Interim Results
St. Ives PLC
14 April 2004
EMBARGOED FOR RELEASE 07:00 14 APRIL 2004
ST IVES plc
Interim Results for the 26 weeks ended 30 January 2004
St Ives plc, the UK's leading printing group, announces interim results for the
26 weeks ended 30 January 2004.
Key Points
• Turnover was 6.3% lower at £208.8m (2003: £222.9m)
• Underlying* pre tax profit up 2.6% to £17.1m (2003: £16.7m)
• Underlying* earnings per share were 10.81p (2003: 10.77p)
• Interim dividend maintained at 5.0p per share
*pre exceptional items, goodwill amortisation and impairment
Commenting on the results, Chairman, Miles Emley said:
'Trading in the first six months of the year remained extremely challenging with
overcapacity and continuing pricing pressure across most of our markets. In
spite of these adverse trading conditions we have achieved modest increases in
underlying profitability, earnings and margins.
'We will continue our investment to reduce costs and improve productivity. Our
cost base will be kept under review and we are confident that when market
conditions begin to improve we will be able to deliver improved returns to
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 Interim Results for the 26 weeks ended 30 January 2004 show turnover of
£208.8 million (2003 - £222.9 million) and profit before tax, exceptional items
and goodwill amortisation and impairment of £17.1 million (2003 - £16.7
million). Due to exceptional charges of £22.1 million, including goodwill
impairment of £13 million, there was a loss before tax of £5.0 million (2003 -
profit before tax of £15.2 million). Earnings per share before exceptional
items and goodwill amortisation and impairment were 10.81 pence (2003 - 10.77
pence). Basic earnings per share were a loss of 10.58 pence per share (2003 - a
profit of 9.54 pence per share).
Dividend
An interim dividend of 5.0 pence per share (2003 - 5.0 pence per share) has been
declared, which will be paid on 21 May 2004 to shareholders on the register on
23 April 2004.
Trading Conditions
Demand for books held up well. However conditions in our other markets remained
extremely challenging throughout the half year. Demand for web offset products
in all our markets was volatile and pricing pressure particularly severe. In
these circumstances we did well to achieve turnover only 6.3 per cent below the
first half of last year (4.4 per cent lower ignoring exchange rate movements),
while at the same time achieving a modest increase in underlying profitability
and an improvement in margin. As a result of the cost reduction initiatives
principally undertaken in earlier periods, both direct and indirect costs were
lower overall.
Continuing unfavourable conditions in our markets made further reductions in our
cost base necessary. Regrettably, we announced the closure of St Ives Inc, Case
-Hoyt shortly before the end of the half year. The estimated cost, including
the cost of some 300 redundancies, was charged as an exceptional item in the
half year. Since the end of the half year, we have announced the proposed
relocation of the business of St Ives Multimedia at Tunbridge Wells to our site
at Crayford at an estimated cost of £4 million, which will also be treated as
exceptional.
Books
Our sales of books increased modestly. Sales of cased books for the trade and
general, religious and reference markets were above those achieved in the first
half of the previous year. We continue to supply almost all the leading trade
publishing houses in the UK and produced the majority of their best selling
titles in both cased and paperback bindings. The reliable service and short
lead times which we are able to offer have been particularly important in
winning this business. Export sales, mainly to European markets, were ahead of
the previous year.
Direct Response and Commercial
UK
Sales to these markets in the UK were slightly lower. The effects of further
pricing pressure and weak demand for longer-run, commodity products were offset
by higher sales of shorter-run, more specialist products. Sales of personalised
products and associated fulfilment services were particularly strong and
benefited from the completion of the relocation of our direct mail operations in
the previous year. As a result of the more favourable balance of work, overall
our businesses serving these markets showed an improved return.
Germany
Demand from these markets in Germany remained subdued and continuing over-
capacity resulted in further pressure on prices. Our own sales were broadly
maintained and an improvement in the mix of work resulted in a small reduction
in the level of losses.
USA
In the catalogue and brochure market in the USA we experienced weak demand and
continuing pricing pressure. In particular we were no longer able to achieve
historic levels of pricing in the high quality retail and travel and leisure
sectors. Sales and profit were significantly reduced as a result, although
there was some benefit from the cost reductions of previous years. In these
circumstances, the cost base of our facility at Rochester proved unsustainable
and, as we were not able to reach agreement on the changes needed to make it
viable, the decision was taken to close the plant shortly before the end of the
half year.
