Half Yearly Report

RNS Number : 7316Y

St. Ives PLC

06 March 2012

 



6 March 2012                                                                                     

ST IVES plc

Half Year Results for the 26 weeks ended 27 January 2012

St Ives plc, the UK's leading marketing services and print group, announces half year results for the 26 weeks ended 27 January 2012.

Group Financial Highlights

· Underlying* revenue up 11.7% to £166.4m (2011: £149.0m)

· Underlying* profit before tax up 8.7% to £11.1m (2011: £10.2m)

· Basic underlying* earnings per share up 2.8% to 7.05p (2011: 6.86p)

· Interim dividend maintained at 1.75p per share (2011: 1.75p per share)

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

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

Operational Highlights

· Continued success in implementing the strategic repositioning of the Group.

· Acquisitions of Response One and Pragma in September, and Incite since the period end, all enhance and differentiate the Group's Marketing Services offering.

· Marketing Services now generating 20% of Group underlying operating profit.

· Books business performed well and remains a market leader, strengthened by investment in eBook specialist EvolvedGroup and recent market share gain.

· Market share continuing to grow, with a number of new contracts won across the Group during the period, including: Transport for London; GAP; Random House; Albemarle & Bond; and RNLI.

· Major restructuring within the Print businesses completed.

Commenting on the results, Patrick Martell, Chief Executive of St Ives, said:

"These half year results reflect the significant progress we have made in implementing the strategic repositioning of the Group, improving our financial performance and creating a complementary range of digital and marketing services that will enable the Group to add further value to existing and new clients. We fully expect the proportion of profit generated by marketing services to increase further as we move forward.

We do not see an immediate improvement in the general economic climate in this financial year and margins within our Print businesses will remain under pressure. Nonetheless, the growth and development of our Marketing Services business gives us confidence of achieving further overall progress for the Group."

 

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

Chief Executive's Statement

Results

St Ives' results for the 26 weeks ended 27 January 2012 reflect the significant progress we have made in implementing the strategic repositioning of the Group.

Underlying Group revenues from continuing operations of £166.4 million were 11.7% ahead of those for the equivalent period last year (2011: £149.0 million) driven by further acquisition and growth within our newer Marketing Services businesses. Print revenues declined slightly, reflecting the increasingly competitive landscape and reduced demand for traditional print services, but nonetheless we have continued to grow our market share.

Underlying profit before tax, at £11.1 million, represented an 8.7% improvement compared to the same period last year (2011: £10.2 million). We are pleased to have made this progress given the tough economic climate and its impact on our markets.

Group structure

During the period we have continued to make significant progress in our strategy of creating a complementary range of digital and marketing services that will enable the Group to add further value to existing and new clients, whilst reducing our exposure to the more commoditised print markets.

In September 2011, we acquired two businesses - Response One, a fast growing data marketing business, and Pragma, a leading consultancy specialising in retail and consumer markets. Both have been integrated successfully and have significantly strengthened and extended our marketing services capabilities.

In November 2011, we made a minority investment in EvolvedGroup, a provider of eBook conversion software to the publishing industry. Through Clays, we are the UK's leading book printer and this investment will allow Clays to further develop its eBook strategy.

More recently, we announced last week the acquisition of Incite, a leading strategic research and consultancy business with a strong management team and blue chip customer base.

In November 2011, we announced the proposed closure of our Westerham and Blackburn manufacturing sites which printed company reports and CD/DVD inserts. The employee consultation has been completed and both sites have now ceased trading, the equipment sold and the properties marketed for sale. Following the disposal of our Magazine printing business in April 2011, further action to reduce capacity within our Direct Response print business, and other internal initiatives, has meant that we have now completed our planned restructuring of those businesses exposed to commoditised markets where print is sourced on price alone.

Going forward our Print businesses will report to Lloyd Wigglesworth in addition to his Group sales role and the Marketing Services businesses will report to Matt Armitage in addition to his role as Group Finance Director. In addition, we have appointed a deputy Group Finance Director.

Print

Conditions in our Print segment continue to be impacted by structural change in demand and the ongoing effect of the current economic conditions. Whilst margins remain under pressure we continue to seek opportunities to improve efficiencies and reduce cost. Our exposure to commoditised print markets has, however, been significantly reduced in line with our stated strategy. Our Book, Point-of-Sale (POS), and Exhibition and Events businesses are all market leading companies, are well invested and have all continued to win market share.

