7 March ST IVES plc Half Year Results for the 27 weeks ended 2 February St Ives plc, the international marketing services group, announces half year results for the 27 weeks ended 2 February. Financial Highlights 27 weeks to 2 February 26 weeks to 27 January %age change Continuing operations: Revenue 146.5m 136.7m +7% Adjusted profit before tax 1 12.7m 9.5m +35% Adjusted basic earnings per share 1 7.06p 5.26p +34% Statutory loss before tax (15.0)m (3.1)m Statutory basic loss per share (11.57)p (2.96)p Interim dividend 0.65p 0.65p Net debt 42.2m 54.6m 2 1 Adjusted results exclude Adjusting Items to enhance understanding of the ongoing financial performance of the Group. Adjusting Items comprise of redundancies, restructuring costs; gain or loss on disposal of properties; impairment or amortisation charges related to goodwill, tangible and intangible assets; contingent consideration required to be treated as remuneration; movements in deferred consideration and costs related to the St Ives Defined Benefits Pension Scheme. 2 Net debt as at 28 July. 3 Continuing operations excludes the results of the four Marketing Activation businesses disposed of at the end of February (Note 8). 4 Like-for-like revenue is calculated by applying prior period exchange rates to local currency results for the current and prior periods. A positive six months, with encouraging growth in both Group revenue and adjusted profit before tax from continuing operations. Strategic Marketing, which lies at the centre of the Group s long term growth strategy, delivered like-forlike 4 revenue growth of 23%, representing 85% of the Group s adjusted operating profit. Disposal of four businesses within the Marketing Activation segment significantly reduced Group exposure to commoditised print markets. Net debt reduced to 42.2 million from 54.6 million at 28 July. Interim dividend maintained at 0.65 pence, to reflect both ongoing investment in organic growth of the Strategic Marketing segment and strengthening the balance sheet. Matt Armitage, Chief Executive, said: This is an encouraging first half performance, with notable progress in our higher growth and higher margin Strategic Marketing segment, offsetting commercial pressures elsewhere in the Group. Strategic Marketing continues to go from strength to strength, and making a significant 85 percent contribution to adjusted operating profit during the period. Trading continues to be strong in this segment. We are encouraged by new projects won from both existing and new clients, and excited by the opportunities generated from increased collaboration between our businesses. Having indicated our intention to remain focused on diversifying into other sectors, we are pleased to have recently announced the disposal of a significant element of our Marketing Activation segment. This significantly reduces the Group s exposure to the structurally challenged, commoditised print markets and the risk of further, potentially significant re-structuring costs. We remain confident in our long-term growth strategy to generate value for shareholders. 1
For further information, please contact: St Ives plc 020 7928 8844 Matt Armitage, Chief Executive Brad Gray, Chief Financial Officer MHP Communications 020 3128 8778 Tim Rowntree, Giles Robinson, Luke Briggs https://www.st-ives.co.uk/investor-relations The foregoing contains forward looking statements made by the Directors in good faith based on information available to them up to 7 March. Such statements need to be read with caution due to inherent uncertainties, including economic and business risk factors underlying such statements. 2
Chief Executive s Review Group Performance from Continuing Operations The results for the Group s continuing operations for the 27 week period to 2 February show Group revenue of 146.5 million, 7% higher than the previous period. Our Strategic Marketing segment delivered, for the twenty seven week period to 2 February, like-for-like revenue growth of 23% (excluding the impact of currency movements) in comparison to the twenty six week period to 27 January. This was partially offset by an 11% decline in our Marketing Activation segment and a 10% decline in our Books segment. The Group s Adjusted profit before tax increased to 12.7 million (: 9.5 million) and Adjusted basic earnings per share increased by 34% to 7.06 pence (: 5.26 pence). The Group s statutory loss before tax of 15.0 million (: 3.1 million) includes Adjusting Items of 27.7 million (: 12.6 million). The Adjusting Items include costs related to acquisitions made in prior periods of 23.4 million, impairment of intangible assets of 2.2 million, costs related to the St Ives Defined Benefits Pension Scheme (the Scheme ) of 0.9 million and other restructuring costs of 1.2 million. Adjusting items of 26.9 million have been recorded in the Strategic Marketing segment and 0.8 million has been recorded in the Books segment. The half year reflects further significant progress in our higher growth and higher margin Strategic Marketing segment, offsetting pressures elsewhere. Strategic Marketing contributed 85% of Group Adjusted profit from