St Ives Feels Strong In Spite of Steep Falls

Year-end turnover at St Ives plc has fallen - down £26m - whilst pre-tax profits have steeply fallen from £34.6m to £14.9m.

Year-end turnover at St Ives plc has fallen - down £26m - whilst pre-tax profits have steeply fallen from £34.6m to £14.9m.

But in the year ended 30 July 2004 the group reported an underlying pre-tax profit of £39.7m (2003: £36.9m) - an increase of 7.5 per cent - before exceptional items and the amortisation of goodwill was accounted for.

St Ives has declared final dividend maintained at 12.15p per share.

Turnover for the year ended July 2004 was £410.3m, compared to £437.2m in 2002-2003, whilst pre-tax profit was £14.9m (2003: £34.6m).

Commenting on the results, chairman, Miles Emley said: "The results for this year are a creditable performance, achieved in spite of continued challenging conditions in most of our markets, and reflect the benefits of the actions we have taken to reduce costs over recent years.

The business remains strongly cash generative and our financial position is robust.

We believe that St Ives is well placed to emerge strengthened from the current turbulent conditions." The group believes the results reflect the benefits of its reduced cost base.

The exceptional charge of £9.9 million (excluding goodwill impairment of £13m) mainly represented the costs of the closures at Rochester and Marlton in the USA and of transferring manufacturing operations from Tunbridge Wells to Crayford (UK), together with redundancy costs arising from restructuring as a result of investment or consolidation of operations in other parts of the group.

In its book market, St Ives said demand remained robust, where paperback sales were particularly strong.

St Ives said it produced a high proportion of best selling titles, which it was able to win because of its ability to provide initial orders on very short lead-times and to deliver quick reprints when required.

The volume of books increased for which the group provided direct delivery to retail chains and other ancillary services.

Its continuing investment in systems and equipment had enabled the company to reduce cost as well as enhance service.

In other markets, sales of more specialist, shorter-run product grew.

However, web offset markets in all St Ives' geographic areas was again characterised by over-capacity and fluctuating demand.

Pricing for longer-run, non-time-sensitive products was especially competitive.

While there was a modest improvement in levels of corporate finance activity in the USA, that market remained very quiet in Europe and the UK and pricing was extremely competitive in both corporate financial and annual reports markets.

The market for company annual reports also became more competitive, as a number of customers reduced product specifications and non-specialist commercial printers sought to enter the market.

In UK direct response and commercial print St Ives grew sales of specialist, personalised direct mail pieces, particularly for the financial and government sectors of the market, as the company continued to concentrate on customers with demanding service requirements.

Winning longer-run catalogue and brochure work at prices that generated an economic return proved challenging in the face of continuing over-capacity.

However, as a result of changes in St Ives' mix of work, it was able to improve profitability.

Commercial markets remained subdued in Germany.

Losses at Johler Druck were reduced through improvements in the work mix and more concentration on parts of the market with a greater requirement for more specialist print.

Utilisation improved modestly.

In USA markets demand was weak and pricing pressure continued.

Following the closure of St Ives Inc Case-Hoyt, which was announced in January, St Ives had been able to retain a proportion of its work for production at its other facilities, thereby improving utilisation.

It also produced increased volumes of work requiring additional fulfilment and logistics, which helped to improve returns.

A slight improvement in activity levels in corporate finance markets in the USA was sustained through the second half of the year.

In the USA, as a result of more short-run work and increasing use of digital printing, as well as electronic distribution, there has been no increase in demand for offset printing, despite the underlying increase in activity.

Accordingly at the end of the year St Ives closed its facility at Marlton.

In the UK, magazine paginations were volatile but generally subdued with no evidence of a recovery in advertising expenditure.

That, coupled with over-capacity, led to continuing pricing pressure, especially in the longer-run, less time-sensitive part of the market, with the result that longer-run equipment was under-utilised.

Shorter-run titles were generally more resilient.

The company said it has taken steps to reduce cost and improve productivity at longer-run plants.

The magazine market in the USA faced similar conditions to those in the UK, with fierce price competition prevailing for longer-run titles in particular.

The company said that there had been greater concentration on specialist packaging and DVD related products that offset reduced demand for standard music CD products.

As already announced, the lack of growth in St Ives' markets made it necessary to transfer operations from Tunbridge Wells to its modern facility at Crayford to achieve improved utilisation and to reduce cost.

Since the year end St Ives had acquired the whole of the issued share capital of SP Group, a Midlands (UK) company that supplies a full range of point-of-sale material and services to multiple retail chains and major brand companies.

SP's product range and emphasis on service made it an excellent fit with those of the group's existing businesses that serve those customers and markets.

Back to top