The Book business has performed well and our industry leading levels of investment in digital output, superior levels of service, and the recent investment in EvolvedGroup have further strengthened our market leading position. Our POS business has performed well. In our Exhibition and Events business trading has been more challenging and we have yet to see any significant increase in demand ahead of the London Olympics. The actions taken within the Direct Response division have been successful and the business is now consolidated on to two sites - Leeds and Bradford.

Marketing Services

We are steadily building a very compelling and extensive range of marketing services capabilities, with this segment generating approximately 20% of underlying operating profit in the period, despite not yet having the full benefit of the recent acquisitions.

As well as being individually strong, when combined our businesses create a differentiated proposition which will present us with increasing opportunities for growth and margin improvement. We will continue to invest carefully in all of these businesses and to seek further selective acquisitions.

Within data marketing the combination of services from Occam and Response One provides us with unique capabilities to use data analytics and insight to help our clients to design and deliver effective communication both to existing customers, and to target new prospects.

Our field marketing business Tactical Solutions has performed well and continues to grow. We have been successful in cross-selling our POS business to its customers and are working on joint propositions for retailers and brands.

Pragma has made a valuable contribution to the Marketing Services segment and we are pleased both with how the business has integrated and with the quality of the services it provides. The recent acquisition of Incite broadens our offering into research and consumer insight and provides consultancy services complementary to the specialist retail consultancy offered by Pragma.

Dividend

The Board has declared an unchanged interim dividend of 1.75p per share (2011: 1.75p) which will be payable on 9 May 2012 to shareholders on the register at 10 April 2012.

Balance Sheet

The Group's balance sheet remains strong with net debt at the period end of £9.6 million, despite the investment of some £10.5 million in acquisitions during the period, and additional working capital requirements for recent large contract wins.

Outlook

We have taken further significant steps during the period to improve our financial performance, and to reposition the Group towards higher added value services. Replacing declining revenues from our print markets through our investment in higher margin marketing services capabilities is integral to our strategy. We fully expect the proportion of profit generated by Marketing Services to increase further as we move forward.

We do not see an immediate improvement in the general economic climate in this financial year and margins within our Print businesses will remain under pressure. Nonetheless, the growth and development of our Marketing Services business gives us confidence of achieving further overall progress for the Group.

Patrick Martell

Chief Executive

6 March 2012

Condensed Consolidated Income Statement

		26 weeks to 27 January 2012
	Note	Underlying £'000	Non- underlying* (note 3) £'000	Total £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Revenue	2	166,387	1,322	167,709	149,408	297,244
Cost of sales		(123,265)	(3,951)	(127,216)	(111,047)	(221,929)
Gross profit		43,122	(2,629)	40,493	38,361	75,315
Selling costs		(12,752)	(803)	(13,555)	(12,196)	(24,436)
Administrative expenses		(19,432)	(5,712)	(25,144)	(17,667)	(38,049)
Other operating income		101	615	716	4,175	4,481
Profit from operations	2	11,039	(8,529)	2,510	12,673	17,311
Investment income		7,464	−	7,464	7,083	13,973
Finance costs		(7,430)	−	(7,430)	(7,105)	(14,388)
Profit before tax		11,073	(8,529)	2,544	12,651	16,896
Income tax charge	4	(3,156)	1,622	(1,534)	(3,797)	(3,072)
Profit for the period from continuing operations		7,917	(6,907)	1,010	8,854	13,824
Loss from discontinued operations		−	−	−	(19,178)	(18,585)
Net profit/(loss) for the period		7,917	(6,907)	1,010	(10,324)	(4,761)
Attributable to:
Shareholders of the parent company		7,770	(6,869)	901	(10,324)	(4,803)
Non-controlling interests		147	(38)	109	−	42
		7,917	(6,907)	1,010	(10,324)	(4,761)
Basic earnings per share (p)
From continuing operations	6	7.05	(6.23)	0.82	8.57	13.23
From continuing and discontinued operations	6	7.05	(6.23)	0.82	(10.00)	(4.61)
Diluted earnings per share (p)
From continuing operations	6	6.98	(6.17)	0.81	8.53	13.14
From continuing and discontinued operations	6	6.98	(6.17)	0.81	(9.95)	(4.58)

