23-11-2004 - Printing.com - Interim results - Baker Tilly
INTERIM RESULTS FOR THE PERIOD ENDED 10 OCTOBER 2004GBP (000) 28 week periodEnded10 October 2004 28 week period Ended12 October 2003 Change
Turnover 5,564 4,769 +17%
Operating profit 726 388 +87%
Profit before tax 631 251 +151%
EPS Basic 1.09p 0.45p +142%
EPS Fully Diluted 1.08p 0.42p +157%
Outlets Active at Period End
Stores 25 19 +32%
Bolt-ons 58 41 +41%
Total Active 83 60 +38%
Contracted 13 12 +8%
Total Active and Contracted 96 72 +33%
Total Retail Sales 7,518 5,354 +40%
· Move to AIM achieved, placing over subscribed
· Profits up 151%
· Turnover up 17%
· Total Retail Sales up 40%
· Substantial increase in earnings per share up 142%
· All Store Franchisees now upgraded to Territory Franchise
· Optimistic about prospects
For further information:
Printing.com plc
Tony Rafferty (Chief Executive) 07966 51 73 36
Alan Roberts (Finance Director) 0161 848 5713
Beattie Financial
Brian Coleman-Smith / John Moriarty / Jo Clewlow 020 7398 3300
Background note:
Printing.com
Printing.com offers a broad product range including leaflets, booklets, postcards, promotional cards, invitations, letterheads and business cards to consumers and small and medium sized companies. Unlike its competitors, Printing.com Stores and Franchises do not depend on any printing equipment on location. The Companyâ??s printing and ancillary equipment is based at the centralised Production Hub with the head office in Manchester. All work is produced in full four colour rather than two colour. Delivery to the customer is usually within three days. The printing sector has traditionally been served by smaller printing companies or other On Demand Printers and is estimated to be worth some £1 billion.
Printing.com has three routes to market: Franchise Stores, Bolt-on Franchises and Company owned Stores.
Company Stores
Dublin Store Ireland Dublin Dublin 2
Nottingham Store Midlands Nottingham NG1 6DQ
Birmingham Store Midlands Birmingham B5 4JL
Oxford Store Midlands Oxford OX2 7HT
Sheffield Store North East Sheffield S1 4GF
Hull Store North East Hull HU1 2AG
Manchester Store North West Manchester M3 4BQ
The Hub North West Trafford Park M17 1FG
Edinburgh Store Scotland Edinburgh EH3 6QY
Edinburgh Store Scotland Edinburgh EH3 9LY
Bristol Store South West Bristol BS1 3LZ
Franchised Stores
Central London Store London Baker Street NW1 6UY
Hampstead Store London Hampstead NW3 5HS
Watford Store London Watford WD17 1RA
Harrow Store London Harrow HA7 2QJ
Reading Store London Reading RG1 4TA
Ealing Store London Ealing W13 8SB
Leicester Store Midlands Leicester LE1 1LB
Wolverhampton Midlands Wolverhampton WV1 4BL
Newcastle Store North East Newcastle NE1 5EE
Leeds Store North East Leeds LS1 3DL
Liverpool Store North West Liverpool L2 2HF
Lancaster Store North West Lancaster LA1 1XN
Warrington North West Warrington WA1 1EP
Glasgow Store Scotland Glasgow G3 8LZ
Ashford Store South East Ashford TN24 8UU
Plymouth Store South West Plymouth PL4 0AU
Bolt-on Franchises
Red Hot Media East Lowestoft NR32 1EB
Expocentric - Wardour London Soho W1V 3AU
Color Co. - Canary Wharf London Canary Wharf E14 4PZ
Expocentric - Dover London Mayfair W1X 3PH
London & General London Chelsea SW10 0XF
Full Colour Store London Clapham SW17 9SH
