Design Group Regulatory News (IGR)

28 Jun 2006 07:01

International Greetings PLC28 June 2006 INTERNATIONAL GREETINGS PLC International expansion and product diversification underpin solid results and future growth International Greetings PLC ("International Greetings", "the Company" or "theGroup") (AIM: IGR), the global designer and manufacturer of greetings products,film and television character based licensed stationery, books and gifts, todayannounces preliminary results for the year ended 31 March 2006. Financial Highlights: • Turnover improved 37% to £196.6m (2005: £143.7m) • Adjusted profit before tax* increased 30% to £18.0m (2005: £13.8m) • European sales grew 29% to £22.7m (2005: £17.6m) • US sales increased 34% to £47.2m (2005: £35.1m) • Total overseas sales rose 36% to £74.1m (2005: £54.7m) • Adjusted earnings per share* increased 18% to 28.9p (2005: 24.5p) • Final dividend per share of 7p, increases the year's total dividend 20% to 9p (2005: total dividend: 7.5p) Operational Highlights: • Completion of the acquisition and integration of Anker International in May 2005 • Chinese manufacturing facility relocated to new purpose-built complex, increasing in-house production and ability to monitor quality control Post Period Events • April 2006, acquisition of Alligator Books, for an initial £2.5m • Board restructure - Keith James to assume chairman's role in September 2006 Commenting on the results, Nick Fisher, Joint Chief Executive, said: "Theseresults reflect our recent drive to establish efficient, low cost manufacturingand distribution bases, and our expansion programmes in the US and Europeanmarkets. "These initiatives, together with our latest acquisitions, further underpin ourstrategy to diversify the Group's activities, and increase our product offeringto existing and new customers, whilst ensuring the success of our business forthe future." Adjusted to exclude exceptional items of £3,310,000 (2005: £738,000), profit ondisposal of fixed assets of £1,838,000 (2005: £nil) and amortisation of goodwillof £1,031,000 (2005: £443,000) For further information: Nick Fisher, Joint Chief Executive, International Greetings: 01707 630 630 Richard Sunderland/Rachel Drysdale, Tavistock Communications: 020 7920 3150 CHAIRMAN'S STATEMENT I am delighted to report another significant year of progress for InternationalGreetings. The Group's existing businesses have performed well during the yearwith growth in both profit and turnover. We also completed the purchase of AnkerInternational in May last year which, with a total cost of £35.4m, is ourlargest acquisition to date. This acquisition has been a major development forthe Group, not only increasing turnover significantly, but also enhancing ourtrading profile. It has taken the Group into new market sectors, extended ourproduct categories and reduced our seasonality of sales. Anker has fulfilledexpectations since it was acquired and we are encouraged by its performance. Adjusted profit before tax* for the year ended 31 March 2006 increased by 30%to £18.0m with turnover increasing by 37% to £196.6m. The success of our focuson international expansion in recent years is again reflected in these figureswith sales in the US increasing 34% to £47.2m and sales in Europe growing 29% to£22.7m. Total overseas sales now account for £74.1m or 38% of turnover, anincrease of 36% over last year's £54.7m. Adjusted earnings per share* increased by 18% to 28.9p and in line with ourpolicy of increasing shareholder returns and reflecting our continued confidencein our business, we are recommending a final dividend of 7p per share. Thismakes a total for the year of 9p, an increase of 20% over last year. Since the year end, we have made a further acquisition. Alligator Books,acquired in April, creates and publishes children's licensed and generic books,which it sells primarily in the UK, and we are delighted to have entered intothe mainstream publishing market. This acquisition met all of our criteria,including introducing another new product category into the Group's portfolio. After 10 years as chairman, I have decided to step down following the Company'sAnnual General Meeting in September, but will remain on the Board as anon-executive director. Keith James, currently a non-executive director, willassume the position of chairman at that time. With his breadth of businessexperience, together with his newly acquired knowledge of our business sincejoining the board, I