TIDMIGR
RNS Number : 4438W
International Greetings PLC
29 July 2009
29th July 2009
International Greetings PLC ('International Greetings' or 'the Group')
Preliminary Results for the year ended 31 March 2009
International Greetings PLC, one of the world's leading designers, innovators
and manufacturers of gift wrap, crackers, cards, stationery and accessories,
announces its Preliminary Results for the year ended 31 March 2009.
Financial Highlights
* Revenue from continuing operations increased by 13.1% to GBP216.9m (2008
restated: GBP191.7m)
* Operating profit before significant items from continuing operations increased
to GBP4.0m (2008 restated: loss of GBP4.8m)
* Loss from continuing operations, before significant items and tax, GBP0.3m (2008
restated: loss GBP8.1m)
* Significant items:
* Asset impairment costs - GBP11.0m
* Cash cost - GBP11.4m
* Cash generated from operations of GBP11.9m (2008: GBP5.8m)
* Net debt GBP68.5m (2008: GBP64.8m)
* Principal banking facilities reviewed, resulting in continuing support from the
Group's banks
Operational Highlights
* Completed the restructuring of UK Greetings division
* Growth in 'everyday' business reducing the risk of seasonality
* Introduced Group wide initiatives to drive integration, efficiencies and best
practice
* Major strengthening of the Board and Senior Management teams
* New Management incentive scheme issued
Commenting on the results, Paul Fineman CEO said:
"It was a transformational year for the Group, and despite the challenging
market conditions, we made excellent progress in restructuring our business.
This has resulted in a stronger and more balanced income stream.
"We continue to strengthen our relationships across the globe with retailers
offering outstanding value, many of whom are enjoying increasing market share.
"Following the decisive action taken this year, spearheaded by a new management
team to deliver profitable growth, we are increasingly focused on continued
operational improvements, enhanced margins and cash generation. I believe we can
return to profitability and achieve significant further progress in 2009/10."
+-------------------------------------+----------+------------------------+
| For further information, please | | |
| contact: | | |
| | | |
+-------------------------------------+----------+------------------------+
| International Greetings plc | | Tel: 01707 630630 |
| Paul Fineman, Chief Executive | | |
| Sheryl Tye, Finance Director | | |
| | | |
+-------------------------------------+----------+------------------------+
| Arden Partners plc | | Tel: 020 7398 1632 |
| Richard Day | | |
| Colin Smith | | |
| | | |
+-------------------------------------+----------+------------------------+
| Financial Dynamics | | Tel: 020 7831 3113 |
| Jonathon Brill | | |
| Caroline Stewart | | |
| | | |
+-------------------------------------+----------+------------------------+
Chairman's Statement
The difficult trading environment I referred to in our last Report continued
throughout the past year. As an international manufacturing and trading
business, operating across four continents, inevitably we have been affected by
the recessionary pressures in the global economy and recent exchange rate
volatility. Notwithstanding this, good progress has been made in the recovery
plan we initiated over a year ago. Our Group is leaner, fitter and now operates
much more effectively as an integrated business. Most important of all, we have
strengthened our management team under the leadership of Paul Fineman.
Revenues for the year ended 31st March 2009 were up over 13% at GBP216.9 million
(2008 restated: GBP191.7 million). The loss before tax for the year before
significant items was GBP0.3 million (2008 restated: GBP8.1 million loss).
Significant items from continuing operations were GBP22.4 million (2008
restated: GBP3.3 million) and the loss from discontinued operations was GBP3.9
million (2008 restated: GBP4.4 million loss). The total loss before tax from
continuing operations was GBP22.8 million (2008 restated: GBP11.4 million loss).
The basic loss per share for the year was 59.0p (2008 restated: 27.6p loss).
An interim dividend was not paid to shareholders during the year and no final
dividend is proposed. When we move back to profit and reduce bank debt the Board
will review the dividend policy.
After several years of acquisitive growth, we are concentrating our efforts on
growing existing businesses. A plan prepared by the new team to return the
business to profit has been approved by the Board and is now being implemented
across the Group.
