TIDMSIV
RNS Number : 5703L
St. Ives PLC
04 October 2016
4 October 2016
ST IVES plc
Full Year Results for the 52 weeks ended 29 July 2016.
St Ives plc, the international marketing services group,
announces preliminary results for the
52 weeks ended 29 July 2016.
Financial Highlights
52 weeks 52 weeks
to to
29 July 31 July %age
2016 2015 change
----------------------------------- --------- --------- -------
Revenue GBP367.5m GBP344.6m +7%
Adjusted* profit before tax GBP30.4m GBP33.0m -8%
Adjusted* basic earnings per share 17.61p 20.32p -13%
Statutory (loss)/profit before
tax GBP(5.7)m GBP8.7m -
Basic (loss)/earnings per share (5.93)p 4.35p -
Full year dividend 7.80p 7.80p -
Net debt GBP80.8m GBP62.8m
----------------------------------- --------- --------- -------
* Adjusted profit before tax and adjusted basic earnings exclude
Adjusting Items. Adjusting Items comprise of redundancies, empty
property and restructuring costs; impairments, gain or loss on
disposal of properties; costs related to the acquisitions or
setting up of new subsidiaries; impairment or amortisation charges
related to goodwill and intangible assets; contingent consideration
required to be treated as remuneration; movements in deferred
consideration; costs related to the St Ives Defined Benefits
Pension Scheme and accelerated bank amortisation fees.
Operational Highlights
-- Further strong revenue growth of 30% in Strategic Marketing
segment: 11% organic, 19% acquisitive growth
-- 3% revenue increase in Books offset by 7% decline in Marketing Activation
-- Strategic Marketing now contributing 39% of Group revenue
(2015: 32%) and 58% of adjusted operating profit (2015: 46%)
-- Important strategic progress across all three drivers of growth:
-- Enhanced collaboration, with over 150 clients using services of more than one Group business (2015: 106), including Universal Pictures, Whitbread, Jaguar Land Rover, Adidas and Regatta.
-- Continued international growth, with nine Strategic Marketing
businesses serving clients on an international basis; over 37% of
Strategic Marketing revenue now generated from international client
work (2015: 30%).
-- Two further Strategic Marketing acquisitions completed during
the year: 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; both trading in line with expectations.
Matt Armitage, Chief Executive, said:
"We are pleased to confirm that, after some short-term
challenges in the final quarter of the Financial Year, trading
across our Strategic Marketing segment has stabilised.
"We are excited by the opportunities that the breadth of our
marketing services capabilities creates and we are making
encouraging progress in bringing in new projects from both existing
and new clients. We see significant opportunities to push ahead
with our strategic priorities in the year ahead, particular in
further organic growth in our Strategic Marketing segment.
"Whilst we remain alert to the possible impact from Brexit on
business confidence, we will continue to invest in the UK, the US
and Asia to support our medium term growth plans. Assuming no
marked change to the current market conditions, we are well
positioned to make further progress this 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 8100
John Olsen, Giles Robinson,
Gina Bell
Notes to Editors
St Ives is an international marketing services group, made up of
a number of successful and dynamic businesses serving leading
brands internationally, with offices in the UK, North America,
China, Singapore and Dubai.
We operate not as a single entity but as a group of market
leading businesses, each with its own unique value proposition,
offering complementary services and collaborating closely with each
other wherever this adds value to clients. We work with a large
number of leading, international consumer-facing brands across all
major sectors - including retail & FMCG, healthcare &
pharma, financial services, media, technology, automotive and
charity - helping them determine strategic direction and designing
and delivering world-class solutions to match their specific
requirements.
Our industry-leading Strategic Marketing businesses have strong
capabilities across three specialist high growth areas: Data,
Digital and Insight.
Our Marketing Activation businesses, which deliver marketing
communications through a combination of print and in-store
marketing services, complement our Strategic Marketing offering and
collaborate with them where this adds value to clients.
The Group's strategy for further growth for the marketing
services businesses is centred around three key priorities:
-- organic growth through collaboration and investment in our
existing brands;
-- internationalisation, often client-led, into large and high
growth markets; combined with
-- further acquisitions of complementary, ambitious and growing
Strategic Marketing businesses that share our common attributes and
ethos.
Our separate long-standing Books production business, which is
the UK market leader, represents source of profit and cash
generation as we pursue our overall growth strategy.
St Ives employs more than 3,000 people in the UK, North America
and Asia and is listed on the London Stock Exchange (SIV) with a
market capitalisation of GBP195.2m.
Chief Executive's Review
Performance Highlights
Group revenue of GBP367.5 million was 7% higher than the
previous year. This growth was driven by our Strategic Marketing
segment, which delivered growth of 11% on an organic basis along
with acquisitive growth of 19%. Revenue within our Books Segment
was 3% ahead of the prior year. These performances were partially
offset by a 7% decline in our Marketing Activation segment, due to
continued pressure within the grocery retail sector.
The Group's statutory loss before tax of GBP5.7 million (2015:
profit of GBP8.7 million) includes Adjusting Items of GBP36.1
million (2015: GBP24.2 million), of which GBP12.7 million relates
to a non-cash impairment charge in the Marketing Activation
segment.
The Group's adjusted profit before tax declined to GBP30.4
million (2015: GBP33.0 million) and adjusted basic earnings per
share decreased by 13% to 17.61 pence (2015: 20.32 pence).
This year saw further growth in our Strategic Marketing segment,
which contributed 58% (2015: 46%) of the Group's adjusted operating
profit, offset by decline within our Marketing Activation and Books
segments. Towards the end of the year, as previously announced, we
experienced the cancellation and deferral of a number of large
contracts within our Strategic Marketing segment, reflecting
greater caution within our customer base over the allocation of
budgets. Whilst we can confirm that this was a short-term challenge
and that we have made encouraging progress in replacing those
revenues, this nonetheless materially impacted the outturn for the
year.
The Board is recommending a final dividend of 5.45 pence, making
a full year dividend of 7.80 pence (2015: 7.80 pence), reflecting
the Board's confidence in the Group's ability to make further
strategic and financial progress during the year ahead.
We are confident in our strategy for further growth, which
remains centred around 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.
Once again, we have made strategic progress in all three
areas.
Collaboration
Our approach is based on cross-thinking as opposed to
cross-selling, where collaboration is facilitated and supported
rather than forced. Over 150 of our clients currently work with
more than one business across the Group (2015: 106), collaborating
on projects for clients including Universal Pictures, Whitbread,
Jaguar Land Rover, Adidas and Regatta.
In addition, we are seeing further evidence of our businesses
working together on joint propositions. Synergies between Solstice,
the Chicago-based mobile and emerging technology business bought in
2015 and the recently acquired TAB have resulted in both businesses
sharing resources, working practices, growth frameworks and data.
They are collaborating on existing clients and exciting new
business opportunities.
This has been an important driver of the organic revenue growth
achieved in our Strategic Marketing segment.
Internationalisation
Many of our businesses deliver international solutions for
clients and where we can identify client-led opportunities, we plan
to open additional overseas offices. These opportunities must be in
large markets or in markets with the potential for significant and
sustainable growth.
