GRA.L Regulatory News (GRA)

5 Jun 2007 07:03

Printing.com plc05 June 2007 FOR RELEASE 7.00AM 5 June 2007 PRINTING.COM PLC ("Printing.com or "the Group") Specialist retail chain with 205 Outlets opened and pending across the UK and Ireland Preliminary Results for year ended 2April 2007 2007 2006 Change Total Retail Sales £21.28m £18.22m +16.8% Turnover £12.14m £11.88m +2.2%Operating Profit £2.20m £1.83m +20.2%Profit Before Tax £2.33m £2.24m +4.0%Earnings Per Share - Basic 3.60p 3.58p +0.6%EPS - Fully Diluted 3.43p 3.40p +1.0%Dividend 2.50p 1.75p +42.9%Capital expenditure £3.94m £0.97m +306.2%Net cash £2.86m £3.45m -17.1% * Record network sales and profit * Number of outlets up from 166 to 205 * Manchester Hub capacity increased from £20-£25 million to £40-45 million * New Zealand licence owner operational, expanding and generating royalties * Expect to see material growth across UK and Irish network * Successful launch of "Websites by Printing.com" * French initiative about to be launched to boost Hub volume * Significant acceleration of dividend reflects continued confidence For further information: Printing.com plcTony Rafferty (Chief Executive) 07966 517 336Alan Roberts (Finance Director) 0161 848 5713 Cubitt ConsultingBrian Coleman-Smith / Leanne Denman / James Verstringhe 020 7367 5100 Background note: Printing.com Printing.com offers a broad product range including leaflets, booklets,postcards, promotional cards, invitations, letterheads and business cards toconsumers and small and medium sized companies. Unlike its competitors,Printing.com Stores and Franchises do not depend on any printing equipment onlocation. The Company's printing and ancillary equipment is based at thecentralised Production Hub with the head office in Manchester. All work isproduced in full four colour rather than two colour. Delivery to the customer isusually within three days. The printing sector has traditionally been served bysmaller printing companies or other On Demand Printers and is estimated to beworth some £1 billion. Printing.com has three routes to market: Franchise Stores, Bolt-on Franchisesand Company owned Stores. A complete list of Printing.com's Outlets is included at the end of the release. PRINTING.COM PLC ("Printing.com or "the Group") Specialist retail chain with 205 Outlets opened and pending across the UK and Ireland Preliminary Results for year ended 2April 2007 CHAIRMAN'S STATEMENT TRADING RESULTS At first glance the pre-tax profit of £2.3m (2006 restated: £2.2m) could beinterpreted as indicating just a year of consolidation. However we believe thatmore careful scrutiny indicates that momentum is continuing to build in yourCompany, albeit the rate of growth is marginally below what we had expected.Nevertheless the year exhibited growth in terms of Total Retail Sales ("TRS")through the network to £21.3m (2006: £18.2m), an increase of 17%. Additionally, Operating Profit showed a material increase to £2.2m (2006:£1.8m). The increase in TRS is not reflected in the turnover of £12.1m (2006:£11.9m), due to the increased number of stores now under franchised ownershipwhereby only the 'wholesale' component of each printing order is counted towardsyour Company's turnover. CASH Your Company finished the year with cash reserves of £2.9m against £3.5m theprevious year, reflecting the timing of corporation tax which now requires us tomake advance payments on account whilst also, in this instance, being requiredto make payment for the previous year. We also paid dividends of £828,000 (2006:£469,000) and invested £3.9m in plant, equipment and infrastructure, of which£2.9m was funded by a finance lease. DIVIDEND Shareholders will recall that when your Company went onto the AIM market, theBoard set out its aspiration to follow a progressive dividend policy. In linewith this strategy, and taking into account our strong cash reserves, your boardis proposing a final dividend of 1.9p per ordinary share to be paid on 9 August2007 to shareholders on the register at the close of business on 29 June 2007.Making a total dividend for the year of 2.5p per ordinary share (2006: 1.75p). PEOPLE AT PRINTING.COM Across the Printing.com network, it is the hard work and endeavours of ourfranchisees, the people who work alongside them, and our direct employees thatensures your Company delivers an excellent front line service to Printing.com'sclients. On your behalf, I thank them all for their hard work and would payparticular tribute to those in the production department at our Manchester Hubfor the way they have risen to numerous challenges during the Hub expansionprogramme. OUTLOOK Importantly, in the year under review, significant infrastructure was put inplace that should position your Company for further growth over the comingyears. At the Manchester Hub, capacity was increased from £20-25m to £40-45m andthe first International Master Licence was granted for New Zealand. This allowsa printer operating in that marketplace to utilise Printing.com's, Flyerlink(R)software, its systems and collateral in return for royalty payments. Over the coming year we expect to see material growth across our UK and Irishfranchise network that feeds our Manchester Hub. Having invested £3.9m in theyear under review, we once again have an abundance of unutilised capacity.Looking ahead, as volumes increase we would expect to see a proportionate netincrease in your Company's EBITDA. As a rule of thumb, assuming we are able tomaintain or improve current operational