Final Results
International Greetings PLC
26 June 2007
26 June 2007
International Greetings plc
('International Greetings' or the 'Company')
Continued success in the US, Europe and Asia underpins international
diversification strategy
International Greetings PLC (AIM: IGR), the leading designer and manufacturer of
greetings, stationery and licensed published products announces results for the
year to 31 March 2007.
Financial highlights:
• Year-on-year sales maintained at £197 million
• 3% rise in pre-tax profits to £18.1 million* (2006: £17.6 million**)
• Earnings per share up 5% to 29.5p* (2006: 28.0p**)
• Recommended final dividend of 7.75p, bringing the total dividend for
the year to 10p, an increase of 11%
Operational highlights:
• Strategy for international growth progressing well:
• Non UK sales now account for 40% of turnover (2006: 38%) and expected to
continue to increase
• European turnover grew by 32% to £30.0 million (2006: £22.7 million)
• IG Asia sales up 52% to $32 million (2006: $21 million)
• Strategic acquisitions strengthen Group's product offering, and
international distribution
• Alligator Books, Anchor International and Eick Pack acquired during
the period
• Weltec, Artex and Pinwheel acquired post year-end
• Seasonal UK operating divisions restructured to ensure they remain cost
effective and efficient
Commenting on the results, Nick Fisher, joint CEO said: 'These results not only
reflect a year of operational consolidation but also show clearly that our
strategy to re-position International Greetings as a truly global business, with
a diverse product range is progressing well. 40% of turnover is now derived
outside of the UK, a figure that we expect to continue to increase.
'We will continue to make acquisitions which provide us with new product ranges,
new distribution channels and access to new geographical markets, whilst at the
same time ensuring that we can achieve the maximum possible growth from our
existing businesses.'
For further information:
International Greetings: 01707 630 630 Tavistock Communications: 020 7920 3150
Nick Fisher, Joint Chief Executive Jeremy Carey / Rachel Drysdale
* Adjusted to exclude exceptional costs of £1,252,000 (2006: £3,310,000), profit
on disposal of fixed assets of £2,240,000 (2006: £1,838,000), and amortisation
of goodwill of £1,458,000 (2006: £1,031,000)
** Restated following adoption of FRS20 Share based payments
Chairman's Statement 2007
As stated in my interim announcement, our strategy for growth continues to focus
upon international expansion, particularly across Europe, reducing our reliance
on the UK market which has experienced a challenging trading climate and seen
the demise of a number of retailers during the past year. Against this
background, I am pleased to report a 3% rise in adjusted profits before tax* to
£18.1m, on sales of £197m, with adjusted earnings per share* growing to 29.5p, a
5% increase.
Reflecting our continued confidence in our business and its future prospects, we
are recommending a final dividend of 7.75p, making a total of 10p for the year,
an increase of 11% on last year. This will be paid on 27th September 2007 to
shareholders on the register at 7th September 2007.
Sales outside the UK now account for 40% of the Group's turnover, up from 38%
last year. We expect this trend to continue as we develop our international
businesses. In particular, turnover of our European division grew by 32%, as a
result of acquisitions and a concerted sales effort in the region.
In addition to the Alligator and Anchor International acquisitions announced in
the Interim Report, we also completed the acquisition of Eick Pack towards the
year end. Based in Germany, this business supplies gift wrap for in-store gift
wrapping across Europe and we expect to increase our market share in this sector
in the future. Subsequent to the financial year end, we announced three further
acquisitions - Weltec, Artex and Pinwheel.
Weltec provides a step change in our photoframe business across Europe and will
operate through Anchor International based in Holland. Artex, a gift wrap
business located in Poland, gives us a manufacturing and distribution platform
from which we can continue to grow our presence in the important emerging
Eastern European market. In the UK, our children's book division, Alligator,
acquired the business of Pinwheel, a children's book publisher, complementing
their existing portfolio of children's licensed activity products.
This is my first full period as chairman. I am delighted with the strategic
progress the Group has made this year, and am confident that strong foundations
have been laid to ensure our future success.
