Interim Results

RNS Number : 6571R

Communisis PLC

26 August 2010

 

 

26 August 2010

 

Communisis plc

 

("Communisis" or the "Company")

 

Interim Results for the six months ended 30 June 2010

 

Marketing Services Provider Communisis plc, (LSE: CMS), is pleased to announce its interim results for the six months ended 30 June 2010.

 

Financial Highlights

 

·; Operating Profit before exceptional items increased by 6% to £2.8m (H109: £2.7m)

·; Cash generation significantly improved with £1.6m inflow (H109: £6.3m outflow)

·; Earnings per share 1.58p (H109: 1.22p)

·; Interim dividend 0.43p (FY09: 1.29p, H109: 0.86p)

 

Operational Highlights

 

·; Our proposition, focus and go-to-market strategy are now clearly defined:

o Identity as a leading Marketing Services Provider successfully launched

o New segmentation put in place; Intelligence Driven Communications ("IDC") and Specialist Production and Sourcing ("SPS") - two distinct but complementary foundations to our proposition

o Tesco plc, BrightHouse, Bank of Ireland Group plc, TNT Post UK and Nationwide amongst new business wins in H1

·; Data-driven services have been a key driver of progress in this first half:

o IDC delivered a strong performance and shows good growth potential

o Delayed recovery in Direct Mail and lower statement volumes have restricted SPS growth in H1

·; Successfully addressing our challenges:

o First phase of restructuring of Leeds facility completed

o Enhanced Transfer phase of pension project completed in July

·; Investing in technology for future growth

o High-speed colour digital technology is on-stream and delivering tangible client benefits

 

Commenting on the results Communisis Chief Executive, Andy Blundell, said:

 

"I am pleased with the good progress we have achieved in this first half, demonstrating Communisis' ability to move with its customers and meet their increasingly sophisticated requirements. The intelligent use of data and technology, coupled with our strong production and sourcing capabilities appeals to clients from a range of sectors, steadily proving that our reputation as a Marketing Services Provider is gaining traction both within and beyond our traditional core customer base."

 

 

For further information please contact:

 

Communisis plc via FD

Andy Blundell, Chief Executive / Peter King, Finance Director

 

FD +44 20 7831 3113

James Melville-Ross / Ed Bridges / Matt Dixon / Nicola Biles

 

Brewin Dolphin 0845 213 1000

Richard Jones / Sean Wyndham-Quin

Chief Executive's Review

 

Summary

 

I am pleased with the progress Communisis has made in this first half of 2010, with all trading targets being met and all key financial metrics showing an improvement over the corresponding period in 2009. We have succeeded in defining and launching our new go-to-market strategy as a Marketing Services Provider ("MSP"), aligning our business and our proposition in a way that better suits the direction of our marketplace and the demands of our clients.

 

Our new approach is live, is being actively marketed to clients, and is working. In this first half we have succesfully delivered revenue and operating profit growth, largely driven by the attractiveness of our data-led services. In addition, as a result of continued financial discipline and strong working capital management, we have made further gains in operating cash generation and have improved our debt profile ahead of our own internal expectations.

 

Our efforts in the period have focused on two fundamental areas - (1) investment in sales and customer development, and (2) bringing together the technology and partnerships necessary to support our revitalised proposition.

 

On sales, during the period we completed a comprehensive third party audit of our clients' views of our service. We have been emboldened by the many positive responses to this audit, and also now have a clear view of those areas where our service may be improved. The prime purpose of the project is to ensure that our own strategic planning for the future is aligned very closely to that of our clients. Our senior leadership team, enhanced by a number of new recruits during the second half of 2009, has enjoyed significant success in winning important new business - including new mandates for Tesco, BrightHouse, Bank of Ireland Group, TNT Post UK and Nationwide. These are important relationships for Communisis, a number being outside of our traditional Financial Services core, and we look forward to building on these successes over the longer term.

 

We have continued to invest in the technology we need - and our clients demand - in order to continue to offer a value-added service. Our new high-speed colour digital technology, introduced in our Leeds facility, has come on-stream most effectively and is already benefitting a number of key clients. In addition, our partnership with Equifax, announced in May, has created the UK's most comprehensive and accurate marketing database solution and offers Communisis access to a number of potential new client opportunities.

