11th Oct 2005 07:01
St. Ives PLC11 October 2005 EMBARGOED FOR RELEASE 07:00 11 OCTOBER 2005 11 October 2005 ST IVES plc Preliminary Results for the 52 weeks ended 29 July 2005 St Ives plc, the UK's leading printing group, announces preliminary results forthe 52 weeks ended 29 July 2005. Key Points • Turnover £419.5m (2004: £410.3m)• Pre tax profit £11.4m (2004: £14.9m)• Underlying* pre tax profit £39.1m (2004: £39.7m)• Basic earnings per share 2.70p (2004: 2.92p)• Underlying* earnings per share 25.30p (2004: 25.08p)• Total dividend maintained at 17.15p per share * pre exceptional items and goodwill amortisation Commenting on the results, Chairman, Miles Emley said: "In our principal markets our competitive position is as strong as ever. Inrecent years we have undertaken significant rationalisation and consolidation ofthe Group's activities whilst continuing to invest in the best availabletechnology to reduce costs of production and enhance our service offering. "Notwithstanding the continuing challenge posed by current market conditions, webelieve that our commitment to service and quality, and our increasing focus onthe provision of added-value services in addition to the supply of printedproducts, will deliver progress for shareholders." For further information contact: St Ives plcMiles Emley, ChairmanBrian Edwards, Managing Director 020 7928 8844 SmithfieldJohn AntcliffeAnna Rainbow 020 7360 4900 Results The results for the fifty two weeks ended 29 July 2005 show turnover of £419.5million (2004 - £410.3 million) and underlying profit before taxation,exceptional items and goodwill amortisation of £39.1 million (2004 - £39.7million). Profit before taxation was £11.4 million (2004 - £14.9 million).Underlying earnings per share before exceptional items and goodwill amortisationwere 25.30p (2004 - 25.08p) and basic earnings per share were 2.70p (2004 -2.92p). The results include an initial contribution to operating profit beforeexceptional items and goodwill amortisation of £4.15 million from SP Group forthe forty six weeks since its acquisition in September 2004. The profit before taxation, exceptional items and goodwill amortisation issimilar to that achieved in the previous financial year and is in accordancewith the indications which we gave at the time of our Interim Statement inApril. The charge for exceptional items and goodwill of £27.7 millionrepresents the loss on disposal of Johler Druck (£14.1 million which includes£5.9 million of goodwill previously written-off to reserves), exceptional costsrelating the consolidation of the Group's operations into fewer sites (£9.9million) and goodwill amortisation and write-off (£3.7 million). Dividends The Board is recommending a final dividend of 12.15p per share, making totaldividends of 17.15p per share for the year as a whole, the same as the previousyear. If approved, the final dividend will be paid on 2 December 2005 toshareholders on the register on 4 November 2005. Trading Conditions Demand for books and for point-of-sale services was resilient but, as weindicated earlier in the year, most of our other markets continued to experiencelittle growth, downward pricing pressure and over-capacity. Books Our books sales were higher than in the previous year. We maintained marketshare, mainly because our service levels are faster and more responsive thanthose offered by our competitors. We produced over 50 per cent of the bestsellers published during our financial year in both hardback and paperbackformats. Sales of fulfilment and other post-production services also grew. Theresults showed the benefit of our continuing investment in equipment andsystems. Direct Response, Commercial and Point-of-Sale UK In the UK, demand for personalised direct mail products, especially fromfinancial services customers, reduced sharply and the market for lesstime-sensitive, longer-run products continued to face over-capacity, intenselycompetitive pricing and lower volumes. During the year we rationalised ouroperations further through the closure of our factory in Bristol, many of whosecustomers we have continued to serve from elsewhere in the Group. Demand for point-of-sale products and services remained steady. SP Group made acontribution of £35.3 million to Group turnover in the forty six weeks since itsacquisition. We undertook new work for our client base, which comprises leadingretail store chains and international brand companies. We completed theconsolidation of the point-of-sale operations previously carried out at St