Final Results
St. Ives PLC
15 October 2002
15th OCTOBER 2002
ST IVES plc - PRELIMINARY RESULTS
Continuing tough market conditions
St Ives, the leading UK-based printing group, today announces Preliminary
Results for the 52 weeks ended 2 August 2002. Key points include:
2002 2001
• Turnover £467m £498m
• Profit before tax, exceptional items and goodwill
amortisation £36.1m £62.0m
• Earnings per share before exceptional items and
goodwill amortisation 24.33p 41.59p
• Total dividends per share 17.15p 17.15p
Commenting on the Preliminary Results, Miles Emley, Chairman, St Ives plc said:
'Almost all our markets have continued to experience worse trading conditions
than for many years. The effects of sharp reductions in advertising
expenditure, especially in the technology and internet related sectors have been
exacerbated by persistently low levels of activity in corporate finance markets
and by the significant overcapacity which exists in our industry in all
geographic areas in which we operate. Only the UK market for monochrome books
has been resilient, with demand remaining robust and service requirements
becoming greater.
'We remain committed to the highest standards of service, to consistent and
continuing investment in the latest, most flexible technology and the
development of systems and people to support it. While the current surplus of
capacity in our industry will make significant progress hard to achieve in the
short term, we remain confident that the financial and competitive strengths of
our company will enable us to improve our returns over the longer term.'
Enquiries to: Miles Emley, Chairman St Ives plc
Brian Edwards, Managing Director 020 7928 8844
Duncan Murray Citigate Dewe Rogerson
020 7638 9571
Results
The results for the fifty-two weeks ended 2 August 2002 show turnover of £467
million (2001 - £498 million) and profit before taxation, amortisation of
goodwill and exceptional items of £36.1 million (2001 - £62.0 million). The
exceptional charge of £9.5 million represents the estimated cost of the
rationalisation and restructuring measures announced during the year, which were
made necessary by substantially reduced demand for many of our products and
services. Profit before taxation, but after amortisation of goodwill and
exceptional items, was £24.3 million (2001 - £60.5 million). Earnings per share
before amortisation of goodwill and exceptional items were 24.33p (2001 -
41.59p).
Dividend
A final dividend of 12.15p per share is proposed, making total dividends of
17.15p per share in respect of the year as a whole, the same as for the previous
year. If approved, the dividend will be paid on 4 December 2002 to shareholders
on the register on 25 October 2002.
Trading Conditions
As anticipated at the half year, almost all of our markets experienced worse
trading conditions than for many years. In most parts of the business, we have
been affected by a sharp reduction in advertising expenditure, especially in the
technology and internet related sectors. The effects of the resulting fall in
demand have been exacerbated by the significant over-capacity which exists in
our industry in all the geographic areas in which we operate. Amongst the
markets which we serve, only that for monochrome books in the UK has remained
resilient.
Books
Sales of mass market paperbacks have grown strongly, while overall sales have
shown a modest increase on the previous year. We continue to produce a high
proportion of best-selling titles for the UK market and have gained additional
volumes from existing customers following the closure of two of our competitors.
Export sales, chiefly of religious and reference books, remain subdued. In a
further enhancement of flexibility and service capability, we are investing in
new binding and sheet-fed and web offset printing capacity all of which has or
will come on stream during the first half of the new financial year.
Direct Response and Commercial
UK
Overall, sales to direct response and commercial markets in the UK were somewhat
lower than in the previous year, reflecting reduced demand, increased activity
by overseas competitors and continuing pricing pressure. Sales of shorter-run,
specialist products for customers with demanding service requirements generally
proved more resilient than those of longer-run, less time-sensitive material,
for which in particular there continues to be significant over-capacity. In the
light of these conditions we reduced capacity and rationalised several of our
facilities: we closed our finishing operations in Penge; we moved the business
of DisplayCraft from two sites in south London to new premises at Crayford; and
in April, web offset printing ceased at Leeds, where the expanded direct mail
operations of Red Letter in Yorkshire are now based.
