10th Mar 2006 07:01
4imprint Group PLC10 March 2006 Press Release 10 March 2006 4imprint Group plc Preliminary results for the year ended 31 December 2005 4imprint Group plc announces today its results for the year ended 31 December2005 Highlights • Total sales £99.03m, 6% ahead of prior year, continuing operations at £96.48m, 8% ahead. Sales of the web/catalogue based US Direct Marketing business increased by 28% over prior year • Operating profit before exceptional items £6.50m, 57% ahead of prior year, continuing operations at £5.70m, 81% ahead • Total profit before tax and exceptional items at £6.77m is 53% ahead of prior year • Total profit before tax, after exceptional net income of £2.18m (2004 : £0.53m expense), is £8.95m (2004 : £3.90m) • Cash is £9.01m at the end of 2005; following £10.83m of own share purchases, £1.98m spent on acquisitions, £1.00m capital expenditure and £1.61m dividends paid. This was partly offset by £4.85m generated from operating activities in the year and £5.26m generated from the sale of Adventures in Advertising Corporation • Final proposed dividend of 4.50p per share, an increase of 28% on prior year. Total dividend, paid and proposed, 33% ahead of 2004 • Basic EPS is 30.94p compared to 22.97p in 2004, an increase of 35% • Adventures in Advertising Corporation, a US subsidiary, was sold on 21 July 2005 for US$11.3m cash consideration Commenting on the results, Ken Minton, Executive Chairman said: "The Group has performed well in 2005, and the results reflect the benefits ofvalue generating initiatives executed during this period. Cash generation wasexcellent and the Group's financial, managerial resources together with marketstrength provide a strong base for further progress." -Ends- For further information, please contact: Ken Minton, Chairman Tel: +44 (0) 20 7299 72014imprint Group plc Chairman's Statement In my statement to Shareholders in the 2005 half year report, I set out severalinitiatives which were being actively pursued in our drive for sustained growthof Shareholder value. Shareholders will recall that these initiatives were asfollows:- (a) The completion of the disposal of the US Franchising business. (b) In the US Direct Marketing and Corporate Programmes Division, the exploitation of the rapid growth opportunity in the web/catalogue sector, where our business is already a market leader. (c) In the European Direct Marketing and Corporate Programmes Division to restore to full profitability the Corporate Programmes sector, and to put new impetus behind the web/catalogue business and remodel it using the successful and proven template of the US Division. (d) To integrate the European Premium Promotions Division into the European Direct Marketing and Corporate Programmes Division, streamline the cost base, and refocus it on customer service and growth. For the 4imprint Group, 2005 was a very successful year. Group sales (including that of US Franchising, which was sold in July) were£99.03m, 6% ahead of 2004, while profit before tax, finance income andexceptional items, on the same basis, at £6.50m was 57% better than last year. Indeed, for continuing businesses, the performance was even more impressive withprofit before tax, finance income and exceptional items at £5.70m, 81% ahead of2004. Total profit before tax and exceptional items is £6.77m (2004 : £4.42m) andafter exceptional items is £8.95m (2004 : £3.90m). The divisional performances were as follows:- (a) The European Direct Marketing and Corporate Programmes Division achieved sales growth of 10% while operating profit before exceptional items was 76% ahead of 2004. This excellent result reflected strong improvements in profitability in all component sectors. (b) The US Direct Marketing and Corporate Programmes Division also delivered an outstanding performance with sales up 14% and operating profit 53% ahead of last year. The Direct Marketing business which represents the majority of this Division delivered sales growth of 28%, while the Corporate Programmes sector was downsized but delivered better profits on lower sales. (c) At the European Premium Promotions Division sales and profits were lower than in 2004 but as stated earlier, this Division has been refocused and integrated with the European Direct Marketing and Corporate Programmes Division with substantial reductions in administration costs. This has allowed the whole thrust of this Division to be concentrated on customer service and growth. At the Corporate level, costs have remained under tight control, and beforedefined benefit pension charges and share option charges, headquarter costs were24% below those of last year. Net interest income at £0.27m was similar to last year. The Group taxation charge at £0.99m comprises £1.69m tax charge relating tocontinuing operations, £1.05m tax credit on the disposal of the US Franchisingbusiness, £0.16m tax charge on the profits of the US Franchising business to thedate of disposal and £0.19m tax charge relating to the US Supplier business soldin 1999. Total Group profit after tax, including profit arising from the disposal of theUS Franchising business, amounted to £7.96m (2004 : £6.57m). Basic earnings per share for all operations at 30.94p was 35% ahead of lastyear. Acquisitions and capital investment The Group made one acquisition in 2005, the purchase of MT Promotions Limited, aspeciality supplier of golf related promotional products, which has been avaluable addition to the European Direct Marketing and Corporate ProgrammesDivision. The total consideration was £1.98m. Capital investments amounted to £1.00m. Cash management Cash is £9.01m at the end of 2005; following £10.83m of own share purchases,£1.98m spent on acquisitions, £1.00m capital expenditure and £1.61m dividendspaid. This was partly offset by £4.85m generated from operating activities inthe year and £5.26m generated from the sale of Adventures in AdvertisingCorporation Dividend The Board is recommending a final dividend of 4.50p which will bring the totaldividend, paid and proposed, to 7.00p (2004 : final dividend 3.50p, totaldividend, paid and proposed, 5.25p). People