Significant achievements during the year include:
* The completion of the restructuring of the UK Greetings Division
* Integration of Glitterwrap into our US operations; divestment of Halloween
Express
* Successful restructuring of our debt facilities with the support of our banks
* Reducing our dependence on Christmas trade by increasing the sale of "everyday"
products
* Winning globally recognised awards for customer service and innovation from
Tesco and Disney
We were delighted to appoint Paul Fineman as Chief Executive on 1st January
2009. Paul joined the Board upon the acquisition of Anker in 2005 and as Group
Managing Director successfully led the restructuring of our UK Greetings
Division. He took over from Nick Fisher who left the business in December. We
are grateful to Nick for the contribution he made in building the business over
the past 20 years.
Sheryl Tye was appointed Finance Director in September 2008, replacing Mark
Collini who retired as Finance Director after 17 years with the Group. We thank
Mark for all his hard work and wish him a successful future.
John Elfed Jones, my predecessor as Chairman, retired as a non executive
director in March having devoted many years of service to the Group. We shall
miss his wise counsel. We welcome Chris Howell as a Non- Executive director.
Chris is an experienced business advisor and a former managing director of
turnaround business at KPMG. We have also promoted Charles Uwakaneme to the
Board as an Executive Director.
We believe strongly in the potential of our business and motivating our team is
key to our success. During the year the Board approved a new share incentive
scheme, which will ensure that as our business succeeds and corporate value is
restored for our shareholders, our management will also benefit from their hard
work and commitment.
We experienced many challenges and frustrations last year, including losing
long-standing customers and suppliers whose companies failed. We were also very
disappointed to make redundancies due to the restructuring of our business.
However, by the year end, the Group was a transformed business - with a new
management team, significantly restructured operations and a solid platform for
growth across the Group established. Our priority now is to return the business
to profit and to deliver value once again for our shareholders.
We thank our employees for their hard work and commitment during another
difficult year and our customers and shareholders for their continued support.
Keith James
Chairman
29 July 2009
Chief Executive's Statement
I am delighted to be reporting for the first time as Chief Executive, in what
has been a very challenging and busy year for the Group as a whole. This has
been by far the most transformational period we have experienced as we
restructured the business during the year and refocused our strategy to
establish a solid platform for growth.
Our priority in doing this is to return the business to profit and deliver
shareholder value.
Highlights of the year:
* Completing the restructuring of our UK Greetings division, resulting in leaner,
streamlined operations aligned to the needs of our market
* Closure of our Latvian operations and the transfer of production and machinery
to China, to reduce supply risk
* Completion of the integration of Glitterwrap (USA), Weltec (Holland) and
Pinwheel (UK Publishing) into our existing operations
* Significant growth in everyday product lines with the value and discount
retailers
* Making a number of high quality appointments across our teams
Strategy
Our strategy is to return the Group to profit within the next 12 months through
decisive action to improve cash generation, reduce our debt and enhance margins.
Our restructuring plans are being implemented operationally by refocusing our
product offering towards higher margin products, and creating a better balance
in the business - between manufactured and imported products, customer bespoke
and generic brand products, and sales of 'everyday' and Christmas products. We
progressed well on achieving this objective and it is a developing long-term
strategy.
We continue to make good progress in sharing best practice across the Group.
UK
Our UK businesses achieved a solid performance during the year, particularly
given the challenging market conditions.
The restructuring of our UK Greetings division was completed in March 2009, on
time and to plan. This involved refocusing the business on profitable product
categories, enhancing our creative design capabilities and streamlining our
logistical services; all of which have been underpinned by improved IT
systems. Core to this is a major cultural shift to focus on our profitability by
becoming more efficient - embracing all aspects of the business from reducing
waste to becoming more innovative about our processes as well as products. We
are delighted that our efforts resulted in supplier performance and innovation
awards from Tesco and Disney respectively, in this thirtieth year of our UK
Greetings business. We are very pleased with the result to date, and this
remains a key focus in the year ahead.
Anker achieved significant profitable growth due to the strong performance of
its value and discount retail customers. It has an improved product offering,
designed, sold, sourced and distributed by its UK and Far East based teams,
providing customers with excellent service levels.
Alligator saw a year of solid sales performance as it benefitted, for the first
time, from being awarded a Disney licence due to Group ownership. We expect new
product formats to be rolled out which will benefit the business going forward.
