Interim Results

4imprint Group PLC 03 August 2005 4imprint Group plc - Interim results 2005 Highlights Prepared under IFRS Half year Half year Full year 2005 2004 2004 £m £m £m Sales 47.02 43.37 93.59 Operating profit 3.07 0.68 3.61 Operating profit before exceptional items and pension charges 3.35 1.46 5.02 Basic EPS 12.38p 9.08p 22.97p Dividend per share - interim 2.50p 1.75p 1.75p - final - - 3.50p Cash and bank overdrafts 3.39 10.16 14.67 • Sales at £47m are 8.4% up on 2004 • Operating profit before exceptional items and pension charges more than doubled at £3.35m, operating profit is £3.07m compared to £0.68m for the first half of 2004 • Dividend of 2.5p per share, an increase of 42.8% on 2004 interim • Share buy back returned £9.6m to Shareholders in April • Adventures in Advertising, a US subsidiary, was sold on 21 July 2005 for $11.3m consideration • Sales of the web/catalogue based US direct marketing business increased by 33% over prior year Chairman's Statement I am pleased to report to Shareholders that the results for the first half of 2005 are evidence of further substantial progress in the drive to rebuild the value of your company. Sales of £47.02m were 8.4% ahead of the first half of last year, with all businesses except European Premium Promotions (the PPI business) contributing to this growth. Operating profit before exceptional items and pension charges at £3.35m compared with £1.46m for last year, and operating margins before exceptional items and pension charges were increased to 7.1% from 3.4%. Operating profit was £3.07m compared to £0.68m for last year. After interest income of £0.16m, pre tax profits were £3.78m comprising £3.23m from continuing operations and £0.55m from discontinued operations (release of provision relating to the disposal of a US supplier business in 1999) compared with £0.80m for last half year. The tax rate for the half year was 10%, Group post tax profit was £3.41m (continuing operations £3.04m and discontinued operations £0.37m). Earnings per share at 12.38p compares with 9.08p for last year, reflecting both the strong operational performance achieved, and the reduced number of shares in issue after the 'share buy back' executed earlier this year. In addition the prior half year earning per share value benefited from one-off tax provision releases. Net cash at the end of the period was £3.4m. The Board has declared a dividend of 2.50p per share which compares with 1.75p per share for the first half of 2004. The first half of 2005 was a period of significant activity for the Group, and several major initiatives were carried out including the following: Firstly, in April, the Group completed the share buy back plan, approved at the 2005 Annual General Meeting. A total of 3.9 million shares were repurchased representing 13% of the issued capital at a price of 245 pence with a total value of £9.6m. The number of shares in issue reduced to 25 million. Secondly, on 22 July 2005, the Group announced the sale of its US based subsidiary franchise company, Adventures in Advertising, to the Riverside Company, a US based Private Investment Group for a consideration of $11.3m. Shareholders will recall that AiA was acquired in 2000, and that the subsequent financial performance of AiA gave rise to significant problems for the Group and resulted in substantial destruction of value. A major effort by new management reversed the financial weakness, and the AiA business had been restored to a sustainable profitability. However, AiA was the only Franchise business in the Group and it did not fit with the other core businesses. The Group's net cash position at the end of July was around £8m. Thirdly, the 4imprint Group in the USA, which comprises principally a Direct Marketing enterprise using web/catalogue/telephone sales and marketing methods, is developing into one of the strongest and most rapidly growing companies in the Group. In the first half of this year, sales increased by 17% and profits were almost double those of prior year. Significantly, sales of the web catalogue based direct marketing business at $33m increased by 33% over last year, sales in corporate programmes were reduced but profits increased as the business was downsized and refocused. Further investments have been made in web expertise and catalogue coverage to underpin all growth plans, and 4imprint's position as the leading direct marketer of promotional products using web/ catalogue/telephone systems. Fourthly, the European Corporate Programmes and Direct Marketing Division, which includes the Manchester based Broadway business and the German based Kreyer company delivered an impressive performance in the first half with sales 11% ahead of the previous year and operating profits over four times those of the first half of 2004. All sections of the business did well with Corporate Programmes showing substantial improvement. During the first half of 2005 a major initiative was put underway to develop the existing Direct Marketing Business into a web/catalogue/telephone business, modelled on the 4imprint Inc business in the USA, and with significant input from the US sister company. In addition, the European Premium Promotions Business (PPI) is being integrated into the Broadway business. The rewards are expected to be significant, not only from a reduced cost base, but with increased management and commercial support from closer integration with the other promotional product streams. Outlook: In general, the market for the Group's products in North America remains good, while in the UK the position is stable. The initiatives underway in the Group are expected to underpin progress in the second half. Ken Minton