Share Name Share Symbol Market Type Share ISIN Share Description
ST Ives LSE:SIV London Ordinary Share GB0007689002 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.375p +0.53% 70.50p 69.50p 70.25p 70.50p 69.50p 69.50p 1,070,371 16:35:27
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Media 367.5 -5.7 -5.9 - 100.64

St. Ives PLC Final Results

06/10/2015 7:00am

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St. Ives PLC

06 October 2015

6 October 2015

ST IVES plc

Full Year Results for the 52 weeks ended 31 July 2015

St Ives plc, the international marketing services group, announces preliminary results for the 52 weeks ended 31 July 2015.

Financial Highlights

 
                                                       52 weeks 
                                                             to 
                                        52 weeks 
                                              to       1 August 
                                         31 July           2014        %age 
                                            2015   (restated**)      change 
=====================================  =========  =============  ========== 
Underlying* revenue                    GBP344.6m      GBP327.6m         +5% 
Underlying* profit before tax           GBP33.0m       GBP29.9m        +10% 
Underlying* basic earnings per share      20.32p         18.70p         +9% 
 
Reported profit before tax               GBP8.7m       GBP11.9m    *    27% 
 
Basic earnings per share                   4.35p          8.60p    *    49% 
Full year dividend                         7.80p          7.15p         +9% 
Net debt                                GBP62.8m       GBP42.7m 
=====================================  =========  =============  ========== 
 

* Non-underlying items comprise acquisition costs; restructuring costs; provision releases; operating results of non-continuing sites; net profit on disposal of property, plant and equipment; profit on disposal of subsidiary; consideration required to be treated as remuneration; amortisation or impairment of acquired intangibles; remeasurement of deferred consideration; costs related to the St Ives defined benefits pension scheme and other one-off items.

** Figures are restated for the 52 Weeks to 1 August 2014 to reclassify the costs related to the St Ives defined benefits pension scheme as non-underlying items.

Business Highlights

-- Strong financial performance for the year, reflecting further growth in Strategic Marketing which contributed 46% (2014 - 37%) of underlying operating profit

   --   Important strategic progress across all three drivers of growth: 

- Further increase in collaboration, with over 100 clients using services of more than one Group business (2014: 82), including Johnson & Johnson, Carlsberg, Royal Mail and Pizza Express

- Continued international growth, with Incite opening an office in Shanghai and Amaze winning its first major e-commerce project from its new Chicago office; over 30% of Strategic Marketing revenue is now generated from clients based outside UK

- Further carefully screened acquisitions: Chicago-based Solstice Mobile ("Solstice"), a mobile-first marketing & technology business, acquired in March 2015 and integrating well; and Fripp, Sandeman and Partners ("FSP"), a specialist retail property consultancy, acquired since year-end

Matt Armitage, Chief Executive, said:

"This has been a very good year for St Ives, with a strong financial performance driven by further growth from our Strategic Marketing businesses.

"The extent of the growth in collaboration between our businesses, and the increase in international activity for our clients is clear evidence that our strategy is working. At the same time, we have made two further acquisitions with both Solstice and, more recently, FSP adding important new strategic capabilities to our offering.

"The new financial year has started in line with our expectations, and we continue to invest in our higher margin Strategic Marketing activities. Assuming current market conditions continue, we are confident that we will make further strategic and financial progress during the year ahead."

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 and Singapore.

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 consulting.

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 long standing Books business, which is the UK market leader, represents another valuable 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 cGBP240m.

Chief Executive's Review

Performance Highlights

The Group has again delivered a strong financial performance for the year.

Underlying Group revenue of GBP344.6 million was 5% higher than the previous year. The growth was driven by our Strategic Marketing segment, which delivered growth of 4% on an organic basis along with acquisitive growth of 24%. This was partially offset by a 4% decline in our Marketing Activation segment, due to pressure within the grocery retail sector. Revenue within our Books segment was broadly in line with the prior year.

Group underlying profit before tax grew to GBP33.0 million (2014 - GBP29.9 million) and underlying basic earnings per share increasing by 9% to 20.32 pence (2014 - 18.70 pence).

These improvements reflect further growth in our Strategic Marketing segment, which contributed 46% (2014 - 37%) of the Group's underlying operating profit during the financial year.

The Board is recommending a final dividend of 5.55 pence, making a full year dividend of 7.80 pence (2014 - 7.15 pence), an increase of 9%, reflecting the Board's confidence in the Group's ability to make further strategic and financial progress during the year ahead.

Once again there was clear evidence of our ability to collaborate across our individual businesses to the benefit of our clients, with the level and quality of internal referrals increasing further during the year. In 2015 more than 100 (2014 - 82) of our clients used the services of more than one business within the Group.

In line with our strategy, during the year we acquired Chicago based Solstice Consulting LLC ("Solstice "), a leading mobile-first marketing and technology business which is integrating well into the Group. Following the year-end we also acquired Fripp, Sandeman and Partners ("FSP"), a specialist retail property consultancy, which will work closely with our Pragma Consulting business, particularly in the airport, travel and commercial space sectors.

The past year also saw continued growth from our international operations. Our market research consultancy, Incite, opened an office in Shanghai, to complement the offices we have opened in New York and Singapore, with the business winning its first new client mandates in the region at the end of the financial year. In addition, Amaze, one of our digital businesses, won its first major e-commerce systems integration project from our newly opened Chicago office.

Our strategy for further growth is 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.

We have continued to make progress across all three strategic objectives in the year:

Collaboration

Our approach is based on cross-thinking as opposed to cross-selling, where collaboration is facilitated and supported rather than forced. Over 100 of our clients currently work with more than one business across the Group, compared to just over 80 in the previous financial year, collaborating on projects for clients including Johnson & Johnson, Carlsberg, Royal Mail and Pizza Express. In the year, we also extended our remit with HSBC, which now engages with six businesses across the Group. In addition, investments have been made in our Occam and Amaze businesses, which culminated with the launch of our digitally-led Customer Relationship Management ("CRM") offering 'Amaze One'.

Internationalisation

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Many of our businesses deliver international solutions for clients and we plan to open additional overseas offices where we can identify client-led opportunities. These opportunities must be in large markets or in markets with the potential for significant and sustainable growth. During the year we continued to expand our headcount in both the US and Asia to meet client demand. We also opened an office in Shanghai for Incite, our consumer and market research consultancy. Over 30% of our Strategic Marketing revenue now comes from clients based outside of the UK, compared with 27% in 2014 and 15% in 2013. Seven of our Group businesses, Incite, Pragma, Hive, Amaze, Realise, Branded3 and Solstice, now service clients on an international basis.

