Final Results

St. Ives PLC 11 October 2005 EMBARGOED FOR RELEASE 07:00 11 OCTOBER 2005 11 October 2005 ST IVES plc Preliminary Results for the 52 weeks ended 29 July 2005 St Ives plc, the UK's leading printing group, announces preliminary results for the 52 weeks ended 29 July 2005. Key Points â€¢ Turnover Â£419.5m (2004: Â£410.3m) â€¢ Pre tax profit Â£11.4m (2004: Â£14.9m) â€¢ Underlying* pre tax profit Â£39.1m (2004: Â£39.7m) â€¢ Basic earnings per share 2.70p (2004: 2.92p) â€¢ Underlying* earnings per share 25.30p (2004: 25.08p) â€¢ Total dividend maintained at 17.15p per share * pre exceptional items and goodwill amortisation Commenting on the results, Chairman, Miles Emley said: 'In our principal markets our competitive position is as strong as ever. In recent years we have undertaken significant rationalisation and consolidation of the Group's activities whilst continuing to invest in the best available technology to reduce costs of production and enhance our service offering. 'Notwithstanding the continuing challenge posed by current market conditions, we believe that our commitment to service and quality, and our increasing focus on the provision of added-value services in addition to the supply of printed products, will deliver progress for shareholders.' For further information contact: St Ives plc Miles Emley, Chairman Brian Edwards, Managing Director 020 7928 8844 Smithfield John Antcliffe Anna Rainbow 020 7360 4900 Results The results for the fifty two weeks ended 29 July 2005 show turnover of Â£419.5 million (2004 - Â£410.3 million) and underlying profit before taxation, exceptional items and goodwill amortisation of Â£39.1 million (2004 - Â£39.7 million). Profit before taxation was Â£11.4 million (2004 - Â£14.9 million). Underlying earnings per share before exceptional items and goodwill amortisation were 25.30p (2004 - 25.08p) and basic earnings per share were 2.70p (2004 - 2.92p). The results include an initial contribution to operating profit before exceptional items and goodwill amortisation of Â£4.15 million from SP Group for the forty six weeks since its acquisition in September 2004. The profit before taxation, exceptional items and goodwill amortisation is similar to that achieved in the previous financial year and is in accordance with the indications which we gave at the time of our Interim Statement in April. The charge for exceptional items and goodwill of Â£27.7 million represents the loss on disposal of Johler Druck (Â£14.1 million which includes Â£5.9 million of goodwill previously written-off to reserves), exceptional costs relating the consolidation of the Group's operations into fewer sites (Â£9.9 million) and goodwill amortisation and write-off (Â£3.7 million). Dividends The Board is recommending a final dividend of 12.15p per share, making total dividends of 17.15p per share for the year as a whole, the same as the previous year. If approved, the final dividend will be paid on 2 December 2005 to shareholders on the register on 4 November 2005. Trading Conditions Demand for books and for point-of-sale services was resilient but, as we indicated earlier in the year, most of our other markets continued to experience little growth, downward pricing pressure and over-capacity. Books Our books sales were higher than in the previous year. We maintained market share, mainly because our service levels are faster and more responsive than those offered by our competitors. We produced over 50 per cent of the best sellers published during our financial year in both hardback and paperback formats. Sales of fulfilment and other post-production services also grew. The results showed the benefit of our continuing investment in equipment and systems. Direct Response, Commercial and Point-of-Sale UK In the UK, demand for personalised direct mail products, especially from financial services customers, reduced sharply and the market for less time-sensitive, longer-run products continued to face over-capacity, intensely competitive pricing and lower volumes. During the year we rationalised our operations further through the closure of our factory in Bristol, many of whose customers we have continued to serve from elsewhere in the Group. Demand for point-of-sale products and services remained steady. SP Group made a contribution of Â£35.3 million to Group turnover in the forty six weeks since its