Statement re contract

RNS Number : 3578W

St. Ives PLC

08 February 2017

 

This announcement contains inside information

St Ives plc ("St Ives" or the "Group")

Statement re contract

St Ives, the international marketing services group, was informed today by HarperCollins that its contract with the Group's Books business for the production of monochrome books in the UK will not be renewed.  The current contract ends on 30 June 2017.

Notwithstanding the generally positive trading in the Books business in recent months, management will be initiating actions to reduce the cost base of the Books business and therefore mitigate the impact of the non-renewal of this contract. 

The HarperCollins contract represents approximately 3% of the Group's current revenues.  The non-renewal will not materially impact Group revenue or Group EBIT in the current financial year to 28 July 2017.  After the planned mitigating actions, the Board expects the non-renewal to result in a reduction of approximately £11 million in Group revenue, and £3.5 million in Group adjusted EBIT, in the financial year ending 3 August 2018.  The Board expects the mitigating actions to result in a one-off cash cost of £1.5 million the majority of which will impact the financial year ending 3 August 2018.  In addition, the Board expects there to be a £3.0 million non-cash impairment charge impacting the current financial year ending 28 July 2017.

Matt Armitage, CEO of St Ives, said:

"Although we have recently seen some increase in demand for book production overall, the market remains competitive and we are not prepared to chase volume at uneconomic prices.  We will be taking decisive action to ensure that the cost base of our Books business reflects the future level of volumes we now expect."

As stated in the Group's pre-close trading update on 19 January, the Board remains confident in the long term growth strategy currently being pursued.  The balance sheet remains sound and the Group has the necessary cash flow capabilities to support its investment priorities and to further reduce debt.

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For further information contact:

St Ives plc                                                        020 7928 8844

Matt Armitage, CEO

Brad Gray, CFO

MHP Communications                                     020 3128 8100

John Olsen / Giles Robinson / Gina Bell

 

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