Scoop, our gift solutions business, had a year of steady profit, and is now
looking to expand outside the UK.
We have strong management teams in place across our UK businesses that will take
proactive measures to strengthen further our operations and protect margins.
Europe
Our European operations, comprising Anchor BV, Artex, Eick Pack, Hoomark and
Weltec had a mixed year of performance, achieving big volume gains with the
value and discount retailers, which offset difficult trading with the
independent retailers and department stores.
We made good progress in reorganising the logistics of our operations by
consolidating our businesses in Europe during the year. Weltec, which had its
first full year of operating within the Group, had its product portfolio
re-sourced and its customer service and sales operations integrated into Anchor
BV's operations.
The financial and operational management teams of Eick Pack and Artex were also
re-organised to report directly into Hoomark management.
US
We saw sales improve by 31% during the year, largely due to the contribution in
this year's accounts from Glitterwrap, acquired in September 2007, and our
expansion into the mass market. We divested Halloween Express in April 2008 and
closed the Glitterwrap party business which is shown in the accounts as a
discontinued operation.
In terms of profit, our US business underperformed during the year. We have
started to restructure our US operations with a focus on reducing costs and
stock levels, improving cash collections and enhancing margins. We made senior
management changes and I personally am going to be spending significant time in
the US ensuring the restructuring achieves the same benefits as those in the UK
this year.
There remains huge scope, in particular with the value and discount retailers,
to grow our market share in the US.
Asia
Our two operations in Asia are our Hong Kong sourcing business and our factory
in China. The Group's performance in Asia, despite the impact on the Far East
supply base of the global economic downturn, was in line with expectations.
We transferred our equipment from Latvia which has enabled us to increase the
range of products we are able to competitively manufacture rather than
outsource, as our factory reduces the risk of relying on external suppliers.
We have the distinct ability to provide our customers with a broad range of key
product categories which are produced in one location with state of the art
equipment and in an enviroment that meets high quality factory standards. We
were delighted for this to be acknowledged during the year by several of the
world's largest retailers auditing and fully approving our factory.
We made several senior appointments to oversee our operations in Asia and
believe the measures taken will improve performance in the year ahead.
Australia
Artwrap PTY, an associate in which we have a 50% share, performed in line with
the projections for its first year of the three year growth strategy we devised
with our co-owners. We are pleased with the continuing integration into the
Group's operations.
The business experienced several challenging issues including a large Chinese
supplier and large Australian retailer going into administration which resulted
in GBP0.2 million of significant costs in that company.
During the latter end of the year we introduced Anker and Alligator products to
this market and we look forward to reporting their progress.
Our customers
Even though market conditions across the globe were tough, consumer demand for
our products continued to grow as we focused on the growing discount market.
During the year we significantly increased the amount of business we conduct
with the value and discount retailers across all our markets. These retailers
allow us to sell significant volumes supported by streamlined and efficient
product development and logistics as their performance is proving resilient
against challenging trading conditions. This market sector is also allowing us
to accelerate our growth of 'everyday' product categories, providing more
balance to Group cash flows.
We progressed our working relationships with our key customers to provide them
with the best and most innovative products for their markets which was
recognised by an award of "Best Greetings supplier to Tesco Papershop". This
focus led to a consolidation in the number of customers supplied. This is better
quality and higher margin business that will continue to be delivered through
next year.
With Woolworths and several other retailers going into administration, this
resulted in GBP3.1 million of bad debts and branded stock write offs, which is
shown under significant items in the accounts. As a result, our other customers
picked up market share, particularly in the greetings and stationery categories.
Our brands and licences
We have a fantastic collection of licences that still has scope to be further
utilised across the Group. Traditionally this has been a focus of our UK and
European operations, but we have been broadening this activity to our US,
Australian and New Zealand markets.
Key licences for the Group in 2008-9 included High School Musical. We enjoy an
excellent relationship with Disney and we were delighted to receive a Disney
'Consumer Products - Quality Product Award' post period end. The growing use of
licences across the Group contributed to the increase in sales of 'everyday'
products, including cards, gifts and bags for birthdays and occasions, making
the Group less dependent on Christmas sales.
Our capital investment includes the further development of our design systems
and programmes, offering an 'easy to use' digital archive to all Group
companies, and providing opportunities for creating revenue for the future.
