Annual Report and Accounts 2017 and Notice of AGM
1 November 2017
St Ives plc
2017 Annual Report and Accounts and Notice of AGM
Further to the Company's announcement of its annual results on 3 October 2017, copies of the Annual Report and Accounts 2017 for the fifty two weeks ended 28 July 2017 ('the Annual Report 2017'), the Notice of Annual General Meeting of the Company and the Form of Proxy in relation to the Annual General Meeting ('the Shareholder Documents') have today been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm
The Shareholder Documents will shortly be available to download from the Company Policies & Circulars section of the Company's website, under Investor Relations, at www.st-ives.co.uk.
Hard copies of the above Shareholder Documents have today been posted to shareholders.
The Company's Annual General Meeting will be held at 11.00 a.m. on Thursday, 30 November 2017 at One Tudor Street, London EC4Y 0AH.
Additional Information
The following information is extracted from the Annual Report 2017 (page references are to pages in the Annual Report 2017) and should be read in conjunction with the Company's announcement of its annual results issued on 3 October 2017. Both documents can be found at www.st-ives.co.uk and together, constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the Annual Report 2017 in full.
Principal Risks and Uncertainties
|
Risk |
Description |
Change in 2017 |
Mitigating activities |
|
ACQUISITION STRATEGY Acquisitions may not fit in to the Group's strategic direction and may fail to deliver growth and successful integration as a result. |
As businesses are acquired as part of the Group's strategic objectives to grow its Strategic Marketing segment, it is fundamental to identify businesses that will enhance the Group's capabilities. |
Decreased. No acquisitions were made during the course of the year. As a result and whilst acquisitions remain a strategic objective in the medium term, the inherent risk rating is lower than in the prior year. |
Stringent selection criteria followed for pursuing acquisitions that fit within the Group's strategy and culture. Detailed due diligence undertaken using external advisers. Board strategic reviews held annually to monitor progress against the business model to, as necessary, refresh and adapt the Group's strategy for delivering growth. Meetings held with senior management of the subsidiaries to determine cross-selling opportunities. |
|
ORGANIC GROWTH Organic growth, including overseas expansion, may not be pursued in the right sectors or territories. |
Investing in the wrong sectors or territories could result in significant incremental costs to the Group. |
Unchanged. Organic growth is a key strategic objective for the business and the risk factors involved are considered to be consistent with the prior year in view of those territories that have been targeted. |
Regular discussion of strategy at Board meetings and meetings of representatives from the businesses to develop the Group's proposition, growth opportunities and collaborative behaviour. Detailed budgets and three year plans submitted to the Board for review. |
|
SCALABILITY Strategic Marketing businesses may not have sufficient scale within their sectors to secure substantial customer contracts.
|
Achieving scalability is important within Digital, Data and Insight in order to pursue a high growth strategy. Whilst included as a risk, achieving greater scalability is also an opportunity for the Group. |
New risk. This risk has been added as a key risk to the Group during the year following discussion by the Board on driving further organic growth.
Whilst the residual risk has also been assessed as medium, the Board is encouraged by the progress made within Digital during the second half of the year in achieving greater scalability and with the current trajectory. |
Collaboration by businesses such as working on joint pitches. Organic growth of businesses through recruitment drives and opening of new offices. Bringing businesses closer together under a single senior management team (such as in Data) to achieve a greater combined scalable offering. Investment in high growth Strategic Marketing businesses and greater focus on securing longer term contracts. |
|
LEGACY BUSINESSES Issues arising within Marketing Activation and Books may distract or inhibit the Board's focus on its strategic objectives. |
This could, in the short term, impact the growth within the Strategic Marketing segment if the Board encounters issues that emerge in other parts of the Group. |
Increased. This risk rating has been increased following the further decline in Marketing Activation led by the grocery sector and the loss of the HarperCollins contract in Books. Cost mitigation has been undertaken. |
Consolidation of businesses and management within the Marketing Activation segment has created greater synergies with a senior management team across the segment that oversees each of the subsidiaries. Diversification away from the grocery retail. Further restructuring and cost mitigation initiatives. |
|
ECONOMY Challenging economic conditions may inhibit growth and create uncertainty. |
Uncertainty in the economy largely associated with Brexit, could result in marketing campaigns or projects being cancelled or deferred at short notice. Whilst the Group does have long term contracts with clients, the level of spend is predominantly at the client's discretion rather than being derived from guaranteed sales volumes. |
Unchanged. This risk rating was increased during the prior year due to the degree of uncertainty in the economy, partly impacted by Brexit. The Board's view is that the risk remains the same. |
Diversification into markets that are capable of delivering profit growth with an increasing range of marketing companies. Diversification through growth in the US and opportunities pursued to open overseas offices, where client demand warrants it. Investment in a wider range of services offered to clients. A continual review the Group's cost base. Secure more long-term client relationships and contracts. Seek to increase market share by investing in sophisticated and targeted sales lead generation. A regular review of performance of all businesses against their budgets and implement timely remedial action, where needed. |
|
CLIENTS Competitive pressure that may result in the loss of a key client. |
The Group has a variety of key clients in each of its three business segments. Long-term relationships have been fostered with many of these clients over a number of years. |
Increased. Whilst the financial impact of these key contracts has not increased, the likelihood of the risk, and hence the risk rating, has risen due to a greater appetite seen for clients to carry out full tenders, particularly in the Marketing Activation and Books segments. |
Encourage collaborative behaviour across the Group's businesses and create a commitment to cross-selling that will distinguish the Group's marketing offering from its competitors'. Achieve or exceed service level agreements with clients. Broaden our capabilities, providing marketing solutions in support of our clients' marketing strategies. Avoid over reliance on any single client. Implement bespoke propositions for securing the renewal of key client contracts, providing Group support where appropriate. Conduct client satisfaction surveys. |
|
EMPLOYEES A failure to attract, develop and retain employees with the necessary talent for our businesses. |
Retaining staff is a key priority for the Group as it continues to invest in new and existing service orientated businesses. |
Unchanged. This risk rating is consistent with the prior year. |
Implement appraisals and fulfil training needs where identified. Develop a collaborative culture across the Group's businesses. Operate discretionary share-based incentive schemes, and other benefits. Pay part of consideration in shares to vendor directors of acquired businesses, with 'lock-in' obligations. |
|
FINANCING The Group's ability to trade may be compromised by lack of cash funds. |
Being able to finance working capital and carry out operations is fundamental to the Group. |
Unchanged. This inherent risk is consistent with prior years. The bank facility runs up to 23 March 2019; further details are provided on page 104.