Print Express London Colindale NW9 5DL
0800 Promote London Finchley N3 1TR
Printer Net Services London Wimbledon SW19 8TY
London Print Company London Shaftesbury Avenue WC2H 8EB
Printhouse London Nottinghill W11 3HT
0800 Promote London North Finchley N12 9QG
Kaleidoscope Midlands Leamington Spa CV31 1BZ
Albry Printing Company Midlands Wallingford OX10 9DA
Final Imaging Midlands Sawtry PE28 5SB
Dove Signs Midlands Nuneaton CV11 6GX
Multiprint Midlands Normanton WF6 2AF
Custard Creative Midlands Northampton NN3 6WL
Cre8ive Design Midlands Kenilworth CV8 1JD
For Colour Midlands Newark, Nottingham NG24 1LE
Sign It Midlands Beeston, Nottingham NG9 2AY
Ozmedia Print Midlands Barrow Upon Soar LE12 8JH
Pewter Design Midlands Market Harborough LE16 7DS
St Ives Quickprint Midlands St Ives PE27 3WS
Artichoke Design Midlands Birmingham B18 6NN
The Ideas Room Midlands Leicester LE3 0DL
Ideas Taking Shape Midlands Rugby CV21 2SD
Graphic Results Midlands Belper DE56 1AY
Colour Box Design North East York YO23 1NA
Print House Direct North East Bishop Auckland DL14 0LZ
The Factory North East Leeds LS12 2DS
Maskerade Design North East Sunderland SR2 7PR
Pro-Actif Communications North East Darlington DL3 7TD
GOWEB North East Wakefield WF2 9BL
Creative Web design UK North East Alnwick NE71 6EA
Blah D Blah North Wales Bangor LL57 1NY
Granthams - Preston North West Preston PR1 2UQ
Granthams - Blackpool North West Blackpool FY1 4PE
Print Design Warehouse North West Marple SK6 7AD
RAS Limited North West Chester CH3 5AG
Silverback North West Isle of Man IM1 2LA
Mailboxes North West Stockport SK1 1LE
Printel North West Widnes WA3 8LG
ER Design & Print North West Alsager CW2 5PR
Impact Advertising North West Timperley WA15 7SP
Masterprint North West St Helens WA10 1DH
Copycat North West Maghull L31 2HB
Bradbury Graphics Northern Ireland Belfast BT7 1BS
Xpress Creative Northern Ireland Newtonabbey BT36 4PU
Mooney Media Northern Ireland County Down BT32 4QD
Color Co. - Edinburgh Scotland Edinburgh EH2 2PA
Glasgow Print Scotland North Glasgow G64 1RX
TRS Graphics South East Croydon CR2 6EB
Felix Communications South East Rochester ME2 4HZ
Studio Direct South East Chelmsford CM2 6HE
Lussh Creative South East Chesterfield S40 2BY
Inprint South East Colchester CO1 1PB
Anneset South West Weston-Super-Mare BS23 3DE
Presto Print South West Christchurch BH23 1QD
Malthouse South West Taunton TA1 3EP
Print Creative South West Bath BA1 2JB
PRINTING.COM PLC
(â??Printing.comâ?? or â??the Companyâ??)
Specialist retail chain with 88 Outlets(plus 12 pending) across the UK
INTERIM RESULTS FOR THE PERIOD ENDED 10 OCTOBER 2004
Chairmanâ??s & Chief Executiveâ??s Statement
Trading Results
We are pleased to announce that, for the interim period of 28 weeks ending 10 October 2004, your Company increased pre-tax profits by 151% to £631,000 (2003: £251,000), turnover increased by 17% to £5,564,000 (2003: £4,769,000) and earnings per share rose by 142% to 1.09p (2003: 0.45p).
Total Retail Sales, the Companyâ??s estimate of the retail sales value of all Printing.com transactions, rose by 40% to £7,518,000 (2003: £5,354,000).
The total number of Outlets active at the end of the interim period was 83 (2003: 60) with a further 13 Outlets pending.