 

Refocused Organisation

 

Our adoption of a clear identity as a Marketing Services Provider and our resultant re-segmentation has meant a new go-to-market approach which brings with it a range of fresh opportunities for the growth and development of our business. Each of our stakeholders - both internal and external - now has a clear view of our Company's aims and ambitions, coupled with a better understanding of where our future emphasis will lie in the pursuit of growth. This sets us further apart from our competitors, allows us to make better judgements on future capital investment needs and, most importantly, it gives our employees a clear understanding of how their individual efforts can affect our overall strategy. Now, not only are our customers aware of the full breadth of services they can expect from Communisis, but our teams also have a keen understanding of how they can come together to meet increasingly sophisticated and integrated client needs.

 

Performance Review

 

Intelligence Driven Communications ("IDC")

 

Our IDC segment aims to help businesses increase the revenue that they generate from their customer base, utilising data to deliver more targeted and relevant marketing programmes across a range of different channels.

 

During this first half, operating profit from the IDC segment increased to £2.1m (H109: £1.4m) on revenue of £12.9m (H109: £11.5m) and delivered a 16% return on sales. We offer our clients four key services under the IDC banner, each of which has made good progress during the period:

 

·; Data and Analysis Services is built around Ai, a company we acquired in 2008 and which is performing well, having enjoyed a number of new business successes during this first half. BrightHouse, the UK's leading 'Rent-to-Own' retailer with over 200 stores nationwide is one such example, awarding Communisis a contract to develop its key customer assessment system. The system encompasses a suite of customer assessment technologies delivered through a web-based solution that is fully hosted by our Data and Analysis Services. We also continue to develop the breadth of our offering in this area, including a strategic alliance with Equifax which now gives Communisis greater presence in the credit-checking space.

 

·; Campaign Management Servicesuses our proprietary software tools Aprimo and IQ plus to help optimise the efficiency and effectiveness of our clients' campaigns at every stage of the campaign process. We have continued to win new clients for this service during the first half, most notably Tesco, which awarded Communisis a contract to implement a data-driven supply management solution. The solution, which incorporates a range of bespoke technologies, is designed to increase the efficiency with which Tesco can procure its 'Point of Sale' material, store-specific marketing collateral and its packaging. The solution uses and analyses store-specific data to monitor and meet the individual requirements of each store, thereby eliminating over-production and waste.

 

·; Creative Services specialises in turning our clients' brand communication strategies into highly creative content. We use insight, intelligence and a channel agnostic approach to ensure that we maximise the impact of this content across multiple media channels. Creative Services plays a helpful first stage role in extending our broader MSP service offering to current and potential clients.

 

·; Multi-Channel Composition Servicesallow us to provide our customers with all of the composition services they need if they are to send effective personalised messaging to their clients, be that through traditional or online channels.

 

Specialist Production and Sourcing ("SPS")

 

Our SPS segment aims to help businesses improve the efficiency and quality of their supply chains at reduced cost. SPS markets are in transition as customers move towards new environments with the emphasis on visible cost controls coupled with a willingness to outsource more services. These trends suit Communisis.

 

During this first half, operating profit from the SPS segment reduced to £3.1m (H109: £3.4m), equating to a 4% return on revenue of £72.2m (H109: £72.1m). This reduced performance is a result of a delay in the pace of market recovery in Direct Mail and lower volumes on two of our statement contracts. We offer our clients four key services under the SPS banner and progress here can be summarised as follows:

·; Print Sourcing delivered an improved year-on-year performance during the period. Our progressive model for print management, coupled with our significant buying power, continues to appeal to current and new customers. During the first half, we renewed our print sourcing contract with BMI and secured new business from a range of sectors including further penetration in Social Housing, with Hyde, and Retail and Leisure with Travelodge and Jet2.com. Print Sourcing continues to fulfil an important role as incubator for new customer relationships which we can develop further within the Group. We expect that to continue.

 

·; Direct Mail as a market has changed substantially, impacted by recessionary pressures and by the advent of new media. Volumes of traditional direct mail will continue to decline. Nevertheless, the trend towards smaller, more targeted direct mail campaigns favours Communisis and our multi-channel capability. The direct mail space also continues to consolidate and customers are increasingly looking to place work with those companies which they believe are resilient and committed to the direct mail market for the long-term. Communisis is one such player and our ability to couple sophisticated data services with our direct mail offering remains a critical competitive differentiator for us.

 

Operationally, the first phase of our efficiency programme at the Leeds direct mail facility is now complete. The cost benefits of the restructuring we have undertaken are successfully coming through now, on a monthly basis. Our attentions have now turned to addressing and improving workflow across the plant, which will unlock further efficiency gains.

