Final Results
4imprint Group PLC
10 March 2006
Press Release 10 March 2006
4imprint Group plc
Preliminary results for the year ended 31 December 2005
4imprint Group plc announces today its results for the year ended 31 December
2005
Highlights
• Total sales £99.03m, 6% ahead of prior year, continuing operations at
£96.48m, 8% ahead.
Sales of the web/catalogue based US Direct Marketing business increased by
28% over prior year
• Operating profit before exceptional items £6.50m, 57% ahead of prior year,
continuing operations at £5.70m, 81% ahead
• Total profit before tax and exceptional items at £6.77m is 53% ahead of
prior year
• Total profit before tax, after exceptional net income of £2.18m (2004 :
£0.53m expense), is £8.95m (2004 : £3.90m)
• Cash is £9.01m at the end of 2005; following £10.83m of own share
purchases, £1.98m spent on acquisitions, £1.00m capital expenditure and
£1.61m dividends paid. This was partly offset by £4.85m generated from
operating activities in the year and £5.26m generated from the sale of
Adventures in Advertising Corporation
• Final proposed dividend of 4.50p per share, an increase of 28% on prior
year. Total dividend, paid and proposed, 33% ahead of 2004
• Basic EPS is 30.94p compared to 22.97p in 2004, an increase of 35%
• Adventures in Advertising Corporation, a US subsidiary, was sold on 21 July
2005 for US$11.3m cash consideration
Commenting on the results, Ken Minton, Executive Chairman said:
'The Group has performed well in 2005, and the results reflect the benefits of
value generating initiatives executed during this period. Cash generation was
excellent and the Group's financial, managerial resources together with market
strength provide a strong base for further progress.'
-Ends-
For further information, please contact:
Ken Minton, Chairman Tel: +44 (0) 20 7299 7201
4imprint Group plc
Chairman's Statement
In my statement to Shareholders in the 2005 half year report, I set out several
initiatives which were being actively pursued in our drive for sustained growth
of Shareholder value. Shareholders will recall that these initiatives were as
follows:-
(a) The completion of the disposal of the US Franchising business.
(b) In the US Direct Marketing and Corporate Programmes Division, the
exploitation of the rapid growth opportunity in the web/catalogue sector,
where our business is already a market leader.
(c) In the European Direct Marketing and Corporate Programmes Division to
restore to full profitability the Corporate Programmes sector, and to put
new impetus behind the web/catalogue business and remodel it using the
successful and proven template of the US Division.
(d) To integrate the European Premium Promotions Division into the European
Direct Marketing and Corporate Programmes Division, streamline the cost
base, and refocus it on customer service and growth.
For the 4imprint Group, 2005 was a very successful year.
Group sales (including that of US Franchising, which was sold in July) were
£99.03m, 6% ahead of 2004, while profit before tax, finance income and
exceptional items, on the same basis, at £6.50m was 57% better than last year.
Indeed, for continuing businesses, the performance was even more impressive with
profit before tax, finance income and exceptional items at £5.70m, 81% ahead of
2004.
Total profit before tax and exceptional items is £6.77m (2004 : £4.42m) and
after exceptional items is £8.95m (2004 : £3.90m).
The divisional performances were as follows:-
(a) The European Direct Marketing and Corporate Programmes Division achieved
sales growth of 10% while operating profit before exceptional items was 76%
ahead of 2004. This excellent result reflected strong improvements in
profitability in all component sectors.
(b) The US Direct Marketing and Corporate Programmes Division also delivered an
outstanding performance with sales up 14% and operating profit 53% ahead of
last year. The Direct Marketing business which represents the majority of
this Division delivered sales growth of 28%, while the Corporate Programmes
sector was downsized but delivered better profits on lower sales.
(c) At the European Premium Promotions Division sales and profits were lower
than in 2004 but as stated earlier, this Division has been refocused and
integrated with the European Direct Marketing and Corporate Programmes
Division with substantial reductions in administration costs. This has
allowed the whole thrust of this Division to be concentrated on customer
service and growth.
At the Corporate level, costs have remained under tight control, and before
defined benefit pension charges and share option charges, headquarter costs were
24% below those of last year.
Net interest income at £0.27m was similar to last year.
The Group taxation charge at £0.99m comprises £1.69m tax charge relating to
continuing operations, £1.05m tax credit on the disposal of the US Franchising
business, £0.16m tax charge on the profits of the US Franchising business to the
date of disposal and £0.19m tax charge relating to the US Supplier business sold
in 1999.
Total Group profit after tax, including profit arising from the disposal of the
US Franchising business, amounted to £7.96m (2004 : £6.57m).
Basic earnings per share for all operations at 30.94p was 35% ahead of last
year.
Acquisitions and capital investment
The Group made one acquisition in 2005, the purchase of MT Promotions Limited, a
speciality supplier of golf related promotional products, which has been a
valuable addition to the European Direct Marketing and Corporate Programmes
Division. The total consideration was £1.98m.
Capital investments amounted to £1.00m.
Cash management
Cash is £9.01m at the end of 2005; following £10.83m of own share purchases,
£1.98m spent on acquisitions, £1.00m capital expenditure and £1.61m dividends
paid. This was partly offset by £4.85m generated from operating activities in
the year and £5.26m generated from the sale of Adventures in Advertising
Corporation
Dividend
The Board is recommending a final dividend of 4.50p which will bring the total
dividend, paid and proposed, to 7.00p (2004 : final dividend 3.50p, total
dividend, paid and proposed, 5.25p).
People
It is often stated in Annual Reports of Companies that much of the success of an
enterprise is due to the people employed in it. I am absolutely certain that
this is the case of 4imprint which is a business requiring very modest capital,
and whose success relies totally on the energy, creativity, and commitment to
customer service, of our people. On behalf of the Board I thank everyone for
their contribution to the success we have enjoyed in 2005.
