Half Yearly Report

RNS Number : 9625B

St. Ives PLC

11 March 2014

 



11 March 2014

ST IVES plc

Half Year Results for the 26 weeks ended 31 January 2014

St Ives plc, the UK's leading marketing services and print group, announces half year results for the 26 weeks ended 31 January 2014.

Group Financial Highlights

· Underlying* Group revenue of £164.8m (2013: £161.7m)

· Marketing Services revenue up 50.0% to £46.7m (2013: £31.1m)

· Underlying* profit before tax up 13.1% to £12.9m (2013**: £11.4m)

· Profit before tax of £6.2m (2013**: £1.2m)

· Basic underlying* earnings per share up 13.0% to 8.10p (2013**: 7.17p)

· Interim dividend raised by 7.5% to 2.15p per share (2013: 2.0p per share)

· Strong balance sheet with net debt at 31 January 2014 of £12.4m (2 August 2013: £15.2m)

*  Non-underlying items comprise: restructuring costs; provision releases; operating results of non-continuing sites; net profit on disposal of property, plant and equipment; profit on disposal of subsidiary; acquisition costs; consideration required to be treated as remuneration; amortisation of acquired intangibles; and other one-off items.

** IAS 19 (revised) 'Employee benefits' has been adopted for 2014 and the 2013 comparatives have been restated accordingly.

Operational Highlights

· Continued success in implementing the strategic repositioning of the Group

· Marketing Services segment generated 35% of underlying Group operating profit - on target to contribute over half of Group underlying operating profit by 2016

· Acquisition of Realise further strengthens the digital strand of our marketing services offering

· 2013 acquisitions of Amaze and Branded3 integrated well and on plan

· Print Services segment major restructuring now complete and overall level of profitability maintained

· Our market-leading Books business benefited from investment in new digital printing equipment

Commenting on the results, Patrick Martell, Chief Executive of St Ives, said:

"We are very pleased to report another strong set of results, with further progress in our strategy of building a broadly-based marketing services offering whilst moving away from the commoditised print markets. Having successfully completed the restructuring within our Print Services segment, we are continuing to build and strengthen our digital and data offering in Marketing Services, highlighted by the acquisition of Realise earlier this month.

With the UK economy showing further signs of recovery and consumer confidence improving, we remain confident that the Group is well positioned to make further progress in the full year."

 

For further information contact:

St Ives plc Patrick Martell, Chief Executive Matt Armitage, Chief Financial Officer	020 7928 8844
MHP Communications John Olsen/Giles Robinson/Gina Bell	020 3128 8100

Chief Executive's Statement

Results

We are pleased to report another positive set of results for the half year, and further growth within our core Marketing Services segment.

The Group performed well during the period, with underlying revenue up 1.9% to £164.8 million. Underlying profit before tax grew to £12.9 million, a 13.1% increase compared with the first half of the prior financial period and underlying operating margins increased from 7.5% to 8.3%.

Our Marketing Services segment reported revenue of £46.7 million for the period, an increase of 50.0% over the equivalent period last year, made up of acquisition growth of 36.1% and organic growth of 13.9%. Marketing Services now represents 35.0% of underlying Group operating profit (2013: 31.3%), demonstrating continued progress towards our stated objective that it should contribute over half of Group operating profit by 2016.

Underlying revenue in our Print Services segment reduced by 7.4% to £121.7 million reflecting the sale in October 2013 of the Group's direct mail printing business, St Ives Direct Bradford Limited. On a like-for-like basis, excluding the effect of the disposal of the direct mail business, revenue grew by 2.4%. Profitability for the segment improved as a result of our focus on higher margin business over high volume commoditised work.

Strategy

Our strategy is to continue to invest for growth and to further develop our Marketing Services business. While print will remain integral to our offering, marketing services will increasingly make a proportionately higher contribution to the Group.

We will target organic growth through investment and increasing collaboration across our existing businesses. Over fifty of our clients now use the services of more than one Group business. For example, HSBC now uses the services of four St Ives companies across both our Marketing and Print Services segments.

Additionally, we aim to acquire strategically relevant businesses that broaden and strengthen our client proposition and provide a platform for strong financial performance.