Executive Chairman 3 August 2005 Finance Director's Report Results Summary: Total sales, at £47.02m, increased by 8.4% over the same period last year, 9.7% before exchange movements, with strong performances in both the European Direct Marketing and Corporate Programmes business and the US Direct Marketing Business. Operating profit before exceptional items and pension charges was £3.35m, a £1.89m increase over 2004. All businesses, apart from the European Premium Promotions business, achieved significant operating profit growth due to a combination of higher sales, improved margins and tight cost control. Group overheads before IFRS 2 charges for share options and IAS 19 defined benefit pension charges are below £0.5m. In accordance with IFRS 2 the expense for senior management share options and SAYE options is £0.21m in the first half year. The Group defined benefit pension scheme deficit net of deferred taxation is £11.49m and this is now shown on the balance sheet as a liability in accordance with IAS19. The defined benefit scheme charge for the first six months is £0.24m and cash payments into the scheme were £0.72m. The charge for the defined contribution scheme was £0.18m. The taxation charge for the period is calculated at a rate of 10%, the Group's best estimate of the underlying rate for the year. The disposal of AiA will result in the crystallisation of a deferred tax asset relating to the associated goodwill which had previously been written off to reserves. Basic earnings per share in the first half were 12.38p compared to 9.08p last year. However, excluding the large tax credit in 2004 the underlying growth is significant. Basic earnings per share for the first half of 2004 were 10.19p (under UK GAAP), the movement to IFRS reduced this to 9.08p. In addition, in 2004 there was a significant tax credit of £1.95m, which contributed 6.80p to earnings per share, whereas in 2005 there is a small tax charge. In 2005 the average number of shares has been reduced as a consequence of the share buy back, the impact of this is an increase of 0.64p. The Board has declared a dividend of 2.50p an improvement of 42.8% over prior year. The Group completed the share buy back in April 2005, returning £9.57m to shareholders; the closing net cash balance at the end of June was £3.39m. The average US dollar exchange rate was $1.8631 (2004: $1.8202), the exchange rate at the balance sheet date was $1.7714 (2004: $1.8213). This resulted in an increase in reserves of £0.54m. International Financial Reporting Standards: The Group is required to adopt International Financial Reporting Standards for the first time in its financial statements to 31 December 2005. The interim results for the period ended 2 July 2005 have been prepared in accordance with the accounting policies under IFRS published on the 4imprint website (www.4imprint.co.uk). The principal adjustments relate to: • Adoption of IAS 19 'Employee benefits,' 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'. • Recognition of the cost of share based payments granted after 7 November 2002 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 IAS12 'Income taxes'. The Group's unaudited estimate of the results under UK GAAP for the first half of 2005 has been included for Shareholder information, the defined benefit pension scheme charge is assumed to be the same for full year 2005 as 2004. UK GAAP IFRS UK GAAP IFRS UK GAAP IFRS Half year Half year Half year Half year Full year Full year 2005 2005 2004 2004 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 Operating profit before 3,635 3,348 1,558 1,455 5,075 5,018 goodwill amortisation, exceptional items and pension charges Goodwill amortisation (138) - (138) - (276) - Exceptional items 134 134 (308) (308) (525) (525) Pension charges (633) (415) (207) (470) (1,154) (887) Operating profit 2,998 3,067 905 677 3,120 3,606 Basic earnings per share 12.13p 12.38p 10.19p 9.08p 21.53p 22.97p Net assets 29,268 16,068 33,805 20,355 34,877 22,683 Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Operating profit under UK 2,998 905 3,120 GAAP* IFRS 2 share option charge (213) (6) (20) IAS 19 holiday pay accrual (75) (89) (9) Write off of deferred - (9) (29) charges, which do not meet the IFRS definition of an asset Write back of goodwill 138 138 276 amortisation Adjustment of pension 218 (263) 267 charges on an IAS 19 basis Other sundry items 1 1 1 Operating profit under IFRS 3,067 677 3,606 * before adoption of FRS 20 'Accounting for share based payment' in 2005. 2 July 26 June 2004 31 December 2005 2004 Note £'000 £'000 £'000 Net assets under UK GAAP 1 29,268 33,805 34,877 IAS19 recognition of pension (16,418) (17,305) (16,902) liability Write off of UK GAAP pension (1,925) (2,069) (1,659) prepayment Write back of goodwill 138 138 276 amortisation Write off of deferred (443) (411) (414) charges, which do not meet the IFRS definition of an asset IAS 19 holiday pay accrual (165) (172) (90) Tax on above adjustments 5,613 5,866 5,603 Dividend Recognition - 503 992 Net assets under IFRS 16,068 20,355 22,683 Note 1: net assets at 2 July 2005 include the impact of the £9.6m share buyback. Gillian Davies Group Finance Director 3 August 2005 Operating Review European Direct Marketing and Corporate Programmes Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Sales 18,233 16,487 35,727 Operating profit before exceptional items 1,444 377 1,907 and pension charges Operating profit 1,381 327 1,682 The Manchester based business which accounts for 85% of this division's sales, comprises the following divisions: (a) Trade division - 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' printing facilities. The sector again had an