Germany
Johler Druck's sales were substantially reduced, as a result of over-capacity,
weak demand and further pressure on pricing. In the middle of the financial
year, we reduced our capacity by decommissioning our oldest, least versatile
press and we have replaced another older press with a more flexible machine
capable of printing a wide range of products.
USA
Sales to commercial markets in the USA showed a significant increase because the
results of St Ives Inc Avanti and St Ives Inc Case-Hoyt were included for a full
year for the first time (as compared with the second six months only in the
prior year). Generally, we experienced falling demand and a weak pricing
environment, attributable mainly to sharply reduced advertising expenditure. We
reduced capacity by disposing of our three oldest presses. Following last
year's acquisition, our operations serving these markets, together with those
serving the publications market in the USA, are now fully integrated.
Financial
Extremely low levels of activity in corporate financial printing markets, both
in Europe and North America, persisted throughout the period. As a result, we
have been unable to generate acceptable returns, despite having taken action to
reduce costs early in the financial year. The market for Annual Reports for
public companies and investment funds has become increasingly competitive both
in the UK and USA.
Magazines
UK
Falling advertising expenditure led to reduced paginations and a number of title
closures. Internet and technology related advertising and titles have been
particularly affected, while, in contrast, fashion and lifestyle titles
generally held up well. Against this background, excess web offset capacity has
resulted in increasing pricing pressure at contract renewal, particularly for
those titles where high quality and service levels are not a requirement. Our
own sales to these markets in the UK were lower than in the prior year. In
June, we reduced capacity by closing operations at Gillingham, our least well
equipped site, and have been successful in retaining substantially all the work
previously undertaken there for production at other factories within the Group.
USA
In the USA, our experience was similar, again leading to a reduction in volumes
accompanied by further pressure on prices. Closed-loop colour is now fully
installed across all presses at St Ives Inc Hollywood, enabling us to deliver
shorter run products and faster turn-around times more cost effectively.
Multimedia
Demand for both music and multimedia related product remains weak in the UK and
Europe. Levels of activity have also fluctuated sharply in the short term.
These factors, together with continuing pricing pressure, have made it difficult
to achieve satisfactory levels of utilisation and as a result we have been
unable to generate adequate returns.
Staff
Regrettably the rationalisation and restructuring made necessary by the
prevailing market conditions has resulted in a number of people being made
redundant throughout the Group. The total number of employees at 2 August 2002
was 5,232 as compared with 5,911 at the end of the previous year, a fall of some
11.5 per cent.
Balance Sheet and Investment
Capital investment during the year amounted to £35.3 million (2001 - £36.9
million). Substantially the whole of the Group is now equipped with full
digital pre-press capabilities, which has further enhanced flexibility and
service levels.
Notwithstanding reduced profitability and significant exceptional costs, the
financial position of our company remains strong. Our operations continue to
generate strong positive cashflow, with the result that net cash at the year end
amounted to £13.4 million - an increase of nearly £12 million during the year.
Outlook
In the UK monochrome book market, demand remains robust and service requirements
are becoming greater. However, the growth prospects of the other markets which
we serve continue to be uncertain. There are, as yet, no signs of any sustained
increase in advertising expenditure or upturn in levels of activity in corporate
financial markets. We continue to keep all costs in the business under close
review.