I welcome all our new employees, particularly those working in the companies we
acquired this year, and thank all our staff for their commitment to the Group
and to serving the needs of our customers around the world.
Keith James OBE
Chairman
* adjusted to exclude exceptional costs of £1,252,000 (2006: £3,310,000), profit
on disposal of fixed assets of £2,240,000 (2006: £1,838,000), and amortisation
of goodwill of £1,458,000 (2006: £1,031,000)
Chief Executive's Report
The past year has been extremely active for all areas of the Group's business.
Consistent with our stated strategy, acquisitions have been made that have
enabled us to both enter new geographical regions and strengthen our position in
existing ones. In addition, a number of operating divisions have been
restructured and refocused to ensure all opportunities to grow organically are
maximised to their full potential.
UK
The UK market place, which historically formed the cornerstone of International
Greetings' business, has encountered some well documented difficulties in recent
years. We have experienced the closure of a number of retailers, difficult
trading conditions and intense pricing pressure. To combat this we have clearly
identified those opportunities that offer us growth potential, and have put in
place a three point strategy which reduces our reliance on our traditional
private label seasonal business.
We have reorganised our UK seasonal trading divisions into one business unit
based in South Wales; this new structure will reduce costs, streamline our
supply and logistic functions and simplify the buying process for our customers.
We are expanding our proprietary range business by developing the trading brands
of Anker, Tom Smith, Giftmaker and Copywrite, with a focus on selling higher
volumes of these branded ranges to a broader customer base throughout the UK.
We will continue to diversify our business with a highly focused acquisition
programme, investing in businesses where we can add value and which will
complement our existing operations. This is illustrated by last year's
acquisition of Alligator Books and our more recent purchase of Pinwheel
Children's Books, which takes us into a new product category that utilises our
core strengths of design, sourcing and distribution.
Europe
Mainland Europe has once again been a key growth region for the Group, achieving
a 32% increase in turnover.
The Hoomark division is targeted to manufacture and distribute greetings
products with Anchor International BV, now a wholly owned subsidiary,
concentrating on selling photographic and stationery products throughout Europe.
The acquisition of Weltec, with its associated brand of B+H, has made us a major
supplier to the German photoframes market and we intend to develop this product
category further in other European territories.
Mass market licensed stationery ranges have been developed by Copywrite for the
European market and early sales indications have been very encouraging.
The acquisition of Artex in Poland provides International Greetings with a gift
wrap manufacturing base in Eastern Europe and, coupled with our investment in
Latvia, we now feel we have the foundations in place to build a solid business
in the region.
US
Our marketing and product development strategy introduced last year to stratify
the market into entry level, mass market and premium ranges for our US retail
customer base, has performed well.
Our top end brands, marketed as premium product, feature innovative designs and
materials and, in particular, the Pepperpot brand of stationery is carving a
niche of its own in the department store and independent sectors.
The mass market product offers the largest volume of retail distribution in the
US and we continue to add new customers both for proprietary Giftwrap Company
ranges and private label brands.
Our entry level product is being marketed through the recently formed Anker USA
division, with goods initially being fulfilled direct to customers from IG Asia.
This new division has proved to be very successful and we intend to launch a
catalogue of standard products, mirroring the Anker UK collection, from March
2008 for next year's season.
Sales in the US now account for 23% of the Group's total turnover, and we
believe the US market place offers significant potential for future growth.
Far East
Last year's factory move in China and investment in a new sourcing and trading
office in Hong Kong have both yielded significant benefits to the Group. Direct
sales to customers around the globe from IG Asia now represent approximately 9%
of Group turnover, a 50% increase over last year's 6%.
In addition to the production of Christmas crackers, we have increased output of
products that require a high labour content in their manufacture, particularly
gift bags, which are a growth product in the worldwide gift wrapping sector. We
have also invested $3.7m, primarily in new printing and conversion machinery
during the past 12 months in order to obtain the benefits of lower costs through
vertical integration.
We will continue to develop our activities in Asia, to meet the demands of our
customers around the world.