It is often stated in Annual Reports of Companies that much of the success of anenterprise is due to the people employed in it. I am absolutely certain thatthis is the case of 4imprint which is a business requiring very modest capital,and whose success relies totally on the energy, creativity, and commitment tocustomer service, of our people. On behalf of the Board I thank everyone fortheir contribution to the success we have enjoyed in 2005. Outlook Although we are only two months into 2006, the initial trading results and thegeneral level of activity in the markets we serve suggests that this year willbe another year of growth for the 4imprint Group. Ken MintonExecutive Chairman10 March 2006 Finance Director's Report • Sales from continuing operations are 8% ahead of prior year and total sales are 6% ahead of prior year. • Operating profit before exceptional items from continuing operations at £5.70m is 81% ahead of prior year. • Total operating profit before exceptional items at £6.50m is 57% ahead of prior year. • Total profit before tax and exceptional items is £6.77m (2004 : £4.42m); total profit before tax is £8.95m (2004 : £3.90m). Summary of results As previously reported, the Financial Statements have been prepared underInternational Financial Reporting Standards ("IFRS") as adopted by the EuropeanUnion. In this year of transition, presented below, is a summary of results in aUK GAAP format. 2005 2004 £'000 £'000Sales:Continuing operations 96,481 88,965Discontinued operations 2,546 4,626Total 99,027 93,591Operating profit before exceptional items:Continuing operations 5,703 3,150Discontinued operations 797 980Total 6,500 4,130Operating profit after exceptional items:Continuing operations 5,388 2,625Discontinued operations 3,294 980Total 8,682 3,605Net finance income 269 291Total profit before tax after exceptional items 8,951 3,896Total profit before tax and exceptional items 6,769 4,421Exceptional items 2,182 (525)Total profit before tax after exceptional items 8,951 3,896Taxation (989) 2,676Total profit after tax 7,962 6,572 Sales Sales from continuing operations at £96.48m increased by 8% compared to 2004. Sales growth in the US Direct Marketing and Corporate Programmes Division was14%, with the US Direct Marketing business 28% ahead. Sales growth in theEuropean Direct Marketing and Corporate Programmes Division was 10%. Sales inthe European Premium Promotions Division were 13% below prior year. Operating profit Operating profit before exceptional items for discontinued operations representsthe operating profit of the US Franchising business up to the date of sale, 21July 2005. Charges for the closed defined benefit pension scheme under IAS 19 "EmployeeBenefits" are £0.50m (2004: £0.64m) and for employee share benefits under IFRS 2"Share Based Payments" are £0.50m (2004: £0.02m). Excluding the impact of theseitems, operating profit before exceptional items has increased to £7.50m from£4.79m in 2004, an increase of 57%. Exceptional Items 2005 2004Exceptional charge/(income) £'000 £'000Continuing operations 315 525Discontinued operations (2,497) - (2,182) 525 Continuing operations The exceptional charge of £0.32m comprises two items: (a) Exceptional costs of £0.44m relate to the further reorganisation of the European Premium Promotions Division and its integration into the European Direct Marketing and Corporate Programmes Division, together with the integration of MT Promotions Limited into the European Direct Marketing and Corporate Programmes Division. (b) Exceptional income of £0.13m relates to insurance income net of costs which was received in 2005 for the product recall in the European Premium Promotions Division in 2004. The costs of the product recall were recognised as exceptional in 2004. Discontinued operations The exceptional income of £2.50m comprises the following items: (a) On 21 July 2005 the Group sold its US based Franchising business to a US Private Investment Group for total cash consideration of US$11.3m. The net cash inflow (after costs of disposal) in the year was £5.26m and £0.58m (US$1.0m) of deferred consideration is due on 21 July 2006. Exceptional profit on disposal of the US Franchising business is £1.81m. The net assets of this business at the date of disposal were £4.05m. (b) Exceptional income of £0.13m relates to a bad debt provision release in the US Franchising business following a review earlier in the year. (c) During the year the Group received the final instalment of consideration relating to the disposal of a US Supplier business in 1999. A provision of £0.55m was released in relation to this receipt and is shown as exceptional. Pensions 2005 2004Pension charges £'000 £'000Defined contribution schemes 298 247Closed defined benefit scheme 498 640 796 887 Most employees are members of defined contribution schemes which have a regularannual cost to the company of around £0.3m. The Group also has a defined benefitscheme which is closed to new members. Membership of the scheme at the date ofits last accounts (April 2005) was 5 active members, 1,498 deferred pensionersand 1,017 pensioners. The last full scheme valuation in April 2004 showed apre-tax deficit of £11.3m. The Company accounts for pension costs for the defined benefit scheme inaccordance with the amendment to IAS 19 "Employee benefits - actuarial gains andlosses, group plans and disclosures" with the deficit recognised in full on thebalance sheet. The profit and loss charge in the year is £0.50m (2004: £0.64m).Employer's cash payments into the scheme are £1.16m (2004:£1.44m). At thebeginning of the year pension liabilities were £86.38m. This increased to£98.02m at the end of the year, primarily due to the reduction in the discountrate to 4.9% from 5.5% as a consequence of reduced bond yields. In the sameperiod assets of the scheme increased from £68.39m to £77.09m. The deficit of£20.93m is included in the balance sheet as a non current liability, with anassociated deferred tax asset included within non current assets. Share option charges The Group adopted IFRS 2 "Share based payments" in the year. There is a £0.50m(2004:£0.02m) charge to operating profit for SAYE, Executive Directors andSenior Management schemes. The charge has been calculated using the Monte Carloand Binomial valuation models and the charge is spread over the vesting periodof the options. Net finance income Net finance income from continuing operations is £0.25m in 2005, compared to£0.19m in 2004. The majority of the group cash balance is held and invested inthe UK. The average month end cash balance during 2005 was £8.42m (2004:£8.12m). Finance income from discontinued operations is £0.02m in 2005, compared to£0.11m in 2004 and principally represents the interest receivable on thedeferred consideration relating to the disposal of a US Supplier business in1999. Taxation The tax charge on continuing operations is £1.69m, an effective rate of 30%.