acquisition. We undertook new work for our client base, which comprises leading retail store chains and international brand companies. We completed the consolidation of the point-of-sale operations previously carried out at St Ives Crayford into our site at Redditch towards the end of the period. USA Commercial markets in the USA remained fiercely competitive against a background of continuing over-capacity. Sales were reduced, although we retained the more suitable work previously undertaken at Case-Hoyt, thus improving utilisation and returns at our other facilities. We expanded the volumes of specialist franchise print work (including on-line ordering and inventory control, fulfilment and distribution) produced mainly at our Cleveland site. Financial Demand for financial print in the USA was unchanged but continued low activity in the UK and Europe necessitated a further reduction in our cost base there, which was completed towards the end of the year. Volumes of annual report printing grew, partly as a result of increased pagination. Losses overall were again reduced. Magazines UK Magazine sales in the UK were lower as a result of competitive pricing, principally because of over-capacity, and weak demand. In the second half of the year we closed our factory at Caerphilly and have been successful in retaining the work previously produced there for our other sites. During the year we commissioned a new high speed stitching line and two new 72-page presses to lower our cost of production and enhance service further. USA In the USA, magazine sales grew and returns improved modestly as a result of better utilisation of our facilities. Multimedia Sales to music and multimedia markets were maintained overall, mainly because of growth in demand for special packaging and DVD related products for video, audio and computer games applications. Improved utilisation generated better returns at Uden in Holland, although short lead times and volatile demand made utilisation a challenge in the UK. Balance Sheet Net assets at the year end were Â£215 million with net borrowings of Â£23 million. As already announced, we disposed of our German subsidiary, Johler Druck, during the year for a cash consideration of â‚¬2.2 million. Investment Capital expenditure during the year amounted in total to Â£36 million, more than twice last year's level. We have continued to invest in systems and equipment across the Group to reduce our costs of production and enhance the flexibility of the service we are able to offer our customers. The largest individual items were the new logistics facility at Redditch, web presses and a high speed stitching line for the magazine market, digital presses mainly for point-of-sale customers and a sheetfed press in Cleveland. IFRS As in previous years, our consolidated financial statements have been prepared under UK Generally Accepted Accounting Principles ('UKGAAP'). In accordance with EU regulations, in future we will be required to adopt International Financial Reporting Standards ('IFRS') and prepare consolidated financial statements on an IFRS basis. We will report under IFRS for the first time in our Interim Statement for the twenty six weeks ending 27 January 2006 and our Annual Report for 2006 will be the first to be prepared under IFRS. The 2006 Interim Statement and Annual Report will include comparative IFRS information for the corresponding periods in 2005. An announcement will be made in January 2006 setting out the restatement of the 2005 results and providing an explanation of the effects of the change to IFRS on our results. The most significant impact is expected to be in relation to the treatment of the defined benefits pension scheme (which was closed to new members in April 2002) and an indication of the effect in relation to 2005 is set out in note 4(b) of the accompanying financial information. Outlook Most of our markets continue to experience over-capacity and fiercely competitive pricing. We have invested further in the latest, most flexible and productive web and sheetfed presses and stitching and binding lines in order to lower our costs of production and further enhance service. Upward pressure on costs, particularly indirect costs of employment and utilities, continues. We have renewed medium or long-term contracts with most of our larger book publishing customers and are poised to make further