 

The new direct mail sales and marketing personnel hired in the second half of last year are making a positive impact on our service here. During the first half we have been successful in recovering market share in key target verticals, such as the Mutual sector, which is helping to improve the mix of work within the Leeds facility. During the first six months, value-added work undertaken at Leeds has improved three percentage points. We are also particularly proud of our growing relationship with Tesco. Other sales successes during the first half include work with the Liberal Democrat party in the run-up to the 2010 General Election and a contract with Xafinity for acquisition and retention mailing. Our forward pipeline for the second half is developing well.

 

·; Transactional Services continued its efficiency programme at Speke during the first half, with a progressive reduction achieved in temporary labour and investments made in automation. Over time we can see the same digital full-colour solutions being adopted in statement production as has already happened in direct mail. Usefully we are now on a parallel track of technical development in direct mail and transactional services.

 

Whilst volumes on two of our statement contracts were negatively impacted in H1, we successfully implemented our new contract with Wolseley. We have also contracted with TNT Post UK (TNT) to support its new Hybrid Mail solution. Utilising TNT's channel to market combined with our document composition and output capability, Hybrid Mail will allow TNT to capture office mail from its customers and send those files electronically to Communisis for output. Five customers now underpin Transactional Services, up from three at the end of 2009. We believe that good potential exists to add additional new customers and our pipeline is good.

 

·; Cheques enjoyed a strong first half and continues to make a valuable contribution to the Group as a whole. We were assisted by a reduction in volumes at less than the anticipated rate over the period. We continue to retain effective operational control over this service line, being able to remove cost faster than the rate of volume decline. During the first half, our leadership position in the UK cheque market was further strengthened as Nationwide, one of the top three savings providers and mortgage lenders in the UK and the world's largest building society, appointed us as the supplier of its personalised chequebooks. Re-branding and new entrants to the Banking sector represent future opportunity.

 

Looking Ahead

 

Our strategic aim is to grow Communisis as a Marketing Services Provider and through a range of organic, alliance and acquisition orientated initiatives, improve profitability in the medium term.

 

Our markets in IDC continue to demonstrate good growth potential, aided by our clients' increasing move towards targeting individual customers with their marketing activity. Our clients are increasingly isolating individual target customers, personalising collateral so as to communicate directly with those targets, and then measuring response rates.

 

SPS markets are in transition as customers move towards new environments with the emphasis on visible cost controls coupled with a willingness to outsource more services - these trends suit Communisis. The short-term situation in SPS is stabilising and weare confident of improving performances from Direct Mail and Transactional Services in H2.

 

We are clear about our trading targets for 2010 as a whole and we presently have the right balance of risks and opportunities to make the Board confident that we will meet expectations.

 

 

 

 

Andy Blundell

Chief Executive

25 August 2010

Financial Performance Report

 

In the first half of 2010 Communisis has seen considerable further growth in our IDC business, significant progress in reducing the risk posed by our legacy pension liabilities and our balance sheet remains strong.

 

Profitability

 

The table below is an extract from the Company's segmental profit and loss account. Overall, revenue is up 3.3% year-on-year on 2009 and, importantly, we are seeing growth in IDC and SPS stabilising.

 

 

 

		Half year		Half year
		ended 30		ended 30
		June 2010		June 2009
Turnover
IDC		12.9		11.5
SPS		72.2		72.1
Pass Through		13.0		11.4
		98.1		95.0
Profit from operations
IDC		2.1		1.4
SPS		3.1		3.4
Pass Through		-		-
Corporate costs		(2.4)		(2.1)
		2.8		2.7
Interest		(1.0)		(0.9)
Profit before tax		1.8		1.8
Tax		0.4		(0.1)
Profit after tax		2.2		1.7
Earnings per share		1.58 p		1.22 p

 

 

Our IDC business performed very strongly in the first half of 2010. Driven primarily by increasingly strong demand for our data services, we have seen IDC revenue grow by 12% to £12.9m and operating profit in this segment grow even more strongly by 50% to £2.1m. The business has also continued to invest in people. During the first half we have added to our solutions development team positioning us well to deliver further growth.

 

Some of the market conditions faced by SPS remain challenging. This is particularly the case in direct mail where, with spare capacity available across the industry, we have experienced some price pressure. The actions taken to strengthen our direct mail team late in 2009 have been important in responding to this competitive environment. Our sales team has been very successful in winning a greater share of more complex communications and this has significantly improved the mix of work enjoyed by this business. In addition, the successful implementation of the first phase of our direct mail efficiency programme has reduced overheads enabling us to be more selective. Our digital output operation has also performed well in the first half with a positive contribution from recent investments.