£1.22m of this charge relates to current overseas tax, £1.1m is in the USbusiness and is offset for payment by available credits from discontinuedoperations. There is a tax credit of £0.70m for discontinued operations. This isprincipally due to the acceleration and crystallisation of tax deductionsrelating to goodwill associated with the US Franchising business, offset by£0.19m deferred tax charge relating to the disposal of a US Supplier business in1999, and a £0.16m tax charge on the US Franchising business profits to the dateof disposal. Acquisitions The Group acquired MT Promotions Limited for total consideration (includingcosts) of £1.98m on 3 August 2005. £0.70m of the consideration is deferred forone year and is held in escrow. MT Promotions Limited is a speciality supplierof golf related promotional products. Segment reporting Results have been presented consistently with the 2004 financial statements,showing four separate Divisions of the Group. Following the disposal of the USFranchising business in 2005 as well as the integration of the European PremiumPromotions Division into the European Direct Marketing and Corporate ProgrammesDivision during 2005, results going forward will be presented in two separatesegments in accordance with the way the business is managed. Earnings per share 2005 2004Basic p pContinuing operations 15.35 11.54Discontinued operations 15.59 11.43 30.94 22.97 Total basic earnings per share (under UK GAAP) in 2004 were 21.53p and the moveto International Financial Reporting Standards increased this to 22.97p. In 2005, continuing operations have a 30% tax charge which deducts 6.57p fromEPS and in 2004 there was a tax credit which contributed 1.72p to continuingoperations EPS. In both years discontinued operations include significant tax credits whichcontribute 2.73p to EPS in 2005 and 7.63p in 2004. In 2005 the average number of shares decreased as a result of the share buyback.This contributed 2.95p to total basic EPS. Dividend The Board proposes a final dividend of 4.50p which together with the interimdividend of 2.50p gives 7.00p (2004 : 5.25p) for the year; dividend cover basedon profits from continuing operations and calculated using the interim dividendpaid in the year and the final dividend proposed is 2.3x (2004 : 2.2x). Cash flow The Group net cash balance at 31 December 2005 was £9.01m. At 30 June 2005 theGroup had net cash of £3.39m following a share buyback of £9.90m and the receiptof £1.65m deferred proceeds on disposal of a US Supplier business in 1999.Following the disposal of the US Franchising business in July, cash increased by£5.26m. Cash generated from operating activities in the second half of the yearis £4.64m, therefore following routine investment in capital expenditure of£0.47m and payment of dividends of £0.62m in the second half, the cash balancewould have been around £12m. Following the purchase of own shares for £0.93m andthe acquisition of MT Promotions Limited for £1.98m the cash balance reduced to£9.01m. Deferred proceeds on the US Franchising business disposal are £0.58m (US$1m) andare due in July 2006. This amount is currently held in escrow. Balance sheet and Shareholders' funds Equity Shareholders' funds have decreased to £15.96m (2004: £21.86m), after ownshare purchases in 2005 totalling £10.83m. Reported Shareholders' funds in 2004under UK GAAP were £34.88m and, the transition to IFRS reduced this to £21.86m.This reduction was principally a result of including the defined benefit pensionfund deficit as a liability on the balance sheet offset by the associateddeferred tax asset. Exchange and cash management The average US dollar exchange rate through the year used to translate theprofit and loss accounts of overseas subsidiaries is $1.8144 (2004: $1.8312) tothe pound. The exchange rate at the balance sheet date, used to translate assets andliabilities in dollars was $1.7168 (2004: $1.9031). This resulted in an increaseof US dollar denominated assets of £1.65m. The Group does not currently hedge the translation exposure of profits andassets of its US subsidiaries. Treasury policy Treasury policy is centrally to manage the financial requirements of theDivisions which arise in relation to business needs. The Group operates cashpooling arrangements on currency accounts for its US operations and separatelyfor its UK and European operations. The Group matches currency requirements inits UK Divisions with currency cash flows arising in its subsidiaries andactively seeks to hold the majority of cash in the UK on deposit to maximiseinterest income. Adoption of International Financial Reporting Standards The Group is required to adopt International Financial Reporting Standards(IFRS) for the first time in its financial statements to 31 December 2005. The principal adjustments to UK GAAP relate to: • Adoption of the amendment to IAS 19 "Employee benefits - actuarial gains and losses, group plans and disclosures" recognising employee benefit obligations, particularly pensions, on the balance sheet. • Goodwill is no longer amortised, but is subject to impairment review, in line with IFRS 3 "Business Combinations" and IAS 36 "Impairment of assets". • Recognition of the cost of share based payments granted after 7 November 2002, which had not vested by 1 January 2005, in line with IFRS 2 "Share-based