excellent period with sales up 7% on 2004. (b) Corporate Programmes division - this division builds on its product base by providing sophisticated design and artwork and additional support functions, including warehousing, distribution and product range consultancy, delivering a fully out-sourced solution for specific corporate promotional programmes for major clients. The drive for profitability over the last 2 years is producing positive results and sales in this area are returning to a growth phase, up 11% on H1 2004. (c) Direct Marketing division - both sales and profits increased over the same period last year. Direct Marketing uses catalogue, telephone and web selling techniques and the foundations to accelerate growth have been put in place, utilising the advanced skills and methods employed by 4imprint Inc. in the US. This includes a re-development of the website and revised end customer acquisition and retention techniques. Investment is being made in marketing activity to generate increased sales growth. (d) Field Sales division - This division supplies promotional merchandise to a range of corporate entities on either a preferred supplier or 'ad hoc' basis through a number of sales account managers. It has produced sales growth of 7% compared to 2004. Kreyer Promotions, in Germany, increased its turnover by 28% compared to prior year due to growth of existing business and acquisition of new customers. Despite tough conditions in the market place the business has focussed on implementation of high potential corporate programmes and development of existing programmes. These sales have been managed on a similar cost base resulting in the business producing a profit in the period compared to a small loss in the same period last year. European Premium Promotions Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Sales 5,809 6,528 13,328 Operating profit before exceptional items 320 466 925 and pension charges Operating profit 291 133 523 This division comprises the Product Plus International (PPI) company based in London, which specialises in the supply of promotional products and services to a range of blue chip clients. In the first half of 2005 the business achieved sales at 90% of prior year, with the airlines, cosmetics and retail sectors performing strongly; however the publishing sector was less buoyant. Steps have been taken during the period to integrate the PPI business with the Manchester based European Direct Marketing and Corporate Programmes business; resulting in one strongly managed European business, reduced costs via the integration and increased focus on sales growth. The integration process will be fully completed by the end of 2005. Operating Review (continued) US Direct Marketing and Corporate Programmes Half year Half year Half year Half year Full year Full year 2005 2005 2004 2004 2004 2004 US$'000 £'000 US$'000 £'000 US$'000 £'000 Sales 38,502 20,666 33,003 18,132 73,083 39,910 Operating profit before pension 2,750 1,476 1,429 785 4,477 2,445 charges Operating profit 2,642 1,418 1,331 731 4,278 2,336 4imprint Inc consists of a core Direct Marketing business with a small Corporate Programmes business. Direct Marketing activities, which now account for more than 86% of total sales, are up 33% over the same period in 2004. Planned restructuring in Corporate Programmes resulted in a decrease in revenue in this area. The net effect for the site is a 17% increase in sales at mid-year and a 98% improvement in operating profit. The strong growth pattern seen in Direct Marketing in 2004 has continued. An integrated marketing strategy utilising the latest web, catalogue and telephone techniques has led to a number of positive results. Orders received in the first half of 2005 are up 25% over prior year, with orders from new customers up more than 35%. The percentage of web orders increased 58% and now constitutes 36% of all orders received. In 2005 the same strategy was adopted for the Canadian business and early results are encouraging with orders up 30%. This business operates under favourable working capital conditions which generally average 5% of full year sales. US Franchising Half year Half year Half year Half year Full year Full year 2005 2005 2004 2004 2004 2004 US$'000 £'000 US$'000 £'000 US$'000 £'000 Fee income 4,302 2,309 4,039 2,219 8,471 4,626 Operating profit before exceptional 1,397 750 788 433 1,833 1,001 items and pension charges Operating profit 1,623 871 768 422 1,795 980 The franchising division, Adventures in Advertising (AiA), has generated fee income growth due to increased system wide sales. Further improvement in operating profit is attributable to tight cost control and reduced external fees. The AiA business was sold on 21 July 2005. Ken Minton Executive Chairman 3 August 2005 Consolidated income statement (unaudited) Half year Half year Full year 2005 2004 2004 Note £'000 £'000 £'000 Continuing operations: Sales 2 47,017 43,366 93,591 Operating expenses (43,950) (42,689) (89,985) Operating profit 2 3,067 677 3,606 Operating profit before exceptional items and pension charges 3,348 1,455 5,018 Exceptional items 3 134 (308) (525) Pension charges 10 (415) (470) (887) Operating profit 2 3,067 677 3,606 Finance income - net 163 121 290 Profit before tax 3,230 798 3,896 Taxation 5 (190) 1,810 2,676 Profit for the period from continuing operations 3,040 2,608 6,572 Discontinued operations: Release of provision relating to disposal of US supplier business 6 366 - - in 1999 Profit attributable to equity shareholders 3,406 2,608 6,572 Earnings per share Basic 7 12.38p 9.08p 22.97p Diluted 7 11.86p 8.97p 22.21p Earnings per share from continuing operations Basic 7 11.05p 9.08p 