Following the January 2017 trading update, the residual risk rating was increased from low to medium at the Half Year. The risk has since been further mitigated by the disposal of two freehold properties for net proceeds totalling £9.8m, resulting in the leverage covenant reducing to 1.6 at the year end (see page 112). |
Conduct 'going concern' reviews and longer-term viability assessments twice yearly; continually monitor the Group's performance against its banking covenants. Undertake monthly reviews of working capital, cash forecasts and headroom on banking covenants. Periodically review the Group's financial KPIs with its bankers. |
|
PENSION SCHEME The volatility of the St Ives Defined Benefits Pension Scheme (the 'Scheme') deficit. |
The volatility of the Scheme's deficit is impacted by the inflation rate, changes in the discount rate derived from gilt yields and changes in actuarial assumptions, such as mortality. |
Unchanged. This risk rating associated with the Scheme's deficit remains high. The deficit had increased in recent years primarily due to low interest rates. As at 28 July 2017, the deficit has reduced due to a higher level of return on the Scheme's assets. |
Agree deficit recovery plan with the Pension Scheme Trustee. Regularly engage the Trustee directors in discussions on the Group's performance. Manage possible Section 75 debts arising from business disposals and closures. Contribute to discussions on the Scheme's investment strategy. Proactively seek to limit the growth in the pension liability. |
|
REPUTATIONAL Exposure to reputational or financial damage due to accident, unethical trading, non-compliance with legislation or regulation or disputes. |
Health and safety is a pre-eminent priority for the Board and is discussed at each Board meeting.
Other reputational risks need to be carefully managed as part of the Group's governance procedures. |
Unchanged. This risk rating is consistent with the prior year, reflecting the Board's assessment of the associated risk impact. |
Ingrain robust health and safety culture throughout the Group, supported by rigorous health and safety and environmental policies. Monitor compliance, measure performance and investigate major incidents. Monitor changes in legislation and regulations, take legal advice and provide training where necessary. Place a strong emphasis on compliance with local taxation rules by embedding the Group's processes and procedures. Apply the Group's policies on Ethical Trading, Share dealings, Equal Opportunities, Dignity at Work and Whistle-blowing. Have in place business continuity plans and a procedure for dealing with 'leaks' of inside information. |
|
DATA SECURITY Exposure to reputational or financial damage due to corruption or theft of company owned or client owned data or data breaches arising. |
This includes the risk of loss of data, sabotage or disruption to the business, fraud, reputation damage, and possible fines. |
Unchanged. This risk was added as a key risk for the Group in the prior year due to, in part, the new General Data Protection Regulation ("GDPR") coming into effect in 2018. |
IT functions in place around the Group with responsibility to protect data (e.g. encryption, firewalls, restricted access). Periodic reviews by Internal Audit, utilising in-house IT as well as specialist external consultants. Cyber security and IT questionnaire completed periodically by subsidiaries to highlight areas of potential risk, together with any mitigating actions performed in order to address this risk. The appointment of a new Data Protection Officer for the Group to assist with the Group's GDPR compliance. |
Related Party Transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this [Annual Report 2017] note. No material related party transactions have been entered into during the current period, which might reasonably affect the decisions made by the users of these financial statements.
No other executive officers of the Company or their associates had material transactions with the Group during the period.
The Group earned revenue of £805,000 from Loop Integration LLC and the Group incurred £Nil charges for services received. At the reporting date, Loop Integration LLC owed the Group £26,000.
The total amounts for Directors' remuneration were as follows:
|
|
2017 £'000 |
2016 £'000 |
|
Short-term employee benefits |
962 |
926 |
|
Post-employment benefits |
95 |
108 |
|
|
1,057 |
1,034 |
Statement of Directors' Responsibilities
The following statement which was prepared for the purposes of the Annual Report 2017 is repeated here for the purposes of complying with DTR 6.3.5. It relates to and is extracted from the Annual Report 2017 and is not connected to the extracted and summarised information presented in this announcement.
The Director's confirm to the best of their knowledge:
· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
· the Strategic Report includes a fair review of the development, position and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Signed in accordance with a resolution of the Board of Directors on 2 October 2017 on its behalf by Matt Armitage, Chief Executive and Brad Gray, Chief Financial Officer.
Enquiries:
Daniel Fattal 020 7928 8844
Company Secretary
St Ives plc
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