Interim Results

4imprint Group PLC 02 August 2006 4imprint Group plc - Interim Results 2006 02 August 2006 Highlights • Sales from continuing operations at £55.31m were 24% up on half year 2005 • Operating profit before exceptional items from continuing operations at £3.16m was 44% up on half year 2005 • Profit before tax and exceptional items from continuing operations was £3.27m, 39% ahead of half year 2005 • Profit before tax from continuing operations at £3.08m was 31% ahead of half year 2005 • Profit after tax (tax rate 30%), from continuing operations was £2.15m; compared to profit after tax (tax rate 6%), of £2.21m in half year 2005 • Basic EPS from continuing operations was 8.79p, 10% up on half year 2005 • Interim dividend of 3.25p per share, an increase of 30% on prior year • Net cash at 1 July 2006 was £8.40m Chairman's Statement Shareholders will be pleased to see that the first half of 2006 has been another period of substantial progress for their Company. Sales of continuing businesses (shareholders will recall that the US Franchising business was sold in July 2005) at £55.31m, were 24% ahead of the same period last year. Operating profit from continuing operations, before exceptional items, defined benefit pension charges and share option charges, at £3.63m was 37% ahead of the same period last year. After exceptional costs of £0.19m, defined benefit pension charges of £0.17m and share option charges of £0.30m, operating profit from continuing operations was £2.97m, an increase of 35% on £2.20m in half year 2005. Net finance income was £0.11m and profit before tax on continuing operations was £3.08m. Profit after tax (tax rate 30%), from continuing operations was £2.15m compared to profit after tax (tax rate 6%), from continuing operations of £2.21m in half year 2005. Basic earnings per share from continuing operations were 8.79p an increase of 10% (half year 2005: 8.02p). The Board has declared an interim dividend of 3.25p per share, an increase of 30% over the 2.5p per share paid at the interim in 2005. Net cash at the end of the period was £8.40m. During the first half of this year, much progress has been achieved in both of the Group's operating Divisions, as follows:- US Division In the US Division, sales in sterling increased by 37% to £28.37m, while in US dollars sales were 33% up at $51.15m. All of this growth was attributable to the Direct Marketing sector which has increased sales in dollars by 39% over last half year. The growth reflected the continued investment in the catalogue/ website/call centre model, which is enabling the Division to expand its position as the leader in this type of promotional products distribution. The US Division's operating profits were 47% up on last half year at £2.11m, 44% up in US dollars at $3.86m. The small Corporate Programmes sector increased its modest contribution to the Division's profitability. European Division The European Division comprises two main business sectors, the UK based Broadway business and the German based Kreyer business. Divisional sales were £26.95m, 12% above last half year, while divisional profits before exceptional items at £2.05m were 21% ahead. The Broadway business, now including the European Premium Promotions sector, increased sales by 8% over last half year to £23.22m. The several sectors comprising the Broadway business performed as follows:- (a) Direct Marketing In this sector, which is modelled on the US Direct Marketing business, sales increased by 42% over last half year which reflects the benefits of investments made in catalogue/web/call centre technologies to develop this most attractive business. (b) Corporate Programmes This sector made progress with sales modestly ahead and some important new clients and contracts secured. (c) Premium Promotions This sector, now integrated into the Broadway business, had slightly lower sales than last half year but profitability was ahead, and the business is now soundly based to resume a growth pattern. (d) Field Sales This sector made strong progress with sales and profitability well ahead of last half year. (e) Trade This sector made good progress with sales ahead of last half year, and benefited further from the small MT Golf acquisition made last year. The other business in the European Division, the German based Kreyer business, had a