Outlook
Although we are only two months into 2006, the initial trading results and the
general level of activity in the markets we serve suggests that this year will
be another year of growth for the 4imprint Group.
Ken Minton
Executive Chairman
10 March 2006
Finance Director's Report
• Sales from continuing operations are 8% ahead of prior year and total sales
are 6% ahead of prior year.
• Operating profit before exceptional items from continuing operations at
£5.70m is 81% ahead of prior year.
• Total operating profit before exceptional items at £6.50m is 57% ahead of
prior year.
• Total profit before tax and exceptional items is £6.77m (2004 : £4.42m);
total profit before tax is £8.95m (2004 : £3.90m).
Summary of results
As previously reported, the Financial Statements have been prepared under
International Financial Reporting Standards ('IFRS') as adopted by the European
Union. In this year of transition, presented below, is a summary of results in a
UK GAAP format.
2005 2004
£'000 £'000
Sales:
Continuing operations 96,481 88,965
Discontinued operations 2,546 4,626
Total 99,027 93,591
Operating profit before exceptional items:
Continuing operations 5,703 3,150
Discontinued operations 797 980
Total 6,500 4,130
Operating profit after exceptional items:
Continuing operations 5,388 2,625
Discontinued operations 3,294 980
Total 8,682 3,605
Net finance income 269 291
Total profit before tax after exceptional items 8,951 3,896
Total profit before tax and exceptional items 6,769 4,421
Exceptional items 2,182 (525)
Total profit before tax after exceptional items 8,951 3,896
Taxation (989) 2,676
Total profit after tax 7,962 6,572
Sales
Sales from continuing operations at £96.48m increased by 8% compared to 2004.
Sales growth in the US Direct Marketing and Corporate Programmes Division was
14%, with the US Direct Marketing business 28% ahead. Sales growth in the
European Direct Marketing and Corporate Programmes Division was 10%. Sales in
the European Premium Promotions Division were 13% below prior year.
Operating profit
Operating profit before exceptional items for discontinued operations represents
the operating profit of the US Franchising business up to the date of sale, 21
July 2005.
Charges for the closed defined benefit pension scheme under IAS 19 'Employee
Benefits' are £0.50m (2004: £0.64m) and for employee share benefits under IFRS 2
'Share Based Payments' are £0.50m (2004: £0.02m). Excluding the impact of these
items, operating profit before exceptional items has increased to £7.50m from
£4.79m in 2004, an increase of 57%.
Exceptional Items
2005 2004
Exceptional charge/(income) £'000 £'000
Continuing operations 315 525
Discontinued operations (2,497) -
(2,182) 525
Continuing operations
The exceptional charge of £0.32m comprises two items:
(a) Exceptional costs of £0.44m relate to the further reorganisation of the
European Premium Promotions Division and its integration into the European
Direct Marketing and Corporate Programmes Division, together with the
integration of MT Promotions Limited into the European Direct Marketing and
Corporate Programmes Division.
(b) Exceptional income of £0.13m relates to insurance income net of costs which
was received in 2005 for the product recall in the European Premium
Promotions Division in 2004. The costs of the product recall were
recognised as exceptional in 2004.
Discontinued operations
The exceptional income of £2.50m comprises the following items:
(a) On 21 July 2005 the Group sold its US based Franchising business to a US
Private Investment Group for total cash consideration of US$11.3m. The net
cash inflow (after costs of disposal) in the year was £5.26m and £0.58m
(US$1.0m) of deferred consideration is due on 21 July 2006.
Exceptional profit on disposal of the US Franchising business is £1.81m.
The net assets of this business at the date of disposal were £4.05m.
(b) Exceptional income of £0.13m relates to a bad debt provision release in the
US Franchising business following a review earlier in the year.
(c) During the year the Group received the final instalment of consideration
relating to the disposal of a US Supplier business in 1999. A provision of
£0.55m was released in relation to this receipt and is shown as
exceptional.
Pensions
2005 2004
Pension charges £'000 £'000
Defined contribution schemes 298 247
Closed defined benefit scheme 498 640
796 887
Most employees are members of defined contribution schemes which have a regular
annual cost to the company of around £0.3m. The Group also has a defined benefit
scheme which is closed to new members. Membership of the scheme at the date of
its last accounts (April 2005) was 5 active members, 1,498 deferred pensioners
and 1,017 pensioners. The last full scheme valuation in April 2004 showed a
pre-tax deficit of £11.3m.
The Company accounts for pension costs for the defined benefit scheme in
accordance with the amendment to IAS 19 'Employee benefits - actuarial gains and
losses, group plans and disclosures' with the deficit recognised in full on the
balance sheet. The profit and loss charge in the year is £0.50m (2004: £0.64m).
Employer's cash payments into the scheme are £1.16m (2004:£1.44m). At the
beginning of the year pension liabilities were £86.38m. This increased to
£98.02m at the end of the year, primarily due to the reduction in the discount
rate to 4.9% from 5.5% as a consequence of reduced bond yields. In the same
period assets of the scheme increased from £68.39m to £77.09m. The deficit of
£20.93m is included in the balance sheet as a non current liability, with an
associated deferred tax asset included within non current assets.
Share option charges
The Group adopted IFRS 2 'Share based payments' in the year. There is a £0.50m
(2004:£0.02m) charge to operating profit for SAYE, Executive Directors and
Senior Management schemes. The charge has been calculated using the Monte Carlo
and Binomial valuation models and the charge is spread over the vesting period
of the options.
Net finance income
Net finance income from continuing operations is £0.25m in 2005, compared to
£0.19m in 2004. The majority of the group cash balance is held and invested in
the UK. The average month end cash balance during 2005 was £8.42m (2004:£8.12m).
Finance income from discontinued operations is £0.02m in 2005, compared to
£0.11m in 2004 and principally represents the interest receivable on the
deferred consideration relating to the disposal of a US Supplier business in
1999.