Marketing Services

Our Marketing Services segment comprises businesses within Data Marketing, Digital Marketing, Consultancy Services and Field Marketing.

Occam and Response One, our Data Marketing businesses, reported a significantly improved performance in revenue and profitability, principally from new client wins. Together, these two companies provide clients with comprehensive data marketing services and have benefited from increased collaboration within the Group.

Our Digital Marketing businesses, Amaze and Branded3, both performed strongly and it was pleasing to see them integrate well with the rest of the Group. In January, we launched Loop Integration, a joint venture between Amaze and Contiigo, a well-established systems integrator.  Based in Chicago, Loop Integration further drives our capabilities in digital commerce. Our commitment to digital marketing has also now been strengthened by the acquisition of Realise, announced earlier this month.

Pragma and Incite, our Consultancy Services businesses, have both delivered revenue growth, although our investment in people and overseas offices has had a short-term negative effect on margin. This is in line with our strategic plans and we are very pleased with progress to date.

Tactical Solutions, our Field Marketing business, experienced a decline in revenue compared with the previous period. We have a new management team, which is focused on evolving the service proposition through delivering data-driven technology and in-store marketing compliance.

Print Services

Our Print Services segment comprises two customer offerings, Books and Marketing Print.

At our specialist book printing business, Clays, profits were maintained despite a decrease in revenue in line with the level of market decline. Physical book volumes are now stabilising and we continue to believe that digital and printed books will co-exist. Our investment in digital print production has allowed us to respond to changing consumer behaviour and meet the demand for quick response and short print-runs. Going forward, our focus will be on continuing margin improvement rather than chasing less profitable volume.

Marketing Print consists of three businesses, Service Graphics, SP Group and St Ives Management Services (SIMS).

Service Graphics, our exhibition and events business, performed satisfactorily without the positive effect of the Olympics and Paralympics in the previous period. This business stands to benefit from continuing signs of confidence returning to the market for discretionary marketing spend.

SP Group, our point of sale business, increased its market share in difficult trading conditions, resulting in an improvement in both revenue and operating profit.

Following the sale of our direct mail printing business in Bradford, we continue to offer outsourced direct response services through SIMS, which performed well during the period, generating increased profits from revenues broadly unchanged compared with the equivalent period in the prior year.

Acquisition

As announced on 3 March 2014, we are delighted to have acquired Realise, a digital marketing agency.

Dividend

The Board has declared an interim dividend of 2.15 pence per share (2013: 2.0 pence), an increase of 7.5%, which will be payable on 14 May 2014 to shareholders on the register at 11 April 2014.

Balance sheet

Despite our ongoing level of investment and acquisition related expenditure, the Group's balance sheet remains strong and underlying free cash flow continues to be robust. Net debt at the half year was £12.4 million (2 August 2013: £15.2 million).

Outlook

With the UK economy showing further signs of recovery and consumer confidence improving, we remain confident that the Group is well positioned to make further progress in the full year.

Having completed our planned restructuring activity and improved profitability within the Group's Print Services segment, we are now focused on expanding and strengthening our Marketing Services offering.

Patrick Martell

Chief Executive

11 March 2014

Condensed Consolidated Income Statement

26 weeks to 31 January 2014

	Note	Underlying £'000	Non- underlying* (Note 3) £'000	Total £'000	27 weeks to 1 February 2013 (Restated Note 9)  £'000	53 weeks to 2 August 2013 (Restated Note 9)  £'000
Revenue	2	164,809	3,097	167,906	167,313	322,679
Cost of sales		(116,035)	(3,042)	(119,077)	(123,978)	(232,889)
Gross profit		48,774	55	48,829	43,335	89,790
Selling costs		(10,557)	(163)	(10,720)	(10,996)	(21,877)
Administrative expenses		(24,607)	(7,917)	(32,524)	(30,706)	(61,049)
Other operating income		14	1,366	1,380	291	280
Profit/(loss) from operations	2	13,624	(6,659)	6,965	1,924	7,144
Investment income		6,485	-	6,485	5,538	11,395
Finance costs		(7,215)	-	(7,215)	(6,252)	(13,083)
Profit/(loss) before tax		12,894	(6,659)	6,235	1,210	5,456
Income tax (charge)/credit		(3,095)	3,978	883	(836)	(1,092)
Net profit/(loss) for the period		9,799	(2,681)	7,118	374	4,364
Attributable to:
Shareholders of the parent company		9,796	(2,666)	7,130	290	4,446
Non-controlling interests		3	(15)	(12)	84	(82)
		9,799	(2,681)	7,118	374	4,364
Basic earnings per share (p)	5	8.10	(2.21)	5.89	0.24	3.71
Diluted earnings per share (p)	5	7.79	(2.12)	5.67	0.23	3.60