progress in growing market share through the provision of more post-production added-value services. The underlying market is stable. In the magazine market in the UK we are further sharpening our focus on short-run specialist titles and offering additional logistics and mailing services. A new freehold facility has been established at our Roche factory for this purpose. The investment in a new high-speed perfect binding line at our factory in Plymouth is particularly suited to shorter-run, time-sensitive work. The market for longer-run, more commoditised work continues to offer poor returns and we are keeping our overall mix of work under constant review. There is no indication of any sustained pick-up in demand for corporate financial documentation either in the UK or the USA. The market for annual reports remains competitive, although pagination is growing as a result of increased regulatory and disclosure requirements. As always it is difficult to predict levels of demand for music, multimedia and software related packaging. However demand for special packaging is increasing as video and audio publishers seek to exploit their back catalogues. Demand for point-of-sale products and services is steady. We have won business from a number of new customers. In particular, at the start of the new financial year we were awarded a long-term contract to supply all Marks & Spencer's point-of-sale requirements. At the same time we acquired their print facility at Burnley, where some of this work will be produced. We have established a new, purpose-built freehold logistics facility at Redditch in order to accommodate the new business as well as to enable us to offer a broader range of fulfilment services to customers across all our markets. Commercial and direct response markets remain extremely competitive, especially for longer-run and more commodity products. We are increasing our focus on customers with requirements for more specialist products and services. US markets for magazine and commercial products face similar challenges. Here too we are keeping our work mix under continuous review and are concentrating further on more specialist areas and on providing added-value services. Recent hurricanes have caused short-term disruption to our businesses in Florida, but without damage to property. In our principal markets our competitive position is as strong as ever. In recent years we have undertaken significant rationalisation and consolidation of the Group's activities. We continue to invest in the best available technology to reduce our costs of production and enhance our service offering: capital expenditure this year is expected to be well in excess of last year's level. In the short term question marks remain over consumer confidence and rising utility costs are a particular concern. However, notwithstanding the continuing challenge posed by current market conditions, we believe that our commitment to service and quality, and increasing focus on the provision of added-value services in addition to the supply of printed products, will deliver progress for shareholders. CONSOLIDATED PROFIT AND LOSS ACCOUNT 52 weeks to 29 July 2005 52 weeks to 30 July 2004 _____________________________________________ ___________________________________________ 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) _____________ _____________ ____________ ____________ _____________ ____________ Existing activities | 384,203 | | - || 384,203 || 410,304 | | - || 410,304 | Acquired activities | 35,274 | | - || 35,274 || - | | - || - | |_____________| |_____________||____________||____________| |_____________||____________| 419,477 - 419,477 410,304 - 410,304 Cost of sales (308,824) (6,837) (315,661) (300,931) (5,265) (306,196) _____________ _____________ ____________ ____________ _____________ ____________ Gross profit 110,653 (6,837) 103,816 109,373 (5,265) 104,108 Sales and distribution costs (28,494) (843) (29,337) (25,628) (377) (26,005) Administrative expenses _____________ _____________ ____________ ____________ _____________ ____________ Goodwill amortisation | | | || || | | || | - existing activities | - | | (1,413)|| (1,413)|| - | | (1,810)|| (1,810)| - acquired activities | - | | (1,360)|| (1,360)|| - | | - || - | Goodwill impairment | - | | - || - || - | | (13,000)|| (13,000)| Goodwill write-off | - | | (941)|| (941)|| - | | - || - | Exceptional