TIDMSIV
RNS Number : 6767Y
St. Ives PLC
07 March 2017
This announcement contains inside information
7 March 2017
ST IVES plc
Half Year Results for the 26 weeks ended 27 January 2017
St Ives plc, the international marketing services group,
announces half year results for the 26 weeks ended 27 January
2017.
Financial Highlights
26 weeks 26 weeks
to to
27 January 29 January %age
2017 2016 change
----------------------------------- ----------- ----------- --------
Revenue GBP195.1m GBP185.7m 5%
Adjusted profit before tax* GBP9.8m GBP16.1m (39)%
Adjusted basic earnings per share* 5.45p 9.70p (44)%
Interim dividend 0.65p 2.35p (72)%
Statutory loss before tax GBP(26.8)m GBP(2.8)m -
GBP10.4m
Net debt GBP70.4m GBP80.8m less**
----------------------------------- ----------- ----------- --------
* Adjusted Results exclude Adjusting Items to enhance
understanding of the financial performance of the Group. 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, tangible
and intangible assets; contingent consideration required to be
treated as remuneration; movements in deferred consideration and
costs related to the St Ives Defined Benefits Pension Scheme.
** Net debt as at 29 July 2016.
Key points
-- Very challenging six months, reflected in our financial performance
-- Strategic Marketing segment, which lies at the centre of our
long term growth strategy, represents 39% of Group revenue and 55%
of Adjusted operating profit
-- Revenue growth of 5% driven by our Strategic Marketing
segment which delivered growth of 9%. Revenue in Books 15% ahead of
the previous half year, partially offset by a 3% decline in
Marketing Activation
-- Further progress made against key strategic priorities -
collaboration and internationalisation
- Over 160 of our clients currently working with more than one
business across the Group (2016:130) including Unilever, Standard
Life Investments, Microsoft and Bosch
- Over 45% of our Strategic Marketing revenue now comes from
clients based outside of the UK (2016: 40%). Nine of our Strategic
Marketing businesses are servicing clients on an international
basis
-- Net debt reduced to GBP70.4 million (29 July 2016: GBP80.8
million), with further debt reduction initiatives being pursued in
H2
-- Interim dividend of 0.65 pence (2016: 2.35 pence) recognises
the importance of dividends to shareholders whilst reflecting the
importance of investing in the further organic growth of the
Strategic Marketing segment, and the strengthening of the balance
sheet
Matt Armitage, Chief Executive, said:
"While recent months have proved very challenging, these results
mask further encouraging underlying progress within our core
Strategic Marketing segment, with a number of exciting new projects
being won from existing and new clients as we continue to develop
our unique offering. We remain confident in the quality and
strength of our Strategic Marketing businesses and in the long term
growth strategy for this segment.
"However, we recognise the effect that the legacy businesses are
having on our overall performance and on our ability to generate
value for shareholders. We are reviewing strategic options for both
our Marketing Activation and our Books segments whilst taking
decisive action to improve efficiencies and reduce costs and to
diversify our Marketing Activation sector focus. This is a priority
for us in the months ahead and we will continue to report on its
progress."
For further information, please contact:
St Ives plc 020 7928 8844
Matt Armitage, Chief Executive
Brad Gray, Chief Financial
Officer
MHP Communications 020 3128 8139
John Olsen, Giles Robinson,
Gina Bell
Chief Executive's Review
Introduction
Recent months have been very challenging for the Group as a
whole, and this is reflected in the reported results for the first
six months of the current financial year. It has also been a very
disappointing period for shareholders, something of which the Board
is acutely aware.
The challenges reside primarily within our legacy Marketing
Activation and Books segments. In both cases, and despite their
strong market positions, competition is becoming ever more intense
and is leading to relentless downward pressure on margins. We are
taking immediate action to reduce the cost base of both segments to
reflect the new market realities and, at the same time, we are
reviewing the strategic options for both.
These issues, and their impact on the results, mask further
encouraging underlying progress within our core Strategic Marketing
segment. This segment lies at the centre of our long term growth
strategy and now represents some 39% of Group revenues and 55% of
Adjusted operating profit. We have seen important progress in our
pursuit of organic growth here, particularly through collaboration
between our various businesses.
Group Performance
Group revenue of GBP195.1 million was 5% higher than the
comparable period in the previous year. Our Strategic Marketing
segment delivered growth of 9% - primarily acquisition growth.
Revenue within our Books Segment was 15% ahead of the previous half
year. These performances were partially offset by a 3% decline in
our Marketing Activation segment, due to continued pressure within
the grocery retail sector.
The Group's statutory loss before tax of GBP26.8 million (2016:
GBP2.8 million) includes Adjusting Items of GBP36.6 million (2016:
GBP19.0 million), of which GBP35.7 million relates to non-cash
items. The non-cash Adjusting Items include an impairment charge of
GBP23.9 million in the Marketing Activation segment and GBP3.0
million in the Books segment.
The Group's adjusted profit before tax declined to GBP9.8
million (2016: GBP16.1 million) and adjusted basic earnings per
share decreased by 44% to 5.45 pence (2016: 9.70 pence).
The half year saw further growth in our Strategic Marketing
segment although, as previously reported, we experienced a number
of project cancellations and deferrals in the last quarter of the
previous financial year, which have also impacted revenue growth
and operating margin within the first half of the current financial
year. We remain encouraged by the progress that has been made to
replace the cancelled work. However, this process is taking longer
than previously anticipated, and it is unlikely that we will see
the full benefit of the new work we have won until the final
quarter of the current financial year.
