Final Results

RNS Number : 1409C

4imprint Group PLC

02 March 2011

 



2 March 2011

4imprint Group plc

Final Results for the period ended 1 January 2011

4imprint Group plc announces today its results for the period ended 1 January 2011

Highlights

•          Group revenue was £200.77m, an increase of 19%

•          Underlying operating profit* was £10.49m, an increase of 92%

•          Underlying profit before tax was £9.98m (2009: £5.14m)

•          Profit before tax was £8.09m, (2009: £2.83m)

•          Year end net debt was £0.24m, a reduction of £2.89m

•          Underlying basic earnings per share 32.87p (2009: 17.07p)

•          Basic earnings per share 26.65p (2009: 9.39p)

•          Final dividend proposed of 9.0p (2009: 8.5p)

John Poulter, Chairman said:

"As incoming Chairman, it is a pleasure to report these strong results. The efforts to drive our business forward have been rewarded and our market positions have undoubtedly improved.

Despite the wider threats to economic growth, the momentum developed in the past year is evident in the early weeks of 2011."

* Underlying operating profit is operating profit before IAS 38 marketing cost adjustment, defined benefit pension charges, share option costs and exceptional items

- Ends -

For further information, please contact:

John Poulter

Chairman

4imprint Group plc                                                          Tel. [phone]

Gillian Davies

Group Finance Director

4imprint Group plc                                                          Tel. [phone]

Chairman's Statement

The Group delivered a good performance with strong revenue and operating profit growth as well as a reduction in net debt. The Group has seen some recovery in the markets its serves during the year. However, it has grown revenue and profitability at a rate well ahead of this recovery as the 4imprint Direct Marketing and Brand Addition Divisions continue to grow their market share.

Group revenue for the year was £200.77m, an increase of 19% over prior year. Underlying operating profit* was £10.49m, 92% ahead of prior year. Underlying operating margin increased to 5.2% from 3.2% in the prior year. Profit before tax was £8.09m (2009: £2.83m), an increase of 186%.

Operating cash flow was strong and cash generated from operations was £7.85m (2009: £7.63m) after a modest increase of £1.69m in working capital to support revenue growth (2009: £3.15m decrease) and contributions to the defined benefit pension fund of £2.50m (2009: £2.46m). Net debt reduced to £0.24m from £3.13m at the end of 2009.

Basic earnings per share were 26.65p (2009: 9.39p)

Divisional performance

4imprint Direct Marketing

Total revenue £128.97m (2009: £111.14m)

Revenue in the Division grew strongly and was 16% ahead of 2009, increasing market share. Underlying operating profit of £7.97m was more than double prior year. Both new and existing customer orders were significantly ahead of prior year as the business saw improvement in the yield on its prospecting catalogue and internet marketing spend coupled with further growth in its customer file and retention rate of existing customers. New customer orders in North America were up 14% over prior year and existing customer orders were up 27%. The UK business traded profitably on revenue which increased by 12% over the prior year.

Brand Addition

Total revenue £58.89m (2009: £44.22m)

Revenue in the Division grew by 33% compared to 2009. Underlying operating profit was £4.28m, 27% ahead of prior year. The Division benefited from new corporate contracts gained at the end of 2009 and during 2010, as well as some recovery in spend from its existing customer base. The Division continues to expand its geographic reach and has invested in people to maintain its service levels and expertise across a diverse range of industry sectors.

SPS

Total revenue £16.25m (2009: £16.85m)

Revenue in the Division was 4% below prior year. Underlying operating profit was £0.06m compared to a small loss in 2009. As a result of the weak performance, further cost cutting initiatives have been undertaken during the year. In addition the business has strengthened its senior management team with particular emphasis on sales and marketing.

Dividend

The Board has recommended a final dividend of 9.0p per share, an increase of 6% compared to 2009. The Board seeks to pay a progressive dividend whilst having regard for the performance and cash requirements of the Group.

Strategy

The Board reiterates its strategy of revenue investment in driving profitable organic growth in its three Divisions and continuing to grow market share.

The Board continues to examine ways of reducing the risk of the pension fund to the Group. An early retirement exercise was completed in 2010 and an offer allowing deferred members to transfer funds out of the scheme at an enhanced value is underway. The Board will continue to seek further strategic opportunities to reduce the pension deficit.

Outlook

The positive trading trends experienced in 4imprint Direct Marketing and Brand Addition in 2010 have continued into the early part of the new year. The Board, while mindful of the potential macroeconomic risk, remains optimistic for the performance of the Group in 2011.

John Poulter

Chairman

2 March 2011

* Operating profit before IAS 38 marketing cost adjustment, defined benefit pension charges, share option costs and exceptional items.