know that International Greetings will be in safe hands. Helooks forward to leading the Group during its next level of corporatedevelopment and I wish him future success in the role. Finally, I would like to thank all the staff of International Greetings andeveryone associated within the Group who have helped me in my role for the lastdecade. It has been both a pleasure and privilege to serve as chairman of theCompany. John Elfed Jones CBE DLChairman *Adjusted to exclude exceptional items of £3,310,000 (2005: £738,000), profit ondisposal of fixed assets of £1,838,000 (2005: £nil) and amortisation of goodwillof £1,031,000 (2005: £443,000) CHIEF EXECUTIVE'S REPORT Once again we have experienced a very active year due to our consistentlyexpanding business and the dynamic environment in which we operate. The Group isnow truly an international business, supported by our core strengths of bestdesign and product development, combined with efficient manufacturing anddistribution. UKDuring the past year, we have continued to rationalise our manufacturing anddistribution activities in the UK in order to maintain our competitiveness. Following last year's relocation of card manufacturing to Latvia, additionalmanufacturing equipment has been moved from the UK to Latvia this year. This hasresulted in redundancies and exceptional costs of closure during the year, butwas necessary in order to ensure we operate an efficient low cost manufacturingbase for the future. The acquisition of Anker last year has significantly expanded the Group's UKoperations. It has performed well since acquisition and we have recently takenthe opportunity to merge our Copywrite licensed stationery division into Anker.Although this has resulted in one-off exceptional costs during the current year,we believe we will generate future cost savings as well as creating many new andexciting opportunities for the merged business. Our strategy for growth in the UK, a highly competitive and difficult market, isto focus on those sales opportunities that provide us with the best return andstrategic long term benefits. These opportunities will be coupled withacquisitions which will provide not only immediate benefits but alsoopportunities for the further diversification of our activities. We areconfident this strategy will ensure we continue to be in the best competitiveposition and are able to take advantage as and when UK market conditionsimprove. The acquisition of Alligator Books in April this year extends the Group's UKbusiness into children's licensed books and fun learning products. Alligatordistributes an extensive range of fiction and non-fiction books and recentlyacquired from Chrysalis the world-wide publishing rights of 80 non-fictionillustrated reference books that made up its children's book division. Webelieve that as part of International Greetings, we can significantly expandthis business in the future, not only in the UK, but also in our othergeographical markets. EuropeFollowing a period of acquisition and investment in Europe in recent years, ahighly focused European division has now been created. We have restructured theEuropean sales teams within our existing business, which will provide orders fordelivery from our manufacturing and distribution centre based in Holland. Wehave achieved growth in European sales this year of 29% and are looking tocontinue expansion by a strong sales and marketing effort across all Groupproduct categories in all European territories. USWe remain committed to our expansion programme in the US market. Our efforts arefocussed on both our traditional supply channel to the department store andindependent sector, together with a continued push into the mass market andown-brand sector for both seasonal and everyday products. We are also activelyensuring that all of the Group's product categories are being offered to thefull breadth of US retailers identifying all sales opportunities available tous. The Anker ranges, including the high quality Pepper Pot stationery brand,are also being offered to the speciality retailer sector. The success of thisstrategy is reflected in the growth of the US business this year, which has seenlike-for-like turnover increase by 22% to $50.5m and like-for-like operatingprofit increase 18% to $3.1m. Overall, the Group's sales in the US now accountfor 24% of total sales. Far EastWith the ever increasing importance of the Far East to the Group's business, wehave further