Half Yearly Report

RNS Number : 3162R
St. Ives PLC
08 March 2016
 

8 March 2016

ST IVES plc

Half Year Results for the 26 weeks ended 29 January 2016

St Ives plc, the international marketing services group, announces half year results for the 26 weeks ended 29 January 2016.

Financial Highlights

 

26 weeks to

29 January

2016

26 weeks to

30 January

2015

%age

change

Underlying* revenue

£185.7m

£175.0m

+6%

Underlying* profit before tax

£16.1m

£15.4m

+5%

Underlying* basic earnings per share

9.70p

9.64p

+1%

Interim dividend

2.35p

2.25p

+4%

Net debt

£82.1m

£62.8m

**

*  Non-underlying items comprise acquisition costs; restructuring costs; net profit or loss on disposal of property, plant and equipment; consideration required to be treated as remuneration; amortisation or impairment of acquired intangibles; re-measurement of deferred consideration; costs related to the St Ives defined benefits pension scheme and other one-off items.

** Net debt as at 31 July 2015.

 

Business Highlights

·      Strong financial performance in the half year, reflecting further growth in the Strategic Marketing segment

·      37% growth in underlying revenue across Strategic Marketing businesses

·      Strategic Marketing now contributing 56% of Group underlying operating profit (2015- 43%)

·      Important strategic progress across all three drivers of growth:

·    Enhanced collaboration, with over 130 clients using services of more than one Group business (2015 - 100), including Adidas, Marks and Spencer, Vodafone and Unilever

·    Continued international growth, with eight Strategic Marketing businesses serving clients on an international basis; over 40% of Strategic Marketing revenue is now generated from international client work

·  Two further Strategic Marketing acquisitions: Fripp, Sandeman and Partners ("FSP"), a specialist retail property consultancy, acquired in August 2015 and The App Business ("TAB"), a mobile-led digital consultancy, acquired in January 2016

Marketing Activation and Books continue to support Group collaboration initiatives and provide profit and cash for further growth.

Matt Armitage, Chief Executive, said:

"In the past six months we have made good progress, with our Strategic Marketing businesses now contributing more than half of the Group's profits. This has been achieved through increased collaboration between our businesses, growing our international footprint in the US and Asia and our continued investment in high growth Strategic Marketing businesses.

                       

"While current global economic uncertainty will inevitably lead to some caution in the allocation of marketing budgets, we firmly believe that our Strategic Marketing segment is focused on service areas that deliver a demonstrable return on investment for our clients. We are clear on our growth priorities and we have the financial strength to continue to support our strategic ambitions.

 

"In the absence of any material change to market conditions, we are confident that we are well positioned to achieve a positive outcome for the full year."

For further information, please contact:

St Ives plc

020 7928 8844

Matt Armitage, Chief Executive

Brad Gray, Chief Financial Officer

 

 

MHP Communications

020 3128 8139

John Olsen, Giles Robinson, Gina Bell

 

 

Chief Executive's Review

Performance Highlights

Underlying Group revenue of £185.7m was 6% higher than the comparable period in the previous year. The growth was driven by further strong progress in our Strategic Marketing segment with revenues 37% ahead, of which 16% was achieved on an organic basis. This was partially offset by a 9% decline in our Marketing Activation segment, due to continued pressure within the grocery retail sector, as previously reported. Revenue within our Books segment was in line with the previous half year.

Group underlying operating profit increased 5% during the period to £17.5m (2015 - £16.6m), and Group operating margins were maintained at 9% (2015 - 9%). Group underlying profit before tax grew to £16.1m  (2015 - £15.4m) and underlying basic earnings per share increased by 1% to 9.70p (2015 - 9.64p).

This performance reflects the further growth in, and increasing importance of, our higher growth and higher margin Strategic Marketing segment, offsetting pressures elsewhere.  Strategic Marketing contributed 56% of Group underlying operating profit during the period (2015 - 43%). We announced two strategically important acquisitions in this segment during the period, as described below.

The Board is recommending an interim dividend of 2.35p, an increase of 4% on the previous half year.

Our growth strategy is centred around further growth  and investment in our Strategic Marketing segment, with a focus on three key priorities:

·    organic growth through collaboration and investment in our existing Marketing Services businesses;

·    internationalisation, primarily client-led, into large and high growth markets; combined with

·    further acquisitions of complementary, ambitious and growing Strategic Marketing businesses, which share our common attributes and ethos.

We have continued to make progress across all three strategic objectives in the first half of the year:

Collaboration

We continue to make progress with our collaboration agenda with over 130 of our clients currently working with more than one business across the Group, on projects for clients including Adidas, Marks and Spencer, Vodafone and Unilever. In addition, a collaboration between our data agency Response One and our search agency Branded3 has greatly enhanced the digital media services both companies can offer to new and existing clients.

