Interim Results

4imprint Group PLC 18 September 2001 Press Release 18 September 2001 4imprint Group plc Interim Results for the six months ended 30 June 2001 4imprint Group plc, the leading global distributor of imprinted promotional products, today reports its Interim Results for the six months ended 30 June 2001. Highlights * turnover from continuing operations up 5.5% to £45.7 million * profit before tax, exceptional items and goodwill amortisation £944,000, (£2,014,000 half year 2000) * earnings per share (EPS) pre goodwill amortisation of 2.3p * new dividend policy implemented - interim dividend of 1.0p per ordinary share * integration of US-based AIA franchise operations on target * other operating divisions performing well and poised for growth * Nissan Europe added to global 'blue chip' client list * market share worldwide still increasing Commenting on the Results, Dick Nelson, Chief Executive of 4imprint Group plc, said: 'The resources we have put in place during the first half of this year puts us in a position to gain market share in a highly fragmented market. The results for the six months to end of June 2001 are the first to reflect our new dividend policy that we made reference to in our review of the full year's results in 2000. 'Although we remain cautious about the effect of the economy on our US direct marketing business in the second half of this year, we are working on a number of new substantial programme opportunities on both sides of the Atlantic that should have a positive effect on the group from 2002 and beyond.' - Ends - www.4imprint.com / www.4imprint.co.uk For further information, please contact: 4imprint Group plc Dick Nelson, Chief Executive Tel: +00 1 (920) 236 7270 Email: dnelson@4imprint.com Issued by: Julian Bosdet / Henry Harrison-Topham Bankside Consultants Limited Tel: +44 (0) 20 7444 4141 Email: henry.ht@bankside.com 2001 Interim Results announcement Introduction 4imprint Group has continued to increase its market share worldwide, despite the problems with the US economy and the knock-on effects that they have created in the UK and the rest of the world. At the same time, the Company also continues to invest in the systems and processes it will need to support its future growth. The integration of Adventures in Advertising Franchise, Inc. (AIA), the acquisition made in December of last year, is proceeding on plan as we now begin to convert their 450 'plus' franchise owners into OASIS, the Company's bespoke enterprise operating system. Additionally, the franchise owner network has responded extremely positively to the expanded support they now have available to them. Evidence of this can already be seen by a number of corporate programme contract wins as well as a growing number of programmes that are in various stages of discussion. Financial Summary It is most encouraging to report that group turnover is up by 5.5% to £45.7 million in the Company's continuing operations. Every even year our direct import division, PPI, experiences significant revenues from major sporting events such as the World Cup. Management has been successful in diversifying revenues towards more predictable streams in this division as evidenced by PPI's first half sales of £7.6 million, which are more than double the £2.9 million it achieved in 1999, the last 'non-event' year, though down £3.7 million from 2000. Profits before tax and goodwill amortisation were £940,000 compared with £ 2,041,000 last year. This decrease is largely the result of lower profit by the US direct marketing operations, reallocation of central costs and the ' one-off' costs associated with the AIA acquisition referred to below. The Board has declared an interim dividend of 1.0p per ordinary share that implements the new dividend policy as set out in the full report and accounts for 2000. Adventures in Advertising contributed turnover of $3.3 million for the half year but incurred losses of $400,000 due to the seasonal nature of the business, including one-off costs of $250,000, relating to its acquisition in respect of the termination of its credit facility with GE Capital and the winding down of its contract with its previous software provider. Cash outflow in the first half of the year amounted to £16m, the non-recurring factors being the acquisition of AIA (£11 million) and the acceleration of payments to AIA suppliers (£3 million). Further detail is shown in the cash flow statement. Corporate Programmes Our corporate programme division designs, sources, manufacturers, warehouses and distributes promotional products for such