metrics, we would expect EBITDA toincrease by around £1m for each £5m of additional TRS. In the UK, we have launched our first 'new media' offering, 'Websites byPrinting.com'. Following significant development over the past year, themajority of franchises are now trained in the service and the first websites arenow live. We believe there is great scope for this offering to further assistour clients to better promote their own businesses, and for our franchisees andyour Company to generate incremental profits. In 2003 we commenced shipping to the Republic of Ireland to test our systemswithin the Euro zone, and this has proved very successful. In September thisyear we will begin a similar operation in France. Over the past 18 months wehave invested in this new initiative and firmly believe that, by distributingvia Bolt-on Franchise partners, a great opportunity exists without the need todirectly invest in stores. The gestation period for the granting of international Master Licences appearslonger than we would have hoped and its launch more costly than anticipated.However, the success that has been achieved to date in New Zealand, coupled withthe granting of the second such agreement and the progressed negotiations in theUS, gives us confidence that in the years to come we will be able to exploityour Company's intellectual property. Collectively, we believe these initiatives herald an exciting time ahead foryour Company, reflected by our confidence in the acceleration of the dividend.In the current year, we are cautiously optimistic that the International MasterLicence programme will make a material contribution to your Company's profits. George HardieChairman5 June 2007 CHIEF EXECUTIVE'S STATEMENT ESTATE DEVELOPMENT 1 June 2007 31 March 2007 31 March 2006 Company Owned Stores 2 2 6Franchise Stores (Open &Pending) 47 47 42Bolt-on Franchises 156 149 118 ---------------- ---------------- ---------------- 205 198 166 ================ ================ ================ As you will see from the table above, once again, the Printing.com estate hasexhibited material growth and, indeed, during the year became the UK's largestprinting network, measured by the number of outlets. In terms of network revenuewe estimate that today Printing.com is still only a third of the size of thelargest competitor, reflecting the scope for ongoing growth. Our objective forthe UK and Ireland remains the establishment of a network of circa 50 Territoryand over 350 Bolt-on Franchises. We favour this approach, as it enables your Company to leverage the endeavoursof established entrepreneurs, who in most instances, would not consider atraditional franchise format. Of note, during the year, three established andsuccessful Bolt-on Franchisees, elected to also establish Territory Franchises.We believe this reflects a most positive endorsement of our business model. The increase in the number of Territory Franchises includes the transfer of theBirmingham Centre and Luton/Hertfordshire Territory Franchises via ManagementBuy Outs, and the Oxfordshire Territory via a Management Buy In. Indeed, theOxford and Luton outlets, having previously been bought back, were once againreturned to franchise ownership. Across the United Kingdom we now have only a handful of empty TerritoryFranchises. Accordingly, our expenditure on marketing this franchise format, atnational exhibitions and the like, has been scaled back. Previously we reportedthat we had enlarged the geographic area of certain Territory Franchises toprovide more scope for successful exponents to establish additional Bolt-onFranchises. We have continued to apply this strategy in an additional fiveinstances. The Bolt-on Franchise, in which an established printing business or graphic/webdesigner utilises the Printing.com brand and offering in tandem with theirexisting business, continues to go from strength to strength. Whilstindividually a typical Bolt-on Franchise contributes less revenue than astand-alone store, this format allows the propagation of Printing.com intosmaller towns and districts than would otherwise be possible. As the Printing.com offering is only a component of the Bolt-on Franchisee'sbusiness, inevitably from time to time we experience some 'churn' in the Bolt-onFranchise estate where, for instance, the franchisee elects to follow analternative overall strategy. Where this occurs we endeavour to seek acommercial resolution and to appoint an alternative local Bolt-on.Notwithstanding this inherent churn, during the year under review we saw a netincrease of 31 Bolt-on Franchises. During the current year our objective is to further increase the net Bolt-onestate by a minimum of 50 outlets. We believe that this is realistic as ourTerritory Franchisees' experience of marketing the Bolt-on franchise opportunitycontinues to develop. THE PRODUCTION HUB AND INFRASTRUCTURE The year under review saw the Manchester Hub change beyond recognition ascapacity was increased from £20-25m to £40-45m. The addition of a sizeable mezzanine floor added a further 745 sq. m. ofproduction area. A swimming pool sized recess was also constructed toaccommodate the new 'double-decker' printing press. Building these structureswhilst maintaining an undisrupted supply to our franchisees and customersrepresented a significant challenge that your Company overcame. During the year we also developed and commissioned Smartpack, a bespoke joblogistics/sortation system. Smartpack is driven by Printing.com's