Annual Report • Jan 1, 2011
Annual Report
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4imprint Group plc is a leading international distributor of promotional products and comprises three Divisions supplying promotional products under three brand names: 4imprint; Brand Addition; and SPS.
The leading Direct Marketing promotional products business in USA, headquartered in Oshkosh, Wisconsin and servicing a wide range of customers in USA and Canada. European customers are serviced through its base in Manchester, England. 06 07 08 09 10 3.4 4.7 2.9 2.3 4.3 07 08 09 10 16.8 19.8 23.7 16.3 3.3
The UK market leader in sales of outsourced promotional product programmes, supplying large and medium sized customers throughout UK and Europe, principally through contractual and preferred supplier relationships. Operations in Manchester, London and Germany and sourcing offices in Hong Kong and China. 07 08 09 10
Underlying operating profit
£m
A trade supplier selling promotional products to distributors in UK and Europe for onward sale to their customers. The company has specialist manufacturing and sourcing capability together with an extensive range of printing and branding facilities.
* Underlying operating profit is operating profit before IAS 38 marketing cost adjustment, defined benefit pension charges, share option costs and exceptional items
| Group operations | 2 |
|---|---|
| Chairman's statement | 4 |
| Finance Director's report | 5 |
| Operating review | 8 |
| Board of Directors | 11 |
| Directors' report | 12 |
| Statement on Corporate Governance |
16 |
| Statement of Directors' responsibilities |
21 |
| Remuneration report | 22 |
| Independent Auditors' report – Group |
27 |
| Group income statement | 28 |
| Group statement of comprehensive income |
29 |
| Group balance sheet | 30 |
| Group statement of changes in Shareholders' equity |
31 |
| Group cash flow statement |
32 |
| Notes to the financial statements |
33 |
| Independent Auditors' report – Company |
59 |
| Company balance sheet | 60 |
| Statement of changes in Company Shareholders' equity |
61 |
| Company cash flow | |
| statement | 62 |
| Notes to the Company's financial statements |
63 |
| Five year financial record 70 | |
| Registered office and Company advisers |
71 |
4imprint Direct Marketing supplies an extensive range of promotional products and branded apparel to a wide variety of businesses and organisations throughout the USA, Canada, UK and Ireland. The business model combines innovative print and internet based direct marketing, responsive customer service and an award winning working environment to create a platform for growth in the combined \$21bn promotional products market in these countries.
Customers use promotional products as an integral part of their sales and marketing activities, employee/ volunteer/student recruitment and recognition schemes, health and safety programmes and other initiatives where branded products make a lasting connection between an organisation and the recipient. The Division's objective is to take advantage of the growing significance of
promotional products in the overall marketing and advertising mix and the trend towards internet driven purchasing of these items.
Customers in the USA and Canada are served from the divisional headquarters in Oshkosh, Wisconsin. The UK operation serves the UK and Ireland. Both sites use a common, proprietary technology platform that delivers a highly efficient customer service and order fulfilment process that includes art preparation, targeted samples and industry leading turnaround time backed up by an 'on-time or free' promise.
The marketing process includes websites, catalogues, subscription e-mails, internet advertising, educational content and exclusive Blue Box® mailings which deliver targeted product samples and marketing materials to
Brand Addition supplies promotional merchandise to medium and large businesses based in the UK and Europe, predominantly through contractual relationships with businesses who outsource the management of their complex promotional merchandise requirements. It is the market leader in the UK and has a leading position in the rest of Europe.
Its customers who wish to enhance their brand profile using corporate marketing activity and to increase
their revenue via consumer promotion campaigns are amongst the best known businesses in the world. It supplies businesses across all industry sectors with particular strength within Financial Services, Technology, Health and Beauty, Automotive and Engineering.
Using the expertise of its operations in UK and Germany as well as its Asian sourcing operations, Brand Addition offers its customers a range of services to support their requirements across UK and European locations. These
SPS supplies promotional and advertising products to distributors within the promotional products industry who then sell these products on to end users. SPS is based in Blackpool and is the largest UK manufacturer of promotional items.
SPS's customer base comprises more than 2,000 UK and Ireland based distributors. This includes distributors who specialise in promotional products as well as companies who sell promotional products as part of a range of
services. It also supplies product into Europe through a network of specialist companies serving the local promotional product industry.
Based on an annual catalogue with a print run of over 100,000, which is used extensively throughout the industry, and supplemented by targeted product focussed catalogues, SPS sells an extensive range of manufactured and sourced products and has a wide range of manufacturing, printing and branding capability including
encourage customers to discover creative ways to use promotional items.
The business works closely with a small group of supply partners to create an extensive product range to meet the needs of customers. The range includes everything from basic giveaways like pens, bags and drinkware, to exclusive products, full colour trade show displays, embroidered clothing and more, all of which can be ordered through the websites or over the phone with the assistance of the customer care team.
In addition to favourable growth characteristics, the business is highly cash generative. Working capital requirements at around 5% of sales are low, driven by minimal inventory and an increasing proportion of sales being paid by credit card.
Total revenue
Total revenue*
07 08 09 10 16.8 19.8 23.7 16.3
include creative design, bespoke product ranges, ethical sourcing, logistical and inventory management expertise together with account management and web based selling solutions. Total revenue £m 129.0 Underlying operating profit £m
The business has 230 employees who are based at sites in the UK, Germany and Asia. The business is cash generative with minimal fixed capital investment and modest investment in working capital. 07 08 09 10 111.1 96.7 76.7 63.4 4.9
06
injection moulding, pad production, litho, screen, pad and digital printing, labelling and embroidery. Underlying operating profit £m Underlying Total revenue £m
The product range covers much of the industry's requirements with in-house branding supported by an artroom which enables quick order turnaround to match short customer leadtimes. 6.5 6.2 4.9 8.0 07 08 09 10 44.255.0 50.8
06 07 08 09 10 3.4 4.7 2.9 2.3 4.3 *Division formed in 2007
Total revenue* £m
Underlying operating profit*
£m
The Group delivered a good performance with strong revenue and operating profit growth as well as a reduction in net debt. The Group has seen some recovery in the markets it serves during the year. However, it has grown revenue and profitability at a rate well ahead of this recovery as the 4imprint Direct Marketing and Brand Addition Divisions continue to grow their market share.
Group revenue for the year was £200.77m, an increase of 19% over prior year. Underlying operating profit* was £10.49m, 92% ahead of prior year. Underlying operating margin increased to 5.2% from 3.2% in the prior year. Profit before tax was £8.09m (2009: £2.83m), an increase of 186%.
Operating cash flow was strong and cash generated from operations was £7.85m (2009: £7.63m) after a modest increase of £1.69m in working capital to support revenue growth (2009: £3.15m decrease) and contributions to the defined benefit pension fund of £2.50m (2009: £2.46m). Net debt reduced to £0.24m from £3.13m at the end of 2009.
Basic earnings per share were 26.65p (2009: 9.39p)
Revenue in the Division grew strongly and was 16% ahead of 2009, increasing market share. Underlying operating profit of £7.97m was more than double prior year. Both new and existing customer orders were significantly ahead of prior year as the business saw improvement in the yield on its prospecting catalogue and internet marketing spend coupled with further growth in its customer file and retention rate of existing customers. New customer orders in North America were up 14% over prior year and existing customer orders were up 27%. The UK business traded profitably on revenue which increased by 12% over the prior year.
Revenue in the Division grew by 33% compared to 2009. Underlying operating profit was £4.28m, 27% ahead of prior year. The Division benefited from new corporate contracts gained at the end of 2009 and during 2010, as well as some recovery in spend from its existing customer base. The Division continues to expand its geographic reach and has invested in people to maintain its service levels and expertise across a diverse range of industry sectors.
Revenue in the Division was 4% below prior year. Underlying operating profit was £0.06m compared to a small loss in 2009. As a result of the weak performance, further cost cutting initiatives have been undertaken during the year. In addition the business has strengthened its senior management team with particular emphasis on sales and marketing.
The Board has recommended a final dividend of 9.0p per share, an increase of 6% compared to 2009. The Board seeks to pay a progressive dividend whilst having regard for the performance and cash requirements of the Group.
The Board reiterates its strategy of revenue investment in driving profitable organic growth in its three Divisions and continuing to grow market share.
The Board continues to examine ways of reducing the risk of the pension fund to the Group. An early retirement exercise was completed in 2010 and an offer allowing deferred members to transfer funds out of the scheme at an enhanced value is underway. The Board will continue to seek further strategic opportunities to reduce the pension deficit.
The positive trading trends experienced in 4imprint Direct Marketing and Brand Addition in 2010 have continued into the early part of the new year. The Board, while mindful of the potential macroeconomic risk, remains optimistic for the performance of the Group in 2011.
John Poulter Chairman 2 March 2011
* Operating profit before IAS 38 marketing cost adjustment, defined benefit pension charges, share option costs and exceptional items.
| 2010 | 2009 restated |
||
|---|---|---|---|
| £m | £m | Change | |
| Group revenue | 200.77 | 169.09 | +19% |
| Underlying operating profit* | 10.49 | 5.45 | +92% |
| Operating profit | 8.60 | 3.14 | +174% |
| Profit before tax | 8.09 | 2.83 | +186% |
| Net debt | (0.24) | (3.13) +£2.89m |
* Operating profit before IAS 38 marketing cost adjustment, defined benefit pension charges, share option costs and exceptional items.
| 200.77 | 169.09 | +19% | |
|---|---|---|---|
| Inter-segment | (3.34) | (3.12) | |
| SPS | 16.25 | 16.85 | – 4% |
| Brand Addition | 58.89 | 44.22 | +33% |
| 4imprint Direct Marketing | 128.97 | 111.14 | +16% |
| 2010 £m |
Revenue 2009 £m |
Change |
Revenue increased in both the 4imprint Direct Marketing and Brand Addition Divisions with a small decrease in SPS. The Group estimates that the impact of the 53 v 52 week reporting period in 2009 v 2010 resulted in approximately a £1m reduction in revenue in the 4imprint Direct Marketing Division.
| Underlying operating profit | |||
|---|---|---|---|
| 2010 | 2009 | ||
| restated | |||
| £m | £m | Change | |
| 4imprint Direct Marketing | 7.97 | 3.56 | +124% |
| Brand Addition | 4.28 | 3.37 | +27% |
| SPS | 0.06 | (0.06) | |
| Head Office | (1.82) | (1.42) | |
| 10.49 | 5.45 | +92% |
Underlying operating profit increased in all Divisions as a result of tight control of costs and investment in marketing and infrastructure to grow market share resulting in increased revenue in the 4imprint Direct Marketing and Brand Addition Divisions.
The Board monitors progress on the Group's strategy by reference to the following KPIs:
These are discussed in the divisional operating reviews and in this report.
As discussed in the interim statement the Group has adopted the amendment to IAS 38 'Intangible assets' in these financial statements. The amendment requires the expense for mail order catalogues and related marketing expenses to be recognised when the Group has access to the catalogues rather than when the catalogues are distributed. At the end of the year catalogues to which the Group had access are expensed rather than being included in prepayments. This resulted in a small increase in 2010 profit of £0.02m (2009: £0.26m), following restatement of 2008 and 2009 balance sheets.
The Group charged £0.22m (2009: £0.54m) to operating profit. In 2010 this charge is in respect of employee share option schemes in the UK and USA. The charge has been restated in line with a clarification to IFRS 2 'Share-based payments' that the cancellation of options by employees results in a charge of the full remaining cost of the options. This has resulted in an increase in the 2010 charge of £0.10m (2009: £0.11m). The charge is a non cash item.
The Group sponsors a defined benefit pension scheme, closed to new members. At 5 April 2010 (the date of the triennial valuation), the scheme had 1,170 pensioners (2009: 982) and 1,042 deferred members (2009:1,293) and 2 active members (2009: 2).
The triennial valuation of the scheme as at 5 April 2010 was completed in December 2010 and resulted in a deficit on a scheme funding basis of £26.26m, based on assets of £74.94m and liabilities at £101.20m. At the year end, the IAS 19 pension valuation showed a £21.91m deficit with an increase in assets to £77.55m and liabilities at £99.46m (see note 4). The Group has agreed a cash contribution rate to the scheme of £3m for 2011 (increasing at 3% per annum).
The deficit of £21.91m is £0.55m less than the previous year end. This is due to higher asset values (£3.50m) offset by higher liability (£2.95m), as a result of a reduction in the discount rate from 5.8% to 5.5%.
During the year an early retirement exercise was undertaken and 184 members opted to take early retirement from the scheme. In addition, the Company is proposing to make an enhanced transfer value offer to those deferred members who wish to receive it. A trivial commutation exercise is also ongoing. In addition, from March 2011 the scheme will be closed to future accrual.
The Group charged £1.13m to exceptional items in the year (2009: £0.77m).
Exceptional charges of £0.54m related to further restructuring in the SPS Division – including reduction in headcount and the planned closure of an off site warehouse in early 2011.
An exceptional charge of £0.59m related to a 4imprint Group plc guarantee for a leasehold property. This guarantee was maintained following the sale of the Henry Booth business by the Group in 2000. Bemrosebooth Ltd, who acquired the Henry Booth business, went into administration in 2010 and 4imprint became liable for the obligation to the end of the lease in March 2013. An extensive search has not revealed any other historical property guarantees.
The Group tax charge was £1.23m (2009: £0.42m), an effective rate of 15% (2009: 15%). The tax charge is below the Group's marginal rate due principally to the utilisation of previously unrecognised tax losses. The Group had a tax cash refund of £0.60m in the year and paid tax of £0.10m in overseas territories.
Underlying basic earnings per share were 32.87p (2009:17.07p) and basic earnings per share were 26.65p (2009: 9.39p). The calculations are set out in note 9.
The Board has proposed a final dividend of 9.0p which together with the interim dividend of 4.7p, gives a dividend paid and proposed for the period of 13.7p, an increase of 7.5% compared to prior year.
The Group's net debt at 1 January 2011 was £0.24m, a reduction of £2.89m in the year. The principal components of the cash flow movement are:
| £m | |
|---|---|
| Underlying operating profit | 10.49 |
| Working capital movement | (1.69) |
| Depreciation and amortisation | 2.06 |
| Capital expenditure | (1.54) |
| Cash exceptional items | (0.53) |
| 8.79 | |
| Tax and interest | 0.02 |
| Defined benefit pension contributions | (2.50) |
| Dividends | (3.40) |
| Exchange and other | (0.02) |
| Reduction in net debt | 2.89 |
| 2010 £m |
2009 | |
|---|---|---|
| £m | ||
| Cash and cash equivalents | 8.46 | 5.61 |
| Borrowings due in less than one year | (0.37) | (6.20) |
| Borrowings due after one year | (8.33) | (2.54) |
| (0.24) | (3.13) |
The Group agreed new facilities with Lloyds TSB Bank plc in January 2010 and with JPMorgan Chase Bank in the USA in August 2010. These facilities are set out below.
The Group has a £9.75m facility with Lloyds TSB Bank plc, its principal banker. A £6m facility at an interest rate of LIBOR plus 3%, repayable on 31 December 2012, a £1.75m mortgage at an interest rate of LIBOR plus 2.75%, repayable £0.25m on 30 December 2011 and £1.5m on 31 December 2012 and an overdraft facility of £2m at base rate plus 2.75% renewable on 31 December 2011. The Group's US subsidiary has a facility of US\$10m with JPMorgan Chase Bank, at an interest rate of US\$ LIBOR plus 1.5% repayable on 20 April 2012.
The Group had headroom on its borrowing facilities of £7.77m at year end; together with cash balances of £8.46m; in total available funding of £16.23m.
| 2010 | 2009 | |
|---|---|---|
| £m | restated £m |
|
| Non current assets | 29.68 | 31.45 |
| Working capital | 10.68 | 8.64 |
| Net debt | (0.24) | (3.13) |
| Pension deficit | (21.91) | (22.45) |
| Other (liabilities)/assets | (1.00) | 0.05 |
| Net assets | 17.21 | 14.56 |
Net assets increased by £2.65m with the principal movements being profit for the period £6.86m offset by dividend payments totalling £3.40m and a net pension deficit adjustment to reserves £1.10m.
The main exchange rates relevant to the Group are set out below:
| 2010 | 2009 | |||
|---|---|---|---|---|
| Year End | Average Year End Average | |||
| US Dollar | 1.57 | 1.55 | 1.61 | 1.56 |
| Euro | 1.17 | 1.17 | 1.13 | 1.12 |
The movements in the average rates in the year increased operating profit in the US business by £0.09m and reduced the operating profit of the German business by £0.04m. The movements in the year end rates resulted in an increase in US dollar denominated overseas subsidiaries assets of £0.23m and a decrease in Euro denominated overseas subsidiary assets of £0.09m.
Critical accounting policies are those that require significant judgements or estimates and potentially result in materially different results under different assumptions or conditions. It is considered that the Group's critical accounting policies are pensions, deferred taxation, goodwill and inventory provisions.
As already mentioned the Group has adopted the amendment to IAS 38 'Intangible assets' and the clarification to IFRS 2 'Share-based payments' in the period. In addition the adoption of the following standards have impacted on the financial statements:
IAS 1 'Presentation of Financial Statements' (Revised 2007): IAS 1 (revised) requires the presentation of a statement of changes in equity as a performance statement. As a result, a Group statement of changes in Shareholders' equity has been included in the primary
statements rather than in the notes. The Group has elected to show the Income statement and Statement of comprehensive income as separate performance statements.
IFRS 8 'Operating segments' and other new or amended standards effective during the period have not impacted upon the financial statements.
Treasury policy is to manage centrally the financial requirements of the Divisions in line with their business needs. The Group operates cash pooling arrangements on currency accounts separately for its US operations and its UK operations. The Group enters into forward contracts to buy or sell currency relating to specific receivables and payables. It matches its remaining currency requirements in its UK Divisions with currency cash flows arising in its overseas subsidiaries and holds the majority of cash or borrowings with its principal UK banker.