Financial
Corporate financial markets remained extremely quiet throughout the period. In
the USA we achieved a small increase in sales to a level at which, as a result
of earlier cost reductions, we were able to break-even. In the UK and Europe,
there has been no such improvement and pricing for the available work became
even more competitive; despite further reductions in the cost base, losses,
albeit at a reduced level, were incurred. Other, non-specialist printers have
sought to enter the market for reports for mutual funds and public companies,
which is becoming increasingly competitive as a result.
Magazines
UK
In the UK the market price for production of magazines has been under severe
pressure and pagination, particularly in longer-run, less specialist titles, has
been volatile. Accordingly our sales were lower. Although at times during the
period we were extremely busy, current pricing levels do not always support the
service and flexibility which we provide to our customers, especially if
overtime working at premium rates is required. Despite reduced costs, profit
was below the level of the first half of the previous year. An investment of
almost £5 million in new binding equipment at our Peterborough factory will
result in greater productivity and lower cost when it becomes operational at the
start of our next financial year.
USA
In the USA fluctuating demand in an over-supplied market led to reduced volume
and price and consequently lower returns.
Multimedia
While music and multimedia markets overall remained subdued, we experienced
growth in sales of DVD related product and of special packaging material for
both CD and DVD products both in the UK and Europe. The improved work mix and
better utilisation resulted in a modestly improved financial performance
overall. Nonetheless the operations at Tunbridge Wells and Crayford together
achieved a result only slightly better than break-even and shortly after the end
of the half year the decision was taken to propose the relocation of our
operations at Tunbridge Wells to the more suitable, modern facility at Crayford.
Regrettably this is likely to result in a reduction of some 40 positions but
will reduce the cost of the combined operations, allow for improved utilisation
and enable us to grow sales of special packaging products.
Balance Sheet
Shareholders' funds reduced from £239 million at 1 August 2003 to £220 million
as a result of the exceptional charges, including goodwill impairment, incurred
during the period. Net cash resources remained substantial. However, as
already announced, at the end of May we will make a special payment of £25
million into the defined benefit pension scheme as part of a number of changes,
including a reduction in the future accrual rate. The scheme has been closed to
new members since April 2002.
Outlook
Demand for books remains steady. In the USA there are some early signs of a
modest upturn in levels of corporate finance activity. In this market in the UK
and Europe activity has scarcely increased and some pricing has reached
unsustainable levels. In our other markets, although some of our competitors
have reduced capacity or withdrawn from the market, there are few signs of any
improvement in pricing levels and demand remains volatile and hard to predict.
We shall continue to invest to reduce costs and improve productivity.
Notwithstanding the significant steps already taken over the last two years, our
cost base will be kept under review. We are confident that when market
conditions begin to improve we will be able to deliver improved returns to
shareholders.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
26 weeks to 30 January 2004
_______________________________________________
Before Exceptional
exceptional items and
items and goodwill 26 weeks to 52 weeks to
goodwill charges 31 January 1 August
charges (note 6) Total 2003 2003
____________ ___________ ___________ ____________ __________
£'000 £'000 £'000 £'000 £'000
Turnover (note 2) 208,828 - 208,828 222,916 437,211
Cost of sales (155,750) (2,853) (158,603) (169,352) (328,606)
____________ ___________ ___________ ____________ __________
Gross profit 53,078 (2,853) 50,225 53,564 108,605
Sales and distribution costs (13,179) (184) (13,363) (14,708) (28,927)
Administrative expenses
____________ ___________ ___________ ____________ __________
Goodwill amortisation - (1,104) (1,104) (1,077) (2,195)
Goodwill impairment - (13,000) (13,000) - -
Exceptional items - (3,429) (3,429) (55) 404
Other administrative
expenses (23,451) - (23,451) (23,098) (44,829)
____________ ___________ ___________ ____________ __________
(23,451) (17,533) (40,984) (24,230) (46,620)
Other operating
income/(costs) 124 (1,498) (1,374) 343 1,009
____________ ___________ ___________ ____________ __________
Operating profit/
(loss) (note 2) 16,572 (22,068) (5,496) 14,969 34,067
Interest receivable 728 - 728 530 1,142
Interest payable (213) - (213) (348) (620)
____________ ___________ ___________ ____________ __________
Profit/(loss) before
taxation 17,087 (22,068) (4,981) 15,151 34,589
Taxation (note 3) (5,981) 89 (5,892) (5,303) (12,106)
____________ ___________ ___________ ____________ __________
Profit/(loss) after taxation 11,106 (21,979) (10,873) 9,848 22,483
Equity dividends (note 4) (5,145) - (5,145) (5,162) (17,643)
____________ ___________ ___________ ____________ __________
Retained profit/(loss) 5,961 (21,979) (16,018) 4,686 4,840
============ =========== =========== ============ ==========
Basic (loss)/earnings
per share (note 5) (10.58p) 9.54p 21.82p
___________ ____________ __________
Diluted (loss)/earnings
per share (note 5) (10.57p) 9.54p 21.81p
___________ ____________ __________
Earnings per share
before exceptional items
and goodwill
charges (note 5) 10.81p 10.77p 23.45p
____________ ____________ __________
Dividend per ordinary
share 5.00p 5.00p 17.15p
___________ ____________ __________
Comparative figures for the twenty six weeks to 31 January 2003 and fifty two
weeks to 1 August 2003 include exceptional items as detailed in note 6.