During the year we continued to increase our headcount in both
the US and Asia to meet client demand, expanding our presence in
New York and opening further offices in San Francisco and
Dubai.
Now over 37% of our Strategic Marketing revenue comes from
clients based outside of the UK (2015: 30%), Nine of our Strategic
Marketing businesses, Incite, Pragma, FSP, Hive, Amaze, Realise,
Branded3, TAB and Solstice, service clients on an international
basis.
Acquisitions
We have made two further acquisitions during the year; Fripp,
Sandeman and Partners Limited ("FSP"), a specialist retail property
consultancy, which is working closely with our Pragma Consulting
business to secure new business wins and TAB, a mobile-led
consultancy which has provided the Group with additional scale and
deeper strategy and development capabilities within the fast
growing mobile technology sector. Both acquisitions have integrated
well into the Group.
The acquisition of further complementary marketing services
businesses, which add value to our existing portfolio and operate
in our chosen growth areas of data, digital and insight services,
will continue to be an important element of our overall growth
strategy.
Given the challenges experienced in the latter months of the
financial year however, in the year ahead we will be prioritising
organic growth, through increased collaboration and leveraging the
investments we have made in existing propositions and in new
offices.
While the Group's 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 separate, long-standing and market leading Books
business. These separate segments represent an additional source of
profit and cash generation as we pursue our overall growth
strategy.
Segment Overview
Strategic Marketing
Our Strategic Marketing operations, which represent 39% of Group
revenue (2015: 32%), are organised around three high-growth
sectors: Data, Digital and Insight.
2016 2015
GBP'm GBP'm
============================================== ====== ======
Data Marketing 36.2 33.2
Digital Marketing 71.2 45.5
Insight 36.7 32.0
Strategic Marketing revenue 144.1 110.7
Strategic Marketing adjusted operating profit 19.4 16.3
---------------------------------------------- ------ ------
Despite the cancellation and deferral of a number of large
projects during the second half of the financial year (as reported
in our 25 April trading statement), trading across our Strategic
Marketing segment has continued to be positive and ahead of the
prior year.
We are encouraged with the progress that is being made to
replace the projects which were cancelled.
Data Marketing
Our Data businesses represented 25% of Strategic Marketing
revenue at GBP36.2 million (2015: GBP33.2 million).
Over the course of the year, the Data businesses have continued
to diversify their propositions to take advantage of new revenue
streams, whilst increasing their collaboration with other
businesses within the Group.
New propositions have included the introduction of a specialist
marketing technology offering, myBench and the continued
development of the CRM business, Amaze One. Both offerings have
benefitted from significant client wins throughout the year
including being appointed by Ryanair to implement a new marketing
platform and the delivery of a CRM solution for Morrisons.
In addition, collaboration between our Data and Digital
businesses has resulted in a number of new client wins including
Vue Cinemas and Universal Pictures.
Digital Marketing
The Digital businesses represented 49% of Strategic Marketing
revenue at GBP71.2 million (2015: GBP45.5 million).
Our Digital businesses offer services across the entire digital
spectrum including the high growth areas of customer experience,
eCommerce, mobile and digital technology innovation, including The
Internet of Things and is therefore benefitting from the trend of
continued investment in digital services internationally.
This has resulted in a number of significant new business wins.
Most notably, we have recently been appointed as one of two long
term digital partners to the English Football League (EFL). This is
an important and valuable long term partnership, involving
designing and developing EFL's new digital platforms, including new
websites for over 60 EFL clubs and providing integrated solutions
across what is the world's largest sporting digital network.
During the year, we were also appointed as global digital
partner for Emirates Airline, which has resulted in us building a
presence in Dubai. In addition, the division has won projects with
Electrolux, the BBC, McDonalds, the Met Office, Walmart and
confused.com.
As stated above, in January 2016 we acquired TAB, a mobile-led
consultancy specialising in strategy, product development and
business transformation. The acquisition further strengthens our
digital capabilities particularly in the high growth area of mobile
sector.
Insight
Our Insight businesses represented 26% of Strategic Marketing
revenue at GBP36.7 million (2015: GBP32.0 million).
We have continued to expand our international reach within our
Insight division, with the opening of an office in San Francisco
and expansion of headcount in New York, Singapore and Shanghai to
meet increased client demand.
Our airports and commercial spaces proposition continues to be a
high-growth area for the division. One of this year's most high
profile projects has been advising on the commercial strategy for
La Guardia International Airport in the US.
In addition, we are continuing to see our retail consultancy
business Pragma and the newly acquired specialist retail property
consultancy, FSP, working closely together. Their combined services
are gaining traction with both existing and new clients.
Marketing Activation
Our Marketing Activation segment represented 42% of Group
revenue for the year (2015: 48%).
2016 2015
GBP'm GBP'm
=============================================== ====== ======
Marketing Activation revenue 154.8 167.0
Marketing Activation adjusted operating profit 8.1 10.9
----------------------------------------------- ------ ------
Trading conditions within this segment have continued to be
challenged, due in large part to the ongoing pressures within the
grocery retail market.
Whilst our expertise in grocery retail remains an important
strength, diversification of the client base beyond this sector
remains a priority.
We were recently appointed as print and fulfilment partner for
Whitbread on a long term contract to support all of their brands.
Whilst we incurred some transition costs in the final quarter, this
contract, along with additional services now being provided under
our contract with HSBC, will help to reduce our dependency on the
grocery retail sector in the long term.
In addition to the above, the segment has had a number of new
wins and project extensions throughout the year for clients
including Royal Mail, The Conservative Party, Adidas, Footlocker,
Revlon, Informa and Duracell. We continue to target other contracts
of this nature although we recognise that it will take time and
investment to win and transition such work.
Moving forward our focus is on strategic growth opportunities in
markets that value service and innovation and further reduce the
over-reliance on grocery retail. This will include delivering a
wider portfolio of goods and services that cover the whole of the
marketing operations sphere of brands and retailers. We will also
continue to focus on protecting margins through driving efficiency
improvements and cost reductions and by differentiating our
competitive offering through targeted investment in new service
lines and further cross sales initiatives.
Books
Our market-leading Books business, represented 19% (2015: 20%)
of Group revenue for the year.
2016 2015
GBP'm GBP'm
================================ ====== ======
Books revenue 68.6 66.9
Books adjusted operating profit 5.8 8.1
-------------------------------- ------ ------
Revenue was some 3% higher than the prior year at GBP68.6million
(2015: GBP66.9 million).
During the year, the business has worked on a number of exciting
projects, most recently the new J.K. Rowling title, Harry Potter
and The Cursed Child. Books were distributed to over 50 retail
destinations in the week ahead of publication to support what was
the biggest single book launch in the UK and the US for ten years.
Since publication over 1,200,000 copies have been sold in the UK,
making it the largest selling book of 2016.
Clay's has also benefitted from a number of new business wins
and from growth in self-publishing.