Operational Review
Territory Franchise and Store development
During the period, Printing.com Stores, both Company-owned and franchised, accounted for estimated Total Retail Sales of £3,855,000 (2003: £2,646,000), an increase of £1,209,000 or 46%.
With little more than a year elapsed since the Company announced the crystallisation of its Territory Franchise model, significant progress has been made. Firstly, the process of formally upgrading the early adopters of the Printing.com Store Franchise to the Printing.com Territory Franchise was successfully completed. Essentially this means that the Franchisee is not only granted a licence to operate a Printing.com Store but also required to establish a network of Printing.com Bolt-on Franchises.
In the interim period, a new Company-owned outlet opened at Printing.comâ??s Manchester Hub. Printing.com Stores (each pertaining to a Territory Franchise) were opened in Harrow and Reading. The previously Company-owned Store in Ealing was franchised, whilst conversely, the previously franchised Store in Oxford was â??bought backâ?? by Printing.com due to the changed circumstances of the Franchisee. The intention is to re-franchise the Oxford Store when a suitable candidate emerges. Additionally, Franchise agreements were completed for the Middlesbrough, Bournemouth, Warrington and Wolverhampton territories. Since the close of the interim period, the Warrington and Wolverhampton Stores have commenced trading, with Middlesbrough and Bournemouth openings anticipated soon.
During the interim period â??Optionsâ?? (granted in consideration of a non-refundable payment of £6,000) were granted for the London South East, Coventry and Dublin North territories. An Option was also entered into covering the presently Company-owned outlet in Kingston-upon-Hull. Two earlier Options lapsed. Post the interim period Options have been granted covering the Cardiff and Brighton territories.
To date the Store estate comprises 27 open units, 11 of which are Company owned and 16 Franchised. Two stores are in the final stages of preparing to open. A further six Options are in place for additional Stores.
Following the recent National Franchise Exhibition, a strong pipeline of prospective Franchisees are currently being interviewed and assessed. Accordingly, the Directors are optimistic that another wave of Options will be granted prior to the close of the current fiscal year.
As the focus on the Territory Franchise is not only building a Store but also developing a network of Bolt-on Franchises, the Directors believe that reporting conventional like-for-like Store sales would present an incomplete picture. This is also true of the Companyâ??s own Stores which essentially double-up as regional Franchise support bases. Moving forward, it is intended to report like-for-like Total Retail Sales for Territory Franchises (embracing both the Store and its associated Bolt-on Franchises) once sufficient operational data has been collated to enable a meaningful comparison.
Bolt-on Franchise Development
During the period, sales through the Bolt-on Franchises rose by 78% to an estimated £2,867,000 (2003: £1,613,000) in Total Retail Sales value.
Over the period an additional 12 Bolt-on Franchise agreements were completed, 18 Bolt-on Franchises commenced trading and four Bolt-on Franchise agreements were terminated. Post 10th October a further three Bolt-on Franchises have commenced trading. To date the estate comprises 61 operational Bolt-on Franchises, with a further four preparing to launch.
In the latest â??four-weekâ?? trading periods (ending 10 October and 7 November respectively), the estimated value of Total Retail Sales generated by Printing.com Bolt-on Franchises exceeded £500,000 per period. Moreover, segmenting the Bolt-on Franchises by length of operation clearly indicates a steady growth in transactional levels as the Bolt-on Franchises adopt Printing.comâ??s methods of operation.
An important facet of the Territory Franchise structure is the marketing of the Bolt-on Franchise opportunity by every Territory Franchisee. Clearly the identification, scrutiny and proposal of a prospective Bolt-on Franchise is a complex marketing cycle. It is thought that the success of this programme will accelerate, as established Territory Franchisees gain experience. This belief is supported by the success of the Leicester and Newcastle Territory Franchises, having added 3 and 2 Bolt-on Franchises respectively in little over a year. Both of these Franchisees hail from buyouts by experienced employees, which would appear to indicate that the Territory Franchise potential is realised once the Printing.com methodology is successfully adopted.