proprietarysoftware Flyerlink and groups together the discrete 'bundles' of product thatcomprise each order. Previously this manual process was not only labourintensive but also one of the most fallible stages of production. With Smartpack, the individual product bundles are routed automatically from the'Guillotines' to a designated packing chute, allowing all components of thegiven order to be consolidated. From there, they can be rapidly packed, andautomatically labelled, weighed and sealed before shipping. Last minute changesto information such as delivery instructions are again routed directly, viaFlyerlink, to the Smartpack chutes Introducing this infrastructure is an important step in ensuring the scalabilityof the Manchester Hub and its ability to suitably support our franchises as wegrow. INTERNATIONAL EXPANSION In November 2005, we set out our plans to expand Printing.com beyond the UK andRepublic of Ireland by licencing our systems, software, brand and reputation toprinters in other countries wishing to pursue a similar business model. We alsoset out the potential revenue streams for the Master Licence Agreement ("MLA")comprising of an initial licence fee and ongoing royalties. During the year under review we granted our first MLA, for New Zealand. Thislicence was granted to a commercial printer in the country's capital, Wellington. This business, aside from its general printing activities, had established anetwork of 14 outlets supplying a service similar to Printing.com. We believethat the rationale for them entering into the MLA is centred on the access thatit gives to the Flyerlink software and other extensive Printing.com collateral. Following extensive training in the UK, Printing.com supported the launch of thesystem in New Zealand. Since then the New Zealand network has expanded to 23(open or pending). The estate development has centred on the successful launchof the New Zealand Bolt-on Franchise initiative. The company is optimistic that,moving forward, the estate will continue to grow. It was previously reported that MLA Options had been granted for both Poland andAustralia. The Polish Option has since lapsed. The New Zealand MLA owners, theprevious grantee of the Australian Option, have elected to focus their strategyon their domestic market - accordingly the Option did not progress. However, anew Option has been granted over Australia to a company with whom we previouslyheld extensive discussions. During February 2007, a second MLA was granted. In this respect, a programme ofextensive UK based training has now been completed, with the delivery of thelocal component scheduled for late summer 2007. As the MLA is granted to arelatively small country in terms of population (but with an affluent economy),at this juncture we are reserving its identity so as not to detract from theforthcoming launch. In October 2006, Printing.com attended the Graph Expo printing exhibition inChicago, US. Following on from this, a number of potential partners have madevisits to the UK and vice versa. Since then we have entered into a period ofexclusive discussions with one prospective partner which may or may not resultin the grant of a formal Option or MLA. Discussions continue to progress with prospective partners in other countries. 'WEBSITES BY PRINTING.COM' The Printing.com structure essentially provides the architecture to vendservices, in addition to printing, to the highly fragmented SME marketplace. The essence of 'Websites by Printing.com' is a design, build and hosting servicepositioned between the numerous DIY offerings on the web and the entry-levelservice available via a typical small business website designer. It is expectedthat most websites will be offered in the range of £400 to £600. The service differentiates itself for the franchisee, in that no specificknowledge of HTML or other website development languages is required. For theend user client the differentiation is the inclusion of an 'Update Centre'allowing the end user to update their websites without the delay, expense orinconvenience of involving a website designer. The launch of 'Websites by Printing.com' follows the acquisition in July 2006 ofcertain intellectual property from Website World Limited for a nominal sum withan earn-out provision. Website World had previously offered a similar servicefrom retail premises in Sheffield. During the past four months we have delivered hundreds of classroom trainingdays to our Franchisees. This classroom training has been augmented with anextensive programme of field support by your Company's Development Managers. The service and the functionality that it offers has been well received by thePrinting.com franchise community and, whilst at an early stage, the firstpaid-for websites have now been produced with early indications showing them tobe well-received by the clients. Moving forward, we believe that this service will offer a useful additionalrevenue stream for our franchisees. In common with printing, they pay a transferprice for each website. We believe that not only will this service add to theappeal of a Printing.com franchise, but will become a material incrementalrevenue stream for your Company. PRINTING.COM IN FRANCE Whilst we intend to develop most international territories via the grant of anInternational Master Licence, the proximity of France, coupled with the adventof Flyerlink's multi-lingual capabilities will enable us to enter this market inSeptember 2007. Over the past year our research