operations during the period ( 54%). Discontinued Operations On 2 March, as part of the Group s continuing strategy to focus on its Strategic Marketing segment, we announced the disposal of a significant part of our Marketing Activation segment including Point-of-sale, Exhibitions and Events, and Field Marketing businesses. These businesses have been treated as discontinued operations and assets held for sale, with a non cash impairment of 14.0 million to the goodwill related to these businesses. The consideration of 6.0 million will be used to reduce Group debt. Balance Sheet Net debt as at 2 February was 42.2 million, down from the 54.6 million as at 28 July, representing a net debt to adjusted EBITDA ratio of 1.2x (28 July : 1.6x). Dividend The Board has declared a maintained interim dividend of 0.65 pence per share ( 0.65 pence) which will be paid on 4 May to the shareholders on the register at 6 April, with an ex-dividend date of 5 April. Pension Scheme On an IAS 19 basis the net deficit on the Scheme decreased to 15.8 million (28 July : 16.0 million). This is mainly due to a decrease in the discount rate used, which reduced the obligations of the plan. Strategic Priorities The Board remains confident in its long term strategy for further growth, which is built around our Strategic Marketing segment and remains centred around three key priorities: Collaboration We continue to make progress with our collaboration agenda with major clients including Tesco, Kraft Heinz, Jaguar Land Rover and Electrolux working with multiple businesses across the Group. We continue to see a general increase in demand for integrated solutions from clients within our Strategic Marketing segment. Having seen the benefit of bringing a number of our Digital and Data businesses closer together, we are continuously looking to review and evolve our operating model in this segment to take advantage of further collaboration opportunities. Internationalisation Many of our businesses continue to deliver international solutions for clients with nine of our Strategic Marketing businesses servicing clients on an international basis. 3
Our strategy for developing St Ives overseas footprint is client-driven and we will continue to open offices in those territories where we can identify client-led opportunities. However, we remain disciplined in our implementation of this strategy; the opportunities must be in large markets or in markets with the potential for significant and sustainable growth, and the offices need to be capable of generating appropriate returns within a reasonable time frame. Acquisitions In the longer term, the acquisition of further complementary marketing services businesses, which add value to our existing portfolio and operate in our chosen growth areas of digital, data and insight services, will continue to be an important element of the growth strategy of our Strategic Marketing segment. However we are currently prioritising organic growth, including leveraging the investments we have made in existing propositions and in new offices. Segment Overview Continuing Operations Strategic Marketing Our Strategic Marketing operations represent 63% of Group revenue for the half year (: 55%) and 85% of Group Adjusted operating profit (: 54%). Digital 56.7 41.6 Data 16.8 16.7 Insight 18.2 17.5 Revenue from continuing operations 91.7 75.8 Adjusted operating profit 12.0 5.9 We have seen further encouraging progress within the Strategic Marketing segment- the core of the Group and key to our long-term growth strategy - with significant new client wins including NFU Mutual, Sun Life, Amgen, BMS and Brunswick. As a result of an increase in client demand for more integrated solutions, we have continued to drive our collaboration agenda and to evolve our operating model accordingly. We continue to focus on the disciplines of Digital, Data and Insight although the strict distinctions between these disciplines are becoming less relevant as clients demand more integrated propositions from us. Our Data businesses work increasingly with each other and also with our Digital businesses, where numerous joint propositions have been developed. We see further opportunities for collaboration between our Digital and Data businesses as data continues to be the driving force behind successful digital marketing and brand transformation activities. The short-term priority within our Data businesses is to ensure that our offering is fully compliant with and able to benefit from the new General Data Protection Regulation ( GDPR ) which will apply from May. Synergies between our five Digital businesses continue to develop, resulting in shared resources, working practices, growth frameworks and data. During the period we brought the management of our five Digital businesses under J Schwan (previously the CEO of Solstice, our Chicago based mobile and emerging technology consultancy) to help drive our collaboration agenda and develop a broad-based technology proposition for our clients. Our research consultancy Incite is performing in line with expectations. The core UK business has seen continued growth with strong performance in the pharma and finance sectors and robust sales in FMCG; bucking the trend in a highly challenging market. Meanwhile we continue to see both growth and improved profitability in our US businesses, with the new office in San Francisco quickly building a strong presence in the technology sector. m m 4