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

Condensed Consolidated Statement of Comprehensive Income

	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Profit/(loss) for the period	1,010	(10,324)	(4,761)
Actuarial (losses)/gains on defined benefits pension schemes	(844)	11,047	16,696
Transfers of gains on cash flow hedges to hedged items	(4)	(59)	(59)
Gains on cash flow hedges taken directly to equity	28	−	4
Tax credit/(charge) on items taken directly to equity	204	(2,967)	(4,697)
Other comprehensive (loss)/ income for the period	(616)	8,021	11,944
Total comprehensive income/(loss) for the period	394	(2,303)	7,183
Attributable to:
Shareholders of the parent company	285	(2,303)	7141
Non-controlling interests	109	−	42
	394	(2,303)	7183

Condensed 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 30 July 2010	10,358	46,706	(1,913)	1,238	60	43	46,134	73,394	−	129,886
Loss for the period	−	−	−	−	−	−	−	(10,324)	−	(10,324)
Other comprehensive loss/(income) for the period	−	−	−	−	−	(43)	(43)	8,064	−	8,021
Comprehensive loss for the period	−	−	−	−	−	(43)	(43)	(2,260)	−	(2,303)
Dividends	−	−	−	−	−	−	−	(1,807)	−	(1,807)
Issue of share capital	10	51	769	−	−	−	820	(606)	−	224
Recognition of share-based payments	−	−	−	−	60	−	60	−	−	60
Balance at 28 January 2011	10,368	46,757	(1,144)	1,238	120	−	46,971	68,721	−	126,060
Profit for the period	−	−	−	−	−	−	−	5,521	42	5,563
Other comprehensive income for the period	−	−	−	−	−	4	4	3,919	−	3,923
Comprehensive income for the period	−	−	−	−	−	4	4	9,440	42	9,486
Arising on acquisition of subsidiary	−	−	−	−	−	−	−	−	620	620
Dividends	−	−	−	−	−	−	−	(1,809)	−	(1,809)
Issue of share capital	217	1,783	−	−	−	−	1,783	−	−	2,000
Recognition of share-based payments	−	−	−	−	224	−	224	−	−	224
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	−	−	−	−	−	−	−	901	109	1,010
Other comprehensive income/(loss) for the period	−	−	−	−	−	17	17	(633)	−	(616)
Comprehensive income/(loss) for the period	−	−	−	−	−	17	17	268	109	394
Adjustment in respect of acquisition of subsidiary (note 7)	−	−	−	−	−	−	−	−	(13)	(13)
Dividends	−	−	−	−	−	−	−	(3,756)	−	(3,756)
Issue of share capital	626	4,129	788	−	−	−	4,917	(607)	−	4,936
Recognition of share-based payments	−	−	−	−	390	−	390	−	−	390
Balance at 27 January 2012	11,211	52,669	(356)	1,238	734	21	54,306	72,257	758	138,532

Condensed Consolidated Balance Sheet

	Note	27 January 2012 £'000	28 January 2011 £'000	29 July 2011 £'000
Assets
Non-current assets
Property, plant and equipment		58,552	69,085	62,376
Goodwill		80,270	54,383	67,443
Other intangible assets		25,943	4,926	11,522
Financial assets		2,877	−	2,429
		167,642	128,394	143,770
Current assets
Inventories		7,476	7,732	7,182
Trade and other receivables		82,902	65,253	65,110
Derivative financial instruments		28	−	4
Cash and cash equivalents		5,945	15,962	16,262
Assets held for sale	8,9	3,100	40,671	−
		99,451	129,618	88,558
Total assets		267,093	258,012	232,328
Liabilities
Current liabilities
Loans payable		15,000	−	−
Trade and other payables		72,371	63,586	69,255
Current tax liabilities		2,662	1,527	3,283
Deferred consideration payable	7	13,908	−	1,677
Deferred income		283	400	376
Provisions		4,559	1,535	1,626
Liabilities directly associated with assets held for sale	8	−	20,671	−
		108,783	87,719	76,217
Non-current liabilities
Loans payable		573	18,156	−
Retirement benefits obligations	10	11,585	20,590	12,295
Deferred consideration payable	7	256	−	2,621
Provisions		−	1,417	687
Deferred tax liability		7,364	4,070	3,927
		19,778	44,233	19,530
Total liabilities		128,561	131,952	95,747
Net assets		138,532	126,060	136,581
Equity
Capital and reserves
Share capital		11,211	10,368	10,585
Other reserves		54,306	46,971	48,982
Retained earnings		72,257	68,721	76,352
Attributable to shareholders of the parent company		137,774	126,060	135,919
Non-controlling interest		758	−	662
Total equity		138,532	126,060	136,581

These financial statements were approved by the board of directors on 6 March 2012.

