Re-shaped St Ives grows print profits

By Jo Francis, Tuesday 11 March 2014

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St Ives has pushed up both sales and margins at its restructured print wing, alongside a huge jump in marketing services revenues at the acquisitive group.

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Martell: results show strategy is paying off

In its interim results for the six months to 31 January the PLC posted group sales up 1.9% to £164.8m, with underlying pre-tax profits posting another double-digit rise, up 13.1% to £12.9m.

Marketing services revenues jumped 50% year-on-year to £46.7m, fuelled by the group's flurry of acquisitions in this space, although St Ives said almost 14% of the increase was down to organic growth.

On a like-for-like basis, print sales were up 2.4% at £121.7m, and margins improved from 6.5% to 7.3%.

“We are very pleased with the results, which are the manifestation of our strategy to move out of commoditised print and move forward in our ambitions to make marketing services 50% of our operating profit,” said chief executive Patrick Martell.

The print division results exclude the former St Ives Direct Bradford operation, now renamed Global MP, which was sold in September 2013 for £8m, of which £5m was to be made in deferred payments.

Martell said St Ives was receiving payments, albeit not to the original schedule, and was being “as accommodating and flexible as we can be” in helping Global MP with a revised payment plan.

Finance director Matt Armitage said St Ives was taking a cautious approach to the outstanding amount.

“We take a very conservative view so we are not writing up the deferred consideration to the balance sheet. We are accounting for it as we receive it.”

At book wing Clays, sales were down 5.7%. The operation is undergoing a strategic review in the face of changing demands from book publishers.

However, margins were maintained at the Bungay-based book printer and Martell said the sales decline was in line with the overall market reduction for printed books.

“There has been some substitution by e-books but we see that very much flattening out. E-books are creating more reading, not less,” he said.

“We are making good progress in our strategic review, in that we are engaged with a number of initiatives to enable us to offer publishers services around stock management and inventory management to help them predict print requirements,” Martell explained.

“I’m encouraged; I think there are big opportunities there for us.”

The new digital printing lines at Clays are now fully up and running compared with the prior year, when the kit wasn’t working to specification.

The performance of exhibition and events specialist Service Graphics was described as “satisfactory” in the absence of work for the London Olympics and Paralympics, which had boosted its results in the prior year. However, the firm recently won a contract with Twickenham Stadium and upcoming events such as the Rugby World Cup are likely to provide an uplift in business.

Point-of-sale wing SP Group, which is St Ives’ largest print operation by turnover, pushed up sales and profits on the back of “significant” new contract wins including work for fashion retailer New Look.

“Across all our print businesses we won’t pursue volume at low margins. We are focused on service,” Martell stated.

The SP business was streamlined during the period with the closure of a small sheetfed printing operation in Birmingham, which was relocated to the main Redditch site.

The group is also benefiting from cross-selling of its marketing services offering to large-scale print clients, such as HSBC.

Margins were reduced in the marketing services wing as St Ives invested in additional personnel and overseas expansion. It opened an office in Singapore and is considering a similar set-up for Shanghai.

“We are delivering on the top line but there are upfront costs associating with building the business to deliver that growth, and in the short term we will invest in these operations,” said Armitage.

Field marketing specialist Tactical Solutions, viewed as a high-growth business when it was acquired in 2011, disappointed with a drop in sales year-on-year.

“We are transitioning the previous owner from the business and have put a new management team in place, and we have also invested quite heavily in technology for that business,” Martell said.

St Ives’ pension scheme swung from a small surplus last year to a £6.9m obligation. “Fractional movements in some of the key assumptions mean it can easily move by a few million pounds," said Armitage. “We have just finished the triennial negotiations with the pension trustees and our £2m-per-annum contribution remains in place.”

Net debt fell by £2.8m to £12.4m.

The group increased its interim dividend by 7.5% to 2.15p per share. “The dividend is very important to our shareholders and as the business improves, so will the dividend,” added Martell.

St Ives shares rose 4.5p in early trading to 202p, having hit a 52-week high of 203.13p last month. 

Recent acquisition Realise came after the period under review. 

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