We remain committed to the highest standards of service, to consistent and
continuing investment in the latest, most flexible technology and the
development of systems and people to support it. While the current surplus of
capacity in our industry will make significant progress hard to achieve in the
short term, we remain confident that the financial and competitive strengths of
our company will enable us to improve our returns over the longer term.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
52 weeks to 2 August 2002
Before Exceptional
exceptional items and
items and goodwill 53 weeks to
goodwill amortisation 3 Aug 2001
Note amortisation (note 7) Total (Restated)+
£'000 £'000 £'000 £'000
Turnover 2 466,806 - 466,806 498,154
Cost of sales (352,670) (4,316) (356,986) (361,063)
Gross Profit 114,136 (4,316) 109,820 137,091
Sales and distribution (31,162) (537) (31,699) (31,223)
costs
Administrative expenses
Goodwill amortisation - (2,250) (2,250) (1,546)
Exceptional items - (4,013) (4,013) -
Other administrative expenses (47,862) - (47,862) (46,151)
(47,862) (6,263) (54,125) (47,697)
Other operating 1,250 (683) 567 889
income/(costs)
Operating profit 2 36,362 (11,799) 24,563 59,060
Interest receivable 787 - 787 2,563
Interest payable (1,074) - (1,074) (1,164)
Profit before taxation 36,075 (11,799) 24,276 60,459
Taxation 3 (11,067) 2,618 (8,449) (18,628)
Profit after taxation 25,008 (9,181) 15,827 41,831
Equity dividends 5 (17,688) - (17,688) (17,711)
Retained profit/(loss) 7,320 (9,181) (1,861) 24,120
Basic earnings per 6 15.40p 40.20p
share
Diluted earnings per 6 15.36p 40.00p
share
Earnings per share
before
exceptional items and
goodwill amortisation 6 24.33p 41.59p
Dividend per ordinary 5 17.15p 17.15p
share
+ Comparative figures for the 53 weeks to 3 August 2001 have been restated to
reflect a change in accounting policy for deferred taxation following the
adoption of FRS19 'Deferred Taxation' (see notes 1 and 3).
All transactions are derived from continuing activities.
CONSOLIDATED BALANCE SHEET
2 August 2002 3 August 2001
(Restated)
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 40,839 44,328
Tangible assets 201,558 205,580
242,397 249,908
Current assets
Stocks 15,444 21,134
Debtors 69,391 87,521
Cash at bank and in hand 39,768 32,961
124,603 141,616
Creditors: amounts falling due
within one year (113,525) (137,827)
Net current assets 11,078 3,789
Total assets less current liabilities 253,475 253,697
Creditors: amounts falling due
after more than one year (1,189) (3,817)
Provisions for liabilities and charges (15,946) (10,887)
Deferred income (1,523) (1,786)
(18,658) (16,490)
234,817 237,207
Capital and reserves
Called up share capital 10,317 10,256
Share premium account 45,455 43,568
Capital redemption reserve 1,238 1,238
Profit and loss account 177,807 182,145
Equity shareholders' funds 234,817 237,207
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
52 weeks to 53 weeks to
2 August 3 August
2002 2001
£'000 £'000
Net cash inflow from operating activities 73,196 81,618
Returns on investments and servicing of finance (150) 1,463
Tax paid (14,731) (21,781)
Capital expenditure (32,621) (35,212)
Acquisitions 332 (35,489)
Equity dividends paid (17,619) (17,866)
Cash inflow/(outflow) before financing 8,407 (27,267)
Financing
Issue of ordinary share capital 1,948 2,112
Purchase of own shares - (8,370)
(Decrease)/increase in debt (2,286) 1,292
Increase/(decrease) in cash in the year 8,069 (32,233)
NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit 24,563 59,060
Depreciation 33,847 31,556
Other non cash movements 4,213 4
Changes in working capital 10,432 (9,122)
Other items 141 120
73,196 81,618
NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
continued
52 weeks to 53 weeks to
2 August 3 August
2002 2001
£'000 £'000
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash in the year 8,069 (32,233)
Cash outflow/(inflow) from decrease/(increase)
in debt and lease financing 2,286 (1,292)
Change in net funds resulting from cash flows 10,355 (33,525)
Loans and finance leases acquired with subsidiary - (20,815)
Exchange adjustments 1,255 (670)
Movement in net funds in the year 11,610 (55,010)
Opening net funds 1,740 56,750
Closing net funds 13,350 1,740
Analysis of net funds
3 August Cash Exchange 2 August
2001 flow movement 2002
£'000 £'000 £'000 £'000
Cash at bank and in hand 32,961 7,837 (1,030) 39,768
Overdrafts (232) 232 - -
8,069
Debt due within one year (26,033) 503 2,278 (25,006)
Debt due after one year (2,145) 284 7 (100)
Finance leases (2,811) 1,499 - (1,312)
1,740 10,355 1,255 13,350
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
52 weeks to 53 weeks to
2 August 3 August
2002 2001
(Restated)
£'000 £'000
Profit after taxation 15,827 41,831
Exchange differences (2,477) 1,626
Total recognised gains and losses relating to the year 13,350 43,457
Prior year adjustment (627)
Total recognised gains and losses since last
Annual Report 12,723
MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS
52 weeks to 53 weeks to
2 August 3 August
2002 2001
(Restated)
£'000 £'000
Opening shareholders' funds 237,834 218,521
Prior year adjustment (627) (802)
Opening shareholders' funds (as restated) 237,207 217,719
Total recognised gains and losses 13,350 43,457
Dividends (17,688) (17,711)
Issue of ordinary shares 1,948 2,112
Purchase of own shares - (8,370)
Closing shareholders' funds 234,817 237,207
The prior year adjustments shown in the statement of total recognised gains and
losses and the movements in shareholders' funds for the years ended
2 August 2002 and 3 August 2001 are as a result of the adoption of FRS19
(see notes 1 and 3).