Although incremental volume was secured through the Penguin
Random House contract, this was offset by publishers' destocking,
as previously reported. This appears to have now run its course
but, coupled with costs associated with the transitioning of the
Penguin Random House contract, it adversely affected the segment's
adjusted operating profit.
We continue to adapt to suit the evolving needs of clients, with
further investment in digital print technology to provide a broader
product range and greater capacity to support fast lead-times and
lower stock-holding and with continued focus on extending
supply-chain solutions to reduce the overall cost of the books
supply-chain.
Outlook
Trading in the new financial year has started in line with our
expectations.
Following the short-term challenges during the final quarter of
last year, trading across our Strategic Marketing segment has
stabilised. We are pleased by the progress being made in bringing
in new projects from existing and new clients and are excited by
the opportunities that the breadth of our capabilities create.
Trading conditions within our Marketing Activation segment
continue to be challenging, due in large part to the ongoing
pressures within the grocery retail market, but we are focused on
diversifying into other higher growth sectors and expect to build
on the success we have seen in this regard in recent months.
Within our Books business, having finalised the transition of
the additional work won from Penguin Random House, we will focus on
volume growth and targeting additional work from new and existing
clients.
We see considerable opportunities to progress our strategic
priorities in the year ahead, particularly through further
collaboration between businesses within the Group and through
ongoing internationalisation that matches client demand. Our
particular focus will be on organic growth within our Strategic
Marketing segment. Whilst remaining alert to the possible impact
from Brexit on business confidence, we will continue to invest in
the UK and in the US and Asia, to support our plans for growth over
the medium term.
We remain clear on our long-term growth priorities and have the
financial strength to support our strategic ambitions. Our balance
sheet is sound and we have the necessary cashflow capabilities both
to support our dividends and to reduce debt. Assuming no marked
change to current market conditions, we are confident of making
further strategic and financial progress during the current
year.
Matt Armitage
Chief Executive
4 October 2016
Financial Overview
Overview
Although the Group delivered strong revenue growth largely
within the Strategic Marketing segment the Group's operating profit
declined due to revenue decline within Marketing Activation and
margin pressures within both Marketing Activation and Books.
The Group's statutory results are set out in the table
below:
52 weeks 52 weeks
to to
29 July 31 July
2016 2015
------------------------------------------------ --------- ---------
Revenue GBP367.5m GBP344.6m
Statutory (loss)/profit before interest and tax GBP(1.8)m GBP11.7m
Statutory (loss)/profit before tax GBP(5.7)m GBP8.7m
Basic (loss)/earnings per share (5.93)p 4.35p
------------------------------------------------ --------- ---------
The Group prepares adjusted results, which, in management's view
reflect how the business is managed and show the performance in a
manner consistent with the previous year. Adjusted results exclude
items such as costs related to restructuring activities,
acquisitions made in current and prior periods, disposal of sites
and St Ives Defined Benefits Pension Scheme charges. The analysis
of adjusting items is set out below:
52 weeks 52 weeks
to to
29 July 31 July
2016 2015
GBP'm GBP'm
---------------------------------------------------------------- -------- --------
Statutory (loss)/profit from operations* (1.8) 11.7
Adjusting Items:
Expenses related to restructuring items 2.6 3.2
Loss/(profit) on disposal of property, plant and equipment 1.7 (0.5)
Amortisation of acquired intangibles 9.2 7.8
Impairment of available for sale asset - 1.5
Impairment of goodwill and acquired intangible assets 12.7 1.5
Costs associated with the acquisition and setup of subsidiaries 0.8 0.7
Contingent consideration required to be treated as remuneration 8.2 6.2
(Decrease)/increase in deferred consideration (0.8) 2.5
Administrative expenses related to St Ives Defined Benefits
Pension Scheme 0.7 0.8
---------------------------------------------------------------- -------- --------
Adjusted profit from operations* 33.3 35.4
---------------------------------------------------------------- -------- --------
*Profit from operations is stated as operating profit plus share
of results of joint ventures and other operating
income/(expense)
A non-cash impairment charge of GBP12.7 million was recorded in
the Marketing Activation segment against goodwill and acquired
intangibles. An impairment charge of GBP10.2m has been made against
the goodwill allocated to SP Group Limited. This reflects the
reduction in operating profits and expected future growth rates
resulting from lower promotional activity levels within grocery
retail and the wider retail sector. An impairment charge of GBP2.5m
has been made against the goodwill and customer relationship asset
of Tactical Solutions UK Limited due to the loss of a customer and
a decline in operating profit.
Other non-cash adjusting items include contingent consideration
required to be treated as remuneration of GBP8.2m, amortisation of
acquired intangibles of GBP9.2m, offset by a decrease in deferred
consideration of GBP0.8m.
Revenue
Revenue increased by GBP23.0 million (7%) to GBP367.5 million.
Acquisitive growth was 6% with organic growth of 1%. Strong organic
growth in Strategic Marketing and Books was largely offset by a
decline in Marketing Activation.
Revenue generated from overseas business increased from GBP35
million to GBP53 million and represented 15% of revenue (2015:
10%).
Revenue from our Strategic Marketing segment increased from
GBP110.7 million to GBP144.2 million as a result of recent
acquisitions and organic growth. The growth of 30% was split
between strong organic growth of 11% and acquisition growth of
19%.
Revenue from the Marketing Activation segment decreased from
GBP167.0 million to GBP154.8 million. The segment suffered from
continued pressures within the retail grocery market where our
clients reduced spend on promotional activity.
Revenue from the Books segment increased by 3% from GBP66.9
million to GBP68.6 million with the transition of the final tranche
of the Penguin Random House contract in January 2016.
Adjusted gross profit margin and underlying profitability
The Group's gross profit margin decreased marginally from 33% to
32%. Margin was adversely impacted by differing factors within each
segment and is more fully explained below.
Adjusted profit from operations has decreased from GBP35.4
million (10% of revenue) to GBP33.3 million (9% of revenue).
Adjusted profit from operations in the Strategic Marketing
segment has increased from GBP16.3 million to GBP19.4 million with
an operating margin of 13% (2015: 15%). This includes a full year
contribution from Solstice LLC, Fripp Sandeman and Partners Limited
("FSP" - acquired in August 2015) and six months from The App
Business Limited ("TAB"). In the final quarter of the year the
segment saw the cancellation and deferral of a number of projects
and therefore a reduction in forecast revenue for the year. In
order to mitigate the impact of the revenue decline a number of
tactical cost reductions were made, although the skilled workforce
was broadly maintained and this detrimentally affected the margin
in the final quarter.
Adjusted profit from operations in the Marketing Activation
segment has decreased from GBP10.9 million to GBP8.1 million with
an operating margin of 5% (2015: 7%). The action taken in early
2015 of consolidating production sites, with the closure of
operations at Burnley, has offset some of the impact on margins of
reduced promotional activity from the grocery retailers. In the
latter part of the financial year the segment has been successful
in partially diversifying its client base with the provision of
goods and services to Whitbread plc, although in the short term the
segment has incurred additional transition cost.