extended our presence in this region. Our Chinese manufacturing facility has recently been relocated to a new largerpurpose-built complex. This extra capacity will allow us to produce many more ofour product categories in-house under our direct control, ensuring standards ofproduct quality, productivity and on-time delivery to our customers ismaintained. At peak production we expect to employ some 1,300 people in thefacility. We have also relocated the trading, sourcing and administration activities ofour Hong Kong operation into a new office suite of 10,000 sq feet. Thefacilities include a new showroom displaying all the Group's products availablefor sale in the global market place. We have also employed additional supportstaff to ensure that all out-sourced products match the production and qualitycriteria of our own in-house manufactured goods. All trading divisions within the Group have the opportunity to benefit from thisfacility and, where feasible, orders from different trading regions will beconsolidated to achieve manufacturing efficiencies and cost savings. Design and LicensingA key to our continued success is the strong commitment to the design anddevelopment of our products. During the year we have re-evaluated the design processes carried out throughoutthe Group. This has culminated in the creation of a highly focused operatingstructure to maximise the quality of design in each of our product categories.In addition, a separate licensed studio has been formed to provide all of theGroup's trading divisions with the specialist design techniques utilised in thisarea of intellectual property. The Alligator acquisition has furtherstrengthened our status within the licence industry and will improve our abilityto obtain additional licences for the future. Following this year's results announcement are the launches of Disney's newPixar film "Cars" and "Pirates of the Caribbean II", for both of which we havedesigned and created new ranges of products. ConclusionOur business has now been operating for over 25 years. We have the knowledge,experience and ambition to continue to grow our business, and have created anoperating model that is flexible enough to adapt to the different andever-changing market conditions across all the geographical territories in whichwe operate. Acquisitions will continue to be an important part of our future strategy tocreate a more diverse business by introducing new product categories to ourportfolio and extending the Group's international business. We would also like to thank our outgoing chairman, John Elfed Jones, for hisinvaluable support and guidance over what has been a very successful ten yearsfor the Company and welcome Keith James into the chair. Anders Hedlund and Nick FisherJoint Chief Executives FINANCE REVIEW Group PerformanceTurnover for the year to 31 March 2006 amounted to £196.6m, an increase of 37%over last year. Excluding £34.8m attributable to the acquisition of Anker, Groupturnover amounted to £161.7m, an increase of 13% over last year. US salesincreased by 34% to £47.2m whilst European turnover rose 29% to £22.7m. Totaloverseas sales increased 36% to £74.1m and represented 38% of total turnover.Excluding Anker's sales, which are primarily made in the UK, overseas salesrepresented 44% of the Group's total. This growth in the Group's overseas salesover recent years represents a significant strategic development as the Group'sexpansion and diversification into new markets continues. Operating profit increased from £12.7m to £15.4m. Excluding Anker andexceptional items, operating profit increased from £13.4m to £14.4m. Theexceptional items of £3.3m relate primarily to a number of restructuring changesmade to the Group's operations during the year in order to maintain ourcompetitiveness. These restructuring changes included the relocation ofproduction operations overseas, the integration and relocation of Copywrite'soperations into Anker and the merging of Hoomark's UK sales operation into theGroup's UK division. Net interest payable increased from £36,000 to £1.8m, £1.0m of which arose as aresult of the acquisition of Anker. Other significant factors in this increasewere the full year effect, for the first time, of the £5.1m purchase of our newfactory and distribution facility in Holland, in November 2004, and the £4.5mpurchase of the Napier Christmas cracker business in January 2005. The profit on disposal of fixed assets of £1.8m arose on the