Final Results

RNS Number : 6533N

St. Ives PLC

02 October 2012

 



2 October 2012

ST IVES plc

Preliminary Results for the 52 weeks ended 27 July 2012

St Ives plc, the UK's leading marketing services and print Group, announces preliminary results for the 52 weeks ended 27 July 2012.

Group Financial Highlights

· Underlying* revenue up 10.3% to £327.4m (2011: £296.8m)

· Underlying* profit before tax up 15.9% to £24.2m (2011: £20.9m)

· Underlying* earnings per share up 8.0% to 15.61p (2011: 14.45p)

· Earnings per share down 12.0% to 11.64p (2011: 13.22p)

· Total dividend up 9.5% to 5.75p per share (2011: 5.25p per share)

· Net debt of £13.4m (2011: net cash £16.3m)

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 sites, acquisition costs, adjustments to deferred consideration, net profit on disposal of property, plant and equipment, amortisation of acquired intangibles and other one-off items.

Operational Highlights

· Continued success in implementation of strategic repositioning of the Group

· Three acquisitions to enhance our marketing services offering, including:

- Response One, one of the UK's fastest growing data marketing businesses,
in September 2011

- Pragma, a leading consultancy specialising in retail and consumer markets,
in September 2011

- Incite, an industry leading market research and insights consultancy, in February 2012

· Investment in Sponge, a leading mobile marketing agency, and Easypress Group (formerly EvolvedGroup), an eBook conversion software company

· Further successful cost reduction initiatives across Print businesses, and investment in
digital production

· Winning additional market share, with the Group's new multi-discipline offering gaining traction with key clients including HSBC, Punch Taverns, Holland and Barrett and Johnston Press

· Contract renewals with key clients including Sainsbury's, Royal Mail and Heinz

Commenting on the results and the outlook for the Group, Chief Executive Patrick Martell said:

"We have made continued progress in our transformational plan to build a substantial and broadly-based marketing services offering whilst moving away from commoditised print, and this has resulted in a significantly improved financial performance.

We have successfully integrated our three new Marketing Services acquisitions and are pleased with how they have performed to date.

St Ives' future is in selling services that enable organisations and brands to deliver effective marketing, and in developing differentiated customer propositions which use a range of the capabilities from across the Group.  Trading conditions remain difficult, but we are in a strong financial position and will continue to invest to realise growth opportunities, to improve operational efficiencies, and to develop the business for the long term benefit of our shareholders."

For further information contact:

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

Chief Executive's Strategic Review

We are very pleased to report further significant improvement in our financial performance and the continuing success in delivering our strategy.

Strategic Vision and Implementation

The strategic realignment of our business has resulted in us building a range of complementary marketing services capabilities and our exit from commoditised print markets. Whilst our Book business, Clays, continues to provide solutions focused on the needs of book publishers, our other businesses collaborate as required to provide marketing services across a number of sectors, including: Retail, Financial Services, FMCG, Leisure and Travel, Automotive, Charity and the Public Sector.

The rise in consumer power is driving a fundamental change in the role of marketing which will impact across all of these markets. The shift from push marketing to conversational marketing based on understanding customer needs, and responding accordingly, is well under way and St Ives is ideally positioned to help our clients meet the challenges this presents. 

Our consultancy services are set up to help our clients better understand their markets and customers, and to develop future strategies.  We have the cross-media capability to execute these strategies physically, digitally and socially using our Print and Marketing Services businesses, creating a unique and compelling combination of services in the market place.

For example:

· In Retail we see the combination of sophisticated customer insight and research driving specific in-store and online offerings that we fulfil for the UK's largest brands.

· In Financial Services, the drive to create engaging and cost-effective customer connections has never been more important; at St Ives we help some of the largest retail banks deliver more targeted multi-channel campaigns whilst at the same time saving expenditure on printed materials.

· In Publishing, our strategy is to provide a range of services which enable our customers to profitably produce books in more flexible quantities and to minimise the need for, and risk of, holding stock. We have invested in developing our eBook conversion software offering during the year through our stake in the Easypress Group. Our ongoing investment in digital production will help to mitigate the impact on margin of shorter run lengths and we will continue to seek further opportunities to reduce the cost of conventional production.

We have successfully exited commoditised print markets, such as magazines, fine art printing and CD/DVD insert printing, and invested in those print businesses serving markets where there is a requirement for added value services in addition to print.  Other than Clays, our book printing business, all other businesses in the Group now provide marketing related services. Last year we stated that in three years' time 30% - 40% of the Group's operating profit would come from Marketing Services. We are pleased with the progress made in the first year and we remain confident that over the period this remains a deliverable target.

Execution of our strategy has enabled us to improve our financial performance and fund acquisitions. Our focus going forward is to further strengthen the individual businesses and continue to develop broader customer propositions that utilise a number of the capabilities across the Group.

We will invest to support organic growth in our businesses whilst also seeking further acquisition opportunities to complement our offering. The Group has an extensive blue chip customer base of which it is rightly proud and we will continue to seek opportunities to extend the scope of services and products we provide to them.

Our Business Model

As the shape of our business changes we have to adapt our business model.

The real power of our business comes from collaboration across the Group's businesses.  We have created a culture of involvement which is starting to show benefits, with our success in cross-selling and the cultural shift having broken down the business silos.  A growing proportion of our print work is in collaboration with, or in support of, our Marketing Services activities, and we increasingly provide marketing services invoiced directly through our Print businesses and vice versa.

