Half Yearly Report

RNS Number : 7513Z

St. Ives PLC

12 March 2013

 



12 March 2013

ST IVES plc

Half Year Results for the 27 weeks ended 1 February 2013

St Ives plc, the UK's leading marketing services and print group, announces half year results for the 27 weeks ended 1 February 2013.

Group Financial Highlights

· Underlying* Group revenue of £161.7m (2012: £166.4m)

· Marketing Services revenue up 36.4% to £31.1m (2012: £22.8m)

· Underlying* profit before tax up 10.1% to £12.2m (2012: £11.1m)

· Basic underlying* earnings per share up 8.8% to 7.67p (2012: 7.05p)

· Interim dividend raised by 14.3% to 2.0p per share (2012: 1.75p per share)

· Strong balance sheet with net debt at 1 February 2013 of £7.0m

(27 July 2012: £13.4 m)

    All figures for revenue, profit and earnings per share are based on continuing operations.

*  Before non-underlying items which comprise restructuring costs, operating results of non-continuing sites, acquisition costs, contingent consideration required to be treated as remuneration, net profit on disposal of property, plant and equipment, amortisation of acquired intangibles and other one-off items.

Operational Highlights

·     Continued success in implementing the strategic repositioning of the Group

·     Marketing Services segment generated 31% of underlying Group operating profit

·     Proposed acquisition of Amaze will further enhance Marketing Services offering

·     Print segment major restructuring now complete, overall level of profitability maintained

·     Our market leading Books business benefited from investment in new digital printing equipment

·     New contracts won across the Group during the period, including Innocent Drinks, Johnston Press, JD Williams and Pizza Hut

·     Over fifty clients now trade with more than one business within the Group

Commenting on the results, Patrick Martell, Chief Executive of St Ives, said:

"We are very pleased to report another strong set of results and further progress in our plan to build a substantial and broadly-based marketing services offering whilst moving away from the commoditised sectors of the print market. The Group is in a strong financial position and we remain confident that we will make further progress in the full year to reposition the Group, extend our propositions and drive organic and acquisition growth in our Marketing Services businesses."

 

For further information contact:

St Ives plc Patrick Martell, Chief Executive Matt Armitage, Finance Director	020 7928 8844
MHP Communications John Olsen/Ian Payne /Giles Robinson	020 3128 8100

Chief Executive's Statement

Results

We are very pleased to report another strong set of results and further progress in our plan to build a substantial and broadly-based marketing services offering whilst moving away from the commoditised sectors of the print market.

On an underlying basis, Group revenue was £161.7 million, 2.8% below the equivalent period in the prior year although, on a like-for-like basis, removing the effect of acquisitions and the print markets which we have exited, Group revenue increased by 2.9%.

The Group achieved an underlying profit before tax of £12.2 million, a 10.1% increase compared to the equivalent period in the prior year.

Our Marketing Services segment reported revenue of £31.1 million for the period, a primarily acquisition driven increase of 35% over last year. Marketing Services now represents 30.8% of underlying Group operating profit (2012: 20.0%). Within the Print segment our decision to exit the markets for printed company reports and DVD / CD inserts (2012 revenue: £10.6 million) resulted in marginally reduced overall revenue, but pleasingly profitability was maintained.

Print

As expected we have maintained the overall level of profitability across the Print segment. Whilst prices have remained under pressure, we continue to improve efficiencies and reduce costs; this has enabled us to maintain margins across the segment.

Our Books business continues to be affected by shorter run lengths and a corresponding increase in the number of orders received. Our recently commissioned digital printing equipment is helping to improve efficiency on our conventional equipment as more short-run production is transferred to digital.

Our Exhibition and Events business benefited from the 2012 Paralympics at the start of the current financial year and has continued to perform well since.

Our Point of Sale business has continued to perform well and a number of key contracts have been renewed in the period.

In our Direct Response business, we completed the closure of the Leeds operation and successfully consolidated the business at our facility in Bradford. The performance of the business has improved significantly as a result and we anticipate further future benefit.

Marketing Services

The benefit of the acquisitions made over the last two years can be seen in these interim results. We are pleased with the individual performances of the acquisitions and the broader range of capabilities and added value services the Group now has to offer. Collaboration and integration continues to build and we now have in excess of fifty clients where we are providing services from more than one part of the Group.