Our team
During the year we made changes at a Board and operational management level
across the business. Of particular note is the appointment of Sheryl Tye as
Finance Director. Sheryl was instrumental in renegotiating our banking
facilities and has taken swift action to strengthen systems and structures
across our finance function.
We are delighted to welcome Charles Uwakaneme to the Board, following his
outstanding contribution to the restructuring of UK Greetings. Charles will be
applying his considerable experience of international business to ensure we
deliver synergy benefits and global strategies.
We now have an executive Board member responsible for each geographical
territory, which we believe will help us in trying to encourage knowledge
sharing across our operations.
We have a strong team in place with the experience and platforms across all
levels of our business to grow our operations. The team is incentivised by a new
share incentive scheme that will reward its hard work and success in achieving
this.
The business this year has undergone a significant amount of restructuring,
which has been fundamental for the future of the business. I would like to thank
my colleagues for their commitment and determination to return our Group to
significant profitability.
'IG Greener Greetings'
The Board feel strongly about developing our corporate responsibility position
to ensure consistent standards are adopted across the Group that protect the
welfare of our colleagues and ensure we are operating responsibly. However,
anything that is implemented has to be compatible with our strategy, culture and
policies and make commercial sense.
Amongst our new initiatives are a focus on using raw materials from sustainable
and environmentally responsible sources, and increasing efficiency in the
consumption of energy.
The Board and senior management team gained IOSH qualifications from a health
and safety awareness course in the year. We also appointed health and safety
officers in each of our operations.
There will be further development of our corporate responsibility practices and
we are encouraging our colleagues to provide suggestions as to how we can help
improve our social, environmental, ethical and safety standards across the
Group.
Outlook
After several years of acquisitive growth, we focused on restructuring our
existing operations. There are substantial opportunities to exploit synergistic
benefits going forward to drive profitability - our corporate mantra is direct
and to the point - 'Synergise to Maximise'.
There has been a cultural shift across our businesses. We now have a mindset
that is proactive, encourages our colleagues to work with our customers to
develop our product offering and also work with other colleagues across the
Group to grow our business. We are adopting industry leading practices and
improving our IT systems and procedures to enable us to do this and believe that
progressively the business is becoming more cohesive.
I would like to thank our banks for their support during and following our
restructuring, which has enabled us to strengthen our financial standing.
I expect market conditions to remain challenging, however we are in the process
of putting the business into the best possible shape to respond to market needs.
We are encouraged by our performance during the inital trading months of the new
financial year and the order book. We believe we can return to profit in 2009-10
as we continue to focus on integrating and consolidating our businesses to
maximise our financial performance.
We now have a stronger, more stable, balanced business which is well positioned
to meet the challenges of the current economic climate and further benefit from
the market recovery when it happens.
Paul Fineman
Chief Executive
Financial review
Group performance
Revenues from continuing operations for the year to 31 March 2009 were up 13.1%
to GBP216.9 million (2008: GBP191.7 million, restated from GBP194.2 million due
to reclassification of a discontinued business). The strengthening of the US$
and Euro against Sterling accounted for GBP13.1 million (6.8%).
The rest of the increase in our revenues was driven mainly in the US, with the
full year impact of the Glitterwrap acquisition, and organic growth into mass
market customers.
Operating profit before significant items and discontinued operations increased
to GBP4.0 million (2008 restated: GBP4.8 million loss).
After significant items, our operating loss was GBP17.1 million (2008 restated:
GBP8.1 million loss).