Our healthcare consultancy, Hive, despite a slow start to the year has had a number of new client wins during the period including Valeant, Vifor, HCA and Amgen. It has also expanded its international footprint particularly within the USA, with the Hive and Pollen Brands now in New York and Boston. Pragma, our strategic consumer consultancy, has won several large new diligence projects in the last six months. Pragma s Airport and Commercial Spaces division has also won new large projects working with both airport investors and owners, while its Strategy division has invested in building its senior team in the areas of digital and operational improvement. Pragma continues to work closely with FSP, our specialist property consulting firm, with joint projects for property asset managers. Marketing Activation Our Marketing Activation segment represented 12% of Group revenue from continuing operations for the half year (: 15%) and 10% of Group Adjusted operating profit (: 21%). Revenue from continuing operations 17.4 19.5 Adjusted operating profit 1.4 2.3 m m As detailed above, subsequent to the end of the half year, we disposed of our Point-of-sale, Exhibitions and Events, and Field Marketing businesses which represented a significant portion of our Marketing Activation segment. As the disposal of these businesses was highly probable at the balance sheet date, the businesses have been treated as discontinued operations and assets held for sale. Further details on this can be found in note 8. The remaining business within the segment, St Ives Management Services Limited, provides outsourcing and supply chain management solutions to a number of significant clients including Royal Mail, The Co-operative Group, Conservative Party, Akzo Nobel and Informa. Books Our market-leading Books business represented 25% (: 30%) of Group revenue for the half year and 5% of Group Adjusted operating profit (: 25%). Revenue from continuing operations 37.4 41.4 Adjusted operating profit 0.8 2.7 m m Revenue was 10% lower than the prior half year at 37.4 million (2016: 41.4 million). The reduction in revenue was due to a previously announced contract loss. Aside from this, trading during the first half year was generally positive, particularly during the pre-christmas period, and this has continued in the new calendar year. We continue to adapt to suit the evolving needs of clients, leveraging our well-invested digital print technology to provide a broader product range, greater capacity to support fast lead-times, lower stock-holding and with continued focus on extending supply-chain solutions to reduce the overall cost of the books supply-chain. 5
Outlook Trading across our Strategic Marketing segment was robust during the period. We are encouraged by the new projects being won from existing and new clients, and excited by the opportunities that increased collaboration between our businesses is generating. However, we recognise the need to continue to address the effect that our legacy businesses are having on the Group s overall performance and our ability to generate value for shareholders, which remains a top priority for the Board. Within our Books business we are continuing to take decisive action to ensure that the cost base reflects the future level of volumes we now expect. Earlier this month, we were pleased to announce the disposal of a significant element of our Marketing Activation segment. This significantly reduces the Group s exposure to the structurally challenged, commoditised print markets and the risk of further, potentially significant re-structuring costs. We remain confident in our long term growth strategy to generate value for shareholders. This is supported by the quality of the businesses within Strategic Marketing and illustrated by the major clients, international brands and significant contracts we continue to attract. Matt Armitage Chief Executive 7 March 6
Condensed Consolidated Income Statement Revenue Note 2 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Adjusted Adjusting Statutory Statutory Statutory Results Items Results Results* Results* (Note 3) 146,403 64 146,467 136,683 282,614 Cost of sales (98,782) (358) (99,140) (99,593) (199,984) Gross profit 47,621 (294) 47,327 37,090 82,630 Selling costs (6,890) (6,890) (6,882) (13,897) Administrative expenses (26,766) (27,336) (54,102) (32,120) (82,124) Share of results of joint ventures 231 231 122 355 Other operating (expense)/income (30) 117 87 450 2,819 Profit/(loss) from operations 2 14,166 (27,513) (13,347) (1,340) (10,217) Net pension finance expense (194) (194) (323) (638) Other finance expense (1,432) (1,432) (1,472) (3,017) Profit/(loss) before tax 12,734 (27,707) (14,973) (3,135) (13,872) Income tax (charge)/credit (2,653) 1,111 (1,542) (1,083) 277 Profit/(loss) for the period from 10,081 (26,596) (16,515) (4,218) (13,595) continuing operations Profit/(loss) from discontinued operations 8 985 (13,853) (12,868) (23,763) (29,763) Net profit/(loss) for the period 11,066 (40,449) (29,383) (27,981) (43,358) Continuing operations Basic earnings/(loss) per share (p) Diluted earnings/(loss) per share (p) 5 5 7.06 (18.63) (11.57) (2.96) (9.53) 7.06 (18.63) (11.57) (2.95) (9.53) Continuing and discontinued operations Basic earnings/(loss) per share (p) Diluted earnings/(loss) per share (p) 5 5 7.76 (28.34) (20.58) (19.63) (30.40) 7.76 (28.34) (20.58) (19.62) (30.40) Adjusting Items comprise of redundancies, empty property and restructuring costs; gain or loss on disposal of properties; costs related to the acquisitions; impairment or amortisation charges related to goodwill, tangible and intangible assets; contingent consideration required to be treated as remuneration; movements in deferred consideration and costs related to the St Ives Defined Benefits Pension Scheme. *The comparative figures have been reclassified to show the Point-of-Sale, Exhibition and Events, and Field Marketing businesses, which lie within our Marketing Activation segment, as discontinued operations. 7
Condensed Consolidated Statement of Comprehensive Income 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Loss for the period (29,383) (27,981) (43,358) Items that will not be reclassified subsequently to profit or loss: Remeasurement of the net retirement benefits obligation (1,751) 7,335 8,958 Tax charge/(credit) on items taken directly to equity 298 (1,320) (1,584) (1,453) 6,015 7,374 Items that may be reclassified subsequently to profit or loss: Transfers of (profits)/losses on cash flow hedges to hedged items (163) (109) 302 (Losses)/profits on cash flow hedges (768) 163 (138) Foreign exchange (loss)/profit (889) 759 369 (1,820) 813 533 Other comprehensive (expense)/income for the period (3,273) 6,828 7,907 Total comprehensive expense for the period (32,656) (21,153) (35,451) All income for all periods was attributable to shareholders of the parent company. 8
Condensed Consolidated Statement of Changes in Equity Share capital Additional paid-in capital^ Treasury shares Share option reserve Hedging and translation reserve Other reserves* Retained earnings Balance at 30 July 2016 14,244 69,795 (163) 6,723 661 77,016 42,368 133,628 Loss for the period (27,981) (27,981) Other comprehensive income for the period 813 813 6,015 6,828 Comprehensive income/(expense) for the period 813 813 (21,966) (21,153) Dividends (7,777) (7,777) Recognition of shared-base contingent consideration deemed as remuneration 2,828 2,828 2,828 Transfer of contingent consideration deemed as remuneration (371) (371) 393 22 Settlement of share-based payments 44 395 (123) 272 124 440 Recognition of share-based payments (54) (54) (54) Balance at 27 January 14,288 70,190 (163) 9,003 1,474 80,504 13,142 107,934 Loss for the period (15,377) (15,377) Other comprehensive (expense)/income for the period (280) (280) 1,359 1,079 Total Comprehensive expense for the period (280) (280) (14,018) (14,298) Dividends (928) (928) Recognition of shared-base contingent consideration deemed as remuneration 4,141 4,141 4,141 Transfer of contingent consideration deemed as remuneration 225 (5,305) (5,080) 5,361 281 Settlement of share-based payments (4) 3 3 (1) (2) Tax on share-based payments (63) (63) 16 (47) Recognition of share-based payments 124 124 124 Balance at 28 July 14,284 70,418 (163) 7,900 1,194 79,349 3,572 97,205 Loss for the period (29,383) (29,383) Other comprehensive expense for the period (1,820) (1,820) (1,453) (3,273) Comprehensive expense for the period (1,820) (1,820) (30,836) (32,656) Dividends (1,856) (1,856) Recognition of shared-base contingent consideration deemed as remuneration 3,268 3,268 3,268 Transfer of contingent consideration deemed as remuneration (619) (619) 655 36 Recognition of share-based payments 839 839 839 Balance at 2 February 14,284 70,418 (163) 11,388 (626) 81,017 (28,465) 66,836 ^ Additional paid-in capital represents share premium, merger reserve and capital redemption reserve. * Other Reserves comprises the sum of; additional paid in capital, treasury shares, share option reserve and hedging and translation reserve. 9
Condensed Consolidated Balance Sheet 2 February 27 January 28 July Note Assets Non-current assets Property, plant and equipment 23,575 29,022 26,235 Investment property 6,203 Goodwill 9 93,163 115,332 108,676 Other intangible assets 9 34,893 48,618 42,792 Available for sale 3 3 3 Investment in joint venture 723 206 517 Deferred tax assets 367 232 375 Other non-current assets 12 14 13 152,736 199,630 178,611 Current assets Inventories 3,262 6,467 6,253 Trade and other receivables 60,633 95,656 91,063 Derivative financial instruments 8 45 Income tax receivable 102 124 Assets held for sale 8 29,205 11 Cash and cash equivalents 21,419 18,486 25,651 114,629 120,609 123,147 Total assets 267,365 320,239 301,758 Liabilities Current liabilities Trade and other payables 58,993 86,392 79,539 Derivative financial instruments 1,016 226 17 Income tax payable 2,047 1,461 Deferred consideration payable 26,621 2,367 15,920 Liabilities held for sale 8 23,205 Deferred income 8,090 6,801 7,141 Provisions 274 9 388 118,199 97,842 104,466 Non-current liabilities Loans payable 63,660 88,906 80,245 Retirement benefits obligations 6 15,789 18,469 16,041 Deferred consideration payable 750 790 Other non-current liabilities 579 682 Provisions 954 2,240 1,823 Deferred tax liabilities 598 4,058 1,296 82,330 114,463 100,087 Total liabilities 200,529 212,305 204,553 Net assets 66,836 107,934 97,205 Equity Capital and reserves Share capital 14,284 14,288 14,284 Other reserves 81,017 80,504 79,349 (Accumulated losses)/retained earnings (28,465) 13,142 3,572 Total equity 66,836 107,934 97,205 These financial statements were approved by the Board of Directors on 7 March. 