80)	(4.61)	9.65	(2.14)	7.51
Diluted earnings per share (p)
From continuing operations	6	14.36	(1.22)	13.14	11.83	(0.96)	10.87
From continuing and discontinued operations	6	13.11	(17.69)	(4.58)	9.65	(2.14)	7.51

†   The results for the prior period have been reclassified to present the Magazine printing business as a discontinued operation.

*  Non-underlying items comprise restructuring charges, provision releases, operating results of non-continuing operations, amortisation of acquired intangibles and other one-off items.

Consolidated Statement of Comprehensive Income

	52 weeks to 29 July 2011  £'000	52 weeks to 30 July 2010  £'000
(Loss)/profit for the period	(4,761)	7,738
Actuarial gains on defined benefits pension schemes	16,696	3,835
Transfers of gains on cash flow hedges to hedged items	(59)	(209)
Gains on cash flow hedges taken directly to comprehensive     income	4	59
Tax charge on items taken directly to comprehensive income	(4,697)	(1,367)
Other comprehensive income for the period	11,944	2,318
Total comprehensive income for the period	7,183	10,056
Attributable to:
Shareholders of the parent company	7,141	10,056
Non-controlling interests	42	-
	7,183	10,056

Consolidated Statement of Changes in Equity

	Share capital £'000	Share premium £'000	ESOP reserve £'000	Capital redemption reserve £'000	Share option reserve  £'000	Hedging and translation reserve £'000	Other reserves £'000	Retained earnings £'000	Non-controlling interest £'000	Total £'000
Balance at 31 July 2009	10,355	46,689	(1,913)	1,238	-	157	46,171	65,542	-	122,068
Profit for the period	-	-	-	-	-	-	-	7,738	-	7,738
Other comprehensive (loss)/income for the period	-	-	-	-	-	(114)	(114)	2,432	-	2,318
Comprehensive income/(loss) for the period	-	-	-	-	-	(114)	(114)	10,170	-	10,056
Dividends	-	-	-	-	-	-	-	(2,318)	-	(2,318)
Issue of share capital	3	17	-	-	-	-	17	-	-	20
Recognition of share-based payments	-	-	-	-	60	-	60	-	-	60
Balance at 30 July 2010	10,358	46,706	(1,913)	1,238	60	43	46,134	73,394	-	129,886
Loss for the period	-	-	-	-	-	-	-	(4,803)	42	(4,761)
Other comprehensive (loss)/income for the period	-	-	-	-	-	(39)	(39)	11,983	-	11,944
Comprehensive (loss)/income for the period	-	-	-	-	-	(39)	(39)	7,180	42	7,183
Arising on acquisition of subsidiary	-	-	-	-	-	-	-	-	620	620
Dividends	-	-	-	-	-	-	-	(3,616)	-	(3,616)
Issue of share capital	227	1,834	769	-	-	-	2,603	(606)	-	2,224
Recognition of share-based payments	-	-	-	-	284	-	284	-	-	284
Balance at 29 July 2011	10,585	48,540	(1,144)	1,238	344	4	48,982	76,352	662	136,581

Consolidated Balance Sheet

	Note	29 July 2011 £'000	30 July 2010 £'000
Assets
Non-current assets
Property, plant and equipment		62,376	107,438
Goodwill		67,443	54,383
Other intangible assets		11,522	4,683
Financial assets		2,429	3,495
Deferred tax assets		-	1,355
Other non-current assets		-	202
		143,770	171,556
Current assets
Inventories		7,182	10,112
Trade and other receivables		65,110	68,148
Current tax receivable		-	568
Derivative financial instruments		4	59
Cash and cash equivalents		16,262	10,515
Assets held for sale		-	2,140
		88,558	91,542
Total assets		232,328	263,098
Liabilities
Current liabilities
Trade and other payables		69,255	79,920
Income tax payable		3,283	-
Deferred consideration payable		1,677	-
Deferred income		376	934
Provisions		1,626	3,752
		76,217	84,606
Non-current liabilities
Loans		-	13,193
Retirement benefits obligations	7	12,295	32,887
Deferred consideration payable		2,621	-
Deferred income		-	593
Provisions		687	666
Deferred tax liabilities		3,927	1,267
		19,530	48,606
Total liabilities		95,747	133,212
Net assets		136,581	129,886
Equity
Capital and reserves
Share capital		10,585	10,358
Other reserves		48,982	46,134
Retained earnings		76,352	73,394
Attributable to shareholders of the parent company		135,918	129,886
Non-controlling interests		662	-
Total equity		136,581	129,886

