Half Yearly Report

RNS Number : 3162R

St. Ives PLC

08 March 2016

 

8 March 2016

ST IVES plc

Half Year Results for the 26 weeks ended 29 January 2016

St Ives plc, the international marketing services group, announces half year results for the 26 weeks ended 29 January 2016.

Financial Highlights

	26 weeks to 29 January 2016	26 weeks to 30 January 2015	%age change
Underlying* revenue	£185.7m	£175.0m	+6%
Underlying* profit before tax	£16.1m	£15.4m	+5%
Underlying* basic earnings per share	9.70p	9.64p	+1%
Interim dividend	2.35p	2.25p	+4%
Net debt	£82.1m	£62.8m	**

*  Non-underlying items comprise acquisition costs; restructuring costs; net profit or loss on disposal of property, plant and equipment; consideration required to be treated as remuneration; amortisation or impairment of acquired intangibles; re-measurement of deferred consideration; costs related to the St Ives defined benefits pension scheme and other one-off items.

** Net debt as at 31 July 2015.

Business Highlights

·      Strong financial performance in the half year, reflecting further growth in the Strategic Marketing segment

·      37% growth in underlying revenue across Strategic Marketing businesses

·      Strategic Marketing now contributing 56% of Group underlying operating profit (2015- 43%)

·      Important strategic progress across all three drivers of growth:

·    Enhanced collaboration, with over 130 clients using services of more than one Group business (2015 - 100), including Adidas, Marks and Spencer, Vodafone and Unilever

·    Continued international growth, with eight Strategic Marketing businesses serving clients on an international basis; over 40% of Strategic Marketing revenue is now generated from international client work

·  Two further Strategic Marketing acquisitions: Fripp, Sandeman and Partners ("FSP"), a specialist retail property consultancy, acquired in August 2015 and The App Business ("TAB"), a mobile-led digital consultancy, acquired in January 2016

Marketing Activation and Books continue to support Group collaboration initiatives and provide profit and cash for further growth.

Matt Armitage, Chief Executive, said:

"In the past six months we have made good progress, with our Strategic Marketing businesses now contributing more than half of the Group's profits. This has been achieved through increased collaboration between our businesses, growing our international footprint in the US and Asia and our continued investment in high growth Strategic Marketing businesses.

"While current global economic uncertainty will inevitably lead to some caution in the allocation of marketing budgets, we firmly believe that our Strategic Marketing segment is focused on service areas that deliver a demonstrable return on investment for our clients. We are clear on our growth priorities and we have the financial strength to continue to support our strategic ambitions.

"In the absence of any material change to market conditions, we are confident that we are well positioned to achieve a positive outcome for the full year."

For further information, please contact:

St Ives plc	020 7928 8844
Matt Armitage, Chief Executive Brad Gray, Chief Financial Officer
MHP Communications	020 3128 8139
John Olsen, Giles Robinson, Gina Bell

Chief Executive's Review

Performance Highlights

Underlying Group revenue of £185.7m was 6% higher than the comparable period in the previous year. The growth was driven by further strong progress in our Strategic Marketing segment with revenues 37% ahead, of which 16% was achieved on an organic basis. This was partially offset by a 9% decline in our Marketing Activation segment, due to continued pressure within the grocery retail sector, as previously reported. Revenue within our Books segment was in line with the previous half year.

Group underlying operating profit increased 5% during the period to £17.5m (2015 - £16.6m), and Group operating margins were maintained at 9% (2015 - 9%). Group underlying profit before tax grew to £16.1m  (2015 - £15.4m) and underlying basic earnings per share increased by 1% to 9.70p (2015 - 9.64p).

This performance reflects the further growth in, and increasing importance of, our higher growth and higher margin Strategic Marketing segment, offsetting pressures elsewhere.  Strategic Marketing contributed 56% of Group underlying operating profit during the period (2015 - 43%). We announced two strategically important acquisitions in this segment during the period, as described below.

The Board is recommending an interim dividend of 2.35p, an increase of 4% on the previous half year.

Our growth strategy is centred around further growth  and investment in our Strategic Marketing segment, with a focus on three key priorities:

·    organic growth through collaboration and investment in our existing Marketing Services businesses;

·    internationalisation, primarily client-led, into large and high growth markets; combined with

·    further acquisitions of complementary, ambitious and growing Strategic Marketing businesses, which share our common attributes and ethos.