Finance Director's Report

Group results	2010 £m	2009 restated £m	Change
Group revenue	200.77	169.09	+19%
Underlying operating profit*	10.49	5.45	+92%
Operating profit	8.60	3.14	+174%
Profit before tax	8.09	2.83	+186%
Net debt	(0.24)	(3.13)	+£2.89m

* Operating profit before IAS 38 marketing cost adjustment, defined benefit pension charges, share option costs and exceptional items.

Divisional summary	Revenue
	2010 £m	2009 £m	Change
4imprint Direct Marketing	128.97	111.14	+16%
Brand Addition	58.89	44.22	+33%
SPS	16.25	16.85	-4%
Inter-segment	(3.34)	(3.12)
	200.77	169.09	+19%

Revenue increased in both the 4imprint Direct Marketing and Brand Addition Divisions with a small decrease in SPS. The Group estimates that the impact of the 53 v 52 week reporting period in 2009 v 2010 resulted in approximately a £1m reduction in revenue in the 4imprint Direct Marketing Division.

	Underlying operating profit
	2010 £m	2009 restated £m	Change
4imprint Direct Marketing	7.97	3.56	+124%
Brand Addition	4.28	3.37	+27%
SPS	0.06	(0.06)
Head Office	(1.82)	(1.42)
	10.49	5.45	+92%

Underlying operating profit increased in all Divisions as a result of tight control of costs and investment in marketing and infrastructure to grow market share resulting in increased revenue in the 4imprint Direct Marketing and Brand Addition Divisions.

KPIs

The Board monitors progress on the Group's strategy by reference to the following KPIs:

        •      Revenue by division

        •      Underlying operating profit by division

        •      Group profit before tax

        •      Group and divisional operating cash flow

These are discussed in the divisional operating reviews and in this report.

IAS 38 Marketing cost adjustment

As discussed in the interim statement the Group has adopted the amendment to IAS 38 'Intangible assets' in these financial statements. The amendment requires the expense for mail order catalogues and related marketing expenses to be recognised when the Group has access to the catalogues rather than when the catalogues are distributed. At the end of the year catalogues to which the Group had access are expensed rather than being included in prepayments. This resulted in a small increase in 2010 profit of £0.02m (2009: £0.26m), following restatement of 2008 and 2009 opening balance sheets.

Share option charge

The Group charged £0.22m (2009: £0.54m) to operating profit. In 2010 this charge is in respect of employee share option schemes in the UK and USA. The charge has been restated in line with a clarification to IFRS 2 'share based payments' that the cancellation of options by employees results in a charge of the full remaining cost of the options. This has resulted in an increase in the 2010 charge of £0.10m (2009: £0.11m). The charge is a non cash item.

Defined benefit pension scheme

The Group sponsors a defined benefit pension scheme, closed to new members. At 5 April 2010 (the date of the triennial valuation), the scheme had 1,170 pensioners (2009: 982) and 1,042 deferred members (2009:1,293) and 2 active members (2009: 2).

The triennial valuation of the scheme as at 5 April 2010 was completed in December 2010 and resulted in a deficit on a scheme funding basis of £26.26m, based on assets of £74.94m and liabilities at £101.20m. At the year end, the IAS 19 pension valuation showed a £21.91m deficit with an increase in assets to £77.55m and liabilities at £99.46m (see note 6). The Group has agreed a cash contribution rate to the scheme of £3m for 2011 (increasing at 3% per annum).

The deficit of £21.91m is £0.55m less than the previous year end. This is due to higher asset values (£3.50m) offset by higher liability (£2.95m), as a result of a reduction in the discount rate from 5.8% to 5.5%.

During the year an early retirement exercise was undertaken and 184 members opted to take early retirement from the scheme. In addition, the Company is proposing to make an enhanced transfer value offer to those deferred members who wish to receive it. A trivial commutation exercise is also ongoing. In addition, from March 2011 the scheme will be closed to future accrual.

Exceptional items

The Group charged £1.13m to exceptional items in the year (2009: £0.77m).

Exceptional charges of £0.54m related to further restructuring in the SPS Division - including reduction in headcount and the planned closure of an off site warehouse in early 2011.

An exceptional charge of £0.59m related to a 4imprint Group plc guarantee for a leasehold property. This guarantee was maintained following the sale of the Henry Booth business by the Group in 2000. Bemrosebooth Ltd, who acquired the Henry Booth business, went into administration in 2010 and 4imprint became liable for the obligation to the end of the lease in March 2013. An extensive search has not revealed any other historical property guarantees.

Taxation

The Group tax charge was £1.23m (2009: £0.42m), an effective rate of 15% (2009: 15%). The tax charge is below the Group's marginal rate due principally to the utilisation of previously unrecognised tax losses. The Group had a tax cash refund of £0.60m in the year and paid tax of £0.10m in overseas territories.

Earnings per share

Underlying basic earnings per share were 32.87p (2009:17.07p) and basic earnings per share were 26.65p (2009: 9.39p). The calculations are set out in note 4.

