Final Results

St. Ives PLC 14 October 2003 14th OCTOBER 2003 ST IVES plc - PRELIMINARY RESULTS St Ives, the leading UK-based printing group, today announces Preliminary Results for the 52 weeks ended 1 August 2003. Key points include: 2003 2002 â€¢ Turnover Â£437.2m Â£466.8m â€¢ Profit before taxation, exceptional items and goodwill amortisation Â£36.9m Â£36.1m â€¢ Profit before taxation Â£34.6m Â£24.3m â€¢ Earnings per share before exceptional items and goodwill amortisation 23.45p 24.33p â€¢ Basic earnings per share 21.82p 15.40p â€¢ Total dividends per share 17.15p 17.15p Commenting on the Preliminary Results, Miles Emley, Chairman, St Ives plc said: 'Trading conditions were challenging throughout the year. We did well to make a modest improvement in both margin and profit. Clays, our business serving the UK book market, had a particularly good year. The Company's financial strength is undiminished. 'There is little sign of any sustained upturn in activity, but in the longer term we remain confident in the potential of the Company's strong competitive position in its chosen markets.' Enquiries to: Miles Emley, Chairman St Ives plc Brian Edwards, Managing Director 020 7928 8844 Martin Jackson / Fiona Bradshaw Citigate Dewe Rogerson 020 7638 9571 Results The results for the 52 weeks ended 1 August 2003 show turnover of Â£437.2 million (2002 - Â£466.8 million) and profit before taxation, exceptional items and amortisation of goodwill of Â£36.9 million (2002 - Â£36.1 million). There was a net exceptional cost of Â£119,000 (2002 - Â£9,549,000). Profit before taxation was Â£34.6 million (2002 - Â£24.3 million). Earnings per share, before goodwill amortisation and exceptional items were 23.45p (2002 - 24.33p). Basic earnings per share were 21.82p (2002 - 15.40p). Dividends A final dividend of 12.15p per share is recommended, making total dividends of 17.15p per share in respect of the year, the same as for the previous year. If approved, the final dividend will be paid on 4 December 2003 to shareholders on the register on 7 November 2003. Trading Conditions Demand for books in the UK remained resilient and was reinforced by sales of a number of best selling titles. In all our other markets trading conditions were extremely challenging throughout the year. Demand was weak as a result of reduced advertising expenditure, especially for longer run, less targeted products, and was also subject to significant short term fluctuations, which made it difficult to achieve satisfactory utilisation. Activity was particularly low in the last quarter of our financial year, especially in Germany and the USA. Corporate financial printing was consistently quiet. The benefits of the cost reductions which we implemented last year were mainly passed on to our customers in lower prices, brought about by reduced demand and industry over capacity in all the geographic regions in which we operate. Upward pressure on costs, largely resulting from changes in tax and employment legislation, continued. In the circumstances, we did well to achieve turnover which was only some 6 per cent below the previous year and make a modest improvement in margin and profit. Overall, considerable progress in the UK and the Netherlands was offset by weak performances in the USA and Germany. Books Clays had an excellent year and consolidated its position as the leading supplier of monochrome books to the UK trade and general market. We were again able to grow our market share because of the flexible service which we offer our customers and, as in the past, produced a very high proportion of best selling titles, most notably 'Harry Potter and the Order of the Phoenix' by J K Rowling for Bloomsbury. We continue to supply nearly all the leading UK trade and general publishers with cased and/or paperback books. During the year we invested in additional pre-press equipment as well as web and sheet fed presses, which enabled us to enhance our service offering further. Direct Response and Commercial UK In the UK, demand for longer run, less specialist work has been patchy and pricing weak. We sharpened our focus on time-sensitive, shorter run work and have gained more of this business from both existing and new customers, including the Government and Government agencies. As a result, although our sales were down overall, more specialised work accounted for a higher proportion and accordingly profit and margins improved. During the year we expanded our production facilities offering personalisation and mailing