St Ives slumps after profit warning

The group said trading in the eight months ended 1 April has continued to be broadly in line with management expectations, with revenue approximately 5% ahead of the equivalent period last year. However, the outlook for the final quarter, and the following financial year, has deteriorated.

Trading across the company’s Strategic Marketing segment has been strong to date, and much better than the equivalent period last year, with organic growth of 15% driven by a combination of international expansion and greater collaboration across its businesses, as well as acquisition-driven growth of 20%.

However, as noted at the half-year results, the current global economic uncertainty is leading to greater caution in the allocation of marketing budgets, the company said.

St Ives said there has been an increase in uncertainty within the digital segment in particular, and caution within its client base which has led to the cancellation and deferral of a number of significant projects.

The group said this was likely to be a short-term issue, but it will impact trading for the rest of the financial year and into the following year.

St Ives is implementing targeted cost saving measures where appropriate but will not do so if this results in long -term damage to the business.

Chief executive Matt Armitage said: “It is disappointing to have to report this marked deterioration in the near-term outlook, but we remain clear on our long-term growth priorities and have the financial strength to continue to support our strategic ambitions.

“We continue to believe there is further scope to expand our higher margin Strategic Marketing activities both organically and through acquisition, and to invest in our growing international operations and client offerings in the US and Asia."

The group’s Marketing Activation business is facing challenging conditions, partly due to the ongoing pressures within the UK grocery retail sector, and these conditions have worsened. As a result, revenue within the segment is around 11% below the previous year. In the Books business, meanwhile, revenue is around 1% below the year before.

Numis put its ‘buy’ rating and target price under review after the profit warning and cut its pre-tax profit and earnings per share estimate for 2016 to £30.4m and 17.5p from £38.3m and 21.6p, respectively.

It downgraded its 2017 pre-tax profit and EPS estimates by 22% to £32.4m and 17.8p from £42.5m and 23p.

At 1555 BST, St Ives shares were down 48% to 118.75p.