payment". • Dividends are recognised in the period in which they are approved in line with IAS 37 "Provisions, contingent liabilities and contingent assets". • Tax implications of the adjustments outlined above in accordance with IAS 12 "Income taxes". The Group's estimate of its results using UK GAAP accounting policies andstandards applicable in 2004 have been included for Shareholder information. UK GAAP IFRS UK GAAP IFRS 2004 2004 2005 2005 £'000 £'000 £'000 £'000Continuing operationsOperating profit before goodwill amortisation andexceptional items 5,847 5,703 2,937 3,150Goodwill amortisation (276) - (276) -Exceptional items (315) (315) (525) (525)Operating profit 5,256 5,388 2,136 2,625Basic earnings per share - continuing operations 15.00p 15.35p 10.09p 11.54pDiscontinued operationsOperating profit including profit on disposal 3,342 3,294 984 980Basic earnings per share - all operations 30.70p 30.94p 21.53p 22.97p Net assets 30,546 15,960 34,877 21,864 2005 2004Continuing operations £'000 £'000Operating profit under UK GAAP 5,256 2,136IFRS 2 share option charge (495) (18)IAS 19 holiday pay accrual 26 (7)Write off of deferred charges, which do not meet (84) (29)the IFRS definition of an assetWrite back of goodwill amortisation 276 276Adjustment of pension charges on an IAS 19 basis 409 267Operating profit under IFRS 5,388 2,625 2005 2004Discontinued operations £'000 £'000Operating profit under UK GAAP including profit on disposal 3,342 984IFRS 2 share option charge (3) (2)IAS 19 holiday pay accrual (45) (2)Operating profit under IFRS including profit on disposal 3,294 980 31 December 31 December 2005 2004 £'000 £'000Net assets under UK GAAP 30,546 34,877IAS19 recognition of pension liability (20,930) (17,989)Write off of UK GAAP pension prepayment (1,802) (1,549)Write back of goodwill amortisation 552 276Write off of deferred charges, which do not meet the IFRS definition of an (735) (582)assetIAS 19 holiday pay accrual (60) (90)Tax on IFRS adjustments 7,287 5,929Dividend Recognition 1,102 992Net assets under IFRS 15,960 21,864 Net assets at 31 December 2005 include the impact of the share buyback, whichreduced net assets by £9,898,000. Gillian DaviesGroup Finance Director10 March 2006 Operating Review European Direct Marketing and Corporate Programmes 2005 2004 £'000 £'000Sales 39,160 35,727Operating profit before exceptional items 3,257 1,850Operating profit 3,222 1,682 The Manchester based business, which accounts for 81% of this Division's sales,comprises:- (a) Trade - supplies a wide range of promotional products on a regular basis to end user suppliers. It provides bespoke printing and engraving services through its own 'in-house' production facilities. This business has continued its excellent sales growth with a 9% like-for-like increase in sales on a record performance in 2004 whilst maintaining strong margins. In August, the acquisition of MT Promotions Limited (MT Golf) added a further dimension to this division, supplying personalised golf products to end user suppliers and the sports club market. MT Golf has been fully integrated into the existing infrastructure in Manchester. (b) Corporate Programmes - builds on its client base by providing sophisticated design, product development and additional support functions, including warehousing, distribution and product range consultancy, delivering a fully out-sourced solution for specific corporate promotional programmes. Sales have increased by 9% over prior year and this, together with tight overhead control, has contributed significantly to the increased profitability of the Manchester based business in 2005. (c) Direct Marketing - uses integrated catalogue, telephone and web selling techniques. In 2005 it has aligned its strategy for growth with the successes that have been evident in the US Direct Marketing business. This began to impact in the second half of 2005. Sales in the last quarter of 2005 were 45% ahead of the same period in 2004. Continued investment in catalogues and the website, as well as advanced skills and techniques employed in the US business are being used to generate increased sales growth in 2006 and beyond. (d) Field Sales - supplies promotional merchandise to a range of corporate entities on either a preferred supply or 'ad hoc' basis through a number of sales account managers. Sales finished at 96% of prior year and following a reorganisation and a recruitment drive within this team, 2006 has started with a stronger and more experienced sales team. Kreyer Promotions, in Germany, comprises: Corporate Programmes and Field Sales.The business increased its sales by 32% compared to prior year. The majority ofgrowth stemmed from Corporate Programmes, which added a number of major newcustomers. This, together with tight cost control has resulted in the doublingof profits from prior year in this business. European Premium Promotions 2005 2004 £'000 £'000Sales 11,595 13,328Operating profit before exceptional items 638 880Operating profit 358 523 This Division comprises the Product Plus International (PPI) company based inLondon, which specialises in the supply of bespoke promotional products andservices to a range of blue chip clients. Sales for the Division were only 87% of prior year. The airline, cosmetic andretail groups in the Division all performed ahead of prior year, howeverpublishing was significantly below 2004 levels. During the year the Division hasbeen further reorganised and is now integrated and managed as part of theEuropean Direct Marketing and Corporate Programmes Division. This has reducedadministration costs and focused resources on customer service and sales growth. An exceptional charge of £409,000, resulting from the reorganisation, has beenpartly offset by £129,000 net income arising from the insurance settlement onthe prior year product recall. US Direct Marketing and Corporate Programmes 2005 2004 US$'000 £'000 US$'000 £'000Sales 82,965 45,726 73,083 39,910Operating profit 6,561 3,616 4,276 2,335 This Division comprises: the core Direct Marketing operation serving the US andCanada, and a smaller Corporate Programmes operation. Considerable