St Ives now 'very much on track'


A £10.2m goodwill write-down at SP Group has helped propel St Ives to a £5.7m pre-tax loss for the year, but the group said all its operations are now back on track.

The PLC had issued a profits warning in April due to slowdown in business at its burgeoning Strategic Marketing division, home to its string of recent marketing services acquisitions, alongside continuing tough trading in point-of-sale for major grocery retail clients.

Although chief executive Matt Armitage said trading had subsequently “stabilised”, the results include a £36.1m charge for adjusting items that includes restructuring and write-downs across the business in its year-end results for the period to 29 July.

The charge also included £8.2m of contingent consideration for acquisitions that is required to be treated as remuneration, and a £9.2m write-down of acquired intangible assets.

The group also lost £1.65m on the disposal of surplus property in Bradford (the former St Ives Direct/Global MP facility) and an ex-SP site in Birmingham.

Group sales rose 6.6% to £367.5m, while adjusted pre-tax profits were down 7.8% at £30.4m. The pre-tax loss for the year was £5.7m (2015 profit: £8.7m), and the bottom line loss was £8.1m.

Sales at its Marketing Activation division, which includes point-of-sale specialist SP Group, large-format wing Service Graphics, and field marketing agency Tactical Solutions, were down 7.2% at £154.8m.

St Ives said the fall was primarily because of ongoing market pressure affecting key grocery retail clients.

The group has moved to broaden its customer base and recently won a large print and fulfilment contract with Whitbread, which owns brands including Premier Inn, Costa, and Brewers Fayre.

The contract was previously held by Adare.

Further client diversification in Marketing Activation was still “a priority”.

Operating profit at the division prior to adjusting items was down 26.2% at £8.1m, while margins slipped from 6.6% to 5.2%.  

The adjusting items included the £10.2m impairment charge related to the value of SP, a £2.16m write-off against Tactical Solutions, plus £365,000 relating to the loss of an unnamed customer at Tactical. The bottom line loss for the division was £7.7m (2015 profit: £6.2m).

Sales at Books division Clays were up 3% to £68.6m, but operating profits fell from £8.1m to £5.8m.

Clays benefited from the latest JK Rowling book, the script for Harry Potter and the Cursed Child, and invested in additional digital printing equipment and added-value services as part of the transition of the Penguin Random House work.

However, around 30 redundancies were made at a cost of £521,000 due to over-staffing and a change in the work mix. 

The growing Strategic Marketing division now accounts for 39% of St Ives’ sales, and the group remains on the lookout for further acquisitions despite recent travails.

Sales at Strategic Marketing jumped by £33.5m to £144.2m, and adjusted operating profits rose from £16.34m to £19.35m. However, margins slipped to 13.4% (2015: 14.8%).

A number of redundancies were made, at a cost of £486,000.

Chief executive Matt Armitage said: “Although we lost some work [in Strategic Marketing] we thought the right thing to do was not cut costs severely in those businesses, so we carried some resource in anticipation of winning new work and we’ve now replaced the majority of it.

“We are expecting both Marketing Activation and Books to be stable in the top line and with margins similar to where they are currently. So we’re expecting stability.”

The group’s net debt increased from £62.8m to £80.8m and St Ives has put in place new finance facilities through to 2019, including a £30m loan and a reduced revolving credit facility of £95m.  

Armitage said that after the hiatus earlier this year the business was now “very much on track”.

“We’re feeling fine. We were very clear in April that the issues in Marketing Activation were market issues and we’ve dealt with them, and the issue in Strategic Marketing was short-term. There isn’t a hole in our basket.”

He described the Brexit situation as “just a bit unhelpful”.

“We’re not seeing any specific examples of cancelled or pulled work, but generally speaking it’s not helpful because it increases the level of caution and creates background noise.”

The group’s share price, which fell to a 52-week low of 120p after the profits warning in April and then fell further over the summer, rose by 8.95p or 6.5% to 145.95p after the results. 

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