All transactions are derived from continuing activities.
CONSOLIDATED BALANCE SHEET
1 August
30 January 31 January 2003
2004 2003 (Restated)
__________ __________ __________
£'000 £'000 £'000
Fixed assets
Intangible assets 23,520 39,762 38,644
Tangible assets 169,087 193,695 185,293
__________ __________ __________
192,607 233,457 223,937
Current assets
Stocks 14,376 15,900 12,437
Debtors 67,879 69,478 70,768
Cash at bank and in hand 51,234 37,452 50,871
__________ __________ __________
133,489 122,830 134,076
Creditors: due within one year (85,190) (102,112) (104,834)
__________ __________ __________
Net current assets 48,299 20,718 29,242
__________ __________ __________
Total assets less current liabilities 240,906 254,175 253,179
Creditors: due after more than one year (882) (838) (1,043)
Provisions and deferred taxation (19,226) (13,332) (11,586)
Deferred income (908) (1,318) (1,113)
__________ __________ __________
219,890 238,687 239,437
========== ========== ==========
Capital and reserves
Called up share capital 10,329 10,319 10,323
Share premium account 45,852 45,518 45,645
Capital redemption reserve 1,238 1,238 1,238
ESOP reserve (964) - (1,280)
Profit and loss account 163,435 181,612 183,511
__________ __________ __________
Equity shareholders' funds 219,890 238,687 239,437
========== ========== ==========
Comparative figures at 1 August 2003 have been restated to reflect a change in
accounting policy following the adoption of UITF 38 (note 1).
This interim statement was approved by the board of directors on 14 April 2004.
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
52 weeks to
26 weeks to 26 weeks to 1 August
30 January 31 January 2003
2004 2003 (Restated)
__________ __________ __________
£'000 £'000 £'000
Net cash inflow from operating activities 25,246 25,090 59,959
Returns on investments and servicing of finance 503 (11) 400
Tax paid (6,968) (2,180) (7,804)
Capital expenditure (5,692) (11,698) (20,520)
Acquisitions
Subsequent cash flows in respect
of prior year acquisition 1,020 - -
Equity dividends paid (12,487) (12,537) (17,697)
__________ __________ __________
Net cash inflow/(outflow) before financing 1,622 (1,336) 14,338
Financing
Issue of shares 213 65 196
Decrease in debt and lease financing (492) (656) (1,282)
Purchase of own shares held by ESOP trusts - - (1,913)
__________ __________ __________
Increase/(decrease) in cash 1,343 (1,927) 11,339
========== ========== ==========
NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
26 weeks to 26 weeks to 52 weeks to
30 January 31 January 1 August
2004 2003 2003
__________ __________ __________
£'000 £'000 £'000
Net cash inflow from operating activities
Operating (loss)/profit (5,496) 14,969 34,067
Depreciation 16,371 17,187 34,390
Goodwill amortisation 1,104 1,077 2,195
Goodwill impairment 13,000 - -
Amortisation of own shares 316 - 633
Other non cash movements 7,223 (593) (3,202)
Changes in working capital (7,202) (7,029) (7,003)
Other items (70) (521) (1,121)
__________ __________ __________
25,246 25,090 59,959
========== ========== ==========
Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash in the period 1,343 (1,927) 11,339
Cash outflow from decrease in
debt and lease financing 492 656 1,282
__________ __________ __________
Change in net funds resulting from cash flows 1,835 (1,271) 12,621
Exchange adjustments 1,637 589 306
__________ __________ __________
Movement in net funds in the period 3,472 (682) 12,927
Opening net funds 26,277 13,350 13,350
__________ __________ __________
Closing net funds 29,749 12,668 26,277
========== ========== ==========
1 August Exchange 30 January
2003 Cash flow movement 2004
________ _________ ________ __________
£'000 £'000 £'000 £'000
Analysis of net funds
Cash at bank and in hand 50,871 1,343 (980) 51,234
Bank loans due within one year (24,212) 110 2,617 (21,485)
Finance leases (382) 382 - -
________ _________ ________ __________
26,277 1,835 1,637 29,749
======== ========= ======== ==========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
26 weeks to 26 weeks to 52 weeks to
30 January 31 January 1 August
2004 2003 2003
___________ ___________ ___________
£'000 £'000 £'000
(Loss)/profit after taxation (10,873) 9,848 22,483
Exchange differences (4,057) (861) 801
Related taxation (1) (20) 63
___________ ___________ ___________
Total recognised gains and losses
relating to the period (14,931) 8,967 23,347
=========== =========== ===========
MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS
52 weeks to
26 weeks to 26 weeks to 1 August
30 January 31 January 2003
2004 2003 (Restated)
