31 October 2016
St Ives plc - 2016 Annual Report and Accounts and Notice of AGM
Further to the Company's announcement of its annual results on 4 October 2016, copies of the Annual Report and Accounts 2016 for the fifty two weeks ended 29 July 2016 ('the Annual Report 2016'), the Notice of Annual General Meeting of the Company and the Form of Proxy in relation to the Annual General Meeting ('the Shareholder Documents') have today been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/nsm
The Shareholder Documents will shortly be available to download from the Company Policies & Circulars section of the Company's website, under Investor Relations, at www.st-ives.co.uk.
Hard copies of the above Shareholder Documents have today been posted to shareholders.
The Company's Annual General Meeting will be held at 11.00 a.m. on Thursday, 1 December 2016 at One Tudor Street, London EC4Y 0AH.
Additional Information
The following information is extracted from the Annual Report 2016 (page references are to pages in the Annual Report 2016) and should be read in conjunction with the Company's announcement of its annual results issued on 4 October 2016. Both documents can be found at www.st-ives.co.uk and together, constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the Annual Report 2016 in full.
Principal Risks and Uncertainties
| Risk | Description | Change in 2016 | Mitigating activities |
| ACQUISITION STRATEGY Acquisitions may not fit in to the Group's strategic direction and may fail to deliver growth and successful integration as a result. |
As businesses are acquired as part of the Group's strategic objectives to grow its Strategic Marketing segment, it is fundamental to identify businesses that will enhance the Group's capabilities. |
Unchanged. The inherent risk rating is consistent with the prior year. Over time, with scale increasing from further acquisitions, it is expected that the rating of this risk will fall. |
Stringent selection criteria is followed for pursuing acquisitions that fit the Group's strategy and its culture. Detailed due diligence is undertaken using external advisors. Board strategic reviews are held annually to monitor progress against the business model to, as necessary, refresh and adapt the Group's strategy for delivering growth. Meetings are held with senior management of the subsidiaries to determine cross-selling opportunities. |
| ORGANIC GROWTH Organic growth, including overseas expansion, may not be pursued in the right sectors or territories. |
Investing in the wrong territories could result in significant incremental costs to the Group. |
Unchanged. Organic growth is a key strategic objective for the business and the risk factors involved are considered to be consistent with the prior year in view of those territories that have been targeted. |
Regular discussion of strategy at Board meetings and meetings of representatives from the businesses to develop the Group's proposition and growth opportunities and collaborative behaviour. Detailed budgets and three year plans are submitted to the Board for review. |
| LEGACY BUSINESSES Issues arising within Marketing Activation and Books may distract or inhibit the Board's focus on its strategic objectives. |
This could, in the short term, impact the growth within the Strategic Marketing segment if the Board has to address issues that emerge in other parts of the Group. |
Increased. Decline in the Marketing Activation segment was experienced during the year, primarily due to issues in the grocery retail sector. |
Consolidation of businesses and management within the Marketing Activation segment has created greater synergies with a senior management team across the segment that oversees each of the subsidiaries. Diversification away from the grocery retail sector is being undertaken. |
| ECONOMY Challenging economic conditions may inhibit growth and create uncertainty. |
Brexit has created more uncertainty in the economy which could result in marketing campaigns or projects being cancelled or deferred at short notice. Whilst the Group does have long term contracts with clients, the level of spend is predominantly at the client's discretion rather than being derived from guaranteed sales volumes. |
Increased. Given the degree of uncertainty in the economy, partly impacted by Brexit, the Board's view is that this risk has increased from the prior year. |
Diversification into markets that are capable of delivering profit growth with an increasing range of marketing companies. Opportunities pursued to open overseas offices, where client demand warrants it. Investment in a wider range of services offered to clients. A continual review of the Group's cost base. The securing of long-term client relationships. Seeking to increase market share by investing in sophisticated and targeted sales lead generation. A regular review of performance of all businesses against their budgets and implement timely remedial action, where needed. |
| CLIENTS Competitive pressure that may result in the loss of a key client.
|
The Group has a variety of key clients in each of its three business segments. Long-term relationships have been fostered with many of these clients over a number of years. |
Decreased. Whilst still a key risk that needs to be considered by the Board, this risk has reduced in part due to two further acquisitions in the year and also following the decline in the grocery retail sector which has reduced the contribution of these clients to the Group's results. |
Encourage collaborative behaviour across the Group's businesses and create a commitment to cross-selling that will distinguish the Group's marketing offering from its competitors'. Achieve or exceed service level agreements with clients. Broaden our capabilities, providing marketing solutions in support of our clients' marketing strategies. Avoid over reliance on any single client. Implement bespoke propositions for securing the renewal of key client contracts, providing Group support where appropriate. Conduct client satisfaction surveys. |
| EMPLOYEES A failure to attract, develop and retain employees with the necessary talent for our businesses. |
Retaining staff is a key priority for the Group as it continues to invest in new and existing service orientated businesses.
