Annual Report • Dec 28, 2013
Annual Report
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4imprint Group plc Annual Report and Accounts 2013
4imprint is a UK listed promotional products Group with one continuing operation – 4imprint Direct Marketing.
In 2013 the Group had two businesses 4imprint Direct Marketing and SPS. In early 2014 the Group sold SPS, a UK manufacturing business, which represented 7% of Group revenue. This followed the sale, in March 2012, of Brand Addition, its European distribution business.
The disposal of these non-core businesses allows the Group to concentrate on its strategy of continued growth in its Direct Marketing business, gaining market share in the large and highly fragmented markets in which it operates, as well as reducing the risk of its legacy defined benefit pension scheme.
4imprint Direct Marketing is a leading direct marketer of promotional products in the USA, Canada, the UK and Ireland. The business is headquartered in Wisconsin, USA and 96% of its revenue is generated in the USA and Canada. The business also serves UK and Irish customers out of its base in Manchester, England.
* Underlying is before share option related charges, defined benefit pension charges and exceptional items
† Restated for amendments to IAS 19, to include SPS as a discontinued operation and to include delivery receipts
25.03
and other income in revenue
| 2013 £m |
2012 restated† £m |
Change | |
|---|---|---|---|
| Revenue | 212.86 | 183.51 | +16% |
| Underlying* profit before tax | 12.50 | 9.20 | +36% |
| Profit before tax | 9.25 | 6.37 | +45% |
| Underlying* basic EPS (p) | 35.51 | 25.03 | +42% |
| Basic EPS (p) | 25.64 | 16.41 | +56% |
| Proposed total dividend (p) | 17.00 | 15.45 | +10% |
* Underlying is before share option related charges, defined benefit pension charges and exceptional items.
† Restated for amendments to IAS 19, to classify SPS as a discontinued operation and to include delivery receipts and other income in revenue.
| Chairman's statement | 2 | RE |
|---|---|---|
| Strategic report | 3 | VIE |
| Operating review | 5 | W |
| Finance review | 7 | |
| Board of Directors | 13 | GO |
| Directors' report | 14 | VE |
| Statement on Corporate Governance |
17 | RN AN |
| Annual statement by the Chairman of the |
CE | |
| Remuneration Committee | 23 | |
| Remuneration report | 24 | |
| Statement of Directors' responsibilities |
35 | |
| Independent Auditors' | ||
| report – Group | 36 | |
| Group income statement | 39 | AC |
| Group statement of | CO | |
| comprehensive income | 40 | UN |
| Group balance sheet Group statement of |
41 | TS |
| changes in | ||
| Shareholders' equity | 42 | |
| Group cash flow statement |
43 | |
| Notes to the financial | ||
| statements | 44 | |
| Independent Auditors' report – Company |
74 | |
| Company balance sheet | 76 | |
| Statement of changes | ||
| in Company Shareholders' equity |
77 | |
| Company cash flow | ||
| statement | 78 | |
| Notes to the Company's | ||
| financial statements | 79 | |
| Five year financial record | 85 | AD |
| Registered office and | DIT | |
| Company advisers | 86 | IO |
| NA L I |
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| NF | ||
| OR | ||
| MA TIO |
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| N | ||
| 4imprint Group plc Annual Report and Accounts 2013 | 1 | |
2013 was another successful year for 4imprint Group plc. The strong performance is documented in the pages which follow.
The Direct Marketing business delivered revenue growth and operating margin percentage ahead of target, derived from an increased yield on revenue investment in marketing and favourable cost experience in its marketing expenditure.
The UK Direct Marketing business, now located in its new facility in Manchester, also enjoyed good growth.
SPS, having shown good performance improvement over the past three years, was sold shortly after year-end to a private equity/management vehicle, having completed a competitive process.
Following the sale, the Group has significant net cash which will be directed to further reductions in risk in the legacy defined benefit pension scheme. To this effect an, albeit minor, step is a proposal for individual flexible early retirement which has been offered to eligible deferred pensioners in February 2014.
Early indications for 2014 are of continuing good operational performance in line with our aspirations although the dollar exchange rate will, if sustained, act as a headwind on performance measured in sterling.
John Poulter Chairman 5 March 2014
4imprint Direct Marketing is a leading direct marketer of promotional products in the USA, Canada, the UK and Ireland. Its strategy is to deliver profitable organic growth, gaining market share in the large and highly fragmented markets in which it operates. This is achieved through ongoing investment in marketing, people and technology.
From early 2014 onwards, 4imprint Direct Marketing, which generates 96% of its revenue in North America, is the sole business in the 4imprint Group (and represents the Group's "continuing operations"). This follows the disposal, in February 2014, of SPS, a UK based manufacturer of promotional products and the disposal, in 2012, of Brand Addition, a European distributor of promotional products to medium and large businesses. These businesses are both classified as "discontinued operations".
The disposal of these non-core businesses allows the Group to concentrate on its strategy of doubling the revenue of its Direct Marketing business, at stable operating profit margin percentage, over the five year period 2011 to 2016, consistent with the achievement in the previous five years. In 2013, in respect of its continuing operations, the Group achieved revenue growth of 16%, underlying* profit before tax growth of 36% and underlying* basic EPS growth of 42%. This represented another year of delivery of this strategy.
The Group is in a strong financial position, with net cash, and will continue to focus its resources on i) growth in the profitable and cash generative Direct Marketing business and ii) reducing the risk and size of its legacy defined benefit pension scheme.
4imprint Direct Marketing sells an extensive range of customised products to individuals in businesses and organisations of all sizes, processing hundreds of thousands of individually customised orders each year. Items are imprinted and shipped directly to customers from 4imprint's suppliers. 4imprint provides an easy
* Underlying is before share option related charges, defined benefit pension charges and exceptional items
and convenient order process, allowing customers to purchase in a simple and secure way online or via telephone, backed by its service level guarantees. Organic growth is delivered by using a range of datadriven, offline and online direct marketing techniques to capture market share in the large and highly fragmented promotional products markets it serves.
Promotional products are purchased by a wide range of individuals within all types and sizes of businesses and organisations. These products have a wide range of uses: as an integral part of sales and marketing activities; recruitment and recognition schemes; health and safety programmes and other initiatives to make a connection between the customer's organisation and the recipient. The range of products is diverse from basic giveaways such as pens, bags and drinkware to more exclusive products such as embroidered clothing, business gifts and full colour trade show displays.
4imprint is the largest direct marketer of promotional products in both the US and Canadian promotional products markets, which together total \$24 billion, and is a leading player in the £830 million UK market. The promotional products market place is highly fragmented. The largest market, the USA, is served by more than 23,000 distributors, of which more than 90% each have annual sales of less than \$2.5 million.
The US and Canadian markets are serviced out of the principal office in Wisconsin, USA and the UK and Irish markets out of an office in Manchester, UK.
4imprint has a unique business model through which to address the market, allowing it to access millions of potential customers, offering thousands of customised products.
Customers are offered an easy and convenient way to purchase an extensive range of products via telephone
or over the web, with the assistance of a highly skilled customer service team. They receive free samples, free artwork and unique service level guarantees such as lowest price, on time delivery or free and total satisfaction or money back. 4imprint has a strong service culture, committed to equipping employees with training and tools to deliver a superior customer experience which is a key component of growth.
Key supplier partnerships facilitate rapid and efficient deliveries against short lead times, underpinning 4imprint's service guarantees and allowing 4imprint to expand its product range without significant investment in inventory. A dedicated merchandising team works with suppliers, continually updating the product range to ensure that the business offers customers an extensive product choice, including some products which are exclusive to 4imprint.
Growth is achieved through investment in marketing to increase the customer base. A wide range of innovative catalogue and internet-based direct marketing techniques are used to acquire an increasing number of new customers. Once a customer has been acquired, targeted marketing such as Blue Boxes™ (product samples and tailored individual marketing packages sent to customers), catalogues, internet advertising and subscription e-mails are used to retain customers and generate repeat purchases.
This model is backed by innovative proprietary technology which provides a fast and simple experience for the customer, together with an efficient platform for processing hundreds of thousands of customised orders to tight lead times and seamless interfaces with key suppliers. Sophisticated database analytics support the targeted marketing to millions of potential and existing customers.
4imprint has developed its competitive advantage through the investment of free cash flow to increase its market share, continually developing and enhancing bespoke marketing methods and proprietary technology. The continued growth of the business increases the competitive barriers to entry created by its scale and complexity.
Double-digit annual revenue growth has been achieved consistently over a number of years. This is driven by increasing the number of customers acquired each year and maintaining the rate at which customers repurchase as the number of customers acquired increases. More than 30% of new customers place new orders within one year and more than 40% within two years.
4imprint has grown significantly ahead of the market, consistently gaining market share. Growth has been achieved organically, driven by revenue investment in marketing, technology and people. Even after this investment, the business generates substantial operating cash flow. This is driven by low fixed and working capital requirements which are less than 5% of annual revenue, due to limited inventory and a high proportion of customer payments being made by credit card.
The contribution of each of its employees is key to 4imprint's success and the business is committed to a culture which encourages the training, development, wellbeing and participation of each employee. For each of the last six years, the North American business has been named a top 25 medium sized best workplace in the USA.
Employees are informed of business objectives through quarterly briefings and are encouraged to contribute to the development of the business through these briefings and team meetings. All employees participate in a "gain share" plan which is paid on a quarterly basis, dependent upon meeting specified targets which are regularly discussed with and communicated to them.
Training and development of new employees is usually carried out in-house and covers job specific skills and other soft skills required for their role. In addition, employees are regularly offered ongoing training to encourage their development in a variety of business related subjects and other areas.
The North American business, which is predominately office based, has a wellness programme for its employees to mitigate any health and safety risks. Employees are offered health risk assessments on site as well as a range of other initiatives e.g. nutritionist, physical therapist.
The business recognises the importance and benefit of ensuring employee diversity and strives to create a culture which recruits and promotes the development of all employees regardless of background or gender. At 28 December 2013, women made up 75% of the total
employees of the Direct Marketing business and 22% of its senior management team.
The North American business runs a 'one by one®' charitable giving programme which reflects its culture and philosophy. Each business day, the business gives a nonprofit organisation \$500 in promotional products to spread the word, recruit volunteers or thank donors. In addition, employees are given paid time off to volunteer for a charity of their choice.
| 2013 | 2012 (restated)† |
||
|---|---|---|---|
| Revenue | £m | £m | Change |
| Sales of promotional products | 196.42 | 168.90 | |
| Delivery receipts and other income | 16.44 | 14.61 | |
| Total | 212.86 | 183.51 | +16% |
| 2013 | 2012 (restated)† |
||
| Underlying* operating profit | £m | £m | Change |
| 4imprint Direct Marketing | 14.60 | 11.00 | |
| Head Office | (2.14) | (1.84) | |
| Total | 12.46 | 9.16 | +36% |
Underlying profit is included because the Directors consider this gives a measure of the underlying performance of the business. * Underlying is before share option related charges, defined benefit pension charges and exceptional items.
† Restated to classify SPS as a discontinued operation and to include delivery receipts and other income in revenue.
The 2013 results represent another year of progress consistent with the strategy to drive significant organic revenue growth at a stable percentage operating profit margin.
Revenue grew 16% compared to 2012 (15% at constant currency). Underlying operating profit increased 33% compared to prior year, (31% at constant currency),
driven by a combination of stable gross margin, successful marketing execution and a favourable environment in respect of its catalogue costs in the year.
The North American business produced revenue growth of 15% to \$294.91m. This compares to the US promotional products market as a whole which, according to industry estimates, grew by approximately 5-6% from 2012 to 2013. The business processed more than 600,000 individually customised orders, each backed by an 'on time or free' guarantee, demonstrating the robustness and scalability of its processes and systems.
Orders from new customers in North America increased by 8% compared to 2012, representing the acquisition of over 145,000 new customers, which was in line with the increased investment in new customer marketing. New customer activity was particularly strong in the second half of the year, driven by increased prospecting, powered by opportunities identified via advances in data analytics.
Orders from existing customers were 19% higher than prior year, demonstrating the productive and reliable nature of the customer file. The popular Blue Box™ sample mailings remain a key element of retention marketing.
Marketing spend in the year increased by 10%, in line with the strategy of investment to drive organic growth. The increase in spend included expansion of the current customer acquisition and retention techniques as well as the implementation of additional on and offline marketing activities. Online marketing spend increased by 25% in the year. Revenue generated per marketing dollar in 2013 improved to \$5.72 (2012: \$5.48). This was due to both improved yield on marketing initiatives and favourable postage and paper prices in 2013, which would ordinarily have been expected to increase.
All sales activity, whether to new or existing customers, is underpinned by a commitment to innovation and excellence in business operations. Merchandising initiatives and evolving supplier partnerships resulted in a stream of new
products. In addition, continued investment in technology produced enhanced websites, process efficiency and further sophistication in data analysis. A commitment to providing a remarkable customer experience characterises the approach to customer care. Essential to making all of this happen is the ability to attract and retain a quality workforce. For the sixth year in succession, the North American business was named as a top 25 medium sized best workplace in the USA.
The UK business, based in Manchester, also had a successful year. Revenue was 12% higher than 2012, outpacing growth in the market. During 2013 there was an emphasis on expansion of the product range and further implementation of marketing and customer service techniques which have been tried and tested in the North American business. The same principles of innovation and excellence seen in the North American business drive the continued growth in the UK.
The Direct Marketing model remains highly cash generative with US\$21.93m of pre tax operating cash generated in North America.
Head office costs of £2.14m (2012: £1.84m) comprised Board costs, UK corporate office and other plc related costs.
| 2013 Underlying* |
2012 Underlying (restated)† |
2013 Total |
2012 Total (restated)† |
|
|---|---|---|---|---|
| Continuing operations Revenue |
£m 212.86 |
£m 183.51 |
£m 212.86 |
£m 183.51 |
| Underlying* operating profit | 12.46 | 9.16 | 12.46 | 9.16 |
| Share option related charges (including social security) | (1.60) | (0.65) | ||
| Exceptional items | (0.25) | (0.59) | ||
| Net finance income | 0.04 | 0.04 | 0.04 | 0.04 |
| Defined benefit pension charges | (1.40) | (1.59) | ||
| Profit before tax | 12.50 | 9.20 | 9.25 | 6.37 |
| Underlying profit is included because the Directors consider this gives a measure of the underlying performance of the business. * Underlying is before share option related charges, defined benefit pension charges and exceptional items. † Restated to classify SPS as a discontinued operation and to include delivery receipts and other income in revenue. |
||||
| Exchange The average US dollar rate for the year was \$1.56 (2012: \$1.58). The closing US dollar rate for the year ended 28 December 2013 was \$1.65 (2012: \$1.62). The majority of the Group's revenue and its operating profit are earned in US dollars. If the average rate for the year had been \$1.65 (the year end rate) revenue would have been £10.58m lower and profit before tax £0.74m lower. |
Taxation | The tax charge for continuing operations for the year was £2.47m (2012: £2.05m), an effective rate of 27% (2012: 32%). The charge comprised current tax of £1.91m representing tax payable in the USA and deferred tax of £0.56m. The tax charge for underlying profit before tax was £3.10m, an effective tax rate of 25% (2012: 29%). |
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| The movement in the average rate for the year, compared to 2012, increased revenue by £2.66m and profit by £0.19m. The movement in the year end rate reduced US dollar denominated overseas subsidiaries assets by £0.28m. Share option charges The Group charged £1.60m (2012: £0.65m) to continuing operations in respect of IFRS 2, 'Share-based payments'. £1.52m related to the charge in respect of the Group Performance Share Plan approved by Shareholders on 27 April 2011, including £0.81m employers' social security costs in respect of options that have now vested and may be exercised from April 2014, as well as the charges in respect of UK and US SAYE schemes. Exceptional items Exceptional items in the year totalled £0.25m. These costs related to third party fees incurred in respect of a flexible early retirement offer made to 153 eligible deferred pensioners in February 2014, as part of the pension risk reduction exercise. Further costs will be incurred in respect of this exercise in 2014 and are dependent upon the number of people who accept the offer. Exceptional costs of £0.59m in 2012 arose as a consequence of the sale of Brand Addition in that year. Net finance income Net finance income in the year was £0.04m (2012: £0.04m), which reflected the Group's net cash position, invested at the current rates of interest. |
Earnings per share Dividends dividend policy. |
The effective tax rate is above the UK corporate tax rate as the Group's profit is generated principally in the USA where there is a higher corporate tax rate. Underlying basic earnings per share in respect of continuing operations was 35.51p (2012: 25.03p), an increase of 42%, reflecting the increased earnings and lower underlying effective tax rate compared to 2012. Basic earnings per share, from continuing operations, was 25.64p (2012: 16.41p), an increase of 56%. Including the impact of discontinued operations, basic earnings per share was 14.74p (2012: 51.95p). 2013 EPS included a decrease of 10.90p in respect of the £2.89m loss related to discontinued operations (2012: an increase of 35.54p in respect of £9.34m profit from discontinued operations). The Board has proposed a final dividend of 11.40p which, together with the interim dividend of 5.60p, gives a dividend paid and proposed for the year of 17.00p, an increase of 10% compared to prior year, in line with its progressive |
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| 4imprint Group plc Annual Report and Accounts 2013 |
On 10 February 2014, the Group completed the sale of SPS, its UK based manufacturing operation, to the SPS senior management, backed by Maven Capital Partners, a leading UK private equity firm. The consideration was £7.25m (subject to post completion adjustments relating to the amount of working capital, debt and cash at completion). Net cash proceeds are expected to be circa £5.8m after costs of disposal, including a bonus payable to the SPS senior management on completion of the disposal.
In accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', SPS has been presented as a discontinued operation in both the 2013 and 2012 Income Statements and as an asset held for sale in the 2013 Balance Sheet.
Revenue generated by SPS in 2013 was £15.33m, an increase of 9% compared to the prior year. Operating profit was £0.92m (2012: £0.78m). The improved performance was a result of successful focus on new product innovation and marketing initiatives, together with stable gross margin. SPS generated £0.84m of pre tax cash flow in 2013 (2012: £0.20m). Cash spend on costs related to the sale in 2013 was £0.18m.
A £3.65m provision for loss on the remeasurement of the SPS net assets to their net realisable value, has been made in the year. This was based on year end net assets of £9.20m, adjusted to reflect normalised working capital, and takes into account the estimated costs of disposal.
The Group completed the sale of Brand Addition, its European distribution business, on 23 March 2012 for aggregate consideration of £24.00m, of which £1.25m was deferred for a year and received in March 2013. Profit on the sale in 2012 was £8.46m. Cash flow from discontinued operations in 2013 included £1.25m of deferred consideration received and payment of costs previously accrued of £0.08m in relation to this sale.
The Group sponsors a UK defined benefit pension scheme, closed to new members and future accrual. At the end of 2013 the scheme had 1,163 pensioners (including 436 with insured benefits), 591 deferred members and no active members.
The Board's strategy is to reduce the risk of the defined benefit pension scheme to the Group. The Group has completed a number of risk reduction exercises in previous years, including a partial buy-in of £20.47m of pensioner liabilities in 2012. In early 2014, the Group made a flexible early retirement offer to 153 eligible deferred pensioners. The Group is also considering the feasibility and cost of insuring further tranches of pensioner liabilities.
Amendments to IAS 19 have been adopted in the period. The Group is now required to include the administration costs of the Scheme (managed and paid by the Scheme Trustee) within operating expenses in the Group income statement. These costs totalled £0.48m (2012: £0.44m) and have been included within operating expenses and £0.08m (2012: nil) has been included within exceptional operating expenses. Prior periods have been restated.
In addition, the defined benefit pension finance charge has been calculated in line with the amendments to IAS 19 which requires the discount rate on Scheme liabilities to be used to calculate the interest income on Scheme assets, resulting in a charge of £0.92m (2012: £1.15m, increased by £0.12m to reflect the amendments to IAS 19).
Contributions to the Scheme in the year were £3.18m. During the year, the Scheme's triennial actuarial valuation at 5 April 2013 was finalised. The deficit, on a Scheme funding basis, at that date was £30.64m. The Company has agreed a schedule of contributions with the Trustee. The contribution to the Scheme in 2014 will be £3.28m and this amount will increase by 3% annually. The recovery plan period is 6.3 years, which takes into account the material funding improvement between the date of valuation and the date of the recovery plan (December 2013), as agreed with the Scheme Actuary. The improvement is principally due to an increase in UK gilt rates during that period.
At 28 December 2013, the deficit of the Scheme on an IAS 19 basis was £16.61m (2012: £22.89m).