* Non-underlying items comprise: restructuring costs; provision releases; operating results of non-continuing sites; net profit on disposal of property, plant and equipment; profit on disposal of subsidiariy; acquisition costs; consideration required to be treated as remuneration; amortisation of acquired intangibles; and other one-off items.

Condensed Consolidated Statement of Comprehensive Income

	26 weeks to 31 January 2014  £'000	27 weeks to 1 February 2013 (Restated Note 9)  £'000	53 weeks to 2 August 2013 (Restated Note 9)  £'000
Profit for the period	7,118	374	4,364
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of the net retirement benefits obligation	(6,947)	23,506	18,803
Tax credit/(charge) on items taken directly to equity	1,207	(5,419)	(4,576)
	(5,740)	18,087	14,227
Items that may be reclassified subsequently to profit or loss:
Transfers of losses/(gains) on cash flow hedges to hedged items	29	(66)	(66)
Gains/(losses) on cash flow hedges	14	(67)	(50)
Tax credit on items taken directly to equity	15	32	2
	58	(101)	(114)
Other comprehensive (expense)/income for the period	(5,682)	17,986	14,113
Total comprehensive income for the period	1,436	18,360	18,477
Attributable to:
Shareholders of the parent company	1,448	18,276	18,559
Non-controlling interests	(12)	84	(82)
	1,436	18,360	18,477

Condensed Consolidated Statement of Changes in Equity

	Share capital £'000	Additional paid-in capital^ £'000	ESOP reserve £'000	Treasury shares £'000	Share option reserve £'000	Hedging and translation reserve £'000	Other reserves £'000	Retained earnings (Restated Note 9) £'000	Non- controlling interest £'000	Total £'000
Balance at 28 July 2012	11,983	51,071	(356)	-	4,351	51	55,117	64,476	361	131,937
Profit for the period	-	-	-	-	-	-	-	290	84	374
Other comprehensive (expense)/income for the period	-	-	-	-	-	(101)	(101)	18,087	-	17,986
Comprehensive (expense)/income for the period	-	-	-	-	-	(101)	(101)	18,377	84	18,360
Dividends	-	-	-	-	-	-	-	(4,793)	-	(4,793)
Purchase of own shares	-	-	(360)	-	-	-	(360)	-	-	(360)
Allocation of shares	-	-	664	-	-	-	664	(293)	-	371
Transfer of contingent consideration deemed as remuneration	-	167	-	-	(1,215)	-	(1,048)	1,232	-	184
Recognition of share-based payments	-	-	-	-	2,342	-	2,342	-	-	2,342
Balance at 1 February 2013	11,983	51,238	(52)	-	5,478	(50)	56,614	78,999	445	148,041
Profit for the period	-	-	-	-	-	-	-	4,156	(166)	3,990
Other comprehensive expense for the period	-	-	-	-	-	(13)	(13)	(3,860)	-	(3,873)
Comprehensive (expense)/income for the period	-	-	-	-	-	(13)	(13)	296	(166)	117
Dividends	-	-	-	-	-	-	-	(2,377)	-	(2,377)
Issue of share capital	188	393	1,303	-	(221)	-	1,475	(1,076)	-	587
Transfer of contingent consideration deemed as remuneration	-	234	-	-	(2,129)	-	(1,895)	2,099	-	204
Exchange differences	-	-	-	-	-	(11)	(11)	-	-	(11)
Purchase of own shares	-	-	(1,451)	(62)	-	-	(1,513)	-	-	(1,513)
Recognition of share-based payments	-	-	-	-	2,577	-	2,577	-	-	2,577
Deferred tax on share-based payments	-	-	-	-	564	-	564	-	-	564
Balance at 2 August 2013	12,171	51,865	(200)	(62)	6,269	(74)	57,798	77,941	279	148,189
Profit for the period	-	-	-	-	-	-	-	7,130	(12)	7,118
Other comprehensive income/(expense) for the period	-	-	-	-	-	58	58	(5,740)	-	(5,682)
Comprehensive income/(expense) for the period	-	-	-	-	-	58	58	1,390	(12)	1,436
Dividends	-	-	-	-	-	-	-	(5,570)	-	(5,570)
Acquisition of non-controlling interest	-	-	-	-	-	-	-	(468)	(267)	(735)
Transfer of contingent consideration deemed as remuneration	-	351	-	-	(2,331)	-	(1,980)	2,393	-	413
Purchase of own shares	-	-	(235)	(2,757)	-	-	(2,992)	-	-	(2,992)
Exchange differences	-	-	-	-	-	(23)	(23)	-	-	(23)
Recognition of share-based payments	-	-	407	1,789	1,512	-	3,708	(1,029)	-	2,679
Balance at 31 January 2014	12,171	52,216	(28)	(1,030)	5,450	(39)	56,569	74,657	-	143,397