progress wasmade in both during 2005. Direct Marketing sales increased by 28% over 2004. Total orders received grewmore than 26% while orders received from new customers grew 37% over prior year.Orders via the web now represent nearly 40% of order intake. This excellent performance was driven by an aggressive expansion of our prospectcatalogue mailings, an increased investment in internet-based selling methods,principally website technology and search engine advertising, and continuousimprovements in customer retention activities. Added resource and focus inmerchandising and market segmentation capabilities enhanced the result. Thismethod of marketing and selling takes advantage of an increasing number ofbusiness-to-business buyers who embrace a web/telephone purchasing process. The same techniques have been employed in the Canadian market which helped todrive sales up by 60% over 2004, on a more modest increase in prospectcatalogues mailed. The restructuring of our US Corporate Programmes activities was successfullycompleted in the year. As planned, revenue decreased, but contribution to siteprofitability increased over 2004. US Franchising Up to Up to 21 July 21 July 2005 2005 2004 2004 US$'000 £'000 US$'000 £'000Fee income 4,706 2,546 8,471 4,626Operating profit before exceptional items 1,473 797 1,795 980Operating profit 1,721 931 1,795 980 The US Franchising business, Adventures in Advertising Corporation was sold on21 July 2005. Fee income and operating profit is included up to this date. The exceptional item relates to the release of a bad debt provision following areview undertaken earlier in the year. Ken MintonExecutive Chairman10 March 2006 Income statement for the year ended 31 December 2005 2005 2004 Note £'000 £'000Continuing operationsSales 2 96,481 88,965Operating expenses (91,093) (86,340)Operating profit 2 5,388 2,625Operating profit before exceptional items 5,703 3,150Exceptional items 4 (315) (525)Operating profit 2 5,388 2,625Finance costs (47) (140)Finance income 300 325Profit before tax 5,641 2,810Taxation 5 (1,691) 492Profit for the year from continuing operations 3,950 3,302Profit for the year from discontinued operations 6 4,012 3,270Profit attributable to equity shareholders 7,962 6,572Earnings per share for all operationsBasic 8 30.94p 22.97pDiluted 8 29.46p 22.21pEarnings per share from continuing operationsBasic 8 15.35p 11.54pDiluted 8 14.62p 11.16p Statement of recognised income and expense for the year ended 31 December 2005 2005 2004 £'000 £'000 Profit for the financial year 7,962 6,572Exchange adjustments offset in reserves net of tax 413 (614)Actuarial losses taken to reserves net of tax (2,721) (761)Net losses not recognised in income statement (2,308) (1,375) Total recognised income for the year 5,654 5,197 Balance sheet at 31 December 2005 2005 2004 Note £'000 £'000Non Current AssetsProperty, plant and equipment 1,370 1,656Goodwill 4,341 4,341Intangible assets 3,556 2,743Investments 8 8Deferred income tax assets 8,921 8,407 18,196 17,155Current AssetsInventories 5,663 4,640Trade and other receivables 19,864 22,919Cash and cash equivalents 9,103 15,310 34,630 42,869Current LiabilitiesTrade and other payables 14,737 16,077Current tax 823 697Borrowings 91 2,565Provisions 285 832 15,936 20,171Net Current Assets 18,694 22,698Non Current LiabilitiesRetirement benefit obligations 3 20,930 17,989Net Assets 15,960 21,864 Shareholders' EquityShare capital 9 9,634 11,063Share premium reserve 9 37,684 37,659Capital redemption reserve 9 208 208Cumulative translation differences 9 (210) (614)Retained earnings 9 (31,356) (26,452)Total Equity 15,960 21,864 The US dollar to sterling exchange rate at the balance sheet date was $1.7168(2004 : $1.9031). Cash flow statement for the year ended 31 December 2005 2005 2004 Note £'000 £'000Cash flows from operating activitiesCash generated from operations 10 4,662 7,151Tax (paid)/received (179) 470Interest received 409 339Interest paid (47) (141)Net cash generated from operating activities 4,845 7,819Cash flows from investing activitiesAcquisition of subsidiary 11 (1,975) -Disposal of subsidiary 6 5,263 -Deferred consideration on disposal of US Supplier business 6 1,653 546in 1999Purchases of property, plant and equipment (457) (289)Purchases of intangible assets (544) (946)Proceeds from sale of property, plant and equipment 131 -Net cash generated from/(used in) investing activities 4,071 (689)Cash flows from financing activitiesMovements in borrowings • Net proceeds from the issue of new borrowings - 345 • Repayment of borrowings (2,015) (546)Proceeds from issuance of ordinary shares 98 48Purchase of own shares for cancellation (9,898) -Purchase of own shares (933) (889)Dividends paid to shareholders (1,608) (1,364)Net cash used in financing activities (14,356) (2,406)Net (decrease)/ increase in cash and bank overdrafts (5,440) 4,724Cash and bank overdrafts at beginning of the period 14,666 9,905Exchange (losses)/gains on cash and bank overdrafts (214) 37Cash and bank overdrafts at end of the period 9,012 14,666Analysis of cash and bank overdraftsCash at bank and in hand 9,103 15,310Bank overdraft (91) (644) 9,012 14,666 1 Basis of preparation The financial information set out in this announcement does not constitute theGroup statutory accounts for the year ended 31 December 2005 or 31 December2004, but is derived from these accounts. The statutory accounts for the Group for the year ended 31 December 2005 and2004 were reported on by the auditors without qualification and as such did notcontain any statement under section 237(2) or (3) of the Companies Act 1985. From 1 January 2005, 4imprint Group plc is required to prepare its consolidatedfinancial statements in accordance with International Financial ReportingStandards ("IFRS") as adopted by the European Union. The financial informationset out in this preliminary statement has been prepared in accordance with theaccounting policies under IFRS published on the 4imprint website"www.4imprint.co.uk". The Group had previously reported under UK GAAP. A full reconciliation betweenthe figures presented under UK GAAP and IFRS will be provided in the AnnualReport and Accounts. The preparation of financial statements in conformity with generally acceptedaccounting principles requires the use of estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Although these estimates are based on management's bestknowledge of the amount, event or actions, actual results ultimately may differfrom those estimates. The full Annual Report and Accounts for the year ended 31 December 2005 will beposted to shareholders shortly and, after adoption at the Annual GeneralMeeting, delivered to the Registrar of Companies. 