Final Results

Printing.com plc 01 June 2005 TO BE RELEASED 7.00AM 1 June 2005 PRINTING.COM PLC ('Printing.com','the Company'or 'the Group') Specialist retail chain with 112 outlets (plus 15 pending) across the UK Preliminary Results for year ended 31 March 2005 2005 2004 Total Retail Sales Â£14.44m Â£10.84m +33.2% Turnover Â£10.72m Â£9.33m + 14.9% Profit Before Tax Â£1.51m Â£0.94m +60.6% Earnings Per Share - basic 2.74p 1.53p +79.1% Dividend 0.50p Nil N/A Cash Reserves Â£2.86m Â£0.79m +262.0% * Record turnover, profit before tax and earnings per share * Strong cash position * Maiden dividend of 0.50p * Expansion continues to gather pace o 50% increase in production floor space scheduled o Further increase in printing capacity planned * First 8 weeks of the current financial year in line with budget * Currently opening an outlet every fifth working day * Outlook for the future development of the Group is positive For further information: Printing.com plc Tony Rafferty (Chief Executive) 07966 517 336 Alan Roberts (Finance Director) 0161 848 5713 Beattie Financial Brian Coleman-Smith / Jo Clewlow 020 7053 6400 Background note: Printing.com Printing.com offers a broad product range including leaflets, postcards, promotional cards, invitations, letterheads and business cards to consumers and small and medium sized companies. Unlike its competitors, Printing.com Stores do not have any printing equipment on location. The Company's printing and ancillary equipment is based at the centralised Production Hub with the head office in Manchester. All work is produced in full four colour rather than two colour. Delivery to the customer is usually within three days. The printing sector has traditionally been served by smaller printing companies or other On Demand Printers and is estimated to be worth some GBP1 billion. Printing.com has four routes to market: Franchise Stores, Bolt-on Franchises, Company owned Stores, and via the Company's website where online design and ordering are facilitated. Printing.com outlets Red Hot Media East Lowestoft NR32 1EB Goldengate East Suffolk IP30 9QS Dublin Store Ireland Dublin Dublin 2 North Dublin Ireland Dublin Dublin 7 Central London London Baker Street NW1 6UY Store Hampstead Store London Hampstead NW3 5HS Watford Store London Watford WD17 1RA Harrow Store London Harrow HA7 2QJ Reading Store London Reading RG1 4QA Ealing Store London Ealing W13 8SB Orpington London Orpington BR6 0JY Luton London Luton LU1 2PL Expocentric - London Soho W1V 3AU Wardour Expocentric - London Mayfair W1X 3PH Dover London & London Chelsea SW10 0XF General Full Colour London Clapham SW17 9SH Store Print Express London Colindale NW9 5DL 0800 Promote London Finchley N3 1TR Printer Net London Wimbledon SW19 8TY Services London Print London Shaftesbury WC2H 8EB Compamy Avenue Printhouse London Nottinghill W11 3HT 0800 Promote London North Finchley N12 9QG Toppers London Stevenage SG1 3HR Harrow Life London Harrow HA1 2EA Birmingham Midlands Birmingham B5 4JL Store Oxford Store Midlands Oxford OX2 7HT Leicester Store Midlands Leicester LE1 1LB Wolverhampton Midlands Wolverhampton WV1 4BL Nottingham Midlands Nottingham NG1 6DQ Store Kaleidoscope Midlands Leamington Spa CV31 1BZ Albry Printing Midlands Wallingford OX10 9DA Company Final Imaging Midlands Sawtry PE28 5SB Dove Signs Midlands Nuneaton CV11 6GX Custard Midlands Northampton NN3 6WL Creative Cre8ive Design Midlands Kenilworth CV8 1JD For Colour Midlands Newark, NG24 1LE Nottingham Sign It Midlands Beeston, NG9 2AY Nottingham Ozmedia Print Midlands Barrow Upon Soar LE12 8JH Pewter Design Midlands Market Harborough LE16 7DS St Ives Midlands St Ives PE27 3WS Quickprint Artichoke Midlands Birmingham B18 6NN Design The Ideas Room Midlands Leicester LE3 0DL Ideas Taking Midlands Rugby CV21 2SD Shape Graphic Results Midlands Belper DE56 1AY The Studio Midlands Walsall WS1 1JQ Hussellworks Midlands Halesowen B63 3HR First Image Midlands Coventry CV5 7FW Hull Store North Hull HU1 2AG East Newcastle Store North Newcastle NE1 5EE East Leeds Store North Leeds LS1 3DL East Middlesbrough North Middlesbrough TS1 1LY East Sheffield Store North Sheffield S1 4GF East Colour Box North York YO23 