This means that at times the way we approach our markets and customers may differ from the way we manage, measure and report on our business segments.  We need to be flexible and adapt the management of our organisation to reflect this approach, as our clients and their markets change. Our external approach is focused on market sectors and, in particular, ensuring we continue to meet the needs of our clients.  Our internal approach is to manage our Print segment as cost effectively as possible and develop the growth opportunities within our Marketing Services businesses.

This collaboration has manifested itself in new business wins such as our recent engagement by Punch Taverns, a contract won by our Point of Sale business in conjunction with a wide range of our Group companies including Occam and Response One.  These businesses will all be delivering services to Punch Taverns via a single contact within the Point of Sale business.

The effectiveness of our cross-Group collaboration is also demonstrated in new long-term contracts for Sainsbury's Supermarkets, Sainsbury's Bank, Royal Mail, HSBC and Heinz.

Strong Performance in 2011/2012

During a year of significant change across the Group, we have once again delivered a robust financial performance. Trading conditions during the year continued to be very tough as the economic climate remained challenging and uncertain. Underlying Group revenue of
£327.4 million was 10.3% higher compared to the previous year. We have again made further progress in improving the underlying profit before tax of the business to £24.2 million
(2011 - £20.9 million) with underlying EPS increasing by 8.0% to 15.61p (2011 - 14.45p).

The improvement in our revenue and profit performance was driven by growth in our Marketing Services segment.

Our Marketing Services businesses contributed 16.4% of the Group's operating profit in the financial year, which would have been just over 20% with a full year's contribution from Incite, Pragma and Response One, which were all acquired during the year. The integration of all the Marketing Services businesses is progressing well and we have invested approximately £1.0 million in additional staff to support our future growth plans.

Overall our Print businesses have performed well as a result of the actions we have taken to reduce costs and improve operational efficiencies. We benefitted both from a late surge in activity associated with the 2012 London Olympics and from our decision to cease production of company reports and CD/DVD inserts.  Our Book business performed marginally below the comparative prior period as a result of further reductions in average run lengths and higher costs associated with their conventional production. The new digital equipment is expected to become operational by November 2012.

We have finished the year with net debt of £13.4 million (2011 - net cash of £16.3 million) after £6.5 million of restructuring cash outflow and investment of £27.2 million in acquisitions.

The board is recommending a final dividend of 4.00p making a full year dividend of 5.75p (2011 - 5.25p). If approved, the final dividend will be paid on 21 December 2012 to shareholders on the register at 30 November 2012 with an ex-dividend date of 28 November 2012.

Segment Overview

Print

Our Print segment represented 85.6% (2011 - 95.3%) of Group external revenue for the year. This comprises the Books; Exhibition and Events; Point of Sale; and Direct Response businesses.

	2012 £'000	2011 £'000
Underlying revenue	280,327	282,736
Underlying operating profit	20,442	20,870

Books

The Group's Book business accounted for 26.8% of the Print segment's revenue. Books revenue was down by 2.7% compared to the previous year at £75.0 million (2011 - £77.1 million). However, book volumes increased by 500,000 units compared to the same period in the previous year as our reputation for superior levels of service and quality continues to ensure we produce the majority of the bestselling titles. The trend towards ordering smaller quantities has had a negative impact on profitability as the number of orders processed increased by 13% whilst average run lengths reduced by 11%. Our investment in new digital equipment, due to come on stream by November 2012, will help to mitigate this impact and ensure we are better positioned to capitalise on this continuing trend.

Exhibitions and Events

Revenue of £38.2 million (2011 - £34.8 million) was 9.6% ahead of last year and accounted for 13.6% of the Print segment revenue. We experienced a significant late boost in activity for the 2012 London Olympics and are benefitting from our new modern facility in Chessington.

Point of Sale

Point of Sale material for UK retailers and brands represented 31.5% of the Print segment revenue at £88.2 million (2011 - £85.7 million). Although the market remains fiercely competitive, we have increased our market share with some exciting new customer wins and have succeeded in renewing a number of our existing contracts against strong competition and at acceptable margins.

Direct Response

Direct Response printing accounted for 28.1% of the Print segment revenue. Market conditions continued to be extremely challenging and, after the year end, we took further action to reduce costs by consolidating our operations into a single site at Bradford, which is planned to be completed in December 2012.

Revenue in the Direct Response business fell compared to the previous year to £78.9 million (2011 - £85.1 million). However, the sales mix has changed significantly as a result of our decision to exit the markets for company reports and CD/DVD inserts. The combination of reduced cost base and change of sales mix has significantly improved the financial performance of this business.

Marketing Services

Marketing Services accounts for approximately 14.4% (2011 - 4.7%) of external revenue and includes Occam, Tactical Solutions and our recently acquired businesses, Response One, Pragma and Incite.

	2012 £'000	2011 £'000
Underlying revenue	47,049	14,054
Underlying operating profit	4,011	450

 

 

Data Marketing

Our Data Marketing businesses, Occam and Response One, represented 52.8% of Marketing Services revenue at £24.8 million (2011 - £6.8 million). This combined offering gives us a unique end-to-end proposition enabling the delivery of highly targeted and sophisticated communications to help our clients both acquire and retain customers.