Design and Licensing
Product development and design still remains a vital part of our industry and
its importance to our future development cannot be overstated. We now employ
over 120 people in the creative areas of our business and have recently
introduced an intranet based system to allow each trading division within the
Group, wherever geographically located, to share its intellectual assets with
all Group companies. This Digital Asset Management System will allow us to
minimise our design costs by maximising the potential of each design created
across the global market-place.
Licensed properties continue to feature heavily within our portfolio of
products, and we are delighted to have obtained merchandise rights for ranges of
products for the UK release this week of Shrek 3 and The Simpsons Movie in July.
Conclusion
We have now put in place a business strategy and operational structure to
deliver consistent growth for the next three years. Both organic growth and
acquisition opportunities have been identified in all the product categories and
geographical regions in which we operate. Our management teams and staff are
focused and motivated to achieve our corporate goals and we look forward to the
future with confidence.
Anders Hedlund and Nick Fisher
Joint Chief Executives
26 June 2007
Finance Review
1 Group Performance
Reported turnover for the year to 31st March 2007 amounted to £196.7m (2006:
£196.6m). With an increasing proportion of our business being overseas, the
Group's results are affected by movements in exchange rates on the translation
of the results of overseas subsidiaries, particularly in relation to the US$.
Last year the results of US$ denominated subsidiaries were translated at $1.73
compared with $1.88 this year. Excluding the effect of this, Group turnover
would have shown an increase of 2%. Overseas sales of £77.7m (2006: £74.1m)
accounted for 40% (2006: 38%) of the total, of which £45.1m (2006: £47.2m) was
in the US. Excluding the effect of exchange rates, US sales increased by 2%. IG
Asia, our Hong Kong subsidiary, performed extremely well with direct sales to
customers in the UK, Europe and US increasing by 52% to $33m, compared with $21m
last year.
The gross profit margin percentage (excluding exceptional costs) increased from
31.2% to 32.9% primarily due to a credit of £4.2m (2006: £1.3m) in relation to
compensation for gross profit on lost sales as a result of a fire at the Group's
South Wales print plant in 2005. Operating profit increased from £15.0m to
£18.2m. Adjusted operating profit* increased from £19.3m to £20.9m, an increase
of 8%. Exceptional items during the year of £1.3m relate to a restructuring of
the Group's UK operations in order to maintain competitiveness. These changes
included the relocation of production operations overseas, the integration and
relocation of Copywrite's operations into Anker and the merging of the
individual UK Christmas giftwrap, cracker and card operations into one division.
Net interest payable increased from £1.8m to £2.8m, primarily due to the cost of
acquisitions and increasing interest rates during the year.
The profit on disposal of fixed assets of £2.2m arose on the sale of the
freehold interest in the Group's property in Duxford which was no longer
required following the integration of Copywrite's operations into Anker. Net
profit before taxation increased by 17% to £17.7m, with adjusted profit before
tax* increasing 3% to £18.1m. Excluding the effect of exchange rates on the
profits of overseas subsidiaries referred to above, adjusted profit before tax
would have increased by 7%.
2 Earnings Per Share and Dividend
Adjusted basic earnings per share* for the year ended 31st March 2007 were
29.5p, an increase of 5% over last year. Basic earnings per share were 28.1p, an
increase of 7% over last year.
The final dividend proposed for the year of 7.75p (2006: 7p) makes a total
dividend for the year of 10p, an increase of 11% and is covered 2.8 times by
basic earnings per share.
* adjusted to exclude exceptional costs of £1,252,000 (2006: £3,310,000), profit
on disposal of fixed assets of £2,240,000 (2006: £1,838,000), and amortisation
of goodwill of £1,458,000 (2006: £1,031,000)
3 Balance Sheet and Cash Flow
Net debt at 31st March 2007 amounted to £38.0m, compared to £10.7m last year.
Cash paid in respect of acquisitions, including debt acquired with new
acquisitions, accounted for £16.8m of this movement. This included £10.5m
deferred consideration paid in relation to the acquisition of Anker
International PLC in May 2005. Capital expenditure of £11.9m was £6m higher
than the depreciation charge, due primarily to the £1.9m purchase of property
in the US to facilitate future growth and a total of £1.8m invested in
IG Asia's operations in China. Cash from the sale of the Group's property in
Duxford, giving rise to the £2.2m profit on disposal on fixed assets during
the year, was not received until after the year-end and is therefore not
reflected in these figures.