sale of thefreehold interest in property owned by Anker. Net profit before taxationincreased by 23% to £15.5m, with adjusted profit before tax* for the yearincreasing 30% to £18m. Earnings Per Share and DividendAdjusted basic earnings per share* for the year ended 31 March 2006 were28.9p, an increase of 18% over last year. Basic earnings per share were 27.1p,an increase of 21% over last year. The final dividend proposed for the year of 7p (2005: 5.75p) makes a totaldividend for the year of 9p, an increase of 20% and is covered three times bybasic earnings per share. Treasury OperationsThe Board continues to assess and manage the risks associated with the treasuryfunction as the business develops. The Group's business has a strong seasonalfocus, resulting in large variations in working capital, with net funds forcertain periods of the year and net borrowings in other periods. As a result,the Board considers that long term reduction of exposure to fluctuations ininterest rates on working capital is unlikely to be economically viable. A significant proportion of the Group's purchases are denominated in US$. Theeffect of exchange rate fluctuations is reduced through a combination ofmeasures including hedging and forward exchange contracts. Balance Sheet and Cash FlowNet debt at 31 March 2006 amounted to £10.7m, compared to net funds of £3.8mlast year. The cost of acquiring Anker accounted for £13.1m of this £14.5mmovement. The sale of Anker's property, which has subsequently been leased back,generated a net cash inflow of £18.8m and resulted in an overall cash inflowfrom capital expenditure of £7.8m. This was offset by increases in stock anddebtors of £9.7m and £5.7m respectively, which were attributable to a number offactors including the Anker acquisition, increased working capital to facilitatethe high growth rates being achieved in our overseas markets and a debtor of£3.7m in relation to an outstanding insurance claim. The £35.4m cost of the Anker acquisition was funded by £12.9m paid in cash,£12.5m paid by the issue of new ordinary shares during the year, with a furthercash payment due of £10m, which has been paid subsequent to the year end.Shareholder funds increased by £22.1m to £75.7m and with year-end gearing of 14%and interest covered 8.6 times by operating profit, the Group's financialposition remains strong. Mark ColliniFinance Director *Adjusted to exclude exceptional items of £3,310,000 (2005: £738,000), profit ondisposal of fixed assets of £1,838,000 (2005: £nil) and amortisation of goodwillof £1,031,000 (2005: £443,000) Consolidated profit and loss accountfor the year ended 31 March 2006 Note Continuing operations Excluding acquisition Acquisition Pre-exceptional Exceptional Pre-exceptional Exceptional Total Total item item item item (Restated- see Note 1) 2006 2006 2006 2006 2006 2005 £000 £000 £000 £000 £000 £000 Group turnover including share of joint venture turnover 161,706 - 36,433 - 198,139 143,689 Less: Share of jointventure turnover - - (1,585) - (1,585) - ----------------------------------------------------------------------------------- Group turnover 2 161,706 - 34,848 - 196,554 143,689Cost of sales (111,834) - (23,287) - (135,121) (99,220) ----------------------------------------------------------------------------------- Gross profit 49,872 - 11,561 - 61,433 44,469Distribution expenses (14,005) - (2,476) - (16,481) (14,017)Administrative expenses (21,462) (3,053) (4,747) (257) (29,519) (17,799) ----------------------------------------------------------------------------------- Operating profit 2 14,405 (3,053) 4,338 (257) 15,433 12,653 Share of operating profit of joint venture - - 7 - 7 - ----------------------------------------------------------------------------------- 14,405 (3,053) 4,345 (257) 15,440 12,653 ------------------------------------------------------------ Profit on disposal offixed assets 1,838 - Net interest payable (1,801) (36) ----------------------- Profit on ordinary activities before taxation 2-3 15,477 12,617 Tax on profit on ordinary activities 4 (3,146) (3,098) ----------------------- Profit for the financial year 12,331 9,519 ----------------------- Earnings per share 7Basic 27.1p 22.4pDiluted 26.6p 22.1p ======================= Consolidated statement of total recognised gains and lossesfor the year ended 31 March 2006 2006 2005 £000 £000 Profit for the financial year 12,331 9,519Currency translation differences arising on foreign currency net