Gillian Davies Group Finance Director 2 March 2011
| 2010 | 2009 | |
|---|---|---|
| restated | ||
| £'000 | £'000 | |
| External revenue | 128,972 | 111,138 |
| Underlying operating profit | 7,973 | 3,557 |
| Operating profit | 7,998 | 3,838 |
Revenue in the Division increased 16% over 2009 (15% at constant currency) as continuous enhancement of marketing techniques, more favourable market conditions and the decision to maintain marketing investment during the economic downturn in 2009 allowed the business to emerge from the recession in a strong position. In 2010, North American revenue in US Dollars was \$190.1m, compared to \$165.4m in the previous year. Revenue in the UK and Ireland was £6.0m, compared to £5.3m in 2009. Operating profit was more than double that of 2009 driven largely by the improving yield on customer acquisition activities.
Industry sources in the USA estimate the size of the promotional products industry in 2010 to be \$17.4bn. This represents a 9% increase over 2009, but is still 12% below the 2008 market estimate of \$19.8bn. In contrast, 4imprint Direct Marketing revenue in the USA increased by 12% between 2008 and 2010. 4imprint's revenue in the UK and Canadian markets is also well above prerecession levels.
In 2010, the yield on prospecting activities improved, generating an 11% increase in customers acquired during the year to more than 100,000. In addition, existing customers were retained at a higher rate, a result of increasingly sophisticated marketing programmes that deliver highly targeted materials to each individual
customer. Orders from existing customers produce a stronger contribution as the cost of acquisition has already been absorbed. Together, these prospecting and retention dynamics along with a stabilised average order value were the principal factors contributing to increases in profitability and return on sales in the year.
2010 was a year of progress for the developing UK based Direct Marketing business. Although the UK economic conditions remain uncertain, revenue increased by 12%, reflecting the progress made in both prospecting and customer retention activities and the business made a small profit.
The business is committed to creating a working environment that attracts and retains the best employees and equips them with the training and tools they need to deliver the superior customer experience that is a key component to growth. In 2010, this was reflected in the North American operation being named for the third consecutive year in the list of 'Best Small & Medium Workplaces in America' by the Great Place to Work Institute® and the 'Investors in People' accreditation achieved in the UK.
The Division remains highly cash generative, with net operating cash inflow broadly equivalent to operating profit in the year.
| 2010 | 2009 |
|---|---|
| £'000 | |
| 58,886 | 44,219 |
| 58,414 | 43,594 |
| 4,284 | 3,370 |
| 4,284 | 3,183 |
| £'000 |
Total revenue in Brand Addition at £58.89m increased 33% over 2009 and underlying operating profit increased by 27%. The revenue growth in 2010 was a result of new contracts gained, including some major international customers gained in 2009, as well as an improvement in sales to existing customers as the economic environment stabilised.
The Division continues to pursue its strategy of providing value added service to its existing customers whilst vigorously pursuing new business opportunities, expanding both its market share and geographic reach. Over half of the Division's revenue comes from outside the UK.
Underlying operating profit was £4.28m, £0.91m ahead of prior year. Operating margin was slightly lower than prior year as a result of customer mix and some foreign exchange impact. The Division also invested in its customer facing teams to ensure that it continues to deliver excellent service to customers as well as pursuing its business growth strategy and maintaining strong control of costs.
The Division is cash generative requiring minimal fixed capital investment and some working capital investment to support growth.
| 2010 | 2009 restated |
|
|---|---|---|
| £'000 | £'000 | |
| External and inter division revenue | 16,252 | 16,847 |
| External revenue | 13,382 | 14,356 |
| Underlying operating profit/(loss) | 57 | (56) |
| Operating loss | (486) | (73) |
Total revenue for 2010 at £16.25m was 4% below prior year. Further production efficiencies and cost cutting initiatives were undertaken in the year to mitigate the reduction in revenue. Underlying operating profit before depreciation in 2010 was £0.77m compared to £0.71m in 2009. Underlying operating profit for 2010 was £0.06m compared with a loss of £0.06m in 2009.
The business continues to focus on improving its revenue and customer service levels and has strengthened its senior management, sales and customer service teams during the year. In addition, the business continues to focus on its product offering with further
product development in manufactured products being undertaken and modest investment in new digital printing, embroidery and screen printing technology.
The business continued to maintain tight control of working capital and cash generated in the year was ahead of underlying operating profit before depreciation and amortisation.
Exceptional costs in the year related to reduction in headcount from 227 to 211 and closure of an off site warehouse.
G. Davies, 43
Group Finance Director
John Poulter was appointed a Non-Executive Director with effect from 1 May 2010 and on 1 September 2010 became Chairman. He is a former Non-Executive Chairman and former Chief Executive of Spectris plc and has served as a Non-Executive Director on several public and private Boards, including Filtronic plc, RAC plc and Kidde plc. He is currently Chairman of Zenergy Power plc.
Gillian Davies was appointed as Group Finance Director in 2004. She has held a series of financial positions, initially with KPMG, where she qualified as a chartered accountant, followed by Zeneca Plc, senior financial roles with Avecia both in the UK and the US and
at the Consumer Division of Georgia Pacific GB Ltd.
Andrew Scull was appointed as Corporate Services Director and Legal Counsel in 2004. He has an MBA from Warwick University and since qualifying as a solicitor in 1980, he has held a number of senior positions including Group Legal Counsel at Laporte plc, Commercial Director at SGB Group plc and Director of Legal Services at Coors Brewers Limited. In addition to extensive experience of international mergers and acquisitions, he has had responsibility for corporate services including pensions, human resources, insurance and real estate.
Ian Brindle was appointed a Non-Executive Director in 2003. He was Chairman of PricewaterhouseCoopers UK and on retiring in 2001 he became Deputy Chairman of the Financial Reporting Review Panel, where he served until 2007. He is a Non-Executive director of Elementis plc, Spirent Communications plc, F&C Asset Management plc and Chairman of Sherborne Investors (Guernsey) A Limited.
Nicholas Temple was appointed a Non-Executive Director in 2003. He spent 30 years with IBM, starting as a systems engineer in 1965 and retiring in 1996 as Chairman, IBM UK Limited and Vice President, IBM Industries, responsible for market strategy and development for Europe, the Middle East and Africa. He currently serves as the Chairman of Intela Global Ltd and Hotelscene Ltd and as a Non-Executive Director of Datatec Pty (SA) and Oceans Connect (UK) Ltd.
Audit Committee Remuneration Committee Nomination Committee Ian Brindle (Chairman) Nicholas Temple (Chairman) Nicholas Temple (Chairman) Nicholas Temple Ian Brindle Ian Brindle
The Directors present their report and the audited financial statements for the period ended 1 January 2011. The Company's statement on Corporate Governance is included in the Corporate Governance Report on pages 16 to 20 of these financial statements.
4imprint Group plc (registered number 177991) is a public limited company incorporated in England and Wales, domiciled in the UK and listed on the London Stock Exchange. Its registered office is 7/8 Market Place, London W1W 8AG.
The principal activities of the Company and its subsidiaries (the "Group") are the manufacture, distribution and sale of promotional products.
The Chairman's statement and business review, comprising the Finance Director's report and the Operating review, contain a fair view of the development, performance and position of the Group. This report also contains a fair view of the risks and uncertainties facing the Group as well as outlines of other policies including those on health and safety and environment.
The results of the Group for the period are set out in detail on page 28.
An interim dividend of 4.7p per ordinary share was paid on 15 September 2010 and the Directors recommend a final dividend of 9.0p per share. The proposed final dividend, if approved, will be paid on 4 May 2011 in respect of shares registered at the close of business on 1 April 2011.
The total distribution paid and recommended for 2010 on the ordinary shares is £3.53m or 13.7p per share (2009: £3.24m or 12.75p per share).
The Group contributed the following sums:
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Charitable purposes | 80 | 79 |
Donations were made to a variety of charities. No political donations were made.
Charitable donations are made principally by the North American business of 4imprint Direct Marketing under its "one by one"® charitable programme. For every business day, the Division awards at least a \$500 in-kind grant to eligible organisations across the United States and Canada. Eligible organisations include those with IRSapproved 501(c)3 status, Canadian registered charities, religious organisations and accredited schools.
The Group has an established policy of encouraging the employment of disabled persons wherever this is practicable and endeavours to ensure that disabled employees benefit from training and career development programmes in common with all other employees. The Group's policy includes, where practicable, the continued employment of those who may become disabled during their employment.
As a key part of the Group's philosophy, it continues to place great importance on involving staff in operations. Regular meetings are held between management and employee representatives through whom the aim is to keep staff informed and involved in the progress and performance of the Group. To ensure that employees remain motivated and identify more closely with the business, Shareholders and future growth, a savings related share option scheme continues to be made available to employees.
The Group may be affected by a number of risks, not all of which are within its control. The separate nature and business model of each Division means that they face differing risks, for example, SPS has manufacturing risks at its Blackpool premises, which are not risks faced by 4imprint Direct Marketing. Outlined below are a number of risks which may affect the 4imprint Group businesses, but the list is not exhaustive and other factors may adversely affect the Group.
The revenues, profits and cash flows of the Group may vary from period to period as a result of a variety of factors including general economic conditions, seasonal trends, disruption in specific industries, customers defaulting on payments, delays in obtaining stocks or raw materials, increased costs associated with obtaining banking facilities and falls in spending on promotional products. Specific examples include:
The Group operates in a competitive market, competing with other national and international producers of promotional products. The Group may be unsuccessful in persuading customers that its products are priced favourably compared with those of its competitors. New technology, changing commercial circumstances, existing competitors and new entrants to the markets in which the Group currently operates, or markets in which the Group has targeted for expansion, may adversely affect its business, financial condition and results of operations.
Operational risks are present in the Group's business. These risks include the risk of inadequate or failed internal and external processes and systems, departure of key management personnel, human error and external events such as changes in credit terms offered by suppliers, major disruption to delivery services or to the product supply chain.
The Group uses a range of materials and services which are essential to its operation, for example, purchased commodities and raw materials, staff, utilities (including electricity and other sources of energy), currencies, rates, postage and catalogue costs which can amount to a significant proportion of sales value and there may be only a limited ability to mitigate increases caused by market factors. Future increased costs in such items could, therefore, have a significant effect on the Group's financial performance.
The Group could be the subject of complaints or litigation from customers and from other third parties for breach of contract, negligence or otherwise. It may also incur additional liabilities as a property owner (including environmental liability). If the Group were to be found liable in respect of any complaint or litigation, this could adversely affect the Group's results, operations and its reputation.
A major change in law or regulations, for example privacy laws restricting the mailing of catalogues or purchase of products over the internet, could adversely affect the Group's results or operations and its reputation.
The names of the present Directors and their interests in the share capital of the Company are shown on page 25. The biographical details of the Directors, committee memberships, independence status and identification of the Senior Independent Director are given on page 11.
Neither the Directors, their associated companies, nor any members of their families, had any interest either during or at the end of the period in any contract with the Company or its subsidiaries requiring disclosure under Sections 197, 198, 200, 201 and 203 of the Companies Act 2006.
The Board recognises its obligations to protect the environment and is committed to achieving a high environmental standard across all the activities of the Group and to minimising environmental impact.
4imprint is registered to the international environmental
standard ISO 14001:2004 within the UK. The formal systems in place are subject to both internal and external audits and management is regularly notified of key issues and developments. Across all of its businesses worldwide 4imprint assesses, monitors and reviews any potential impact of its operations upon the environment. Steps are taken to recycle packaging and raw materials as well as to control energy consumption and waste.
The Board recognises its corporate social responsibilities and has developed, approved and issued a social and ethical policy, the purpose of which is to ensure, as far as reasonably practicable, that when undertaking their operations, all businesses operate in accordance with best practice. The policy addresses issues such as working hours, discrimination, collective bargaining and child labour. The policy is regularly reviewed and was re-considered by the Board at its meeting on 1 December 2010.
During 2010, the Group continued to pursue improvements to the management of health and safety issues in each of the Divisions. Regular monthly reports on health and safety matters are received by the Executive Committee.
The Company has a single class of share capital which is divided into ordinary shares of 38 6/13 pence each. The shares are in registered form.
Subject to applicable statutes and other shareholders' rights, shares may be issued with such rights and restrictions as the Company may by ordinary resolution decide, or, if there is no such resolution or so far as it does not make specific provision, as the Board may decide. Subject to the current Articles of Association of the Company, the Companies Act and other Shareholder's rights, unissued shares are at the disposal of the Board. At each Annual General Meeting, the Company seeks annual shareholder authority authorising the Company's Directors to allot unissued shares, in certain circumstances, for cash.
No member shall be entitled to vote at any general meeting in respect of any shares held by that member if any call or other sum then payable by that member in respect of that share remains unpaid. Currently, all issued shares are fully paid.
Directors may be appointed by the Company by ordinary resolution or by the Board. A Director appointed by the Board holds office only until the next following Annual General Meeting and is then eligible for election by the Shareholders.
At every Annual General Meeting of the Company, a minimum of one third of the Directors shall retire by
rotation. The office of Director shall be vacated if (a) he resigns or offers to resign and the Board resolves to accept such offer (b) he is or has been suffering from mental ill health, (c) he becomes bankrupt or compounds with his creditors generally, (d) he is prohibited by law from being a Director, (e) he ceases to be a Director by virtue of the Companies Act or (f) he is removed from office pursuant to the Articles of Association.
Subject to the Company's Memorandum and Articles of Association, the Companies Acts and any directions given by special resolution, the business of the Company will be managed by the Board who may exercise all the powers of the Company.
During 2008, Qualifying Third Party Indemnity Agreements were signed by the Company in respect of each of the Directors then in office and these remained in effect during 2010 and up to 2 March 2011. A Qualifying Third Party Indemnity Agreement has been signed in respect of Mr J.W. Poulter, with effect from the date of his appointment.
The trustees of the 4imprint Group plc Employee Share Trust may vote or abstain from voting on shares held in the Trust in any way they think appropriate.
The following contain provisions entitling the counterparty to exercise termination or other rights in the event of a change of control of the Company:
A change in control of the Company, in case (i) and (subject to certain exceptions involving bona-fide inter group re-constructions or amalgamations) SPS in case (ii), constitutes an Event of Default, the occurrence of which means that the Bank may cancel any obligations it has to lend money to the Company and to SPS respectively and may also make the loans (or either of them) become repayable on demand. If the loans, (or either of them), is repayable on demand, the Company, or SPS, or both, (as the case may be) must, when requested, repay the loans (or either of them), to the Bank, together with all interest which has accrued on the loans (or either of them) and any other amounts owing under the business loan agreements, (or either of them).
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operating review on pages 8 to 10. The financial position of the Group, its cash flows, and net debt position are described in the Finance Director's report on pages 5 to 7. In addition note 21 to the financial statements includes the Group's policies for managing its financial risk and its exposures to credit risk and liquidity risk.
The Group borrowings and facilities are set out in note 19. The Group has a diverse number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group can manage its business risks successfully despite the current uncertain economic outlook.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue to operate for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.
Details of share and option holdings are set out in the Remuneration report on pages 25 and 26. Currently the Company has no policy regarding minimum shareholdings by Directors but the issue is considered annually.
Details of the procedures and guidelines used by the Committee in determining remuneration are outlined in its report on pages 23 and 24.
Following the approval, at the 2010 Annual General Meeting, of Resolution 9, the Company is authorised, generally and without conditions to make market purchases, as defined in the Companies Acts, of its ordinary shares of 38 6/13 pence subject to the provisions set out in such Resolution. This authority applies from 27 April 2010 until the earlier of the end of the 2011 Annual General Meeting and 25 July 2011 unless previously cancelled or varied by the Company in general meeting. No such cancellation or variation has taken place.
At 17 February 2011 the Company had been notified of the following interests in the issued ordinary share capital of the Company:
| Number of shares | % | |
|---|---|---|
| Aberforth Partners | 4,676,500 | 18.10 |
| SVG Investment Managers | 3,315,492 | 12.83 |
| Artemis Investment Management | 2,634,096 | 10.19 |
| Mr K.J. Minton | 1,718,010 | 6.65 |
| Aviva Investors | 1,683,636 | 6.52 |
| Hermes Pensions Management | 1,405,270 | 5.44 |
| Standard Life Investments | 1,071,975 | 4.15 |
| Gartmore Investment | 981,813 | 3.80 |
| Legal and General Investment | 813,553 | 3.15 |
The dividend income in respect of the 90,325 shares (2009: 90,325 shares) held in the 4imprint Group plc employee share trust has been waived.
In view of the diverse nature of the Group's Divisional businesses and their operations in a wide range of geographical areas, no universal code or standard on payment policy is followed, but the Divisions are expected to establish payment terms consistent with local procedures, custom and practice. The Company had no trade payables at the period end (2009: £nil).
Notice of the AGM is set out in a separate document. Items of special business to be considered at the Meeting are described in detail in the Notice of the AGM and the notes on the business to be conducted.
A resolution to re-appoint PricewaterhouseCoopers LLP as auditors to the Company has been recommended by the Audit Committee to the Board and will be proposed at the AGM.
In the case of each of the persons who are Directors of the Company at the date this report was approved:
Andrew Scull Secretary 2 March 2011
The disclosures required by Company law in relation to the Takeover Directive are incorporated in the Directors' Report.
During 2010 the Group has complied with the provisions of the Combined Code (2008), except for the following matter:
There is no Group Chief Executive but the role of Executive Chairman was undertaken by Mr K.J. Minton until his retirement on 31 August 2010. Mr J.W. Poulter was appointed as Chairman on that date. (Principle A.2.1).
The structure of the Group is such that there are three Divisions, each of which has a Divisional Chief Executive supported by a Divisional Finance Director and senior marketing and operational managers.
The three Divisional Chief Executives, Mr C. Lee – Brand Addition, Mr K. Lyons-Tarr – 4imprint Direct Marketing and Mr R.W.G. MacLeod – SPS; and the Divisional Finance Director of 4imprint Direct Marketing, Mr D.J.E. Seekings, are members of the Executive Committee, together with the Chairman, the Group Finance Director and the Corporate Services Director. The Executive Committee meets usually once each month to review financial performance and to address significant issues affecting the Divisions and the Group. In advance of these scheduled meetings, the Executive Committee receives minutes of the previous meetings and detailed financial information on the performance of the Divisions' businesses as well as any other items for discussion.