Taxation
The tax charge on continuing operations is £1.69m, an effective rate of 30%.
£1.22m of this charge relates to current overseas tax, £1.1m is in the US
business and is offset for payment by available credits from discontinued
operations. There is a tax credit of £0.70m for discontinued operations. This is
principally due to the acceleration and crystallisation of tax deductions
relating to goodwill associated with the US Franchising business, offset by
£0.19m deferred tax charge relating to the disposal of a US Supplier business in
1999, and a £0.16m tax charge on the US Franchising business profits to the date
of disposal.
Acquisitions
The Group acquired MT Promotions Limited for total consideration (including
costs) of £1.98m on 3 August 2005. £0.70m of the consideration is deferred for
one year and is held in escrow. MT Promotions Limited is a speciality supplier
of golf related promotional products.
Segment reporting
Results have been presented consistently with the 2004 financial statements,
showing four separate Divisions of the Group. Following the disposal of the US
Franchising business in 2005 as well as the integration of the European Premium
Promotions Division into the European Direct Marketing and Corporate Programmes
Division during 2005, results going forward will be presented in two separate
segments in accordance with the way the business is managed.
Earnings per share
2005 2004
Basic p p
Continuing operations 15.35 11.54
Discontinued operations 15.59 11.43
30.94 22.97
Total basic earnings per share (under UK GAAP) in 2004 were 21.53p and the move
to International Financial Reporting Standards increased this to 22.97p.
In 2005, continuing operations have a 30% tax charge which deducts 6.57p from
EPS and in 2004 there was a tax credit which contributed 1.72p to continuing
operations EPS.
In both years discontinued operations include significant tax credits which
contribute 2.73p to EPS in 2005 and 7.63p in 2004.
In 2005 the average number of shares decreased as a result of the share buyback.
This contributed 2.95p to total basic EPS.
Dividend
The Board proposes a final dividend of 4.50p which together with the interim
dividend of 2.50p gives 7.00p (2004 : 5.25p) for the year; dividend cover based
on profits from continuing operations and calculated using the interim dividend
paid in the year and the final dividend proposed is 2.3x (2004 : 2.2x).
Cash flow
The Group net cash balance at 31 December 2005 was £9.01m. At 30 June 2005 the
Group had net cash of £3.39m following a share buyback of £9.90m and the receipt
of £1.65m deferred proceeds on disposal of a US Supplier business in 1999.
Following the disposal of the US Franchising business in July, cash increased by
£5.26m. Cash generated from operating activities in the second half of the year
is £4.64m, therefore following routine investment in capital expenditure of
£0.47m and payment of dividends of £0.62m in the second half, the cash balance
would have been around £12m. Following the purchase of own shares for £0.93m and
the acquisition of MT Promotions Limited for £1.98m the cash balance reduced to
£9.01m.
Deferred proceeds on the US Franchising business disposal are £0.58m (US$1m) and
are due in July 2006. This amount is currently held in escrow.
Balance sheet and Shareholders' funds
Equity Shareholders' funds have decreased to £15.96m (2004: £21.86m), after own
share purchases in 2005 totalling £10.83m. Reported Shareholders' funds in 2004
under UK GAAP were £34.88m and, the transition to IFRS reduced this to £21.86m.
This reduction was principally a result of including the defined benefit pension
fund deficit as a liability on the balance sheet offset by the associated
deferred tax asset.
Exchange and cash management
The average US dollar exchange rate through the year used to translate the
profit and loss accounts of overseas subsidiaries is $1.8144 (2004: $1.8312) to
the pound.
The exchange rate at the balance sheet date, used to translate assets and
liabilities in dollars was $1.7168 (2004: $1.9031). This resulted in an increase
of US dollar denominated assets of £1.65m.
The Group does not currently hedge the translation exposure of profits and
assets of its US subsidiaries.
Treasury policy
Treasury policy is centrally to manage the financial requirements of the
Divisions which arise in relation to business needs. The Group operates cash
pooling arrangements on currency accounts for its US operations and separately
for its UK and European operations. The Group matches currency requirements in
its UK Divisions with currency cash flows arising in its subsidiaries and
actively seeks to hold the majority of cash in the UK on deposit to maximise
interest income.
Adoption of International Financial Reporting Standards
The Group is required to adopt International Financial Reporting Standards
(IFRS) for the first time in its financial statements to 31 December 2005.
The principal adjustments to UK GAAP relate to:
• Adoption of the amendment to IAS 19 'Employee benefits - actuarial gains
and losses, group plans and disclosures' recognising employee benefit
obligations, particularly pensions, on the balance sheet.
• Goodwill is no longer amortised, but is subject to impairment review, in
line with IFRS 3 'Business Combinations' and IAS 36 'Impairment of assets'.
• Recognition of the cost of share based payments granted after 7 November
2002, which had not vested by 1 January 2005, in line with IFRS 2
'Share-based payment'.
• Dividends are recognised in the period in which they are approved in line
with IAS 37 'Provisions, contingent liabilities and contingent assets'.
• Tax implications of the adjustments outlined above in accordance with IAS
12 'Income taxes'.
The Group's estimate of its results using UK GAAP accounting policies and
standards applicable in 2004 have been included for Shareholder information.