We have continued to make progress across all three strategic objectives in the first half of the year:

Collaboration

We continue to make progress with our collaboration agenda with over 130 of our clients currently working with more than one business across the Group, on projects for clients including Adidas, Marks and Spencer, Vodafone and Unilever. In addition, a collaboration between our data agency Response One and our search agency Branded3 has greatly enhanced the digital media services both companies can offer to new and existing clients.

We are also continuing to develop our service offering, particularly within Strategic Marketing - investing in Amaze One (a joint CRM venture between Occam and Amaze), in My Bench, a specialist marketing technology offering and in Accelero, a data management platform within Occam.

Internationalisation

We have continued to expand our international reach and headcount in line with strong client demand. During the half year, Incite, our consumer and market research consultancy, expanded its New York operation and opened a second US office in San Francisco. In addition, Hive, our healthcare communications consultancy, joined Incite in New York in response to growing client demand in the region.

Having been appointed as global digital partner to Emirates, Amaze has started building an on-the-ground presence in Dubai to more effectively service its client list in the Middle East.

Eight of the Group's Strategic Marketing businesses - Incite, Pragma, Hive, Amaze, Realise, Branded3, Solstice and TAB - now service clients on an international basis. Over 40% of the Group's Strategic Marketing revenue now comes from international client work, compared with 30% at the previous year end. 

 

Acquisitions

An important element of St Ives' growth strategy is our continued ability to acquire further complementary Strategic Marketing businesses which add value to our existing portfolio and operate in the key growth areas we have identified of data, digital and insight. During the first half, we announced two further acquisitions of Strategic Marketing businesses.

In August, we acquired Fripp, Sandeman and Partners ("FSP"), a specialist retail property consultancy which is already working closely with our Pragma consulting business to provide a broad range of complementary strategic services and build upon existing market leading positions. The teams have already worked on a number of projects together, particularly on location planning strategies for retailers.

In January, we announced the acquisition of The App Business ("TAB"), a mobile-led consultancy that specialises in strategy, product development and business transformation. Coupled with the acquisition of Solstice in March 2015, this provides us with additional breadth and scale as well as deeper strategy and development capabilities within the fast growing mobile technology sector.

Coinciding with the TAB acquisition, we raised £13.3m (net) through a share placing, both to part-fund that acquisition, while maintaining our ability to acquire further Strategic Marketing businesses in line with our growth strategy.

Whilst our strategic focus is on expanding our Strategic Marketing offering, we also recognise the importance of continued investment and innovation in our complementary Marketing Activation segment and our separate, long-standing and market-leading Books business. These separate divisions not only support the Group's overall growth through collaboration, but also represent an additional source of profit and cash generation as we deliver our growth strategy.

Segment Overview

Strategic Marketing

Our Strategic Marketing operations, representing 37% of Group underlying revenue (2015 - 29%), are organised around three high-growth sectors: Data, Digital and Insight.  

	2016 £'m	2015 £'m
Data	19.9	16.6
Digital	32.2	17.9
Insight	17.3	16.2
Underlying revenue	69.4	50.7
Underlying operating profit	9.7	7.1

Data

Revenues in our Data businesses, Occam and Response One, increased by 20% in the first half.

This strong growth was due primarily to our investments in Amaze One (a joint venture between Occam and Amaze), My Bench, a specialist marketing technology offering, and Accelero, a data management platform, within Occam. Each of these new offerings are performing well and are delivering a broader service offering to both existing clients and a number of new client wins including Ryanair.

In addition, a separate collaboration between our data agency Response One and our search agency Branded3 is greatly enhancing the digital media services that both companies offer and is starting to gain traction with clients.

Digital

Revenues in our Digital businesses - Amaze, Branded3, Realise, Solstice and TAB - increased 78% in the half year.

This high growth in part reflects the contribution from Solstice, acquired in March 2015, but also strong organic growth as we continued to benefit from increasing client expenditure within the digital and technology space.  With the Group now employing over 800 digital practitioners globally, our businesses provide services to clients across the entire digital and mobile spectrum and offer a depth of expertise in the high growth areas of customer experience, eCommerce, mobile and digital technology innovation.

The acquisition of Solstice broadened our digital capabilities and enhanced our international offering, and our credentials have been further strengthened by the recent acquisition of TAB, which significantly increases the segment's mobile strategy and product development engineering capabilities.

In the half year our Digital division secured a number of significant international client wins including Amaze being appointed as global digital partner for Emirates, one of the world's largest international airlines, Branded3 signing a global Search Engine Optimisation account for Travelex and Realise being appointed to build a sales enablement platform for HP. Our Internet of Things capability is growing rapidly, with Solstice partnering with both Bosch and John Deere to launch new connected solutions into the market. 