Additionally, business reviews are undertaken at least bi-monthly with each of the Divisions at which the Divisional Chief Executive and other senior Divisional management present to the Chairman and the Executive Directors a report including the financial performance of their businesses and the risks which it faces together with its plans for the short and medium term.
Against that background, the Board currently sees no compelling reason to employ a Group Chief Executive. This situation is kept under review by the Board, at least annually.
The Board is responsible to Shareholders for creating and sustaining shareholder value through the management of the Group's businesses.
It is also responsible for ensuring that management maintain a system of control that provides assurance of effective and efficient operations, internal financial control and compliance with law and regulation.
The Board is the decision making body for all matters material to the Group's finances, strategy and reputation.
The Board has a formal schedule of matters reserved for its decision and the schedule was re-considered and approved by the Board at its meeting on 1 December 2010. The schedule includes, for example, the approval
of interim and final financial statements, the acquisition and disposal of businesses, changes to the capital structure of the Company, the appointment or removal of Directors and the financing of the Group's businesses. Otherwise, the Board delegates day-to-day management of the Group to the Executive Directors.
In any circumstances where a Director has a concern, which cannot be resolved, about the running of the Company or a proposed action, any such concern is recorded in the minutes of Board meetings.
The Companies Act 2006 codifies the Directors duty to avoid a situation in which they have, or can have, an interest that conflicts or possibly may conflict, with the interests of the Company. A Director will not be in breach of that duty if the relevant matter has been authorised in accordance with the Articles of Association, by the other Directors. Each Director has confirmed that they are aware of the need to notify the Company of any potential conflict of interest.
Specific responsibilities have been delegated to Board Committees which have access to independent expert advice at the Group's expense. The details of the Board Committees and their activities are set out in pages 17 to 19.
The Non-Executive Directors meet from time to time, without the Executive Directors being present.
All Directors have access to the advice and services of the Company Secretary.
The Board consists of a Chairman, a Group Finance Director, a Corporate Services Director and two Independent Non-Executive Directors. The role of the Non-Executive Directors includes assisting in the development of strategy, scrutinising the performance of management, monitoring the integrity of financial information and systems of risk management as well as determining the appointment, removal and remuneration of Executive Directors. During 2009, a search was undertaken, without the use of an external search consultancy or open advertising, with a view to the appointment in 2010 of an additional Non-Executive Director who would, subsequent to appointment as a Non-Executive Director, take on the role of Chairman. During 2010 Mr J.W. Poulter acted as a Non-Executive Director from the date of his appointment on 1 May 2010 until the date of his appointment as Chairman on 1 September 2010. Mr J.W. Poulter was considered independent on appointment. The Board has considered whether it is appropriate to have additional Non-Executive Directors. The current Non-Executive Directors have letters of appointment for three years from 5 September 2009 in the case of Mr N. Temple and from 10 October 2009 in the case of Mr I. Brindle. The letters of appointment of Mr Brindle and Mr Temple are available for inspection by any person at the Company's registered office during normal business hours and also at the Annual General Meeting.
The Corporate Services Director also acts as the Company Secretary. This situation has been reconsidered by the Board at its meeting on 1 December 2010 and approved by the Board. The Corporate Services Director took no part in that decision. The appointment and removal of the Company Secretary is a matter to be decided by the Board as a whole (excluding the Corporate Services Director).
The Board has at least six scheduled meetings per year, and additional Board meetings are convened as and when required. In advance of each meeting, the Board receives minutes of the previous meetings, detailed financial information on the performance of the businesses and items for discussion. This enables the Directors to make informed decisions on the corporate and business issues under consideration. Additionally, the Company Secretary provides resources as appropriate, to enable Directors to update their skills and knowledge. Independent professional advice is available to the Directors as required, at the Company's expense.
The Board has undertaken an evaluation of its performance and the performance of its committees. The evaluation process was conducted by the Non-Executive Directors, assisted by the Company Secretary. The evaluation of the Board indicated areas for improvement but no material issues were identified. The Non-Executive Directors, led by the Senior Independent Non-Executive Director would, customarily, undertake an evaluation of the performance of the Chairman, taking into account the views of the Executive Directors. As Mr J.W. Poulter has only recently been appointed as Chairman, a formal evaluation has not yet been undertaken.
The Company provides the necessary resources for developing and updating the knowledge and capabilities of the Directors.
A table setting out the number of Board and Committee Meetings and attendance by Directors at those meetings is set out below:
| Board Meetings |
Committee Meetings |
Audit Remuneration Committee Meetings |
Nomination Committee Meetings |
|
|---|---|---|---|---|
| Total number | 7 | 2 | 2 | 1 |
| Mr J.W. Poulter* | 5 | 1 | 1 | – |
| Mr K.J. Minton | 4 | 2 | 1 | – |
| Mr I. Brindle | 7 | 2 | 2 | 1 |
| Ms G. Davies | 7 | 2 | – | – |
| Mr A.J. Scull | 7 | 2 | – | – |
| Mr N. Temple | 7 | 2 | 2 | 1 |
*Mr J.W. Poulter was appointed as a director on 1 May 2010 and succeeded Mr K.J. Minton as Chairman following Mr Minton's retirement on 31 August 2010.
The Board has three permanent Committees. Other than the Committee members, further participants may attend by the invitation of the Committee. Each Committee has defined terms of reference, procedures, responsibilities and powers as follows:
The responsibilities of the Nomination Committee include: (i) reviewing the structure, size and composition of the Board and making recommendations to the Board with regard to any adjustments that are necessary; (ii) identifying and nominating candidates for the approval of the Board to fill Board vacancies as and when they arise; (iii) putting in place plans for succession at Board level; and (vi) recommending Directors who are retiring by rotation to be put forward for re-election.
The Nomination Committee was chaired throughout 2010 and at the date of this report by Mr N. Temple, an Independent Non-Executive Director. The other member of the Committee during 2010 was Mr I. Brindle, the Senior Independent Non-Executive Director. The Chairman of the Company is usually invited to attend formal meetings of the Committee. The Company Secretary attends meetings of the Nomination Committee, in his capacity as Secretary.
The Nomination Committee has Terms of Reference which were re-considered and approved by the Board of the Company at its Board Meeting on 1 December 2010. These Terms of Reference are available for inspection at the Company's registered office during normal business hours.
The Nomination Committee meets as frequently as is required to fulfil its duties. When there are not specific decisions or recommendations to be made, the Chairman of the Committee consults the other member of the Committee as necessary. During 2010, the Nomination Committee held one meeting to consider the appointment of Mr J.W. Poulter.
The responsibilities of the Remuneration Committee include: (i) determining and making recommendations to the Board on remuneration policy and remuneration for the Executive Directors, the Company Secretary and other members of the Executive Committee of the Company. No Director is allowed to be involved in determining his or her own remuneration; (ii) reviewing the on-going relevance of the remuneration policy; (iii) approving the design of and determining the targets for any performance related pay schemes operated by the Company; (iv) approving the total annual payments made under such schemes; (v) reviewing the design of all share incentive plans for approval by the Board and Shareholders and, for any such plans, determining whether awards will be made and if so the overall amount of such awards and by whom they will be received; (vi) determining the policy for and scope of pension arrangements for Executive Directors, and other members of the Executive Committee; (vii) ensuring that contractual terms on termination and any payments
made are fair to the individual and the Company; (viii) determining within the agreed policies, and having regard to relevant legal and remuneration guidance, the total individual remuneration package of each Executive Director and member of the Executive Committee including salary, annual bonus, incentive payments, pensions and share options; and (ix) determining the terms of reference for any remuneration consultants who may advise the Committee.
The Remuneration Committee was chaired throughout 2010 and at the date of this report by Mr N. Temple, an Independent Non-Executive Director. The other member of the Committee was Mr I. Brindle, the Senior Independent Non-Executive Director. The Company Secretary attends meetings of the Remuneration Committee, in his capacity as Secretary.
The Remuneration Committee has Terms of Reference which were re-considered and approved by the Board at its meeting on 1 December 2010. These Terms of Reference are available for inspection at the Company's registered office during normal business hours.
The Remuneration Committee met twice during 2010. Where there are no specific decisions or recommendations to be made, the Chairman of the Committee consults with the other member of the Committee and with external Shareholders as necessary.
The Audit Committee is responsible for maintaining an appropriate relationship with the Group's external auditors and for reviewing the Company's internal financial controls and the audit process. It aids the Board in seeking to ensure that the financial and nonfinancial information supplied to Shareholders presents a balanced assessment of the Company's position.
The Committee reviews the objectivity and independence of the external auditors and also considers the scope of their work and fees paid for audit and non-audit services.
The Committee has unrestricted access to Company documents and information, as well as to employees of the Company and the external auditors. Members of the Committee may, in pursuit of their duties, take independent professional advice on any matter, at the Company's expense. The Audit Committee Chairman reports the outcome of Audit Committee meetings to the Board.
The Audit Committee was chaired throughout 2010 and at the date of this report by Mr I. Brindle, the Senior Independent Non-Executive Director who was Chairman of PricewaterhouseCoopers UK and on retiring, in 2001, became Deputy Chairman of the Financial Reporting Review Panel, where he served until 2007. He has extensive recent and relevant financial knowledge and experience. The other member of the Committee is Mr N. Temple, an Independent Non-Executive Director. The Chairman of the Company and the Group Finance Director are normally invited to attend meetings of the Audit Committee as is, from time to time, the
Group Financial Controller. The Company Secretary attends meetings of the Audit Committee in his capacity as Secretary.
The Audit Committee has Terms of Reference which were re-considered and approved by the Board at its meeting on 1 December 2010. These Terms of Reference are available for inspection at the Company's registered office during normal business hours. The Board considers that the Audit Committee members have an understanding of the following areas:
The Audit Committee meets at least twice each year and has an agenda linked to events in the Group's financial calendar. The Audit Committee met twice during 2010.
In order to fulfil its terms of reference, the Audit Committee receives and reviews presentations and reports from the Group's senior management, consulting as necessary with the external auditors.
During the year, the Audit Committee formally reviewed draft interim and annual reports and associated interim and year end results' announcements. These reviews considered:
The Audit Committee is required to assist the Board to fulfil its responsibilities relating to the adequacy and effectiveness of the control environment and the Group's compliance with the Combined Code (2008). To fulfil these duties, the Audit Committee reviewed:
During 2010, the Group's auditors provided non-audit advice in a number of areas, including, for example, tax advisory work, and pension advice. In each case, before any non-audit work is commissioned, the nature and extent of such work is considered, initially by the Group Finance Director and the Corporate Services Director, to determine if such work would put at risk auditor objectivity and independence. This process includes discussion with the audit partner at PricewaterhouseCoopers LLP. If there is any concern that auditors' objectivity and independence would be put at risk, the matter will be referred to the Audit Committee, prior to commissioning. No such references were made during 2010.
The Audit Committee is responsible for the development, implementation and monitoring of the Group's policy on external audit. The Group's policy on external audit prohibits certain types of non-audit work from being performed by the auditor, particularly in cases where auditor objectivity and independence would be put at risk.
The Board has specifically reviewed the nature and extent of non-audit work carried out by the auditors in 2010 and concluded that there are no cases where auditor objectivity and independence has been put at risk.
To fulfil its responsibility regarding the independence of the external auditors, the Audit Committee reviewed:
To assess the effectiveness of the external auditors, the Audit Committee reviewed:
To fulfil its responsibility for oversight of the external audit process, the Audit Committee reviewed:
PricewaterhouseCoopers LLP, or its predecessor firms, have been the Company's auditors since 1992. The Audit Committee considers that the relationship with the auditors is working well and remains satisfied with their effectiveness.
Accordingly, it has not considered it necessary to date to require the firm to tender for the Audit.
The external auditors are required to rotate the audit partner responsible for the Group and subsidiary audits every 5 years. The current audit partner was first appointed in respect of the financial year ended December 2010 and will cease to be partner in charge of the Company audit following the conclusion of the December 2014 audit, after five years, in line with the Listing Rules.
There are no contractual obligations restricting the Company's choice of external auditor.
The Audit Committee has recommended to the Board that the external auditors are re-appointed.
The Board does not currently consider the establishment of a separate internal audit function to be commercially viable. However, this matter is reviewed by the Board, at least annually.
The Group has a 'Whistleblowing' policy which contains arrangements for the Company Secretary to receive, in confidence, complaints on accounting, risk issues, internal controls, auditing issues and related matters for reporting to the Audit Committee as appropriate.
As necessary, the Audit Committee holds private meetings with the external auditors to review key issues within their spheres of interest and responsibility.
The Chairman of the Committee will be present at the Annual General Meeting to answer questions on this report, matters within the scope of the Audit Committee's responsibilities and any significant matters brought to the Audit Committee's attention by the external auditors.
The Board places a high value on its relations with its investors.
The Group, principally through the Chairman and the Group Finance Director has regular dialogue and meetings with institutional shareholders, fund managers and analysts. Subject always to the constraints regarding sensitive information, a wide range of issues, including strategy, performance, management and governance is discussed.
The Board considers it important to understand the views of Shareholders, in particular, any issues which concern them. The Senior Independent Non-Executive Director is available to meet major Shareholders, if they so wish.
The Board consults with Shareholders in connection with specific issues where it considers it appropriate.
Private Shareholders can keep up to date through updates provided on the Investor Relations Section of the 4imprint website and through the provision of the Annual and Interim Report and Accounts. Shareholders are invited at any time to write to the Chairman or any other Director to express their views and the AGM provides an opportunity for Shareholders to address their questions to the Board in person.
The control system of the Group is intended to manage rather than eliminate the risk of failure to meet the Group's objectives and any such system can only provide reasonable and not absolute assurances against material misstatement or loss. The effectiveness of the control system including financial, operating, compliance and risk management is reviewed by the Board at least annually.
Additionally, through the management process outlined in the Statement on Corporate Governance on page 16, the Group operates a continuous process of identifying, evaluating and managing the significant risks faced by each Division and the Group as a whole. This process, which has been in place throughout 2010 and up to the date of the approval of this Annual Report, complies with the Turnbull guidance and includes the following:
The internal controls extend to the financial reporting process and the preparation of the consolidated financial statements. The basis of preparation of the consolidated financial statements is set out on page 33.
The internal control process will continue to be monitored and reviewed by the Board which will, where necessary, ensure improvements are implemented. The Board has undertaken a review of the effectiveness of internal controls.
Details of the Company's share capital are provided in the Directors' Report on pages 12 to 15.
The going concern statement is on page 14.
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed in the Board of Directors on page 11 confirm that, to the best of their knowledge:
Andrew Scull Company Secretary 2 March 2011
Except as indicated, this report is unaudited.
The Remuneration Committee is a Committee whose membership is comprised solely of Non-Executive Directors. The responsibilities of the Remuneration Committee are set out in further detail on pages 17 and 18 of the Annual Report and Accounts.
The members of the Committee are Mr I. Brindle and Mr N. Temple who, throughout 2010 and at the date of this Report chaired the Committee. The Committee meets at least once a year and may invite other attendees as it sees fit.
The Committee considers that during 2010 the Company has complied with the Best Practice Provision for Directors' Remuneration as required by the Financial Services Authority's Listing Rules.
Ms G. Davies and Mr A.J. Scull have rolling service contracts which continue until terminated by the expiry of twelve months written notice from the Company to the Director. The contractual termination payment in such circumstances would comprise up to twelve months payments, equivalent to the notice period, in respect of salary, car allowance, employers' contributions to defined contribution pension schemes and contributions to healthcare schemes. Each service contract provides for participation in a discretionary bonus scheme, the provision of a car (or car allowance) and pension entitlements. Further detailed information in regard to the foregoing may be found later in the Report in the section entitled "Elements of remuneration".
| Name | Contract Details | Unexpired term at 1 January 2011 |
Notice period (i) from Company (ii) from Director |
Contractual Termination payment |
|---|---|---|---|---|
| J.W. Poulter | 24 March 2010 | Twenty eight months | (i) Three months* (ii) Three months |
(i) See below ** (ii) n/a |
| G. Davies | 6 December 2004 | n/a | (i) Twelve months (ii) Six months |
Twelve months contractual benefits n/a |
| A.J. Scull | 8 November 2004 | n/a | (i) Twelve months (ii) Six months |
Twelve months contractual benefits n/a |
* Such notice not to be given prior to 1 February 2011.
** Contractual benefit up to a maximum of three months if notice given by the Company on or after 1 February 2011 reducing to no contractual benefit if notice is given on or after 1 May 2011.
The Chairman has a letter of appointment dated 24 March 2010 pursuant to which he was appointed as a Non-Executive Director with effect from 1 May 2010 and as Chairman with effect from 1 September 2010. The appointment is for a period of three years from 1 May 2010 after which it is renewable by mutual agreement subject to the provisions in respect of reappointment contained in the Company's Articles of Association.
The letter of appointment indicates that the appointment will terminate, forthwith, without any entitlement to compensation, if, at any time:
The letter of appointment also provided that his appointment as a Director of the Company may also be terminated, without any entitlement to compensation by either party giving to the other three months written notice, in which case the date of termination will be the date on which the three months notice expires, provided that no such notice may be given by the Company prior to 1 February 2011. No such notice has been given by either party.
Additionally, if, during the period between 1 May 2010 and 30 April 2011, the Company terminates the appointment, he shall be entitled to receive payment for any unexpired period commencing on the date of such termination and ending on 30 April 2011.
The letter of appointment does not provide for: (i) any participation in an annual bonus scheme; (ii) any pension provision; or (iii) any car allowance.
The remuneration of the Non-Executive Directors is determined by the Board with assistance, as required, from independent advisors.
The Non-Executive Directors do not receive any pension or benefits from the Company relating to their activities as Non-Executive Directors, nor do they participate in any bonus, incentive or share option schemes.
The Non-Executive Directors do not have service agreements with the Company. They are appointed for a two or three year period and offer themselves for re-election at the relevant Annual General Meeting. The current Non-Executive Directors have letters of appointments for three years from 5 September 2009 in the case of Mr N. Temple and from 10 October 2009 in the case of Mr I. Brindle.