We are also continuing to develop our service offering, particularly within Strategic Marketing - investing in Amaze One (a joint CRM venture between Occam and Amaze), in My Bench, a specialist marketing technology offering and in Accelero, a data management platform within Occam.

 

Internationalisation

We have continued to expand our international reach and headcount in line with strong client demand. During the half year, Incite, our consumer and market research consultancy, expanded its New York operation and opened a second US office in San Francisco. In addition, Hive, our healthcare communications consultancy, joined Incite in New York in response to growing client demand in the region.

 

Having been appointed as global digital partner to Emirates, Amaze has started building an on-the-ground presence in Dubai to more effectively service its client list in the Middle East.

 

Eight of the Group's Strategic Marketing businesses - Incite, Pragma, Hive, Amaze, Realise, Branded3, Solstice and TAB - now service clients on an international basis. Over 40% of the Group's Strategic Marketing revenue now comes from international client work, compared with 30% at the previous year end. 

 

Acquisitions

An important element of St Ives' growth strategy is our continued ability to acquire further complementary Strategic Marketing businesses which add value to our existing portfolio and operate in the key growth areas we have identified of data, digital and insight. During the first half, we announced two further acquisitions of Strategic Marketing businesses.

In August, we acquired Fripp, Sandeman and Partners ("FSP"), a specialist retail property consultancy which is already working closely with our Pragma consulting business to provide a broad range of complementary strategic services and build upon existing market leading positions. The teams have already worked on a number of projects together, particularly on location planning strategies for retailers.

In January, we announced the acquisition of The App Business ("TAB"), a mobile-led consultancy that specialises in strategy, product development and business transformation. Coupled with the acquisition of Solstice in March 2015, this provides us with additional breadth and scale as well as deeper strategy and development capabilities within the fast growing mobile technology sector.

Coinciding with the TAB acquisition, we raised £13.3m (net) through a share placing, both to part-fund that acquisition, while maintaining our ability to acquire further Strategic Marketing businesses in line with our growth strategy.

Whilst our strategic focus is on expanding our Strategic Marketing offering, we also recognise the importance of continued investment and innovation in our complementary Marketing Activation segment and our separate, long-standing and market-leading Books business. These separate divisions not only support the Group's overall growth through collaboration, but also represent an additional source of profit and cash generation as we deliver our growth strategy.

Segment Overview

Strategic Marketing

Our Strategic Marketing operations, representing 37% of Group underlying revenue (2015 - 29%), are organised around three high-growth sectors: Data, Digital and Insight.  

 

2016
£'m

2015
£'m

Data

19.9

16.6

Digital

32.2

17.9

Insight

17.3

16.2

Underlying revenue

69.4

50.7

Underlying operating profit

9.7

7.1

 

Data

Revenues in our Data businesses, Occam and Response One, increased by 20% in the first half.

This strong growth was due primarily to our investments in Amaze One (a joint venture between Occam and Amaze), My Bench, a specialist marketing technology offering, and Accelero, a data management platform, within Occam. Each of these new offerings are performing well and are delivering a broader service offering to both existing clients and a number of new client wins including Ryanair.

In addition, a separate collaboration between our data agency Response One and our search agency Branded3 is greatly enhancing the digital media services that both companies offer and is starting to gain traction with clients.

Digital

Revenues in our Digital businesses - Amaze, Branded3, Realise, Solstice and TAB - increased 78% in the half year.

This high growth in part reflects the contribution from Solstice, acquired in March 2015, but also strong organic growth as we continued to benefit from increasing client expenditure within the digital and technology space.  With the Group now employing over 800 digital practitioners globally, our businesses provide services to clients across the entire digital and mobile spectrum and offer a depth of expertise in the high growth areas of customer experience, eCommerce, mobile and digital technology innovation.

 

The acquisition of Solstice broadened our digital capabilities and enhanced our international offering, and our credentials have been further strengthened by the recent acquisition of TAB, which significantly increases the segment's mobile strategy and product development engineering capabilities.

 

In the half year our Digital division secured a number of significant international client wins including Amaze being appointed as global digital partner for Emirates, one of the world's largest international airlines, Branded3 signing a global Search Engine Optimisation account for Travelex and Realise being appointed to build a sales enablement platform for HP. Our Internet of Things capability is growing rapidly, with Solstice partnering with both Bosch and John Deere to launch new connected solutions into the market. 

 

Insight

Revenues in our Insight businesses - Incite, Pragma, FSP and Hive - increased by 7% in the half year.