UK GAAP IFRS
UK GAAP IFRS 2004 2004
2005 2005
£'000 £'000 £'000 £'000
Continuing operations
Operating profit before goodwill amortisation and
exceptional items 5,847 5,703 2,937 3,150
Goodwill amortisation (276) - (276) -
Exceptional items (315) (315) (525) (525)
Operating profit 5,256 5,388 2,136 2,625
Basic earnings per share - continuing operations 15.00p 15.35p 10.09p 11.54p
Discontinued operations
Operating profit including profit on disposal 3,342 3,294 984 980
Basic earnings per share - all operations 30.70p 30.94p 21.53p 22.97p
Net assets 30,546 15,960 34,877 21,864
2005 2004
Continuing operations £'000 £'000
Operating profit under UK GAAP 5,256 2,136
IFRS 2 share option charge (495) (18)
IAS 19 holiday pay accrual 26 (7)
Write off of deferred charges, which do not meet (84) (29)
the IFRS definition of an asset
Write back of goodwill amortisation 276 276
Adjustment of pension charges on an IAS 19 basis 409 267
Operating profit under IFRS 5,388 2,625
2005 2004
Discontinued operations £'000 £'000
Operating profit under UK GAAP including profit on disposal 3,342 984
IFRS 2 share option charge (3) (2)
IAS 19 holiday pay accrual (45) (2)
Operating profit under IFRS including profit on disposal 3,294 980
31 December 31 December
2005 2004
£'000 £'000
Net assets under UK GAAP 30,546 34,877
IAS19 recognition of pension liability (20,930) (17,989)
Write off of UK GAAP pension prepayment (1,802) (1,549)
Write back of goodwill amortisation 552 276
Write off of deferred charges, which do not meet the IFRS definition of an (735) (582)
asset
IAS 19 holiday pay accrual (60) (90)
Tax on IFRS adjustments 7,287 5,929
Dividend Recognition 1,102 992
Net assets under IFRS 15,960 21,864
Net assets at 31 December 2005 include the impact of the share buyback, which
reduced net assets by £9,898,000.
Gillian Davies
Group Finance Director
10 March 2006
Operating Review
European Direct Marketing and Corporate Programmes
2005 2004
£'000 £'000
Sales 39,160 35,727
Operating profit before exceptional items 3,257 1,850
Operating profit 3,222 1,682
The Manchester based business, which accounts for 81% of this Division's sales,
comprises:-
(a) Trade - supplies a wide range of promotional products on a regular basis to
end user suppliers. It provides bespoke printing and engraving services
through its own 'in-house' production facilities. This business has
continued its excellent sales growth with a 9% like-for-like increase in
sales on a record performance in 2004 whilst maintaining strong margins. In
August, the acquisition of MT Promotions Limited (MT Golf) added a further
dimension to this division, supplying personalised golf products to end
user suppliers and the sports club market. MT Golf has been fully
integrated into the existing infrastructure in Manchester.
(b) Corporate Programmes - builds on its client base by providing sophisticated
design, product development and additional support functions, including
warehousing, distribution and product range consultancy, delivering a fully
out-sourced solution for specific corporate promotional programmes. Sales
have increased by 9% over prior year and this, together with tight overhead
control, has contributed significantly to the increased profitability of
the Manchester based business in 2005.
(c) Direct Marketing - uses integrated catalogue, telephone and web selling
techniques. In 2005 it has aligned its strategy for growth with the
successes that have been evident in the US Direct Marketing business. This
began to impact in the second half of 2005. Sales in the last quarter of
2005 were 45% ahead of the same period in 2004. Continued investment in
catalogues and the website, as well as advanced skills and techniques
employed in the US business are being used to generate increased sales
growth in 2006 and beyond.
(d) Field Sales - supplies promotional merchandise to a range of corporate
entities on either a preferred supply or 'ad hoc' basis through a number of
sales account managers. Sales finished at 96% of prior year and following a
reorganisation and a recruitment drive within this team, 2006 has started
with a stronger and more experienced sales team.
Kreyer Promotions, in Germany, comprises: Corporate Programmes and Field Sales.
The business increased its sales by 32% compared to prior year. The majority of
growth stemmed from Corporate Programmes, which added a number of major new
customers. This, together with tight cost control has resulted in the doubling
of profits from prior year in this business.
European Premium Promotions
2005 2004
£'000 £'000
Sales 11,595 13,328
Operating profit before exceptional items 638 880
Operating profit 358 523
This Division comprises the Product Plus International (PPI) company based in
London, which specialises in the supply of bespoke promotional products and
services to a range of blue chip clients.
Sales for the Division were only 87% of prior year. The airline, cosmetic and
retail groups in the Division all performed ahead of prior year, however
publishing was significantly below 2004 levels. During the year the Division has
been further reorganised and is now integrated and managed as part of the
European Direct Marketing and Corporate Programmes Division. This has reduced
administration costs and focused resources on customer service and sales growth.
An exceptional charge of £409,000, resulting from the reorganisation, has been
partly offset by £129,000 net income arising from the insurance settlement on
the prior year product recall.
US Direct Marketing and Corporate Programmes
2005 2004
US$'000 £'000 US$'000 £'000
Sales 82,965 45,726 73,083 39,910
Operating profit 6,561 3,616 4,276 2,335
This Division comprises: the core Direct Marketing operation serving the US and
Canada, and a smaller Corporate Programmes operation. Considerable progress was
made in both during 2005.
Direct Marketing sales increased by 28% over 2004. Total orders received grew
more than 26% while orders received from new customers grew 37% over prior year.
Orders via the web now represent nearly 40% of order intake.
This excellent performance was driven by an aggressive expansion of our prospect
catalogue mailings, an increased investment in internet-based selling methods,
principally website technology and search engine advertising, and continuous
improvements in customer retention activities. Added resource and focus in
merchandising and market segmentation capabilities enhanced the result. This
method of marketing and selling takes advantage of an increasing number of
business-to-business buyers who embrace a web/telephone purchasing process.
The same techniques have been employed in the Canadian market which helped to
drive sales up by 60% over 2004, on a more modest increase in prospect
catalogues mailed.
The restructuring of our US Corporate Programmes activities was successfully
completed in the year. As planned, revenue decreased, but contribution to site
profitability increased over 2004.