Our Data Marketing businesses, Occam and Response One, performed well in the period. They have collaborated successfully to sell a combined offering using data analytics to create marketing campaigns in order to help our clients improve both their customer acquisition and retention.

Tactical Solutions, our Field Marketing business, experienced a quieter than anticipated summer during the Olympics, but the traditionally busy Christmas trading period was strong.

Our consultancy businesses, Pragma and Incite, have performed well and we are encouraged with the pipeline of opportunities both in the UK and abroad. It is our intention to relocate Pragma from its offices in Twickenham to our head office in central London to enhance their plans for growth.

We will continue to seek selective acquisitions in Marketing Services that extend our range of propositions to clients. We intend to continue our policy of using a mix of cash, share and deferred payments as consideration, which we feel is an appropriate incentive for vendors who will have continuing responsibility for the businesses we are acquiring. As our balance sheet remains strong, we have decided that we will seek, in a limited way, to purchase and hold treasury shares that can be used to satisfy share-based purchase consideration for existing and future acquisitions.

Acquisition

As announced on 11 March 2013, we are delighted to have reached an agreement to acquire the digital marketing business Amaze from Hasgrove plc, subject to the approval of Hasgrove's shareholders at their EGM, which is due to take place on 27 March 2013.

Dividend

The Board has declared an interim dividend of 2.0p per share (2012: 1.75p), an increase
of 14.3%, which will be payable on 3 May 2013 to shareholders on the register at
12 April 2013.

Balance sheet

Despite the ongoing investment in acquisitions and restructuring, the Group's balance sheet remains strong and underlying free cash flow continues to be robust. Net debt at the half year was £7.0 million (27 July 2012: £13.4 million).

Outlook

The UK economy is showing only tentative signs of improvement with confidence still fragile and consumers continuing to be under financial pressure. However, the Group is in a strong financial position and we remain confident that we will make further progress in the full year to reposition the Group, extend our propositions to clients and drive organic and acquisition growth in our Marketing Services businesses.

Patrick Martell

Chief Executive

12 March 2013

Condensed Consolidated Income Statement
	27 weeks to 1 February 2013

	Note	Underlying £'000	Non- underlying* (Note 3) £'000	Total £'000	26 weeks to 27 January 2012 (Restated Note 8)  £'000	52 weeks to 27 July 2012 (Restated Note 8)  £'000
Revenue	2	161,670	5,643	167,313	167,709	329,459
Cost of sales		(117,083)	(6,895)	(123,978)	(127,216)	(241,752)
Gross profit		44,587	(1,252)	43,335	40,493	87,707
Selling costs		(10,434)	(562)	(10,996)	(13,555)	(25,208)
Administrative expenses		(21,852)	(8,651)	(30,503)	(29,235)	(57,487)
Other operating income		16	275	291	716	1,605
Profit/(loss) from operations	2	12,317	(10,190)	2,127	(1,581)	6,617
Investment income		6,134	-	6,134	7,464	15,239
Finance costs		(6,256)	-	(6,256)	(7,430)	(15,464)
Profit/(loss) before tax		12,195	(10,190)	2,005	(1,547)	6,392
Income tax charge		(2,988)	1,957	(1,031)	(1,534)	(1,579)
Net profit/(loss) for the period		9,207	(8,233)	974	(3,081)	4,813
Attributable to:
Shareholders of the parent company		9,185	(8,295)	890	(2,962)	4,916
Non-controlling interests		22	62	84	(119)	(103)
		9,207	(8,233)	974	(3,081)	4,813
Basic earnings per share (p)
From continuing operations	5	7.67	(6.93)	0.74	(2.69)	4.31
Diluted earnings per share (p)
From continuing operations	5	7.49	(6.77)	0.72	(2.66)	4.27

* Non-underlying items comprise restructuring costs, operating results of non-continuing sites, acquisition costs, contingent consideration required to be treated as remuneration, net profit on disposal of property, plant and equipment, amortisation of acquired intangibles and other one-off items.