into the marketplace, an exploration ofpotential Master Licence opportunities has provided a good insight. We intend toexploit this opportunity by granting Bolt-on Franchises in a similar manner tothe UK. At this stage, we do not intend to open either directly owned stores orterritory franchises but believe that many proprietors of Graphic/Web Designerswould benefit from the Printing.com offering. To exploit this opportunity weassembled a team in December 2006 including a seasoned Printing.com DevelopmentManager who is fluent in French, and a Manager from a French competitor. Having been thorough in our appraisal of the market and by partnering withestablished French businesses, we are optimistic that this initiative will provesuccessful and drive more volume through your Company's Manchester Hub. Movingforward, we expect that the business will be bought out, production moved to thenew owner's facility in France and operate in a similar manner to the NewZealand Master Licence, with your Company receiving royalties. CURRENT TRADING Post the start of the current financial year we are pleased to report thattrading volumes are ahead of the same period in the previous year and broadlyspeaking in line with the Company's internal budget. During the same period anadditional 8 Bolt-on Franchise agreements have been completed with the pipelineproviding encouragement moving forward. Tony RaffertyChief Executive5 June 2007 FINANCIAL REVIEW TOTAL RETAIL SALES (TRS) TRS is the Company's key metric, being the retail price paid by the client, andprovides the clearest indication of the growth of the network. The ongoingdevelopment of Printing.com is clearly illustrated with TRS increasing by 16.8%to £21.28m (2006: £18.22m). In the period under review Franchised Outletsaccounted for 95% of TRS sales (2006: 84%). LIKE FOR LIKE TRS This metric reports on the like for like progress of our Territory Franchisees(or equivalent Company owned operations) that have operated for a minimum ofthree years. Therefore, the earliest figures that would be reported for aTerritory Franchise are it's third year versus it's second year. In presentingthese figures we believe that it is essential to consider both the performanceof the Store within the Territory Franchise and the growth in revenues from itsassociated Bolt-On Franchises. On this basis like for like growth during theyear under review was 13.4% (2006:17.6%) with 20 (2006:14) Territory Franchises(or Company owned equivalents) contributing to this metric. ACCOUNTING POLICY CHANGES Accounting standard developments have given rise to three changes in accountingpolicies which have resulted in a restatement of the accounts for year ended 31March 2006: each is covered separately in the report. They are revenuerecognition where, firstly, the policy for deferring licence income has beenadopted. Secondly, the net income from selling Company owned Stores has beentaken out of turnover and is now reported as other income. The adoption ofFRS20, the expensing of share based payments, has also resulted in a restatementof the 2006 report. In addition, the tax charge for 2006 has been amended to account for the taxcomputation error reported in January 2007. In the 2008 financial year the Group's internal reporting will be on a calendarmonth basis as opposed to the thirteen four week periods used in the past. Thiswill result in this year's interim report being for six months rather than fortwenty eight weeks. TURNOVER Overall turnover increased by 2.2% from £11.88m (restated) to £12.14m. At theend of 2006 three Company owned Stores and the Agency business were franchisedwhich had a negative effect on Company turnover, due to the loss of the retailmargin. However, this was compensated for through lower Company overheads.Network growth is essentially derived from adding Franchised outlets withadditional turnover being at 'wholesale' value. GROSS PROFIT The Company's simple definition of Gross Profit is turnover less directmaterials (including the cost of distribution, when made direct to customers). Gross Profit decreased by 2.5% from £8.34m (restated) to £8.14m. In percentageterms it reduced from 70.2% to 67.1% of turnover as more sales moved through thefranchise channels, at wholesale prices, where the retail margin is passed overto Franchisees who then, of course, incur the corresponding retail overheads. PRE-TAX PROFIT The Company recorded a pre tax profit of £2.33m (2006 restated: £2.24m) being19.2% (2006 restated: 18.8%) of Company turnover and 10.9% (2006 restated:12.3%) of TRS. We believe this sustained level of pre tax profitability, in bothabsolute terms and on these key metrics, validates our franchise centredstrategy. Through the period the Company's costs increased as the discrete itemsin the Hub expansion project came online. By the end of the year all of themajor items of plant had been commissioned and were operational. The effect of franchising Company operations in 2006 meant that overall staffcosts decreased in the year from £3.31m (restated) to £3.01m and fell as apercentage of turnover from 27.9% to 24.8%. The depreciation charge for the yearwas £1.08m (2006 restated: £0.79m) which rose through the year as new plant,associated with the major capital expenditure project, was brought on line. Those overheads directly related to Company owned retail operations, includingpayroll and depreciation, reduced from £1.78m to £0.78m or 15.0% of turnoverdown to 6.4%. This was essentially due to