Final Results

Printing.com plc 05 June 2007 FOR RELEASE 7.00AM 5 June 2007 PRINTING.COM PLC ('Printing.com or 'the Group') Specialist retail chain with 205 Outlets opened and pending across the UK and Ireland Preliminary Results for year ended 2April 2007 2007 2006 Change Total Retail Sales Â£21.28m Â£18.22m +16.8% Turnover Â£12.14m Â£11.88m +2.2% Operating Profit Â£2.20m Â£1.83m +20.2% Profit Before Tax Â£2.33m Â£2.24m +4.0% Earnings Per Share - Basic 3.60p 3.58p +0.6% EPS - Fully Diluted 3.43p 3.40p +1.0% Dividend 2.50p 1.75p +42.9% Capital expenditure Â£3.94m Â£0.97m +306.2% Net cash Â£2.86m Â£3.45m -17.1% * Record network sales and profit * Number of outlets up from 166 to 205 * Manchester Hub capacity increased from Â£20-Â£25 million to Â£40-45 million * New Zealand licence owner operational, expanding and generating royalties * Expect to see material growth across UK and Irish network * Successful launch of 'Websites by Printing.com' * French initiative about to be launched to boost Hub volume * Significant acceleration of dividend reflects continued confidence For further information: Printing.com plc Tony Rafferty (Chief Executive) 07966 517 336 Alan Roberts (Finance Director) 0161 848 5713 Cubitt Consulting Brian Coleman-Smith / Leanne Denman / James Verstringhe 020 7367 5100 Background note: Printing.com Printing.com offers a broad product range including leaflets, booklets, postcards, promotional cards, invitations, letterheads and business cards to consumers and small and medium sized companies. Unlike its competitors, Printing.com Stores and Franchises do not depend on any printing equipment on location. The Company's printing and ancillary equipment is based at the centralised Production Hub with the head office in Manchester. All work is produced in full four colour rather than two colour. Delivery to the customer is usually within three days. The printing sector has traditionally been served by smaller printing companies or other On Demand Printers and is estimated to be worth some Â£1 billion. Printing.com has three routes to market: Franchise Stores, Bolt-on Franchises and Company owned Stores. A complete list of Printing.com's Outlets is included at the end of the release. PRINTING.COM PLC ('Printing.com or 'the Group') Specialist retail chain with 205 Outlets opened and pending across the UK and Ireland Preliminary Results for year ended 2April 2007 CHAIRMAN'S STATEMENT TRADING RESULTS At first glance the pre-tax profit of Â£2.3m (2006 restated: Â£2.2m) could be interpreted as indicating just a year of consolidation. However we believe that more careful scrutiny indicates that momentum is continuing to build in your Company, albeit the rate of growth is marginally below what we had expected. Nevertheless the year exhibited growth in terms of Total Retail Sales ('TRS') through the network to Â£21.3m (2006: Â£18.2m), an increase of 17%. Additionally, Operating Profit showed a material increase to Â£2.2m (2006: Â£1.8m). The increase in TRS is not reflected in the turnover of Â£12.1m (2006: Â£11.9m), due to the increased number of stores now under franchised ownership whereby only the 'wholesale' component of each printing order is counted towards your Company's turnover. CASH Your Company finished the year with cash reserves of Â£2.9m against Â£3.5m the previous year, reflecting the timing of corporation tax which now requires us to make advance payments on account whilst also, in this instance, being required to make payment for the previous year. We also paid dividends of Â£828,000 (2006: Â£469,000) and invested Â£3.9m in plant, equipment and infrastructure, of which Â£2.9m was funded by a finance lease. DIVIDEND Shareholders will recall that when your Company went onto the AIM market, the Board set out its aspiration to follow a progressive dividend policy. In line with this strategy, and taking into account our strong cash reserves, your board is proposing a final dividend of 1.9p per ordinary share to be paid on 9 August 2007 to shareholders on the register at the close of business on 29 June 2007. Making a total dividend for the year of 2.5p per ordinary share (2006: 1.75p). PEOPLE AT PRINTING.COM Across the Printing.com network, it is the hard work and endeavours of our franchisees, the people who work alongside them, and our direct employees that ensures your Company delivers an excellent front line service to Printing.com's clients. On your behalf, I thank them all for their hard work and would pay particular tribute to those in the production department at our Manchester Hub for the way they have risen to numerous challenges during the Hub expansion programme. OUTLOOK Importantly, in the year under review, significant infrastructure was put in place that should position your Company for further growth over the coming years. At the Manchester Hub, capacity was increased from Â£20-25m to Â£40-45m and the first International Master Licence was granted for New Zealand. This allows a printer operating in that marketplace to utilise Printing.com's, Flyerlink(R) software, its systems and collateral in return for royalty payments. Over the coming year we expect to see material growth across our UK and Irish franchise network that feeds our Manchester Hub. Having invested Â£3.9m in the year under review, we once again have an abundance of unutilised capacity. Looking ahead, as volumes increase we would expect to see a proportionate net increase in your Company's EBITDA. As a rule of thumb, assuming we are able to maintain or improve current operational