22.97p Diluted 7 10.58p 8.97p 22.21p At At At Consolidated balance sheet (unaudited) 2 July 26 June 31 Dec 2005 2004 2004 £'000 £'000 £'000 Non Current Assets Property, plant and equipment 1,677 1,928 1,682 Goodwill 4,341 4,341 4,341 Intangible assets 2,510 2,874 2,743 Investments 7 - 8 Deferred income tax assets 7,910 7,373 8,081 16,445 16,516 16,855 Current Assets Inventories 5,919 6,295 4,640 Trade and other receivables 22,352 24,241 22,977 Cash and cash equivalents 4,757 10,858 15,310 33,028 41,394 42,927 Current Liabilities Trade and other payables 16,015 15,730 16,077 Current income tax liabilities 783 695 697 Borrowings 7 2,630 2,572 Provisions and other liabilities 164 1,146 832 16,969 20,201 20,178 Net Current Assets 16,059 21,193 22,749 Non Current Liabilities Retirement benefit obligations 16,418 17,305 16,902 Borrowings 18 23 19 Provisions and other liabilities - 26 - 16,436 17,354 16,921 Net Assets 16,068 20,355 22,683 Shareholders' Equity Share capital 9,633 11,054 11,063 Share premium reserve 37,683 37,655 37,659 Capital redemption reserve 208 208 208 Treasury shares (889) - (889) Cumulative translation differences (77) (343) (614) Fair value and other reserves 236 9 23 Retained earnings (30,726) (28,228) (24,767) Total Equity 16,068 20,355 22,683 Consolidated statement of changes in shareholders' equity (unaudited) Share Capital Cumulative Fair value Share premium redemption Treasury translation and other Retained Total capital reserve reserve shares differences reserves earnings Equity £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 28 December 2003 11,044 37,630 208 (7) - 3 (29,975) 18,903 Treasury shares issued - - - - - 7 - 7 Profit for the period - - - - - - 2,608 2,608 Currency translation adjustments - - - - (343) - - (343) Shares issued 10 25 - - - - - 35 Employee options - - - - - 6 - 6 Dividends - - - - - - (861) (861) Balance at 26 June 2004 11,054 37,655 208 - (343) 9 (28,228) 20,355 Balance at 28 December 2003 11,044 37,630 208 (7) - 3 (29,975) 18,903 Treasury shares issued - - - 7 - - - 7 Treasury shares purchased - - - (889) - - - (889) Profit for the period - - - - - - 6,572 6,572 Currency translation - - - - (614) - - (614) adjustments Shares issued 19 29 - - - - - 48 Employee options - - - - - 20 - 20 Dividends - - - - - - (1,364) (1,364) Balance at 31 December 2004 11,063 37,659 208 (889) (614) 23 (24,767) 22,683 Balance at 1 January 2005 11,063 37,659 208 (889) (614) 23 (24,767) 22,683 Profit for the period - - - - - - 3,406 3,406 Currency translation - - - - 537 - - 537 adjustments Shares issued 72 24 - - - - - 96 Own shares purchased and (1,502) - - - - - (8,373) (9,875) cancelled Employee options - - - - - 213 - 213 Dividends - - - - - - (992) (992) Balance at 2 July 2005 9,633 37,683 208 (889) (77) 236 (30,726) 16,068 Consolidated cash flow statement (unaudited) Half year Half year Full year 2005 2004 2004 Note £'000 £'000 £'000 Cash flows from operating activities Cash generated from operations 9 1,635 1,539 7,697 Income tax (paid)/received (36) 384 470 Interest received 301 106 339 Interest paid (45) (49) (142) Net cash generated from operating activities 1,855 1,980 8,364 Cash flows from investing activities Purchases of property, plant and equipment (289) (143) (289) Purchases of intangible assets (245) (413) (946) Proceeds from sale of property, plant and equipment 124 - - Net cash used in investing activities (410) (556) (1,235) Cash flows from financing activities Movements in borrowings • Net proceeds from the issue of new borrowings - - 345 • Repayment of borrowings (1,941) (275) (538) Proceeds from issuance of ordinary shares 96 32 44 Purchase of own shares for cancellation (9,840) - - Purchase of treasury shares - - (889) Dividends paid to shareholders (992) (860) (1,367) Net cash used in financing activities (12,677) (1,103) (2,405) Net (decrease)/ increase in cash and bank overdrafts (11,232) 321 4,724 Cash and bank overdrafts at beginning of the period 14,666 9,905 9,905 Exchange (losses)/gains on cash and bank overdrafts (40) (69) 37 Cash and bank overdrafts at end of the period 3,394 10,157 14,666 These financial statements should be read in conjunction with the notes to the accounts. 1 Basis of preparation The interim financial statements of 4imprint Group plc for the half year period ended 2 July 2005 are unaudited and do not comprise statutory accounts within the meaning of Section 240 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) endorsed by the European Union. Reconciliations and descriptions of the effect of the transition from UK GAAP to IFRS on the Group's equity and its income statement are provided in an attachment to the interim report. The financial information set out in this interim statement has been prepared in accordance with the accounting policies under IFRS published on the 4imprint website (www.4imprint.co.uk). Standards currently in issue and adopted by the EU are subject to interpretation issued from time to time by the International Financial Reporting Interpretations Committee (IFRIC). Further standards may be issued by the International Accounting Standards Board that will be adopted for financial years beginning on or after 1 January 2005. Additionally, IFRS is currently being applied in the United Kingdom and in a large number of countries simultaneously for the first time. Furthermore, due to a number of new and revised Standards included within the body of the Standards that comprise IFRS, there is not yet a significant body of established practice on which to draw in forming options regarding interpretation and application. Accordingly, practice is continuing to evolve. At this preliminary stage, therefore, the full financial effect of reporting under IFRS as it will be applied and reported on in the Company's first IFRS Financial Statements for the year ended 31 December 2005 may be subject to change. 