Balance Sheet
Net debt as at 27 January 2017 was GBP70.4 million, down from
the GBP80.8 million as at 29 July 2016, representing a net debt to
adjusted EBITDA ratio of 2.0x (29 July 2016: 2.0x). Further
reducing the Group's indebtedness, including a focus on cash
generation and the disposal of certain non-core properties
currently held for sale, is a priority for the Board.
Dividend
The Board has reviewed the Group's near-term dividend policy to
reflect the impact of the issues experienced in the legacy
businesses and the costs involved in the ongoing cost-reduction
initiatives (more details of which are set out in the Segment
Overview below). In doing so it has balanced the importance of
dividends to shareholders, the importance of investing in the
further organic growth of the core Strategic Marketing segment, and
the strengthening of the balance sheet. Against that background the
Board has declared an interim dividend of 0.65 pence per share, a
decrease of 72% against last year's interim dividend of 2.35 pence.
The Board will re-evaluate the Group's longer-term dividend policy
in due course.
The interim dividend of 0.65 pence will be paid on 5 May 2017 to
the shareholders on the register at 7 April 2017, with an
ex-dividend date on 6 April 2017.
Pension Scheme
On an IAS 19 basis the net deficit on the St Ives Defined
Benefits Pension Scheme (the "Scheme") has reduced to GBP18.5
million (29 July 2016: GBP26.4 million). Scheme assets performed
well increasing by GBP8.9 million over the period. Scheme
liabilities increased by GBP1.0 million to GBP371.5 million, where
an increase in the discount rate used to calculate the liabilities
was offset by an increase in the inflation rate.
Strategic Priorities
We are confident in our long term strategy for further growth,
which is built around our Strategic Marketing segment and which
remains centred around three key priorities:
Collaboration
We continue to make progress with our collaboration agenda with
over 160 of our clients currently working with more than one
business across the Group (2016: 130). These include Unilever,
Standard Life Investments, Microsoft and Bosch.
We are seeing a general increase in demand for integrated
solutions from clients within our Strategic Marketing segment,
which, while aligning to our collaboration agenda, has lead us to
review and evolve our operating model within the segment, and
resulted in us bringing a number of our Digital and Data businesses
closer together.
Internationalisation
Many of our businesses now deliver international solutions for
clients. Over 45% of our Strategic Marketing revenue now comes from
clients based outside of the UK (2016: 40%). Nine of our Strategic
Marketing businesses are servicing clients on an international
basis.
Our strategy for developing our overseas footprint is
client-driven; we will open offices in those territories where we
can identify client-led opportunities. However, we will be
disciplined in our implementation of this strategy; the
opportunities must be in large markets or in markets with the
potential for significant and sustainable growth, and the offices
need to be capable of generating appropriate returns within a
reasonable period of time.
Acquisitions
In the longer term, the acquisition of further complementary
marketing services businesses, which add value to our existing
portfolio and operate in our chosen growth areas of digital, data
and insight services, will continue to be an important element of
the growth strategy of our Strategic Marketing segment.
Given the recent challenges however, we are currently
prioritising organic growth, including leveraging the investments
we have made in existing propositions and in new offices.
Segment Overview
Strategic Marketing
Our Strategic Marketing operations represent 39% of Group
revenue for the half year (2016: 37%) and 55% of Group Adjusted
operating profit.
2017 2016
GBP'm GBP'm
-------------------------- ------ ------
Digital 41.6 32.2
Data 16.7 19.9
Insight 17.5 17.3
========================== ====== ======
Revenue 75.8 69.4
Adjusted operating profit 6.2 9.7
========================== ====== ======
We have seen further encouraging underlying progress within the
Strategic Marketing segment, the core of the Group and of our long
term growth strategy.
One of our priorities has been to replace the work lost in the
last quarter of the previous financial year, and we have had a
number of significant new client wins and contract renewals
including long term agreements to be the digital partner of
Rockwell Automation and DuPont Pioneer. We are encouraged by these
successes although it is taking longer than previously anticipated
to replace the lost revenues; revenue growth and operating margin
were therefore subdued in the half year.
As a result of an increase in client demand for more integrated
solutions, we have continued to drive our collaboration agenda and
to evolve our operating model accordingly. We continue to focus on
the disciplines of Digital, Data and Insight although the strict
distinctions between these disciplines are becoming less relevant
as more integrated propositions are provided to clients.
During the half year we announced some senior management changes
within our Digital and Data businesses. Our three Digital
businesses (Amaze, Realise and Branded3) are now under the
management responsibility of a single individual, Tony Murphy, who
was previously the CEO of Realise. We have also announced that our
two Data businesses (Occam and Response One) will be managed by a
single individual, Damian Coverdale (previously MD at Response
One). These changes will ensure that we offer a coherent
proposition combined with the breadth and scale of services to
support our clients' expanding digital and data requirements.
Our Data businesses work increasingly with each other and also
with our digital marketing businesses, where numerous joint
propositions have been developed. We see further opportunities for
collaboration between our Digital and Data businesses as data
continues to be the driving force behind successful digital
marketing and transformation activities.
Synergies between Solstice, our Chicago-based mobile and
emerging technology business, and TAB continue to result in both
businesses sharing resources, working practices, growth frameworks
and data. The two are working together to develop innovative
connected digital experiences using Voice, Virtual Reality and
Internet of Things technology for clients. New wins in the half
year have included projects for clients including Ford, BMW, Bosch
and Electrolux.
Within our research consultancy, Incite, we have seen growth of
our UK and US businesses through a significant number of new client
wins in the technology, FMCG, finance and pharma sectors, although
client spend and sentiment in Asia has been less robust. We
continue to support our overseas offices in order to provide an
international offering to clients - a growing number of Incite's
clients are serviced by more than one Incite office - and to drive
long-term growth, although this continues to affect short-term
profitability.