Dividend

The Board has proposed a final dividend of 9.0p which together with the interim dividend of 4.7p, gives a dividend paid and proposed for the period of 13.7p, an increase of 7.5% compared to prior year.

Cash flow

The Group's net debt at 1 January 2011 was £0.24m, a reduction of £2.89m in the year. The principal components of the cash flow movement are:

	£m
Underlying operating profit	10.49
Working capital movement	(1.69)
Depreciation and amortisation	2.06
Capital expenditure	(1.54)
Cash exceptional items	(0.53)
	8.79
Tax and interest	0.02
Defined benefit pension contributions	(2.50)
Dividends	(3.40)
Exchange and other	(0.02)
Reduction in net debt	2.89

Net debt

	2010	2009
	£m	£m
Cash and cash equivalents	8.46	5.61
Borrowings due in less than one year	(0.37)	(6.20)
Borrowings due after one year	(8.33)	(2.54)
	(0.24)	(3.13)

Borrowing facilities

The Group agreed new facilities with Lloyds TSB Bank plc in January 2010 and with JPMorgan Chase Bank  in the USA in August 2010. These facilities are set out below.

The Group has a £9.75m facility with Lloyds TSB Bank plc, its principal banker. A £6m facility at an interest rate of LIBOR plus 3%, repayable on 31 December 2012, a £1.75m mortgage at an interest rate of LIBOR plus 2.75%, repayable £0.25m on 30 December 2011 and £1.5m on 31 December 2012 and an overdraft facility of £2m at base rate plus 2.75% renewable on 31 December 2011. The Group's US subsidiary has a facility of US$10m with JPMorgan Chase Bank, at an interest rate of US$ LIBOR plus 1.5% repayable on 20 April 2012.

The Group had headroom on its borrowing facilities of £7.77m at year end; together with cash balances of £8.46m; in total available funding of £16.23m.

Balance sheet and Shareholders' funds

	2010 £m	2009 restated £m
Non current assets	29.68	31.45
Working capital	10.68	8.64
Net debt	(0.24)	(3.13)
Pension deficit	(21.91)	(22.45)
Other (liabilities)/assets	(1.00)	0.05
Net assets	17.21	14.56

Net assets increased by £2.65m with the principal movements being profit for the period £6.86m offset by dividend payments totalling £3.40m and a net pension deficit adjustment to reserves £1.10m.

Exchange

The main exchange rates relevant to the Group are set out below:

	2010		2009
	Year end	Average	Year end	Average
US Dollar	1.57	1.55	1.61	1.56
Euro	1.17	1.17	1.13	1.12

The movements in the average rates in the year increased operating profit in the US business by £0.09m and reduced the operating profit of the German business by £0.04m. The movements in the year end rates resulted in an increase in US dollar denominated overseas subsidiaries assets of £0.23m and a decrease in Euro denominated overseas subsidiary assets of £0.09m.

Critical accounting policies

Critical accounting policies are those that require significant judgements or estimates and potentially result in materially different results under different assumptions or conditions. It is considered that the Group's critical accounting policies are pensions, deferred taxation, goodwill and inventory provisions.

New accounting standards

As already mentioned the Group has adopted the amendment to IAS 38 'Intangible Assets' and the clarification to IFRS 2 'share-based payments' in the period. In addition the adoption of the following standards have impacted on the financial statements:

IAS 1 'Presentation of Financial Statements' (Revised 2007): IAS 1 (revised) requires the presentation of a Statement of Changes in Equity as a performance statement. As a result, a Group Statement of Changes in Shareholders' Equity has been included in the primary statements rather than in the notes. The Group has elected to show the Income Statement and Statement of Comprehensive Income as separate performance statements.

IFRS 8 - 'Operating Segments' and other new or amended standards effective during the period have not impacted upon the financial statements.

Treasury policy

Treasury policy is to manage centrally the financial requirements of the Divisions in line with their business needs. The Group operates cash pooling arrangements on currency accounts separately for its US operations and its UK operations. The Group enters into forward contracts to buy or sell currency relating to specific receivables and payables. It matches its remaining currency requirements in its UK Divisions with currency cash flows arising in its overseas subsidiaries and holds the majority of cash or borrowings with its principal UK banker.

Principal risks

The Group reported in its Annual Report for the period ended 2 January 2010 that its activities expose it to a number of operational and financial risks. These principal risks, as set out in the Director's Report and note 20 of the 2009 Annual Report, remain unchanged at the date of this announcement.

The principal risks are: macroeconomic conditions; market competitors and new products; operation risks; purchase of material and services; potential litigation and complaints; and changes in law or regulation.