items | - | | (2,863)|| (2,863)|| - | | (2,913)|| (2,913)| Other administrative | | | || || | | || | expenses | (43,440)| | - || (43,440)|| (45,578)| | - || (45,578)| |_____________| |_____________||____________||____________| |_____________||____________| (43,440) (6,577) (50,017) (45,578) (17,723) (63,301) Other operating income/ (costs) 576 72 648 292 (1,390) (1,098) Operating profit (note 2) _____________ _____________ ____________ ____________ _____________ ____________ Existing activities | 35,142 | | (12,239)|| 22,903 || 38,459 | | (24,755)|| 13,704 | Acquired activities | 4,153 | | (1,946)|| 2,207 || - | | - || - | |_____________| |_____________||____________||____________| |_____________||____________| 39,295 (14,185) 25,110 38,459 (24,755) 13,704 Profit on disposal of fixed assets - 626 626 - - - Loss on disposal of subsidiary - (14,101) (14,101) - - - Interest receivable 574 - 574 1,645 - 1,645 Interest payable (763) - (763) (450) - (450) _____________ _____________ ____________ ____________ _____________ ____________ Profit on ordinary activities before taxation 39,106 (27,660) 11,446 39,654 (24,755) 14,899 Tax on profit on ordinary activities (note 3) (13,072) 4,406 (8,666) (13,879) 1,980 (11,899) _____________ _____________ ____________ ____________ _____________ ____________ Profit on ordinary activities after taxation 26,034 (23,254) 2,780 25,775 (22,775) 3,000 Equity dividends (note 5) (17,675) - (17,675) (17,637) - (17,637) _____________ _____________ ____________ ____________ _____________ ____________ Retained loss for the financial period transferred from reserves 8,359 (23,254) (14,895) 8,138 (22,775) (14,637) _____________ _____________ ____________ ____________ _____________ ____________ Basic earnings per share (note 6) 2.70p 2.92p ____________ ____________ Diluted earnings per share (note 6) 2.70p 2.92p ____________ ____________ Earnings per share before exceptional items and goodwill amortisation (note 6) 25.30p 25.08p _____________ ____________ Equity dividend per ordinary share 17.15p 17.15p ____________ ____________ All transactions are derived from continuing activities. CONSOLIDATED BALANCE SHEET 29 July 2005 30 July 2004 __________________________ __________________________ Â£'000 Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets 51,089 22,814 Tangible assets 159,557 163,165 ___________ ____________ 210,646 185,979 Current assets Stocks 13,344 11,554 Debtors - amounts falling due within one year 79,965 67,924 Debtors - amounts falling due after more than one year 22,938 22,896 Cash at bank and in hand 5,594 47,455 ___________ ____________ 121,841 149,829 Creditors: amounts falling due within one year (101,029) (92,833) ___________ ____________ Net current assets 20,812 56,996 ___________ ____________ Total assets less current liabilities 231,458 242,975 Creditors: amounts falling due after more than one year (947) (992) Provisions for liabilities and charges (15,582) (18,519) Deferred income (308) (706) ___________ ____________ (16,837) (20,217) ___________ ____________ Net assets 214,621 222,758 ___________ ____________ Capital and reserves Called up share capital 10,349 10,331 Share premium account 46,497 45,909 Capital redemption reserve 1,238 1,238 ESOP reserve (1,913) (1,913) Profit and loss account 158,450 167,193 ___________ ____________ Equity shareholders' funds 214,621 222,758 ___________ ____________ SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 29 July 30 July 2005 2004 ______________ ______________ Â£'000 Â£'000 Net cash inflow from operating activities before one-off pension payment 41,788 65,175 One-off pension payment - (25,000) ______________ ______________ Net cash inflow from operating activities 41,788 40,175 Returns on investments and servicing of finance (137) 1,289 Taxation (8,882) (12,061) Capital expenditure and financial investment (28,197) (14,935) Acquisitions and disposals (30,414) 1,020 Equity dividends paid (17,648) (17,628) ______________ ______________ Net cash outflow before financing (43,490) (2,140) Financing Issue of ordinary share capital 606 272 Decrease in debt and lease financing (3,449) (526) ______________ ______________ Decrease in cash in the year (46,333) (2,394) ______________ ______________ NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 2005 2004 Â£'000 Â£'000 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 