services, by moving to larger premises at our Romford site. USA In the USA sales to direct response and commercial markets were lower because of reduced advertising and promotional expenditure especially in the travel, automotive and leisure sectors and amongst customers requiring high quality retail and direct mail catalogues. We experienced further pricing pressure and significant short term variations in demand, giving rise to periods of poor utilisation, especially in the last quarter of the financial year. In these circumstances, it regrettably proved necessary to make a further reduction in the number of employees. Germany Johler Druck continued to experience weak demand and competitive pricing in economic conditions which have not been favourable. As a result sales were lower and losses increased. Financial Activity in corporate financial markets remained extremely subdued throughout the year in the UK, Europe and the USA, with the result that sales were below the level of the previous year. Our continued reorganisation unfortunately resulted in further reductions in staffing levels. We maintained our market share, but the volume of business was not sufficient to enable us to trade profitably in this market. We increased our share of the printing of Annual Reports for FTSE companies. However, both in the UK and the USA some annual report work was won at lower prices and to less demanding specifications than in the previous year. Magazines UK Magazine paginations have been very variable both amongst titles and from issue to issue. Fashion and lifestyle titles were more robust than those dependent on travel and leisure advertising. Sales were lower overall and demand was particularly weak in the last quarter of the financial year. The pricing environment remained extremely competitive. During the year we won some new business but not so as to offset completely the effect on profitability of lower paginations and some title closures. We are now fully invested in digital computer-to-plate systems at all our sites, which will enable us further to reduce the lead times which we can offer our customers and increase flexibility. USA In the USA, paginations were more stable but we experienced increasing pricing pressure during the year. The benefits of the cost reductions implemented over the last eighteen months through the consolidation of our operations in south Florida were insufficient to offset fully the effect on profitability of lower volumes and prices. Multimedia The market for music and multimedia products remained subdued. However we increased sales, particularly of less time-sensitive products, which enabled us to improve utilisation and profitability at all three of our sites. Growth in demand for specialist packaging and DVD related products offset reduced demand for standard audio CD packaging. The move to new premises in Blackburn was completed towards the end of the previous financial year and the new factory is now fully operational. Board We are pleased to welcome Patrick Martell to the board. He has been with the group since 1980, for the last three years as Managing Director of our Book Division, and was appointed an executive director on 2 August 2003. Graham Menzies will leave the board at the AGM on 3 December 2003, having served just over 6 years as a non-executive director. We are grateful to him for his advice during the period of his membership of the board. We hope to be able to announce the appointment of a further non-executive director shortly. Balance Sheet The balance sheet remains strong: at the year end, net assets were almost Â£241 million and net cash has almost doubled to Â£26.3 million. Capital expenditure during the year was nearly Â£20 million (2002 - Â£35.6 million). Outlook The UK market for monochrome books is steady, although sales of best selling titles are likely to have less impact than in the past year. In all our other markets supply continues to exceed demand, pricing pressures are unabated and there is no current indication of a sustained or significant upturn in levels of activity. Our markets in the USA and Germany are especially challenging. We continue to concentrate on customers and markets with exacting service and quality requirements. Our Company's financial strength and our long standing commitment to investment in people, systems and equipment, in order to enhance service, improve productivity and maintain cost effectiveness, is more important than ever in an environment where employment and other costs