Preliminary Results for the year ended 28 December 2002
4imprint Group plc, the leading global distributor of imprinted promotional products, today reports its unaudited Preliminary Results for the year ended 28 December 2002.
· Pre-tax profits before exceptional items and goodwill amortisation up by 7% from £2.44 million to £2.61 million
· Dividend for year maintained at 2.25 pence per share
· Strong year-end net cash position of £4.83 million
· Turnover maintained by UK Corporate Programmes and more than tripled in US Corporate Programmes
· European Premiums group produced outstanding performance
· MFR pension fund contributions to be increased from £0.12 million to £1.44 million per annum from May 2003
· Several account wins, including Barclays, Cessna and Toro. Appointed preferred supplier to GlaxoSmithKline – Consumer Division, Kimberly-Clark Europe and Campbell’s.
· European Premiums unit’s best year since joining Group
· US Premiums team topped the US$1 million revenue mark from a standing start
· US Partner Services franchise operation maintains ongoing programme of reducing the overall numbers but increasing the quality of the remaining owners in the network
Commenting on the Results, Dick Nelson, Chief Executive of 4imprint Group plc, said:
“An excellent performance from our European Premiums unit, combined with consistent bottom-line results in our US Direct Marketing Group enabled us to more than offset weakness in our Manchester operation and achieve a 7% increase in profit before tax, exceptional items and goodwill amortisation to £2.61 million, up from £2.44 million the prior year.
“We believe it will be difficult to expect any significant rebound in the general advertising markets for as long as the current geo-political uncertainty remains. However, the Group has managed to maintain its turnover and increase profits before exceptional items and goodwill amortisation over the past twelve very challenging months. Aside from the increase in pension costs, we expect to show additional progress in 2003.”
- Ends -
For further information, please contact:
4imprint Group plc,
Dick Nelson, Chief Executive, Tel: +44 (0) 20 7444 4140,
Email: firstname.lastname@example.org (today only)
Henry Harrison-Topham / Russell Elliott, Tel: +44 (0) 20 7444 4140,
Advertising and marketing businesses worldwide have continued to experience a tough environment throughout 2002. I am pleased to report that, despite these difficulties, sales were increased marginally and profit before goodwill amortisation, exceptional items and tax was ahead of 2001. We ended the year with an increased net cash balance of £4.83 million and we are proposing a final dividend of 1.25 pence per share, to give a total of 2.25 pence per share for the year (2001 - 2.25 pence per share).
The pattern of business in 2002 was an encouraging increase in sales to large international companies, where we have continued to win significant new contracts. We have seen a particularly good performance in PPI, our European Premiums unit based in London, while sales at the smaller end of our target markets have declined a little. Our CEO Dick Nelson has provided a much fuller analysis in his report.
In the Interim Results on 24 September 2002, we announced that we were experiencing difficulties in collecting monies owed by certain franchise owners in our AIA operation in the US. An exceptional provision of £2.37 million was made predominantly against potentially unrecoverable debts and a thorough review of franchise performance and control systems was conducted. Consequent changes to improve controls and raise the overall quality of the Franchise Owner base were implemented during 2002. We have now recruited David Woods, a highly experienced and well-reputed Chief Executive from within the promotional products industry, to run this operation for us. I am satisfied that future prospects in this business are much improved.
Our Final Salary Pension Fund, closed to new entrants, is a legacy of former activities in the printing industry. For many years the fund was in substantial surplus, but falls in the stock market over the last two years have contributed to a deficit under FRS17 of £11.56 million after deferred tax (2001 - £2.40 million). We continue to keep the situation under review with our pension advisers and the trustees. The short-term impact of this deficit upon the Group will be an increase under MFR (Minimum Funding Requirement), with effect from May 2003, in our contributions and pension charge from £0.12 million to £1.44 million (before tax relief) on an annualised basis. Future contributions would be mitigated by any recovery in the value of the equity element of the investment portfolio. Further details are set out in the notes to the accounts.
In December 2002, Nicholas Wrigley retired from the Board as a non-executive director after seven years with the Group. His experience of the City has been of great value to us, especially during the period of re-organisation of our activities. The whole Board joins me in offering him our thanks and good wishes for the future. I am pleased to welcome Peter Evans, a former senior partner with KPMG, to take his place. I would also like to record special thanks to our Group Finance Director Craig Slater, who has taken the added responsibility of leading the team at our Manchester based operation in recent months. As a result, we have now strengthened our Central Finance Department by the promotion of David Seekings to Company Secretary. David, based in Oshkosh, is also Chief Financial Officer for our US operations and previously served as Group Financial Controller at our Head Office.
Finally I would like to thank all of our staff for their continuing efforts throughout this difficult time for the business. Their many achievements are reflected in our growing list of top-class clients and our underlying financial strength.
13 March 2003
Chief Executive’s Review
An excellent performance in our European Premiums unit, combined with consistent bottom-line results in our US Direct Marketing group, enabled us to more than offset weakness in our Manchester-based Broadway operation. Consequently, we achieved a 7% increase from £2.44 million to £2.61 million in profits before tax, exceptional items and goodwill amortisation.
As reported in our Interim Results, we identified areas of control weaknesses in AIA, which resulted in the recognition of an exceptional provision of £2.37 million. Following a thorough review of the business, we implemented substantial changes to the control environment, the management and the recruitment emphasis to tighten procedures and raise the quality of our Franchise Owner base.