Insight

Revenues in our Insight businesses - Incite, Pragma, FSP and Hive - increased by 7% in the half year.

Growth in this division continues to be driven by our investment in international expansion.  Incite has offices in London, New York, Singapore, Shanghai and recently opened a San Francisco office to support West Coast clients and the business continues to expand its client base within these markets, working with local and global brands including Intel.

We have also invested in a New York offering for Hive, our healthcare communications consultancy, which has started well with a number of new international client wins.

Pragma, our retail and consumer strategy consultancy, continued to expand its international remit winning and delivering projects with high profile clients across its business during the half year.

Marketing Activation

Our Marketing Activation businesses - Service Graphics, SP Group, St Ives Management Services ("SIMS"), and Tactical Solutions - represented 43% of Group underlying revenue in the first half (2015 - 50%).

	2016 £'m	2015 £'m
Underlying revenue	80.2	88.1
Underlying operating profit	4.0	5.0

Trading conditions within Marketing Activation continue to be challenging due to the ongoing pressures within the UK grocery retail sector, resulting in a 9% reduction in revenue.

Whilst our expertise in the grocery sector remains an important strength, we are continuing to diversify the client portfolio to reduce this exposure.  We have grown our existing relationships with major clients including Adidas, Holland & Barrett, Royal Bank of Scotland, GAME and Royal Mail, and have secured a number of new contract wins, including with Triumph, Piaggio, Berkeley Homes and Henkel. Encouragingly, many businesses are now using multiple services across our Marketing Activation portfolio.

Our focus is on protecting margins in this segment by driving efficiency improvements and cost reductions, and by differentiating our competitive offering through targeted investment in new service lines.

Books

Our market-leading Books business - Clays - represented 20% of Group underlying revenue in the first half (2015 - 21%).

	2016 £'m	2015 £'m
Underlying revenue	36.1	36.2
Underlying operating profit	3.7	4.5

Revenues were in line with the prior period at £36.1m (2015 - £36.2m).

The previously announced Penguin Random House contract win is now generating additional volumes for Clays, while further increasing its market share of the UK book printing industry, albeit the costs associated with the transition have resulted in a reduction in margin during the first half.

In addition, within the half-year Clays signed new three year agreements with Oneworld Publications, Cambridge University Press (a collaboration with SIMS) and Oxford University Press.

Outlook

We continue to encourage and facilitate opportunities for collaboration across our individual businesses and believe there is further scope to expand our higher margin Strategic Marketing activities both organically and through acquisition during the second half and over the coming years. We will continue to invest in our growing international operations and client offerings in the US and Asia, as well as in our recent acquisitions, Solstice, FSP and TAB.

The current global economic uncertainty will inevitably lead to some caution in the allocation of marketing budgets but we firmly believe that our Strategic Marketing segment is focused on those service areas that can deliver a demonstrable return on investment for our clients and we remain confident of delivering continued growth.

Our Marketing Activation business will continue to face challenging conditions this year, due in large part to exposure to the UK grocery retail sector.  Our Books business continues to gain market share, albeit the margin dilution from the transition of the Penguin Random House contract is likely to continue into the second half.  However, both segments remain profitable and cash generative for the Group, and therefore support our overall growth strategy.

Overall, we are clear on our growth priorities and we are confident that, in the absence of any material change to current market conditions, St Ives will make further strategic and financial progress during the remainder of this financial year.

Matt Armitage

Chief Executive

8 March 2016

 

Condensed Consolidated Income Statement

26 weeks to 29 January 2016

26 weeks to 30 January 2015 (Restated Note 2)

52 weeks to 31 July 2015

	Note	Underlying £'000	Non- underlying* (Note 3) £'000	Total £'000	Total £'000	Total £'000
Revenue	2	185,706	-	185,706	174,953	344,553
Cost of sales		(125,688)	(105)	(125,793)	(116,980)	(229,654)
Gross profit		60,018	(105)	59,913	57,973	114,899
Selling costs		(12,859)	(86)	(12,945)	(11,493)	(23,779)
Administrative expenses		(29,634)	(16,601)	(46,235)	(43,139)	(80,040)
Share of results of joint ventures		(104)	-	(104)	(42)	(88)
Other operating (expense)/income		-	(1,669)	(1,669)	369	721
Profit/(loss) from operations	2	17,421	(18,461)	(1,040)	3,668	11,713
Net pension finance charge		-	(494)	(494)	(210)	(373)
Other finance costs		(1,313)	-	(1,313)	(1,169)	(2,611)
Profit/(loss) before tax		16,108	(18,955)	(2,847)	2,289	8,729
Income tax (charge)/credit		(3,383)	1,036	(2,347)	(1,210)	(3,173)
Net profit/(loss) for the period		12,725	(17,919)	(5,194)	1,079	5,556
Basic earnings per share (p)	5	9.70	(13.66)	(3.96)	0.86	4.35
Diluted earnings per share (p)	5	9.52	(13.40)	(3.88)	0.84	4.24

