Trading Update

RNS Number : 1446W

St. Ives PLC

25 April 2016

 

25 April 2016                            

St Ives plc ("St Ives" or the "Group")

Trading update

St Ives, the international marketing services group, provides the following trading update.

Trading overall in the eight months ended 1 April 2016 has continued to be broadly in line with management expectations, with Group revenue running approximately 5% ahead of the equivalent period last year.  However, the outlook for the final quarter, and for the following financial year, has deteriorated.

Trading across our Strategic Marketing segment has been strong to date, and significantly ahead of the equivalent period last year, with organic growth of 15% driven by a combination of international expansion and greater collaboration across our businesses, combined with acquisition-driven growth of 20%. However, as noted within our half-year results, the current global economic uncertainty is leading to greater caution in the allocation of marketing budgets. Recently, and within the digital segment in particular, we have observed an increase in this level of uncertainty and caution within our client base which has led to the cancellation and deferral of a number of significant projects. We consider this to be a short term issue although it will impact trading for the remainder of the financial year and into the following year. We are implementing targeted cost saving measures where appropriate but will not do so if this results in long term damage to the business.

As previously reported, our Marketing Activation segment is facing challenging conditions, due in large part to the ongoing pressures within the UK grocery retail sector, and these conditions have worsened. As a result, revenue within the segment is running approximately 11% below the prior year and we have experienced a reduction in margin due to increasing price pressure.  Diversification of the client base to reduce this segment's dependency on the grocery sector remains a priority, but the benefits of this will inevitably take time to show through in its financial performance.

Within our Books business revenue is running slightly behind (1%) the prior year. The incremental volume secured through the previously announced Penguin Random House contract win has been offset by volume reductions caused by de-stocking in the market, as a result of a reduction in publisher warehousing capacity, and the movement overseas of work previously printed in the UK. In addition, the costs associated with transitioning the Penguin Random House contract have continued to adversely affect operating margins.

Despite a strong performance overall in the year to date, the combination of factors outlined above lead the Board to conclude that the Group's underlying profit before tax for the current financial year is likely to be materially below management's current expectations.  Whilst it is too early to judge with accuracy at this stage, it is expected that these factors will impact the outturn for the next financial year also.

Matt Armitage, Chief Executive, said:

"It is disappointing to have to report this marked deterioration in the near-term outlook, but we remain clear on our long-term growth priorities and have the financial strength to continue to support our strategic ambitions.  We continue to believe there is further scope to expand our higher margin Strategic Marketing activities both organically and through acquisition, and to invest in our growing international operations and client offerings in the US and Asia."

- Ends -

For further information contact:

St Ives plc                                                        020 7928 8844

Matt Armitage, CEO

Brad Gray, CFO

MHP Communications                                     020 3128 8100

John Olsen / Giles Robinson / Gina Bell

 

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