2 Segmental analysis At 2 July 2005, the Group is organised into four main business segments as detailed in the Chairman's statement. The segmental results for the period ended 2 July 2005 are as follows: Gross segment sales Inter-segment sales Sales Half Half Full Half Half Full Half Half Full year year year year year year year year year 2005 2004 2004 2005 2004 2004 2005 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 European Direct 18,272 16,494 35,904 (39) (7) (177) 18,233 16,487 35,727 Marketing and Corporate Programmes European Premium 6,066 6,727 13,882 (257) (199) (554) 5,809 6,528 13,328 Promotions US Direct Marketing 20,666 18,132 39,910 - - - 20,666 18,132 39,910 and Corporate Programmes US Franchising 2,309 2,219 4,626 - - - 2,309 2,219 4,626 Continuing 47,313 43,572 94,322 (296) (206) (731) 47,017 43,366 93,591 operations Operating profit/ Exceptional items Pension charges Operating profit/ (loss) before (loss) exceptional items and pension charges Half Half Full Half Half Full Half Half Full Half Half Full year year year year year year year year year year year year 2005 2004 2004 2005 2004 2004 2005 2004 2004 2005 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 European Direct 1,444 377 1,907 - - (168) (63) (50) (57) 1,381 327 1,682 Marketing and Corporate Programmes European Premium 320 466 925 - (308) (357) (29) (25) (45) 291 133 523 Promotions US Direct Marketing 1,476 785 2,445 - - - (58) (54) (109) 1,418 731 2,336 and Corporate Programmes US Franchising 750 433 1,001 134 - - (13) (11) (21) 871 422 980 Unallocated costs (642) (606) (1,260) - - - (252) (330) (655) (894) (936) (1,915) Continuing 3,348 1,455 5,018 134 (308) (525) (415) (470) (887) 3,067 677 3,606 operations A review of the segments is included in the operating review. Costs have been allocated in terms of resources required and contain some indirect costs not dependant on the level of business conducted. Unallocated costs relate to Head Office costs and IAS19 'Employee Benefits' charge for the defined benefit pension scheme. 3 Exceptional items Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Release of bad debt provision 134 - - Product recall charges - (308) (267) European restructuring charges - - (258) Total - continuing operations 134 (308) (525) Items are considered exceptional when their size and/or nature are considered sufficiently material to warrant separate disclosure. The release of the bad debt provision in 2005 relates to a review undertaken in the US Franchising segment. The restructuring and product recall charge in 2004 relates to the cost of a product recall issue in the European Premium Promotions segment, which has been disclosed separately due to its rare occurrence and size and to restructuring costs at December 2004 of £90,000 in the European Premium Promotions division and £168,000 in the European Direct Marketing and Corporate Programmes division. 4 Post balance sheet event - sale of Adventures in Advertising On 21 July 2005, 4imprint Group plc completed the sale of Adventures in Advertising (AiA) to The Riverside Company, a US Private Investment Group for consideration of $11.3m. AiA constitutes the US Franchising segment 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. 5 Taxation Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 UK Taxation: Corporate tax charge (190) (51) - Adjustment in respect of previous years - 1,953 1,945 Overseas Taxation: Current tax - - 34 Adjustment in respect of previous years - - 10 Deferred Taxation: Current tax (188) (92) 592 Adjustment in respect of previous years - - 95 (378) 1,810 2,676 The total taxation (charge)/credit above comprises: Continuing operations (190) 1,810 2,676 Discontinued operations (188) - - (378) 1,810 2,676 The taxation charge for the period to 2 July 2005 has been calculated by applying the best estimate of the Group's annual tax rate to the profit before tax for the period. 6 Discontinued operations Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Release of provision relating to disposal of Norwood, a US supplier 554 - - business, in 1999 Associated deferred tax charge (188) - - 366 - - 7 Earnings per share The earnings per share for the half year is based on the profit on ordinary activities after taxation and weighted average shares in issue, excluding ordinary shares purchased by the Company and held as treasury shares, of 27,503,813 (26 June 2004: 28,729,765 shares, 31 December 2004: 28,606,434). The shares in issue at 2 July 2005 are 25,043,818. The diluted earnings per share for the half year is based on the same income statement 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 is therefore 28,720,947 (26 June 2004: 29,081,207, 31 December 2004: 29,586,860). 8 Dividends The interim dividend for 2005 of 2.50p per ordinary share (interim 2004: 1.75p, final 2004: 3.50p) will be paid on 14 September 2005 to ordinary shareholders on the register at the close of business on 19 August 2005. Dividends paid in the period totalled £992,000 (period to 26 June 2004: £861,000, period to 31 December 2004: £1,364,000). 