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Moneyback on Petrol:
Market Cap
£41.77m
Change Today
-7.00p
Share Price
164.50p
Update - Final Results
4imprint Group PLC
04 March 2008
4 March 2008
4imprint Group plc
Preliminary Results for the period ended 29 December 2007
4imprint Group plc announces today its results for the period ended 29 December
2007
Highlights
• Group sales increased to £146.82m, £27.30m ahead of 2006 with organic
growth in the Direct Marketing Division producing a 21% increase on 2006,
organic growth in the End User Division a 7% increase, while the Trade Division
sales more than doubled those in 2006 reflecting the acquisition of Supreme in
November 2006.
• Operating profit at £10.16m before exceptional items and a one off
share grant was 35% ahead of 2006 and pre tax profit on the same basis was 26%
ahead.
• Profit before tax, after exceptional items and one off share grant
was £3.30m.
• Tax charge was £1.07m (32%) (2006: £2.35m: 32%).
• Basic earnings per share before exceptional items and one off share
grant was up 24% at 26.40p (2006: 21.34p).
• Basic earnings per share was 8.93p (2006: 20.29p).
• Final dividend of 8.00p per share is proposed, 28% over 2006 giving a
total dividend paid and proposed of 12.00p, 26% ahead of 2006, in line with the
established progressive dividend policy adopted by the Board.
Commenting on the results, Ken Minton, Executive Chairman, said:
"2007 was another year of significant progress for the 4imprint Group with
strong growth in operating and pre tax profit before exceptional items. The
latter were principally incurred in preparing the Trade and End User Divisions
for sustained profitable growth. The Direct Marketing Division delivered another
year of strong growth in sales and profits".
- Ends -
For further information, please contact:
Ken Minton
Executive Chairman
4imprint Group plc
Tel. +44 (0) 207 299 7201
Executive Chairman's Statement
In my statement to Shareholders in the interim report for 2007, I advised that
the Board expected that the progress made by the Group at the half year would
continue though the second half. I am pleased to report that the Group achieved
that objective.
Group sales were £146.82m, £27.30m or 23% ahead of 2006. Of this £27.30m,
organic growth in the Direct Marketing Division contributed £13.31m or 21% over
2006, organic growth in the End User Division contributed £3.37m or 7% over 2006
and the Trade Division contributed £10.62m or 117% over 2006, reflecting the
acquisition of Supreme in November 2006.
Operating profit before exceptional items and share grant at £10.16m was 35%
ahead of 2006.
Exceptional charges were substantial at £5.27m; the main components of which
were:-
(a) The integration of the Product Source business into the Supreme site at
Blackpool,
(b) The major rationalisation of the Manchester Broadway site, made possible
by the Product Source move to Blackpool,
(c) The cost of the termination of a significant and onerous contract in the
Manchester based Corporate Programmes business, which took place in the first
half and for which a partial provision was recorded in the interim report.
In addition, a non recurring share grant of £1.14m, relating to shares granted
to the Executive Chairman as an element of his overall remuneration package was
made. Details of which are given in note 4.
Operating profit after these charges was £3.75m. Net interest costs were £0.45m
producing profit before tax of £3.30m. Tax charges were £1.07m producing profit
after tax of £2.23m.
Earnings per share before exceptional items and share grant was 26.40p an
increase of 24% on last year.
The acquisition of the Supreme trade business at the end of 2006 provided the
Group with the opportunity to transfer its Manchester based Product Source trade
business onto the Supreme site at Blackpool. This integration, in July last
year, resulted in the recruitment of over 120 more staff at Blackpool and a
similar reduction of jobs in Manchester. Furthermore, the overhead structure
needed to support the remaining businesses at Manchester was able to be
substantially reduced also leading to a transformation of the profitability of
that business.
The whole integration/rationalisation programme was a major undertaking for the
Trade Division. Despite extensive planning, production capability was unable to
meet the major increases in demand placed on it. As a result customer
satisfaction fell and sales likewise. In response, resources in many areas were
increased, particularly in customer service, and by the end of 2007 output and
customer satisfaction had greatly improved. During the first two months of this
year production/quality/customer satisfaction were at planned levels.