Our healthcare consultancy, Hive, has experienced a number of
new client wins including Roche, Leo Pharma, Ipsen, Gilead and
Almiral. The business has also expanded its offering and client
base in the US, delivering significant growth (albeit from a low
base) through a number of client wins including Pfizer. We see the
US, and further international expansion, as a significant
contributor to future growth.
Our retail consultancy, Pragma has undertaken a number of large
advisory projects, including strategic reviews and commercial due
diligence of multinational consumer businesses. A growing number of
such projects involve collaboration with FSP, our specialist
property consulting firm, particularly where catchment analysis or
location planning forms a key part of the investment decision.
The progress outlined above underscores the quality of our
individual Strategic Marketing businesses and the potential for
further profitable growth that they offer, both individually and,
more importantly, through collaboration. They offer differentiated,
value added services to clients and we are confident that the
segment's margins can and will return to levels achieved in
previous years.
Marketing Activation
Our Marketing Activation segment represented 40% of Group
revenue for the half year (2016: 43%) and 17% of Group Adjusted
operating profit.
2017 2016
GBP'm GBP'm
========================== ====== ======
Revenue 77.9 80.2
Adjusted operating profit 1.9 4.0
========================== ====== ======
Trading conditions within this segment continue to be very
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 continues to be a priority.
The segment has had a number of new wins and project extensions
during the half year for clients including Royal Mail, Innocent,
Superdry, AkzoNobel, ESPA and OfficeTeam. While we have been
successful in securing this work, the market remains extremely
price competitive in all areas.
We will continue to focus on protecting margins through driving
efficiency improvements and cost reductions, the benefits of which
are expected to come through in the final quarter of the current
financial year. A consultation has commenced with employees to
reduce employee numbers in SP Group, our point-of-sale business.
The cash cost, in addition to other restructuring costs, will be
approximately GBP1.0 million and will be recorded in the second
half of the year. In addition a non-cash impairment charge of
GBP23.9 million has been incurred relating to SP Group, which is
heavily dependent on the grocery retail market. At the same time,
we are focusing on growth opportunities in markets that value
service and innovation to further reduce the over-reliance on
grocery retail.
Books
Our market-leading Books business represented 21% (2016: 20%) of
Group revenue for the half year and 28% of Group Adjusted operating
profit.
2017 2016
GBP'm GBP'm
========================== ====== ======
Revenue 41.4 36.1
Adjusted operating profit 3.2 3.7
========================== ====== ======
Revenue was 15% higher than the prior half year at GBP41.4
million (2016: GBP36.1 million).
Trading during the first half year was generally positive,
particularly during the pre-Christmas period, and this has
continued in the new year. Sales of printed books in the UK as
reported by Nielsen were up 5% on 2016.
Following the end of the half year and as announced on 8
February, we were informed by HarperCollins that our contract for
the production of monochrome books in the UK would not be renewed.
The contract ends on 30 June 2017. As a result of the non-renewal,
significant re-structuring and cost reductions are underway. We
expect the mitigating actions to result in a one-off cash cost of
GBP1.5 million, the majority of which will now impact the second
half of this financial year and a GBP3.0 million non-cash
impairment charge that has impacted the first half of the current
financial year.
We continue to adapt to suit the evolving needs of clients,
leveraging our well-invested digital print technology to provide a
broader product range, greater capacity to support fast lead-times,
lower stock-holding and with continued focus on extending
supply-chain solutions to reduce the overall cost of the books
supply-chain.
Outlook
Trading across our Strategic Marketing segment is recovering. We
are encouraged by the new projects being won from existing and new
clients, and excited by the opportunities that the increased
collaboration between our businesses is generating.
Trading conditions within our Marketing Activation segment
continue to be very challenging, due in large part to the ongoing
pressures within the grocery retail market, but we are taking
decisive action to increase efficiency and reduce costs and remain
focused on diversifying into other sectors.
Similarly, within our Books business we are taking decisive
action to ensure that the cost base reflects the future level of
volumes we now expect.
Overall, we remain confident in the long term growth strategy
currently being pursued in Strategic Marketing, and in the quality
of the businesses within that segment, as illustrated by the
clients and contracts they continue to attract. However, we
recognise the need to address, decisively, the effect that the
legacy businesses are having on the Group's overall performance and
on our ability to generate value for shareholders. This, together
with further strengthening of the balance sheet, is a priority for
the Board and we will report further to shareholders on this in the
months ahead.
Matt Armitage
Chief Executive
7 March 2017
Condensed Consolidated Income Statement
26 weeks 52 weeks
to to
29 January 29 July
2016 2016
(Restated (Restated
26 weeks to 27 January Note Note
2017 6) 6)
---------------------- ----------- -----------
Adjusted Adjusting Statutory Statutory Statutory
Results Items Results Results Results
GBP'000 (Note GBP'000 GBP'000 GBP'000
3)
Note GBP'000
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
Revenue 2 195,127 - 195,127 185,706 367,546
Cost of sales (144,746) - (144,746) (131,973) (262,468)
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
Gross profit 50,381 - 50,381 53,733 105,078
Selling costs (13,599) - (13,599) (12,945) (25,011)
Administrative expenses (25,621) (36,781) (62,402) (40,055) (80,304)
Share of results
of joint ventures 122 - 122 (104) (122)
Other operating (expense)/income (7) 457 450 (1,669) (1,484)
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
Profit/(loss) from
operations 2 11,276 (36,324) (25,048) (1,040) (1,843)
Net pension finance
charge - (323) (323) (494) (972)
Other finance costs (1,472) - (1,472) (1,313) (2,899)
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
Profit/(loss) before
tax 9,804 (36,647) (26,843) (2,847) (5,714)
Income tax (charge)/credit (2,031) 893 (1,138) (2,347) (2,391)
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
Net profit/(loss)
for the period 7,773 (35,754) (27,981) (5,194) (8,105)
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
Basic earnings/(loss)
per share (p) 5 5.45 (25.08) (19.63) (3.96) (5.93)
Diluted earnings/(loss)
per share (p) 5 5.45 (25.07) (19.62) (3.88) (5.89)
--------------------------------- ---- --------- ---------- ---------- ---------- ----------
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, tangible and intangible assets; contingent consideration
required to be treated as remuneration; movements in deferred
consideration and costs related to the St Ives Defined Benefits
Pension Scheme.