The change in deficit is explained as follows:
| £m | |
|---|---|
| IAS 19 deficit at 29 December 2012 | (22.89) |
| Company contributions to the Scheme | 3.18 |
| Pension finance and administration charges | (1.40) |
| Exceptional items – flexible early retirement offer costs (0.08) | |
| Remeasurement gains due to changes in assumptions | 4.58 |
| IAS 19 deficit at 28 December 2013 | (16.61) |
The Group had net cash of £15.76m at 28 December 2013, resulting from a net cash inflow of £5.08m in the year. Net cash at 28 December 2013 was represented by:
| 2013 £m |
2012 £m |
|
|---|---|---|
| Other financial assets – cash deposits | 4.95 | 3.00 |
| Cash and cash equivalents | 10.81 | 14.10 |
| Borrowings due in less than one year | – | (1.64) |
| Borrowings due after one year | – | (4.78) |
| Net cash | 15.76 | 10.68 |
The Group has US\$13.0m working capital facilities with its principal US bank, JPMorgan Chase. The interest rate is US\$ LIBOR plus 1.5% and the facilities are due for repayment on 31 August 2015.
The movement in net cash is summarised below. This presentation shows an analysis of operating cash flow from continuing operations and cash flow in relation to discontinued operations as a single line.
| Operating cash flow | 2013 £m |
|---|---|
| Underlying operating profit | 12.46 |
| Depreciation and amortisation | 1.15 |
| Change in working capital | 0.19 |
| Capital expenditure | (1.14) |
| Operating cash flow after capital expenditure – continuing operations |
12.66 |
| Interest and tax | (1.68) |
| Defined benefit pension contributions | (3.18) |
| Exchange and other | (0.37) |
| Free cash flow – continuing operations | 7.43 |
| Discontinued operations net cash inflow | 1.83 |
| Dividends to Shareholders | (4.18) |
| Net cash inflow in the year | 5.08 |
The Group delivered a strong cash flow performance in 2013, generating £12.66m of pre tax operating cash flow (after £1.14m of capital expenditure) from continuing operations. This demonstrates the cash generative profile of the Direct Marketing business which is one of the key strengths of the Group. The business has low fixed and working capital requirements and the North American business generated US\$21.93m of pre tax operating cash flow in 2013 – an operating profit to cash conversion rate of 97% (2012: 98%).
Free cash flow from continuing operations (after the defined benefit pension contribution of £3.18m and pension related exceptional payments of £0.17m) was £7.43m, providing cover of 1.8 times the dividend paid in the year.
Cash flow from discontinued operations of £1.83m, included £1.25m of deferred proceeds from the sale of Brand Addition in 2012, £0.84m of pre tax operating cash inflow (after capital expenditure) from SPS offset by £0.26m cash spend in respect of disposal costs.
Net assets at 28 December 2013 were £16.78m (2012: £13.79m), an increase of £2.99m.
In 2013, the net assets of SPS, which have been written down to net realisable value, are shown as assets and liabilities held for sale. In 2012 the assets and liabilities of SPS are included within each line item on the balance sheet.
| 2013 £m |
2012 £m |
|
|---|---|---|
| Non current assets | 9.99 | 19.57 |
| Working capital | 2.49 | 6.20 |
| Net cash | 15.76 | 10.68 |
| Pension deficit | (16.61) | (22.89) |
| Deferred consideration | – | 1.25 |
| Net assets held for sale | 5.74 | – |
| Other liabilities | (0.59) | (1.02) |
| 16.78 | 13.79 |
Shareholders' equity has increased as a result of profit generated for the year of £3.90m (continuing operations: £6.79m and a loss from discontinued operations: £2.89m), remeasurement gains on the pension scheme deficit net of tax of £2.35m; offset by dividends paid to shareholders of £4.18m and other items of £0.92m.
| Average operating capital employed† £m |
ROCE* % |
|
|---|---|---|
| 4imprint Direct Marketing | 9.87 | 148.0 |
* Based on underlying operating profit.
† Includes fixed assets and operating working capital.
Treasury policy is to manage centrally the financial requirements of the Group. The Group operates cash pooling arrangements separately for its North American operations and its UK operations. The Group enters into forward contracts to buy or sell currency relating to specific receivables and payables as well as remittances from its overseas subsidiaries. The Group holds the majority of its cash on deposit with its principal UK banker and working capital requirements of the North American business are funded by a facility with its principal US banker.
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 only critical accounting policy is in respect of pensions.
Amendments to IAS 19, 'Employee Benefits' are effective from accounting periods commencing on or after 1 January 2013. Although the Group's 2013 accounting period began on 30 December 2012, the Group has adopted these amendments in its 2013 financial statements and 2012 has been restated. The impact of the restatement is disclosed in the notes. No other new standards have impacted the Group's financial statements in the period.
The Board monitors the performance of the Direct Marketing business and Group against its strategy using the KPIs set out below. These KPIs have been selected as they are considered appropriate to measure the progress of the business towards achieving its strategy and objectives.
As 96% of the Group's business is based in North America the revenue, underlying operating profit margin, operating cash generation, order intake rate and efficiency of marketing spend of that business are shown separately and presented in US dollars as appropriate. Underlying profit before tax, underlying earnings per share and dividends paid per share are measured at a Group level and are presented in Sterling.
The Group's key strategic aim is organic revenue growth in its Direct Marketing business at stable operating margin percentage, through investment in marketing, people and technology.
and cash generated \$m Underlying operating profit
17.3
16.9
15.9
13.2
Revenue per marketing dollar and operating margin %
Growth of 15% in the year. Operating profit grew 31% in
the year and operating cash conversion rate was 97%.
Total orders increased by 16% in the year, new customer orders increased by 8% and existing customer orders by 19%.
Revenue per marketing dollar increased to \$5.72 in the year. Operating profit margin % increased.
Group underlying* PBT† £m
Underlying* EPS† and dividend per share (pence)
Underlying operating profit
22.5
21.9
The Group's business model means that it may be affected by a number of risks, not all of which are within its control. Outlined below are a number of risks which may affect the Group, but the list is not exhaustive and other factors may adversely affect the Group.
| Risk | Mitigating activities |
|---|---|
| Economic and market risks | |
| Macroeconomic conditions | |
| The Group conducts its operations principally in the USA and the profitability of its business could be adversely affected by a worsening of general economic conditions in this region. |
• Management monitors economic conditions to ensure that where possible, any potential adverse impact can be factored into business requirements and actions. • Continual efforts to deliver value to customers, via price and quality, in light of economic climate at any given time. |
| Competition | |
| The Group operates in competitive markets, competing with other distributors of promotional products. New technology, changing commercial circumstances, existing competitors and new entrants to the markets in which the Group currently operates may adversely affect revenue. |
• Price, satisfaction and service level guarantees provided to customers. • Post-order and other surveys/research to gauge customer satisfaction and perception. • A proactive approach to monitoring marketplace activity. |
| Finance | |
| Due to the concentration of the business in the USA, the Group may be adversely impacted by movements in the Sterling/US dollar exchange rate, when it repatriates cash to UK. |
• The Group partially hedges cash receipts from its overseas subsidiary for the following 12 months which gives some certainty for a short period of amounts receivable in Sterling. |
| Technological risks | |
| Failure or interruption of information technology systems and infrastructure |
|
| The business is dependent on its IT infrastructure and any system performance issues (for example, system or infrastructure failure, damage or denial of access) could affect trading and performance of the Group. |
• Ongoing investment in IT systems, to ensure that they are sufficient to continue to respond to the needs of a growing business. • Back up processes in place to minimise impact of information technology interruption. |
| Failure to adopt technological innovations | |
| Failure to adopt new technological platforms to reach its target market could impact the business performance. |
• The use of various technology platforms and systems is regularly reviewed by management. • The business has demonstrated a proactive approach to adopting relevant new technologies. |
| Security of customer data | |
| Unauthorised access to customer data could lead to reputational damage and loss of customer confidence. |
• The business employs IT staff who are appropriately trained to mitigate IT security violations. • Technical and physical controls in place to mitigate unauthorised access to customer data. • The business is PCI compliant and complete credit card data is not stored by the business. |
| Risk | Mitigating activities |
|---|---|
| Operational risks | |
| Business facility disruption | |
| In North America, the business operates from two centralised facilities, an office and a distribution centre. The performance of the Group could be adversely affected if activities at one of these facilities were to be disrupted, for example, by fire, flood or failure. |
• Back up plans are in place to ensure that customer service disruption is minimised. |
| Disruption to delivery service or the product supply chain |
|
| The business's operations could be adversely affected if the activities of one of its key suppliers were disrupted and it was unable to source an alternative supplier in the short term. |
• Rigorous selection process for key suppliers, with arrangements in place for monitoring quality, production capability/capacity, ethical standards and financial stability. • The business maintains relationships with suitable alternative suppliers for each product category. |
| Purchase of materials and services | |
| The Group purchases a range of materials and services which are essential to its operation, for example, the purchase of products; postage and paper for catalogues and online marketing services. Increased costs or lack of availability could affect the performance of the Group. |
• The Group uses cost effective sources of materials and services, where possible, using a range of suppliers to mitigate potential cost increases, or shortages of such materials and services. • The Group regularly trials new services and suppliers in order to strengthen its offering, reduce risk or reduce costs. |
| Reliance on key personnel | |
| The Group's performance depends on the Group's ability to continue to attract, motivate and retain key staff. These individuals possess sales and marketing, merchandising, supply chain, IT and financial skills that are key to the continued successful operation of the Group's business. |
• The Group provides employment conditions aimed at attracting and retaining key personnel. |
Social and ethical responsibility, health and safety and environmental matters are covered in the Directors' report on pages 14 to 16.
Kevin Lyons-Tarr Gillian Davies CEO, 4imprint Direct Marketing Group Finance Director
J.W. Poulter Executive Chairman
John Poulter was appointed a Non-Executive Director with effect from 1 May 2010 and Executive Chairman on 1 September 2010. John is currently Non-Executive Chairman of RM plc. He is a former Non-Executive Chairman and Chief Executive of Spectris plc. He has served as Non-Executive Chairman on several public and private Boards, including Filtronic plc and as a Non-Executive Director of, amongst others, RAC Plc and Kidde plc.
G. Davies Group Finance Director 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.
Kevin Lyons-Tarr was appointed an Executive Director in 2012. He is Chief Executive Officer of 4imprint Direct Marketing based in Oshkosh, Wisconsin and has been with the business for twentytwo years, serving in several capacities, including Chief Information Officer and Chief Operating Officer. He was appointed President of the Direct Marketing business in 2004 and has led its substantial growth.
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.
John Warren was appointed a Non-Executive Director in 2012. A chartered accountant, John was Group Finance Director of United Biscuits (Holdings) Plc and WH Smith PLC before embarking on a career as a Non-Executive Director. He is currently a Non-Executive Director and Chairman of the Audit Committee at Spectris plc, Bovis Homes Group PLC, Welsh Water and Greencore Group plc. He has previously served on the Boards of The Rank Group Plc, Rexam Plc, RAC Plc and BPP Holdings Plc and chaired the Board at Uniq Plc through the resolution of their major pension issues.
Independent Non-Executive Director Steve Gray was appointed a Non-Executive Director in 2012. After an early career with FMCG companies including Procter & Gamble and Pepsico, Steve was appointed Managing Director of dunnhumby UK & Ireland Limited, the Tesco customer loyalty and data analytics company and a director of the dunnhumby joint venture, with Kroger, in the USA. He is currently Chairman of Tanfield Foods, a Senior Advisor to Boston Consulting Group and founder of SG-retail.
Mr J.A. Warren (Chairman) Mr S.J. Gray
Mr S.J. Gray (Chairman) Mr J.A. Warren
Nomination Committee Mr S.J. Gray (Chairman) Mr J.A. Warren
The Directors present their report and the audited consolidated financial statements for the period ended 28 December 2013. The Company's statement on Corporate Governance is included in the Corporate Governance report on pages 17 to 22 of these financial statements. The Corporate Governance report forms part of the Directors' Report and is incorporated into it by cross reference.
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.
An interim dividend of 5.60p per ordinary share was paid on 13 September 2013 and the Directors recommend a final dividend of 11.40p per share. The proposed final dividend, if approved, will be paid on 9 May 2014 in respect of shares registered at the close of business on 11 April 2014.
The total distribution paid and recommended for 2013 on the ordinary shares is £4.50m or 17.00p per share (2012: £4.08m or 15.45p per share).
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 the businesses in the Group operate in accordance with best practice.
The policy addresses such issues as working hours, discrimination, collective bargaining and child labour. The policy is regularly reviewed and was reconsidered by the Board at its meeting on 4 December 2013.
The Board recognises its obligations to protect the environment and is committed both to achieving required environmental standards across all the activities of the Group and to minimising environmental impact. Formal systems in place are subject to audits and management is regularly notified of key issues and developments. The businesses in the Group assess and monitor the potential impact of their operations upon the environment and steps are taken to control energy consumption and waste and to ensure that paper used for marketing purposes is sourced from sustainable forests.
No political donations were made in the period or prior period.
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.
During 2013, the Group continued to pursue improvements to the management of health and safety in its businesses. Regular reports on health and safety are received and reviewed by the Board. Any accidents and incidents are reported to the Board together with corrective actions which have been implemented. There was one such incident in 2013 relating to the SPS business.
The names of the present Directors (and others who were Directors during the period) and their interests in the share capital of the Company are shown on page 34. The biographical details of the present Directors, committee memberships, independence status and identification of the Senior Independent Director are given on page 13.
Neither the Directors, nor 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 Group recognises the importance and benefit of ensuring diversity throughout the business and strives to create a culture which recruits and promotes the development of all employees regardless of background or gender.
As at 28 December 2013, 16% of the Board is female and 16% is non-UK national.
The Group's objective for managing capital is described in note 21.
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 in 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 Shareholders' rights, unissued shares are at the disposal of the Board. At each Annual General Meeting, the Company seeks annual Shareholder authority for 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.
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.
On 10 February 2014, the Group completed the sale of SPS to the SPS senior management, backed by Maven Capital Partners. The gross consideration was £7.25m (subject to post completion adjustments relating to the levels of working capital, debt and cash at completion).
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 2013 and up to 5 March 2014 in respect of Ms G. Davies and Mr A.J. Scull. Qualifying Third Party Indemnity Agreements have also been signed by the Company in respect of Mr J.W. Poulter, Mr S.J. Gray, Mr J.A. Warren and Mr K. Lyons-Tarr with effect from the date of their respective appointments.
The trustees of both the 4imprint Group plc Employee Share Trust and the 4imprint 2012 Employee Benefit Trust may vote or abstain from voting on shares held in the trusts in any way they consider appropriate.
There are no agreements containing provisions entitling the counterparty to exercise termination or other rights in the event of a change of control.
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report on pages 3 to 12. The financial position of the Group, its cash flows, and net cash position are described in the Financial review on pages 7 to 10. In addition note 21 to the financial statements includes the Group's policies for managing its financial risk and its exposures to credit risk, liquidity risk, and capital risk management.
The Group borrowings and facilities are set out in note 18. 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 financial statements.
Details of the procedures and guidelines used by the Committee in determining remuneration are outlined in its report on pages 24 to 30.
Following the approval at the 2013 Annual General Meeting of Resolution 14, 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 1 May 2013 until the earlier of the end of the 2014 Annual General Meeting or 1 August 2014 unless previously cancelled or varied by the Company in general meeting. No such cancellation or variation has taken place.
| end of the 2014 Annual General Meeting or 1 August 2014 unless previously cancelled or varied by the Company in general meeting. No such cancellation or variation has taken place. |
GO VE RN AN CE |
||
|---|---|---|---|
| Substantial interests At 17 February 2014 the Company had been notified of the following interests in the issued ordinary share capital of the Company: |
|||
| Number of shares | % | ||
| BlackRock Investment Management | 4,422,348 | 16.54 | |
| Standard Life Investments | 2,607,901 | 9.75 | |
| GVO Investment Management | 1,878,775 | 7.02 | |
| Mr K.J. Minton | 1,735,088 | 6.49 | |
| Artemis Fund Managers Limited | 1,718,892 | 6.43 | |
| Fidelity Worldwide Investment | 1,479,366 | 5.53 | |
| J.P. Morgan Asset Management | 1,070,563 | 4.00 | |
| Crystal Amber Asset Management (Guernsey) |
918,423 | 3.43 | |
| trusts has been waived. | |||
| Greenhouse Gas Emissions Report | |||
| Global greenhouse gas (GHG) | |||
| emissions data for the year | Tonnes of carbon dioxide equivalent |
||
| Combustion of fuel and operation of facilities (Scope 1) |
171 | ||
| Electricity, heat, steam and cooling purchased | |||
| for own use (Scope 2) Emissions intensity per thousand pounds of revenue |
3,054 0.015 |
||
| Methodology We have reported on all of the emission sources required under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 for Scope 1 and Scope 2 emissions. |
|||
| We have used emission factors from the UK Government's GHG Conversion Factors for Company Reporting 2013. |
|||
| Annual General Meeting 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. |
| Tonnes of carbon dioxide equivalent |
|
|---|---|
| Combustion of fuel and operation of facilities (Scope 1) |
171 |
| Electricity, heat, steam and cooling purchased for own use (Scope 2) |
3,054 |
| Emissions intensity per thousand pounds of revenue | 0.015 |
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:
By order of the Board
Andrew Scull Company Secretary 5 March 2014
The disclosures required by Company law in relation to the Takeover Directive in relation to the Group's capital structure are incorporated in the Directors' report on pages 14 to 16.
During 2013 the Group has complied with the provisions of The UK Corporate Governance Code (2010) (the "Code"), except for the following matter:
There is no Group Chief Executive but the role of Executive Chairman was undertaken by Mr J.W. Poulter during the year. (Principle A.2.1).
Having considered the matter at its Board meeting on 4 December 2013 and taking into account Mr Lyons-Tarr's position as CEO of the Direct Marketing business, 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 structure of the Group is such that during 2013 there were two businesses, each of which had a Chief Executive Officer supported by a Finance Director and senior marketing and operational managers. The CEO of the Direct Marketing business, Mr K. Lyons-Tarr, is also a Director of 4imprint Group plc.
Reviews have been undertaken, at least bi-monthly, at which the Chief Executive and other senior management of the two businesses presented to the Executive Chairman, the Group Finance Director and the Corporate Services Director 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. In advance of these scheduled meetings, detailed financial information was circulated, together with any other items for discussion.
The Code is publicly available on the Financial Reporting Council's website, www.frc.org.uk.
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 maintains 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 4 December 2013. 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 could 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. Mr A.J. Scull has notified the Company that he is a Director and Company Secretary of the 4imprint Pension Trustee Company Limited which administers the legacy defined benefit pension scheme.
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 18 to 22.
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.
4imprint Group plc Annual Report and Accounts 2013 17GOVERNANCE The Board consists of an Executive Chairman, the Chief Executive of the Direct Marketing business, the Group Finance Director, the 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.
The Board has considered whether it is appropriate to have additional Non-Executive Directors but has concluded that such additional appointments are not necessary at the current stage of the Group's development. The current Non-Executive Directors have letters of appointment for three years from 11 June 2012, which 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 re-considered by the Board at its meeting on 4 December 2013 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 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 evaluations and those of its Committees which were undertaken in 2009, 2010 and 2011 were undertaken internally through a process conducted by the Non-Executive Directors, assisted by the Company Secretary. The Code recommends that FTSE 350 companies should undertake an external evaluation at least once every three years. During 2012, two new Non-Executive Directors were appointed and whilst an evaluation was undertaken internally, the Board was of the view that before any external evaluation should be undertaken, it would be of greater value once those Directors had been in their respective roles for at least one full year.
A table setting out the number of Board and Committee Meetings held during the period 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 | 1 | 0 |
| Mr J.W. Poulter | 7 | 2* | 1* | 0 |
| Ms G. Davies | 7 | 2* | 0 | 0 |
| Mr K. Lyons-Tarr | 6 | 0 | 0 | 0 |
| Mr A.J. Scull | 7 | 2* | 0 | 0 |
| Mr J.A. Warren | 7 | 2 | 1 | 0 |
| Mr S.J. Gray | 7 | 2 | 1 | 0 |
* By invitation.
The Board has three permanent Committees being the Audit Committee, the Nomination Committee and the Remuneration Committee. 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 described in this report.
The responsibilities and composition of the Remuneration Committee are disclosed in the Remuneration report on page 23.
The Remuneration Committee has Terms of Reference which were re-considered and approved by the Board at its meeting on 4 December 2013. These Terms of Reference are available for inspection at the Company's registered office during normal business hours.
The Remuneration Committee met once during 2013.
The Board places a high value on its relations with its investors.
The Group, principally through the Executive Chairman, the CEO of the Direct Marketing business 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, discussions cover a wide range of issues, including strategy, performance, management and governance.
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 4imprint corporate website, investors.4imprint.com, 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.
Details of the Company's share capital are provided in the Directors' report on page 14.
The going concern statement is on page 15.
I am pleased to present my report to Shareholders as Chairman of the Nomination Committee.
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; and (iii) putting in place plans for succession at Board level.
The Nomination Committee has Terms of Reference which were re-considered and approved by the Board of the Company at its Board Meeting on 4 December 2013. These Terms of Reference are available for inspection at the Company's registered office during normal business hours.
