St Ives 'much improved' at start of second half

Marketing services group St Ives updated the market on its current trading on Wednesday, saying that following a challenging first half of the financial year, the first four months of the second half had - as anticipated - delivered a “much improved performance”, though the board’s expectations for the full year remained unchanged.

The London-listed company said revenue for the strategic marketing segment for the first four months of the second half year was approximately 12% above the equivalent period in the prior year.

Excluding the effects of currency movements, like-for-like revenue growth was approximately 7%.

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

“We are encouraged by the fact that the segment has now returned to delivering like-for-like revenue growth and also that the operating margin has improved significantly.”

Trading conditions within St Ives’ marketing activation segment continued to be “very challenging”, due in large part to the ongoing pressures within the grocery retail sector - the segment's largest single market.

Revenue was flat in the first four months of the second half - compared to a 3% decline in the first half - and the pressure on operating margin remained “intense”, according to the board.

“The cost reduction measures initiated within the segment have been implemented and the benefits are helping to mitigate this margin pressure.”

Within the firm’s books business, revenue for the first four months of the second half was approximately 12% ahead of the equivalent period in the prior year - compared to an increase of 15% in the first half - with continued pressure on operating margin.

“The previously announced cost reduction and restructuring measures will be implemented as planned before the end of the financial year.”

St Ives said it was continuing to look for opportunities to further strengthen the group's balance sheet, following the recent sale of a non-core property in Roche for £4.2m, which successfully reduced debt and created further headroom against the company’s banking covenants.

The group currently had one further non-core property held for sale.

“As discussed at our interim results in March, we continue to review strategic options for both the group's marketing activation and books segments, taking decisive action to improve efficiencies and reduce costs,” the board explained.

“This process is ongoing and we will provide further reports on its progress in due course.”

St Ives’ board said it remained “confident” in the strategy currently being pursued, and in the long term 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.”