Publishing and marketing services outfit St Ives (SIV) sheds 7.1% to 222p as investor fret over an accounting loss posted in first half results announced 8 March 2016 (today).

Losses are mainly a result of non-cash accounting charges which chief executive Matt Armitage dismisses as largely irrelevant to underlying performance.

Acquisitions have become a big part of Armitage’s strategy at St Ives since taking the helm in August 2014.

Armitage, former head of St Ives’ Marketing Services business, is aiming to diversify the group from its legacy book printing unit which has a large contract with publisher Penguin Random House.

Strategic Marketing, which includes data, digital and communications businesses and is part of the overall Marketing Services unit, will represent around 60% of operating profit by the year-end, Armitage says.

STIVES - Comparison Line Chart (Rebased to first)8

‘We are on target to deliver 60% of operating profit from strategic marketing and that’s our short-term target,’ says Armitage.

‘We’re looking to acquire more businesses, mainly in the US, to build out the community of companies we have now developed in that country.

‘We are very much on track with the strategy we set out to investors – rebalancing the business and growing margins. That growth is coming through from the Strategic Marketing division, which delivered 14% operating margins in the first half.’

A scrappy set of results includes £18.5 million of ‘non-underlying items’, up from £12.9 million a year earlier.

Around £10.7 million of these might be considered acquisition-related, which includes a £2.5 million write-down of goodwill on a previously acquired unit after the loss of a customer contract.

Cash flow is also a little weaker than a year earlier. Net cash from operations was £9.3 million versus £12.8 million a year earlier. Finance officer Brad Gray says there is some strain on working capital because of growth in the Marketing Services division.

There was also an impact from the scheduling of payments from customers which typically occur at the end of the month, rather than 29 January 2016 which was the end of St Ives’ accounting period.

Net debt increased £19.3 million to £82.1 million, mainly a result of acquisitions and dividend payments.

Around £13 million of funds raised from a placing are not included in the net debt calculation because the proceeds have yet to be paid to St Ives until after the period-end.

Issue Date: 08 Mar 2016