31st Jul 2007 07:01
4imprint Group PLC31 July 2007 31 July 2007 4imprint Group plc Interim Results for the period ended 30 June 2007. 4imprint Group plc announces today its interim results for the period ended 30June 2007. Highlights • Sales at £69.09m were 25% up on half year 2006. • Operating profit before exceptional items was £4.50m, 43% ahead of half year 2006. • Profit before tax and exceptional items was £4.29m, 31% ahead of half year 2006. • Exceptional items of £2.94m, £2.57m of which relates to the integration of the Trade Division and the resultant reorganisation of the Manchester business and infrastructure which will realise substantial cost reduction. • Profit after exceptionals, interest and tax, (tax rate 32%) was £0.92m, compared to £2.15m in half year 2006 (tax rate 30%). • Basic EPS pre exceptional items was 11.78p (half year 2006: 9.33p). • Basic EPS was 3.70p (half year 2006: 8.79p). • Interim dividend of 4.00p per share, an increase of 23% on prior year. Commenting on the results, Ken Minton, Executive Chairman said "The Group made substantial progress in the first half and laid the foundationsfor major gains in operating efficiency and cost reduction which will becomeevident during the second half". - Ends - For further information, please contact: Ken MintonChairman4imprint Group plc Tel. + 44 (0) 207 299 7201 Chairman's Statement Shareholders will be pleased to see that the first half of 2007 has been anotherperiod of substantial progress for their company. Sales in the first half of 2007 at £69.09m were 25% above the same period lastyear reflecting particularly, the contribution from Supreme, the UK Tradebusiness acquired in November 2006, and the continued strong growth of the USDirect Marketing business. Operating profits before exceptional items at £4.50m were 43% over the sameperiod last year. Exceptional charges amounted to £2.94m and net interest costs were £0.21m. Pretax profit after exceptional charges was £1.35m. The tax charge at 32% compares with 30% last half year, and post tax profitsafter exceptionals were £0.92m. Basic earnings per share amounted to 3.70 pence per share. Net debt at the end of the period was £3.25m. The Board has declared a dividend of 4.00 pence per share. During the first half of this year, the Group planned and is now completing theexecution of a major change in the structure and efficiency of the UKbusinesses. Shareholders will recall that in the 2006 Annual Report, I reported on theacquisition of the Blackpool based Supreme business, and our intentions to mergethis business with the Manchester based Product Source and MT Golf businesses tocreate a combined company with sales in excess of £25m and operating profits of£3m per annum. Furthermore I advised Shareholders that a complete integration ofthese two companies was planned and was expected to realise synergies in excessof £1.5m per annum. I am pleased to report that the transfer of the Product Source business onto theBlackpool site took place in July and the MT Golf transfer will be executed byearly October. Furthermore the forecast synergies of £1.5m per annum are onschedule to be achieved when the integration is complete. The principal sources of the £1.5m per annum synergies arising from theintegration of the Trade business onto the Blackpool site are:- (a) The elimination of the infrastructure costs carried by the Product Source and MT Golf businesses in Manchester since the Supreme Blackpool base can, with marginal additional costs, support the transferred businesses; and (b) Additional potential cost savings and commercial benefits created from the fusion of the three businesses into a single enterprise. The concentration of the Trade Business onto the Blackpool site has meant thatthe infrastructure at the Manchester base is now far too large to be supportedby the remaining businesses on this site. A major review of the needs of theremaining businesses has been carried out, as a result of which the Manchesterbase has been considerably downsized and simplified. The total numbers of employees at the Manchester and Blackpool sites will reduceby 45, or around 10%, as a result of these changes. These changes gave rise to the "one off" exceptional costs of £2.57m notedearlier, which are mainly due to severance costs and exceptional operatingcosts. The divisional trading performances during the first half have been as follows:- The Trade Division produced gross sales of £13.26m compared with £6.43m lastyear, reflecting the inclusion of Supreme. Operating profit before exceptionalitems was £2.03m compared with £1.25m in 2006. Market conditions were generallystable, with Supreme sales ahead of last year and those of Product Source and MTGolf marginally behind. The North American Division had an excellent first half with sales in US Dollarsof $66.59m, 30% above last year and divisional dollar profits of $5.54m, 44%ahead of last year. The Direct Marketing business continued its fast growth withfirst half sales 35% over the previous year. The small Corporate Programmesbusiness produced, as planned, lower sales than 2006 as the business isprogressively focussed on higher quality opportunities. The End User Division performed as follows:- (a) Sales of the Corporate Programmes business were ahead of last year but profits were down reflecting the poor performance of a major contract now terminated; (b) Field Sales produced substantial growth in sales and operating profits; (c) At PPI, the