Condensed Consolidated Statement of Comprehensive Income
	27 weeks to 1 February 2013  £'000	26 weeks to 27 January 2012 (Restated Note 8)  £'000	52 weeks to 27 July 2012 (Restated Note 8)  £'000
Profit/(loss) for the period	974	(3,081)	4,813
Actuarial gains/(losses) on defined benefits pension schemes	22,711	(844)	(11,256)
Transfers of gains on cash flow hedges to hedged items	(66)	(4)	(5)
(Losses)/gains on cash flow hedges taken directly to equity	(67)	28	66
Tax (charge)/credit on items taken directly to equity	(5,192)	204	2,049
Other comprehensive income/(expense) for the period	17,386	(616)	(9,146)
Total comprehensive income/(expense) for the period	18,360	(3,697)	(4,333)
Attributable to:
Shareholders of the parent company	18,276	(3,578)	(4,230)
Non-controlling interests	84	(119)	(103)
	18,360	(3,697)	(4,333)

Condensed Consolidated Statement of Changes in Equity
	Share capital £'000	Additional paid-in capital† (Restated Note 8) £'000	ESOP reserve £'000	Share option reserve (Restated Note 8) £'000	Hedging and translation reserve £'000	Other reserves £'000	Retained earnings (Restated Note 8) £'000	Non- controlling interest (Restated Note 8) £'000	Total £'000
Balance at 30 July 2011	10,585	48,778	(1,144)	656	4	48,294	74,686	477	134,042
Loss for the period	-	-	-	-	-	-	(2,962)	(119)	(3,081)
Other comprehensive income/(expense) for the period	-	-	-	-	17	17	(633)	-	(616)
Total comprehensive income/(expense) for the period	-	-	-	-	17	17	(3,595)	(119)	(3,697)
Adjustment in respect of acquisition of subsidiary	-	-	-	-	-	-	-	(13)	(13)
Dividends	-	-	-	-	-	-	(3,756)	-	(3,756)
Issue of share capital	626	1,324	788	-	-	2,112	(607)	-	2,131
Transfer of contingent share consideration	-	-	-	-	-	-	-	-	-
Recognition of share-based payments	-	-	-	1,640	-	1,640	-	-	1,640
Balance at 27 January 2012	11,211	50,102	(356)	2,296	21	52,063	66,728	345	130,347
Profit for the period	-	-	-	-	-	-	7,878	16	7,894
Other comprehensive income/(expense) for the period	-	-	-	-	29	29	(8,559)	-	(8,530)
Comprehensive income/(expense) for the period	-	-	-	-	29	29	(681)	16	(636)
Dividends	-	-	-	-	-	-	(2,018)	-	(2,018)
Issue of share capital	772	926	-	-	-	926	-	-	1,698
Transfer of contingent share consideration	-	43	-	(532)	-	(489)	448	-	(41)
Recognition of share-based payments	-	-	-	2,587	-	2,587	-	-	2,587
Balance at 27 July 2012	11,983	51,071	(356)	4,351	50	55,116	64,477	361	131,937
Profit  for the period	-	-	-	-	-	-	890	84	974
Other comprehensive (expense)/income for the period	-	-	-	-	(101)	(101)	17,487	-	17,386
Comprehensive (expense)/income for the period	-	-	-	-	(101)	(101)	18,377	84	18,360
Dividends	-	-	-	-	-	-	(4,793)	-	(4,793)
Own share acquired	-	-	(360)	-	-	(360)	-	-	(360)
Allocation of shares	-	-	664	-	-	664	(293)	-	371
Transfer of contingent share consideration	-	167	-	(1,215)	-	(1,048)	1,232	-	184
Recognition of share-based payments	-	-	-	2,342	-	2,342	-	-	2,342
Balance at 1 February 2013	11,983	51,238	(52)	5,478	(51)	56,613	79,000	445	148,041

†Additional paid-in capital represents share premium, merger reserve and capital redemption reserve.

Condensed Consolidated Balance Sheet
	Note	1 February 2013 £'000	27 January 2012 (Restated Note 8) £'000	27 July 2012 (Restated Note 8) £'000
Assets
Non-current assets
Property, plant and equipment		59,267	58,552	56,361
Goodwill		70,824	69,283	70,824
Other intangible assets		24,914	25,943	31,325
Financial assets		3,420	2,877	3,050
Surplus on retirement benefits obligations	6	4,074	-	-
		162,499	156,655	161,560
Current assets
Inventories		7,250	7,476	7,038
Trade and other receivables		74,359	82,901	89,497
Derivative financial instruments		73	28	76
Cash and cash equivalents		8,670	5,945	12,109
Assets held for sale		-	3,100	-
		90,352	99,450	108,720
Total assets		252,851	256,105	270,280
Liabilities
Current liabilities
Loans payable		275	15,000	-
Finance lease payables		62	-	-
Trade and other payables		70,893	72,888	80,118
Income tax payable		1,893	2,662	1,752
Deferred consideration payable		2,091	10,737	2,221
Deferred income		969	283	824
Provisions		2,599	4,559	1,348
		78,782	106,129	86,263
Non-current liabilities
Loans payable		15,000	573	25,550
Finance lease payables		348	-	-
Retirement benefits obligations	6	-	11,585	19,991
Deferred consideration payable		-	107	-
Provisions		780	-	1,190
Deferred tax liability		9,900	7,364	5,349
		26,028	19,629	52,080
Total liabilities		104,810	125,758	138,343
Net assets		148,041	130,347	131,937
Equity
Capital and reserves
Share capital		11,983	11,211	11,983
Other reserves		56,613	52,063	55,116
Retained earnings		79,000	66,728	64,477
Attributable to shareholders of the parent company		147,596	130,002	131,576
Non-controlling interest		445	345	361
Total equity		148,041	130,347	131,937