investments 914 (160) -----------------------Total recognised gains and losses relating to the financial year 13,245 9,359 ======================= Consolidated balance sheetat 31 March 2006 Note 2006 2005 (Restated-see Note 1) £000 £000 £000 £000 Fixed assetsIntangible assets - goodwill 21,339 5,113Tangible assets 37,134 30,853Investments in joint venture- share of gross assets 769 -- share of gross liabilities (596) - -------- -------- 58,646 35,966Current assetsStocks 40,008 24,178Debtors 29,863 16,477Investments - unquoted 65 -Cash at bank and in hand 11,825 6,490 -------- -------- 81,761 47,145 Creditors: amounts falling due within one year (56,382) (23,452) -------- -------- Net current assets 25,379 23,693 -------- --------Total assets less current liabilities 84,025 59,659 Creditors: amounts falling dueafter more than one year (6,352) (5,690)Provisions for liabilities and charges (1,950) (380) -------- --------Net assets 75,723 53,589 ======== ======== Capital and reservesCalled up share capital 2,308 2,140Share premium account 2,386 2,704Potential issue of shares 6(a) 1,052 926Other reserves 13,964 21Profit and loss account 56,013 47,798 -------- --------Equity shareholders' funds 8 75,723 53,589 ======== ======== Consolidated cash flow statementfor the year ended 31 March 2006 Note 2006 2005 £000 £000 Net cash inflow from operating activities 10 2,706 14,398 Returns on investments and servicing of finance 11 (1,232) (54) Taxation (5,980) (3,600)Capital expenditure 11 7,809 (8,793)Acquisitions and disposals 11 (13,078) (5,984)Equity dividends paid (3,578) (2,872) -------- --------Cash outflow before financing (13,353) (6,905)Financing 11 (630) (1,180) -------- --------Decrease in cash in the year (13,983) (8,085) ======== ======== Reconciliation of net cash flow to movement in net (debt)/fundsfor the year ended 31 March 2006 Note 2006 2005 £000 £000 Decrease in cash in the year (13,983) (8,085)Cash outflow from debt and lease financing 12 462 1,541 -------- --------Change in net funds resulting from cash flows (13,521) (6,544) Translation differences 12 (1,013) 66 -------- -------- Movement in net funds in the year (14,534) (6,478)Net funds at beginning of year 3,790 10,268 Net (debt)/funds at end of year 12 (10,744) 3,790 ======== ======== Notes 1 Basis of preparation The financial information set out above does not constitute the Company'sstatutory financial statements for the years ended 31 March 2006 or 2005.Statutory financial statements for 2005 have been delivered to the registrar ofcompanies, and those for 2006 will be delivered following the company's annualgeneral meeting. The auditors have reported on those accounts; their reportswere unqualified and did not contain statements under section 237(2) or (3) ofthe Companies Act 1985. The financial information has been prepared in accordance with applicableaccounting standards and under the historical cost accounting rules. In thisfinancial information the following new standards have been adopted for thefirst time: • FRS 21 'Events after the balance sheet date' • FRS 22 'Earnings per share' • FRS 25 'Financial instruments: presentation and disclosure' - presentation requirements only • FRS 28 'Corresponding amounts' FRS 28 'Corresponding amounts' has had no material effect as it imposes the samerequirements for comparatives as hitherto required by the Companies Act 1985. Following adoption of FRS 21 'Events after the balance sheet date' thecomparative figures as at 31 March 2005 and the opening reserves figures as at 1April 2004 have been restated to exclude the proposed dividend of £2,461,000 and£2,112,000 respectively. FRS 22 dictates the measures of earnings per share which can be shown on theface of the profit and loss account to ensure consistency in the presentation offinancial information. The adoption of the presentation elements of FRS 25 means that dividends are nolonger shown as an expense in the profit and loss account - they are insteadpresented as a movement on shareholders' funds (see note 8). 