IvesCrayford into our site at Redditch towards the end of the period. USA Commercial markets in the USA remained fiercely competitive against a backgroundof continuing over-capacity. Sales were reduced, although we retained the moresuitable work previously undertaken at Case-Hoyt, thus improving utilisation andreturns at our other facilities. We expanded the volumes of specialistfranchise print work (including on-line ordering and inventory control,fulfilment and distribution) produced mainly at our Cleveland site. Financial Demand for financial print in the USA was unchanged but continued low activityin the UK and Europe necessitated a further reduction in our cost base there,which was completed towards the end of the year. Volumes of annual reportprinting grew, partly as a result of increased pagination. Losses overall wereagain reduced. Magazines UK Magazine sales in the UK were lower as a result of competitive pricing,principally because of over-capacity, and weak demand. In the second half ofthe year we closed our factory at Caerphilly and have been successful inretaining the work previously produced there for our other sites. During theyear we commissioned a new high speed stitching line and two new 72-page pressesto lower our cost of production and enhance service further. USA In the USA, magazine sales grew and returns improved modestly as a result ofbetter utilisation of our facilities. Multimedia Sales to music and multimedia markets were maintained overall, mainly because ofgrowth in demand for special packaging and DVD related products for video, audioand computer games applications. Improved utilisation generated better returnsat Uden in Holland, although short lead times and volatile demand madeutilisation a challenge in the UK. Balance Sheet Net assets at the year end were £215 million with net borrowings of £23 million.As already announced, we disposed of our German subsidiary, Johler Druck,during the year for a cash consideration of €2.2 million. Investment Capital expenditure during the year amounted in total to £36 million, more thantwice last year's level. We have continued to invest in systems and equipmentacross the Group to reduce our costs of production and enhance the flexibilityof the service we are able to offer our customers. The largest individual itemswere the new logistics facility at Redditch, web presses and a high speedstitching line for the magazine market, digital presses mainly for point-of-salecustomers and a sheetfed press in Cleveland. IFRS As in previous years, our consolidated financial statements have been preparedunder UK Generally Accepted Accounting Principles ('UKGAAP'). In accordancewith EU regulations, in future we will be required to adopt InternationalFinancial Reporting Standards ('IFRS') and prepare consolidated financialstatements on an IFRS basis. We will report under IFRS for the first time inour Interim Statement for the twenty six weeks ending 27 January 2006 and ourAnnual Report for 2006 will be the first to be prepared under IFRS. The 2006Interim Statement and Annual Report will include comparative IFRS informationfor the corresponding periods in 2005. An announcement will be made in January2006 setting out the restatement of the 2005 results and providing anexplanation of the effects of the change to IFRS on our results. The mostsignificant impact is expected to be in relation to the treatment of the definedbenefits pension scheme (which was closed to new members in April 2002) and anindication of the effect in relation to 2005 is set out in note 4(b) of theaccompanying financial information. Outlook Most of our markets continue to experience over-capacity and fiercelycompetitive pricing. We have invested further in the latest, most flexible andproductive web and sheetfed presses and stitching and binding lines in order tolower our costs of production and further enhance service. Upward pressure oncosts, particularly indirect costs of employment and utilities, continues. We have renewed medium or long-term contracts with most of our larger bookpublishing customers and are poised to make further progress in growing marketshare through the provision of more post-production added-value services. Theunderlying market is stable. In the magazine market in the UK we are further sharpening our focus onshort-run specialist titles and offering additional logistics and mailingservices. A new freehold facility has been established at our Roche factory forthis purpose. The investment in a new high-speed perfect binding