very successful first half with sales 54% ahead of prior half year and profitability also ahead. The excellent progress made reflected both the recovery of the German economy and the initiatives to improve performance implemented by Management. Outlook In general, the markets for the Group's products remain good and the Group expects to continue to progress during the second half. Ken Minton Executive Chairman 2 August 2006 Finance Director's Report Summary of results Sales Sales from continuing operations at £55.31m were 24% ahead of prior half year. Sales growth (in US Dollars) in the US Direct Marketing sector was 39% and the total Division was 33% ahead of prior half year (37% ahead in sterling). Sales growth in the European Division was 12% including a strong performance from Kreyer, the German business, where sales were more than 50% ahead of prior half year. Operating profit Operating profit from continuing operations before exceptional items at £3.16m was 44% ahead of £2.20m prior half year. Discontinued operations operating profit before exceptional items in half year 2005 was £0.74m. Operating profit from the US Division at £2.11m was 47% ahead of prior half year and from the European Division at £2.05m was 21% ahead. Head office costs before exceptional items were £0.54m compared to £0.50m in half year 2005. Charges for the closed defined benefit pension scheme under IAS 19 'Employee benefits' were £0.17m (half year 2005: £0.24m) and for employee benefits under IFRS 2 'Share-based payments' were £0.30m (half year 2005: £0.21m). Exceptional items The exceptional charge of £0.19m comprised two items: (a) Exceptional costs of £0.13m related to a one off Group restructuring exercise to create further distributable reserves in the holding company. (b) Exceptional costs of £0.06m related to an OFT fine and associated legal costs, relating to the supply of stock check pads by a former Group company for the period 20 April 2000 to 2 July 2000 (see note 3). Taxation The tax charge for the period was calculated at 30% (half year 2005: 10%). Discontinued operations Discontinued operations in the half year 2005 related to post tax profit of £0.82m arising from the US based franchising business which was sold on 21 July 2005 and post tax profit of £0.38m related to deferred consideration from the disposal of a US Supplier business in 1999. Segment reporting Following the integration of the European Premium Promotions business into the Manchester based, Broadway business during 2005, the Group now reports all of its European operations as the 'European Division' in accordance with the way the business is managed. Earnings per share Half year Half year 2006 2005 Basic p p Continuing Operations 8.79 8.02 Discontinued Operations - 4.36 8.79 12.38 Basic earnings per share from continuing operations have increased by 10% and total earnings per share have decreased by 29%. The underlying tax rate in 2006 was 30% (2005: 6% for continuing operations and 10% for total operations). In addition, the average number of shares in issue decreased by 11% as a result of a share buyback and purchase of own shares in 2005. Assuming the same tax rates and number of shares in 2005 as 2006, the EPS growth for continuing operations would have been 31%. Dividend The Board has declared a dividend of 3.25p, a 30% increase over prior half year. Cashflow The Group net cash balance at 1 July 2006 was £8.40m. In the period £4.16m cash was generated from trading, £0.74m was paid to the defined benefit pension scheme and £2.14m was absorbed into working capital. Routine capital investment absorbed £0.78m and a £1.11m dividend was paid to shareholders, resulting in a £0.61m reduction in cash. Balance sheet and shareholders' funds Equity shareholders' funds have increased to £19.20m at 1 July 2006 from £15.96m at 31 December 2005. The movement includes a £4.16m reduction in the gross pension deficit to £16.77m (£2.91m reduction net of tax). This was principally due to a 0.5% increase in the discount rate from 4.9% to 5.4% as a result of higher bond yields. Exchange rates The average US dollar exchange rate for the period for translating US profits was $1.8244 (half year 2005: $1.8631) and the closing rate was $1.8496 (June 2005: $1.7714). Gillian Davies 2 August 2006 Operating Review US Division Half year Half year Half