These financial statements were approved by the board of directors on 12 March 2013. 

Condensed Consolidated Cash Flow Statement
	Note	27 weeks to 1 February 2013  £'000	26 weeks to 27 January 2012 (Restated Note 8)  £'000	52 weeks to 27 July 2012 (Restated Note 8)  £'000
Operating activities
Cash generated from/(used in) operations	7	14,628	(4,080)	8,108
Interest paid		(510)	(520)	(1,442)
Income taxes paid		(1,529)	(2,851)	(5,700)
Net cash generated from/(used in) operating activities		12,589	(7,451)	966
Investing activities
Purchase of property, plant and equipment		(3,200)	(4,589)	(6,426)
Purchase of other intangibles		(202)	(333)	(613)
Proceeds on disposal of property, plant and equipment		315	757	4,917
Disposal proceeds of subsidiaries, net of cash disposed		1,691	564	2,255
Acquisition of subsidiaries, net of cash acquired		-	(9,009)	(21,978)
Disposal proceeds of available-for-sale financial assets		275	-	-
Purchase of available-for-sale financial assets		(250)	(1,500)	(2,500)
Net cash used in investing activities		(1,371)	(14,110)	(24,345)
Financing activities
Dividends paid	4	(4,792)	(3,756)	(5,774)
Increase in finance lease rentals		410	-	-
(Decrease)/increase in bank loans		(10,275)	15,000	25,000
Net cash generated from/(used in) financing activities		(14,657)	11,244	19,226
Net decrease in cash and cash equivalents		(3,439)	(10,317)	(4,153)
Cash and cash equivalents at beginning of the period		12,109	16,262	16,262
Cash and cash equivalents at end of the period	7	8,670	5,945	12,109

Notes to the Condensed Consolidated Financial Statements

1. Basis of preparation

The condensed financial statements have been prepared in accordance with IAS 34 "Interim Financial Statements" and in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority.

The recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern

The directors, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the combined financial information for the twenty seven weeks ended 1 February 2013.

Other than as disclosed in note 8, the interim statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts for 2012. The interim statements have not been audited or reviewed.

The interim statements and prior half and full year comparatives do not comprise statutory accounts for the purpose of Section 435 of the Companies Act 2006. The abridged information for the fifty two weeks to 27 July 2012 has been extracted from the Group's statutory accounts for that period which have been filed with the Registrar of Companies. The Auditor's report on the accounts of the Group for that period was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.

Risks and uncertainties

The board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in pages 36 and 37 of the Group's 2012 Annual Report and Accounts, a copy of which is available on the Group's website: www.st-ives.co.uk. The key financial risks are interest rate risk, foreign exchange risk, credit risk and the volatility of the defined pension scheme net surplus or deficit.

2. Segment reporting

The Group manages its business on a market segment basis. Following the change in accounting policy on business combinations as disclosed in note 8, contingent consideration relating to Tactical Solutions, Response One, Pragma and Incite is included as a non-underlying item in the Marketing Services segment.

Corporate costs are allocated to revenue-generating segments as this presentation better reflects their profitability.