US Franchising
Up to Up to
21 July 21 July
2005 2005 2004 2004
US$'000 £'000 US$'000 £'000
Fee income 4,706 2,546 8,471 4,626
Operating profit before exceptional items 1,473 797 1,795 980
Operating profit 1,721 931 1,795 980
The US Franchising business, Adventures in Advertising Corporation was sold on
21 July 2005. Fee income and operating profit is included up to this date.
The exceptional item relates to the release of a bad debt provision following a
review undertaken earlier in the year.
Ken Minton
Executive Chairman
10 March 2006
Income statement for the year ended 31 December 2005
2005 2004
Note £'000 £'000
Continuing operations
Sales 2 96,481 88,965
Operating expenses (91,093) (86,340)
Operating profit 2 5,388 2,625
Operating profit before exceptional items 5,703 3,150
Exceptional items 4 (315) (525)
Operating profit 2 5,388 2,625
Finance costs (47) (140)
Finance income 300 325
Profit before tax 5,641 2,810
Taxation 5 (1,691) 492
Profit for the year from continuing operations 3,950 3,302
Profit for the year from discontinued operations 6 4,012 3,270
Profit attributable to equity shareholders 7,962 6,572
Earnings per share for all operations
Basic 8 30.94p 22.97p
Diluted 8 29.46p 22.21p
Earnings per share from continuing operations
Basic 8 15.35p 11.54p
Diluted 8 14.62p 11.16p
Statement of recognised income and expense for the year ended 31 December 2005
2005 2004
£'000 £'000
Profit for the financial year 7,962 6,572
Exchange adjustments offset in reserves net of tax 413 (614)
Actuarial losses taken to reserves net of tax (2,721) (761)
Net losses not recognised in income statement (2,308) (1,375)
Total recognised income for the year 5,654 5,197
Balance sheet at 31 December 2005
2005 2004
Note £'000 £'000
Non Current Assets
Property, plant and equipment 1,370 1,656
Goodwill 4,341 4,341
Intangible assets 3,556 2,743
Investments 8 8
Deferred income tax assets 8,921 8,407
18,196 17,155
Current Assets
Inventories 5,663 4,640
Trade and other receivables 19,864 22,919
Cash and cash equivalents 9,103 15,310
34,630 42,869
Current Liabilities
Trade and other payables 14,737 16,077
Current tax 823 697
Borrowings 91 2,565
Provisions 285 832
15,936 20,171
Net Current Assets 18,694 22,698
Non Current Liabilities
Retirement benefit obligations 3 20,930 17,989
Net Assets 15,960 21,864
Shareholders' Equity
Share capital 9 9,634 11,063
Share premium reserve 9 37,684 37,659
Capital redemption reserve 9 208 208
Cumulative translation differences 9 (210) (614)
Retained earnings 9 (31,356) (26,452)
Total Equity 15,960 21,864
The US dollar to sterling exchange rate at the balance sheet date was $1.7168
(2004 : $1.9031).
Cash flow statement for the year ended 31 December 2005
2005 2004
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 10 4,662 7,151
Tax (paid)/received (179) 470
Interest received 409 339
Interest paid (47) (141)
Net cash generated from operating activities 4,845 7,819
Cash flows from investing activities
Acquisition of subsidiary 11 (1,975) -
Disposal of subsidiary 6 5,263 -
Deferred consideration on disposal of US Supplier business 6 1,653 546
in 1999
Purchases of property, plant and equipment (457) (289)
Purchases of intangible assets (544) (946)
Proceeds from sale of property, plant and equipment 131 -
Net cash generated from/(used in) investing activities 4,071 (689)
Cash flows from financing activities
Movements in borrowings
• Net proceeds from the issue of new borrowings - 345
• Repayment of borrowings (2,015) (546)
Proceeds from issuance of ordinary shares 98 48
Purchase of own shares for cancellation (9,898) -
Purchase of own shares (933) (889)
Dividends paid to shareholders (1,608) (1,364)
Net cash used in financing activities (14,356) (2,406)
Net (decrease)/ increase in cash and bank overdrafts (5,440) 4,724
Cash and bank overdrafts at beginning of the period 14,666 9,905
Exchange (losses)/gains on cash and bank overdrafts (214) 37
Cash and bank overdrafts at end of the period 9,012 14,666
Analysis of cash and bank overdrafts
Cash at bank and in hand 9,103 15,310
Bank overdraft (91) (644)
9,012 14,666
1 Basis of preparation
The financial information set out in this announcement does not constitute the
Group statutory accounts for the year ended 31 December 2005 or 31 December
2004, but is derived from these accounts.
The statutory accounts for the Group for the year ended 31 December 2005 and
2004 were reported on by the auditors without qualification and as such did not
contain any statement under section 237(2) or (3) of the Companies Act 1985.
From 1 January 2005, 4imprint Group plc is required to prepare its consolidated
financial statements in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union. The financial information
set out in this preliminary statement has been prepared in accordance with the
accounting policies under IFRS published on the 4imprint website
'www.4imprint.co.uk'.
The Group had previously reported under UK GAAP. A full reconciliation between
the figures presented under UK GAAP and IFRS will be provided in the Annual
Report and Accounts.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The full Annual Report and Accounts for the year ended 31 December 2005 will be
posted to shareholders shortly and, after adoption at the Annual General
Meeting, delivered to the Registrar of Companies.
