Final Results

10th Oct 2006 07:01

St. Ives PLC10 October 2006 10 October 2006 ST IVES plc Preliminary Results for the 52 weeks ended 28 July 2006 St Ives plc, the UK's leading printing group, announces preliminary results forthe 52 weeks ended 28 July 2006. Key Points • Turnover £401.3m (2005: £419.5m) • Profit before tax £22.6m (2005: £20.2m) • Underlying* profit before tax £21.7m (2005: £38.2m) • Basic earnings per share 14.38p (2005: 11.14p) • Underlying* earnings per share 14.16p (2005: 24.73p) • Total dividend maintained at 17.15p per share * before restructuring costs and provision releases Commenting on the results, Chairman, Miles Emley said: "Over-capacity and volatile demand in most of our markets made 2006 anotherchallenging year. However the closure of a number of competitors in recentmonths should improve the balance of supply and demand. "Our market leading reputation for service and our strong financial positionmean that we are well positioned to respond rapidly to any opportunities thatarise in our industry and we will continue to seek ways to develop and grow ourcore activities for the benefit of shareholders." For further information contact: St Ives plcMiles Emley, ChairmanBrian Edwards, Managing DirectorRay Morley, Finance Director 020 7928 8844 SmithfieldJohn AntcliffeRupert Trefgarne 020 7360 4900 CHAIRMAN'S STATEMENT Results Sales were £401.3 million (2005 - £419.5 million) and profit before taxation was£22.6 million (2005 - £20.2 million). Profit before restructuring costs andprovision releases and taxation was £21.7 million (2005 - £38.2 million).Earnings per share were 14.38p or 14.16p before restructuring costs andprovision releases (2005 - 11.14p and 24.73p respectively). Dividends A maintained final dividend of 12.15p per share is proposed, making a totaldividend of 17.15p per share for the year as a whole, the same as last year. Ifapproved, the dividend will be paid on 8 December 2006 to shareholders on theregister on 10 November 2006. Trading Conditions Over-capacity in most of our markets and the resultant intense price competitionmade it another challenging year for our Company. In all our markets demand hasbeen more volatile and forward visibility more restricted than usual. Our Group Sales team, inaugurated in April, made an extremely promisingcontribution. Media Products Amongst Media Products in the UK, demand for books remained steady. Our ownbusiness performed well and was able to mitigate the effects of pricing pressureby winning increased volume. We continued to increase sales of ancillarylogistics and distribution services. Our sales to magazine markets were lower aswe were unwilling to reduce prices to the unsustainable levels offered bycertain of our competitors, especially in the case of longer-run titles.Magazine paginations were particularly volatile towards the end of our financialyear. Growth in demand for special packaging, mainly for DVD products, partlyoffset further reductions in demand for standard music products. Commercial Products Demand for Commercial Products in the UK varied widely. Over-capacity in the weboffset sector, coupled with a volatile market, made for intense pricecompetition. Demand for personalised direct mail products was weaker. Sales toretail and brand point-of-sale customers grew significantly although activitylevels fluctuated during the year. We were especially busy in the first half ofthe financial year which led to manufacturing inefficiencies and increased costsand resulted in a reduced performance. Margins in the second half of ourfinancial year were returned to more normal levels. We maintained our share ofthe market for Annual Report and Accounts, which continued to expand toaccommodate increased disclosure requirements. Levels of activity in the marketfor corporate financial print both in the UK and USA remained subdued, against abackground of increased migration towards electronic distribution. Pricing inthese markets has reached levels which cannot be sustained indefinitely. USA In the USA, commercial and publication markets experienced similar conditions ofover-capacity and fierce price competition to those in the UK. We experiencedsignificant fluctuations in demand. The severe disruption to our South Floridaoperations in the first half of the financial year as a result of hurricanescontributed to a reduced result. Investment We continued to invest in our business where the projected returns justified it.During the year investment was focused on improving the responsiveness of ourservice so as further to distance our offering from that of the competition. Our equipment base is already technologically unequalled but additionalinvestment will be hard to justify in many of our markets. We are activelyconsidering acquisition opportunities which will further consolidate ourposition as the leading provider of specialist print-related services to UKmarkets. Staff On behalf of shareholders I should like to thank all the Group's employees forthe contribution they have made in the face of continuing challenges. Board During the year Lorraine Baldry retired from the board after six years' serviceas a non-executive director. We thank her for her contribution over that period.We welcome David Best and Richard Stillwell as new non-executive directors: bothtook up their appointments on 1 September 2006. Outlook The launch of our new Group Sales team in April marked an important further stepon the focusing of our offering on customers and markets which have arequirement for more than commodity print. As a result we have started the newfinancial year with a higher level of contracted sales, mainly to commercialrather than media customers. Demand remains volatile and forward visibilitylimited in all our markets. The recent closure or failure of a number ofcompetitors holds the promise of a more rational pricing environment in the weboffset and direct mail markets. Our market leading reputation for service andstrong financial position will enable us to respond rapidly to any opportunitiesthat arise as a result. Miles Emley Chairman 10 October 2006 BUSINESS REVIEW Strategy St Ives' strategy is to focus in all its markets on segments where there is ademand for time-sensitive service and where, in addition to print, it is able tosupply services including complex logistical, fulfilment or distributionrequirements. By adding value in this way, the Group seeks to provide lower costsolutions for its customers while generating an improved return. St Ives hasavoided commodity markets, except where necessary to achieve economicutilisation. It is considered that the demand for focused and therefore shorter-run, quickerturnaround work will grow in the Group's markets. We expect that as advertisersaccumulate more information on consumers' purchasing habits, they will focustheir promotions accordingly; similarly, magazine customers will continue totarget titles at more narrowly defined audience groups; book publishers willseek to avoid risky investment in long runs when they can rely on a quickreprint for a bestselling title; and requirements for point-of-sale materialsfor in-store promotions are immediate and time-sensitive and specificallytargeted at individual stores within multiple chains. The Group often provides added value services such as stock management,fulfilment, distribution, mailing and logistics services in addition to thesupply of the printed product. We concentrate on supplying markets which havehigh service requirements, and products are mostly supplied just-in-time todomestic markets. There is little export business and import penetration intothe Group's markets is limited. During the year, in the UK, we set up a Group Sales team, offering customers thecombined service and printing resources across both the Commercial and MediaProducts segments and a single point of contact with St Ives' facilities. Thisstrategy is directed to offering customers an alternative to print managementcompanies and other intermediaries who, in contrast to St Ives, predominantlysub-contract their customers' work to the trade thereby surrendering a largedegree of control and accountability. We keep all areas of our business under continual review and remain committed tothe development and growth of our core activities for the benefit ofshareholders. Review of operations The business of the Group is reported on below by market segment. Media Products Comprise the production of books, magazines and printing for the multimedia andmusic industries. 2006 2005 £'000 £'000Media Products total revenue 187,965 205,419Media Products profit before restructuring costs, provision releases 23,904 28,670and interest Media Products represented 47% of Group external sales. Books Cost effective short initial runs and quick turnaround reprints allow publishersto reduce risk stock on the initial run and respond quickly to market demandwhile still keeping their risk stock to a minimum. Books currently account for approximately 37% of Media Products' external sales.St Ives has a substantial share of the UK's monochrome trade and general bookmarket. Some Bibles and reference books are also manufactured. The Group'sprincipal competitors are CPI Group (Cox & Wyman, Bath Press, Mackays andBookmarque) and other small to medium sized private companies. St Ives works for almost all of the major UK trade publishing houses, includingBloomsbury, Hachette (including Orion, Hodder, Headline and Little, Brown),Harper Collins, Penguin and Random House, which together account for thesignificant majority of sales. The UK demand for monochrome books remains strong and our Book businesscontinues to benefit from its unrivalled reputation and ability to deliver afirst class service. We have seen further growth in demand for direct deliveriesand for post-bind services. Activities such as stickering and shrink wrappingare often a requirement as a result of books being delivered directly to retailoutlets or customers' chosen distributors. During the year we once again produced a high proportion of the bestsellerswhich included 'Journey's End' (Josephine Cox) for HarperCollins; 'Mary, Mary'(James Patterson) for Headline; 'Being Freddie: The Story so Far' (AndrewFlintoff) for Hodder; 'I Can Make You Thin' (Paul McKenna) for Transworld; 'Labyrinth' (Kate Mosse) for Orion; 'Next to You' (Gloria Hunniford) and 'Freakonomics' (Levitt and Dubner), both for Penguin; 'Mao: The Unknown Story'(Chang and Halliday) for Random House; 'Predator' (Patricia Cornwell) and 'Extreme: My Autobiography' (Sharon Osbourne), both for Time Warner; 'Schott'sAlmanac' (Ben Schott) for Bloomsbury. Investment during the year included additional printing capacity further tostrengthen our ability to respond to ever increasing demand for faster service;further development of electronic trading solutions for our customers; and theexpansion of our cover and jacket printing capabilities. Utilising IT solutionsto