continue to rise. In the short term, we are unlikely to be able to make more than modest progress, but in the longer term we remain confident in the potential of our Company's strong competitive position in its chosen markets. CONSOLIDATED PROFIT AND LOSS ACCOUNT 52 weeks to 1 August 2003 52 weeks to 2 August 2002 _____________________________________________ ________________________________________ Before Exceptional Before Exceptional exceptional items and exceptional items and items and goodwill items and goodwill goodwill amortisation goodwill amortisation amortisation (note 7) Total amortisation (note 7) Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 _________________ _________________ _____________ ________________ ________________ ____________ Turnover (note 2) 437,211 - 437,211 466,806 - 466,806 Cost of (328,150) (456) (328,606) (352,670) (4,316) (356,986) sales _________________ _________________ _____________ ________________ ________________ ____________ Gross profit 109,061 (456) 108,605 114,136 (4,316) 109,820 Sales and (28,635) (292) (28,927) (31,162) (537) (31,699) distribution costs Administrative expenses _________________ _________________ _____________ ________________ ________________ ____________ Goodwill - (2,195) (2,195) - (2,250) (2,250) amortisation Exceptional - 404 404 - (4,013) (4,013) items Other (44,829) - (44,829) (47,862) - (47,862) administrative expenses _________________ _________________ _____________ ________________ ________________ ____________ (44,829) (1,791) (46,620) (47,862) (6,263) (54,125) Other 784 225 1,009 1,250 (683) 567 operating income/(costs) _________________ _________________ _____________ ________________ ________________ ____________ Operating 36,381 (2,314) 34,067 36,362 (11,799) 24,563 profit (note 2) Interest 1,142 - 1,142 787 - 787 receivable Interest (620) - (620) (1,074) - (1,074) payable _________________ _________________ _____________ ________________ ________________ ____________ Profit before 36,903 (2,314) 34,589 36,075 (11,799) 24,276 taxation Taxation (note 3) (12,739) 633 (12,106) (11,067) 2,618 (8,449) _________________ _________________ _____________ ________________ ________________ ____________ Profit after 24,164 (1,681) 22,483 25,008 (9,181) 15,827 taxation Equity (17,643) - (17,643) (17,688) - (17,688) dividends (note 5) _________________ _________________ _____________ ________________ ________________ ____________ Retained 6,521 (1,681) 4,840 7,320 (9,181) (1,861) profit/(loss) ================= ================= ============= ================ ================ ============ Basic earnings - - 21.82p - - 15.40p per share (note 6) ============= ============ Diluted - - 21.81p - - 15.36p earnings per share (note 6) ============= ============ Earnings per 23.45p - - 24.33p - - share before exceptional items and goodwill amortisation (note 6) ================= ================ Dividend per - - 17.15p - - 17.15p ordinary share ============= ============ All transactions are derived from continuing activities. CONSOLIDATED BALANCE SHEET 1 August 2003 2 August 2002 __________________ _____________________ Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets 38,644 40,839 Tangible assets 185,293 201,558 Investments 1,280 - __________ __________ 225,217 242,397 Current assets Stocks 12,437 15,444 Debtors 70,768 69,391 Cash at bank and in hand 50,871 39,768 __________ __________ 134,076 124,603 Creditors - due within one year (104,834) (113,525) __________ __________ Net current assets 29,242 11,078 ___________ ___________ Total assets less current 254,459 253,475 liabilities Creditors - due after one (1,043) (1,189) year Provisions and deferred (11,586) (15,946) taxation Deferred income (1,113) (1,523) __________ __________ (13,742) (18,658) ___________ ___________ 240,717 234,817 =========== =========== Capital and reserves Called up share capital 10,323 10,317 Share premium account 45,645 45,455 Capital redemption reserve 1,238 1,238 Profit and loss account 183,511 177,807 ___________ ___________ Equity shareholders' funds 240,717 234,817 =========== =========== SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 1 August 2 August 2003 2002 Â£'000 Â£'000 ____________ ____________ Net cash inflow from operating activities 59,959 73,196 Returns on investments and servicing of 400 (150) finance Tax paid (7,804) (14,731) Capital expenditure and financial investment (22,433) (32,621) Acquisitions - 332 Equity dividends paid (17,697) (17,619) ____________ ____________ Cash inflow before