Business segments

	27 weeks to 1 February 2013
	Print £'000	Marketing Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	131,311	30,359	−	161,670
Group sales	204	774	(978)	−
Underlying revenue	131,515	31,133	(978)	161,670
Non-underlying revenue	5,643	−	−	5,643
Total revenue	137,158	31,133	(978)	167,313
Result
Result before non-underlying items	8,527	3,790	−	12,317
Non-underlying items	(5,408)	(4,782)	−	(10,190)
Profit/(loss) from operations	3,119	(992)	−	2,127
Investment income				6,134
Finance costs				(6,256)
Profit before tax				2,005
Income tax charge				(1,031)
Net profit for the period				974

	26 weeks to 27 January 2012
	Print £'000	Marketing Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	143,771	22,616	-	166,387
Group sales	50	163	(213)	-
Underlying revenue	143,821	22,779	(213)	166,387
Non-underlying revenue	1,322	-	-	1,322
Total revenue	145,143	22,779	(213)	167,709
Result
Result before non-underlying items	8,835	2,204	-	11,039
Non-underlying items (restated note 8)	(5,915)	(6,705)	-	(12,620)
Profit/(loss) from operations	2,920	(4,501)	-	(1,581)
Investment income				7,464
Finance costs				(7,430)
Profit before tax				(1,547)
Income tax charge				(1,534)
Net loss for the period				(3,081)

	52 weeks to 27 July 2012
	Print £'000	Marketing Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	280,327	47,049	-	327,376
Group sales	211	608	(819)	-
Underlying revenue	280,538	47,657	(819)	327,376
Non-underlying revenue	2,083	-	-	2,083
Total revenue	282,621	47,657	(819)	329,459
Result
Result before non-underlying items	20,442	4,011	-	24,453
Non-underlying items (restated note 8)	(5,608)	(12,228)	-	(17,836)
Profit/(loss) from operations	14,834	(8,217)	-	6,617
Investment income				15,239
Finance costs				(15,464)
Profit before tax				6,392
Income tax charge				(1,579)
Net profit for the period				4,813

Geographical segments

The Print and Marketing Services business segments operate primarily in the UK, deriving more than 96% of their revenue and results from operations and customers located in the UK.

3. Non-underlying items

Non-underlying items disclosed on the face of the Condensed Consolidated Income statement are as follows:

	27 weeks to 1 February 2013  £'000	26 weeks to 27 January 2012 (Restated Note 8)  £'000	52 weeks to 27 July 2012 (Restated Note 8)  £'000
Expense/(income)
Restructuring items
Redundancies, impairments and other charges	3,850	5,726	6,699
Profit on disposal of property, plant and equipment	(275)	(615)	(1,421)
Operating losses from non-continuing sites	1,873	250	601
	5,448	5,361	5,879
Other
Amortisation of acquired intangibles	2,775	1,659	3,729
Contingent consideration required to be treated as remuneration	1,923	4,091	6,827
Costs associated with the acquisition of subsidiaries and other investments	-	920	1,384
Remaining other non-underlying expenses	44	589	17
	10,190	12,620	17,836
Income tax credit	(1,957)	(1,622)	(4,737)
	8,233	10,998	13,099

The restructuring charges in the current period include redundancies of £1,388,000 and other restructuring costs of £2,462,000 within the Print segment. The disposal of plant and equipment as a result of the closure of the Leeds site gave rise to gains of £275,000 within the Print segment. The operating loss from non-continuing sites relates to operating results in the period following the decision to close the Leeds site in July 2012. These are recorded within the Print segment.

Amortisation charges of £2,775,000 relate to acquired customer relationships, proprietary techniques and software intangibles and were recorded in the Marketing Services segment. Following the change in accounting policy as set out in note 8, amounts paid to selling shareholders of £1,923,000 in respect of acquisitions is required to be treated as remuneration rather than contingent consideration and is recorded in the Marketing Services segment.

4. Dividends

	per share	27 weeks to 1 February 2013  £'000	26 weeks to 27 January 2012  £'000	52 weeks to 27 July 2012  £'000
Final dividend paid for the 52 weeks ended 29 July 2011	3.50p	-	3,756	3,756
Interim dividend paid for the 26 weeks ended 27 January 2012	1.75p	-	-	2,018
Final dividend paid for the 52 weeks ended 27 July 2012	4.00p	4,792	-	-
Dividends paid during the period		4,792	3,756	5,774
Declared interim dividend for the 27 weeks ended 1 February 2013 (2012 - 1.75p per share)	2.00p	2,396	-	−

 

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:

Number of shares

	27 weeks to 1 February 2013 '000	26 weeks to 27 January 2012 '000	52 weeks to 27 July 2012 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	119,728	110,278	114,017
Weighted average number of ordinary shares for the purposes of diluted earnings per share	122,608	111,392	115,228