Gillian Davies

Group Finance Director

2 March 2011

Operating Review

4imprint Direct Marketing

		2010	2009 restated
		£'000	£'000
External Revenue		128,972	111,138
Underlying operating profit		7,973	3,557
Operating profit		7,998	3,838

Revenue in the Division increased 16% over 2009 (15% at constant currency) as continuous enhancement of marketing techniques, more favourable market conditions and the decision to maintain marketing investment during the economic downturn in 2009 allowed the business to emerge from the recession in a strong position. In 2010, North American revenue in US Dollars was $190.1m, compared to $165.4m in the previous year. Revenue in the UK and Ireland was £6.0m, compared to £5.3m in 2009. Operating profit was more than double that of 2009 driven largely by the improving yield on customer acquisition activities.

Industry sources in the USA estimate the size of the promotional products industry in 2010 to be $17.4bn. This represents a 9% increase over 2009, but is still 12% below the 2008 market estimate of $19.8bn. In contrast, 4imprint Direct Marketing revenue in the USA increased by 12% between 2008 and 2010. 4imprint's revenue in the UK and Canadian markets is also well above pre-recession levels.

In 2010, the yield on prospecting activities improved, generating an 11% increase in customers acquired during the year to more than 100,000. In addition, existing customers were retained at a higher rate, a result of increasingly sophisticated marketing programmes that deliver highly targeted materials to each individual customer. Orders from existing customers produce a stronger contribution as the cost of acquisition has already been absorbed. Together, these prospecting and retention dynamics along with a stabilised average order value were the principal factors contributing to increases in profitability and return on sales in the year.

2010 was a year of progress for the developing UK based Direct Marketing business. Although the UK economic conditions remain uncertain, revenue increased by 12%, reflecting the progress made in both prospecting and customer retention activities and the business made a small profit.

The business is committed to creating a working environment that attracts and retains the best employees and equips them with the training and tools they need to deliver the superior customer experience that is a key component to growth. In 2010, this was reflected in the North American operation being named for the third consecutive year in the list of 'Best Small & Medium Workplaces in America' by the Great Place to Work Institute® and the 'Investors in People' accreditation achieved in the UK.

The Division remains highly cash generative, with net operating cash inflow broadly equivalent to operating profit in the year.

Operating Review

Brand Addition

		2010	2009
		£'000	£'000
External and inter division revenue		58,886	44,219
External revenue		58,414	43,594
Underlying operating profit		4,284	3,370
Operating profit		4,284	3,183

Total revenue in Brand Addition at £58.89m increased 33% over 2009 and underlying operating profit increased by 27%. The revenue growth in 2010 was a result of new contracts gained, including some major international customers gained in 2009, as well as an improvement in sales to existing customers as the economic environment stabilised.

The Division continues to pursue its strategy of providing value added service to its existing customers whilst vigorously pursuing new business opportunities, expanding both its market share and geographic reach. Over half of the Division's revenue comes from outside the UK.

Underlying operating profit was £4.28m, £0.91m ahead of prior year. Operating margin was slightly lower than prior year as a result of customer mix and some foreign exchange impact. The Division also invested in its customer facing teams to ensure that it continues to deliver excellent service to customers as well as pursuing its business growth strategy and maintaining strong control of costs.

The Division is cash generative requiring minimal fixed capital investment and some working capital investment to support growth.

Operating Review

SPS

	2010	2009 restated
	£'000	£'000
External and inter division revenue	16,252	16,847
External revenue	13,382	14,356
Underlying operating profit /(loss)	57	(56)
Operating loss	(486)	(73)

Total revenue for 2010 at £16.25m was 4% below prior year. Further production efficiencies and cost cutting initiatives were undertaken in the year to mitigate the reduction in revenue. Underlying operating profit before depreciation in 2010 was £0.77m compared to £0.71m in 2009. Underlying operating profit for 2010 was £0.06m compared with a loss of £0.06m in 2009.

The business continues to focus on improving its revenue and customer service levels and has strengthened its senior management, sales and customer service teams during the year. In addition, the business continues to focus on its product offering with further product development in manufactured products being undertaken and modest investment in new digital printing, embroidery and screen printing technology.

The business continued to maintain tight control of working capital and cash generated in the year was ahead of underlying operating profit before depreciation and amortisation.

Exceptional costs in the year related to reduction in headcount from 227 to 211 and closure of an off site warehouse.

Group income statement for the 52 weeks ended 1 January 2011

		2010 52 weeks	2009 53 weeks restated*
	Note	£'000	£'000
Revenue	1	200,768	169,088
Operating expenses		(192,172)	(165,948)
Operating profit	1	8,596	3,140
Operating profit before exceptional items		9,721	3,911
Exceptional items	2	(1,125)	(771)
Operating profit	1	8,596	3,140
Finance income		13	28
Finance costs		(522)	(343)
Profit before tax		8,087	2,825
Taxation	3	(1,225)	(424)
Profit for the period - attributable to equity Shareholders		6,862	2,401
Earnings per share
Basic	4	26.65p	9.39p
Diluted	4	26.05p	9.29p

* Note 9

All amounts in the income statement relate to continuing operations for both the current and prior periods.