major clients as Audi, British Airways, BT, Gillette, IBM, JCB, L'Oreal, Microsoft, ntl:, Rolls Royce, and UNISYS. Turnover in UK corporate programmes was up 11% in the first half, virtually on budget. From a near standing start last year, nearly 18% of our corporate programme orders came in through the client internet stores. Additionally, the team has won seven new contracts in the last three months against no losses. These wins, which include Nissan Europe and others will yield estimated annualised revenue of £5 million. US corporate programme turnover was more than double last year's first half, but is from a much smaller base than in the UK. However, this part of the Company is poised for considerable growth and has won in recent weeks several significant multi-year contracts that will add annualised estimated revenue of $10 million. These include new programmes with Hitachi Data Systems, Brunswick and Raley's, which will produce estimated combined annual revenue of over $5 million, that have been won by AIA franchise owners, an excellent result that we anticipated at the time of the acquisition. Direct Marketing Our direct marketing division posts over 10 million catalogues and other mailing pieces annually and serves over 150,000 customers worldwide. UK direct marketing and field sales were up 25% over the first half of last year, driven by an increase in catalogues posted and greater productivity from the reorganised sales force. Twenty-five percent of the direct marketing orders are now coming in over the internet, which has a positive impact on processing costs. Order count was up slightly in the US direct marketing business though additional costs were incurred as16% more catalogues were posted this year than last. A slippage in the average order value has left turnover level with last year though exchange rate movements lifted revenues by £1.7 million. Gross margins have remained the same. It is pleasing to report that the busiest order intake week in the US direct marketing division's history took place in the second week of August, only to be eclipsed with another new record in the fourth week of August. Premiums Our premium division designs, sources and arranges offshore manufacturing of large one-off imprinted product orders most often used by larger companies in consumer promotions. Our direct import business in the UK continues to move away from its dependence on major events, for example the World Cup, with contracts such as the one the Company has to provide airline amenity kits for several of the world's leading carriers. As a result, turnover is up more than two and one-half times on the first half of 1999, the last year when there were no significant world sporting events. We have added staff in both the USA and Hong Kong to support the growth of the US direct import business, which will be driven largely by the AIA franchise owner network. This expanded resource was introduced to the owners in the latter part of the first half and, as lead times are quite long in the import business, we have achieved only limited billable US direct import sales in the first half. However, there is much in the pipeline that bodes well for the second half of 2001 and for next year. Partner Services Our Partner Services division's charter is to leverage our bespoke enterprise operating systems and industry-leading supply chain management processes into other channels of distribution. The Company's acquisition of AIA at the end of last year was its first effort to leverage its processes and systems on a wider scale. In the first half Service Fee Income, the 'royalties' AIA receives on sales billed through it system, increased 63%, while System Wide Billings were up 32% to $47.4 million. Service Fee Income has increased at more than double the rate of billings because the Company has expanded its services to the franchise owners in recent years and is therefore able to charge additional fees. The 62 new franchises sold in the first half were a little below plan as a number of prospects took a wait-and-see attitude after it was announced at the beginning of the year that AIA had been acquired. This initial scepticism has since evaporated as the expanded services and financial support brought to AIA by 4imprint has become better known. Sales activity in recent months has accelerated and we expect to outpace last year's total in the second half. As AIA continues to shift to the 'conversion' phase of franchising, we are attracting more people who have industry experience. As a result, a larger percentage of those joining