The Committee's policy is to provide Executive Directors with remuneration packages, which are:
The Committee has access to surveys carried out by remuneration consultants, as well as to the services of independent advisors, as required. These external sources of data, the policy and the objectives outlined below provide a framework for the Committee's decision making process.
The Committee's objectives are:
The elements of remuneration set out below apply to Executive Directors other than Mr J.W. Poulter. Similar arrangements apply to Senior Managers, with the exception of annual performance related bonuses which are capped at 100% of salary for Senior Managers.
Basic salaries for Executive Directors are reviewed with effect from January of each year based on levels of responsibility and any changes thereto, experience and individual performance with the Committee taking advice, as required, on market rates for comparable jobs.
Each Executive Director is entitled to participate in a discretionary bonus scheme, which provides rewards according to growth in financial parameters established by the Committee. The level of bonus and the financial parameters are decided by the Committee each year and may vary from time to time. All bonus payments are capped and do not form part of pensionable remuneration. Other than in exceptional circumstances, the cap is 30% of salary for Executive Directors.
If the maximum bonus is achieved, the composition of each Executive Director's remuneration (excluding shares and share options) will be as follows:
| Non Performance Related | Performance Related | |
|---|---|---|
| G. Davies | 77% | 23% |
| A.J. Scull | 77% | 23% |
Each Executive Director is entitled to receive post retirement benefits through the Group's defined contribution pension scheme. The amounts paid by the Company to Ms G. Davies and Mr A.J. Scull during the period ending 1 January 2011 are set out in Note (a) on page 25 of the Remuneration Report.
Executive Directors may be granted share options or nil cost shares under the Company's share option schemes which, in certain cases, have been approved by H M Revenue and Customs and which, in other cases, are not so approved. Such grants are subject to performance targets, which are determined by the Committee taking independent advice as required. Since 23 October 2009, other than an option scheme relating specifically to Mr K.J. Minton, which scheme terminated on 31 August 2010, there has been no share option scheme in effect, other than an SAYE scheme.
Option grants were made during the period ended 1 January 2011, in respect of the SAYE scheme only.
It is the intention that a share option scheme will be proposed for approval by Shareholders at the 2011 Annual General Meeting. It is the intention that Mr J.W. Poulter will be a participant in such share option scheme.
The Remuneration Committee has agreed the provision of other benefits to Executive Directors, including a car (or car allowance) and membership for each Executive Director, other than Mr J.W. Poulter, and their spouse and children up to age 18 of a private healthcare scheme.
Details of Directors' basic salaries or fees, annual performance related bonuses and other benefits (including all interests in shares and share options held by Directors) are set out on pages 25 and 26.
The Board believes that the Company can benefit from Executive Directors accepting appointments as Non-Executives and, as a consequence, allows them to hold outside appointments as Non-Executive Directors, subject to the approval of the Board. Any remuneration for an outside appointment is retained by the Executive Director. During the period and up to the date of this Report, neither Ms G. Davies nor Mr A.J. Scull had any appointments as a Non-Executive Director. Other Directorships held by Mr J.W. Poulter are set out on page 11.
A comparative total shareholder return of the "Small Cap Media index" and the "Small Cap index" are included on the basis of the market capitalisation of 4imprint Group plc.
| Holding at 1 January 2011 |
Holding at 2 January 2010 |
|
|---|---|---|
| J.W. Poulter | 10,000 | – |
| G. Davies | 104,950 | 104,950 |
| A.J. Scull | 116,117 | 116,117 |
| I. Brindle* | 3,337 | 3,337 |
| N. Temple* | – | – |
* Non-Executive Director
There has been no change in the Directors' interests in the share capital of the Company since 1 January 2011.
The following information has been audited by the Company's auditors, PricewaterhouseCoopers LLP, as required by Sections 421 and 497 of the Companies Act 2006.
| Directors' emoluments | ||
|---|---|---|
| 2010 | 2009 | |
| £'000 | £'000 | |
| Emoluments of the Directors of 4imprint Group plc are as follows: | ||
| Fees and contractual salary payments | 614 | 466 |
| Performance related bonus | 180 | – |
| Aggregate emoluments of the highest paid Director | 237 | 166 |
The total emoluments, excluding pension contributions, of the Directors were as follows:
| Total emoluments | ||||||
|---|---|---|---|---|---|---|
| Basic salary/fee |
Benefits | Performance bonus |
2010 | 2009 | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Executive | ||||||
| J.W. Poulter | (b) (d) | 80 | – | – | 80 | – |
| K.J. Minton | (b) (e) (f) | 80 | 12 | 80 | 172 | 55 |
| G. Davies | (a) | 170 | 15 | 50 | 235 | 165 |
| A.J. Scull | (a) | 170 | 17 | 50 | 237 | 166 |
| Non-Executive | (b) | |||||
| I. Brindle | 35 | – | – | 35 | 45 | |
| N. Temple | 35 | – | – | 35 | 35 | |
| Total 2010 | 570 | 44 | 180 | 794 | ||
| Total 2009 | 400 | 56 | 10 | 466 |
Notes:
(a) The Group made defined contributions to the pension plans of Ms G. Davies and Mr A.J. Scull, amounting to £25,500 (2009: £22,500) each.
(b) Mr K.J. Minton, Mr J.W. Poulter and the Non-Executive Directors do not have any pension arrangements with the Group.
(c) Benefits include a company car allowance, travel costs and medical insurance.
(d) Mr J.W. Poulter was appointed a director on 1 May 2010.
Details of share options held by the Directors are set out below:
| Holding at | Date of | Exercise | Exercisable | |||
|---|---|---|---|---|---|---|
| 1 January 2011 | grant | price | From | To | ||
| G. Davies | ||||||
| – 2009 SAYE | 10,431 | 7 Oct 2009 | 87p | 1 Jan 2013 | 30 June 2013 | |
| A.J. Scull | ||||||
| – 2009 SAYE | 10,431 | 7 Oct 2009 | 87p | 1 Jan 2013 | 30 June 2013 |
Gains on the exercise of options in the period by Ms Davies and Mr Scull were nil each (2009: £229,500 each).
During 2010 the middle market value of the share price ranged from 120p to 275p and was 270p at the close of business on 1 January 2011.
Details of share options granted by 4imprint Group plc as at 1 January 2011 are given in note 22. None of the terms and conditions of the share options was varied during the period. The performance criteria for all the Directors' options were consistent with the remuneration policy. Once an award has vested, the exercise of share options is unconditional, subject to the Rules of the option grant.
On behalf of the Board
Nick Temple Chairman of the Remuneration Committee 2 March 2011
We have audited the Group financial statements of 4imprint Group plc for the 52 weeks ended 1 January 2011 which comprise the Group income statement, Group statement of comprehensive income, Group balance sheet, Group statement of changes in shareholders' equity, Group cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
As explained more fully in the Statement of Directors' responsibilities set out on page 21, the Directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.
In our opinion the Group financial statements:
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
We have reported separately on the parent company financial statements of 4imprint Group plc for the 52 weeks ended 1 January 2011 and on the information in the Directors' Remuneration Report that is described as having been audited.
2 March 2011
for the 52 weeks ended 1 January 2011
| 2010 52 weeks |
2009 53 weeks restated* |
||
|---|---|---|---|
| Note | £'000 | £'000 | |
| Revenue | 1 | 200,768 | 169,088 |
| Operating expenses | 2 | (192,172) | (165,948) |
| Operating profit | 1 | 8,596 | 3,140 |
| Operating profit before exceptional items | 9,721 | 3,911 | |
| Exceptional items | 5 | (1,125) | (771) |
| Operating profit | 1 | 8,596 | 3,140 |
| Finance income | 6 | 13 | 28 |
| Finance costs | 6 | (522) | (343) |
| Profit before tax | 8,087 | 2,825 | |
| Taxation | 7 | (1,225) | (424) |
| Profit for the period – attributable to equity Shareholders | 6,862 | 2,401 | |
| Earnings per share | |||
| Basic | 9 | 26.65p | 9.39p |
| Diluted | 9 | 26.05p | 9.29p |
* Note 25
All amounts in the income statement relate to continuing operations for both the current and prior periods.
for the 52 weeks ended 1 January 2011
| Total comprehensive income/(expense) for the period | 5,837 | (3,547) | |
|---|---|---|---|
| Other comprehensive expense net of tax | (1,025) | (5,948) | |
| Effect of change in UK tax rate | (219) | – | |
| Tax relating to components of other comprehensive income | 388 | 1,876 | |
| Actuarial losses on defined benefit pension scheme | 4 | (1,387) | (6,701) |
| Exchange differences on translation of foreign subsidiaries | 193 | (1,123) | |
| Other comprehensive income/(expense) | |||
| Profit for the period | 6,862 | 2,401 | |
| Note | 2010 52 weeks £'000 |
2009 53 weeks restated* £'000 |
* Note 25
at 1 January 2011
| 2010 | 2009 restated* |
2008 restated* |
||
|---|---|---|---|---|
| Note | £'000 | £'000 | £'000 | |
| Non current assets | ||||
| Property, plant and equipment | 10 | 12,580 | 13,063 | 12,548 |
| Intangible assets – goodwill | 11 | 9,084 | 9,084 | 9,084 |
| Other intangible assets | 12 | 1,657 | 1,730 | 1,630 |
| Investments | 13 | 9 | 10 | 11 |
| Deferred tax assets | 14 | 6,348 | 7,558 | 6,244 |
| 29,678 | 31,445 | 29,517 | ||
| Current assets | ||||
| Inventories | 15 | 6,317 | 7,022 | 8,449 |
| Trade and other receivables | 16 | 29,947 | 23,207 | 27,685 |
| Cash and cash equivalents | 17 | 8,465 | 5,613 | 4,411 |
| 44,729 | 35,842 | 40,545 | ||
| Current liabilities | ||||
| Trade and other payables | 18 | (25,588) | (21,390) | (23,601) |
| Current tax | (239) | (150) | (151) | |
| Borrowings | 19 | (374) | (6,196) | – |
| Provisions for other liabilities and charges | 20 | (377) | – | – |
| (26,578) | (27,736) | (23,752) | ||
| Net current assets | 18,151 | 8,106 | 16,793 | |
| Non current liabilities | ||||
| Retirement benefit obligations | 4 | (21,905) | (22,450) | (16,937) |
| Borrowings | 19 | (8,330) | (2,543) | (8,600) |
| Provisions for other liabilities and charges | 20 | (383) | – | – |
| (30,618) | (24,993) | (25,537) | ||
| Net assets | 17,211 | 14,558 | 20,773 | |
| Shareholders' equity | ||||
| Share capital | 22 | 9,939 | 9,939 | 9,846 |
| Share premium reserve | 38,016 | 38,016 | 38,016 | |
| Capital redemption reserve | 208 | 208 | 208 | |
| Cumulative translation differences | 221 | 28 | 1,151 | |
| Retained earnings | (31,173) | (33,633) | (28,448) | |
| Total equity | 17,211 | 14,558 | 20,773 | |
* Note 25
The financial statements on pages 28 to 58 were approved by the Board of Directors on 2 March 2011 and were signed on its behalf by:
John Poulter Gillian Davies
Chairman Group Finance Director
| Retained earnings | ||||||||
|---|---|---|---|---|---|---|---|---|
| Share capital £'000 |
Share reserve £'000 |
premium redemption reserve £'000 |
Capital Cumulative translation differences £'000 |
Own shares £'000 |
Profit and loss £'000 |
Total equity £'000 |
||
| Balance at 28 December 2008 | 9,846 | 38,016 | 208 | 1,151 | (519) | (27,143) | 21,559 | |
| Change in accounting policies* | (786) | (786) | ||||||
| Balance at 28 December 2008 (restated) |
9,846 | 38,016 | 208 | 1,151 | (519) | (27,929) | 20,773 | |
| Profit for the period* | 2,401 | 2,401 | ||||||
| Other comprehensive income/(expense) |
||||||||
| Exchange differences on translation of foreign subsidiaries |
(1,123) | (1,123) | ||||||
| Actuarial losses on defined benefit pension scheme |
(6,701) | (6,701) | ||||||
| Tax relating to components of other comprehensive income |
1,876 | 1,876 | ||||||
| Total comprehensive expense | (1,123) | (2,424) | (3,547) | |||||
| Shares issued | 93 | 93 | ||||||
| Own shares utilised | 451 | (451) | – | |||||
| Own shares purchased | (93) | (93) | ||||||
| Share based payment charge* | 470 | 470 | ||||||
| Deferred tax on share based payment charge |
(14) | (14) | ||||||
| Dividends | (3,124) | (3,124) | ||||||
| Balance at 2 January 2010 | 9,939 | 38,016 | 208 | 28 | (161) | (33,472) | 14,558 | |
| Profit for the period | 6,862 | 6,862 | ||||||
| Other comprehensive income/(expense) |
||||||||
| Exchange differences on translation of foreign subsidiaries |
193 | 193 | ||||||
| Actuarial losses on defined benefit pension scheme |
(1,387) | (1,387) | ||||||
| Tax relating to components of other comprehensive income |
388 | 388 | ||||||
| Effect of change in UK tax rate | (219) | (219) | ||||||
| Total comprehensive income | 193 | 5,644 | 5,837 | |||||
| Share based payment charge | 215 | 215 | ||||||
| Dividends | (3,399) | (3,399) | ||||||
| Balance at 1 January 2011 | 9,939 | 38,016 | 208 | 221 | (161) | (31,012) | 17,211 | |
*restated (note 25)
for the 52 weeks ended 1 January 2011
| Note | 2010 52 weeks £'000 |
2009 53 weeks £'000 |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash generated from operations | 24 | 7,849 | 7,633 |
| Net tax recovered | 499 | 73 | |
| Finance income | 13 | 28 | |
| Finance costs | (497) | (340) | |
| Net cash generated from operating activities | 7,864 | 7,394 | |
| Cash flows from investing activities | |||
| Purchases of property, plant and equipment | (884) | (1,679) | |
| Purchases of intangible assets | (656) | (633) | |
| Net cash used in investing activities | (1,540) | (2,312) | |
| Cash flows from financing activities | |||
| Proceeds from borrowings | 10,814 | – | |
| Repayment of borrowings | (10,814) | (174) | |
| Capital element of finance lease payments | (129) | (126) | |
| Proceeds from issue of ordinary shares | – | 93 | |
| Purchase of own shares | – | (93) | |
| Dividends paid to Shareholders | 8 | (3,399) | (3,124) |
| Net cash used in financing activities | (3,528) | (3,424) | |
| Net movement in cash, cash equivalents and bank overdrafts | 2,796 | 1,658 | |
| Cash, cash equivalents and bank overdrafts at beginning of the period | 5,613 | 4,411 | |
| Exchange gains/(losses) on cash, cash equivalents and bank overdrafts | 56 | (456) | |
| Cash, cash equivalents and bank overdrafts at end of the period | 8,465 | 5,613 | |
| Analysis of cash, cash equivalents and bank overdrafts | |||
| Cash at bank and in hand | 17 | 5,215 | 5,613 |
| Short term deposits | 17 | 3,250 | – |
| 8,465 | 5,613 |
4imprint Group plc, registered number 177991, is a public limited company incorporated and domiciled in the UK and listed on the London Stock Exchange. Its registered office is 7/8 Market Place, London W1W 8AG.
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the periods presented except as noted below.
IAS 38 'Intangible assets': Following an amendment to IAS 38 an expense will now be recognised for mail order catalogues and other related marketing expenses when the Group has access to the catalogues, rather than when the catalogues are distributed to customers as was the previous policy.
The impact on reported profit for the period was to reduce operating expenses by £19,000, which has the impact of increasing profit after tax by £16,000 (2009: decrease in operating expenses of £264,000 and increase in profit after tax of £224,000). Net assets at 1 January 2011 are reduced by £493,000 as a result of this change of policy (2009: £496,000 decrease).
IFRS 2 'Share-based payments': A clarification to the interpretation of this standard requires that cancellations of options by employees are to be treated in the same way as cancellations by the employer and that the full remaining cost of the options are expensed at the time of cancellation. As a result of this clarification, operating expenses for the period have increased by £98,000 (2009: £111,000), which reduces profit after tax by £83,000 (2009: £94,000). There is no net impact on net assets.
IAS 1 (revised), 'Presentation of financial statements': In applying this standard both the income statement and statement of comprehensive income have been presented as performance statements.
IFRS 8 – 'Operating segments': The reporting requirements of IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. The adoption of this standard in the current reporting period has not impacted on the reported numbers or segments.
Other new and revised standards effective during the period have not impacted on the Group financial statements.
The financial statements have been prepared under the historical cost convention in accordance with IFRS (International Financial Reporting Standards), IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The standards used are those published by the International
Accounting Standards Board (IASB) and endorsed by the EU at the time of preparing these statements (March 2011).
After making enquiries, the Directors have reasonable expectations that the Group has adequate resources to continue in existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial statements.
The consolidated financial statements include the financial statements of the Company and its subsidiaries for the period. A subsidiary is an entity that is controlled by the Company. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the consideration. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. The excess of the cost of acquisition over the Group's share of identifiable net assets is recorded as goodwill.
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Critical accounting policies are those that require significant judgement or estimates and potentially result in materially different results under different assumptions or conditions. Management consider the following to be the critical accounting policies.
As disclosed in note 4 the Group operates a closed defined benefit scheme. Year end recognition of the liabilities under this scheme and the return on assets held to fund these liabilities require a number of significant actuarial assumptions to be made including inflation, asset returns, discount rate and mortality rates. Small changes in assumptions can have a significant impact on the expense recorded in the income statement and on the pension liability in the balance sheet.
The Group is required to estimate the income tax in each of the jurisdictions in which it operates. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different tax and accounting treatments. Assumptions are made around the extent to which it is probable that future taxable profit will be available against which the temporary differences can be utilised and deferred tax assets are recognised at the balance sheet date based on these assumptions.
Goodwill on acquisition of subsidiaries is included in intangible assets and is stated at cost less any impairment. Goodwill is not amortised but is tested annually for impairment. The test for impairment involves the use of assumed discount rates, future growth rates and operating margins. Changes in the assumptions can have an impact on the impairment test.