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 Annual General Meeting and is then eligible for election by the Shareholders.
At every Annual General Meeting of the Company, all Directors put themselves forward for re-election. The office of Director shall be vacated if (a) he or she resigns or offers to resign and the Board resolves to accept such offer, (b) he or she is, or has been, suffering from mental ill health, (c) he or she becomes bankrupt or compounds with creditors generally, (d) he or she is prohibited by law from being a Director, (e) he or she ceases to be a Director by virtue of the provisions of the Companies Act or (f) he or she is removed from office pursuant to the Articles of Association.
I chair the Nomination Committee and I am an Independent Non-Executive Director. The other member of the Committee is Mr J.A. Warren, the Senior Independent Non-Executive Director. The Chairman of the Company is usually invited to attend formal meetings of the Committee. The Company Secretary may be invited to attend meetings of the Nomination Committee, in his capacity as Company Secretary.
The Nomination Committee meets as frequently as is required to fulfil its duties. When there are no specific decisions or recommendations to be made, the Chairman of the Committee consults the other member of the Committee as necessary. During the year ended 28 December 2013 there were no meetings of the Nomination Committee.
S.J. Gray Chairman of the Nomination Committee 5 March 2014
I am pleased to present my report to Shareholders as Chairman of the Audit Committee.
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 non-financial information supplied to Shareholders presents a fair, balanced and understandable assessment of the Company's performance and position.
The Committee reviews the effectiveness, objectivity and independence of the external auditors and also considers the scope of their work and fees paid for audit and nonaudit services.
The Audit Committee has Terms of Reference which were re-considered and approved by the Board at its meeting on 4 December 2013. 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:
4imprint Group plc Annual Report and Accounts 2013 19GOVERNANCE I chair the Audit Committee and I am the Senior Independent Non-Executive Director. I am a chartered accountant and was Group Finance Director of United Biscuits (Holdings) PLC and WH Smith PLC. The Board is of the view that I have recent and relevant financial knowledge and experience derived from current roles as Chairman of the Audit Committee at Spectris plc, Bovis Homes Group Plc, Welsh Water and Greencore Group plc. The other member of the Committee is Mr S.J. Gray, 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 Company Secretary.
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 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 2013.
In order to fulfil its Terms of Reference, the Audit Committee receives and reviews presentations and reports from the Group's senior management and 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 Corporate Governance Code. To fulfil these duties, the Audit Committee reviewed:
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.
During 2013, the Group's auditors provided non-audit advice in a number of areas, principally in respect of advice on the pension flexible early retirement offer. Before any significant 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. For the area referred to above, after following the process described in this paragraph, it was considered that PricewaterhouseCoopers LLP was the most suitable firm to perform the work. During 2013, tax advice was also taken from Deloitte LLP.
In addition to the above, the Board has specifically reviewed the nature and extent of other non-audit work carried out by the auditors in 2013 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:
During the year ended 28 December 2013, the Audit Committee's business has included the following items:
The Committee assesses whether suitable accounting policies have been adopted and whether management has made appropriate estimates and judgments. The Committee reviews accounting papers prepared by management which provided details on the main financial reporting judgments.
The Committee also reviews reports by the external auditors on the half year and full year results which highlight any
issues arising from the work undertaken in respect of the half year review and year end audit.
Specific areas of audit and accounting risk reviewed by the Committee were:
The defined benefit pension scheme is material to the financial position of the Group. The amount shown in the balance sheet is highly sensitive to changes in key actuarial assumptions. The Committee reviewed the appropriateness and consistency of these assumptions and the auditors confirmed that the assumptions used were reasonable and within an acceptable range. Full disclosure of the pension scheme is provided in note 4 to the accounts, which includes the key assumptions on page 54 and the sensitivities on page 55.
The classification of SPS as a discontinued operation and a business held for sale was considered by the Committee. The auditors confirmed that in their view SPS met the requirements laid down in IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and that therefore the accounting treatment and presentation adopted was appropriate. Additionally, the judgements made in calculating the provision for the estimated loss on disposal of SPS were discussed with management and the auditors, and the Committee was satisfied that the amounts provided were appropriate. The provision, described as 'Loss on remeasurement of assets of disposal group', is shown in note 10.
The Committee considered, and was satisfied with, management's presentation of the financial statements and, in particular, the presentations of certain items as exceptional items.
The auditors confirmed to the Committee that it was not aware of any material misstatements during the course of their work. The Committee is satisfied that the judgments made by management are reasonable and that appropriate disclosures have been included in the financial statements.
After reviewing the presentation from management and following discussions with the auditors, the Committee is satisfied that:
PricewaterhouseCoopers LLP, or its predecessor firms, has been the Company's auditor since 1992. The Audit Committee considers that the relationship with the auditors is working well and remains satisfied with their effectiveness.
Accordingly, the Committee has not considered it necessary to date to require the firm to retender for the Audit. However, the Committee has noted the guidance from the Financial Reporting Council and potential future changes in the EU to the regulatory framework and will continue to keep the matter under review.
4imprint Group plc Annual Report and Accounts 2013 21GOVERNANCE The external auditors are required to rotate the audit partner responsible for the Group and subsidiary audits every five 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 no later than 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.
Taking into consideration the external auditors' knowledge of the Group and level of experience, the Audit Committee has recommended to the Board that the external auditors are re-appointed.
Given the present structure of the Group, the Board does not currently consider the establishment of a separate internal audit function to be necessary. 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.
As Chairman of the Committee I 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 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 pages 17 and 18, the Group operates a continuous process of identifying, evaluating and managing the significant risks faced by each
business and the Group as a whole. This process, which has been in place throughout 2013 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 44.
The internal control process will continue to be monitored and reviewed by the Board which will, where necessary, ensure improvements are implemented. During the year the Board has undertaken a review of the effectiveness of internal controls and systems. No material matters were identified.
J.A. Warren Chairman of the Audit Committee 5 March 2014
The Board's strategy is the pursuit of further profitable and cash generative organic growth in 4imprint Direct Marketing while taking appropriate steps to reduce the burden of the legacy defined benefit pension scheme.
Recent years have seen sustained growth in the 4imprint Direct Marketing business and in earnings per share and share price. The Board and the Remuneration Committee aim to ensure that the Company has the best possible management to continue both that growth and the creation of further shareholder value and aim to reward for fulfilment of this strategy.
The Committee's approach to remuneration is that it should: (i) be competitive when compared to those in organisations of similar size, complexity and type, (ii) be structured so that remuneration is linked to the long term growth in profitability and shareholder value of the Company (iii) be clear, easy to understand and motivating, (iv) not promote unacceptable behaviour or encourage unacceptable risk taking, and (v) be structured to avoid reward for failure.
In April 2011, Shareholders approved the introduction and implementation of the 2011 4imprint Group plc Performance Share Plan which provided, for Executive Directors and senior management, nil-cost share option and conditional share awards which vested upon share price targets of £3, £3.50 and £4 being achieved and maintained for a minimum of thirty consecutive dealing days. The options become exercisable on 27 April 2014 being three years from the date of grant. The 2011 closing year end share price was £2.29.
Given the changes in the structure of 4imprint since the introduction of the 2011 Performance Share Plan, in particular the increasing focus of the business towards the USA and the 2013 closing year end share price of £6.85p considerably exceeding the share price targets under the 2011 Performance Share Plan, the Committee does not intend to award any further nil-cost share options or conditional share awards under the 2011 Performance Share Plan.
The Committee intends that a new, share based, long-term incentive plan will be developed, during 2014, which will reflect the changes in the Group since the introduction of the 2011 Performance Share Plan. This new plan will support the long term strategy of the Group, align management interests with those of Shareholders and will be put to Shareholders for approval at the 2015 Annual General Meeting. Assuming it is approved, awards will be made pursuant to its terms.
Pursuant to the Group's strategy, SPS, a UK based manufacturer, was sold on 10 February 2014. Therefore, the Group's continuing operations now comprises the Direct Marketing businesses, 96% of the revenue of which is generated in North America. Consequently, the remuneration policy will need to reflect the increasing focus of the business to the United States.
The Committee reserves the right to make payments outside this policy in exceptional circumstances. The Committee would only use this right where it believes that this is in the best interests of the Company and when it would be disproportionate to seek specific approval from a general meeting.
4imprint Group plc Annual Report and Accounts 2013 23GOVERNANCE Remuneration is a topic upon which shareholders have widely differing views, but I hope that 4imprint's principles of clarity, relative simplicity and balance will help to explain what the Committee does and to enable Shareholders to evaluate the Remuneration Policy. In this context, I am pleased to note that at the 2013 Annual General Meeting the Remuneration report was approved by 96.65% of our Shareholders.
S.J. Gray Chairman of the Remuneration Committee 5 March 2014
This report sets out the information required by the Companies Act 2006, Schedule 8 of the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008 and the Listing Rules of the Financial Conduct Authority. This report is unaudited, except where otherwise stated. An ordinary resolution to approve this report will be put to the Annual General Meeting on 6 May 2014.
The Remuneration Committee is a committee whose membership is comprised solely of independent Non-Executive Directors, being Mr S.J. Gray (Chairman of the Committee) and Mr J.A. Warren. The Committee meets at least once a year and may invite other attendees as it sees fit.
The Committee did not use any external consultants during the year ended 28 December 2013 and has not consulted Shareholders or employees in formulating the remuneration policy. However, the Committee remains mindful of the remuneration of employees when reviewing changes in executive pay.
During the year ended 28 December 2013, the Remuneration Committee met once.
The principal duties of the Remuneration Committee are reflected in its Terms of Reference and include the following:
The remuneration of Non-Executive Directors is determined by the Executive Chairman of the Board and the Executive Directors.
The Remuneration Committee met once during the year ending 28 December 2013 and the following matters were considered:
Approving the salaries of the Executive Directors for 2013 and monitoring and reviewing the level and structure of salaries for senior management for 2013.
Approving the bonuses for the Executive Directors for 2012 and monitoring and reviewing the level and structure of bonuses for senior management for 2012.
Approving the structure of the bonus criteria for Executive Directors for 2013.
Approving awards and performance targets under the Rules of the 2011 4imprint Group plc Performance Share Plan for 20,000 nil cost share awards to be made to each of seven senior managers in the Direct Marketing business.
The Company has a well-established and clear remuneration policy which, in the view of the Committee, has made an important contribution to the success of the Company over a sustained period. The policy includes providing Executive Directors with remuneration packages which are: (i) competitive when compared to those in organisations of similar size, complexity and type; (ii) structured so that remuneration is linked to the long term growth in profitability and shareholder value of the Company; (iii) clear, easy to understand and motivating; (iv) designed not to promote unacceptable behaviour or encourage unacceptable risk taking; and (v) structured to avoid reward for failure.
New regulations came into force on 1 October 2013, which require the Company to offer Shareholders a binding vote on the Company's forward-looking directors' remuneration policy at least every three years. Once the policy is approved, the Company will not be able to make a remuneration payment to a current or prospective director or a payment for loss of office to a current or past director, unless that payment is consistent with the policy or has been approved by a resolution of the members of the Company.
As such, Shareholders are also being asked to approve the remuneration policy as set out below, such policy to take effect from the date on which the resolution is passed.
Remuneration for Executive Directors comprises both fixed and variable elements. The principal component of the fixed element is a salary, which is set at an appropriate level for the size and type of the Company to retain the quality of management it requires to further the Board's objectives, but which is not excessive. Base salary in 2013 was not increased from the level in the preceding year.
| The fixed and variable components of remuneration are set out below. | |||
|---|---|---|---|
| Fixed components | |||
| Element and purpose | Policy and opportunity | Operation and performance measures |
Implementation of policy in year |
| Base salary | |||
| of pay and reflects the individual's role, position and responsibility within the Company and includes adjustments to reflect their experiences, capability and contribution |
reviewed each year, the Company's policy is not automatically to award an inflationary increase – Base salaries are considered against those paid in organisations of similar size, complexity and type in order to attract and retain the required quality of executives to meet the Board's strategy and, while the Committee applies judgement rather than setting by reference to a fixed percentile position, its general approach when considered in conjunction with variable pay and long-term incentives is to constrain base salaries to levels it believes to be at the lower end of an acceptable market range – No claw back or recovery provisions apply |
in arrears in cash – Base salaries are reviewed annually with changes normally taking effect from 1 January taking into account: (i) personal contribution (ii) changes in level of responsibility (iii) change of role (iv) individual experience and performance (v) market practice |
December 2013 no salary increase was effected for any Executive Director The maximum salary increase will normally be in line with the market. However, larger increases may be awarded in certain circumstances, including, but not limited to: (i) increase in scope or responsibilities of the role; (ii) to apply salary progression for a newly appointed director; and (iii) where the directors' salary has fallen significantly below the market positioning |
| Element and purpose | Policy and opportunity | Operation and performance measures |
Implementation of policy in year |
|---|---|---|---|
| Benefits in kind | |||
| To provide other benefits valued by the recipient to assist in attracting and retaining executives of the required quality to meet the Board's objectives |
– Provide benefits in kind which are competitive in the market – Benefits include: (i) company car or car allowance paid in cash (ii) private medical insurance for the executive and his/ her family (iii) life assurance of 4 times base salary (iv) income protection insurance (v) access to independent professional advice when necessary – No claw back or recovery provisions apply |
– Benefits currently received by Executive Directors comprise a car allowance (other than for Mr K. Lyons-Tarr and Mr J.W. Poulter) and for each Executive Director, (other than Mr J.W. Poulter) and their spouse and children up to the age of 18 provision of a private healthcare and income protection scheme – The Company may periodically amend the benefits it makes available and the Executive Directors would normally be eligible to receive such amended benefits on similar terms to all other senior staff |
– No changes were made to this element of remuneration in the year ended 28 December 2013 |
| Pension | |||
| To attract and retain Executive Directors of the required quality to meet the Board's objectives and remain competitive within the market place |
– Provide a competitive employer sponsored pension plan – The maximum entitlement is 15 per cent of base salary – No claw back or recovery provisions apply |
– All Executive Directors (other than Mr J.W. Poulter) are eligible to (i) participate in a defined contribution pension plan or (ii) receive a salary supplement in lieu (such salary supplement is not taken into account as salary for calculation of annual bonus, LTIP or other benefits), with a total value of 15 per cent of salary – Mr K. Lyons-Tarr is entitled to receive post retirement benefits through the defined contribution retirement programmes established by 4imprint Incorporated |
– No changes were made to these elements of remuneration within the year – Ms G. Davies and Mr A.J. Scull received a total benefit equivalent to 15 per cent of salary – Mr K. Lyons-Tarr received a total benefit equivalent to 2.9 per cent of salary – During the financial year ended 28 December 2013 no contributions for Mr A.J. Scull were paid into the defined contribution pension scheme but an equivalent amount to such contributions was paid to Mr A.J. Scull as salary, which is subject to deduction of tax and National Insurance |
| Annual Bonus The short term incentive – The maximum bonus – Bonus levels and the – Any annual bonus is paid potential is 50 per cent of appropriateness of in one tranche, usually in arrangements are designed to motivate employees and base salary for all Executive performance measures March incentivise delivery of annual Directors (including with are reviewed annually to performance targets across a effect from 1 January ensure they continue to – The bonuses paid to range of key strategic areas 2014, Mr J.W. Poulter) support the Company's Executive Directors in for the business strategy respect of the year ended – The Company retains the 28 December 2013 were: ability to adjust or set – In respect of the CEO different performance of the Direct Marketing (i) Zero in the case of Mr J.W. Poulter measures if events occur business, the bonus is (e.g. a change in strategy, based upon revenue percentage increase and (ii) 50 per cent of salary in material acquisition, divestment or change operating profit margin respect of the other three percentage achieved in the Executive Directors, being in prevailing market conditions) which cause Direct Marketing business £90k in the case of Ms G. Davies and Mr A.J. Scull it to determine that the conditions are no longer – In respect of the other and \$175k in the case of appropriate and that Executive Directors the Mr K. Lyons-Tarr amendment is required so bonus is based upon that the conditions achieve a range of measures – Bonuses were paid since all their original purpose. including profitability, cash targets for the year ended In these circumstances, generation, improvement 28 December 2013 were any amendment would in financial performance met or exceeded not result in achievement over prior year and specific against those measures corporate objectives, for being materially less example, reducing the risks difficult to satisfy. Any associated with the legacy use in this ability would, defined benefit pension scheme where relevant, be explained in the Annual Remuneration Report and may, as appropriate, be the subject of consultation with the Company's major Shareholders – No claw back or recovery provisions apply |
Element and purpose | Policy and opportunity | Operation and performance measures |
Implementation of policy in year |
|---|---|---|---|---|
| 4imprint Group plc Annual Report and Accounts 2013 |
| Element and purpose | Policy and opportunity | Operation and performance measures |
Implementation of policy in year |
|---|---|---|---|
| Long-term incentives | |||
| To motivate and incentivise delivery of sustained share price performance over the long-term, the Group has operated the 2011 4imprint Group plc Performance Share Plan ("2011 PSP") A new long term share based incentive plan will be put to Shareholders for approval at the 2015 AGM |
– Given the changes in the structure of the Group since the approval by Shareholders of the 2011 PSP, in particular the divestment of the two UK based businesses, Brand Addition in 2012 and SPS in 2014 and the consequent increasing focus of the Group's business towards the USA, it is intended that no further awards under the 2011 PSP will be made and that a new long-term share based incentive plan will be put to Shareholders for approval at the 2015 AGM. Assuming such new plan is approved by Shareholders, awards (including any maximum awards) will be made pursuant to its terms – No claw back or recovery provisions apply |
– Under the terms of the 2011 PSP the Executive Directors are entitled to nil-cost share option and conditional share awards which vested upon share price targets of £3, £3.50 and £4 being achieved and maintained for a minimum of thirty consecutive dealing days and become exercisable on 27 April 2014 being three years from the date of grant. The 2011 closing year end share price was £2.29 |
– No long-term incentive awards were made to Directors in the year |
| Shareholding guidelines | |||
| To encourage share ownership by the Executive Directors and ensure interests are aligned with Shareholders |
– There are no specific shareholding requirements for Executive Directors |
– Despite there not being any specific shareholding requirement for Executive Directors, currently (using a share price of £6.85p being the share price at the end of the period concluding on 28 December 2013) the value of the shareholdings of the respective Executive Directors at the same date and as a multiple of their annual salaries are: (i) Mr J.W. Poulter 1.71 (ii) Mr K. Lyons-Tarr 3.04 (iii) Ms G. Davies 4.62 (iv) Mr A.J. Scull 4.81 |
| Element and purpose | Policy and opportunity | Operation and performance measures |
Implementation of policy in year |
|---|---|---|---|
| All-employee share plans | |||
| To encourage share ownership by employees, thereby allowing them to share in the long-term success of the Group and align their interests with those of the Shareholders |
– Executive Directors are able to participate in all employee share plans on the same terms as other Group employees |
– Save As You Earn – Two plans are in place. The first is a Save As You Earn plan in the UK under which individuals may save up to a maximum of £250 each month for a fixed period of three years – The second is an Employee Stock Purchase plan in the USA under which individuals may save amounts each month for a period of two years and three months |
– No schemes were established or options issued in the year ended 28 December 2013 |
| – At the end of the savings period, individuals may use their savings to buy ordinary shares in the Company at a discount of up to 20 per cent of the market price set at the launch of each scheme |
|||
| Non-Executive Director fees | |||
| To set fees reflecting time commitments and responsibilities in each role, in line with fees provided by similarly sized companies |
– The fees paid to the Non Executive Directors aim to be competitive with other fully listed companies of equivalent size, complexity and type. Fee levels are periodically reviewed by the Board. The Company does not adopt a quantitative approach to pay positioning and exercises judgement as to what it considers to be reasonable in all the circumstances as regards quantum – No claw back or recovery |
– Fees are paid in monthly arrears in cash – Fee levels for the Non Executive Directors are reviewed periodically, the last such review being on their appointment in 2012 |
– Current fee levels are £35,000 for the role of Non-Executive Director |
| Recruitment remuneration policy | provisions apply | ||
| The Company's recruitment remuneration policy aims to secure the appointment and promotion of high-calibre executives to strengthen the management team and secure the appropriate skills to deliver the Company's strategic objectives. The following represents guidelines considered reasonable by the Committee: |
|||
| discretion would be disclosed to Shareholders | – The starting point for the Committee will be to look at the general remuneration policy for Executive Directors as set out above and structure a package in accordance with that policy circumstances. The Committee would only use this right where it believes that to do so would be in the best interests of the Company and when it would be disproportionate to seek specific approval from a general meeting. Any use of this – For an internal appointment, any variable pay element awarded in respect of the prior role may either continue on its original terms or be adjusted to reflect the new appointment, as appropriate |
– For external appointments, the Committee reserves the right to make payments outside this policy, but only in exceptional | |
| 4imprint Group plc Annual Report and Accounts 2013 |
At the Annual General Meeting held on 1 May 2013, the Directors Remuneration Report received the following votes from Shareholders:
| For | 96.65% |
|---|---|
| Against | 3.35% |
The graph below illustrates the Company's Total Shareholder Returns performance relative to constituents of the FTSE small cap and FTSE small cap media of which the Company is a constituent. The graph shows performance of a hypothetical £100 invested in its performance over the period.