metrics, we would expect EBITDA to increase by around Â£1m for each Â£5m of additional TRS. In the UK, we have launched our first 'new media' offering, 'Websites by Printing.com'. Following significant development over the past year, the majority of franchises are now trained in the service and the first websites are now live. We believe there is great scope for this offering to further assist our clients to better promote their own businesses, and for our franchisees and your Company to generate incremental profits. In 2003 we commenced shipping to the Republic of Ireland to test our systems within the Euro zone, and this has proved very successful. In September this year we will begin a similar operation in France. Over the past 18 months we have invested in this new initiative and firmly believe that, by distributing via Bolt-on Franchise partners, a great opportunity exists without the need to directly invest in stores. The gestation period for the granting of international Master Licences appears longer than we would have hoped and its launch more costly than anticipated. However, the success that has been achieved to date in New Zealand, coupled with the granting of the second such agreement and the progressed negotiations in the US, gives us confidence that in the years to come we will be able to exploit your Company's intellectual property. Collectively, we believe these initiatives herald an exciting time ahead for your Company, reflected by our confidence in the acceleration of the dividend. In the current year, we are cautiously optimistic that the International Master Licence programme will make a material contribution to your Company's profits. George Hardie Chairman 5 June 2007 CHIEF EXECUTIVE'S STATEMENT ESTATE DEVELOPMENT 1 June 2007 31 March 2007 31 March 2006 Company Owned Stores 2 2 6 Franchise Stores (Open & Pending) 47 47 42 Bolt-on Franchises 156 149 118 ---------------- ---------------- ---------------- 205 198 166 ================ ================ ================ As you will see from the table above, once again, the Printing.com estate has exhibited material growth and, indeed, during the year became the UK's largest printing network, measured by the number of outlets. In terms of network revenue we estimate that today Printing.com is still only a third of the size of the largest competitor, reflecting the scope for ongoing growth. Our objective for the UK and Ireland remains the establishment of a network of circa 50 Territory and over 350 Bolt-on Franchises. We favour this approach, as it enables your Company to leverage the endeavours of established entrepreneurs, who in most instances, would not consider a traditional franchise format. Of note, during the year, three established and successful Bolt-on Franchisees, elected to also establish Territory Franchises. We believe this reflects a most positive endorsement of our business model. The increase in the number of Territory Franchises includes the transfer of the Birmingham Centre and Luton/Hertfordshire Territory Franchises via Management Buy Outs, and the Oxfordshire Territory via a Management Buy In. Indeed, the Oxford and Luton outlets, having previously been bought back, were once again returned to franchise ownership. Across the United Kingdom we now have only a handful of empty Territory Franchises. Accordingly, our expenditure on marketing this franchise format, at national exhibitions and the like, has been scaled back. Previously we reported that we had enlarged the geographic area of certain Territory Franchises to provide more scope for successful exponents to establish additional Bolt-on Franchises. We have continued to apply this strategy in an additional five instances. The Bolt-on Franchise, in which an established printing business or graphic/web designer utilises the Printing.com brand and offering in tandem with their existing business, continues to go from strength to strength. Whilst individually a typical Bolt-on Franchise contributes less revenue than a stand-alone store, this format allows the propagation of Printing.com into smaller towns and districts than would otherwise be possible. As the Printing.com offering is only a component of the Bolt-on Franchisee's business, inevitably from time to time we experience some 'churn' in the Bolt-on Franchise estate where, for instance, the franchisee elects to follow an alternative overall strategy. Where this occurs we endeavour to seek a commercial resolution and to appoint an alternative local Bolt-on. Notwithstanding this inherent churn, during the year under review we saw a net increase of 31 Bolt-on Franchises. During the current year our objective is to further increase the net Bolt-on estate by a minimum of 50 outlets. We believe that this is realistic as our Territory Franchisees' experience of marketing the Bolt-on franchise opportunity continues to develop. THE PRODUCTION HUB AND INFRASTRUCTURE The year under review saw the Manchester Hub change beyond recognition as capacity was increased from Â£20-25m to Â£40-45m. The addition of a sizeable mezzanine floor added a further 745 sq. m. of production area. A swimming pool sized recess was also constructed to accommodate the new 'double-decker' printing press. Building these structures whilst maintaining an undisrupted supply to our franchisees and customers represented a significant challenge that your Company overcame. During the year we also developed and commissioned Smartpack, a bespoke job logistics/sortation system. Smartpack is driven by Printing.com's proprietary