Inventory provisions are made in relation to slow moving and obsolete inventory and are based on assumptions of expected usage using historic and forecast sales as a basis.
The reporting requirements of IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.
Revenue is represented by the invoiced value of goods to customers outside the Group excluding value added taxes and other similar revenue based taxes less estimated rebates. Revenues are primarily recognised upon despatch of goods to customers in the Brand Addition and SPS Divisions and on delivery to the customer in 4imprint Direct Marketing.
Where the Group has substantially all of the risks and rewards of ownership under a lease, the lease will be classified as a finance lease. All other leases are classified as operating leases.
Assets acquired through finance leases are capitalised as property, plant and equipment, at the lower of the fair value of the leased asset and the present value of the minimum lease payments, and depreciated over the lease term or the estimated useful life, whichever is shorter. The resulting lease obligations are included in liabilities net of finance charges. Interest costs on finance leases are charged directly to the income statement.
Assets leased under operating leases are not recorded on the balance sheet. Rental payments are charged
directly to the income statement on a straight line basis over the period of the lease.
All share options are valued using option-pricing models (primarily Black-Scholes, Binomial or Monte Carlo). The fair value is charged to the income statement over the vesting period of the share option schemes. The value of the charge is adjusted to reflect the expected number of options that will become exercisable. All options cancelled are fully expensed to the income statement upon cancellation.
Income or costs which are both material and nonrecurring, whose significance is sufficient to warrant separate disclosure in the financial statements, are referred to as exceptional items.
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity in which case the tax is recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group's subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Final equity dividends are recognised in the Group's financial statements in the period in which the dividends are approved by the Shareholders. Interim equity dividends are recognised when paid.
The functional and presentational currency of the
Company is Sterling and the consolidated financial statements are presented in Sterling.
Transactions in currencies other than the functional currency of the Company or subsidiary concerned are recorded at the exchange rate prevailing at the date of the transaction. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing at the balance sheet date. Translation differences on monetary items are taken to the income statement.
On consolidation the financial statements of overseas enterprises are translated into Sterling at the exchange rate ruling at the balance sheet date; income and expenses are translated at average rates for the trading period under review. The resulting exchange differences are taken to the cumulative translation differences reserve and are reported in the consolidated statement of other comprehensive income.
On disposal of a foreign operation any cumulative exchange differences held in Shareholders' equity are transferred to the consolidated income statement.
The Group uses forward foreign exchange contracts to hedge highly probable cash flows in relation to future sales and product purchases.
Derivatives are recognised initially at fair value and are remeasured at fair value at each reporting date. The treatment of the gain or loss on remeasurement depends on the nature of the item being hedged.
Hedges of the fair value of recognised assets and liabilities are designated as fair value hedges. Hedges of highly probable forecast transactions are designated as cash flow hedges.
Changes in the fair value of fair value hedges are recognised in the income statement. Changes in the fair value of the hedged items are also recognised in the income statement.
The effective portion of changes in cash flow hedges are deferred in a hedging reserve and then charged to the income statement when the forecast sale or purchase occurs or if the forecast transaction is no longer expected to occur. Any ineffective portion of the cash flow hedge is recognised immediately in the income statement.
Investments held by subsidiaries are stated at historical cost. Where, in the opinion of the Directors, an impairment of the investment has arisen, provisions are made in accordance with IAS 36 'Impairment of assets'.
Property, plant and equipment are stated at cost less depreciation and any impairment losses. No depreciation is provided on land and assets in the course of construction. For all other property, plant and equipment, depreciation is
calculated to write-off their cost less residual value by equal annual instalments over the period of their estimated useful lives, which are reviewed and revised on a regular basis. Leasehold assets are depreciated over the shorter of the term of the lease or their estimated useful lives.
The principal useful lives currently fall within the following ranges:
| Buildings | 20 – 50 years |
|---|---|
| Plant, machinery, fixtures and fittings | 3 – 15 years |
| Computer hardware | 3 years |
Profits and losses on disposal which have arisen from over or under depreciation are accounted for in arriving at operating profit and are separately disclosed when material.
Goodwill is the excess of the fair value of the consideration payable for an acquisition over the fair value of the Group's share of identifiable net assets of a subsidiary acquired at the date of acquisition. Fair values are attributed to the identifiable assets, liabilities and contingent liabilities that existed at the date of acquisition, reflecting their condition at that date. Adjustments are made where necessary to bring the accounting policies of acquired businesses into alignment with those of the Group.
Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is stated at cost less any impairment. Goodwill is not amortised but is tested annually for impairment.
Acquired software licences and external expenditure on developing websites and other computer systems is capitalised, held at historic cost and amortised from the invoice date on a straight-line basis over its useful economic life (currently 3 to 5 years). Internal costs and non-development costs are expensed as incurred.
An expense is recognised for mail order catalogues and other related marketing expenses when the Group has access to those catalogues.
All property, plant and equipment and intangible assets with the exception of goodwill are reviewed for impairment in accordance with IAS 36 'Impairment of assets' if there is some indication that the carrying value of the asset may have been impaired. Goodwill is tested for impairment annually. Where an impairment review is required, the carrying value of the assets is measured against their value in use based on future estimated cash flows, discounted by the appropriate cost of capital, resulting from the use of those assets. Assets are grouped at the lowest level for which there is a separately identifiable cash flow (cash generating unit). An impairment loss is recognised for the amount at which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
Inventories are valued at the lower of cost and net realisable value using weighted average cost or first in first out basis. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Cost comprises materials, labour and the overheads attributable to the stage of production reached. Items in transit where the Group holds the risks and rewards are included in inventories.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is recognised in the income statement.
Cash and cash equivalents includes cash in hand, deposits held on call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. In the cash flow statement cash and cash equivalents are shown net of bank overdrafts.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost.
The Group operates defined contribution plans for the majority of its UK and US employees. The regular contributions are charged to the income statement as they are incurred.
The Group operated a defined benefit scheme, which is now closed to new members.
The Group accounts for the defined benefit scheme under IAS19 'Employee benefits – actuarial gains and losses, group plans and disclosures'. The deficit of the defined benefit scheme is recognised in full on the balance sheet and represents the difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date. A full actuarial valuation is carried out at least every three years and the defined benefit obligation is updated on an annual basis, by independent actuaries, using the projected unit credit method.
The pension charge recognised in operating expenses in the income statement consists of current service costs and a finance cost based on the interest on pension scheme liabilities less the expected return on pension assets.
Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included directly in the consolidated statement of comprehensive income.
Borrowings are measured at cost net of transaction costs incurred and subsequently carried at amortised costs using the effective interest rate method. Arrangement fees are amortised over the life of the loan. Trade and other receivables are measured at amortised cost less any provision for impairment. Trade and other receivables are discounted when the time value of money is considered material.
Provisions are made when there is a legal or constructive obligation as a result of past events and it is probable that expenditure will be incurred and a reliable estimate can be made of the cost. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.
Own shares acquired, to meet future obligations under employee share options, are held in an independent Trust. These are funded by the Company and purchases of shares by the Trust are charged directly to equity.
Administration expenses of the Trust are charged to the Company's income statement as incurred.
The IASB and IFRIC have issued additional standards and interpretations which are effective for accounting periods starting 1 January 2011 unless otherwise stated. These standards and interpretations are not expected to have a material impact on the Group financial statements.
Amendments IAS 32 'Financial Instruments: Presentation on classification of rights issues' (effective 1 February 2010)
Amendment to IFRS 1 'First time adoption on financial instrument disclosures' (effective 1 July 2010) IFRIC 19 'Extinguishing financial liabilities with equity instruments' (effective 1 July 2010) Amendment IAS 24 'Related party disclosure' Amendment to IFRIC 14 'Pre-payments of a Minimum Funding Requirement'
Annual improvements 2010
The chief operating decision maker has been identified as the Executive Committee and the segmental analysis is presented based on the Group's internal reporting to the Executive Committee.
At 1 January 2011, the Group is reported in three primary business segments:
| Revenue | Total | Inter-segment | External | ||||
|---|---|---|---|---|---|---|---|
| 2010 £'000 |
2009 £'000 |
2010 £'000 |
2009 £'000 |
2010 £'000 |
2009 £'000 |
||
| 4imprint Direct Marketing | 128,972 | 111,138 | – | – | 128,972 | 111,138 | |
| Brand Addition | 58,886 | 44,219 | (472) | (625) | 58,414 | 43,594 | |
| SPS | 16,252 | 16,847 | (2,870) | (2,491) | 13,382 | 14,356 | |
| Total | 204,110 | 172,204 | (3,342) | (3,116) | 200,768 | 169,088 |
All revenue is derived from the sale of promotional products. Inter-segment revenues are on an arms-length basis.
| Operating profit | Underlying operating profit |
Exceptional items |
Operating profit/(loss) |
|||
|---|---|---|---|---|---|---|
| 2010 £'000 |
2009 £'000 |
2010 £'000 |
2009 £'000 |
2010 £'000 |
2009 restated £'000 |
|
| 4imprint Direct Marketing | 7,973 | 3,557 | – | – | 7,973 | 3,557 |
| Brand Addition | 4,284 | 3,370 | – | (187) | 4,284 | 3,183 |
| SPS | 57 | (56) | (537) | – | (480) | (56) |
| Head Office | (1,828) | (1,419) | (588) | (584) | (2,416) | (2,003) |
| 10,486 | 5,452 | (1,125) | (771) | 9,361 | 4,681 | |
| IAS 38 marketing cost adjustment:* | ||||||
| – 4imprint Direct Marketing | 25 | 281 | ||||
| – SPS | (6) | (17) | ||||
| Defined benefit pension charge | (569) | (1,268) | ||||
| Share option charge* | (215) | (537) | ||||
| Total | 8,596 | 3,140 |
* Note 25
Net finance cost totalling £509,000 (2009: £315,000) and taxation charge of £1,225,000 (2009: £424,000) cannot be separately allocated to individual segments.
A description and review of the segments is included in the Operating review.
During the year the operating segments have been renamed to reflect their trading names: Direct Marketing is now 4imprint Direct Marketing; End User is now Brand Addition; and Trade is now SPS. This has not impacted on the components of the segments.
| Capital | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Assets | Liabilities | expenditure | Depreciation | Amortisation | ||||||
| 2010 | 2009 restated |
2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| 4imprint Direct Marketing |
19,672 | 17,289 | (12,277) | (9,819) | 919 | 2,267 | (547) | (559) | (367) | (371) |
| Brand Addition | 23,008 | 18,482 | (11,098) | (8,695) | 368 | 439 | (173) | (182) | (226) | (195) |
| SPS | 16,574 | 17,645 | (1,847) | (2,092) | 142 | 451 | (639) | (684) | (77) | (77) |
| Unallocated assets/ (liabilities) & costs |
6,688 | 8,258 | (23,270) | (23,385) | 26 | 10 | (25) | (23) | (4) | – |
| Cash/(net debt) | 8,465 | 5,613 | (8,704) | (8,738) | ||||||
| Total | 74,407 | 67,287 | (57,196) | (52,729) | 1,455 | 3,167 | (1,384) | (1,448) | (674) | (643) |
Unallocated assets, liabilities and costs relate to Head Office items and Group tax balances, which cannot be reliably allocated to individual segments.
| Revenue by destination |
Non current assets |
|||
|---|---|---|---|---|
| 2010 £'000 |
2009 £'000 |
2010 £'000 |
2009 £'000 |
|
| Europe | 75,918 | 59,067 | 23,814 | 21,384 |
| North America | 124,850 | 110,021 | 5,864 | 10,061 |
| Total | 200,768 | 169,088 | 29,678 | 31,445 |
| 2010 | 2009 | ||
|---|---|---|---|
| Note | £'000 | restated £'000 |
|
| The following items have been included in arriving at operating profit: | |||
| Inventories: | |||
| – Purchase of raw materials and consumables | 127,097 | 104,949 | |
| – Changes in inventories | 786 | 1,238 | |
| Staff costs | 3 | 28,563 | 27,611 |
| Depreciation of property, plant and equipment | 1,247 | 1,313 | |
| Depreciation of leased assets | 137 | 135 | |
| Amortisation of intangible assets | 674 | 643 | |
| Loss on disposal of property, plant and equipment | – | 26 | |
| Other operating lease rentals payable: | |||
| – Plant and machinery | 239 | 257 | |
| – Property | 1,364 | 1,359 | |
| Exceptional items | 5 | 1,125 | 771 |
| Net exchange gains | (40) | (195) | |
| Other operating expenses | 30,980 | 27,841 | |
| 192,172 | 165,948 |
During the year the Group obtained the following services from its auditors at costs as detailed below:
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Fees payable to the Company's auditor for the audit of the Parent Company and consolidated financial statements |
68 | 66 |
| Fees payable to the Company's auditor and its associates for other services: | ||
| – the audit of Company's subsidiaries pursuant to legislation | 65 | 62 |
| – other services relating to taxation: | ||
| – advice | 7 | 8 |
| – valuation and actuarial services: | ||
| – pensions advice | 53 | 21 |
| – structural services | – | 18 |
| – all other services | – | 13 |
| 193 | 188 |
In addition the 4imprint Pension Scheme has paid the auditors £6,375 (2009: £6,175) for audit services.
| Staff costs | 2010 | 2009 restated |
|
|---|---|---|---|
| Note | £'000 | £'000 | |
| Wages and salaries | 24,931 | 23,099 | |
| Social security costs | 2,343 | 2,214 | |
| Pension costs | 4 | 1,074 | 1,761 |
| Share-based payment charges | 23 | 215 | 537 |
| 28,563 | 27,611 |
Termination costs totalling £146,000 have been charged to the Group exceptional items (2009: £653,000).
| Average number of people (including Executive Directors) employed | ||
|---|---|---|
| 2010 No. |
2009 No. |
|
| 4imprint Direct Marketing | 452 | 445 |
| Brand Addition | 224 | 217 |
| SPS | 213 | 237 |
| Head Office | 8 | 8 |
| 897 | 907 |
| Key management compensation | 2010 £'000 |
2009 £'000 |
|---|---|---|
| Salaries, fees and short-term employee benefits | 1,501 | 1,022 |
| Social security costs | 122 | 81 |
| Pension contributions | 102 | 91 |
| Share-based payment charges | 113 | 299 |
| 1,838 | 1,493 |
Key management compensation includes the emoluments of all Directors (which are disclosed separately in the Remuneration Report) and the emoluments of members of the Group Executive Committee.
| Directors' remuneration | 2010 £'000 |
2009 £'000 |
|---|---|---|
| Aggregate emoluments | 794 | 466 |
| Company contributions to money purchase pension schemes | 51 | 45 |
| Aggregated gains made on the exercise of share options | – | 459 |
The Group operates defined contribution plans for the majority of its UK and US employees. The regular contributions are charged to the income statement as they are incurred.
The Group also operates a UK defined benefit scheme which is closed to new members.
| Net pension costs | 2010 £'000 |
2009 £'000 |
|---|---|---|
| Defined contribution plans | 505 | 493 |
| Defined benefit scheme | ||
| – Current service cost | 38 | 28 |
| – Net interest charge | 531 | 1,240 |
| 1,074 | 1,761 |
All of the above charge was included within operating expenses.
The financial position of the defined benefit scheme has been updated on an approximate basis at 1 January 2011. The last full actuarial valuation was carried out by a qualified independent actuary as at 5 April 2010.
The principal assumptions made by the actuaries at each period end were:
| 2010 | 2009 | |
|---|---|---|
| Rate of increase in pensionable salaries | 4.4% | 4.4% |
| Rate of increase in pensions in payment and deferred pensions | 3.4% | 3.4% |
| Discount rate | 5.5% | 5.8% |
| Inflation assumption | 3.4% | 3.4% |
| Expected return on scheme assets | 6.3% | 6.8% |
The expected return on scheme assets is a weighted average based on actual scheme assets held and respective returns expected on the separate asset classes, as calculated by the Group's independent actuaries.
The mortality assumptions adopted at 1 January 2011 imply the following life expectancies at age 65:
| 2010 | 2009 | |
|---|---|---|
| Male currently age 40 | 24.4 yrs | 21.5 yrs |
| Female currently age 40 | 27.9 yrs | 24.2 yrs |
| Male currently age 65 | 22.0 yrs | 20.3 yrs |
| Female currently age 65 | 25.3 yrs | 23.2 yrs |
The amounts recognised in the balance sheet comprise:
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Present value of funded obligations | (99,460) | (96,505) |
| Fair value of scheme assets | 77,555 | 74,055 |
| Net liability recognised in the balance sheet | (21,905) | (22,450) |
The major categories of plan assets as a percentage of total scheme assets are as follows:
| 2010 | 2009 | |||
|---|---|---|---|---|
| £'000 | % | £'000 | % | |
| Equities | 24,674 | 32% | 28,323 | 38% |
| Bonds | 38,629 | 50% | 28,970 | 39% |
| Property | 13,722 | 17% | 12,842 | 17% |
| Cash | 530 | 1% | 3,920 | 6% |
The amounts recognised in the income statement are as follows:
| Total included in staff costs | 569 | 1,268 |
|---|---|---|
| Expected return on scheme assets | (4,868) | (4,034) |
| Interest cost | 5,399 | 5,274 |
| Current service cost | 38 | 28 |
| 2010 £'000 |
2009 £'000 |
Changes in the present value of the defined benefit obligation are as follows:
| Defined benefit obligation at end of period | 99,460 | 96,505 |
|---|---|---|
| Benefits paid | (6,762) | (4,195) |
| Actuarial losses | 4,280 | 12,228 |
| Interest cost | 5,399 | 5,274 |
| Current service cost | 38 | 28 |
| Defined benefit obligation at start of period | 96,505 | 83,170 |
| 2010 £'000 |
2009 £'000 |
Changes in the fair value of scheme assets are as follows:
| Fair value of assets at end of period | 77,555 | 74,055 |
|---|---|---|
| Benefits paid | (6,762) | (4,195) |
| Contributions by employer | 2,501 | 2,456 |
| Actuarial gains | 2,893 | 5,527 |
| Expected return on assets | 4,868 | 4,034 |
| Fair value of assets at start of period | 74,055 | 66,233 |
| 2010 £'000 |
2009 £'000 |
Based on the current schedule of cash contributions, contributions by the employer for 2011 will be £500,000 higher than the 2010 contributions.