^ Additional paid-in capital represents share premium, merger reserve and capital redemption reserve.

Condensed Consolidated Balance Sheet

	Note	31 January 2014 £'000	1 February 2013 £'000	2 August 2013 £'000
Assets
Non-current assets
Property, plant and equipment		54,400	59,267	56,232
Goodwill		90,148	70,824	90,148
Other intangible assets		30,141	24,914	33,039
Available for sale		1,544	3,070	1,517
Investment in joint venture		30	-	-
Surplus on retirement benefits obligations	6	-	4,074	84
Other non-current assets		512	350	724
		176,775	162,499	181,744
Current assets
Inventories		7,427	7,250	8,106
Trade and other receivables		67,116	74,359	67,597
Derivative financial instruments		13	73	735
Cash and cash equivalents		12,642	8,670	15,581
		87,198	90,352	92,019
Total assets		263,973	252,851	273,763
Liabilities
Current liabilities
Obligations under finance leases		20	62	169
Loans payable		-	275	-
Trade and other payables		71,954	70,893	75,098
Derivative financial instruments		14	-	44
Income tax payable		3,180	1,893	2,104
Deferred consideration payable		2,128	2,091	2,051
Deferred income		3,404	969	4,320
Provisions		684	2,599	1,625
		81,384	78,782	85,411
Non-current liabilities
Loans payable		25,000	15,000	30,000
Finance lease payables		19	348	576
Retirement benefits obligations	6	6,034	-	-
Provisions		1,341	780	1,156
Deferred tax liability		6,798	9,900	8,431
		39,192	26,028	40,163
Total liabilities		120,576	104,810	125,574
Net assets		143,397	148,041	148,189
Equity
Capital and reserves
Share capital		12,171	11,983	12,171
Other reserves		56,569	56,614	57,798
Retained earnings		74,657	78,999	77,941
Attributable to shareholders of the parent company		143,397	147,596	147,910
Non-controlling interest		-	445	279
Total equity		143,397	148,041	148,189

These financial statements were approved by the board of directors on 11 March 2014.

Condensed Consolidated Cash Flow Statement

	Note	26 weeks to 31 January 2014  £'000	27 weeks to 1 February 2013  £'000	53 weeks to 2 August 2013  £'000
Operating activities
Cash generated from operations	8	16,853	14,628	35,932
Interest paid		(741)	(510)	(1,056)
Income taxes received/(paid)		850	(1,529)	(3,557)
Net cash generated from operating activities		16,962	12,589	31,319
Investing activities
Purchase of property, plant and equipment		(7,674)	(3,200)	(6,110)
Purchase of other intangibles		(286)	(202)	(420)
Proceeds on disposal of property, plant and equipment		321	315	326
Disposal proceeds of subsidiaries, net of cash disposed		2,854	1,691	2,537
Acquisition of subsidiaries, net of cash acquired		(1,681)	-	(22,204)
Disposal of available-for-sale financial assets		-	275	596
Purchase of available-for-sale financial assets		(25)	(250)	(517)
Investment in joint venture		(30)	-	-
Net cash used in investing activities		(6,521)	(1,371)	(25,792)
Financing activities
Purchase of treasury shares		(2,757)	-	-
Dividends paid	4	(5,570)	(4,792)	(7,170)
(Decrease)/increase in finance lease rentals		(36)	410	676
(Decrease)/increase in bank loans		(5,000)	(10,275)	4,450
Net cash used infinancing activities		(13,363)	(14,657)	(2,044)
Net (decrease)/increase in cash and cash equivalents		(2,922)	(3,439)	3,483
Cash and cash equivalents at beginning of the period		15,581	12,109	12,109
Effect of foreign exchange rate changes		(17)	-	(11)
Cash and cash equivalents at end of the period	8	12,642	8,670	15,581