Growth in this division continues to be driven by our investment in international expansion.  Incite has offices in London, New York, Singapore, Shanghai and recently opened a San Francisco office to support West Coast clients and the business continues to expand its client base within these markets, working with local and global brands including Intel.

We have also invested in a New York offering for Hive, our healthcare communications consultancy, which has started well with a number of new international client wins.

Pragma, our retail and consumer strategy consultancy, continued to expand its international remit winning and delivering projects with high profile clients across its business during the half year.

Marketing Activation

Our Marketing Activation businesses - Service Graphics, SP Group, St Ives Management Services ("SIMS"), and Tactical Solutions - represented 43% of Group underlying revenue in the first half (2015 - 50%).

 

2016
£'m

2015
£'m

Underlying revenue

80.2

88.1

Underlying operating profit

4.0

5.0

 

Trading conditions within Marketing Activation continue to be challenging due to the ongoing pressures within the UK grocery retail sector, resulting in a 9% reduction in revenue.

Whilst our expertise in the grocery sector remains an important strength, we are continuing to diversify the client portfolio to reduce this exposure.  We have grown our existing relationships with major clients including Adidas, Holland & Barrett, Royal Bank of Scotland, GAME and Royal Mail, and have secured a number of new contract wins, including with Triumph, Piaggio, Berkeley Homes and Henkel. Encouragingly, many businesses are now using multiple services across our Marketing Activation portfolio.

Our focus is on protecting margins in this segment by driving efficiency improvements and cost reductions, and by differentiating our competitive offering through targeted investment in new service lines.

Books

Our market-leading Books business - Clays - represented 20% of Group underlying revenue in the first half (2015 - 21%).

 

2016
£'m

2015
£'m

Underlying revenue

36.1

36.2

Underlying operating profit

3.7

4.5

 

Revenues were in line with the prior period at £36.1m (2015 - £36.2m).

The previously announced Penguin Random House contract win is now generating additional volumes for Clays, while further increasing its market share of the UK book printing industry, albeit the costs associated with the transition have resulted in a reduction in margin during the first half.

In addition, within the half-year Clays signed new three year agreements with Oneworld Publications, Cambridge University Press (a collaboration with SIMS) and Oxford University Press.

Outlook

We continue to encourage and facilitate opportunities for collaboration across our individual businesses and believe there is further scope to expand our higher margin Strategic Marketing activities both organically and through acquisition during the second half and over the coming years. We will continue to invest in our growing international operations and client offerings in the US and Asia, as well as in our recent acquisitions, Solstice, FSP and TAB.

The current global economic uncertainty will inevitably lead to some caution in the allocation of marketing budgets but we firmly believe that our Strategic Marketing segment is focused on those service areas that can deliver a demonstrable return on investment for our clients and we remain confident of delivering continued growth.

Our Marketing Activation business will continue to face challenging conditions this year, due in large part to exposure to the UK grocery retail sector.  Our Books business continues to gain market share, albeit the margin dilution from the transition of the Penguin Random House contract is likely to continue into the second half.  However, both segments remain profitable and cash generative for the Group, and therefore support our overall growth strategy.

Overall, we are clear on our growth priorities and we are confident that, in the absence of any material change to current market conditions, St Ives will make further strategic and financial progress during the remainder of this financial year.

 

Matt Armitage

Chief Executive

8 March 2016

 

 

Condensed Consolidated Income Statement

 

 

26 weeks to 29 January 2016

26 weeks to

30 January

2015

(Restated

Note 2)

 52 weeks to

31 July

2015

 

 

 

 

 

Note

 

 

Underlying

£'000

Non-

underlying*

(Note 3)

£'000

 

 

Total

£'000

 

 

Total

£'000

 

 

Total

£'000

Revenue

2

185,706

185,706

174,953

344,553

Cost of sales

 

(125,688)

(105)

(125,793)

(116,980)

(229,654)

Gross profit

 

60,018

(105)

59,913

57,973

114,899

Selling costs

 

(12,859)

(86)

(12,945)

(11,493)

(23,779)

Administrative expenses

 

(29,634)

(16,601)

(46,235)

(43,139)

(80,040)

Share of results of joint ventures

 

(104)

(104)

(42)

(88)

Other operating (expense)/income

 

(1,669)

(1,669)

369

721

Profit/(loss) from operations

2

17,421

(18,461)

(1,040)

3,668

11,713

Net pension finance charge

 

- 

(494)

(494)

(210)

(373)

Other finance costs

 

(1,313)

(1,313)

(1,169)

(2,611)

Profit/(loss) before tax

 

16,108

(18,955)