Condensed Consolidated Cashflow Statement

	Note	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Operating activities
Cash (used in)/generated from operations	11	(4,080)	7,350	22,282
Interest paid		(520)	(626)	(1,079)
Income taxes (paid)/received		(2,851)	3	(1,323)
Net cash (used in)/generated from operating activities		(7,451)	6,727	19,880
Investing activities
Purchase of property, plant and equipment		(4,589)	(4,040)	(6,814)
Purchase of other intangibles		(333)	(873)	(2,070)
Proceeds on disposal of property, plant and equipment		757	432	9,263
Disposal proceeds of subsidiaries, net of cash disposed		564	−	14,772
Acquisition of subsidiaries, net of cash acquired	7	(9,009)	−	(12,170)
Purchase of available for sale financial assets		(1,500)	−	−
Net cash (used in)/generated from investing activities		(14,110)	(4,481)	2,981
Financing activities
Dividends paid	5	(3,756)	(1,807)	(3,616)
Increase/(decrease) in bank loans		15,000	5,000	(13,494)
Net cash generated from/(used in) financing activities		11,244	3,193	(17,110)
Net (decrease)/increase in cash and cash equivalents		(10,317)	5,439	5,751
Cash and cash equivalents at beginning of period		16,262	10,515	10,515
Effect of foreign exchange rate changes		−	8	(4)
Cash and cash equivalents at end of period	11	5,945	15,962	16,262

Notes to the Condensed Consolidated Financial Statements

1. Basis of preparation

The condensed financial statements have been prepared in accordance with IAS 34 "Interim Financial Statements" and in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority.

The recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern

The directors, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the combined financial information for the twenty six weeks ended 27 January 2012.

The interim statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts for 2011. The interim statements have not been audited or reviewed.

The interim statements and prior half and full year comparatives do not comprise statutory accounts for the purpose of Section 435 of the Companies Act 2006. The abridged information for the fifty two weeks to 29 July 2011 has been extracted from the Group's statutory accounts for that period which have been filed with the Registrar of Companies. The Auditor's report on the accounts of the Group for that period was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.

Risks and uncertainties

The board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in page 33 and pages 93 to 95 of the Group's 2011 Annual Report and Accounts, a copy of which is available on the Group's website: www.st-ives.co.uk. The key financial risks are interest rate risk, foreign exchange risk, credit risk and liquidity risk.

2. Segment reporting

The Group manages its business on a market segment basis. The results of the Response One and Pragma businesses, both acquired in the period, are reported under the Marketing Services segment.

Corporate costs are allocated to revenue generating segments as this presentation better reflects their profitability.

Business segments

Continuing operations	26 weeks to 27 January 2012
	Print £'000	Marketing Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	143,771	22,616	−	166,387
Group sales	50	163	(213)	−
Underlying revenue	143,821	22,779	(213)	166,387
Non-underlying revenue	1,322	−	−	1,322
Total revenue	145,143	22,779	(213)	167,709
Result
Result before non-underlying items	8,835	2,204	−	11,039
Non-underlying items	(5,915)	(2,614)	−	(8,529)
Profit/(loss) from operations	2,920	(410)	−	2,510
Investment income				7,464
Finance costs				(7,430)
Profit before tax				2,544
Income tax charge				(1,534)
Profit for the period from continuing operations				1,010

	26 weeks to 28 January 2011
	Print £'000	Marketing Services £'000	Total £'000
Revenue
Underlying revenue (all external)	145,769	3,184	148,953
Non-underlying revenue	455	−	455
Total revenue	146,224	3,184	149,408
Result
Result before non-underlying items	10,217	(4)	10,213
Non-underlying items	2,649	(189)	2,460
Profit/(loss) from operations	12,866	(193)	12,673
Investment income			7,083
Finance costs			(7,105)
Profit before tax			12,651
Income tax charge			(3,797)
Profit for the period from continuing operations			8,854