support the additional post-bind services being offered has been particularlyimportant to our growth in this area. We continue to develop online solutions toenable our customers to track orders and to place production and deliveryinstructions. In addition to winning several new accounts, we are delighted to have renewedsome major contracts during the year for periods of up to seven years. Thecurrent dollar exchange rates have made it difficult to grow sales to the USBible market but we have retained some key customers, including IBS, LivingStream and Tyndale. Magazines UK magazines currently account for around 45% of Media Products' external sales.All types of consumer and business magazines are produced from shorter-run sheetfed titles of 1,000+ copies, to longer-run heatset web offset magazines. Ourcompetitors include Cooper Clegg, Polestar, Southernprint, Wyndeham Press, and anumber of small to medium sized private companies. Magazines with paginations that vary every issue are often produced forcustomers within hours of the disc or digital transmission being received. Thisallows customers more selling time for filling their advertising space andincluding up-to-the-minute editorial material. St Ives works for most of the UKmagazine publishers including The Economist, EMAP and Time Out, as well as theUK businesses of international publishers such as AOL/Time Warner (IPC), CondeNast and VNU. In order further to reduce our costs of production during the year we purchaseda new Goss M600 press for our Plymouth site which, when fully operational inAutumn 2006, will replace two older, less productive, presses. This press,complemented by the high-speed Kolbus/Ferag perfect binder that was recentlyinstalled, will improve productivity. Pricing pressures remain due to continued over-capacity in the web offsetmarket. During the year we declined work for a number of customers because webelieved that prices had reached uneconomic levels. As a consequence, sales inthe second half of the financial year were reduced in comparison to the previousyear and further restructuring of our cost base was implemented mainly byreducing overheads. Our strategy of seeking shorter-run time-sensitive work, which has resulted inour winning over 80 new titles, continues to broaden our customer base and weare also able to offer our customers integrated printing, mailing and fulfilmentservices following the establishment of SouthWest Mailing on a site adjoiningour factory at Roche. Multimedia The Group's Multimedia business provides CD and DVD booklets and inlays and awide range of specialist board packaging to music, television series, movie andcomputer games publishers and manufacturers of electronic media in both the UKand Europe. Our main competitors in the UK and Europe are AGI and Shorewoods(both owned by US parent companies) and a range of smaller operations servinglocal markets: CMCS, Delga and Ingersol in the UK and Alt, Kaiser and Pozzolliin Europe. Two major disc duplicators serving publishers in Germany and TheNetherlands have their own in-plant printing facilities. Booklets and inserts for new release music CDs are often produced with a largeinitial order to meet the product launch requirements followed by repeat,short-run, just-in-time orders. Quick reprints are linked to the CD discduplicators' production control systems to keep customers' risk stock to aminimum. Customers include most of the major international home entertainment and mediapublishers including Electronic Arts, Microsoft, Universal Music, UniversalPictures, Warner Home Entertainment, Warner Music; large independent UKlicensees and distributors including Anchor Bay and Contender; and the majorEuropean disc duplicators Cinram, EDC, MediaMotion, ODS, Sonopress, Sony DADCand Technicolor. The business made significant improvements in the pattern of sales over theprior year despite challenging market conditions. The UK business reaped fullyear benefits of cost savings implemented from a restructuring initiated in thesecond half of the previous financial year and from additional sales ofmultimedia print. Progress has been made in broadening the customer base atUden, our business based in The Netherlands. Our reputation for quality and reliability throughout the year remainsunrivalled amongst the specialist print suppliers serving multimedia publishers.This has resulted in our securing substantial additional contracted work fromUniversal Music and EDC Blackburn. The multimedia market is expected to remain highly seasonal and extremely pricecompetitive. To mitigate this we are also offering our specialist packagingcapabilities to other markets which present opportunities for winning somecounter-cyclical work. There is little sign that the price pressure experienced in recent years willabate in the near future. In reaching longer-term agreements with our principalcustomers we have negotiated increased volumes and revised service levels inexchange for sharing resultant savings in costs. More flexible workingarrangements with our workforce to better align our capacity with the seasonalrequirements of our customers were achieved during the year. Commercial Products Include direct response and general commercial printing; corporate and financialsecurity printing; and point-of-sale materials for major retailers and brands. 2006 2005 £'000 £'000Commercial Products total revenue 151,431 150,216Commercial Products profit before restructuring costs, 1,611 6,679provision releases and interest Commercial Products accounted for 37% of Group external sales. Direct Response Products include mail order catalogues, business catalogues, brochures,leaflets, newspaper and magazine inserts and other promotional material anddirect mail pieces mostly for more narrowly targeted, specialist and shorter-runmarkets. Services provided to customers include data manipulation,personalisation and fulfilment, as well as printing. The Group's main competitors are Communisis, Howitt, Pindar, Polestar, WyndehamPress and other small to medium sized private companies. As almost all commercial enterprises and other organisations of any size havesome requirement for print, the market is substantial. In the UK, significantcustomers for our targeted and personalised print services include Co-op, Focus,the Government (including HMRC, DWP and COI), HSBC, Makro, OgilvyOne, RBS, ShopDirect and Somerfield. Market conditions within our commercial markets have remained extremelychallenging throughout the year as supply continued to exceed demand and, as aconsequence, trading margins have declined on sales which were maintainedoverall, but which masked reductions in prices and added value. Managingcapacity loadings was particularly challenging, with little forward visibility. There has, however, been growth in sales to our major commercial customers whichhas partly offset reductions in demand from those Government departments withwhom we have dealt. In the commercial web offset market we have had some success within the retailsector in winning more time-sensitive, in-store marketing material. We are noweven better placed to win this work following the commissioning of a new 5 unit32-page short grain press at our Bradford site in May 2006. The overallprofitability of our commercial web operations has declined over the priorfinancial year due mainly to lower sales volumes following the end of a contractwith a major customer as well as reduced prices reflecting the wider commercialprint market. More targeted direct marketing has resulted in a fall in demand for volumepersonalised direct mail although the number of individual campaigns undertakenfor our customers has risen. We have also seen an increase in variable contentcolour personalised work, particularly in the automotive, entertainment andfinancial sectors as a result of the investment in digital print facilities inLeeds in the previous year. The trading performance of our direct mail, digitaland graphics operations was adversely affected by fierce competition in anover-supplied market which saw a significant reduction in demand from thefinancial services sector in particular. Our commercial sheet fed businesses also suffered from significant over-supplywithin the wider market arena. During the year we established a new Group Sales team. The costs of setting upand developing the infrastructure were incurred from January 2006. Initialorders were won in April and sales have been built up as the year progressed,with incremental sales being secured from existing and new customers, includingAtos, Ethel Austin, Halfords, Manor Bakeries and Verve Venues - an encouragingstart. Customers are now able to have immediate access to the full range of StIves' capabilities through a dedicated sales team, headed by the Group Salesdirector supported by a new business development director. Customers are offered a proprietary online tool, named 'dna'TM, to facilitatecomplete control of all their print activity, including progress monitoring,stock and logistics management, storage and management of creative assets andproofing. Access to a centralised customer service team gives customers the opportunity tosimplify the process of specifying, buying and managing complex projects. Point-of-Sale We produce point-of-sale material for the retail market, predominantly in theUK, and for UK and international brands. Point-of-sale products and servicesaccount for approximately 38% of Commercial Products' external sales. Campaignsare mainly bespoke, store specific and produced to tight timetables to meetmarketing needs. This market has grown considerably in importance for the Groupfollowing the acquisition of SP Group in September 2004 and of Marks andSpencer's in-house printing facility in August 2005. As well as supplyingprinted products, the Group usually provides ancillary services, includingcomplex collation, fulfilment and distribution, front-end inventory control andasset management. Customers include Arcadia, Cadbury, Halfords, Levi's, Marksand Spencer and SPAR. Competitors include Augustus Martin, bezier and numerous small privatecompanies. This was a year of mixed fortunes: sales grew 63%, year-on-year, as a result ofthe absorption of Crayford's point-of-sale activities; the implementation of along-term exclusive supply agreement with Marks and Spencer for itspoint-of-sale requirements (including the purchase and integration of its printoperation in Burnley); substantial sales growth from other new and existingcustomers; and the establishment of St Ives Logistics at a new purpose-builtfacility in Redditch. The significant volume increase and integration of additional facilities at StIves Logistics and Burnley caused disruption to the business. High outsourcingand labour costs to meet customers' needs had a short-term detrimental impact onmargins which, predominantly, affected the first half of the financial year. Asannounced on 29 August 2006 the previously robust