(2,847)

2,289

8,729

Income tax (charge)/credit

 

(3,383)

1,036

(2,347)

(1,210)

(3,173)

Net profit/(loss) for the period

 

12,725

(17,919)

(5,194)

1,079

5,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (p)

5

9.70

(13.66)

(3.96)

0.86

4.35

 

 

 

 

 

 

 

Diluted earnings per share (p)

5

9.52

(13.40)

(3.88)

0.84

4.24

*  Non-underlying items comprise acquisition costs; restructuring costs; net profit or loss on disposal of property, plant and equipment; consideration required to be treated as remuneration; amortisation or impairment of acquired intangibles; re-measurement of deferred consideration; costs related to the St Ives defined benefits pension scheme and other one-off items.

Condensed Consolidated Statement of Comprehensive Income

 

 

 

26 weeks to
29 January
2016
 £'000

26 weeks to
30 January
2015
 £'000

52 weeks to
31 July
2015
 £'000

(Loss)/profit for the period

(5,194)

1,079

5,556

Items that will not be reclassified subsequently to profit or loss:

Remeasurement of the net retirement benefits obligation

Tax (charge)/credit on items taken directly to equity

(1,057)

4,832

3,925

 

4,816

(19,326)

(15,766)

Items that may be reclassified subsequently to profit or loss:

Transfer of losses on available for sale financial asset - items reclassified to Consolidated Income Statement

Transfers of losses on cash flow hedges to hedged items

Losses on cash flow hedges

 

(108)

(14)

1,473

Other comprehensive income/(expense) for the period

4,708

(19,340)

(14,293)

Total comprehensive expense for the period

(486)

(18,261)

(8,737)

All income for all periods was attributable to shareholders of the parent company.

Condensed Consolidated Statement of Changes in Equity

 

 

 

 

Share

capital

£'000

Additional paid-in capital^

£'000

ESOP

reserve

£'000

Treasury shares

£'000

Share

option

reserve

£'000

Hedging

and

translation

reserve

£'000

Other

reserves

£'000

Retained

earnings

£'000

Non-

controlling

interest

£'000

 

 

 

Total

£'000

Balance at 2 August 2014

12,517

53,234

(11)

(163)

7,199

(34)

60,225

71,575

144,317

Profit for the period

1,079

1,079

Other comprehensive expense for the period

(14)

(14)

(19,326)

(19,340)

Comprehensive expense for the period

(14)

(14)

(18,247)

(18,261)

Dividends

(6,551)

(6,551)

Issue of share capital

160

(160)

(160)

Transfer of contingent consideration deemed as remuneration

41

19

633

2,655

3,307

(254)

3,094

Purchase of own shares

(180)

(922)

(1,102)

(51)

(1,153)

Exchange differences

43

43

43

Recognition of share-based payments

323

(328)

(5)

851

846

Balance at 30 January 2015

12,718

53,253

(28)

(452)

9,526

(5)

62,294

47,323

122,335

Profit for the period

4,477

4,477

Other comprehensive (expense)/income for the period

(53)

(53)

5,100

5,047

Comprehensive (expense)/income for the period

(53)

(53)

9,577

9,524

Dividends

(2,904)

(2,904)

Acquisitions

213

1,731

845

2,576

(917)

1,872

Transfer of contingent consideration deemed as remuneration

103

230

323

(7,092)

(6,539)

4,064

(2,372)

Exchange differences

485

485

485

Purchase of own shares

(42)

(1,536)

(1,578)

51

(1,527)

Recognition of share-based payments

55

307

70

4,795

5,172

353

5,580

Deferred tax on share-based payments

(456)

(456)

345

(111)

Balance at 31 July 2015

13,089

55,521

(820)

6,773

427

61,901

57,892

132,882

Loss for the period

(5,194)

(5,194)

Other comprehensive (expense)/income for the period

(108)

(108)

4,816

4,708

Comprehensive expense for the period

(108)

(108)

(378)

(486)

Dividends

(7,515)

(7,515)

Issue of share capital

115

(115)

(115)

Acquisitions

260

1,062

658

1,720

(527)

5,116

6,569

Transfer of contingent consideration deemed as remuneration

- 

(933)

(933)

986

- 

53

Purchase of own shares

(395)

(395)

(35)

(430)

Exchange differences

(1,060)

(1,060)

(1,060)

Recognition of share-based payments

13

119

302

1,706

2,127

740

2,880

Balance at 29 January 2016

13,477

56,702

(208)

(162)

7,546

(741)

63,137

51,163

5,116

132,893

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

Condensed Consolidated Balance Sheet

 

 