Notes to the Condensed Consolidated Financial Statements

1. Basis of preparation

The condensed financial statements have been prepared in accordance with IAS 34 "Interim Financial Statements" and in accordance with the Disclosure and Transparency Rules of the UK's Financial Conduct Authority ("FCA").

The recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going concern

The directors, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for the foreseeable future and that, therefore, it is appropriate to adopt the going concern basis in preparing the combined financial information for the twenty six weeks ended 31 January 2014.

Other than as disclosed in note 8, the interim statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Accounts for 2013. The interim statements have not been audited or reviewed.

The interim statements and prior half and full year comparatives do not comprise statutory accounts for the purpose of Section 435 of the Companies Act 2006. The abridged information for the fifty three weeks to 2 August 2013 has been extracted from the Group's statutory accounts for that period which have been filed with the Registrar of Companies. The Auditor's report on the accounts of the Group for that period was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.

Risks and uncertainties

The board continuously assesses and monitors the key risks of the business. The key risks that could affect the Group's medium term performance and the factors that mitigate those risks have not substantially changed from those set out in pages 28 and 29 of the Group's 2013 Annual Report and Accounts, a copy of which is available on the Group's website: www.st-ives.co.uk. The key financial risks are interest rate risk, foreign exchange risk, credit risk and the volatility of the defined pension scheme net surplus or deficit.

2. Segment reporting

The Group manages its business on a market segment basis.

Corporate costs are allocated to revenue generating segments as this presentation better reflects their profitability.

Business segments

	26 weeks to 31 January 2014
	Marketing Services £'000	Print Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	43,144	121,665	−	164,809
Group sales	3,558	55	(3,613)	−
Underlying revenue	46,702	121,720	(3,613)	164,809
Non-underlying revenue	−	3,097	−	3,097
Total revenue	46,702	124,817	(3,613)	167,906
Result
Result before non-underlying items	4,774	8,850	−	13,624
Non-underlying items	(6,858)	199	−	(6,659)
(Loss)/profit from operations	(2,084)	9,049	−	6,965
Investment income				6,485
Finance costs				(7,215)
Profit before tax				6,235
Income tax credit				883
Net profit for the period				7,118

	27 weeks to 1 February 2013 (Restated)
	Marketing Services £'000	Print Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	30,359	131,311	-	161,670
Group sales	774	204	(978)	-
Underlying revenue	31,133	131,515	(978)	161,670
Non-underlying revenue	-	5,643	-	5,643
Total revenue	31,133	137,158	(978)	167,313
Result
Result before non-underlying items	3,790	8,324	-	12,114
Non-underlying items	(4,782)	(5,408)	-	(10,190)
(Loss)/profit from operations	(992)	2,916	-	1,924
Investment income				5,538
Finance costs				(6,252)
Profit before tax				1,210
Income tax charge				(836)
Net profit for the period				374

	53 weeks to 2 August 2013 (Restated)
	Marketing Services £'000	Print Services £'000	Eliminations £'000	Total £'000
Revenue
External sales	64,062	252,974	-	317,036
Group sales	2,174	352	(2,526)	-
Underlying revenue	66,236	253,326	(2,526)	317,036
Non-underlying revenue	-	5,643	-	5,643
Total revenue	66,236	258,969	(2,526)	322,679
Result
Result before non-underlying items	7,176	19,731	-	26,907
Non-underlying items	(10,028)	(9,735)	-	(19,763)
(Loss)/profit from operations	(2,852)	9,996	-	7,144
Investment income				11,395
Finance costs				(13,083)
Profit before tax				5,456
Income tax charge				(1,092)
Net profit for the period				4,364

Geographical segments

The Marketing and Print Services business segments operate primarily in the UK, deriving more than 94% of their revenue and results from operations and customers located in the UK.