The Group now comprises three completely separate Divisions, all of which
delivered substantial progress during 2007, as follows:-
a) End User Division
This Division comprises the Manchester based Corporate Programmes/Field Sales
business, the London based specialist premiums business and Kreyer, the Germany
based Corporate Programmes/Field Sales business. Like for like total sales for
this Division increased by 7% to £50.85m while operating profit before
exceptional items at £2.88m increased by 23%, reflecting the benefits
particularly of the rationalisation of the Manchester based business.
b) Direct Marketing Division
During the second half of the year, the fast growing Direct Marketing Division
was repositioned to develop internationally. The UK Direct Marketing business
was put under the direct control and management of the US business, and the
Division is now additionally focussed on diversifying its business into Western
Europe. Like for like, sales of this Division increased by 21% to £76.74m, while
Divisional operating profit increased by 26% to £6.17m. Sales in the US and
Canada continued to grow strongly throughout the second half and full year sales
were 30% ahead of prior year.
c) Trade Division
The Trade Division has almost doubled in size with the acquisition of Supreme.
Total sales in 2007 at £23.73m were 81% up on 2006. Divisional operating profit
before exceptional items at £3.33m was 41% ahead. Sales were lower than planned
in the second half, caused by the supply and customer service problems at
Blackpool, particularly in the period July to October. These issues and the
increased costs incurred, produced lower profits in the second half than
planned. However, as I said earlier, these problems are now resolved and sales
are now recovering steadily.
Cash management
The Group started the year with £0.25m of net debt and ended the year with
£7.08m of net debt and borrowings.
Cash inflow from operating profit adjusted for non cash items and before
exceptional items was £12.94m, principal outflows were tax, dividends, interest
and defined benefit pension contributions of £7.52m; cash incurred on
exceptional items was £3.03m and operating working capital and capital invested
amounted to £9.12m.
Strategy
When the acquisition of Supreme was announced, the Company stated that its
intention would be to first merge its Product Source business with that of
Supreme, and when this was completed, the Company would pursue the placing of
the merged business into separate ownership. With the completion of the merger,
the Company will now pursue the second part of this strategy.
Dividend
The Board has a well established policy of ensuring that dividend payout is kept
in line with the growth of the Group's earnings, while maintaining dividend
cover pre exceptional items in excess of two.
Accordingly, the Board is proposing a final dividend of 8.00p per share, which
with the interim payment already made of 4.00p per share means a dividend payout
of 12.00p per share, an increase of 26% over 2006.
People
4imprint has achieved sustained growth over recent years, and profit before
exceptional items for 2007 is the highest for many years. Credit for achieving
this excellent performance must go to everyone working in the Divisions and in
the Group and on behalf of the Board I congratulate everyone for this
achievement and thank them for their great effort and commitment.
Outlook
Group sales in the first two months of this year were ahead of the same period
last year. Sales in the Direct Marketing Division were strongly ahead of 2007,
the End User Division sales more modestly so, while in the Trade Division sales
were lower than in the same period last year, but confirmed the recovery seen at
the end of 2007. In addition, 2008 should see a full year's benefit from the
reduced cost base at Manchester and the successfully completed Trade Division
integration.
Ken Minton
Executive Chairman
4 March 2008
Finance Director's Report
The Group's results are reported in three divisions, in accordance with the way
the business is now managed:
Trade Division
End User Division
Direct Marketing Division
A description of each division is given in the Operating Review. The UK Direct
Marketing business was transferred from the End User Division to the Direct
Marketing Division during 2007 and prior year comparatives have been restated
accordingly.
Group results 2007 2006
£m £m Change
Group sales 146.82 119.52 +23%
Group operating profit before exceptional items and share grant 10.16 7.54 +35%
Group profit before tax, exceptional items and share grant 9.72 7.72 +26%
Group profit before tax 3.30 7.34 -55%
Sales and operating profit before exceptional items from all three divisions
were ahead of prior year.
Head office costs at £1.33m were greater than prior year (2006: £1.02m),
principally reflecting increased professional advisory costs in the year.
Share option charges
The Group charged £0.60m (2006: £0.74m) to operating profit in accordance with
IFRS2 "Share based payment".
Pensions
The Group sponsors a closed defined benefit scheme with 4 active members, 940
pensioners and 1,434 deferred members at 5 April 2007, the date of the last
actuarial valuation. The pension charge to profit in the period for this scheme
was £0.30m (2006: £0.33m) and the cash contributions by the Company were £1.90m
(2006: £1.50m).
The pension fund deficit reduced to £10.55m (2006: £18.44m).
The scheme assets at 29 December 2007 were £80.99m (2006: £81.91m); the
liabilities were £91.54m (2006: £100.35m); the reduction in liabilities was
principally due to an increase in the discount rate from 5.3% to 6.0%; partly
offset by increases in inflation and mortality assumptions.
