21-11-2006 - Printing.com - Interim Results Announcement November 2006
21 November 2006Printing.com plc ("Printing.com" or "the Company")
Specialist retail chain with 188 Outlets open and pending across the UK
Unaudited Interim Results for the period ended 15 October 2006
________________ 28 Weeks period ended____ 28 Weeks period ended
________________ 15 October 2006 _________ 16 October 2005
(*restated)
_________________ �£'000 _______________ �£'000 ___ Change
Total Retail Sales __ 10,879 _________________ 9,383 ___ +15.9%
Turnover ___________ 6,187 _________________ 6,404 ____ -3.4%
Operating profit ____ 1,021 _________________ 1,020 ____ +0.1%
Profit before tax ___ 1,026 __________________ 1,019 ____ +0.7%
EPS - Basic ________ 1.61p _________________ 1.61p ____ -
EPS - Fully Diluted __ 1.53p _________________ 1.53p ____ -
Dividend ___________ 0.60p _________________ 0.50p ____ +20.0%
Outlets Active at Period end
Stand alone stores _____ 47 __________________ 41 ____ +14.6%
Bolt-ons _____________ 128 __________________ 91 ____ +40.7%
Total Active __________ 175 _________________ 132 ____ +32.6%
Contracted ____________ 13 __________________ 13 ____ -
Total Outlets
open and pending ______ 188 _________________ 145 ____ +29.7%
* The restatement of the prior year results relates to the new accounting treatment for share based compensation as required by Financial Reporting Standard 20 (note 1)
* Expansion of Manchester Hub substantially complete
* Total Retail Sales capacity increased from �£20-�£25 million to �£40-�£45 million
* First International Master Franchise operational
* Optimistic about the prospects for Printing.com
Chairman's & Chief Executive's Statement
Trading Results and Dividend
We are pleased to announce that, for the interim period covering the 28 weeks ending 15 October 2006, your Company increased pre-tax profits by 0.7% to �£1,026,000 (2005: �£1,019,000).
Total Retail Sales increased by 15.9% to �£10,879,000 (2005: �£9,383,000) and provides the measure that we believe best indicates transactional volumes. In a similar manner, Transfer Price (the wholesale value paid by the franchisee in respect of each order) increased by 16.1% to �£5,881,000 (2005: �£5,067,000).
Turnover marginally decreased by 3.4% to �£6,187,000 (2005: �£6,404,000), reflecting the change in ownership of several Stores and, significantly, the legacy 'Agency' division. In previous periods these were Company owned and Total Retail Sales were included in turnover. In the period under review, now under franchise ownership, Printing.com's turnover only included the wholesale value (Transfer Price) of these orders, with the balance (along with the associated overheads) passed to the franchisee.
At the close of the interim period, the Company had cash-in-hand of �£3,223,000. During the period, working capital increased by �£543,000 and the Company paid dividends of �£559,000. Capital expenditure in the period amounted to �£3,285,000 of which �£2,955,000 was lease financed.
The Directors are declaring an interim dividend of 0.6p per share to be paid on 15 December 2006 to shareholders on the register at 1 December 2006.
Current Trading
As previously reported at the Company's AGM, trading deteriorated during June and July with the downturn being more than would simply reflect the usual summer seasonality. It was also reported that disruption pertaining to the Hub expansion restricted certain options which could ordinarily have been used to mitigate such conditions: accordingly the Company revised its budget for the year.
We are pleased to report that following the last update on 28 July 2006, and save for the first two weeks of August, trading has proved more encouraging. As a result, the penultimate and final 4-week trading Periods, ending 17 September 2006 and 15 October 2006, saw volumes inline with the Company's current budget. Encouragingly, the first Period of the second half has also followed this more positive trend.
We attribute better trading both to an improvement in the market and to more potent promotional offers that are now possible following the Hub expansion. Indeed, September's 'Stationery Pack' offer generated over �£200,000 of Total Retail Sales with over 1,200 clients placing orders.
