The shares fell by more than 12 per cent after St Ives said that market conditions remained competitive and that demand was weak. Given the company's exposure to the advertising and financial cycles, it's perhaps surprising that such worries have not dramatically hit the price earlier.
After a long period of expansion the printing industry is suffering from overcapacity, while a strong pound has helped competitors in Europe. That dreary situation leaves chairman, Miles Emley, expecting a few casualties this year among his UK competitors - he says they have expanded speculatively.
As for St Ives, profits suffered from a GBP700,000 redundancy cost and an estimated GBP1m hit from industrial action at some factories last autumn. Performance was also hit from a downturn in corporate activity, such as mergers - about 15 per cent of revenue is generated from printing financial documents. In hindsight, the acquisitions of financial specialists Packard Press and Global Financial early last year look a touch poorly timed. Those two businesses lost GBP1.25m over the period. While a drop in advertising demand from technology and internet players is being felt at the group's magazines.
Otherwise, management insists that magazine printing is holding up well. In January, St Ives acquired US-based Avanti Press for $42m, funded entirely from its own cash resources. That should boost the existing US operations - investors shouldn't be surprised if there's more US acquisitions.
House broker ABN Amro has downgraded its adjusted pre-tax profit expectations for the full year by 11 per cent to GBP62.4m.
IC VIEW
St Ives has a long record of robust profit growth and in the longer term there's no reason why that growth pattern won't be resumed. But for now a rerating, possibly driven by an upturn in financial activity, could take time. Fairly priced.