accounting controls failed andthere were a number of accounting errors which were identified at the year end.Trading and margins in the second half of the financial year were in line withexpectations. Comment on our reponses to this failure in controls is made in thereport on Corporate Governance contained in the Annual Report and Accounts. While competitive pressure in the UK continues, we maintain strong relationshipswith our customers by providing unique added value services to take costs outfrom the supply chain. High levels of customer service, fast response times anddetailed reviews of performance against service level agreements, all serve tocement customer loyalty. The markets served are vulnerable to volatility in high street spending andconsumer confidence but we believe that our business model gives us acompetitive advantage. We remain a market leader in the point-of-sale field.Recent capital investments, most notably in a large format litho printing press,provides a platform for further growth and place us in a good position to pursuenew sales opportunities as they arise. Financial Services supplied to these markets include the typesetting, proofing, proofdistribution and production of statutory or regulatory documents either for thecorporate finance transaction market (such as take-overs and mergers,reconstructions, and equity and debt issuance) or annual reports. We offercustomers a range of internet-based products for proof distribution andamendment. These products comprise a suite of facilities under the brand namesmartproducts(TM) which facilitate the editing and proof reading of time-sensitiveconfidential documents, including smartEDGAR(TM) (for electronic filing with theSEC), smartforum(TM) (for collaborative amendment of proofs) and smartapps(TM) (forthe compilation of regular fund reports). Smartforum(TM) was used in compiling theCompany's Annual Report and Accounts. Corporate finance documentation is produced securely and on an overnight basis.Annual Report and Accounts and projects requiring large and complexdistributions are also printed to tight timetables, using the Group's facilitieswhenever practicable. Financial printing accounts for approximately 24% of the Group's external salesof Commercial Products, less than a quarter of which relates to corporatefinancial transactional work. This activity is mainly in the second half of ourfinancial year. In the UK we produce Annual Report and Accounts for around 30%of FTSE 100 companies. The remaining turnover in financial printing has been the Group's mostunpredictable market and low levels of activity have made further costreductions necessary. The Group's principal competitors are Bowne, Merrill Corporation and RRDonnelley (US companies) and, in the UK, Greenaways, Imprima, Royles (a CPIGroup subsidiary) and a number of small private companies. The market for transactional corporate finance work remains very competitive.Although there has been an increase in the amount of deal activity,over-capacity and more electronic distribution continue to reduce the size ofthe market. In some cases customers have ceased printing altogether, by makingmore use of the SEC's Access=Delivery legislation. Whilst this has led to adecline in printed volumes it has however created a new demand for strongerelectronic tracking (provided by smarttrans). Total sales of financial printing declined during the year. Half of this isattributable to the transfer of the UK Funds business to the Group's DirectResponse business. The balance was due to the loss of some low margin printcontracts which were only renewable on an uneconomic basis and a reduction inprinted volumes as more documents are distributed electronically. These lowlevels of activity necessitated further cost reduction initiatives, whichincluded an increase in our outsourcing of typesetting to India. In the Annual Report and Accounts market, increased legislation has led to thegrowth of compliance work, with a requirement for greater disclosure withinshorter timeframes. Whilst run lengths have remained steady, pagination hasexpanded and we expect that this trend will continue. In both the corporatefinance and the compliance markets, customers are seeking ways of moreeffectively managing their content and data. They are searching for ways ofsaving time and reducing cost. Smartproducts(TM) will assist us to meet thesemarket needs. USA Comprise magazine printing, general commercial printing and the supply ofpoint-of-sale materials to retailers and franchisees. 2006 2005 £'000 £'000USA total revenue 65,143 67,207USA (loss)/profit before restructuring costs, provision releases and (241) 3,484interest USA revenue represented 16% of Group external sales. In the USA, the Group produces controlled circulation magazines and specialistmail order catalogues and brochures (predominantly print runs of less than150,000 copies) and magazines for the Spanish speaking market. We also produce point-of-sale material for franchise operators, such as DominosPizza and Pizza Hut, and for brand advertising for distribution in nationalstore chains. In addition, we manufacture marketing coupons for News America,which are supplied to up to 30,000 outlets over recurring two week cycles,together with in-store advertising material. St Ives' competitors in the USA are Banta, Quad/Graphics, Quebecor, RR Donnelleyand a large number of other printers. The loss sustained by the business resulted mainly from interruption during themost active and damaging hurricane season for many years and from continuedindustry over-capacity. Physical damage to our premises was light, but wesuffered from lengthy power and telecommunications outages and many of ourFlorida based customers were also affected by the hurricanes and volume wasreduced as a result. Our sites in Florida have relocated their computer serversoffsite to ensure that they will be able to operate M.I.S. and St Ives On-LineTMservices in the event of future hurricane disruption. We have concentrated onsecuring more repetitive work and continue to focus on customers with arequirement for shorter print runs and higher service levels. Competitors, in anover-supplied market, continue to price at uneconomic levels. Regulatory environment The principal regulations affecting the Group's day-to-day business and themarkets we serve have been identified by the board as Employment Law, Health &Safety Law, Environmental Law, Planning Law, Data Protection legislation,Taxation Law, the law of defamation and Competition Law. The board each yearreviews the impact that these might have on the business and how to manage therisks to the business. Capital expenditure The Group has a policy of continuous investment in the latest technology whereit can be justified. The size of some capital items is such that expenditure isnot evenly spread from year-to-year. Almost all the Group's properties are freehold or long leasehold. The Group hasalso invested significantly in systems to enable it to provide an increasinglyrapid, flexible and tailored response to customers' changing requirements. Allthe Group's facilities are equipped with computer-to-plate systems which havebeen a major contributor to shorter lead times and enhanced service levels. Muchof our business is just-in-time, to enable customers to meet their marketingneeds, reduce stock levels and stock holding risk, extend selling time foradvertising and keep editorial content up-to-date. Inevitably, however, thisreduces our forward visibility of activity levels. Outlook Market characteristics have changed little since the start of our new financialyear. The majority of the Group's businesses experienced low demand in the firstfew weeks of August although volumes have picked up since then. Our Group Sales team's efforts have added revenues: since its inception in April2006 we have invoiced around £1 million of additional sales and signed up anumber of long-term contracts for periods of one to three years. Although volumeis not guaranteed these contracts currently have an estimated total value ofover £20 million over their terms. Most of our markets have limited visibility and volume can be volatile.Oversupply is prevalent and consequently markets are very price competitive. Wecontinue to seek ways of lowering the cost of production, including investmentand refining working patterns to meet continuously changing customerrequirements. None of our customers guarantees volume. However the majority of our bookpublishing customers are signed up to long-term contracts. We continue to wincontracts from magazine customers, mainly in the short to medium run area toreplace uneconomic and longer-run work. We have recently won additional titlespreviously produced by a competitor who has now closed. As always, our mix ofwork is subject to continuous review. The book business continues to perform well and we look forward to anothersuccessful year and further progress in developing our services beyondtraditional book printing and binding services to provide a unique offering tothe UK monochrome book market. Music and multimedia markets have extremely short visibility although demand forspecial packaging of, in particular, back list titles is a useful addition tothe business. Music CD is now a mature product and we expect volumes to fall asdownloading from the internet increases. At the beginning of our new financial year we decided to merge the salesmanagement of our direct and point-of-sale activities. Many customers,particularly in retail and financial services, have requirements for theservices of both. The extensive digital facilities of our point-of-sale businessare particularly suited to the increasingly focused spend of marketingdepartments. Our logistics and fulfilment facility is also in demand ascustomers want more active management of marketing material to reduce waste anddistribution costs. Markets for direct mail and commercial web offset products are still pricecompetitive. Our focus remains on the shorter-run, personalised and targetedareas of this market. Whilst market conditions are expected to remain highlycompetitive, some customers are becoming concerned about the financial health ofcertain of our competitors and our financial standing and recent investments innew, technologically advanced, equipment position us well to pursueopportunities as they arise. Corporate financial documentation activity in both the UK and USA is flat. Wehave recently outsourced some typesetting requirements to affiliates in Indiawhere costs are lower. Similar market conditions to the UK face our magazine and commercial activitiesin the USA. The containment of utility and labour costs is an ever present challenge andthere are continuous reviews of these items in particular. We are well investedand, as around 90% of our manufacturing space is occupied freehold or longleasehold, we can be flexible in responding to changing requirements. Market conditions