year Half year Full year Full year 2006 2006 2005 2005 2005 2005 US$'000 £'000 US$'000 £'000 US$'000 £'000 Sales 51,147 28,368 38,502 20,666 82,965 45,726 Operating profit 3,855 2,113 2,677 1,437 6,692 3,688 The Division comprises: the core Direct Marketing sector serving the US and Canada, and a small Corporate Programmes sector. The first half of 2006 saw further development of the growth pattern evident over the previous two years. Direct Marketing sales, in US dollars, increased 39% over the same period last year, and accounted for 90% of the total Division's sales. As planned, sales in the Corporate Programmes sector were flat against prior half year, however profitability was increased due to improved processes and cost control. The Direct Marketing sector acquires and retains customers through an integrated catalogue-web-customer service marketing approach developed internally. Catalogue circulation to prospective customers has been further increased in conjunction with additional investment in web-based techniques. Similar methods have been used in both the US and Canadian markets, resulting in an increase in new customer orders of 44% and 94% respectively. At the same time, business from a rapidly growing existing customer base is running well ahead of prior year. The Corporate Programmes sector develops deep relationships and delivers excellent service to a stable portfolio of quality companies. Operating profit, in US dollars, for the Division was 44% ahead of prior half year. In addition, the favourable working capital characteristics of the Division allow it to generate strong cash flow as it continues to expand. Operating Review (Continued) European Division Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Sales 26,946 24,042 50,755 Operating profit before exceptional items 2,050 1,700 3,994 Operating profit 2,050 1,700 3,679 The UK based business, accounts for more than 80% of this Division's sales and comprises: a) Direct Marketing - uses an integrated catalogue-web-customer service marketing approach. The alignment of the strategy of this division with the US Direct Marketing business, a significant increase in prospect catalogue circulation and investment in internet selling methods has led to a sales increase of 42% over prior half year. The total number of orders grew by 66% with orders received from new customers 103% ahead of prior half year. Orders from existing customers have also increased significantly with additional focus on customer retention activities. b) Corporate Programmes - builds on its client base by providing sophisticated design, product development and additional support functions including warehousing, distribution and product range consultancy, delivering a fully out-sourced solution for specific corporate promotional programmes. Sales have increased by 7% over prior half year. Investment in people in this division to support new contracts and generate further organic growth has taken place during the period. c) Premium Promotions - specialises in the supply of bespoke promotional products to a range of blue chip clients. Sales were 92% of prior half year, however the business has benefited from stronger margins and cost savings following the re-organisation in 2005. d) Field Sales - supplies promotional merchandise to a range of corporate entities on a preferred supply or 'ad hoc' basis through a number of sales account managers. Sales have increased by 20% over prior half year as the business has benefited from recruitment and the team reorganisation that took place in 2005. e) Trade - supplies a wide range of promotional products on a regular basis to suppliers of end users. It provides bespoke printing and engraving services through its own 'in-house' production facilities. External sales in this sector have increased by 18% including the sales of MT Golf, which was acquired in August 2005. MT Golf is producing net returns in line with that expected on acquisition. Kreyer Promotions, in Germany, comprises Corporate Programmes and Field Sales. The business had an excellent period with an increase in sales of 54% over prior half year whilst profitability has further benefited from increased margins and strong cost control. Ken Minton Executive Chairman 2 August 2006 Consolidated income statement (unaudited) Half year Half year Full