25,110 13,704 Depreciation 29,701 31,769 Impairment of tangible fixed assets 3,278 - Goodwill amortisation 2,773 1,810 Goodwill impairment - 13,000 Goodwill write-off 941 - Long term incentive schemes provision (release)/charge (1,266) 633 Deferred income (398) (407) Net non-cash provisions movement 5,344 7,996 (Profit)/loss on disposal of tangible fixed assets (648) 1,098 Changes in working capital (13,864) (1,977) Provisions utilised (9,183) (2,451) One-off pension payment - (25,000) ______________ ______________ Net cash inflow from operating activities 41,788 40,175 ______________ ______________ 2005 2004 Â£'000 Â£'000 Reconciliation of net cash flow to movement in net (debt)/funds Decrease in cash in the year (46,333) (2,394) ______________ ______________ Cash outflow from decrease in debt and lease financing 3,449 526 Change in net (debt)/funds resulting from cash flows (42,884) (1,868) Loan notes issued on acquisition of subsidiary (6,016) - Exchange movement (598) 1,597 ______________ ______________ Movement in net (debt)/funds in the year (49,498) (271) Opening net funds 26,006 26,277 ______________ ______________ Closing net (debt)/funds (23,492) 26,006 ______________ ______________ Acquisition excluding 31 July cash and Exchange 29 July 2004 Cash flow overdrafts movement 2005 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Analysis of net (debt)/funds Cash at bank and in hand 47,455 (41,989) - 128 5,594 Overdrafts - (4,344) - (42) (4,386) Debt due within one year (21,449) 3,449 (6,016) (684) (24,700) ____________ ____________ ____________ ____________ ____________ 26,006 (42,884) (6,016) (598) (23,492) ____________ ____________ ____________ ____________ ____________ CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 52 weeks to 52 weeks to 29 July 30 July 2005 2004 _____________ _____________ Â£'000 Â£'000 Profit after taxation 2,780 3,000 Exchange differences on foreign currency net investments 997 (4,520) Related taxation (385) 1,573 _____________ _____________ Total recognised gains and losses relating to the year 3,392 53 _____________ _____________ MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 52 weeks to 52 weeks to 29 July 30 July 2005 2004 _____________ _____________ Â£'000 Â£'000 Opening shareholders' funds 222,758 239,437 Total recognised gains and losses 3,392 53 Equity dividends (17,675) (17,637) Issue of ordinary shares 606 272 Long term incentive schemes (1,266) 633 Goodwill previously written-off included in retained loss for the year 6,806 - _____________ _____________ Closing shareholders' funds 214,621 222,758 _____________ _____________ 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 2004. 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 29 July 2005 and for the fifty two weeks to 30 July 2004 has been extracted from the Group's statutory accounts for the respective years. The Group's statutory accounts for the fifty two weeks to 30 July 2004 have been filed with the Registrar of Companies. The Group's statutory accounts for the fifty two weeks to 29 July 2005 will be sent to all shareholders before 1 November 2005. 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. Analyses of turnover and operating profit The geographical analysis of turnover by destination is stated below: 2005 2004 Â£'000 Â£'000 United Kingdom 299,239 283,335 United States of America 85,171 95,650 Rest of the World 35,067 31,319 __________ __________ 419,477 410,304 __________ __________ The geographical analysis of turnover and operating profit/(loss) by origin is stated below: Turnover Operating profit/(loss) _________________________ _________________________ 2005 2004 2005 2004 Â£'000 Â£'000 Â£'000 Â£'000 United Kingdom 307,421 288,052 22,956 33,838 United States of America 84,282 94,840 4,847 (4,506) Rest of the World 27,774 27,412 1,021 (818) ___________ ___________ ____________ ___________ 419,477 410,304 28,824 28,514 Goodwill amortisation - UK - - (1,360) - Goodwill amortisation - USA - - (1,413) (1,810) Goodwill impairment - USA - - - (13,000) Goodwill write-off - UK - - (941) - ___________ ___________ ____________ ___________ 419,477 410,304 25,110 13,704 ___________ ___________ ____________ ___________ The geographical analysis of operating profit/(loss) before exceptional items and goodwill amortisation is stated below: 2005 2004 Â£'000 Â£'000 United Kingdom 35,385 36,704 United States of America 2,889 2,573 Rest of the World 1,021 (818) __________ __________ 39,295 38,459 __________ __________ All turnover and operating profits derive from continuing activities. The segmental analysis of turnover is stated below: 2005 2004 Â£'000 Â£'000 Books 71,708 66,042 Direct Response, Commercial and Point-of-Sale 186,219 181,990 Financial 32,540 33,810 Magazines 103,873 104,033 Multimedia 25,137 24,429 __________ __________ 419,477 410,304 __________ __________ The turnover of SP Group since acquisition of Â£35,274,000 is included in Direct Response, Commercial and Point-of-Sale in the table above for 2005. 