 

Our cheque operation has delivered another strong performance. Operational efficiency improvements were implemented at the beginning of the year and we have experienced lower than anticipated volume erosion.

 

Statement volumes have continued to decline at greater than anticipated rates on two of our long term transactional contracts. Against this backdrop, the new management team in charge of the Speke operation continues to strengthen the business. We have realised sizeable efficiency gains and we look forward to further progress in the second half of 2010.

 

The underlying tax rate paid by the Company remains at around 28%. During the first half we have successfully resolved an outstanding tax issue in respect of a former subsidiary based in the USA. This has resulted in the write back of provisions made at the time of that business' disposal of £0.9m.

 

Overall, profit after tax has increased to £2.2m (H109: £1.7m) and basic earnings per share to 1.58p (H109: 1.22p). The Company paid interim dividends and proposed final dividends together totalling 1.29 pence per share in 2009. We will pay an interim dividend of 0.43 pence per share, equivalent to one third of the full year dividend in 2009. The dividend will be paid on 15 October 2010 to shareholders on the register at the close of business on 17 September 2010.

 

 

Cash flow and net debt

 

The table below summarises the Company's key cash flows. We have worked to manage the phasing of cash flows across the first and second halves of 2010. The result of this, coupled with our usual strong control over working capital, is a net debt figure at the end of the first half of £16.3m (H109: £24.8m).

 

 

 

£m	Half year	Half year	Year
	ended 30	ended 30	ended 31
	June 2010	June 2009	Dec 2009
Profit from operations before exceptional items	2.8	2.7	7.2
Depreciation and other non-cash items	3.0	4.2	8.2
(Increase) / decrease in working capital	(2.8)	(8.8)	(7.9)
Additional pension scheme contributions	-	(2.5)	(2.5)
Interest and tax	(1.4)	(1.9)	(3.8)
Net cash inflow/(outflow) from operating activities	1.6	(6.3)	1.2
Net capital expenditure	(0.4)	(2.8)	(4.1)
Business disposals	-	0.5	3.5
Business acquisitions	-	(0.6)	(0.6)
Dividends	(0.6)	(2.3)	(3.5)
Exchange rate movements	(0.1)	(0.2)	(0.2)
Reduction / (increase) in net debt	0.5	(11.7)	(3.7)
Opening net debt	(16.8)	(13.1)	(13.1)
Closing net debt	(16.3)	(24.8)	(16.8)

 

 

Working capital trends are positive. In part this reflects greater stability in the volume of print and postage passing through the business at cost. It is also the result of very strong controls within our operational businesses. At 30 June 2010, the level of customer payments falling overdue was just 2.7% (FY09: 5.9%).

 

The Company has continued to invest in both IDC and SPS. The disclosed net cash cost of capital expenditure benefitted from the successful disposal of two of the three redundant print lines shut in direct mail. To access future technology upgrades, we chose to finance our most recent investment in digital output capability via an operating lease which has further reduced net capital expenditure in 2010. Adjusting for these factors, the underlying level of investment in the business in the first half is of the order of £4.7m. We remain committed to growing our business through investment in the right technologies.

 

Pensions

 

Phase one (early retirement offers) and phase two (enhanced transfer offers) of our project to reduce the sizeable liability imposed on our Balance Sheet by the Company's defined benefit pension scheme are now complete. We announced that we would make up to £4m available to fund the project and have now written to 1,454 members offering them enhanced transfers. 401 members (28%) have confirmed their acceptance and the transfers will be processed in the second half of 2010.

 

In total, we have now committed £3m to this project and in the process reduced the £40m funding deficit by £7m. In addition, the proportion of the remaining liability that is taken up by much less risky pensions in payment has increased to 60% from 40%. This improvement is important; it reduces our exposure to inflation and increases the potential to deliver further risk reduction through a subsequent transaction with a third party pensions provider.

 

With good progress being achieved, we will now turn our attention to phase three and look to take advantage of some of the emerging solutions offering further risk reduction opportunities, particularly in respect of our liability to the pensioner section of the scheme.