	Continuing operations £'000	Discontinued operations (note 8) £'000	Total £'000
Revenue
Underlying revenue	148,953	37,931	186,884
Non-underlying revenue	455	−	455
Total revenue	149,408	37,931	187,339
Result
Result before non-underlying items	10,213	(769)	9,444
Non-underlying items	2,460	(18,670)	(16,210)
Profit/(loss) from operations	12,673	(19,439)	(6,766)

	52 weeks to 29 July 2011
	Print £'000	Marketing Services £'000	Total £'000
Revenue
Underlying revenue (all external)	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/(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

	Continuing operations £'000	Discontinued operations (note 8) £'000	Total £'000
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/(loss) from operations	17,311	(17,411)	(100)

Geographical segments

The Print and Marketing Services business segments operate primarily in the UK, deriving more than 96% of their revenue and profit from operations and customers located in the UK.

3. Non-underlying items

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

	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Expense/(income)
Restructuring items
Redundancies, impairments and other charges	5,726	1,267	6,788
Provision releases	−	−	(316)
Profit on disposal of property, plant and equipment	(615)	(4,086)	(4,299)
	5,111	(2,819)	2,173
Other
Amortisation of acquired intangibles	1,659	317	1,149
Operating losses from non-continuing operations	250	16	16
Costs associated with the acquisition of subsidiaries	920	−	608
Remaining other non-underlying expenses	589	26	63
	8,529	(2,460)	4,009
Income tax (credit)/charge	(1,622)	689	(2,692)
	6,907	(1,771)	1,317

The restructuring charges in the current period include redundancies of £3,116,000, impairments of property, plant and machinery of £927,000 and other restructuring costs of £1,536,000 within the Print segment, and redundancy costs of £147,000 within the Marketing Services segment. The disposal of plant and equipment as a result of the site closures at Westerham and Blackburn gave rise to gains of £615,000 within the Print segment.

Amortisation charges of £1,659,000 relate to acquired customer relationships, proprietary techniques and software intangibles and were recorded in the Marketing Services segment. Operating losses from non-continuing operations relate to trading on the period following the decision to close the Westerham and Blackburn sites in December 2011 and January 2012 respectively. These are recorded within the Print segment.

Non-underlying items relating to discontinued operations for prior period are detailed in note 8.

4. Tax

Tax on profit of continuing operations as shown in the income statement is as follows:

	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Tax charge on continuing operations	1,534	3,797	3,072
Tax (credit)/charge on discontinued operations	−	(619)	807
Total tax charge	1,534	3,178	3,879

5. Dividends

	per share	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Final dividend paid for the 52 weeks ended 30 July 2010	1.75p	−	1,806	1,806
Interim dividend paid for the 26 weeks ended 29 January 2011	1.75p	−	−	1,811
Final dividend paid for the 52 weeks ended 29 July 2011	3.50p	3,756	−	−
Dividends paid during the period		3,756	1,806	3,617
Declared interim dividend for the 26 weeks ended 27 January 2012	1.75p	2,018

 

6. Earnings per share

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

Number of shares

	26 weeks to 27 January 2012 '000	26 weeks to 28 January 2011 '000	52 weeks to 29 July 2011 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	110,278	103,268	104,206
Weighted average number of ordinary shares for the purposes of diluted earnings per share	111,392	103,805	104,879

Basic and diluted earnings per share

	26 weeks to 27 January 2012		26 weeks to 28 January 2011		52 weeks to 29 July 2011
	Earnings £'000	Earnings per share pence	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	7,770	7.05	7,083	6.86	15,060	14.45
Non-underlying items	(6,869)	(6.23)	1,771	1.71	(1,278)	(1.23)
Earnings and basic earnings per share	901	0.82	8,854	8.57	13,782	13.23
Earnings and diluted earnings per share from continuing activities
Underlying earnings and underlying earnings per share	7,770	6.98	7,083	6.82	15,060	14.36
Non-underlying items	(6,869)	(6.17)	1,771	1.71	(1,278)	(1.22)
Earnings and diluted earnings per share	901	0.81	8,854	8.53	13,782	13.14

	26 weeks to 27 January 2012		26 weeks to 28 January 2011		52 weeks to 29 July 2011
	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence
Loss and basic earnings per share from discontinued activities	−	−	(19,178)	(18.57)	(18,585)	(17.83)
Loss and diluted Loss per share from discontinued activities	−	−	(19,178)	(18.48)	(18,585)	(17.72)

	26 weeks to 27 January 2012		26 weeks to 28 January 2011		52 weeks to 29 July 2011
	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence
Basic earnings/(losses) per share from continuing and discontinued activities	901	0.82	(10,324)	(10.00)	(4,803)	(4.61)
Diluted earnings/(losses) per share from continuing and discontinued activities	901	0.81	(10,324)	(9.95)	(4,803)	(4.58)

Underlying earnings is calculated by adding back non-underlying items, as adjusted for tax, to the profit/(loss) for the period.