As a result of the closure of our Woking facility and its problematic integration into our Manchester business, performance at Broadway was below expectations, which led to a fundamental review of the operation. Under the direction of Craig Slater, Group Finance Director and interim Managing Director of Broadway, the structure and strategy of this unit have now been clarified and we expect improved results in 2003.
The Oshkosh operation continues to develop as the resource centre for the US operations and will house most of the AIA back office functions by mid-year 2003. Here, excellent top line performance in the US Corporate Programmes group offset a decrease in Direct Marketing sales during 2002.
We continue to focus on tight cash management across all of our businesses and this, in conjunction with the more rigorous approach adopted towards Franchise Owner recruitment in AIA, has enabled us to produce a strong net cash position by the year-end of £4.83 million (2001: £3.30 million).
Our Corporate Programmes channel designs, sources, manufactures, warehouses and distributes products for major clients, which include Barclays, Cessna, British Airways and Union Pacific.
The UK Corporate Programmes group maintained its turnover in 2002 despite the fact that many large companies were looking to reduce their advertising spend. While the emphasis was primarily on overcoming operational challenges associated with the integration of the Woking facility into Manchester, we had several account wins in the year including Barclays, Sport England and The Number.
US Corporate Programmes revenue more than tripled over the prior year as the investment made in this channel began to produce results. We had over a dozen wins including Cessna, BearingPoint (formerly KPMG Consulting), VNU (parent company of ACNielsen), Airgas, Toro and Wellmark. The US team continues to carry out our strategy of using AIA certified franchise owners to service large corporate clients at a local level, with the Oshkosh facility providing merchandising, marketing, technology and fulfilment support. Currently, around 60% of the orders we receive from our corporate programme clients are sourced via the Internet stores we create for them. As noted at the Interims, we have invested significant resources to build this channel over the past two years and expect it to make a positive contribution in 2003.
Our Direct Marketing group reaches customers and prospects via eight million catalogues, more than a quarter of a million product mailings, hundreds of thousands of e-mails and tens of thousands of telephone calls.
In response to the weakness in both the UK and US advertising markets, we chose to take a more conservative approach to prospecting in 2002 and reduced our catalogue mailings accordingly. As expected, turnover was down in both direct marketing units compared to the prior year. The team further expanded the e-mail marketing programme launched last year and was therefore able to limit the decrease in the channel’s turnover, compared to 2001, to 15% even though we mailed 25% fewer catalogues. Orders received via the Internet still account for approximately 20% of the Direct Marketing group’s total intake. Our 2003 plan calls for increased mailings in both the UK and the US, as well as an expansion of our outbound telemarketing activity to existing customers in the US based on the success of the tests we conducted last year. This channel remains highly profitable and cash generative overall.
Our Premiums group designs, sources and arranges offshore manufacturing of large one-off imprinted promotional product orders most often used by larger companies in consumer promotions.
The European Premiums group, with sales offices in London, Bristol and Paris, and a buying office in Hong Kong, had its best year since joining the Group. The group expanded existing client relationships, which included better than expected results from their airline amenity kit business, and capitalised on a revitalised new account development initiative that began at the end of 2001. As forecast, there was only a slight lift from the Football World Cup; however we do expect something more from the EURO 2004 football competition. In addition, the team has secured preferred supplier status with several major clients in the year, including Diageo, Weetabix, BBC and United Biscuits.
From a standing start at the beginning of the year the US Premium team crossed the million-dollar revenue mark and is looking for a solid increase in 2003 as more AIA franchise owners are becoming interested in selling Premiums.
Our Partner Services group leverages our bespoke enterprise operating systems and industry-leading supply chain management processes into other channels of distribution.
As reported in the Interim Results, we identified areas of control weaknesses in AIA, our US franchise operation, which led to an exceptional provision predominantly against bad debt of £2.37 million during the second quarter of 2002. A fundamental review of the operation was completed, which resulted in a number of changes including the installation of David Woods, an industry veteran, as CEO of AIA. David joined us at the beginning of February 2003 and will be responsible for all operational aspects of the business except for recruiting, which will remain under founder Dan Carlson’s direction.
System Wide Billings in AIA increased to US$120 million (US$110 million in 2001), while operating expenses were held at a similar level to prior year. The transition of owners to the OASIS system slowed slightly in the last quarter as franchisees found it challenging to service customers in the busy holiday gift season and also have the time to prepare for conversion to the new system. Momentum has returned to this effort which we now anticipate will be largely completed by the end of the first quarter of 2003. At present, over 75% of our sales are conducted on the new system.
In keeping with our plan that was also announced in the Interims to enhance the quality of the franchise owner business, we have raised the standards for joiners and have begun to remove from the network those owners who are under performing or non-compliant. As expected, although we added 121 new owners in 2002, there was a net decrease in the total of active franchisees in the system over the last couple of months. This reduction in quantity and increase in the quality will continue through much of 2003.
The UK Field Sales group had a challenging year in 2002, but progress is being made as we are now serving smaller clients with our Direct Marketing team, thereby allowing our field salespeople to focus on medium and larger accounts. Our recent appointment as preferred supplier by GlaxoSmithKline – Consumer Division is further evidence of the success of this strategy.
We believe it will be difficult to expect any significant rebound in the general advertising markets for as long as the current geo-political uncertainty remains. However, the Group has managed to maintain its turnover and increase profits before exceptional items and goodwill amortisation over the past twelve challenging months. Aside from the increase in pension costs referred to above, we expect to show additional progress in 2003.
Chief Executive Officer
13 March 2003
Full results available at www.4imprint.com or www.4imprint.co.uk
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