Condensed Consolidated Statement of Comprehensive Income
26 weeks 26 weeks 52 weeks
to to to
27 January 29 January 29 July
2017 2016 2016
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- --------
Loss for the period (27,981) (5,194) (8,105)
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of the net retirement
benefits obligation 7,335 5,873 83
Tax charge on items taken directly
to equity (1,320) (1,057) (545)
------------------------------------- ----------- ----------- --------
6,015 4,816 (462)
Items that may be reclassified
subsequently to profit or loss:
Transfers of (profits)/losses
on cash flow hedges to hedged
items (109) 127 127
Profits/(losses) on cash flow
hedges 163 (235) (302)
Profit on foreign exchange 759 - 409
813 (108) 234
Other comprehensive income/(expense)
for the period 6,828 4,708 (228)
------------------------------------- ----------- ----------- --------
Total comprehensive expense
for the period (21,153) (486) (8,333)
------------------------------------- ----------- ----------- --------
All income for all periods was attributable to shareholders of
the parent company.
Condensed Consolidated Statement of Changes in Equity
Hedging
Additional Share and Non-
Share paid-in ESOP Treasury option translation Other Retained controlling
capital capital^ reserve shares reserve reserve reserves earnings interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
August
2015 13,089 55,521 - (820) 6,773 427 61,901 57,892 - 132,882
Loss for the
period - - - - - - - (5,194) - (5,194)
Other
comprehensive
(expense)/profit
for the period - - - - - (108) (108) 4,816 - 4,708
----------------- ------- ---------- ------- -------- ------- ----------- -------- -------- ----------- --------
Comprehensive
expense
for the period - - - - - (108) (108) (378) - (486)
Dividends - - - - - - - (7,515) - (7,515)
Issue of share
capital 115 - (115) - - - (115) - - -
Acquisitions 260 1,062 - 658 - - 1,720 (527) 5,116 6,569
Recognition of
shared-base
contingent
consideration
deemed
as remuneration - - - - 2,240 - 2,240 - - 2,240
Transfer of
contingent
consideration
deemed
as remuneration - - - - (933) - (933) 986 - 53
Purchase of own
shares - - (395) - - - (395) (35) - (430)
Exchange
differences - - - - - (1,060) (1,060) - - (1,060)
Recognition of
share-based
payments - - - - 446 - 446 - - 446
Settlement of
share-based
payments 13 119 302 - (980) - (559) 740 - 194
----------------- ------- ---------- ------- -------- ------- ----------- -------- -------- ----------- --------
Balance at 29
January
2016 13,477 56,702 (208) (162) 7,546 (741) 63,137 51,163 5,116 132,893
Loss for the
period - - - - - - - (2,911) - (2,911)
Other
comprehensive
income/(expense)
for the period - - - - - 342 342 (5,278) - (4,936)
----------------- ------- ---------- ------- -------- ------- ----------- -------- -------- ----------- --------
Comprehensive
income/(expense)
for the period - - - - - 342 342 (8,189) - (7,847)
Dividends - - - - - - - (3,419) - (3,419)
Issue of share
capital 660 12,716 (20) - - - 12,696 - - 13,356
Acquisitions 105 272 - (1) - - 271 (1) (5,116) (4,741)
Recognition of
shared-base
contingent
consideration
deemed
as remuneration - - - - 2,903 - 2,903 - - 2,903
Transfer of
contingent
consideration
deemed
as remuneration - 97 - - (2,362) - (2,265) 2,396 - 131
Exchange
differences - - - - - 1,060 1,060 - - 1,060
Purchase of own
shares - - - - - - - 35 - 35
Recognition of
share-based
payments - - - - (682) - (682) - - (682)
Settlement of
share-based
payments 2 8 228 - (451) - (215) 128 - (85)
Deferred 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
Loss for the
period - - - - - - - (27,981) - (27,981)
Other
comprehensive
income for the
period - - - - - 813 813 6,015 - 6,828
----------------- ------- ---------- ------- -------- ------- ----------- -------- -------- ----------- --------
Comprehensive
income/(expense)
for the period - - - - - 813 813 (21,966) - (21,153)
Dividends - - - - - - - (7,777) - (7,777)
Recognition of
shared-base
contingent
consideration
deemed
as remuneration - - - - 2,828 - 2,828 - - 2,828
Transfer of
contingent
consideration
deemed
as remuneration - - - - (371) - (371) 393 - 22
Settlement of
share-based
payments 44 395 - - (123) - 272 124 - 440
Recognition of
share-based
payments - - - - (54) - (54) - - (54)
----------------- ------- ---------- ------- -------- ------- ----------- -------- -------- ----------- --------
Balance at 27
January
2017 14,288 70,190 - (163) 9,003 1,474 80,504 13,142 - 107,934
----------------- ------- ---------- ------- -------- ------- ----------- -------- -------- ----------- --------
^ Additional paid-in capital represents share premium, merger
reserve and capital redemption reserve.