___________ ___________ ___________
£'000 £'000 £'000
Opening shareholders' funds
(as previously reported) 240,717 234,817 234,817
Prior year adjustment (note 1) (1,280) - -
___________ ___________ ___________
Opening shareholders' funds (as restated) 239,437 234,817 234,817
Total recognised gains and losses (14,931) 8,967 23,347
Dividends (5,145) (5,162) (17,643)
Issue of ordinary shares 213 65 196
Purchase of own shares held by ESOP trusts - - (1,913)
Amortisation of own shares held by ESOP trusts 316 - 633
___________ ___________ ___________
Closing shareholders' funds 219,890 238,687 239,437
=========== =========== ===========
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation
The interim statements have been prepared in accordance with the accounting
policies set out in the Group's Annual Report for 2003 except for the adoption
of Urgent Issues Task Force abstract 38 'Accounting for ESOP trusts' (UITF 38).
In accordance with UITF 38, shares in St Ives plc held by the Employees' Benefit
Trusts are now deducted within consolidated shareholders' funds. Previously,
such shares were included within fixed asset investments. Within the
consolidated cash flow statement, the purchase of such shares is now presented
as a financing transaction and not as a purchase of fixed asset investments.
The consolidated balance sheet at 1 August 2003 and consolidated cash flow
statement for the fifty two weeks to 1 August 2003 have been restated
accordingly. There is no effect on the profit and loss account for the current
or prior periods.
NOTES TO THE FINANCIAL STATEMENTS continued
1. Basis of preparation continued
The interim statements are neither audited nor reviewed. The financial
information set out in these statements does not comprise statutory accounts for
the purposes of Section 240 of the Companies Act 1985. The abridged information
for the fifty two weeks to 1 August 2003 has been prepared from the Group's
statutory accounts for that period, which have been filed with the Registrar of
Companies. The auditors' report on the accounts of the Group for that period
was unqualified and did not contain a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985.
2. Analysis of turnover and operating profit
The geographical analysis of turnover and operating profit by origin is stated
below:
26 weeks to 26 weeks to 52 weeks to
30 January 31 January 1 August
2004 2003 2003
___________ ___________ ___________
£'000 £'000 £'000
Turnover
United Kingdom 141,911 144,952 291,282
United States of America 53,084 65,170 120,553
Rest of the World 13,833 12,794 25,376
___________ ___________ ___________
208,828 222,916 437,211
=========== =========== ===========
Operating profit/(loss) before
exceptional items and goodwill charges
United Kingdom 16,041 17,302 39,260
United States of America 957 65 (703)
Rest of the World (426) (890) (2,176)
___________ ___________ ___________
16,572 16,477 36,381
=========== =========== ===========
Exceptional items
United Kingdom (130) (440) 19
United States of America (7,834) (206) (363)
Rest of the World - 215 225
___________ ___________ ___________
(7,964) (431) (119)
=========== =========== ===========
Operating (loss)/profit
United Kingdom 15,911 16,862 39,279
United States of America (6,877) (141) (1,066)
Rest of the World (426) (675) (1,951)
___________ ___________ ___________
8,608 16,046 36,262
Goodwill amortisation - USA (1,104) (1,077) (2,195)
Goodwill impairment - USA (13,000) - -
___________ ___________ ___________
(5,496) 14,969 34,067
=========== =========== ===========
NOTES TO THE FINANCIAL STATEMENTS continued
2. Analysis of turnover and operating profit continued
The segmental analysis of turnover is stated below:
26 weeks to 26 weeks to 52 weeks to
30 January 31 January 1 August
2004 2003 2003
___________ ___________ ___________
£'000 £'000 £'000
Books 33,322 32,533 70,145
Direct Response and Commercial 97,677 106,773 192,342
Financial 12,207 11,401 34,968
Magazines 50,447 57,779 113,163
Multimedia 15,175 14,430 26,593
___________ ___________ ___________
208,828 222,916 437,211
=========== =========== ===========
3. Taxation
The taxation charge is analysed below:
26 weeks to 26 weeks to 52 weeks to
30 January 31 January 1 August
2004 2003 2003
___________ ___________ ___________
£'000 £'000 £'000
United Kingdom taxation 5,856 5,728 13,134
Overseas taxation 36 (425) (1,028)
___________ ___________ ___________
5,892 5,303 12,106
=========== =========== ===========
The taxation charge for the period ended 30 January 2004 is based on the
estimated charge for fifty two weeks to 30 July 2004.