software Flyerlink and groups together the discrete 'bundles' of product that comprise each order. Previously this manual process was not only labour intensive but also one of the most fallible stages of production. With Smartpack, the individual product bundles are routed automatically from the 'Guillotines' to a designated packing chute, allowing all components of the given order to be consolidated. From there, they can be rapidly packed, and automatically labelled, weighed and sealed before shipping. Last minute changes to information such as delivery instructions are again routed directly, via Flyerlink, to the Smartpack chutes Introducing this infrastructure is an important step in ensuring the scalability of the Manchester Hub and its ability to suitably support our franchises as we grow. INTERNATIONAL EXPANSION In November 2005, we set out our plans to expand Printing.com beyond the UK and Republic of Ireland by licencing our systems, software, brand and reputation to printers in other countries wishing to pursue a similar business model. We also set out the potential revenue streams for the Master Licence Agreement ('MLA') comprising of an initial licence fee and ongoing royalties. During the year under review we granted our first MLA, for New Zealand. This licence was granted to a commercial printer in the country's capital, Wellington . This business, aside from its general printing activities, had established a network of 14 outlets supplying a service similar to Printing.com. We believe that the rationale for them entering into the MLA is centred on the access that it gives to the Flyerlink software and other extensive Printing.com collateral. Following extensive training in the UK, Printing.com supported the launch of the system in New Zealand. Since then the New Zealand network has expanded to 23 (open or pending). The estate development has centred on the successful launch of the New Zealand Bolt-on Franchise initiative. The company is optimistic that, moving forward, the estate will continue to grow. It was previously reported that MLA Options had been granted for both Poland and Australia. The Polish Option has since lapsed. The New Zealand MLA owners, the previous grantee of the Australian Option, have elected to focus their strategy on their domestic market - accordingly the Option did not progress. However, a new Option has been granted over Australia to a company with whom we previously held extensive discussions. During February 2007, a second MLA was granted. In this respect, a programme of extensive UK based training has now been completed, with the delivery of the local component scheduled for late summer 2007. As the MLA is granted to a relatively small country in terms of population (but with an affluent economy), at this juncture we are reserving its identity so as not to detract from the forthcoming launch. In October 2006, Printing.com attended the Graph Expo printing exhibition in Chicago, US. Following on from this, a number of potential partners have made visits to the UK and vice versa. Since then we have entered into a period of exclusive discussions with one prospective partner which may or may not result in the grant of a formal Option or MLA. Discussions continue to progress with prospective partners in other countries. 'WEBSITES BY PRINTING.COM' The Printing.com structure essentially provides the architecture to vend services, in addition to printing, to the highly fragmented SME marketplace. The essence of 'Websites by Printing.com' is a design, build and hosting service positioned between the numerous DIY offerings on the web and the entry-level service available via a typical small business website designer. It is expected that most websites will be offered in the range of Â£400 to Â£600. The service differentiates itself for the franchisee, in that no specific knowledge of HTML or other website development languages is required. For the end user client the differentiation is the inclusion of an 'Update Centre' allowing the end user to update their websites without the delay, expense or inconvenience of involving a website designer. The launch of 'Websites by Printing.com' follows the acquisition in July 2006 of certain intellectual property from Website World Limited for a nominal sum with an earn-out provision. Website World had previously offered a similar service from retail premises in Sheffield. During the past four months we have delivered hundreds of classroom training days to our Franchisees. This classroom training has been augmented with an extensive programme of field support by your Company's Development Managers. The service and the functionality that it offers has been well received by the Printing.com franchise community and, whilst at an early stage, the first paid-for websites have now been produced with early indications showing them to be well-received by the clients. Moving forward, we believe that this service will offer a useful additional revenue stream for our franchisees. In common with printing, they pay a transfer price for each website. We believe that not only will this service add to the appeal of a Printing.com franchise, but will become a material incremental revenue stream for your Company. PRINTING.COM IN FRANCE Whilst we intend to develop most international territories via the grant of an International Master Licence, the proximity of France, coupled with the advent of Flyerlink's multi-lingual capabilities will enable us to enter this market in September 2007. Over the past year our research