Analysis of the movement in the balance sheet liability:
| At end of period | 21,905 | 22,450 |
|---|---|---|
| Actuarial losses recognised in other comprehensive income | 1,387 | 6,701 |
| Contributions paid | (2,501) | (2,456) |
| Total expense | 569 | 1,268 |
| At start of period | 22,450 | 16,937 |
| 2010 £'000 |
2009 £'000 |
The actual return on scheme assets was a gain of £8,135,000 (2009: gain £9,367,000).
| 2010 £'000 |
2009 £'000 |
||||
|---|---|---|---|---|---|
| Cumulative actuarial losses recognised in the statement of other comprehensive income | 13,976 | 12,589 | |||
| History of experience gains and losses | |||||
| 2010 £'000 |
2009 £'000 |
2008 £'000 |
2007 £'000 |
2006 £'000 |
|
| Fair value of assets | 77,555 | 74,055 | 66,233 | 80,995 | 81,911 |
| Fair value of defined benefit obligations | (99,460) | (96,505) | (83,170) | (91,544) | (100,347) |
| Net liability | (21,905) | (22,450) | (16,937) | (10,549) | (18,436) |
| Experience adjustment on scheme liabilities | 3,693 | (79) | (406) | 2,240 | (25) |
| Experience adjustment on scheme assets | 2,893 | 5,527 | (18,309) | (3,242) | 2,251 |
| 5 Exceptional items | |||||
| 2010 £'000 |
2009 £'000 |
||||
| Onerous contracts and termination costs | (588) | (584) | |||
| SPS restructuring costs | (537) | – | |||
| Brand Addition reorganisation costs | – | (187) | |||
| (1,125) | (771) |
The onerous contract charge in the year related to a 4imprint Group plc guarantee for a leasehold property. This guarantee was maintained following the sale of the Henry Booth business by the Group in 2000. Bemrosebooth Ltd, who acquired the Henry Booth business, went into administration in 2010 and 4imprint became liable for the obligation to the end of the lease in March 2013. An extensive search has not revealed any other historical property guarantees.
SPS restructuring costs related to the closure of an offsite warehouse facility and a headcount reduction exercise.
The termination and onerous contract costs in 2009 related to a reduction in the Group overhead costs.
Brand Addition reorganisation costs in 2009 related to the completion of the restructuring commenced in 2008.
Cash expenditure on exceptional items in 2010 was £526,000 (2009: £829,000). Cash items of £456,000 (2009: £728,000) are included in accruals and £760,000 included in provisions (2009: £nil) at 1 January 2011.
| 6 Finance income and costs | ||
|---|---|---|
| 2010 £'000 |
2009 £'000 |
|
| Finance income | ||
| Bank and other interest | 13 | 28 |
| Finance costs | ||
| Interest payable on bank borrowings | (494) | (308) |
| Interest payable on finance leases | (28) | (35) |
| (522) | (343) | |
| 7 Taxation | ||
| 2010 | 2009 restated |
|
| £'000 | £'000 | |
| Analysis of charge/(credit) in the period: | ||
| UK tax – current | – | 3 |
| Overseas tax – current | 208 | 95 |
| Adjustments in respect of prior years | – | (144) |
| Total current tax | 208 | (46) |
| Deferred tax | 1,021 | 524 |
| Effect of change in UK tax rate | (4) | – |
| Adjustment in respect of prior years | – | (54) |
| Total deferred tax (note 14) | 1,017 | 470 |
| Taxation | 1,225 | 424 |
The tax for the year is different to the standard rate of corporation tax in the UK (28%). The differences are explained below:
| 2010 | 2009 | |
|---|---|---|
| £'000 | restated £'000 |
|
| Profit before tax | 8,087 | 2,825 |
| Profit before tax multiplied by rate of corporation tax in the UK of 28% (2009: 28%) | 2,264 | 791 |
| Effects of: | ||
| Adjustments in respect of foreign tax rates | 138 | (152) |
| Expenses not deductible for tax purposes and non taxable income | 78 | (18) |
| Timing differences and other differences | (455) | 1 |
| Adjustments in respect of previous years | – | (198) |
| Utilisation of losses not previously recognised | (796) | – |
| Effect of change in UK tax rate on deferred tax balances | (4) | – |
| Taxation | 1,225 | 424 |
| 8 Dividends | |||
|---|---|---|---|
| Equity dividends – ordinary shares | 2010 £'000 |
2009 £'000 |
|
| Interim paid: | 4.7p (2009: 4.25p) | 1,210 | 1,098 |
| Final paid: | 8.5p (2009: 8.0p) | 2,189 | 2,026 |
| 3,399 | 3,124 |
In addition, the Directors are proposing a final dividend in respect of the period ended 1 January 2011, of 9.0p per share, which will absorb an estimated £2.32m of Shareholders' funds. It will be paid on 4 May 2011 to Shareholders who are on the register of members on 1 April 2011. These financial statements do not reflect this proposed dividend.
The basic, underlying and diluted earnings per share are calculated based on the following data:
| 2010 | 2009 | |
|---|---|---|
| restated | ||
| £'000 | £'000 | |
| Profit for the period | 6,862 | 2,401 |
| Add back: | ||
| IAS 38 marketing cost adjustment | (19) | (264) |
| Defined benefit pension charge | 569 | 1,268 |
| Share option charge | 215 | 537 |
| Exceptional items | 1,125 | 771 |
| Tax relating to above items | (287) | (347) |
| Underlying profit for the period | 8,465 | 4,366 |
| Number 000's |
Number 000's |
|
|---|---|---|
| Basic weighted average number of shares | 25,750 | 25,574 |
| Dilutive potential ordinary shares – employee share options | 593 | 261 |
| Diluted weighted average number of shares | 26,343 | 25,835 |
| Basic earnings per share | 26.65p | 9.39p |
|---|---|---|
| Underlying basic earnings per share | 32.87p | 17.07p |
| Diluted earnings per share | 26.05p | 9.29p |
The basic weighted average number of shares excludes shares held in the 4imprint Group plc Employee Share Trust. The effect of this is to reduce the average by 90,325 (2009: 170,648).
The basic earnings per share is calculated based on the profit for the financial period divided by the basic weighted average number of shares.
The underlying basic earnings per share is calculated before the after tax effect of IAS 38 marketing cost adjustments, defined benefit pension charges, share option charges and exceptional items and is included because the Directors consider this gives a measure of the underlying performance of the business.
For diluted earnings per share, the basic weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares. The potential dilutive ordinary shares relate to those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares at the balance sheet date.
| Net book value at 1 January 2011 | 2,878 | 2,515 | 4 | 6,804 | 379 | 12,580 |
|---|---|---|---|---|---|---|
| At 1 January 2011 | 130 | 252 | 111 | 4,578 | 1,502 | 6,573 |
| Exchange translation | 1 | 1 | 1 | 36 | 16 | 55 |
| Reclassifications | – | 11 | (11) | – | – | – |
| Disposals | – | – | (6) | (366) | (238) | (610) |
| Charge for the period | 72 | 64 | 2 | 954 | 292 | 1,384 |
| At 3 January 2010 | 57 | 176 | 125 | 3,954 | 1,432 | 5,744 |
| Depreciation: | ||||||
| At 1 January 2011 | 3,008 | 2,767 | 115 | 11,382 | 1,881 | 19,153 |
| Exchange translation | 91 | 1 | 1 | 74 | 19 | 186 |
| Reclassifications | – | 37 | (37) | – | – | – |
| Disposals | – | – | (6) | (475) | (238) | (719) |
| Additions | 5 | – | – | 607 | 267 | 879 |
| At 3 January 2010 | 2,912 | 2,729 | 157 | 11,176 | 1,833 | 18,807 |
| Cost: | ||||||
| buildings £'000 |
buildings £'000 |
buildings £'000 |
fittings £'000 |
hardware £'000 |
Total £'000 |
|
| land and leasehold | leasehold | fixtures & Computer | ||||
| Freehold | Long | Plant, Short machinery, |
Freehold land with a value of £304,000 (2009: £295,000) has not been depreciated.
| Plant, | ||||||
|---|---|---|---|---|---|---|
| Freehold buildings |
Long land and leasehold buildings |
leasehold buildings |
Short machinery, fittings |
fixtures & Computer hardware |
Total | |
| Cost: | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| At 28 December 2008 | 2,290 | 2,767 | 166 | 10,726 | 1,878 | 17,827 |
| Additions | 854 | – | – | 1,206 | 274 | 2,334 |
| Disposals | – | (38) | – | (513) | (237) | (788) |
| Exchange translation | (232) | – | (9) | (243) | (82) | (566) |
| At 2 January 2010 | 2,912 | 2,729 | 157 | 11,176 | 1,833 | 18,807 |
| Depreciation: | ||||||
| At 28 December 2008 | – | 128 | 117 | 3,604 | 1,430 | 5,279 |
| Charge for the period | 59 | 68 | 12 | 1,005 | 304 | 1,448 |
| Disposals | – | (20) | – | (506) | (236) | (762) |
| Exchange translation | (2) | – | (4) | (149) | (66) | (221) |
| At 2 January 2010 | 57 | 176 | 125 | 3,954 | 1,432 | 5,744 |
| Net book value at 2 January 2010 | 2,855 | 2,553 | 32 | 7,222 | 401 | 13,063 |
Plant and machinery additions in 2009 of £683,000 were acquired by means of finance lease.
The Directors are not aware of a significant difference between the net book value and the fair value of property, plant and equipment.
| £'000 | |
|---|---|
| Cost: | |
| At 1 January 2011 and 2 January 2010 | 9,084 |
A segment-level summary of the goodwill allocation is presented below:
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Brand Addition | 4,341 | 4,341 |
| SPS | 4,743 | 4,743 |
| 9,084 | 9,084 |
The recoverable amount of a segment is determined based on value in use calculations compared against the goodwill and non current assets of the segment. These calculations use cash flow projections based on financial budgets approved by management covering a two year period. Subsequent cash flows have been increased in line with past performance and management's view of market developments using growth rates noted below. These growth rates do not exceed the long term average growth rates for the countries in which the Divisions operate. The discounted rate is calculated using the capital asset pricing model.
The key assumptions used in the value in use calculations for goodwill held at 1 January 2011 and 2 January 2010 were:
| 2010 | 2009 | |
|---|---|---|
| Discount rate pre tax | 13.36% | 13.89% |
| Operating profit margin | 7% | 7% |
| Long term growth rate | 2% | 2% |
The recoverable amount calculated for SPS indicated a headroom of £0.7m. A reduction in the short term growth rate of 0.8% or an increase to the discount rate of 0.5% would remove this headroom.
| Computer software £'000 |
|
|---|---|
| Cost: | |
| At 3 January 2010 | 5,426 |
| Additions | 576 |
| Disposals | (489) |
| Exchange translation | 53 |
| At 1 January 2011 | 5,566 |
| Amortisation: | |
| At 3 January 2010 | 3,696 |
| Charge for the period | 674 |
| Disposals | (489) |
| Exchange translation | 28 |
| At 1 January 2011 | 3,909 |
| Net book value at 1 January 2011 | 1,657 |
| Computer software £'000 |
|
|---|---|
| Cost: | |
| At 28 December 2008 | 5,178 |
| Additions | 833 |
| Disposals | (394) |
| Exchange translation | (191) |
| At 2 January 2010 | 5,426 |
| Amortisation: | |
| At 28 December 2008 | 3,548 |
| Charge for the period | 643 |
| Disposals | (392) |
| Exchange translation | (103) |
| At 2 January 2010 | 3,696 |
| Net book value at 2 January 2010 | 1,730 |
The average remaining life of intangible assets is 2.7 years.
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Investment in German trade organisation | 9 | 10 |
The investment represents an equity investment in a German promotional products trade group of which the German subsidiary is a member. The movement in cost is entirely due to exchange translation.
| At end of period | 6,348 | 7,558 |
|---|---|---|
| Exchange gain/(loss) | 51 | (78) |
| Effect of change in UK tax rate – other comprehensive income | (219) | – |
| Effect of change in UK tax rate – income statement | 4 | – |
| Deferred tax credited to other comprehensive income | 388 | 1,862 |
| Offset with current tax in respect of loss carry back | (413) | – |
| Income statement charge | (1,021) | (470) |
| At start of period | 7,558 | 6,244 |
| £'000 | restated £'000 |
|
| 2010 | 2009 |
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries. No tax is expected to be payable on them in the foreseeable future.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown in the following table. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.
| Deferred tax analysis | |||||
|---|---|---|---|---|---|
| Depreciation/ | |||||
| capital allowances |
Tax losses |
Pension | Other | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| At 3 January 2010 | (893) | 1,555 | 6,283 | 278 | 7,223 |
| Impact of changes to accounting policies (note 25) | – | – | – | 335 | 335 |
| At 3 January 2010 (restated) | (893) | 1,555 | 6,283 | 613 | 7,558 |
| Income statement charge | (3) | (231) | (541) | (246) | (1,021) |
| Offset with current tax in respect of loss carry back | – | (413) | – | – | (413) |
| Deferred tax credited to other comprehensive income | – | – | 388 | – | 388 |
| Effect of change in UK tax rate – income statement | 24 | (18) | – | (2) | 4 |
| Effect of change in UK tax rate – other comprehensive income | – | – | (219) | – | (219) |
| Exchange translation differences | (5) | 37 | – | 19 | 51 |
| At 1 January 2011 | (877) | 930 | 5,911 | 384 | 6,348 |
Included in Other in the table above is deferred tax in respect of US goodwill and other timing differences.
Deferred tax assets have been recognised where it is considered that there will be taxable profit available in future against which the deductible temporary differences can be utilised.
No provision has been made for deferred tax assets relating to trading losses carried forward of £0.3m (2009: £0.7m). These losses are available for offset against future taxable trading profits.
No provision has been made for deferred tax assets relating to losses carried forward in holding companies of £6.7m (2009: £9.4m). These losses may be available for offset against future profits in these companies.
No provision has been made for deferred tax assets relating to capital losses carried forward of £9.85m (2009: £9.85m). These amounts will be utilised should the UK Group have any chargeable gains in the future. No material gains were anticipated as at 1 January 2011.
A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010 included legislation to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. These future changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.
The effect of the reduction in the rate of 1% enacted in the Finance (No 2) Act 2010 has been to reduce the deferred tax asset at 1 January 2011 by £215,000. This decrease in the net deferred tax asset increased profit for the period by £4,000 and decreased other comprehensive income by £219,000.
The proposed reductions of the main rate of corporation tax by 1% per year to 24% by 1 April 2014 are expected to be enacted separately each year. The overall effect of the further changes from 27% to 24%, if these applied to the deferred tax balance at 1 January 2011, would be to reduce the deferred tax asset by £640,000.
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Raw materials and consumables | 304 | 381 |
| Work in progress | 95 | 321 |
| Finished goods and goods for resale | 5,918 | 6,320 |
| 6,317 | 7,022 |
During both the current and previous year, inventory was carried at cost less appropriate provisions as this did not exceed the fair value less cost to sell. Provisions held against inventory total £617,000 (2009: £1,112,000).
During the year a net amount of £134,000 has been charged to the income statement in respect of provisions for slow moving and obsolete stock (2009: £36,000 credit).
The amount of inventory charged to the income statement is shown in note 2.
| 2010 £'000 |
2009 restated £'000 |
2008 restated £'000 |
|
|---|---|---|---|
| Trade receivables | 24,135 | 18,145 | 23,566 |
| Less: Provision for impairment of receivables | (169) | (178) | (987) |
| Trade receivables – net | 23,966 | 17,967 | 22,579 |
| Corporation tax debtor | – | 208 | 250 |
| Other receivables | 3,386 | 2,794 | 3,228 |
| Prepayments and accrued income | 2,595 | 2,238 | 1,628 |
| 29,947 | 23,207 | 27,685 |
The fair value of trade receivables does not differ from the book value.
The impairment of trade receivables charged to the income statement was £131,000 (2009: £45,000 credit). This was incurred in the divisions as follows: SPS £84,000 (2009: £150,000); 4imprint Direct Marketing £36,000 (2009: £75,000); and Brand Addition £11,000 (2009: £270,000 credit). There is no impairment of any receivables other than trade receivables.
The ageing of past due trade receivables which are not impaired is as follows:
| Time past due date | 2010 £'000 |
2009 £'000 |
2008 £'000 |
|---|---|---|---|
| Up to 3 months | 2,979 | 2,941 | 5,122 |
| 3 to 6 months | 461 | 186 | 605 |
| Over 6 months | 34 | 142 | 110 |
| 3,474 | 3,269 | 5,837 |
The ageing of impaired trade receivables is as follows:
| Time past due date | 2010 £'000 |
2009 £'000 |
2008 £'000 |
|---|---|---|---|
| Up to 3 months | 58 | 15 | 104 |
| 3 to 6 months | 95 | 58 | 196 |
| Over 6 months | 16 | 105 | 687 |
| 169 | 178 | 987 |
The carrying amounts of the trade and other receivables are denominated in the following currencies:
| 2010 £'000 |
2009 restated £'000 |
2008 restated £'000 |
|
|---|---|---|---|
| Sterling | 10,805 | 7,974 | 10,700 |
| US Dollars | 13,099 | 11,973 | 13,114 |
| Euros | 5,301 | 2,669 | 2,905 |
| Canadian Dollars | 701 | 524 | 811 |
| Other currencies | 41 | 67 | 155 |
| 29,947 | 23,207 | 27,685 |
Movements in the provision for impairment of trade receivables are as follows:
| 2010 | 2009 | 2008 | |
|---|---|---|---|
| £'000 | £'000 | £'000 | |
| At 3 January 2010 | 178 | 987 | 603 |
| Exchange translation | 2 | (10) | 20 |
| Utilised | (128) | (754) | (515) |
| Provided | 131 | 355 | 975 |
| Released | (14) | (400) | (96) |
| At 1 January 2011 | 169 | 178 | 987 |
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Cash at bank and in hand | 5,215 | 5,613 |
| Short term deposits | 3,250 | – |
| 8,465 | 5,613 |
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Trade payables | 20,127 | 16,449 |
| Other tax and social security payable | 1,086 | 1,008 |
| Other payables | 137 | 111 |
| Accruals | 4,238 | 3,822 |
| 25,588 | 21,390 |
The fair value of trade payables does not differ from the book value.
| 19 Financial liabilities – borrowings | ||
|---|---|---|
| 2010 | 2009 | |
| £'000 | £'000 | |
| Current borrowing | ||
| Finance lease creditor | 135 | 124 |
| Bank loans | 239 | 6,072 |
| 374 | 6,196 | |
| Non current borrowings | ||
| Finance lease creditor | 293 | 416 |
| Bank loans | 8,037 | 2,127 |
| 8,330 | 2,543 | |
| The fair value of borrowings does not differ from the book value. | ||
| 2010 £'000 |
2009 £'000 |
|
| Non current borrowings | ||
| Repayable in 1-2 years | 8,330 | 199 |
| Repayable in 2-5 years | – | 2,344 |
| 8,330 | 2,543 |
£1,750,000 of the non current borrowings outstanding at the end of 2010 is secured on the SPS long leasehold property in Blackpool. The non current borrowings in 2009 include £2,199,000 related to a mortgage for the US distribution centre secured on the land and building.