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The preliminary financial statements have been prepared in accordance with the
accounting policies set out in, and are consistent with, the Group's Annual
Report for 2002.
The financial information set out in these statements does not comprise
statutory accounts for the purposes of Section 240 of the Companies Act 1985.
The abridged information for the fifty two weeks to 2 August 2002 and for the
fifty three weeks to 3 August 2001 has been extracted from the Group's statutory
accounts for the respective years. The abridged information in respect of the
statutory accounts for the fifty three weeks to 3 August 2001 has been amended
to reflect the change in accounting policy following the adoption of FRS19. The
Group's statutory accounts for the fifty three weeks to 3 August 2001 have been
filed with the Registrar of Companies. The Group's statutory accounts for the
fifty two weeks to 2 August 2002 will be sent to all shareholders before 1
November 2002. The auditors' reports on the accounts of the Group for both
years were unqualified and did not contain a statement under either Section 237
(2) or Section 237(3) of the Companies Act 1985.
2. Geographical analysis
2002 2001
£'000 £'000
United Kingdom 295,261 332,533
United States of America 143,908 132,384
Rest of the World 27,637 33,237
466,806 498,154
The geographical analysis of turnover by destination is stated below:
Turnover Operating Profit/(Loss)
2002 2001 2002 2001
£'000 £'000 £'000 £'000
United Kingdom 303,362 340,875 26,310 53,976
United States of America 141,504 130,878 3,510 6,962
Rest of the World 21,940 26,401 (3,007) (332)
466,806 498,154 26,813 60,606
Goodwill amortisation - USA - - (2,250) (1,546)
466,806 498,154 24,563 59,060
2. Geographical analysis (continued)
The geographical analysis of turnover and operating profit/(loss) by origin is
stated below:
2002 2001
£'000 £'000
United Kingdom 34,970 53,976
United States of America 3,613 6,962
Rest of the World (2,221) (332)
36,362 60,606
The directors consider that the Group has only one class of business and
consequently no further analysis of turnover or profit is given.
3. Effect of change in accounting policy
The Group adopted FRS19 'Deferred Taxation' during the year and therefore
provided for all non-permanent timing differences which originated, but had not
reversed by the balance sheet date. This has resulted in a decrease in the
group taxation charged in the previous year of £175,000 and a corresponding
increase in profit after tax and has also increased deferred taxation provisions
by £802,000 at 3 August 2001 and £627,000 at 2 August 2002. Taxation and profit
after tax for the fifty two weeks ended 2 August 2002 would have been materially
unchanged if FRS19 had not been adopted.
4. Pensions
(a) SSAP 24
The Group has continued to account for pensions in accordance with SSAP 24.
The pension cost for the Group's UK schemes was £4,120,000 (2001 - £3,772,000).
The triennial valuation of the principal scheme was carried out as at 6 April
2002, using the projected unit method, by Jonathan Punter, Fellow of the
Institute of Actuaries, Punter Southall & Co Ltd ('the scheme's actuary'), who
is independent of the Group. The principal actuarial assumptions adopted for
the purposes of both SSAP 24 and determining the funding rate in the valuation
were: a long term interest rate (investment return) of 7.0 per cent per annum
before Normal Retirement Age (NRA) and 6.0 per cent after NRA; salary increases
of 3.5 per cent per annum and limited price indexation of 2.5 per cent per
annum. Pension increases were allowed for in accordance with the rules of the
scheme and past practice.