business improved margin on somewhat lower sales and held profits at last year's levels; (d) Kreyer, the Germany based Corporate Programmes and Field Sales business, produced sales ahead of last year but profits were lower as a particularly profitable Corporate Programme featured in the 2006 half year; and (e) The UK Direct Marketing businesses had a good first half with sales 20% ahead of last year. Outlook The Board expects the substantial progress made by the Group in the first halfto be continued in the second half underpinned by the benefits from the majorchanges implemented during the first half. Ken MintonExecutive Chairman31 July 2007 Finance Director's Report Segment reporting Following the acquisition of the Supreme business in November 2006, the Groupreports its results in three divisions in line with the way the business ismanaged:- i) Trade Division, comprising the Supreme, Product Source and MT Golf businesses. ii) European End User Division, comprising UK Corporate Programmes, Field Sales, Premium Promotions and Direct Marketing businesses and the German business Kreyer. iii) North American Division, comprising North American Direct Marketing and the small US Corporate Programmes businesses. The cost of infrastructure and support in Manchester for the European End UserDivision, Product Source business and the MT Golf business (which form part ofthe Trade Division) is not allocated by division and is reported separately innote 2. Sales Sales were £69.09m, an increase of 25% over half year 2006. The impact of thedollar exchange rate reduced Group sales by 6%. Growth of 12% was attributableto sales from the Supreme business, acquired in November 2006. Sales growth in the North American division was 30% in US dollars, with theDirect Marketing business 35% ahead. The European End User division grewexternal sales by 8% and the Trade business by 155% including the impact of theSupreme acquisition. Operating profit Operating profit before exceptional items was £4.50m, a 43% increase over priorhalf year. North American profits were £2.79m, 32% ahead of prior year; 44%ahead in US dollars. Exchange movement in the US dollar reduced profits by£0.24m compared to half year 2006. European End User Division operating profit before exceptional items at £2.38mwas 92% of the prior half year. The reduction compared to prior half year isprincipally due to losses on an underperforming contract which has beenterminated in the period. Trade Division operating profit before exceptional items was £2.03m (half year2006: £1.25m) including the benefit of the Supreme acquisition. Overhead costs to support the European End User Division and the Product Sourceand MT Golf businesses of the Trade Division were £1.70m (half year 2006:£1.80m, full year 2006: £3.31m). Group Headquarters' costs were in line with prior year. Exceptional items The exceptional charge in 2007 of £2.94m comprises three items: 1) Costs of £1.74m in the Trade Division as a result of the ongoing integration of the Product Source and MT Golf businesses into the site of the Supreme business in Blackpool; 2) Costs of £0.83m in the European End User Division relating to the Trade Division integration including restructuring of the business and related infrastructure; and 3) Provision of £0.37m in the European End User Division relating to the exit of an onerous customer contract. Pensions The pension deficit on the Company's closed defined benefit pension schemereduced to £9.84m in the period (half year 2006: £16.77m and full year 2006:£18.44m); primarily as a result of the increase in the discount rate due toincreased bond yields. The discount rate at half year 2007 was 6.00% (half year2006: 5.40%, full year 2006: 5.30%). A full triennial valuation to 5 April 2007is currently being prepared. Company contributions to the scheme in the periodwere £0.95m (half year 2006: £0.74m, full year 2006: £1.50m). Taxation The taxation charge for the period was calculated at 32% (half year 2006: 30%;full year 2006: 32%). Earnings per share Basic earnings per share before exceptional items were 11.78p (half year 2006:9.33p). Basic earnings per share were 3.70p (half year 2006: 8.79p). Dividend The Board has declared a dividend of 4.00p, a 23% increase over prior half year. Cashflow The Group's net debt at 30 June 2007 was £3.25m, the opening net debt positionwas £0.25m. Cash generated from operating profit after a £0.95m contribution tothe defined benefit pension scheme was £2.15m. Increase in working capital was£1.54m (including the impact of a £1.27m increase in the period in tradereceivables due to the Supreme acquisition in 2006 and a £2.25m increase increditors and provisions relating to exceptional charges in the period). Cashoutflow relating to tax, dividends and interest was £2.55m, capital investmentwas £0.92m and other items £0.14m. Balance sheet and Shareholders' funds Equity Shareholders' funds increased by £5.28m to £25.36m, profit for the periodwas £0.92m and dividends paid were £1.55m. The after tax reduction in thepension deficit increased Shareholders' funds by £5.46m and further increases inShareholders' funds from other items totalled £0.45m. Exchange rates The average US dollar exchange rate for the period for translating US profitswas $1.9827 (half year 2006 : $1.8244) and for Euros was €1.4749 (half year2006: €1.4515) to the pound. The exchange rate at the balance sheet date, usedto translate assets and liabilities in US Dollars, was $2.0064 (June 2006:$1.8496) and for Euros was €1.4856 (June 2006: €1.4465). Gillian DaviesGroup Finance Director31 July 2007 Operating Review Restructuring of the Manchester based business The Manchester based business which, until the acquisition of Supreme at the endof last year, represented over 80% of the Group's entire European activities,comprises the following: • The Product Source and MT Golf Trade businesses• The Corporate Programmes business• The Field Sales business• The UK Direct Marketing business Whilst the four businesses operated quite separately they were supported by acommon infrastructure including areas such as IT, Finance, Logistics and HR. Thetotal annual cost of this infrastructure amounted to £3.31m in 2006. Earlier in 2007, the Board decided to merge the Product Source and MT Golfbusinesses with the newly acquired Supreme company to create a single enterpriseentirely located on the Supreme site at Blackpool. The operational benefits andcost savings to be achieved by this step were significant, and sufficientinfrastructure existed at Blackpool to accommodate the combined enterprise, withonly marginal additions. The transfer of the Product Source business took placeat the beginning of July 2007, the small MT Golf business will be transferred byearly October. A consequence of establishing the entire Trade Division at Blackpool has beenthe need for a major review of the whole organisation of the remaining businessat Manchester including the infrastructure and support services, since prior tothe Supreme acquisition the Product Source and MT Golf businesses weresignificant users of these services. This review is complete and major changes have been implemented, comprising thefollowing: (a) the Direct Marketing business has been placed under the Executive control of the US Direct Marketing business. This step will provide the focus and integrated control necessary to underpin the growth of the business and establish a viable base for extending the business into Europe. (b) The Corporate Programmes and Field Sales businesses have been merged to provide a more efficient organisation. (c) The Manchester infrastructure and support services have been reorganised and have been incorporated into the merged Corporate Programmes and Field Sales businesses, from July 2007. As a result the whole Manchester based business is more focused, simpler andleaner. The total number of people employed has been reduced by nearly 50% fromapproximately 285 to 145. Operating Review (continued) European End User Division Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000--------------------------------------------------------------------------------------------------------External and inter divisional sales 24,800 23,049 50,818External sales 24,598 22,723 50,388Operating profit before exceptional itemsand Manchester overheads 2,381 2,597 5,651Operating profit after exceptional items butbefore Manchester overheads 1,182 2,597 5,481-------------------------------------------------------------------------------------------------------- This Division comprises the following sectors:- a) Corporate Programmes - Sales of the core business grew 3% in the period and a number of medium sized new account wins have been added to this business. Corporate clients are becoming ever more sophisticated in terms of their needs for design, product development and technology based solutions in order to justify sole and preferred supplier status. Therefore the business continues to invest in its technical, marketing and brand management capabilities in order to retain existing relationships and form the platform for further growth. During the period, a contract which was implemented during 2006 and generatedlosses in the period, has been terminated. The direct costs specificallyattributable to this contract have been removed. b) Field Sales - This business had an excellent performance in the period with sales increasing by 20% over prior year and has experienced the equivalent increase in its overall performance as costs were managed in line with this sales growth. c) Premium Promotions - based in London, this business specialises in the supply of bespoke products to a range of blue chip clients. Sales were 88% of prior year, however profitability held at prior half year level due to an improvement in margin as well as overhead cost control. d) Direct Marketing - uses an integrated catalogue-web-customer service marketing approach. The strategy of rapidly developing this division in line with the US Direct Marketing business has continued with sales 20% ahead of prior year. The sector has continued its investment in prospect catalogues, search engine marketing initiatives and a widening product range and orders from new customers were 29% ahead of prior year. From 1 July 2007, this business has been placed under Executive control of the US Direct Marketing business. Kreyer Promotions, in Germany, operates in both the Corporate Programmes andField Sales areas. Sales of the business are 4% ahead of prior half year. Therewas a slight reduction in margin and increased investment in resource comparedto prior year, resulting in a decrease in profitability. The exceptional charges incurred in the period related to the reorganisation ofthe End User Division as a result of the Trade integration (£0.83m) and aprovision for the termination of a significant, underperforming contractreported within the Corporate Programmes business (£0.37m). Operating