2 Segmental reporting
Primary reporting format - business segments
At 31 December 2005, the Group is reported in three main business segments
(following the sale of the US Franchising business on 21 July 2005). The
segmental results for the year ended 31 December 2005 are as follows:
Sales
2005 2004
£'000 £'000
Continuing operations
European Direct Marketing and Corporate Programmes 39,160 35,727
European Premium Promotions 11,595 13,328
US Direct Marketing and Corporate Programmes 45,726 39,910
Total 96,481 88,965
Discontinued operations
US Franchising 2,546 4,626
Total Operations 99,027 93,591
Operating profit Pension Share option Operating profit/ Exceptional Operating
/(loss) before charges charges (loss) before items profit/(loss)
exceptional exceptional items
items, pension
and share option
charges
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing
operations
European Direct
Marketing and
Corporate
Programmes 3,412 1,910 (85) (57) (70) (3) 3,257 1,850 (35) (168) 3,222 1,682
European Premium 718 925 (51) (45) (29) - 638 880 (280) (357) 358 523
Promotions
US Direct Marketing 3,801 2,452 (113) (109) (72) (8) 3,616 2,335 - - 3,616 2,335
and Corporate
Programmes
Unallocated costs (952) (1,253) (532) (655) (324) (7) (1,808) (1,915) - - (1,808) (1,915)
Total 6,979 4,034 (781) (866) (495) (18) 5,703 3,150 (315) (525) 5,388 2,625
Net finance income totalling £253,000 (2004 : £185,000) and taxation charge of
£1,691,000 (2004: £492,000 credit) cannot be separately allocated to individual
segments. A review of the segments is included in the Operating Review.
Unallocated costs comprise head office costs and costs relating to the closed
defined benefit pension scheme.
Operating Pension Share option Operating profit Exceptional Operating
profit before charges charges before items profit
exceptional exceptional items
items, pension
and share
option charges
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Discontinued
operations
Profit for the
period from US
Franchising
business 815 1,003 (15) (21) (3) (2) 797 980 134 - 931 980
Profit before tax 1,809 - 1,809 -
on disposal of US
Franchising
business
Profit before tax 554 - 554 -
on disposal of US
Supplier business
in 1999
Total 815 1,003 (15) (21) (3) (2) 797 980 2,497 - 3,294 980
Finance income totalling £16,000 (2004 : £106,000) and a tax credit of £702,000
(2004: £2,184,000) is attributable to discontinued operations.
Other segment items
Assets Liabilities Capital Depreciation Amortisation
expenditure
2005 2004 2005 2004 2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
European Direct Marketing
and Corporate Programmes 19,269 14,909 (7,811) (6,183) 283 404 (235) (340) (472) (509)
European Premium
Promotions 6,222 5,861 (1,451) (1,780) 13 187 (39) (41) (7) (4)
US Direct Marketing and
Corporate Programmes 8,406 6,467 (4,785) (3,400) 445 482 (201) (263) (463) (476)
Unallocated assets/
(liabilities) and costs 9,244 8,486 (22,728) (19,652) 102 - - - - -
Cash/(bank overdrafts and
loans) 9,103 15,310 (91) (2,565)
Total 52,244 51,033 (36,866) (33,580) 843 1,073 (475) (644) (942) (989)
Discontinued operations
Deferred consideration
from US Supplier business
disposed in 1999 - 1,854 - (542) - - - - - -
US Franchising Business 582 7,137 - (4,038) 158 162 (27) (65) (118) (188)
Total 582 8,991 - (4,580) 158 162 (27) (65) (118) (188)
Total Operations 52,826 60,024 (36,866) (38,160) 1,001 1,235 (502) (709) (1,060) (1,177)
Unallocated assets, liabilities and costs relate to head office items, including
Group tax and the liability and deferred tax asset relating to the closed
defined benefit pension scheme which cannot be allocated to individual segments.
Secondary reporting format - geographical segments
Assets Capital
Sales expenditure
2005 2004 2005 2004 2005 2004
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Europe 50,755 49,055 33,183 27,311 398 591
US 45,726 39,910 9,958 8,412 445 482
Unallocated assets
- Group cash 9,103 15,310
Total 96,481 88,965 52,244 51,033 843 1,073
Discontinued operations
US 2,546 4,626 582 8,991 158 162
Total operations 99,027 93,591 52,826 60,024 1,001 1,235
3 Employee pension schemes
The Group operates defined contribution plans for the majority of its UK and US
employees. The regular contributions are charged to the income statement as
they are incurred.
The Group also operates a funded UK defined benefit scheme which is closed to
new members. The funds of the scheme are administered by a Trustee Company and
are independent of the Group's finances.
2005 2004
Continuing and discontinued operations £'000 £'000
Net pension costs:
Defined contribution plans 298 247
Defined benefit scheme:
Current service cost 89 75
Net interest cost 409 565
796 887
The whole of the above charge was included within operating expenses.
Defined benefit plan
In the most recent actuarial review of the 4imprint Group plc defined benefit
plan the principal assumptions made by the actuaries were:
2005 2004
Rate of increase in pensionable salaries 3.90% 3.70%
Rate of increase in pensions in payment and deferred pensions 2.80% 2.70%
Discount rate 4.90% 5.50%
Inflation assumption 2.80% 2.70%
Expected return on plan assets 5.89% 6.59%
The post-retirement mortality assumptions used are based on the 'PA 92' standard
tables with some allowance for future mortality improvements. The assumptions
are such that a current non-pensioner member who later retires at age 65 will
live on average for a further 19 years after retirement if they are male and a
further 22 years after retirement if they are female. A current pensioner member
aged 65 will live on average for a further 18 years if they are male and for a
further 21 years if they are female.