Note

29 January 2016

£'000

30 January 2015

£'000

31 July

2015

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

44,929

47,738

48,242

Goodwill

 

156,191

124,177

137,488

Other intangible assets

 

42,956

39,067

45,652

Available for sale financial assets

 

3

2

3

Investment in joint venture

 

90

109

Deferred tax assets

 

139

139

Other non-current assets

 

750

310

1,086

 

 

244,968

211,384

232,719

Current assets

 

 

 

 

Inventories

 

7,097

5,818

6,579

Trade and other receivables

 

86,940

76,750

75,945

Derivative financial instruments

 

2

165

Asset held for sale

 

- 

412

Cash and cash equivalents

 

14,005

12,026

16,392

 

 

108,042

94,596

99,493

Total assets

 

353,010

305,980

332,212

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Obligations under finance leases

 

19

Loans payable

 

55,000

Trade and other payables

 

75,601

71,527

71,070

Derivative financial instruments

 

124

12

4

Income tax payable

 

932

1,490

355

Deferred consideration payable

 

9,607

10,204

4,879

Deferred income

 

6,666

7,007

6,976

Provisions

 

342

783

408

 

 

93,272

146,042

83,692

Non-current liabilities

 

 

 

 

Loans payable

 

96,149

79,225

Retirement benefits obligations

7

21,145

33,069

27,597

Deferred consideration payable

 

3,384

1,241

3,487

Other non-current liabilities

 

790

698

Provisions

 

1,905

1,322

1,732

Deferred income

 

- 

81

Deferred tax liabilities

 

3,472

1,971

2,818

 

 

126,845

37,603

115,638

Total liabilities

 

220,117

183,645

199,330

Net assets

 

132,893

122,335

132,882

Equity

 

 

 

 

Capital and reserves

 

 

 

 

Share capital

 

13,477

12,718

13,089

Other reserves

 

63,137

62,294

61,901

Retained earnings

 

51,163

47,323

57,892

Attributable to shareholders of the parent company

 

127,777

122,335

132,882

Non-controlling interests

 

5,116

Total equity

 

132,893

122,335

132,882

 

These financial statements were approved by the Board of Directors on 8 March 2016.

Condensed Consolidated Cash Flow Statement

 

 

Note

26 weeks to
29 January
2016
 £'000

26 weeks to
30 January
2015
 £'000

52 weeks to
31 July
2015
 £'000

Operating activities

 

 

 

 

Cash generated from operations

8

13,472

17,159

35,510

Interest paid

 

(1,313)

(1,164)

(2,398)

Income taxes paid

 

(2,832)

(3,195)

(6,595)

Net cash generated from operating activities

 

9,327

12,800

26,517

 

 

 

 

 

Investing activities

 

 

 

 

Purchase of property, plant and equipment

 

(4,698)

(1,361)

(5,542)

Purchase of other intangibles

 

(194)

(293)

(533)

Proceeds on disposal of property, plant and equipment

 

2,965

3,714

4,751

Acquisition of subsidiaries, net of cash acquired

 

(16,163)

(7,395)

(19,854)

Deferred consideration paid for acquisitions made in prior periods

 

(1,105)

(14,626)

Investment in joint venture

 

(122)

Net cash used in investing activities

 

(19,195)

(5,457)

(35,804)

 

 

 

 

 

Financing activities

 

 

 

 

Purchase of treasury shares

 

(395)

(1,153)

(9,455)

Dividends paid

4

(7,515)

(6,551)

(2,680)

Decrease in finance lease rentals

 

(9)

(28)

Increase in bank loans

 

15,000

24,225

Net cash generated from/(used in) financing activities

 

7,090

(7,713)

12,062

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(2,778)

(370)

2,775

Cash and cash equivalents at beginning of the period

 

16,392

12,336

12,336

Effect of foreign exchange rate changes

 

391

60

1,281

Cash and cash equivalents at end of the period

8

14,005

12,026

16,392

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 Conduct Authority ("FCA").

The financial information contained in these half year financial statements has been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts 2015, prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union commission, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The half year statements have not been audited or reviewed.

The financial information for the twenty six weeks ended 29 January 2016 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 31 July 2015 has been extracted from the Group's Annual Report and Accounts 2015 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.

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 six weeks ended 29 January 2016.

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 24 and 25 of the Group's Annual Report and Accounts 2015, a copy of which is available on the Group's website: www.st-ives.co.uk.

2. Segment reporting

The Group manages its business on a market segment basis, based on the Group's internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been determined to be the Chief Executive Officer and Chief Financial Officer as they are primarily responsible for the allocation of resources to the segments and the assessment of performance of the segments.