The Company has developed with its bankers, the Royal Bank of Scotland (â??RBSâ??), a mechanism whereby RBS will provide development finance to assist further copyshops, printers and graphic designers to adopt Printing.com Bolt-on Franchises. The scheme has been designed to dovetail with the launching of Bolt-on Franchises, funding both the licence fee and some additional working capital.
RBS has provided an indicative facility of £500,000, which Printing.com anticipates will support in the order of 40 investments. Whilst the Company is exposed to guarantees in respect of these loans, the Directors note the success of the Bolt-on Franchise programme to date and believe the upside of accelerating the Bolt-on Franchises rollout is disproportionate to the risks involved.
The Agency
The Companyâ??s â??Traditional Marketsâ?? division has been re-branded â??the Agencyâ??. Whereas most Company Stores focus on the SOHO and SME community, the Agency continues to foster relationships with larger clients. The Directors believe that the methodology developed and its success in servicing such larger clients bodes well for any Company Franchise that may wish to expand their businesses in such a manner. However, trading overall proved disappointing for the division, with turnover down 16% at £897,000 (2003: £1,074,000). Options are being explored whereby the Agency might be franchised.
Operational infrastructure
The Directors have previously estimated that the capacity of the Companyâ??s Manchester Hub, measured in terms of Total Retail Sales, is in the order of £20-25 million. Annualising the last â??four-weekâ?? period indicates that the Total Retail Sales run rate has now reached £16 million. It is anticipated that additional capacity will be required during the next fiscal year and alternative options for increasing capacity are now being reviewed.
Cash
At the close of the interim period the Company had cash-in-hand of £1,807,000. During the period, bank loans of £117,000 were paid off early and the consideration for the buyback of the Oxford Franchise was paid in cash. Had these events not taken place, the corresponding cash-in-hand position would have exceeded £2 million and the net increase in cash from operational activity (excluding the proceeds from the AIM placing and the execution of share options) would have been £372,000.
The Company also makes certain interest bearing loans, principally where a Company-owned Store is franchised. This is due to a technicality caused by Printing.com having used the â??Government Small Firms Loan Guarantee Schemeâ?? scheme in March 2000, prior to its Ofex listing in that year which now prevents a franchisee from utilising this Scheme. The Directors consider that an appropriate prudent provision has been made in the Companyâ??s accounts in respect of these loans and the balances are regularly reviewed. At the close of the period the sum of these loans was £251,000.
Outlook
The franchise nature of Printing.comâ??s business model has been structured so that the Company is insulated from the loss-making phase of a new outlet or one that continues to under perform and that each new outlet should yield a positive contribution from its inception. The growth of the number of outlets, coupled with the prospect of increasing volume as new and fledgling outlets mature should, in the opinion of the Directors, result in ongoing volume growth. Significant unutilised capacity still exists in Printing.comâ??s Manchester Hub. In the short-term, additional volumes should incur only the marginal cost of production leading to the prospect an increased contribution from the Hub. Moving forward, the Directors intend to follow a strategy of proportionally scaling the production infrastructure to allow for growth in both volumes and profit.
The Company has previously set out its objective of achieving 175 outlets by September 2005. The Directors believe achieving this objective will be dependant upon Franchisees securing suitable premises and each Territory Franchisee respectively developing their network of Bolt-on Franchises. Further, the Directors believe that the foundations are now in place for a substantial increase in the size of the Companyâ??s network.
It is for these reasons that the Directors are optimistic about the prospects for Printing.com.