into the marketplace, an exploration of potential Master Licence opportunities has provided a good insight. We intend to exploit this opportunity by granting Bolt-on Franchises in a similar manner to the UK. At this stage, we do not intend to open either directly owned stores or territory franchises but believe that many proprietors of Graphic/Web Designers would benefit from the Printing.com offering. To exploit this opportunity we assembled a team in December 2006 including a seasoned Printing.com Development Manager who is fluent in French, and a Manager from a French competitor. Having been thorough in our appraisal of the market and by partnering with established French businesses, we are optimistic that this initiative will prove successful and drive more volume through your Company's Manchester Hub. Moving forward, we expect that the business will be bought out, production moved to the new owner's facility in France and operate in a similar manner to the New Zealand Master Licence, with your Company receiving royalties. CURRENT TRADING Post the start of the current financial year we are pleased to report that trading volumes are ahead of the same period in the previous year and broadly speaking in line with the Company's internal budget. During the same period an additional 8 Bolt-on Franchise agreements have been completed with the pipeline providing encouragement moving forward. Tony Rafferty Chief Executive 5 June 2007 FINANCIAL REVIEW TOTAL RETAIL SALES (TRS) TRS is the Company's key metric, being the retail price paid by the client, and provides the clearest indication of the growth of the network. The ongoing development of Printing.com is clearly illustrated with TRS increasing by 16.8% to Â£21.28m (2006: Â£18.22m). In the period under review Franchised Outlets accounted for 95% of TRS sales (2006: 84%). LIKE FOR LIKE TRS This metric reports on the like for like progress of our Territory Franchisees (or equivalent Company owned operations) that have operated for a minimum of three years. Therefore, the earliest figures that would be reported for a Territory Franchise are it's third year versus it's second year. In presenting these figures we believe that it is essential to consider both the performance of the Store within the Territory Franchise and the growth in revenues from its associated Bolt-On Franchises. On this basis like for like growth during the year under review was 13.4% (2006:17.6%) with 20 (2006:14) Territory Franchises (or Company owned equivalents) contributing to this metric. ACCOUNTING POLICY CHANGES Accounting standard developments have given rise to three changes in accounting policies which have resulted in a restatement of the accounts for year ended 31 March 2006: each is covered separately in the report. They are revenue recognition where, firstly, the policy for deferring licence income has been adopted. Secondly, the net income from selling Company owned Stores has been taken out of turnover and is now reported as other income. The adoption of FRS20, the expensing of share based payments, has also resulted in a restatement of the 2006 report. In addition, the tax charge for 2006 has been amended to account for the tax computation error reported in January 2007. In the 2008 financial year the Group's internal reporting will be on a calendar month basis as opposed to the thirteen four week periods used in the past. This will result in this year's interim report being for six months rather than for twenty eight weeks. TURNOVER Overall turnover increased by 2.2% from Â£11.88m (restated) to Â£12.14m. At the end of 2006 three Company owned Stores and the Agency business were franchised which had a negative effect on Company turnover, due to the loss of the retail margin. However, this was compensated for through lower Company overheads. Network growth is essentially derived from adding Franchised outlets with additional turnover being at 'wholesale' value. GROSS PROFIT The Company's simple definition of Gross Profit is turnover less direct materials (including the cost of distribution, when made direct to customers). Gross Profit decreased by 2.5% from Â£8.34m (restated) to Â£8.14m. In percentage terms it reduced from 70.2% to 67.1% of turnover as more sales moved through the franchise channels, at wholesale prices, where the retail margin is passed over to Franchisees who then, of course, incur the corresponding retail overheads. PRE-TAX PROFIT The Company recorded a pre tax profit of Â£2.33m (2006 restated: Â£2.24m) being 19.2% (2006 restated: 18.8%) of Company turnover and 10.9% (2006 restated: 12.3%) of TRS. We believe this sustained level of pre tax profitability, in both absolute terms and on these key metrics, validates our franchise centred strategy. Through the period the Company's costs increased as the discrete items in the Hub expansion project came online. By the end of the year all of the major items of plant had been commissioned and were operational. The effect of franchising Company operations in 2006 meant that overall staff costs decreased in the year from Â£3.31m (restated) to Â£3.01m and fell as a percentage of turnover from 27.9% to 24.8%. The depreciation charge for the year was Â£1.08m (2006 restated: Â£0.79m) which rose through the year as new plant, associated with the major capital expenditure project, was brought on line. Those overheads directly related to Company owned retail operations, including payroll and depreciation, reduced from Â£1.78m to Â£0.78m or 15.0% of turnover down to 6.4%. This was essentially