Borrowings are held in the following currencies and interest is payable at the following effective interest rates:
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Sterling (2010: 3.70%; 2009: 1.30%) | 6,654 | 6,000 |
| US Dollars (2010: 1.765%; 2009: 5.30%) | 2,050 | 2,739 |
| 8,704 | 8,739 |
The Group had the following undrawn committed borrowing facilities available at 1 January 2011:
| Floating rate | ||
|---|---|---|
| Borrowing facilities | 2010 £'000 |
2009 £'000 |
| Expiring within one year | 250 | 8,025 |
| Expiring in more than one year | 7,515 | – |
| 7,765 | 8,025 |
The Group renewed its UK borrowing facilities in January 2010 and its US borrowing facilities in August 2010. This resulted in the existing borrowings of £6m in the UK, and £4.8m in the USA being repaid by draw down on the new facilities.
The £6m loan facility and £4m overdraft facility in the UK were replaced with a £6m loan facility repayable on 31 December 2012, a £2m mortgage repayable £0.25m on 30 December 2010, £0.25m on 30 December 2011 and £1.5m on 31 December 2012 and an overdraft facility of £2m renewable annually on 31 December.
The Group's US subsidiary replaced its mortgage and line of credit with a \$10m line of credit repayable on 20 April 2012.
| At end of period | 760 | – |
|---|---|---|
| Charged to the income statement | 760 | – |
| At start of period | – | – |
| 2010 £'000 |
2009 £'000 |
Analysis of provisions
| Total | 760 | – |
|---|---|---|
| Non current | 383 | – |
| Current | 377 | – |
| 2010 £'000 |
2009 £'000 |
The provisions relate to rental and dilapidations costs for onerous leases in respect of a guarantee enforced on a lease previously assigned on disposal of a business and a SPS warehouse in Blackpool (see note 5).
The Group's activities expose it to a variety of financial risks including currency risk, credit risk, liquidity risk and interest rate risk.
The Group operates internationally and is exposed to various currency exposures, predominantly the US Dollar and the Euro. Risk arises predominantly from the translation of profits of overseas subsidiaries and the net assets of these subsidiaries. In addition, Group subsidiaries may make both sales and purchases in a currency other than their functional currency and have foreign currency trade receivables and trade payables in relation to these transactions.
The Group uses derivative financial instruments only to hedge foreign currencies cash flows arising from sales and purchases of goods. Contracts outstanding at the year end had no material impact on the financial statements. It does not hedge the currency exposure of profits and assets of its overseas subsidiaries or other financial transactions.
The Group operates a UK cash currency pooling arrangement and also, when appropriate, seeks to utilise currency cash flows arising in its overseas subsidiaries to match currency cash outflows in its other subsidiaries.
The movement in the exchange rates compared to prior year increased profit of the US business by £0.1m and net assets by £0.2m. Closing rate was US\$1.57 (2009: US\$1.61) and the average rate used to translate profits was US\$1.55 (2009: US\$1.56).
A weakening in the US Dollar exchange rate by ten cents would reduce profit by £0.48m and net assets by £0.45m.
Credit risk arises from deposits with banks and financial institutions, as well as credit exposure to trade receivable balances due from customers.
The risk associated with banks and financial institutions is managed on a Group basis and all banking relationships must be approved by the Group Finance Director or the Board based on the credit rating of the bank.
The Group operates cash pooling arrangements for its UK subsidiaries and, apart from overseas subsidiaries working capital cash requirements, the Group seeks to hold any cash balances on deposit with its principal UK banker.
Cash deposits at 1 January 2011 are as follows:
| 2010 Rating |
2010 Deposit £'000 |
2009 Rating |
2009 Deposit £'000 |
|
|---|---|---|---|---|
| Lloyds TSB | Aa3 | 6,396 | Aa3 | 2,583 |
| JPMorgan Chase Bank, NA | Aa1 | 805 | Aa1 | 350 |
| Commerzbank | Aa3 | 490 | – | |
| Sparkassen – Finanzgruppe | Aa2 | 636 | – | |
| Associated | A3 | 84 | A1 | 1,406 |
| HSBC | Aa2 | 34 | Aa2 | 57 |
| Fortis | – | Aa2 | 1,201 | |
| Other | 20 | 16 | ||
| 8,465 | 5,613 |
There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers who are internationally dispersed.
Credit risk arising from customers is delegated to the senior management of each Division to a maximum level per customer, above which, it is referred to the Group Executive Committee for approval. External agency credit assessment reports are referred to as part of this process.
Group borrowing requirements are managed centrally and borrowing arrangements are customarily with the Group's principal UK bank and terms are agreed which are considered appropriate for the funding requirement of the Group at that time. Local operating working capital cash requirements in overseas subsidiaries are customarily raised locally in accordance with Group guidelines.
Operating working capital is managed within each Division to levels agreed with Group and cash forecasts are reviewed regularly by Group and Divisional management.
At 1 January 2011 the net debt position of the Group was £239,000 (2009: £3,126,000).
The maturity profile of the Group's borrowings is shown in note 19.
Group cash balances earn interest at variable rates and Group borrowing facilities incur interest at variable rates as agreed between the Group and the banks at the time of entering the facility. These are linked to the Bank of England base rate, LIBOR or appropriate local equivalent for overseas subsidiaries.
If interest rates had been 0.1% higher, interest charges would have been £11,000 (2009: £8,000) higher in the year.
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Authorised | ||
| 39,000,000 (2009: 39,000,000) ordinary shares of 38 6/13p each | 15,000 | 15,000 |
| Allotted and fully paid | ||
| 25,840,552 (2009: 25,840,552) ordinary shares of 38 6/13p each | 9,939 | 9,939 |
No ordinary shares were issued in the period (2009: 240,000, value £92,308 to satisfy the exercise of share options under UK Executive schemes).
At 1 January 2011 the following options have been granted and were outstanding under the Company's share option schemes:
| Date of | Number of ordinary shares |
Number of option holders |
Number of ordinary shares |
Subscription | Date exercisable | ||
|---|---|---|---|---|---|---|---|
| Scheme | grant | 2010 | 2010 | 2009 | price | From | to |
| SAYE | 03.10.06 | – | – | 12,284 | 266.0p | Jan 2010 | Jun 2010 |
| 01.10.07 | 12,994 | 29 | 13,547 | 346.0p | Jan 2011 | Jun 2011 | |
| 07.10.08 | 58,173 | 31 | 69,541 | 130.0p | Jan 2012 | Jun 2012 | |
| 07.10.09 | 458,507 | 100 | 520,040 | 87.0p | Jan 2013 | Jun 2013 | |
| 05.10.10 | 55,279 | 46 | – | 166.0p | Jan 2014 | Jun 2014 | |
| US Sharesave | |||||||
| 07.10.08 | 7,972 | 7 | 12,527 | \$2.32 | Dec 2010 | Jan 2011 | |
| 07.10.09 | 436,036 | 154 | 482,305 | \$1.49 | Dec 2011 | Jan 2012 | |
| 05.10.10 | 61,276 | 86 | – | \$3.14 | Dec 2012 | Jan 2013 | |
| Total | 1,090,237 | 453 | 1,110,244 |
The weighted average exercise price for options outstanding at 1 January 2011 was 95.21p (2009: 97.76p).
Share options may be granted to senior management and in addition a SAYE scheme is available to all UK and US employees. The exercise price for SAYE options is equal to the market rate, plus any discount up to the limit imposed by the local tax authority at the pricing date.
The fair value of the options is determined using the Black-Scholes model for SAYE and Sharesave schemes and is spread over the vesting period of the options. The significant inputs into the model are an expected life of between 2.17 and 3 years for all options, the volatility measured at the standard deviation of expected share price returns is based on statistical analysis of daily share prices over the last 5 years and the risk-free rate is based on a zero coupon government bond yields.
| 2010 | 2009 | |
|---|---|---|
| restated | ||
| £'000 | £'000 | |
| Charge resulting from spreading the fair value of options | 215 | 537 |
The fair value per option granted and the assumptions used in the calculation are as follows:
| UK SAYE Schemes | US Sharesave Scheme | ||||||
|---|---|---|---|---|---|---|---|
| Grant date | 01/10/07 | 07/10/08 | 07/10/09 | 05/10/10 | 07/10/08 | 07/10/09 | 05/10/10 |
| Share price at grant date | 432.5p | 129p | 110p | 232.5p | 129p | 110p | 232.5p |
| Exercise price | 346p | 130p | 87p | 116p | \$2.32 | \$1.49 | \$3.14 |
| Number of employees | 29 | 31 | 100 | 46 | 7 | 154 | 86 |
| Shares under option | 12,994 | 58,173 | 458,507 | 55,279 | 7,972 | 436,036 | 61,276 |
| Vesting period (years) | 3 | 3 | 3 | 3 | 2.17 | 2.17 | 2.17 |
| Expected volatility | 18% | 35% | 40% | 45% | 35% | 40% | 45% |
| Option life (years) | 3.5 | 3.5 | 3.5 | 3.5 | 2.25 | 2.25 | 2.25 |
| Expected life (years) | 3 | 3 | 3 | 3 | 2.17 | 2.17 | 2.17 |
| Risk free rate | 5.2% | 3.7% | 2.0% | 1.3% | 3.6% | 2.0% | 0.9% |
| Expected dividends expressed as a dividend yield |
2.3% | 5.5% | 8.5% | 5.5% | 5.5% | 8.5% | 5.5% |
| Possibility of ceasing employment before vesting |
10% | 10% | 10% | 10% | 10% | 10% | 10% |
| Expectations of meeting performance criteria |
100% | 100% | 100% | 100% | 100% | 100% | 100% |
| Fair value per option | 95.0p | 24.5p | 24.0p | 75.1p | 20.8p | 22.3p | 59.1p |
A reconciliation of option movements over the period to 1 January 2011 is shown below:
| 2010 | 2009 | ||||
|---|---|---|---|---|---|
| of shares | Number Weighted average exercise price |
of shares | Number Weighted average exercise price |
||
| Outstanding at start of period | 1,110,244 | 97.76p | 1,088,109 | 96.35p | |
| Granted | 116,555 | 184.16p | 1,008,209 | 89.53p | |
| Forfeited/cancelled | (121,118) | 97.64p | (496,995) | 139.01p | |
| Exercised | (3,160) | 87.00p | (440,000) | 0.00p | |
| Expired | (12,284) | 266.00p | (49,079) | 231.15p | |
| Outstanding at end of period | 1,090,237 | 95.21p | 1,110,244 | 97.76p | |
| Exercisable at end of period | 20,966 | 270.78p | – | – |
| 2010 | 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| Range of exercise |
Weighted average exercise |
Number | Weighted average remaining life (years) |
Weighted average exercise |
Number | Weighted average remaining life (years) |
||
| prices | price | of shares | Expected | Contractual | price | of shares | Expected | Contractual |
| £0.01 – £1 | 90.98p | 894,543 | 1.51 | 1.81 | 89.53p | 1,002,345 | 2.52 | 2.52 |
| £1.01 – £2 | 165.35p | 182,700 | 1.90 | 2.24 | 110.38p | 82,068 | 1.85 | 1.85 |
| £2.01 – £3 | – | – | – | – | 266.0p | 12,284 | 1.00 | 1.00 |
| £3.01 – £4 | 346.0p | 12,994 | 0.00 | 0.50 | 346.0p | 13,547 | 1.00 | 1.50 |
| 2010 | 2009 restated |
||
|---|---|---|---|
| £'000 | £'000 | ||
| Operating profit | 8,596 | 3,140 | |
| Adjustments for: | |||
| Depreciation charge | 1,384 | 1,448 | |
| Amortisation of intangibles | 674 | 643 | |
| Loss on disposal of property, plant and equipment | – | 26 | |
| Exceptional non cash items | 111 | – | |
| Increase/(decrease) in exceptional accrual/provisions | 488 | (58) | |
| Share option non cash charge | 215 | 470 | |
| IAS 19 pension charge for defined benefit scheme | 569 | 1,268 | |
| Contributions to defined benefit pension scheme | (2,501) | (2,456) | |
| Changes in working capital: | |||
| Decrease in inventories | 688 | 1,158 | |
| (Increase)/decrease in trade and other receivables | (6,683) | 3,405 | |
| Increase/(decrease) in trade and other payables | 4,308 | (1,411) | |
| Cash generated from operations | 7,849 | 7,633 | |
| Analysis of net debt | Note | 2010 £'000 |
2009 £'000 |
| Cash at bank and in hand | 17 | 5,215 | 5,613 |
| Short term deposits | 17 | 3,250 | – |
| Current finance lease creditor | 19 | (135) | (124) |
| Current bank loans | 19 | (239) | (6,072) |
| 8,091 | (583) | ||
| Non current bank loans | 19 | (8,037) | (2,127) |
| Non current finance lease creditor | 19 | (293) | (416) |
| Net debt | (239) | (3,126) |
IAS 38 'Intangible assets': Following an amendment to IAS 38 an expense will now be recognised for mail order catalogues and other related marketing expenses when the Group has access to the catalogues, rather than when the catalogues are distributed to customers as was the previous policy.
The impact on reported profit for the period ended 2 January 2010 was to decrease operating expenses by £264,000, which has the impact of increasing profit after tax by £224,000. Net assets at 2 January 2010 are reduced by £496,000 as a result of this change of policy (2008: £786,000 decrease).
IFRS 2 'Share-based payments': A clarification to the interpretation of this standard requires that cancellations of options by employees are to be treated in the same way as cancellations by the employer and that the full remaining cost of the options are expensed at the time of cancellation. As a result of this clarification, operating expenses for the period ended 2 January 2010 have increased by £111,000, which reduces profit after tax by £94,000. There is no net impact on net assets.
As a result of these changes in accounting policy, the comparative amounts have been restated, as follows:
| 2009 £'000 |
|
|---|---|
| Profit for the period as previously reported | 2,271 |
| Decrease in operating expenses | 153 |
| Deferred tax impact of the above | (23) |
| Profit for the period as restated | 2,401 |
| 2009 £'000 |
2008 £'000 |
|
|---|---|---|
| Net assets as previously reported | 15,054 | 21,559 |
| Reduction in trade and other receivables | (831) | (1,169) |
| Increase in deferred tax asset | 335 | 383 |
| Net assets as restated | 14,558 | 20,773 |
At 1 January 2011, the Group was committed to make payments in respect of non-cancellable operating leases expiring in the following periods:
| 2010 | 2009 | |||
|---|---|---|---|---|
| Land and buildings £'000 |
Other £'000 |
Land and buildings £'000 |
Other £'000 |
|
| In one year | 1,501 | 274 | 1,341 | 263 |
| In two to five years | 4,426 | 382 | 4,579 | 474 |
| In more than five years | 3,371 | – | 4,351 | – |
| 9,298 | 656 | 10,271 | 737 |
The Group has no known contingent liabilities (2009: none).
The Group had capital commitments contracted but not provided for in the financial statements of £79,000 (2009: £nil).
The Group did not participate in any related party transactions that require disclosure.
Key management compensation is disclosed in note 3.
We have audited the parent company financial statements of 4imprint Group plc for the 52 weeks ended 1 January 2011 which comprise the Company balance sheet, Statement of changes in Company shareholders' equity, Company cash flow statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
As explained more fully in the Directors' responsibilities statement set out on page 21, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.
In our opinion the parent company financial statements:
In our opinion:
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
We have reported separately on the Group financial statements of 4imprint Group plc for the 52 weeks ended 1 January 2011.