Basic and diluted earnings per share

	27 weeks to 1 February 2013		26 weeks to 27 January 2012		52 weeks to 27 July 2012
	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence
Earnings and basic earnings per share from continuing activities
Underlying earnings and underlying earnings per share	9,185	7.67	7,770	7.05	17,795	15.61
Non-underlying items (restated note 8)	(8,295)	(6.93)	(10,732)	(9.74)	(12,879)	(11.30)
Earnings and basic earnings per share (restated note 8)	890	0.74	(2,962)	(2.69)	4,916	4.31
Earnings and diluted earnings per share from continuing activities
Underlying earnings and underlying earnings per share	9,185	7.49	7,770	6.98	17,795	15.44
Non-underlying items (restated note 8)	(8,295)	(6.77)	(10,732)	(9.64)	(12,879)	(11.18)
Earnings and diluted earnings per share (restated note 8)	890	0.72	(2,962)	(2.66)	4,916	4.27

Underlying earnings is calculated by adding back non-underlying items, as adjusted for tax, to the profit/(loss) for the period.

6. Retirement benefits

A net surplus has been recognised in respect of retirement benefit obligations of £4,074,000 at 1 February 2013 compared to a net deficit of  £19,991,000 at 27 July 2012 primarily due to the better than expected investment performance of plan assets and a higher discount rate, partially offset by a higher rate of assumed inflation.

7. Notes to the condensed consolidated cash flow statement

Reconciliation of cash generated from operations

	27 weeks to 1 February 2013  £'000	26 weeks to 27 January 2012 (Restated Note 8)  £'000	52 weeks to 27 July 2012 (Restated Note 8)  £'000
Profit/(loss) from continuing operations	2,127	(1,581)	6,617
Adjustments for:
Depreciation of property, plant and equipment	3,708	3,906	7,837
Impairment losses	-	927	832
Amortisation of intangible assets	3,204	2,061	4,556
Profit on disposal of property, plant and equipment	(291)	(716)	(1,605)
Deferred income credit/(charge)	145	(105)	436
Share-based payment charge	439	390	766
Decrease in retirement benefit obligations	(1,192)	(1,000)	(2,458)
Increase in contingent consideration required to be treated as remuneration	1,923	4,091	4,111
Increase in provisions	842	2,246	225
Operating cash inflows before movements in working capital	10,905	10,219	21,317
(Increase)/decrease in inventories	(212)	(225)	212
Decrease/(increase) in receivables	5,404	(11,910)	(14,955)
(Decrease)/increase in payables	(1,469)	(2,164)	1,534
Cash generated from/(used in) operations	14,628	(4,080)	8,108

Analysis of net debt

	28 July 2012 £'000	Cash flow £'000	Reclassify £'000	1 February 2013 £'000
Cash and cash equivalents	12,109	(3,439)	-	8,670
Bank loans due less than one year	-	-	(275)	(275)
Bank loans due greater than year	(25,550)	10,275	275	(15,000)
Finance leases due less than one year	-	(62)	-	(62)
Finance leases due greater than year	-	(348)	-	(348)
Net debt	(13,441)	6,426	-	(7,015)

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. The effective interest rates on cash and cash equivalents are based on current market rates.

8. Change in accounting policy

In January 2013, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued revised guidance in respect of IFRS 3 "Business Combinations". Under this guidance, contingent consideration for acquired subsidiaries where the selling shareholders continue to be employed by the Group, but which is automatically forfeited upon termination of employment, is now required to be classified as remuneration for post-combination services. Prior to this revised guidance, the contingent consideration could be treated for accounting purposes as either consideration or remuneration depending on the substance of the transaction.

Previously the Group reached an overall conclusion based on a balanced assessment of all indicators, including whether payments were dependent on continuing employment and determined that these amounts were consideration rather than remuneration. The Group has now changed its accounting policy to conform with the revised guidance, and the half and full year comparatives have been re-stated. This change in accounting policy has no impact on net cash flow or net debt.