1NA Design East Multiprint North Normanton WF6 2AF East Print House North Bishop Auckland DL14 0LZ Direct East The Factory North Leeds LS12 2DS East Maskerade North Sunderland SR2 7PR Design East Pro-Actif North Darlington DL3 7TD Communications East GOWEB North Wakefield WF2 9BL East Creative Web North Alnwick NE71 6EA design UK East Bluprint North Rotheram S60 8LZ East Blah D Blah North Bangor LL57 1NY Wales Manchester North Manchester M3 4BQ Store West The Hub North Trafford Park M17 1FG West Liverpool Store North Liverpool L2 2HF West Lancaster Store North Lancaster LA1 1XN West Warrington North Warrington WA1 1EP West Granthams - North Preston PR1 2UQ Preston West Granthams - North Blackpool FY1 4PE Blackpool West Print Design North Marple SK6 7AD Warehouse West RAS Limited North Chester CH3 5AG West Silverback North Isle of Man IM1 2LA West Mailboxes North Stockport SK1 1LE West Printel North Widnes WA3 8LG West ER Design & North Alsager CW2 5PR Print West Impact North Timperley WA15 7SP Advertising West Masterprint North St Helens WA10 1DH West Copycat North Maghull L31 2HB West Utopia North Birkenhead CH41 7AB West Alert 2 Media North Manchester M1 1DZ West Print Hub North Bolton BL1 3QJ Design West Soda North Golbourne WA3 3BU West Justleigh North Eccles M30 8GH West Brightspark North Carlisle CA2 5BB West Openhouse North Manchester M1 6DE West Bradbury Northern Belfast BT7 1BS Graphics Ireland Xpress Creative Northern Newtonabbey BT36 4PU Ireland Mooney Media Northern County Down BT32 4QD Ireland Edinburgh Store Scotland Edinburgh EH3 6QY Edinburgh Store Scotland Edinburgh EH3 9LY Glasgow Store Scotland Glasgow G3 8LZ Color Co. - Scotland Edinburgh EH2 2PA Edinburgh Glasgow Print Scotland North Glasgow G64 1RX Hamilton (662c) Scotland Hamilton ML3 7AR Haus of Print South Andover SP11 6RU Brighton South Brighton BN2 8AA Ashford Store South Ashford TN24 8UU East TRS Graphics South Croydon CR2 6EB East Felix South Rochester ME2 4HZ Communications East Studio Direct South Chelmsford CM2 6HE East Lussh Creative South Chesterfield S40 2BY East Inprint South Colchester CO1 1PB East Bristol Store South Bristol BS1 3LZ West Plymouth Store South Plymouth PL4 0AU West Bournemouth South Bournemouth DT1 1HS West Anneset South Weston-Super-Mare BS23 3DE West Presto Print South Christchurch BH23 1QD West Malthouse South Taunton TA1 3EP West Wessex Direct South Minehead TA24 5UB West Print Creative South Bath BA1 2JB West Printing South South Totnes TQ9 5DW West West Australian Wales Cardiff CF14 3JP Welsh PRINTING.COM PLC ('Printing.com' or 'the Company') Specialist retail chain with 112 outlets (plus 15 pending) across the UK Preliminary Results for year ended 31 March 2005 Chairman's Statement Trading Results Once again I am pleased to report that for the year under review the Company made further significant progress, resulting in a turnover of Â£10.72m (2004: Â£9.33m) and a pre tax profit of Â£1.51m (2004: Â£0.94m). Earnings per share were 2.74p an increase of 79%. Total Retail Sales 'TRS' (being the estimated value of invoiced sales through the Printing.com network) were Â£14.44m (2004: Â£10.84m). The increase in TRS reflects the significant growth in the size of our network with 119 outlets open and pending at the year end (2004: 85). Since the year end the number of outlets open or pending has increased by 8. Cash I am also pleased to report a strong generation of cash from operational activity, especially during the second half, with the result that your Company closed the year with cash reserves of Â£2.86m (2004: Â£0.79m). Successful Move to AIM Following almost four years on London's Ofex market, August 2004 saw the successful admission of the Company's shares to AIM. Since making this move we have seen an appreciation in the share price and a significant increase in the liquidity of our shares. Dividend The Company now has distributable reserves and the Board are proposing the payment of a final dividend of 0.50p per ordinary share on the 5th August 2005 to shareholders on the register at the close of business on the 17th June 2005. This reflects the Company's dividend policy as set out in its AIM admission prospectus. Employees