9 Cash generated from operations Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Profit for the period 3,406 2,608 6,572 Adjustments for: Tax 378 (1,810) (2,676) Depreciation 256 408 714 Amortisation 588 593 1,177 (Profit)/loss on sale of property, plant and equipment (16) 4 44 Net movement in provisions for liabilities and charges (685) (62) (350) Interest income (208) (170) (432) Interest expense 45 49 142 Option charges 213 6 20 Exchange (gains)/losses on borrowings 19 (56) (139) Changes in working capital : Inventories (1,276) (397) 1,261 Trade and other receivables 1,385 1,998 2,869 Trade and other payables (2,470) (1,632) (1,505) Cash generated from operations 1,635 1,539 7,697 Included in the above is cash generated from discontinued operations of £1,687,000 (relating to the disposal of Norwood, a US supplier business, in 1999). 10 Retirement benefits Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 The net pension charges are made up as follows: Defined contribution plans 179 147 247 Defined benefit schemes: Regular cost 38 35 75 Interest expensed 2,331 2,270 4,506 Expected return on assets (2,133) (1,982) (3,941) 415 470 887 Defined contribution plans The Group operates defined contribution plans for the majority of its UK and US employees. The regular contributions are charged to the profit and loss account as they are incurred. Defined benefit scheme - IAS 19 costs The defined benefit scheme is closed to new members. IAS 19 'Employee Benefits' was adopted at the transition date, 28 December 2003. The corridor approach, allowed under IAS19, has been adopted. During the period the financial position of the defined benefit scheme has been updated in line with the anticipated annual cost for current and past service, the expected return on scheme assets, the interest on scheme liabilities and cash contributions made to the scheme. No interim valuation of the scheme's assets or liabilities has been carried out, accordingly, there are no further recognised or unrecognised actuarial gains or losses since 31 December 2004. The next actuarial update will be carried out as at 31 December 2005. The movements in the net pension liability were: Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Net pension liability at beginning of period (11,831) (12,391) (12,391) Movement in period; Total expenses charged in the income statement (236) (323) (640) Contributions paid 720 720 1,440 Movement in deferred tax asset (146) (120) (240) Net pension liability at end of period (11,493) (12,114) (11,831) 11 Share based payments Share options are granted to senior management and in addition a SAYE scheme is available to all UK and US employees. The exercise price of options designed for senior management is nil and for SAYE options is equal to the market rate, plus any discount up to the limit imposed by the local tax authority at the pricing date. The fair value of options granted after 7 November 2002 are determined using the Monte Carlo valuation model for executive options and the Binomial model for SAYE options and are spread over the vesting period of the options. The significant inputs into the model are an expected life of between 1.9 and 3 years for all options, the volatility measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices over the last 3 years and a risk-free rate based on a 36 month UK LIBOR. Half year Half year Full year 2005 2004 2004 £'000 £'000 £'000 Charge resulting from spreading the fair value of options granted after 7 213 6 20 November 2002 over the vesting period of the options The Group has no legal or constructive obligation to repurchase or settle the options in cash. IFRS Restatement Information Transition to IFRS The following reconciliations show the differences between figures presented under UK GAAP and IFRS. Transitional arrangements - Application of IFRS 1 The Group's financial statements for the year ended 31 December 2005 will be the Group's first annual financial statements in compliance with IFRS. 4imprint Group plc's transition date is 28 December 2003. The Group prepared its opening IFRS balance sheet at that date. The Group's IFRS adoption date is 1 January 2005. On transition to IFRS, an entity is generally required to apply IFRS retrospectively, except where an exemption is available under IFRS 1 'First-time Adoption of International Financial Reporting Standards'. The Group has applied the mandatory exemptions and certain of the optional exemptions from full retrospective application of IFRS. The following is a summary of the key elections from IFRS 1 that were made by the Group: • The Group has elected to adopt the IFRS 1 exemption in relation to business combinations and will only apply IFRS 3 'Business Combinations' prospectively from 28 December 2003. As a result, the balance of goodwill under UK GAAP as at 27 December 2003 will be deemed the cost of goodwill at 28 December 2003. • The Group has elected to adopt the IFRS 1 option to reset foreign currency cumulative translation reserves to zero on transition to IFRS. • Cumulative actuarial gains and losses at the date of transition on the valuation of post employment benefit assets and liabilities have been recognised as an adjustment to equity. • The Group has elected to apply the share-based payment exemption. It has applied IFRS 2 from 28 December 2003 to those options that were issued after 7 November 2002 but have not vested by 1 January 2005. Reconciliation of the income statement (unaudited) UK GAAP IFRS UK GAAP IFRS Ref 26 June 04 26 June 04 Diff 31 Dec 04 31 Dec 04 Diff £'000 £'000 £'000 £'000 £'000 £'000 Sales 43,366 43,366 - 93,591 93,591 - Operating expenses (42,461) (42,689) (228) (90,471) (89,985) 486 Operating profit 905 677 (228) 3,120 3,606 486 Operating profit before goodwill amortisation, exceptional items and pension charges 1.1 1,558 1,455 (103) 5,075 5,018 (57) Goodwill amortisation 1.2 (138) - 138 (276) - 276 Exceptional items (308) (308) - (525) (525) - Pension charges 1.3 (207) (470) (263) (1,154) (887) 267 Operating profit 905 677 (228) 3,120 3,606 486 Net finance income 1.4 122 121 (1) 291 290 (1) Profit