Despite the current economic climate, which has resulted in client budget pressure and the deferral of some larger database builds, we have invested in our Data Marketing businesses to expand their capabilities. We have also been successful in winning new business and in sharing customers and expertise across our two businesses.

Field Marketing

Our Field Marketing business, Tactical Solutions, represented 31.7% of Marketing Services revenue at £14.9 million (2011 - £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 increased sales in store through targeted intervention.

We have invested to grow this business and have adopted the latest tablet-based technology to support our teams when working in the retail environment. 

Cross-sale success between Tactical Solutions and our Point of Sale business is starting to see some traction, with a number of projects having been commissioned across a range of clients. 

Field Marketing is a growing marketing discipline and we are well placed to continue to benefit from this growth.

Consultancy Services

Our Consultancy Services businesses, Pragma and Incite, represented 15.5% of Marketing Services revenue at £7.3 million (2011 - £nil).

Pragma is a leading consultancy firm which specialises in retail and consumer markets; since its acquisition in September 2011 the business has integrated well and made an excellent contribution to the Group.

Within Incite, our strategic market research business acquired in February 2012, our team of senior consultants work with clients to help them make decisions and initiate change through identifying and communicating market research insights. We are very pleased with the quality of the business and have already identified good opportunities to grow its offering both in the UK and overseas.

Both Pragma and Incite have potential for significant growth and it is our intention to invest further in these businesses moving forward.

Mobile Marketing

We have made a minority investment in Sponge, one of the UK's leading mobile marketing agencies, allowing us to offer these services as the desire for cross-media campaign execution grows. 

Outlook

St Ives' future is in selling services which enable organisations and brands to improve the effectiveness of their marketing.

We have successfully integrated the Marketing Services acquisitions into the Group and we are very pleased with how the businesses have performed to date.

As a result of the major rationalisation across our Print businesses, the requirement for capital expenditure is substantially reduced versus historic levels. Investment is now predominantly focused on additional staff, expertise and capability within the Marketing Services businesses in order to realise growth opportunities, extend our customer propositions and develop the business for the long term.

We do not expect the current extremely difficult trading conditions to ease.  However, our market positions are strong, we continue to improve operational efficiencies, our financial position is robust and we have recently renewed our banking facilities. We are proposing an increased dividend and remain confident that further progress can be made.

We believe that the actions we have taken during the year have significantly improved the Group's prospects and positioned it well for the future.

Patrick Martell

Chief Executive

2 October 2012

Financial Review

Overview of revenue

Underlying revenue for the Group from continuing operations increased by £30.6 million (10.3%) to £327.4 million. Revenue of £25.2 million is included for Response One, Pragma and Incite, all acquired during the year.

Revenue from the Print segment decreased by £2.4 million (0.9%). Revenue decreased by 2.7% in the Books business but market share increased. Exhibitions and Events revenue increased by 9.6% and was helped by a late surge in Olympics related work towards the end of the year. Revenue for the Point of Sale business increased by £2.5 million (2.9%) but Direct Response revenue declined by 7.3%, due to planned reductions in capacity and our exit from unprofitable markets.

Revenue for the Marketing Services segment increased significantly due to the acquisitions of Response One, Pragma and Incite during the year.

From a geographical point of view, 96.6% (2011 - 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 26.8% to 27.4%. Despite the revenue decline within the Print segment, gross margins in the segment were broadly 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 led to the overall improvement in margin at Group level.

Underlying selling and administrative overheads increased by £7.1 million driven by new acquisitions and investment within the Marketing Services businesses of £8.5 million, partially offset by restructuring related overhead reductions within the Print segment.

As a result of these management actions, underlying profit before taxation for the Group from continuing operations increased from £20.9 million to £24.2 million (7.0% to 7.4% 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, exit unprofitable markets and improve operating performance.

The £9.3 million net charge before tax (2011 - £4.0 million) relates to: redundancy, asset impairment and other restructuring related costs (net of associated asset disposals) within our Direct Response, Point of Sale, Exhibition and Events and Data Marketing businesses of £5.9 million; acquisition related transaction costs of £1.4 million; and the amortisation of acquired intangibles of £3.7 million; partially offset by a reduction in estimated acquisition related deferred consideration of £1.7 million.

Balance sheet

The Consolidated Balance Sheet has strengthened with net assets increasing to
£146.8 million (2011 - £136.6 million). The movement reflects the profit after taxation of £13.3 million; dividends of £5.8 million; actuarial losses on the defined benefits pension scheme (net of deferred tax) of £9.2 million; and the impact of the issue of shares of
£11.9 million.

Net debt

Net debt increased during the year from a cash balance of £16.3 million to a net debt position of £13.4 million. The increase in debt was entirely growth-driven: partly due to the acquisitions of Response One, Pragma and Incite and partly due to the working capital requirements associated with a number of large contract wins and renewals.

In May 2012, the Group concluded a new £55.0 million committed revolving multicurrency credit agreement which expires on 31 October 2015.

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 £7.0 million (2011 - £8.9 million) and cash receipts from asset disposals were £4.9 million (2011 - £9.3 million). Depreciation, amortisation and impairments charged in the year were £13.2 million (2011 - £35.0 million which included a £13.5 million impairment charge in respect of the disposed Magazine printing business).