retail outlets previously owned by theCompany becoming franchised units. FRS 20 SHARE BASED PAYMENTS FRS20 was adopted when presenting the un-audited 2007 Interim financialstatements using a Black Scholes model to measure the fair value of share optionawards. Subsequent review of the complex nature of the schemes resulted in thedevelopment of a Monte Carlo model which, giving a more appropriate fair value,has been used to arrive at the charge for these options in the financial yearended 2 April 2007. The total FRS20 charge for 2007 is £114,000 (2006: £101,000 and 2005: £63,000)and is included in staff costs and other operating charges. See note 6 to thefinancial statements. OTHER INCOME / INTEREST RECEIVED AND CHARGED Other income, £141,000 for the year (2006 restated:£400,000) is the net incomederived from Franchising previously Company owned Stores after deducting the netbook value of assets, licence fees and any other charges relating to thetransactions. See note 7 to the financial statements. Interest received of £194,000 (2006:£141,000) reflects interest on the cashbalances held and interest charged to Franchisees on loans to them fromPrinting.com. Interest paid of £207,000 (2006:£134,000) increased because ofthrough the lease finance costs of elements associated with the Hub expansionproject. TAXATION The standard rate for tax remains at 30%. The charge for the current year is£0.72m or 31% of PBT (2006 restated: £0.66m or 29.2%). As reported in January 2007 a tax computation error notified to the company byBaker Tilly, its then auditors and tax advisers, has had to be accounted for inthis report. The error caused the Group's taxation charge for the two yearsended 31 March 2005 and 2006 to be understated by an aggregate of £205,000. The treatment in these financial statements in respect of this tax adjustment isa prior year adjustment. The impact of the prior year adjustment is to increasethe tax charge in the year ended 31 March 2006 by £113,000 and to decreaseopening profit and loss account reserves at 1 April 2005 by £92,000. EARNINGS PER SHARE (EPS) Basic EPS improved to 3.60p (2006 restated:3.58p), the weighted average numberof shares used was 44,730,883. Diluted EPS improved to 3.43p (2006 restated:3.40p), the weighted average number of shares used was 46,904,112. The yearclosed with 44,746,500 ordinary shares in issue. CASH FLOW At the year end the Company had cash balances of £2.86m (2006: £3.45m) and NetDebt of £0.23m (Net Funds 2006:£2.51m). Operational cash inflow increased to £2.99m (2006: £2.47m). Significant cashoutflow included the payment of £1.04m in corporation tax and an increase individends paid to £0.83m from £0.44m. CAPITAL EXPENDITURE The total expenditure for the year was £3.94m (2006: £0.97m). The major itemswere Software development and computing infrastructure £0.54m; and theProduction Hub expansion project £3.32m. Of the capital expenditure £2.96m wasfinance leased. SHARE CAPITAL AND SHARE OPTIONS Employees' options over 69,608 shares and Franchisee options over 10,000 shareswere exercised during the year. TREASURY POLICIES AND FINANCIAL RISK Surplus funds are intended to support the Group's short term working capitalrequirements. These funds are invested through the use of short term depositsand the policy is to maximise returns as well as provide the flexibilityrequired to fund on-going operations. It is not the Group's policy to enter intofinancial derivatives for speculative or trading purposes.Interest rate risk,liquidity risk and currency risk Interest rate risks are limited to the fixed element of finance lease or hirepurchase agreements. The Group uses leasing or hire purchase at periods of up to5 years to finance purchases of some of its assets where it is considered to bea more effective use of funds. Surplus funds are invested on a short term basis at money market rates and,therefore, such funds are available at very short notice. The Group has no overseas assets or liabilities, apart from minor trade relateddebtors and creditors, and thus any currency movements have no material impact INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) As a company listed on the UK Alternative Investment Market (AIM), the Groupwill be required to comply with IFRS in the interim financial statements for thesix months ended 30 September 2007 and thereafter. The Board intends to issue a"restatement report" in advance of the interim financial statements in line withbest practice. Alan Q. RobertsFinance Director5 June 2007 Group Profit and Loss Account for the financial year ended 2 April 2007 As restated Note 2007 2006 £000 £000 Turnover 1 12,136 11,879 Change in stocks of finished goods (20) 16 and work in progress --- --- 12,116 11,895 Raw materials and consumables (3,977) (3,557) Other external charges Staff costs (3,007) (3,308) Depreciation and other amounts written off tangible and (1,080) (794) intangible fixed assets Other operating charges (1,850) (2,402) --- --- Operating profit 2,202 1,834 Other Income 141 400 Other interest receivable and similar 194 141 income Interest payable and similar charges (207) (134) --- --- Profit on ordinary activities before 2,330 2,241 taxation Tax on profit on ordinary activities 2 (719) (655) --- --- Profit on ordinary activities after 1,611 1,586 taxation --- ---Earnings per ordinary share - basic 4 3.60p 3.58pEarnings per ordinary share - diluted 4 3.43p 3.40p The operating profit for the year arises from the Group's continuing operations. Group Balance SheetAt 2 April 2007 As restated Note 2007 2006 £000 £000Fixed assetsIntangible assets 105 68Tangible assets 6,621 3,855 --- --- 6,726 3,923 Current assetsStocks 104 124Debtors (includes £581,000 due after more than oneyear. 