The amounts recognised in the balance sheet are determined as follows:
2005 2004
£'000 £'000
Present value of funded obligations (98,023) (86,379)
Fair value of plan assets 77,093 68,390
Net liability recognised in the balance sheet (20,930) (17,989)
The major categories of plan assets as a percentage of total plan assets are as
follows:
2005 2004
Equities 40% 53%
Bonds 44% 46%
Property 14% nil
Cash 2% 1%
The amounts recognised in the income statement are as follows:
2005 2004
£'000 £'000
Current service cost 89 75
Interest cost 4,657 4,506
Expected return on plan assets (4,248) (3,941)
Total included in staff costs 498 640
Changes in the present value of the defined benefit obligation are as follows:
2005 2004
£'000 £'000
Defined benefit obligation at start of year 86,379 83,718
Current service cost 89 75
Interest cost 4,657 4,506
Contributions by plan participants 2 5
Actuarial loss 10,616 1,743
Benefits paid (3,720) (3,668)
Defined benefit obligation at end of year 98,023 86,379
Changes in the fair value of plan assets are as follows:
2005 2004
£'000 £'000
Fair value of assets at start of year 68,390 66,016
Expected return on assets 4,248 3,941
Actuarial gains 7,013 656
Contributions by employer 1,160 1,440
Contributions by plan participants 2 5
Benefits paid (3,720) (3,668)
Fair value of assets at end of year 77,093 68,390
Analysis of the movement in the balance sheet liability:
2005 2004
£'000 £'000
At start of year 17,989 17,702
Total expense as above 498 640
Contributions paid (1,160) (1,440)
Actuarial losses taken directly to equity 3,603 1,087
31 December 20,930 17,989
The actual return on plan assets was £11,261,000 (2004: £4,597,000).
4 Exceptional items
2005 2004
Continuing operations £'000 £'000
Product recall income/(charge) 129 (267)
European reorganisation charge (444) (258)
(315) (525)
The product recall charge in 2004 relates to the cost of a product recall issue
in the European Premium Promotions Division which has been disclosed separately
due to its rare occurrence and size. In 2005 insurance income net of costs was
received.
The European reorganisation charge in 2005 relates to the ongoing integration of
the European Premium Promotions Division into the European Direct Marketing and
Corporate Programmes Division, and the integration of MT Promotions Limited,
acquired in the period, into the European Direct Marketing and Corporate
Programmes Division. In 2004 the charge relates to reorganisation in the
European Premium Promotions Division and the European Direct Marketing and
Corporate Programmes Division.
5 Taxation
2005 2004
Continuing operations £'000 £'000
Analysis of charge/(credit) in the period:
UK tax - current - -
Overseas tax - current 1,225 (21)
Deferred tax 466 (471)
Taxation 1,691 (492)
The tax for the year is different to the standard rate of corporation tax in the
UK (30%). The differences are explained below:
2005 2004
Continuing operations £'000 £'000
Profit before tax 5,641 2,810
Profit on ordinary activities multiplied by rate of UK corporation tax of 30% (2004 : 30%) 1,692 843
Effects of:
Adjustments in respect of foreign tax rates 222 (85)
Expenses not deductible for tax purposes 145 43
Timing differences and other differences (368) (1,293)
Total taxation 1,691 (492)
6 Discontinued operations
2005 2004
Note £'000 £'000
Profit after tax on disposal of US Franchising business a 2,866 -
Profit after tax for the period from US Franchising business b 770 1,279
Profit after tax attributable to disposal of US Supplier business in 1999 c 376 1,991
4,012 3,270
a) Disposal of US Franchising business
On 21 July 2005, the Group completed the sale of Adventures in Advertising
Corporation ('AiA') to The Riverside Company, a US Private Investment Group for
consideration of US$11.3m. AiA constitutes the US Franchising business in note
2 and being the only franchise business in the Group did not fit with the long
term strategy, which is to concentrate on the core activities of providing
products and support services for Corporate and Product Promotions, using 'in
house' resources.
2005
£'000 £'000
Net cash consideration (after costs of disposal) 5,263
Deferred cash consideration 582
Total consideration 5,845
Total assets carrying value at date of disposal (8,655)
Total liabilities carrying value at date of disposal 4,610
Net assets on disposal (4,045)
Cumulative exchange gain transferred from reserves 9
Profit before tax 1,809
Tax credit arising on disposal 1,057
Profit on disposal of US Franchising business 2,866
The tax credit arising on disposal relates principally to the acceleration and
crystallisation of tax deductible goodwill. This goodwill would otherwise have
been deductible over the next ten years.
b) Profit for the period from US Franchising business
2005 2004
£'000 £'000
Sales 2,546 4,626
Operating expenses (1,615) (3,646)
Operating profit 931 980
Operating profit before exceptional item 797 980
Exceptional item 134 -
Operating profit 931 980
Finance income 2 14
Profit before tax 933 994
Taxation (163) 285
Profit after tax 770 1,279
The exceptional item relates to the release of a bad debt provision following a
review undertaken in this business.
c) Profit attributable to disposal of US Supplier business in 1999
2005 2004
£'000 £'000
Exceptional operating profit 554 -
Finance income 14 92
Profit before tax 568 92
Taxation (192) 1,899
Profit after tax 376 1,991
The exceptional operating profit relates to the release of a provision during
the year.
In addition to the profit above, the Group received £1,653,000 of deferred
consideration during the year. This is included in cash generated from investing
activities in the cash flow.
d) Cash flows arising from discontinued operations
2005 2004
£'000 £'000
Net cash generated from operating activities 731 1,492
Net cash generated from disposal of subsidiary 5,263 -
Deferred consideration on disposal of US Supplier business in 1999 1,653 546
7,647 2,038
7 Dividends
2005 2004
£'000 £'000
Equity dividends - ordinary shares
Interim paid: 2.50p (2004: 1.75p) 616 503
Final paid: 3.50p (2004: 3.00p) 992 861
In addition, the Directors are proposing a final dividend in respect of the
financial year ended 31 December 2005, of 4.50p per share which will absorb an
estimated £1.10m of Shareholders' funds. It will be paid on 21 April 2006 to
Shareholders who are on the register of members on 24 March 2006.