Acquisitions

An important element of our growth strategy going forward is our continued ability to acquire further complementary marketing services businesses which add value to our existing portfolio and operate in the growth areas we have identified of data, digital and consultancy services. Our acquisition strategy adopts very stringent quantitative, qualitative and financial criteria. We aim to acquire non-competing businesses that support our business model. In addition, any companies we acquire must already enjoy reasonable scale and have management teams looking to execute the next phase of growth, as well as encouraging an entrepreneurial and collaborative culture that fits well with our own. Once acquired, we transition each business into the Group using our well-established and successful integration process. We then work with the management teams to identify and implement the most appropriate initiatives for driving organic growth within the business. This model makes it imperative that there is a clear sharing of values between the Group and any acquired company.

In 2015 we acquired mobile-first marketing & technology business Solstice, which has integrated successfully into St Ives and is performing well, benefitting from and contributing to collaboration opportunities within the Group. Following the year-end, we also acquired FSP, a specialist retail property consultancy, which will work closely with our Pragma Consulting business.

While the Group's strategic focus is on expanding our Strategic Marketing offering, management also recognises the importance of continued investment and innovation in our complementary Marketing Activation segment and separate, long-standing and market leading Books business. These separate divisions not only support growth for the Group as a whole through collaboration, but also represent an additional source of profit and cash generation as we pursue our growth strategy.

Segment Overview

Strategic Marketing

Our Strategic Marketing operations, which represent 32% of Group underlying revenue (2014 - 26%), are organised around three high-growth sectors: Data, Digital and Consulting. .

 
                                             2015    2014 
                                            GBP'm   GBP'm 
=========================================  ======  ====== 
Data                                         33.2    35.5 
Digital                                      45.5    27.8 
Consulting                                   32.0    22.9 
=========================================  ======  ====== 
Underlying Strategic Marketing revenue      110.7    86.2 
Underlying Strategic Marketing operating 
 profit                                      16.3    11.8 
=========================================  ======  ====== 
 

Data

Our Data businesses - Occam and Response One - represented 30% of Strategic Marketing revenue at GBP33.2 million (2014 - GBP35.5 million).

As reported at the half year, revenue within our Data division reduced compared with the previous year due to two factors: a significant one-off software sale within Occam in the previous year and a change in work mix in Response One. While these factors have led to a decrease in revenue in this financial year, they have also led to an increase in margin during the period.

Over the course of the year, Response One has introduced a new analytics proposition and improved its digital capabilities.

In addition, Occam has significantly expanded its remit within Jaguar Land Rover and we are now delivering services into them through both Occam and Amaze One. Occam has also secured a number of new wins, including Car Giant, Healthspan, Sainsbury's Retail Technology Services and the RAC.

Digital

This division, which comprises Amaze, Branded3, Realise and Solstice had a good year and contributed GBP45.5 million (2014 - GBP27.8 million); 41% of Strategic Marketing revenue.

Amaze has continued to extend its commerce capabilities with a number of significant new client wins throughout the year. It has established a core strength in advising manufacturers who are transacting directly with their consumers for the first time and in the delivery of B2B commerce solutions. Both areas are currently experiencing significant market growth.

Following the launch of Amaze One, the CRM collaboration between Amaze and Occam, highlighted above, the business has progressed well, winning projects for the Arcadia Group and Royal Mail while also extending its CRM remit with Northern Rail.

Branded3 has achieved a number of new business wins throughout the year, securing the search engine optimisation account for First Direct, which further extends our remit within HSBC, as well as winning contracts for Halfords, Chelsea FC and Durham University.

Realise has continued to build its business both within the UK and internationally. Highlights included a digital transformation project for Greyhound in the US and international digital marketing campaigns for Disneyland Parks and Expedia. In addition, Realise has had a number of significant new business wins including Nikon in Europe and Hewlett Packard & Sutter Health in the US.

Our acquisition of Solstice in March 2015 broadened the Group's digital capabilities and enhanced our international credentials. Solstice's offering of mobile product design and engineering services complements St Ives' existing digital businesses and creates significant opportunities for increased collaboration at an international level.

Moving forward, it is our intention to bring our digital businesses closer together in order to collaborate on large scale multi-discipline, multi-territory digital client mandates.

Consulting

Our Consulting businesses - Incite, Pragma and Hive - represented 29% of Strategic Marketing revenue at GBP32.0 million (2014 - GBP22.9 million).

Incite continues to grow internationally, in response to client demand. It has seen strong growth in New York and Singapore having opened offices in both markets during 2013, and has secured a number of significant new business wins. Following this successful expansion, the business opened an operation in Shanghai this year, winning its first new client mandates in the region at the end of the financial year.

Pragma has also seen an increase in demand for overseas projects. Airports and commercial spaces in particular are high-growth areas, with the business advising on the commercial strategy of New Mexico City International Airport, one of this year's most high profile projects.

Hive, the healthcare communications consultancy we acquired in May 2014, has integrated well into the Group and continues to add new clients to its roster, with substantial wins from three top 20 pharmaceutical companies. Its patient journey mapping proposition is a strong growth driver for the business, with recent new projects wins from Bayer, Novartis and AbbVie. This area is expected to see continued momentum into 2016.

Marketing Activation

Our Marketing Activation segment represented 48% (2014 - 53%) of Group underlying revenue for the year.

 
                                              2015    2014 
                                             GBP'm   GBP'm 
==========================================  ======  ====== 
Exhibitions and Events                        37.6    36.7 
Point-of-Sale                                 73.5    82.4 
Print Management                              46.3    43.1 
Field Marketing                                9.6    11.8 
==========================================  ======  ====== 
Underlying Marketing Activation revenue      167.0   174.0 
Underlying Marketing Activation operating 
 profit                                       10.9    11.4 
==========================================  ======  ====== 
 

Our Marketing Activation segment comprises our Exhibitions and Events business, Service Graphics; our Point-of-Sale (POS) specialist, SP Group; our Print Management business, St Ives Management Services (SIMS); and our Field Marketing business, Tactical Solutions.

Trading conditions within Marketing Activation were mixed, with growth in Service Graphics and SIMS offset by a reduction in POS revenue caused by ongoing pressures within the UK grocery retail sector. Despite the overall reduction in revenue we have maintained margins through improved efficiencies and cost reductions.

Within Service Graphics we won new clients during the year such as the Ministry of Defence, Moorfields Eye Hospital and Rolls Royce. Within SIMS we delivered significant growth due to new client wins, including Adidas and Pernod Ricard, as well as securing organic growth from our existing client base.

Despite a difficult year, due to increased competitive pressures within the grocery retail market, Tactical Solutions has also had a number of new business wins over the year, including Revlon and Quorn. We continue to invest in new data and technology capabilities and have recently launched a bespoke data tool, TSeye, to continue to differentiate the business in a crowded market place.