2 Segmental reporting Primary reporting format - business segments At 31 December 2005, the Group is reported in three main business segments(following the sale of the US Franchising business on 21 July 2005). Thesegmental results for the year ended 31 December 2005 are as follows: Sales 2005 2004 £'000 £'000Continuing operations European Direct Marketing and Corporate Programmes 39,160 35,727European Premium Promotions 11,595 13,328US Direct Marketing and Corporate Programmes 45,726 39,910Total 96,481 88,965Discontinued operations US Franchising 2,546 4,626Total Operations 99,027 93,591 Operating profit Pension Share option Operating profit/ Exceptional Operating /(loss) before charges charges (loss) before items profit/(loss) exceptional exceptional items items, pension and share option charges 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Continuing operations European DirectMarketing andCorporateProgrammes 3,412 1,910 (85) (57) (70) (3) 3,257 1,850 (35) (168) 3,222 1,682European Premium 718 925 (51) (45) (29) - 638 880 (280) (357) 358 523PromotionsUS Direct Marketing 3,801 2,452 (113) (109) (72) (8) 3,616 2,335 - - 3,616 2,335and CorporateProgrammesUnallocated costs (952) (1,253) (532) (655) (324) (7) (1,808) (1,915) - - (1,808) (1,915)Total 6,979 4,034 (781) (866) (495) (18) 5,703 3,150 (315) (525) 5,388 2,625 Net finance income totalling £253,000 (2004 : £185,000) and taxation charge of£1,691,000 (2004: £492,000 credit) cannot be separately allocated to individualsegments. A review of the segments is included in the Operating Review.Unallocated costs comprise head office costs and costs relating to the closeddefined benefit pension scheme. Operating Pension Share option Operating profit Exceptional Operating profit before charges charges before items profit exceptional exceptional items items, pension and share option charges 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000DiscontinuedoperationsProfit for the period from USFranchisingbusiness 815 1,003 (15) (21) (3) (2) 797 980 134 - 931 980 Profit before tax 1,809 - 1,809 -on disposal of USFranchisingbusinessProfit before tax 554 - 554 -on disposal of USSupplier businessin 1999Total 815 1,003 (15) (21) (3) (2) 797 980 2,497 - 3,294 980 Finance income totalling £16,000 (2004 : £106,000) and a tax credit of £702,000(2004: £2,184,000) is attributable to discontinued operations. Other segment items Assets Liabilities Capital Depreciation Amortisation expenditure 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Continuing operationsEuropean Direct Marketingand Corporate Programmes 19,269 14,909 (7,811) (6,183) 283 404 (235) (340) (472) (509) European PremiumPromotions 6,222 5,861 (1,451) (1,780) 13 187 (39) (41) (7) (4) US Direct Marketing andCorporate Programmes 8,406 6,467 (4,785) (3,400) 445 482 (201) (263) (463) (476) Unallocated assets/(liabilities) and costs 9,244 8,486 (22,728) (19,652) 102 - - - - - Cash/(bank overdrafts andloans) 9,103 15,310 (91) (2,565) Total 52,244 51,033 (36,866) (33,580) 843 1,073 (475) (644) (942) (989) Discontinued operationsDeferred considerationfrom US Supplier businessdisposed in 1999 - 1,854 - (542) - - - - - - US Franchising Business 582 7,137 - (4,038) 158 162 (27) (65) (118) (188) Total 582 8,991 - (4,580) 158 162 (27) (65) (118) (188) Total Operations 52,826 60,024 (36,866) (38,160) 1,001 1,235 (502) (709) (1,060) (1,177) Unallocated assets, liabilities and costs relate to head office items, includingGroup tax and the liability and deferred tax asset relating to the closeddefined benefit pension scheme which cannot be allocated to individual segments. Secondary reporting format - geographical segments Assets Capital Sales expenditure 2005 2004 2005 2004 2005 2004 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations Europe 50,755 49,055 33,183 27,311 398 591 US 45,726 39,910 9,958 8,412 445 482 Unallocated assets - Group cash 9,103 15,310 Total 96,481 88,965 52,244 51,033 843 1,073 Discontinued operations US 2,546 4,626 582 8,991 158 162 Total operations 99,027 93,591 52,826 60,024 1,001 1,235 3 Employee pension schemes The Group operates defined contribution plans for the majority of its UK and USemployees. The regular contributions are charged to the income statement asthey are incurred. The Group also operates a funded UK defined benefit scheme which is closed tonew members. The funds of the scheme are administered by a Trustee Company andare independent of the Group's finances. 2005 2004Continuing and discontinued operations £'000 £'000Net pension costs:Defined contribution plans 298 247Defined benefit scheme:Current service cost 89 75Net interest cost 409 565 796 887 The whole of the above charge was included within operating expenses. Defined benefit plan In the most recent actuarial review of the 4imprint Group plc defined benefitplan the principal assumptions made by the actuaries were: 2005 2004Rate of increase in pensionable salaries 3.90% 3.70%Rate of increase in pensions in payment and deferred pensions 2.80% 2.70%Discount rate 4.90% 5.50%Inflation assumption 2.80% 2.70%Expected return on plan assets 5.89% 6.59% The post-retirement mortality assumptions used are based on the "PA 92" standardtables with some allowance for future mortality improvements. The assumptionsare such that a current non-pensioner member who later retires at age 65 willlive on average for a further 19 years after retirement if they are male and afurther 22 years after retirement if they are female. A current pensioner memberaged 65 will live on average for a further 