Adjusted profit from operations in the Books segment decreased
from GBP8.1 million to GBP5.8 million with an operating margin of
9% (2015: 12%).The margin was adversely impacted by transition
costs relating to the Penguin Random House contract and also a
change in the mix of client work. This led to a number of personnel
positons becoming redundant with an associated redundancy cost of
GBP521,000 recorded as an Adjusting Item.
Acquisitions
On 13 August 2015 the Group acquired FSP a UK-based retail
consultancy. The consideration of GBP2.2 million was payable in the
form of cash and St Ives plc shares.
On 29 January 2016 the Group acquired 82.16% of TAB with the
remaining 17.84% acquired on 8 February 2016. TAB is a UK based
mobile led consultancy specialising in strategy product development
and business transformation. The initial consideration of GBP22.3
million and the consideration of GBP4.9 million to acquire the
remaining equity was payable in the form of cash and St Ives plc
shares.
Deferred consideration paid in relation to prior year
acquisitions totalled GBP9.4 million (2015: GBP15.6 million).
The Group raised GBP13.4 million, after expenses, through the
issue of 6.4 million shares in February 2016.
Tax
The statutory effective tax rate was 33.3% (2015: 36.4%). This
rate is impacted by Adjusting Items that were not deductible for
taxation purposes. The total tax charge was GBP2.4 million (2015:
GBP3.2 million).
The Group's tax rate on the adjusted profit before tax was 20.8%
(2015: 21.3%) compared to the standard rate of tax of 22.67% (2015:
19.86%) for the Group. The adjusted tax charge was GBP6.3 million
(2015: GBP7.0 million).
Income tax of GBP4.3 million (2015: GBP6.6 million) was paid in
the United Kingdom.
Dividend
The Board is recommending a final dividend of 5.45p per ordinary
share (2015: 5.55p) giving a total dividend of 7.80p (2015: 7.80p).
The dividend, on an adjusted basis, is covered 2.3 times by
adjusted earnings and will be paid on 19 December 2016 to
shareholders on the register at 25 November 2016, with an
ex-dividend date on 24 November 2016.
Pensions
The Group closed its Defined Benefits Pension Scheme (the
"Scheme") to new members in 2002 and ceased future accrual within
the Scheme in 2008. The Group accounts for post-retirement benefits
in accordance with IAS19 Employee Benefits. The Consolidated
Balance Sheet reflects the net deficit on the Scheme at 29 July
2016 based on the market value of the assets at that date and the
valuation of liabilities using AA non-gilt bond yields.
On an IAS19 basis the net deficit on the Scheme reduced to
GBP26.4 million (2015: GBP27.6 million) before the related deferred
tax asset. The value of the plan assets increased to GBP344.1
million (2015: GBP311.0 million). Approximately 65% of the plan
assets are invested in return seeking assets providing a higher
level of return over the longer period. Plan liabilities increased
to GBP370.5 million (2015: GBP338.6 million) primarily due to a
decrease in the discount rate offset by a fall in the inflation
rate and net re-measurement gains of GBP21.1 million (2015: GBP1.5
million losses).
The Scheme's actuarial valuation reviews determine any cash
deficit payments by the Group. The Scheme's triennial valuation was
as at April 2016 and discussions are underway with the Scheme
Trustee for future funding levels. The Group currently makes
deficit funding contributions of GBP2.0 million per annum and a
contribution of GBP0.4 million per annum (2015: GBP0.4 million)
towards the costs of administration.
The Group is continuing the process of automatically enrolling
eligible UK employees into a qualifying pension scheme. The charge
for the year for the Group's defined contribution schemes was
GBP3.9 million (2015: GBP3.8 million).
Cash Flow
Cash generated from operations was GBP23.7 million (2015:
GBP35.5 million). The decrease in cash generated from operations is
primarily due to an increased working capital requirement of GBP7.4
million resulting from the growth in Strategic Marketing and an
increase in consideration treated as remuneration of GBP2.6
million.
Total capital expenditure was as follows:
2016 2015
GBP'm GBP'm
--------------------- ------ ------
Strategic Marketing 3.1 1.5
Marketing Activation 1.5 1.1
Books 3.0 3.5
--------------------- ------ ------
Total 7.6 6.1
--------------------- ------ ------
The expenditure of GBP3.1 million in Strategic Marketing
included the fit-out of new offices for Incite and Solstice and the
refurbishment of offices for Amaze. The expenditure of GBP4.5
million in Marketing Activation and Books related to maintenance
capital and the final expenditure relating to the Penguin Random
House contract.
Debt
During the year, the Group increased its revolving credit
facility, which expires on 23 March 2019 from GBP115.0 million to
GBP125.0 million. Subsequent to the year end the Group has reduced
its revolving credit facility to GBP95.0m, supplemented by a term
loan of GBP30.0m and increased its maximum leverage covenant
condition (net debt to Adjusted EBITDA) for the remaining duration
of the facility.
Net debt increased during the year from GBP62.8 million to
GBP80.8 million. At 29 July 2016, St Ives had drawn GBP92.6 million
on its bank credit facility, leaving an unutilised commitment of
GBP32.4 million. The Group had cash in hand of GBP11.8 million.