remain challenging and consumer confidence and related marketsdo not seem to be particularly robust. However, we believe our continued focuson cost effective, usually shorter-run, time-sensitive, logistically complex andtargeted products, coupled with strong commitment to customer service, willprovide a base for improved returns for shareholders over time. Brian Edwards Managing Director 10 October 2006 FINANCIAL REVIEW Overview of revenue External sales revenue from our three market segments fell in total by £18.2million to £401.3 million. Within this reduction Media Products was lower by £18.3 million (9%). Revenuefrom Books was 5% lower; Magazines were 10% lower and Print & Display, whichincludes multimedia activities, was 14% lower. Commercial Products revenue increased by £2.1 million (1.4%). Within this,significant growth in Point-of-Sale of 63%, more than offset the revenue lost asa result of the sale of our business in Germany and 19% lower revenues in ourFinancial business. Direct Response revenues were flat. In the USA revenues reduced by £2 million (3%). Adjusting for currencytranslation, the underlying reduction was £3.7 million (5.4%). The averageexchange rate used to translate US dollars to sterling was 1.7975 (2005 -1.8443). In geographical terms the £18.2 million reduction in external sales revenuerepresented a £1.5 million increase in the UK, a £4.7 million reduction in theUSA (this geographical segment includes the US operation of our Financialbusiness), and a £15.0 million reduction in the Rest of the World mainly as aresult of the sale of our German business, Johler Druck, in April 2005. Key financial performance indicators The most significant key performance indicators ('KPIs') used by the Group arefinancial and are explained below. Other performance indicators of anoperational nature are focused on individual machines, factories and divisionsand, because of the varied and bespoke nature of the products and servicesprovided by the Group, are necessarily detailed and specific to operations.Consequently it is not possible to present operational indicators in anymeaningful way in a segmental context. The financial KPIs used are: i. Operating profit (as defined below) by segment ii. Operating profit as a percentage of added value by segment iii. Gross margin per £ of manufacturing labour by segment iv. EBITDA by segment v. Free cash flow by segment Operating profit by segment Operating profit represents the profit from operations before restructuringcosts and provision releases and is in accordance with the segment reportingshown in note 2 except that the results of our German business, which was soldin April 2005, have been excluded from the KPIs for 2005. 2006 2005 Change £'000 £'000 % Media Products 23,904 28,670 (16.6)Commercial Products 1,611 6,946 (76.8)USA (241) 3,484 (106.9)Corporate (33) 1,844 (101.8) ------- ------- -------Group 25,241 40,944 (38.4) ------- ------- ------- Operating profit as a percentage of added value by segment Using the operating profit by segment from the foregoing KPI, this KPI comparesoperating profit with the added value generated within a segment. Added value isthe sum of total revenue less materials, outwork, consumables and carriagecosts. 2006 2005 Change % % %Media Products 19.3 20.8 (7.2)Commercial Products 2.1 9.6 (78.1)USA (0.6) 8.5 (107.1) ------- ------- -------Group 10.6 16.3 (35.0) ------- ------- ------- Gross margin per £ of manufacturing labour by segment Using the added value referred to above, this KPI compares the margin left afterdeducting manufacturing labour costs from added value with the manufacturinglabour cost. The result represents the margin return, before manufacturingcosts, sales and distribution costs and administrative expenses, for every £1 ofmanufacturing labour spent in the segment and it reflects the impacts of salesvalue, machines and people productivity and labour cost within a singlemeasurement. Operationally this KPI is used extensively in the Group to measureoperational performance and returns from both individual jobs and customers. 2006 2005 Change £ £ %Media Products 1.38 1.33 3.8Commercial Products 1.95 2.27 (14.1)USA 1.03 1.18 (12.7) ------- ------- -------Group 1.47 1.52 (3.3) ------- ------- ------- The three profit-related KPIs shown above reflect the comments made within theChairman's Statement and the Business Review regarding business performanceduring the year. EBITDA by segment EBITDA is operating profit before depreciation and amortisation and is used as ameasure of cash generation by segment. 2006 2005 Change £'000 £'000 %Media Products 37,013 43,849 (15.6)Commercial Products 9,396 14,168 (33.7)USA 3,918 8,295 (52.8)Corporate 1,722 3,374 (49.0) ------- ------- -------Group 52,049 69,686 (25.3) ------- ------- ------- Free cash flow by segment Free cash flow provides a measure of the Group's liquidity and the cashgenerated from its operations. Capital payments are the amounts, by segment,from the Consolidated Cash Flow Statement for the purchase of property, plantand machinery and other intangibles. By deducting the capital payments from theEBITDA the cash available for acquisitions, dividends, tax and working capitalis measured. 2006 ---------------------------------------- EBITDA Capital Free cash payments flow £'000 £'000 £'000 Media Products 37,013 (15,644) 21,369Commercial Products 9,396 (10,365) (969)USA 3,918 (2,148) 1,770)Corporate 1,722 (3,738) (2,016) ------- ------- -------Group 52,049 (31,895) 20,154 ------- ------- ------- 2005 ---------------------------------------- EBITDA Capital Free cash payments flow £'000 £'000 £'000 Media Products 43,849 (16,830) 27,019Commercial Products 14,167 (7,369) 6,798USA 8,295 (2,307) 5,988Corporate 3,375 (6,884) (3,509) ------- ------- -------Group 69,686 (33,390) 36,296 ------- ------- ------- The two cash-related KPIs shown above clearly demonstrate the impact that thereduced operating profit and lower depreciation charges in 2006, compared to2005, have had on EBITDA and, in turn, cash flow. Capital payments were similarin both years. Free cash flow reduced considerably in 2006 and, but for thefavourable working capital movement in 2006, our net debt position at the end ofthe year would have reflected the reduced free cash flow. International Financial Reporting Standards ('IFRS') The Group is complying with IFRS for the first time for the fifty two weeks to28 July 2006. A summary of the transition process, explaining the maindifferences between UK GAAP and the new standards, is disclosed in note 11. Restructuring costs and provision releases The net income shown as restructuring costs and provision releases for the yearof £0.9 million is a combination of profits on the disposal of assets soldfollowing the closure of St Ives Caerphilly of £2.8 million, rationalisationmeasures in both the UK and USA of £2.4 million, and £0.5 million of provisionreleases relating to closures and the previous acquisition of Avanti. The net charge in 2005 of £18.0 million related to the disposal of Johler Druck,the closure of St Ives Caerphilly, the closure of the Woolwich operations andsubsequent restructuring of the Financial printing business and otherrationalisation measures throughout the Group. These costs were reduced byprovision and accrual releases relating to previous closures and acquisitions. Balance sheet Net assets increased to £167.9 million (2005 - £164.3 million). The movementreflects an improvement in cash generated from operations and a reduction inretirement benefits obligations. Net debt Net debt reduced in the year from £23.5 million to £8.9 million. Cash generatedfrom operations was £67.6 million (2005 - £41.8 million). The improvementprimarily reflects working capital benefits as a result of timing differences. Within net debt are: bank loans of £19.5 million due within one year; unsecuredloan notes of £1.6 million, £0.3 million of which will be redeemed during thenext financial year and £1.3 million of which could be redeemed at the holders'request during the next financial year; and bank overdrafts of £0.3 million. TheGroup has overdraft facilities available of £50 million. None of the debt issecured. Capital expenditure and depreciation Capital expenditure in cash flow terms on property, plant and equipment,together with additions to intangible assets, other than goodwill, was £31.9million (2005 - £33.6 million) and cash receipts from asset disposals were £7.0million (2005 - £5.4 million). Net cash outflow in the year was £24.9 million(2005 - £28.2 million). Assets capitalised were £31.3 million due to timing differences compared withcash flow of £31.9 million. Depreciation charged in the year was £26.8 million (2005 - £29.7 million). Acquisitions On 1 August 2005 SP Group secured a long-term contract to supply all Marks andSpencer plc's point-of-sale requirements. At the same time the trade and certainassets and liabilities of their print business in Burnley were acquired by theGroup for a cash consideration of £2.9 million. Tax The Group's tax rate on profit before restructuring costs and provision releaseswas 32.8% (2005 - 33.4%). The decrease in the rate includes favourable prioryear adjustments. Dividends The board is recommending the payment of a final dividend of 12.15 pencebringing the total dividend for the year to 17.15 pence. The same total dividendhas been paid in respect of each financial year from 2001. For this financialyear the basic earnings per share are 14.38 pence so the dividend is uncoveredby earnings in this year. The Group was cash generative and net debt levelsremain relatively low. Pensions As part of the adoption of IFRS this financial year, the Group has appliedInternational Accounting Standard 19: "Employee Benefits" ('IAS 19'). ApplyingIAS 19 brings the deficit on the defined benefits pension scheme on to thebalance sheet. The deficit in the scheme at the end of the year, excluding therelated deferred tax asset, was £59.5 million (2005 - £66.6 million). The chargeto operating profit for this scheme was £3.8 million (2005 - £2.8 million, lessa curtailment credit of £0.6 million). The charge represents the cost of thebenefits accrued to members of the scheme during the period. In addition theincome statement includes a net financing cost of £2.0 million (2005 - £2.3million) which represents the increase in the pension liability, because thebenefits are one year closer to being paid, less the expected return on assetsof the scheme based on market rates available at the start of the financialyear. The defined benefits pension scheme was closed to new entrants from 6 April2002; benefits continue to accrue for active existing members. A one-off paymentof £25 million was made by the Company to the scheme in May 2004. Contributions were paid by the Company at the rate of 10.6% of pensionable payfrom May 2004 and the accrual rate for future pensionable service was changedfrom 60ths to 80ths at the