due to retail outlets previously owned by the Company becoming franchised units. FRS 20 SHARE BASED PAYMENTS FRS20 was adopted when presenting the un-audited 2007 Interim financial statements using a Black Scholes model to measure the fair value of share option awards. Subsequent review of the complex nature of the schemes resulted in the development of a Monte Carlo model which, giving a more appropriate fair value, has been used to arrive at the charge for these options in the financial year ended 2 April 2007. The total FRS20 charge for 2007 is Â£114,000 (2006: Â£101,000 and 2005: Â£63,000) and is included in staff costs and other operating charges. See note 6 to the financial statements. OTHER INCOME / INTEREST RECEIVED AND CHARGED Other income, Â£141,000 for the year (2006 restated:Â£400,000) is the net income derived from Franchising previously Company owned Stores after deducting the net book value of assets, licence fees and any other charges relating to the transactions. See note 7 to the financial statements. Interest received of Â£194,000 (2006:Â£141,000) reflects interest on the cash balances held and interest charged to Franchisees on loans to them from Printing.com. Interest paid of Â£207,000 (2006:Â£134,000) increased because of through the lease finance costs of elements associated with the Hub expansion project. TAXATION The standard rate for tax remains at 30%. The charge for the current year is Â£0.72m or 31% of PBT (2006 restated: Â£0.66m or 29.2%). As reported in January 2007 a tax computation error notified to the company by Baker Tilly, its then auditors and tax advisers, has had to be accounted for in this report. The error caused the Group's taxation charge for the two years ended 31 March 2005 and 2006 to be understated by an aggregate of Â£205,000. The treatment in these financial statements in respect of this tax adjustment is a prior year adjustment. The impact of the prior year adjustment is to increase the tax charge in the year ended 31 March 2006 by Â£113,000 and to decrease opening profit and loss account reserves at 1 April 2005 by Â£92,000. EARNINGS PER SHARE (EPS) Basic EPS improved to 3.60p (2006 restated:3.58p), the weighted average number of shares used was 44,730,883. Diluted EPS improved to 3.43p (2006 restated: 3.40p), the weighted average number of shares used was 46,904,112. The year closed with 44,746,500 ordinary shares in issue. CASH FLOW At the year end the Company had cash balances of Â£2.86m (2006: Â£3.45m) and Net Debt of Â£0.23m (Net Funds 2006:Â£2.51m). Operational cash inflow increased to Â£2.99m (2006: Â£2.47m). Significant cash outflow included the payment of Â£1.04m in corporation tax and an increase in dividends paid to Â£0.83m from Â£0.44m. CAPITAL EXPENDITURE The total expenditure for the year was Â£3.94m (2006: Â£0.97m). The major items were Software development and computing infrastructure Â£0.54m; and the Production Hub expansion project Â£3.32m. Of the capital expenditure Â£2.96m was finance leased. SHARE CAPITAL AND SHARE OPTIONS Employees' options over 69,608 shares and Franchisee options over 10,000 shares were exercised during the year. TREASURY POLICIES AND FINANCIAL RISK Surplus funds are intended to support the Group's short term working capital requirements. These funds are invested through the use of short term deposits and the policy is to maximise returns as well as provide the flexibility required to fund on-going operations. It is not the Group's policy to enter into financial derivatives for speculative or trading purposes.Interest rate risk, liquidity risk and currency risk Interest rate risks are limited to the fixed element of finance lease or hire purchase agreements. The Group uses leasing or hire purchase at periods of up to 5 years to finance purchases of some of its assets where it is considered to be a more effective use of funds. Surplus funds are invested on a short term basis at money market rates and, therefore, such funds are available at very short notice. The Group has no overseas assets or liabilities, apart from minor trade related debtors and creditors, and thus any currency movements have no material impact INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) As a company listed on the UK Alternative Investment Market (AIM), the Group will be required to comply with IFRS in the interim financial statements for the six months ended 30 September 2007 and thereafter. The Board intends to issue a 'restatement report' in advance of the interim financial statements in line with best practice. Alan Q. Roberts Finance Director 5 June 2007 Group Profit and Loss Account for the financial year ended 2 April 2007 As restated Note 2007 2006 Â£000 Â£000 Turnover 1 12,136 11,879 Change in stocks of finished goods (20) 16 and work in progress --- --- 12,116 11,895 Raw materials and consumables (3,977) (3,557) Other external charges Staff costs (3,007) (3,308) Depreciation and other amounts written off tangible and (1,080) (794) intangible fixed assets Other operating charges (1,850) (2,402) --- --- Operating profit 2,202 1,834 Other Income 141 400 Other interest receivable and similar 194 141 income Interest payable and similar charges (207) (134) --- --- Profit on ordinary activities before 2,330 2,241 taxation Tax on profit on ordinary activities 2 (719) (655) --- --- Profit on ordinary activities after 1,611 1,586 taxation --- --- Earnings per ordinary share - basic 4 3.60p 3.58p Earnings per ordinary share - diluted 4 3.43p 3.40p The operating profit for the year arises from the