We have also significantly developed our creative marketing and design offering, The Shop, which sits within our SP operation and which has extended our European remit with international client engagements such as Adidas.

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In addition, since the end of last year we have re-signed and extended contracts with many of our leading clients. These contract extensions provide an increased level of visibility and a stable foundation for market share growth over the next two to three years.

Books

Our market-leading Books business, Clays, represented 20% (2014: 21%) of Group underlying revenue for the year.

 
                                      2015    2014 
                                     GBP'm   GBP'm 
==================================  ======  ====== 
Underlying Books revenue              66.9    67.4 
Underlying Books operating profit      8.1     8.4 
==================================  ======  ====== 
 

Revenue in Clays was broadly in line with the prior year at GBP66.9 million (2014 - GBP67.4 million), with a slight decrease in margins.

Clays is the market leader in UK trade monochrome book production services and continues to extend its range of value-added services to the publishing market through digital and supply chain-related investment. This has included the introduction of a new self-publishing service that is seeing rapid volume growth.

As reported at the half year, sentiment within the physical book market has improved, with eReader penetration appearing to have levelled off within the UK and the US and with physical book volumes stable for the first time in a number of years.

During the year we reached agreement with Penguin Random House, the UK's largest trade publisher, to provide 100% of their UK monochrome book production under a new multi-year contract. This represents a significant market share gain for the business and, along with a number of other recent contract wins and extensions, secures approximately 80% of Clays' workload for the next three to six years.

Outlook

The new financial year has started in line with our expectations. We continue to encourage and facilitate significant opportunities for collaboration across our individual businesses and there is further scope to expand our higher margin Strategic Marketing activities both organically and through acquisition over the coming year. We will continue to invest in our growing operations and client offering in the US and Asia, as well as in our recent acquisitions, Solstice and FSP.

The outlook for our Marketing Activation businesses remains challenging, impacted by the competitive trading conditions in the UK grocery retail sector, which are expected to continue this year. However, this business segment remains profitable and cash generative for the Group, as does our market-leading Books business. Both segments have recently benefitted from a number of contract wins or extensions which help to provide an enhanced level of stability. This, together with our strong balance sheet, leaves St Ives well positioned to pursue further acquisitions of complementary, ambitious and growing Strategic Marketing businesses which share our common attributes and ethos.

As a Group, we are clear on our growth priorities and are confident that, assuming current market conditions continue, St Ives will make further strategic and financial progress during the year ahead.

Matt Armitage

Chief Executive

6 October 2015

Financial Overview

Overview

The Group has delivered a strong financial performance for the full year, with growth in both underlying revenue and underlying profit, and with recent acquisitions making a significant contribution to the Group's results.

The Group's total revenue for the period increased by 4% from GBP330.7 million to GBP344.6 million. Reported profit before tax decreased from GBP11.9 million to GBP8.7 million with reported basic earnings per share decreasing from 8.60 pence to 4.35 pence. This decrease in reported results is the result of an increase in non-underlying items, largely driven by the acquisitions made during the year.

The following Financial Review focuses on the underlying results of the Group which, in management's view, best reflect how the business is managed and show the performance in a consistent manner. The underlying results remove the impact of non-underlying items which include acquisition costs, restructuring costs, provision releases, operating results of non-continuing sites, net profit on disposal of property, plant and equipment, profit on disposal of subsidiary, consideration required to be treated as remuneration, amortisation or impairment of acquired intangibles, remeasurement of deferred consideration, costs related to St Ives defined benefits pension scheme and other one-off items.

As a result of the reallocation of resources and a change in the Group's internal reporting, we have redefined our segments as Strategic Marketing, Marketing Activation and Books. Comparatives have been restated to reflect the reclassification of reporting segments for the 52 weeks to 1 August 2014. A full explanation of our segmental reporting disclosures can be found in note 2

Prior year figures have been restated to classify the costs related to St Ives defined benefits pension scheme as non-underlying items (note 5).

Revenue

Underlying revenue increased by GBP17.0 million (5%) to GBP344.6 million. After equalising the effect of acquisitions made, during the current and prior year, growth from acquisitions was 6% offset by a 1% organic decline. The organic growth within our Strategic Marketing segment has been offset by a decline in the Marketing Activation segment and, to a lesser extent, the Books segment.

Underlying revenue from our Strategic Marketing segment increased from GBP86.2 million to GBP110.7 million, an increase of 28%, as a result of recent acquisitions and organic growth. The growth was split between organic growth of 4% and acquisition growth of 24%. Organic growth in the current year was adversely impacted by a one-off software licence sale recorded within our Data division in the prior year of GBP2.4 million.

Underlying revenue from our Marketing Activation segment decreased by 4% from GBP174.0 million to GBP167.0 million primarily, due to the structural changes and pressures in the retail grocery market. This has impacted our POS business, SP Group and our Field Marketing business, Tactical Solutions.

Revenue from our Books segment was broadly in line with the prior year at GBP66.9 million (2014 - GBP67.4 million).

Gross profit margin and underlying profitability

The Group's underlying gross profit margin improved from 31% to 33% primarily as a result of the increased mix from our Strategic Marketing segment, which carries a higher gross profit margin.

Underlying profit from operations increased by 12% from GBP31.5 million to GBP35.4 million with the operating margin remaining at 10% of revenue.

Underlying profit from operations in our Strategic Marketing segment increased by 38% from GBP11.8 million to GBP16.3 million with an operating margin of 15% (2014 - 14%). This includes full year contributions from Realise Limited and The Health Hive Group Limited, which were acquired in the prior year and a contribution from Solstice which was acquired in March 2015. The improvement in operating margin has been as a result of the acquisition of higher margin businesses and the change of mix within our Data businesses where, although the revenue has decreased, underlying operating profit has been maintained.

Underlying profit from operations in our Marketing Activation segment has decreased by 4% from GBP11.4 million to GBP10.9 million with an operating margin of 7% (2014 - 7%). Despite the fall in revenue, the Group was able to maintain its operating margin through a combination of further rationalisation and improved efficiency. During the period the Group closed its print operation at its Burnley site and to improve efficiency transferred some operations and equipment to other Group sites. The cost of GBP1,297,000 is recorded as a non-underlying item (note 3).

Underlying profit from operations in our Books segment decreased by 4% from GBP8.4 million to GBP8.1 million, with an operating margin of 12% (2014 - 13%). In March 2015 the Book business entered into a multi-year contract with Penguin Random House to produce all of its UK monochrome books. The transfer of production from the previous supplier is split into two tranches; the first took place in January 2015; and the final tranche will be transferred in January 2016. As a result of this increased business, we have invested in additional equipment and people to fulfil the contract.