George Hardie Chairman
Tony Rafferty Chief Executive
23 November 2004
Unaudited Consolidated Profit and Loss Account for the 28 week period
ended 10 October 2004
28 Weeks ended 10 October2004Unaudited壉??000 28 Weeks ended 12 October2003Unaudited壉??000 Year Ended31 March2004Audited壉??000
TURNOVER 5,564 4,769 9,328
Changes in stocks of finished goods 31 (7) (6)
5,595 4,763 9,322
Other operating income 0 0 11
5,595 4,763 9,332
Raw materials and consumables 1,531 1,157 2,231
4,064 3,605 7,102
Staff costs 1,739 1,561 2,998
Depreciation and amortisation 381 340 698
Other operating charges 1,217 1,315 2,212
OPERATING PROFIT 726 388 1,193
Investment income 27 7 10
Interest payable and similar charges (122) (144) (264)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 631 251 940
Taxation (189) (75) (346)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 442 175 593
Earnings per ordinary share - basic 1.09p 0.45p 1.53p
Earnings per ordinary share â?? fully diluted 1.08p 0.42p 1.43p
Note. The Interim accounts have been prepared on the basis of the accounting policies set out
In the 2003/4 Group Accounts.
Unaudited Consolidated Group Balance Sheet as at
10 October 2004
28 Weeks ended 10 October2004Unaudited壉??000 28 Weeks ended 12 October2003Unaudited壉??000 YearEnded31 March2004Audited壉??000
FIXED ASSETS
Intangible assets 108 46 54
Tangible assets 3,698 4,053 3,901
3,806 4,099 3,954
CURRENT ASSETS
Stocks 104 72 73
Debtors 2,161 1,774 1,716
Cash at bank and in hand 1,807 545 789
4,072 2,391 2,577
CREDITORS: Amounts falling due within one year (2,474) (2,523) (2,316)
NET CURRENT ASSETS 1,598 (132) 260
TOTAL ASSETS LESS CURRENT LIABILITIES 5,404 3,966 4,215
CREDITORS: Amounts falling due after more than one year (1,300) (1,668) (1,497)
4,104 2,298 2,718
CAPITAL AND RESERVES
Called up share capital 442 388 389
Share premium 3,765 2,875 2,876
Merger reserve 211 211 211
Other reserve 1 1 1
Profit and loss account (315) (1,177) (759)
SHAREHOLDERSâ?? FUNDS 4,104 2,298 2,718
Unaudited Group Cash Flow Statement for the 28 week period
ended 10 October 2004
28 Weeks ended 10 October2004Unaudited壉??000 28 Weeks ended 12 October2003Unaudited壉??000 YearEnded31 March2004Audited壉??000
Cash flow from operating activities 838 969 1,537
Returns on investments and servicing of finance (95) (137) (253)
Capital expenditure (233) (736) (629)
Taxation 0 (22) (12)
CASH INFLOW BEFORE FINANCING 510 74 643
Financing 508 (397) (722)
INCREASE/(DECREASE) IN CASH IN PERIOD 1,018 (323) (80)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN DEBT
(Decrease)/Increase in cash in the period 3c 1,018 (323) (80)
Cash outflow from decrease in net debt financing 3b 430 397 724
Change in net debt resulting from cash flows 1,448 74 644
New finance leases 0 (566) (897)
MOVEMENT IN NET DEBT IN THE PERIOD 1,448 (492) (253)
NET DEBT AT START OF PERIOD 3c (1,346) (1,093) (1,093)
NET DEBT AT END OF PERIOD 3c 102 (1,585) (1,346)
Being:
Net Cash 3c 1,807 545 789
Finance Leases (1,705) (1,914) (1,968)
Bank Loans 0 (216) (167)
3c 102 (1,585) (1,346)
Notes to the unaudited Interim accounts for the 28 week period
ended 10 October 2004
The information set out does not constitute statutory accounts within the meaning of s240 CA85.
1. The Interim Report was approved by the directors on 22 November 2004.
The Interim Report, which is the responsibility of the directors, has not been audited but has been reviewed by our auditors Baker Tilly to the extent described in the review report.
The Interim Report has been prepared using established Group accounting policies.