3. Taxation The taxation charge is analysed below: 2005 2004 Â£'000 Â£'000 United Kingdom taxation 8,501 12,602 Overseas taxation 165 (703) __________ __________ 8,666 11,899 __________ __________ 4. Pensions (a) Statement of Standard Accounting Practice 24 'Accounting for Pension Costs' ('SSAP24') The Group has continued to account for pensions in accordance with SSAP24. The Group operates a defined benefits pension scheme in which approximately half of its UK employees participate, with assets held in separate trustee administered funds (the 'defined benefits scheme'). This scheme was closed to new entrants from 6 April 2002, but benefits continue to accrue for existing active members. A defined contribution scheme has been 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 for the Group's UK schemes was Â£4,380,000 (2004 - Â£3,400,000). A triennial valuation of the defined benefits scheme was carried out as at 6 April 2005, using the projected unit method, by Jonathan Punter, Fellow of the Institute of Actuaries, Punter Southall & Co Ltd ('the 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 7.8 per cent per annum before Normal Retirement Age ('NRA') and 5.3 per cent after NRA; salary increases of 3.9 per cent per annum and limited price indexation of 2.9 per cent per annum. Pension increases were allowed for in accordance with the rules of the defined benefits scheme and past practice. At the valuation date, the actuarial value of the assets on this basis was sufficient to cover 86 per cent of the benefits that had been accrued to members equivalent to a deficit of Â£23.2 million. The market value of the defined benefits scheme's assets, as at 6 April 2005, was Â£143.3 million. For the purpose of the actuarial valuation, assets were taken at market value. These results remain preliminary until the actuary's formal valuation report has been signed. The increase in the deficit can mainly be attributed to the revised mortality assumption adopted. The 2005 valuation has been based on post-retirement mortality table PA92 (Year of birth) whereas the 2002 valuation was based on table PA90 (Age-rated down two years). The PA92 table reflects significant improvements in pensioner life expectancy. The Company has continued to pay contributions at the rate of 10.6 per cent of pensionable pay in accordance with the actuary's recommendation. Following the results of the 2005 valuation, the contribution rate is currently under review. Included in debtors is a prepayment of Â£25,001,000 (2004 - Â£25,068,000), inclusive of interest accrued, mainly arising as a result of a one-off payment by the Company into the defined benefits scheme in May 2004. (b) Financial Reporting Standard 17 'Retirement Benefits' ('FRS17') The FRS17 disclosures below have been based on the actuarial valuation of the defined benefits scheme as at 6 April 2005 adjusted to allow for the assumptions and actuarial methodology required by FRS17 and updated to 29 July 2005 by the actuary. The major assumptions used by the actuary were: 29 July 2005 30 July 2004 1 August 2003 per annum per annum per annum Rate of increase in salaries 3.8% 3.9% 3.6% Rate of increase in pensions in payment and deferred pensions 2.8% 2.9% 2.6% Discount rate 5.0% 5.7% 5.5% Inflation assumption 2.8% 2.9% 2.6% The FRS17 assumptions are similar to those used for funding and the SSAP24 disclosures, except for the lower investment return assumption (discount rate) used of 5.0 per cent which is based on corporate bond yields. This has the effect of increasing the value placed on the liabilities and thereby increases the deficit disclosed. The higher investment return used for funding and SSAP24 purposes reflects the higher return expected