Group statement of comprehensive income for the 52 weeks ended 1 January 2011

		2010 52 weeks	2009 53 weeks restated*
	Note	£'000	£'000
Profit for the period		6,862	2,401
Other comprehensive income/(expense)
Exchange differences on translation of foreign subsidiaries		193	(1,123)
Actuarial losses on defined benefit pension scheme	6	(1,387)	(6,701)
Tax relating to components of other comprehensive income		388	1,876
Effect of change in UK tax rate		(219)	-
Other comprehensive expense net of tax		(1,025)	(5,948)
Total comprehensive income/(expense) for the period		5,837	(3,547)

* Note 9

Group balance sheet at 1 January 2011

	Note	2010	2009 restated*	2008 restated*
		£'000	£'000	£'000
Non current assets
Property, plant and equipment		12,580	13,063	12,548
Intangible assets - goodwill		9,084	9,084	9,084
Other intangible assets		1,657	1,730	1,630
Investments		9	10	11
Deferred tax assets		6,348	7,558	6,244
		29,678	31,445	29,517
Current assets
Inventories		6,317	7,022	8,449
Trade and other receivables		29,947	23,207	27,685
Cash and cash equivalents		8,465	5,613	4,411
		44,729	35,842	40,545
Current liabilities
Trade and other payables		(25,588)	(21,390)	(23,601)
Current tax		(239)	(150)	(151)
Borrowings		(374)	(6,196)	-
Provisions for other liabilities and charges		(377)	-	-
		(26,578)	(27,736)	(23,752)
Net current assets		18,151	8,106	16,793
Non current liabilities
Retirement benefit obligations	6	(21,905)	(22,450)	(16,937)
Borrowings		(8,330)	(2,543)	(8,600)
Provisions for other liabilities and charges		(383)	-	-
		(30,618)	(24,993)	(25,537)
Net assets		17,211	14,558	20,773
Shareholders' equity
Share capital		9,939	9,939	9,846
Share premium reserve		38,016	38,016	38,016
Capital redemption reserve		208	208	208
Cumulative translation differences		221	28	1,151
Retained earnings		(31,173)	(33,633)	(28,448)
Total equity		17,211	14,558	20,773

* Note 9

Group statement of changes in Shareholders' equity

					Retained earnings
	Share capital	Share premium reserve	Capital redemption reserve	Cumulative translation differences	Own shares	Profit and loss	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 28 December 2008	9,846	38,016	208	1,151	(519)	(27,143)	21,559
Change in accounting policies*						(786)	(786)
Balance at 28 December 2008 (restated)	9,846	38,016	208	1,151	(519)	(27,929)	20,773
Profit for the period*						2,401	2,401
Other comprehensive income/(expense)
Exchange differences on translation of foreign subsidiaries				(1,123)			(1,123)
Actuarial losses on defined benefit pension scheme						(6,701)	(6,701)
Tax relating to components of other comprehensive income						1,876	1,876
Total comprehensive expense				(1,123)		(2,424)	(3,547)
Shares issued	93						93
Own shares utilised					451	(451)	-
Own shares purchased					(93)		(93)
Share based payment charge*						470	470
Deferred tax on share based payment charge						(14)	(14)
Dividends						(3,124)	(3,124)
Balance at 2 January 2010	9,939	38,016	208	28	(161)	(33,472)	14,558
Profit for the period						6,862	6,862
Other comprehensive income/(expense)
Exchange differences on translation of foreign subsidiaries				193			193
Actuarial losses on defined benefit pension scheme						(1,387)	(1,387)
Tax relating to components of other comprehensive income						388	388
Effect of change in UK tax rate						(219)	(219)
Total comprehensive income				193		5,644	5,837
Share based payment charge						215	215
Dividends						(3,399)	(3,399)
Balance at 1 January 2011	9,939	38,016	208	221	(161)	(31,012)	17,211

*restated (note 9)

Group cash flow statement for the 52 weeks ended 1 January 2011

		2010 52 weeks	2009 53 weeks
	Note	£'000	£'000
Cash flows from operating activities
Cash generated from operations	8	7,849	7,633
Net tax recovered		499	73
Finance income		13	28
Finance costs		(497)	(340)
Net cash generated from operating activities		7,864	7,394
Cash flows from investing activities
Purchases of property, plant and equipment		(884)	(1,679)
Purchases of intangible assets		(656)	(633)
Net cash used in investing activities		(1,540)	(2,312)
Cash flows from financing activities
Proceeds from borrowings		10,814	-
Repayment of borrowings		(10,814)	(174)
Capital element of finance lease payments		(129)	(126)
Proceeds from issue of ordinary shares		-	93
Purchase of own shares		-	(93)
Dividends paid to Shareholders	5	(3,399)	(3,124)
Net cash used in financing activities		(3,528)	(3,424)
Net movement in cash, cash equivalents and bank overdrafts		2,796	1,658
Cash, cash equivalents and bank overdrafts at beginning of the period		5,613	4,411
Exchange gains/(losses) on cash, cash equivalents and bank overdrafts		56	(456)
Cash, cash equivalents and bank overdrafts at end of the period		8,465	5,613
Analysis of cash, cash equivalents and bank overdrafts
Cash at bank and in hand		5,215	5,613
Short term deposits		3,250	-
		8,465	5,613