 

 

Peter King

Finance Director

25 August 2010

 

Consolidated Income Statement

for the half year ended 30 June 2010: unaudited

 

		Half year ended	Half year ended	Year ended
		30 June	30 June	31 Dec
		2010	2009	2009
	Note	£000	£000	£000
Revenue	1	98,131	94,959	190,188
Changes in inventories of finished goods and work in progress		599	489	(292)
Raw materials and consumables used		(52,070)	(48,429)	(96,109)
Employee benefits expense		(28,285)	(28,010)	(54,617)
Other operating expenses		(12,273)	(12,943)	(25,003)
Depreciation and amortisation expense		(3,295)	(3,411)	(6,960)
Adjustment to deferred consideration for disposal of Bath business		-	-	(650)
Exceptional property provisions		-	-	(2,000)
Profit from operations	1	2,807	2,655	4,557
Analysed as:
Profit from operations before exceptional items		2,807	2,655	7,207
Adjustment to deferred consideration for disposal of Bath business		-	-	(650)
Exceptional property provisions		-	-	(2,000)
Profit from operations		2,807	2,655	4,557
Finance revenue		137	356	499
Finance costs		(1,182)	(1,255)	(2,459)
	2	(1,045)	(899)	(1,960)
Profit before taxation		1,762	1,756	2,597
Income tax credit/(expense)	3	430	(71)	562
Profit for the period attributable to equity holders of the parent		2,192	1,685	3,159
Earnings per share	4
On profit for the period attributable to equity holders and from continuing operations
- basic		1.58p	1.22p	2.28p
- diluted		1.52p	1.20p	2.25p
	5
Dividend per share
- paid		0.430p	1.635p	2.495p
- proposed		0.430p	0.860p	0.430p

 

Dividends paid and proposed during the period were £0.6 million and £0.6 million respectively (30 June 2009: £2.3 million and £1.2 million respectively, 31 December 2009: £3.5 million and £0.6 million respectively).

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

All income and expenses relate to continuing operations.

 

 

  

Consolidated Statement of Comprehensive Loss

for the half year ended 30 June 2010: unaudited

 

		Half year ended	Half year ended	Year ended
		30 June	30 June	31 Dec
		2010	2009	2009
		£000	£000	£000
Profit for the period		2,192	1,685	3,159
Exchange differences on translation of foreign operations		(21)	(20)	(9)
Actuarial losses on defined benefit pension plans		(6,965)	(13,919)	(8,889)
Income tax thereon		1,950	3,897	2,489
Loss on cash flow hedges taken directly to equity		(195)	(505)	(37)
Income tax thereon		55	142	10
Other comprehensive loss for the period, net of tax		(5,176)	(10,405)	(6,436)
Total comprehensive loss for the period, net of tax		(2,984)	(8,720)	(3,277)
Attributable to:
Equity holders of the parent		(2,984)	(8,720)	(3,277)

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

 

Consolidated Cash Flow Statement

for the half year ended 30 June 2010: unaudited

 

		Half year ended 30 June	Half year ended 30 June	Year ended 31 Dec
		2010	2009	2009
	Note	£000	£000	£000
Cash flows from operating activities
Cash generated from operations	6	3,052	(4,500)	4,882
Interest paid		(998)	(1,018)	(2,167)
Interest received		91	356	331
Income tax paid		(480)	(1,226)	(1,918)
Net cash flows from operating activities		1,665	(6,388)	1,128
Cash flows from investing activities
Receipt of consideration from the sale of Bath business		-	500	3,500
Acquisition of subsidiary undertakings including overdraft acquired		-	(600)	(600)
Purchase of property, plant and equipment		(845)	(1,788)	(2,782)
Proceeds from the sale of property, plant and equipment		638	38	38
Purchase of intangible assets		(258)	(999)	(1,356)
Net cash flows from investing activities		(465)	(2,849)	(1,200)
Cash flows from financing activities
New borrowings		3,000	24,000	39,000
Repayment of borrowings		(7,000)	(16,000)	(34,000)
Dividends paid	5	(595)	(2,262)	(3,452)
Net cash flows from financing activities		(4,595)	5,738	1,548
Net (decrease)/increase in cash and cash equivalents		(3,395)	(3,499)	1,476
Cash and cash equivalents at 1 January		19,178	17,940	17,940
Exchange rate effects		(126)	(268)	(238)
Cash and cash equivalents at end of period		15,657	14,173	19,178
Cash and cash equivalents consist of:
Cash and cash equivalents		35,674	14,216	19,178
Overdrafts		(20,017)	(43)	-
		15,657	14,173	19,178