in the long term by investing in asset classes other than corporate bonds, in particular equities. The assets, the expected rates of return on the assets and the liabilities of the scheme were: Long term Long term Long term rate of rate of rate of return return return expected at Value at expected at Value at expected at Value at 29 July 29 July 30 July 30 July 1 August 1 August 2005 2005 2004 2004 2003 2003 per annum Â£'000 per annum Â£'000 per annum Â£'000 Equities or equivalent 7.0% 77,707 7.0% 62,505 7.0% 58,224 Bonds 4.7% 63,441 5.3% 39,276 5.2% 34,384 Other 4.5% 12,233 4.5% 27,089 4.8% 2,377 ___________ ___________ ___________ Total market value of assets 153,381 128,870 94,985 Present value of liabilities 219,965 173,801 156,753 ___________ ___________ ___________ Deficit in the scheme (66,584) (44,931) (61,768) Related deferred tax asset 19,975 13,479 18,530 ___________ ___________ ___________ Net pension liability (46,609) (31,452) (43,238) ___________ ___________ ___________ The effect on the Group's profit and loss account and the statement of total recognised gains and losses in respect of the defined benefits scheme, had FRS17 been adopted during the year, would have been as follows: 2005 2004 Â£'000 Â£'000 Analysis of the amount charged to operating profit: Current service cost 4,002 5,032 Past service costs - - Settlements/curtailments (600) - __________ __________ Total operating charge 3,402 5,032 __________ __________ Analysis of the amount charged to other finance costs: Expected return on pension scheme assets (7,719) (6,290) Interest on pension scheme liabilities 9,976 8,764 __________ __________ Net finance charge 2,257 2,474 __________ __________ Net charge to profit and loss account 5,659 7,506 __________ __________ 2005 2004 Â£'000 Â£'000 Movement in deficit during the year: Deficit in the scheme at the beginning of year (44,931) (61,768) Movement in year: Current service cost (4,002) (5,032) Contributions 5,124 30,687 Past service costs - - Settlements/curtailments 600 - Other net finance charges (2,257) (2,474) Actuarial loss (21,118) (6,344) __________ __________ Deficit in the scheme at end of year (66,584) (44,931) __________ __________ (c) Other The pension cost relating to foreign schemes was Â£529,000 (2004 - Â£1,680,000). The foreign schemes are defined contribution schemes and are principally Section 401(k) Plans in the USA. 5. Equity dividends The directors propose a final equity dividend of 12.15p for each ordinary share payable to holders on the register on 4 November 2005. If approved, the final dividend will be paid on 2 December 2005. 6. Earnings per share The calculation of basic earnings per share is based on profit after taxation as disclosed in the profit and loss account of Â£2,780,000 (2004 - Â£3,000,000). 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 102,914,012 (2004 - 102,783,290) 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 102,968,476 (2004 - 102,888,405) shares during the year. The difference between the number of shares used in the basic and diluted earnings per share calculation is 54,464 (2004 - 105,115) 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 372.70p (2004 - 390.24p). 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: 2005 2004 ________________________ ________________________ Earnings Earnings Earnings Earnings per share per share Â£'000 pence Â£'000 pence Earnings and basic earnings per share 2,780 2.70 3,000 2.92 Exceptional items and goodwill amortisation 23,254 22.60 22,775 22.16 ___________ ___________ ___________ ___________ Adjusted earnings and adjusted earnings per share 26,034 25.30 25,775 25.08 ___________ ___________ ___________ ___________ All the above calculations exclude 500,000 (2004 - 500,000) ordinary shares which are held on behalf of the Company by Employees' Benefit Trusts. 