| 2009 £000s |
2010 £000s |
2011 £000s |
2012 £000s |
2013 £000s |
||
|---|---|---|---|---|---|---|
| K.J. Minton | 55 | 172 | ||||
| J.W. Poulter | 40 | 120 | 738 | 1,356 | ||
| Total Remuneration | 55 | 212 | 120 | 738 | 1,356 | |
| Annual variable award | ||||||
| % versus max opportunity | n/a | 100% | n/a | n/a | n/a | |
| Long term incentive | ||||||
| Vesting rate | – | – | – | 33.30% | 66.70% | |
| the role. | There is no Group Chief Executive Officer and therefore reference in this section is to the Executive Chairman, who fulfils | |||||
| Percentage change in remuneration of Executive Chairman and employees The table below shows the percentage change in remuneration of the Director undertaking the role of Group Chief Executive Officer and the Company's employees as a whole between 2013 and 2012. |
||||||
| Percentage increase in remuneration in 2013 | ||||||
| Executive Chairman | compared with remuneration in 2012 Average pay based on all employees |
|||||
| Salary | 0% | 3.4% | ||||
| Benefits | 0% | 4.1% | ||||
| Annual bonus | 0% | 85.8% | ||||
| Relative importance of spend on pay to dividends: |
The following table below shows the Group's actual spend on pay (for all employees within continuing operations) relative | 2013 £m |
2012 £m |
% change |
||
| Wages and salaries Dividends paid |
18.40 4.18 |
16.03 3.90 |
14.0% 7.2% |
|||
| Reward scenarios J.W. Poulter (£'000) Annual bonus |
The chart below shows how the composition of the Executive Directors remuneration packages for 2014 may vary at different levels of performance under the policy set out in this report as a percentage of total remuneration opportunity. K. Lyons-Tarr (\$'000) |
G. Davies (£'000) |
A.J. Scull (£'000) |
|||
| Base | 600 | 350 | 350 | |||
| 33% | 32% 500 |
300 | 29% | 300 | 29% | |
| 23% | 22% | 20% 250 |
250 | 20% | ||
| 77% 67% |
400 100% 78% 68% |
80% 100% 200 |
71% | 200 | 100% | 80% 71% |
| 100% | 300 | 150 | 150 | |||
| 200 | ||||||
| 100 | 100 | |||||
| 100 | 50 | 50 |
| Percentage increase in remuneration in 2013 compared with remuneration in 2012 |
||
|---|---|---|
| Executive Chairman | Average pay based on all employees | |
| Salary | 0% | 3.4% |
| Benefits | 0% | 4.1% |
| Annual bonus | 0% | 85.8% |
| 2013 £m |
2012 £m |
% change |
|
|---|---|---|---|
| Wages and salaries | 18.40 | 16.03 | 14.0% |
| Dividends paid | 4.18 | 3.90 | 7.2% |
Ms G. Davies and Mr A.J. Scull (the "UK-based Executive Directors") have rolling service contracts which continue until terminated by the expiry of twelve months written notice from the Company to the Director. Each service contract provides for participation in a discretionary bonus scheme, the provision of a car (or car allowance) and, in the case of Ms G. Davies, pension entitlements and in the case of Mr A.J. Scull, pay in lieu of pension entitlements. 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 (in the case of Ms G. Davies) and contributions to healthcare and income protection schemes.
Mr K. Lyons-Tarr (the "US-based Executive Director") has a rolling employment agreement with 4imprint Incorporated which continues until terminated by the expiry of twelve months written notice from that Company to the Director. The employment agreement for the US-based Director provides for participation in a discretionary bonus scheme and entitlement to benefits generally available to employees of 4imprint Incorporated from time to time including, for example, retirement, disability, group accident, life and health insurance programmes. The contractual termination payment in such circumstances would comprise up to twelve months payments, equivalent to the notice period in respect of salary and other non-discretionary components.
Any commitment made to the Executive Directors by the Company under his/her service contract or otherwise which is consistent with the approved remuneration policy in force at the time that commitment was made will be honoured, even where it is not consistent with the policy prevailing at the time such commitment is fulfilled.
| Name | Contract Details |
Unexpired term at 28 December 2013 |
Notice period (i) from Company (ii) from Director |
Contractual Termination payment |
|---|---|---|---|---|
| J.W. Poulter | 30 April 2013 | Two years and eight months |
(i) Three months | (i) n/a |
| (ii) Three months | (ii) n/a | |||
| G. Davies | 6 December 2004 | n/a | (i) Twelve months | (i) Twelve months contractual benefits |
| (ii) Six months | (ii) n/a | |||
| K. Lyons-Tarr | 27 July 2009 | n/a | (i) Twelve months | (i) Twelve months contractual benefits |
| (ii) Six months | (ii) n/a | |||
| A.J. Scull | 8 November 2004 | n/a | (i) Twelve months | (i) Twelve months contractual benefits |
| (ii) Six months | (ii) n/a |
Mr J.W. Poulter, the Executive Chairman has a letter of appointment dated 30 April 2013. The appointment is for a period of three years from 1 May 2013 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:
(a) he is not reappointed as a Director of the Company upon retirement (by rotation or otherwise) pursuant to the Company's Articles of Association; or
(b) he is removed as a Director of the Company by resolution passed at a General Meeting of the Company; or
(c) he ceases to be a Director of the Company by reason of his vacating or being removed from office pursuant to any provisions of the Company's Articles of Association.
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. With effect from 1 January 2014, Mr J.W. Poulter will be entitled to the annual bonus and therefore his appointment letter will be amended in due course to reflect this entitlement.
Mr S.J. Gray and Mr J.A. Warren have letters of appointment dated 30 May 2012. Their respective appointments are for three years, after which they are renewable by agreement with the Company, subject to the provisions in respect of re-appointment 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 (a), (b) or (c) above apply. The Executive Directors service contracts and the Non-Executive Directors and Mr J.W. Poulter's letters of appointment are available for inspection at the Company's registered office.
Executive Directors are entitled to receive any contractual benefits on termination of employment. The Committee may consider pro-rata payment of any accrued bonus entitlement within the remuneration policy. In addition to any contractual rights to a payment for loss of office, all employees (including the Executive Directors) will have legal rights under law to certain additional payments e.g. in a redundancy situation.
| Total | 773,771 | 19,200 | 19,519 | 291,885 | 1,104,375 | 4,944,000 | 60,549 | 6,108,924 |
|---|---|---|---|---|---|---|---|---|
| S.J. Gray | 35,000 | 35,000 | 35,000 | |||||
| J.A. Warren | 35,000 | 35,000 | 35,000 | |||||
| Non-Executive | ||||||||
| K. Lyons-Tarr | 223,771 | 9,833 | 111,885 | 345,489 1,236,000 | 6,549 | 1,588,038 | ||
| A.J. Scull | 180,000 | 9,600 | 6,201 | 90,000 | 285,801 1,236,000 | 27,000 | 1,548,801 | |
| G. Davies | 180,000 | 9,600 | 3,485 | 90,000 | 283,085 1,236,000 | 27,000 | 1,546,085 | |
| J.W. Poulter | 120,000 | 120,000 1,236,000 | 1,356,000 | |||||
| Executive | ||||||||
| Basic salary/fee £ |
Car allowance £ |
Benefits in kind £ |
Annual bonus £ |
Total emoluments £ |
LTIP vested (a) £ |
contributions/ (b) £ |
Total pay in lieu remuneration 2013 £ |
|
| Employers pension |
(b) Mr A.J. Scull received £27,000 pay in lieu of pension contributions (2012: £22,438).
| Directors' remuneration – single total figure | The following information on pages 33 and 34 has been audited by the Company's auditors, PricewaterhouseCoopers LLP. | |||||||
|---|---|---|---|---|---|---|---|---|
| Employers | ||||||||
| Basic salary/fee £ |
Car allowance £ |
Benefits in kind £ |
Annual bonus £ |
Total emoluments £ |
LTIP vested (a) £ |
pension contributions/ (b) £ |
Total pay in lieu remuneration 2013 £ |
|
| Executive | ||||||||
| J.W. Poulter | 120,000 | 120,000 1,236,000 | 1,356,000 | |||||
| G. Davies | 180,000 | 9,600 | 3,485 | 90,000 | 283,085 1,236,000 | 27,000 | 1,546,085 | |
| A.J. Scull | 180,000 | 9,600 | 6,201 | 90,000 | 285,801 1,236,000 | 27,000 | 1,548,801 | |
| K. Lyons-Tarr | 223,771 | 9,833 | 111,885 | 345,489 1,236,000 | 6,549 | 1,588,038 | ||
| Non-Executive | ||||||||
| J.A. Warren | 35,000 | 35,000 | 35,000 | |||||
| S.J. Gray | 35,000 | 35,000 | 35,000 | |||||
| 773,771 Basic |
19,200 Car |
19,519 Benefits |
291,885 Annual |
1,104,375 Total |
4,944,000 LTIP vested |
60,549 Employers pension |
||
| salary/fee £ |
allowance £ |
in kind £ |
bonus £ |
emoluments £ |
(c) £ |
pay in lieu (b) £ |
||
| 120,000 | 120,000 | 618,000 | 6,108,924 Total contributions/ remuneration 2012 £ 738,000 |
|||||
| 180,000 | 9,600 | 658 | 36,000 | 226,258 | 618,000 | 27,000 | ||
| 180,000 | 9,600 | 2,193 | 36,000 | 227,793 | 618,000 | 26,938 | ||
| 109,023 | 5,451 | 21,805 | 136,279 | 618,000 | 3,503 | 871,258 872,731 757,782 |
||
| 20,417 | 20,417 | |||||||
| Total K. Lyons-Tarr is paid in US dollars and the amounts have been converted at the average exchange rate for the year of 1.564. (a) Based on the 200,000 shares vested at an average share price for the last quarter of 2013 of £6.18. (b) Mr A.J. Scull received £27,000 pay in lieu of pension contributions (2012: £22,438). Executive J.W. Poulter G. Davies A.J. Scull K. Lyons-Tarr Non-Executive J.A. Warren S.J. Gray I. Brindle* |
20,417 17,500 |
20,417 17,500 |
20,417 20,417 17,500 |
|||||
| N. Temple** | 17,500 | 17,500 | 17,500 |
| Holding at 2013 |
Holding at 28 December 29 December 2012 |
|---|---|
| J.W. Poulter 30,000 |
30,000 |
| G. Davies 121,481 |
114,250 |
| K. Lyons-Tarr 99,432 |
99,432 |
| A.J. Scull 126,548 |
116,117 |
| J.A. Warren 5,000 |
5,000 |
| S.J. Gray 8,000 |
8,000 |
There has been no change in the Directors' interests in the share capital of the Company since 28 December 2013 to the date of this report.
Details of share options held by the Directors are set out below:
| Holding at 29 Dec 2012 |
during the year |
Exercised Holding at 28 Dec 2013 |
Date of grant |
Exercise price |
From | Exercisable To |
|
|---|---|---|---|---|---|---|---|
| J.W. Poulter | |||||||
| – Performance Share Plan | 300,000 | – | 300,000 27 Apr 2011 | Nil | 27 Apr 2014 27 Apr 2021 | ||
| – 2012 SAYE | 3,383 | – | 3,383 | 31 Oct 2012 | 266p | 1 Jan 2016 30 Jun 2016 | |
| G. Davies | |||||||
| – Performance Share Plan | 300,000 | – | 300,000 27 Apr 2011 | Nil | 27 Apr 2014 27 Apr 2021 | ||
| – 2009 SAYE | 10,431 | (10,431) | – | 7 Oct 2009 | 87p | 1 Jan 2013 30 Jun 2013 | |
| – 2012 SAYE | 3,383 | – | 3,383 | 31 Oct 2012 | 266p | 1 Jan 2016 30 Jun 2016 | |
| K. Lyons-Tarr | |||||||
| – Performance Share Plan | 300,000 | – | 300,000 27 Apr 2011 | Nil | 27 Apr 2014 27 Apr 2021 | ||
| – 2012 US Sharesave | 2,395 | – | 2,395 | 31 Oct 2012 | \$4.76 | 16 Jan 2015 | 29 Jan 2015 |
| A.J. Scull | |||||||
| – Performance Share Plan | 300,000 | – | 300,000 27 Apr 2011 | Nil | 27 Apr 2014 27 Apr 2021 | ||
| – 2009 SAYE | 10,431 | (10,431) | – | 7 Oct 2009 | 87p | 1 Jan 2013 30 Jun 2013 | |
| – 2012 SAYE | 3,383 | – | 3,383 | 31 Oct 2012 | 266p | 1 Jan 2016 30 Jun 2016 |
Gains on exercise of options in the period were £27,694 each for Ms G. Davies and Mr A.J. Scull (2012: £nil).
During 2013 the middle-market value of the share price ranged from 352p to 685p and was 685p at the close of business on 28 December 2013.
Details of share options granted by 4imprint Group plc as at 28 December 2013 are given in note 23. None of the terms and conditions of the share options was varied during the period. The performance criteria for all 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
S.J. Gray Chairman of the Remuneration Committee 5 March 2014
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 prepared the Group and 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.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess a Company's performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Board of Directors on page 13 confirm that, to the best of their knowledge:
By order of the Board
Andrew Scull Company Secretary 5 March 2014
In our opinion the Group financial statements:
This opinion is to be read in the context of what we say in the remainder of this report.
The Group financial statements, which are prepared by 4imprint Group plc, comprise:
The financial reporting framework that has been applied in their preparation comprises applicable law and IFRSs as adopted by the European Union.
Certain disclosures required by the financial reporting framework have been presented elsewhere in the Annual Report and the Accounts (the "Annual Report"), rather than in the notes to the financial statements. These are cross-referenced from the financial statements and are identified as audited.
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)"). 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:
In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Group financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
We set certain thresholds for materiality. These helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the Group financial statements as a whole.
Based on our professional judgement, we determined materiality for the Group financial statements as a whole to be £480,000 which represents approximately 5% of profit before tax and non-recurring impairment charges.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £20,000 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
The Group has three trading entities (which combine to form two operating segments, one of which has been presented as a discontinued operation in the year, as set out in note 1 and note 10 to the financial statements). 4imprint Inc. and 4imprint Direct Marketing Limited form the Direct Marketing operating segment and are based in the United States and United Kingdom respectively. SPS (EU) Limited has been presented as a discontinued operation in the year following its sale post year end. These entities, together with the Parent Company, 4imprint Group plc and six nontrading entities form the Group's reporting units.
In establishing the overall approach to the Group audit, we determined the level and type of work that we needed to perform at each reporting unit to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group financial statements as a whole.
We performed an audit of the complete financial information at four reporting units, being 4imprint Inc., SPS (EU) Limited, 4imprint Direct Limited and 4imprint Group plc, which in total comprised in excess of 95% of the consolidated Group's revenue and profit before tax and non-recurring impairment charges.
In preparing the financial statements, the Directors made a number of subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. We primarily focused our work in these areas by assessing the Directors' judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements.
During our audit, we tested and examined information, using sampling and other auditing techniques, to the extent we considered necessary to provide a reasonable basis for us to draw conclusions. We obtained audit evidence through a combination of testing the effectiveness of controls and substantive procedures.
We considered the following areas to be those that required particular focus in the current period. This is not a complete list of all risks or areas of focus identified by our audit. We discussed these areas of focus with the Audit Committee.
Their report on those matters that they considered to be significant issues in relation to the financial statements is set out on pages 20 to 21.
| Area of focus | How the scope of our audit addressed the area of focus |
|---|---|
| Accounting for defined benefit pension scheme assets and liabilities | |
| We focused on this area because the Group operates a large defined benefit pension scheme which, although closed to future accrual, has a significant deficit which is sensitive to changes in actuarial assumptions. Modest changes to the assumptions used to value the Group's net pension deficit could have a significant effect on the results and financial position of the Group. |
Our audit procedures included evaluating the assumptions and methodologies used by the Group's actuarial advisors, in particular those relating to the discount rate, inflation and mortality assumptions. We compared the Group's assumptions to externally derived data as well as our own, independently formed, assessments in relation to these and other key inputs in assessing whether the assumptions used were reasonable. We also assessed whether the disclosures reflect the risks inherent in the accounting for the pension scheme. |
| Accounting for SPS (EU) Limited as held for sale and the related discontinued operations | |
| We focused on this area given the judgement required in determining whether SPS (EU) Limited met the criteria for classification as a disposal group held for sale and as a discontinued operation as at 28 December 2013; and in determining the fair value less cost to sell of SPS (EU) Limited. Changes in estimates of net proceeds and costs to sell could materially impact the impairment charge recognised. The impairment charge arising on classification as held for sale had a significant impact on the Group's financial performance and position. |
We tested the Directors' presentation and disclosure of SPS (EU) Limited as held for sale and the presentation of the results for the 52 week period ended 28 December 2013 as discontinued operations. We also tested the restatement of the prior year income statement to reflect the results of SPS (EU) Limited as discontinued in the comparative information. Our audit procedures included obtaining the sale and purchase agreement to check the net proceeds from the sale agreed after the year end date. We tested the Directors' estimate of costs to sell by agreeing them to supporting third party documentation and checking that the costs |
| included were directly attributable to the sale. | |
| Fraud in revenue recognition | |
| ISAs (UK & Ireland) presume there is a risk of fraud in revenue recognition. We focused on the risk that revenue may have been recognised for each revenue stream for transactions that had not occurred. |
Our testing of revenue transactions, to assess whether a service had been provided or a sale had occurred, focused on understanding whether cash had been received and whether evidence existed to support the completion of the service or sale agreed to be provided. Where revenue was recorded through manual journal entries we checked whether a sale had occurred in the financial year to support this recognition. |
| Risk of management override of internal controls | |
| ISAs (UK & Ireland) require that we consider this. | We assessed the overall control environment of the Group, including the arrangements for staff to "whistle-blow" inappropriate actions, and interviewed senior management. We examined the significant accounting estimates and judgements relevant to the financial statements for evidence of bias by the Directors, that may represent a risk of material misstatement due to fraud. We also tested journal entries to determine the rationale for manual adjustments. |
| Going Concern Under the Listing Rules we are required to review the Directors' statement, set out on page 15, in relation to going concern. We have nothing to report having performed our review. |
As noted in the Directors' statement, the Directors have concluded that it is appropriate to prepare the Group's financial statements using the going concern basis of accounting. The going concern basis presumes that the Group has adequate resources to remain in operation, and |
| 4imprint Group plc Annual Report and Accounts 2013 |
that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors' use of the going concern basis is appropriate.
However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group's ability to continue as a going concern.
Adequacy of information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion, we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility.
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of Directors' remuneration specified by law have not been made, and under the Listing Rules we are required to review certain elements of the report to Shareholders by the Board on Directors' remuneration. We have no exceptions to report arising from these responsibilities.
Under the Companies Act 2006, we are required to report to you if, in our opinion, a corporate governance statement has not been prepared by the Parent Company. We have no exceptions to report arising from this responsibility. Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to the Parent Company's compliance with nine provisions of the UK Corporate Governance Code ("the Code"). We have nothing to report having performed our review.
On page 35 of the Annual Report, as required by the Code Provision C.1.1, the Directors state that they consider the Annual Report taken as a whole is fair, balanced and understandable and provides the information necessary for members to assess the Group's performance, business model and strategy. On page 21, as required by C.3.8 of the Code, the Audit Committee has set out the significant issues that it considered in relation to the financial statements, and how they were addressed. Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
We have no exceptions to report arising from this responsibility.
Under ISAs (UK & Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:
We have no exceptions to report arising from this responsibility.
As explained more fully in the Statement of Directors responsibilities set out on page 35, 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 ISAs (UK & 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.
We have reported separately on the parent company financial statements of 4imprint Group plc for the 52 week period ended 28 December 2013 and on the information in the Directors' Remuneration report that is described as having been audited.