2 Segmental analysis (a) Geographical area of operation UK, Europe & Far East USA Group 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 Turnover 167,344 121,675 29,210 22,014 196,554 143,689 ================================================================================== Operating profitbefore exceptionalitems 16,947 12,003 1,796 1,388 18,743 13,391Exceptional items (see below) (3,310) (738) - - (3,310) (738) ---------------------------------------------------------------------------------- Operating profit after exceptional items 13,637 11,265 1,796 1,388 15,433 12,653 Share of operatingprofit of jointventure 7 - - - 7 - ---------------------------------------------------------------------------------- 13,644 11,265 1,796 1,388 15,440 12,653 Profit on disposal of fixed assets 1,838 - - - 1,838 - Net interest (1,108) 279 (693) (315) (1,801) (36) ---------------------------------------------------------------------------------- Profit on ordinaryactivities before taxation 14,374 11,544 1,103 1,073 15,477 12,617 ==================================================================================Net assets (restated-note 1) 68,338 47,305 7,385 6,284 75,723 53,589 ================================================================================== The above results relate entirely to continuing operations. (b) Exceptional items 2006 2005 £000 £000 Restructuring costs (see (i) below) 2,906 738Other (see (ii) below) 404 - -------------------- 3,310 738 ==================== i) During the year ended 31 March 2006, the Group made a number ofrestructuring changes to its operations in order to maintain competitiveness.These consisted of (a) the relocation of UK production operations overseas(including the cracker manufacturing operation forming part of the business andassets of Napier Industries Ltd acquired in January 2005), (b) the relocationand integration of the Copywrite licensed stationery division into Anker'soperations and (c) the integration of Hoomark's UK sales operation into theGroup's UK division. The cost of these restructuring changes, primarilyredundancy and other personnel related items, amounted to £2,906,000. During the year ended 31 March 2005, the Group transferred the manufacturing ofgreetings cards and tags from Hatfield to a new facility in Latvia. Theexceptional item of £738,000 represented the costs, primarily redundancy andmachinery re-location, associated with this transfer. ii) These represent one-off product safety recall and rectification costs incurred in connection with one of the Group's products. (c) Geographical analysis of turnover by destination 2006 2005 £000 £000 UK 122,443 89,004USA 47,191 35,132Europe 2,665 17,637Rest of world 4,255 1,916 ---------------------- 196,554 143,689 ====================== 3 Profit on ordinary activities before taxation 2006 2005 £000 £000 Profit on ordinary activities before taxation is stated after charging/(crediting) Auditors' remuneration - audit fees paid to the company's auditor and its associates 116 86 - non audit fees paid to the company's auditor and its associates 197 36Hire of plant and machinery - rentals payable under operating leases 410 343Hire of other assets - operating leases 1,249 746Release of deferred grant income (498) (554)Depreciation - owned 5,469 4,217 - leased 276 255Amortisation of goodwill 1,031 443 ====================== Audit fees payable by the company for the year were £31,000 (2005: £21,000). Non audit fees payable by the Group relate to advice given on taxation, and inrelation to the relocation of the Group's Chinese facility. The 2005 non auditfees relate mainly to tax advice. 4 Taxation 2006 2005 £000 £000 £000 £000Current taxUK corporation tax on profits of the year 2,885 2,240 Adjustments in respect of previous periods 22 (235) ------- ------- 2,907 2,005Foreign taxOn profits of the year 1,369 1,237Adjustments in respect of previous periods 14 (51) ------- ------- 1,383 1,186 ------- -------Total current tax 4,290 3,191 Deferred taxationOrigination and reversal of timing differences (1,231) (95)Adjustments in respect of previous periods 87 2 ------- -------Total deferred tax (1,144) (93) ------- -------Tax on profits on ordinary activities 3,146 3,098 ======= ======= Factors affecting tax charge for period 2006 2005 £000 £000 Profit on ordinary activities before tax 15,477 12,617 ====== ====== Profit on ordinary activities multiplied bystandard rate of corporation tax in the UK of 30% 4,643 3,785 Effects of:Current tax charge/(credit)---------------------------Difference between accounting and taxable profits on sale of fixed assets 88 -Goodwill arising on consolidation 265 85Fair value adjustment arising on consolidation (202) -Notional interest expense disallowed 120 -Expenses not deductible for corporation tax purposes 191 147Tax deductions for gains on employee share options (88) (155)Difference between UK