The Group's businesses are very well invested and they are therefore able to operate at reduced levels of capital expenditure versus historic levels without any deterioration in competitive advantage. The Group will, however, continue to invest in those businesses that present opportunities for growth.

Acquisitions

On 14 September 2011, the Group acquired Response One Holdings Limited, one of the UK's leading data marketing companies. The total consideration payable for the business, net of cash acquired, was £18.4 million.

On 20 September 2011, the Group acquired Pragma Holdings Limited, a leading specialist retail and consumer strategy consultancy. The total consideration payable for the business, net of cash acquired, was £4.5 million.

On 28 February 2012, the Group acquired Incite Marketing Planning Limited, an industry leading consumer research consultancy. The total consideration payable for the business, net of cash acquired, was £14.2 million.

During the year the Group also invested, on a minority basis, in The Easypress Group Limited (formerly EvolvedGroup), a provider of eBook conversion software, and Sponge Limited, a provider of mobile marketing solutions.

Tax

The Group's tax rate on underlying profit before tax was 26.1% (2011 - 27.6%).

The non-underlying tax credit of £4.7 million (2011 - £2.7 million) relates to the non-underlying items and the revaluation of deferred tax liabilities following the substantial enactment of the reduction in the corporation tax rate from 25% to 23%.

Dividends

The board is recommending a final dividend of 4.00p, bringing the total dividend for the year to 5.75p, resulting in an underlying dividend cover of 2.6 times.

The Group remains cash-generative with a modest level of debt at the end of the financial year. Distributable retained earnings in the Consolidated Balance Sheet at 27 July 2012 were £74.0 million (2011 - £76.4 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 £20.0 million (2011 - £12.3 million). The increase of the deficit is due, primarily, to a reduction in corporate bond yields, which in turn reduced the applied discount rate, from 5.5% to 4.5%, partially offset by a reduction in the assumed rate of inflation.

The charge to underlying operating profit for this scheme was £0.2 million (2011 - £0.2 million) which represents the costs of its administration. The Consolidated Income Statement also includes a net financing credit of £1.1 million (2011 - £0.6 million) 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.

Matt Armitage

Chief Financial Officer

2 October 2012

Consolidated Income Statement

		52 weeks to 27 July 2012			52 weeks to 29 July 2011
	Note	Underlying £'000	Non-underlying* (note 3) £'000	Total £'000	Underlying £'000	Non-underlying* (note 3) £'000	Total £'000
Revenue	2	327,376	2,083	329,459	296,790	454	297,244
Cost of sales		(237,686)	(4,066)	(241,752)	(217,284)	(4,645)	(221,929)
Gross profit/(loss)		89,690	(1,983)	87,707	79,506	(4,191)	75,315
Selling costs		(24,469)	(739)	(25,208)	(24,160)	(276)	(24,436)
Administrative expenses		(40,952)	(8,019)	(48,971)	(34,207)	(3,842)	(38,049)
Other operating income		184	1,421	1,605	181	4,300	4,481
Profit/(loss) from operations	2	24,453	(9,320)	15,133	21,320	(4,009)	17,311
Investment income		15,239	-	15,239	13,973	-	13,973
Finance costs		(15,464)	-	(15,464)	(14,388)	-	(14,388)
Profit/(loss) before tax		24,228	(9,320)	14,908	20,905	(4,009)	16,896
Income tax (charge)/credit	4	(6,316)	4,737	(1,579)	(5,764)	2,692	(3,072)
Profit/(loss) for the period from continuing operations		17,912	(4,583)	13,329	15,141	(1,317)	13,824
Loss from discontinued operations		-	-	-	(1,312)	(17,273)	(18,585)
Net profit/(loss) for the period		17,912	(4,583)	13,329	13,829	(18,590)	(4,761)
Attributable to:
Shareholders of the parent company		17,795	(4,532)	13,263	13,748	(18,551)	(4,803)
Non-controlling interests		117	(51)	66	81	(39)	42
		17,912	(4,583)	13,329	13,829	(18,590)	(4,761)
Basic earnings per share (p)
From continuing operations	6	15.61	(3.97)	11.64	14.45	(1.23)	13.22
From continuing and discontinued operations	6	15.61	(3.97)	11.64	13.19	(17.80)	(4.61)
Diluted earnings per share (p)
From continuing operations	6	15.44	(3.93)	11.51	14.36	(1.22)	13.14
From continuing and discontinued operations	6	15.44	(3.93)	11.51	13.11	(17.69)	(4.58)

* Non-underlying items comprise restructuring costs, provision releases, operating results of non-continuing sites, acquisition costs, adjustments to deferred consideration, net profit on disposal of property, plant and equipment, amortisation of acquired intangibles and other one-off items.