line at ourfactory in Plymouth is particularly suited to shorter-run, time-sensitive work.The market for longer-run, more commoditised work continues to offer poorreturns and we are keeping our overall mix of work under constant review. There is no indication of any sustained pick-up in demand for corporatefinancial documentation either in the UK or the USA. The market for annualreports remains competitive, although pagination is growing as a result ofincreased regulatory and disclosure requirements. As always it is difficult to predict levels of demand for music, multimedia andsoftware related packaging. However demand for special packaging is increasingas video and audio publishers seek to exploit their back catalogues. Demand for point-of-sale products and services is steady. We have won businessfrom a number of new customers. In particular, at the start of the newfinancial year we were awarded a long-term contract to supply all Marks &Spencer's point-of-sale requirements. At the same time we acquired their printfacility at Burnley, where some of this work will be produced. We have established a new, purpose-built freehold logistics facility at Redditchin order to accommodate the new business as well as to enable us to offer abroader range of fulfilment services to customers across all our markets. Commercial and direct response markets remain extremely competitive, especiallyfor longer-run and more commodity products. We are increasing our focus oncustomers with requirements for more specialist products and services. US markets for magazine and commercial products face similar challenges. Heretoo we are keeping our work mix under continuous review and are concentratingfurther on more specialist areas and on providing added-value services. Recenthurricanes have caused short-term disruption to our businesses in Florida, butwithout damage to property. In our principal markets our competitive position is as strong as ever. Inrecent years we have undertaken significant rationalisation and consolidation ofthe Group's activities. We continue to invest in the best available technologyto reduce our costs of production and enhance our service offering: capitalexpenditure this year is expected to be well in excess of last year's level. In the short term question marks remain over consumer confidence and risingutility costs are a particular concern. However, notwithstanding the continuingchallenge posed by current market conditions, we believe that our commitment toservice and quality, and increasing focus on the provision of added-valueservices in addition to the supply of printed products, will deliver progressfor shareholders. CONSOLIDATED PROFIT AND LOSS ACCOUNT 52 weeks to 29 July 2005 52 weeks to 30 July 2004 _____________________________________________ ___________________________________________ Before Exceptional Before Exceptional exceptional items and exceptional items and items and goodwill items and goodwill goodwill amortisation goodwill amortisation amortisation (note 7) Total amortisation (note 7) Total _____________ _____________ ____________ ____________ _____________ ____________ £'000 £'000 £'000 £'000 £'000 £'000Turnover (note 2) _____________ _____________ ____________ ____________ _____________ ____________ Existing activities | 384,203 | | - || 384,203 || 410,304 | | - || 410,304 | Acquired activities | 35,274 | | - || 35,274 || - | | - || - | |_____________| |_____________||____________||____________| |_____________||____________| 419,477 - 419,477 410,304 - 410,304Cost of sales (308,824) (6,837) (315,661) (300,931) (5,265) (306,196) _____________ _____________ ____________ ____________ _____________ ____________Gross profit 110,653 (6,837) 103,816 109,373 (5,265) 104,108Sales and distribution costs (28,494) (843) (29,337) (25,628) (377) (26,005)Administrative expenses _____________ _____________ ____________ ____________ _____________ ____________ Goodwill amortisation | | | || || | | || | - existing activities | - | | (1,413)|| (1,413)|| - | | (1,810)|| (1,810)| - acquired activities | - | | (1,360)|| (1,360)|| - | | - || - | Goodwill impairment | - | | - || - || - | | (13,000)|| (13,000)| Goodwill write-off | - | | (941)|| (941)|| - | | - || - | Exceptional items | - | | (2,863)|| (2,863)|| - | | (2,913)|| (2,913)| Other administrative | | | || || | | || | expenses | (43,440)| | - || (43,440)|| (45,578)| | - || (45,578)| |_____________| |_____________||____________||____________| |_____________||____________| (43,440) (6,577) (50,017) (45,578) (17,723) (63,301)Other