*  Non-underlying items comprise acquisition costs; restructuring costs; net profit or loss on disposal of property, plant and equipment; consideration required to be treated as remuneration; amortisation or impairment of acquired intangibles; re-measurement of deferred consideration; costs related to the St Ives defined benefits pension scheme and other one-off items.

Condensed Consolidated Statement of Comprehensive Income

	26 weeks to 29 January 2016  £'000	26 weeks to 30 January 2015  £'000	52 weeks to 31 July 2015  £'000
(Loss)/profit for the period	(5,194)	1,079	5,556
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of the net retirement benefits obligation	5,873	(24,158)	(19,691)
Tax (charge)/credit on items taken directly to equity	(1,057)	4,832	3,925
	4,816	(19,326)	(15,766)
Items that may be reclassified subsequently to profit or loss:
Transfer of losses on available for sale financial asset - items reclassified to Consolidated Income Statement	-	-	1,540
Transfers of losses on cash flow hedges to hedged items	127	60	60
Losses on cash flow hedges	(235)	(74)	(127)
	(108)	(14)	1,473
Other comprehensive income/(expense) for the period	4,708	(19,340)	(14,293)
Total comprehensive expense for the period	(486)	(18,261)	(8,737)

All income for all periods was attributable to shareholders of the parent company.

Condensed Consolidated Statement of Changes in Equity

	Share capital £'000	Additional paid-in capital^ £'000	ESOP reserve £'000	Treasury shares £'000	Share option reserve £'000	Hedging and translation reserve £'000	Other reserves £'000	Retained earnings £'000	Non- controlling interest £'000	Total £'000
Balance at 2 August 2014	12,517	53,234	(11)	(163)	7,199	(34)	60,225	71,575	-	144,317
Profit for the period	-	-	-	-	-	-	-	1,079	-	1,079
Other comprehensive expense for the period	-	-	-	-	-	(14)	(14)	(19,326)	-	(19,340)
Comprehensive expense for the period	-	-	-	-	-	(14)	(14)	(18,247)	-	(18,261)
Dividends	-	-	-	-	-	-	-	(6,551)	-	(6,551)
Issue of share capital	160	-	(160)	-	-	-	(160)	-	-	-
Transfer of contingent consideration deemed as remuneration	41	19	-	633	2,655	-	3,307	(254)	-	3,094
Purchase of own shares	-	-	(180)	(922)	-	-	(1,102)	(51)	-	(1,153)
Exchange differences	-	-	-	-	-	43	43	-	-	43
Recognition of share-based payments	-	-	323	-	(328)	-	(5)	851	-	846
Balance at 30 January 2015	12,718	53,253	(28)	(452)	9,526	(5)	62,294	47,323	-	122,335
Profit for the period	-	-	-	-	-	-	-	4,477	-	4,477
Other comprehensive (expense)/income for the period	-	-	-	-	-	(53)	(53)	5,100	-	5,047
Comprehensive (expense)/income for the period	-	-	-	-	-	(53)	(53)	9,577	-	9,524
Dividends	-	-	-	-	-	-	-	(2,904)	-	(2,904)
Acquisitions	213	1,731	-	845	-	-	2,576	(917)	-	1,872
Transfer of contingent consideration deemed as remuneration	103	230	-	323	(7,092)	-	(6,539)	4,064	-	(2,372)
Exchange differences	-	-	-	-	-	485	485	-	-	485
Purchase of own shares	-	-	(42)	(1,536)	-	-	(1,578)	51	-	(1,527)
Recognition of share-based payments	55	307	70	-	4,795	-	5,172	353	-	5,580
Deferred tax on share-based payments	-	-	-	-	(456)	-	(456)	345	-	(111)
Balance at 31 July 2015	13,089	55,521	-	(820)	6,773	427	61,901	57,892	-	132,882
Loss for the period	-	-	-	-	-	-	-	(5,194)	-	(5,194)
Other comprehensive (expense)/income for the period	-	-	-	-	-	(108)	(108)	4,816	-	4,708
Comprehensive expense for the period	-	-	-	-	-	(108)	(108)	(378)	-	(486)
Dividends	-	-	-	-	-	-	-	(7,515)	-	(7,515)
Issue of share capital	115	-	(115)	-	-	-	(115)	-	-	-
Acquisitions	260	1,062	-	658	-	-	1,720	(527)	5,116	6,569
Transfer of contingent consideration deemed as remuneration	-	-	-	-	(933)	-	(933)	986	-	53
Purchase of own shares	-	-	(395)	-	-	-	(395)	(35)	-	(430)
Exchange differences	-	-	-	-	-	(1,060)	(1,060)	-	-	(1,060)
Recognition of share-based payments	13	119	302	-	1,706	-	2,127	740	-	2,880
Balance at 29 January 2016	13,477	56,702	(208)	(162)	7,546	(741)	63,137	51,163	5,116	132,893