financing 12,425 8,407 Financing Issue of ordinary share capital 196 1,948 Decrease in debt (1,282) (2,286) ____________ ____________ Increase in cash 11,339 8,069 ============ ============ NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT Reconciliation of operating profit to net cash inflow from operating activities 52 weeks to 52 weeks to 1 August 2 August 2003 2002 Â£'000 Â£'000 ____________ ____________ Operating profit 34,067 24,563 Depreciation 34,390 33,847 Goodwill amortisation 2,195 2,250 Amortisation of own shares 633 - Net non-cash provisions movement (1,738) 3,105 Profit on disposal of tangible fixed assets (1,009) (884) Other non cash movements (455) (258) Changes in working capital (7,003) 10,432 Other items (1,121) 141 ____________ ____________ 59,959 73,196 ============ ============ NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT continued 52 weeks to 52 weeks to 1 August 2 August 2003 2002 Â£'000 Â£'000 ____________ ____________ Reconciliation of net cash flow to movement in net funds Increase in cash in the year 11,339 8,069 Cash outflow from decrease in debt and lease 1,282 2,286 financing ____________ ____________ Change in net funds resulting from cash flows 12,621 10,355 Exchange adjustments 306 1,255 ____________ ____________ Movement in net funds in the year 12,927 11,610 Opening net funds 13,350 1,740 ____________ ____________ Closing net funds 26,277 13,350 ============ ============ Analysis of net funds 2 August Cash Other Exchange 1 August 2002 flow non cash movement 2003 changes Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 __________ ________ __________ __________ __________ Cash at bank and in hand 39,768 11,339 - (236) 50,871 Debt due within one year (25,006) 352 (107) 549 (24,212) Debt due after one year (100) - 107 (7) - Finance leases (1,312) 930 - - (382) __________ ________ __________ __________ __________ 13,350 12,621 - 306 26,277 ========== ======== ========== ========== ========== CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 52 weeks to 52 weeks to 1 August 2 August 2003 2002 Â£'000 Â£'000 ____________ ____________ Profit after taxation 22,483 15,827 Exchange differences 801 (3,989) Related taxation 63 1,512 ____________ ____________ Total recognised gains and losses relating to 23,347 13,350 the year ============ ============ MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 52 weeks to 52 weeks to 1 August 2 August 2003 2002 Â£'000 Â£'000 ____________ ____________ Opening shareholders' funds 234,817 237,207 Total recognised gains and losses 23,347 13,350 Dividends (17,643) (17,688) Issue of ordinary shares 196 1,948 ____________ ____________ Closing shareholders' funds 240,717 234,817 ============ ============ 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 2003. 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 1 August 2003 and for the fifty two weeks to 2 August 2002 has been extracted from the Group's statutory accounts for the respective years. The Group's statutory accounts for the fifty two weeks to 2 August 2002 have been filed with the Registrar of Companies. The Group's statutory accounts for the fifty two weeks to 1 August 2003 will be sent to all shareholders before 4 November 2003. 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. Analysis of turnover and operating profit The geographical analysis of turnover by destination is stated below: 2003 2002 Â£'000 Â£'000 United Kingdom 285,923 295,261 United States of America 122,685 143,908 Rest of the World 28,603 27,637 __________ __________ 437,211 466,806 ========== ========== The geographical analysis of turnover and operating profit/(loss) by origin is stated below: Turnover Operating profit/(loss) ___________________ _________________________ 2003 2002 2003 2002 Â£'000 Â£'000 Â£'000 Â£'000 United Kingdom 291,282 303,362 39,279 26,310 United States of America 120,553 141,504 (1,066) 3,510 Rest of the World 25,376 21,940 (1,951) (3,007) _________ _________ _________ ________ 437,211 466,806 36,262 26,813 Goodwill amortisation - USA - - (2,195) (2,250) _________ _________ _________ ________ 437,211 466,806 34,067 24,563 ========= ========= ========= ======== 2. Analysis of turnover and operating profit (continued) The geographical analysis of operating profit/(loss) before exceptional items and goodwill amortisation is stated below: 2003 2002 Â£'000 Â£'000 United Kingdom 39,260 34,970 United States of (703) 3,613 America Rest of the World (2,176) (2,221) _________ _________ 36,381 36,362 ========= ========= The segmental analysis of turnover is stated below: 2003 2002 Â£'000 Â£'000 Books 70,145 56,017 Direct Response and Commercial 192,342 217,492 Financial 34,968 48,630 Magazines 113,163 123,109 Multimedia 26,593 21,558 _________ _________ 437,211 466,806 ========= ========= The directors consider that an analysis of profit on a segmental basis would be seriously prejudicial to the interests of the Group and, as permitted by SSAP25, no further disclosure is given. 