|
Unchanged. This risk rating is consistent with the prior year. |
Implement appraisals and fulfil training needs where identified. Develop a collaborative culture across the Group's businesses. Operate discretionary share-based incentive schemes, and other benefits. Pay part of consideration in shares to vendor directors of acquired businesses, with 'lock-in' obligations. |
| FINANCING The Group's ability to trade may be compromised by lack of cash funds. |
Being able to finance working capital and carry out operations is fundamental to the Group. |
Unchanged. This inherent risk is consistent with prior years. The bank facility was increased during the year and subsequently amended after the year end, further details of which are provided on page 91. |
Conduct 'going concern' reviews on a twice yearly basis; conduct longer-term viability assessments annually; continually monitor the Group's performance against its banking covenants. Undertake monthly reviews of working capital, cash forecasts and headroom on banking covenants. Periodically review the Group's financial KPIs with its bankers. |
| PENSION SCHEME The volatility of the St Ives Defined Benefits Pension Scheme deficit. |
The volatility of the Scheme's deficit is impacted by the inflation rate, changes in the discount rate derived from gilt yields and changes in actuarial assumptions, such as mortality. |
Unchanged. This risk rating associated with the Scheme's deficit remains high. The deficit has increased primarily due to low interest rates. |
Agree deficit recovery plan with the Pension Scheme Trustee. Regularly engage the Trustee directors in discussions on the Group's performance. Manage possible Section 75 debts arising from business disposals and closures. Contribute to discussions on the Scheme's investment strategy. Proactively seek to limit the growth in the pension liability. |
| REPUTATIONAL Exposure to reputational or financial damage due to accident, unethical trading, non-compliance with legislation or regulation or disputes. |
Health and safety is a pre-eminent priority for the Board and is discussed at each Board meeting.
Other reputational risks need to be carefully managed as part of the Group's governance procedures.
|
Unchanged. This risk rating is consistent with the prior year, reflecting the Board's assessment of the associated risk impact. |
Ingrain robust health and safety culture throughout the Group, supported by rigorous health and safety and environmental policies; monitor compliance; measure performance and investigate major incidents. Monitor changes in legislation and regulations, take legal advice and provide training where necessary. Place a strong emphasis on compliance with local taxation rules by embedding the Group's processes and procedures. Apply the Group's policies on Ethical Trading, Share Dealing, Equal Opportunities, Dignity at Work and Whistle Blowing. Have in place business continuity plans and a procedure for dealing with the control of Inside Information. |
| DATA SECURITY Exposure to reputational or financial damage due to corruption or theft of company owned or client owned data. |
This includes the risk of loss of data, sabotage or disruption to the business, fraud, reputation damage, and possible fines. |
New risk. This risk has been added as a key risk for the Group during the year in part following the new regulations coming into effect concerning data security. |
IT functions in place around the Group with responsibility to protect data (e.g. encryption, firewalls, restricted access). Periodic reviews by Internal Audit, utilising in-house IT as well as specialist external consultants. Cyber security and IT questionnaire completed periodically by subsidiaries to highlight areas of potential risk, together with any mitigating actions performed in order to address this risk. |
Related Party Transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this [Annual Report 2016] note. No material related party transactions have been entered into during the current period, which might reasonably affect the decisions made by the users of these financial statements.
On 2 November 2015, shares in the Company were purchased from the Group's Employee Benefit Trust on behalf of Matt Armitage and Brad Gray as outlined in note 34 [of the Annual Report 2016].
No other executive officers of the Company or their associates had material transactions with the Group during the period.
The Group traded with Loop Integration LLC. The Group earned revenue of £216,608 and the Group incurred charges for services received of £202,168. At the reporting date, Loop Integration LLC owed the Group £103,829.
The total amounts for Directors' remuneration were as follows:
|
| 2016 £'000 | 2015 £'000 |
| Short-term employee benefits | 926 | 1,195 |
| Post-employment benefits | 108 | 83 |
| Share-based payment | - | 430 |
|
| 1,034 | 1,708 |
Statement of Directors' Responsibilities
The following statement which was prepared for the purposes of the Annual Report 2016 is repeated here for the purposes of complying with DTR 6.3.5. It relates to and is extracted from the Annual Report 2016 and is not connected to the extracted and summarised information presented in this announcement.
The Director's confirm to the best of their knowledge:
· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
· the Strategic Report includes a fair review of the development, position and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Signed in accordance with a resolution of the Board of Directors on 4 October 2016 on its behalf by Matt Armitage, Chief Executive and Brad Gray, Chief Financial Officer.
Enquiries:
Daniel Fattal 020 7928 8844
Company Secretary
St Ives plc