Estate Development
The Company's estate of open and pending Outlets at the end of the reporting period comprised:-
________________15 October 2006___16 October 2005___31 March 2006
Company owned Stores __ 6 ______________ 8 _____________ 6
Franchised Stores _____ 42 _____________ 39 ____________ 42
Open and pending
Bolt-on Franchises ____ 140 ____________ 98 ____________ 118
Total Outlets
open and pending ______ 188 ____________ 145 ___________ 166
The Franchised Stores (most of which operate under the Company's Territory Franchise model) include not only those open but also those pending under option or trading from temporary premises. Whilst previously the pending element, would have represented a significant number, today all but one of the Stores are now trading from permanent locations.
Our strategy for securing franchisees for the limited remaining Territory Franchises has reverted away from the expense of major exhibitions as in many parts of the UK and Ireland we simply have no availability.
Previously our proposed structure for the UK included 66 Territory Franchises or Company owned equivalents. Such has been the success of the Bolt-on Franchise programme that in certain instances we have 'merged' designated Territory Franchise areas to provide greater scope for expedited Bolt-on Franchise development. Accordingly, we now anticipate that a full complement of Territory Franchises would be in the region of 58 to 60. We therefore have in the order of 12 to 14 still to grant.
Bolt-on Franchise development continues to make good progress and we hope that the rate of growth will increase as more Territory Franchisees gain experience in the marketing of the Bolt-on opportunity. Certain of our Territory Franchisees have now added more than five Bolt-ons across their development area and, indeed, many of these successful Territory Franchisees are optimistic that additional Bolt-on outlets may be signed. Accordingly, we believe that the scope exists for the number of Bolt-on franchises to significantly exceed 300 as the estate matures.
Like for Like
Our like for like measure reflects the value of transactions pertaining to the principal Store and the Bolt-on Franchises of a given Territory Franchise.This is because some of the Territory Franchisees put more emphasis on the Store they directly own, whilst others focus on the development of the local Bolt-on network. Both are valid strategies. In addition, only Territory Franchises where the Store is over three years old are considered, thereby avoiding new stores distorting this metric.
On this basis, like for like growth during the interim period was 6.8% versus 17.6% reported for the twelve months to March 2006. This reflects the challenging trading conditions that have been encountered over the summer
months.
International Development
It is a little over a year since your Company outlined its International strategy, whereby established printing companies in other countries would be able to licence Printing.com's software and systems and thereby establish a similar network in their market place. In return for providing its software and systems, Printing.com would be paid a combination of licence fees and royalties.
June 2006 saw the granting of the first of these licences to an established printing group in New Zealand with an Option also granted for Australia. Following extensive training of the New Zealand team in the UK, coupled with on-site support in New Zealand, the system and software are now in use.
Importantly, initial feedback from both the licence owner and their franchisees has been encouraging. Also, since commencing operations with the system, the first New Zealand Bolt-on Franchise has been secured demonstrating the scope for this model to translate into other countries.
The operation of the system means that royalties have begun to be generated at a modest level, but we anticipate that over the next fiscal year and beyond, these will prove more significant and worthwhile.
In July, we announced that an Option had been taken out over Poland. This situation has progressed significantly and we remain optimistic of a positive outcome.
Following a variety of promotional initiatives, including major print exhibitions in the UK and US, we are actively engaged in discussions with many prospective partners across the EU, US and elsewhere. We remain cautiously optimistic that these discussions will result in the granting of additional licences during the current fiscal year.
Hub Development
At the beginning of the Interim period Printing.com's production Hub had a capacity measured in Total Retail Sales of �£20-25 million with the Period by Period run rate close to this level and week by week peaks having exceeded this range.
Following the substantial completion of the major Hub expansion project, we now have a Total Retail Sales capacity �£40-�£45 million and our objective is to derive the maximum efficiencies from our new infrastructure whilst maintaining the high standards that the Printing.com brand represents.
Outlook
During the interim period we have faced challenges relating both to the softer market conditions combined with the Hub operational disruption and the complex demands on managerial time for the activities surrounding the promotion of the Master Franchise programme and the instigation of the first international operational licencee.
Whilst the fiscal performance of the Interim period versus the previous year could be construed as one of consolidation, we firmly believe that the operational developments provide the basis for the Company to significantly move forward.
Accordingly, we remain optimistic about the prospects for Printing.com.
George Hardie
Chairman
21 November 2006
Tony Rafferty
Chief Executive
21 November 2006