^ Additional paid-in capital represents share premium, merger reserve and capital redemption reserve.

Condensed Consolidated Balance Sheet

	Note	29 January 2016 £'000	30 January 2015 £'000	31 July 2015 £'000
Assets
Non-current assets
Property, plant and equipment		44,929	47,738	48,242
Goodwill		156,191	124,177	137,488
Other intangible assets		42,956	39,067	45,652
Available for sale financial assets		3	2	3
Investment in joint venture		-	90	109
Deferred tax assets		139	-	139
Other non-current assets		750	310	1,086
		244,968	211,384	232,719
Current assets
Inventories		7,097	5,818	6,579
Trade and other receivables		86,940	76,750	75,945
Derivative financial instruments		-	2	165
Asset held for sale		-	-	412
Cash and cash equivalents		14,005	12,026	16,392
		108,042	94,596	99,493
Total assets		353,010	305,980	332,212
Liabilities
Current liabilities
Obligations under finance leases		-	19	-
Loans payable		-	55,000	-
Trade and other payables		75,601	71,527	71,070
Derivative financial instruments		124	12	4
Income tax payable		932	1,490	355
Deferred consideration payable		9,607	10,204	4,879
Deferred income		6,666	7,007	6,976
Provisions		342	783	408
		93,272	146,042	83,692
Non-current liabilities
Loans payable		96,149	-	79,225
Retirement benefits obligations	7	21,145	33,069	27,597
Deferred consideration payable		3,384	1,241	3,487
Other non-current liabilities		790	-	698
Provisions		1,905	1,322	1,732
Deferred income		-	-	81
Deferred tax liabilities		3,472	1,971	2,818
		126,845	37,603	115,638
Total liabilities		220,117	183,645	199,330
Net assets		132,893	122,335	132,882
Equity
Capital and reserves
Share capital		13,477	12,718	13,089
Other reserves		63,137	62,294	61,901
Retained earnings		51,163	47,323	57,892
Attributable to shareholders of the parent company		127,777	122,335	132,882
Non-controlling interests		5,116	-	-
Total equity		132,893	122,335	132,882

These financial statements were approved by the Board of Directors on 8 March 2016.

Condensed Consolidated Cash Flow Statement

	Note	26 weeks to 29 January 2016  £'000	26 weeks to 30 January 2015  £'000	52 weeks to 31 July 2015  £'000
Operating activities
Cash generated from operations	8	13,472	17,159	35,510
Interest paid		(1,313)	(1,164)	(2,398)
Income taxes paid		(2,832)	(3,195)	(6,595)
Net cash generated from operating activities		9,327	12,800	26,517
Investing activities
Purchase of property, plant and equipment		(4,698)	(1,361)	(5,542)
Purchase of other intangibles		(194)	(293)	(533)
Proceeds on disposal of property, plant and equipment		2,965	3,714	4,751
Acquisition of subsidiaries, net of cash acquired		(16,163)	(7,395)	(19,854)
Deferred consideration paid for acquisitions made in prior periods		(1,105)	-	(14,626)
Investment in joint venture		-	(122)	-
Net cash used in investing activities		(19,195)	(5,457)	(35,804)
Financing activities
Purchase of treasury shares		(395)	(1,153)	(9,455)
Dividends paid	4	(7,515)	(6,551)	(2,680)
Decrease in finance lease rentals		-	(9)	(28)
Increase in bank loans		15,000	-	24,225
Net cash generated from/(used in) financing activities		7,090	(7,713)	12,062
Net (decrease)/increase in cash and cash equivalents		(2,778)	(370)	2,775
Cash and cash equivalents at beginning of the period		16,392	12,336	12,336
Effect of foreign exchange rate changes		391	60	1,281
Cash and cash equivalents at end of the period	8	14,005	12,026	16,392

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 Conduct Authority ("FCA").