same time. Following the actuarial valuation in 2005the contribution rate was changed from 1 February 2006 to 5.3% of pensionablepay plus £2.7 million per annum paid monthly (equivalent to approximately 13.5%of pensionable pay). The Company continues to keep the defined benefits schemeunder review. Financial risk management and treasury policies The main financial risks of the Group relate to interest rate, liquidity,foreign exchange and credit (in relation to its trade receivables). The Group's treasury function is responsible for managing the Group's exposureto financial risk and operates within a defined set of policies and proceduresapproved by the board. The overall objective of the treasury policy is to use financial instruments tomanage the financial risks that arise from the specific activities of thebusiness. It follows, therefore, that the Group does not enter into speculativefinancial transactions for which there is no underlying business requirement. Interest rate risk The Group finances its operations from retained earnings and bank borrowings.The borrowings are predominantly short-term at floating rates. Liquidity risk The Group has sufficient available committed borrowing facilities to meet anyforecasted funding needs. At the end of the year the Group had committed bankfacilities (excluding US dollar denominated loans used to hedge net investmentsin the USA) of £50 million, the utilisation of which was minimal. Foreign exchange risk Currency risk management relating to transactional business is dealt with by theuse of currency derivatives, which are mainly foreign currency forwardcontracts. Translational risk relating to the capital employed in overseassubsidiaries is covered, in part only, by the use of currency loans. Credit risk (trade receivables) The majority of sales of the Group to its customers are made on credit. It isGroup policy that all customers granted credit are subject to creditverification procedures. A rigorous system of credit control is applied andreceivables are continually monitored. Bad debt provisions represented 5.6% ofgross trade debtors at the year end. Principal risks and uncertainties The Group has a large number of longstanding relationships with its customers,in many cases based on medium to long-term contractual agreements. However noneof our customers guarantees volume and their individual requirements are subjectto changes in consumer demand and/or advertising spend. As a result our marketsafford limited forward visibility and can be subject to significant short-termfluctuations in demand. Since all our production is bespoke, often on ajust-in-time basis, we are not able to manufacture any products for stock. As aresult of these factors, utilisation of equipment and labour is subject tosignificant seasonal and short-term variation. Many of our competitors are not making economic returns and a number of themfrequently offer prices which cannot be sustained and which do not offer anadequate return on the investment which is needed to maintain, or even enhance,production efficiency. Other risks are those to which any business employing significant numbers ofboth skilled and unskilled people and undertaking substantial capital investmentin a mature market are subject. Critical accounting estimations In the course of applying the Group's accounting policies the followingestimations have been made which could have a significant effect on the resultsof the Group, were they subsequently found to be inappropriate. Impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value inuse of the cash generating units ('CGUs') for which goodwill has beenidentified. In arriving at the value in use an estimation of the future cashflows of CGUs and selecting appropriate discount rates is required to calculatepresent values. This process involves estimation. The carrying value of goodwillat the balance sheet date was £54.1million (2005 - £53.9 million). Retirement benefit obligations The calculation of retirement benefit obligations requires estimates to be madeof discount rates, inflation rates, future salary and pension increases andmortality. The net liability recognised in the balance sheet for retirementbenefit obligations is £59.5 million (2005 - £66.6 million). Details of theassumptions made will be provided in the Annual Report and Accounts. Other accounting issues The year as a whole was marred by the discovery during our year end process ofserious accounting errors in the Point-of-Sale business, which were the subjectof a Trading Statement made on 29 August 2006. The errors arose from costs not being properly expensed, an over-valuation ofwork-in-progress, and unrecoverable debtors. The errors mainly affected theresults of the first half of the financial year and totalled £2.8 million(before tax). The Group's profits for the year include the effects of theseerrors. The circumstances that led to the errors and their subsequent discovery havebeen thoroughly investigated. As a result, changes to our internal controlprocedures have been, and are being, introduced. These changes will be explainedin the report on Corporate Governance contained in the Annual Report andAccounts. Ray Morley Finance Director 10 October 2006 CONSOLIDATED INCOME STATEMENT 52 weeks to 28 July 2006 52 weeks to 29 July 2005 ---------------------------------------- ----------------------------------------------- Before restruc- Restructuring Before Restructuring turing costs and restructuring costs and costs and provision costs and provision provision releases provision releases releases (note 3) Total releases (note 3) Total --------- --------- --------- --------- --------- --------- Note £'000 £'000 £'000 £'000 £'000 £'000Revenue 2 --------- --------- --------- --------- --------- ---------Existing activities 393,763 - 393,763 419,477 - 419,477Acquired activities 7,500 - 7,500 - - - --------- --------- --------- --------- --------- --------- 401,263 - 401,263 419,477 - 419,477Cost of sales (302,742 ) (1,176 ) (303,918 ) (308,824 ) (6,837 ) (315,661 ) --------- --------- --------- --------- --------- ---------Gross profit 98,521 (1,176 ) 97,345 110,653 (6,837 ) 103,816Sales and distribution (29,030 ) (379 ) (29,409 ) (28,494 ) (843 ) (29,337 )costsAdministrative expenses (44,954 ) (383 ) (45,337 ) (42,058 ) (2,863 ) (44,921 )Other operating income --------- --------- --------- --------- --------- ---------Profit on disposal of fixed - 2,084 2,084 - 626 626assetsOther income 704 717 1,421 576 72 648 --------- --------- --------- --------- --------- --------- 704 2,801 3,505 576 698 1,274 --------- --------- --------- --------- --------- ---------Profit from operations 2 --------- --------- --------- --------- --------- ---------Existing activities 24,426 863 25,289 40,677 (9,845 ) 30,832Acquired activities 815 - 815 - - - --------- --------- --------- --------- --------- --------- 25,241 863 26,104 40,677 (9,845 ) 30,832 Loss on disposal of - - - - (8,135 ) (8,135 )subsidiary Investment income 9,224 - 9,224 8,336 - 8,336Finance costs (12,758 ) - (12,758 ) (10,794 ) - (10,794 ) --------- --------- --------- --------- --------- ---------Profit before tax 21,707 863 22,570 38,219 (17,980 ) 20,239Income tax expense 4 (7,120 ) (636 ) (7,756 ) (12,772 ) 3,997 (8,775 ) --------- --------- --------- --------- --------- ---------Profit for the period 14,587 227 14,814 25,447 (13,983 ) 11,464 Basic earnings per share 6 14.38p 11.14p --------- -------- Diluted earnings per share 6 14.38p 11.13p --------- -------- All transactions are derived from continuing activities. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 52 weeks to 52 weeks to 28 July 29 July Note 2006 2005 ------ --------- £'000 £'000Exchange (losses)/gains on translating foreign operations (899 ) 1,081Losses on cash flow hedges taken to equity (85 ) -Actuarial gains/(losses) on defined benefits pension schemes 8,974 (21,078 )Tax on items taken directly to equity (1,651 ) 5,913 ------ ---------Net income/(expense) recognised directly in equity 6,339 (14,084 )Transfer to profit and loss from equity of exchange differences on - (101 )disposal of foreign operationTransfer to the initial carrying amount on non-financial hedged (24 ) -items on cash flow hedgesTax on items transferred from equity 7 -Profit for the period 14,814 11,464 ------ ---------Total recognised income/(expense) 21,136 (2,721 ) ---------Transition adjustment on adoption of IAS 32 and IAS 39 10 24 ------Total recognised income for the period 21,160 ------ CONSOLIDATED BALANCE SHEET 28 July 29 July Note 2006 2005 £'000 £'000 -------- --------ASSETSNon-current assetsProperty, plant and equipment 160,909 158,908Goodwill 54,135 53,946Other intangible assets 1,089 649Deferred tax asset 12,067 16,173Other non-current assets 132 140 -------- -------- 228,332 229,816 -------- --------Current assetsInventories 12,593 13,344Trade and other receivables 67,000 77,762Cash and cash equivalents 12,620 5,594 -------- -------- 92,213 96,700 -------- --------Total assets 320,545 326,516 -------- --------LIABILITIESCurrent liabilitiesTrade and other payables 63,480 54,408Short-term borrowings 21,490 29,086Current tax payable 3,350 5,623Deferred income 81 102Short-term provisions 2,126 3,659Derivative financial instruments 85 - -------- -------- 90,612 92,878 -------- --------Non-current liabilitiesRetirement benefit obligations 59,471 66,584Deferred tax liabilities 2 46Deferred income 411 206Other non-current liabilities 714 947Long-term provisions 1,434 1,518 -------- -------- 62,032 69,301 -------- --------Total liabilities 152,644 162,179 -------- --------Net assets 167,901 164,337 -------- --------EQUITYCapital and reservesShare capital 10,355 10,349Other reserves 7 46,334 46,723Retained earnings 8 111,212 107,265 -------- --------Total equity 167,901 164,337 -------- -------- CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 28 July 29 July Note 2006 2005 -------- -------- £'000 £'000Operating activitiesCash generated from operations 9 67,648 41,788Interest received 255 574Interest paid on overdrafts (634 ) (99 )Income taxes paid (7,551 ) (8,882 ) -------- --------Net cash from operating activities 59,718 33,381 -------- -------- Investing activitiesAcquisition of business (2,901 ) -Acquisition of subsidiary - (31,099 )Purchase of property, plant and equipment (31,085 ) (33,192 )Purchase of other intangibles (810 ) (379 )Proceeds on disposal of property, plant and equipment 6,970 5,374Disposal of subsidiary - 685Regional grants received 285 - -------- --------Net cash used in investing activities (27,541 ) (58,611 ) -------- -------- Financing activitiesProceeds from issue of share capital 198 606Loan notes redeemed (2,317 ) (3,449 )Interest paid on loans (1,040 ) (612 )Dividends paid 5 (17,672 ) (17,648 )(Decrease)/increase in bank overdrafts (4,059 ) 4,344 -------- --------Net cash used in financing activities (24,890 ) (16,759 ) -------- -------- Net increase/(decrease) in