and Franchisees The Company's employees have continued to meet the challenges of working in a dynamic and evolving business and, together with the hard work and endeavours of our Franchisees and their employees, this has underpinned another year of considerable progress. On your behalf we thank them all for their invaluable contribution in moving your Company forward. British Franchise Association / HSBC Award for Enterprise I am delighted to report that your Company won the British Franchise Association 'HSBC Award for Enterprise' at the May annual Franchisor of the Year Awards held at London's Savoy Hotel. Sponsored by HSBC and the Daily Express, the BFA awards ceremony aims to showcase the UK's strongest and better performing franchisors. Brian Smart, Director General of the British Franchise Association, was quoted as saying 'the judges felt Printing.com had taken up the challenge of enterprise, both in its business and its approach to franchising in a way that could not be matched'. I believe that in winning this award it can only further enhance the Company's brand and market awareness and is further recognition of our rapid growth and success. Outlook Each year when reporting Printing.com's preliminary results, I have expressed my optimism regarding the Company's ongoing potential. With three consecutive years exhibiting sequential material growth in profitability, the result of a robust and scaleable business model, I believe that my previous optimism has proved well-founded. We have a strong pipeline of prospective Franchisees and I now believe the Company is entering its most exciting phase to date. Expansion continues to gather pace providing scope for Printing.com to deliver an ongoing increase in shareholder value. George Hardie Chairman Chief Executive's Statement Looking back, the Company's 14 directly owned stores (opened between 1998 and 2001) served as an important phase in refining and proving the format and provided the platform for future growth via franchising. It is still only a little over three years since the Company's first Bolt-on Franchise opened and just over two years since the first Printing.com Store Franchise commenced operations. Moving forward our expansion plans are centred on a further rapid increase in our network essentially via franchising. Winning the British Franchise Association / HSBC Award for Enterprise is a significant reflection of the progress and profile that Printing.com now enjoys within the UK franchise community. Network Overview The table below sets out the Printing.com network and illustrates the rapid expansion during the year under review coupled with an acceleration post the close of the year. 1st June March March 2005 2005 2004 Company owned Stores 9 9 10 Franchised Stores* Open and pending 36 33 20 under option Bolt-on Franchises** 82 77 55 Total 127 119 85 *Includes Territory Franchises and two 'Boutique' Franchises - see below **Includes four 'Guerrilla' Franchises - see below Territory Franchise Development During the year we completed the process of formally upgrading the early adopters of the Printing.com Store Franchise to the new Territory format. This granted each Franchisee a licence not only to operate a Printing.com Store but also to establish a network of Printing.com Bolt-on Franchises. All 12 of our Store Franchisees at the time upgraded. Eight Territory Franchises became operational during the year in Reading, Middlesbrough, Warrington, Wolverhampton, Bournemouth, Orpington, North Dublin and Luton. A further 3 Territory Franchises were established, 2 through MBIs of our Nottingham and Ealing Stores and 1 through an MBO of our Sheffield Store. At the end of the period under review, there were a further 8 'Options' (each involving the payment of a non-refundable deposit of Â£6,000) taken out over Territory Franchises. Since the end of the period a further Store has commenced trading in Brighton. Property is being sought for East Glasgow and negotiations continue to progress in respect of premises for the Manchester North, Birmingham East, Birmingham South West, Coventry, Northampton and Cardiff Territory Franchises. We are optimistic that these endeavours