At 29 July 2016, the ratio of net debt to EBITDA before
Adjusting Items was 1.96 times (2015: 1.45 times) as shown
below:
2016 2015
GBP'm GBP'm
-------------------------- --------- -----
Adjusted profit
from operations 33.3 35.4
Depreciation and
Amortisation 7.9 7.9
------------------------------ --------- -----
EBITDA before Adjusting
Items 41.2 43.3
------------------------------ --------- -----
Net Debt 80.8 62.8
------------------------------ --------- -----
Net debt to EBITDA before
Adjusting Items 1.96 1.45
--------------------------- --------- -----
Brad Gray
Chief Financial Officer
4 October 2016
Consolidated Income Statement
52 weeks to 31
52 weeks to 29 July 2016 July 2015
Adjusting Adjusting
items items
Adjusted (note Statutory Adjusted (note Statutory
Results 3) Results Results 3) Results
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Revenue 2 367,546 - 367,546 344,553 - 344,553
Cost of sales (249,730) - (249,730) (229,654) - (229,654)
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Gross profit 117,816 - 117,816 114,899 - 114,899
Selling costs (25,011) - (25,011) (23,569) (210) (23,779)
Administrative expenses (59,570) (33,472) (93,042) (56,047) (23,993) (80,040)
Share of results of
joint arrangements (122) - (122) (88) - (88)
Other operating income/(expense) 167 (1,651) (1,484) 180 541 721
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Profit/(loss) from
operations 33,280 (35,123) (1,843) 35,375 (23,662) 11,713
Pension finance charge - (972) (972) - (373) (373)
Other finance costs (2,899) - (2,899) (2,398) (213) (2,611)
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Profit/(loss) before
tax 2 30,381 (36,095) (5,714) 32,977 (24,248) 8,729
Income tax (charge)/credit 4 (6,322) 3,931 (2,391) (7,014) 3,841 (3,173)
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Net profit/(loss)
for the period 24,059 (32,164) (8,105) 25,963 (20,407) 5,556
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Attributable to:
Shareholders of the
parent company 24,059 (32,164) (8,105) 25,963 (20,407) 5,556
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Basic earnings/(loss)
per share
(p) 6 17.61 (23.54) (5.93) 20.32 (15.97) 4.35
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Diluted earnings/(loss)
per share (p) 6 17.49 (23.38) (5.89) 19.82 (15.58) 4.24
--------------------------------- ---- --------- --------- --------- ---------- --------- ---------
Consolidated Statement of Comprehensive Income
52 weeks
52 weeks to to
29 July 31 July
2016 2015
GBP'000 GBP'000
-------------------------------------------- ----------- --------
(Loss)/profit for the period (8,105) 5,556
Items that will not be reclassified
subsequently to profit or loss:
Actuarial profit/(loss) on defined
benefits pension scheme 83 (19,691)
Tax (charge)/credit on items taken
directly to equity (545) 3,925
-------------------------------------------- ----------- --------
(462) (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 - 1,540
Transfers of losses on cash flow hedges
to hedged items 127 60
Losses on cash flow hedges (302) (127)
Profit on foreign exchange 409 -
-------------------------------------------- ----------- --------
234 1,473
-------------------------------------------- ----------- --------
Other comprehensive expense for the
period (228) (14,293)
-------------------------------------------- ----------- --------
Total comprehensive expense for the
period (8,333) (8,737)
-------------------------------------------- ----------- --------
Attributable to shareholders of the
parent company (8,333) (8,737)
-------------------------------------------- ----------- --------
Consolidated Statement of Changes in Equity
Hedging
Additional Share and
Share paid-in ESOP Treasury option translation Other Retained
capital capital** reserve shares reserve reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============== ======== ========== ======== ======== ======== ============ ========= ========= ========
Balance at
1 August 2014 12,517 53,234 (11) (163) 7,199 (34) 60,225 71,575 144,317
Profit for the
period - - - - - - - 5,556 5,556
Other
comprehensive
expense - - - - - (67) (67) (14,226) (14,293)
============== ======== ========== ======== ======== ======== ============ ========= ========= ========
Comprehensive
expense - - - - - (67) (67) (8,670) (8,737)
Dividends - - - - - - - (9,455) (9,455)
Acquisitions 213 1,731 - 845 - - 2,576 (917) 1,872
Transfer of
share-based
contingent
consideration
deemed as
remuneration 144 249 - 956 (4,437) - (3,232) 3,810 722
Exchange
differences - - - - - 528 528 - 528
Purchase of
own
shares 160 - (382) (2,458) - - (2,840) - (2,680)
Recognition of
share-based
payments 55 307 393 - 4,467 - 5,167 1,204 6,426
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 - - - - - - - (8,105) (8,105)
Other
comprehensive
expense - - - - - 234 234 (462) (228)
============== ======== ========== ======== ======== ======== ============ ========= ========= ========
Comprehensive
expense - - - - - 234 234 (8,567) (8,333)
Dividends - - - - - - - (10,934) (10,934)
Issue of
shares 775 12,716 (135) - - - 12,581 - 13,356
Acquisitions 365 1,334 - 657 - - 1,991 (528) 1,828
Recognition of
share-based
contingent
consideration
deemed as
remuneration - - - - 5,143 - 5,143 - 5,143
Transfer of
share-based
contingent
consideration
deemed as
remuneration - 97 - - (3,295) - (3,198) 3,382 184
Purchase of
own
shares - - (395) - - - (395) - (395)
Recognition of
share-based
payments - - - - (236) - (236) - (236)
Settlement of
share-based
payments 15 127 530 - (1,431) - (774) 868 109
Tax on
share-based
payments - - - - (231) - (231) 255 24
============== ======== ========== ======== ======== ======== ============ ========= ========= ========
Balance at
29 July 2016 14,244 69,795 - (163) 6,723 661 77,016 42,368 133,628
============== ======== ========== ======== ======== ======== ============ ========= ========= ========
** Additional paid-in capital represents share premium, merger
reserve and capital redemption reserve.
Consolidated Balance Sheet
29 July 31 July
2016 2015
Note GBP'000 GBP'000
--------------------------------- ---- -------- --------
Assets
Non-current assets
Property, plant and equipment 35,559 48,242
Investment property 6,203 -
Goodwill 135,633 137,488
Other intangible assets 53,234 45,652
Available for sale 3 3
Investment in joint arrangement 94 109
Deferred tax assets 232 139
Other non-current assets 374 1,086
--------------------------------- ---- -------- --------
231,332 232,719
--------------------------------- ---- -------- --------
Current assets
Inventories 7,482 6,579
Trade and other receivables 90,761 75,945
Derivative financial instruments - 165
Income tax receivable 1,246 -
Asset held for sale 1,481 412
Cash and cash equivalents 11,835 16,392
--------------------------------- ---- -------- --------
112,805 99,493
--------------------------------- ---- -------- --------
Total assets 344,137 332,212
--------------------------------- ---- -------- --------
Liabilities
Current liabilities
Trade and other payables 76,486 71,070
Derivative financial instruments 535 4
Income tax payable - 355
Deferred consideration payable 1,772 4,879
Deferred income 6,206 6,976
Provisions 31 408
--------------------------------- ---- -------- --------
85,030 83,692
--------------------------------- ---- -------- --------
Non-current liabilities
Loans 92,595 79,225
Retirement benefits obligations 7 26,394 27,597
Deferred consideration payable - 3,487
Other non-current liabilities 814 698
Provisions 2,185 1,732
Deferred income - 81
Deferred tax liabilities 3,491 2,818
--------------------------------- ---- -------- --------
125,479 115,638
--------------------------------- ---- -------- --------
Total liabilities 210,509 199,330
--------------------------------- ---- -------- --------
Net assets 133,628 132,882
--------------------------------- ---- -------- --------
Equity
Capital and reserves
Share capital 14,244 13,089
Other reserves 77,016 61,901
Retained earnings 42,368 57,892
--------------------------------- ---- -------- --------
Total equity 133,628 132,882
--------------------------------- ---- -------- --------
These financial statements were approved by the Board of
Directors on 4 October 2016.