cash and cash equivalents 7,287 (41,989 )Cash and cash equivalents at beginning of period 5,594 47,455Effect of foreign exchange rate changes (261 ) 128 -------- --------Cash and cash equivalents at end of period 9 12,620 5,594 -------- -------- NOTES TO THE PRELIMINARY RESULTS 1. Basis of preparation The preliminary results have been prepared in accordance with the recognitionand measurement principles of International Financial Reporting Standards ('IFRS') as adopted by the European Union, and those parts of the Companies Act1985 applicable to companies reporting under IFRS. The Group is complying with IFRS for the first time for the fifty two weeks to28 July 2006 and the accounting policies applicable to the Group from 31 July2004 are those that are set out in a separate document, "Restated FinancialInformation for International Financial Reporting Standards", published on 31January 2006. The same accounting policies have been consistently applied to thepreliminary financial statements except where the Group has taken advantage ofthe exemption in International Financial Reporting Standard 1: "First-timeAdoption of International Financial Reporting Standards" ('IFRS 1') from therequirement to restate comparative information for International AccountingStandard 32: "Financial Instruments: Disclosure and Presentation" ('IAS 32') andInternational Accounting Standard 39: "Financial Instruments: Recognition andMeasurement" ('IAS 39'). These standards have been adopted from 30 July 2005 andthe restated opening balance sheet is set out in note 10. The preliminary results do not comprise statutory accounts for the purposes ofSection 240 of the Companies Act 1985. The abridged information for the fiftytwo weeks to 28 July 2006 has been extracted from the Group's statutory accountsfor that period which will be sent to all shareholders before 1 November 2006.The abridged information for the fifty two weeks to 29 July 2005 is based oninformation extracted from the Group's statutory accounts for that periodprepared under UK GAAP, and restated in accordance with IFRS, as set out in note11. The Group's 2005 statutory accounts, prepared under UK GAAP, have been filedwith the Registrar of Companies. The auditors' reports on the accounts of theGroup for both periods were unqualified and did not contain a statement undereither Sections 237(2) or Sections 237(3) of the Companies Act 1985. 2. Segment reporting The Group manages its business on a market segment basis and these segments arethe basis on which the Group reports its primary segment information. The segment analysis is provided for the Group's continuing operations.Inter-segment sales are charged at arms length prices. Business segments 52 weeks to 28 July 2006 ---------------------------------------------------------------------- Media Commercial Products Products USA Elimination Total £'000 £'000 £'000 £'000 £'000Revenue External sales 186,253 149,955 65,055 - 401,263 Inter-segment sales 1,712 1,476 88 (3,276 ) - -------- -------- -------- -------- --------Total revenue 187,965 151,431 65,143 (3,276 ) 401,263 -------- -------- -------- -------- --------Result Segment result 23,211 1,095 (509 ) - 23,797 Add back restructuring costs and provision 693 516 268 - 1,477 releases -------- -------- -------- -------- -------- Segment result before restructuring costs 23,904 1,611 (241 ) - 25,274 and provision releases -------- -------- -------- -------- Unallocated corporate expense (net) (33 ) -------- Operating profit before restructuring 25,241 costs and provision releases Restructuring costs and provision releases 863 -------- Profit from operations 26,104 Investment income 9,224 Finance costs (12,758 ) -------- Profit before tax 22,570 Income tax expense (7,756 ) --------Profit for the period 14,814 -------- 52 weeks to 29 July 2005 ---------------------------------------------------------------------- Media Commercial Products Products USA Elimination Total £'000 £'000 £'000 £'000 £'000RevenueExternal sales 204,598 147,870 67,009 - 419,477Inter-segment sales 821 2,346 198 (3,365 ) - -------- -------- -------- -------- --------Total revenue 205,419 150,216 67,207 (3,365 ) 419,477 -------- -------- -------- -------- --------ResultSegment result 21,432 3,612 5,158 - 30,202Add back restructuring costs and provision 7,238 3,067 (1,674 ) - 8,631releases -------- -------- -------- -------- --------Segment result before restructuring costs and 28,670 6,679 3,484 - 38,833provision releases -------- -------- -------- -------- Unallocated corporate income (net) 1,844 -------- Operating profit before restructuring costs and 40,677provision releasesRestructuring costs and provision releases (9,845 ) --------Profit from operations 30,832Loss on disposal of subsidiary (8,135 )Investment income 8,336Finance costs (10,794 ) --------Profit before tax 20,239Income tax expense (8,775 ) --------Profit for the period 11,464 -------- Geographical segments The Group's operations are located in the United Kingdom, the United States ofAmerica and the Rest of the World. The Group's Media Products and CommercialProducts services are carried out across the three locations. The following table provides an analysis of the Group's revenue and result bygeographical market. 52 weeks to 28 July 2006 --------------------------------------------------- United United States Rest of Kingdom Of America the World Total £'000 £'000 £'000 £'000Revenue 308,952 79,518 12,793 401,263 -------- -------- -------- --------Segment result 26,918 (1,269 ) 455 26,104Add back restructuring costs and provision releases (1,348 ) 485 - (863 ) -------- -------- -------- --------Segment result before restructuring costsand provision releases 25,570 (784 ) 455 25,241 -------- -------- -------- -------- 52 weeks to 29 July 2005 --------------------------------------------------- United United States Rest of Kingdom of America the World Total £'000 £'000 £'000 £'000Revenue 307,421 84,282 27,774 419,477 -------- -------- -------- --------Segment result 24,211 5,492 1,129 30,832Add back restructuring costs and provision releases 11,803 (1,958 ) - 9,845 -------- -------- -------- --------Segment result before restructuring costsand provision releases 36,014 3,534 1,129 40,677 -------- -------- -------- -------- 3. Restructuring costs and provision releases Restructuring costs and provision releases included within the consolidatedincome statement are as follows: 2006 2005 £'000 £'000Income/(costs)Rationalisation measures (2,471 ) (12,749 )Provision releases 533 2,206Profit on disposal of fixed assets 2,084 626Other income 717 72 ------ ------ 863 (9,845 )Loss on disposal of subsidiary - (8,135 ) ------ ------ 863 (17,980 )Related income tax (636 ) 3,997 ------ ------ 227 (13,983 ) ------ ------ Rationalisation measures of £2,471,000 includes £1,458,000 relating to therestructuring of the magazine printing businesses within the Media Productssegment and £403,000 for restructuring within the USA business segment. Theremaining £610,000 relates to ongoing restructuring in other areas of the Group.Provision releases of £533,000 includes £312,000 relating to the closure of StIves Caerphilly Limited, with the balance of £221,000 relating to a number ofprovision releases of items previously charged as restructuring costs. Profit onthe sale of fixed assets of £2,084,000 relates to the sale of the Caerphillyfactory which was closed in the previous financial period and other income of£717,000 relates to the net profit on the sale of other fixed assets at thissite. 4. Tax Tax on profit as shown in the income statement is as follows: 2006 2005 £'000 £'000 United Kingdom corporation tax expense/(income) at30% (2005 - 30%): Current year 6,141 7,521 Adjustments in respect of prior years (497 ) 549 ------ ------ 5,644 8,070Overseas current tax expense/(income): Current year 129 561 Adjustments in respect of prior years (62 ) (590 ) ------ ------Total current tax expense 5,711 8,041Deferred tax on origination and reversal of temporary differences: United Kingdom deferred tax 1,482 594 Overseas deferred tax 196 (437 ) Adjustments in respect of prior years 367 577 ------ ------ 7,756 8,775 ------ ------ 5. Dividends per share 2006 2005 pence £'000 £'000Final dividend paid for the 52 weeks ended 30 July 2004 12.15 - 12,499Interim dividend paid for the 26 weeks to 28 January 2005 5.00 - 5,149Final dividend paid for the 52 weeks ended 29 July 2005 12.15 12,521 -Interim dividend paid for the 26 weeks to 27 January 2006 5.00 5,151 - ------ ------Dividends paid during the period 17,672 17,648 ------ ------Proposed final dividend at the period end at 12.15p per share (2005 - 12.15p per share) 12,520 12,517 ------ ------ The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting and has not been included as a liability in these financialstatements. 6. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing information: Number of shares 2006 2005 million million Weighted average number of ordinary shares for the purpose of basic earnings per share 103.0 102.9 Dilutive potential ordinary shares from share options - 0.1 ------ ------ Diluted weighted average number of shares 103.0 103.0 ------ ------ Earnings 2006 2005 --------------------- --------------------- Earnings Earnings Earnings per share Earnings per share £'000 pence £'000 pence Earnings and basic earnings per share 14,814 14.38 11,464 11.14 Restructuring costs and provision releases (227 ) (0.22 ) 13,983 13.59 --------- --------- --------- --------- Adjusted earnings and adjusted earnings per share 14,587 14.16 25,447 24.73 --------- --------- --------- --------- Diluted earnings per share 14.38 11.13 --------- --------- Adjusted earnings is calculated by adding back restructuring costs and provisionreleases, as adjusted for tax, to the profit for the period. 7. Other reserves Hedging Capital Share and Share ESOP redemption option translation premium reserve reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 July 2004 45,909 (1,913 ) 1,238 985 - 46,219 Shares issued at premium 588 - - - - 588 Exchange differences and related tax - - - - 671 671 Transfer to profit and loss from equity of exchange differences on disposal of foreign operation - - - - (101 ) (101 ) Recognition of share-based payments - - - (654 ) - (654 ) ------ ------- ------- ------- ------- ------- Balance at 29 July 2005 46,497 (1,913 ) 1,238 331 570 46,723 Transition adjustment on adoption of IAS 32 and IAS 39 - - - - 59 59 ------ ------- ------- ------- ------- ------- Balance at 30 July 2005 46,497 (1,913 ) 1,238 331 629 46,782 Shares issued at premium 192 - - - - 192 Exchange differences and related tax - - - - (433 ) (433 ) Cash flow hedges: Losses taken to equity - - - - (85 ) (85 ) Transferred to fixed assets - - - - (24 ) (24 ) Tax on items taken directly to or transferred from equity - - - - 24 24 Recognition of share-based payments - - - (122 ) - (122 ) ------ ------- ------- ------- ------- ------- Balance at 28 July 2006 46,689 (1,913 ) 1,238 209 111 46,334 ------ ------- ------- ------- ------- ------- 8. Retained earnings £'000 Balance at 31 July 2004 128,204 Dividends paid (17,648 ) Profit for the year attributable to equity holders of the parent 11,464 Actuarial losses on defined benefits pension schemes (14,755 ) ------- Balance at 29 July 2005 107,265 Transition adjustment on adoption of IAS 32 and IAS 39 (35 ) ------- Balance at 30 July 2005 107,230 Dividends paid (17,672 ) Profit for the year attributable to equity holders of the parent 14,814 Actuarial gains on defined benefits pension schemes 6,840 ------- Balance at 28 July 2006 111,212 ------- Details of the adoption of IAS 32 and IAS 39 are set out in note 10. 