Consolidated Cash Flow Statement

Note

52 weeks to 29 July 2011  £'000

52 weeks to 30 July 2010  £'000

Operating activities
Cash generated from operations	10	22,282	37,222
Interest paid		(1,079)	(1,160)
Income taxes (paid)/received		(1,323)	744
Net cash generated from operating activities		19,880	36,806
Investing activities
Purchase of property, plant and equipment		(6,814)	(11,245)
Purchase of other intangibles		(2,070)	(804)
Proceeds on disposal of property, plant and equipment		9,263	4,584
Disposal proceeds of subsidiary, net of cash disposed	8	14,772	-
Acquisition of subsidiary, net of cash acquired	9	(12,170)	(10,517)
Net cash generated from/(used in) investing activities		2,981	(17,982)
Financing activities
Dividends paid		(3,616)	(2,318)
Decrease in bank loans		(13,494)	(20,000)
Net cash used in financing activities		(17,110)	(22,318)
Net increase/(decrease) in cash and cash equivalents	10	5,751	(3,494)
Cash and cash equivalents at beginning of period		10,515	14,016
Effect of foreign exchange rate changes		(4)	(7)
Cash and cash equivalents at end of period	10	16,262	10,515

Notes to the Preliminary Results

1. Basis of preparation

The preliminary results have been prepared on the basis of the accounting policies as set out in the Group's Annual Report and Accounts 2011. Certain balance sheet items have been reclassified in the prior year comparatives to reflect changes in presentation.

The financial information set out in the preliminary results does not comprise statutory accounts for the purpose of section 434 of the Companies Act 2006 in respect of the year ended 29 July 2011 and 30 July 2010.

The financial information for the year ended 29 July 2011 has been extracted from the Group's 2011 statutory accounts for that period which have been prepared on a going concern basis and in accordance with the recognition and measurement principles
of International Financial Reporting Standards as adopted by European Union ('IFRS') and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The 2011 statutory accounts will be delivered to the Registrar of Companies following the Company's 2011 Annual General Meeting.

The financial information for the year ended 30 July 2010 has been extracted from the Group's statutory accounts for that period which have been delivered to the Registrar of Companies. The Auditor's report on both the Group's 2011 and 2010 statutory accounts were unqualified and did not contain statements under sections 498(2) or 498(3) of the Companies Act 2006 in respect of the 2010 and 2011 statutory accounts.

2. Segment reporting

The Group manages its business on a market segment basis. Following a change in the way resources are allocated by the board, the Group's chief operating decision maker, and in light of the increased proportion of investment in non-print businesses, the reporting segments were redefined in the period as Print and Marketing Services. The Print segment comprises the Group's Books business previously reported within the Media Products segment and all the business that were reported within the Commercial Products segment except Occam, the database marketing services business. Occam is now reported within the Marketing Services segment together with Tactical Solutions, the field marketing services business acquired in the period. The results of the Group's Magazine printing business previously reported under the Media Products segment are reported within discontinued operations. The nature of the market segments is described in the Business Review.

The changes noted above did not result in any misstatement of the prior period reported balance sheet. Inter-segment sales are charged at arm's length prices. Corporate costs before non-underlying items are allocated to revenue-generating segments as this better reflects their profitability.