operating income/ (costs) 576 72 648 292 (1,390) (1,098)Operating profit (note 2) _____________ _____________ ____________ ____________ _____________ ____________ Existing activities | 35,142 | | (12,239)|| 22,903 || 38,459 | | (24,755)|| 13,704 | Acquired activities | 4,153 | | (1,946)|| 2,207 || - | | - || - | |_____________| |_____________||____________||____________| |_____________||____________| 39,295 (14,185) 25,110 38,459 (24,755) 13,704Profit on disposal of fixed assets - 626 626 - - - Loss on disposal of subsidiary - (14,101) (14,101) - - - Interest receivable 574 - 574 1,645 - 1,645Interest payable (763) - (763) (450) - (450) _____________ _____________ ____________ ____________ _____________ ____________Profit on ordinary activities before taxation 39,106 (27,660) 11,446 39,654 (24,755) 14,899Tax on profit on ordinary activities (note 3) (13,072) 4,406 (8,666) (13,879) 1,980 (11,899) _____________ _____________ ____________ ____________ _____________ ____________Profit on ordinary activities after taxation 26,034 (23,254) 2,780 25,775 (22,775) 3,000Equity dividends (note 5) (17,675) - (17,675) (17,637) - (17,637) _____________ _____________ ____________ ____________ _____________ ____________Retained loss for the financial period transferred from reserves 8,359 (23,254) (14,895) 8,138 (22,775) (14,637) _____________ _____________ ____________ ____________ _____________ ____________ Basic earnings per share (note 6) 2.70p 2.92p ____________ ____________ Diluted earnings per share (note 6) 2.70p 2.92p ____________ ____________ Earnings per share before exceptional items and goodwill amortisation (note 6) 25.30p 25.08p _____________ ____________ Equity dividend per ordinary share 17.15p 17.15p ____________ ____________ All transactions are derived from continuing activities. CONSOLIDATED BALANCE SHEET 29 July 2005 30 July 2004 __________________________ __________________________ £'000 £'000 £'000 £'000Fixed assetsIntangible assets 51,089 22,814Tangible assets 159,557 163,165 ___________ ____________ 210,646 185,979Current assetsStocks 13,344 11,554Debtors - amounts falling due within one year 79,965 67,924Debtors - amounts falling due after more than one year 22,938 22,896Cash at bank and in hand 5,594 47,455 ___________ ____________ 121,841 149,829 Creditors: amounts falling due within one year (101,029) (92,833) ___________ ____________ Net current assets 20,812 56,996 ___________ ____________ Total assets less current liabilities 231,458 242,975 Creditors: amounts falling due after more than one year (947) (992)Provisions for liabilities and charges (15,582) (18,519)Deferred income (308) (706) ___________ ____________ (16,837) (20,217) ___________ ____________Net assets 214,621 222,758 ___________ ____________ Capital and reservesCalled up share capital 10,349 10,331Share premium account 46,497 45,909Capital redemption reserve 1,238 1,238ESOP reserve (1,913) (1,913)Profit and loss account 158,450 167,193 ___________ ____________Equity shareholders' funds 214,621 222,758 ___________ ____________ SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 29 July 30 July 2005 2004 ______________ ______________ £'000 £'000 Net cash inflow from operating activities before one-off pension payment 41,788 65,175One-off pension payment - (25,000) ______________ ______________Net cash inflow from operating activities 41,788 40,175 Returns on investments and servicing of finance (137) 1,289 Taxation (8,882) (12,061) Capital expenditure and financial investment (28,197) (14,935) Acquisitions and disposals (30,414) 1,020 Equity dividends paid (17,648) (17,628) ______________ ______________Net cash outflow before financing (43,490) (2,140) Financing Issue of ordinary share capital 606 272 Decrease in debt and lease financing (3,449) (526) ______________ ______________Decrease in cash in the year (46,333) (2,394) ______________ ______________ NOTES TO THE SUMMARISED CONSOLIDATED CASH FLOW STATEMENT 2005 2004 £'000 £'000Reconciliation of operating profit to net cash inflow from operating activities Operating profit 25,110 13,704 Depreciation 29,701 31,769 Impairment of tangible fixed assets 3,278 - Goodwill amortisation 2,773 1,810 Goodwill impairment - 13,000 Goodwill write-off 941 - Long term incentive schemes provision (release)/charge (1,266) 633 Deferred income (398) (407) Net non-cash provisions movement 5,344 7,996 (Profit)/loss on disposal of tangible fixed assets (648) 1,098 Changes in working capital (13,864) (1,977) Provisions