will result in a steady stream of openings and that most will indeed be trading by the close of H1. Over the past month an additional 3 Options have been taken out, covering our Exeter, Bradford and Guildford Territory Franchises. The Guildford Option has been taken out by an internal candidate. With an anticipated June launch, this would take the number of employees becoming Territory Franchisees to 5. We believe that these employee Buy Outs / start-ups not only provide the basis for excellent sector news flow but also serve to reassure external candidates considering franchise opportunities with Printing.com. New Franchise Format - The Printing.com Boutique Franchise We have developed the Boutique format to meet the demand from prospective franchisees seeking a Printing.com outlet. This format can prove suitable where, geographically a Territory Franchise is unavailable or where the Franchisee is seeking a lower level of regulation or does not want to be concerned with the management and development and support of Bolt-on Franchises. It also offers a lower cost route to a Printing.com Store as the franchise fees charged are lower. We are delighted to report that the first two Boutiques are now under option in South Glasgow and Doncaster. It is believed that this format will provide a significant number of additional outlets and additional revenues as new outlets mature. Bolt-on Franchise Development At the start of the year we had 55 Bolt-on Franchises and by year end this had risen to 76. Post the year end we have completed a further 2 agreements. The pipeline of prospective transactions is also very buoyant which leads us to be optimistic that a further significant wave of Bolt-on Franchise openings is imminent. New Franchise Format - The Guerrilla Franchise We have developed the Guerrilla format to enable fledgling entrepreneurs, without the investment capital required to follow the Territory or Boutique schemes, to open a Printing.com outlet. Typically, such a Franchise would be launched from serviced offices or similar low cost premises. Overheads would also be kept to a minimum, as no additional staff would be employed until the franchise became profitable. In certain instances the Franchisee may be allowed to work for a short period from home allowing start up costs to be further reduced. The inspiration for this scheme comes directly from my own experience starting the business that today is Printing.com and that of Peter Gunning (the Company's Operations Director). In my case the business was started with under Â£5,000 and operated from a small rented office. Peter Gunning started 'The Design Foundry' in Edinburgh with a similar level of investment. In the Guerrilla scenario, whilst launching the business with limited capital, the Franchisee would already be working in the sector. We believe that their existing technical skills plus their contacts in the local business community will compensate for the lack of capital. To facilitate this development the Company has developed a finance option in conjunction with the Royal Bank of Scotland. Essentially Â£500,000 is being made available by RBS, in tranches of circa Â£10,000 to Â£15,000, to finance initiatives of this nature. Whilst Printing.com provides certain guarantees (in addition to the Franchisee's own personal guarantee) to RBS in respect of this financing, the Board believe that this initiative makes sound commercial sense and that the risk is mitigated as: (i) a significant proportion of the investment is paid immediately to Printing.com (in respect of licence and support fees); (ii) the risk will be spread across a high number of low value 'investments'. Towards the close of the year, the first Franchise of this format opened and post the year end a further 3 agreements have been completed. The profile of a typical 'Guerrilla' Franchisee is reflected by our recent Carlisle opening. The Franchisee, aged 26, was previously working as an Account Executive / Graphic Designer with a rival local company. This Guerrilla Franchise required an overall investment of less than Â£20,000 reflecting the dramatically lower set up costs of this format. We anticipate that Guerrilla