Consolidated Statement of Comprehensive Income

	52 weeks to 27 July 2012  £'000	52 weeks to 29 July 2011  £'000
Profit/(loss) for the period	13,329	(4,761)
Actuarial (loss)/gains on defined benefits pension schemes	(11,256)	16,696
Transfers of gains on cash flow hedges to hedged items	(5)	(59)
Gains on cash flow hedges	66	4
Tax credit/(charge) on items taken directly to equity	2,049	(4,697)
Other comprehensive (expense)/income for the period	(9,146)	11,944
Total comprehensive income for the period	4,183	7,183
Attributable to:
Shareholders of the parent company	4,117	7,141
Non-controlling interests	66	42
	4,183	7,183

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 2010	10,358	46,706	(1,913)	1,238	60	43	46,134	73,394	-	129,886
(Loss)/profit 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 (note 8)	-	-	-	-	-	-	-	-	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
Profit for the period	-	-	-	-	-	-	-	13,263	66	13,329
Other comprehensive income/(loss) for the period	-	-	-	-	-	46	46	(9,192)	-	(9,146)
Comprehensive income for the period	-	-	-	-	-	46	46	4,071	66	4,183
Adjustment in respect of acquisition of subsidiary (note 8)	-	-	-	-	-	-	-	-	(13)	(13)
Dividends	-	-	-	-	-	-	-	(5,774)	-	(5,774)
Issue of share capital	1,398	9,467	788	-	-	-	10,255	(607)	-	11,046
Recognition of share-based payments	-	-	-	-	767	-	767	-	-	767
Balance at 27 July 2012	11,983	58,007	(356)	1,238	1,111	50	60,050	74,042	715	146,790

Consolidated Balance Sheet

	Note	27 July 2012 £'000	29 July 2011 £'000
Assets
Non-current assets
Property, plant and equipment		56,361	62,376
Goodwill		87,169	67,443
Other intangible assets		31,325	11,522
Other financial assets		3,050	2,429
		177,905	143,770
Current assets
Inventories		7,038	7,182
Trade and other receivables		89,498	65,110
Derivative financial instruments		76	4
Cash and cash equivalents		12,109	16,262
		108,721	88,558
Total assets		286,626	232,328
Liabilities
Current liabilities
Trade and other payables		79,101	69,255
Income tax payable		1,752	3,283
Deferred consideration payable		4,731	1,677
Deferred income		824	376
Provisions		1,348	1,626
		87,756	76,217
Non-current liabilities
Loans		25,550	-
Retirement benefits obligations	7	19,991	12,295
Deferred consideration payable		-	2,621
Provisions		1,190	687
Deferred tax liabilities		5,349	3,927
		52,080	19,530
Total liabilities		139,836	95,747
Net assets		146,790	136,581
Equity
Capital and reserves
Share capital		11,983	10,585
Other reserves		60,050	48,982
Retained earnings		74,042	76,352
Attributable to shareholders of the parent company		146,075	135,919
Non-controlling interests		715	662
Total equity		146,790	136,581

Consolidated Cash Flow Statement

	Note	52 weeks to 27 July 2012  £'000	52 weeks to 29 July 2011  £'000
Operating activities
Cash generated from operations	10	10,822	22,282
Interest paid		(1,442)	(1,079)
Income taxes paid		(5,700)	(1,323)
Net cash generated from operating activities		3,680	19,880
Investing activities
Purchase of property, plant and equipment		(6,426)	(6,814)
Purchase of other intangibles		(613)	(2,070)
Proceeds on disposal of property, plant and equipment		4,917	9,263
Disposal proceeds of subsidiaries, net of cash disposed		2,255	14,772
Acquisition of subsidiaries, net of cash acquired	8	(24,692)	(12,170)
Purchase of available for sale financial assets		(2,500)	-
Net cash (used in)/generated from investing activities		(27,059)	2,981
Financing activities
Dividends paid	5	(5,774)	(3,616)
Increase/(decrease) in bank loans		25,000	(13,494)
Net cash generated from/(used in) financing activities		19,226	(17,110)
Net (decrease)/increase in cash and cash equivalents		(4,153)	5,751
Cash and cash equivalents at beginning of the period		16,262	10,515
Effect of foreign exchange rate changes		-	(4)
Cash and cash equivalents at end of the period	10	12,109	16,262

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 2012.

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 27 July 2012 and 29 July 2011.

The financial information for the period ended 27 July 2012 has been extracted from the Group's 2012 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'), Companies Act 2006 and Article 4 of the EU IAS Regulations. The 2012 statutory accounts will be delivered to the Registrar of Companies following the Company's 2012 Annual General Meeting.

The financial information for the period ended 29 July 2011 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 2012 and 2011 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 2012 and 2011 statutory accounts.

2. Segment reporting

The Group manages its business on a market segment basis. The nature of the market segments is described in the Chief Executive's Strategic Review. The Print segment comprises the Group's Books, Exhibition and Events, Point of Sale and Direct Response businesses. The Marketing Services segment comprises the Data Marketing, Field Marketing and Consultancy Services businesses.

During the current period, the Group acquired a data marketing business, Response One, and two Consultancy Services businesses, Pragma and Incite. The acquired entities are recorded within the Marketing Services segment together with Occam, a Data Marketing business, and Tactical Solutions, a Field Marketing business.

The Group's Magazine printing business was sold on 6 April 2011 and is classified as a discontinued operation throughout the comparative period and is not included within segmental reporting.