Exceptional items
The exceptional charge of £5.27m in 2007, comprised the following items:-
i) Costs of £3.49m related to relocating the Manchester based Trade
Businesses to Blackpool;
ii) Costs of £0.98m of reorganisation in the End User Division following
the exit of the Trade Businesses;
iii) Contract exit costs of £0.80m related to the cost of exiting an
onerous customer contract in the End User Division, including an
inventory write down of £0.50m.
Share grant
200,000 shares were granted to the Chairman on 1 August 2007. The charge of
£1.14m represents the number of shares awarded at the share price on the date of
grant plus associated costs. In view of the magnitude of the charge arising and
non-recurring nature of the award, separate disclosure has been made on the face
of the income statement.
Taxation
The tax charge was £1.07m (32%) compared to £2.35m (32%) in 2006. Tax paid in
the year amounted to £2.73m (2006: £0.85m), principally in overseas territories.
The current tax charge at £2.19m relates principally to overseas subsidiaries
and the deferred tax credit of £1.12m is due to the recognition of deferred tax
assets in both the UK and US. Deferred tax of £2.94m was debited to reserves
relating to a reduction in the deferred tax assets for both pensions and share
options.
Earnings per share
Basic earnings per share for the year was 8.93p (2006: 20.29p); basic earnings
per share before exceptional items and share grant was 26.40p (2006: 21.34p).
Dividends
The Board proposes a final dividend of 8.00p which together with the interim
dividend of 4.00p gives 12.00p (2006: 9.50p) for the period, an increase of 26%.
Cash flow
The Group's net debt and borrowings at 29 December 2007 were £7.08m (2006:
£0.25m).
The principal components of the £6.83m cash outflow are as follows:
£m
Cash generated from operating profit* before exceptional items and share grant 12.94
Defined benefit pension contributions (1.90)
Cash cost of exceptional items (3.03)
Operating working capital outflow before exceptional items (7.23)
Tax, dividends and interest (5.62)
Capital investment (1.89)
Other items (0.10)
(6.83)
*Plus defined benefit pension charge, share option charge, depreciation and
amortisation.
Operating working capital absorption is spread across all three divisions
principally comprising: £0.50m in the Direct Marketing Division in line with
higher sales; £3.20m in the End User Division principally due to around £2m
higher receivables as a result of an increase in last quarter sales in the
specialist premiums business and around £1m increase in ageing of receivables.
£2.90m in the Trade Division due to £0.70m higher receivables and £0.90m higher
inventory as a result of integration issues and a further £1.30m increase in
receivables due to the fact that the Supreme business was purchased with no
trade receivables in November 2006.
Balance sheet and Shareholders' funds
Equity Shareholders' funds increased by £4.64m to £24.72m. Profit, net of
dividends paid in the period was £(0.33)m and movements relating to pensions,
employee share options, share grant, exchange and related tax taken to reserves
represented an increase of £4.91m, principally due to a reduction in the pension
deficit reflected in reserves (£3.89m net of tax).
Exchange and cash management
The average exchange rates during the period used to translate the income
statements of principal overseas subsidiaries were US dollars: $2.0025 (2006:
$1.8581) and Euros: €1.4559 (2006: €1.4660) to the pound. The movement compared
to prior year in US dollar exchange rate reduced profit of the US business by
£0.49m.
The exchange rates at the balance sheet date used to translate assets and
liabilities were US dollars: $1.9929 (2006: $1.9572) and Euros: €1.3553 (2006:
€1.4842). This resulted in a decrease in US dollar denominated overseas
subsidiaries assets of £0.09m and an increase in Euro denominated overseas
subsidiary assets of £0.23m.
Critical accounting policies
Critical accounting policies are those that require significant judgements or
estimates and potentially result in materially different results under different
assumptions or conditions. It is considered that the Group's critical accounting
policies are limited to pensions, exceptional items, deferred taxation, share
based payments and inventory provisions. Further details are given in the notes.
Treasury policy
Treasury policy is to manage centrally the financial requirements of the
Divisions in line with their business needs. The Group operates cash pooling
arrangements on currency accounts separately for its US operations and its UK
operations. The Group matches currency requirements in its UK Divisions with
currency cash flows arising in its subsidiaries and actively seeks to hold the
majority of cash or borrowings with its principal UK banker.
Gillian Davies
Group Finance Director
4 March 2008
Operating Review
Direct Marketing Division
2006
2007 (restated)
£'000 £'000
Sales 76,738 63,423
Operating profit 6,167 4,910
2007 was another year of great progress in the Direct Marketing Division. As
part of its plan to expand on an international scale, the UK based Direct
Marketing business was transferred into the Division and the Divisional results
for 2007 include this business. The results for 2006 have been restated to
reflect this change.