9. Notes to the consolidated cash flow statement Reconciliation of cash generated from operations 2006 2005 £'000 £'000 Profit from operations 26,104 30,832 Adjustments for: Depreciation of property, plant and equipment 26,450 29,317 Impairment of property, plant and equipment - 3,278 Amortisation of intangible assets 358 384 Gain on disposal of property, plant and equipment (3,505 ) (1,274 ) Foreign exchange gains and losses - 84 Deferred income (101 ) (398 ) Share-based payment credit (122 ) (654 ) Decrease in provisions (1,575 ) (3,839 ) ------- ------- Operating cash inflows before movements in working capital 47,609 57,730 Decrease/(increase) in inventories 495 (1,568 ) Decrease/(increase) in receivables 10,088 (6,142 ) Increase/(decrease) in payables 9,456 (8,232 ) ------- ------- Cash generated from operations 67,648 41,788 ------- ------- Analysis of net debt 30 July Exchange 28 July 2005 Cash flow movements 2006 £'000 £'000 £'000 £'000Cash and cash equivalents 5,594 7,287 (261 ) 12,620Bank overdrafts (4,386 ) 4,059 - (327 )Debt due within one year (24,700 ) 2,317 1,220 (21,163 ) ------ ------ ------ ------ (23,492 ) 13,663 959 (8,870 ) ------ ------ ------ ------ Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. The effective interest rates on cash and cash equivalents are based on currentmarket rates. 10. Adoption of IAS 32 and IAS 39 The Group adopted IAS 32 and IAS 39 from 30 July 2005 and the impact on thefinancial information as at 30 July 2005 is set out below. At 30 July 2005 the fair values of forward contracts held at that date have beenrecorded on the balance sheet and directly in equity. The balance sheet includesderivative financial instruments within current assets of £62,000 and withincurrent liabilities of £38,000. Closing Opening balance sheet IAS 32 and balance sheet at 29 July IAS 39 at 30 July 2005 adjustments 2005 £'000 £'000 £'000AssetsNon-current assets 229,816 - 229,816Current assets 96,700 62 96,762 ------ ------ ------ 326,516 62 326,578 ------ ------ ------LiabilitiesCurrent liabilities 92,878 38 92,916Non-current liabilities 69,301 - 69,301 ------ ------ ------ 162,179 38 162,217 ------ ------ ------Net assets 164,337 24 164,361 ------ ------ ------EquityShare capital 10,349 - 10,349Other reserves 46,723 59 46,782Retained earnings 107,265 (35 ) 107,230 ------ ------ ------Total equity 164,337 24 164,361 ------ ------ ------ During the period to 28 July 2006 losses on cash flow hedges of £85,000were taken to equity and £24,000 was transferred to the initial carrying amountof non-financial hedged items on cash flow hedges. The related deferred taxtaken directly to equity totalled £24,000. The resulting fair values of forwardcontracts held at 28 July 2006 were £85,000 recorded in current liabilities onthe balance sheet. 11. Transition to IFRS The Group previously reported under UK Generally Accepted Accounting Principles('UK GAAP') for all periods up to and including the fifty two weeks to 29 July2005. These preliminary financial statements are the first the Group is requiredto prepare in accordance with IFRS. International Financial Reporting Standard 1: "First-time Adoption ofInternational Financial Reporting Standards'' ('IFRS 1') permits those companiesadopting IFRS for the first time to take certain exemptions from the fullrequirements of IFRS in the transition period. The Group has taken advantage ofthe following exemptions: Business combinations Business combinations that took place prior to 31 July 2004, the date oftransition to IFRS, have not been restated. Goodwill IAS 21 requires goodwill arising on the acquisition of a foreign business to beretranslated at each period end. The Group has opted not to retranslate suchgoodwill for acquisitions arising prior to 31 July 2004 but continues totranslate it at acquisition rate. Fair value as deemed cost The Group has opted to use the previous valuation of tangible fixed assets madeunder UK GAAP as deemed cost. Retirement benefits The deficits and surpluses of the defined benefits pension scheme have beenrecognised in full on the Group's balance sheet at 31 July 2004. The Group hasopted to account for pension benefits under the amendment to IAS 19 issued inDecember 2004 in which all actuarial gains and losses are recognised in equity.This is similar to the UK GAAP treatment under FRS 17. FRS 17 was not previouslyadopted but the effects were disclosed in the Annual Report and Accounts. Cumulative translation differences Translation differences relating to foreign currency investments in subsidiariesin existence at the transition date are deemed to be zero at the date oftransition, and as such the gain or loss on subsequent disposal of any foreignoperation excludes translation differences that arose before that date. Financial instruments IAS 32 and IAS 39 have been applied from 30 July 2005 and as such the Group'sopening IFRS balance sheet at 31 July 2004 and restated information for thefifty two weeks to 29 July 2005 excludes any adjustments required by thesestandards. Such adjustments are disclosed in note 10 above. Share-based payments IFRS 2 is applied to all share-based rewards made after 7 November 2002 that didnot vest before 31 July 2004. IFRS 1 establishes the transitional requirementsfor the preparation of financial statements in accordance with IFRS for thefirst time. The effect of the adoption of IFRS is outlined below along with the openingconsolidated balance sheet at 31 July 2004, consolidated income statement forthe fifty two weeks to 29 July 2005 and the consolidated balance sheet at 29July 2005. Changes to presentation: IAS 1: ''Presentation of Financial Statements'' ('IAS 1') Separately identifiable items Under IFRS a definition of exceptional items does not exist; however materialitems should be disclosed separately. As such the restructuring costs providedand any related provision releases previously reported under UK GAAP willcontinue to be shown separately on the face of the income statement. Deferred tax Under IAS 1 deferred tax assets and liabilities must be split by tax group. Provisions and deferred income IAS 1 requires provisions and deferred income to be split between currentliabilities and non-current liabilities. Hedging and translation reserve Exchange differences written-off to reserves under UK GAAP were disclosed in thestatement of total recognised gains and losses and included in the profit andloss reserve. Under IFRS they are disclosed in the statement of recognisedincome and expense and shown in equity in the hedging and translation reserve. IAS 7: ''Cash Flow Statements'' ('IAS 7') IAS 7 defines cash equivalents as 'short-term, highly liquid investments thatare readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value'. IAS 7 also recognises that bankoverdrafts repayable on demand may form an integral part of an entity's cashmanagement and should therefore be included in cash and cash equivalents. IAS 14: ''Segment Reporting'' ('IAS 14') On 30 September 2005 St Ives plc announced changes in board responsibilities,reflecting the structure under which the Group would be managed. The structurecomprises three business segments which are Media Products, Commercial Productsand USA. Changes to accounting: IAS 10: ''Events After the Balance Sheet Date'' ('IAS 10') Proposed dividends IAS 10 states that dividends declared after the balance sheet date should not berecognised as a liability at that date but recognised in the period in whichthey are formally approved for payment. The final proposed dividend for the fifty two weeks to 30 July 2004 of£12,491,000 has been reversed in the opening IFRS consolidated balance sheet andis recognised in the accounts for the fifty two weeks ended 29 July 2005.Similarly the final proposed dividend for the fifty two weeks ended 29 July 2005of £12,517,000 has been reversed and has been recognised in the period to 28July 2006. IAS 12: ''Income Taxes'' ('IAS 12') IAS 12 requires deferred tax to be provided on all temporary differences ratherthan only taxable timing differences. At 31 July 2004 an unprovided deferred tax liability of £825,000 has beenrecognised in respect of rolled over gains (net of capital losses). At 29 July 2005 the deferred tax liability increased to £1,234,000 reflecting acharge in the income statement of £409,000. Adjustments have also been made to the financial information where deferred taxliabilities and assets can be offset under the provisions of IAS 12. IAS 19: ''Employee Benefits'' ('IAS 19') St Ives defined benefits pension scheme IAS 19 requires the net pension liability relating to the defined benefitspension scheme to be recognised on the balance sheet. Under UK GAAP, the Group accounted for its defined benefits pension schemesunder SSAP 24: ''Accounting for pension costs'' ('SSAP 24') and presented,within the notes to the financial statements, disclosures under FRS 17: ''Retirement benefits'' ('FRS 17'). Balance sheet impact In the opening IFRS balance sheet at 31 July 2004 the SSAP 24 prepayment of£25,068,000 and its related deferred tax liability of £1,875,000 have beenreversed through opening retained earnings. The treatment of the pension deficitis similar under IAS 19 and FRS 17, and any differences are not consideredmaterial. As such the deficit of £44,931,000 at 30 July 2004 has been recordedin the opening IFRS balance sheet, along with the related deferred tax asset of£13,479,000. In addition, a deferred tax asset of £5,625,000 has been recognisedin respect of £18,750,000 of pension costs which have been paid but for whichtax relief had not been obtained at 31 July 2004. At 30 July 2005 the pension deficit was £66,584,000 and deferred tax asset£23,725,000. Income statement impact For the fifty two weeks to 29 July 2005 the SSAP 24 pension cost of £3,990,000has been reversed and the IAS 19 current service cost of £2,202,000 (net of£1,200,000 age-related rebates) has been recognised in administrative expensesin the income statement. The IAS 19 net finance charge of £2,257,000 has alsobeen reflected in the income statement within finance costs. The movement in thedeferred tax asset recognised in the income statement is £161,000. The Group has