year 2006 2005 2005 Note £'000 £'000 £'000 Continuing operations Sales 2 55,314 44,708 96,481 Operating expenses (52,347) (42,512) (91,093) Operating profit 2 2,967 2,196 5,388 Operating profit before exceptional items 3,156 2,196 5,703 Exceptional items 3 (189) - (315) Operating profit 2 2,967 2,196 5,388 Finance costs (18) (45) (47) Finance income 128 192 300 Profit before tax 3,077 2,343 5,641 Taxation 4 (923) (137) (1,691) Profit for the period from continuing operations 2,154 2,206 3,950 Profit for the period from discontinued operations 5 - 1,200 4,012 Profit attributable to equity shareholders 2,154 3,406 7,962 Earnings per share from all operations Basic 6 8.79p 12.38p 30.94p Diluted 6 8.41p 11.86p 29.46p Earnings per share from continuing operations Basic 6 8.79p 8.02p 15.35p Diluted 6 8.41p 7.68p 14.62p Statement of recognised income and expense (unaudited) Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Profit for the period 2,154 3,406 7,962 Exchange adjustments offset in reserves (808) 537 413 Actuarial losses taken to reserves net of tax 2,512 (1,359) (2,721) Net profits/(losses) not recognised in income statement 1,704 (822) (2,308) Total recognised income for the period 3,858 2,584 5,654 Consolidated balance sheet (unaudited) At At 2 July At 1 July 2005 31 Dec 2006 (restated) 2005 Note £'000 £'000 £'000 Non current assets Property, plant and equipment 1,536 1,652 1,370 Goodwill 4,341 4,341 4,341 Intangible assets 3,324 2,510 3,556 Investments 8 7 8 Deferred income tax assets 7,177 8,962 8,921 16,386 17,472 18,196 Current assets Inventories 6,883 5,919 5,663 Trade and other receivables 19,264 22,294 19,864 Cash and cash equivalents 8,403 4,757 9,103 34,550 32,970 34,630 Current liabilities Trade and other payables 13,709 14,652 14,737 Current tax 1,039 783 823 Borrowings - 1,363 91 Provisions 213 164 285 14,961 16,962 15,936 Net current assets 19,589 16,008 18,694 Non current liabilities Retirement benefit obligations 9 16,772 19,447 20,930 Net assets 19,203 14,033 15,960 Shareholders' equity Share capital 10 9,752 9,633 9,634 Share premium reserve 10 37,740 37,683 37,684 Capital redemption reserve 10 208 208 208 Cumulative translation differences 10 (1,018) (77) (210) Retained earnings 10 (27,479) (33,414) (31,356) Total equity 19,203 14,033 15,960 The half year 2005 balance sheet has been restated to be consistent with IFRS implementation in the full year 2005 accounts. The principal restatement related to the pension deficit being recognised in full in accordance with the amendment to IAS 19 'Employee benefits - actuarial gains and losses, group plans and disclosures' and the related deferred tax. Other restatements related to the derecognition of assets which did not meet the definition of an asset under IFRS and the recognition of deferred tax on employee share options. Consolidated cash flow statement (unaudited) Half year Half year Full year 2006 2005 2005 Note £'000 £'000 £'000 Cash flows from operating activities Cash generated from/(used in) operations 8 1,273 (1,290) 4,662 Tax paid (114) (36) (179) Finance income received 128 301 409 Finance income paid (18) (45) (47) Net cash generated from/(used in) operating activities 1,269 (1,070) 4,845 Cash flows from investing activities Acquisition of subsidiary - - (1,975) Disposal of subsidiary - - 5,263 Deferred consideration on disposal of US Supplier business in 1999 - 1,653 1,653 Purchases of property, plant and equipment (478) (289) (457) Purchases of intangible assets (301) (245) (544) Proceeds from sale of property, plant and equipment - 124 131 Net cash (used in)/generated from investing activities (779) 1,243 4,071 Cash flows from financing activities Repayment of borrowings - (669) (2,015) Proceeds from issuance of ordinary shares 174 96 98 Purchase of own shares for cancellation - (9,840) (9,898) Purchase of own shares - - (933) Dividends paid to shareholders (1,109) (992) (1,608) Net cash used in financing activities (935) (11,405) (14,356) Net decrease in cash and bank overdrafts (445) (11,232) (5,440) Cash and bank overdrafts at beginning of the period 9,012 14,666 14,666 Exchange losses on cash and bank overdrafts (164) (40) (214) Cash and bank overdrafts at end of the period 8,403 3,394 9,012 Analysis of cash and bank overdrafts Cash at bank and in hand 8,403 4,757 9,103 Bank overdrafts - (1,363) (91) 8,403 3,394 9,012 1 Basis of preparation The interim financial statements of 4imprint Group plc for the half year ended 1 July 2006 are unaudited and do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information has been prepared on the basis of the accounting policies set out in the Group's annual report and accounts for the year ended 31 December 2005. Those accounts carry an unqualified auditors' report and have been delivered to the Registrar of Companies. The comparative results for the year ended 31 December 2005 are abridged, and as such do not represent statutory accounts. 