Total Divisional sales in sterling increased by 21% and operating profit by 26%
over 2006.
The Division now markets directly into three countries: the US, UK and Canada.
Sales from the UK and Canada now comprise more than 10% of total sales.
The North American business continued the strong growth pattern of the last four
years: sales have nearly tripled over that time period. In 2007 total sales for
the North American business in US dollars were $145.35m (2006: $111.39m), 30%
ahead of prior year, and US dollar operating profit was 39% above prior year.
The fundamentals of the catalogue/internet based business model continue to
drive the growth, enhanced by new product and service offerings for an
ever-increasing customer base. New customer orders were 33% up over 2006, and
the overall retention rate of existing customers continued to increase over
prior year. Increased effort in the Canadian market continued to produce
favourable results, as sales grew more than 70% over the prior year. The small
US Corporate Programmes business had a successful year, providing first class
personalised service to a select group of larger clients.
From 1 July 2007, the UK Direct Marketing operation has been managed as part of
the Direct Marketing Division. All of the necessary people, structure and
systems work has been done to allow the UK Direct Marketing business to operate
independently from the UK End User Division. The team is now focused on
implementing the appropriate elements of the US and Canadian methodology to
drive growth in the UK market.
Cash generation across the Direct Marketing Division remains very healthy, with
low working capital requirements relative to the overall size of the business.
Operating Review
End User Division
2006
2007 (restated)
£'000 £'000
External and inter division sales 50,846 47,448
External sales 50,383 47,018
Operating profit before exceptional items 2,880 2,345
Operating profit 1,099 2,175
The End User Division comprises three separate businesses each with its own
management team, based in Manchester, London and Germany. The core activity of
this group of businesses is the distribution of promotional items principally to
large corporate clients through the use of innovative product design and project
management capabilities and the use of technology based solutions. Although the
businesses operate largely independently, the specialist skills within each
business and their geographical locations are complementary to each other in
meeting the needs of our client requirements.
Taking each of these businesses in turn:
a) Manchester
Following the relocation of the Product Source and MT Golf trade businesses to
the Blackpool based Trade Division and the transfer of UK Direct Marketing to
the executive control of US Direct Marketing, a major reorganisation of the
remaining business, infrastructure and support services took place and was
operational throughout the second half of 2007. The result is the merger of the
Corporate Programmes and Field Sales businesses and the incorporation of the
revised infrastructure and support services into this business.
The reduction in support and infrastructure costs and focus on this single
business produced an excellent second half profit performance. Sales at this
site grew by 4% in the year and from a breakeven profit position at the half
year, the re-organisation programme transformed the site's profitability to
produce an excellent operating profit performance in the second half. In the
year, operating profit before exceptional items increased by 35%.
(b) London
Our specialist Premiums business delivered a strong second half performance and
sales for the full year were 18% ahead of 2007. This resulted from the growth of
sales to existing clients and acquisition of new clients particularly in the
Health and Beauty and Airline sectors. Operating profit for the London based
business increased by 21%.
(c) Germany
This business provides a similar type of service as the Manchester business,
offering value added services and corporate programme solutions to its clients,
working on occasions in partnership with the Manchester business.
Sales in the business were 3% ahead of 2006 while operating profit was 13%
higher aided by tight control of costs.
The exceptional charges incurred in the year relate to the re-organisation
programme in Manchester (£980,000) and to the termination of a significant,
underperforming contract in the Manchester business (£801,000).
Operating Review
Trade Division
2007 2006
£'000 £'000
External and inter division sales 23,727 13,137
External sales 19,702 9,078
Operating profit before exceptional items 3,334 2,361
Operating (loss)/profit (158) 2,361
For two reasons, 2007 has been a year of major change for the Trade Division:-
(a) The acquisition in November 2006 of the Blackpool based business of Supreme
almost doubled the size of the Trade Division and made it the largest supplier
to the Promotional Products trade in the UK.
(b) The transfer of the Product Source business from Manchester to Blackpool in
the second half of the year provided further significant opportunity to optimise
the cost structure of both businesses and enhanced the resources available to
develop the combined business.
The integration process was a complex operation including the recruitment and
training of over 50% more staff at Blackpool, together with the commissioning of
new and transferred equipment on the Blackpool site. The integration process
extended over the whole of the second half, during which the normal high
standards of customer service and production output were seriously weakened.
Costs were also considerably higher as we dealt with these problems. By the end
of 2007, both capacity and service were approaching the desired levels and
further progress has been made in the early weeks of 2008 to the point where our
production capability, quality and delivery are at planned levels. Excess costs
were removed at the end of the year.