Acquisitions

In March 2015 the Group acquired Solstice, a Chicago-based digital business specialising in mobile-first digital product design and engineering services. The initial consideration of GBP24.7 million was payable in the form of cash and St Ives plc shares.

In August 2015 the Group acquired FSP, a specialist retail property consultancy. The consideration was payable in the form of cash and St Ives plc shares.

The deferred consideration paid in the year for acquisitions made in prior years totalled GBP15.6 million (2014 - GBP4.8 million).

The Group, where possible, has issued shares from Treasury to satisfy the share element of initial and deferred consideration.

Tax

The Group's tax rate on the underlying profit before tax was 21.3% (2014 - 23.4%). A significant proportion of the Group's profit is generated and taxed in the UK and the UK Corporation tax rate fell from 21% to 20% this year. The total underlying tax charge is GBP7.0 million (2014 - GBP7.1 million).

Corporation tax of GBP6.3 million (2014 - GBP3.7 million) was paid in the UK.

Dividend

The Board is recommending a final dividend of 5.55p per ordinary share (2014 - 5.00p), giving a full year dividend of 7.80p (2014 - 7.15p), an increase of 9% on 2014. The dividend is covered 2.6 times by underlying earnings and will be paid on 22 December 2015 to shareholders on the register at 27 November 2015, with an ex-dividend date of 26 November 2015.

Pensions

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The Trustees of the Group's defined benefits pension scheme completed an actuarial valuation of the Scheme as at 30 April 2013 that was updated to 31 July 2015. The Group will continue to make deficit funding contributions of GBP2.0 million per annum and a contribution of GBP0.4 million per annum (2014 - GBP0.4 million) towards the costs of administration.

The IAS 19 (Employee Benefits) accounting deficit of the Scheme at 31 July 2015 was GBP27.6 million (2014 - GBP9.8 million). The deficit has increased as a result of an increase in the liabilities of the scheme, caused by a decrease in the discount rate used to value the liabilities and an increase in the inflation rate.

In line with legislation that came into effect on 1 October 2012, 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 GBP3.8 million (2014 - GBP2.8 million).

Cashflow

Cash generated from operations was GBP35.5 million (2014 - GBP31.2 million). Total capital expenditure was GBP6.1 million (2014 - GBP11.7 million) and included new capital of GBP3.5 million in the Books segment to meet the additional volume generated by the Penguin Random House contract; a further GBP1.1 million of maintenance capital and the development of Tactical Solutions data offering in Marketing Activation; and other expenditure of GBP1.5 million in Strategic Marketing and St Ives plc.

Debt

The Group negotiated a new revolving credit facility with its existing two banks for a term of four years expiring on 23 March 2019 and with the ability to extend the term for a further year. The facility was increased from GBP90.0 million to GBP115.0 million.

Net debt increased during the year from GBP42.7 million to GBP62.8 million. At 31 July 2015, St Ives had drawn GBP79.2 million on its bank credit facility, leaving an unutilised commitment of GBP35.8 million. The Group had cash in hand of GBP16.4 million.

Our policy is to maintain prudent leverage ratios. At 31 July 2015 the ratio of net debt to EBITDA, before non-underlying items, was 1.4 times as shown below:

 
                                       2015    2014 
                                      GBP'm   GBP'm 
===================================  ======  ====== 
 
Net debt                               62.8    42.7 
EBITDA before non-underlying items     43.4    39.3 
                                        1.4     1.1 
===================================  ======  ====== 
 

Brad Gray

Chief Financial Officer

6 October 2015

Condensed Consolidated Income Statement

 
  52 weeks to 31   52 weeks to1 August 
     July 2015      2014 (restated**) 
  ==============  ==================== 
 
 
                                       Underlying  Non-underlying*      Total   Underlying  Non-underlying*      Total 
                                 Note     GBP'000          GBP'000    GBP'000      GBP'000          GBP'000    GBP'000 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
 
Revenue                           2       344,553                -    344,553      327,587            3,097    330,684 
Cost of sales                           (229,654)                -  (229,654)    (224,755)          (3,049)  (227,804) 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
Gross profit                              114,899                -    114,899      102,832               48    102,880 
Selling costs                            (23,569)            (210)   (23,779)     (21,855)            (396)   (22,251) 
Administrative expenses                  (56,047)         (23,993)   (80,040)     (49,346)         (19,879)   (69,225) 
Share of results of joint 
 ventures                                    (88)                -       (88)        (120)                -      (120) 
Other operating income                        180              541        721           23            2,185      2,208 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
Profit/(loss) from operations     2        35,375         (23,662)     11,713       31,534         (18,042)     13,492 
Pension finance (charge)/credit                 -            (373)      (373)            -               57         57 
Other finance costs                       (2,398)            (213)    (2,611)      (1,666)                -    (1,666) 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
Profit/(loss) before tax                   32,977         (24,248)      8,729       29,868         (17,985)     11,883 
Income tax (charge)/credit        4       (7,014)            3,841    (3,173)      (6,986)            5,608    (1,378) 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
Net profit/(loss) for 
 the period                                25,963         (20,407)      5,556       22,882         (12,377)     10,505 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
 
Attributable to: 
Shareholders of the parent 
 company                                   25,963         (20,407)      5,556       22,879         (12,362)     10,517 
Non-controlling interests                       -                -          -            3             (15)       (12) 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
                                           25,963         (20,407)      5,556       22,882         (12,377)     10,505 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
 
Basic earnings per share 
 (p)                              7         20.32          (15.97)       4.35        18.70          (10.10)       8.60 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
 
Diluted earnings per share 
 (p)                              7         19.82          (15.58)       4.24        18.10           (9.78)       8.32 
===============================  ====  ==========  ===============  =========  ===========  ===============  ========= 
 

* Non-underlying items comprise: acquisition costs; restructuring costs; provision releases; operating results of non-continuing sites; net profit on disposal of property, plant and equipment; profit on disposal of subsidiary; consideration required to be treated as remuneration; amortisation of acquired intangibles; remeasurement of deferred consideration; costs related to the St Ives defined benefits pension scheme and other one-off items (note 3).

** Figures are restated for the 52 Weeks to 1 August 2014 to reclassify the costs related to the St Ives defined benefits pension scheme as non-underlying items (note 5).