Nicholas Boden (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester
5 March 2014
for the 52 weeks ended 28 December 2013
| 2013 | 2012 | ||
|---|---|---|---|
| Note | £'000 | (restated)† £'000 |
|
| Continuing operations | |||
| Revenue | 1 | 212,861 | 183,513 |
| Operating expenses | 2 | (202,724) | (176,039) |
| Operating profit before exceptional items | 10,391 | 8,066 | |
| Exceptional items | 5 | (254) | (592) |
| Operating profit | 1 | 10,137 | 7,474 |
| Finance income | 6 | 56 | 199 |
| Finance costs | 6 | (17) | (157) |
| Other net financing charges | 6 | (924) | (1,151) |
| Net finance cost | (885) | (1,109) | |
| Profit before tax | 9,252 | 6,365 | |
| Taxation | 7 | (2,466) | (2,053) |
| Profit for the period from continuing operations | 6,786 | 4,312 | |
| Discontinued operations | |||
| (Loss)/profit from discontinued operations | 10 | (2,886) | 9,337 |
| Profit for the period | 3,900 | 13,649 | |
| Earnings per share | |||
| Basic | |||
| From continuing operations | 8 | 25.64p | 16.41p |
| From continuing and discontinued operations | 8 | 14.74p | 51.95p |
| Diluted | |||
| From continuing operations | 8 | 24.38p | 16.18p |
| From continuing and discontinued operations | 8 | 14.01p | 51.20p |
| Underlying | |||
| From continuing operations | 8 | 35.51p | 25.03p |
| † See page 44 | |||
| 4imprint Group plc Annual Report and Accounts 2013 | 39 |
for the 52 weeks ended 28 December 2013
| 2013 | 2012 | |
|---|---|---|
| £'000 | (restated) £'000 |
|
| Profit for the period | 3,900 | 13,649 |
| Other comprehensive income/(expense) | ||
| Items that may be reclassified subsequently to the income statement: | ||
| Exchange differences on translation of foreign subsidiaries | (423) | (316) |
| Items that will not be reclassified subsequently to the income statement: | ||
| Remeasurement gains/(losses) on post employment obligations | 4,586 | (10,124) |
| Tax relating to components of other comprehensive income | (2,239) | 1,265 |
| Effect of change in UK tax rate | (483) | (589) |
| Other comprehensive income/(expense) net of tax | 1,441 | (9,764) |
| Total comprehensive income for the period | 5,341 | 3,885 |
| 2013 £'000 |
2012 (restated) £'000 |
|
|---|---|---|
| Total comprehensive income/(expense) attributable to equity Shareholders arising from |
||
| – Continuing operations | 8,227 | (5,452) |
| – Discontinued operations | (2,886) | 9,337 |
| 5,341 | 3,885 |
at 28 December 2013
| Note | 2013 £'000 |
2012 £'000 |
|
|---|---|---|---|
| Non current assets | |||
| Property, plant and equipment | 11 | 5,337 | 12,338 |
| Intangible assets | 12 | 818 | 954 |
| Deferred tax assets | 13 | 3,834 | 6,281 |
| 9,989 | 19,573 | ||
| Current assets | |||
| Assets held for sale | 10 | 8,381 | – |
| Inventories | 14 | 2,235 | 3,338 |
| Trade and other receivables | 15 | 18,253 | 20,190 |
| Other financial assets – bank deposits | 16 | 4,950 | 3,000 |
| Cash and cash equivalents | 16 | 10,807 | 14,101 |
| 44,626 | 40,629 | ||
| Current liabilities | |||
| Trade and other payables | 17 | (17,997) | (16,075) |
| Current tax | (150) | (150) | |
| Borrowings | 18 | – | (1,646) |
| Liabilities held for sale | 10 | (2,646) | – |
| (20,793) | (17,871) | ||
| Net current assets | 23,833 | 22,758 | |
| Non current liabilities | |||
| Retirement benefit obligations | 4 | (16,611) | (22,894) |
| Borrowings | 18 | – | (4,777) |
| Deferred tax liability | 19 | (289) | (720) |
| Provisions for other liabilities and charges | 20 | (147) | (150) |
| (17,047) | (28,541) | ||
| Net assets | 16,775 | 13,790 | |
| Shareholders' equity | |||
| Share capital | 22 | 10,286 | 10,222 |
| Share premium reserve | 38,575 | 38,437 | |
| Other reserves | 24 | (335) | 88 |
| Retained earnings | (31,751) | (34,957) | |
| Total Shareholders' equity | 16,775 | 13,790 |
John Poulter Gillian Davies Chairman Group Finance Director
for the 52 weeks ended 28 December 2013
| Retained earnings | ||||||
|---|---|---|---|---|---|---|
| capital £'000 |
Share Share premium £'000 |
Other reserves reserve (note 24) £'000 |
Own shares £'000 |
Profit and loss £'000 |
Total equity £'000 |
|
| Balance at 31 December 2011 | 9,939 | 38,016 | 439 | (124) | (35,213) | 13,057 |
| Profit for the period (restated) | 13,649 | 13,649 | ||||
| Other comprehensive income/(expense) | ||||||
| Exchange differences on translation of foreign subsidiaries | (316) | (316) | ||||
| Remeasurement losses on post employment obligation (restated) | (10,124) | (10,124) | ||||
| Tax relating to components of other comprehensive income (restated) | 1,265 | 1,265 | ||||
| Effect of change in UK tax rate | (589) | (589) | ||||
| Total comprehensive income | (316) | 4,201 | 3,885 | |||
| Shares issued | 283 | 421 | 704 | |||
| Own shares utilised | 3 | (3) | – | |||
| Own shares purchased | (605) | (605) | ||||
| Share-based payment charge | 685 | 685 | ||||
| Recycled translation differences of business sold | (35) | (35) | ||||
| Dividends | (3,901) | (3,901) | ||||
| Balance at 29 December 2012 | 10,222 | 38,437 | 88 | (726) | (34,231) | 13,790 |
| Profit for the period | 3,900 | 3,900 | ||||
| Other comprehensive income/(expense) | ||||||
| Exchange differences on translation of foreign subsidiaries | (423) | (423) | ||||
| Remeasurement gains on post employment obligations | 4,586 | 4,586 | ||||
| Tax relating to components of other comprehensive income | (2,239) | (2,239) | ||||
| Effect of change in UK tax rate | (483) | (483) | ||||
| Total comprehensive income | (423) | 5,764 | 5,341 | |||
| Shares issued | 64 | 138 | 202 | |||
| Own shares utilised | 5 | (5) | – | |||
| Own shares purchased | (130) | (130) | ||||
| Share-based payment charge | 795 | 795 | ||||
| Deferred tax relating to share options | 961 | 961 | ||||
| Dividends | (4,184) | (4,184) | ||||
| Balance at 28 December 2013 | 10,286 | 38,575 | (335) | (851) | (30,900) | 16,775 |
for the 52 weeks ended 28 December 2013
| Note 25 |
£'000 11,451 |
£'000 |
|---|---|---|
| (5,992) | ||
| (1,735) | (1,421) | |
| 70 | 169 | |
| (14) | (181) | |
| 9,772 | (7,425) | |
| (986) | (1,685) | |
| (311) | (448) | |
| 10 | 991 | 18,543 |
| (306) | 16,410 | |
| (6,434) | (2,452) | |
| – | 2,142 | |
| (151) | (141) | |
| (1,950) | (3,000) | |
| 22 | 202 | 704 |
| (130) | (605) | |
| 9 | (4,184) | (3,901) |
| (12,647) | (7,253) | |
| (3,181) | 1,732 | |
| 14,101 | 12,492 | |
| (113) | (123) | |
| 10,807 | 14,101 | |
| 16 | 6,557 | 9,351 |
| 16 | 4,250 | 4,750 |
| 10,807 | 14,101 | |
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.
The Group has adopted IAS 19 (revised) in the period and prior periods have been restated (see note below). Other new and revised standards effective during the period have not impacted on the Group's financial statements.
The financial statements have been prepared under the historical cost convention in accordance with IFRS (International Financial Reporting Standards) as adopted by the EU, IFRS IC 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 financial statements (March 2014).
After making enquiries, the Directors have reasonable expectations that the Group has adequate resources to continue to operate for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the 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, as amended to conform with Group accounting policies, 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 paid. 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. Acquisition related costs are expensed as incurred.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. In addition, comparatives are also restated to reclassify disposed businesses, or those that meet the criteria of IFRS 5 to be classified as held for sale and as discontinued operations.
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.
The 2012 income statement, statement of comprehensive income, statement of changes in Shareholders' equity and notes have been restated to classify SPS as a discontinued operation; to include income from delivery receipts and other activities in revenue; and also for the amendments to IAS 19 'Employee Benefits'.
The reclassification of SPS as a discontinued operation has no net impact on the profit for the period. The amounts reclassified to discontinued operations are shown by line item in note 10.
Revenue has been restated to include income from delivery receipts and other income which has been moved from operating expenses, where it was offset against the costs of these activities. Management consider that this is in line with current best practice. The amounts moved to revenue are disclosed in note 1. This change has no net impact on profit.
The IAS 19 amendments require the administration costs of the defined benefit pension scheme, which are managed and paid by the Scheme Trustee, to be included in operating expenses. Costs of managing the pension scheme assets continue to be deducted from the return on scheme assets within equity. In addition, the return on defined benefit pension scheme assets is required to be calculated using the same discount rate that is applied to calculate the present value of the defined benefit obligation. The impact of these changes in 2012 is to increase operating expenses by £438,000 and interest expense by £123,000, with associated deferred tax relief of £137,000. This results in a reduction in profit for the period of £424,000. Offsetting this, in the statement of comprehensive income, the remeasurement losses on post employment obligations are reduced by £561,000 and the tax relief relating to components of other comprehensive income is reduced by £137,000. Consequently there is no net impact on the balance sheet and no cash flow impact.
As a result of these changes in accounting policy, the comparative amounts have been restated, as follows:
| 2012 £'000 |
|
|---|---|
| Profit for the period as previously reported | 14,073 |
| Increase in operating expenses | (438) |
| Increase in net pension finance charge | (123) |
| Deferred tax impact of the above | 137 |
| Profit for the period as restated | 13,649 |
| Other comprehensive expense as | |
| previously reported | (10,188) |
| Reduction in remeasurement loss | |
| on post employment obligations | 561 |
| Deferred tax impact of the above | (137) |
| Other comprehensive expense as restated | (9,764) |
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 only critical accounting policy:
As disclosed in note 4 the Group sponsors a defined benefit pension scheme closed to new members and future accruals. Period 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, 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.
Revenue from sales of promotional goods, delivery receipts and other activities, is measured at the fair value of the consideration received or receivable for goods and services provided in the normal course of business net of discounts, returns and sales related taxes. Revenues are recognised upon the despatch of goods to customers, or when the service is provided.
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 chief operating decision maker has been identified by the Directors as the Board and accordingly the segmental reporting included in the financial statements aligns with those reported monthly to the Board.
During 2013 the reporting to the Board included two operating segments: 4imprint Direct Marketing; and SPS. In addition corporate head office costs were shown separately. SPS has now been classified as a discontinued operation
and on a continuing basis the Group has one operating segment, 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. These assets are 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.
4imprint Group plc Annual Report and Accounts 2013 45ACCOUNTS All share options are measured at fair value at the date of grant using option-pricing models (primarily Black-Scholes or Monte Carlo) allowing for any non-market and service conditions, and the impact of any non-vesting conditions (for example requirements for the employee to save). The fair value is charged to the income statement over the vesting period of the share option schemes on a straight line basis. The value of the charge is adjusted each year 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 non-recurring, whose significance is sufficient to warrant separate disclosure in the financial statements, are referred to as exceptional items. The Directors consider that the separate disclosure of these items assists in understanding the Group's financial performance.
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 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 Group's financial statements. However, 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 presentation currency of the Company is Sterling and the Group's 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 balance sheets of overseas enterprises are translated into Sterling at the exchange rate ruling at the balance sheet date and income statements 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 statement of comprehensive income.
On disposal of a foreign operation any cumulative exchange differences held in Shareholders' equity are recycled to the income statement.
The Group uses derivative forward foreign exchange contracts to hedge highly probable cash flows in relation to future sales and product purchases, as well as remittances from its overseas subsidiaries.
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 hedging instruments 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, where material, 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.
Property, plant and equipment are stated at cost less accumulated 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 on a regular basis. Leasehold assets are depreciated over the shorter of the term of the lease or their estimated useful lives.
Cost comprises the purchase price plus costs directly incurred in bringing the asset into use.
The principal useful lives currently fall within the following ranges:
| Freehold and long leasehold buildings | 50 years |
|---|---|
| Short leasehold buildings | Life of lease |
| Plant, machinery, fixtures and fittings | 3 – 15 years |
| Computer hardware | 3 years |
Freehold land is not depreciated.
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.
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 nondevelopment 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 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. 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.
Business components that represent separate major lines of business or geographical areas of operations are recognised as discontinued if the operations have been disposed of, or meet the criteria to be classified as held for sale under IFRS 5. Assets and disposal groups are classified as held for sale if their carrying amount will be principally recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable, expected to be completed within one year and the asset (or disposal group) is available for immediate sale in its present condition. Disposal groups or assets held for sale are held at the lower of their carrying amount on the date they are classified as held for sale and fair value less costs to sell.
Inventories are valued at the lower of cost, net of provisions for slow moving and discontinued items, 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. Trade and other receivables are discounted when the time value of money is considered material.
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. Cash deposits with an original maturity in excess of three months are classified as other financial assets.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost. Trade and other payables are discounted when the time value of money is considered material.
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 sponsors a defined benefit scheme, which is now closed to new members and future accruals. The Group accounts for the defined benefit-scheme under IAS 19 'Employee Benefits'. The deficit of the defined benefit pension 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.
Pension charges recognised in the income statement consists of administration charges of the scheme and a finance cost based on the interest on net pension scheme liabilities calculated in accordance with IAS 19.
Differences between the actual and expected return on assets, experience gains and losses and changes in actuarial assumptions are included directly in the Group's statement of comprehensive income.
Borrowings are measured initially at fair value 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 borrowing. Borrowings are discounted when the time value of money is considered material.
4imprint Group plc Annual Report and Accounts 2013 47ACCOUNTS Provisions for future lease costs and dilapidations 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 that 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 independent trusts. These are funded by the Company and purchases of shares by the trusts are charged directly to equity.
Administration expenses of the trusts are charged to the Company's income statement as incurred.
The IASB and IFRS IC have issued new or amended standards and interpretations which are effective for accounting periods as noted overleaf. Management do
not believe the impact of adopting these new or amended standards and interpretations will have a material impact on the results or net assets of the Group.
IFRS 10, 'Consolidated Financial Statements' (effective 1 January 2013) (endorsed 1 January 2014) IFRS 12, 'Disclosures of Interests in Other Entities' (effective 1 January 2013) (endorsed 1 January 2014) IAS 27 (revised 2011) 'Separate Financial Statements' (effective 1 January 2013) (endorsed 1 January 2014) Amendments to IFRS 10,11 and 12 on transition guidance (effective 1 January 2013) (endorsed 1 January 2014) Amendments to IAS 32 on financial instruments asset and liability offsetting (effective 1 January 2014) Amendment to IAS 36 'Impairment of Assets' on recoverable amount disclosures (effective 1 January 2014) Amendment to IAS 39 'Financial Instruments: Recognition and Measurement' on novation of derivatives and hedge accounting (effective 1 January 2014) Amendment to IAS 12 'Income Taxes' on deferred tax (effective 1 January 2012) (endorsed 1 January 2013) IFRS 13 'Fair Value Measurement' (effective 1 January 2013) Amendments to IFRS 7 on financial instruments asset and liability offsetting (effective 1 January 2013) Annual improvements 2011 (effective 1 January 2013) Annual improvements 2012 (effective 1 July 2014)
The chief operating decision maker has been identified as the Board of Directors and the segmental analysis is presented based on the Group's internal reporting to the Board.
At 28 December 2013, the Group is reported as one primary operating segment and the costs of the Head Office:
| 2013 | 2012 | |
|---|---|---|
| 4imprint Direct Marketing | £'000 | (restated) £'000 |
| Sales of promotional products | 196,422 | 168,905 |
| Delivery receipts and other income | 16,439 | 14,608 |
| Total revenue from promotional products | 212,861 | 183,513 |
| 2013 2012 2013 2012 (restated) (restated) £'000 £'000 £'000 £'000 4imprint Direct Marketing 14,602 11,002 14,602 11,002 Head Office (2,139) (1,848) (2,139) (1,848) Underlying operating profit 12,463 9,154 12,463 9,154 Exceptional items – Head Office (note 5) (254) (592) Share option related charges (note 23) (1,594) (650) Defined benefit pension scheme administrative expenses (note 4) (478) (438) Operating profit 12,463 9,154 10,137 7,474 Net finance income (note 6) 39 42 39 42 Defined benefit pension finance charge (note 4) (924) (1,151) Profit before tax 12,502 9,196 9,252 6,365 Taxation charge of £2,466,000 (2012: £2,053,000) cannot be separately allocated to individual segments. |
Profit – continuing operations | Underlying | Total |
|---|---|---|---|
| Assets | Liabilities | Capital expenditure |
Depreciation | Amortisation | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 |
|
| 4imprint Direct Marketing |
26,351 | 23,259 | (16,382) | (13,497) | 1,040 | 2,002 | (767) | (632) | (344) | (353) |
| Head Office items | 4,126 | 8,156 | (18,812) | (24,368) | – | – | (26) | (27) | (11) | (16) |
| Cash/(debt) | 15,757 | 17,101 | – | (6,423) | – | – | – | – | – | – |
| 46,234 | 48,516 | (35,194) | (44,288) | 1,040 | 2,002 | (793) | (659) | (355) | (369) | |
| Discontinued operations* |
8,381 | 11,686 | (2,646) | (2,124) | 169 | 312 | (571) | (607) | (45) | (91) |
| Total | 54,615 | 60,202 | (37,840) | (46,412) | 1,209 | 2,314 | (1,364) | (1,266) | (400) | (460) |
Head Office items relate principally to retirement benefit obligations and Group tax balances.
* The assets/liabilities of the discontinued operation (formerly the SPS segment) are included in assets/liabilities held for resale in 2013 (note 10).
| North | All other | |||
|---|---|---|---|---|
| UK | America countries | Total | ||
| 2013 – Continuing operations | £'000 | £'000 | £'000 | £'000 |
| Total revenue by destination | 7,837 | 204,649 | 375 | 212,861 |
| Property, plant and equipment | 1,005 | 4,332 | – | 5,337 |
| Intangible assets | 71 | 747 | – | 818 |
| North | All other | |||
| UK | America countries | Total | ||
| 2012 – Continuing operations | £'000 | £'000 | £'000 | £'000 |
| Total revenue (restated) by destination | 7,168 | 176,137 | 208 | 183,513 |
| Property, plant and equipment | 7,936 | 4,402 | – | 12,338 |
| Intangible assets | 140 | 814 | – | 954 |
| 2013 | 2012 (restated) |
||
|---|---|---|---|
| Continuing operations | Note | £'000 | £'000 |
| The following items have been included in arriving at operating profit | |||
| Purchase of goods for resale, raw materials and consumables | 122,041 | 105,002 | |
| Changes in inventories | (601) | (272) | |
| Staff costs | 3 | 21,972 | 18,407 |
| Depreciation of property, plant and equipment | 793 | 659 | |
| Amortisation of intangible assets | 355 | 369 | |
| Operating lease payments | 874 | 820 | |
| Exceptional items | 5 | 254 | 592 |
| Defined benefit pension scheme administration charge | 4 | 478 | 438 |
| Net exchange losses/(gains) | 135 | (69) | |
| Other operating expenses | 56,423 | 50,093 | |
| 202,724 | 176,039 |
| Other operating expenses | 56,423 | 50,093 |
|---|---|---|
| 202,724 | 176,039 | |
| During the year the Group obtained the following services from its auditors at costs as detailed below: | ||
| 2013 | 2012 (restated) |
|
| £'000 | £'000 | |
| Continuing operations | ||
| Fees payable to the Company's auditors for the audit of the parent company, non statutory audits of overseas subsidiaries and audit of consolidated financial statements |
88 | 81 |
| Fees payable to the Company's auditors and its associates for other services: | ||
| – the audit of Company's subsidiaries pursuant to legislation | 7 | 6 |
| – pensions advice | 196 | 123 |
| – share scheme advice | – | 29 |
| – all other services | 4 | 4 |
| 295 | 243 | |
| Discontinued operations | ||
| – audit of Company's subsidiaries included in discontinued operations | 17 | 23 |
| Fees in respect of the disposal of Brand Addition: | ||
| – transaction services | – | 111 |
| 312 | 377 | |
| The 4imprint defined benefit pension scheme has paid the auditors £8,900 (2012: £8,000) for audit services. | ||
| 4imprint Group plc Annual Report and Accounts 2013 |
| 2013 | 2012 (restated) | ||||
|---|---|---|---|---|---|
| Staff costs | Note | Continuing operations £'000 |
Discontinued operations £'000 |
Continuing operations £'000 |
Discontinued operations £'000 |
| Wages and salaries | 18,405 | 4,310 | 16,030 | 5,790 | |
| Social security costs | 1,510 | 379 | 1,313 | 531 | |
| Pension costs | 4 | 463 | 74 | 414 | 128 |
| Share option charges | 23 | 784 | 11 | 650 | 35 |
| Social security costs related to share options | 23 | 810 | – | – | – |
| 21,972 | 4,774 | 18,407 | 6,484 |
| Continuing operations | 598 | 554 |
|---|---|---|
| Head Office | 8 | 8 |
| 4imprint Direct Marketing | 590 | 546 |
| 2013 No. |
2012 No. |
For the period prior to disposal, discontinued operations had an average headcount of 210 in 2013 (2012: 449).