During the year the product range of the combined business was extended and
sales into export markets expanded; these now represent over 14% of the total
sales of the Division.
Managerial resources were strengthened during the second half and the Division
is now in a strong position to pursue its planned growth opportunities.
The exceptional charge of £3.49m represents the costs attributable to the
relocation and integration of the Manchester based Product Source and MT Golf
trade businesses onto the Blackpool site.
Income statement for the period ended 29 December 2007
2007 2006
Note £'000 £'000
Sales 2 146,823 119,519
Operating expenses (143,076) (112,355)
Operating profit 2 3,747 7,164
Operating profit before exceptional items and share grant 10,160 7,541
Exceptional items 3 (5,273) (377)
Share grant 4 (1,140) -
Operating profit 2 3,747 7,164
Finance costs (458) (44)
Finance income 13 218
Profit before tax 3,302 7,338
Taxation 6 (1,072) (2,348)
Profit attributable to equity Shareholders 2,230 4,990
Earnings per share
Basic 8 8.93p 20.29p
Diluted 8 8.65p 19.44p
Balance sheet at 29 December 2007
Note 2007 2006
£'000 £'000
Non current assets
Property, plant and equipment 10,240 10,315
Goodwill 9,084 9,084
Intangible assets 1,459 1,616
Investments 8 7
Deferred tax assets 4,334 6,149
25,125 27,171
Current assets
Inventories 9,335 8,409
Trade and other receivables 31,156 23,748
Cash and cash equivalents 2,744 2,115
43,235 34,272
Current liabilities
Trade and other payables 22,950 18,710
Current tax 322 857
Borrowings 3,821 2,364
27,093 21,931
Net current assets 16,142 12,341
Non current liabilities
Retirement benefit obligations 5 10,549 18,436
Financial liability - 1,000
Borrowings 6,000 -
16,549 19,436
Net assets 24,718 20,076
Shareholders' equity
Share capital 9 9,823 9,766
Share premium reserve 9 37,943 37,757
Capital redemption reserve 9 208 208
Cumulative translation differences 9 (1,690) (1,750)
Retained earnings 9 (21,566) (25,905)
Total equity 24,718 20,076
The US dollar to sterling exchange rate at the balance sheet date was $1.9929
(2006: $1.9572).
Cash flow statement for the period ended 29 December 2007
2007 2006
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 10 782 3,052
Tax paid (2,734) (848)
Finance income 82 167
Finance costs (406) (23)
Net cash (used in)/ generated from operating activities (2,276) 2,348
Cash flows from investing activities
Acquisition of subsidiary (266) (2,058)
Cash acquired with subsidiary - 520
Proceeds on disposal of subsidiary - 526
Purchases of property, plant and equipment (1,220) (822)
Purchases of intangible assets (672) (643)
Proceeds from sale of property, plant and equipment - 27
Net cash used in investing activities (2,158) (2,450)
Cash flows from financing activities
Repayment of borrowings on acquisition - (7,219)
Proceeds from new borrowings 6,000 -
Proceeds from issue of ordinary shares 243 205
Dividends paid to Shareholders 7 (2,557) (1,911)
Net cash generated from/(used in) financing activities 3,686 (8,925)
Net movement in cash and bank overdrafts (748) (9,027)
Cash and bank overdrafts at beginning of the period (249) 9,012
Exchange losses on cash and bank overdrafts (80) (234)
Cash and bank overdrafts at end of the period (1,077) (249)
Analysis of cash and bank overdrafts
Cash at bank and in hand 2,744 2,115
Bank overdraft (3,821) (2,364)
(1,077) (249)
1 Basis of preparation
The consolidated financial statements of 4imprint Group plc are prepared in
accordance with International Financial Reporting Standards ("IFRS") and IFRIC
interpretations endorsed by the European Union (EU) and with those parts of the
Companies Act 1985 applicable to those companies reporting under IFRS.
These consolidated financial statements are prepared under the historical cost
convention.
Critical accounting policies
Critical accounting policies are those that require significant judgement or
estimates and potentially result in materially different results under different
assumptions or conditions.
Pensions
As disclosed in note 5 the Group operates a closed defined benefit scheme. Year
end recognition of the liabilities under this scheme and the return on assets
held to fund these liabilities require a number of significant actuarial
assumptions to be made including inflation, asset returns, discount rate and
mortality rates. Small changes in assumptions can have a significant impact on
the expense recorded in the income statement and on the pension liability in the
balance sheet.