Condensed Consolidated Balance Sheet
27 January 29 January 29 July
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
--------------------------------- ---- ---------- ---------- --------
Assets
Non-current assets
Property, plant and equipment 29,022 44,929 35,559
Investment property 6,203 - 6,203
Goodwill 115,332 156,191 135,633
Other intangible assets 48,618 42,956 53,234
Available for sale 3 3 3
Investment in joint venture 206 - 94
Deferred tax assets 232 139 232
Other non-current assets 14 750 374
--------------------------------- ---- ---------- ---------- --------
199,630 244,968 231,332
--------------------------------- ---- ---------- ---------- --------
Current assets
Inventories 6,467 7,097 7,482
Trade and other receivables 95,656 86,940 90,761
Income tax receivable - - 1,246
Asset held for sale - - 1,481
Cash and cash equivalents 18,486 14,005 11,835
--------------------------------- ---- ---------- ---------- --------
120,609 108,042 112,805
--------------------------------- ---- ---------- ---------- --------
Total assets 320,239 353,010 344,137
--------------------------------- ---- ---------- ---------- --------
Liabilities
Current liabilities
Trade and other payables 86,392 75,601 76,486
Derivative financial instruments 226 124 535
Income tax payable 2,047 932 -
Deferred consideration payable 2,367 9,607 1,772
Deferred income 6,801 6,666 6,206
Provisions 9 342 31
--------------------------------- ---- ---------- ---------- --------
97,842 93,272 85,030
--------------------------------- ---- ---------- ---------- --------
Non-current liabilities
Loans payable 88,906 96,149 92,595
Retirement benefits obligations 7 18,469 21,145 26,394
Deferred consideration payable - 3,384 -
Other non-current liabilities 790 790 814
Provisions 2,240 1,905 2,185
Deferred tax liabilities 4,058 3,472 3,491
--------------------------------- ---- ---------- ---------- --------
114,463 126,845 125,479
--------------------------------- ---- ---------- ---------- --------
Total liabilities 212,305 220,117 210,509
--------------------------------- ---- ---------- ---------- --------
Net assets 107,934 132,893 133,628
--------------------------------- ---- ---------- ---------- --------
Equity
Capital and reserves
Share capital 14,288 13,477 14,244
Other reserves 80,504 63,137 77,016
Retained earnings 13,142 51,163 42,368
--------------------------------- ---- ---------- ---------- --------
Attributable to shareholders
of the parent company 107,934 127,777 133,628
Non-controlling interests - 5,116 -
--------------------------------- ---- ---------- ---------- --------
Total equity 107,934 132,893 133,628
--------------------------------- ---- ---------- ---------- --------
These financial statements were approved by the Board of
Directors on 7 March 2017.
Condensed Consolidated Cash Flow Statement
26 weeks 26 weeks 52 weeks
to to to
27 January 29 January 29 July
2017 2016 2016
Note GBP'000 GBP'000 GBP'000
---------------------------------- ---- ----------- ----------- --------
Operating activities
Cash generated from operations 8 18,862 13,472 23,650
Interest paid (1,472) (1,313) (2,899)
Income taxes received/(paid) 1,500 (2,832) (6,286)
---------------------------------- ---- ----------- ----------- --------
Net cash generated from operating
activities 18,890 9,327 14,465
---------------------------------- ---- ----------- ----------- --------
Investing activities
Purchase of property, plant
and equipment (1,762) (4,698) (7,124)
Purchase of other intangibles (226) (194) (488)
Proceeds on disposal of property,
plant and equipment 1,947 2,965 3,315
Acquisition of subsidiaries,
net of cash acquired - (16,163) (20,937)
Deferred consideration paid
for acquisitions made in prior
periods (144) (1,105) (5,790)
---------------------------------- ---- ----------- ----------- --------
Net cash used in investing
activities (185) (19,195) (31,024)
---------------------------------- ---- ----------- ----------- --------
Financing activities
Proceeds on issue of shares 439 - 13,356
Purchase of treasury shares - (395) (395)
Dividends paid 4 (7,777) (7,515) (10,934)
(Decrease)/increase in bank
loans (5,000) 15,000 10,000
---------------------------------- ---- ----------- ----------- --------
Net cash (used in)/generated
from financing activities (12,338) 7,090 12,027
---------------------------------- ---- ----------- ----------- --------
Net increase/(decrease) in
cash and cash equivalents 6,367 (2,778) (4,532)
Cash and cash equivalents
at beginning of the period 11,835 16,392 16,392
Effect of foreign exchange
rate changes 284 391 (25)
---------------------------------- ---- ----------- ----------- --------
Cash and cash equivalents
at end of the period 8 18,486 14,005 11,835
---------------------------------- ---- ----------- ----------- --------
Notes to the Condensed Consolidated Financial Statements
1. Basis of preparation
The condensed financial statements have been prepared in
accordance with IAS 34 "Interim Financial Statements" and in
accordance with the Disclosure and Transparency Rules of the UK's
Financial Conduct Authority ("FCA").
The financial information contained in these half year financial
statements has been prepared in accordance with the accounting
policies set out in the Group's Annual Report and Accounts 2016,
prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards as
adopted by the European Union commission, and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The half year statements have not been audited or reviewed.