10
Condensed Consolidated Cash Flow Statement Operating activities Note 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Cash generated from operations 7 23,149 18,862 30,686 Interest paid (1,432) (1,472) (3,017) Income taxes (paid)/received (4,146) 1,500 (587) Net cash generated from operating activities 17,571 18,890 27,082 Investing activities Purchase of property, plant and equipment (1,444) (1,762) (3,154) Purchase of other intangibles (226) (311) Proceeds on disposal of property, plant and equipment 136 1,947 11,770 Deferred consideration paid for acquisitions made in prior periods (2,587) (144) (663) Net cash (used in)/generated from investing activities (3,895) (185) 7,642 Financing activities Proceeds on issue of shares 439 438 Dividends paid 4 (1,856) (7,777) (8,705) Decrease in bank loans (15,500) (5,000) (15,000) Net cash used in financing activities (17,356) (12,338) (23,267) Net (decrease)/ increase in cash and cash equivalents (3,680) 6,367 11,457 Cash and cash equivalents at beginning of the period 25,651 11,835 11,835 Effect of foreign exchange rate changes (552) 284 2,359 Cash and cash equivalents at end of the period 21,419 18,486 25,651 11
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 financial information contained in these half year financial statements has been prepared in accordance with the accounting policies set out in the Group s Annual Report and Accounts, prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union commission, and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. New accounting standards, amendments to standards, and IFRIC interpretations which became applicable during the period were either not relevant or had no impact on the Group s net results or net assets. The half year statements have not been audited but have been reviewed by the company s auditor. The financial information for the twenty seven weeks ended 2 February and prior half year (twenty six weeks) and full year (fifty two weeks) comparatives do not comprise statutory accounts for the purpose of Section 435 of the Companies Act 2006. The abridged information for the fifty two weeks to 28 July has been extracted from the Group s Annual Report and Accounts 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. Going concern The Directors, having made appropriate enquiries, consider that adequate resources exist for the Group to continue in operational existence for a period of at least twelve months from the date of approval of the condensed consolidated financial statements and that, therefore, it is appropriate to adopt the going concern basis in preparing the combined financial information for the twenty seven weeks ended 2 February. 12
Notes to the Condensed Consolidated Financial Statements continued 2. Segment reporting The Group manages its business on a market segment basis, based on the Group s internal reporting to the Chief Operating Decision Maker ( CODM ). The CODM has been determined to be the Chief Executive Officer and Chief Financial Officer as they are primarily responsible for the allocation of resources to the segments and the assessment of performance of the segments. The continuing operations comprise the Strategic Marketing, Marketing Activation and Books segments. The Strategic Marketing segment comprises of the Group s Digital, Data and Insight businesses. The Marketing Activation segment comprises of the Group s Print Management business. The Books segment comprises Clays. The discontinued operations comprise Point-of-sale, Exhibition and Events, and Field Marketing businesses as detailed in note 8. Corporate costs are allocated to revenue generating segments as this presentation better reflects their profitability. Business segments Continuing operations 27 weeks to 2 February Strategic Marketing Marketing Activation Books Total Revenue External sales 91,263 17,370 37,770 146,403 Group sales 1,591 417 16 2,024 Eliminations (1,204) (404) (416) (2,024) Adjusted revenue 91,650 17,383 37,370 146,403 Adjusting items 64 64 Total revenue 91,714 17,383 37,370 146,467 Result Operating profit before Adjusting Items 12,011 1,380 775 14,166 Adjusting Items (26,848) (665) (27,513) Statutory (loss)/profit from operations (14,837) 1,380 110 (13,347) Net pension finance expense Other finance expenses (194) (1,432) Statutory loss before tax (14,973) Income tax charge (1,542) Net statutory loss for the period (16,515) 13 Continuing Operations 000 Discontinued Operations Revenue Adjusted revenue 146,403 53,233 199,636 Adjusting items 64 64 Total revenue 146,467 53,233 199,700 Result Operating profit before Adjusting Items 14,166 1,195 15,361 Adjusting Items (27,513) (13,853) (41,366) Loss from operations (13,347) (12,658) (26,005) Total