3. Non-underlying items

Non-underlying items disclosed on the face of the Condensed Consolidated Income statement are as follows:

	26 weeks to 31 January 2014  £'000	27 weeks to 1 February 2013  £'000	53 weeks to 2 August 2013  £'000
Expense/(income)
Restructuring items
Redundancies, impairments and other charges	1,121	3,850	7,538
Provision releases	(17)	-	(292)
Profit on disposal of property, plant and equipment	(297)	(275)	(271)
Operating losses from non-continuing sites	303	1,873	1,723
	1,110	5,448	8,698
Other
Amortisation of acquired intangibles	2,800	2,775	5,314
Impairment of available for sale asset	-	-	1,581
Contingent consideration required to be treated as remuneration	3,714	1,923	3,489
Profit on disposal of subsidiary	(1,070)	-	-
Costs associated with the acquisition of subsidiaries and other investments	-	-	641
Remaining other non-underlying expenses	105	44	40
	6,659	10,190	19,763
Income tax credit	(3,978)	(1,957)	(5,090)
	2,681	8,233	14,673

The restructuring charges in the current period include redundancies of £375,000, £74,000 of impairment charges and other restructuring costs of £404,000 within the Print Services segment. The disposal of plant and equipment as a result of the closure of the Birmingham site, gave rise to gains of £297,000 within the Print Services segment. Operating losses from non-continuing operations relate to trading at the Bradford site before the disposal of St Ives Direct Bradford Limited in September 2013. These are recorded within the Print Services segment. Redundancy and restructuring costs of £268,000 were recorded in the Marketing Services segment.

Profit on disposal of subsidiary of £1,070,000 relates to the sale of St Ives Direct Bradford Limited and is recorded within the Print Services segment.

Amortisation charges of £2,800,000 relate to acquired customer relationships, proprietary techniques and software intangibles and were recorded in the Marketing Services segment. Contingent consideration of £3,714,000 in respect of acquisitions is required to be treated as remuneration rather than consideration and is recorded in the Marketing Services segment.

The non-underlying tax credit includes a credit of £3,188,000 in respect of the determination of the tax treatment of a prior period non-underlying item.

4. Dividends

	per share	26 weeks to 31 January 2014  £'000	27 weeks to 1 February 2013  £'000	53 weeks to 2 August 2013  £'000
Final dividend paid for the 52 weeks ended 27 July 2012	4.00p	-	4,792	4,792
Interim dividend paid for the 27 weeks ended 1 February 2013	2.00p	-	-	2,378
Final dividend paid for the 53 weeks ended 2 August 2013	4.00p	5,570	-	-
Dividends paid during the period		5,570	4,792	7,170
Declared interim dividend for the 26 weeks ended 31 January 2014 (2013 - 2.00p per share)	2.15p	2,603	-	−

5. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:

Number of shares

	26 weeks to 31 January 2014 '000	27 weeks to 1 February 2013 '000	53 weeks to 2 August 2013 '000
Weighted average number of ordinary shares for the purposes of basic earnings per share	120,899	119,728	119,877
Weighted average number of ordinary shares for the purposes of diluted earnings per share	125,760	122,608	123,622

Basic and diluted earnings per share

	26 weeks to 31 January 2014		27 weeks to 1 February 2013 (Restated)		53 weeks to 2 August 2013 (Restated)
	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence	Earnings £'000	Earnings per share pence
Earnings and basic earnings per share from continuing activities
Underlying earnings and underlying earnings per share	9,796	8.10	8,585	7.17	19,062	15.90
Non-underlying items	(2,666)	(2.21)	(8,295)	(6.93)	(14,616)	(12.20)
Earnings and basic earnings per share	7,130	5.89	290	0.24	4,446	3.71
Earnings and diluted earnings per share from continuing activities
Underlying earnings and underlying earnings per share	9,796	7.79	8,585	7.00	19,062	15.42
Non-underlying items	(2,666)	(2.12)	(8,295)	(6.77)	(14,616)	(11.82)
Earnings and diluted earnings per share	7,130	5.67	290	0.23	4,446	3.60

Underlying earnings is calculated by adding back non-underlying items, as adjusted for tax, to the profit/(loss) for the period.