2. Turnover and profit before taxation were all derived from the Groupâ??s principal activity carried out in the UK and Republic of Ireland.
3. The Debtors figure of £2,161,000 includes amounts falling due after more than one year of £143,000.
4. Earnings per share for the period have been calculated using 40,408,746 shares, the weighted average number of shares in issue over the 28 weeks.
The diluted earnings per share includes 671,369 shares arising from the dilutive effect of share options. The weighted average number of shares used was 41,080,115.
5. The movement in shareholdersâ?? funds is analysed as follows:
28 Weeks ended 10 October2004
£(000)
Opening shareholdersâ?? funds 2,718
Profit for the financial period 442
Exchange gain 2
Proceeds from issue of shares 53
Share premium 889
Closing shareholdersâ?? funds 4,104
6. Cash Flow
28 Weeks ended 10 October2004Unaudited壉??000 28 Weeks ended 12 October2003Unaudited壉??000 YearEnded31 March2004Audited壉??000
a Reconciliation of operating profit to net cash inflow from operating activities
Operating profit 726 388 1,193
Amortisation & Depreciation 382 340 698
Increase/(decrease) in stocks (31) 7 6
Increase in debtors (495) (405) (622)
Increase in creditors 256 639 272
Profit on sale of fixed assets 0 0 (11)
838 969 1,537
b Analysis of Cash Flows For Headings Netted Off in the Cash Flow Statement
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 27 7 10
Interest paid (4) (9) (14)
Interest element of finance lease rental payments (118) (135) (249)
Net cash outflow from returns on investments and servicing of finance (95) (137) (253)
CAPITAL EXPENDITURE
Purchase of intangible assets (71) 0 (41)
Purchase of tangible assets (174) (794) (668)
Sale of tangible assets 12 58 79
Net cash outflow from capital expenditure (233) (736) (629)
FINANCING
Issue of ordinary share capital 1,220 0 1
Issue Costs (278) 0 0
Other new long term loan 0 0 0
Repayment of bank loan (168) (64) (113)
Capital elements of hire purchase contracts 15 0 0
Capital elements of hire purchase contracts (281) (333) (610)
Net cash inflow/(outflow) from financing 508 (397) (722)
c Analysis of Net Funds
At 31 March2004Audited£(000) Cash Flow£(000) Other NonCash Changes£(000) At 10 October2004Unaudited£(000)
Net cash:
Cash at bank and in hand 789 1,018 0 1,807
789 1,018 0 1,807
Debt:
Finance leases (1,967) 277 (15) (1,705)
Bank loan due within 1 year (110) 110 0 0
Bank loan due after 1 year (58) 58 0 0
(2,135) 445 (15) (1,705)
Net cash/(debt) (1,346) 1,463 (15) 102
7. Taxation
28 Weeks ended 10 October2004
£(000)
Corporation tax at 30% 189
Overprovision in prior year -
Total current tax 189
Deferred tax
Originating from timing differences â?? based on standard rate of corporation tax in the UK of 30% (50)
Tax on profit on ordinary activities 139
8. Interim Statement
The Interim Report will be posted to all shareholders of the Company and copies will be available upon application to the registered office, Printing.com plc, Focal Point, 3rd Avenue, The Village, Trafford Park, Manchester M17 1FG.
INDEPENDENT REVIEW REPORT BY BAKER TILLY TO PRINTING.COM PLC
Introduction
We have been instructed by the company to review the financial information set out on pages 9 to 14 and we have read the other information in the interim statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report, including the conclusion, has been prepared for and only for the company for the purpose of their interim statement and for no other purpose. We do not, therefore in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Directorsâ?? responsibilities
The interim statement, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Interim Statement in accordance with the Alternative Investment Market Rules which require that the accounting policies and presentation applied to the interim figures must be consistent with those that will be adopted in the companyâ??s annual accounts.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board as if that Bulletin applied. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the 28 weeks months ended 10 October 2004.