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Trading statements

St Ives warns on FY outturn

19 January 2017 09:14

St Ives warns that its expected FY outturn would be materially below its previous views, with the majority of the shortfall due to the pressures within the Marketing Activation segment.

However, the directors added that they remained confident in the long-term strategy currently being pursued, and in the growth opportunities open to the group.

"The balance sheet remains sound and we have the necessary cash flow capabilities to support our investment priorities and to further reduce debt," it added.

STRATEGIC MARKETING

St Ives said revenue for the Strategic Marketing segment for the half year was expected to be approximately 9% above the equivalent period in the prior year.

"Excluding the effects of acquisitions and currency movements, like-for-like revenue is expected to be broadly in line with the prior half year," it said.

"As previously reported, we experienced a number of project cancellations and deferrals in the last quarter of the previous financial year, which have also impacted revenue growth and operating margin within the first half of the current financial year.

"We remain encouraged by the progress that has been made to replace the cancelled work. However, this process is taking longer than previously anticipated, and it is unlikely that we will see the full benefit of the new work we have won until the final quarter of the current financial year."

BOOKS

Within St Ives' Books business, revenue for the first half was expected to be about 13% above the prior half year. Trading during the pre-Christmas period had generally been positive and was particularly helped by the two recently published J.K. Rowling titles.

MARKETING ACTIVATION

St Ives said trading conditions within its Marketing Activation segment continue to be very challenging due in large part to the ongoing pressures within the grocery retail sector, the segment's largest single market.

"We expect the rate of revenue decline to have reduced in the first half of the financial year to approximately 2% (compared to a 7% decline in the previous full financial year) although the pressure on operating margin has increased," the company said.

"Diversification of the client base to reduce this segment's dependency on the grocery sector remains a priority and we have secured a number of new client wins in the half year, although at lower margins than historic levels due to the increasingly competitive nature of the market."

St Ives added that, due to the increased pressure on operating margins, it had initiated further cost-reduction measures within the segment. "The benefits of these actions are expected to come through in the final quarter of the current financial year."

At 9:14am: (LON:SIV) St Ives PLC share price was -46p at 80.5p

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Related Company: SIV

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