3,949 3,0842006: £561,000)Cash at bank and in hand 2,855 3,452 --- --- 6,908 6,660Creditors: amounts falling due within one year (4,189) (3,943) --- ---Net current assets 2,719 2,717 --- ---Total assets less current liabilities 9,445 6,640Creditors: amounts falling due after more than (2,170) (499)one yearProvisions for liabilities (448) (221) --- ---Net assets 6,827 5,920 --- --- Capital and reservesCalled up share capital 447 447Share premium account 3,833 3,823Merger reserve 211 211Other reserves 279 165Profit and loss account 2,057 1,274 --- ---Shareholders' funds 6,827 5,920 --- --- === Group Cash Flow Statementfor the financial year ended 2 April 2007 Note 2007 2006 £000 £000 Cash flow statement Cash flow from operating activities 6a 2,993 2,466 Returns on investments and servicing of finance 6b (13) 7Taxation (1,042) -Capital expenditure and financial investment 6b (906) (973) Dividends paid on shares classified in shareholders'funds 3 (828) (443) --- ---Net cash inflow before financing 204 1,057 Financing 6b (801) (469) --- ---(Decrease)/Increase in cash in the year (597) 588 === ===Reconciliation of net cash flowto movement in net debt (Decrease)/increase in cash in the year (597) 588 Cash outflow from increase in debt and lease financing 6b 811 527 --- ---Change in net debt resulting from cash flows 214 1,115 New finance leases (2,955) (45) --- ---Movement in net funds in the year (2,741) 1,070Net funds at the start of the year 2,508 1,438 --- ---Net (debt)/funds at the end of the year 6c (233) 2,508 === === Statement of total recognised gains and lossesfor the year ended 2 April 2007 Group As restated Company As restated Group Company 2007 2006 2007 2006 £000 £000 £000 £000 Profit for the year 1,611 1,586 1,032 746 --- --- --- ---Total recognised gains andlosses relating to financialyear 1,611 1,586 1,032 746Prior year adjustment (see note6) (508) (132) Total recognised gains andlosses since last annual reportand financial statements 1,103 900 Notes to the Accounts 1. Turnover and profit on ordinary activities before taxation The principal components of turnover are the design and production of publicityand marketing material, and franchise fee income. All of the turnover is in onecontinuing business segment being the development of the Printing.com Franchiseand originates in the United Kingdom and Republic of Ireland. The directorsbelieve that full compliance with SSAP25 'Segmental Reporting' would beseriously prejudicial to the interests of the Group as it would requiredisclosure of commercially sensitive information. Analysis bygeographical segment 2007 2006 £000 £000United Kingdom 11,548 11,404Republic of Ireland 522 475Rest of the world 66 - --- --- 12,136 11,879 === === 2 Taxation Analysis of charge in period 2007 2006 Restated £000 £000UK corporation taxCurrent tax on income for the period 492 679 Deferred tax (see note 20)Origination/reversal of timing differences 221 (24)Adjustment in respect of previous years 6 - --- ---Total deferred tax 227 (24) Tax on profit on ordinary activities 719 655 === === Factors affecting the tax charge for the current period The current tax charge for the period is higher (2006: lower) than the standardrate of corporation tax in the UK 30%,(2006: 30%). The differences are explainedbelow. 2007 2006 Restated £000 £000Current tax reconciliationProfit on ordinary activities before tax 2,330 2,241 --- ---Current tax at 30% (2006:30%) 699 672 Effects of:Expenses not deductible for tax purposes 13 16Capital allowances for period in excess of depreciation (123) (32)Other timing differences (97) 63Income not taxable - (33)Losses utilised - (7) --- ---Total current tax charge (see above) 492 679 === === It has been announced that the corporation tax rate applicable to the company isexpected to change from 30% to 28% from 1 April 2008. The deferred tax liabilityhas been calculated at 30% in accordance with FRS 19. Any timing differenceswhich reverse before 1 April 2008 will be relieved at 30%, any timingdifferences which exist at 1 April 2008 will reverse at 28% and, because of theuncertainty of the when the deferred tax asset/liability will reverse, it is notyet possible to calculate the full financial impact of this change.' 3 Dividends The aggregate amount of dividends comprises: 2007 2006 £000 £000 Final dividends paid in respect of prior year butnot recognised 559 221as liabilities in that yearInterim dividends paid in respect of the current 269 222year --- ---Aggregate amount of dividends paid in the financial 828 443year === ===Proposed for approval at Annual General Meeting (Not recognised at year end)Equity dividends on ordinary shares:Final dividend for 2007 1.90p (2006: 1.25p) 850 558 The £559,000 dividend proposed for the year ended 31 March 2006 has been accountedfor as a distribution in 2007 in accordance with FRS 21 Post balance sheet events. 4 Earnings per share The calculations of earnings per share are based on the following profits andnumbers of shares. 