and overseas tax rates (427) (424)Release of grant (142) (161)Difference between capital allowances and depreciation (187) 167Provisions not deductible until paid 82 1Other timing differences (89) 32Adjustments in respect of previous periods 36 (286) --------------------- (353) (594) ---------------------Total current tax 4,290 3,191 Deferred tax charge/(credit)----------------------------Credit in relation to the disposal of fixed assets (1,305) -Origination and reversal of timing differences 336 (95)Difference between UK and overseas tax rates (262) -Adjustments in respect of prior periods 87 2 ---------------------Total deferred tax (1,144) (93) ---------------------Total tax charge for the period 3,146 3,098 ===================== 5 Dividends paid 2006 2005 (Restated - see note 1) £000 £000 Final for year ended 31 March 2005 - 5.75p per share (2004: 5p) 2,652 2,126 Interim for year ended 31 March 2006 - 2p per share (2005: 1.75p) 926 746 ----------------------Dividends paid 3,578 2,872 ====================== 6 Acquisitions (a) On 19 November 2003, the Group acquired 100% of the issued share capital of Hoomark Gift-Wrap Partners BV. The purchase agreement provided for future payments of deferred consideration, based on Hoomark's profits for the 3 years ended March 2007. At 31 March 2005, the future consideration payable was estimated at £926,000, of which up to 100% was payable by the issuance of new ordinary shares at the company's option. During the year ended 31 March 2006, £255,000 of this amount was paid in cash. Based on Hoomark's results for the year ended 31 March 2006, and future projections, the estimated future consideration has been increased by £381,000 including £16,000 accounted for by exchange differences. Up to 100% of the total unpaid consideration of £1,052,000 at 31 March 2006 may be payable by the issue of new ordinary shares, at the company's option. (b) On 27 May 2005, the Group acquired 100% of the issued share capital of Anker International PLC, an international design, import and distribution business for a total cost of £35.4m. £25.4m was paid on completion, of which £12.5m was represented by the issue of 3,294,242 ordinary shares and £12.9m in cash. The remaining cost of £10.0m plus £0.5m accounted for as notional interest payable on the deferred purchase consideration, was paid in cash on 31 May 2006. The book value and provisional fair value of assets purchased was as follows: Book value Provisional fair Provisional fair value value at date adjustments of acquisition £000 £000 £000 Tangible fixed assets 14,579 (473) 14,106Investments 224 - 224Stock 5,932 (642) 5,290Debtors 6,379 - 6,379Creditors (6,689) (784) (7,473)Bank overdraft (31) - (31) ---------------------------------------------- 20,394 (1,899) 18,495 ====== ======= Goodwill (estimated useful life of 30 years) 16,881 ------ Total consideration 35,376 ====== The latest available audited accounts of Anker International PLC were preparedat 31 December 2004 and reflect turnover of £40.0m, operating profit of£4.1m and interest payable of £0.3m, resulting in a profit beforetaxation of £3.8m. The provisional fair value adjustment to fixed assets represents an adjustmentto bring freehold property into line with market value. The provisionaladjustment to stock represents an adjustment to reflect the sterling value ofstock purchased in US$ at actual cost. The provisional adjustment to creditorsrepresents (a) an adjustment of £430,000 to decrease the sterling value of US$denominated trade creditors to the rate of exchange prevailing at the date ofacquisition, (b) a provision of £1,278,000 in respect of onerous forward foreignexchange contracts, being the difference between the contracted rate and theprevailing spot rate at the date of acquisition and (c) the tax effect of£64,000 in relation to the above adjustments to stock and trade creditors. 