Consolidated Cash Flow Statement
52 weeks 52 weeks
to to
29 July 31 July
2016 2015
Note GBP'000 GBP'000
--------------------------------------------- ---- -------- --------
Operating activities
Cash generated from operations 9 23,650 35,510
Interest paid (2,899) (2,398)
Income taxes paid (6,286) (6,595)
--------------------------------------------- ---- -------- --------
Net cash generated from operating activities 14,465 26,517
--------------------------------------------- ---- -------- --------
Investing activities
Purchase of property, plant and equipment (7,124) (5,542)
Purchase of other intangibles (488) (533)
Proceeds on disposal of property, plant
and equipment 3,315 4,751
Acquisition of subsidiaries, net of
cash acquired 8 (20,937) (19,854)
Deferred consideration paid for acquisitions
made in prior periods (5,790) (14,626)
--------------------------------------------- ---- -------- --------
Net cash used in investing activities (31,024) (35,804)
--------------------------------------------- ---- -------- --------
Financing activities
Proceeds on issue of shares 13,356 -
Dividends paid 5 (10,934) (9,455)
Purchase of treasury shares (395) (2,680)
Decrease in finance lease obligations - (28)
Increase in bank loans 10,000 24,225
--------------------------------------------- ---- -------- --------
Net cash generated from financing activities 12,027 12,062
--------------------------------------------- ---- -------- --------
Net (decrease)/increase in cash and
cash equivalents (4,532) 2,775
Cash and cash equivalents at beginning
of the period 16,392 12,336
Effect of foreign exchange rate changes (25) 1,281
--------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of
the period 9 11,835 16,392
--------------------------------------------- ---- -------- --------
Notes to the Consolidated Financial Statements
1. Basis of preparation
The preliminary results have been prepared on the basis of the
accounting policies as set out in the Group's Annual Report and
Accounts 2016. The financial information set out in the preliminary
results does not comprise statutory accounts for the purpose of
section 434 of the Companies Act 2006 in respect of the period
ended 29 July 2016 and 31 July 2015.
The financial information for the period ended 29 July 2016 has
been extracted from the Group's 2016 statutory accounts for that
period which have been prepared on a going concern basis and in
accordance with the recognition and measurement principles of
International Financial Reporting Standards as adopted by European
Union ('IFRS') and those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The 2016 statutory accounts will
be delivered to the Registrar of Companies following the Company's
2016 Annual General Meeting. The financial information for the
period ended 31 July 2015 has been extracted from the Group's
statutory accounts for that period which have been delivered to the
Registrar of Companies. The Auditor's report on both the Group's
2016 and 2015 statutory accounts were unqualified and did not
contain statements under sections 498(2) or 498(3) of the Companies
Act 2006 in respect of the 2016 and 2015 statutory accounts.
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
includes businesses, which deliver marketing communications through
a combination of print and in-store marketing services. The Books
segment comprises of Clays.
Corporate costs are allocated to revenue-generating segments as
this presentation better reflects their profitability.
Business segments
52 weeks to 29 July 2016
Strategic Marketing
Marketing Activation Books Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ----------- -------- --------
Revenue
External sales 138,745 159,694 69,107 367,546
Group sales 6,987 10,411 17 17,415
Intercompany eliminations (1,577) (15,298) (540) (17,415)
---------------------------------- ---------- ----------- -------- --------
Total revenue 144,155 154,807 68,584 367,546
---------------------------------- ---------- ----------- -------- --------
Operating profit before adjusting
items 19,354 8,084 5,842 33,280
Adjusting items (18,140) (15,752) (1,231) (35,123)
---------------------------------- ---------- ----------- -------- --------
Statutory profit/(loss) from
operations 1,214 (7,668) 4,611 (1,843)
---------------------------------- ---------- ----------- --------
Pension finance charge (972)
Other finance costs (2,899)
---------------------------------- ---------- ----------- -------- --------
Statutory loss before tax (5,714)
Income tax charge (2,391)
---------------------------------- ---------- ----------- -------- --------
Statutory net loss for the
period (8,105)
---------------------------------- ---------- ----------- -------- --------
52 weeks to 31 July 2015
Strategic Marketing
Marketing Activation Books Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- ----------- -------- --------
Revenue
External sales 107,084 170,494 66,975 344,553
Group sales 4,639 9,822 28 14,489
Intercompany eliminations (1,033) (13,346) (110) (14,489)
---------------------------------- ---------- ----------- -------- --------
Total revenue 110,690 166,970 66,893 344,553
---------------------------------- ---------- ----------- -------- --------
Operating profit before adjusting
items 16,340 10,947 8,088 35,375
Adjusting items (16,983) (4,719) (1,960) (23,662)
---------------------------------- ---------- ----------- -------- --------
Statutory (loss)/profit from
operations (643) 6,228 6,128 11,713
---------------------------------- ---------- ----------- --------
Pension finance charge (373)
Other finance costs (2,611)
---------------------------------- ---------- ----------- -------- --------
Statutory profit before tax 8,729
Income tax charge (3,173)
---------------------------------- ---------- ----------- -------- --------
Statutory net profit for
the period 5,556
---------------------------------- ---------- ----------- -------- --------
Geographical segments
The Strategic Marketing, Marketing Activation and Books segments
operate primarily in the UK, deriving more than 85% of the total
revenue from customers located in the UK and 10% of the total
revenue from customers located in the US.
The largest customer of the Group accounted for GBP25.9 million
(2015: GBP30.9 million) of revenue in the current period.
3. Adjusting items
Adjusting items disclosed on the face of the Consolidated Income
Statement are as follows:
2016 2016 2015 2015
Expense/(income) GBP'000 GBP'000 GBP'000 GBP'000
====================================== ======== ======== ======== ========
Restructuring items
Redundancies and other charges 1,612 2,408
Costs associated with empty
properties 976 671
-------------------------------------- -------- -------- -------- --------
2,588 3,079
St Ives Defined Benefits Pension
Scheme costs
Administrative costs 582 562
Curtailment credit (198) -
Other 327 268
-------------------------------------- -------- -------- -------- --------
711 830
Costs related to acquisitions
made in current and prior periods
Amortisation of acquired intangibles 9,237 7,827
Impairment of available for
sale asset - 1,540
Impairment of goodwill and
acquired intangible assets 12,712 1,470
Costs associated with the acquisition
and setup of subsidiaries 785 686
Contingent consideration required
to be treated as remuneration 8,220 6,233
(Decrease)/increase in deferred
consideration (781) 2,538
-------------------------------------- -------- -------- -------- --------
30,173 20,294
-------------------------------------- -------- -------- -------- --------
Adjusting items in administrative
expenses 33,472 24,203
Loss/(profit) on disposal of
property, plant and equipment 1,651 (541)
-------------------------------------- -------- -------- -------- --------
Adjusting items before interest
and tax 35,123 23,662
Net pension finance charge
in respect of defined benefits
pension scheme 972 373
Accelerated amortisation of
bank arrangement fees - 213
-------------------------------------- -------- -------- -------- --------
972 586
-------------------------------------- -------- -------- -------- --------
Adjusting items before tax 36,095 24,248
Income tax credit (3,931) (3,841)
-------------------------------------- -------- -------- -------- --------
32,164 20,407
-------------------------------------- -------- -------- -------- --------
The restructuring items in the current period include redundancy
costs of GBP521,000 relating to the Books segment, GBP574,000
relating to the restructure of the former Print Service segment to
Marketing Activation segment and GBP31,000 of costs related to
subsidiaries disposed of in prior periods. During the period,
redundancy costs of GBP486,000 were recorded in the Strategic
Marketing segment.
Costs relating to empty properties of GBP976,000 relate to
business that the Group disposed or closed in prior periods and are
recorded in the Marketing Activation segment.
The loss on disposal of property, plant and equipment of
GBP1,651,000 relates to the sale of the Group's properties at
Bradford and Birmingham. These items are recorded in the Marketing
Activation segment.