The financial information for the twenty six weeks ended 27
January 2017 and prior half and full year comparatives do not
comprise statutory accounts for the purpose of Section 435 of the
Companies Act 2006. The abridged information for the fifty two
weeks to 29 July 2016 has been extracted from the Group's Annual
Report and Accounts 2016 which have been filed with the Registrar
of Companies. The Auditor's report on the accounts of the Group for
that period was unqualified, did not draw attention to any matters
by way of emphasis and did not contain a statement under Sections
498(2) or (3) of the Companies Act 2006.
Going concern
The Directors, having made appropriate enquiries, consider that
adequate resources exist for the Group to continue in operational
existence for the foreseeable future and that, therefore, it is
appropriate to adopt the going concern basis in preparing the
combined financial information for the twenty six weeks ended 27
January 2017.
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
Digital, Data and Insight businesses. The Marketing Activation
segment comprises of the Group's Exhibitions and Events,
Point-of-Sale, Print Management and Field Marketing businesses. The
Books segment comprises Clays.
Corporate costs are allocated to revenue generating segments as
this presentation better reflects their profitability.
Business segments
26 weeks to 27 January
2017
------------------------------- -------------------------------------------
Strategic Marketing
Marketing Activation Books Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ----------- -------- --------
Revenue
External sales 74,748 78,218 42,161 195,127
Group sales 1,822 5,763 58 7,643
Eliminations (793) (6,038) (812) (7,643)
------------------------------- ---------- ----------- -------- --------
Total revenue 75,777 77,943 41,407 195,127
------------------------------- ---------- ----------- -------- --------
Result
Operating profit before
Adjusting Items 6,174 1,894 3,208 11,276
Adjusting Items (8,717) (23,726) (3,881) (36,324)
------------------------------- ---------- ----------- -------- --------
Statutory loss from operations (2,543) (21,832) (673) (25,048)
------------------------------- ---------- ----------- --------
Net pension finance charge (323)
Other finance costs (1,472)
------------------------------- ---------- ----------- -------- --------
Statutory loss before tax (26,843)
Income tax charge (1,139)
------------------------------- ---------- ----------- -------- --------
Statutory net loss for
the period (27,982)
------------------------------- ---------- ----------- -------- --------
26 weeks to 29 January
2016 (restated)
--------------------------- -------------------------------------------
Strategic Marketing
Marketing Activation Books Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- ----------- -------- --------
Revenue
External sales 66,429 83,057 36,220 185,706
Group sales 3,587 4,501 6 8,094
Eliminations (657) (7,331) (106) (8,094)
--------------------------- ---------- ----------- -------- --------
Total revenue 69,359 80,227 36,120 185,706
--------------------------- ---------- ----------- -------- --------
Result
Operating profit before
Adjusting Items 9,684 3,971 3,766 17,421
Adjusting Items (13,059) (5,145) (257) (18,461)
--------------------------- ---------- ----------- -------- --------
Statutory (loss)/profit
from operations (3,375) (1,174) 3,509 (1,040)
--------------------------- ---------- ----------- --------
Net pension finance charge (494)
Other finance costs (1,313)
--------------------------- ---------- ----------- -------- --------
Statutory loss before tax (2,847)
Income tax charge (2,347)
--------------------------- ---------- ----------- -------- --------
Statutory net loss for the
period (5,194)
--------------------------- ---------- ----------- -------- --------
52 weeks to 29 July 2016
(restated)
--------------------------- -------------------------------------------
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
Eliminations (1,577) (15,298) (540) (17,415)
--------------------------- ---------- ----------- -------- --------
Total revenue 144,155 154,807 68,584 367,546
--------------------------- ---------- ----------- -------- --------
Result
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)
--------------------------- ---------- ----------- --------
Net 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)
--------------------------- ---------- ----------- -------- --------
Geographical segments
The Strategic Marketing, Marketing Activation and Books business
segments operate primarily in the UK, deriving more than 18% of
their revenue and results from operations and customers located in
the UK.
3. Adjusting Items
Adjusting Items disclosed on the face of the Condensed
Consolidated Income statement are as follows:
26 weeks 26 weeks 52 weeks
to to to
27 January 29 January 29 July
2017 2016 2016
Expense/(income) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- ------- ------- ------- ------- -------
Restructuring items
Redundancies and other
charges 359 817 1,612
Costs associated with
empty properties 19 771 976
Impairment of tangible
assets 5,800 - -
------------------------------- ------- ------- ------- ------- ------- -------
6,178 1,588 2,588
St Ives defined benefits
pension scheme costs
Administrative costs 435 325 582
Curtailment credit - (198) (198)
Other 409 130 327
------------------------------- ------- ------- ------- ------- ------- -------
844 257 711
Costs relating to acquisitions
made in current and prior
periods
Amortisation of acquired
intangibles 5,047 4,079 9,237
Impairment of goodwill
and acquired intangible
assets 21,130 2,520 12,712
Costs associated with
the acquisition and setup
of subsidiaries - 172 785
Contingent consideration
required to be treated
as remuneration 3,616 5,237 8,220
(Decrease)/increase in
deferred consideration (34) 2,939 (781)
------------------------------- ------- ------- ------- ------- ------- -------
29,759 14,947 30,173
Adjusting Items in expenses 36,781 16,792 33,472
(Profit)/loss on disposal
of property, plant and
equipment (457) 1,669 1,651
------------------------------- ------- ------- ------- ------- ------- -------
Adjusting Items before
interest and tax 36,324 18,461 35,123
Net pension finance charge
in respect of defined
benefits pension scheme 323 494 972
------------------------------- ------- ------- ------- ------- ------- -------
Adjusting Items before
tax 36,647 18,955 36,095
Income tax credit (893) (1,036) (3,931)
------------------------------- ------- ------- ------- ------- ------- -------
Adjusted results 35,754 17,919 32,164
------------------------------- ------- ------- ------- ------- ------- -------
Redundancy and restructuring costs of GBP167,000 and costs
relating to Burnley of GBP19,000 were recorded within the Marketing
Activation segment. Redundancy costs of GBP153,000 were recorded in
the Strategic Marketing segment. Restructuring costs of GBP39,000
were recorded in the Books segment.