Notes to the Condensed Consolidated Financial Statements continued 2. Segment reporting (continued) Continuing operations 26 weeks to 27 January Strategic Marketing Marketing Activation Books Revenue External sales 75,249 19,272 42,162 136,683 Group sales 1,306 814 58 2,178 Eliminations (778) (587) (813) (2,178) Total revenue 75,777 19,499 41,407 136,683 Total Result Operating profit before Adjusting Items 5,940 2,250 2,741 10,931 Adjusting Items (8,717) 327 (3,881) (12,271) Statutory (loss)/profit from operations (2,777) 2,577 (1,140) (1,340) Net pension finance expense (323) Other finance expenses (1,472) Statutory loss before tax (3,135) Income tax charge (1,083) Net statutory loss for the period (4,218) Continuing Operations 000 Discontinued Operations Revenue Total revenue 136,683 58,444 195,127 Result Operating profit before Adjusting Items 10,931 345 11,276 Adjusting Items (12,271) (24,053) (36,324) Loss from operations (1,340) (23,708) (25,048) Total 14
Notes to the Condensed Consolidated Financial Statements continued Continuing operations 52 weeks to 28 July Strategic Marketing Marketing Activation Revenue External sales 161,932 42,982 77,700 282,614 Group sales 2,996 1,315 77 4,388 Eliminations (1,981) (1,095) (1,312) (4,388) Total revenue 162,947 43,202 76,465 282,614 Books Total Result Operating profit before Adjusting Items 18,610 5,730 1,874 26,214 Adjusting Items (33,427) 2,632 (5,636) (36,431) Statutory (loss)/profit from operations (14,817) 8,362 (3,762) (10,217) Net pension finance expense (638) Other finance expenses (3,017) Statutory loss before tax (13,872) Income tax credit 277 Net statutory loss for the period (13,595) Continuing Operations 000 Discontinued Operations Revenue Total revenue 282,614 110,540 393,154 Result Operating profit before Adjusting Items 26,214 891 27,105 Adjusting Items (36,431) (31,087) (67,518) Loss from operations (10,217) (30,196) (40,413) Total Geographical segments The Strategic Marketing, Marketing Activation and Books business segments operate primarily in the UK, deriving more than 78% of their revenue and results from operations and customers located in the UK. 15
Notes to the Condensed Consolidated Financial Statements continued 3. Adjusting Items Adjusting Items disclosed on the face of the Condensed Consolidated Income statement are as follows: 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Expense/(income) Restructuring items Redundancies and other charges 1,302 359 1,918 Impairment of tangible assets 2,896 1,302 3,255 1,918 St Ives defined benefits pension scheme costs Administrative costs 292 435 756 Other 433 409 497 725 844 1,253 Costs relating to acquisitions made in current and prior periods Amortisation of acquired intangibles 4,959 5,047 4,581 Impairment of goodwill and acquired intangible assets 2,161 8,428 Costs associated with the acquisition and setup of subsidiaries 99 Contingent consideration required to be treated as remuneration 15,288 3,616 15,550 Increase/(decrease) in deferred consideration 3,195 (34) 7,362 25,603 8,629 36,020 Adjusting Items in expenses from continuing operations 27,630 12,728 39,191 Profit on disposal of property, plant and equipment (117) (457) (2,760) Adjusting Items before interest and tax 27,513 12,271 36,431 Net pension finance charge in respect of defined benefits pension scheme 194 323 638 Adjusting Items before tax from continuing operations 27,707 12,594 37,069 Income tax credit (1,111) (874) (4,999) Adjusted results from continuing operations 26,596 11,720 32,070 Following the changes in senior management teams within Digital and Data businesses, redundancy and restructuring costs of 0.9 million are recorded within the Strategic Marketing segment. In addition revenue of 0.1 million and costs of 0.4 million related to closure of the Shanghai office is also recorded within the Strategic Marketing segment. Restructuring costs of 0.1 million are recorded in the Books segment. During the period, a charge of 2.2 million was recorded in respect of the proprietary techniques related to Hive; further details are available in Note 9. The profit on disposal of property, plant and equipment of 0.1 million relates to the sale of a Group property at Bungay and is recorded in the Books segment. 16