Review (continued) North American Division Half year Half year Half year Half year Full year Full year 2007 2007 2006 2006 2006 2006 US$'000 £'000 US$'000 £'000 US$'000 £'000-------------------------------------------------------------------------------------------------------------Sales 66,593 33,739 51,147 28,368 111,585 60,053Operating profit 5,536 2,792 3,855 2,113 9,123 4,910------------------------------------------------------------------------------------------------------------- The strong growth pattern demonstrated by the US division and sustained overrecent years continued in the first half of 2007, with total sales 30% over thesame period in 2006 in US dollars. The division's Direct Marketing operations continued to drive top line growth,with total sales 35% higher than the prior year comparative. The integratedprint/web marketing approach developed over the last few years is constantlyrefined and expanded where opportunities arise, and is supported by asignificant investment in catalogues, customer marketing, website developmentand search engine marketing. Underpinning these initiatives is an unwaveringdedication to first class customer service, based on the daily commitment ofeach of our employees to deliver on our unique, market leading customerguarantees. Customer acquisition activities remain effective, with new customerorders increasing by 38%, and our existing customer base continues to performwell, driven by creative retention techniques. As ever, the performance of our supplier partners is fundamental in allowing usto deliver on our customer promises. Our merchandising and marketing teams havedeveloped strong relationships with our vendors, resulting in offers andexclusives with a winning combination of price, quality and service. Inaddition, several small 'niche' catalogues have been developed, some focusing onnew product categories and others offering an expanded range of products inexisting categories. These books are being test marketed to our existingcustomers first. The application of the same Direct Marketing techniques in the Canadian marketcontinues to produce favourable results. The smaller Corporate Programmes business had a successful first half, albeitwith sales slightly lower, (as planned), than in 2006. Our account managementteam develops close relationships with large customers to provide a tailoredcombination of products and services to suit the individual requirements of eachaccount. Operating profit in the underlying currency increased 44% over the first half of2006, however movements in the dollar/sterling exchange rate reduced this gainto 32% when translated to the reporting currency. This division remainsefficient in its use of working capital. From 1 July 2007 the 4imprint UK based Direct Marketing business becomes part ofthe North American Division. This will allow the Division to provide increasedfocus and Executive management direction to the Direct Marketing business.Furthermore it is consistent with our intention to extend the American businessinternationally. Operating Review (continued) Trade Division Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000--------------------------------------------------------------------------------------------------------External and inter divisional sales 13,259 6,431 13,137External sales 10,751 4,223 9,078Operating profit before exceptional itemsand Manchester overheads 2,027 1,253 2,361Operating profit after exceptional items butbefore Manchester overheads 283 1,253 2,361-------------------------------------------------------------------------------------------------------- The Trade Division comprises Product Source, MT Golf and Leisure and the Supremebusiness, which was acquired in November 2006. As from 1 July, Product Source has been transferred into the Supreme business inBlackpool, under the new name of SPS (EU) Ltd, trading as Supreme and ProductSource Select. MT Golf and Leisure will be transferred into the Blackpool business under theumbrella of SPS (EU) Ltd at the beginning of October 2007, which is at the endof the golf season. The combined business is the largest promotional products trade supply companyin the UK within the promotional, marketing, advertising and business giftmarket, utilising its specialist manufacturing and print processes combined withits experience in worldwide sourcing of unique product ranges. The combined strengths of the integrated division will facilitate an expectedincrease in its range of sales to its UK and Eire distributors and a selectnumber of appointed agents throughout the rest of the world with its one stopshop mentality. The exceptional item of £1.74m relates to the one off costs of integration ofthe Product Source and MT Golf and Leisure businesses onto the Blackpool site. The division has traded satisfactorily in the first half of 2007. The market hasbeen stable and the division has benefited both from the opportunity to developintra group sales and from supplying a wider range of products into its combinedcustomer base. The transfer of the Product Source business onto the Blackpool site in July 2007included the transfer of substantial plant and machinery and inventory fromManchester to Blackpool, system transfer and recruitment of approximately 100people. This integration process is expected to be complete by early October.Some temporary disruption to the standards of customer service has occurred asthese changes have been implemented. Consolidated