Condensed Consolidated Statement of Comprehensive Income

 
                                                 52 weeks 
                                                       to   52 weeks 
                                                       31         to 
                                                     July   1 August 
                                                     2015       2014 
                                                  GBP'000    GBP'000 
===============================================  ========  ========= 
Profit for the period                               5,556     10,505 
   Items that will not be reclassified 
    subsequently to profit or loss: 
   Actuarial losses on defined benefits 
    pension scheme                               (19,691)   (11,677) 
   Tax credit on items taken directly 
    to equity                                       3,925      2,366 
===============================================  ========  ========= 
                                                 (15,766)    (9,311) 
   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                                    60         50 
   Losses on cash flow hedges                       (127)       (60) 
   Losses on available for sale financial 
    asset                                               -    (1,540) 
   Tax credit on items taken directly 
    to equity                                           -         13 
===============================================  ========  ========= 
                                                    1,473    (1,537) 
===============================================  ========  ========= 
   Other comprehensive expense for the 
    period                                       (14,293)   (10,848) 
===============================================  ========  ========= 
Total comprehensive expense for the 
 period                                           (8,737)      (343) 
===============================================  ========  ========= 
 
Attributable to: 
Shareholders of the parent company                (8,737)      (331) 
Non-controlling interests                               -       (12) 
===============================================  ========  ========= 
                                                  (8,737)      (343) 
===============================================  ========  ========= 
 

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Condensed Consolidated Statement of Changes in Equity

 
                                                                        Hedging 
                            Additional                       Share          and 
                     Share     paid-in     ESOP  Treasury   option  translation     Other  Retained  Non-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 
 3 August 2013      12,171      51,865    (200)      (62)    6,269         (74)    57,798    77,941              279   148,189 
Profit/(loss) for 
 the period              -           -        -         -        -            -         -    10,517             (12)    10,505 
Other 
 comprehensive 
 income/(expense) 
 for the period          -           -        -         -        -            3         3  (10,851)                -  (10,848) 
=================  =======  ==========  =======  ========  =======  ===========  ========  ========  ===============  ======== 
Comprehensive 
 income/ 
 (expense) for 
 the 
 period                  -           -        -         -        -            3         3     (334)             (12)     (343) 
Dividends                -           -        -         -        -            -         -   (8,170)                -   (8,170) 
Acquisitions           311         925        -     1,030        -            -     1,955   (1,526)            (267)       473 
Transfer of 
 share-based 
 contingent 
 consideration 
 deemed as 
 remuneration           35         444        -       396  (3,687)            -   (2,847)     3,688                -       876 
Exchange 
 differences             -           -        -         -        -           37        37         -                -        37 
Purchase of own 
 shares                  -           -    (235)   (3,169)        -            -   (3,404)         -                -   (3,404) 
Recognition of 
 share-based 
 payments                -           -      424     1,642    4,427            -     6,493     (823)                -     5,670 
Tax on 
 share-based 
 payments                -           -        -         -      190            -       190       799                -       989 
=================  =======  ==========  =======  ========  =======  ===========  ========  ========  ===============  ======== 
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 for the 
 period                  -           -        -         -        -         (67)      (67)  (14,226)                -  (14,293) 
=================  =======  ==========  =======  ========  =======  ===========  ========  ========  ===============  ======== 
Comprehensive 
 expense 
 for the period          -           -        -         -        -         (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 
=================  =======  ==========  =======  ========  =======  ===========  ========  ========  ===============  ======== 
 

*** Additional paid-in capital represents share premium, merger reserve and capital redemption reserve

Condensed Consolidated Balance Sheet

.

 
                                          31 July  1 August 
                                             2015      2014 
                                   Note   GBP'000   GBP'000 
=================================  ====  ========  ======== 
Assets 
Non-current assets 
Property, plant and equipment              48,242    53,360 
Goodwill                                  137,488   123,254 
Other intangible assets                    45,652    43,981 
Available for sale                              3         2 
Investment in joint venture                   109        11 
Deferred tax assets                           139         - 
Other non-current assets                    1,086       671 
=================================  ====  ========  ======== 
                                          232,719   221,279 
=================================  ====  ========  ======== 
Current assets 
Inventories                                 6,579     5,732 
Trade and other receivables                75,945    79,554 
Derivative financial instruments              165        18 
Asset held for sale                           412         - 
Cash and cash equivalents                  16,392    12,336 
=================================  ====  ========  ======== 
                                           99,493    97,640 
=================================  ====  ========  ======== 
Total assets                              332,212   318,919 
=================================  ====  ========  ======== 
Liabilities 
Current liabilities 
Obligations under finance leases                -        11 
Trade and other payables                   71,070    76,885 
Derivative financial instruments                4        14 
Income tax payable                            355     1,786 
Deferred consideration payable              4,879    12,587 
Deferred income                             6,976     5,927 
Provisions                                    408     1,276 
=================================  ====  ========  ======== 
                                           83,692    98,486 
=================================  ====  ========  ======== 
Non-current liabilities 
Loans                                      79,225    55,000 
Obligations under finance leases                -        17 
Retirement benefits obligations     8      27,597     9,833 
Deferred consideration payable              3,487     1,406 
Other non-current liabilities                 698         - 
Provisions                                  1,732     1,273 
Deferred income                                81         - 
Deferred tax liabilities                    2,818     8,587 
=================================  ====  ========  ======== 
                                          115,638    76,116 
=================================  ====  ========  ======== 
Total liabilities                         199,330   174,602 
=================================  ====  ========  ======== 
Net assets                                132,882   144,317 
=================================  ====  ========  ======== 
Equity 
Capital and reserves 
Share capital                              13,089    12,517 
Other reserves                             61,901    60,225 
Retained earnings                          57,892    71,575 
=================================  ====  ========  ======== 
Total equity                              132,882   144,317 
=================================  ====  ========  ======== 
 

These financial statements were approved by the Board of Directors on 6 October 2015.

Condensed Consolidated Cash Flow Statement

 
                                              52 weeks 
                                                    to   52 weeks 
                                                    31         to 
                                                  July   1 August 
                                                  2015       2014 
                                        Note   GBP'000    GBP'000 
======================================  ====  ========  ========= 
Operating activities 
Cash generated from operations           10     35,510     31,216 
Interest paid                                  (2,398)    (1,598) 
Income taxes paid                              (6,595)    (3,711) 
======================================  ====  ========  ========= 
Net cash generated from operating 
 activities                                     26,517     25,907 
======================================  ====  ========  ========= 
 
Investing activities 
Purchase of property, plant and 
 equipment                                     (5,542)   (11,108) 
Purchase of other intangibles                    (533)      (566) 
Proceeds on disposal of property, 
 plant and equipment                             4,751      1,236 
Acquisition of subsidiaries, 
 net of cash acquired                         (19,854)   (35,214) 
Deferred consideration paid for 
 acquisitions made in prior period            (14,626)          - 
Disposal proceeds of subsidiaries, 
 net of cash disposed                                -      3,289 
Investment in financial assets                       -      (158) 

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======================================  ====  ========  ========= 
Net cash used in investing activities         (35,804)   (42,521) 
======================================  ====  ========  ========= 
 
Financing activities 
Dividends paid                           6     (9,455)    (8,170) 
Purchase of treasury shares                    (2,680)    (3,404) 
Decrease in finance lease obligations             (28)       (48) 
Increase in bank loans                          24,225     25,000 
======================================  ====  ========  ========= 
Net cash generated from financing 
 activities                                     12,062     13,378 
======================================  ====  ========  ========= 
Net increase/(decrease) in cash 
 and cash equivalents                            2,775    (3,236) 
Cash and cash equivalents at 
 beginning of the period                        12,336     15,581 
Effect of foreign exchange rate 
 changes                                         1,281        (9) 
======================================  ====  ========  ========= 
Cash and cash equivalents at 
 end of the period                              16,392     12,336 
======================================  ====  ========  ========= 
 

Notes to the Condensed 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 2015.