At the valuation date, the actuarial value of the assets on this basis was
sufficient to cover 88 per cent of the benefits that had accrued to members
equivalent to a deficit of £12.6 million. The market value of the scheme's
assets as at 6 April 2002 was £98.6 million. For the purpose of the actuarial
valuation, assets were taken at 97.7 per cent of the market value.
The scheme's actuary recommended that the current contribution rate of 8.25 per
cent of pensionable pay was appropriate, as this is designed to remove the
deficit referred to above. This recommendation has been accepted by the Company
and the Trustee.
(b) FRS17
The actuarial valuation, adjusted for FRS17 and updated at 2 August 2002, showed
a deficit of £37,563,000 (£26,294,000 after the related deferred tax asset).
Contributions for the year of £3,872,000 were paid at the recommended rate of
8.25 per cent of pensionable pay. The Trustee has confirmed with the scheme's
actuary that, subject to review and, in particular, the market value of the
scheme's assets, the contribution rate should remain at 8.25 per cent until the
next valuation of the scheme, which will be no later than as at 6 April 2005.
The scheme was closed to new entrants with effect from 6 April 2002. As a
result, the current service cost calculated using the projected unit method will
increase over time (expressed as a percentage of pensionable salary) but will be
applied to a shrinking pensionable payroll.
(c) Other
A new defined contribution scheme has been established for joiners after 6 April
2002, to which the Group contributes 4 per cent of pensionable pay.
The pension cost relating to foreign schemes was £1,188,000 (2001 - £1,095,000).
The foreign schemes are defined contribution schemes and are principally
Section 401(k) Plans in the USA.
5. Dividends
The directors propose a final equity dividend of 12.15p for each ordinary share
payable to holders on the register on 25 October 2002. If approved, the final
dividend will be paid on 4 December 2002.
6. Earnings per share
The calculation of basic earnings per share is based on profits after taxation
as disclosed in the profit and loss account of £15,827,000 (2001 - £41,831,000,
as restated). Adjusted earnings per share is calculated by adding back
exceptional items and goodwill amortisation, as adjusted for taxation, to the
profit after taxation. Basic earnings per share and adjusted basic earnings per
share are calculated on a weighted average of 102,777,257 (2001 - 104,067,152)
ordinary shares in issue during the year.
The calculation of the diluted earnings per share is based on profit after
taxation as disclosed in the profit and loss account and on a diluted weighted
average of 103,011,170 (2001 - 104,575,248) shares during the year.
The difference between the number of shares used in the basic and diluted
earnings per share calculation is 233,913 (2001 - 508,096) representing dilutive
share options held but not yet exercised. Dilution has been restricted to share
options where the individual option price is less than the average market value
of shares during the year, which was 414.39p (2001 - 435.77p).
An adjusted basic earnings per share has been presented in order to highlight
the underlying performance of the Group, and is calculated as set out in the
table below:
2002 2001
Earnings Earnings Earnings Earnings
per share per share
£'000 pence £'000 pence
Earnings and basic earnings per share 15,827 15.40 41,831 40.20
Exceptional items and goodwill amortisation 9,181 8.93 1,447 1.39
Adjusted earnings and adjusted earnings
per share 25,008 24.33 43,278 41.59
7. Exceptional items and goodwill amortisation
2002 2001
Related Related
Total taxation Total taxation
£'000 £'000 £'000 £'000
Exceptional items 9,549 2,528 - -
Goodwill Amortisation 2,250 90 1,546 99
11,799 2,618 1,546 99
The exceptional items relate to rationalisation measures including redundancy
costs, losses less realised gains on asset disposals and provision for
lease termination and other closure costs.
2002
£'000
Cashflows in respect of exceptional items:
Net cash outflow from operating activities (6,020)
Disposal of tangible fixed assets 1,328
Decrease in cash (4,692)
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