Shareholders' funds increased by £8.1m to £83.9m and with year-end gearing of
45% and interest covered 6.6 times by operating profit, the Group's financial
position remains strong.
4 Treasury Operations
The Board continues to assess and manage the risks associated with the treasury
function as our business develops. The Group's business has a strong seasonal
focus, resulting in large variations in working capital. As a result, the Board
considers that long term reduction of exposure to fluctuations in interest rates
on working capital is unlikely to be economically viable.
A significant proportion of the Group's purchases are denominated in US$. The
effect of exchange rate fluctuations is reduced through a combination of
measures including hedging and forward exchange contracts.
Consolidated profit and loss account for the year ended 31 March 2007
Continuing operations
Excluding acquisitions
Pre-exceptional Exceptional Acquisitions Total Total
item item (Restated -
see Note 1)
2007 2007 2007 2007 2006
Note £000 £000 £000 £000 £000
Group turnover
including share
of joint venture
turnover 185,344 - 11,757 197,101 198,139
Less: Share of
joint venture
turnover (383) - - (383) (1,585)
------------------------------------------------------------------
Group turnover 2 184,961 - 11,757 196,718 196,554
Cost of sales (123,814) (897) (8,148) (132,859) (135,121)
------------------------------------------------------------------
Gross profit 61,147 (897) 3,609 63,859 61,433
Distribution
expenses (16,818) - (400) (17,218) (16,481)
Administrative
expenses (26,433) (355) (1,675) (28,463) (29,942)
------------------------------------------------------------------
Operating profit 2 17,896 (1,252) 1,534 18,178 15,010
Share of operating
profit of joint venture - - - - 7
------------------------------------------------------------------
17,896 (1,252) 1,534 18,178 15,017
Profit on disposal of
fixed assets 2,240 - - 2,240 1,838
Net interest payable (2,477) - (280) (2,757) (1,801)
------------------------------------------------------------------
Profit on
ordinary
activities before
taxation 2-3 17,659 (1,252) 1,254 17,661 15,054
------------------------------------
Tax on profit
on ordinary
activities 4 (4,662) (3,106)
----------------------
Profit for the
financial year 12,999 11,948
----------------------
Earnings per share 7
Basic 28.1p 26.2p
Diluted 27.7p 25.8p
======================
Consolidated statement of total recognised
gains and losses for the year ended 31 March 2007 2007 2006
(Restated see
Note 1)
£000 £000
Profit for the financial year 12,999 11,948
Currency translation differences arising on
foreign currency net investments (2,598) 914
-----------------------
Total recognised gains and losses
relating to the financial year 10,401 12,862
=======
Prior year adjustment (see Notes 2(d)) 68
-------
Total gains and losses recognised since the last
annual report 10,469
=======
Consolidated balance sheet at 31 March 2007
Note 2007 2006
(Restated -
see Note 1)
£000 £000 £000 £000
Fixed assets
Intangible assets
- goodwill 26,695 21,339
Tangible assets 41,882 37,134
Investments in joint venture
- share of gross assets - 769
- share of gross liabilities - (596)
-------- --------
68,577 58,646
Current assets
Stocks 48,577 40,008
Debtors 41,283 29,931
Investments - unquoted 20 65
Cash at bank and in hand 12,990 11,825
-------- --------
102,870 81,829
Creditors: amounts falling
due within one year (79,903) (56,382)
-------- --------
Net current assets 22,967 25,447
-------- --------
Total assets less
current liabilities 91,544 84,093
Creditors: amounts
falling due after more
than one year (5,737) (6,352)
Provisions for liabilities
and charges (1,939) (1,950)
-------- --------
Net assets 83,868 75,791
======== ========
Capital and reserves
Called up share capital 2,317 2,308
Share premium account 2,515 2,386
Potential issue of
shares 6(a) & (b) 2,235 1,052
Other reserves 11,759 13,964
Profit and loss account 65,042 56,081
-------- --------
Equity shareholders'
funds 8 83,868 75,791
======== ========
Consolidated cash flow statement
for the year ended 31 March 2007
Note 2007 2006
£000 £000
Net cash inflow from operating activities 9 10,889 2,706
Returns on investments and servicing
of finance 10 (2,419) (1,232)
Taxation (3,024) (5,980)
Capital expenditure 10 (11,838) 7,809