8 Earnings per share
Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to ordinary Shareholders by the weighted average number of ordinary
shares in issue during the period, excluding those held in the Employee Share
Trust (note 9) which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potential dilutive ordinary
shares. The potential dilutive ordinary shares relate to those share options
granted to employees where the exercise price is less than the average market
price of the Company's ordinary shares at the balance sheet date.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below:
2005 2004
Weighted Weighted
average average
number number
Earnings of shares Pence per Earnings of shares Pence per
£'000 '000 share £'000 '000 share
Earnings attributable to 7,962 6,572
ordinary shareholders
Ordinary shares in issue 26,217 28,742
Shares held by employee (481) (135)
share trust
Basic EPS 7,962 25,736 30.94 6,572 28,607 22.97
Effect of dilutive
securities
Options 1,291 (1.48) 980 (0.76)
Diluted EPS
Adjusted earnings 7,962 27,027 29.46 6,572 29,587 22.21
Earnings per share from
continuing operations
Basic EPS 3,950 25,736 15.35 3,302 28,607 11.54
Diluted EPS 3,950 27,027 14.62 3,302 29,587 11.16
Earnings per share from
discontinued operations
Basic EPS 4,012 25,736 15.59 3,270 28,607 11.43
Diluted EPS 4,012 27,027 14.84 3,270 29,587 11.05
9 Statement of changes in Shareholders' equity
Retained earnings
Share Capital Cumulative Profit
Share premium redemption translation Own and Total
capital reserve reserve differences shares loss Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 28 December 2003 11,044 37,630 208 - (7) (30,030) 18,845
Profit for the period 6,572 6,572
Exchange adjustments net of (614) (614)
tax
Own shares issued 7 7
Own shares purchased (889) (889)
Shares issued 19 29 48
Employee share options 20 20
Actuarial losses taken to (1,087) (1,087)
reserves
Deferred tax on actuarial 326 326
losses taken to reserves
Dividends (1,364) (1,364)
Balance at 31 December 2004 11,063 37,659 208 (614) (889) (25,563) 21,864
Balance at 1 January 2005 11,063 37,659 208 (614) (889) (25,563) 21,864
Profit for the period 7,962 7,962
Exchange adjustments net 413 413
of tax
Exchange adjustment (9) (9)
previously taken to
reserves, transferred to
income statement on
disposal of subsidiary
Own shares purchased (933) (933)
Shares issued 73 25 98
Own shares purchased and (1,502) (8,396) (9,898)
cancelled
Employee share options 498 498
Deferred tax on employee 294 294
share options taken to
reserves
Actuarial losses taken to (3,603) (3,603)
reserves
Deferred tax on actuarial 882 882
losses taken to reserves
Dividends (1,608) (1,608)
Balance at 31 December 9,634 37,684 208 (210) (1,822) (29,534) 15,960
2005
The cumulative goodwill written off to the reserves in respect of subsidiary
companies and businesses currently held amounts to £15,297,000 (2004 :
£15,297,000).
Purchase of own shares represents the cost of 875,000 of the Company's ordinary
shares held at 31 December 2005 (2004 : 440,000). These shares were acquired by
the 4imprint Group plc Employee Share Trust in 2005 and 2004 to meet obligations
under the Executive Share Option Scheme using funds provided by 4imprint Group
plc. The costs of funding and administering the schemes are charged to the
income statement of the Company in the period to which they relate. Dividend
income from and voting rights in respect of the shares held under Trust have
been waived and the shares have been excluded from the earnings per share
calculation. The market value of the shares at 31 December 2005 was £2,620,625
(2004 : £838,201).
10 Cash generated from operations
2005 2004
£'000 £'000
Continuing operations
Net profit 3,950 3,302
Adjustments for:
Taxation 1,691 (492)
Depreciation charge 475 644
(Profit)/loss on disposal of property, plant and equipment (13) 44
Amortisation of intangibles 942 989
Finance income (300) (325)
Finance costs 47 141
Share option charge 495 18
IAS 19 pension charge for defined benefit scheme 498 640
Contributions to defined benefit pension scheme (1,160) (1,440)
Changes in working capital:
(Increase)/decrease in inventories (944) 1,261
(Increase)/decrease in trade and other receivables (2,194) 2,459
Increase/(decrease) in trade and other payables 474 (1,466)
Decrease in provisions (30) (116)
Cash generated from continuing operations 3,931 5,659
Discontinued operations
Net profit 4,012 3,270
Adjustments for:
Taxation (702) (2,184)
Depreciation charge 27 65
Profit on disposal of subsidiary undertaking (1,809) -
Amortisation of intangibles 118 188
Finance income (16) (106)
Share option charge 3 2
Changes in working capital:
Decrease/(increase) in trade and other receivables 170 (127)
(Decrease)/increase in trade and other payables (518) 618
Decrease in provisions (554) (234)
Cash generated from discontinued operations 731 1,492
Cash generated from operations 4,662 7,151
11 Acquisition of MT Promotions Limited
The Group purchased MT Promotions Limited on 3 August 2005 for a total
consideration of £1,975,000 (including acquisition costs) of which £700,000 will
be paid on 3 August 2006. This purchase has been accounted for as an
acquisition.
Prior to its acquisition by the Group, MT Promotions Limited earned £318,000 of
profit before interest and £317,000 after interest for the period 1 January 2005
to 2 August 2005.
All of the voting shares were acquired. From 3 August 2005 to 31 December 2005
the acquisition contributed £484,000 to sales, £110,000 to profit before and
after interest and £100,000 to the Group's net operating cashflows. MT
Promotions Limited utilised no capital expenditure from 3 August 2005 to 31
December 2005.
Assets acquired are recognised at their respective provisional fair values.
Carrying values pre Provisional
acquisition fair value
£'000 £'000
Intangible fixed assets - brand name - 1,775
Property, plant and equipment 10 -
Inventories 200 200
Cost of acquisition 1,975
Cash flow in the year for the cost of acquisition is as follows:
£'000
Cash used in investing activities 1,975
£700,000 deferred consideration is due to be paid on 3 August 2006 and is held
in escrow.
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