before tax 1,027 798 (229) 3,411 3,896 485 Taxation 1.5 1,902 1,810 (92) 2,748 2,676 (72) Profit attributable to equity shareholders 2,929 2,608 (321) 6,159 6,572 413 Basic EPS 10.19p 9.08p (1.11p) 21.53p 22.97p 1.44p The effect of adopting International Financial Reporting Standards upon the profit attributable to the equity shareholders was: Reference 1.1 26 June 31 Dec 2004 2004 Continuing operations £'000 £'000 Adoption of IFRS 2 'Share-based Payment' requires the assignment of fair values at the date of grant to the options granted to employees after 7 November 2002 and not vested by 1 January 2005. The expense is spread over the vesting period of those options. (6) (20) The adoption of IAS 17 'Leases' resulted in the reclassification of certain motor vehicles held from operating to finance leases, the capitalised assets have been depreciated over the useful economic life and the interest associated with the lease reclassified from 1 1 operating expenses to finance expenses. Write off of deferred charges which do not meet the IFRS definition of an asset. (9) (29) IAS 19 'Employee Benefits' requires the recognition of liabilities relating to holiday pay (89) (9) not previously accounted for under UK GAAP (103) (57) Reference 1.2 26 June 31 Dec 2004 2004 Continuing operations £'000 £'000 The adoption of IFRS 3 'Business Combinations' resulted in the write back of goodwill amortisation in 2004. No impairment charge arose. 138 276 Reference 1.3 26 June 31 Dec 2004 2004 Continuing operations £'000 £'000 Adoption of IAS 19 'Employee Benefits' in relation to the defined benefit pension scheme. The Group has adopted the corridor approach of spreading the deficit. (263) 267 Reference 1.4 26 June 31 Dec 2004 2004 Continuing operations £'000 £'000 The adoption of IAS 17 'Leases' resulted in the reclassification of certain motor vehicles held from operating to finance leases, the capitalised assets have been depreciated over the useful economic life and the interest associated with the lease reclassified from (1) (1) operating expenses to finance expenses. Reference 1.5 26 June 31 Dec 2004 2004 Continuing operations £'000 £'000 The effect on taxation of the adoption of IAS 19 'Employee Benefits' was • a deferred taxation charge relating to movements in the pension creditor: (120) (240) • a deferred taxation credit relating to the reversal of the movement in the - 160 pension prepayment under SSAP 24 • deferred taxation arising from the charges in relation to the recognition of liabilities relating to holiday pay not previously accounted for under UK GAAP 26 2 • The associated deferred taxation arising from the charges for employee options under IFRS2 in the period 2 6 (92) (72) Reconciliation of equity (unaudited) UK GAAP IFRS Ref 26 June 26 June UK GAAP IFRS UK GAAP IFRS 2004 2004 Diff 31 Dec 04 31 Dec 04 Diff 27 Dec 03 27 Dec 03 Diff £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Non Current Assets Property, plant and 2.1 4,772 1,928 (2,844) 4,399 1,682 (2,717) 5,299 2,223 (3,076) equipment Goodwill 2.2 4,203 4,341 138 4,065 4,341 276 4,341 4,341 - Intangible assets 2.3 - 2,874 2,874 - 2,743 2,743 - 3,109 3,109 Investments - - - 8 8 - - - - Deferred income tax 2.4 1,790 7,373 5,583 2,478 8,081 5,603 1,814 7,489 5,675 assets Trade and other receivables - - - - - - 1,901 1,901 - 10,765 16,516 5,751 10,950 16,855 5,905 13,355 19,063 5,708 Current Assets Inventories 6,295 6,295 - 4,640 4,640 - 5,959 5,959 - Trade and other 2.5 26,438 24,241 (2,197) 25,050 22,977 (2,073) 26,709 25,172 (1,537) receivables Cash and cash equivalents 10,858 10,858 - 15,310 15,310 - 10,128 10,128 - 43,591 41,394 (2,197) 45,000 42,927 (2,073) 42,796 41,259 (1,537) Current Liabilities Trade and other payables 2.6 15,558 15,730 172 15,987 16,077 90 17,585 17,669 84 Current income tax liabilities 695 695 - 697 697 - 2,272 2,272 - Borrowings 2.7 2,623 2,630 7 2,565 2,572 7 2,476 2,483 7 Dividends 2.8 503 - (503) 992 - (992) 861 - (861) Provisions and other 1,146 1,146 - 832 832 - 619 619 - liabilities 20,525 20,201 (324) 21,073 20,178 (895) 23,813 23,043 (770) Net Current Assets 23,066 21,193 (1,873) 23,927 22,749 (1,178) 18,983 18,216 (767) Non Current Liabilities Retirement benefit 2.9 - 17,305 17,305 - 16,902 16,902 - 17,702 17,702 obligations Borrowings 2.7 - 23 23 - 19 19 - 26 26 Provisions and 26 26 - - - - 648 648 - other liabilities 26 17,354 17,328 - 16,921 16,921 648 18,376 17,728 Net Assets 33,805 20,355 (13,450) 34,877 22,683 (12,194) 31,690 18,903 (12,787) Shareholders' Equity Share capital 11,054 11,054 - 11,063 11,063 - 11,044 11,044 - Share premium 37,655 37,655 - 37,659 37,659 - 37,630 37,630 - reserve Capital redemption reserve 208 208 - 208 208 - 208 208 - Treasury shares 2.10 - - - - (889) (889) - (7) (7) Cumulative - (343) translation differences 2.11 (343) - (614) (614) - - - Fair value and other 2.12 - 9 9 - 23 23 - 3 3 reserves Retained earnings 2.13 (15,112) (28,228) (13,116) (14,053) (24,767) (10,714) (17,192) (29,975) (12,783) Total Equity 33,805 20,355 (13,450) 34,877 22,683 (12,194) 31,690 18,903 (12,787) The effect of adopting International Financial Reporting Standards upon the balance sheet was: Reference 2.1 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 In accordance with IAS 16 'Property, plant and equipment' computer software has been reclassified from tangible to intangible assets, the effect on tangible assets being: (2,874) (2,743) (3,109) The adoption of IAS 17 'Leases' resulted in the recognition of certain Group vehicles as finance leases, which were previously accounted for as operating leases under UK GAAP, the effect on tangible assets being: 30 26 33 (2,844) (2,717) (3,076) Reference 2.2 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 The adoption of IFRS 3 'Business Combinations' resulted in the write back of goodwill previously amortised since the transition date, 28 December 2003. No impairment charge is required. 