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Balance Sheet

30 June 2010: unaudited

	Half year ended	Half year ended	Year ended
	30 June	30 June	31 Dec
	2010	2009	2009
	£000	£000	£000
ASSETS
Non-current assets
Property, plant and equipment	22,889	24,156	24,236
Intangible assets	157,550	157,261	158,160
Trade and other receivables	450	3,715	450
Deferred tax assets	4,572	3,781	2,442
	185,461	188,913	185,288
Current assets
Inventories	6,709	6,790	6,431
Trade and other receivables	29,635	33,436	27,249
Cash and cash equivalents	15,657	14,216	19,178
	52,001	54,442	52,858
TOTAL ASSETS	237,462	243,355	238,146
EQUITY AND LIABILITIES
Equity attributable to the equity holders of the parent
Equity share capital	34,651	34,651	34,651
Share premium	22	22	22
Merger reserve	11,427	11,427	11,427
Capital redemption reserve	1,375	1,375	1,375
ESOP reserve	(338)	(338)	(338)
Cumulative translation adjustment	(173)	(163)	(152)
Retained earnings	77,920	77,053	81,283
Total equity	124,884	124,027	128,268
Non-current liabilities
Interest-bearing loans and borrowings	34,366	24,000	37,236
Retirement benefit obligations	24,600	22,500	17,518
Provisions	1,726	654	1,807
Financial liability	207	485	45
	60,899	47,639	56,606
Current liabilities
Interest-bearing loans and borrowings	473	15,043	359
Trade and other payables	49,157	52,116	50,012
Income tax payable	1,243	3,153	2,029
Provisions	542	1,118	641
Financial liability	264	259	231
	51,679	71,689	53,272
Total liabilities	112,578	119,328	109,878
TOTAL EQUITY AND LIABILITIES	237,462	243,355	238,146

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

Consolidated Statement of Changes in Equity

for the half year ended 30 June 2010: unaudited

 

 

Half year ended 30 June 2010

 

	Issued capital	Share premium	Merger reserve	ESOP reserve	Capital redemption reserve	Cumulative translation adjustment	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000	£000
As at 1 January 2010	34,651	22	11,427	(338)	1,375	(152)	81,283	128,268
Profit for the period	-	-	-	-	-	-	2,192	2,192
Other comprehensive loss	-	-	-	-	-	(21)	(5,155)	(5,176)
Total comprehensive loss	-	-	-	-	-	(21)	(2,963)	(2,984)
Employee share option schemes: - value of services provided	-	-	-	-	-	-	195	195
Dividends paid	-	-	-	-	-	-	(595)	(595)
As at 30 June 2010	34,651	22	11,427	(338)	1,375	(173)	77,920	124,884

 

 

Half year ended 30 June 2009

 

	Issued capital	Share premium	Merger reserve	ESOP reserve	Capital redemption reserve	Cumulative translation adjustment	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000	£000
As at 1 January 2009	34,651	22	11,427	(338)	1,375	(143)	87,773	134,767
Profit for the period	-	-	-	-	-	-	1,685	1,685
Other comprehensive loss	-	-	-	-	-	(20)	(10,385)	(10,405)
Total comprehensive loss	-	-	-	-	-	(20)	(8,700)	(8,720)
Employee share option schemes: - value of services provided	-	-	-	-	-	-	242	242
Dividends paid	-	-	-	-	-	-	(2,262)	(2,262)
As at 30 June 2009	34,651	22	11,427	(338)	1,375	(163)	77,053	124,027

 

 

Year ended 31 December 2009

 

	Issued capital	Share premium	Merger reserve	ESOP reserve	Capital redemption reserve	Cumulative translation adjustment	Retained earnings	Total equity
	£000	£000	£000	£000	£000	£000	£000	£000
As at 1 January 2009	34,651	22	11,427	(338)	1,375	(143)	87,773	134,767
Profit for the year	-	-	-	-	-	-	3,159	3,159
Other comprehensive loss	-	-	-	-	-	(9)	(6,427)	(6,436)
Total comprehensive loss	-	-	-	-	-	(9)	(3,268)	(3,277)
Employee share option schemes: - value of services provided	-	-	-	-	-	-	230	230
Dividends paid	-	-	-	-	-	-	(3,452)	(3,452)
As at 31 December 2009	34,651	22	11,427	(338)	1,375	(152)	81,283	128,268

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

 

Notes to the Financial Statements

for the half year ended 30 June 2010: unaudited

 

1 Segmental information

 

At 30 June 2010, the Group is organised into two main segments: Intelligence Driven Communications ('IDC') and Specialist Production and Sourcing ('SPS').