Income Statement (unaudited) Half year Half year Full year 2007 2006 2006 Note £'000 £'000 £'000----------------------------------------------------------------------------------------------------------Sales 2 69,088 55,314 119,519Operating expenses (67,529) (52,347) (112,355)----------------------------------------------------------------------------------------------------------Operating profit 2 1,559 2,967 7,164----------------------------------------------------------------------------------------------------------Operating profit before exceptional items 4,502 3,156 7,541Exceptional items 3 (2,943) (189) (377)----------------------------------------------------------------------------------------------------------Operating profit 2 1,559 2,967 7,164----------------------------------------------------------------------------------------------------------Finance costs (214) (18) (44)Finance income 5 128 218----------------------------------------------------------------------------------------------------------Profit before tax 1,350 3,077 7,338Taxation 4 (432) (923) (2,348)----------------------------------------------------------------------------------------------------------Profit attributable to equity Shareholders 918 2,154 4,990---------------------------------------------------------------------------------------------------------- Earnings per shareBasic 5 3.70p 8.79p 20.29pDiluted 5 3.56p 8.41p 19.44p---------------------------------------------------------------------------------------------------------- £'000 £'000 £'000----------------------------------------------------------------------------------------------------------Dividends paid in the period 6 1,549 1,109 1,911Dividends per share declared - Interim 6 4.00p 3.25p 3.25p - Final 6 6.25p---------------------------------------------------------------------------------------------------------- Statement of Recognised Income and Expense (unaudited) Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000---------------------------------------------------------------------------------------------------------Profit for the period 918 2,154 4,990---------------------------------------------------------------------------------------------------------Exchange gains and losses offset in reserves (123) (808) (1,540)Current tax deduction on exercise of employee share options - - 492Actuarial gains taken to reserves net of tax 5,461 2,512 771---------------------------------------------------------------------------------------------------------Net gains/(losses) not recognised in income statement 5,338 1,704 (277)---------------------------------------------------------------------------------------------------------Total recognised income for the period 6,256 3,858 4,713--------------------------------------------------------------------------------------------------------- Consolidated Balance Sheet (unaudited) At At At 30 June 1 July 30 Dec 2007 2006 2006 Note £'000 £'000 £'000----------------------------------------------------------------------------------------------------------Non current assetsProperty, plant and equipment 10,266 1,536 10,315Goodwill 9,084 4,341 9,084Intangible assets 1,596 3,324 1,616Investments 7 8 7Deferred income tax assets 4,433 7,177 6,149---------------------------------------------------------------------------------------------------------- 25,386 16,386 27,171----------------------------------------------------------------------------------------------------------Current assetsInventories 10,001 6,883 8,409Trade and other receivables 26,370 19,264 23,748Cash and cash equivalents 2,545 8,403 2,115---------------------------------------------------------------------------------------------------------- 38,916 34,550 34,272----------------------------------------------------------------------------------------------------------Current liabilitiesTrade and other payables 21,000 13,709 18,710Current tax 909 1,039 857Borrowings 5,792 - 2,364Provisions 370 213 ----------------------------------------------------------------------------------------------------------- 28,071 14,961 21,931----------------------------------------------------------------------------------------------------------Net current assets 10,845 19,589 12,341----------------------------------------------------------------------------------------------------------Non current liabilitiesRetirement benefit obligations 8 9,842 16,772 18,436Deferred consideration 1,030 - 1,000---------------------------------------------------------------------------------------------------------- 10,872 16,772 19,436----------------------------------------------------------------------------------------------------------Net assets 25,359 19,203 20,076---------------------------------------------------------------------------------------------------------- Shareholders' equityShare capital 9 9,798 9,752 9,766Share premium reserve 9 37,886 37,740 37,757Capital redemption reserve 9 208 208 208Cumulative translation differences 9 (1,873) (1,018) (1,750)Retained earnings 9 (20,660) (27,479) (25,905)----------------------------------------------------------------------------------------------------------Total equity 25,359 19,203 20,076---------------------------------------------------------------------------------------------------------- Consolidated Cash Flow Statement (unaudited) Half year Half year Full year 2007 2006 2006 Note £'000 £'000 £'000---------------------------------------------------------------------------------------------------------Cash flows from operating activities Cash generated from operations 7 618 1,273 3,052Tax paid (903) (114) (848)Finance income 74 128 167Finance costs (173) (18) (23)---------------------------------------------------------------------------------------------------------Net cash (used in)/generated from operating activities (384) 1,269 2,348--------------------------------------------------------------------------------------------------------- Cash flows from investing activitiesAcquisition of subsidiary (266) - (2,058)Cash acquired with subsidiary - - 520Proceeds on disposal of subsidiary - - 526Purchases of property, plant and equipment (559) (478) (822)Purchases of intangible assets (363) (301) (643)Proceeds from sale of property, plant and equipment - - 27---------------------------------------------------------------------------------------------------------Net cash used in investing activities (1,188) (779) (2,450)--------------------------------------------------------------------------------------------------------- Cash flows from financing activitiesRepayment of borrowings on acquisition - - (7,219)Proceeds from issuance of ordinary shares 161 174 205Dividends paid to Shareholders (1,549) (1,109) (1,911)---------------------------------------------------------------------------------------------------------Net cash used in financing activities (1,388) (935) (8,925)--------------------------------------------------------------------------------------------------------- Net decrease in cash and bank overdrafts (2,960) (445) (9,027)Cash and bank overdrafts at beginning of the period (249) 9,012 9,012Exchange losses on cash and bank overdrafts (38) (164) (234)---------------------------------------------------------------------------------------------------------Cash and bank overdrafts at end of the period (3,247) 8,403 (249)---------------------------------------------------------------------------------------------------------Analysis of cash and bank overdraftsCash at bank and in hand 2,545 8,403 2,115Bank overdrafts (5,792) - (2,364)--------------------------------------------------------------------------------------------------------- (3,247) 8,403 (249)--------------------------------------------------------------------------------------------------------- 1 Basis of preparation This financial information comprises the consolidated interim balance sheet asof 30 June 2007 and 1 July 2006 and related consolidated interim statements ofincome and cashflows for the period then ended of 4imprint Group plc(hereinafter referred to as "financial information"). The interim financialstatements of 4imprint Group plc for the period ended 30 June 2007 are unauditedand do not comprise statutory accounts within the meaning of Section 240 of theCompanies Act 1985. The financial information has been prepared on the basis ofthe accounting policies set out in the Group's annual report and accounts forthe year ended 30 December 2006. Those accounts carry an unqualified auditors'report and have been delivered to the Registrar of Companies. The comparativeresults for the year ended 30 December 2006 are abridged, and as such do notrepresent statutory accounts. The Group has chosen not to adopt IAS34 "Interimfinancial reporting", in preparing its interim statements. 2 Segmental analysis At 30 June 2007, the Group was organised in three divisions: Sales Gross sales Inter divisional sales Sales Half Half Full Half Half Full Half Half Full year year year year year year year year year 2007 2006 2006 2007 2006 2006 2007 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000----------------------------------------------------------------------------------------------------------------Trade Division 13,259 6,431 13,137 (2,508) (2,208) (4,059) 10,751 4,223 9,078European End User Division 24,800 23,049 50,818 (202) (326) (430) 24,598 22,723 50,388North American Division 33,739 28,368 60,053 - - - 33,739 28,368 60,053---------------------------------------------------------------------------------------------------------------- 71,798 57,848 124,008 (2,710) (2,534) (4,489) 69,088 55,314 119,519---------------------------------------------------------------------------------------------------------------- Operating profit Operating profit/(loss) Exceptional items Operating profit/(loss) before exceptional items Half Half Full Half Half Full Half Half Full year year year year year year year year year 2007 2006 2006 2007 2006 2006 2007 2006 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------------Trade Division 2,027 1,253 2,361 (1,744) - - 283 1,253 2,361European End User Division 2,381 2,597 5,651 (1,199) - (170) 1,182 2,597 5,481Manchester overhead and (1,697) (1,800) (3,306) - - - (1,697) (1,800) (3,306)infrastructure costs *------------------------------------------------------------------------------------------------------------------Total European 2,711 2,050 4,706 (2,943) - (170) (232) 2,050 4,536 North American Division 2,792 2,113 4,910 - - - 2,792 2,113 4,910Group Headquarters costs (524) (538) (1,015) - (189) (207) (524) (727) (1,222)------------------------------------------------------------------------------------------------------------------Operating profit before defined 4,979 3,625 8,601 (2,943) (189) (377) 2,036 3,436 8,224benefit pension and share optionchargesDefined benefit pension charges (157) (172) (325) - - - (157) (172) (325)Share option charges (320) (297) (735) - - - (320) (297) (735)------------------------------------------------------------------------------------------------------------------ 4,502 3,156 7,541 (2,943) (189) (377) 1,559 2,967 7,164------------------------------------------------------------------------------------------------------------------ Net finance costs totalling £209,000 (half year 2006: £110,000 income, full year2006: £174,000 income), and taxation charge of £432,000 (half year 2006:£923,000, full year 2006: £2,348,000) cannot be separately allocated toindividual segments. A review of the segments is included in the OperatingReview. * The Manchester overhead and infrastructure costs support the End User Divisionand the Product Source and MT Golf businesses of the Trade Division until theirtransfer (see Operating Review) 3 Exceptional items Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------Trade Division integration costs (1,744) - -European End User Division integration costs (829) - -Contract exit costs (370) - -Group restructuring costs - (125) (143)OFT fine and related legal costs - (64) (64)European End User Division reorganisation costs - - (170)------------------------------------------------------------------------------------------------------------ (2,943) (189) (377)------------------------------------------------------------------------------------------------------------ Trade Division integration costs and European End User Division integrationcosts represent the costs attributable to the relocation of the Manchester basedProduct Source and MT Golf trade businesses into the Supreme trade business inBlackpool, together with the resultant reorganisation of the business andrelated infrastructure in Manchester. Contract exit costs represent a provision for the costs of exiting an onerouscustomer contract in the European End User Division. 4 Taxation The taxation charge for the period to 30 June 2007 has been calculated at 32%,(half year 2006: 30%; full year 2006: 32%) of the profit before tax for theperiod. 5 Earnings per share Basic earnings per share (EPS) is calculated by dividing the earningsattributable to ordinary Shareholders by the weighted average number of ordinaryshares in issue during the period, excluding those held in the Employee ShareTrust which are treated as cancelled. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all potential dilutive ordinaryshares. The potential dilutive ordinary shares relate to those share optionsgranted to employees where the exercise price is less than the average marketprice of the Company's ordinary shares at the balance sheet date. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below: Half year Half year Full year 2007 2006 2006 Weighted Weighted Weighted average average average number Pence number Pence number Pence Earnings of shares per Earnings of shares per Earnings of shares per £'000 '000 share £'000 '000 share £'000 '000 share-------------------------------------------------------------------------------------------------------------------Earnings attributable toordinary Shareholders 918 2,154 4,990Ordinary shares in issue 25,449 25,323 25,343Shares held by EmployeeShare Trust (665) (816) (754)-------------------------------------------------------------------------------------------------------------------Basic EPS 918 24,784 3.70 2,154 24,507 8.79 4,990 24,589 20.29Effect of dilutive share 995 (0.14) 1,106 (0.38) 1,084 (0.85)options-------------------------------------------------------------------------------------------------------------------Diluted EPS 918 25,779 3.56 2,154 25,613 8.41 4,990 25,673 19.44------------------------------------------------------------------------------------------------------------------- 6 Dividends The interim dividend for 2007 of 4.00p per ordinary share (interim 2006: 3.25p,final 2006: 6.25p) will be paid on 31 August 2007 to ordinary Shareholders onthe register at the close of business on 10 August 2007. Dividends paid in the period totalled £1,549,000 (period to 1 July 2006:£1,109,000, period to 30 December 2006: £1,911,000). 7 Cash generated from operations Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000---------------------------------------------------------------------------------------------------------Operating profit 1,559 2,967 7,164 Adjustments for:Depreciation charge 590 263 604Loss/(profit) on disposal of property, plant and equipment 106 - (1)Amortisation of intangibles 371 460 778Share option charge 320 297 735IAS 19 pension charge for defined benefit scheme 157 172 325Contributions to defined benefit pension scheme (950) (741) (1,500) Changes in working capital:Increase in inventories (1,604) (1,249) (1,162)(Increase)/decrease in trade and other receivables (2,818) 117 (5,195)Increase/(decrease) in trade and other payables 2,517 (941) 1,589Increase/(decrease) in provisions 370 (72) (285)---------------------------------------------------------------------------------------------------------Cash generated from operations 618 1,273 3,052--------------------------------------------------------------------------------------------------------- In the full year 2006, on acquisition, trade receivables of Pramic Limited (thetrading company of the Supreme Group), amounting to £2,481,000, formed part ofthe consideration paid to the vendors. This payment necessitated the funding of trade receivables of Pramic Limited,during the period from the date of acquisition. Accordingly, there was anoutflow of £1,200,000 in the full year 2006 and £1,270,000 in the half year2007, included above, representing an increase in Pramic trade receivables. 