On the back of "varied" trading conditions the group turned in a pre-tax profit of 19.5m (2004: 17.1m) in the six months ending 28 January. Pre-tax profit after exceptional items (a gain of 1.65m) and a goodwill write-off of 1.3m, was 19.8m against 2004's 5m loss. Sales edged up to 210.8m from 208.8m.

Chairman Miles Emley said "costs remain under review" at the group, which has undergone significant restructuring of late. Last week it revealed the sale of its loss-making German web offset arm, Johler Druck, to Arques Industries, and it is currently in consultation with staff over the closure of its Caerphilly web offset plant, and the relocation of the former Displaycraft PoS operation in Crayford to SP's base in Redditch.

The charges associated with these measures will be taken in the group's second half.

"The market is what the market is, and we have to continue to reduce our cost of production. If the market is not growing then that means fewer, more productive machines," Emley said.

Trading conditions across the group's geographic and product sectors were mixed. Sales in books remained flat but it had been successful in increasing sales of added value services such as distribution, price stickering and warehousing, according to group managing director Brian Edwards.

In the direct response, commercial and PoS markets, St Ives experienced weaker demand for mailings in the financial services sector, "which made utilisation of equipment and people more challenging," said Edwards. While SP, which it acquired last September, had made a contribution in line with expectations.

Losses in the UK financial wing were reduced while the US turned in a flat performance. Volumes in the UK magazines market were maintained, though overcapacity and price pressure remained.

Capex of 8.4m and the cash element of the purchase price of SP (29.74m) meant the group's net cash decreased by 37m. It now has minimal gearing for the first time in almost a decade.

However finance director Ray Morley said it was "not keeping us awake at night. You could say our balance sheet has some strength in it despite that level of gearing."

Shares were up 1.75p at 366.75p at the time of this bulletin.

Story by Lauretta Roberts