2007 2006 £000 Restated £000Profit for the financial year 1,611 1,586 === === Weighted average number of shares 2007 2006 No. of shares No. of sharesFor basic earnings per share 44,730,883 44,312,566Exercise of share options 2,173,229 2,304,496 --- ---For diluted earnings per share 46,904,112 46,617,062 === === 5 Reconciliation of movement in shareholders' funds Group Company 2007 2006 2007 2006 £000 £000 £000 £000 Restated RestatedProfit for the financial year 1,611 1,586 1,032 746Share based compensation 114 101 114 101Dividends on equity shares (828) (443) (828) (443)Proceeds from issue of shares 10 58 10 58 --- --- --- ---Net addition to shareholders' funds 907 1,302 328 462Opening shareholders' funds 6,264 4,823 4,912 4,469Prior year adjustment (344) (205) 32 13 --- --- --- ---As restated 5,920 4,618 4,944 4,482 --- --- --- ---Closing shareholders' funds 6,827 5,920 5,272 4,944 === === === === 6 Notes to the statement of cash flows 2007 2006 £000 £000a Reconciliation of operating profit to net cash inflow from operating activities Operating profit 2,202 1,834 Other income 141 400 Share based compensation 114 101 Amortisation 40 39 Depreciation 1,040 755 Decrease/(Increase) in stocks 20 (16) Increase in debtors (865) (934) Increase in creditors 323 284 (Profit)/Loss on sale of fixed assets (22) 3 --- --- 2,993 2,466 === === b Analysis of Cash Flows For Headings Netted Off in the 2007 2006 Cash Flow Statement £000 £000 Returns on investments and servicing of finance Interest received 194 141 Interest paid (1) (1) Interest element of finance lease rental payments (206) (133) Net cash (outflow)/inflow from returns on investments (13) 7 and servicing of finance === === c Analysis of net (debt)/funds At Cash flow Other At 1 April £000 non cash 2April 2007 changes 2006 £000 £000 £000 Net cash: Cash at bank and in hand 3,452 (597) - 2,855 Debt: Finance leases (944) 811 (2,955) (3,088) --- --- --- --- Net (debt)/funds 2,508 214 (2,955) (233) === === === === 7 Basis of the Preliminary Announcement The preliminary financial statements for the financial year ended 2 April 2007were approved by the Board of Directors on 5 June 2007. The financialinformation set out above does not constitute the Company's statutory accountsfor the financial years ended 31 March 2006 or 2 April 2007 but is derived fromthose accounts (subject to restatements). Statutory accounts for the financialyear ended 31 March 2006 have been delivered to the Registrar of Companies. Theauditors have reported on those accounts; their reports were unqualified and didnot contain statements under section 237(2) or (3) of the Companies Act 1985.The statutory accounts for the financial year ended 2 April 2007 will bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. Branch Network Customer Region Town Post Code Sign It Central England Beeston, Nottingham NG9 2AYGraphic Results Central England Belper DE56 1AYEast Birmingham Store Central England Birmingham B26 3JRSouth West Birmingham Store Central England Birmingham B16 9RDBirmingham Store Central England Birmingham B5 4JLArtichoke Design Central England Birmingham B18 6NNKnight Mason Central England Broughton Astley LE9 6RDCoventry Store Central England Coventry CV2 4BEImage IT Central England Daventry NN11 8RYSportwise Central England Derby DE1 3QBF7 Design Central England Digbeth B16 0JLHussellworks Central England Halesowen B63 3HRClientel Central England Kibworth LE8 0HSLeicester Store Central England Leicester LE1 1LBThe Ideas Room Central England Leicester LE3 0DLTrident Design Central England Lutterworth LE17 4EEPenzNPrint Central England Market Rasen LN8 3ENFor Colour Central England Newark, Nottingham NG24 1LENorthampton Store Central England Northampton NN1 5QJCustard Creative Central England Northampton NN3 6WLNottingham Store Central England Nottingham NG1 6DQOxford Store Central England Oxford OX2 7HTPeterborough Store Central England Peterborough PE2 8ANIdeas Taking Shape Central England Rugby CV21 2SDMailboxes Central England Shrewsbury SY1 1HNBoomerang Central England Solihull B93 0LYHigh Tide Central England Sutton Coldfield B18 6NFRuntime Printers Central England Telford TF2 8AJAlbry Printing Company Central England Wallingford OX10 9DAWolverhampton Store Central England Wolverhampton WV1 4BLRed Hot Media East Lowestoft NR32 1EBGoldengate East Suffolk IP30 9QSKK Print Ireland Athlone - County WestmeathDublin Store Ireland Dublin Dublin 2North Dublin Store Ireland Dublin Dublin 7Creative State Ireland Naas - County KildareTMC Ireland Tullow - County CarlowThomas Hughes Ireland WexfordCentral London Store London Baker Street NW1 6UYAlpha to Omega London Beckenham BR3 3HXPlug & Play London Bramley GU5 0DYShiver London Camden NW1 0AGSource Grafic Design London Catford SE6 1TJTCG London Clapham SW11 1TNCity & Clerkenwell Store London Clerkenwell EC1M 5QAPrint Express London Colindale NW9 5DLLast LLP London Docklands E16 E16 1AGEaling Store London Ealing W13 8SB0800 Promote London Finchley N3 1TRFull Colour Store London Fulham SW6 6SEGuildford Store London Guildford GU1 3HYHampstead Store London Hampstead NW3 5HSHarrow Life London Harrow HA1 2EADigipics London Ilford IG1 4DULondon Office Services London London W1G 8JRMarmoset Media London London SW17 SW17 7PJExpocentric - Dover London Mayfair W1X 3PHPrinthouse London Nottinghill W11 3HTOrpington Store London Orpington BR6 0JYReading Store London Reading RG1 4QALondon Print Compamy London Shaftesbury Avenue WC2H 8EBDNA Design London Slough SL1 1XWExpocentric - Wardour London Soho W1V 3AUToppers London Stevenage SG1 3HRAK Design & Print London Swiss Cottage NW3 6JPKink Design London Thornton Heath CR7 7AXTalon Graphics London Thornton Heath CR7 7JWSnow Media London Tooting SW17 0RGWernham Printers London