Business segments

52 weeks to 29 July 2011

	Print £'000	Marketing Services £'000	Total £'000
Revenue
Underlying revenue	282,736	14,054	296,790
Non-underlying revenue	454	-	454
Total revenue	283,190	14,054	297,244
Result
Result before non-underlying items	20,870	450	21,320
Non-underlying items	(2,483)	(1,526)	(4,009)
Profit from operations	18,387	(1,076)	17,311
Investment income			13,973
Finance costs			(14,388)
Profit before tax			16,896
Income tax charge			(3,072)
Profit for the period from continuing operations			13,824
	Continuing operations £'000	Discontinued operations £'000	Total £'000
Revenue
Underlying revenue	296,790	51,248	348,038
Non-underlying revenue	454	-	454
Total revenue	297,244	51,248	348,492
Result
Result before non-underlying items	21,320	(506)	20,814
Non-underlying items	(4,009)	(16,905)	(20,914)
Profit from operations	17,311	(17,411)	(100)

52 weeks to 30 July 2010 (restated)

	Print £'000	Marketing Services £'000	Total £'000
Revenue
Underlying revenue	290,542	888	291,430
Non-underlying revenue	39	-	39
Total revenue	290,581	888	291,469
Result
Segmental result before non-underlying items	18,968	(216)	18,752
Non-underlying items	(4,097)	(525)	(4,622)
Profit from operations	14,871	(741)	14,130
Investment income			13,267
Finance costs			(14,222)
Profit before tax			13,175
Income tax charge			(1,974)
Profit for the period from continuing operations			11,201
	Continuing operations £'000	Discontinued operations £'000	Total £'000
Revenue
Underlying revenue	291,430	70,489	361,919
Non-underlying revenue	39	298	337
Total revenue	291,469	70,787	362,256
Result
Result before non-underlying items	18,752	(2,739)	16,013
Non-underlying items	(4,622)	(1,687)	(6,309)
Profit from operations	14,130	(4,426)	9,704

 

3. Non-underlying items

Non-underlying items disclosed on the face of the consolidated income statement included in respect of continuing operations are as follows:

	2011 £'000	2010 £'000
Expense/(income)
Restructuring items
Redundancies, impairments and other charges	6,788	5,518
Provision releases	(316)	(192)
Profit on disposal of property, plant and equipment	(4,299)	(1,614)
	2,173	3,712
Other
Operating losses from non-continuing operations	16	182
Amortisation of acquired intangibles	1,149	105
Costs associated with the acquisition of subsidiaries	608	418
Remaining other non-underlying expenses	63	205
	4,009	4,622
Income tax credit	(2,692)	(3,633)
	1,317	989

Restructuring items

Included within redundancies, impairment and other charges are impairments of £3,508,000 in respect of plant, equipment and software located at the Blackburn, Bradford and Leeds sites. The activities of the sites are recorded within the Print segment. Also included are redundancy and other charges associated with restructuring activities principally in the Direct and Service Graphics operating businesses. Provision releases include the release of £316,000 in respect of costs associated with the Edenbridge site closure. Profit on disposal of fixed assets includes a gain from the disposal of the Lavington Street building, as well as gains on the disposal of buildings at Edenbridge site, offset by losses on disposal of plant and machinery following the relocation of certain operations of Service Graphics to a new site. All of the restructuring items are recorded within the Print segment.

Other

Operating losses from non-continuing operations classified as non-underlying items relate to operating results arising after the decision to close a site. In the period, these arose in the Edenbridge site. Amortisation of acquired intangibles relates to customer relationships acquired with Tactical Solutions in the period as well as to customer relationships and in-house developed software acquired with Occam in the prior year. Costs associated with the acquisition of subsidiaries of £608,000 relate to the Tactical Solutions acquisition, principally professional advisers' fees.

Tax

In the current year, the tax credit relates to the items discussed above, and to the revaluation of deferred tax liabilities following the substantial enactment of the reduction of the UK statutory corporate income tax rate from 27% to 25%.