As a result of the non-renewal of the HarperCollins contract,
the Group recorded an impairment charge of GBP3,000,000 relating to
tangible assets in the Books segment.
A non-cash impairment charge of GBP23,930,000 was recorded in
respect of SP Group's goodwill and tangible assets. This is
primarily as a result of the dependency on the grocery retail
sector and declining margins.
The gain on disposal of property, plant and equipment of
GBP457,000 relates to the sale of the Group's property at Burnley.
This item was recorded in the Marketing Activation segment.
4. Dividends
26 weeks 26 weeks 52 weeks
to to to
27 January 29 January 29 July
per 2017 2016 2016
share GBP'000 GBP'000 GBP'000
----------------------------- ------ ----------- ----------- --------
Final dividend paid for the
52 weeks ended 31 July 2015 5.55p - 7,515 7,515
Interim dividend paid for
the 26 weeks ended
29 January 2016 2.35p - - 3,419
Final dividend paid for the
52 weeks ended 29 July 2016 5.45p 7,777 - -
----------------------------- ------ ----------- ----------- --------
Dividends paid during the
period 7,777 7,515 10,934
----------------------------- ------ ----------- ----------- --------
Declared interim dividend
for the 26 weeks ended
27 January 2017 (2016 -
2.35p per share) 0.65p 928 - -
----------------------------- ------ ----------- ----------- --------
5. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following:
Number of shares
26 weeks 26 weeks 52 weeks
to 27 to 29 to 29
January January July
2017 2016 2016
'000 '000 '000
-------------------------------------- -------- -------- --------
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 142,541 131,225 136,633
Effect of dilutive potential ordinary
shares:
Share options: 96 2,456 930
-------------------------------------- -------- -------- --------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 142,637 133,681 137,563
-------------------------------------- -------- -------- --------
Basic and diluted earnings per share
26 weeks 26 weeks 52 weeks
to to to
27 January 29 January 29 July
2017 2016 2016
------------------------- ------------------ ------------------ ------------------
Earnings Earnings Earnings
per per per
Earnings share Earnings share Earnings share
GBP'000 pence GBP'000 pence GBP'000 pence
------------------------- -------- -------- -------- -------- -------- --------
Earnings/(loss) and
basic earnings/(loss)
per share
Adjusted earnings
and adjusted basic
earnings per share 7,773 5.45 12,725 9.70 24,059 17.61
Adjusting Items (35,754) (25.08) (17,919) (13.66) (32,164) (23.54)
------------------------- -------- -------- -------- -------- -------- --------
Loss and basic loss
per share (27,981) (19.63) (5,194) (3.96) (8,105) (5.93)
------------------------- -------- -------- -------- -------- -------- --------
Earnings/(loss) and
diluted earnings/(loss)
per share
Adjusted earnings
and Adjusted diluted
earnings per share 7,773 5.45 12,725 9.52 24,059 17.49
Adjusting Items (35,754) (25.07) (17,919) (13.40) (32,164) (23.38)
------------------------- -------- -------- -------- -------- -------- --------
Loss on earnings and
diluted loss per share (27,981) (19.62) (5,194) (3.88) (8,105) (5.89)
------------------------- -------- -------- -------- -------- -------- --------
Adjusted earnings is calculated by adding back Adjusting Items,
as adjusted for tax, to the profit/(loss) for the period.
6. Restatement
Previously the Group reported the employee costs of the Insight
businesses, part of Strategic Marketing segment, under
administrative expenses. The Group's accounting policy is to
include these types of costs within cost of sales and accordingly
the half and full year comparatives have been re-stated to ensure
consistency.
The impact of the prior period adjustments on the previously
reported Consolidated Income Statement are summarised as
follows:
52 weeks to 29 26 weeks to 29
July 2016 January 2016
------------------------ ------------------------------------ -----------------------------------
Before Before
Adjustments Adjustments Restated Adjustments Adjustments Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- ----------- -------- ------------ ----------- --------
Adjusted Results:
Cost of sales 249,730 12,738 262,468 125,688 6,180 131,868
Administrative expenses 59,570 (12,738) 46,832 29,634 (6,180) 23,454
------------------------ ------------- ----------- -------- ------------ ----------- --------
Statutory Results:
Cost of sales 249,730 12,738 262,468 125,793 6,180 131,973
Administrative expenses 93,042 (12,738) 80,304 46,235 (6,180) 40,055
------------------------ ------------- ----------- -------- ------------ ----------- --------
There is no impact on Consolidated Comprehensive Income,
Consolidated Statement of Changes in Equity, Consolidated Balance
Sheet and Consolidated Cashflow for either the half or full year
comparatives.
7. Retirement benefits
The net obligation in respect of St Ives plc Retirement Benefits
Pension Scheme of GBP18,469,000 at 27 January 2017 has decreased
compared to GBP26,394,000 as at 29 July 2016. The decrease is
primarily due to strong investment performance of the plan
assets.