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 31 July 2015 and 1 August 2014.

The financial information for the period ended 31 July 2015 has been extracted from the Group's 2015 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 2015 statutory accounts will be delivered to the Registrar of Companies following the Company's 2015 Annual General Meeting.

The financial information for the period ended 1 August 2014 has been extracted from the Group's statutory accounts for that period which have been delivered to the Registrar of Companies with the exception of the restated amounts as disclosed in note 2 and note 5. The Auditor's report on both the Group's 2015 and 2014 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 2015 and 2014 statutory accounts.

2. Segmental 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 Office 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.

As a result of the reallocation of resources and a change in the Group's internal reporting, the segments have been redefined as Strategic Marketing, Marketing Activation and Books.

The Strategic Marketing segment comprises all the businesses that were previously reported under the Marketing Services segment other than the Field Marketing business which is now reported under the Marketing Activation segment. The Strategic Marketing segment comprises the Data, Digital and Consulting businesses.

The Marketing Activation segment includes the Field Marketing business, and all the Group's Marketing Print businesses that were previously reported under the Print Services segment other than Clays which is now reported under the Books segment. The Marketing Activation segment comprises the Group's Exhibitions and Events, Point-of-sale, Print Management and Field Marketing businesses

The Books segment comprises Clays that was previously reported under the Print Services segment.

Corporate costs are allocated to revenue generating segments as this presentation better reflects their profitability.

Comparatives have been restated to reflect the reclassification of reporting segments for the 52 weeks to 1 August 2014.

Business segments

 
  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 
Eliminations                       (1,033)     (13,346)     (110)  (14,489) 
==============================  ==========  ===========  ========  ======== 
Underlying revenue                 110,690      166,970    66,893   344,553 
Result 
Result before non-underlying 
 items                              16,340       10,947     8,088    35,375 
Non-underlying items              (16,983)      (4,719)   (1,960)  (23,662) 
==============================  ==========  ===========  ========  ======== 
(Loss)/profit from operations        (643)        6,228     6,128    11,713 
==============================  ==========  ===========  ======== 
Pension finance charge                                                (373) 
Finance costs                                                       (2,611) 
==============================  ==========  ===========  ========  ======== 
Profit before tax                                                     8,729 
Income tax charge                                                   (3,173) 
==============================  ==========  ===========  ========  ======== 
Profit for the period                                                 5,556 
==============================  ==========  ===========  ========  ======== 
 
 
  52 weeks to 1 August 
     2014 (Restated) 
 
 
                                 Strategic    Marketing 
                                 Marketing   Activation     Books     Total 
                                   GBP'000      GBP'000   GBP'000   GBP'000 
==============================  ==========  ===========  ========  ======== 
Revenue 
External sales                      81,804      178,329    67,454   327,587 
Group sales                          4,448          231        18     4,697 
Eliminations                          (65)      (4,545)      (87)   (4,697) 
==============================  ==========  ===========  ========  ======== 
Underlying revenue                  86,187      174,015    67,385   327,587 
Non-underlying revenue                   -        3,097         -     3,097 
==============================  ==========  ===========  ========  ======== 
Total revenue                       86,187      177,112    67,385   330,684 
Result 
Result before non-underlying 
 items                              11,787       11,356     8,391    31,534 
Non-underlying items              (14,421)      (2,906)     (715)  (18,042) 
==============================  ==========  ===========  ========  ======== 
(Loss)/profit from operations      (2,634)        8,450     7,676    13,492 
==============================  ==========  ===========  ======== 
Pension finance credit                                                   57 
Finance costs                                                       (1,666) 
==============================  ==========  ===========  ========  ======== 
Profit before tax                                                    11,883 
Income tax charge                                                   (1,378) 
==============================  ==========  ===========  ========  ======== 
Profit for the period                                                10,505 
==============================  ==========  ===========  ========  ======== 
 

Geographical segments

The Strategic Marketing, Marketing Activation and Books business segments operate primarily in the UK, with the Group deriving 90% of its revenue and profits from operations and customers located in the UK.

3. Non-underlying items

Non-underlying items disclosed on the face of the Condensed Consolidated Income statement are as follows:

 
                                           2015      2015      2014      2014 
Expense/(income)                        GBP'000   GBP'000   GBP'000   GBP'000 
=====================================  ========  ========  ========  ======== 
Restructuring items 
                                       ========            ======== 
Redundancies and other charges            2,408               1,534 
Impairment of property, plant 
 and equipment                                -                 824 
Costs associated with empty 
 properties                                 671                 738 
Provision releases                            -                (45) 
Profit on disposal of property, 
 plant and equipment                      (541)               (840) 
Net profit on disposal of 
 a subsidiary                                 -               (883) 
Operating losses from non-continuing 
 sites                                        -                 441 
Remaining other non-underlying 
 income                                       -               (149) 
                                       ========            ======== 
                                                    2,538               1,620 
St Ives defined benefits 
 pension scheme costs 
                                       ========            ======== 
Adiministrative costs                       562                 547 
Other                                       268                   - 
                                       ========            ======== 
                                                      830                 547 
Acquisition costs 

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                                       ========            ======== 
Amortisation of acquired 
 intangibles                              7,827               6,125 
Impairment of available for 
 sale asset                               1,540                   - 
Impairment of acquired intangibles 
 and goodwill                             1,470               1,234 
Costs associated with the 
 acquisition and setup of 
 subsidiaries                               686                 947 
Contingent consideration 
 required to be treated as 
 remuneration                             6,233               7,569 
Increase in deferred consideration        2,538                   - 
                                       ========            ======== 
                                                   20,294              15,875 
=====================================  ========  ========  ========  ======== 
Non-underlying items before 
 interest and tax                                  23,662              18,042 
                                       ========            ======== 
Net pension finance (charge)/credit 
 in respect of defined benefit 
 pension scheme                             373                (57) 
Accelerated amortisation 
 of bank arrangement fees                   213                   - 
                                       ========            ======== 
                                                      586                (57) 
=====================================  ========  ========  ========  ======== 
Non-underlying items before 
 tax                                               24,248              17,985 
Income tax credit                                 (3,841)             (5,608) 
=====================================  ========  ========  ========  ======== 
                                                   20,407              12,377 
=====================================  ========  ========  ========  ======== 
 

The restructuring items in the current period include costs relating to the closure of the Burnley site of GBP1,297,000, redundancy costs of GBP764,000 relating to the restructuring of the former Print Services segment to the Marketing Activation segment and costs relating to empty properties of GBP671,000. These costs are recorded within the Marketing Activation segment. Redundancy costs of GBP347,000 were recorded in the Strategic Marketing segment.