3. Taxation The tax charge is analysed below: 52 weeks to 52 weeks to 1 August 2 August 2003 2002 Â£'000 Â£'000 ____________ ____________ United Kingdom taxation 13,134 8,621 Overseas taxation (1,028) (172) ____________ ____________ 12,106 8,449 ============ ============ 4. Pensions (a) SSAP24 The Group has continued to account for pensions in accordance with SSAP24. The pension cost for the Group's UK schemes was Â£3,757,000 (2002 - Â£4,120,000). 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 SSAP24 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 Â£12.6 million. The market value of the scheme's assets as at 6 April 2002 was Â£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 contribution rate of 8.25 per cent of pensionable pay was appropriate. This recommendation was accepted by the Company and the Trustee. (b) FRS17 The actuarial valuation, adjusted for FRS17 and updated at 1 August 2003, showed a deficit of Â£61,768,000 (Â£43,238,000 after the related deferred tax asset). Contributions for the year of Â£3,581,000 were paid at the recommended rate of 8.25 per cent of pensionable pay. Ordinarily the contribution rate would not be reviewed until the next formal valuation of the scheme, which is due no later than as at 6 April 2005. However, in light of lower than expected investment returns the Company and the Trustee are reviewing the options for dealing with the growing deficit. 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 pay) but will be applied to a shrinking pensionable payroll. (c) Other A defined contribution scheme was established for joiners after 6 April 2002, to which the Group contributes at the rate of 4 per cent of pensionable pay. The pension cost relating to foreign schemes was Â£1,165,000 (2002 - Â£1,188,000). 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 7 November 2003. If approved, the final dividend will be paid on 4 December 2003. 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 Â£22,483,000 (2002 - Â£15,827,000). 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 103,062,130 (2002 - 102,777,257) ordinary shares in issue during the year. The 500,000 (2002 - nil) EPP matching shares held on behalf of the Company have been excluded from the earnings per share calculation. 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 103,101,320 (2002 - 103,011,170) shares during the year. The difference between the number of shares used in the basic and diluted earnings per share calculation is 39,190 (2002 - 233,913) 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 344.03p (2002 - 414.39p). 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: 2003 2002 __________________________ __________________________ Earnings Earnings Earnings Earnings per share per share Â£'000 pence Â£'000 pence Earnings and basic 22,483 21.82 15,827 15.40 earnings per share Exceptional items and 1,681 1.63 9,181 8.93 goodwill amortisation Adjusted earnings and adjusted earnings ___________ __________ _________ _________ per share 24,164 23.45 25,008 24.33 =========== ========== ========= ========= 7. Exceptional items and goodwill amortisation 2003 2002 ______________________ ______________________ Total Related Total Related taxation taxation Â£'000 Â£'000 Â£'000 Â£'000 Exceptional items 119 532 9,549 2,528 Goodwill amortisation 2,195 101 2,250 90 _______ ________ ________ ________ 2,314 633 11,799 2,618 ======= ======== ======== ======== The exceptional items relate to major rationalisation measures including redundancy costs,losses less realised gains on asset disposals, provision for and release of lease termination and other closure costs. 2003 2002 Â£'000 Â£'000 Cashflows in respect of exceptional items: Net cash outflow from operating activities - current year (804) (6,020) - prior year (1,121) - Disposal of tangible fixed assets 340 1,328 ________ ________ Decrease in cash (1,585) (4,692) ======== ======== This information is provided by RNS The company news service from the London Stock Exchange FBF

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