The Strategic Marketing segment comprises of the Group's Data, Digital and Insight businesses. The Marketing Activation segment comprises of the Group's Exhibitions and Events, Point-of-Sale, Print Management and Field Marketing businesses. The Books segment comprises Clays.

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

Comparatives have been restated to reflect the reclassification of the income and expense of the St Ives Defined Benefits Pension Scheme, set out in note 6 of the Group's Annual Report and Accounts 2015.

Business segments

 

26 weeks to 29 January 2016

 

Strategic Marketing
£'000

Marketing Activation
£'000

Books
£'000


Total
£'000

Revenue

 

 

 

 

External sales

66,429

83,057

36,220

185,706

Group sales

3,587

4,501

6

8,094

Eliminations

(657)

(7,331)

(106)

(8,094)

Total revenue

69,359

80,227

36,120

185,706

 

 

 

 

 

Result

 

 

 

 

Result before non-underlying items

9,684

3,971

3,766

17,421

Non-underlying items

(13,059)

(5,145)

(257)

(18,461)

(Loss)/profit from operations

(3,375)

(1,174)

3,509

(1,040)

Net pension finance charge

 

 

 

(494)

Other finance costs

 

 

 

(1,313)

Loss before tax

 

 

 

(2,847)

Income tax charge

 

 

 

(2,347)

Net loss for the period

 

 

 

(5,194)

 

 

26 weeks to 30 January 2015 (Restated)

 

Strategic Marketing
£'000

Marketing Activation
£'000

Books
£'000


Total
£'000

Revenue

 

 

 

External sales

49,362

89,416

36,175

174,953

Group sales

1,390

85

9

1,484

Eliminations

(15)

(1,453)

(16)

(1,484)

Total revenue

50,737

88,048

36,168

174,953

 

 

 

 

Result

 

 

 

 

Result before non-underlying items

7,124

4,993

4,451

16,568

Non-underlying items

(10,361)

(2,460)

(79)

(12,900)

(Loss)/profit from operations

(3,237)

2,533

4,372

3,668

Net pension finance charge

 

 

(210)

Other finance costs

 

 

 

(1,169)

Profit before tax

 

 

2,289

Income tax charge

 

 

 

(1,210)

Net profit for the period

 

 

 

1,079

 

 

52 weeks to 31 July 2015

 

Strategic Marketing
£'000

Marketing Activation
£'000

Books
£'000


Total
£'000

Revenue

 

 

 

 

External sales

107,084

170,494

66,975

344,553

Group sales

4,639

9,822

28

14,489

Eliminations

(1,033)

(13,346)

(110)

(14,489)

Total revenue

110,690

166,970

66,893

344,553

 

 

 

 

 

Result

 

 

 

 

Result before non-underlying items

16,340

10,947

8,088

35,375

Non-underlying items

(16,983)

(4,719)

(1,960)

(23,662)

(Loss)/profit from operations

(643)

6,228

6,128

11,713

Net pension finance charge

 

 

 

(373)

Other finance costs

 

 

 

(2,611)

Profit before tax

 

 

 

8,729

Income tax charge

 

 

 

(3,173)

Net profit for the period

 

 

 

5,556

Geographical segments

The Strategic Marketing, Marketing Activation and Books business segments operate primarily in the UK, deriving more than 85% 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:

 

26 weeks to
29 January
2016
 

26 weeks to
30 January
2015
  (Restated)

52 weeks to
31 July
2015
 

Expense/(income)

£'000

£'000

£'000

£'000

£'000

£'000

Restructuring items

 

 

 

 

 

 

Redundancies and other charges

817

 

354

 

2,408

 

Costs associated with empty properties

771

 

388

 

671

 

Loss/(profit) on disposal of property, plant and equipment

1,669

 

(369)

 

(541)

 

 

 

3,257

 

373

 

2,538

St Ives defined benefits pension scheme costs

 

 

 

 

 

 

Administrative costs

325

 

300

 

562

 

Settlement credit

(198)

 

-

 

-

 

Other

130

 

154

 

268

 

 

 

257

 

454

 

830

Acquisition costs

 

 

 

 

 

 

Amortisation of acquired intangibles

4,079

 

3,566

 

7,827

 

Impairment of available for sale asset

-

 

-

 

1,540

 

Impairment of acquired intangibles and goodwill

2,520

 

1,470

 

1,470

 

Costs associated with the acquisition and setup of subsidiaries

172

 

225

 

686

 

Contingent consideration required to be treated as remuneration

5,237

 

3,744

 

6,233

 

Increase in deferred consideration

2,939

 

3,068

 

2,538

 

 

 

14,947

 

12,073

 

20,294

Non-underlying items before interest and tax

 