Franchisees may progress from office space to retail premises, thereby essentially becoming a Boutique Franchise and from there, in some cases, to purchasing a Territory Franchise. We believe this new format enables us to tap into the wealth of young talent in the industry at large and facilitate entrepreneurialism that may otherwise be stifled through lack of access to capital. We also anticipate this additional route to market will further increase our rate of growth. The Agency Following a restructuring of The Agency, its divisional Managing Director has now left the Company. As we have indicated in the past it is our objective to transfer this division to franchised ownership. Under the new structure the Agency is now producing stable revenues operating as three independent teams, it also means that buy-outs or buy-ins can be progressed on a team by team basis. We are currently in discussion with a number of internal candidates. The Production Hub and Infrastructure We have previously indicated that the capacity of our national Hub, measured in terms of TRS, was in the range of Â£20-25 million. We now believe that the capacity is nearer to the higher end of this range reflecting our improved efficiency. Additional Printing Capacity At this juncture we believe it is prudent to expand the Manchester Hub before seeking an additional Hub in the south of England. At present we have two printing presses operating in parallel, a third is now being ordered. The additional press is in essence a 'double decker' meaning that both sides of the paper can be printed simultaneously thereby providing savings in labour, speed of delivery and floor space. The new press will provide capacity similar to that of the two existing presses combined, increasing overall TRS press capacity to Â£45-Â£50 million. The press reflects an investment of circa Â£1.8 million and we anticipate it will be commissioned during April 2006. Upgrade to logistics The available production floor space is scheduled to be increased by 50% with the installation of a mezzanine level. The mezzanine will house additional print finishing plant that we expect to bring online as turnover increases. The additional infrastructure will also feature improvements to internal logistics with the objective of significantly reducing manual handling and packing. Flyerlink Pro A further significant development during the year under review was the launch of Flyerlink Pro, a new generation of the Company's software. Flyerlink is the conduit that connects our outlets with the Hub and is now in a format that can be readily scaled. International Expansion In essence we opened our Dublin Store 2 years ago to test the Company's systems working with multiple currencies. The advent of Flyerlink Pro together with the increasingly proven nature of the Printing.com model, encourages us that international development can now be explored. It is anticipated that such expansion would be via joint ventures or master franchise arrangements and executed via such a mechanism that would not put our core UK and Ireland operations at risk. Current Trading The first two trading periods (four week) of the current financial year have now been completed. Overall trading has proved in line with the Company's internal budget. Outlook In terms of the rate at which new Franchisees are being attracted to Printing.com we are at present experiencing our fastest ever growth. Significant expansion has been achieved of late with the network now having 127 outlets 'operational and pending'. This current growth rate represents an additional unit every fifth working day. In addition to new outlets opening, additional revenues should be generated as our recently opened outlets develop quickly and our more established outlets mature. Given present growth rates, and the premise that every new outlet should yield an additional positive contribution from day one, we remain optimistic that the outlook for the future development of the Group is positive and the prospect of continued growth in shareholder value good. Anthony Rafferty Chief Executive Finance Director's Statement Total Retail Sales (TRS) TRS is a key metric, being the retail