4. Income tax charge/(credit)

Income tax on profit/(loss) as shown in the income statement is as follows:

Continuing operations

Discontinued operations

Total

	2011 £'000	2010 £'000	2011 £'000	2010 £'000	2011 £'000	2010 £'000
United Kingdom corporation tax charge/(credit) at 27.33% (2010 - 28%):
Current year	4,891	3,585	456	(1,748)	5,347	1,837
Adjustments in respect of prior years	(838)	(489)	148	(389)	(690)	(878)
	4,053	3,096	604	(2,137)	4,657	959
Overseas:
Adjustments in respect of prior years	-	(545)	-	-	-	(545)
Total current tax charge/(credit)	4,053	2,551	604	(2,137)	4,657	414
Deferred tax on origination and reversal of temporary differences:
United Kingdom deferred tax (credit)/charge	(1,123)	691	64	(23)	(1,059)	668
Adjustments in respect of prior years	142	(1,268)	139	552	281	(716)
Total deferred tax (credit)/charge	(981)	(577)	203	529	(778)	(48)
Total income tax charge/(credit)	3,072	1,974	807	(1,608)	3,879	366

The income tax charge/(credit) on the profit/(loss) before and after non-underlying items is as follows:

Continuing operations

Discontinued operations

Total

	2011 £'000	2010 £'000	2011 £'000	2010 £'000	2011 £'000	2010 £'000
Tax charge on profit before non-underlying items	5,764	5,607	439	(1,135)	6,203	4,472
Tax (credit)/charge on non-underlying items	(2,692)	(3,633)	368	(473)	(2,324)	(4,106)
	3,072	1,974	807	(1,608)	3,879	366

The charge can be reconciled to the profit before tax per the income statement as follows:

Continuing operations

Discontinued operations

Total

	2011 £'000	2010 £'000	2011 £'000	2010 £'000	2011 £'000	2010 £'000
Profit/(loss) before tax	16,896	13,173	(17,778)	(5,069)	(882)	8,104
Tax calculated at a rate of 27.33% (2010 - 28%)	4,617	3,688	(4,858)	(1,419)	(241)	2,269
Non-deductible charges on impairment of assets		-	4,641	-	4,641	-
Expenses not deductible for tax purposes	561	828	734	-	1,295	828
Non-taxable income	(583)	-	-	(280)	(583)	(280)
Effect of alternative use tax basis on sale of buildings	(595)	-	-	-	(595)	-
Effect of change in UK corporate tax rate	(232)	(240)	4	(72)	(228)	(312)
Adjustments in respect of prior years	(696)	(2,302)	286	163	(410)	(2,139)
Total income tax charge/(credit)	3,072	1,974	807	(1,608)	3,879	366

5. Dividends

	per share	2011 £'000	2010 £'000
Final dividend paid for the 52 weeks ended 31 July 2009	0.5 p	-	515
Interim dividend paid for the 26 weeks to 30 January 2010	1.75 p	-	1,803
Final dividend paid for the 52 weeks ended 30 July 2010	1.75 p	1,806	-
Interim dividend paid for the 26 weeks to 29 January 2011	1.75 p	1,811	-
Dividends paid during the period		3,616	2,318
Proposed final dividend at the period end of 3.50p per share (2010 - 1.75p per share)		3,749	1,803

The proposed final dividend is subject to the approval by shareholders at the 2011 Annual General Meeting and has not been included as a liability in these financial statements.

6. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Number of shares

	2011 '000	2010 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	104,206	103,056
Weighted average number of ordinary shares for the purposes of diluted earnings per share	104,879	103,056

Basic and diluted earnings per share

2011

2010

	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence
Earnings and basic earnings per share from continuing activities
Underlying earnings and underlying earnings per share	15,060	14.45	12,190	11.83
Non-underlying items	(1,278)	(1.23)	(989)	(0.96)
Earnings and basic earnings per share	13,782	13.22	11,201	10.87
Earnings and diluted earnings per share from continuing activities
Underlying earnings and underlying earnings per share	15,060	14.36	12,190	11.83
Non-underlying items	(1,278)	(1.22)	(989)	(0.96)
Earnings and diluted earnings per share	13,782	13.14	11,201	10.87

2011

2010

	Earnings £'000	Earnings per share pence	Earnings £'000		Earnings per share pence
Loss and basic loss per share from discontinued activities	(18,585)	(17.83)	(3,463)		(3.36)
Loss and diluted loss per share from discontinued activities	(18,585)	(17.72)	(3,463)		(3.36)
	2011			2010
	Earnings £'000	Earnings per share pence	Earnings £'000		Earnings per share pence
Basic (loss)/ earnings per share from continuing and discontinued activities	(4,803)	(4.61)	7,738		7.51
Diluted (loss)/ earnings per share from continuing and discontinued activities	(4,803)	(4.58)	7,738		7.51

7. Retirement benefits

The net liability in respect of retirement benefits obligations of £12,295,000 at the balance sheet date has decreased compared to July 2010 (£32,887,000) due mainly to investment returns on scheme assets.