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Salaries, fees and short-term employee benefits | 1,131 | 900 |
| Social security costs | 95 | 103 |
| Pension contributions | 34 | 38 |
| Share option charges | 540 | 538 |
| Social security costs in respect of share options | 790 | – |
| 2,590 | 1,579 |
Key management compensation in the period includes the emoluments of all Directors (which are disclosed separately in the Remuneration report). In 2012 the figure also included Mr Lyons-Tarr's remuneration for the part of the year before he was appointed a Director.
| 2013 £'000 |
2012 £'000 |
|---|---|
| Aggregate emoluments 1,131 |
809 |
| Company contributions to money purchase pension schemes 34 |
35 |
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 charges recognised in the income statement are:
| Continuing operations | 2013 £'000 |
2012 £'000 |
|---|---|---|
| Defined contribution plans – employers contributions (note 3) | 463 | 414 |
Pension charges in respect of discontinued operations were £74,000 (2012: £128,000) for defined contribution schemes.
The Group also sponsors a UK defined benefit pension scheme which is closed to new members and future accrual.
The amounts recognised in the income statement are as follows:
| 2013 | 2012 | |
|---|---|---|
| Continuing operations | £'000 | (restated) £'000 |
| Administrative expenses paid by the Scheme | 478 | 438 |
| Interest cost on net defined benefit obligation | 924 | 1,151 |
| Exceptional items – flexible early retirement offer costs paid by Scheme | 76 | – |
| Total defined benefit pension charge – continuing operations | 1,478 | 1,589 |
| The amounts recognised in the balance sheet comprise: | ||
| 2013 £'000 |
2012 £'000 |
|
| Present value of funded obligations | (96,390) | (100,263) |
| Fair value of scheme assets | 79,779 | 77,369 |
| Net liability recognised in the balance sheet | (16,611) | (22,894) |
| retirement. The Scheme is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator, and Guidance Notes adopted by the Financial |
||
| Reporting Council, set out the framework for funding defined benefit occupational pension plans in the UK. | ||
| The trustees of the Scheme are required to act in the best interest of the Scheme's beneficiaries. The appointment of trustees is determined by the Scheme's trust documentation. It is policy that one third of all trustees should be nominated by the members. |
||
| The Scheme typically exposes the Company to actuarial risks such as investment risk, interest rate risk, mortality risk and longevity risk. A decrease in corporate bond yields, a rise in inflation or an increase in life expectancy would result in an increase to Scheme liabilities. This would detrimentally impact the balance sheet position and may give rise to increased charges in future income statements. This effect would be partially offset by an increase in the value of the Scheme's annuities and bond holdings. Additionally, caps on inflationary increases are in place to protect the Scheme against extreme inflation. |
||
| A full actuarial valuation was undertaken as at 5 April 2013 in accordance with the Scheme funding requirements of the Pensions Act 2004. This Scheme actuarial valuation showed a deficit of £30,636,000. The Company has agreed a schedule of contributions with the Trustee. The contributions to the Scheme in 2014 will be £3,279,000 in respect of the deficit and administration costs, and this amount will increase by 3% per annum. The recovery plan period is 6.3 years and takes into account the material funding improvement between the date of valuation and date of the recovery plan (December 2013), as agreed with the Scheme actuary. The improvement is principally due to an increase in UK gilt rates during that period. |
||
| 4imprint Group plc Annual Report and Accounts 2013 |
For the purposes of IAS 19 the actuarial valuation as at 5 April 2013, which was carried out by a qualified independent actuary, has been updated on an approximate basis to 28 December 2013. There have been no changes in the valuation methodology adopted for this period's disclosures compared to the previous period's disclosures.
The principal assumptions applied by the actuaries, as determined by the Directors, at each period end were:
| 2013 | 2012 | |
|---|---|---|
| Rate of increase in pensions in payment | 3.20% | 2.65% |
| Rate of increase in deferred pensions | 2.20% | 1.90% |
| Discount rate | 4.48% | 4.30% |
| Inflation assumption – RPI | 3.30% | 2.75% |
| – CPI | 2.30% | 2.00% |
The mortality assumptions adopted at 28 December 2013 have been updated to align with those used in the Scheme valuation and imply the following life expectancies at age 65:
| 2013 | 2012 | |
|---|---|---|
| Male currently age 40 | 24.6 yrs | 24.5 yrs |
| Female currently age 40 | 27.1 yrs | 28.0 yrs |
| Male currently age 65 | 22.4 yrs | 22.1 yrs |
| Female currently age 65 | 24.7 yrs | 25.4 yrs |
Changes in the present value of the defined benefit obligation are as follows:
| 2013 | 2012 (restated) |
|
|---|---|---|
| £'000 | £'000 | |
| Defined benefit obligation at start of period | 100,263 | 92,870 |
| Administrative expenses paid by the Scheme | 478 | 438 |
| Exceptional items – flexible early retirement costs paid by the Scheme | 76 | – |
| Interest cost | 4,200 | 4,428 |
| Remeasurement (gains)/losses due to Scheme experience | (1,056) | 1,288 |
| Remeasurement gain due to changes in demographic assumptions | (1,953) | – |
| Remeasurement losses due to changes in financial assumptions | 161 | 6,750 |
| Benefits and expenses paid | (5,779) | (5,511) |
| Defined benefit obligation at end of period | 96,390 | 100,263 |
| Changes in the fair value of Scheme assets are as follows: | ||
| 2013 £'000 |
2012 £'000 |
|
| Fair value of assets at start of period | 77,369 | 69,323 |
| Interest income | 3,276 | 3,277 |
| Return on Scheme assets | 1,738 | (2,086) |
| Contributions by employer – normal contributions | 3,175 | 3,090 |
| – additional contributions | – | 9,276 |
| Benefits and expenses paid | (5,779) | (5,511) |
| Fair value of assets at end of period | 79,779 | 77,369 |
The major categories of Scheme assets as a percentage of total Scheme assets are as follows:
| 2013 | 2012 | ||||
|---|---|---|---|---|---|
| £'000 | % | £'000 | % | ||
| Equities | 12,498 | 16 | 17,098 | 22 | |
| Diversified Growth Funds | 23,727 | 30 | – | – | |
| Corporate bonds | 14,134 | 18 | 17,162 | 22 | |
| Gilts | – | – | 7,979 | 10 | |
| Property | 6,436 | 8 | 14,242 | 18 | |
| Insured annuities | 18,713 | 23 | 20,465 | 27 | |
| Cash | 4,271 | 5 | 423 | 1 |
The Scheme holds no 4imprint Group plc shares or any property occupied by the Group.
| Change in assumption | Change in defined benefit obligation | |
|---|---|---|
| Discount rate | Decrease of 0.25% | Increase by 3.2% |
| Rate of inflation | Increase of 0.25% | Increase by 1.2% |
| Rate of mortality | Increase in life expectancy of 1 year | Increase by 3.2% |
| The sensitivities on the key actuarial assumptions as at the end of the period were: Change in assumption Change in defined benefit obligation Discount rate Decrease of 0.25% Increase by 3.2% Rate of inflation Increase of 0.25% Increase by 1.2% Rate of mortality Increase in life expectancy of 1 year Increase by 3.2% The sensitivities shown above are approximate. Each sensitivity considers each change in isolation and are calculated using the same methodology as used for the calculation of the defined benefit obligation at the end of the period. The inflation sensitivity includes the impact of changes to the assumptions for revaluation and pension increases. In practice it is unlikely that the changes would occur in isolation. The average duration of the defined benefit obligation at 28 December 2013 is 12 years. 5 Exceptional items 2013 Continuing operations £'000 Pension flexible early retirement offer costs 254 Business separation costs – 254 In 2013, pension costs related to third party fees in respect of a flexible early retirement offer made to 153 eligible deferred pensioners in February 2014. The fees include £76,000 incurred and paid by the defined benefit pension scheme. In 2012, business separation costs arose as a consequence of the sale of Brand Addition and included: office relocation; restructuring the Group's intercompany financing; and fees in respect of the pension buy-in exercise. Cash expenditure in respect of the continuing Group's exceptional items in 2013 was £167,000 (2012: £1,057,000). |
investment in corporate bonds. | The asset-liability matching strategy of the Scheme involves the purchase of insured annuities for certain pensioners and | |
|---|---|---|---|
| 2012 £'000 |
|||
| – | |||
| 592 | |||
| 592 | |||
| 6 Net finance income and costs | |||||
|---|---|---|---|---|---|
| -- | -- | -------------------------------- | -- | -- | -- |
| 2013 | 2012 (restated) |
|
|---|---|---|
| Continuing operations | £'000 | £'000 |
| Finance income | ||
| Bank and other interest | 56 | 199 |
| Finance costs | ||
| Interest payable on bank borrowings | (13) | (144) |
| Interest payable on finance leases | (4) | (13) |
| (17) | (157) | |
| Other financing costs | ||
| Net pension finance charge (note 4) | (924) | (1,151) |
| Net finance costs | (885) | (1,109) |
| 7 Taxation | 2013 | 2012 |
| Continuing operations | £'000 | (restated) £'000 |
| Analysis of charge in the period: | ||
| UK tax – current | – | – |
| Overseas tax – current | 1,906 | 1,122 |
| Total current tax | 1,906 | 1,122 |
| Origination and reversal of temporary differences | 549 | 892 |
| Effect of change in UK tax rate | (3) | 1 |
| Adjustment in respect of prior years | 14 | 38 |
| Total deferred tax (notes 13 and 19) | 560 | 931 |
| Taxation – continuing operations | 2,466 | 2,053 |
The tax for the period is different to the standard rate of corporation tax in the UK (23.25%). The differences are explained below:
| £'000 9,252 (2,730) 6,522 1,516 764 26 (505) 849 45 |
(restated) £'000 6,365 9,261 15,626 3,828 376 – |
|---|---|
| Profit before tax – continuing operations (Loss)/profit before tax from discontinued operations (note 10) Profit before tax – total operations Profit before tax multiplied by rate of corporation tax in the UK of 23.25% (2012: 24.5%) Effects of: Adjustments in respect of foreign tax rates Adjustments in respect of prior years Expenses not deductible for tax purposes and non taxable income Non deductible loss/(non taxable profit) on disposal of business Timing differences and other differences |
|
| (120) | |
| (2,073) | |
| 192 | |
| Utilisation of tax losses not previously recognised (26) |
(203) |
| Effect of change in UK tax rate on deferred tax balances (47) |
(23) |
| Taxation – total operations 2,622 |
1,977 |
| Taxation – continuing operations 2,466 |
2,053 |
| Taxation – discontinued operations (note 10) 156 |
(76) |
| Taxation – total operations 2,622 |
1,977 |
| 2013 | 2012 |
| The basic, diluted and underlying earnings per share are calculated based on the following data: | (restated) |
| £'000 Profit after tax – continuing operations 6,786 |
£'000 4,312 |
| (Loss)/profit after tax – discontinued operations (2,886) |
9,337 |
| 2013 | 2012 (restated) |
|
|---|---|---|
| £'000 | £'000 | |
| Profit after tax – continuing operations | 6,786 | 4,312 |
| (Loss)/profit after tax – discontinued operations | (2,886) | 9,337 |
| Profit after tax | 3,900 | 13,649 |
| 2013 £'000 |
2012 (restated) £'000 |
|
|---|---|---|
| Profit before tax – continuing operations | 9,252 | 6,365 |
| Adjustments: | ||
| Share option charges (note 23) | 784 | 650 |
| Social security charges on share options (note 23) | 810 | – |
| Exceptional items (note 5) | 254 | 592 |
| Defined benefit pension scheme administration charges (note 4) | 478 | 438 |
| Defined benefit net pension finance charges (note 4) | 924 | 1,151 |
| Underlying profit before tax – continuing operations | 12,502 | 9,196 |
| Taxation – continuing operations | (2,466) | (2,053) |
| Tax relating to above adjustments | (638) | (568) |
| Underlying profit after tax – continuing operations | 9,398 | 6,575 |
| 2013 Number 000s |
2012 Number 000s |
|
| Basic weighted average number of shares | 26,463 | 26,271 |
| Dilutive potential ordinary shares – employee share options | 1,372 | 388 |
| Diluted weighted average number of shares | 27,835 | 26,659 |
| 2013 | 2012 (restated) |
|
| Basic earnings per share from continuing operations | 25.64p | 16.41p |
| Basic (loss)/earnings per share from discontinued operations | (10.90)p | 35.54p |
| 14.74p | 51.95p | |
| Diluted earnings per share from continuing operations | 24.38p | 16.18p |
| Diluted (loss)/earnings per share from discontinued operations | (10.37)p | 35.02p |
| 14.01p | 51.20p | |
| Underlying basic earnings per share from continuing operations Underlying diluted basic earnings per share from continuing operations |
35.51p 33.76p |
25.03p 24.66p |
The basic weighted average number of shares excludes shares held in the 4imprint Group plc employee share trusts. The effect of this is to reduce the average by 272,936 (2012: 112,997).
The basic earnings per share is calculated based on the profit for the financial period divided by the basic weighted average number of shares.
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 and are likely to vest at the balance sheet date. The Performance Share Plan had met vesting conditions for 1,540,000 options at the balance sheet date.
The underlying basic earnings per share is calculated before the after tax effect of share option charges, exceptional items and defined benefit pension charges and is included because the Directors consider this gives a measure of the underlying performance of the continuing business.
| 9 Dividends | ||
|---|---|---|
| Equity dividends – ordinary shares | 2013 £'000 |
2012 £'000 |
| Interim paid: 5.60p (2012: 5.25p) | 1,482 | 1,383 |
| Final paid: 10.20p (2012: 9.60p) | 2,702 | 2,518 |
| 4,184 | 3,901 |
In addition, the Directors are proposing a final dividend in respect of the period ended 28 December 2013 of 11.40p per share, which will absorb an estimated £3.02m of Shareholders' funds. Subject to Shareholder approval at the Annual General Meeting, the dividend is payable on 9 May 2014 to Shareholders who are on the register of members at close of business on 11 April 2014. These financial statements do not reflect this proposed dividend.
On 10 February 2014, the Group completed the sale of SPS to the SPS senior management team, backed by Maven Capital Partners. The consideration was £7.25m (subject to post completion adjustments relating to the levels of working capital, debt and cash at completion).
On 23 March 2012, the Group completed the sale of the Brand Addition business to H.I.G. for aggregate consideration of £24m, of which £1.25m was deferred for one year and which was received in March 2013. The results of discontinued operations were as follows:
| 2013 | 2012 (restated) |
|
|---|---|---|
| £'000 | £'000 | |
| Revenue | 15,327 | 25,330 |
| Operating expenses | (14,407) | (24,529) |
| Operating profit | 920 | 801 |
| Loss on remeasurement of assets of disposal group | (3,650) | – |
| Profit on disposal of business | – | 8,460 |
| (Loss)/profit before tax | (2,730) | 9,261 |
| Taxation | (156) | 76 |
| (Loss)/profit for the period from discontinued operations | (2,886) | 9,337 |
| The results of discontinued operations were as follows: | ||
|---|---|---|
| 2013 | 2012 | |
| £'000 | (restated) £'000 |
|
| Revenue | 15,327 | 25,330 |
| Operating expenses | (14,407) | (24,529) |
| Operating profit | 920 | 801 |
| Loss on remeasurement of assets of disposal group | (3,650) | – |
| Profit on disposal of business | – | 8,460 |
| (Loss)/profit before tax | (2,730) | 9,261 |
| Taxation | (156) | 76 |
| (2,886) | 9,337 | |
| 2012 £'000 |
||
| (Loss)/profit for the period from discontinued operations 2013 related entirely to SPS. 2012 includes both SPS and Brand Addition. The SPS elements of the restated numbers are: Revenue £14,018,000; operating expenses £13,239,000; operating profit £779,000; and a deferred taxation credit of £80,000. The loss on remeasurement of SPS assets is calculated based on the best estimates of the adjusted consideration net of costs of disposal and expected net assets of the disposal group at the time of completion. Costs of £176,000 in respect of the disposal had been paid up to 28 December 2013. Profit on disposal of business Consideration |
24,000 | |
| (1,722) | ||
| 22,278 | ||
| (1,574) | ||
| 20,704 | ||
| (11,447) | ||
| Adjustment for working capital and cash at date of sale Adjusted consideration* Costs of disposal Net assets sold, excluding cash and debt Cash transferred with business sold |
(832) | |
| Recycled translation differences of business sold | 35 |
Assets held for sale
| Gross £'000 |
Provision £'000 |
28 Dec 2013 £'000 |
|
|---|---|---|---|
| Non current assets | |||
| Property, plant and equipment (note 11) | 6,441 | (3,474) | 2,967 |
| Intangible assets (note 12) | 34 | – | 34 |
| 6,475 | (3,474) | 3,001 | |
| Current assets | |||
| Inventories | 1,848 | – | 1,848 |
| Trade and other receivables | 3,532 | – | 3,532 |
| 5,380 | – | 5,380 | |
| Assets held for sale | 11,855 | (3,474) | 8,381 |
| Liabilities held for sale | |||
| Current liabilities | |||
| Trade and other payables | (2,220) | – | (2,220) |
| Deferred tax liability (note 19) | (426) | – | (426) |
| Liabilities held for sale | (2,646) | – | (2,646) |
| Net assets held for sale | 9,209 | (3,474) | 5,735 |
| Net assets held for sale at 28 December 2013 related to SPS. Net assets held for sale at 29 December 2012 were £nil. | |||
| Included within the cash flow statement are the following cash flows from discontinued operations: | |||
| 2013 | 2012 (restated) |
||
| £'000 | £'000 | ||
| Net cash generated from/(used in) operating activities | 994 | (3,039) | |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (153) | (250) | |
| Proceeds from sale of business: | |||
| Consideration received | 1,250 | 21,028 | |
| Cash costs of disposal | (176) | (1,285) | |
| Payment of disposal costs accrued in prior period | (83) | (368) | |
| Cash in subsidiaries sold | – | (832) | |
| Net proceeds from sale of businesses | 991 | 18,543 | |
| Net cash generated from investing activities | 838 | 18,293 | |
| Net movement in cash and cash equivalents | 1,832 | 15,254 |
| Freehold | Plant, Long machinery, |
||||
|---|---|---|---|---|---|
| land and | leasehold | fixtures & Computer | |||
| buildings £'000 |
buildings £'000 |
fittings £'000 |
hardware £'000 |
Total £'000 |
|
| Cost: | |||||
| At 30 December 2012 | 3,604 | 2,767 | 11,050 | 1,069 | 18,490 |
| Additions | 5 | – | 592 | 301 | 898 |
| Disposals | – | – | (86) | (146) | (232) |
| Transfer to assets held for sale (note 10) | – | (2,767) | (6,551) | (211) | (9,529) |
| Exchange translation | (61) | – | (106) | (22) | (189) |
| At 28 December 2013 | 3,548 | – | 4,899 | 991 | 9,438 |
| Depreciation: | |||||
| At 30 December 2012 | 269 | 376 | 4,729 | 778 | 6,152 |
| Charge for the period | 107 | 62 | 970 | 225 | 1,364 |
| Disposals | – | – | (84) | (145) | (229) |
| Transfer to assets held for sale (note 10) | – | (438) | (2,476) | (174) | (3,088) |
| Exchange translation | (9) | – | (76) | (13) | (98) |
| At 28 December 2013 | 367 | – | 3,063 | 671 | 4,101 |
| Net book value at 28 December 2013 | 3,181 | – | 1,836 | 320 | 5,337 |
| 4imprint Group plc Annual Report and Accounts 2013 |
| Net book value at end of period | 818 | 954 | |||
|---|---|---|---|---|---|
| At end of period | 917 | 1,338 | |||
| Exchange translation | (19) | (38) | |||
| Transfer to assets held for sale (note 10) | (443) | – | |||
| Disposals | (359) | (428) | |||
| Charge for the period | 400 | 406 | |||
| At start of period | 1,338 | 1,398 | |||
| Amortisation: | |||||
| At end of period | 1,735 | 2,292 | |||
| Exchange translation | (32) | (69) | |||
| Transfer to assets held for sale (note 10) | (477) | – | |||
| Disposals | (359) | (430) | |||
| Additions | 311 | 448 | |||
| At start of period | 2,292 | 2,343 | |||
| Cost: | |||||
| Computer software | £'000 | £'000 | |||
| 12 Intangible assets | 2013 | 2012 | |||
| Net book value at 29 December 2012 | 3,335 | 2,391 | 6,321 | 291 | 12,338 |
| At 29 December 2012 | 269 | 376 | 4,729 | 778 | 6,152 |
| Exchange translation | (9) | – | (93) | (20) | (122) |
| Disposals | – | – | (712) | (278) | (990) |
| Charge for the period | 74 | 62 | 895 | 195 | 1,226 |
| At 1 January 2012 | 204 | 314 | 4,639 | 881 | 6,038 |
| Depreciation: | |||||
| At 29 December 2012 | 3,604 | 2,767 | 11,050 | 1,069 | 18,490 |
| Exchange translation | (117) | – | (151) | (28) | (296) |
| Disposals | – | – | (791) | (286) | (1,077) |
| Additions | 637 | – | 1,032 | 197 | 1,866 |
| At 1 January 2012 | 3,084 | 2,767 | 10,960 | 1,186 | 17,997 |
| Cost: | |||||
| Freehold land and buildings £'000 |
leasehold buildings £'000 |
Plant, Long machinery, fittings £'000 |
fixtures & Computer hardware £'000 |
Total £'000 |
The average remaining life of intangible assets is 2.3 years (2012: 2.3 years).