6. Retirement benefits

The net obligation in respect of retirement benefit obligations of £6,034,000 at 31 January 2014 has increased compared to 2 August 2013 (surplus of £84,000) primarily due to the lower than expected investment performance of plan assets and a lower discount rate.

7. Disposal

On 30 September 2013, the Group completed the disposal of St Ives Direct Bradford Limited, a direct response business. The net assets of St Ives Direct Bradford Limited at the date of disposal were as follows:

	30 September 2013  £'000
Property, plant and equipment	4,585
Other intangible assets	5
Other non-current assets	58
Deferred tax assets	151
Inventories	1,082
Trade and other receivables	5,795
Cash and cash equivalents	265
Obligations under finance leases	(670)
Trade and other payables	(9,005)
Provisions	(57)
Net assets	2,207
Selling costs	198
Profit on disposal before tax	1,070
Total consideration receivable	3,477

The fair value of the consideration receivable for the disposal of St Ives Bradford Limited is comprised as follows:

	30 September 2013  £'000
Initial consideration paid in cash on 30 September 2013	3,000
Deferred consideration paid during the period	318
Provisional deferred consideration payable	159
Total consideration receivable	3,477

The provisional deferred consideration is stated at the fair value of £159,000.

8. Notes to the condensed consolidated cash flow statement

Reconciliation of cash generated from operations

	26 weeks to 31 January 2014  £'000	27 weeks to 1 February 2013 (Restated Note 9)  £'000	53 weeks to 2 August 2013 (Restated Note 9)  £'000
Profit from continuing operations	6,965	1,924	7,144
Adjustments for:
Depreciation of property, plant and equipment	3,679	3,708	7,482
Impairment losses	74	-	2,205
Amortisation of intangible assets	3,171	3,204	6,150
Profit on disposal of property, plant and equipment	(310)	(291)	(280)
Profit on disposal of a subsidiary	(1,070)	-	-
Deferred income (charge)/credit	(917)	145	2,075
Share-based payment charge	602	439	1,281
Settlement of share based payment	266	-	(221)
Increase in derivatives	-	-	(616)
Decrease in retirement benefit obligations	(816)	(989)	(2,112)
Increase in contingent consideration required to be treated as remuneration	3,714	1,923	1,844
(Decrease)/increase in provisions	(701)	842	53
Operating cash inflows before movements in working capital	14,657	10,905	25,005
Increase in inventories	(405)	(212)	(1,069)
(Increase)/decrease in receivables	(4,687)	5,404	21,279
Increase/(decrease) in payables	7,288	(1,469)	(9,283)
Cash generated from operations	16,853	14,628	35,932

Analysis of net debt

	3 August 2013 £'000	Cash flow £'000	Disposal £'000	Reclassify £'000	Exchange differences £'000	31 January 2014 £'000
Cash and cash equivalents	15,581	(2,922)	-	-	(17)	12,642
Bank loans due greater than year	(30,000)	5,000	-	-	-	(25,000)
Finance leases due less than one year	(169)	36	141	(28)	-	(20)
Finance leases due greater than year	(576)	-	529	28	-	(19)
Net debt	(15,164)	2,114	670	-	(17)	(12,397)

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. The effective interest rates on cash and cash equivalents are based on current market rates.

9. Change in accounting policy

The Group has adopted the IAS19 (revised) Employment Benefits standard as of 3 August 2013. The standard includes changes to accounting principles of defined benefit plans. The standard impacts the Group by amending disclosure requirements and replacing the expected return on net assets and interest expense for the pension liability with net interest expense calculated by multiplying the year-end discount rate by the year-end net pension surplus or deficit. The changes in fair value of pension obligation will be recorded in the statement of other comprehensive income.

As required, the Group has applied IAS19 (revised) standard retrospectively and in accordance with the transitional provisions as set out in IAS19.173 (revised) and IAS8 Accounting Policies, Changes in Accounting Estimates and Errors.