price paid by the client irrespective of whether the transaction took place through a Company owned or a franchised outlet. The importance of this measure is that it gives the clearest indication of the growth in the network. With TRS increasing by 33.2% to Â£14.44m (2004: Â£10.84m) the underlying development of the Printing.com network is clearly illustrated. At this level we would estimate that Printing.com still accounts for less than 2% of the available market. Turnover The statement of turnover masks the underlying growth in the Printing.com network. Network growth is essentially derived from our Franchise initiatives: with such transactions our turnover is limited to the 'wholesale' value of the orders. In addition three Stores, previously under direct ownership, have now been franchised with the retail component of the respective orders given over to the franchisee. Overall turnover increased by 15% from Â£9.33m to Â£10.72m. Company Store sales and sales to Franchisees increased by 26% from Â£7.39m to Â£9.32m for the year. Company turnover was held back by sales at The Agency which fell to Â£1.40m from Â£1.94m. Gross Profit The Company's simple definition of Gross Profit is sales less direct materials (including the cost of distribution, when made direct to customers). Gross Profit increased from Â£7.10m to Â£7.83m. Overall it reduced from 76.1% to 73% of turnover as more sales moved through the franchise channels where the retail margin is passed over to Franchisees who, of course, incur the corresponding retail overheads. Pre-Tax Profit The Company recorded a pre tax profit of Â£1.51m (an increase of Â£0.57m). This represented 14% of Company turnover and 10.4% of TRS. In the previous year the pre tax profit of Â£0.94m represented 10% of turnover and 8.7% of TRS. We believe the significant increase in pre tax profitability, in both absolute terms and on these key metrics, validates our franchised centred strategy. Staff costs increased in real terms by 13% but fell as a percentage of turnover from 32.1% to 30.3%. Other major costs for the year were Depreciation Â£0.73m (2004: Â£0.70m) and Operating Lease costs (plant & property) Â£0.41m (2004: Â£0.38m). Those overheads directly related to Company owned retail operations, including payroll and depreciation, reduced from Â£2.94m to Â£2.26m or 31.5% of turnover down to 21.1%. This was essentially due to Stores previously owned by the Company becoming franchised units. The strong operational cash flow and the placing on the AIM flotation increased cash balances. All bank loans were cleared and coupled with reducing lease finance costs net interest charges decreased to Â£0.12m from Â£0.25m. Taxation The tax charge for the current year is Â£0.35m or 23% (2004: Â£0.35m or 36.8%) of PBT. The lower charge this year is due to certain gains qualifying for rollover relief. Earnings per share (EPS) Basic EPS improved by 79% to 2.74p, the weighted average number of shares used was 42,208,789. Fully diluted EPS improved by 86% to 2.66p. The year closed with 44,289,716 ordinary shares in issue. Cash Flow At the year end the Company had cash balances of Â£2.86m (2004: Â£0.79m). Operational cash flow surged ahead to Â£2.43m (2004: Â£1.54m). The operating profit of Â£1.63m and depreciation & amortisation charge of Â£0.73m were offset by an increase in stock of Â£0.04m, an increase in debtors of Â£0.49m and supplemented by an increase in creditors of Â£0.59m. Trade debtor balances at the year end represented 36 days as they did in 2004. Capital Expenditure The total expenditure for the year was Â£0.5m (2004: Â£1.6m). This was made up of:- a) software development and computing Â£0.25m; b) production equipment Â£0.11m; c) purchase of the Oxford Store and certain limited Store refurbishments Â£0.14m. Share Capital and Share Options Options over 1,592,243 shares were exercised during the year, being:- a) employees options, 175,563; b) Haltcrown Limited options 1,408,680; (option granted at the time of the Company's OFEX IPO) c) Franchisee options 8,000. In July 2004 Territory Franchisees were granted options over 1,400,000 shares subject to their achieving performance targets and there being a sustained