Deferred Taxation
The Group is required to estimate the income tax in each of the jurisdictions in
which it operates. This requires an estimation of the current tax liability
together with an assessment of the temporary differences which arise as a
consequence of different tax and accounting treatments. Assumptions are made
around the extent to which it is probable that future taxable profit will be
available against which the temporary differences can be utilised. Deferred tax
assets are recognised at the balance sheet date based on these assumptions.
Share based payments
The fair values of employee share option plans are calculated using the Binomial
or Monte Carlo models as appropriate. The fair value is charged to the income
statement over the vesting period of the share option schemes. The calculations
require a number of estimates and judgements including the historical volatility
of the Company's share price, expected forfeiture rates of options and expected
life of options.
Inventory provisions
Inventory provisions are made in relation to slow moving and obsolete inventory
and are based on assumptions on expected usage using historic and forecast sales
as a basis.
Exceptional items
The Group presents certain items separately as "exceptional". These are items
which in management's judgement need to be disclosed separately by virtue of
their size and occurrence.
2 Segmental reporting
At 29 December 2007, the Group is reported in three primary business segments:
Gross segment sales Inter-segment sales External sales
2006 2006
2007 (restated) 2007 2006 2007 (restated)
£'000 £'000 £'000 £'000 £'000 £'000
Trade Division 23,727 13,137 (4,025) (4,059) 19,702 9,078
End User Division 50,846 47,448 (463) (430) 50,383 47,018
Direct Marketing Division 76,738 63,423 - - 76,738 63,423
Total 151,311 124,008 (4,488) (4,489) 146,823 119,519
As discussed in the Operating Review, during 2007, the UK Direct Marketing
business was transferred to the Executive control of the Direct Marketing
Division (previously called the North American Division). Its results for 2007
have been included in this Division and 2006 has been restated accordingly.
Inter-segment sales are made on an arms-length basis.
Operating profit/(loss)
before exceptional Exceptional items Operating
items and share grant and share grant profit/(loss)
2006 2006
2007 (restated) 2007 2006 2007 (restated)
£'000 £'000 £'000 £'000 £'000 £'000
Trade Division 3,334 2,361 (3,492) - (158) 2,361
End User Division 2,880 2,345 (1,781) (170) 1,099 2,175
Direct Marketing Division 6,167 4,910 - - 6,167 4,910
Head Office (1,331) (1,015) (1,140) (207) (2,471) (1,222)
Operating profit before defined benefit 11,050 8,601 (6,413) (377) 4,637 8,224
pension and share option charges
Defined benefit pension charges (295) (325) - - (295) (325)
Share option charges (595) (735) - - (595) (735)
Total 10,160 7,541 (6,413) (377) 3,747 7,164
The overheads and infrastructure costs of the Manchester site are shown entirely
in the European End User Division. As discussed in the Operating Review these
overheads supported the Manchester site, including the Manchester based trade
businesses until their relocation in the second half of 2007.
Net finance cost totalling £445,000 (2006 income: £174,000) and taxation charge
of £1,072,000 (2006: £2,348,000) cannot be separately allocated to individual
segments.
A review of the segments is included in the Operating Review.
3 Exceptional items
2007 2006
£'000 £'000
Trade Division integration costs (3,492) -
End User Division reorganisation costs (980) -
Contract exit costs (801) -
Group restructuring costs - (143)
OFT fine and related costs - (64)
European reorganisation charge - (170)
(5,273) (377)
The exceptional item above comprises £3,025,000 cash expenditure in 2007,
£1,253,000 non cash items and £995,000 cash items included in accruals at 29
December 2007.
Trade Division integration costs and End User Division reorganisation costs
represent the costs attributable to the relocation of the Manchester based
Product Source and MT Golf trade businesses to the Supreme trade business in
Blackpool, together with the resultant reorganisation of the business and
related infrastructure in Manchester.
Contract exit costs represent the costs of exiting an onerous customer contract
in the European End User Division, including a £500,000 inventory write down.
The Group restructuring costs in 2006 comprise legal, accounting and tax fees
relating to a one-off project to restructure the legal entities within the Group
to create further distributable reserves in 4imprint Group plc (the Company).
The OFT fine in 2006 was imposed in relation to breaches of competition law
relating to the supply of stock check pads by BemroseBooth Limited (a former
group company) and Achilles Paper Group Ltd. The period during which Bemrose
Corporation plc (now 4imprint Group plc) was involved in such supply was from 20
April 2000 to 2 July 2000. Legal costs of defence were also included in this
charge.
The European reorganisation charge in 2006 relates to rationalisation of the
Manchester based business.