8. Notes to the condensed consolidated cash flow statement
Reconciliation of cash generated from operations
26 weeks 26 weeks 52 weeks
to to to
27 January 29 January 29 July
2017 2016 2016
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- ----------- --------
Loss from continuing operations (25,048) (1,040) (1,843)
Adjustments for:
Depreciation of property, plant
and equipment 3,630 3,608 7,201
Share of (profit)/losses from
joint venture (122) 104 122
Impairment losses 26,930 2,520 12,712
Amortisation of intangible assets 5,389 4,558 10,016
(Profit)/loss on disposal of property,
plant and equipment (450) 1,669 1,484
Share-based payment (credit)/charge (54) 445 (238)
Settlement of share-based payment - 195 108
Increase in fair value of derivatives - - (175)
Decrease in retirement benefit
obligations (1,145) (1,373) (2,278)
Remeasurement of deferred consideration (34) 2,939 (781)
Increase in contingent consideration
required to be treated as remuneration 3,616 5,237 8,220
Increase in provisions 33 86 55
Operating cash inflows before
movements in working capital 12,745 18,948 34,603
---------------------------------------- ----------- ----------- --------
Decrease/(increase) in inventories 239 (506) (880)
Increase in receivables (4,086) (7,245) (9,572)
Increase in payables 9,394 3,763 3,985
Increase/(decrease) in deferred
income 570 (432) (906)
Payment of deemed remuneration - (1,056) (3,580)
---------------------------------------- ----------- ----------- --------
Cash generated from operations 18,862 13,472 23,650
---------------------------------------- ----------- ----------- --------
Analysis of net debt
30 July Cash Exchange 27 January
2016 flow differences 2017
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- ------------ ----------
Cash and cash equivalents 11,835 6,364 287 18,486
Bank loans (92,595) 5,000 (1,311) (88,906)
Net debt (80,760) 11,364 (1,024) (70,420)
-------------------------- -------- -------- ------------ ----------
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less. The effective interest rates on cash and cash
equivalents are based on current market rates.
9. Post-balance sheet events
The Group has classified the investment properties at Roche and
Peterborough as assets held for sale in the second half of the
year.
10. Risks and uncertainties
The Group's principal risks and key mitigating activities in
place to address them, as at 29 July 2016, are set out in pages 21
to 23 of the Group's Annual Report and Accounts 2016, a copy of
which is available on the Group's website: www.st-ives.co.uk.
The principal risks have been considered by the Board and
changes to the risk ratings have been made, since the period ended
29 July 2016, for the following risks.
(i) Legacy Businesses
This risk covers issues arising within the legacy businesses,
Marketing Activation and Books which may distract or inhibit the
Board's focus on its strategic objective and in the short term,
impact the growth within the Strategic Marketing segment if the
Board has to address issues that emerge in these segments.
The inherent risk rating associated with legacy businesses has
been increased from medium to high, following a further decline in
Marketing Activation and the loss of the HarperCollins contract in
Books. A consultation has commenced with employees to reduce
employee numbers within both Books and Marketing Activation in
response to the reduction in revenues. In addition, the Board is
considering its strategic options in respect of these businesses.
Given the continued uncertainty around these businesses the
residual risk rating remains high.
(ii) Clients
The Group has a variety of key clients in each of its three
business segments. Long-term relationships have been fostered with
many of these clients over a number of years however competitive
pressure may result in the loss of a key client.
Whilst the financial impact of these key contracts has not
increased, the likelihood has risen since the appetite for clients
to carry out tenders has become more apparent (particularly in the
Marketing Activation and Books segments), therefore the inherent
risk rating associated with this risk has been increased to high.
The mitigating activities include encouraging collaborative
behaviour across the Group's businesses and creating a commitment
to cross-selling that will distinguish the Group's marketing
offering from its competitors'; achieving or exceeding service
level agreements with clients; broadening the Group's capabilities,
providing marketing solutions in support of our clients' marketing
strategies; avoiding over reliance on any single client;
implementing bespoke propositions for securing the renewal of key
client contracts, providing Group support where appropriate and
conducting client satisfaction surveys. Notwithstanding these
mitigating activities, the residual risk rating has increased from
low to medium.
(iii) Financing
The Group's ability to trade may be compromised by lack of cash
funds. The ability to finance working capital and carry out
operations is fundamental to the Group. In order to monitor this,
the Group conducts 'going concern' reviews twice yearly,
longer-term viability assessments on a yearly basis and continually
monitors the Group's performance against its banking covenants. The
Group also undertakes monthly reviews of working capital, cash
forecasts and headroom on banking covenants and periodically
reviews its financial KPIs with its bankers. This inherent risk is
consistent with prior years and continues to be high.
During the period the GBP125 million revolving credit facility
was reduced to GBP95 million supplemented by a term loan of GBP30
million and the maximum leverage covenant condition (net debt to
Adjusted EBITDA) was increased for the remaining duration of the
facility (which expires on 23 March 2019). However, as a result of
the challenging trading environment, particularly in the Marketing
Activation and Books segments (as detailed in the announcements on
19 January and 8 February 2017), the residual risk rating has
increased to medium from low.
11. Related parties
The nature of related party transactions of the Group has not
changed from those described in the Group's consolidated financial
statements for the fifty two weeks ended 29 July 2016.
12. Responsibility statement
We confirm that, to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS34 "Interim Financial Reporting";
-- the half year management report includes a fair review of the
information required by DTR4.2.7R (indication of important events
during the first six months of the year and descriptions of
principal risks and uncertainties for the remaining six months of
the year); and
-- the half year management report includes a fair review of the
information required by DTR4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Matt Armitage
Chief Executive
7 March 2017
The foregoing contains forward looking statements made by the
Directors in good faith based on information available to them up
to 7 March 2017. Such statements need to be read with caution due
to inherent uncertainties, including economic and business risk
factors underlying such statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UGUAUWUPMPUQ
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