Charges relating to the amortisation of acquired customer
relationships, proprietary techniques and software intangibles of
GBP9,031,000 and GBP206,000 are recorded in the Strategic Marketing
and Marketing Activation segments respectively. Contingent
consideration of GBP8,220,000 in respect of acquisitions required
to be treated as remuneration rather than consideration and a
credit of GBP781,000 related to the decrease in consideration in
respect of past acquisitions are recorded within the Strategic
Marketing segment.
The impairment charge of GBP12,712,000 includes an impairment to
SP Group's goodwill of GBP10,192,000; Tactical Solutions' goodwill
of GBP2,155,000; and to the customer relationship assets of
GBP365,000. This is due to the decline in revenue from the grocery
retail sector and the loss of a customer, resulting in a decline in
operating profit. These items are recorded in the Marketing
Activation segment.
The Group incurred costs related to the acquisitions of FSP and
TAB of GBP135,000 and GBP496,000 respectively, together with costs
of GBP60,000 related to acquisitions made in the period. Setup
costs of GBP94,000 relate to new subsidiaries in Shanghai and
Dubai. These items are recorded in the Strategic Marketing
Segment.
The St Ives Defined Benefits Pension Scheme charges include
service costs of GBP582,000, net pension finance charge of
GBP972,000 and other costs of GBP327,000 related to the St Ives
Defined Benefits Pension Scheme, partially offset by a curtailment
credit of GBP198,000. These items are recorded in the Books
segment.
In the current period, the tax credit of GBP3,931,000 (2015:
GBP3,841,000) relates to the items discussed above.
4. Income tax charge
Income tax charge as shown in the Consolidated Income Statement
is as follows:
2016 2015
GBP'000 GBP'000
----------------------------------------- -------- --------
Total current tax charge:
Current period 5,468 6,114
Adjustments in respect of prior periods 27 (19)
----------------------------------------- -------- --------
Total current tax charge 5,495 6,095
----------------------------------------- -------- --------
Deferred tax on origination and reversal
of temporary differences:
Deferred tax credit (3,181) (2,411)
Adjustments in respect of prior periods 77 (511)
----------------------------------------- -------- --------
Total deferred tax credit (3,104) (2,922)
----------------------------------------- -------- --------
Total income tax charge 2,391 3,173
----------------------------------------- -------- --------
The income tax charge on the (loss)/profit before and after
adjusting items is as follows:
2016 2015
GBP'000 GBP'000
----------------------------------------- -------- --------
Tax charge on adjusted profit before tax 6,322 7,014
Tax credit on adjusting items (3,931) (3,841)
----------------------------------------- -------- --------
Total income tax charge 2,391 3,173
----------------------------------------- -------- --------
The charge can be reconciled to the (loss)/profit before tax per
the Consolidated Income Statement as follows:
2016 2015
GBP'000 GBP'000
---------------------------------------------- -------- --------
(Loss)/profit before tax (5,714) 8,729
Tax calculated at a rate of 22.66% (2015:
19.86%) (1,295) 1,734
Non-deductible charges on impairment of
assets 2,469 664
Expenses not deductible for tax purposes 2,675 2,564
Effect of tax deductible goodwill (423) -
Non-taxable income - (363)
Effect of change in UK corporate tax rate (538) 80
Credit on research and development activities (214) -
Other foreign taxes 150 -
Movement in deferred tax on industrial
buildings (430) (976)
Utilisation of tax losses not previously
recognised (107) -
Adjustments in respect of prior periods 104 (530)
---------------------------------------------- -------- --------
Total income tax charge 2,391 3,173
---------------------------------------------- -------- --------
Income tax credit as shown in the Consolidated Statement of
Comprehensive Income is as follows:
2016 2015
GBP'000 GBP'000
----------------------------------------- -------- --------
United Kingdom corporation tax credit
at 20% (2015: 20.67%) (415) (479)
Deferred tax on origination and reversal
of temporary differences 960 (3,446)
----------------------------------------- -------- --------
Total income tax credit 545 (3,925)
----------------------------------------- -------- --------
Income tax credit/(charge) as shown in the Statement of Changes
in Equity is as follows:
2016 2015
GBP'000 GBP'000
----------------------------------------- -------- --------
United Kingdom corporation tax credit
at 20% (2015: 20.67%) 255 345
Deferred tax on origination and reversal
of temporary differences (231) (456)
----------------------------------------- -------- --------
Total income tax credit/(charge) 24 (111)
----------------------------------------- -------- --------
5. Dividends
2016 2015
per share GBP'000 GBP'000
--------------------------------- --------- -------- --------
Final dividend paid for the 52
weeks ended 1 August 2014 5.00p - 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 -
Interim dividend paid for the
26 weeks ended 29 January 2016 2.35p 3,419 -
--------------------------------- --------- -------- --------
Dividends paid during the period 10,934 9,455
--------------------------------- --------- -------- --------
Proposed final dividend at the
period end of 5.45p per share
(2015: 5.55p per share) 5.45p 7,758 -
--------------------------------- --------- -------- --------
6. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following:
Number of shares
2016 2015
'000 '000
------------------------------------------- ------- -------
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 136,633 127,784
Effect of dilutive potential ordinary
shares:
Share options 930 3,232
------------------------------------------- ------- -------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 137,563 131,016
------------------------------------------- ------- -------
Basic and diluted earnings per share
52 Weeks to 52 Weeks to
29 July 2016 31 July 2015
------------- -------------
Earnings Earnings
Earnings per share Earnings per share
GBP'000 pence GBP'000 pence
----------------------------------- -------- ---------- -------- ----------
Earnings and basic earnings
per share
Adjusted earnings and Adjusted
basic earnings per share 24,059 17.61 25,963 20.32
Adjusting items (32,164) (23.54) (20,407) (15.97)
----------------------------------- -------- ---------- -------- ----------
(Loss)/earnings and basic earnings
per share (8,105) (5.93) 5,556 4.35
----------------------------------- -------- ---------- -------- ----------
Earnings and diluted earnings
per share
Adjusted earnings and Adjusted
diluted earnings per share 24,059 17.49 25,963 19.82
Adjusting items (32,164) (23.38) (20,407) (15.58)
----------------------------------- -------- ---------- -------- ----------
(Loss)/earnings and diluted
earnings per share (8,105) (5.89) 5,556 4.24
----------------------------------- -------- ---------- -------- ----------
Adjusted earnings is calculated by adding back adjusting items,
as adjusted for tax, to the profit/(loss) for the period.
7. Retirement benefits
The net obligation in respect of the St Ives Defined Benefits
Pension Scheme of GBP26,394,000 at 29 July 2016 has decreased
compared to 31 July 2015 (GBP27,597,000) primarily due to an
increase in plan assets partially offset by a decrease in the
discount rate.
8. Acquisition
Fripp, Sandeman and Partners Limited
On 13 August 2015, the Group acquired the entire share capital
of Fripp, Sandeman and Partners Limited ('FSP'), a UK-based retail
consultancy. The consideration was satisfied in cash and St Ives
plc shares.