Acquisitions and disposals 10 (16,776) (13,078)
Equity dividends paid (4,282) (3,578)
------- -------
Cash outflow before financing (27,450) (13,353)
Financing 10 (223) (630)
------- -------
Decrease in cash in the year (27,673) (13,983)
======= =======
Reconciliation of net cash flow to movement in
net (debt)/funds for the year ended 31 March 2007
Note 2007 2006
£000 £000
Decrease in cash in the year (27,673) (13,983)
Cash (inflow)/outflow from debt
and lease financing 11 (688) 462
------- -------
Change in net debt resulting from cash flows (28,361) (13,521)
Loans acquired with subsidiary (173) -
New finance leases (50) -
Translation differences 11 1,315 (1,013)
------- -------
Movement in net debt in the year (27,269) (14,534)
Net (debt)/funds at beginning of year (10,744) 3,790
------- -------
Net debt at end of year 11 (38,013) (10,744)
======= =======
Notes
1. Basis of preparation
The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 31 March 2007 or 2006.
Statutory financial statements for 2006 have been delivered to the registrar of
companies, and those for 2007 will be delivered following the company's annual
general meeting. The auditors have reported on those accounts; their reports
were unqualified and did not contain statements under section 237(2) or (3) of
the Companies Act 1985.
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost accounting rules.
In these financial statements the following new standard has been adopted for
the first time:
FRS 20 'Share-based payments'. The accounting policy under this new standard is
set out below together with an indication of the effects of its adoption.
Share options are, in most cases, issued at market value at the date of grant
and consideration is accounted for when the option is exercised. The fair value
of options granted and not yet vested is recognised as an employee expense with
a corresponding increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become unconditionally
entitled to the options. The fair value of the options granted is measured using
a Black Scholes model, taking into account the terms and conditions upon which
the options were granted. The amount recognised as an expense is adjusted to
reflect the number of share options ultimately expected to vest based on the
company's anticipated future staff turnover.
The corresponding amounts in these financial statements are restated in
accordance with the new policy. The impact of the adoption of FRS 20 on the
results for the year and the preceding year is set out in note 2 (d).
2. Segmental analysis
(a) Geographical area of operation
UK, Europe USA Group
& Far East
2007 2006 2007 2006 2007 2006
(restated - (restated - (restated -
see Note 1) see Note 1) see Note 1)
£000 £000 £000 £000 £000 £000
Turnover 171,500 167,344 25,218 29,210 196,718 196,554
==========================================================================
Operating
profit before
exceptional items 17,887 16,524 1,543 1,796 19,430 18,320
Exceptional
items (see below) (1,252) (3,310) - - (1,252) (3,310)
--------------------------------------------------------------------------
Operating
profit after
exceptional items 16,635 13,214 1,543 1,796 18,178 15,010
Share of
operating
profit of
joint venture - 7 - - - 7
--------------------------------------------------------------------------
16,635 13,221 1,543 1,796 18,178 15,017
Profit on
disposal of
fixed assets 2,240 1,838 - - 2,240 1,838
Net interest (1,849) (1,108) (908) (693) (2,757) (1,801)
--------------------------------------------------------------------------
Profit on
ordinary activities
before taxation 17,026 13,951 635 1,103 17,661 15,054
==========================================================================
Net assets
(restated - note 1) 76,783 68,406 7,085 7,385 83,868 75,791
==========================================================================
The above results relate entirely to continuing operations.
(b) Exceptional items
2007 2006
£000 £000
Restructuring costs (see (i) below) 1,252 2,906
Other (see (ii) below) - 404
------------------
1,252 3,310
==================
(i) During the year ended 31st March 2007 the Group incurred a number of costs
associated with the ongoing restructuring changes that commenced in the
previous year and are being undertaken in order to maintain competitiveness.