2 Segmental analysis At 1 July 2006, the Group is organised into two main business segments as detailed in the operating review. The segmental results for the half year ended 1 July 2006 are as follows: Gross segment sales Inter-segment sales Sales Half Half Full Half Half Full Half Half Full year year year year year year year year year 2006 2005 2005 2006 2005 2005 2006 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations 27,493 24,338 51,433 (547) (296) (678) 26,946 24,042 50,755 European Division US Division 28,368 20,666 45,726 - - - 28,368 20,666 45,726 Total 55,861 45,004 97,159 (547) (296) (678) 55,314 44,708 96,481 Operating profit/(loss) before exceptional items Exceptional items Operating profit/(loss) Half Half Full Half Half Full Half Half Full year year year year year year year year year 2006 2005 2005 2006 2005 2005 2006 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations 2,050 1,700 3,994 - - (315) 2,050 1,700 3,679 European Division US Division 2,113 1,437 3,688 - - - 2,113 1,437 3,688 Head Office costs (538) (500) (986) (189) - - (727) (500) (986) Operating profit before 3,625 2,637 6,696 (189) - (315) 3,436 2,637 6,381 defined benefit pension charges and share option charges Defined benefit pension (172) (236) (498) - - - (172) (236) (498) charges Share option charges (297) (205) (495) - - - (297) (205) (495) Total continuing operations 3,156 2,196 5,703 (189) - (315) 2,967 2,196 5,388 Operating profit from - 737 797 - 134 134 - 871 931 discontinued US Franchising Division Total 3,156 2,933 6,500 (189) 134 (181) 2,967 3,067 6,319 Net finance income totalling £110,000 (half year 2005: £147,000, full year 2005: £253,000), and taxation charge of £923,000 (half year 2005: £137,000, full year 2005: £1,691,000) cannot be separately allocated to individual segments. A review of the segments is included in the operating review. 3 Exceptional items Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Group restructuring costs (125) - - OFT fine and related legal costs (64) - - Product recall income - - 129 European reorganisation charge - - (444) Total (189) - (315) The Group restructuring costs comprise legal, accounting and tax fees relating to a one-off project to restructure the legal entities within the Group to create further distributable reserves in 4imprint Group plc (the Company). The OFT fine was imposed in relation to breaches of competition law relating to the supply of stock check pads by BemroseBooth Limited (a former group company) and Achilles Paper Group Ltd. The period during which Bemrose Corporation plc (now 4imprint Group plc) was involved in such supply was from 20 April 2000 to 2 July 2000. Legal costs of defence are also included in this charge. The product recall income in 2005 related to insurance income received net of costs, in respect of the product recall in 2004, the cost of which was disclosed separately in 2004, due to its rare occurrence and size. The European reorganisation charge in 2005 related to the integration of the European Premium Promotions Division into the European Direct Marketing and Corporate Programmes Division (now combined as the European Division), and the integration of MT Promotions Limited, acquired in the period, into the European Division. 4 Taxation The taxation charge for the period to 1 July 2006 has been calculated at 30% (half year 2005: 10%) of the profit before tax for the period. 