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 27 July 2012
	Print £'000	Marketing Services £'000	Eliminations £'000		Total £'000
Revenue
External sales	280,327	47,049	-		327,376
Group sales	211	608	(819)		-
Underlying revenue	280,538	47,657	(819)		327,376
Non-underlying revenue	2,083	-	-		2,083
Total revenue	282,621	47,657	(819)		329,459
Result
Result before non-underlying items	20,442	4,011	-		24,453
Non-underlying items	(5,608)	(3,712)	-		(9,320)
Profit from operations	14,834	299	-		15,133
Investment income					15,239
Finance costs					(15,464)
Profit before tax					14,908
Income tax charge					(1,579)
Profit for the period from continuing operations				13,329

	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
Segmental result before non-underlying items	20,870	450	21,320
Non-underlying items	(2,483)	(1,526)	(4,009)
Profit/(loss) 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

 

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:

	2012 £'000	2011 £'000
Expense/(income)
Restructuring items
Redundancies, impairments and other charges	6,699	6,788
Provision releases	-	(316)
Profit on disposal of property, plant and equipment	(1,421)	(4,299)
	5,278	2,173
Other
Operating losses from non-continuing sites	601	16
Amortisation of acquired intangibles	3,729	1,149
Costs associated with the acquisition of subsidiaries and other investments	1,384	608
Reduction in deferred consideration of acquired subsidiaries	(1,689)	-
Remaining other non-underlying expenses	17	63
	9,320	4,009
Income tax credit	(4,737)	(2,692)
	4,583	1,317

Restructuring items

Included within redundancies, impairment and other charges are redundancies and other charges of £4,333,000 relating to the closures of the Blackburn and Westerham sites. Also included are redundancies and other charges of £1,314,000 relating to restructuring activities in the Direct Response, Point of Sale and Exhibition and Events businesses. The activities of the sites and businesses are recorded within the Print segment. An impairment charge of £832,000 was recognised in respect of the disposal of the Crayford building. Redundancy costs of £220,000 were recorded in the data marketing business, part of the Marketing Services segment.

Profit on disposal of fixed assets includes a £1,427,000 gain on disposal of plant and machinery following the closure of the Blackburn and Westerham sites, all within the Print segment.

Other

Operating losses from non-continuing sites classified as non underlying items relate to operating results arising after the decision to close a site. In the current period, £601,000 arose in respect of the Blackburn and Westerham sites. Amortisation of acquired intangibles relates to customer relationships and proprietary techniques acquired with Incite, Pragma and Response One in the current period as well as to customer relationships and in-house developed software acquired with Occam and Tactical Solutions in prior periods. Costs associated with the acquisition of subsidiaries and investments include £970,000 in respect of the Incite, Pragma and Response One acquisitions and £414,000 in respect of the Easypress Group and Sponge investments. The fair value of the second tranche of deferred consideration payable in respect of the Tactical Solutions acquisition was reduced by £1,689,000.

Tax

In the current period, 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 corporation tax rate from 25% to 23%.

4. Income tax charge/(credit)

Income tax on profit/(loss) as shown in the Consolidated Income Statement is as follows:

	Continuing operations		Discontinued operations		Total
	2012 £'000	2011 £'000	2012 £'000	2011 £'000	2012 £'000	2011 £'000
United Kingdom corporation tax charge/(credit) at 25.35% (2011 - 27.33%):
Current period	3,842	4,891	-	456	3,842	5,347
Adjustments in respect of prior periods	28	(838)	-	148	28	(690)
Total current tax charge	3,870	4,053	-	604	3,870	4,657
Deferred tax on origination and reversal of temporary differences:
United Kingdom deferred tax (credit)/charge	(1,303)	(1,123)	-	64	(1,303)	(1,059)
Adjustments in respect of prior periods	(988)	142	-	139	(988)	281
Total deferred tax (credit)/charge (note 24)	(2,291)	(981)	-	203	(2,291)	(778)
Total income tax charge	1,579	3,072	-	807	1,579	3,879

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

	2012 £'000	2011 £'000	2012 £'000	2011 £'000	2012 £'000	2011 £'000
Tax charge on profit before non-underlying items	6,316	5,764	-	439	6,316	6,203
Tax (credit)/charge on non-underlying items	(4,737)	(2,692)	-	368	(4,737)	(2,324)
	1,579	3,072	-	807	1,579	3,879

The charge can be reconciled to the profit before tax per the Consolidated Income Statement as follows:

	Continuing operations		Discontinued operations		Total
	2012 £'000	2011 £'000	2012 £'000	2011 £'000	2012 £'000	2011 £'000
Profit/(loss) before tax	14,908	16,896	-	(17,778)	14,908	(882)
Tax calculated at a rate of 25.35% (2011 - 27.33%)	3,779	4,617	-	(4,858)	3,779	(241)
Non-deductible charges on impairment of assets	-	-	-	4,641	-	4,641
Expenses not deductible for tax purposes	654	561	-	734	654	1,295
Non-taxable income	(12)	(583)	-	-	(12)	(583)
Effect of alternative use tax basis on sale of buildings	(957)	(595)	-	-	(957)	(595)
Effect of change in UK corporate tax rate	(925)	(232)	-	4	(925)	(228)
Adjustments in respect of prior periods	(960)	(696)	-	286	(960)	(410)
Total income tax charge	1,579	3,072	-	807	1,579	3,879

5. Dividends

	per share	2012 £'000	2011 £'000
Final dividend paid for the 52 weeks ended 30 July 2010	1.75p	-	1,806
Interim dividend paid for the 26 weeks ended 28 January 2011	1.75p	-	1,810
Final dividend paid for the 52 weeks ended 29 July 2011	3.50p	3,756	-
Interim dividend paid for the 26 weeks ended 27 January 2012	1.75p	2,018	-
Dividends paid during the period		5,774	3,616
Proposed final dividend at the period end of 4.00p per share (2011 - 3.50p per share)	4.00p	4,793	3,749