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| At start of period | 6,281 | 6,115 |
| Reclassified between deferred tax asset and deferred tax liability | (70) | 161 |
| Income statement charge – continuing operations | (648) | (794) |
| Prior year adjustment | (14) | – |
| Deferred tax (debited)/credited to other comprehensive income | (1,502) | 1,402 |
| Deferred tax debited to other comprehensive income – prior year adjustment | (737) | – |
| Deferred tax credited to equity | 961 | – |
| Effect of change in UK tax rate – income statement – continuing operations | 3 | 1 |
| Effect of change in UK tax rate – other comprehensive income | (483) | (589) |
| Exchange in reserves | 43 | (15) |
| At end of period | 3,834 | 6,281 |
| 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. |
|||||
|---|---|---|---|---|---|
| £1.3m of the net deferred tax asset is expected to reverse within the next 12 months. | |||||
| The movements in the net deferred tax asset (subject 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 £'000 |
Tax losses £'000 |
Pension £'000 |
Other £'000 |
Total £'000 |
|
| At start of period | (9) | 289 | 6,001 | – | 6,281 |
| Reclassified between deferred tax liability and deferred tax asset | (363) | – | – | 293 | (70) |
| Income statement charge – continuing operations | (4) | (238) | 41 | (447) | (648) |
| Prior year adjustment | (14) | – | – | – | (14) |
| Deferred tax debited to other comprehensive income | – | – | (1,502) | – | (1,502) |
| Deferred tax debited to other comprehensive income – prior year adjustment – | – | (737) | – | (737) | |
| Deferred tax credited to equity | – | – | – | 961 | 961 |
| Effect of change in UK tax rate – income statement | 3 | – | – | – | 3 |
| Effect of change in UK tax rate – other comprehensive income | – | – | (483) | – | (483) |
| Exchange in reserves | – | 6 | – | 37 | 43 |
| At end of period | (387) | 57 | 3,320 | 844 | 3,834 |
| Included in Other in the table above is deferred tax in respect of timing differences and future deductions relating to share options for US employees. Deferred tax assets have been recognised where it is considered that there will be sufficient taxable profit available in future |
|||||
| against which the deductible temporary timing differences can be utilised. | |||||
| No provision has been made for deferred tax assets relating to losses carried forward in holding companies of £9.7m (2012: £5.6m). These losses have no expiry date and may be available for offset against future profits in these companies. |
|||||
| No provision has been made for deferred tax assets relating to the future exercise of share options by UK employees, as there is unlikely to be sufficient taxable UK profits against which the deductions could be utilised. |
|||||
| 4imprint Group plc Annual Report and Accounts 2013 |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Raw materials and consumables | – | 292 |
| Work in progress | – | 45 |
| Finished goods and goods for resale | 2,235 | 3,001 |
| 2,235 | 3,338 |
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 in respect of continuing operations total £42,000 (2012: £12,000).
During the year a net amount of £39,000 has been charged in respect of continuing operations in the income statement in respect of provisions for slow moving and obsolete stock (2012: £6,000).
The amount of inventory charged to the income statement for continuing operations is shown in note 2.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Trade receivables | 12,153 | 13,476 |
| Less: Provision for impairment of receivables | (71) | (61) |
| Trade receivables – net | 12,082 | 13,415 |
| Other receivables | 4,188 | 5,149 |
| Prepayments and accrued income | 1,983 | 1,626 |
| 18,253 | 20,190 |
Due to their short term nature the fair value of trade receivables does not differ from the book value.
The impairment of trade receivables charged to continuing operations in the income statement was £65,000 (2012: £29,000). There is no impairment of any receivables other than trade receivables.
The ageing of past due trade receivables which are not impaired, based on the customers' credit worthiness and payment history, is as follows:
| Time past due date | 2013 £'000 |
2012 £'000 |
|---|---|---|
| Up to 3 months | 1,411 | 2,137 |
| 3 to 6 months | 4 | 119 |
| 1,415 | 2,256 |
The ageing of impaired trade receivables is as follows:
| Time past due date | 2013 £'000 |
2012 £'000 |
|---|---|---|
| Up to 3 months | – | 11 |
| 3 to 6 months | 68 | 31 |
| Over 6 months | 3 | 19 |
| 71 | 61 |
The carrying amounts of trade and other receivables are denominated in the following currencies:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Sterling | 1,338 | 5,246 |
| US dollars | 15,824 | 13,955 |
| Euros | 35 | 216 |
| Canadian dollars | 1,056 | 773 |
| 18,253 | 20,190 |
Movements in the provision for impairment of trade receivables are as follows:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| At start of period | 61 | 83 |
| Exchange translation | – | (2) |
| Utilised | (33) | (49) |
| Released | (14) | – |
| Provided | 87 | 29 |
| Transferred to assets held for sale | (30) | – |
| At end of period | 71 | 61 |
| (33) | (49) | |
|---|---|---|
| Released | (14) | – |
| Provided | 87 | 29 |
| Transferred to assets held for sale | (30) | – |
| At end of period | 71 | 61 |
| 16 Other financial assets and cash and cash equivalents | 2013 | 2012 |
| £'000 | £'000 | |
| Other financial assets – bank deposits | 4,950 | 3,000 |
| Cash at bank and in hand | 6,557 | 9,351 |
| Short term deposits Cash and cash equivalents Other financial assets comprise bank deposits with an original maturity in excess of three months but not greater than one year. 17 Trade and other payables – current |
4,250 10,807 |
4,750 14,101 |
| 2013 | 2012 | |
| Trade payables | £'000 12,676 |
£'000 12,985 |
| Other tax and social security payable | 1,261 | 573 |
| Other payables | 103 | 196 |
| Accruals | 3,957 | 2,321 |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Trade payables | 12,676 | 12,985 |
| Other tax and social security payable | 1,261 | 573 |
| Other payables | 103 | 196 |
| Accruals | 3,957 | 2,321 |
| 17,997 | 16,075 |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Current borrowings | ||
| Finance lease obligations | – | 146 |
| Bank loans | – | 1,500 |
| – | 1,646 | |
| Non current borrowings | ||
| Bank loans | – | 4,777 |
| – | 4,777 |
All non current borrowings in 2012 were repayable in 2-5 years.
The fair value of borrowings did not differ from the book value due to the relatively short term nature of the borrowings. The non current borrowings were drawn on a line of credit.
£1,500,000 of the current borrowings outstanding at the end of 2012 was secured on the SPS long leasehold property in Blackpool. This borrowing was repaid at maturity on 31 December 2012.
Borrowings were held in the following currencies and interest was payable at the following effective interest rates:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Sterling (2013: nil; 2012: 3.27%) | – | 1,500 |
| US dollars (2013: 1.70%; 2012: 1.72%) | – | 4,923 |
| – | 6,423 |
The Group had the following undrawn committed borrowing facilities available at 28 December 2013:
| Floating rate | ||
|---|---|---|
| Borrowing facilities | 2013 £'000 |
2012 £'000 |
| Expiring within one year | 500 | – |
| Expiring in more than one year | 7,882 | 3,270 |
| 8,382 | 3,270 |
Facilities comprised a UK overdraft facility of £0.5m which expired on 31 December 2013. The Group's US subsidiary has a US dollar 12.5m line of credit and a US dollar 0.5m revolving credit facility, both repayable on 31 August 2015.
| Deferred tax | ||
|---|---|---|
| 2013 £'000 |
2012 £'000 |
|
| At start of period | 720 | 375 |
| Reclassified between deferred tax assets and deferred tax liability | (70) | 161 |
| Charged/(credited) to the income statement – continuing operations | (99) | 269 |
| – discontinued operations | 188 | (44) |
| Prior year adjustment – continuing operations | – | 4 |
| – discontinued operations | 12 | (10) |
| Effect of change in UK tax rate – continuing operations | – | 2 |
| – discontinued operations | (44) | (26) |
| Exchange loss/(gain) in equity | 8 | (11) |
| Transfer to liabilities held for sale | (426) | – |
| At end of period | 289 | 720 |
| At end of period | 289 | 720 | ||
|---|---|---|---|---|
| Deferred tax analysis | Depreciation/ capital allowances £'000 |
Tax losses £'000 |
Other £'000 |
Total £'000 |
| At start of period | 1,297 | (421) | (156) | 720 |
| Reclassified between deferred tax assets and deferred tax liability | (363) | – | 293 | (70) |
| Income statement charge – continuing operations | (204) | – | 105 | (99) |
| – discontinued operations | (32) | 220 | – | 188 |
| Prior year adjustment – discontinued operations | 12 | – | – | 12 |
| Exchange loss in equity | (1) | 2 | 7 | 8 |
| Effect of change in UK tax rate – discontinued operations | (61) | 17 | – | (44) |
| Transfer to liabilities held for sale (note 10) | (633) | 182 | 25 | (426) |
| At end of period | 15 | – | 274 | 289 |
| Onerous leases | ||
|---|---|---|
| 2013 | 2012 | |
| £'000 | £'000 | |
| At start of period | 150 | 417 |
| Charged to the income statement | – | 150 |
| Utilised in period | (3) | (417) |
| At end of period | 147 | 150 |
| Analysis of provisions | ||
| 2013 | 2012 | |
| £'000 | £'000 | |
| Current | – | – |
| Non current | 147 | 150 |
| Total | 147 | 150 |
The onerous lease provisions relate to dilapidation costs of residual leases of property in respect of business disposals, and is expected to be expended in two to five years.
The Group's activities expose it to a variety of financial risks including currency risk, credit risk, liquidity risk and capital risk.
The Group operates internationally and is exposed to various currency movements, predominantly the US dollar and Canadian dollar. Risk arises predominantly from the remittance of overseas earnings, the translation of profits of overseas subsidiaries and the net assets of overseas 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 to partly hedge foreign currency cash flows arising from sales and purchases of goods, as well as remittances from its overseas subsidiaries. Contracts outstanding at the period end had no material impact on the financial statements. The Group does not hedge the currency exposure of profits and assets of its overseas subsidiaries or other financial transactions.
At 28 December 2013 the Group had the following forward currency contracts: the purchase of 0.9m US dollars with Sterling up to July 2014. The fair value of the derivatives was not material when measured at 28 December 2013 and consequently no entries have been reflected in the financial statements.
The movement in the exchange rates compared to prior year increased profit of the US business by £0.2m and reduced net assets by £0.3m. Closing rate was US\$1.65 (2012: US\$1.62) and the average rate used to translate profits was US\$1.56 (2012: US\$1.58).
A weakening in the US dollar exchange rate by ten cents (the approximate range of movement from average to closing exchange rate) would reduce profit in the period by £0.9m (2012: £0.6m) and net assets at period end by £0.5m (2012: £0.5m).
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 was held with the following banks at the period end:
| 2013 Rating |
2013 Deposit £'000 |
2012 Rating |
2012 Deposit £'000 |
|
|---|---|---|---|---|
| Lloyds Bank | A2 | 10,921 | A2 | 12,897 |
| JPMorgan Chase Bank, N.A. | Aa3 | 4,832 | Aa3 | 1,098 |
| Wells Fargo Bank | Aa3 | 2 | Aa3 | 3,099 |
| Other | 2 | 7 | ||
| 15,757 | 17,101 |
There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers.
Credit risk arising from customers is delegated to the senior management of each business to a maximum level per customer, above which, it is referred to the Group Finance Director for approval. External credit agency assessment reports are referred to as part of this process.
Group borrowing requirements are managed centrally and borrowing arrangements are currently with the Group's principal US bank and terms are agreed which are considered appropriate for the funding requirement of the Group at that time.
Operating working capital is managed within each business to levels agreed with the Group and cash forecasts are reviewed regularly by Group and local management.
At 28 December 2013 the net cash position (note 25) of the Group was £15,757,000 (2012: £10,678,000).
The maturity profile of the Group's borrowings is shown in note 18.
The Group's objective for managing debt and equity capital is to safeguard the Group's and Company's ability to continue as a going concern, in order to provide returns for Shareholders and benefits for other stakeholders.
4imprint Group plc Annual Report and Accounts 2013 69ACCOUNTS In 2013 the Company has provided returns to Shareholders in the form of dividends, details of which are included in note 9. Shares were issued only to satisfy options exercised and shares were purchased for an employee benefit trust.
The Group monitors its levels of cash and indebtedness. The Group does not actively monitor a gearing ratio, but seeks to maintain an appropriate level of financial flexibility. Details of borrowing facilities are given in note 18.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Authorised | ||
| 39,000,000 (2012: 39,000,000) ordinary shares of 38 6/13p each | 15,000 | 15,000 |
| Issued and fully paid | ||
| 26,744,947 (2012: 26,576,666) ordinary shares of 38 6/13p each | 10,286 | 10,222 |
The Company issued 168,281 ordinary shares in the period for consideration of £202,000 to satisfy options exercised under the Group's SAYE schemes (2012: 736,114 shares issued).
At 28 December 2013 the following options have been granted and were outstanding under the Company's share option schemes:
| Scheme | Date of grant |
Number of ordinary shares 2013 |
Number of option holders 2013 |
Number of ordinary shares 2012 |
Subscription price |
From | Date exercisable to |
|---|---|---|---|---|---|---|---|
| Performance Share Plan 27/04/11 | 1,400,000 | 5 | 1,400,000 | Nil | Apr 2014 | Apr 2021 | |
| 05/04/13 | 140,000 | 7 | – | Nil | Apr 2016 | Apr 2023 | |
| SAYE | 07/10/09 | – | – | 118,902 | 87.0p | Jan 2013 | Jun 2013 |
| 05/10/10 | 16,910 | 11 | 17,343 | 166.0p | Jan 2014 | Jun 2014 | |
| 31/10/12 | 67,104 | 52 | 72,514 | 266.0p | Jan 2016 | Jun 2016 | |
| US Sharesave | 05/10/10 | – | – | 50,566 | \$3.14 | Dec 2012 | Jan 2013 |
| 31/10/12 | 167,031 | 225 | 175,540 | \$4.76 | Jan 2015 | Jan 2015 | |
| Total | 1,791,045 | 300 | 1,834,865 |
The weighted average exercise price for options outstanding at 28 December 2013 was 38.45p (2012: 51.26p).
On 27 April 2011, 1,400,000 share options were granted to five members of the Group's senior management to acquire ordinary shares at nil cost. The performance conditions are that one third of the options vest if the Company share price attains and remains at, or above, for thirty consecutive days each of: 300p; 350p; and 400p in the three year period commencing 27 April 2011. The options that vest will be exercisable between 27 April 2014 and 27 April 2021. 466,667 options vested in February 2013, 466,667 options vested in April 2013 (466,666 options vested in September 2012). In addition, 140,000 share options were granted to seven senior managers on 5 April 2013. Conditions are as above but target share prices are 500p; 550p; and 600p. These options vested in July, October and November 2013 and are exercisable between 5 April 2016 and 5 April 2023.
Share options may be granted to senior management and in addition a SAYE scheme was 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 the Monte Carlo model for the Performance Share Plan and is spread over the vesting period of the options. The significant inputs into the model are an expected life of between 2.04 and 3 years for the SAYE and Sharesave 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 zero coupon government bond yields.
| 2013 | 2012 (restated) |
|
|---|---|---|
| Continuing operations | £'000 | £'000 |
| Charge resulting from spreading the fair value of options | 784 | 650 |
| Social security costs in respect of share options | 810 | – |
| Total | 1,594 | 650 |
In addition £11,000 was charged in respect of discontinued operations (2012: £35,000).
| Performance Share Plan |
UK SAYE Schemes | US Sharesave Schemes |
|||
|---|---|---|---|---|---|
| Grant date | 05/04/13 | 27/04/11 | 05/10/10 | 31/10/12 | 31/10/12 |
| Share price at grant date | 438p | 260p | 232.5p | 349p | 349p |
| Exercise price | Nil | Nil | 166p | 266p | \$4.76 |
| Number of employees | 7 | 5 | 11 | 52 | 225 |
| Shares under option | 140,000 | 1,400,000 | 16,910 | 67,104 | 167,031 |
| Vesting period (years) | 3 | 3 | 3 | 3 2.04 |
|
| Expected volatility | 35% | 40% | 45% | 38% | 38% |
| Option life (years) | 10 | 10 | 3.5 | 3.5 | 2.08 |
| Expected life (years) | 3.5 | 3.5 | 3 | 3 2.04 |
|
| Risk free rate | 0.26% | 1.7% | 1.3% | 0.5% | 0.3% |
| Expected dividends expressed as a dividend yield | 3.5% | 5.5% | 5.5% | 4.5% | 4.5% |
| Possibility of ceasing employment before vesting | 0% | 0% | 10% | 10% | 10% |
| Expectations of meeting performance criteria | n/a | n/a | 100% | 100% | 100% |
| Fair value per option | 197p-272p | 106p-164p | 75.1p | 97.2p | 79.8p |
| A reconciliation of option movements over the period to 28 December 2013 is shown below: | |||||
| 2013 | 2012 | ||||
| of shares | Number Weighted average exercise price |
Number of shares |
Weighted average exercise price |
||
| Outstanding at start of period | 1,834,865 | 51.26p | 2,388,052 | 42.64p | |
| Granted | 140,000 | – | 248,054 | 77.76p | |
| Forfeited/cancelled | (14,251) | 202.36p | (65,127) | 110.54p | |
| Exercised | (168,281) | 121.01p | (736,114) | 95.75p | |
| Expired | (1,288) | 127.10p | – | – | |
| 1,791,045 | 38.45p | 1,834,865 | 51.26p | ||
| Outstanding at end of period |
| 2013 | 2012 | |||
|---|---|---|---|---|
| of shares | Number Weighted average exercise price |
Number of shares |
Weighted average exercise price |
|
| Outstanding at start of period | 1,834,865 | 51.26p | 2,388,052 | 42.64p |
| Granted | 140,000 | – | 248,054 | 77.76p |
| Forfeited/cancelled | (14,251) | 202.36p | (65,127) | 110.54p |
| Exercised | (168,281) | 121.01p | (736,114) | 95.75p |
| Expired | (1,288) | 127.10p | – | – |
| Outstanding at end of period | 1,791,045 | 38.45p | 1,834,865 | 51.26p |
| Exercisable at end of period | – | – | 50,566 | 194.37p |
| 2013 | 2012 | |||||||
|---|---|---|---|---|---|---|---|---|
| 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 | |
| Nil | – | 1,540,000 | 0.5 | 7.5 | – | 1,400,000 | 1.82 | 8.32 |
| £0.01 – 1.00 | – | – | – | – | 87.00p | 118,902 | – | 0.5 |
| £1.01 – 2.00 | 166.00p | 16,910 | – | 0.5 | 166.00p | 17,343 | 1.00 | 1.5 |
| £2.01 – 3.00 | 282.00p | 234,135 | 1.3 | 1.4 | 270.71p | 298,620 | 1.90 | 2.07 |
| Balance at 28 December 2013 | 208 | (543) | (335) |
|---|---|---|---|
| Exchange differences on translation of foreign subsidiaries | – | (423) | (423) |
| Balance at 29 December 2012 | 208 | (120) | 88 |
| Recycled translation differences of businesses sold | – | (35) | (35) |
| Exchange differences on translation of foreign subsidiaries | – | (316) | (316) |
| Balance at 31 December 2011 | 208 | 231 | 439 |
| Capital redemption reserve £'000 |
Cumulative translation differences £'000 |
Total £'000 |
| 2013 | 2012 (restated) £'000 |
|
|---|---|---|
| £'000 | ||
| Operating profit – continuing operations | 10,137 | 7,474 |
| – discontinued operations (note 10) | 920 | 801 |
| Adjustments for: | ||
| Depreciation charge | 1,364 | 1,266 |
| Amortisation of intangibles | 400 | 460 |
| Exceptional non cash items | 76 | 10 |
| Decrease in exceptional accrual/provisions | (16) | (475) |
| Share option charges – continuing | 784 | 650 |
| – discontinued | 11 | 35 |
| Defined benefit pension administration charge | 478 | 438 |
| Contributions to defined benefit pension scheme | (3,175) | (12,366) |
| Changes in working capital: | ||
| Increase in inventories | (811) | (920) |
| Increase in trade and other receivables | (3,428) | (279) |
| Increase/(decrease) in trade and other payables | 4,711 | (3,086) |
| Cash generated from/(used in) operations | 11,451 | (5,992) |
| 2013 | 2012 | ||
|---|---|---|---|
| Analysis of net cash | Note | £'000 | £'000 |
| Cash at bank and in hand | 16 | 6,557 | 9,351 |
| Short term deposits | 16 | 4,250 | 4,750 |
| Cash and cash equivalents | 10,807 | 14,101 | |
| Other financial assets – bank deposits | 16 | 4,950 | 3,000 |
| Current finance lease creditor | 18 | – | (146) |
| Current bank loans | 18 | – | (1,500) |
| 15,757 | 15,455 | ||
| Non current bank loans | 18 | – | (4,777) |
| Net cash | 15,757 | 10,678 |
At 28 December 2013, the Group was committed to make payments in respect of non-cancellable operating leases in the following periods:
| At 28 December 2013, the Group was committed to make payments in respect of non-cancellable operating leases in the following periods: |
||||
|---|---|---|---|---|
| 2013 2012 |
||||
| Land and buildings £'000 |
Other £'000 |
Land and buildings £'000 |
Other £'000 |
|
| In one year | 795 | 205 | 736 | 213 |
| In two to five years | 2,710 | 325 | 2,785 | 516 |
| In more than five years | 164 | – | 820 | 3 |
| 3,669 | 530 | 4,341 | 732 | |
| Included in 2013 above is £234,000 of commitments in respect of the discontinued operation. | ||||
| 27 Contingent liabilities The Group has no known contingent liabilities (2012: none). |
||||
| 28 Capital commitments The Group had capital commitments contracted for but not provided for in the financial statements of £229,000 for property, plant and equipment (2012: £28,000) of which £229,000 was in respect of discontinued operations (2012: £28,000). |
||||
| 29 Related party transactions The Group did not participate in any related party transactions. |
||||
| Key management compensation is disclosed in note 3. | ||||
| 30 Post balance sheet event On 10 February 2014, the Group completed the sale of SPS to the SPS senior management, backed by Maven Capital Partners. The consideration was £7.25m (subject to post completion adjustments relating to the levels of working capital, debt and cash at completion). |
||||
| 4imprint Group plc Annual Report and Accounts 2013 |
In our opinion the Company financial statements:
This opinion is to be read in the context of what we say below.