7. Exceptional items and goodwill amortisation 2005 2004 Â£'000 Â£'000 Exceptional items - rationalisation measures 12,677 10,747 - provision and accrual releases (2,206) (802) - goodwill impairment - 13,000 - goodwill write-off 941 - - profit on disposal of fixed assets (626) - - loss on disposal of subsidiary 14,101 - Goodwill amortisation 2,773 1,810 __________ __________ 27,660 24,755 Related taxation (4,406) (1,980) __________ __________ Exceptional items and goodwill net of related taxation 23,254 22,775 __________ __________ Rationalisation measures of Â£12,677,000 includes Â£7,801,000 relating to the closure of St Ives Caerphilly Limited and restructuring of the remaining Web operations, Â£1,800,000 relating to the relocation of the point-of-sale business from St Ives Crayford Limited to SP Group Limited and the resulting reorganisation of SP Group's logistics business, and Â£2,002,000 for the closure of our Woolwich operations and subsequent restructuring of the Financial division. The remaining Â£1,074,000 relates to other rationalisation measures completed or announced throughout the Group. The provision and accrual releases of Â£2,206,000 includes Â£1,364,000 relating to the closure of St Ives Inc Case-Hoyt. The balance of Â£842,000 relates to other provision and accrual releases of items previously charged as exceptional costs and the release of fair value provisions no longer required. Following the closure of St Ives Direct Bristol Limited, Â£941,000 of goodwill previously written-off to reserves has now been written-off through the profit and loss account. The profit on disposal of fixed assets relates to the sale of the Tunbridge Wells factory which was closed in the previous financial year. The loss on disposal of subsidiary relates to the sale of Johler Druck GmbH as detailed in note 9, and includes Â£5,865,000 in respect of goodwill previously written-off to reserves. Goodwill amortisation of Â£2,773,000 (2004 - Â£1,810,000) was charged for the fifty two weeks ended 29 July 2005. 8. Acquisition of subsidiary undertaking On 13 September 2004 the whole of the issued share capital of SP Group Holdings Limited ('SP Group') was acquired on a debt free basis. The initial consideration for the acquisition was Â£33 million, payable as to Â£29.8 million in cash and as to the balance through the issue of floating rate loan notes. Following the earn-out period and the achievement of the target profit before interest and goodwill amortisation of Â£4.9 million for the year ended 31 March 2005, additional consideration of Â£3.92 million was paid in June 2005 as to Â£1.4 million in cash and the balance through the issue of floating rate loan notes. The purchase of SP Group has been accounted for by the acquisition method and has been consolidated into the Group from the date of acquisition. The fair value of assets acquired were Â£6,151,000. Total purchase consideration including costs amounted to Â£37,199,000, resulting in goodwill on acquisition of Â£31,048,000. SP Group is a leading supplier of point-of-sale material and services to major retail store chains and international brands. Its services include complete project management and fulfilment operations in addition to digital, silk-screen and lithographic printing facilities located in Birmingham and Redditch. For the period from the date of acquisition to 29 July 2005 SP Group increased the Group's net operating cash flows by Â£2,489,000, received Â£28,000 in respect of net returns on investments and servicing of finance, paid Â£981,000 in respect of taxation and Â£1,850,000 for capital expenditure. 9. Disposal of subsidiary undertaking On 5 April 2005 the Group disposed of the whole of its interest in Johler Druck GmbH ('Johler') for a cash consideration of approximately â‚¬2.2 million. The loss on disposal amounted to Â£14,101,000, including Â£5,865,000 in respect of goodwill previously written-off to reserves. Up to the date of disposal Johler made an operating loss (before interest) of Â£267,000 and in the previous full year it made an operating loss (before interest) of Â£935,000. 10. Post balance sheet events On 1 August 2005 SP Group Limited secured a long-term contract to supply all Marks and Spencer plc's point-of-sale requirements. At the same time the freehold land, building and equipment of their print business in Burnley was acquired for approximately Â£3.4 million. The business has 74 employees and will trade under the name St Ives Burnley Limited. On 15 August 2005 the freehold land, building and equipment formerly owned by Ailec Mailing, located in Roche and adjacent to our existing factory, was acquired for approximately Â£2.2 million. The facility will operate as a mailing house under the name SouthWest Mailing Limited. END This information is provided by RNS The company news service from the London Stock Exchange

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