The proposed final dividend is subject to the approval by shareholders at the 2012 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

	2012 '000	2011 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	114,017	104,206
Weighted average number of ordinary shares for the purposes of diluted earnings per share	115,228	104,879

Basic and diluted earnings per share

	2012		2011
	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	17,795	15.61	15,060	14.45
Non-underlying items	(4,532)	(3.97)	(1,278)	(1.23)
Earnings and basic earnings per share	13,263	11.64	13,782	13.22
Earnings and diluted earnings per share from continuing activities
Underlying earnings and underlying earnings per share	17,795	15.44	15,060	14.36
Non-underlying items	(4,532)	(3.93)	(1,278)	(1.22)
Earnings and basic earnings per share	13,263	11.51	13,782	13.14

	2012		2011
	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)
Loss and diluted loss per share from discontinued activities	-	-	(18,585)	(17.72)
Basic earnings/(loss) per share from continuing and discontinued activities	13,263	11.64	(4,803)	(4.61)
Diluted earnings/(loss) per share from continuing and discontinued activities	13,263	11.51	(4,803)	(4.58)

7. Retirement benefits

The net liability in respect of retirement benefits obligations of £19,991,000 at the balance sheet date has increased compared to 29 July 2011 (£12,295,000) mainly due to a reduction in the discount rate from 5.5% to 4.5%, partially offset by a reduction in the assumed rate of inflation.

8. Acquisitions

Response One

On 14 September 2011, the Group acquired 100% of all classes of shares in Response One Holdings Limited. Response One Holdings Limited owns 100% of Response One Limited ("Response One"), a provider of data marketing services. Goodwill arising on the acquisition relates to the value of future growth from new customers and of the assembled workforce.

Purchase price allocation

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Customer relationships	−	11,244	11,244
Software	−	1,103	1,103
Property, plant and equipment	162	−	162
Available for sale financial assets	802	(252)	550
Trade and other receivables	4,142	330	4,472
Bank balances and cash	4,667	(27)	4,640
Trade and other payables	(5,228)	(1,136)	(6,364)
Deferred tax liabilities	(184)	(2,921)	(3,105)
Net assets acquired	4,361	8,341	12,702
Goodwill arising on acquisition			10,379
Total consideration			23,081

The fair value of the components of the total consideration payable are as follows:

	£'000
Paid in cash in the current period	17,398
St Ives plc ordinary shares issued in the current period	5,683
Total consideration	23,081

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

	£'000
Cash paid	17,398
Less cash acquired	(4,640)
Net cash outflow	12,758

Had Response One been acquired at the beginning of the current period, it would have had the following incremental impact on revenue and operating profit for the Group in the current period.

	£'000
Revenue	2,723
Operating profit	398

Pragma

On 20 September 2011, the Group acquired 100% of all classes of shares in Pragma Holdings Limited, which owns 100% of Pragma Consultancy Limited ("Pragma"), a provider of consultancy services to businesses in the retail and consumer strategy sectors. Goodwill arising on the acquisition relates to the value of future growth from new customers and of the assembled workforce.

Purchase price allocation

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Proprietary techniques	−	2,649	2,649
Property, plant and equipment	53	−	53
Trade and other receivables	731	29	760
Bank balances and cash	1,067	−	1,067
Trade and other payables	(885)	(53)	(938)
Deferred tax liabilities	−	(636)	(636)
Net assets acquired	966	1,989	2,955
Goodwill arising on acquisition			2,595
Total consideration			5,550

The fair value of the components of the total consideration payable are as follows:

	£'000
Paid in cash in the current period	3,800
St Ives plc ordinary shares issued in the current period	1,750
Total consideration payable	5,550

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

	£'000
Cash paid	3,800
Less cash acquired	(1,067)
Net cash outflow	2,733

Deferred consideration is payable in two tranches which are dependent upon the level of EBITDA achieved by Pragma in the years ending 31 March 2012 and 31 March 2013 respectively. The first of these was settled by cash of £1,086,000 and 835,596 newly issued ordinary shares in St Ives plc. The second deferred consideration is estimated to be £nil. The total consideration payable is capped at £6,000,000 excluding a working capital adjustment of £823,000.

Had Pragma been acquired at the beginning of the current period, it would have had the following incremental impact on revenue and operating profit for the Group in the current period.

	£'000
Revenue	498
Operating profit	147

Incite

On 28 February 2012, the Group acquired 100% of all classes of shares in Incite Marketing Planning Limited ("Incite"), an industry leading market research and insights consultancy. Goodwill arising on the acquisition relates to the value of future growth from new customers and of the assembled workforce.