8 Defined benefit pension scheme The Group operates a UK defined benefit pension scheme which is closed to newmembers. The funds of the scheme are administered by a trustee company and areindependent of the Group's finances. During the period the financial position of the defined benefit pension schemehas been updated in line with the anticipated annual cost for current service,the expected return on scheme assets, the interest on scheme liabilities andcash contributions made to the scheme. The last full actuarial valuation was carried out by a qualified independentactuary as at 5 April 2004 and this has been updated on an approximate basis to30 June 2007. Analysis of the balance sheet liability: Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000------------------------------------------------------------------------------------------------------------At start of period 18,436 20,930 20,930Total expense charged in the income statement 157 172 325Contributions paid (950) (741) (1,500)Actuarial gains (7,801) (3,589) (1,319)------------------------------------------------------------------------------------------------------------At end of period 9,842 16,772 18,436------------------------------------------------------------------------------------------------------------ 9 Consolidated statement of changes in Shareholders' equity Share Capital Cumulative Retained earnings Share premium redemption translation Own Profit Total capital reserve reserve differences shares and loss Equity £'000 £'000 £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------At start of period 9,766 37,757 208 (1,750) (1,398) (24,507) 20,076Profit for the period 918 918Exchange adjustments net of tax (123) (123)Shares issued 32 129 161Employee share options 320 320Deferred tax on employee share 95 95options taken to reserves Actuarial gains taken to reserves 7,801 7,801Deferred tax on pensions taken to (2,340) (2,340)reservesDividends (1,549) (1,549)------------------------------------------------------------------------------------------------------At end of period 9,798 37,886 208 (1,873) (1,398) (19,262) 25,359------------------------------------------------------------------------------------------------------ 10 Share based payments Share options are granted to Senior Management and in addition a SAYE scheme isavailable to all UK and US employees. The exercise price of options designedfor Senior Management is nil and for SAYE options is equal to the market rate,plus any discount up to the limit imposed by the local tax authority at thepricing date. The fair value of options (granted after 7 November 2002 which had beenexercised by 1 January 2007) is determined using the Monte Carlo valuation modelfor Senior Management and Executive options and the Binomial model for SAYEoptions and is spread over the vesting period of the options. The significantinputs into the model are an expected life of between 1.35 and 3 years for alloptions, the volatility measured at the standard deviation of expected shareprice returns is based on statistical analysis of daily share prices over thelast 3 years and a risk-free rate based on a 36 month UK LIBOR. Half year Half year Full year 2007 2006 2006 £'000 £'000 £'000-----------------------------------------------------------------------------------------------------------Charge resulting from spreading the fair value of options granted after 7 320 297 735November 2002, which have not been exercised by 1 January 2007, over thevesting period of the options----------------------------------------------------------------------------------------------------------- The Group has no legal or constructive obligation to repurchase or settle theoptions in cash. 4imprint Group plcGroup Headquarters6 Cavendish PlaceLondon W1G 9NBTelephone + 44 (0)207 299 7201Fax + 44 (0)207 299 7209E-mail [email protected] UK4imprintBroadwayTrafford Wharf RoadManchester M17 1DDTelephone +44 (0)870 240 6622Fax +44 (0)870 241 3440E-mail [email protected] 4imprintProduct Plus InternationalSouth Bank Business CentrePonton RoadLondon SW8 5BLTelephone +44 (0)207 393 0033Fax +44 (0)207 393 0080E-mail [email protected] 4imprintProduct Plus InternationalClifton HeightsTriangle WestBristol BS8 1EJTelephone +44 (0)117 929 9236Fax +44 (0)117 925 1808E-mail [email protected] Supreme and Product Source SelectSPS (EU) LimitedNeptune HouseSycamore Trading EstateSquires Gate LaneBlackpoolLancashire FY4 3RLTelephone +44 (0)1253 340 400Fax +44 (0) 1253 340 401E-mail [email protected] USA4imprint101 Commerce StreetOshkoshWI 54901USATelephone +1 920 236 7272Fax +1 920 236 7282E-mail [email protected] Germany4imprintKreyer Promotion ServiceHeydastrasse 13D-58093HagenGermanyTelephone +49 (0)2331 95970Fax +49 (0)2331 959749E-mail [email protected] France4imprintProduct Plus France SA4, boulevard des lles92130 Issy-les-MoulineauxFranceTelephone +33 (0)1559 59640Fax +33 (0)1559 59641E-mail [email protected] Hong Kong4imprintProduct Plus (Far East) LimitedSuites 914-915, 9th FloorWharf T&T Centre, Harbour City7 Canton RoadTsimshatsui, KowloonHong KongTelephone +852 2301 3082Fax +852 2724 5128E-mail [email protected] This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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