Notes

General Information

4imprint Group plc, registered number 177991, is a public limited company incorporated and domiciled in the UK and listed on the London Stock Exchange. Its registered office is 7/8 Market Place, London W1W 8AG.

Basis of preparation

The financial information set out in this document does not constitute the Group's statutory accounts for the year ended 1 January 2011 or 2 January 2010. The annual report and financial statements for the year ended 1 January 2011 were approved by the Board of Directors on 2 March 2011, along with this announcement, but have not yet been delivered to the Registrar of Companies. The auditors' report on the statutory accounts for the year ended 1 January 2011 was unqualified and did not contain a statement under section 498 of the Companies Act 2006. Statutory accounts for the year ended 2 January 2010 have been delivered to the Registrar of Companies. The auditors' report on the statutory accounts for the year ended 2 January 2010 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

The audited consolidated financial statements from which these results are extracted have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The accounting policies set out below represent an extract of the policies set out in the consolidated financial statements. These policies have been consistently applied to all the periods presented except as noted below.

 

IAS 38 'Intangible Assets': Following an amendment to IAS 38 an expense will now be recognised for mail order catalogues and other related marketing expenses when the Group has access to the catalogues, rather than when the catalogues are distributed to customers as was the previous policy.

 

IFRS 2 'Share-based payments': A clarification to the interpretation of this standard requires that cancellations of options by employees are to be treated in the same way as cancellations by the employer and that the full remaining cost of the options are expensed at the time of cancellation.

The impact on the financial statements of the above policy changes is shown in note 9.

IAS 1 (revised), 'Presentation of financial statements'. In applying this standard both the income statement and statement of comprehensive income have been presented as performance statements.

IFRS 8 - 'Operating Segments': The reporting requirements of IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The adoption of this standard in the current reporting period has not impacted on the reported numbers or segments.

Other new and revised standards effective during the period have not impacted on the Group financial statements.

Critical accounting policies

Critical accounting policies are those that require significant judgement or estimates and potentially result in materially different results under different assumptions or conditions.  Management consider the following to be the critical accounting policies.

Pensions

As disclosed in note 6 the Group operates a closed defined benefit scheme. Year end recognition of the liabilities under this scheme and the return on assets held to fund these liabilities require a number of significant actuarial assumptions to be made including inflation, asset returns, discount rate and mortality rates. Small changes in assumptions can have a significant impact on the expense recorded in the income statement and on the pension liability in the balance sheet.

Deferred taxation

The Group is required to estimate the income tax in each of the jurisdictions in which it operates. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different tax and accounting treatments. Assumptions are made around the extent to which it is probable that future taxable profit will be available against which the temporary differences can be utilised and deferred tax assets are recognised at the balance sheet date based on these assumptions.

 

Goodwill

Goodwill on acquisition of subsidiaries is included in intangible assets and is stated at cost less any impairment. Goodwill is not amortised but is tested annually for impairment. The test for impairment involves the use of assumed discount rates, future growth rate and operating margins. Changes in the assumptions can have an impact on the impairment test.

Inventory provisions

Inventory provisions are made in relation to slow moving and obsolete inventory and are based on assumptions of expected usage using historic and forecast sales as a basis.

1. Segmental reporting

The chief operating decision maker has been identified as the Executive Committee and the segmental analysis is presented based on the Group's internal reporting to the Executive Committee.

At 1 January 2011, the Group is reported in three primary business segments:

Revenue	Total		Inter-segment		External
	2010 £'000	2009 £'000	2010 £'000	2009 £'000	2010 £'000	2009 £'000
4imprint Direct Marketing	128,972	111,138	-	-	128,972	111,138
Brand Addition	58,886	44,219	(472)	(625)	58,414	43,594
SPS	16,252	16,847	(2,870)	(2,491)	13,382	14,356
Total	204,110	172,204	(3,342)	(3,116)	200,768	169,088

All revenue is derived from the sale of promotional products. Inter-segment revenues are on an arms-length basis.