2 March 2011
at 1 January 2011
| Note | 2010 £'000 |
2009 £'000 |
|
|---|---|---|---|
| Non current assets | |||
| Property, plant and equipment | B | 175 | 179 |
| Investments | C | 104,182 | 104,187 |
| Deferred tax assets | D | 5,883 | 6,251 |
| Trade and other receivables | E | 52,313 | 60,000 |
| 162,553 | 170,617 | ||
| Current assets | |||
| Trade and other receivables | E | 42,804 | 33,028 |
| Cash and cash equivalents | 4,555 | 1,526 | |
| 47,359 | 34,554 | ||
| Current liabilities | |||
| Trade and other payables | F | (3,951) | (3,428) |
| Borrowings | J | – | (6,000) |
| Provisions for other liabilities and charges | G | (281) | – |
| (4,232) | (9,428) | ||
| Net current assets | 43,127 | 25,126 | |
| Non current liabilities | |||
| Retirement benefit obligations | H | (21,905) | (22,450) |
| Borrowings | J | (4,928) | – |
| Provisions for other liabilities and charges | G | (307) | – |
| Amounts due to subsidiary companies | K | (67,149) | (61,375) |
| (94,289) | (83,825) | ||
| Net assets | 111,391 | 111,918 | |
| Shareholders' equity | |||
| Share capital | M | 9,939 | 9,939 |
| Share premium reserve | 38,016 | 38,016 | |
| Capital redemption reserve | 208 | 208 | |
| Retained earnings | 63,228 | 63,755 |
Total equity 111,391 111,918
The financial statements on pages 60 to 69 were approved by the Board of Directors on 2 March 2011 and were signed on its behalf by:
John Poulter Gillian Davies
Chairman Group Finance Director
| Balance at 1 January 2011 | 9,939 | 38,016 | 208 | (161) | 63,389 | 111,391 |
|---|---|---|---|---|---|---|
| Dividends | (3,399) | (3,399) | ||||
| Share based payment charge | 215 | 215 | ||||
| Total comprehensive income | 2,657 | 2,657 | ||||
| Effect of change in UK tax rate | (219) | (219) | ||||
| Deferred tax on acturial losses | 388 | 388 | ||||
| Acturial losses on defined benefit pension scheme | (1,387) | (1,387) | ||||
| Other comprehensive income | ||||||
| Profit for the period | 3,875 | 3,875 | ||||
| Balance at 2 January 2010 | 9,939 | 38,016 | 208 | (161) | 63,916 | 111,918 |
| Dividends | (3,124) | (3,124) | ||||
| Deferred tax on share-based payment charge | (14) | (14) | ||||
| Share based payment charge | 470 | 470 | ||||
| Own shares purchased | (93) | (93) | ||||
| Own shares utilised | 451 | (451) | – | |||
| Shares issued | 93 | 93 | ||||
| Total comprehensive income | 47,593 | 47,593 | ||||
| Deferred tax on actuarial losses | 1,876 | 1,876 | ||||
| Actuarial losses on defined benefit pension scheme | (6,701) | (6,701) | ||||
| Other comprehensive income | ||||||
| Profit for the period | 52,418 | 52,418 | ||||
| Balance at 28 December 2008 | 9,846 | 38,016 | 208 | (519) | 19,442 | 66,993 |
| Share capital £'000 |
Share reserve £'000 |
Capital premium redemption reserve £'000 |
Own shares £'000 |
Profit and loss £'000 |
Total equity £'000 |
|
| Retained earnings |
for the 52 weeks ended 1 January 2011
| Note | 2010 52 weeks £'000 |
2009 53 weeks £'000 |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash generated from/(used in) operations | L | 12 | (5,948) |
| Tax recovered | – | 47 | |
| Finance income | 8,633 | 7,125 | |
| Finance costs | (1,120) | (4,476) | |
| Net cash generated from/(used in) operating activities | 7,525 | (3,252) | |
| Cash flows from investing activities | |||
| Purchases of property, plant and equipment | (25) | (10) | |
| Dividends received | – | 7,587 | |
| Net cash (used in)/generated from investing activities | (25) | 7,577 | |
| Cash flows from financing activities | |||
| Proceeds from borrowings | 4,928 | – | |
| Repayment of borrowings | (6,000) | – | |
| Proceeds from issue of ordinary shares | – | 93 | |
| Purchase of own shares | – | (93) | |
| Dividends paid to Shareholders | (3,399) | (3,124) | |
| Net cash used in financing activities | (4,471) | (3,124) | |
| Net movement in cash, cash equivalents and bank overdrafts | 3,029 | 1,201 | |
| Cash, cash equivalents and bank overdrafts at beginning of the period | 1,526 | 325 | |
| Cash, cash equivalents and bank overdrafts at end of the period | 4,555 | 1,526 | |
| Analysis of cash, cash equivalents and bank overdrafts | |||
| Cash at bank and in hand | 1,305 | 1,526 | |
| Short term deposits | 3,250 | – | |
| 4,555 | 1,526 |
4imprint Group plc, registered number 177991, is a public limited company incorporated and domiciled in the UK and listed on the London Stock Exchange. Its registered office is 7/8 Market Place, London W1W 8AG.
The principal accounting policies adopted in the preparation of these financial statements are the same as those adopted in the consolidated financial statements on pages 33 to 36 except for the investments policy noted below. These policies have been consistently applied to all the periods presented.
The financial statements have been prepared under the historical cost convention in accordance with IFRS, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The standards used are those published by the International Accounting Standards Board (IASB) and endorsed by the EU at the time of preparing these statements (March 2011). The principal accounting policies are set out below.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Critical accounting policies are those that require significant judgement or estimates and potentially result in materially different results under different assumptions or conditions. Management consider the following to be critical accounting policies of the Company.
As disclosed in note 4 the Company operates a closed defined benefit scheme. Year end recognition of the liabilities under this scheme and the return on assets held to fund these liabilities require a number of significant actuarial assumptions to be made including inflation, asset returns, discount rate and mortality rates. Small changes in assumptions can have a significant impact on the expense recorded in the income statement and on the pension liability in the balance sheet.
The Company is required to estimate the income tax in the jurisdiction in which it operates. This requires an estimation of the current tax liability together with an assessment of the temporary differences which arise as a consequence of different tax and accounting treatments. Assumptions are made around the extent to which it is probable that future taxable profit will be available against which the temporary differences can be utilised and deferred tax assets are recognised at the balance sheet date based on these assumptions.
Investments in subsidiaries are stated at cost. Where, in the opinion of the Directors, an impairment of the investment has arisen, provisions are made in accordance with IAS 36 'Impairment of assets'.
Under Section 408 of the Companies Act 2006 an income statement for the Company is not presented. Profit after tax and before external dividends payable for the period of £3,875,000 (2009: £52,418,000) is included in the financial statements of the Company.
Of the £63,228,000 profit and loss reserve in the Company, £40,000,000 is currently considered not distributable as no qualifying consideration has yet been received and the debt is not expected to be settled within a reasonable period of time.
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Wages and salaries | 1,071 | 692 |
| Social security costs | 131 | 82 |
| Pension costs | ||
| – Defined contribution plans | 60 | 52 |
| – Defined benefit scheme | 569 | 1,268 |
| Share-based payments | 172 | 389 |
| 2,003 | 2,483 | |
There were no termination costs in the Company.
The average number of people employed by the Company during the year was 8 (2009: 8).
| Fixtures & fittings £'000 |
|
|---|---|
| Cost: | |
| At 28 December 2008 | 200 |
| Additions | 10 |
| At 2 January 2010 | 210 |
| Additions | 25 |
| At 1 January 2011 | 235 |
| Depreciation: | |
| At 28 December 2008 | 8 |
| Charge for the period | 23 |
| At 2 January 2010 | 31 |
| Charge for the period | 29 |
| At 1 January 2011 | 60 |
| Net book value at 1 January 2011 | 175 |
|---|---|
| Net book value at 2 January 2010 | 179 |
| At 1 January 2011 | 104,182 |
|---|---|
| Investment written off | (5) |
| At 3 January 2010 | 104,187 |
| Cost: | |
| Shares in subsidiary undertakings £'000 |
The principal operating subsidiaries at 1 January 2011 are set out below. All of these subsidiaries are wholly owned. All subsidiaries have ordinary share capital only.
| Company | Country of incorporation and operation |
Business |
|---|---|---|
| 4imprint Inc. | US | Promotional products |
| 4imprint Direct Limited | England | Promotional products |
| Brand Addition Limited (formerly Broadway Incentives Limited) |
England | Promotional products |
| Kreyer Promotion Service GmbH* | Germany | Promotional products |
| Product Plus International Limited* | England | Promotional products (non trading from 4 October 2010) |
| SPS (EU) Limited | England | Promotional products |
* Trading as Brand Addition
A complete list of investments held by the Company is included with the annual return submitted to Companies House.
An impairment test was performed on the carrying value of the investments in subsidiary undertakings. The recoverable amount was determined based on value in use calculations using cash flow projections based on financial budgets approved by management covering a two year period. Subsequent cash flows have been increased in line with past performance and management's view of market developments using long term growth rates of 2%. These growth rates do not exceed the long term average growth rates for the countries in which subsidiaries operate. The discount rate used of 13.36% pre tax is calculated using the capital asset pricing model.
| D. Deferred tax | 2010 £'000 6,251 |
2009 £'000 |
|---|---|---|
| At start of period | 5,254 | |
| Income statement charge | (537) | (865) |
| Deferred tax credited to other comprehensive income | 169 | 1,876 |
| Deferred tax charged to equity re share options | – | (14) |
| At end of period | 5,883 | 6,251 |
The Company's deferred tax relates to the defined benefit pension scheme and accelerated capital allowances.
The deferred income tax credited to other comprehensive income is as follows:
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Actuarial gains | 388 | 1,876 |
| Effect of change in UK tax rate | (219) | – |
| 169 | 1,876 |
| 42,804 | 33,028 | |
|---|---|---|
| Less non current portion: Amounts due from subsidiary companies | (52,313) | (60,000) |
| 95,117 | 93,028 | |
| Prepayments and accrued income | 55 | 130 |
| Other receivables | 270 | 302 |
| Amounts due from subsidiary companies | 94,792 | 92,596 |
| 2010 £'000 |
2009 £'000 |
Current amounts due from subsidiary companies include £34,142,000 (2009: £24,464,000) which is interest bearing at market rates of interest. The balance is repayable on demand.
Non current amounts due from subsidiary companies are due within two to five years and are interest bearing at market rates of interest.
The carrying amounts of the Company's trade and other receivables are denominated in the following currencies:
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Sterling | 84,560 | 91,124 |
| US Dollars | 8,956 | 276 |
| Euros | 1,601 | 1,628 |
| 95,117 | 93,028 |
| F. Trade and other payables – current | ||
|---|---|---|
| 2010 | 2009 | |
| £'000 | £'000 | |
| Other payables | 87 | 16 |
| Amounts due to subsidiary companies | 3,494 | 3,133 |
| Accruals | 370 | 279 |
| 3,951 | 3,428 |
The amounts due to subsidiary companies are interest free and repayable on demand.
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| At start of period | – | – |
| Charged to the income statement | 588 | – |
| At end of period | 588 | – |
| Analysis of provisions | ||
| 2010 £'000 |
2009 £'000 |
|
| Current | 281 | – |
| Non current | 307 | – |
| Total | 588 | – |
The provision relates to a Company guarantee for a leasehold property. This guarantee was maintained following the sale of the Henry Booth business by the Group in 2000. Bemrosebooth Ltd, who acquired the Henry Booth business, went into administration in 2010 and the Company became liable for the obligation to the end of the lease in March 2013. An extensive search has not revealed any other historical property guarantees.
The amount recognised in the balance represents the net liability in respect of the closed defined benefit scheme. Full details are contained in note 4 on pages 41 to 43.
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Current bank loans | – | 6,000 |
| Non current bank loans | 4,928 | – |
| 4,928 | 6,000 | |
| 2010 | 2009 | |
| Non current borrowings | £'000 | £'000 |
| Repayable in 1-2 years | 4,928 | – |
Borrowings are denominated in Sterling and have an effective interest rate of 3.76% (2009: 1.30%)
The amounts due to subsidiary companies comprises £36,394,000 (2009: £30,620,000) due in two to five years and £30,755,000 (2009: £30,755,000) due after five years. Of the loans due after two years and under five years, £18,247,000 (2009: £12,473,000) are interest bearing at market rates of interest. All other loans are interest free.
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Operating loss | (3,061) | (1,210) |
| Adjustments for: | ||
| Depreciation charge | 29 | 23 |
| Increase/(decrease) in exceptional accrual | 539 | (18) |
| Share option non cash charge | 215 | 470 |
| IAS 19 pension charge for defined benefit scheme | 569 | 1,268 |
| Contributions to defined benefit pension scheme | (2,501) | (2,456) |
| Exchange losses/(gains) on inter-company loans | 697 | (1,227) |
| Changes in working capital: | ||
| Decrease/(increase) in trade and other receivables | 106 | (124) |
| Increase/(decrease) in trade and other payables | 177 | (71) |
| Increase/(decrease) in payables to subsidiary undertakings | 3,242 | (2,603) |
| Cash generated from/(used in) operations | 12 | (5,948) |
| Reconciliation of net debt | 2010 £'000 |
2009 £'000 |
| Cash at bank and in hand | 1,305 | 1,526 |
| Short term deposits | 3,250 | – |
| Current bank loan | – | (6,000) |
| 4,555 | (4,474) | |
| Non current bank loans | (4,928) | – |
| Net debt | (373) | (4,474) |
The Company had financial commitments for land and buildings of £404,000 on leases expiring in two to five years at 1 January 2011 (2009: £167,000). These are payable as follows: within 1 year £190,000 (2009: £48,000); in two to five years £214,000 (2009: £119,000).
| 2010 £'000 |
2009 £'000 |
|
|---|---|---|
| Authorised | ||
| 39,000,000 (2009: 39,000,000) ordinary shares of 38 6/13p each | 15,000 | 15,000 |
| Allotted and fully paid | ||
| 25,840,552 (2009: 25,840,552) ordinary shares of 38 6/13p each | 9,939 | 9,939 |
No ordinary shares were issued in the period (2009: 240,000, value £92,308, to satisfy the exercise of share options under UK Executive schemes).
The options that have been granted and were outstanding under the Company's share option schemes are shown in note 22.
Full details of the share option schemes are given in note 23.
Employees of the Company had interests in 41,724 SAYE options under the 7 October 2009 grant (2009: 49,025 options under the 2009 grant and 2,774 options under the 2007 grant).
Guarantees have been given by the Company for letters of credit and import collections of £352,000 at 1 January 2011 (2009: £158,000).
During the year the Company has been party to a number of transactions with fellow subsidiary companies.
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Income statement | ||
| Finance income due from subsidiary companies | 8,633 | 7,580 |
| Finance costs due to subsidiary companies | 916 | 586 |
| Balance sheet | ||
| Interest bearing loans due from subsidiary companies at end of period | 86,455 | 84,464 |
| Interest bearing loans due to subsidiary companies at end of period | 18,247 | 12,473 |
Key management compensation, comprising only the Directors' remuneration, is disclosed in the Remuneration report on page 25, and was charged to the income statement of the Company.
All related party transactions were made on terms equivalent to those that prevail in arms length transactions.
| Income statement | 2010 £'000 |
2009* £'000 |
2008 £'000 |
2007 £'000 |
2006 £'000 |
|---|---|---|---|---|---|
| Revenue | 200,768 | 169,088 | 168,085 | 146,823 | 119,519 |
| Underlying operating profit | 10,486 | 5,452 | 9,562 | 11,050 | 8,601 |
| IAS 38 marketing cost adjustment† | 19 | 264 | – | – | – |
| Defined benefit pension (charge)/credit | (569) | (1,268) | 150 | (295) | (325) |
| Share option charge | (215) | (537) | (370) | (595) | (735) |
| Exceptional items | (1,125) | (771) | (3,553) | (5,273) | (377) |
| Share grant | – | – | – | (1,140) | – |
| Operating profit | 8,596 | 3,140 | 5,789 | 3,747 | 7,164 |
| Finance income | 13 | 28 | 37 | 13 | 218 |
| Finance costs | (522) | (343) | (756) | (458) | (44) |
| Profit before tax | 8,087 | 2,825 | 5,070 | 3,302 | 7,338 |
| Taxation | (1,225) | (424) | (1,520) | (1,072) | (2,348) |
| Profit from continuing operations | 6,862 | 2,401 | 3,550 | 2,230 | 4,990 |
* 2009 is a 53 week period, other periods are 52 weeks.
† 2010 and 2009 reflect the amendment to IAS 38 re marketing costs. Previous years have not been restated.
| Basic earnings per ordinary share | 26.65p | 9.39p | 14.06p | 8.93p | 20.29p |
|---|---|---|---|---|---|
| Dividend per share – paid and proposed | 13.70p | 12.75p | 12.25p | 12.00p | 9.50p |
| Balance sheet | 2010 £'000 |
2009† £'000 |
2008† £'000 |
2007 £'000 |
2006 £'000 |
| Non current assets (excluding deferred tax) | 23,330 | 23,887 | 23,273 | 20,791 | 21,022 |
| Deferred tax asset | 6,348 | 7,558 | 6,244 | 4,334 | 6,149 |
| Net current assets | 18,151 | 8,106 | 16,793 | 16,142 | 12,341 |
| Pension liability | (21,905) | (22,450) | (16,937) | (10,549) | (18,436) |
| Other liabilities | (8,713) | (2,543) | (8,600) | (6,000) | (1,000) |
| Shareholders' equity | 17,211 | 14,558 | 20,773 | 24,718 | 20,076 |
| Net debt | (239) | (3,126) | (4,189) | (7,077) | (249) |
† restated for amendment to IAS 38 re marketing costs.
7/8 Market Place London W1W 8AG Tel: +44 (0)20 7299 7201 Fax: +44 (0)20 7299 7209 E-mail: [email protected]
177991 England
PricewaterhouseCoopers LLP 101 Barbirolli Square Lower Mosley Street Manchester M2 3PW
Peel Hunt 111 Old Broad Street London EC2N 1PH
Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Lloyds TSB Bank plc JPMorgan Chase Bank, NA
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7/8 Market Place London W1W 8AG Telephone +44 (0)20 7299 7201 Fax +44 (0)20 7299 7209 E-mail [email protected]
101 Commerce Street Oshkosh WI 54901 USA Telephone +1 920 236 7272 Fax +1 920 236 7282 E-mail [email protected]
Broadway Trafford Wharf Road Manchester M17 1DD Telephone +44 (0)845 054 4405 Fax +44 (0)845 054 4406 E-mail [email protected]
Manchester Broadway Trafford Wharf Road Manchester M17 1DD Telephone +44 (0)845 266 6616 Fax +44 (0)870 241 3440 E-mail manchester@ brandaddition.com
Unit 9 South Bank Business Centre Ponton Road London SW8 5BL Telephone +44 (0)20 7393 0033 Fax +44 (0)20 7393 0080 E-mail [email protected]
Hagen
Heydastraße 13 D-58093 Hagen Germany Telephone +49 (0)2331 95970 Fax +49 (0)2331 959749 E-mail [email protected]
Neptune House Sycamore Trading Estate Squires Gate Lane Blackpool Lancashire FY4 3RL Telephone +44 (0)1253 340 400 Fax +44 (0)1253 340 401 E-mail [email protected]
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