Profit on disposal of property, plant and equipment includes GBP411,000 relating to the sale of a property recorded within the Books segment, and a net gain of GBP159,000 from the sale of properties in Blackburn, Leeds and Plymouth relating to the Marketing Activation segment. A loss of GBP29,000 on disposal of assets related to the closure of Burnley site was recorded within Marketing Activation segment.

Charges related to the amortisation of acquired customer relationships, proprietary techniques, trademarks and software intangibles of GBP7,143,000 and GBP684,000 were recorded in the Strategic Marketing and Marketing Activation segments respectively. Contingent consideration of GBP6,233,000 in respect of acquisitions required to be treated as remuneration rather than consideration and additional deferred consideration in respect of the acquisitions of GBP2,538,000 are both recorded within the Strategic Marketing segment.

The impairment charge of GBP1,470,000 relates to an impairment of goodwill of GBP296,000; and to customer relationship assets of GBP1,174,000, where there has been a higher level of customer churn in the Field Marketing business. An impairment charge of GBP1,540,000 was recorded on the disposal of the Group's investment in Easypress Limited for a nominal amount in July 2015 and is included within Books Segment.

The St Ives defined benefits pension scheme administrative expenses were recorded in the Books segment. The prior period figures have been restated to reflect the change in the classification of the St Ives defined benefits pension scheme charges to non-underlying items (note 5).

The Group conducted a project to offer those members of the St Ives defined benefits pension scheme over the age of 55 independent advice on their pension options. These costs of GBP268,000 have been treated as a non-underlying item.

In the current period, the tax credit relates to the items discussed above.

4. Income tax charge

Income tax on profit as shown in the Consolidated Income Statement is as follows:

 
                                               2015      2014 
                                            GBP'000   GBP'000 
=========================================  ========  ======== 
Total current tax charge/(credit) at 
 19.86% (2014 - 22.33%): 
Current period                                6,114     6,938 
Adjustments in respect of prior periods        (19)   (3,982) 
=========================================  ========  ======== 
Total current tax charge                      6,095     2,956 
=========================================  ========  ======== 
Deferred tax on origination and reversal 
 of temporary differences: 
Deferred tax credit                         (2,411)   (1,660) 
Adjustments in respect of prior periods       (511)        82 
=========================================  ========  ======== 
Total deferred tax credit                   (2,922)   (1,578) 
=========================================  ========  ======== 
Total income tax charge                       3,173     1,378 
=========================================  ========  ======== 
 

Income tax charge on the profit before and after non-underlying items is as follows:

 
                                                 2015      2014 
                                              GBP'000   GBP'000 
===========================================  ========  ======== 
Tax charge on profit before non-underlying 
 items                                          7,014     6,986 
Tax credit on non-underlying items            (3,841)   (5,608) 
===========================================  ========  ======== 
Total income tax charge                         3,173     1,378 
===========================================  ========  ======== 
 

The charge can be reconciled to the profit before tax per the Consolidated Income Statement as follows:

 
                                               2015      2014 
                                            GBP'000   GBP'000 
=========================================  ========  ======== 
Profit before tax                             8,729    11,883 
Tax calculated at a rate of 19.86% 
 (2014 - 22.33%)                              1,734     2,653 
Non-deductible charges on impairment 
 of assets                                      664       147 
Expenses not deductible for tax purposes      2,564     2,718 
Non-taxable income                            (363)     (422) 
Effect of change in UK corporate tax 
 rate                                            80       188 
Adjustments in respect of prior periods       (530)   (3,899) 
Movement in deferred tax on industrial 
 buildings                                    (976)         - 
Utilisation of tax losses                         -       (7) 
=========================================  ========  ======== 
Total income tax charge                       3,173     1,378 
=========================================  ========  ======== 
 

Income tax loss as shown in the Consolidated Statement of Comprehensive Income is as follows:

 
                                               2015      2014 
                                            GBP'000   GBP'000 
=========================================  ========  ======== 
United Kingdom corporation tax credit 
 at 20.67% (2014 - 22.33%)                    (479)     (447) 
Deferred tax on origination and reversal 
 of temporary differences                   (3,446)   (1,932) 
=========================================  ========  ======== 
Total income tax credit                     (3,925)   (2,379) 
=========================================  ========  ======== 
 

Income tax credit as shown in the Statement of Changes in Equity is as follows:

 
                                               2015      2014 
                                            GBP'000   GBP'000 
=========================================  ========  ======== 
United Kingdom corporation tax credit 
 at 20.67% (2014 - 22.33%)                      345       799 
Deferred tax on origination and reversal 
 of temporary differences                     (456)       190 
=========================================  ========  ======== 
Total income tax credit                       (111)       989 
=========================================  ========  ======== 
 

5. Restatement

The Group operates a defined benefits pension scheme ("the Scheme") which was closed to new entrants from 6 April 2002 and closed to future benefits accrual with effect from 31 August 2008. At the period end, 7% of the Group's employees were deferred members of the Scheme. The Group has closed and sold a number of businesses that were participating employers of the Scheme and has made eleven acquisitions since June 2010 that are not participating employers. As a result, the board has concluded that the Scheme income and expenses do not relate to the underlying trading activities of the Group. Furthermore, the underlying assumptions used in the Scheme's valuation are determined by reference to external market data (notably discount and inflation rates) that are outside the Group's control and can vary significantly between periods. Therefore, the accounting policy for the Group was amended to reclassify the Scheme income and expenses as non-underlying items (note 3).