4 Share Grant
On 1 August 2007, 200,000 shares were awarded to the Chairman. The charge of
£1,140,000 represents the number of shares awarded at the share price on the
date of grant plus associated costs. In view of the magnitude of the charge
arising and non-recurring nature of the award, separate disclosure on the face
of the income statement is relevant to assisting an understanding of the Group's
financial performance.
5 Employee pension schemes
The Group operates defined contribution plans for the majority of its UK and US
employees. The regular contributions are charged to the income statement as
they are incurred.
The Group also operates a UK defined benefit scheme which is closed to new
members.
2007 2006
£'000 £'000
Net pension costs
Defined contribution plans 396 365
Defined benefit scheme
Current service cost 91 96
Net interest cost 204 229
691 690
Defined benefit scheme
In the most recent actuarial review of the 4imprint Group plc defined benefit
scheme the principal assumptions made by the actuaries were:
2007 2006
Rate of increase in pensionable salaries 4.30% 4.00%
Rate of increase in pensions in payment and deferred pensions 3.30% 3.00%
Discount rate 6.00% 5.30%
Inflation assumption 3.30% 3.00%
Expected return on scheme assets 7.00% 6.20%
The mortality assumptions adopted at 31 December 2007 imply the following life
expectancies at age 65:
2007 2006
Male currently age 40 21.4 years 19.8 years
Female currently age 40 24.2 years 22.8 years
Male currently age 65 20.2 years 19.8 years
Female currently age 65 23.0 years 22.8 years
The amounts recognised in the balance sheet are determined as follows:
2007 2006
£'000 £'000
Present value of funded obligations (91,544) (100,347)
Fair value of scheme assets 80,995 81,911
Net liability recognised in the balance sheet (10,549) (18,436)
The major categories of plan assets as a percentage of total scheme assets are
as follows:
2007 2006
Equities 42% 42%
Bonds 32% 31%
Property 22% 15%
Cash 4% 12%
The amounts recognised in the income statement are as follows:
2007 2006
£'000 £'000
Current service cost 91 96
Interest cost 5,200 4,722
Expected return on scheme assets (4,996) (4,493)
Total included in staff costs 295 325
Changes in the present value of the defined benefit obligation are as follows:
2007 2006
£'000 £'000
Defined benefit obligation at start of period 100,347 98,023
Current service cost 91 96
Interest cost 5,200 4,722
Contributions by scheme participants 3 3
Actuarial (gains)/losses (9,524) 932
Benefits paid (4,573) (3,429)
Defined benefit obligation at end of period 91,544 100,347
Changes in the fair value of scheme assets are as follows:
2007 2006
£'000 £'000
Fair value of assets at start of period 81,911 77,093
Expected return on assets 4,996 4,493
Actuarial (losses)/gains (3,242) 2,251
Contributions by employer 1,900 1,500
Contributions by scheme participants 3 3
Benefits paid (4,573) (3,429)
Fair value of assets at end of period 80,995 81,911
Analysis of the movement in the balance sheet liability:
2007 2006
£'000 £'000
At start of period 18,436 20,930
Total expense as above 295 325
Contributions paid (1,900) (1,500)
Actuarial gains taken directly to equity (6,282) (1,319)
At end of period 10,549 18,436
The actual return on scheme assets was £1,754,000 (2006: £6,744,000).
6 Taxation
2007 2006
£'000 £'000
Analysis of charge in the period:
UK tax - current (341) (96)
Overseas tax - current 2,534 1,041
Deferred tax (1,146) 1,403
Impact of change in UK tax rate on deferred tax 25 -
Taxation 1,072 2,348
The tax for the year is different to the standard rate of corporation tax in the
UK (30%). The differences are explained below:
2007 2006
£'000 £'000
Profit before tax 3,302 7,338
Profit on ordinary activities multiplied by rate of corporation tax in the UK of 30% 991 2,201
Effects of:
Adjustments in respect of foreign tax rates 360 235
Expenses not deductible for tax purposes 88 86
Timing differences and other differences (367) (174)
Taxation 1,072 2,348
7 Dividends
2007 2006
Equity dividends - ordinary shares £'000 £'000
Interim paid: 4.00p (2006: 3.25p) 1,008 809
Final paid: 6.25p (2006: 4.50p) 1,549 1,102
2,557 1,911
In addition, the Directors are proposing a final dividend in respect of the
period ended 29 December 2007, of 8.00p per share, which will absorb an
estimated £2.01m of Shareholders' funds. It will be paid on 28 April 2008 to
Shareholders who are on the register of members on 28 March 2008. These
financial statements do not reflect this proposed dividend.