the system now have an existing customer base and an active order book. These 'veteran' owners pay a lower initial fee because they require less training and therefore absorb fewer company resources than do those who are new to the industry. However, these 'industry-experienced' owners also produce billable sales at both a faster and higher rate, yielding more immediate Service Fee Income for the Company. Current plans call for the introduction of a variation of the AIA model into the UK next year, after the systems integration has been completed in the US. Outlook The resources we have been adding to the Company over the last six months have put us in a position to gain market share in a highly fragmented market in challenging times. Though our US direct marketing business has shown considerable strength in recent weeks, we remain cautious about the effect of the economy on this division in the second half. We are working on a number of new substantial corporate programme opportunities on both sides of the Atlantic, which in a logical market would have a positive effect from 2002 and beyond. Unfortunately, market uncertainties have increased following the tragic events in the United States last week and it is too early to assess the impact it will have on our businesses. Dick Nelson Chief Executive 18 September 2001 Financial Summary for the six months to 30 June 2001 Half year Half year Full year Unaudited Unaudited Audited 30 June 1 July 30 December 2001 2000 2000 Turnover Continuing operations £45.68m £43.28m £88.03m Discontinued operations - £25.55m £28.65m £45.68m £68.83m £116.68m Operating profit/(loss) Continuing operations £0.20m £1.93m £3.81m Discontinued operations - £(2.66)m £(3.72)m £0.20m £(0.73)m £0.09m Profit/(loss) before taxation, goodwill amortisation and exceptional items Continuing operations £0.94m £2.04m £4.79m Discontinued operations - £(2.66)m £(3.72)m £0.94m £(0.62)m £1.07m Exceptional item (Disposals & - £(44.55)m £(45.88)m reorganisation) Dividends per share Ordinary 1.00p 6.45p 18.65p Earnings/(loss) per share Basic 1.16p (158.72)p (160.84)p Diluted 1.16p (157.96)p (160.83)p Pre goodwill amortisation 2.30p (158.37)p (160.15)p Shareholders' funds £47.02m £47.32m £45.84m Net cash / (debt) £4.02m £(5.32)m £20.00m Gearing - 11% - These financial statements should be read in conjunction with the notes. Consolidated Profit & Loss Account Unaudited, for the six months to 30 June 2001 Half Year Half Year Full Year 2001 2000 2000 £'000 £'000 £'000 Turnover 45,680 68,826 116,678 Operating profit/(loss) before 665 (592) 370 goodwill amortisation Goodwill amortisation (469) (138) (277) Operating profit/(loss) 196 (730) 93 Exceptional item : loss on sale of businesses and fundamental - (44,547) (45,884) reorganisation Interest 279 (23) 704 Profit/(loss) before taxation 475 (45,300) (45,087) Taxation (142) 807 (275) Profit/(loss) after taxation 333 (44,493) (45,362) Dividends : Ordinary & (287) (1,822) (5,350) preference Transfer to/(from) reserves 46 (46,315) (50,712) Earnings per share Basic 1.16p (158.72)p (160.84)p Diluted 1.16p (157.96)p (160.83)p Pre goodwill 2.30p (158.37)p (160.15)p amortisation Dividend per ordinary share: 1.00p 6.45p 18.65p These financial statements should be read in conjunction with the notes. Reconciliation of Movement in Shareholders' Funds Unaudited At 30 June At 1 July At 30 December 2001 2000 2000 £'000 £'000 £'000 Profit/(loss) for the 333 (44,493) (45,362) financial period Dividends (287) (1,822) (5,350) 46 (46,315) (50,712) Other recognised gains and losses 1,128 (33) (374) relating to the period Shares issued in the - 54 1,727 period Redemption of - - (208) preference share capital Goodwill reinstated - 29,789 31,590 on disposal of subsidiaries Net movement in 1,174 (16,505) (17,977) shareholders' funds Opening shareholders' 45,845 63,822 63,822 funds Closing shareholders' 47,019 47,317 45,845 funds These financial statements should be read in conjunction with the notes. Consolidated Balance Sheet Unaudited At At At 30 December 30 June 1 July 2001 2000 2000 £'000 £'000 £'000 Fixed assets 25,079 34,099 22,143 Current assets Stock 5,412 21,074 5,732 Debtors due within one year 39,577 33,748 39,635 Debtors due after more than one 5,368 3,963 7,005 year Cash at bank and in hand 19,800 4,988 28,110 70,157 63,773 80,482 Creditors due within one year (40,632) (42,006) (49,352) Net current assets 29,525 21,767 31,130 Pension cost prepayment - 11,556 - Total assets less current 54,604 67,422 53,273 liabilities Creditors due after more than one (5,333) - (5,221) year Provisions