7. Acquisitions

Tactical Solutions

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 was payable in two tranches, based on the EBITDA achieved for the calendar years 2011 and 2012. As at 29 July 2011, the fair value of deferred consideration payable was estimated at £1,677,000 and £2,621,000 for calendar year 2011 and 2012 respectively. The estimates for the EBITDA for the calendar year 2011 and 2012 were reviewed in the period resulting in an increase on the estimate of the total fair value of deferred consideration payable to £4,723,000. The increase in the fair value of the consideration payable of £425,000 has been recorded in the period against goodwill. Further adjustments reducing the fair value of trade receivables at £118,000 and increasing the fair value of current tax liabilities at acquisition by £6,000 were recorded against goodwill.

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	161	3,230
Bank balances and cash	169	−	169
Trade and other payables	(2,266)	(275)	(2,541)
Deferred tax assets/(liabilities)	1	(1,847)	(1,846)
Net assets acquired	1,192	4,879	6,071
Goodwill arising on acquisition			13,597
Non-controlling interest			(606)
Total consideration			19,062
The components of fair value measured at the acquisition date of the total consideration payable were 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
Payable in cash or shares after 27 January 2012			4,723
Total consideration			19,062
The acquisition had no impact on investing cash outflows in the current period.

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 January 2012  £'000
Fair value of consideration	18,637	425	19,062
Allocated to:
Identifiable net assets acquired	6,196	(125)	6,071
Goodwill arising on acquisition	13,060	537	13,597
Non-controlling interest	(619)	13	(606)
	18,637	425	19,062

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.

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Customer relationships	−	11,699	11,699
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	303	4,445
Bank balances and cash	4,667	−	4,667
Trade and other payables	(5,228)	(1,059)	(6,287)
Deferred tax liabilities	(184)	(3,035)	(3,219)
Net assets acquired	4,361	8,759	13,120
Goodwill arising on acquisition			9,961
Total consideration			23,081

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

			£'000
Paid in cash in the period			12,029
St Ives plc ordinary shares issued on 14 September 2011			3,589
Payable in cash or shares after 27 January 2012			7,463
Total consideration			23,081

The consideration payable at 27 January 2012 was subsequently settled as follows:

			£'000
Cash paid on 30 January 2012			5,369
St Ives plc ordinary shares issued on 30 January 2012			2,094
Total consideration settled after 27 January 2012			7,463

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

			£'000
Cash paid in the period			12,029
Less cash acquired			(4,667)
Net investing cash outflow in the period			7,362

The total value of the consideration payable was determined as a multiple of the EBITDA achieved by Response One in the 12 months ended 31 October 2011 subject to a cap of £19,000,000, excluding adjustments for working capital. The consideration payable comprised an amount of £19,000,000 as a result of the EBITDA-based measure exceeding the cap, plus working capital adjustments of £4,081,000.

Had Response One been acquired at the beginning of the 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 Consulting Limited ("Pragma"), a provider of consultancy services to businesses in the retail and travel sectors. Goodwill arising on the acquisition relates to the value of future growth from new customers and of the assembled workforce. In the current period £2,714,000 of cash, including a working capital adjustment of £823,000, and 1,565,481 newly issued ordinary shares in St Ives plc were paid as initial consideration. 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 total consideration payable is capped at £6,000,000 excluding the working capital adjustment noted above. The deferred consideration payable after 27 January 2012 will be settled in cash and St Ives plc ordinary shares.