The financial information contained in these half year financial statements has been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts 2015, prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union commission, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The half year statements have not been audited or reviewed.

The financial information for the twenty six weeks ended 29 January 2016 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 31 July 2015 has been extracted from the Group's Annual Report and Accounts 2015 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.

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 29 January 2016.

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 pages 24 and 25 of the Group's Annual Report and Accounts 2015, a copy of which is available on the Group's website: www.st-ives.co.uk.

2. Segment reporting

The Group manages its business on a market segment basis, based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Chief Executive Officer and Chief Financial Officer as they are primarily responsible for the allocation of resources to the segments and the assessment of performance of the segments.

The Strategic Marketing segment comprises of the Group's Data, Digital and Insight businesses. The Marketing Activation segment comprises of the Group's Exhibitions and Events, Point-of-Sale, Print Management and Field Marketing businesses. The Books segment comprises Clays.

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

Comparatives have been restated to reflect the reclassification of the income and expense of the St Ives Defined Benefits Pension Scheme, set out in note 6 of the Group's Annual Report and Accounts 2015.

Business segments

	26 weeks to 29 January 2016
	Strategic Marketing £'000	Marketing Activation £'000	Books £'000	Total £'000
Revenue
External sales	66,429	83,057	36,220	185,706
Group sales	3,587	4,501	6	8,094
Eliminations	(657)	(7,331)	(106)	(8,094)
Total revenue	69,359	80,227	36,120	185,706
Result
Result before non-underlying items	9,684	3,971	3,766	17,421
Non-underlying items	(13,059)	(5,145)	(257)	(18,461)
(Loss)/profit from operations	(3,375)	(1,174)	3,509	(1,040)
Net pension finance charge				(494)
Other finance costs				(1,313)
Loss before tax				(2,847)
Income tax charge				(2,347)
Net loss for the period				(5,194)

	26 weeks to 30 January 2015 (Restated)
	Strategic Marketing £'000	Marketing Activation £'000	Books £'000	Total £'000
Revenue
External sales	49,362	89,416	36,175	174,953
Group sales	1,390	85	9	1,484
Eliminations	(15)	(1,453)	(16)	(1,484)
Total revenue	50,737	88,048	36,168	174,953
Result
Result before non-underlying items	7,124	4,993	4,451	16,568
Non-underlying items	(10,361)	(2,460)	(79)	(12,900)
(Loss)/profit from operations	(3,237)	2,533	4,372	3,668
Net pension finance charge				(210)
Other finance costs				(1,169)
Profit before tax				2,289
Income tax charge				(1,210)
Net profit for the period				1,079

	52 weeks to 31 July 2015
	Strategic Marketing £'000	Marketing Activation £'000	Books £'000	Total £'000
Revenue
External sales	107,084	170,494	66,975	344,553
Group sales	4,639	9,822	28	14,489
Eliminations	(1,033)	(13,346)	(110)	(14,489)
Total revenue	110,690	166,970	66,893	344,553
Result
Result before non-underlying items	16,340	10,947	8,088	35,375
Non-underlying items	(16,983)	(4,719)	(1,960)	(23,662)
(Loss)/profit from operations	(643)	6,228	6,128	11,713
Net pension finance charge				(373)
Other finance costs				(2,611)
Profit before tax				8,729
Income tax charge				(3,173)
Net profit for the period				5,556

Geographical segments

The Strategic Marketing, Marketing Activation and Books business segments operate primarily in the UK, deriving more than 85% of their revenue and results 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 are as follows:

	26 weeks to 29 January 2016		26 weeks to 30 January 2015   (Restated)		52 weeks to 31 July 2015
Expense/(income)	£'000	£'000	£'000	£'000	£'000	£'000
Restructuring items
Redundancies and other charges	817		354		2,408
Costs associated with empty properties	771		388		671
Loss/(profit) on disposal of property, plant and equipment	1,669		(369)		(541)
		3,257		373		2,538
St Ives defined benefits pension scheme costs
Administrative costs	325		300		562
Settlement credit	(198)		-		-
Other	130		154		268
		257		454		830
Acquisition costs
Amortisation of acquired intangibles	4,079		3,566		7,827
Impairment of available for sale asset	-		-		1,540
Impairment of acquired intangibles and goodwill	2,520		1,470		1,470
Costs associated with the acquisition and setup of subsidiaries	172		225		686
Contingent consideration required to be treated as remuneration	5,237		3,744		6,233
Increase in deferred consideration	2,939		3,068		2,538
		14,947		12,073		20,294
Non-underlying items before interest and tax		18,461		12,900		23,662
Net pension finance charge in respect of defined benefits pension scheme	494		210		373
Accelerated amortisation of bank arrangement fees	-		-		213
		494		210		586
Non-underlying items before tax		18,955		13,110		24,248
Income tax credit		(1,036)		(2,066)		(3,841)
		17,919		11,044		20,407

The restructuring items in the current period include redundancies and restructuring costs of £476,000 and costs relating to empty properties of £421,000 recorded within the Marketing Activation segment. Redundancy and restructuring costs of £341,000 and costs relating to an empty property of £350,000 were recorded in the Strategic Marketing segment.

The loss on disposal of property, plant and equipment of £1,669,000 relates to the sale of the Group's properties at Bradford and Birmingham. These items were recorded in the Marketing Activation segment.

An impairment charge of £2,520,000 is recorded in respect of Tactical Solutions' goodwill and customer relationship asset due to the loss of a customer, resulting in a decline in operating profit.

4. Dividends

	per share	26 weeks to 29 January 2016  £'000	26 weeks to 30 January 2015  £'000	52 weeks to 31 July 2015  £'000
Final dividend paid for the 52 weeks ended 1 August 2014	5.00p	-	6,590	6,590
Interim dividend paid for the 26 weeks ended 30 January 2015	2.25p	-	-	2,865
Final dividend paid for the 52 weeks ended 31 July 2015	5.55p	7,515	-	-
Dividends paid during the period		7,515	6,590	9,455
Declared interim dividend for the 26 weeks ended 29 January 2016 (2015 - 2.25p per share)	2.35p	3,325	-	−

5. Earnings per share

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

Number of shares

	26 weeks to 29 January 2016 '000	26 weeks to 30 January 2015 '000	52 weeks to 31 July 2015 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	131,225	125,787	127,784
Weighted average number of ordinary shares for the purposes of diluted earnings per share	133,681	129,375	131,016

Basic and diluted earnings per share

	26 weeks to 29 January 2016		26 weeks to 30 January 2015 (Restated)		52 weeks to 31 July 2015
	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence
Earnings and basic earnings/(loss) per share from continuing activities
Underlying earnings and underlying earnings per share	12,725	9.70	12,123	9.64	25,963	20.32
Non-underlying items	(17,919)	(13.66)	(11,044)	(8.78)	(20,407)	(15.97)
Earnings and basic (loss)/earnings per share	(5,194)	(3.96)	1,079	0.86	5,556	4.35
Earnings and diluted (loss)/earnings per share from continuing activities
Underlying earnings and underlying earnings per share	12,725	9.52	12,123	9.37	25,963	19.82
Non-underlying items	(17,919)	(13.40)	(11,044)	(8.53)	(20,407)	(15.58)
Earnings and diluted (loss)/earnings per share	(5,194)	(3.88)	1,079	0.84	5,556	4.24

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

6. Acquisitions

FSP

On 13 August 2015, the Group acquired the entire share capital of Fripp, Sandeman and Partners Limited ("FSP"), a UK-based specialist retail property consultancy. The consideration was satisfied in cash and St Ives shares.

The provisional allocation of the purchase price payable for FSP is as follows:

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Proprietary techniques	-	893	893
Property, plant and equipment	181	-	181
Trade and other receivables	466	-	466
Bank balance and cash	943	-	943
Trade and other payables	(489)	-	(489)
Deferred tax liabilities	(3)	(179)	(182)
Net assets acquired	1,098	714	1,812
Goodwill arising on acquisition			647
Total consideration			2,459

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

	£'000
Cash consideration	1,521
Fair value of 362,095 St Ives plc ordinary shares issued	652
Working capital payment in the current period	778
Less consideration treated as deemed remuneration	(492)
	2,459

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

	£'000
Cash paid	2,300
Less acquired	(943)
Net cash outflow	1,357

At the acquisition date, it was estimated that all the trade and other receivables were collectible.