 

Business segments

The segment results for the half year ended 30 June 2010 are as follows: 

 

Continuing operations
	IDC	SPS	Pass Through	Corporate Costs	Total
	£000	£000	£000	£000	£000
Revenue	12,943	72,146	13,042	-	98,131
Profit from operations before exceptional items	2,087	3,070	-	(2,350)	2,807
Exceptional items	-	-	-	-	-
Profit from operations	2,087	3,070	-	(2,350)	2,807

The segment results for the half year ended 30 June 2009 were as follows: 

 

Continuing operations
	IDC	SPS	Pass Through	Corporate Costs	Total
	£000	£000	£000	£000	£000
Revenue	11,483	72,087	11,389	-	94,959
Profit from operations before exceptional items	1,338	3,430	-	(2,113)	2,655
Exceptional items	-	-	-	-	-
Profit from operations	1,338	3,430	-	(2,113)	2,655

The segment results for the year ended 31 December 2009 were as follows: 

 

Continuing operations
	IDC	SPS	Pass Through	Corporate Costs	Total
	£000	£000	£000	£000	£000
Revenue	23,565	143,036	23,587	-	190,188
Profit from operations before exceptional items	3,293	7,874	-	(3,960)	7,207
Exceptional items	-	(650)	-	(2,000)	(2,650)
Profit from operations	3,293	7,224	-	(5,960)	4,557

 

 

 

2 Net finance costs

 

	Half year ended	Half year ended	Year ended
	30 June	30 June	31 Dec
	2010	2009	2009
	£000	£000	£000
Interest on receivables measured at amortised cost	137	356	499
Interest expense for borrowings at amortised cost	(847)	(660)	(1,361)
Net interest from financial assets and financial liabilities not at fair value through profit and loss	(710)	(304)	(862)
Loss on foreign currency financial liabilities	(26)	(83)	(236)
Retirement benefit related cost	(309)	(512)	(862)
Finance costs	(1,045)	(899)	(1,960)

 

 

3 Income tax

 

The tax credit on continuing operations for the period is based upon the estimated effective tax rate for the year of (24.4%).

 

The rate is lower than the standard rate of 28% primarily as a result of adjustments in respect of prior year tax provisions.

 

It was announced on 22 June that the corporation tax rate is to reduce to 27% from 1 April 2011 (with further annual reductions planned to 24% from 1 April 2014). At the balance sheet date the legislation was not substantively enacted and therefore the provision for Deferred Tax at 30 June 2010 has continued to be made at 28%.

 

 

4 Earnings per share

	Half year ended	Half year ended	Year ended
	30 June	30 June	31 Dec
	2010	2009	2009
	£000	£000	£000
Basic and diluted earnings per share are calculated as follows:
Profit attributable to equity holders of the parent	2,192	1,685	3,159
Weighted average number of ordinary shares (excluding treasury shares) for basic earnings per share	138,323	138,323	138,323
Effect of dilution:
Share options	5,760	1,745	2,171
Weighted average number of ordinary shares (excluding treasury shares) adjusted for the effect of dilution	144,083	140,068	140,494

 

279,628 (30 June 2009: 279,628, 31 December 2009: 279,628) shares were held in trust at 30 June 2010.

 

4 Earnings per share (continued)

 

Earnings per share from continuing operations before exceptional items

 

Net profit from continuing operations before exceptional items and attributable to equity holders of the parent is derived as follows:

 

	Half year ended	Half year ended	Year ended
	30 June	30 June	31 Dec
	2010	2009	2009
	£000	£000	£000
Profit after taxation from continuing operations	2,192	1,685	3,159
Exceptional items:
Adjustment to deferred consideration for disposal of Bath business	-	-	650
Exceptional property provision	-	-	2,000
Taxation - adjustments in respect of prior years	(863)	(505)	(1,487)
Taxation on exceptional items	-	-	(742)
Profit after taxation from continuing operations excluding exceptional items	1,329	1,180	3,580

 

Adjusted earnings per share
Basic	0.96p	0.85p	2.59p
Diluted	0.92p	0.84p	2.55p

 

Adjusted earnings per share uses the same weighted average number of ordinary shares as reported above.