Group's continuing operations. Group Balance Sheet At 2 April 2007 As restated Note 2007 2006 Â£000 Â£000 Fixed assets Intangible assets 105 68 Tangible assets 6,621 3,855 --- --- 6,726 3,923 Current assets Stocks 104 124 Debtors (includes Â£581,000 due after more than one year. 3,949 3,084 2006: Â£561,000) Cash at bank and in hand 2,855 3,452 --- --- 6,908 6,660 Creditors: amounts falling due within one year (4,189) (3,943) --- --- Net current assets 2,719 2,717 --- --- Total assets less current liabilities 9,445 6,640 Creditors: amounts falling due after more than (2,170) (499) one year Provisions for liabilities (448) (221) --- --- Net assets 6,827 5,920 --- --- Capital and reserves Called up share capital 447 447 Share premium account 3,833 3,823 Merger reserve 211 211 Other reserves 279 165 Profit and loss account 2,057 1,274 --- --- Shareholders' funds 6,827 5,920 --- --- === Group Cash Flow Statement for the financial year ended 2 April 2007 Note 2007 2006 Â£000 Â£000 Cash flow statement Cash flow from operating activities 6a 2,993 2,466 Returns on investments and servicing of finance 6b (13) 7 Taxation (1,042) - Capital expenditure and financial investment 6b (906) (973) Dividends paid on shares classified in shareholders' funds 3 (828) (443) --- --- Net cash inflow before financing 204 1,057 Financing 6b (801) (469) --- --- (Decrease)/Increase in cash in the year (597) 588 === === Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the year (597) 588 Cash outflow from increase in debt and lease financing 6b 811 527 --- --- Change in net debt resulting from cash flows 214 1,115 New finance leases (2,955) (45) --- --- Movement in net funds in the year (2,741) 1,070 Net funds at the start of the year 2,508 1,438 --- --- Net (debt)/funds at the end of the year 6c (233) 2,508 === === Statement of total recognised gains and losses for the year ended 2 April 2007 Group As restated Company As restated Group Company 2007 2006 2007 2006 Â£000 Â£000 Â£000 Â£000 Profit for the year 1,611 1,586 1,032 746 --- --- --- --- Total recognised gains and losses relating to financial year 1,611 1,586 1,032 746 Prior year adjustment (see note 6) (508) (132) Total recognised gains and losses since last annual report and financial statements 1,103 900 Notes to the Accounts 1. Turnover and profit on ordinary activities before taxation The principal components of turnover are the design and production of publicity and marketing material, and franchise fee income. All of the turnover is in one continuing business segment being the development of the Printing.com Franchise and originates in the United Kingdom and Republic of Ireland. The directors believe that full compliance with SSAP25 'Segmental Reporting' would be seriously prejudicial to the interests of the Group as it would require disclosure of commercially sensitive information. Analysis by geographical segment 2007 2006 Â£000 Â£000 United Kingdom 11,548 11,404 Republic of Ireland 522 475 Rest of the world 66 - --- --- 12,136 11,879 === === 2 Taxation Analysis of charge in period 2007 2006 Restated Â£000 Â£000 UK corporation tax Current tax on income for the period 492 679 Deferred tax (see note 20) Origination/reversal of timing differences 221 (24) Adjustment in respect of previous years 6 - --- --- Total deferred tax 227 (24) Tax on profit on ordinary activities 719 655 === === Factors affecting the tax charge for the current period The current tax charge for the period is higher (2006: lower) than the standard rate of corporation tax in the UK 30%,(2006: 30%). The differences are explained below. 2007 2006 Restated Â£000 Â£000 Current tax reconciliation Profit on ordinary activities before tax 2,330 2,241 --- --- Current tax at 30% (2006:30%) 699 672 Effects of: Expenses not deductible for tax purposes 13 16 Capital allowances for period in excess of depreciation (123) (32) Other timing differences (97) 63 Income not taxable - (33) Losses utilised - (7) --- --- Total current tax charge (see above) 492 679 === === It has been announced that the corporation tax rate applicable to the company is expected to change from 30% to 28% from 1 April 2008. The deferred tax liability has been calculated at 30% in accordance with FRS 19. Any timing differences which reverse before 1 April 2008 will be relieved at 30%, any timing differences which exist at 1 April 2008 will reverse at 28% and, because of the uncertainty of the when the deferred tax asset/liability will reverse, it is not yet possible to calculate the full financial impact of this change.' 3 Dividends The aggregate amount of dividends comprises: 2007 2006 Â£000 Â£000 Final dividends paid in respect of prior year but not recognised 559 221 as liabilities in that year Interim dividends paid in respect of the current 269 222 year --- --- Aggregate amount of dividends paid in the financial 828 443 year === === Proposed for approval at Annual General Meeting (Not recognised at year end) Equity dividends on ordinary shares: Final dividend for 2007 1.90p (2006: 1.25p) 850 558 The Â£559,000 dividend proposed for the year ended 31 March 2006 has been accounted for as a distribution in 2007 in accordance with FRS 21 Post balance sheet events. 4 Earnings per share The calculations of earnings per share are based on the following profits and numbers of shares. 