8 Earnings per share
Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to ordinary Shareholders by the weighted average number of ordinary
shares in issue during the period, excluding those held in the Employee Share
Trust which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potential dilutive ordinary
shares. The potential dilutive ordinary shares relate to those share options
granted to employees where the exercise price is less than the average market
price of the Company's ordinary shares at the balance sheet date.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below:
2007 2006
Weighted Weighted
average average
number number
Earnings of shares Pence per Earnings of shares Pence per
£'000 '000 share £'000 '000 share
Earnings attributable to
ordinary Shareholders 2,230 4,990
Ordinary shares in issue 25,470 25,343
Shares held by Employee Share
Trust (501) (754)
Basic EPS 2,230 24,969 8.93 4,990 24,589 20.29
Effect of dilutive share 802 (0.28) 1,084 (0.85)
options
Diluted EPS 2,230 25,771 8.65 4,990 25,673 19.44
9 Statement of changes in Shareholders' equity
Retained earnings
Share Capital Cumulative Profit
Share premium redemption translation Own and Total
capital reserve reserve differences shares loss Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2006 9,634 37,684 208 (210) (1,822) (29,534) 15,960
Profit for the period 4,990 4,990
Exchange adjustments net of tax (1,540) (1,540)
Shares issued 132 73 205
Own shares utilised 424 (424) -
Employee share options
taken to reserves 650 650
Deferred tax on employee
share options taken to
reserves 459 459
Current tax deduction on
exercise of employee share
options 492 492
Actuarial gains taken to
reserves 1,319 1,319
Deferred tax on pensions
taken to reserves (548) (548)
Dividends (1,911) (1,911)
Balance at 30 December 2006 9,766 37,757 208 (1,750) (1,398) (24,507) 20,076
Balance at 31 December 2006 9,766 37,757 208 (1,750) (1,398) (24,507) 20,076
Profit for the period 2,230 2,230
Exchange adjustments net
of tax 60 60
Shares issued 57 186 243
Own shares utilised 830 (830) -
Own shares purchased (183) (183)
Employee share options
taken to reserves 595 595
Share grant taken to
reserves 908 908
Deferred tax on employee
share options taken to
reserves (540) (540)
Actuarial gains taken to
reserves 6,282 6,282
Deferred tax on pensions
taken to reserves (2,396) (2,396)
Dividends (2,557) (2,557)
Balance at 29 December 2007 9,823 37,943 208 (1,690) (751) (20,815) 24,718
The cumulative goodwill written off to the reserves in respect of subsidiary
companies currently held amounts to £15,297,000 (2006: £15,297,000).
10 Cash generated from operations
2007 2006
£'000 £'000
Operating profit 3,747 7,164
Adjustments for:
Depreciation charge 1,206 604
Amortisation of intangibles 688 778
Profit on disposal of property, plant and equipment - (1)
Exceptional non cash items 1,253 -
Share option charge 595 735
Share grant 1,140 -
IAS 19 pension charge for defined benefit scheme 295 325
Contributions to defined benefit pension scheme (1,900) (1,500)
Changes in working capital:
Increase in inventories (1,426) (1,162)
Increase in trade and other receivables (7,537) (5,195)
Increase in trade and other payables 2,721 1,589
Decrease in provisions - (285)
Cash generated from operations 782 3,052
11 Five Year Financial Record
IFRS IFRS IFRS IFRS UK GAAP
2007 2006 2005 2004 2003
Income statement £'000 £'000 £'000 £'000 £'000
Continuing operations
Sales 146,823 119,519 96,481 88,965 89,773
Operating profit 3,747 7,164 5,388 2,625 1,340
Operating profit before exceptional 1,761
items and share grant 10,160 7,541 5,703 3,150
Exceptional items (5,273) (377) (315) (525) (421)
Share grant (1,140) - - - -
Operating profit 3,747 7,164 5,388 2,625 1,340
Finance costs (458) (44) (47) (140) (234)
Finance income 13 218 300 325 216
Profit before tax 3,302 7,338 5,641 2,810 1,322
Taxation (1,072) (2,348) (1,691) 492 548
Profit from continuing operations 2,230 4,990 3,950 3,302 1,870
Profit/(loss) from discontinued
operations - - 4,012 3,270 (10,006)
Profit/(loss) attributable to equity
Shareholders 2,230 4,990 7,962 6,572 (8,136)
Earnings/(loss) per ordinary share 8.93p 20.29p 30.94p 22.97p (28.34)p
Dividend per share - paid and 12.00p 9.50p 7.00p 5.25p 4.00p
proposed
For consistency UK GAAP results have been split between continuing and
discontinued operations as required by IFRS.
This information is provided by RNS
The company news service from the London Stock Exchange