The Company financial statements, which are prepared by 4imprint Group plc, comprise:
The financial reporting framework that has been applied in their preparation comprises applicable law and IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.
In applying the financial reporting framework, the Directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events.
Certain disclosures required by the financial reporting framework have been presented elsewhere in the Annual Report and the Accounts (the "Annual Report") rather than in the notes to the financial statements. These are crossreferenced from the financial statements and are identified as audited.
We conducted our audit in accordance with International Standards on Auditing (UK & Ireland) ("ISAs (UK & Ireland)"). 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:
In addition, we read all the financial and non-financial
information in the Annual Report to identify material inconsistencies with the audited Company financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
We have no exceptions to report arising from this responsibility.
Under the Companies Act 2006 we are required to report if, in our opinion, certain disclosures of Directors' remuneration specified by law have not been made. We have no exceptions to report arising from this responsibility.
Under ISAs (UK & Ireland), we are required to report to you if, in our opinion, information in the Annual Report is:
We have no exceptions to report arising from this responsibility.
Our responsibilities and those of the Directors As explained more fully in the Statement of Directors responsibilities set out on page 35, the Directors are responsible for the preparation of the 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 Company financial statements in accordance with applicable law and ISAs (UK & 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.
We have reported separately on the Group financial statements of 4imprint Group plc for the 52 week period ended 28 December 2013.
Nicholas Boden (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester
5 March 2014
at 28 December 2013
| Notes | 2013 £'000 |
2012 £'000 |
|
|---|---|---|---|
| Non current assets | |||
| Property, plant and equipment | B | 101 | 137 |
| Investments | C | 104,182 | 104,182 |
| Deferred tax assets | D | 3,312 | 5,985 |
| Other receivables | E | 59,762 | 63,903 |
| 167,357 | 174,207 | ||
| Current assets | |||
| Other receivables | E | 12,000 | 18,657 |
| Other financial assets – bank deposits | 4,950 | 3,000 | |
| Cash and cash equivalents | 5,636 | 9,547 | |
| 22,586 | 31,204 | ||
| Current liabilities | |||
| Other payables | F | (1,812) | (1,242) |
| Net current assets | 20,774 | 29,962 | |
| Non current liabilities | |||
| Retirement benefit obligations | H | (16,611) | (22,894) |
| Provisions for other liabilities and charges | G | (147) | (150) |
| Amounts due to subsidiary companies | J | (70,287) | (87,758) |
| (87,045) | (110,802) | ||
| Net assets | 101,086 | 93,367 | |
| Shareholders' equity | |||
| Share capital | L | 10,286 | 10,222 |
| Share premium reserve | 38,575 | 38,437 | |
| Capital redemption reserve | 208 | 208 | |
| Retained earnings | 52,017 | 44,500 | |
| Total equity | 101,086 | 93,367 |
The financial statements on pages 76 to 84 were approved by the Board of Directors on 5 March 2014 and were signed on its behalf by:
John Poulter Gillian Davies Chairman Group Finance Director
for the 52 weeks ended 28 December 2013
| Retained earnings | ||||||
|---|---|---|---|---|---|---|
| capital £'000 |
Share reserve £'000 |
Capital Share premium redemption reserve £'000 |
Own shares £'000 |
Profit and loss £'000 |
Total equity £'000 |
|
| Balance at 31 December 2011 | 9,939 | 38,016 | 208 | (124) | 58,769 | 106,808 |
| Loss for the period (restated)† | (876) | (876) | ||||
| Other comprehensive income/(expense) | ||||||
| Remeasurement losses on post employment obligations (restated)† |
(10,124) | (10,124) | ||||
| Deferred tax on remeasurement losses (restated)† | 1,265 | 1,265 | ||||
| Effect of change in UK tax rate | (589) | (589) | ||||
| Total comprehensive expense | (10,324) | (10,324) | ||||
| Shares issued | 283 | 421 | 704 | |||
| Own shares purchased | (605) | (605) | ||||
| Own shares utilised | 3 | (3) | – | |||
| Share-based payment charge | 685 | 685 | ||||
| Dividends | (3,901) | (3,901) | ||||
| Balance at 29 December 2012 | 10,222 | 38,437 | 208 | (726) | 45,226 | 93,367 |
| Profit for the period | 9,172 | 9,172 | ||||
| Other comprehensive income/(expense) | ||||||
| Remeasurement gains on post employment obligations | 4,586 | 4,586 | ||||
| Deferred tax on remeasurement gains | (2,239) | (2,239) | ||||
| Effect of change in UK tax rate | (483) | (483) | ||||
| Total comprehensive income | 11,036 | 11,036 | ||||
| Shares issued | 64 | 138 | 202 | |||
| Own shares purchased | (130) | (130) | ||||
| Own shares utilised | 5 | (5) | – | |||
| Share-based payment charge | 795 | 795 | ||||
| Dividends | (4,184) | (4,184) | ||||
| Balance at 28 December 2013 | 10,286 | 38,575 | 208 | (851) | 52,868 | 101,086 |
| † 2012 has been restated for amendments to IAS 19. |
||||||
| 4imprint Group plc Annual Report and Accounts 2013 |
for the 52 weeks ended 28 December 2013
| Note | 2013 £'000 |
2012 £'000 |
|
|---|---|---|---|
| Cash flows from operating activities | |||
| Cash (used in)/generated from operations | K | (18,509) | 5,032 |
| Finance income | 5,375 | 5,327 | |
| Finance costs | (3,071) | (1,119) | |
| Net cash generated from operating activities | (16,205) | 9,240 | |
| Cash flows from investing activities | |||
| Purchases of property, plant and equipment | (1) | – | |
| Net cash used in investing activities | (1) | – | |
| Cash flows from financing activities | |||
| Amounts placed on deposit | (1,950) | (3,000) | |
| Repayment of borrowings | – | (2,464) | |
| Proceeds from issue of shares | 202 | 704 | |
| Own shares purchased | (130) | (605) | |
| Dividends received | 18,357 | – | |
| Dividends paid to Shareholders | (4,184) | (3,901) | |
| Net cash generated from/(used in) financing activities | 12,295 | (9,266) | |
| Net movement in cash and cash equivalents | (3,911) | (26) | |
| Cash and cash equivalents at beginning of the period | 9,547 | 9,573 | |
| Cash and cash equivalents at end of the period | 5,636 | 9,547 | |
| Analysis of cash and cash equivalents | |||
| Cash at bank and in hand | 1,386 | 4,797 | |
| Short term deposits | 4,250 | 4,750 | |
| 5,636 | 9,547 |
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 45 to 48 except for the investments policy noted below. These policies have been consistently applied to all the periods presented, except as noted below.
The Company has adopted IAS 19 (revised) in the period and prior periods have been restated (see page 44). Other new and revised standards effective during the period have not impacted on the Company's financial statements.
The financial statements have been prepared under the historical cost convention in accordance with IFRS as adopted by the EU, IFRS IC 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 2014).
After making enquiries, the Directors have reasonable expectations that the Company has adequate resources to continue to operate for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the financial statements.
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 the only critical accounting policy of the Company.
As disclosed in note 4 on pages 53 to 55, the Company sponsors 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, 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.
4imprint Group plc Annual Report and Accounts 2013 79ACCOUNTS Investments in subsidiaries are stated at cost. Impairment reviews are carried out if there is some indication that the carrying value of the investments may have been impaired. 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 £9,172,000 (2012 loss: £876,000) is included in the financial statements of the Company.
Of the £52,868,000 profit and loss reserve in the Company, £17,665,000 (2012: £21,760,000), in respect of dividends from subsidiary undertakings declared in prior years, 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.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Wages and salaries | 1,148 | 993 |
| Social security costs | 144 | 112 |
| Pension costs | ||
| – Defined contribution plans | 39 | 41 |
| Share option charges | 764 | 676 |
| Social security charges in respect of share options | 760 | – |
| 2,855 | 1,822 |
The average number of people, including Executive Directors, employed by the Company during the year was 8 (2012: 8).
| Fixtures & | |
|---|---|
| fittings £'000 |
|
| Cost: | |
| At 31 December 2011 | 272 |
| Additions | – |
| At 29 December 2012 | 272 |
| Additions | 1 |
| At 28 December 2013 | 273 |
| Depreciation: | |
| At 31 December 2011 | 92 |
| Charge for the period | 43 |
| At 29 December 2012 | 135 |
| Charge for the period | 37 |
| At 28 December 2013 | 172 |
| Net book value at 28 December 2013 | 101 |
| Net book value at 29 December 2012 | 137 |
| Shares in subsidiary undertakings £'000 |
|
|---|---|
| Cost: | |
| At 29 December 2012 and 28 December 2013 | 104,182 |
The principal operating subsidiaries at 28 December 2013, are set out below. All of these subsidiaries are wholly owned and have ordinary share capital only.
| Company | Country of incorporation and operation |
Business |
|---|---|---|
| 4imprint Inc. | USA | Promotional products |
| 4imprint Direct Limited | England | Promotional products |
| SPS (EU) Limited* | England | Promotional products |
| At end of period | 3,312 | 5,985 |
|---|---|---|
| Deferred tax credited to other comprehensive income | (2,722) | 813 |
| Income statement credit/(charge) | 49 | (690) |
| At start of period | 5,985 | 5,862 |
| 2013 £'000 |
2012 £'000 |
| At start of period | 2013 | |
|---|---|---|
| £'000 | 2012 £'000 |
|
| 5,985 | 5,862 | |
| Income statement credit/(charge) | 49 | (690) |
| Deferred tax credited to other comprehensive income | (2,722) | 813 |
| At end of period | 3,312 | 5,985 |
| 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: | ||
| 2013 £'000 |
2012 £'000 |
|
| Remeasurement gains on post employment obligations | (1,502) | 1,402 |
| Prior year adjustment | (737) | – |
| Effect of change in UK tax rate | (483) | (589) |
| (2,722) | 813 |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Amounts due from subsidiary companies | 71,678 | 82,210 |
| Other receivables | 5 | 285 |
| Prepayments and accrued income | 79 | 65 |
| 71,762 | 82,560 | |
| Less non current portion: Amounts due from subsidiary companies | (59,762) | (63,903) |
| 12,000 | 18,657 |
Current amounts due from subsidiary companies include £5,000,000 (2012: £5,000,000) which is interest bearing at market rates of interest. The balance is repayable on demand.
Non current amounts due from subsidiary companies include £23,385,000 due within two to five years and £36,377,000 due after five years. All amounts 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:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Sterling | 35,385 | 45,420 |
| US dollars | 36,377 | 37,140 |
| 71,762 | 82,560 |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Other payables | 38 | 181 |
| Other tax and social security | 760 | – |
| Amounts due to subsidiary companies | 490 | 688 |
| Accruals | 524 | 373 |
| 1,812 | 1,242 |
The amounts due to subsidiary companies are not interest bearing and all are repayable on demand.
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| At start of period | 150 | 291 |
| Utilised | (3) | (291) |
| Charged to the income statement | – | 150 |
| At end of period | 147 | 150 |
| Analysis of provisions | 2013 £'000 |
2012 £'000 |
| Current | – | – |
| Non current | 147 | 150 |
| Total | 147 | 150 |
The onerous lease provisions relate to dilapidation costs of residual property in respect of business disposals, and is expected to be expended within two to five years.
The amount recognised in the balance sheet represents the net liability in respect of the closed defined benefit scheme. Full details are contained in note 4 on pages 53 to 55.
The amounts due to subsidiary companies, totalling £70,287,000, comprises £33,910,000 (2012: £18,147,000) due in two to five years and £36,377,000 (2012: £69,611,000) due after five years. Of the loans due after five years, £36,377,000 (2012: £37,140,000) are interest bearing at market rates of interest. All other loans are interest free.
| 2013 | 2012 | |
|---|---|---|
| £'000 | (restated) £'000 |
|
| Operating loss | (10,596) | (3,436) |
| Adjustments for: | ||
| Depreciation charge | 37 | 43 |
| Exceptional non cash items re intercompany loan impairments | 6,880 | – |
| Decrease in exceptional accrual | (74) | (29) |
| Share option charges | 795 | 685 |
| Defined benefit pension admin charge | 478 | 438 |
| Contributions to defined benefit pension scheme | (3,175) | (12,366) |
| Exchange losses on intercompany loans | – | (15) |
| Changes in working capital: | ||
| Decrease/(increase) in trade and other receivables | 83 | (75) |
| Increase in trade and other payables | 245 | 74 |
| (Decrease)/increase in payables to subsidiary undertakings | (13,182) | 19,713 |
| Cash (used in)/generated from operations | (18,509) | 5,032 |
| Reconciliation of net cash | 2013 £'000 |
2012 £'000 |
| Cash at bank and in hand | 1,386 | 4,797 |
| Short term deposits | 4,250 | 4,750 |
| Cash and cash equivalents | 5,636 | 9,547 |
| Other financial assets – bank deposits | 4,950 | 3,000 |
| Net cash | 10,586 | 12,547 |
| 4imprint Group plc Annual Report and Accounts 2013 |
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Authorised | ||
| 39,000,000 (2012: 39,000,000) ordinary shares of 38 6/13p each | 15,000 | 15,000 |
| Allotted and fully paid | ||
| 26,744,947 (2012: 26,576,666) ordinary shares of 38 6/13p each | 10,286 | 10,222 |
During the period 168,281 ordinary shares were issued (2012: 736,114) for a consideration of £202,000 to satisfy option exercises under SAYE and Sharesave schemes.
The options that have been granted and were outstanding under the Company's share option schemes are shown in note 22 on page 70. Full details of the share option schemes are given in note 23 on page 71.
Employees of the Company had interests in 18,064 SAYE options under the 31 October 2012 grant (2012: 18,064); nil SAYE options under the 7 October 2009 grant (2012: 41,724); and 900,000 options under the Performance Share Plan (2012: 900,000).
The Company had financial commitments for land and buildings of £249,000 at 28 December 2013 (2012: £302,000). These are payable as follows: within 1 year £163,000 (2012: £129,000); in two to five years £86,000 (2012: £173,000).
Guarantees have been given by the Company for letters of credit of subsidiary companies totalling £nil at 28 December 2013 (2012: £120,000).
During the period the Company has been party to a number of transactions with fellow subsidiary companies:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Income statement | ||
| Finance income due from subsidiary companies | 5,302 | 5,417 |
| Finance costs due to subsidiary companies | 3,068 | 1,317 |
| Balance sheet | ||
| Interest bearing loans due from subsidiary companies at end of period | 64,762 | 68,903 |
| Interest bearing loans due to subsidiary companies at end of period | 36,377 | 37,140 |
Key management compensation, comprising remuneration of the Directors based in the UK, charged to the Company's income statement was:
| 2013 £'000 |
2012 £'000 |
|
|---|---|---|
| Salaries, fees and short-term employee benefits | 786 | 672 |
| Social security costs | 87 | 97 |
| Pension contributions | 27 | 31 |
| Share option charges | 405 | 404 |
| Social security in respect of share options | 760 | – |
| 2,065 | 1,204 |
All related party transactions were made on terms equivalent to those that prevail in arms length transactions.
The SPS business was classified as a discontinued operation in 2013 and the 2012 comparatives have been restated. In addition, 2012 has also been restated for amendments to IAS 19 and to include income from delivery receipts and other activities in revenue. The Brand Addition business was classified as a discontinued operation in 2011 and the 2010 comparatives have been restated. Prior periods have not been restated.
| Income statement | 2013 £'000 |
2012 £'000 |
2011 £'000 |
2010 £'000 |
2009*† £'000 |
|---|---|---|---|---|---|
| Revenue | 212,861 | 183,513 | 158,824 | 143,723 | 169,088 |
| Underlying operating profit | 12,463 | 9,154 | 8,486 | 6,221 | 5,716 |
| Defined benefit pension – current service charge | – | – | – | – | (28) |
| – administration | (478) | (438) | – | – | – |
| Share option charges | (1,594) | (650) | (517) | (183) | (537) |
| Goodwill impairment | – | – | (4,743) | – | – |
| Exceptional items | (254) | (592) | (1,935) | (1,125) | (771) |
| Operating profit | 10,137 | 7,474 | 1,291 | 4,913 | 4,380 |
| Finance income | 56 | 199 | – | 10 | 28 |
| Finance costs | (17) | (157) | (352) | (519) | (343) |
| Net pension finance (charge)/income | (924) | (1,151) | (581) | (531) | (1,240) |
| Profit before tax | 9,252 | 6,365 | 358 | 3,873 | 2,825 |
| Taxation | (2,466) | (2,053) | (1,950) | (906) | (424) |
| Profit/(loss) from continuing operations | 6,786 | 4,312 | (1,592) | 2,967 | 2,401 |
| (Loss)/profit from discontinued operations | (2,886) | 9,337 | 3,777 | 3,895 | – |
| Profit for the period | 3,900 | 13,649 | 2,185 | 6,862 | 2,401 |
| Basic earnings per ordinary share | 25.64p | 16.41p | 8.48p | 26.65p | 9.39p |
| Dividend per share – paid and proposed | 17.00p | 15.45p | 14.60p | 13.70p | 12.75p |
| 2013 | 2012 | 2011 | 2010 | 2009† | |
| Balance sheet | £'000 | £'000 | £'000 | £'000 | £'000 |
| Non current assets (excluding deferred tax) | 6,155 | 13,292 | 12,904 | 23,330 | 23,887 |
| Deferred tax assets | 3,834 | 6,281 | 6,115 | 6,348 | 7,558 |
| Net current assets | 18,098 | 22,758 | 13,138 | 18,151 | 8,106 |
| Net assets held for sale | 5,735 | – | 7,916 | – | – |
| Pension liability | (16,611) | (22,894) | (23,547) | (21,905) | (22,450) |
| Other liabilities | (436) | (5,647) | (3,469) | (8,713) | (2,543) |
| Shareholders' equity | 16,775 | 13,790 | 13,057 | 17,211 | 14,558 |
| Net cash/(debt) | 15,757 | 10,678 | 5,463 | (239) | (3,126) |
| * 2009 is a 53 week period, other periods are 52 weeks. | |||||
| † Restated for amendments to IAS 38 re marketing costs. | |||||
| 4imprint Group plc Annual Report and Accounts 2013 |
7/8 Market Place London W1W 8AG Telephone +44 (0)20 7299 7201 Fax +44 (0)20 7299 7209 E-mail [email protected]
177991 England
PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 101 Barbirolli Square Lower Mosley Street Manchester M2 3PW
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