2007 2006 Â£000 Restated Â£000 Profit for the financial year 1,611 1,586 === === Weighted average number of shares 2007 2006 No. of shares No. of shares For basic earnings per share 44,730,883 44,312,566 Exercise of share options 2,173,229 2,304,496 --- --- For diluted earnings per share 46,904,112 46,617,062 === === 5 Reconciliation of movement in shareholders' funds Group Company 2007 2006 2007 2006 Â£000 Â£000 Â£000 Â£000 Restated Restated Profit for the financial year 1,611 1,586 1,032 746 Share based compensation 114 101 114 101 Dividends on equity shares (828) (443) (828) (443) Proceeds from issue of shares 10 58 10 58 --- --- --- --- Net addition to shareholders' funds 907 1,302 328 462 Opening shareholders' funds 6,264 4,823 4,912 4,469 Prior year adjustment (344) (205) 32 13 --- --- --- --- As restated 5,920 4,618 4,944 4,482 --- --- --- --- Closing shareholders' funds 6,827 5,920 5,272 4,944 === === === === 6 Notes to the statement of cash flows 2007 2006 Â£000 Â£000 a Reconciliation of operating profit to net cash inflow from operating activities Operating profit 2,202 1,834 Other income 141 400 Share based compensation 114 101 Amortisation 40 39 Depreciation 1,040 755 Decrease/(Increase) in stocks 20 (16) Increase in debtors (865) (934) Increase in creditors 323 284 (Profit)/Loss on sale of fixed assets (22) 3 --- --- 2,993 2,466 === === b Analysis of Cash Flows For Headings Netted Off in the 2007 2006 Cash Flow Statement Â£000 Â£000 Returns on investments and servicing of finance Interest received 194 141 Interest paid (1) (1) Interest element of finance lease rental payments (206) (133) Net cash (outflow)/inflow from returns on investments (13) 7 and servicing of finance === === c Analysis of net (debt)/funds At Cash flow Other At 1 April Â£000 non cash 2April 2007 changes 2006 Â£000 Â£000 Â£000 Net cash: Cash at bank and in hand 3,452 (597) - 2,855 Debt: Finance leases (944) 811 (2,955) (3,088) --- --- --- --- Net (debt)/funds 2,508 214 (2,955) (233) === === === === 7 Basis of the Preliminary Announcement The preliminary financial statements for the financial year ended 2 April 2007 were approved by the Board of Directors on 5 June 2007. The financial information set out above does not constitute the Company's statutory accounts for the financial years ended 31 March 2006 or 2 April 2007 but is derived from those accounts (subject to restatements). Statutory accounts for the financial year ended 31 March 2006 have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the financial year ended 2 April 2007 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Branch Network Customer Region Town Post Code Sign It Central England Beeston, Nottingham NG9 2AY Graphic Results Central England Belper DE56 1AY East Birmingham Store Central England Birmingham B26 3JR South West Birmingham Store Central England Birmingham B16 9RD Birmingham Store Central England Birmingham B5 4JL Artichoke Design Central England Birmingham B18 6NN Knight Mason Central England Broughton Astley LE9 6RD Coventry Store Central England Coventry CV2 4BE Image IT Central England Daventry NN11 8RY Sportwise Central England Derby DE1 3QB F7 Design Central England Digbeth B16 0JL Hussellworks Central England Halesowen B63 3HR Clientel Central England Kibworth LE8 0HS Leicester Store Central England Leicester LE1 1LB The Ideas Room Central England Leicester LE3 0DL Trident Design Central England Lutterworth LE17 4EE PenzNPrint Central England Market Rasen LN8 3EN For Colour Central England Newark, Nottingham NG24 1LE Northampton Store Central England Northampton NN1 5QJ Custard Creative Central England Northampton NN3 6WL Nottingham Store Central England Nottingham NG1 6DQ Oxford Store Central England Oxford OX2 7HT Peterborough Store Central England Peterborough PE2 8AN Ideas Taking Shape Central England Rugby CV21 2SD Mailboxes Central England Shrewsbury SY1 1HN Boomerang Central England Solihull B93 0LY High Tide Central England Sutton Coldfield B18 6NF Runtime Printers Central England Telford TF2 8AJ Albry Printing Company Central England Wallingford OX10 9DA Wolverhampton Store Central England Wolverhampton WV1 4BL Red Hot Media East Lowestoft NR32 1EB Goldengate East Suffolk IP30 9QS KK Print Ireland Athlone - County Westmeath Dublin Store Ireland Dublin Dublin 2 North Dublin Store Ireland Dublin Dublin 7 Creative State Ireland Naas - County Kildare TMC Ireland Tullow - County Carlow Thomas Hughes Ireland Wexford Central London Store London Baker Street NW1 6UY Alpha to Omega London Beckenham BR3 3HX Plug & Play London Bramley GU5 0DY Shiver London Camden NW1 0AG Source Grafic Design London Catford SE6 1TJ TCG London Clapham SW11 1TN City & Clerkenwell Store London Clerkenwell EC1M 5QA Print Express London Colindale NW9 5DL Last LLP London Docklands E16 E16 1AG Ealing Store London Ealing W13 8SB 0800 Promote London Finchley N3 1TR Full Colour Store London Fulham SW6 6SE Guildford Store London Guildford GU1 3HY Hampstead Store London Hampstead NW3 5HS Harrow Life London Harrow HA1 2EA Digipics London Ilford IG1 4DU London Office Services London London W1G 8JR Marmoset Media London London SW17 SW17 7PJ Expocentric - Dover London Mayfair W1X 3PH Printhouse London Nottinghill W11 3HT Orpington Store London Orpington BR6 0JY Reading Store London Reading RG1 4QA London Print Compamy London Shaftesbury Avenue WC2H 8EB DNA Design London Slough SL1 1XW Expocentric - Wardour London Soho W1V 3AU Toppers London Stevenage SG1 3HR AK Design & Print London Swiss Cottage NW3 6JP Kink Design London Thornton Heath CR7 7AX Talon Graphics London Thornton Heath CR7 7JW Snow Media London Tooting SW17 0RG Wernham Printers London Tottenham N17 6QD Watford Store London Watford WD17 1RA Printer Net Services London Wimbledon SW19 8TY Kaleidoscope