7 Earnings per share 2006 2005Adjusted basic earnings per share excludingexceptional items, profit on disposal of fixedassets and goodwill 28.9p 24.5pLoss per share on goodwill (2.2p) (0.9p)Loss per share on exceptional items (5.1p) (1.2p)Earnings per share on profit on disposal of fixed assets 5.5p - ------------------- Basic earnings per share 27.1p 22.4p ===================Diluted earnings per share 26.6p 22.1p =================== The basic earnings per share is based on the earnings of £12,331,000 (2005:£9,519,000) and the weighted average number of ordinary shares in issue of45,536,856 (2005: 42,529,155). The calculation of diluted earnings per share isbased on 46,304,602 (2005: 43,088,426) ordinary shares. The difference of767,746 (2005: 559,291) represents the dilutive effect of outstanding employeeshare options which has been calculated in accordance with FRS 22. Adjusted basic earnings per share excluding exceptional items, profit ondisposal of fixed assets and goodwill is calculated after adjusting forexceptional items of £3,310,000 (2005: £738,000), the profit on disposal offixed assets of £1,838,000 (2005: £nil), amortisation of goodwill of £1,031,000(2005: £443,000), and the tax relief attributable to these items of £1,691,000(2005: £269,000). 8 Reconciliations of movements in shareholders' funds 2006 2005 (restated-see note 1) £000 £000 Profit for the financial year 12,331 9,519Dividends paid in the year (note 5) (3,578) (2,872) ----------------------Retained profit for the financial year 8,753 6,647Other recognised gains and losses relating tothe year (net) 914 (160)New share capital subscribed 12,879 1,029Potential issue of shares (note 6(a)) 126 (154)Purchase of own shares (538) - ----------------------Net addition to shareholders' funds 22,134 7,362 Opening shareholders' funds - as previously reported 51,128 44,115Prior year adjustment - proposed dividend 2,461 2,112 ----------------------Closing shareholders' funds 75,723 53,589 9 Post balance sheet event On 6 April 2006 the company acquired 100% of the issued share capital ofAlligator Books Limited, a publisher and distributor of children's books andstationery, for an initial consideration of £2.5m, of which £2.25mwas paid in cash and £250,000 by the issue of 62,703 new ordinary shares.Additional consideration may become payable, depending on the level ofprofitability for the year ended 31 March 2007, in a mixture of cash and newordinary shares. 10 Reconciliation of operating profit to net cash inflow from operatingactivities 2006 2005 £000 £000 Operating profit 15,433 12,653Depreciation charge 5,745 4,472(Increase) in stocks (9,650) (1,251)(Increase) in debtors (5,715) (3,366)(Decrease)/increase in creditors (2,833) 2,001Deferred income (632) (554)Goodwill amortisation 1,031 443Utilisation of provision (673) - ----------------------Net cash inflow from operating activities 2,706 14,398 11 Gross cash flows Cash inflow/(outflow) 2006 2005 £000 £000Returns on investment and servicing of financeInterest paid (1,668) (662)Interest received 455 649Interest element of finance lease repayments (19) (41) ----------------------Net cash (outflow) for returns on investment and servicing of finance (1,232) (54) ====================== Capital expenditurePurchase of tangible fixed assets (11,225) (11,262)Disposal of tangible fixed assets 19,034 146Grants received in relation to capital expenditure - 2,323 ----------------------Net cash inflow/(outflow) from capital expenditure 7,809 (8,793) ====================== Acquisitions and disposalsAcquisition of businesses - (5,978)Acquisition of subsidiaries (13,047) (6)Net overdraft acquired with subsidiary (31) - ----------------------Net cash (outflow) for acquisitions and disposals (13,078) (5,984) ====================== FinancingNew shares issued 379 361Purchase of own shares (538) -Repayment of amounts borrowed (99) (1,256)Capital element of finance lease payments (363) (285)Purchase of investments (9) - ----------------------Net cash (outflow) from financing (630) (1,180) ====================== 12 Analysis of changes in net (debt)/funds At 1 April Cash flow Exchange Acquisition of Other At 31 March 2005 movement subsidiary changes 2006 £000 £000 £000 £000 £000 £000 Cash at bank and in hand 6,490 5,070 265 - - 11,825 Overdrafts (672) (19,022) (1,125) (31) - (20,850) -------------------------------------------------------------------------------------- 5,818 (13,952) (860) (31) - (9,025) Debt due after one year (1,143) - (106) - 102 (1,147)Debt due within one year (90) 99 (8) - (102) (101)Finance leases (795) 363 (39) - - (471) -------------------------------------------------------------------------------------- (2,028) 462 (153) - - (1,719) --------------------------------------------------------------------------------------Total net (debt)/funds 3,790 (13,490) (1,013) (31) - (10,744) ====================================================================================== This information is provided by RNS The company news service from the London Stock Exchange