It is expected that the goodwill will not be deductible for income tax purposes.

The post-acquisition impact of FSP on the Group's revenue and operating profit in the period are as follows:

	£'000
Revenue	964
Operating profit	143

Had FSP been acquired at the beginning of the current period, it would have had the following incremental impact on the Group's revenue and operating profit:

	£'000
Revenue	58
Operating profit	11

The App Business

On 29 January 2016, the Group acquired 82.16% of the issued share capital of The App Business Limited ("TAB"), a mobile-led consultancy based in the UK. The consideration was satisfied in cash and St Ives shares.

The provisional allocation of the purchase price payable for TAB is as follows:

	Historical net assets £'000	Fair value adjustments £'000	Fair value of net assets £'000
Property, plant and equipment	323	-	323
Trade and other receivables	2,252	-	2,252
Bank balance and cash	3,665	-	3,665
Trade and other payables	(1,631)	151	(1,480)
Deferred tax liabilities	(62)	-	(62)
Net assets acquired	4,547	151	4,698
Goodwill arising on acquisition			20,211
Less non-controlling asset			(5,116)
Plus consideration treated as deemed remuneration			4,250
Total consideration			24,043

Due to proximity of the acquisition date to the date of this announcement (8^th March), the fair value of the acquired net assets and liabilities are provisional and are subject to final valuations. The surplus of consideration over fair value of the historical net assets acquired has been allocated to goodwill as at 29 January 2016.

On 8 February 2016, the Group acquired the remaining 17.84% of the issued share capital of TAB for approximately £3.7m in cash and the issue of approximately 0.6m St Ives ordinary shares.

7. Retirement benefits

The net obligation in respect of St Ives plc Retirement Benefits Pension Scheme of £21,145,000 at 29 January 2016 has decreased compared to £27,597,000 as at 31 July 2015. The decrease is primarily due to a decrease in the inflation rate.

8. Notes to the condensed consolidated cash flow statement

Reconciliation of cash generated from operations

	26 weeks to 29 January 2016  £'000	26 weeks to 30 January 2015  £'000	52 weeks to 31 July 2015  £'000
(Loss)/profit from continuing operations	(1,040)	3,668	11,713
Adjustments for:
Depreciation of property, plant and equipment	3,608	3,774	7,201
Share of losses from joint venture	104	42	88
Impairment losses	2,520	1,470	3,009
Amortisation of intangible assets	4,558	4,028	8,690
Loss/(profit) on disposal of property, plant and equipment	1,669	(369)	(721)
Decrease/(increase) in deferred income	(432)	1,058	1,132
Share-based payment charge	445	852	908
Settlement of share-based payment	195	(6)	541
Increase in derivatives	-	(32)	(67)
Decrease in retirement benefit obligations	(1,373)	(1,161)	(2,325)
Payment of deemed remuneration	(1,056)	-	(975)
Remeasurement of deferred consideration	2,939	-	2,538
Increase in contingent consideration required to be treated as remuneration	5,237	6,812	6,233
Increase/(decrease) in provisions	86	(446)	(409)
Operating cash inflows before movements in working capital	17,460	19,690	37,556
Increase in inventories	(506)	(68)	(833)
(Increase)/decrease in receivables	(7,245)	3,243	6,864
Increase/(decrease) in payables	3,763	(5,706)	(8,077)
Cash generated from operations	13,472	17,159	35,510

Analysis of net debt

	1 August 2015 £'000	Cash flow £'000	Exchange differences £'000	29 January 2016 £'000
Cash and cash equivalents	16,392	(2,782)	395	14,005
Bank loans due in more than one year	(79,225)	(15,000)	(1,924)	(96,149)
Net debt	(62,833)	(17,782)	(1,529)	(82,144)

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.

9. Post Balance Sheet events

On 2 February 2016, the Group issued 6.4m new ordinary shares through a Placing on the London Stock Exchange, at a price of £2.15 per ordinary share, resulting in net proceeds of £13.3m.

On 8 February 2016, the Group acquired the remaining 17.84% of the issued share capital of TAB for approximately £3.7m in cash and the issue of approximately 0.6m St Ives ordinary shares.

The number of ordinary shares in issue as at 8 March 2016 is 141,747,787 ordinary shares.  

10. 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 31 July 2015.

11. 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 half year 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 half year 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

Matt Armitage

Chief Executive

8 March 2016

The foregoing contains forward looking statements made by the Directors in good faith based on information available to them up to 8 March 2016. 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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