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The impact of the prior period adjustments on the previously reported Consolidated Income Statement are summarised as follows:

 
  52 Weeks to 1 
   August 2014 
  ============= 
 
 
                                           Previously 
                                             Reported  Adjustments  Restated 
                                              GBP'000      GBP'000   GBP'000 
=========================================  ==========  ===========  ======== 
Administrative expenses - underlying 
 items                                       (49,893)          547  (49,346) 
Administrative expenses - non-underlying 
 items                                       (19,328)        (547)  (19,875) 
Interest income - underlying items             13,054     (13,054)         - 
Finance cost - underlying items              (14,663)       12,997   (1,666) 
Net pension finance credit                          -           57        57 
 
Net profit attributable to: 
Shareholders of the parent company 
 - underlying items                            22,389          490    22,879 
Shareholders of the parent company 
 - non-underlying items                      (11,872)        (490)  (12,362) 
 
Underlying basic earnings per 
 share (p)                                      18.30         0.40     18.70 
Non-underlying items (p)                       (9.70)       (0.40)   (10.10) 
=========================================  ==========  ===========  ======== 
Basic earnings per share (p)                     8.60            -      8.60 
=========================================  ==========  ===========  ======== 
Underlying diluted earnings per 
 share (p)                                      17.71         0.39     18.10 
Non-underlying items (p)                       (9.39)       (0.39)    (9.78) 
=========================================  ==========  ===========  ======== 
Diluted earnings per share (p)                   8.32            -      8.32 
=========================================  ==========  ===========  ======== 
 

6. Dividends

 
                                      per      2015      2014 
                                    share   GBP'000   GBP'000 
=================================  ======  ========  ======== 
Final dividend paid for the 53 
 weeks ended 2 August 2013          4.50p         -     5,570 
Interim dividend paid for the 
 26 weeks ended 31 January 2014     2.15p         -     2,600 
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         - 
=================================  ======  ========  ======== 
Dividends paid during the period              9,455     8,170 
=================================  ======  ========  ======== 
Proposed final dividend at the 
 period end of 5.55p per share 
 (2014 - 5.00p per share)           5.55p     7,239     6,590 
=================================  ======  ========  ======== 
 

7. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:

Number of shares

 
                                                2015     2014 
                                                '000     '000 
===========================================  =======  ======= 
Weighted average number of ordinary 
 shares for the purposes of basic earnings 
 per share                                   127,784  122,318 
Effect of dilutive potential ordinary 
 shares: 
  Share options                                3,232    4,088 
===========================================  =======  ======= 
Weighted average number of ordinary 
 shares for the purposes of diluted 
 earnings per share                          131,016  126,406 
===========================================  =======  ======= 
 

Basic and diluted earnings per share

 
                   52 Weeks 
   52 Weeks to    to 1 August 
   31 July 2015      2014 
  =============  ============ 
 
 
                                               Earnings            Earnings 
                                                    per                 per 
                                     Earnings     share  Earnings     share 
                                      GBP'000     pence   GBP'000     pence 
-----------------------------------  --------  --------  --------  -------- 
Earnings and basic earnings 
 per share from continuing 
 activities 
Underlying earnings and underlying 
 earnings per share (restated 
 note 5)                               25,963     20.32    22,879     18.70 
Non-underlying items (restated 
 note 5)                             (20,407)   (15.97)  (12,362)   (10.10) 
===================================  ========  ========  ========  ======== 
Earnings and basic earnings 
 per share                              5,556      4.35    10,517      8.60 
===================================  ========  ========  ========  ======== 
 
Earnings and diluted earnings 
 per share from continuing 
 activities 
Underlying earnings and underlying 
 earnings per share (restated 
 note 5)                               25,963     19.82    22,879     18.10 
Non-underlying items (restated 
 note 5)                             (20,407)   (15.58)  (12,362)    (9.78) 
===================================  ========  ========  ========  ======== 
Earnings and diluted earnings 
 per share                              5,556      4.24    10,517      8.32 
===================================  ========  ========  ========  ======== 
 

Underlying earnings is calculated by adding back non-underlying items, as adjusted for tax, to the profit for the period.

8. Retirement benefits

The net obligation in respect of retirement benefit obligations of GBP27,597,000 at 31 July 2015 has increased compared to 1 August 2014 (GBP9,833,000) primarily due to a lower discount rate and increased inflation rate.

9. Acquisition

On 17 March 2015, the Group acquired 100% of all the issued stock of Solstice, a mobile-first marketing and technology business. Goodwill arising on the acquisition relates to the value of future growth from new customers and of the assembled workforce.

The provisional allocation of the purchase price payable for Solstice is as follows:

 
                                                                Fair 
                                  Historical          Fair     value 
                                         net         value    of net 
                                      assets   adjustments    assets 
                                     GBP'000       GBP'000   GBP'000 
================================  ==========  ============  ======== 
Proprietary techniques                     -         8,992     8,992 
Customer relationships                     -         1,694     1,694 
Trademarks                                 -           961       961 
Property, plant and equipment            285             -       285 
Trade and other receivables            4,152             -     4,152 
Bank balances and cash                   645             -       645 
Trade and other payables             (1,459)             -   (1,459) 
Deferred tax liabilities                   -           (4)       (4) 
================================  ==========  ============  ======== 
Net assets acquired                    3,623        11,643    15,266 
================================  ==========  ============ 
Goodwill arising on acquisition                               12,830 
================================  ==========  ============  ======== 
Total consideration                                           28,096 
================================  ==========  ============  ======== 
 

The fair value of the components of the total consideration payable is as follows:

 
                                             GBP'000 
=========================================    ======= 
Cash consideration payment in 
 the current period                           18,960 
Fair value of 417,294 St Ives 
 plc ordinary shares allocated 
 from treasury shares as at 17 
 March 2015                                      860 
Fair value of 2,125,254 St Ives 
 plc ordinary shares issued as 
 at 17 March 2015                              3,880 
Working capital payment in the 
 current period                                1,539 
Working capital and future consideration 
 payable in cash and shares                    5,114 
Less consideration treated as 
 deemed remuneration                         (2,257) 
===========================================  ======= 
Total consideration                           28,096 
===========================================  ======= 
 

The acquisition had the following impact on investing cash outflows in the current period:

 
                       GBP'000 
===================    ======= 
Cash paid               20,499 
Less cash acquired       (645) 
=====================  ======= 
Net cash outflow        19,854 
=====================  ======= 
 

At the acquisition date, it was estimated that all the trade and other receivables were collectible.

Estimated deferred consideration is payable in three tranches which are dependent upon the level of EBITDA achieved by Solstice and its subsidiaries for the calendar years ending 2015, 2016 and 2017. The total consideration payable is capped at GBP50,000,000 excluding a working capital adjustment of GBP1,900,000.

The post-acquisition impact of Solstice on the Group's revenue and operating profit are as follows:

 
                       2015 
                    GBP'000 
=================  ======== 
Revenue               8,416 
Operating profit      1,570 
=================  ======== 
 

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