utilised (9,183) (2,451) One-off pension payment - (25,000) ______________ ______________Net cash inflow from operating activities 41,788 40,175 ______________ ______________ 2005 2004 £'000 £'000Reconciliation of net cash flow to movement in net (debt)/funds Decrease in cash in the year (46,333) (2,394) ______________ ______________ Cash outflow from decrease in debt and lease financing 3,449 526 Change in net (debt)/funds resulting from cash flows (42,884) (1,868) Loan notes issued on acquisition of subsidiary (6,016) - Exchange movement (598) 1,597 ______________ ______________ Movement in net (debt)/funds in the year (49,498) (271) Opening net funds 26,006 26,277 ______________ ______________ Closing net (debt)/funds (23,492) 26,006 ______________ ______________ Acquisition excluding 31 July cash and Exchange 29 July 2004 Cash flow overdrafts movement 2005 £'000 £'000 £'000 £'000 £'000Analysis of net (debt)/funds Cash at bank and in hand 47,455 (41,989) - 128 5,594 Overdrafts - (4,344) - (42) (4,386) Debt due within one year (21,449) 3,449 (6,016) (684) (24,700) ____________ ____________ ____________ ____________ ____________ 26,006 (42,884) (6,016) (598) (23,492) ____________ ____________ ____________ ____________ ____________ CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 52 weeks to 52 weeks to 29 July 30 July 2005 2004 _____________ _____________ £'000 £'000 Profit after taxation 2,780 3,000Exchange differences on foreign currency net investments 997 (4,520)Related taxation (385) 1,573 _____________ _____________Total recognised gains and losses relating to the year 3,392 53 _____________ _____________ MOVEMENTS IN CONSOLIDATED SHAREHOLDERS' FUNDS 52 weeks to 52 weeks to 29 July 30 July 2005 2004 _____________ _____________ £'000 £'000 Opening shareholders' funds 222,758 239,437Total recognised gains and losses 3,392 53Equity dividends (17,675) (17,637)Issue of ordinary shares 606 272Long term incentive schemes (1,266) 633Goodwill previously written-off included in retained loss for the year 6,806 - _____________ _____________ Closing shareholders' funds 214,621 222,758 _____________ _____________ NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation The preliminary financial statements have been prepared in accordance with theaccounting policies set out in, and are consistent with, the Group's AnnualReport for 2004. The financial information set out in these statements does not comprisestatutory accounts for the purposes of Section 240 of the Companies Act 1985.The abridged information for the fifty two weeks to 29 July 2005 and for thefifty two weeks to 30 July 2004 has been extracted from the Group's statutoryaccounts for the respective years. The Group's statutory accounts for the fiftytwo weeks to 30 July 2004 have been filed with the Registrar of Companies. TheGroup's statutory accounts for the fifty two weeks to 29 July 2005 will be sentto all shareholders before 1 November 2005. The auditors' reports on theaccounts of the Group for both years were unqualified and did not contain astatement under either Section 237(2) or Section 237(3) of the Companies Act1985. 2. Analyses of turnover and operating profit The geographical analysis of turnover by destination is stated below: 2005 2004 £'000 £'000 United Kingdom 299,239 283,335 United States of America 85,171 95,650 Rest of the World 35,067 31,319 __________ __________ 419,477 410,304 __________ __________ The geographical analysis of turnover and operating profit/(loss) by origin isstated below: Turnover Operating profit/(loss) _________________________ _________________________ 2005 2004 2005 2004 £'000 £'000 £'000 £'000 United Kingdom 307,421 288,052 22,956 33,838 United States of America 84,282 94,840 4,847 (4,506) Rest of the World 27,774 27,412 1,021 (818) ___________ ___________ ____________ ___________ 419,477 410,304 28,824 28,514 Goodwill amortisation - UK - - (1,360) - Goodwill amortisation - USA - - (1,413) (1,810) Goodwill impairment - USA - - - (13,000) Goodwill write-off - UK - - (941) - ___________ ___________ ____________ ___________ 419,477 410,304 25,110 13,704 ___________ ___________ ____________ ___________ The geographical analysis of operating profit/(loss) before exceptional itemsand goodwill amortisation is stated below: 2005 2004 £'000 £'000 United Kingdom 35,385 36,704United States of America 2,889 2,573Rest of the World 1,021 (818) __________ __________ 39,295 38,459 __________ __________ All turnover and operating profits derive from continuing activities. The segmental analysis of turnover is stated below: 2005 2004 £'000 £'000 Books 71,708 66,042Direct Response, Commercial and Point-of-Sale 186,219 181,990Financial 32,540 33,810Magazines 103,873 104,033Multimedia 25,137 24,429 __________ __________ 419,477 410,304 __________ __________ The turnover of SP Group since acquisition of £35,274,000 is included in DirectResponse, Commercial and Point-of-Sale in the table above for 2005. 