for liabilities and (2,252) (20,105) (2,207) charges Net assets 47,019 47,317 45,845 Capital and reserves Called up share capital 11,044 11,052 11,044 Other reserves 35,975 36,265 34,801 Shareholders' funds 47,019 47,317 45,845 Analysis of shareholders' funds Equity 47,019 47,109 45,845 Non-equity - 208 - 47,019 47,317 45,845 Net cash/(debt) 4,021 (5,316) 19,997 Cash/(debt) as a percentage of 9% -11% 44% shareholders funds These financial statements should be read in conjunction with the notes. Consolidated Cashflow Unaudited, for the six months to 30 June 2001 Notes Half Half Full Year Year Year 2001 2000 2001 £'000 £'000 £'000 Cash inflow from operating 6 1,068 4,984 183 activities Returns on investments and 207 (23) 772 servicing of finance Taxation (111) (418) (797) Capital expenditure (2,815) (3,902) (4,745) Acquisitions (10,954) (3,259) (1,863) Disposals 266 1,476 37,672 Equity dividends paid (3,490) (3,430) (5,272) Cash (outflow) / inflow before (15,829) (4,572) 25,950 the use of liquid resources and financing Financing Issue of shares 67 54 1,689 Increase/(repayment) of loans 7,801 3,724 (2,700) Capital element of finance lease (7) (162) (179) rental payments 7,861 3,616 (1,190) (Decrease)/increase in cash in (7,968) (956) 24,760 the period Cash (outflow)/inflow from (7,794) (3,562) 2,879 movement in debt and finance leasing Change in net debt resulting (15,762) (4,518) 27,639 from cashflows Debt acquired with subsidiaries - - (7,139) Finance leases disposed of with - - 31 subsidiaries Translation difference (214) (194) 70 Cash (outflow)/inflow in the (15,976) (4,712) 20,601 period Opening net cash/(debt) 19,997 (604) (604) Closing net cash/(debt) 4,021 (5,316) 19,997 These financial statements should be read in conjunction with the notes. Notes to the Financial Statements 1 Basis of preparation This Interim Report for the half year ended 30 June 2001 has not been audited and does not constitute statutory accounts within the meaning of S240 of the Companies Act 1985. The financial information has been prepared on the basis of the accounting policies set out in the Group's Annual Report & Accounts for the year ended 30 December 2000. These accounts carry an unqualified auditor's report and have been delivered to the Registrar of Companies. The comparative results for the year ended 30 December 2000 are abridged, and as such do not represent statutory accounts. 2 Segmental Analysis 2001 2000 Sales Op. profit Sales Op. profit £'000 £'000 £'000 £'000 ORIGIN United Kingdom 24,878 347 26,711 971 United States 20,802 (151) 16,569 955 Businesses disposed of - - 25,546 (2,656) TOTAL 45,680 196 68,826 (730) PRODUCT Promotional Marketing 45,680 196 43,280 1,926 Businesses disposed of - - 25,546 (2,656) TOTAL 45,680 196 68,826 (730) 3 Taxation The taxation charge is calculated by applying the Directors' best estimate of the Group's annual tax rate to the profit before taxation for the period. 4 Dividend The interim dividend for 2001 of 1.00p per ordinary share (2000 : 6.45p) will be paid on 12 November 2001 to ordinary shareholders on the register at the close of business on 19 October 2001. 5 Earnings Per Share The Earnings Per Share for the half year is based on the profit after tax of £333,000 (2000 : Loss - £44,501,000) and weighted average shares in issue of 28,712,756 (2000 : 28,038,032). The Diluted Earnings Per Share for the half year is based on the same profit and loss figures as above, but takes into account the dilutive effect of share options outstanding. The weighted average number of shares in issue for Diluted Earnings Per Share purposes are 28,712,756 (2000 : 28,172,635). The Earnings Per Share pre goodwill amortisation for the half year is based on a profit after tax of £661,000 (2000: Loss - £44,404,000) and weighted average shares in issue of 28,712,756 (2000 : 28,038,032) 6 Reconciliation of operating profit to operating cashflows Half Half Full Year Year Year 2001 2000 2000 £'000 £'000 £'000 Operating 196 (730) 93 profit/(loss) Depreciation 843 2,668 3,537 charge Amortisation of 469 138 277 goodwill Profit on sale of (7) (24) (33) tangible fixed assets Release of (35) (75) (150) deferred profit on sale and leaseback Pension prepayment - 75 75 movement Exceptional (27) (250) (1,256) reorganisation costs paid Decrease/(increase) 348 (7,905) (6,350) in stocks Decrease in 3,138 15,468 11,617 debtors Decrease in (3,857) (4,371) (7,230) creditors Expenditure - (10) (397) against provisions Net cash inflows from 1,068 4,984 183 operating activities

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