 

 

5 Dividends paid and proposed

 

	Half year ended	Half year ended	Year ended
	30 June	30 June	31 Dec
	2010	2009	2009
Declared and paid during the period	£000	£000	£000
Amounts recognised as distributions to equity holders in the period:
Final dividend of the year ended 31 December 2008 of 1.635p per share	-	2,262	2,262
Interim dividend of the year ended 31 December 2009 of 0.860p per share	-	-	1,190
Final dividend of the year ended 31 December 2009 of 0.430p per share	595	-	-
	595	2,262	3,452
Proposed for approval by the Board (not recognised as a liability at period end)
Interim equity dividend on ordinary shares for 2010 of 0.430p (30 June 2009: interim 0.860p, 31 December 2009: final 0.430p) per share	595	1,192	595

 

 

6 Cash generated from operations

 

	Half year ended 30 June	Half year ended 30 June	Year ended 31 Dec
	2010	2009	2009
	£000	£000	£000
Continuing operations
Profit before tax	1,762	1,756	2,597
Adjustments for:
Amortisation of intangible assets arising on business acquisitions	176	176	353
Depreciation and other amortisation	3,337	3,735	7,607
Excess of Income Statement pension charge over normal contributions paid	(55)	-	(86)
Adjustment to deferred consideration for disposal of Bath business	-	-	650
Exceptional property provisions	-	-	2,000
(Profit)/loss on sale of property, plant and equipment	(638)	(8)	22
Share-based payment charge	195	242	230
Net finance costs	1,045	899	1,960
Additional contribution to the defined benefit pension plan	-	(2,500)	(2,500)
Changes in working capital:
(Increase)/decrease in inventories	(294)	425	793
(Increase)/decrease in trade and other receivables	(2,540)	(4,669)	497
Increase/(decrease) in trade and other payables	64	(4,556)	(9,241)
Cash generated from operations	3,052	(4,500)	4,882

 

7 Risks and uncertainties

 

The principal risks and uncertainties relating to the business at 31 December 2009 were set out in the Business Review on pages 9 and 10 of the Annual Report. The view of the Board of Directors is that the nature of these risks has not changed since 25 February 2010 and that they represent our current best understanding of the situation faced by the Company. In terms of risk mitigation, management will continue to be vigilant to anticipate and respond to any problems caused or exacerbated by the current economic uncertainty.

 

 

8 Directors' responsibility statement

 

The directors are responsible for preparing the condensed set of financial statements, in accordance with applicable law and regulations. Andy Blundell, Chief Executive and Peter King, Finance Director confirm that, to the best of their knowledge:

 

·; the condensed set of financial statements on pages 9 to 18 has been prepared in accordance with IAS 34 - Interim Financial Reporting, as adopted by the European Union; and

 

·; the information set out on this page and on pages 1 to 8 includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

 

There were no related party transactions during the period which require disclosure.

 

9 Additional information

 

General information

The information for the year ended 31 December 2009 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

The financial information for the half year ended 30 June 2010 and for the equivalent period in 2009 has not been audited or reviewed. It has been prepared in accordance with IAS 34 ('Interim Financial Reporting') and on the basis of the accounting policies as set out in the 2009 Annual Report and Accounts, except for those noted below:

 

Change in segmental reporting

The Group's activities are now predominantly focused in two main areas which are:

 

·; Intelligence Driven Communications ('IDC') and

·; Specialist Production and Sourcing ('SPS')

 

The key changes to our previously reported segments are:

 

·; Absolute Intuistic and the other activities of our previously named Technology & Services segment are included under the new IDC segment.

 

·; Our Print Sourcing revenues are now subdivided between the SPS and Pass Through segments. Our core Print Sourcing will be categorised in SPS.

 

·; Pass Through is defined as those revenues representing print and/or postage that is passed onto clients at cost and was previously reported under Print Sourcing.

 

·; The revenue and profit associated with data and response handling previously included within our Direct Mail segment is included within IDC. The remainder of our Direct Mail business which is associated with specialist output is included within SPS. Factory overheads have been attributed to both segments.

 

·; Our Cheque, Statement and Billing businesses (previously Transactional) have been included within SPS.

 

·; Costs previously described as 'Central Costs' which comprised marketing, IT infrastructure, Group procurement and Group Sales have now been allocated between the two operating segments - IDC and SPS. We have retained an element of Central Cost now classified as Corporate Costs as these represent the cost of our head office, main board and other plc related costs.

 

Segmental information for the previous financial year to 31 December 2009 and for the six months to 30 June 2009 has been presented in the new format for clarity. The change in reporting segments does not have any impact on previously reported consolidated profits or net assets or earnings per share of the Group.

 

 

Going Concern

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the interim report.

 

 

 

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