18 years if they are male and for afurther 21 years if they are female. The amounts recognised in the balance sheet are determined as follows: 2005 2004 £'000 £'000Present value of funded obligations (98,023) (86,379)Fair value of plan assets 77,093 68,390Net liability recognised in the balance sheet (20,930) (17,989) The major categories of plan assets as a percentage of total plan assets are asfollows: 2005 2004Equities 40% 53%Bonds 44% 46%Property 14% nilCash 2% 1% The amounts recognised in the income statement are as follows: 2005 2004 £'000 £'000Current service cost 89 75Interest cost 4,657 4,506Expected return on plan assets (4,248) (3,941)Total included in staff costs 498 640 Changes in the present value of the defined benefit obligation are as follows: 2005 2004 £'000 £'000Defined benefit obligation at start of year 86,379 83,718Current service cost 89 75Interest cost 4,657 4,506Contributions by plan participants 2 5Actuarial loss 10,616 1,743Benefits paid (3,720) (3,668)Defined benefit obligation at end of year 98,023 86,379 Changes in the fair value of plan assets are as follows: 2005 2004 £'000 £'000Fair value of assets at start of year 68,390 66,016Expected return on assets 4,248 3,941Actuarial gains 7,013 656Contributions by employer 1,160 1,440Contributions by plan participants 2 5Benefits paid (3,720) (3,668)Fair value of assets at end of year 77,093 68,390 Analysis of the movement in the balance sheet liability: 2005 2004 £'000 £'000At start of year 17,989 17,702Total expense as above 498 640Contributions paid (1,160) (1,440)Actuarial losses taken directly to equity 3,603 1,08731 December 20,930 17,989 The actual return on plan assets was £11,261,000 (2004: £4,597,000). 4 Exceptional items 2005 2004Continuing operations £'000 £'000Product recall income/(charge) 129 (267)European reorganisation charge (444) (258) (315) (525) The product recall charge in 2004 relates to the cost of a product recall issuein the European Premium Promotions Division which has been disclosed separatelydue to its rare occurrence and size. In 2005 insurance income net of costs wasreceived. The European reorganisation charge in 2005 relates to the ongoing integration ofthe European Premium Promotions Division into the European Direct Marketing andCorporate Programmes Division, and the integration of MT Promotions Limited,acquired in the period, into the European Direct Marketing and CorporateProgrammes Division. In 2004 the charge relates to reorganisation in theEuropean Premium Promotions Division and the European Direct Marketing andCorporate Programmes Division. 5 Taxation 2005 2004 Continuing operations £'000 £'000 Analysis of charge/(credit) in the period: UK tax - current - - Overseas tax - current 1,225 (21) Deferred tax 466 (471) Taxation 1,691 (492) The tax for the year is different to the standard rate of corporation tax in theUK (30%). The differences are explained below: 2005 2004Continuing operations £'000 £'000 Profit before tax 5,641 2,810Profit on ordinary activities multiplied by rate of UK corporation tax of 30% (2004 : 30%) 1,692 843Effects of:Adjustments in respect of foreign tax rates 222 (85)Expenses not deductible for tax purposes 145 43Timing differences and other differences (368) (1,293)Total taxation 1,691 (492) 6 Discontinued operations 2005 2004 Note £'000 £'000Profit after tax on disposal of US Franchising business a 2,866 -Profit after tax for the period from US Franchising business b 770 1,279Profit after tax attributable to disposal of US Supplier business in 1999 c 376 1,991 4,012 3,270 a) Disposal of US Franchising business On 21 July 2005, the Group completed the sale of Adventures in AdvertisingCorporation ("AiA") to The Riverside Company, a US Private Investment Group forconsideration of US$11.3m. AiA constitutes the US Franchising business in note2 and being the only franchise business in the Group did not fit with the longterm strategy, which is to concentrate on the core activities of providingproducts and support services for Corporate and Product Promotions, using "inhouse" resources. 2005 £'000 £'000Net cash consideration (after costs of disposal) 5,263Deferred cash consideration 582Total consideration 5,845 Total assets carrying value at date of disposal (8,655)Total liabilities carrying value at date of disposal 4,610Net assets on disposal (4,045)Cumulative exchange gain transferred from reserves 9Profit before tax 1,809Tax credit arising on disposal 1,057Profit on disposal of US Franchising business 2,866 The tax credit arising on disposal relates principally to the acceleration andcrystallisation of tax deductible goodwill. This goodwill would otherwise havebeen deductible over the next ten years. b) Profit for the period from US Franchising business 2005 2004 £'000 £'000Sales 2,546 4,626Operating expenses (1,615) (3,646)Operating profit 931 980Operating profit before exceptional item 797 980Exceptional item 134 -Operating profit 931 980Finance income 2 14Profit before tax 933 994Taxation (163) 285Profit after tax 770 1,279 The exceptional item relates to the release of a bad debt provision following areview undertaken in this business. c) Profit attributable to disposal of US Supplier business in 1999 2005 2004 £'000 £'000Exceptional operating profit 554 -Finance income 14 92Profit before tax 568 92Taxation (192) 1,899Profit after tax 376 1,991 The exceptional operating profit relates to the release of a provision duringthe year. In addition to the profit above, the Group received £1,653,000 of deferredconsideration during the year. This is included in cash generated from investingactivities in the cash flow. d) Cash flows arising from discontinued operations 2005 2004 £'000 £'000Net cash generated from operating activities 731 1,492Net cash generated from disposal of subsidiary 5,263 -Deferred consideration on disposal of US Supplier business in 1999 1,653 546 7,647 2,038 7 Dividends 2005 2004 £'000 £'000Equity dividends - ordinary sharesInterim paid: 2.50p (2004: 1.75p) 616 503Final paid: 3.50p (2004: 3.00p) 992 861 In addition, the Directors are proposing a final dividend in respect of thefinancial year ended 31 December 2005, of 4.50p per share which will absorb anestimated £1.10m of Shareholders' funds. It will be paid on 21 April 2006 toShareholders who are on the register of members on 24 March 2006. 