Operating profit	Underlying         operating profit		Exceptional items		Operating    profit/(loss)
	2010 £'000	2009 £'000	2010 £'000	2009 £'000	2010 £'000	2009 restated £'000
4imprint Direct Marketing	7,973	3,557	-	-	7,973	3,557
Brand Addition	4,284	3,370	-	(187)	4,284	3,183
SPS	57	(56)	(537)	-	(480)	(56)
Head Office	(1,828)	(1,419)	(588)	(584)	(2,416)	(2,003)
	10,486	5,452	(1,125)	(771)	9,361	4,681
IAS 38 marketing cost adjustment* - 4imprint Direct Marketing - SPS					25 (6)	281 (17)
Defined benefit pension charge					(569)	(1,268)
Share option charge					(215)	(537)
Operating profit					8,596	3,140

* Note 9

Net finance cost totalling £509,000 (2009: £315,000) and taxation charge of £1,225,000 (2009: £424,000) cannot be separately allocated to individual segments.

A description and review of the segments is included in the Operating Review.

During the year the operating segments have been renamed to reflect their trading names: Direct Marketing is now 4imprint Direct Marketing; End User is now Brand Addition; and Trade is now SPS. This has not impacted on the components of the segments.

2. Exceptional items

	2010	2009
	£'000	£'000
Onerous contracts and termination costs	(588)	(584)
SPS restructuring costs	(537)	-
Brand Addition reorganisation costs	-	(187)
	(1,125)	(771)

The onerous contract charge in the year related to a 4imprint Group plc guarantee for a leasehold property. This guarantee was maintained following the sale of the Henry Booth business by the Group in 2000. Bemrosebooth Ltd, who acquired the Henry Booth business, went into administration in 2010 and 4imprint became liable for the obligation to the end of the lease in March 2013. An extensive search has not revealed any other historical property guarantees.

SPS restructuring costs related to the closure of an offsite warehouse facility and a headcount reduction exercise.

Cash expenditure on exceptional items in 2010 was £526,000 (2009: £829,000). Cash items of £456,000 (2009: £728,000) are included in accruals and £760,000 included in provisions (2009: £nil) at 1 January 2011.

3. Taxation

	2010	2009 restated
	£'000	£'000
Analysis of charge/(credit) in the period:
UK tax - current	-	3
Overseas tax - current	208	95
Adjustments in respect of prior years	-	(144)
Total current tax	208	(46)
Deferred tax	1,021	524
Effect of change in UK tax rate	(4)	-
Adjustment in respect of prior years	-	(54)
Total deferred tax	1,017	470
Taxation	1,225	424

The tax for the year is different to the standard rate of corporation tax in the UK (28%). The differences are explained below:

	2010	2009 restated
	£'000	£'000
Profit before tax	8,087	2,825
Profit before tax multiplied by rate of corporation tax in the UK of 28% (2009: 28%)	2,264	791
Effects of:
Adjustments in respect of foreign tax rates	138	(152)
Expenses not deductible for tax purposes and non taxable income	78	(18)
Timing differences and other differences	(455)	1
Adjustments in respect of previous years	-	(198)
Utilisation of losses not previously recognised	(796)	-
Effect of change in UK tax rate on deferred tax balances	(4)	-
Taxation	1,225	424

4. Earnings per share

Basic, underlying and diluted

The basic, underlying and diluted earnings per share are calculated based on the following data:

	2010	2009 restated
	£'000	£'000
Profit for the period	6,862	2,401
Add back:
IAS 38 marketing cost adjustment	(19)	(264)
Defined benefit pension charge	569	1,268
Share option charge	215	537
Exceptional items	1,125	771
Tax relating to above items	(287)	(347)
Underlying profit for the period	8,465	4,366

	Number 000's	Number 000's
Basic weighted average number of shares	25,750	25,574
Dilutive potential ordinary shares - employee share options	593	261
Diluted weighted average number of shares	26,343	25,835
Basic earnings per share	26.65p	9.39p
Underlying basic earnings per share	32.87p	17.07p
Diluted earnings per share	26.05p	9.29p

The basic weighted average number of shares excludes shares held in the 4imprint Group plc Employee Share Trust. The effect of this is to reduce the average by 90,325 (2009: 170,648).

5. Dividends

	2010	2009
Equity dividends - ordinary shares	£'000	£'000
Interim paid:    4.7p (2009: 4.25p)	1,210	1,098
Final paid:        8.5p (2009: 8.0p)	2,189	2,026
	3,399	3,124

In addition, the Directors are proposing a final dividend in respect of the period ended 1 January 2011, of 9.0p per share, which will absorb an estimated £2.32m of Shareholders' funds. It will be paid on 4 May 2011 to Shareholders who are on the register of members on 1 April 2011. These financial statements do not reflect this proposed dividend.

6. Employee pension schemes

The Group operates defined contribution plans for the majority of its UK and US employees. The regular contributions are charged to the income statement as they are incurred.

The Group also operates a UK defined benefit scheme which is closed to new members.