18,461

 

12,900

 

23,662

 

 

 

 

 

 

 

Net pension finance charge in respect of defined benefits pension scheme

494

 

210

 

373

 

Accelerated amortisation of bank arrangement fees

-

 

-

 

213

 

 

 

494

 

210

 

586

Non-underlying items before tax

 

18,955

 

13,110

 

24,248

Income tax credit

 

(1,036)

 

(2,066)

 

(3,841)

 

 

17,919

 

11,044

 

20,407

 

The restructuring items in the current period include redundancies and restructuring costs of £476,000 and costs relating to empty properties of £421,000 recorded within the Marketing Activation segment. Redundancy and restructuring costs of £341,000 and costs relating to an empty property of £350,000 were recorded in the Strategic Marketing segment.

The loss on disposal of property, plant and equipment of £1,669,000 relates to the sale of the Group's properties at Bradford and Birmingham. These items were recorded in the Marketing Activation segment.

An impairment charge of £2,520,000 is recorded in respect of Tactical Solutions' goodwill and customer relationship asset due to the loss of a customer, resulting in a decline in operating profit.

4. Dividends

 

per share

26 weeks to
29 January
2016
 £'000

26 weeks to
30 January
2015
 £'000

52 weeks to
31 July
2015
 £'000

Final dividend paid for the 52 weeks ended 1 August 2014

5.00p

6,590

6,590

Interim dividend paid for the 26 weeks ended
30 January 2015

2.25p

2,865

Final dividend paid for the 52 weeks ended 31 July 2015

5.55p

7,515

Dividends paid during the period

 

7,515

6,590

9,455

Declared interim dividend for the 26 weeks ended
29 January 2016 (2015 - 2.25p per share)

2.35p

3,325

5. Earnings per share

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

Number of shares

 

26 weeks to 29 January 2016

'000

26 weeks to 30 January 2015

'000

52 weeks to

31 July

2015

'000

Weighted average number of ordinary shares for the purposes of basic earnings per share

131,225

125,787

127,784

Weighted average number of ordinary shares for the purposes of diluted earnings per share

133,681

129,375

131,016

Basic and diluted earnings per share

 

26 weeks to
29 January 2016
 

26 weeks to
30 January 2015 (Restated)

52 weeks to
31 July 2015
 

 

Earnings
£'000

Earnings
per share
pence

Earnings
£'000

Earnings
per share
pence

Earnings
£'000

Earnings
per share
pence

Earnings and basic earnings/(loss) per share from continuing activities

 

 

 

 

 

 

Underlying earnings and underlying earnings per share

12,725

9.70

12,123

9.64

25,963

20.32

Non-underlying items

(17,919)

(13.66)

(11,044)

(8.78)

(20,407)

(15.97)

Earnings and basic (loss)/earnings per share

(5,194)

(3.96)

1,079

0.86

5,556

4.35

Earnings and diluted (loss)/earnings per share from continuing activities

 

 

 

 

 

 

Underlying earnings and underlying earnings per share

12,725

9.52

12,123

9.37

25,963

19.82

Non-underlying items

(17,919)

(13.40)

(11,044)

(8.53)

(20,407)

(15.58)

Earnings and diluted (loss)/earnings per share

(5,194)

(3.88)

1,079

0.84

5,556

4.24

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

6. Acquisitions

FSP

On 13 August 2015, the Group acquired the entire share capital of Fripp, Sandeman and Partners Limited ("FSP"), a UK-based specialist retail property consultancy. The consideration was satisfied in cash and St Ives shares.

The provisional allocation of the purchase price payable for FSP is as follows:

 

Historical net assets

£'000

Fair value adjustments

£'000

Fair value of net assets

£'000

Proprietary techniques

-

893

893

Property, plant and equipment

181

-

181

Trade and other receivables

466

-

466

Bank balance and cash

943

-

943

Trade and other payables

(489)

-

(489)

Deferred tax liabilities

(3)

(179)

(182)

Net assets acquired

1,098

714

1,812

Goodwill arising on acquisition

 

 

647

Total consideration

 

 

2,459

The fair value of the components of the total consideration payable are as follows:

 

 £'000

Cash consideration

1,521

Fair value of 362,095 St Ives plc ordinary shares issued

652

Working capital payment in the current period

778

Less consideration treated as deemed remuneration

(492)

 

2,459

The acquisition has the following impact on investing cash outflows in the current period:

 

 £'000

Cash paid

2,300

Less acquired

(943)

Net cash outflow

1,357

 

At the acquisition date, it was estimated that all the trade and other receivables were collectible.

It is expected that the goodwill will not be deductible for income tax purposes.