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Proprietary techniques	−	3,348	3,348
Property, plant and equipment	53	−	53
Trade and other receivables	731	−	731
Bank balances and cash	1,067	−	1,067
Trade and other payables	(885)	−	(885)
Deferred tax liabilities	−	(837)	(837)
Net assets acquired	966	2,511	3,477
Goodwill arising on acquisition			2,329
Total consideration			5,806
The fair value of the components of the total consideration payable are as follows:
			£'000
Paid in cash in the period			2,714
St Ives plc ordinary shares issued on 20 September 2011			1,166
Payable in cash or shares after 27 January 2012			1,926
Total consideration payable			5,806
The acquisition had the following impact on investing cash outflows in the period:
			£'000
Cash paid in the period			2,714
Less cash acquired			(1,067)
Net cash outflow in the period			1,647

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.

	£'000
Revenue	536
Operating profit	142

Acquisitions had the following impact on investing cashflows in the current period:

	£'000
Net investing cash outflow in respect of Response One	7,362
Net investing cash outflow in respect of Pragma	1,647
Investing cash outflow in respect of acquisition of subsidiaries	9,009

The total deferred consideration payable at 27 January 2012 is analysed as follows:

	£'000
Current liabilities:
Tactical Solutions	4,775
Response One	7,463
Pragma	1,670
	13,908
Non-current liabilites:
Pragma	256
Total deferred consideration payable	14,164

The fair value of deferred consideration payable for Tactical Solutions was discounted at the acquisition date. The deferred consideration payable at 27 January 2012 for Tactical Solutions includes the accretion of notional interest of £52,000.

8. 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 comprised £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 repayments recommencing in December 2011. The monthly repayments were increased such that that the full value of the loan notes are still due to be repaid within 24 months of the date of disposal. The loan notes do not bear interest and the nominal amounts receivable 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 were restated accordingly.

The loss after tax for the period from discontinued operations before non-underlying items is analysed below:

	26 weeks to 27 January 2012 £'000	26 weeks to 28 January 2011 £'000	52 weeks to 29 July 2011 £'000
Revenue	−	37,931	51,248
Operating costs	−	(38,700)	(51,754)
Loss before interest and tax	−	(769)	(506)
Finance costs	−	(358)	(367)
Loss before tax	−	(1,127)	(873)
Income tax credit/(charge)	−	343	(439)
Loss after tax on discontinued operations before non-underlying items	−	(784)	(1,312)

Non-underlying items from discontinued operations are analysed below:

	26 weeks to 27 January 2012 £'000	26 weeks to 28 January 2011 £'000	52 weeks to 29 July 2011 £'000
Impairment of property, plant and equipment	−	(14,232)	(13,526)
Impairment of financial assets	−	(3,454)	(3,454)
Other non-underlying items	−	(984)	75
Total non-underlying items before tax	−	(18,670)	(16,905)
Income tax credit/(charge)	−	276	(368)
Total non-underlying items after tax	−	(18,394)	(17,273)

	26 weeks to 27 January 2012 £'000	26 weeks to 28 January 2011 £'000	52 weeks to 29 July 2011 £'000
Loss before interest, tax and non-underlying items	−	(769)	(873)
Non-underlying items before tax	−	(18,670)	(16,905)
Loss before interest and tax from discontinued operations	−	(19,439)	(17,778)

	26 weeks to 27 January 2012 £'000	26 weeks to 28 January 2011 £'000	52 weeks to 29 July 2011 £'000
Loss after tax before non-underlying items	−	(784)	(1,312)
Non-underlying items after tax	−	(18,394)	(17,273)
Total loss from discontinued operations	−	(19,178)	(18,585)

The impairment of property, plant and equipment in the Magazine printing business was recorded in light of the decision to dispose of this business and was established by reference to the fair value less costs to sell off the assets.

The US promissory loan note, receivable as deferred consideration in respect of the sale of the Group's US segment in January 2009, was fully impaired in the prior period following a continued downturn in the US business, resulting in a charge of £3,454,000.

The defined benefits pension scheme curtailment credit arose as a result of the change in membership status of employees of the Magazine printing business from in-service members to deferred members following the disposal of this business in the prior period.

Other non-underlying items recorded in the prior period comprise redundancy and other restructuring charges arising in the Group's Magazine printing business. The sale of the four operating subsidiaries that make up the Magazine printing business was free of tax.