Net pension costs			2010 £'000	2009 £'000
Defined contribution plans			505	493
Defined benefit scheme
- Current service cost			38	28
- Net interest charge			531	1,240
			1,074	1,761

Defined benefit scheme

The financial position of the defined benefit scheme has been updated on an approximate basis at 1 January 2011. The last full actuarial valuation was carried out by a qualified independent actuary as at 5 April 2010.

The principal assumptions made by the actuaries at each period end were:

	2010	2009
Rate of increase in pensionable salaries	4.4%	4.4%
Rate of increase in pensions in payment and deferred pensions	3.4%	3.4%
Discount rate	5.5%	5.8%
Inflation assumption	3.4%	3.4%
Expected return on scheme assets	6.3%	6.8%

The expected return on scheme assets is a weighted average based on actual scheme assets held and respective returns expected on the separate asset classes, as calculated by the Group's independent actuaries.

The mortality assumptions adopted at 1 January 2011 imply the following life expectancies at age 65:

	2010	2009
Male currently age 40	24.4 yrs	21.5 yrs
Female currently age 40	27.9 yrs	24.2 yrs
Male currently age 65	22.0 yrs	20.3 yrs
Female currently age 65	25.3 yrs	23.2 yrs

The amounts recognised in the balance sheet comprise:

	2010 £'000	2009 £'000
Present value of funded obligations	(99,460)	(96,505)
Fair value of scheme assets	77,555	74,055
Net liability recognised in the balance sheet	(21,905)	(22,450)

Analysis of the movement in the balance sheet liability:

	2010	2009
	£'000	£'000
At start of period	22,450	16,937
Total expense	569	1,268
Contributions paid	(2,501)	(2,456)
Actuarial losses recognised in other comprehensive income	1,387	6,701
At end of period	21,905	22,450

7. Analysis of net debt

		2010	2009
		£'000	£'000
Cash at bank and in hand		5,215	5,613
Short term deposits		3,250	-
Current finance lease creditor		(135)	(124)
Current bank loan		(239)	(6,072)
		8,091	(583)
Non current bank loans		(8,037)	(2,127)
Non current finance lease creditor		(293)	(416)
Net debt		(239)	(3,126)

8. Cash generated from operations

	2010	2009 restated
	£'000	£'000
Operating profit	8,596	3,140
Adjustments for:
Depreciation charge	1,384	1,448
Amortisation of intangibles	674	643
Loss on disposal of property, plant and equipment	-	26
Exceptional non cash items	111	-
Increase/(decrease) in exceptional accruals/provisions	488	(58)
Share option non cash charge	215	470
IAS 19 pension charge for defined benefit scheme	569	1,268
Contributions to defined benefit pension scheme	(2,501)	(2,456)
Changes in working capital:
Decrease in inventories	688	1,158
(Increase)/decrease in trade and other receivables	(6,683)	3,405
Increase/(decrease) in trade and other payables	4,308	(1,411)
Cash generated from operations	7,849	7,633

9. Prior years' restatements

IAS 38 'Intangible Assets': Following an amendment to IAS 38 an expense will now be recognised for mail order catalogues and other related marketing expenses when the Group has access to the catalogues, rather than when the catalogues are distributed to customers as was the previous policy.

The impact on reported profit for the period ended 2 January 2010 was to decrease operating expenses by £264,000, which has the impact of increasing profit after tax by £224,000. Net assets at 2 January 2010 are reduced by £496,000 as a result of this change of policy (2008: £786,000 decrease).

IFRS 2 'Share-based payments': A clarification to the interpretation of this standard requires that cancellations of options by employees are to be treated in the same way as cancellations by the employer and that the full remaining cost of the options are expensed at the time of cancellation. As a result of this clarification, operating expenses for the period ended 2 January 2010 have increased by £111,000, which reduces profit after tax by £94,000. There is no net impact on net assets.

As a result of these changes in accounting policy, the comparative amounts have been restated, as follows:

	2009
	£'000
Profit for the period as previously reported	2,271
Decrease in operating expenses	153
Deferred tax impact of the above	(23)
Profit for the period as restated	2,401

	2009	2008
	£'000	£'000
Net assets as previously reported	15,054	21,559
Reduction in trade and other receivables	(831)	(1,169)
Increase in deferred tax asset	335	383
Net assets as restated	14,558	20,773

10. Related party transactions

The Group did not participate in any related party transactions that require disclosure.

Statement of Directors' Responsibilities

Each of the Directors confirm that, to the best of their knowledge:

·      the financial statements within the full Annual Report and Accounts from which the financial information within this Final Results announcement has been extracted, have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·      the Finance Director's Report and Operating Review include a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

By order of the Board

John Poulter                                      Gillian Davies

Chairman                                           Group Finance Director

2 March 2011

 

END

 

 

FR UAOWRAUAORAR