3. Taxation The taxation charge is analysed below: 2005 2004 £'000 £'000 United Kingdom taxation 8,501 12,602Overseas taxation 165 (703) __________ __________ 8,666 11,899 __________ __________ 4. Pensions (a) Statement of Standard Accounting Practice 24 'Accounting for Pension Costs'('SSAP24') The Group has continued to account for pensions in accordance with SSAP24. The Group operates a defined benefits pension scheme in which approximately halfof its UK employees participate, with assets held in separate trusteeadministered funds (the 'defined benefits scheme'). This scheme was closed tonew entrants from 6 April 2002, but benefits continue to accrue for existingactive members. A defined contribution scheme has been established for joinersafter 6 April 2002, to which the Group contributes at the rate of 4 per cent ofpensionable pay. The pension cost for the Group's UK schemes was £4,380,000 (2004 - £3,400,000). A triennial valuation of the defined benefits scheme was carried out as at 6April 2005, using the projected unit method, by Jonathan Punter, Fellow of theInstitute of Actuaries, Punter Southall & Co Ltd ('the actuary'), who isindependent of the Group. The principal actuarial assumptions adopted for thepurposes of both SSAP24 and determining the funding rate in the valuation were:a long term interest rate (investment return) of 7.8 per cent per annum beforeNormal Retirement Age ('NRA') and 5.3 per cent after NRA; salary increases of3.9 per cent per annum and limited price indexation of 2.9 per cent per annum.Pension increases were allowed for in accordance with the rules of the definedbenefits scheme and past practice. At the valuation date, the actuarial value of the assets on this basis wassufficient to cover 86 per cent of the benefits that had been accrued to membersequivalent to a deficit of £23.2 million. The market value of the definedbenefits scheme's assets, as at 6 April 2005, was £143.3 million. For thepurpose of the actuarial valuation, assets were taken at market value. Theseresults remain preliminary until the actuary's formal valuation report has beensigned. The increase in the deficit can mainly be attributed to the revised mortalityassumption adopted. The 2005 valuation has been based on post-retirementmortality table PA92 (Year of birth) whereas the 2002 valuation was based ontable PA90 (Age-rated down two years). The PA92 table reflects significantimprovements in pensioner life expectancy. The Company has continued to pay contributions at the rate of 10.6 per cent ofpensionable pay in accordance with the actuary's recommendation. Following theresults of the 2005 valuation, the contribution rate is currently under review. Included in debtors is a prepayment of £25,001,000 (2004 - £25,068,000),inclusive of interest accrued, mainly arising as a result of a one-off paymentby the Company into the defined benefits scheme in May 2004. (b) Financial Reporting Standard 17 'Retirement Benefits' ('FRS17') The FRS17 disclosures below have been based on the actuarial valuation of thedefined benefits scheme as at 6 April 2005 adjusted to allow for the assumptionsand actuarial methodology required by FRS17 and updated to 29 July 2005 by theactuary. The major assumptions used by the actuary were: 29 July 2005 30 July 2004 1 August 2003 per annum per annum per annumRate of increase in salaries 3.8% 3.9% 3.6%Rate of increase in pensions in payment and deferred pensions 2.8% 2.9% 2.6%Discount rate 5.0% 5.7% 5.5%Inflation assumption 2.8% 2.9% 2.6% The FRS17 assumptions are similar to those used for funding and the SSAP24disclosures, except for the lower investment return assumption (discount rate)used of 5.0 per cent which is based on corporate bond yields. This has theeffect of increasing the value placed on the liabilities and thereby increasesthe deficit disclosed. The higher investment return used for funding and SSAP24purposes reflects the higher return expected in the long term by investing inasset classes other than corporate bonds, in particular equities. The assets, the expected rates of return on the assets and the