The net assets of the Group's Magazine printing business were classified as assets held for sale and liabilities directly associated with assets held for sale on the face of the balance sheet at 28 January 2011, and were comprised as follows:

	26 weeks to 28 January 2011 £'000
Assets held for sale
Property, plant and equipment	19,921
Intangible assets	50
Deferred tax assets	68
Inventories	4,174
Trade and other receivables	16,458
	40,671
Liabilities directly associated with assets held for sale
Trade and other payable	19,672
Other liabilities	999
	20,671

The net assets of the Magazine printing business at the date of disposal on 6 April 2011 and the consideration receivable were as follows:

	6 April 2011 £'000
Other 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

9. Assets held for sale

Assets held for sale of £3,100,000 at 27 January 2012 consists of a building at Optima Park, Crayford, which was reclassified from property, plant and equipment in the current period. At 28 January 2011, assets held for sale consisted of the assets of the Magazine printing business as described in note 8 above.

10. Retirement benefits

The net liability in respect of retirement benefit obligations of £11,585,000 at 27 January 2012 has decreased compared to 29 July 2011 (£12,295,000) due primarily to the better than expected investment performance of plan assets.

11. Notes to the condensed consolidated cash flow statement

Reconciliation of cash generated from operations

	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Profit from continuing operations	2,510	10,213	21,320
Loss from discontinued operations	−	(769)	(506)
	2,510	9,444	20,814
Adjustments for:
Depreciation of property, plant and equipment	3,906	7,852	12,609
Impairment losses	927	14,232	20,488
Amortisation of intangible assets	2,061	573	1,894
Profit on disposal of property, plant and equipment	(716)	(4,194)	(4,652)
Deferred income credit	(105)	(391)	(393)
Share-based payment charge	390	60	284
Decrease in retirement benefit obligations	(1,000)	(1,000)	(3,345)
Increase/(decrease) in provisions	2,246	(1,201)	(1,880)
Operating cash inflows before movements in working capital	10,219	25,375	45,819
Increase in inventories	(225)	(1,795)	(1,379)
Increase in receivables	(11,910)	(3,600)	(8,375)
(Decrease)/increase in payables	(2,164)	3,580	7,131
Cash (used in)/generated from operations	(4,080)	23,560	43,196

Analysis of net debt

	30 July 2011 £'000	Cash flow £'000	Acquisitions £'000	Other non-cash movements	27 January 2012 £'000
Cash and cash equivalents	16,262	(16,051)	5,734	−	5,945
Bank loans repayable in less than one year	−	(15,000)	−	−	(15,000)
Bank loans repayable in more than one year	−	−	(550)	(23)	(573)
Net debt	16,262	(31,051)	5,184	(23)	(9,628)

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:

	26 weeks to 27 January 2012  £'000	26 weeks to 28 January 2011  £'000	52 weeks to 29 July 2011  £'000
Net cash generated from/(used in) operating activities	−	520	(733)
Net cash used in investing activities	−	(51)	(123)
Net cash generated from financing activities	−	39	182
Net increase/(decrease) in cash from discontinued operations	−	508	(674)

 

12. Related parties

The nature of related party transactions of the Group has not changed from those described in the Group's consolidated financial statements for the fifty two weeks ended 29 July 2011.

On 25 October 2011, 205,934 ordinary shares in the Company were sold at market price to the executive directors of the Company by the Group's employee benefit trust under the rules of the Directors' and Senior Executives' Deferred Bonus Scheme as follows:

	Number of Shares	Price per share pence	Value of shares £
Matt Armitage	50,499	87.95	44,416
Patrick Martell	71,269	87.95	62,684
Lloyd Wigglesworth	84,166	87.95	74,028
	205,934		181,128

13. Post-balance sheet events

On 28 February 2012, the group acquired 100% of all classes of shares in Incite Marketing Planning Limited ("Incite"), a provider of market research services, for an initial consideration of £9,163,000 of which £6,414,000 was settled in cash and £2,749,000 in newly issued St Ives plc ordinary shares. Deferred consideration is payable based on the EBITDA of Incite for the years ending 29 February 2012, 28 February 2013 and 28 February 2014 respectively and will be settled approximately 70% in cash and 30% in shares. The total consideration payable is capped at £17,500,000.

14. Responsibility statement

We confirm that, to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS34 "Interim Financial Reporting";

· the interim management report includes a fair review of the information required by DTR4.2.7R (indication of important events during the first six months of the year and descriptions of principal risks and uncertainties for the remaining six months of the year); and

· the interim management report includes a fair review of the information required by DTR4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the board

Patrick Martell

Chief Executive

6 March 2012

The foregoing contains forward looking statements made by the directors in good faith based on information available to them up to 6 March 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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