The taxation charge for the period is disproportionate to the loss before
taxation as goodwill amortisation and impairment are non-deductible, and a
deferred taxation asset in respect of the St Ives Inc, Case-Hoyt closure costs
has not been recognised.
4. Dividends
The directors have declared an interim dividend of 5.00p (2003 - 5.00p) net per
share. The payment date will be 21 May 2004 and the record date will be 23
April 2004.
NOTES TO THE FINANCIAL STATEMENTS continued
5. Earnings per share
The calculation of the basic (loss)/earnings per share is based on loss after
taxation as disclosed in the profit and loss account of £10,873,000 (2003:
January - profit £9,848,000; July - profit £22,483,000). Earnings per share
before exceptional items and goodwill is calculated by adding back exceptional
items and goodwill amortisation and impairment, as adjusted for taxation, to the
loss after taxation. Basic (loss)/earnings per share and earnings per share
before exceptional items and goodwill are calculated on a weighted average of
102.8 million (2003: January - 103.2 million; July - 103.1 million) shares in
issue during the period.
The calculation of the diluted (loss)/earnings per share is based on loss after
taxation as disclosed in the profit and loss account and on a diluted weighted
average of 102.9 million (2003: January - 103.2 million; July - 103.1 million)
shares during the period.
6. Exceptional items, goodwill amortisation and goodwill impairment
Goodwill amortisation of £1,104,000 (2003: January - £1,077,000; July -
£2,195,000) was charged in the twenty six weeks ended 30 January 2004.
Following a review of the goodwill attaching to our US Division as a whole, an
impairment charge of £13,000,000 has been made in the period. Other exceptional
items of £7,964,000 includes £7,691,000 relating to the closure of St Ives Inc,
Case-Hoyt and £273,000 relating to other rationalisation measures completed or
announced throughout the Group.
The exceptional items, excluding goodwill impairment, included within the profit
and loss account are as follows:
26 weeks to 26 weeks to 52 weeks to
30 January 31 January 1 August
2004 2003 2003
___________ ___________ ___________
£'000 £'000 £'000
Costs/(income)
Cost of sales 2,853 394 456
Sales and distribution costs 184 197 292
Administrative expenses 3,429 55 (404)
Other operating costs/(income) 1,498 (215) (225)
___________ ___________ ___________
7,964 431 119
=========== =========== ===========
NOTES TO THE FINANCIAL STATEMENTS continued
7. Post balance sheet events
Since the half year end there have been two material events which will influence
the future financial position of the Group.
On 23 February 2004 the proposed relocation of St Ives Multimedia at Tunbridge
Wells to our existing site at Crayford was announced. The estimated cost of the
proposed relocation is approximately £4 million. If the outcome of the
consultation process supports the proposal, this amount will be provided in full
as an exceptional item in the accounts for the current financial year.
On 15 March 2004 changes to the Company's defined benefit pension scheme were
announced. These changes will see a reduction in the rate of future accrual for
members of the scheme from 1/60th to 1/80th. The rate at which the Company
contributes to the scheme will increase from 8.25 per cent to 10.6 per cent from
the end of May 2004. At the same time a one-off payment of £25 million will be
paid by the Company to the scheme. This payment will be funded from the
Company's existing resources and available facilities. The effect of the new
benefit structure and the £25 million payment on the profit and loss account for
the current financial year will not be material.
8. A copy of the interim statement will be sent to all shareholders.
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