These consisted of (a) the relocation of certain UK production overseas,
(b) the relocation and integration of the Copywrite Designs Ltd stationery
division into Anker's operations and (c) the reorganisation of the individual
UK Christmas giftwrap, cracker and cards operations into one division. The
costs of these restructuring changes, primarily redundancy and machine
relocation costs amounted to £1,252,000 (2006: £2,906,000).
(ii) These represented one-off product safety recall and rectification costs
incurred in connection with one of the Group's products.
(c) Geographical analysis of turnover by destination
2007 2006
£000 £000
UK 119,043 122,443
USA 45,140 47,191
Europe 29,971 22,665
Rest of world 2,564 4,255
--------------------
196,718 196,554
====================
(d) Share based payments
The Company has adopted FRS20 for the first time in this period and accordingly
the operating profit is stated after charging £244,000 for the cost of share
options. The operating profit for the 12 months to 31st March 2006 has been
restated to include a charge of £423,000 in respect of this cost with a
corresponding reduction of £40,000 in the tax charge as a result of recognising
the associated deferred tax asset. The only impact on the net assets as at 31st
March 2006 relates to the deferred tax asset element and results in an increase
in prior year net assets of £68,000.
3. Profit on ordinary activities before taxation
2007 2006
£000 £000
Profit on ordinary activities before
taxation is stated after charging/(crediting)
Hire of plant and machinery - rentals payable
under operating leases 302 410
Hire of other assets - operating leases 1,487 1,249
Release of deferred grant income (823) (498)
Depreciation - owned 5,641 5,469
- leased 235 276
Amortisation of goodwill 1,458 1,031
===================
During the year payments were made to the group
auditor, KPMG Audit Plc as follows:
2007 2006
£000 £000
Audit of these financial statements 39 36
Amounts receivable by the auditors and their
associates in respect of:
Audit of financial statements of subsidiaries
pursuant to legislation 95 80
Other services relating to taxation 76 39
Services relating to corporate finance transactions
entered into or proposed to be entered into by or on
behalf of the Company or the Company's subsidiaries 24 64
All other services (47) 158
The credit in 2007 for all other services relates to charges for work undertaken
in 2006 in connection with the relocation of the group's Chinese factory.
4. Taxation
2007 2006
(Restated
- see Note 1)
£000 £000 £000 £000
Current tax
UK corporation tax on
profits of the year 2,271 2,885
Adjustments in respect of
previous periods (240) 22
-------- --------
2,031 2,907
Foreign tax
On profits of the year 1,591 1,369
Adjustments in respect of
previous periods 65 14
-------- --------
1,656 1,383
--------- ---------
Total current tax 3,687 4,290
Deferred taxation
Origination and reversal of
timing differences 882 (1,271)
Adjustments in respect of
previous periods 93 87
-------- --------
Total deferred tax 975 (1,184)
--------- ---------
Tax on profits on
ordinary activities 4,662 3,106
========= =========
5. Dividends paid
2007 2006
£000 £000
Final for year ended 31st March 2006
- 7.00p per share (2005: 5.75p) 3,240 2,652
Interim for year ended 31st March 2007
- 2.25p per share (2006: 2p) 1,042 926
------------------
Dividends paid 4,282 3,578
==================
6. Acquisitions
(a) On 19th November 2003, the Group acquired 100% of the issued share capital
of Hoomark Gift-Wrap Partners BV. The purchase agreement provided for future
payments of deferred consideration, based on Hoomark's profits for the 3 years
ended March 2007. At 31st March 2006, the future consideration payable was
estimated at £1,052,000, of which up to 100% was payable by the issuance of new
ordinary shares at the company's option. During the year ended 31st March 2007,
£508,000 of this amount was paid in cash. Based on Hoomark's results for the
year ended 31st March 2007, the estimated future consideration has been
increased by £83,000 less £35,000 accounted for by exchange differences. Up to
100% of the total unpaid consideration of £592,000 at 31st March 2007 may be
payable by the issue of new ordinary shares, at the company's option.