138 276 - Reference 2.3 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 In accordance with IAS 16 'Property, plant and equipment' computer software has been reclassified from tangible to intangible assets, the effect on intangible assets being: 2,874 2,743 3,109 Reference 2.4 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 The effect on taxation of the adoption of IAS 19 'Employee Benefits' was • recognition of a deferred taxation asset relating to the pension 5,191 5,071 5,311 creditor: 338 498 338 • deferred taxation relating to the reversal of the pension prepayment under SSAP 24 • deferred taxation asset relating to the recognition of 52 27 25 liabilities for employee holiday pay not previously accounted for under UK GAAP • deferred taxation asset arising from the charges for employee 2 7 1 options under IFRS2 in the period 5,583 5,603 5,675 Reference 2.5 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 The adoption of IAS 19 'Employee Benefits' resulted in the reversal of the SSAP 24 pension prepayment of: (1,786) (1,659) (1,126) Write off of deferred charges, which do not meet IFRS definition of an (411) (414) (411) asset. (2,197) (2,073) (1,537) Reference 2.6 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 IAS 19 'Employee Benefits' requires the recognition of liabilities relating 172 90 84 to holiday pay not previously accounted for under UK GAAP. Reference 2.7 The adoption of IAS 17 'Leases' resulted in the recognition of certain Group vehicles as finance leases, which were previously accounted for as operating leases under UK GAAP, the associated finance creditor was; 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 Non current liability 23 19 26 Current liability 7 7 7 Reference 2.8 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 IAS 37 'Provisions, contingent liabilities and contingent assets' requires (503) (992) (861) that dividends are recognised in the period in which they are approved. Reference 2.9 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 Upon the adoption of IAS 19 'Employee Benefits' the Group has recognised the pension deficit, relating to the UK defined benefit scheme, in the balance sheet. 17,305 16,902 17,702 Reference 2.10 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 In accordance with IFRS 2 'Share-based Payments' own shares held to satisfy future employee options are held as 'Treasury Shares' within share capital and hence are reclassified from the Profit and Loss reserve, as previously - (889) (7) held under UK GAAP. Reference 2.11 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 In accordance with IAS 'The effect of changes in foreign currency rate' cumulative translation adjustments since the transition date are held in a separate reserve. Under UK GAAP they were held in the profit and loss (353) (643) - reserve. Translation adjustments in respect of US dollar denominated IFRS 10 29 - adjustments. (343) (614) - Reference 2.12 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 IFRS 2 'Share-based Payments' requires the assignment of fair values at the date of grant to options granted to employees after 7 November 2002 which had not vested by 1 January 2005. The expense is spread over the vesting 9 23 3 period of the options and is credited to fair value and other reserves. Reference 2.13 26 June 31 Dec 28 Dec 2004 2004 2003 £'000 £'000 £'000 The adoption of IFRS had the following net impact on the retained earnings: (13,116) (10,714) (12,783) Cumulative total of all adjustments to the balance sheet. Reconciliation of the consolidated cash flow statements (unaudited) UK GAAP IFRS UK GAAP IFRS 26 June 26 June 31 Dec 31 Dec 2004 2004 Diff 2004 2004 Diff £'000 £'000 £'000 £'000 £'000 £'000 Cash and bank overdrafts at end of the period (IFRS)/ net cash (UK GAAP) 8,235 10,157 1,922 12,745 14,666 1,921 The principal difference between UK GAAP and IFRS in the Group's statement of cash flow is the reconciliation to cash and bank overdrafts rather than net cash (which includes bank loans) . 4imprint Group plc Group Headquarters 6 Cavendish Place London W1G 9NB Telephone + 44 (0)207 2997201 Fax + 44 (0)207 2997209 E-mail hq@4imprint.co.uk UK 4imprint Broadway Trafford Wharf Road Manchester M17 1DD Telephone +44 (0)870 240 6622 Fax +44 (0)870 241 3440 E-mail sales@4imprint.co.uk 4imprint Product Plus International South Bank Business Centre Ponton Road London SW8 5BL Telephone +44 (0) 07 393 0033 Fax +44 (0)207 393 0080 E-mail sales@4imprint.co.uk 4imprint Product Plus International Clifton Heights Triangle West Bristol BS8 1EJ Telephone +44 (0)117 929 9236 Fax +44 (0)117 925 1808 E-mail sales@4imprint.co.uk USA 4imprint 101 Commerce Street Oshkosh WI 54901 USA Telephone +1 920 236 7272 Fax +1 920 236 7282 E-mail sales@4imprint.com Germany 4imprint Kreyer Promotion Service Heydastrasse 13 D-58093 Hagen Germany Telephone +49 (0)2331 95970 Fax +49 (0)2331 959749 E-mail 4imprint@kreyer-promotion.de France 4imprint Product Plus France SA 4, boulevard des lles 92130 Issy-les-Moulineaux France Telephone +33 (0)1559 59640 Fax +33 (0)1559 59641 E-mail ppfrance@4imprint.co.uk Hong Kong 4imprint Product Plus Far East Unit 1811, 18th Floor Star House 3 Salisbury Road Tsimshatsui, Kowloon Hong Kong Telephone +852 2301 3082 Fax +852 2724 5128 E-mail ppfe@4imprint.co.uk This information is provided by RNS The company news service from the London Stock Exchange

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