Midlands Leamington Spa CV31 1BZ Ozmedia Print Midlands Loughborough LE12 8JH Pewter Design Midlands Market Harborough LE16 7DS St Ives Quickprint Midlands St Ives PE27 3WS Smart Cards International North East Beverley HU17 0TB Print House Direct North East Bishop Auckland DL14 0LZ Bradford Store North East Bradford BD1 5BD John Siddall North East Cleckheaton BD19 3JL RT Design North East Consett DH8 6BP Pro-Actif Communications North East Darlington DL3 7TD Doncaster Store North East Doncaster DN3 3TW Web Rocket Design North East Durham DH1 1RF Hull Store North East Hull HU1 2AG Ryedale North East Kirbymoorside YO62 6YB Leeds Store North East Leeds LS1 3DL The Factory North East Leeds LS12 2DS Print Ideas North East Leeds LS8 2HU Middlesbrough Store North East Middlesbrough TS1 1LY Newcastle Store North East Newcastle NE1 5EE Direct Business Products North East Newcastle NE12 9UP Multiprint North East Normanton WF6 2AF Viacreative North East Redcar TS10 5SH Bluprint North East Rotheram S60 8LZ Sheffield Store North East Sheffield S1 4GF Eidos North East Slaithwaite HD7 5BB Marckell Business Solutions North East South Shields NE33 1TL Maskerade Design North East Sunderland SR2 7PR GOWEB North East Wakefield WF2 9BL Colour Box Design North East York YO24 1AR Blah D Blah North Wales Bangor LL57 1NY ER Design & Print North West Alsager CW2 5PR Rhino Design North West Ashton-under-Lyne OL6 6XJ Granthams - Blackpool North West Blackpool FY1 4PE Print Hub Design North West Bolton BL1 3QJ Wild Thang North West Bootle L31 2HB Fluid Media North West Bury BB5 2LB Brightspark North West Carlisle CA2 5BB RAS Limited North West Chester CH3 5AG William Seabrooke Assoc. North West Chorlton - Manchester M21 8UP Northstar Design North West Colne BB8 9DB Mailboxes North West Didsbury M20 6UG ScissorsPaperStone North West Eccles M30 8GH First Impression North West Glossop SK13 8RZ Lancaster Store North West Lancaster LA1 1XN Liverpool Store North West Liverpool L2 2HF Sprinter Printer North West Liverpool L22 4QD Copycat North West Maghull L31 2HB North Manchester Store North West Manchester M3 4BQ Manchester Store North West Manchester M3 4BQ Creation Publicity North West Manchester M17 1DZ The Agency Creative North West Manchester M17 1DZ Alert 2 Media North West Manchester M1 1DZ Chilli Cactus North West Manchester M18 7JX Print Design Warehouse North West Marple SK6 7AD SmartStudios North West North Manchester M4 4DE Granthams - Preston North West Preston PR1 2UQ FX Design North West Queensferry CH5 2LR Orbital Design North West Rossendale BB4 8EQ The Graphics Department North West Salford M3 5DN Brash North West Southport PR8 4HZ Masterprint North West St Helens WA10 1DH Mailboxes North West Stockport SK1 1LE Impact Advertising North West Timperley WA15 7SP The Hub North West Trafford Park M17 1FG Warrington Store North West Warrington WA1 1EP Printel North West Widnes WA3 8LG Bradbury Graphics Northern Ireland Belfast BT7 1BS Mooney Media Northern Ireland County Down BT32 4QD Xpress Creative Northern Ireland Newtonabbey BT36 4PU Desktop Northern Ireland Omagh BT78 1DW The Business Boutique Scotland Aberdeen AB24 5BW X Display Systems Scotland Coatbridge ML5 4AS Edinburgh Store Scotland Edinburgh EH3 6QY Color Co. - Edinburgh Scotland Edinburgh EH2 2PA Digisnaps Scotland Edinburgh EH2 2PJ Glasgow Store Scotland Glasgow G3 8LZ SPD Print Solutions Scotland Glasgow G40 4DU Tripple 333 Scotland Glasgow G4 0QR Hamilton (662c) Scotland Hamilton ML3 7AR Fireworks Design Scotland Linlithgow EH49 7TF Academy Press Scotland Livingstone EH54 6QD Glasgow Print Scotland North Glasgow G64 1RX South Glasgow Store Scotland South Glasgow G5 9RR Tangerine Scotland Stirling FK8 1JW Brighton Store South Brighton BN2 8AA Republique South Brighton BN1 4GH Tudor Print South Worthing BN11 1UY Ashford Store South East Ashford TN24 8UU Mailboxes South East Cambridge CB2 1FD Think Tank South East Canterbury CT14 7HR Studio Direct South East Chelmsford CM2 6HE Lussh Creative South East Chesterfield S40 2BY Inprint South East Colchester CO1 1PB TRS Graphics South East Croydon CR2 6EB Jelly Bean Graphics South East Croydon CR9 6YJ LW Design South East Dorking RH4 2ES Home Counties Graphics South East Dunstable LU6 1SX Accomplice South East Hailsham BN27 1AU Luton Store South East Luton LU1 2PL That Life Multimedia Centre South East Maidenhead SL6 1NB Great Printers South East Newbury RG14 5SA Norwich Store South East Norwich NR1 1PL Graphics One South East Norwich NR7 0EQ Colour Wave South East Ramsgate CT11 8NT Felix Communications South East Rochester ME2 4HZ Grow Marketing South East Whitstable CT3 4JH Print Creative South West Bath BA1 2JB Bournemouth Store South West Bournemouth DT1 1HS Bristol Store South West Bristol BS1 3LZ Presto Print South West Christchurch BH23 1QD Exeter Store South West Exeter EX4 3AJ Kualo Creative South West Gloucester GL2 2AT Wessex Direct South West Minehead TA24 5UB Plymouth Store South West Plymouth PL4 0AU Chalk & Cheese South West Ruislip HA4 6HH Southampton Store South West Southampton SO15 2AE Malthouse South West Taunton TA1 3EP Printing South West South West Totnes TQ9 5DW Whitman Design & Print South West Truro TR1 2HE Anneset South West Weston-Super-Mare BS23 3DE Limelight Graphix Wales Bridgend CF31 3SA Cardiff Store Wales Cardiff CF5 1JF Australian Welsh Wales Cardiff CF14 3JP Swansea - Colourbox Creative Wales Swansea SA1 5TY This information is provided by RNS The company news service from the London Stock Exchange

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