liabilities ofthe scheme were: Long term Long term Long term rate of rate of rate of return return return expected at Value at expected at Value at expected at Value at 29 July 29 July 30 July 30 July 1 August 1 August 2005 2005 2004 2004 2003 2003 per annum £'000 per annum £'000 per annum £'000 Equities or equivalent 7.0% 77,707 7.0% 62,505 7.0% 58,224Bonds 4.7% 63,441 5.3% 39,276 5.2% 34,384Other 4.5% 12,233 4.5% 27,089 4.8% 2,377 ___________ ___________ ___________Total market value of assets 153,381 128,870 94,985Present value of liabilities 219,965 173,801 156,753 ___________ ___________ ___________Deficit in the scheme (66,584) (44,931) (61,768)Related deferred tax asset 19,975 13,479 18,530 ___________ ___________ ___________Net pension liability (46,609) (31,452) (43,238) ___________ ___________ ___________ The effect on the Group's profit and loss account and the statement of totalrecognised gains and losses in respect of the defined benefits scheme, had FRS17been adopted during the year, would have been as follows: 2005 2004 £'000 £'000Analysis of the amount charged to operating profit: Current service cost 4,002 5,032 Past service costs - - Settlements/curtailments (600) - __________ __________ Total operating charge 3,402 5,032 __________ __________Analysis of the amount charged to other finance costs: Expected return on pension scheme assets (7,719) (6,290) Interest on pension scheme liabilities 9,976 8,764 __________ __________ Net finance charge 2,257 2,474 __________ __________Net charge to profit and loss account 5,659 7,506 __________ __________ 2005 2004 £'000 £'000Movement in deficit during the year: Deficit in the scheme at the beginning of year (44,931) (61,768) Movement in year: Current service cost (4,002) (5,032) Contributions 5,124 30,687 Past service costs - - Settlements/curtailments 600 - Other net finance charges (2,257) (2,474) Actuarial loss (21,118) (6,344) __________ __________ Deficit in the scheme at end of year (66,584) (44,931) __________ __________ (c) Other The pension cost relating to foreign schemes was £529,000 (2004 - £1,680,000).The foreign schemes are defined contribution schemes and are principally Section401(k) Plans in the USA. 5. Equity dividends The directors propose a final equity dividend of 12.15p for each ordinary sharepayable to holders on the register on 4 November 2005. If approved, the finaldividend will be paid on 2 December 2005. 6. Earnings per share The calculation of basic earnings per share is based on profit after taxation asdisclosed in the profit and loss account of £2,780,000 (2004 - £3,000,000).Adjusted earnings per share is calculated by adding back exceptional items andgoodwill amortisation, as adjusted for taxation, to the profit after taxation.Basic earnings per share and adjusted basic earnings per share are calculated ona weighted average of 102,914,012 (2004 - 102,783,290) ordinary shares in issueduring the year. The calculation of the diluted earnings per share is based on profit aftertaxation as disclosed in the profit and loss account and on a diluted weightedaverage of 102,968,476 (2004 - 102,888,405) shares during the year. The difference between the number of shares used in the basic and dilutedearnings per share calculation is 54,464 (2004 - 105,115) representing dilutiveshare options held but not yet exercised. Dilution has been restricted to shareoptions where the individual option price is less than the average market valueof shares during the year, which was 372.70p (2004 - 390.24p). An adjusted basic earnings per share has been presented in order to highlightthe underlying performance of the Group, and is calculated as set out in thetable below: 2005 2004 ________________________ ________________________ Earnings Earnings Earnings Earnings per share per share £'000 pence £'000 pence Earnings and basic earnings per share 2,780 2.70 3,000 2.92Exceptional items and goodwill amortisation 23,254 22.60 22,775 22.16 ___________ ___________ ___________ ___________Adjusted earnings and adjusted earnings per share 26,034 25.30 25,775 25.08 ___________ ___________ ___________ ___________ All the above calculations exclude 500,000 (2004 - 500,000) ordinary shareswhich are held on behalf of the Company by Employees' Benefit Trusts. 