Writtle half year report and dividend announcement
I am pleased to report on our first half performance.
Although there was an overall increase in turnover for the period, headline profit was behind last year. One of our Instore businesses, Arken, faced unforeseen delays and a reduction in anticipated orders, while all our businesses encountered inflationary cost pressures. Further details are set out in the Review of Trading below. Nevertheless, our strong balance sheet and cash reserves provide stability during these uncertain times when business confidence in the UK is wavering and interest rates are on the rise.
RESULTS AND DIVIDENDS
Turnover increased to £34.23m (2022: £33.84m) but higher costs offset this sales growth leaving headline profit before tax at £0.75m (2022: £1.17m). Exceptional costs of £0.33m and goodwill amortisation of £0.35m reduced profit before tax to £0.12m (2022: £0.83m).
Net cash at 30 June 2023 was £6.21m (2022: £8.95m) following dividend payments of £3m and capital expenditure of £2.5m during the period.
An interim dividend of 7.00p (2022: 7.00p) per share will be paid on 27 October 2023 to shareholders on the register on 7 September 2023.
SHARE OFFER AND BUYBACK
One of our major shareholders, Abry Partners, have expressed an intention to sell their entire shareholding in order to close the fund in which it sits. In order to facilitate the sale Abry have accepted a valuation of £4.00 per share, which is at a significant discount to previous share trading prices. We believe that Writtle purchasing and subsequently cancelling these shares will not only enhance the percentage ownership of all remaining shareholders but also represent a good allocation of our funds. While these shares will also be offered to existing shareholders and share option holders, they will not be made available to new shareholders. Further details are set out in the letter accompanying this report and in the shareholder resolutions that are required to enable this transaction.
REVIEW OF TRADING
The performance of our three business groups is shown on page 8 of this report.
Our Innovation businesses were once again the strongest performers in the first half, with turnover increasing by 5.5% and profits down only slightly on prior year due to inflationary cost pressures. Epoch and Seymourpowell were the standout performers as clients continued to be drawn to their creative reputations and digital transformation expertise.
Our Implementation business, BRANDED, had a much stronger first half with turnover increasing by 7.4% and profit rising substantially compared to a poor first half last year. The business benefitted from the restructuring undertaken last year and its creative agency WMH&I performed particularly well under new leadership. In the US, BRANDED expanded operations in March with a new office in Miami which shows encouraging early signs.
Our Instore businesses endured a difficult first half with a 5.5% decline in turnover and a trading loss of £0.47m. Fero had anticipated a quieter first half as it installed its new high-speed single-pass digital print machine to increase capacity after rapid growth in recent years. Early output and quality have been exceptional boding well for the expected seasonal uplift in the second half. Arken faced the twin challenges of a downturn in trading from its largest account and reduced activity in high street cosmetics retailers. While the second half has shown improvement at Arken it has not yet matched last year’s remarkable comeback.
Our recent focus has been on investing in our existing businesses, with significant capital expenditure by Fero an example of this commitment. However, we remain open to discussions with potential vendors in our areas of expertise. The proposed share buy-back will absorb some of our available cash reserves, but we anticipate these reserves building back up as our businesses continue to generate cash.
Our second half is traditionally stronger than the first and we expect this year to follow suit. Although we remain cautious in light of the uncertain economic climate, we expect to deliver another satisfactory year.
7 September 2023