Purchase price allocation

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Customer relationships	-	8,720	8,720
Property, plant and equipment	315	-	315
Trade and other receivables	3,849	-	3,849
Bank balances and cash	2,810	-	2,810
Trade and other payables	(2,804)	(61)	(2,865)
Deferred tax liabilities	(16)	(2,006)	(2,021)
Net assets acquired	4,155	6,653	10,809
Goodwill arising on acquisition			6,215
Total consideration			17,024

The fair value of the components of the total consideration payable are as follows:

	£'000
Paid in cash in the current period	10,382
St Ives plc ordinary shares issued in the current period	3,432
Estimated consideration payable in cash and shares	3,210
Total consideration	17,024

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

	£'000
Cash paid	10,382
Less cash acquired	(2,810)
Net cash outflow	7,572

Deferred consideration is payable in three tranches which are dependent upon the level of EBITDA achieved by Incite in the years ending 29 February 2012, 28 February 2013 and 28 February 2014 respectively. The first of these was settled by cash of £1,594,000 and 967,561 newly issued ordinary shares in St Ives plc. The total consideration payable is capped at £17,500,000 excluding a working capital adjustment of £2,374,000.

Had Incite been acquired at the beginning of the current period, it would have had the following incremental impact on revenue and operating profit for the Group in the current period.

	£'000
Revenue	6,105
Operating profit	1,104

Tactical Solutions

In the prior period, on 9 February 2011, the Group acquired 90% in aggregate of all shares in Tactical Solutions UK Limited ("Tactical Solutions"), a provider of field marketing services. Deferred consideration for Tactical Solutions is payable in two tranches, based on the EBITDA achieved for the calendar years 2011 and 2012. The Group paid £1,629,000 in respect of the first tranche of deferred consideration. 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.

The final allocation of the purchase price payable for Tactical Solutions is as follows:

	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	162	3,231
Bank balances and cash	169	-	169
Trade and other payables	(2,266)	(275)	(2,541)
Deferred tax liabilities	1	(1,847)	(1,846)
Net assets acquired	1,192	4,880	6,072
Goodwill arising on acquisition			13,597
Non-controlling interest			(607)
Total consideration			19,062

The fair value of the components of the total consideration payable are as follows:

	£'000
Paid in cash prior to 29 July 2011	12,339
St Ives plc ordinary shares issued prior to 29 July 2011	2,000
Estimated consideration payable in cash	4,723
Total consideration	19,062

The adjustments made in the current period to the fair value of consideration payable and to the allocation of consideration to acquired assets are summarised as follows:

	At 29 July 2011 £'000	Adjustments £'000	At 27 July 2012 £'000
Fair value of consideration	18,637	425	19,062
Allocated to:
Identifiable net assets acquired	6,197	(125)	6,072
Goodwill arising on acquisition	13,060	537	13,597
Non-controlling interest	(620)	13	(607)
	18,637	425	19,062

These amounts are not considered material and are shown in the current year. There are no other changes to the acquisition fair values disclosed in the 2011 financial statements.

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

	£'000
Cash paid in the period	1,629
Net cash outflow in the period	1,629

As at 27 July 2012, there was an adjustment to the second tranche of deferred consideration, resulting in a reduction of £1,689,000. The adjustment is shown as a non-underlying item in the Consolidated Income Statement (see note 3). The fair value of consideration payable at 27 July 2012 was £1,521,000.

9. Discontinued operations

During the period, the Group received deferred consideration of £2,255,000 in respect of the disposal of Magazine printing business.

10. Notes to the Consolidated Cash Flow Statement

Reconciliation of cash generated from operations

	2012 £'000	2011 £'000
Profit from continuing operations	15,133	17,311
Loss from discontinued operations	-	(17,411)
	15,133	(100)
Adjustments for:
Depreciation of property, plant and equipment	7,837	12,609
Impairment losses	832	20,488
Amortisation of intangible assets	4,556	1,894
Profit on disposal of property, plant and equipment	(1,605)	(4,652)
Increase/(decrease) in deferred income	436	(393)
Share-based payment charge	766	284
Cash contributions to defined benefit pension schemes	(2,458)	(3,345)
Increase/(decrease) in provisions	225	(1,880)
Operating cash inflows before movements in working capital	25,722	24,905
Decrease/(increase) in inventories	212	(1,379)
Increase in receivables	(14,955)	(8,375)
(Decrease)/increase in payables	(157)	7,131
Cash generated from operations	10,822	22,282

Analysis of net debt

	29 July 2011 £'000	Cash flow £'000	Acquired £'000	27 July 2012 £'000
Cash and cash equivalents	16,262	(4,153)	-	12,109
Bank loans	-	(25,000)	(550)	(25,550)
	16,262	(29,153)	(550)	(13,441)

Cash and cash equivalents (which are presented as a single class of assets on the face of the Consolidated 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 rate.

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 current period, which might reasonably affect the decisions made by the users of these financial statements.

On 25 October 2011, pursuant to the Directors and Senior Executives Deferred Bonus Scheme, a portion of the net bonus payable to Patrick Martell, Matt Armitage and Lloyd Wigglesworth in respect of the 2011 financial year was used to purchase 205,934 shares in the Company from the Group's Employee Benefit Trust ('the EBT') on behalf of these directors at 87.95 pence per share. An ESOP reserve was set up when the EBT originally purchased these shares at a price of 383 pence per share. When the shares were purchased on behalf of the directors in the current period, an amount equivalent to their original cost of £788,000 was released from the ESOP reserve with the difference of £607,000 between the price paid on behalf of the directors and the original cost to the EBT of the shares taken directly to retained earnings.

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

The foregoing contains forward looking statements made by the directors in good faith based on information available to them up to 2 October 2012. 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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