The provisional allocation of the purchase price payable for FSP
is as follows:
Fair value
Historical Fair value of net
net assets adjustments assets
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ------------ ----------
Proprietary techniques - 893 893
Property, plant and equipment 44 - 44
Software 125 - 125
Trade and other receivables 466 - 466
Bank balances and cash 943 - 943
Trade and other payables (477) - (477)
Provision for repairs on leasehold
premises - (21) (21)
Deferred tax liabilities (3) (179) (182)
----------------------------------- ----------- ------------ ----------
Net assets acquired 1,098 693 1,791
----------------------------------- ----------- ------------
Goodwill arising on acquisition 668
----------------------------------- ----------- ------------ ----------
Total consideration 2,459
----------------------------------- ----------- ------------ ----------
The fair value of the components of the total consideration
payable are as follows:
GBP'000
-------------------------------------------------- -------
Cash consideration paid in the current period 1,521
Working capital paid in the current period 779
---------------------------------------------------- -------
Total cash paid in the period 2,300
Fair value of 362,095 St Ives plc ordinary
shares allocated from treasury shares as
at 13 August 2015 652
Less consideration treated as deemed remuneration (493)
---------------------------------------------------- -------
Total consideration 2,459
---------------------------------------------------- -------
Goodwill of GBP668,000 arising on acquisition reflects future
growth opportunities. Goodwill related to FSP is not deductible for
tax purposes.
The acquisition had the following impact on investing cash
outflows in the current period:
GBP'000
------------------- -------
Cash paid 2,300
Less cash acquired (943)
===================== =======
Net cash outflow 1,357
--------------------- -------
At the acquisition date, it was estimated that all the trade and
other receivables were collectible
The post-acquisition impact of FSP on the Group's revenue and
operating profit are as follows:
2016
GBP'000
----------------- --------
Revenue 2,173
Operating profit 402
----------------- --------
The App Business Limited
The Group acquired 82.16% of total share capital of The App
Business Limited ('TAB') on 29 January 2016 and the remaining
17.84% of the total share capital on 8 February 2016. TAB is a
UK-based mobile consultancy business.
The provisional allocation of the purchase price payable for TAB
is as follows:
Fair value
Historical Fair value of net
net assets adjustments assets
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ------------ ----------
Proprietary techniques - 12,294 12,294
Customer contracts - 1,192 1,192
Trademark - 1,073 1,073
Property, plant and equipment 324 - 324
Trade and other receivables 2,494 - 2,494
Bank balances and cash 3,665 - 3,665
Trade and other payables (1,614) 623 (991)
Provision for repairs on leasehold
premises - (195) (195)
Deferred tax liabilities (62) (2,440) (2,502)
----------------------------------- ----------- ------------ ----------
Net assets acquired 4,807 12,547 17,354
----------------------------------- ----------- ------------
Goodwill arising on acquisition 8,378
----------------------------------- ----------- ------------ ----------
Total consideration 25,732
----------------------------------- ----------- ------------ ----------
At the acquisition date, it was estimated that all the trade and
other receivables were collectible.
Goodwill of GBP8,378,000 arising on acquisition reflects future
growth opportunities. Goodwill related to TAB is not deductible for
tax purposes.
The fair value of the components of the total consideration
payable are as follows:
GBP'000
--------------------------------------------- -------
Cash consideration paid in the current
period 20,402
Working capital paid in the current period 2,843
----------------------------------------------- ---------
Total cash paid in the period 23,245
Fair value of 3,167,493 St Ives plc ordinary
shares issued as at 8 February 2016 6,801
Working capital payment payable 873
Less consideration treated as deemed
remuneration (5,187)
----------------------------------------------- ---------
Total consideration 25,732
----------------------------------------------- ---------
Estimated deferred consideration is payable in three tranches
and is dependent upon the level of EBITDA achieved by TAB for the
years ending 30 April 2016, 30 April 2017 and 30 April 2018. The
total consideration payable is capped at GBP55,000,000 excluding a
working capital adjustment of GBP3,717,000.
The acquisition had the following impact on investing cash
outflows in the current period:
GBP'000
------------------- -------
Cash paid 23,245
Less cash acquired (3,665)
--------------------- -------
Net cash outflow 19,580
--------------------- -------
At the acquisition date, it was estimated that all the trade and
other receivables were collectible.
The post-acquisition impact of TAB on the Group's revenue and
operating profit are as follows:
2016
GBP'000
----------------- --------
Revenue 6,532
Operating profit 1,495
----------------- --------
Had TAB 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 in the current period:
2016
GBP'000
----------------- --------
Revenue 6,317
Operating profit 1,688
----------------- --------
9. Notes to the condensed consolidated cash flow statement
Reconciliation of cash generated from operations
2016 2015
GBP'000 GBP'000
----------------------------------------- -------- --------
(Loss)/profit from continuing operations (1,843) 11,713
Adjustments for:
Depreciation of property, plant and
equipment 7,201 7,201
Share of losses from joint arrangement 122 88
Impairment losses 12,712 3,009
Amortisation of intangible assets 10,016 8,690
(Loss)/profit on disposal of property,
plant and equipment 1,484 (721)
Share-based payment (credit)/charge (238) 908
Settlement of share based payments 108 541
Net increase in derivative liabilities (175) (67)
Decrease in defined benefits pension
scheme obligations (2,278) (2,325)
Re-measurement of deferred consideration (781) 2,538
Charge for contingent consideration
required to be treated as remuneration 8,220 6,233
Increase/(decrease) in provisions 55 (409)
----------------------------------------- -------- --------
Operating cash inflows before movements
in working capital 34,603 37,399
Increase in inventories (880) (833)
(Increase)/decrease in receivables (9,579) 6,864
Increase/(decrease) in payables 3,992 (8,077)
(Decrease)/increase in deferred income (906) 1,132
Net decrease in provision for deemed
remuneration (3,580) (975)
----------------------------------------- -------- --------
Cash generated from operations 23,650 35,510
----------------------------------------- -------- --------
Analysis of net debt
Foreign
31 July Cash exchange 29 July
2015 flow losses 2016
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- --------- --------
Cash and cash equivalents 16,392 (4,533) (24) 11,835
Bank loans (79,225) (10,000) (3,370) (92,595)
-------------------------- -------- -------- --------- --------
(62,833) (14,533) (3,394) (80,760)
-------------------------- -------- -------- --------- --------
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.
10. Related parties
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. No material related party transactions have
been entered into during the year, which might reasonably affect
the decisions made by the users of these financial statements.
No other executive officers of the Company or their associates
had material transactions with the Group during the year.
11. Post balance sheet events
On 28 September 2016, the Company sold the freehold land and
building of its Burnley site which, at the balance sheet date, was
recorded as an asset held for sale.
The foregoing contains forward looking statements made by the
directors in good faith based on information available to them up
to 4 October 2016. Such statements need to be read with caution due
to inherent uncertainties, including economic and business risk
factors underlying such statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FXLLBQBFFFBK
(END) Dow Jones Newswires
October 04, 2016 02:00 ET (06:00 GMT)
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