8. Acquisition

On 9 February 2011, the Group acquired 90% of the single class of ordinary shares in Tactical Solutions (UK) Limited ('Tactical Solutions'), a provider of field marketing services. Goodwill arising on the acquisition relates to the value of future growth from new customers and of the assembled workforce. The fair values of the net assets acquired were as follows:

Purchase price allocation

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Customer relationships	-	6,840	6,840
Property, plant and equipment	219	-	219
Trade and other receivables	3,069	280	3,349
Bank balances and cash	169	-	169
Trade and other payables	(2,266)	(269)	(2,535)
Deferred tax liabilities	1	(1,847)	(1,846)
Net assets acquired	1,192	5,004	6,196
Goodwill arising on acquisition			13,060
Non-controlling interest			(619)
Total consideration			18,637

The fair value of the total consideration payable is as follows:

			£'000
Paid in cash prior to 29 July 2011			12,339
St Ives plc ordinary shares issued on 3 March 2011			2,000
Consideration payable in loan notes after 29 July 2011			4,298
Total consideration			18,637

The loan notes payable at 29 July 2011 are analysed as follows:

			£'000
Loan notes payable within one year			1,677
Loan notes payable in more than one year			2,621
Total consideration payable at 29 July 2011			4,298

The acquisition had the following impact on investing cash outflows in the period:

			£'000
Cash paid in the period			12,339
Cash acquired			(169)
Net cash outflow in the period			12,170

The deferred consideration is payable in two tranches which are dependent upon the level of EBITDA achieved by Tactical Solutions in calendar year 2011 and calendar year 2012, the amounts of which are capped at £4 million and £5 million respectively. The Group received an option to purchase the remaining 10% of the single class of ordinary shares from August 2013 at a price dependent on the level of EBITDA achieved by Tactical Solutions in the financial year preceding the date of the exercise of the option. A nominal value of £1 has been attributed to this option at the balance sheet date.

Had Tactical Solutions been acquired at the beginning of the financial year, it would have had the following incremental impact on the Group's operating results:

	£'000
Revenue	5,785
Operating profit	747

9. Discontinued operations

On 6 April 2011, the Group completed the disposal of the four operating subsidiaries that made up the Group's Magazine printing business, namely St Ives Peterborough Limited, St Ives Plymouth Limited, St Ives Roche Limited and St Ives Web Limited ("the Magazine printing business"). Consideration receivable is comprised of £15,000,000 in cash and £5,000,000 in loan notes secured on certain items of plant and machinery within the Magazine printing business. At the date of disposal the loan notes were scheduled to be repaid in 24 equal monthly instalments. All but the initial payment were subsequently rescheduled with repayment recommencing in December 2011. From that date, monthly repayments will resume at a higher level such that the full value of the loan notes are still scheduled to be repaid with 24 months of the date of disposal. The loan notes do not bear interest and the nominal amounts payable were discounted to their present value as at the date of disposal. The Magazine printing business is classified as a discontinued operation and prior period figures have been restated accordingly.

The net assets of the Magazine printing business at the date of disposal, 6 April 2011 were as follows:

	31 July 2010 to 6 April 2011 £'000
Intangible assets	55
Property, plant and equipment	20,653
Inventories	4,308
Trade and other receivables	23,678
Bank overdraft	(386)
Trade and other payables	(26,627)
Tax liabilities	(1,898)
Other liabilities	(982)
Net assets	18,801
Profit on disposal before tax	-
Total consideration receivable, net of selling costs	18,801

The fair value of the consideration receivable for the Magazine printing business, net of selling costs is comprised as follows:

	£'000
Consideration net of selling costs, received in cash on completion	14,178
Loan note receivable and received in the period	208
Fair value of loan notes receivable after 29 July 2011	4,415
Fair value of consideration receivable, net of selling costs	18,801

The loan notes receivable at 29 July 2011 are analysed as follows:

	£'000
Loan notes receivable within one year	1,986
Loan notes receivable in more than one year	2,429
Total consideration receivable at 29 July 2011	4,415

The disposal of the Magazine printing business had the following impact on investing cash inflows in the period:

	£'000
Total consideration net of selling costs, received in cash in the period	14,386
Overdraft included in net assets disposed of in the period	386
Proceeds in the period from disposal, net of cash disposed	14,772

10. Notes to the consolidated cash flow statement

Reconciliation of cash generated from operations

	2011 £'000	2010 £'000
Profit from continuing operations	17,311	14,130
Loss from discontinued operations	(17,411)	(4,427)
	(100)	9,703
Adjustments for:
Depreciation of property, plant and equipment	12,609	18,303
Impairment losses	20,488	1,171
Amortisation of intangible assets	1,894	756
Profit on disposal of property, plant and equipment	(4,652)	(2,374)
Deferred income credit	(393)	(307)
Share-based payment charge	284	60
Decrease in retirement benefit obligations	(3,345)	(2,000)
Decrease in provisions	(1,880)	(1,585)
Operating cash inflows before movements in working capital	24,905	23,727
(Increase)/decrease in inventories	(1,379)	757
(Increase)/decrease in receivables	(8,375)	5,829
Increase in payables	7,131	6,909
Cash generated from operations	22,282	37,222

Analysis of net debt

	30 July 2010 £'000	Cash flow £'000	Exchange movements £'000	29 July 2011 £'000
Cash and cash equivalents	10,515	5,751	(4)	16,262
Bank loans	(13,193)	13,494	(301)	-
	(2,678)	19,245	(305)	16,262

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

The effective interest rates on cash and cash equivalents are based on current
market rates.

Cash flows from discontinued operations

Included within the cash flow statement are the following cash flows from discontinued operations:

	2011 £'000	2010 £'000
Net cash (used in)/generated from operating activities	(733)	4,550
Net cash (used in)/generated from investing activities	(123)	(4,580)
Net cash generated from/(used in) financing activities	182	(733)
Net decrease in cash from discontinued activities	(674)	(763)

11. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. No material related party transactions have been entered into during the year, which might reasonably affect the decisions made by the users of these financial statements.

On 1 November 2010, 201,163 shares in the Company were purchased from the Group's Employee Benefit Trust on behalf of Patrick Martell, Matt Armitage and Lloyd Wigglesworth pursuant to the Directors' Deferred Bonus Scheme ('DBS'). Details of the DBS are set out in the Directors' Remuneration Report within the Annual Report and Accounts 2011.

No other executive officers of the Company or their associates had material transactions with the Group during the year.

12. Post-balance sheet events

On 14 September 2011, the Group acquired 100% of the single class of ordinary shares in Response One Holdings Limited, a data marketing business, for a consideration of approximately £16.25 million. The exact consideration will be determined based on a multiple of the EBITDA for the year ended 31 October 2011, adjusted for working capital. Approximately 70% of the consideration payable will be in cash with the balance to be satisfied by the issue of up to approximately 7.5 million new St Ives plc ordinary shares. An initial payment of £12.5 million in cash was made on completion. The total consideration is capped at £19.0 million.

On 20 September 2011, the Group acquired 100% of the single class of ordinary shares in Pragma Holdings Limited, a consultancy specialising in retail and consumer markets. The consideration payable will be determined as a multiple of the EBITDA achieved for the year ended 31 March 2012 adjusted for working capital, and is estimated to be approximately £4.2 million. An initial payment of £3.3 million in cash was made on completion with the balance of the consideration payable in cash and shares. The total consideration is capped at £6.0 million.

The foregoing contains forward looking statements made by the directors in good faith based on information available to them up to 4 October 2011.  Such statements need to be read with caution due to inherent uncertainties, including economic and business risk factors underlying such statements.

 

END

 

 

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