The impact of the prior period restatement on the previously reported Consolidated Income Statement is summarised as follows:

	27 Weeks to 1 February 2013			53 weeks to 2 August 2013
	Previously Reported	Adjustments	Restated	Previously Reported	Adjustments	Restated
	£'000	£'000	£'000	£'000	£'000	£'000
Administrative expenses	(30,503)	(203)	(30,706)	(60,658)	(391)	(61,049)
Interest income	6,134	(596)	5,538	12,598	(1,203)	11,395
Finance cost	(6,256)	4	(6,252)	(13,073)	(10)	(13,083)
Income tax (charge)/credit	(1,031)	195	(836)	(1,467)	375	(1,092)
Attributable to:
Shareholders of the parent company	890	(600)	290	5,675	(1,229)	4,446
Underlying basic earnings per share	7.67	(0.50)	7.17	16.93	(1.03)	15.90
Non-underlying items	(6.93)	-	(6.93)	(12.20)	-	(12.19)
Basic earnings per share	0.74	(0.50)	0.24	4.73	(1.03)	3.71
Underlying diluted earnings per share	7.49	(0.49)	7.00	16.41	(0.99)	15.42
Non-underlying items	(6.77)	-	(6.77)	(11.82)	-	(11.82)
Diluted earnings per share	0.72	(0.49)	0.23	4.59	(0.99)	3.60

The impact of the prior period restatement on the previously reported Consolidated Statement of Comprehensive Income is summarised as follows:

27 Weeks to 1 February 2013

53 weeks to 2 August 2013

	Previously Reported	Adjustments	Restated	Previously Reported	Adjustments	Restated
	£'000	£'000	£'000	£'000	£'000	£'000
Profit for the period	974	(600)	374	5,593	(1,229)	4,364
Remeasurement of the retirement benefits obligations**	22,711	795	23,506	17,199	1,604	18,803
Tax charge on items taken directly to equity	(5,224)	(195)	(5,419)	(4,201)	(375)	(4,576)
Attributable to:
Shareholders of the parent company	18,276	-	18,276	18,559	-	18,559

** Remeasurement of the retirement benefits obligations was previously referred to as actuarial gains.

The impact of the prior period restatement on the previously reported Consolidated Statement of Changes in Equity is summarised as follows:

27 Weeks to 1 February 2013

53 weeks to 2 August 2013

	Previously Reported	Adjustments	Restated	Previously Reported	Adjustments	Restated
	£'000	£'000	£'000	£'000	£'000	£'000
Retained earnings
Profit/(loss) for the period	974	(600)	374	5,593	(1,229)	4,364
Other comprehensive income for the period	17,386	600	17,986	12,884	1,229	14,113

10. Related parties

The nature of related party transactions of the Group has not changed from those described in the Group's consolidated financial statements for the fifty three weeks ended 2 August 2013.

On 8 November 2013, 122,540 ordinary shares in the Company were sold at market price to the executive directors of the Company by the Group's employee benefit trust under the rules of the Directors' and Senior Executives' Deferred Bonus Scheme as follows:

	Number of Shares	Price per share pence	Value of shares £
Matt Armitage	50,782	181.13	91,979
Patrick Martell	71,668	181.13	129,809
	122,450		221,788

During the period, the company purchased 1,684,939 of its own shares at the market value.  The Group's employee benefit trust acquired 145,061 shares in the company at market value.

11. Post-balance sheet events

On 3 March 2014, the Group acquired the entire issued share capital of Realise Holdings Limited ("Realise"), a digital marketing agency, on a cash and debt free basis, for            £21.7 million, to be satisfied by approximately £18.4 million in cash and approximately 1.7 million St Ives shares. Further consideration of up to £18.3 million may be payable, dependent on incremental financial performance for the years ending 30 September 2014 and 2015.

12. Responsibility statement

We confirm that, to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS34 "Interim Financial Reporting";

· the interim management report includes a fair review of the information required by DTR4.2.7R (indication of important events during the first six months of the year and descriptions of principal risks and uncertainties for the remaining six months of the year); and

· the interim management report includes a fair review of the information required by DTR4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the board

Patrick Martell

Chief Executive

11 March 2014

The foregoing contains forward looking statements made by the directors in good faith based on information available to them up to 11 March 2014. Such statements need to be read with caution due to inherent uncertainties, including economic and business risk factors underlying such statements.

 

END

 

 

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