7. Exceptional items and goodwill amortisation 2005 2004 £'000 £'000Exceptional items- rationalisation measures 12,677 10,747- provision and accrual releases (2,206) (802)- goodwill impairment - 13,000- goodwill write-off 941 -- profit on disposal of fixed assets (626) -- loss on disposal of subsidiary 14,101 -Goodwill amortisation 2,773 1,810 __________ __________ 27,660 24,755Related taxation (4,406) (1,980) __________ __________Exceptional items and goodwill net of related taxation 23,254 22,775 __________ __________ Rationalisation measures of £12,677,000 includes £7,801,000 relating to theclosure of St Ives Caerphilly Limited and restructuring of the remaining Weboperations, £1,800,000 relating to the relocation of the point-of-sale businessfrom St Ives Crayford Limited to SP Group Limited and the resultingreorganisation of SP Group's logistics business, and £2,002,000 for the closureof our Woolwich operations and subsequent restructuring of the Financialdivision. The remaining £1,074,000 relates to other rationalisation measurescompleted or announced throughout the Group. The provision and accrual releasesof £2,206,000 includes £1,364,000 relating to the closure of St Ives IncCase-Hoyt. The balance of £842,000 relates to other provision and accrualreleases of items previously charged as exceptional costs and the release offair value provisions no longer required. Following the closure of St IvesDirect Bristol Limited, £941,000 of goodwill previously written-off to reserveshas now been written-off through the profit and loss account. The profit ondisposal of fixed assets relates to the sale of the Tunbridge Wells factorywhich was closed in the previous financial year. The loss on disposal ofsubsidiary relates to the sale of Johler Druck GmbH as detailed in note 9, andincludes £5,865,000 in respect of goodwill previously written-off to reserves.Goodwill amortisation of £2,773,000 (2004 - £1,810,000) was charged for thefifty two weeks ended 29 July 2005. 8. Acquisition of subsidiary undertaking On 13 September 2004 the whole of the issued share capital of SP Group HoldingsLimited ('SP Group') was acquired on a debt free basis. The initialconsideration for the acquisition was £33 million, payable as to £29.8 millionin cash and as to the balance through the issue of floating rate loan notes.Following the earn-out period and the achievement of the target profit beforeinterest and goodwill amortisation of £4.9 million for the year ended 31 March2005, additional consideration of £3.92 million was paid in June 2005 as to £1.4million in cash and the balance through the issue of floating rate loan notes. The purchase of SP Group has been accounted for by the acquisition method andhas been consolidated into the Group from the date of acquisition. The fairvalue of assets acquired were £6,151,000. Total purchase considerationincluding costs amounted to £37,199,000, resulting in goodwill on acquisition of£31,048,000. SP Group is a leading supplier of point-of-sale material and services to majorretail store chains and international brands. Its services include completeproject management and fulfilment operations in addition to digital, silk-screenand lithographic printing facilities located in Birmingham and Redditch. For the period from the date of acquisition to 29 July 2005 SP Group increasedthe Group's net operating cash flows by £2,489,000, received £28,000 in respectof net returns on investments and servicing of finance, paid £981,000 in respectof taxation and £1,850,000 for capital expenditure. 9. Disposal of subsidiary undertaking On 5 April 2005 the Group disposed of the whole of its interest in Johler DruckGmbH ('Johler') for a cash consideration of approximately €2.2 million. Theloss on disposal amounted to £14,101,000, including £5,865,000 in respect ofgoodwill previously written-off to reserves. Up to the date of disposal Johler made an operating loss (before interest) of£267,000 and in the previous full year it made an operating loss (beforeinterest) of £935,000. 10. Post balance sheet events On 1 August 2005 SP Group Limited secured a long-term contract to supply allMarks and Spencer plc's point-of-sale requirements. At the same time thefreehold land, building and equipment of their print business in Burnley wasacquired for approximately £3.4 million. The business has 74 employees and willtrade under the name St Ives Burnley Limited. On 15 August 2005 the freehold land, building and equipment formerly owned byAilec Mailing, located in Roche and adjacent to our existing factory, wasacquired for approximately £2.2 million. The facility will operate as a mailinghouse under the name SouthWest Mailing Limited. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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