increase in the share price. Employee EMI options totalling 3,190,000 were issued in August 2004, as with the Territory Franchise options each employee has performance targets to achieve and there has to be a sustained increase in share price for the options to become exercisable. During the year 105,000 employee and 106,000 Franchise options lapsed. Flotation on AIM The Company moved its share quotation from Ofex to AIM on the 11th August 2004 at the same time placing 3,833,333 ordinary Shares of 1p for a consideration of 30p per share. The placing raised Â£0.86m net of costs. Alan Q. Roberts Finance Director Unaudited consolidated profit and loss account for the year ended 31 March 2005 Notes 2005 2004 Â£(000) Â£(000) TURNOVER 1 10,717 9,328 Changes in stocks of finished goods 35 (6) -------------- -------------- 10,752 9,322 Other operating income - 10 -------------- -------------- 10,752 9,332 Raw materials and consumables 2,924 2,231 -------------- -------------- 7,828 7,101 Staff costs 3,243 2,859 Depreciation and amortisation 728 698 Other operating charges 2,225 2,351 -------------- -------------- OPERATING PROFIT 1,632 1,193 Investment income 67 10 Interest payable and similar charges (191) (263) -------------- -------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,508 940 Taxation 2 (350) (346) ------------- -------------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,158 594 Dividends on equity shares (221) - ------------- -------------- RETAINED PROFIT FOR THE YEAR 937 594 ------------- -------------- Earnings per ordinary share - basic 5 2.74p 1.53p Earnings per ordinary share - fully diluted 5 2.66p 1.43p Dividend per ordinary share 4 0.50p - The result is based on the Group's continuing operations. No separate statement of Total Recognised Gains and Losses has been presented as all such gains and losses have been dealt with in the profit and loss account. Unaudited group balance sheet as at 31 March 2005 2005 2004 Â£(000) Â£(000) FIXED ASSETS Intangible assets 65 54 Tangible assets 3,637 3,901 ------------ ------------ 3,702 3,955 ------------ ------------ CURRENT ASSETS Stocks 108 73 Debtors 2,150 1,715 Cash at bank and in hand 2,864 789 ------------ ------------ 5,122 2,577 CREDITORS: Amounts falling due (3,006) (2,317) within one year ------------ ------------ NET CURRENT ASSETS 2,116 260 ----------- ------------ TOTAL ASSETS LESS CURRENT 5,818 4,215 LIABILITIES CREDITORS: Amounts falling due after more than one year (904) (1,497) PROVISION FOR LIABILITIES AND CHARGES (312) - ----------- ------------ 4,602 2,718 CAPITAL AND RESERVES Called up share capital 443 389 Share premium 3,769 2,876 Merger reserve 211 211 Other reserve 1 1 Profit and loss account 178 (759) ------------ ------------ 4,602 2,718 Unaudited group cash flow statement for the year ended 31 March 2005 Notes 2005 2004 Â£(000) Â£(000) Cash flow from operating activities 3a 2,425 1,537 Returns on investments and servicing of finance 3b (124) (253) Capital expenditure 3b (425) (629) Taxation 12 (12) ------------ ------------ CASH INFLOW BEFORE FINANCING 1,888 643 Financing 3b 187 (722) ----------- ------------ INCREASE/(DECREASE) IN CASH IN YEAR 2,075 (79) ----------- ------------ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN DEBT Increase/(decrease) in cash in the 3c 2,075 (79) year Cash outflow from decrease in net debt financing 3c 760 723 ----------- ----------- Change in net debt resulting from cash 2,835 644 flows New finance leases (51) (897) ----------- ----------- MOVEMENT IN NET DEBT IN THE YEAR 2,784 (253) NET DEBT AT 1 APRIL 2004 3c (1,346) (1,093) ----------- ----------- NET FUNDS /(DEBT) at 31 MARCH 2005 3c 1,438 (1,346) =========== =========== 1 TURNOVER The principal components of turnover are the design and production of publicity and marketing material, and franchise fee income. All of the turnover is in one continuing business segment being the development of the Printing.com Franchise and originates in the United Kingdom and Republic of Ireland. The directors believe that full compliance with SSAP25 'Segmental Reporting' would be seriously prejudicial to the interests of the Group as it would require disclosure