Notes to the Condensed Consolidated Financial Statements continued 4. Dividends per share 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Final dividend paid for the 52 weeks ended 29 July 2016 5.45p 7,777 7,777 Interim dividend paid for the 26 weeks ended 27 January 0.65p 928 Final dividend paid for the 52 weeks ended 28 July 1.30p 1,856 Dividends paid during the period 1,856 7,777 8,705 Declared interim dividend for the 27 weeks ended 2 February 0.65p 928 Declared interim dividend for the 27 weeks ended 27 January 0.65p 928 5. Earnings per share The calculation of the basic and diluted earnings per share is based on the following: Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Share options: Weighted average number of ordinary shares for the purposes of diluted earnings per share 27 weeks to 26 weeks to 27 52 weeks to 2 February '000 January '000 28 July '000 142,746 142,541 142,642 96 142,746 142,637 142,642 Basic and diluted earnings per share from continuing operations Earnings 27 weeks to 2 February Earnings per share pence Earnings 26 weeks to 27 January Earnings per share pence Earnings 52 weeks to 28 July Earnings per share pence Earnings/(loss) and basic earnings/(loss) per share Adjusted earnings and adjusted basic earnings per share 10,081 7.06 7,502 5.26 18,475 12.95 Adjusting Items (26,596) (18.63) (11,720) (8.22) (32,070) (22.48) Loss and basic loss per share (16,515) (11.57) (4,218) (2.96) (13,595) (9.53) Earnings/(loss) and diluted earnings/(loss) per share Adjusted earnings and Adjusted diluted earnings per share 10,081 7.06 7,502 5.26 18,475 12.95 Adjusting Items (26,596) (18.63) (11,720) (8.21) (32,070) (22.48) Loss and diluted loss per share (16,515) (11.57) (4,218) (2.95) (13,595) (9.53) 17
Notes to the Condensed Consolidated Financial Statements continued Basic and diluted earnings per share from continuing and discontinued operations 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Earnings Earnings per share pence Earnings Earnings per share pence Earnings Earnings per share pence Earnings/(loss) and basic earnings/(loss) per share Adjusted earnings and adjusted basic earnings per share 11,066 7.76 7,773 5.45 19,104 13.39 Adjusting Items (40,449) (28.34) (35,754) (25.08) (62,462) (43.79) Loss and basic loss per share (29,383) (20.58) (27,981) (19.63) (43,358) (30.40) Earnings/(loss) and diluted earnings/(loss) per share Adjusted earnings and Adjusted diluted earnings per share 11,066 7.76 7,773 5.45 19,104 13.39 Adjusting Items (40,449) (28.34) (35,754) (25.07) (62,462) (43.79) Loss and diluted loss per share (29,383) (20.58) (27,981) (19.62) (43,358) (30.40) Adjusted earnings is calculated by adding back Adjusting Items, as adjusted for tax, to the profit/(loss) for the period. 6. Retirement benefits The net obligation in respect of the St Ives plc Retirement Benefits Pension Scheme of 15.8 million at 2 February has decreased compared to 16.0 million as at 27 July. The decrease is primarily due to a decrease in the obligations of the plan, which is the result of a change in the discount rate used. 18
Notes to the Condensed Consolidated Financial Statements continued 7. Notes to the condensed consolidated cash flow statement Reconciliation of cash generated from operations 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Loss from continuing operations (13,347) (1,340) (10,217) Loss from discontinued operations (12,658) (23,708) (30,196) Loss from operations (26,005) (25,048) (40,413) Adjustments for: Depreciation of property, plant and equipment 2,357 3,630 6,149 Share of profit from joint venture (231) (122) (355) Impairment losses 16,207 26,930 33,058 Amortisation of intangible assets 4,873 5,389 10,624 Profit on disposal of property, plant and equipment (87) (450) (2,818) Share-based payment charge/(credit) 839 (54) 70 Decrease in fair value of derivatives 962 Decrease in retirement benefit obligations (2,290) (1,145) (2,789) Remeasurement of deferred consideration 3,195 (34) 7,362 Increase in contingent consideration required to be treated as remuneration 15,288 3,616 15,550 Increase/(decrease) in provisions 220 33 (5) Operating cash inflows before movements in working capital 15,328 12,745 26,433 Decrease in inventories 981 239 583 Decrease/(increase) in receivables 4,999 (4,086) (130) Increase in payables 145 9,394 2,852 Increase in deferred income 1,696 570 948 Cash generated from operations 23,149 18,862 30,686 Analysis of net debt 29 July Cash flow Exchange differences 2 February Cash and cash equivalents 25,651 (3,680) (552) 21,419 Bank loans (80,245) 15,500 1,085 (63,660) Net debt (54,594) 11,820 533 (42,241) 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. 19
Notes to the Condensed Consolidated Financial Statements continued 8. Discontinued Operations and Event after the balance sheet date On 2 March, the Group announced the disposal of a significant portion of its Marketing Activation segment for a total consideration of 6 million. The four subsidiaries disposed of were SP Group Limited (Point-of-sale), Service Graphics Limited (Exhibition and Events), Tactical Solutions UK Limited and Flare Limited (Field Marketing). As the disposals were considered highly probable at the balance sheet date each of these businesses has been classified as discontinued operations and as assets and liabilities held for sale in these interim statements and comparative figures have been restated accordingly. Results of Discontinued Operations Adjusted results from discontinued operations are analysed below: 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Revenue 53,233 58,444 110,540 Operating Costs (52,038) (58,099) (109,649) Profit before