5 Discontinued operations Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Profit after tax on disposal of US Franchising business - - 2,866 Profit after tax for the period from US Franchising business - 824 770 Profit after tax attributable to disposal of US supplier business in 1999 - 376 376 - 1,200 4,012 6 Earnings per share Basic earnings per share (EPS) is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period, excluding those held in the employee share trust which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares. The potential dilutive ordinary shares relate to those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares at the balance sheet date. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below: Half year Half year Full year 2006 2005 2005 Weighted Weighted Weighted average average average number Pence number Pence number Pence Earnings of shares per Earnings of shares per Earnings of shares per £'000 '000 share £'000 '000 share £'000 '000 share Earnings attributable to 2,154 3,406 7,962 ordinary shareholders Ordinary shares in issue 25,323 27,944 26,217 Shares held by employee (816) (440) (481) share trust Basic EPS 2,154 24,507 8.79 3,406 27,504 12.38 7,962 25,736 30.94 Effect of dilutive share 1,106 (0.38) 1,217 (0.52) 1,291 (1.48) options Diluted EPS Adjusted earnings 2,154 25,613 8.41 3,406 28,721 11.86 7,962 27,027 29.46 Earnings per share from continuing operations Basic EPS 2,154 24,507 8.79 2,206 27,504 8.02 3,950 25,736 15.35 Diluted EPS 2,154 25,613 8.41 2,206 28,721 7.68 3,950 27,027 14.62 Earnings per share from discontinued operations Basic EPS - 24,507 - 1,200 27,504 4.36 4,012 25,736 15.59 Diluted EPS - 25,613 - 1,200 28,721 4.18 4,012 27,027 14.84 7 Dividends The interim dividend for 2006 of 3.25p per ordinary share (interim 2005: 2.50p, final 2005: 4.50p) will be paid on 6 September 2006 to ordinary shareholders on the register at the close of business on 11 August 2006. Dividends paid in the period totalled £1,109,000 (period to 2 July 2005: £992,000, period to 31 December 2005: £1,608,000). 8 Cash generated from operations Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Continuing operations Operating profit 2,967 2,196 5,388 Adjustments for: Depreciation and amortisation 723 715 1,417 Profit on disposal of property, plant and equipment - (16) (13) Share option charge 297 205 495 IAS 19 pension charge for defined benefit scheme 172 236 498 Contributions to defined benefit pension scheme (741) (720) (1,160) Changes in working capital : Increase in inventories (1,249) (1,276) (944) Decrease/(increase) in trade and other receivables 117 (1,255) (2,194) (Decrease)/increase in trade and other payables (941) (2,022) 474 Decrease in provisions (72) (131) (30) Cash generated from/(used in) continuing operations 1,273 (2,068) 3,931 Discontinued operations Operating profit - 1,425 3,294 Adjustments for: Depreciation and amortisation - 129 145 Profit on disposal of subsidiary undertaking - - (1,809) Share option charge - 8 3 Changes in working capital : Decrease in trade and other receivables - 987 170 Decrease in trade and other payables - (1,217) (518) Decrease in provisions - (554) (554) Cash generated from discontinued operations - 778 731 Cash generated from/(used in) operations 1,273 (1,290) 4,662 9 Defined benefit pension scheme The defined benefit pension scheme is closed to new members. The funds of the scheme are administered by a trustee company and are independent of the Group's finances. During the period the financial position of the defined benefit pension scheme has been updated in line with the anticipated annual cost for current service, the expected return on scheme assets, the interest on scheme liabilities and cash contributions made to the scheme. The last full actuarial valuation was carried out by a qualified independent actuary as at 5 April 2004 and this has been updated on an approximate basis to 1 July 2006. The movements in the pension liability were: Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Pension liability at beginning of period 20,930 17,989 17,989 Movement in period Total expenses charged in the income statement 172 236 498 Contributions paid (741) (720) (1,160) Actuarial (gains)/losses taken directly to reserves (3,589) 1,942 3,603 Pension liability at end of period 16,772 19,447 20,930 10 Consolidated statements of changes in shareholders' equity Share Capital Cumulative Retained earnings Share premium redemption translation Own Profit Total capital reserve reserve differences shares and loss equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2005 11,063 37,659 208 (614) (889) (25,563) 21,864 Profit for