of commercially sensitive information. An analysis of turnover by geographical segment is given below: 2005 2004 Â£(000) Â£(000) United Kingdom 10,445 9,201 Republic of Ireland 272 127 -------- --------- 10,717 9,328 ======== ========= 2 TAXATION 2005 2004 Â£(000) Â£(000) Corporation tax at 30% (2003: 19%) - - Overprovision in prior year (12) (10) ---------- ----------- Total current tax (12) (10) ---------- ----------- Deferred tax: Origination and reversal of timing differences 362 356 ---------- ----------- Tax on profit on ordinary activities 350 346 ========== =========== Factors affecting the tax charge for the year Profit on ordinary activities before taxation 1,508 940 ========== =========== Profit on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 30.00% (2004: 30.00%) 452 282 Effects of: Non deductible expenses 30 47 Income not taxable (92) - Capital allowances in excess of (51) (85) depreciation Other tax adjustments 4 (44) Losses utilised (343) (200) Prior year adjustment (12) (10) ------------- ------------ (464) (292) ------------- ------------ Current tax credit (12) (10) ============= ============ 3 CASHFLOWS a Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 Â£(000) Â£(000) Operating profit 1,632 1,193 Amortisation 32 15 Depreciation 695 683 (Increase)/decrease in stocks (35) 6 Increase in debtors (485) (621) Increase in creditors 586 272 Loss/(profit) on sale of fixed assets - (11) ------------ --------------- 2,425 1,537 ============ =============== b Analysis of Cash Flows For Headings Netted Off in the Cash Flow Statement 2005 2004 Â£(000) Â£(000) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 67 10 Interest paid (4) (14) Interest element of finance lease rental payments (187) (249) ------------ ------------ Net cash outflow from returns on investments and servicing of finance (124) (253) ============ ============ CAPITAL EXPENDITURE Purchase of intangible assets (44) (41) Purchase of tangible assets (406) (667) Sale of tangible assets 25 79 ------------ ------------ Net cash outflow from capital expenditure (425) (629) ============ ============ FINANCING Issue of ordinary share capital 1,232 1 Issue costs (286) - Repayment of bank loan (167) (113) Capital element of hire purchase (592) (610) contracts ------------ ------------ Net cash inflow/(outflow) from financing 187 (722) ============ ============ At Cash flow Other At 1 April 2004 Â£(000) cash 31 March Â£(000) changes 2005 Â£(000) Â£(000) c Analysis of net (debt)/funds Net cash Cash at bank and in hand 789 2,075 - 2,864 ----------- ----------- ----------- --------- 789 2,075 - 2,864 Debt: Finance leases (1,967) 592 (51) (1,426) Bank loan due within 1 year (110) 110 - - Bank loan due after 1 year (58) 58 - - ----------- ------------ ----------- ----------- (2,135) 760 (51) (1,426) ----------- ------------ ----------- ----------- Net(debt)/funds (1,346) 2,835 (51) 1,438 =========== ============ =========== =========== 4 DIVIDENDS The Directors propose payment of a maiden dividend of 0.50p per ordinary share (2004 Nil). 5 EARNINGS PER SHARE The calculations of earnings per share are based on the following profits and numbers of shares. 2005 2004 Â£(000) Â£(000) Profit for the financial year 1,158 594 ======= ====== Weighted average number of shares 2005 2004 No. of No. of shares shares For basic earnings per share 42,208,789 38,849,906 Exercise of share options 1,301,237 2,540,303 -------------- ------------ For diluted earnings per share 43,510,026 41,390,209 =========== =========== 6 BASIS OF THE PRELIMINARY ANNOUNCEMENT The preliminary financial statements for the twelve months ended 31 March 2005 were approved by the Board of Directors on 31 May 2005. The results are unaudited. The figures for the year ended 31 March 2005 do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The figures for the year ended 31 March 2004 are audited. The preliminary announcement is prepared on the same basis as set out the previous year's statutory accounts. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. This information is provided by RNS The company news service from the London Stock Exchange

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