The impact of the prior period adjustments on the previously reported Consolidated Income Statement are summarised as follows:

	27 weeks to 1 February 2013					26 Weeks to 27 January 2012
	Before Adjustments		Adjustments	Reported		Previously Reported	Adjustments	Restated
	£'000		£'000	£'000		£'000	£'000	£'000
Administrative expenses - non underlying items	(5,190)		(3,461)	(8,651)		(5,712)	(4,091)	(9,803)
Interest expense - underlying items	(6,438)		182	(6,256)		(7,430)	-	(7,430)
Attributable to:
Shareholders of the parent company	4,271		(3,381)	890		901	(3,863)	(2,962)
Non-controlling interests	(18)		102	84		109	(228)	(119)
Underlying basic earnings per share	7.52		0.15	7.67		7.05	-	7.05
Non-underlying items	(3.95)		(2.98)	(6.93)		(6.23)	(3.51)	(9.74)
Basic earnings per share	3.57		(2.83)	0.74		0.82	(3.51)	(2.69)
Underlying diluted earnings per share	7.34		0.15	7.49		6.98	-	6.98
Non-underlying items	(3.86)		(2.91)	(6.77)		(6.17)	(3.47)	(9.64)
Diluted earnings per share	3.48		(2.76)	0.72		0.81	(3.47)	(2.66)
						52 weeks to 27 July 2012
						Previously Reported	Adjustments	Restated
						£'000	£'000	£'000
Administrative expenses - non underlying items						(8,019)	(8,514)	(16,533)
Interest expense - underlying items						(15,464)	-	(15,464)
Attributable to:
Shareholders of the parent company						13,263	(8,345)	4,916
Non-controlling interests						66	(169)	(103)
Underlying basic earnings per share						15.61	-	15.61
Non-underlying items						(3.97)	(7.33)	(11.30)
Basic earnings per share						11.64	(7.33)	4.31
Underlying diluted earnings per share						15.44	-	15.44
Non-underlying items						(3.93)	(7.24)	(11.18)
Diluted earnings per share						11.51	(7.24)	4.27

The adjustment of £3,461,000 to non-underlying items for the 27 weeks to 1 February 2013 represents a remuneration charge of £1,923,000 and the reversal of a credit of £1,538,000 in relation to a release of deferred consideration payable for the Tactical Solutions acquisition that would have been recognised under the previous Group policy.

The adjustment of £8,514,000 to non-underlying items for the 52 weeks to 27 July 2012 represents a remuneration charge of £6,827,000 and the reversal of a credit of £1,687,000 in relation to a previous release of deferred consideration payable for the Tactical Solutions acquisition that was recognised under the previous Group policy.

The impact of the prior period adjustments on the previously reported Consolidated Statement of Changes in Equity are summarised as follows:

27 weeks to 1 February 2013

26 Weeks to 27 January 2012

	Before Adjustments	Adjustments	Reported	Previously Reported	Adjustments	Restated
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at beginning of the period in:
-  Additional paid in capital	59,245	(8,174)	51,071	49,778	(1,000)	48,778
-  Share option reserve	1,111	3,240	4,351	344	312	656
-  Retained earnings	74,042	(9,565)	64,477	76,352	(1,666)	74,686
-  Non-controlling interest	715	(354)	361	662	(185)	477
Issue of shares in:
-  Additional paid in capital	-	-	-	4,129	(2,805)	1,324
Transfer of contingent share consideration in:
- Additional paid in capital	-	167	167	-	-	-
- Share option reserve	-	(1,215)	(1,215)	-	-	-
- Retained earnings	-	1,232	1,232	-	-	-
Recognition of share based payments in:
- Share option reserve	438	1,904	2,342	390	1,250	1,640

52 weeks to 27 July 2012

				Previously Reported	Adjustments	Restated
				£'000	£'000	£'000
Balance at beginning of the period in:
- Additional paid in capital				49,778	(1,000)	48,778
- Share option reserve				344	312	656
- Retained earnings				76,352	(1,666)	74,686
- Non-controlling interest				662	(185)	477
Issue of shares in:
- Additional paid in capital				9,467	(7,217)	2,250
Transfer of contingent share consideration in:
- Additional paid in capital				-	43	43
- Share option reserve				-	(532)	(532)
- Retained earnings				-	448	448
Recognition of share based payments in:
- Share option reserve				767	3,460	4,227

The impact of the prior period adjustments on the previously reported Consolidated Balance Sheet are summarised as follows:

1 February 2013

27 January 2012

	Before Adjustments	Adjustments	Reported	Previously Reported	Adjustments	Restated
	£'000	£'000	£'000	£'000	£'000	£'000
Goodwill	87,169	(16,345)	70,824	80,270	(10,987)	69,283
Trade & other payables	70,027	866	70,893	72,371	517	72,888
Consideration payable less than one year	3,258	(1,167)	2,091	13,908	(3,171)	10,737
Consideration payable greater than year	-	-	-	256	(149)	107
Other reserves	60,691	(4,078)	56,613	54,306	(2,243)	52,063
Retained earnings	90,715	(11,715)	79,000	72,257	(5,529)	66,728
Non-controlling interest	697	(252)	445	758	(413)	345

27 July 2012

				Previously Reported	Adjustments	Restated
				£'000	£'000	£'000
Goodwill				87,169	(16,345)	70,824
Trade & other payables				79,101	1,017	80,118
Consideration payable less than one year				4,731	(2,510)	2,221
Other reserves				60,050	(4,934)	55,116
Retained earnings				74,042	(9,565)	64,477
Non-controlling interest				715	(354)	361

The impact of the prior period adjustments on the previously reported Consolidated Cash Flow Statement are summarised as follows:

27 weeks to 1 February 2013

26 Weeks to 27 January 2012

	Before Adjustments	Adjustments	Reported	Previously Reported	Adjustments	Restated
	£'000	£'000	£'000	£'000	£'000	£'000
Profit from continuing operations	5,588	(3,461)	2,127	2,510	(4,091)	(1,581)
Increase in contingent consideration required to be treated as remuneration	-	1,923	1,923	-	4,091	4,091
(Decrease)/increase in payables	(3,007)	1,538	(1,469)	(2,164)	-	(2,164)
Cash flow from operations	14,628	-	14,628	(4,080)	-	(4,080)
Acquisition of subsidiaries, net of cash acquired	-	-	-	(9,009)	-	(9,009)

52 weeks to 27 July 2012

				Previously Reported	Adjustments	Restated
				£'000	£'000	£'000
Profit from continuing operations				15,133	(8,514)	6,617
Increase in contingent consideration required to be treated as remuneration				-	4,111	4,111
(Decrease)/increase in payables				(157)	1,691	1,534
Cash flow from operations				10,822	(2,714)	8,108
Acquisition of subsidiaries, net of cash acquired				(24,692)	2,714	(21,978)

The additional paid-in capital includes share premium, merger reserve and capital redemption reserve and can be summarised as below:

	30 July 2011	27 January 2012	27 July 2012	1 February 2013
	£'000	£'000	£'000	£'000
Share premium	46,689	46,689	46,689	46,689
Merger reserve	851	2,175	3,144	3,311
Capital redemption reserve	1,238	1,238	1,238	1,238
Additional paid-in capital	48,778	50,102	51,071	51,238

The merger reserve includes the additional paid in capital for the acquisition of Occam, Tactical Solutions, Response One, Pragma and Incite.

9. Related parties

The nature of related party transactions of the Group has not changed from those described in the Group's consolidated financial statements for the fifty two weeks ended 27 July 2012.

On 2 November 2012, 262,232 ordinary shares in the Company were sold at market price to the executive directors of the Company by the Group's employee benefit trust under the rules of the Directors' and Senior Executives' Deferred Bonus Scheme as follows:

	Number of Shares	Price per share pence	Value of shares £
Matthew Armitage	80,270	101.45	81,430
Patrick Martell	123,584	101.45	125,370
Lloyd Wigglesworth	58,378	101.45	59,222
	262,232		266,022

During the period, the Group's employee benefit trust acquired 344,443 shares in the Company at the market value.

10. Post-balance sheet events

On 11 March 2012, the Group has agreed to acquire all of the issued share capital of Amaze plc, a marketing and technology consultancy business, on a cash and debt free basis, for £15.3 million in cash from Hasgrove plc. Further consideration of up to £9.7 million may be payable dependent on incremental financial performance for the year ending 31 December 2013. The acquisition is subject to the approval of Hasgrove's shareholders at their EGM.

11. Responsibility statement

We confirm that, to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS34 "Interim Financial Reporting";

· the interim management report includes a fair review of the information required by DTR4.2.7R (indication of important events during the first six months of the year and descriptions of principal risks and uncertainties for the remaining six months of the year); and

· the interim management report includes a fair review of the information required by DTR4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the board

Patrick Martell

Chief Executive

12 March 2013

The foregoing contains forward looking statements made by the directors in good faith based on information available to them up to 12 March 2013. Such statements need to be read with caution due to inherent uncertainties, including economic and business risk factors underlying such statements.

 

END

 

 

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