(b) On 6th April 2006 the Group acquired 100% of the issued share capital of
Alligator Books Limited, a publisher and distributor of children's books and
stationery. Initial consideration of £2.569m (including costs) was paid,
£2.319m in cash and £0.25m by the issue of 62,703 new ordinary shares.
Estimated additional consideration of £3.66m is payable, based on Alligator's
results for the year ended 31st March 2007. Up to £1.643m of the additional
consideration of £3.66m is payable by the issue of new ordinary shares, at the
company's option.
The book value and provisional fair value of assets acquired was as follows:
£000
Intangible assets 3
Tangible assets 52
Stocks 1,375
Debtors 1,569
Cash 68
Bank overdraft (1,839)
Creditors (1,004)
---------
224
Goodwill (estimated useful life of 20 years) 6,005
---------
Total Consideration 6,229
=========
Audited accounts of Alligator Books Limited for the eleven months ended
31st March 2006 reflected turnover of £5.7m, operating profit of £0.5m and
interest payable of £0.1m, resulting in a profit before tax of £0.4m.
(c) On 8th July 2006, the Group acquired the remaining 50% shareholding not
previously owned in the holding company (Leonard Henry Holdings BV) of the
Group's Dutch joint venture, Anchor International BV. Consideration of €1.26m
was paid, €1m in cash and €0.26m by the issue of 44,692 new ordinary shares.
The book value and provisional fair value of assets acquired was as follows:
£000
Tangible assets 12
Stock 1054
Debtors 731
Cash 75
Bank Overdraft (903)
Creditors (623)
---------
346
Less 50% share previously owned (173)
---------
Net share of assets acquired 173
Goodwill (estimated useful life of 20 years) 726
---------
Total consideration 899
=========
Audited accounts were not previously prepared by Leonard Henry Holdings BV.
Unaudited accounts for the 12 months ended 31st December 2005 reflect turnover
of €4.8m, operating profit of €0.065m and net interest payable of €0.049m
resulting in a profit before tax of €0.016m.
(d) On 23rd January 2007, the Group acquired 100% of the issued share capital
of Eick Pack Werner Eick GmbH & Co ('Eick Pack'), a manufacturer of giftwrap
counter rolls, based in Germany. Initial consideration of €1 was paid for the
shares. The share purchase agreement also provided for the potential repayment
of outstanding loans of €0.512m made by the previous shareholders to Eick Pack.
€0.256m was repaid on completion, with the balance of €0.256m repayable,
dependant on Eick Pack's profits for the years ended 31st March 2008 to 2010.
The book value and provisional fair values of assets acquired was as follows:
Book Provisional Provisional fair
Value fair value value at date of
adjustments acquisition
£000 £000 £000
Tangible assets 29 - 29
Stock 377 (38) 339
Debtors 205 - 205
Cash 19 - 19
Bank overdraft (115) - (115)
Creditors (490) - (490)
---------------------------------------
25 (38) (13)
---------------------
Goodwill (estimated useful
life of 20yrs) 13
----------------
Consideration -
================
Audited accounts were not previously prepared by Eick Pack. Unaudited accounts
for the 12 months ended 31st December 2006 reflect turnover of €2.6m, operating
profit of €0.01m and interest payable of €0.05m resulting in a loss before tax
of €0.04m.
7. Earnings per share
2007 2006
(Restated see
Note 1)
Adjusted basic earnings per share excluding
exceptional items, profit on disposal of
fixed assets and goodwill 29.5p 28.0p
Loss per share on goodwill (3.1p) (2.2p)
Loss per share on exceptional items (1.9p) (5.1p)
Earnings per share on profit on disposal of fixed assets 3.6p 5.5p
--------------------
Basic earnings per share 28.1p 26.2p
====================
Diluted earnings per share 27.7p 25.8p
====================
The basic earnings per share is based on the earnings of £12,999,000 (2006:
£11,948,000) and the weighted average number of ordinary shares in issue of
46,278,695 (2006: 45,536,856). The calculation of diluted earnings per share is
based on 46,998,106 (2006: 46,304,602) ordinary shares. The difference of
719,411 (2006: 559,291) represents the dilutive effect of outstanding employee
share options which has been calculated in accordance with FRS 22.