opted to account for pension benefits in accordance with theamendment to IAS 19 issued in December 2004 under which all actuarial gains andlosses are recognised directly in equity. The actuarial loss recognised for thefifty two weeks to 29 July 2005 was £21,118,000. The deferred tax recognised onthe actuarial losses for the period was £6,335,000. Holiday pay Under UK GAAP the Group provided for holiday pay for some but not all employees,however IAS 19 is more prescriptive. Consequently holiday pay provisions havebeen calculated for all employees as at 30 July 2004 and an adjustment of£485,000 to increase the charge has been recorded at that date. Additionally, aprovision of £120,000 for holiday pay in SP Group has been recorded at 13September 2004, the date of acquisition, reducing the fair value of assetsacquired and therefore increasing goodwill. There was no material movement in the total provision for the fifty two weeks to29 July 2005. IAS 21: ''The Effect of Changes in Foreign Exchange Rates'' ('IAS 21') Loans between St Ives plc and its foreign operations Loans exist between St Ives plc and certain of its foreign operations. Allforeign exchange gains and losses on the restatement of these loans werepreviously written off to reserves under UK GAAP. The majority of the loans meetthe definition of 'net investments in a foreign operation' under IAS 21, assettlement is neither planned nor likely to occur. The foreign exchangedifference on such loans is recognised directly in equity. The foreign exchange differences on the working capital element of these loans,that was not hedged, must be recognised in the income statement under IFRS. Forfifty two weeks to 29 July 2005 a loss of £84,000 has been recognised. Disposal of subsidiary Under IAS 21, any translation differences taken to equity on the retranslationof a foreign operation's assets and liabilities, and income and expense items,should be recognised in the income statement on the disposal of that operation. For the fifty two weeks to 29 July 2005 a gain of £101,000 has been recognisedin the income statement following the disposal of Johler Druck GmbH on 5 April2005. IAS 36: ''Impairment of Assets'' ('IAS 36') Goodwill Under IFRS, goodwill amortisation is not permitted, instead annual impairmentreviews must be carried out. At 31 July 2004 goodwill on the balance sheet andin reserves was frozen. For the fifty two weeks to 29 July 2005 goodwill amortisation of £2,773,000 hasbeen reversed. The impairment tests performed during 2005 have been reworked toreflect IFRS requirements and no impairment charges are required for eitherperiod. IAS 38: ''Intangible Assets'' ('IAS 38') Computer software In accordance with IFRS, capitalised computer software, which is not integral toa related item of hardware, has been reclassified from property, plant andequipment to other intangible assets. At 31 July 2004 the net book value ofcomputer software reallocated was £431,000. Similarly computer softwarereclassified at 29 July 2005 was £649,000. IFRS 1: ''First-time Adoption of International Financial Reporting Standards''('IFRS 1') IFRS 1 permits the freezing of goodwill in the balance sheet at the date oftransition to IFRS. Goodwill reversed out of reserves under UK GAAP in relationto disposals, has been taken back to equity under IFRS. In the fifty two weeks to 29 July 2005 £5,865,000 has been written backfollowing the disposal of Johler Druck GmbH and £941,000 following the closureof St Ives Bristol Limited. IFRS 2: ''Share-based Payment'' ('IFRS 2') IFRS 2 requires the Group to reflect in its accounts the effects of share-basedpayment transactions, including expenses associated with transactions in whichshare options are granted to employees. The options granted by the Group arefair valued at the grant date using a binomial model and charged to the incomestatement over the vesting period of the options. IFRS 2 does not affect the total equity on the opening IFRS balance sheet. Forthe fifty two weeks to 29 July 2005 the long-term incentive scheme release of£1,266,000 under UK GAAP has been reversed in the income statement and the IFRSnet credit of £654,000 under IFRS 2 has been recognised. There is no impact onthe total equity of the Group. IFRS 3: ''Business Combinations'' ('IFRS 3') The acquisition of SP Group has been reviewed as it falls within the scope ofIFRS 3. As a result of the review no separately identifiable intangible assetshave been recognised and the difference between the fair value of the assetsacquired and the consideration is entirely goodwill. IAS 32: ''Financial Instruments: Disclosure and Presentation'' ('IAS 32') andIAS 39: ''Financial Instruments: Recognition and Measurement'' ('IAS 39') The Group adopted IAS 32 and IAS 39 on 30 July 2005: these standards thereforehave no effect on the opening IFRS balance sheet at 30 July 2005 or restatedfinancial information for the fifty two weeks to 29 July 2005. (a) Reconciliation of equity at 31 July 2004 IFRS UK GAAP adjustments IFRSASSETS £'000 £'000 £'000Non-current assetsProperty, plant and equipment 163,165 (431 ) 162,734Goodwill 22,814 - 22,814Other intangible assets - 431 431Deferred tax assets - 10,722 10,722Other non-current assets 22,896 (22,658 ) 238 ------ ------ ------ 208,875 (11,936 ) 196,939 ------ ------ ------Current assetsInventories 11,554 - 11,554Trade and other receivables 67,924 (2,410 ) 65,514Cash and cash equivalents 47,455 - 47,455 ------ ------ ------ 126,933 (2,410 ) 124,523 ------ ------ ------Total assets 335,808 (14,346 ) 321,462 ------ ------ ------LIABILITIESCurrent liabilitiesTrade and other payables 65,358 (12,006 ) 53,352Short-term borrowings 21,449 - 21,449Current tax payable 6,026 - 6,026Deferred income - 398 398Short-term provisions - 6,938 6,938 ------ ------ ------ 92,833 (4,670 ) 88,163 ------ ------ ------Non-current liabilitiesRetirement benefit obligations - 45,249 45,249Deferred tax liabilities 9,624 (9,585 ) 39Deferred income 706 (398 ) 308Other non-current liabilities 992 - 992Long-term provisions 8,895 (6,938 ) 1,957 ------ ------ ------ 20,217 28,328 48,545 ------ ------ ------Total liabilities 113,050 23,658 136,708 ------ ------ ------Net assets 222,758 (38,004 ) 184,754 ------ ------ ------EQUITYCapital and reservesShare capital 10,331 - 10,331Other reserves 45,234 985 46,219Retained earnings 167,193 (38,989 ) 128,204 ------ ------ ------Total equity 222,758 (38,004 ) 184,754 ------ ------ ------ (b) Reconciliation of the Income Statement for the fifty two weeks ended 29July 2005 UK GAAP IFRS ----------------------------------------- --------------------------------------------- Before Before exceptional Exceptional restructuring Restructuring items and items and costs and costs and goodwill goodwill IFRS provision provision amortisation amortisation Total adjustments releases releases Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue ------- ------- -------- ------- ------- -------- ------- Existing activities 384,203 - 384,203 - 384,203 - 384,203 Acquired activities 35,274 - 35,274 - 35,274 - 35,274 ------- ------- -------- ------- ------- -------- ------- 419,477 - 419,477 - 419,477 - 419,477 Cost of sales (308,824 ) (6,837 ) (315,661 ) - (308,824 ) (6,837 ) (315,661) ------- ------- -------- ------- ------- -------- -------Gross profit 110,653 (6,837 ) 103,816 - 110,653 (6,837 ) 103,816 Sales and distribution costs (28,494 ) (843 ) (29,337 ) - (28,494 ) (843 ) (29,337) Administrative expenses (43,440 ) (6,577 ) (50,017 ) 5,096 (42,058 ) (2,863 ) (44,921) Other operating income ------- ------- -------- ------- ------- -------- ------- Profit on disposal of fixed assets - 626 626 - - 626 626 Other income 576 72 648 - 576 72 648 ------- ------- -------- ------- ------- -------- ------- 576 698 1,274 - 576 698 1,274 ------- ------- -------- ------- ------- -------- -------Profit fromoperations ------- ------- -------- ------- ------- -------- ------- Existing activities 35,142 (11,613 ) 23,529 3,736 36,524 (9,259 ) 27,265 Acquired activities 4,153 (1,946 ) 2,207 1,360 4,153 (586 ) 3,567 ------- ------- -------- ------- ------- -------- ------- 39,295 (13,559 ) 25,736 5,096 40,677 (9,845 ) 30,832 Loss on disposal of subsidiary - (14,101 ) (14,101 ) 5,966 - (8,135 ) (8,135) Investment income 574 - 574 7,762 8,336 - 8,336 Finance costs (763 ) - (763 ) (10,031 ) (10,794 ) - (10,794) ------- ------- -------- ------- ------- -------- -------Profit before tax 39,106 (27,660 ) 11,446 8,793 38,219 (17,980 ) 20,239 Income tax expense (13,072 ) 4,406 (8,666 ) (109 ) (12,772 ) 3,997 (8,775) ------- ------- -------- ------- ------- -------- -------Profit for the period 26,034 (23,254 ) 2,780 8,684 25,447 (13,983 ) 11,464 ------- ------- -------- ------- ------- -------- -------Basic earnings per share 2.70p 11.14p ------ ------Diluted earnings per share 2.70p 11.13p ------ ------ (c) Reconciliation of equity at 29 July 2005 IFRS UK GAAP adjustments IFRSASSETS £'000 £'000 £'000Non-current assetsProperty, plant and equipment 159,557 (649 ) 158,908Goodwill 51,089 2,857 53,946Intangible assets - 649 649Deferred tax asset - 16,173 16,173Other non-current assets 22,938 (22,798 ) 140 ------- ------- ------- 233,584 (3,768 ) 229,816 ------- ------- -------Current assetsInventories 13,344 - 13,344Trade and other receivables 79,965 (2,203 ) 77,762Cash and cash equivalents 5,594 - 5,594 ------- ------- ------- 98,903 (2,203 ) 96,700 ------- ------- -------Total assets 332,487 (5,971 ) 326,516 ------- ------- -------LIABILITIESCurrent liabilitiesTrade and other payables 66,320 (11,912 ) 54,408Short-term borrowings 29,086 - 29,086Current tax payable 5,623 - 5,623Deferred income - 102 102Short-term provisions - 3,659 3,659 ------- ------- ------- 101,029 (8,151 ) 92,878 ------- ------- -------Non-current liabilitiesRetirement benefit obligations - 66,584 66,584Deferred tax liabilities 10,405 (10,359 ) 46Deferred income 308 (102 ) 206Other non-current liabilities 947 - 947Long-term provisions 5,177 (3,659 ) 1,518 ------- ------- ------- 16,837 52,464 69,301 ------- ------- -------Total liabilities 117,866 44,313 162,179 ------- ------- -------Net assets 214,621 (50,284 ) 164,337 ------- ------- -------EQUITYCapital and reservesShare capital 10,349 - 10,349Other reserves 45,822 901 46,723Retained earnings 158,450 (51,185 ) 107,265 ------- ------- -------Total equity 214,621 (50,284 ) 164,337 ------- ------- ------- (d) Reconciliation of cash flows There was no material effect on the cash flows of the Group on adopting IFRS. The foregoing contains forward looking statements made by the directors in goodfaith based on information available to them up to 10 October 2006. Suchstatements need to be read with caution due to inherent uncertainties, includingeconomic and business risk factors underlying such statements. This information is provided by RNS The company news service from the London Stock Exchange

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