Tottenham N17 6QDWatford Store London Watford WD17 1RAPrinter Net Services London Wimbledon SW19 8TYKaleidoscope Midlands Leamington Spa CV31 1BZOzmedia Print Midlands Loughborough LE12 8JHPewter Design Midlands Market Harborough LE16 7DSSt Ives Quickprint Midlands St Ives PE27 3WSSmart Cards International North East Beverley HU17 0TBPrint House Direct North East Bishop Auckland DL14 0LZBradford Store North East Bradford BD1 5BDJohn Siddall North East Cleckheaton BD19 3JLRT Design North East Consett DH8 6BPPro-Actif Communications North East Darlington DL3 7TDDoncaster Store North East Doncaster DN3 3TWWeb Rocket Design North East Durham DH1 1RFHull Store North East Hull HU1 2AGRyedale North East Kirbymoorside YO62 6YBLeeds Store North East Leeds LS1 3DLThe Factory North East Leeds LS12 2DSPrint Ideas North East Leeds LS8 2HUMiddlesbrough Store North East Middlesbrough TS1 1LYNewcastle Store North East Newcastle NE1 5EEDirect Business Products North East Newcastle NE12 9UPMultiprint North East Normanton WF6 2AFViacreative North East Redcar TS10 5SHBluprint North East Rotheram S60 8LZSheffield Store North East Sheffield S1 4GFEidos North East Slaithwaite HD7 5BBMarckell Business Solutions North East South Shields NE33 1TLMaskerade Design North East Sunderland SR2 7PRGOWEB North East Wakefield WF2 9BLColour Box Design North East York YO24 1ARBlah D Blah North Wales Bangor LL57 1NYER Design & Print North West Alsager CW2 5PRRhino Design North West Ashton-under-Lyne OL6 6XJGranthams - Blackpool North West Blackpool FY1 4PEPrint Hub Design North West Bolton BL1 3QJWild Thang North West Bootle L31 2HBFluid Media North West Bury BB5 2LBBrightspark North West Carlisle CA2 5BBRAS Limited North West Chester CH3 5AGWilliam Seabrooke Assoc. North West Chorlton - Manchester M21 8UPNorthstar Design North West Colne BB8 9DBMailboxes North West Didsbury M20 6UGScissorsPaperStone North West Eccles M30 8GHFirst Impression North West Glossop SK13 8RZLancaster Store North West Lancaster LA1 1XNLiverpool Store North West Liverpool L2 2HFSprinter Printer North West Liverpool L22 4QDCopycat North West Maghull L31 2HBNorth Manchester Store North West Manchester M3 4BQManchester Store North West Manchester M3 4BQCreation Publicity North West Manchester M17 1DZThe Agency Creative North West Manchester M17 1DZAlert 2 Media North West Manchester M1 1DZChilli Cactus North West Manchester M18 7JXPrint Design Warehouse North West Marple SK6 7ADSmartStudios North West North Manchester M4 4DEGranthams - Preston North West Preston PR1 2UQFX Design North West Queensferry CH5 2LROrbital Design North West Rossendale BB4 8EQThe Graphics Department North West Salford M3 5DNBrash North West Southport PR8 4HZMasterprint North West St Helens WA10 1DHMailboxes North West Stockport SK1 1LEImpact Advertising North West Timperley WA15 7SPThe Hub North West Trafford Park M17 1FGWarrington Store North West Warrington WA1 1EPPrintel North West Widnes WA3 8LGBradbury Graphics Northern Ireland Belfast BT7 1BSMooney Media Northern Ireland County Down BT32 4QDXpress Creative Northern Ireland Newtonabbey BT36 4PUDesktop Northern Ireland Omagh BT78 1DWThe Business Boutique Scotland Aberdeen AB24 5BWX Display Systems Scotland Coatbridge ML5 4ASEdinburgh Store Scotland Edinburgh EH3 6QYColor Co. - Edinburgh Scotland Edinburgh EH2 2PADigisnaps Scotland Edinburgh EH2 2PJGlasgow Store Scotland Glasgow G3 8LZSPD Print Solutions Scotland Glasgow G40 4DUTripple 333 Scotland Glasgow G4 0QRHamilton (662c) Scotland Hamilton ML3 7ARFireworks Design Scotland Linlithgow EH49 7TFAcademy Press Scotland Livingstone EH54 6QDGlasgow Print Scotland North Glasgow G64 1RXSouth Glasgow Store Scotland South Glasgow G5 9RRTangerine Scotland Stirling FK8 1JWBrighton Store South Brighton BN2 8AARepublique South Brighton BN1 4GHTudor Print South Worthing BN11 1UYAshford Store South East Ashford TN24 8UUMailboxes South East Cambridge CB2 1FDThink Tank South East Canterbury CT14 7HRStudio Direct South East Chelmsford CM2 6HELussh Creative South East Chesterfield S40 2BYInprint South East Colchester CO1 1PBTRS Graphics South East Croydon CR2 6EBJelly Bean Graphics South East Croydon CR9 6YJLW Design South East Dorking RH4 2ESHome Counties Graphics South East Dunstable LU6 1SXAccomplice South East Hailsham BN27 1AULuton Store South East Luton LU1 2PLThat Life Multimedia Centre South East Maidenhead SL6 1NBGreat Printers South East Newbury RG14 5SANorwich Store South East Norwich NR1 1PLGraphics One South East Norwich NR7 0EQColour Wave South East Ramsgate CT11 8NTFelix Communications South East Rochester ME2 4HZGrow Marketing South East Whitstable CT3 4JHPrint Creative South West Bath BA1 2JBBournemouth Store South West Bournemouth DT1 1HSBristol Store South West Bristol BS1 3LZPresto Print South West Christchurch BH23 1QDExeter Store South West Exeter EX4 3AJKualo Creative South West Gloucester GL2 2ATWessex Direct South West Minehead TA24 5UBPlymouth Store South West Plymouth PL4 0AUChalk & Cheese South West Ruislip HA4 6HHSouthampton Store South West Southampton SO15 2AEMalthouse South West Taunton TA1 3EPPrinting South West South West Totnes TQ9 5DWWhitman Design & Print South West Truro TR1 2HEAnneset South West Weston-Super-Mare BS23 3DELimelight Graphix Wales Bridgend CF31 3SACardiff Store Wales Cardiff CF5 1JFAustralian Welsh Wales Cardiff CF14 3JPSwansea - Colourbox Creative Wales Swansea SA1 5TY This information is provided by RNS The company news service from the London Stock Exchange