The post-acquisition impact of FSP on the Group's revenue and operating profit in the period are as follows:

 

 £'000

Revenue

964

Operating profit

143

 

Had FSP been acquired at the beginning of the current period, it would have had the following incremental impact on the Group's revenue and operating profit:

 

 £'000

Revenue

58

Operating profit

11

 

The App Business

On 29 January 2016, the Group acquired 82.16% of the issued share capital of The App Business Limited ("TAB"), a mobile-led consultancy based in the UK. The consideration was satisfied in cash and St Ives shares.

The provisional allocation of the purchase price payable for TAB is as follows:

 

Historical net assets

£'000

Fair value adjustments

£'000

Fair value of net assets

£'000

Property, plant and equipment

323

-

323

Trade and other receivables

2,252

-

2,252

Bank balance and cash

3,665

-

3,665

Trade and other payables

(1,631)

151

(1,480)

Deferred tax liabilities

(62)

-

(62)

Net assets acquired

4,547

151

4,698

Goodwill arising on acquisition

 

 

20,211

Less non-controlling asset

 

 

(5,116)

Plus consideration treated as deemed remuneration

 

 

4,250

Total consideration

 

 

24,043

Due to proximity of the acquisition date to the date of this announcement (8th March), the fair value of the acquired net assets and liabilities are provisional and are subject to final valuations. The surplus of consideration over fair value of the historical net assets acquired has been allocated to goodwill as at 29 January 2016.

On 8 February 2016, the Group acquired the remaining 17.84% of the issued share capital of TAB for approximately £3.7m in cash and the issue of approximately 0.6m St Ives ordinary shares.

7. Retirement benefits

The net obligation in respect of St Ives plc Retirement Benefits Pension Scheme of £21,145,000 at 29 January 2016 has decreased compared to £27,597,000 as at 31 July 2015. The decrease is primarily due to a decrease in the inflation rate.

8. Notes to the condensed consolidated cash flow statement

Reconciliation of cash generated from operations

 

26 weeks to

29 January

2016

 £'000

26 weeks to

30 January

2015

 £'000

52 weeks to

31 July

2015

 £'000

(Loss)/profit from continuing operations

(1,040)

3,668

11,713

 

 

 

 

Adjustments for:

 

 

 

Depreciation of property, plant and equipment

3,608

3,774

7,201

Share of losses from joint venture

104

42

88

Impairment losses

2,520

1,470

3,009

Amortisation of intangible assets

4,558

4,028

8,690

Loss/(profit) on disposal of property, plant and equipment

1,669

(369)

(721)

Decrease/(increase) in deferred income

(432)

1,058

1,132

Share-based payment charge

445

852

908

Settlement of share-based payment

195

(6)

541

Increase in derivatives

(32)

(67)

Decrease in retirement benefit obligations

(1,373)

(1,161)

(2,325)

Payment of deemed remuneration

(1,056)

(975)

Remeasurement of deferred consideration

2,939

2,538

Increase in contingent consideration required to be treated as remuneration

5,237

6,812

6,233

Increase/(decrease) in provisions

86

(446)

(409)

Operating cash inflows before movements in working capital

17,460

19,690

37,556

Increase in inventories

(506)

(68)

(833)

(Increase)/decrease in receivables

(7,245)

3,243

6,864

Increase/(decrease) in payables

3,763

(5,706)

(8,077)

Cash generated from operations

13,472

17,159

35,510

Analysis of net debt

 

1 August

2015

£'000

Cash flow

£'000

Exchange differences

£'000

29 January

2016

£'000

Cash and cash equivalents

16,392

(2,782)

395

14,005

Bank loans due in more than one year

(79,225)

(15,000)

(1,924)

(96,149)

Net debt

(62,833)

(17,782)

(1,529)

(82,144)

           

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.

9. Post Balance Sheet events

On 2 February 2016, the Group issued 6.4m new ordinary shares through a Placing on the London Stock Exchange, at a price of £2.15 per ordinary share, resulting in net proceeds of £13.3m.

On 8 February 2016, the Group acquired the remaining 17.84% of the issued share capital of TAB for approximately £3.7m in cash and the issue of approximately 0.6m St Ives ordinary shares.

The number of ordinary shares in issue as at 8 March 2016 is 141,747,787 ordinary shares.  

10. 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 31 July 2015.

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 half year 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 half year 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

 

 

Matt Armitage

Chief Executive

8 March 2016

 

The foregoing contains forward looking statements made by the Directors in good faith based on information available to them up to 8 March 2016. Such statements need to be read with caution due to inherent uncertainties, including economic and business risk factors underlying such statements.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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