tax and Adjusting items 1,195 345 891 Income tax charge (210) (73) (262) Profit after tax before Adjusting Items 985 272 629 Adjusting items from discontinued operations are analysed below: 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Impairment of plant and machinery (2,801) (2,808) Impairment of intangible assets (14,046) (21,130) (27,130) Other adjusting items 193 (122) (1,149) Total Adjusting Items before tax (13,853) (24,053) (31,087) Income tax credit 18 695 Total Adjusting Items after tax (13,853) (24,035) (30,392) The impairment charge of 14.0 million relates to assets held for sale in the Marketing Activation segment and was recorded in light of the reduction of the recoverable amount of these assets, which will be recovered principally through the sale of the subsidiaries outlined above. Other Adjusting items include a credit relating to the acquired intangibles of the Field Marketing businesses. Statutory Results from discontinued operations are analysed below: 27 weeks to 2 February 26 weeks to 27 January 52 weeks to 28 July Profit after tax before Adjusting Items 985 272 629 Adjusting Items after tax (13,853) (24,035) (30,392) Total loss from discontinued operations (12,868) (23,763) (29,763) 20
Notes to the Condensed Consolidated Financial Statements continued The assets and related liabilities of the discontinued operations are classified as held for sale on the face of the balance sheet at 2 February, and are comprised as follows: 2 February Assets held for sale Goodwill 438 Property, plant and equipment 1,623 Intangible assets 265 Deferred tax assets 312 Inventories 2,010 Trade and other receivables 23,624 Other current assets 933 Total Assets 29,205 Liabilities directly associated with assets held for sale Trade and other payables 21,357 Provisions and deferred income 650 Other liabilities 1,198 Total Liabilities 23,205 9. Goodwill and Intangibles At 2 February the Group held goodwill of 15.1 million in relation to Hive. As previously reported in the Annual Report and Accounts, the forecasts and projected growth rates for Hive are sensitive. The impairment model at the half year assumes a projected five year revenue growth rate of 5.6%, a long term growth rate beyond that period of 2.6%, and a pre-tax discount rate of 10%, and shows an excess of value-inuse over carrying value of 5.1 million following the impairment of intangible assets of 2.2 million. Sensitivity analysis on the key assumptions included in the impairment review indicates that a reasonably possible change in the key growth assumption, such as a cumulative 3.7% reduction in the five year revenue growth forecast or a reduction in forecast margin, will result in the recoverable amount of goodwill falling below its carrying value. 10. Risks and uncertainties The Group s principal risks and key mitigating activities in place to address them, as at 28 July, are set out in pages 24 to 27 of the Group s Annual Report and Accounts, a copy of which is available on the Group s website: www.st-ives.co.uk. The principal risks have been considered by the Board and no changes have been made, since the period ended 28 July. 11. 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 two weeks ended 28 July. 21
Notes to the Condensed Consolidated Financial Statements continued 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 half year 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 half year management report includes a fair review of the information required by DTR4.2.8R (disclosure of related parties transactions and changes therein). At the date of this statement, the directors are those listed in the Groups Annual Report and Accounts, with the exception of Ben Gordon who resigned on 30 November. By order of the Board Matt Armitage Chief Executive 7 March The foregoing contains forward looking statements made by the Directors in good faith based on information available to them up to 7 March. Such statements need to be read with caution due to inherent uncertainties, including economic and business risk factors underlying such statements. 22
INDEPENDENT REVIEW REPORT TO ST IVES PLC Report on the condensed consolidated interim financial statements We have been engaged by the company to review the condensed set of financial statements in the half-year results for the twenty seven weeks ended 2 February which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Cash Flow Statement and related notes to the Condensed Financial Statements. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed. Directors responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-year results in accordance with the Disclosure and Transparency Rules of the United Kingdom s Financial Conduct Authority. As disclosed in note 1, the annual report and accounts of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 23
INDEPENDENT REVIEW REPORT TO ST IVES PLC continued Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-year results for the twenty seven weeks ended 2 February is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom s Financial Conduct Authority. Deloitte LLP Statutory Auditor London 7 March 24