Adjusted basic earnings per share excluding exceptional items, profit on
disposal of fixed assets and goodwill is calculated after adjusting for
exceptional items of £1,252,000 (2006: £3,310,000), the profit on disposal of
fixed assets of £2,240,000 (2006: £1,838,000), amortisation of goodwill of
£1,458,000 (2006: £1,031,000), and the tax attributable to these items of
£192,000 (2006: tax relief of £1,691,000).
8. Reconciliation of movements in shareholders' funds
2007 2006
(Restated -
see Note 1)
£000 £000
Profit for the financial year 12,999 11,948
Dividends paid in the year (4,282) (3,578)
----------------------
Retained profit for the financial year 8,717 8,370
Other recognised gains and losses relating
to the year (net) (2,598) 914
New share capital subscribed 531 12,879
Potential issue of shares (note 6(a) and (b)) 1,183 126
Purchase of own shares - (538)
Share based payments 244 423
----------------------
Net addition to shareholders' funds 8,077 22,174
Opening shareholders' funds as previously reported 75,723 53,589
Prior year adjustment - share based payments 68 28
----------------------
Closing shareholders' funds 83,868 75,791
======================
9. Reconciliation of operating profit to net cash inflow from operating
activities
2007 2006
(Restated -
see Note 1)
£000 £000
Operating profit 18,178 15,010
Depreciation charge 5,876 5,745
(Increase) in stocks (7,521) (9,650)
(Increase) in debtors (6,917) (5,715)
Increase/(decrease) in creditors 1,403 (2,833)
Deferred income (1,227) (632)
Goodwill amortisation 1,458 1,031
Utilisation of provision (605) (673)
Charge for share based payments 244 423
----------------------
Net cash inflow from operating activities 10,889 2,706
======================
10. Gross cash flows
Cash inflow/(outflow)
2007 2006
£000 £000
Returns on investment and servicing of finance
Interest paid (2,394) (1,668)
Interest received - 455
Interest element of finance lease repayments (25) (19)
----------------------
Net cash (outflow) for returns on investment and
servicing of finance (2,419) (1,232)
======================
Capital expenditure
Purchase of tangible fixed assets (11,933) (11,225)
Disposal of tangible fixed assets 95 19,034
----------------------
Net cash (outflow)/inflow from capital expenditure (11,838) 7,809
======================
Acquisitions and disposals
Acquisition of subsidiaries (14,081) (13,047)
Net overdraft acquired with subsidiary (2,695) (31)
----------------------
Net cash (outflow) for acquisitions and disposals (16,776) (13,078)
======================
Financing
New shares issued 101 379
Purchase of own shares - (538)
Repayment of amounts borrowed (89) (99)
Capital element of finance lease payments (280) (363)
Sale/(purchase) of investments 45 (9)
----------------------
Net cash (outflow) from financing (223) (630)
======================
11. Analysis of changes in net (debt)/funds
At 1 Cash Exchange Acquisition of Inception of Other At 31 March
April flow movement subsidiary new finance changes 2007
2006 leases and
loans
£000 £000 £000 £000 £000 £000 £000
Cash at
bank and
in hand 11,825 1,746 (743) 162 - - 12,990
Overdrafts (20,850) (26,724) 1,874 (2,857) - - (48,557)
------------------------------------------------------------------------------------------------
(9,025) (24,978) 1,131 (2,695) - - (35,567)
Debt due
after one
year (1,147) - 139 (173) (973) 94 (2,060)
Debt due
within one year (101) 89 12 - (84) (94) (178)
Finance leases (471) 280 33 - (50) - (208)
------------------------------------------------------------------------------------------------
(1,719) 369 184 (173) (1,107) - (2,446)
------------------------------------------------------------------------------------------------
Total net
(debt)/funds (10,744) (24,609) 1,315 (2,868) (1,107) - (38,013)
================================================================================================
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