8 Earnings per share Basic earnings per share (EPS) is calculated by dividing the earningsattributable to ordinary Shareholders by the weighted average number of ordinaryshares in issue during the period, excluding those held in the Employee ShareTrust (note 9) which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all potential dilutive ordinaryshares. The potential dilutive ordinary shares relate to those share optionsgranted to employees where the exercise price is less than the average marketprice of the Company's ordinary shares at the balance sheet date. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below: 2005 2004 Weighted Weighted average average number number Earnings of shares Pence per Earnings of shares Pence per £'000 '000 share £'000 '000 shareEarnings attributable to 7,962 6,572ordinary shareholdersOrdinary shares in issue 26,217 28,742Shares held by employee (481) (135)share trustBasic EPS 7,962 25,736 30.94 6,572 28,607 22.97Effect of dilutivesecuritiesOptions 1,291 (1.48) 980 (0.76)Diluted EPSAdjusted earnings 7,962 27,027 29.46 6,572 29,587 22.21Earnings per share fromcontinuing operationsBasic EPS 3,950 25,736 15.35 3,302 28,607 11.54Diluted EPS 3,950 27,027 14.62 3,302 29,587 11.16Earnings per share fromdiscontinued operationsBasic EPS 4,012 25,736 15.59 3,270 28,607 11.43Diluted EPS 4,012 27,027 14.84 3,270 29,587 11.05 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 28 December 2003 11,044 37,630 208 - (7) (30,030) 18,845Profit for the period 6,572 6,572Exchange adjustments net of (614) (614)taxOwn shares issued 7 7Own shares purchased (889) (889)Shares issued 19 29 48Employee share options 20 20Actuarial losses taken to (1,087) (1,087)reservesDeferred tax on actuarial 326 326losses taken to reservesDividends (1,364) (1,364)Balance at 31 December 2004 11,063 37,659 208 (614) (889) (25,563) 21,864 Balance at 1 January 2005 11,063 37,659 208 (614) (889) (25,563) 21,864Profit for the period 7,962 7,962Exchange adjustments net 413 413of taxExchange adjustment (9) (9)previously taken toreserves, transferred toincome statement ondisposal of subsidiaryOwn shares purchased (933) (933)Shares issued 73 25 98Own shares purchased and (1,502) (8,396) (9,898)cancelled Employee share options 498 498Deferred tax on employee 294 294share options taken toreservesActuarial losses taken to (3,603) (3,603)reservesDeferred tax on actuarial 882 882losses taken to reserves Dividends (1,608) (1,608)Balance at 31 December 9,634 37,684 208 (210) (1,822) (29,534) 15,9602005 The cumulative goodwill written off to the reserves in respect of subsidiarycompanies and businesses currently held amounts to £15,297,000 (2004 :£15,297,000). Purchase of own shares represents the cost of 875,000 of the Company's ordinaryshares held at 31 December 2005 (2004 : 440,000). These shares were acquired bythe 4imprint Group plc Employee Share Trust in 2005 and 2004 to meet obligationsunder the Executive Share Option Scheme using funds provided by 4imprint Groupplc. The costs of funding and administering the schemes are charged to theincome statement of the Company in the period to which they relate. Dividendincome from and voting rights in respect of the shares held under Trust havebeen waived and the shares have been excluded from the earnings per sharecalculation. The market value of the shares at 31 December 2005 was £2,620,625(2004 : £838,201). 10 Cash generated from operations 2005 2004 £'000 £'000Continuing operationsNet profit 3,950 3,302Adjustments for:Taxation 1,691 (492)Depreciation charge 475 644(Profit)/loss on disposal of property, plant and equipment (13) 44Amortisation of intangibles 942 989Finance income (300) (325)Finance costs 47 141Share option charge 495 18IAS 19 pension charge for defined benefit scheme 498 640Contributions to defined benefit pension scheme (1,160) (1,440) Changes in working capital:(Increase)/decrease in inventories (944) 1,261(Increase)/decrease in trade and other receivables (2,194) 2,459Increase/(decrease) in trade and other payables 474 (1,466)Decrease in provisions (30) (116)Cash generated from continuing operations 3,931 5,659Discontinued operationsNet profit 4,012 3,270Adjustments for:Taxation (702) (2,184)Depreciation charge 27 65Profit on disposal of subsidiary undertaking (1,809) -Amortisation of intangibles 118 188Finance income (16) (106)Share option charge 3 2 Changes in working capital:Decrease/(increase) in trade and other receivables 170 (127)(Decrease)/increase in trade and other payables (518) 618Decrease in provisions (554) (234)Cash generated from discontinued operations 731 1,492Cash generated from operations 4,662 7,151 11 Acquisition of MT Promotions Limited The Group purchased MT Promotions Limited on 3 August 2005 for a totalconsideration of £1,975,000 (including acquisition costs) of which £700,000 willbe paid on 3 August 2006. This purchase has been accounted for as anacquisition. Prior to its acquisition by the Group, MT Promotions Limited earned £318,000 ofprofit before interest and £317,000 after interest for the period 1 January 2005to 2 August 2005. All of the voting shares were acquired. From 3 August 2005 to 31 December 2005the acquisition contributed £484,000 to sales, £110,000 to profit before andafter interest and £100,000 to the Group's net operating cashflows. MTPromotions Limited utilised no capital expenditure from 3 August 2005 to 31December 2005. Assets acquired are recognised at their respective provisional fair values. Carrying values pre Provisional acquisition fair value £'000 £'000Intangible fixed assets - brand name - 1,775Property, plant and equipment 10 -Inventories 200 200Cost of acquisition 1,975 Cash flow in the year for the cost of acquisition is as follows: £'000Cash used in investing activities 1,975 £700,000 deferred consideration is due to be paid on 3 August 2006 and is heldin escrow. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
4Imprint