the period 3,406 3,406 Exchange adjustments 537 537 Shares issued 72 24 96 Own shares purchased and cancelled (1,502) (8,373) (9,875) Employee share options 213 213 Deferred tax on employee share options taken to reserves 143 143 Actuarial losses taken to reserves (1,942) (1,942) Deferred tax on actuarial losses taken to reserves 583 583 Dividends (992) (992) Balance at 2 July 2005 9,633 37,683 208 (77) (889) (32,525) 14,033 Balance at 1 January 2005 11,063 37,659 208 (614) (889) (25,563) 21,864 Profit for the period 7,962 7,962 Exchange adjustments 413 413 Exchange adjustment previously taken to reserves, transferred to income statement on disposal of subsidiary (9) (9) Shares issued 73 25 98 Own shares purchased and cancelled (1,502) (8,396) (9,898) Own shares purchased (933) (933) Employee share options 498 498 Deferred tax on employee 294 294 share options taken to reserves Actuarial losses taken to (3,603) (3,603) reserves Deferred tax on actuarial 882 882 losses taken to reserves Dividends (1,608) (1,608) Balance at 31 December 2005 9,634 37,684 208 (210) (1,822) (29,534) 15,960 Share Capital Cumulative Retained earnings Share premium redemption translation Own Profit Total capital reserve reserve differences shares and loss equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 January 2006 9,634 37,684 208 (210) (1,822) (29,534) 15,960 Profit for the period 2,154 2,154 Exchange adjustments (808) (808) Shares issued 118 56 174 Own shares utilised 222 (222) - Employee share options 297 297 Deferred tax on employee 23 23 share options taken to reserves Actuarial losses taken to 3,589 3,589 reserves Deferred tax on actuarial (1,077) (1,077) losses taken to reserves Dividends (1,109) (1,109) Balance at 1 July 2006 9,752 37,740 208 (1,018) (1,600) (25,879) 19,203 11 Share based payments Share options are granted to Senior Management and in addition a SAYE scheme is available to all UK and US employees. The exercise price of options designed for Senior Management is nil and for SAYE options is equal to the market rate, plus any discount up to the limit imposed by the local tax authority at the pricing date. The fair value of options granted after 7 November 2002 are determined using the Monte Carlo valuation model for executive options and the Binomial model for SAYE options and are spread over the vesting period of the options. The significant inputs into the model are an expected life of between 1.35 and 3 years for all options, the volatility measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices over the last 3 years and a risk-free rate based on a 36 month UK LIBOR. Half year Half year Full year 2006 2005 2005 £'000 £'000 £'000 Charge resulting from spreading the fair value of options granted after 7 297 205 495 November 2002 over the vesting period of the options The Group has no legal or constructive obligation to repurchase or settle the options in cash. 4imprint Group plc Group Headquarters 6 Cavendish Place London W1G 9NB Telephone + 44 (0)207 2997201 Fax + 44 (0)207 2997209 E-mail hq@4imprint.co.uk UK 4imprint Broadway Trafford Wharf Road Manchester M17 1DD Telephone +44 (0)870 240 6622 Fax +44 (0)870 241 3440 E-mail sales@4imprint.co.uk 4imprint Product Plus International South Bank Business Centre Ponton Road London SW8 5BL Telephone +44 (0)207 393 0033 Fax +44 (0)207 393 0080 E-mail sales@4imprint.co.uk 4imprint Product Plus International Clifton Heights Triangle West Bristol BS8 1EJ Telephone +44 (0)117 929 9236 Fax +44 (0)117 925 1808 E-mail sales@4imprint.co.uk USA 4imprint 101 Commerce Street Oshkosh WI 54901 USA Telephone +1 920 236 7272 Fax +1 920 236 7282 E-mail sales@4imprint.com Germany 4imprint Kreyer Promotion Service Heydastrasse 13 D-58093 Hagen Germany Telephone +49 (0)2331 95970 Fax +49 (0)2331 959749 E-mail 4imprint@kreyer-promotion.de France 4imprint Product Plus France SA 4, boulevard des lles 92130 Issy-les-Moulineaux France Telephone +33 (0)1559 59640 Fax +33 (0)1559 59641 E-mail ppfrance@4imprint.co.uk Hong Kong 4imprint Product Plus Far East Unit 1811, 18th Floor Star House 3 Salisbury Road Tsimshatsui, Kowloon Hong Kong Telephone +852 2301 3082 Fax +852 2724 5128 E-mail ppfe@4imprint.co.uk This information is provided by RNS The company news service from the London Stock Exchange

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