Significant items, excluding discontinued operations, amounted to GBP22.4
million (2008 restated: GBP3.3 million), including GBP11.0 million of Goodwill
and asset impairments mainly in the USA. The other items
(GBP11.4 million)
relate to:
* Debtors put into administration, mainly Woolworths, and several other high
street names - GBP3.1 million
* Restructuring of operations, mainly redundancy costs in the UK
Greetings Division - GBP3.1 million
* Financial restructuring, being additional bank facility fees, and legal and
professional costs in respect of bank facility restructuring - GBP2.6 million
* Management restructuring - GBP1.6 million
* Losses from the disruption of supply of goods during peak supply period from
three Asian subcontractors - GBP1.0 million
The Impairments of GBP11.0 million relate to:
* A large and high quality printing machine that was transferred at the start of
the year from Latvia to China, but there is not the requirement in China to use
the machine as it was intended - GBP1.7 million
* Goodwill acquired with the Glitterwrap acquisition - GBP5.7 million
* US printing and conversion machinery (and related engraving) due to the
implementation of a reworked manufacturing strategy as the business focuses on
more bought-in product - GBP3.0 million
* UK plant and machinery that is no longer in use and has no resale value -
GBP0.6 million
One-off items are substantial due to the major restructuring that has occurred
during the last year, which was essential to developing the Group's platform for
future growth. We are not expecting major restructuring costs in the coming
year.
Discontinued operations relate to the closure in the second half of this year of
the Party goods business in the US, which was acquired as part of the
Glitterwrap acquisition. We have absorbed the rest of the Glitterwrap business
into our US operations. The closure costs include some staff redundancy, and
provisions for the write down of the stock.
Finance expenses in the year increased to GBP5.8 million (2008 restated: GBP3.8
million). This included GBP1.4 million of significant items (2008: GBPnil)
relating to the re-structuring of our finances, and net exchange rate losses of
GBP0.4 million (2008: GBP0.1 million). The fall in base rate interest has
mitigated the increased margins now being charged by the bank.
The loss before significant items, discontinued items, and tax was - GBP0.3
million (2008 restated: GBP8.1 million loss). The loss before tax from
continuing operations was GBP22.8 million (2008 restated: GBP11.4 million loss).
We spent considerable efforts strengthening the finance teams in most of our
major businesses, and have begun reviewing our financial procedures to
standardise these across the Group. This has lead to prior year adjustments and
reclassifications which give rise to a total reduction of GBP5.1 million in
operating profit before significant items from that previously stated and in
brought forward reserves of GBP1.7 million. These are further explained in Note
3.
Excluding significant items, the gross profit margin decreased slightly from
17.1% to 16.9%. At constant exchange rates, it would have been 17.0%. We are
currently reviewing our USA business to refocus on higher margin products.
Overheads have reduced year on year by GBP4.4 million (11.4% and 17.1% before
currency impact) as the impact of some of the restructuring flows through.
Earnings per share and Dividends
The basic loss per share was 59.0p (2008 restated: 27.6p loss). In the light of
the current trading conditions, the Board do not propose a final dividend for
the year. Our core focus is on returning the business to profitability and
reducing bank debt and our dividend policy will be reviewed when this is
achieved.
Balance sheet and cashflow
Net debt at 31 March 2009 was GBP68.5 million (2008: GBP64.8 million). Our year
end debt includes amounts denominated in currency of $52.0 million (2008: $51.3
million). The year-end exchange rate was $1.44 (2008: $1.97). Using the 2008
exchange rates, our net debt at 31 March 2009 would have been GBP55.9 million, a
reduction of 13.7% from 2008, but the effect of the lower exchange rate at 31
March 2009 increased our reported debt position by GBP12.6 million.
We have focused a great deal of attention on reducing our outstanding debtors,
both to maximise cash but also to reduce our exposure to high risk debts. This
approach paid off in the year as, whilst we incurred significant bad debts due
to our customers going into administration, the effects could have been
considerably worse. Despite the increase in sales, trade debtors fell from
GBP26.0 million to GBP22.4 million. If this had been calculated at 2008 exchange
rates the balance would be further reduced by GBP2.4 million.
We are also reducing our stock levels, but this takes longer as many of our
sales orders are received over 12 months before delivery so we expect to see the
benefits of this going forward. Reduction of stock remains a focus for the
coming year. Stock fell from GBP57.0 million to GBP51.9 million. If this had
been calculated at 2008 exchange rates the balance would be reduced by a further
GBP6.2 million. Overall our cash generated from operations was GBP11.9 millon
(2008 : GBP5.8 million).
Cash paid in respect of acquisitions, accounted for GBP1.3 million (2008:
GBP19.4 million) and related to the deferred consideration for Glitterwrap and
Artwrap which were both acquired in 2007.
We made no new acquisitions during the year. The disposal of our interest in
Halloween Express in April 2008, yielded GBP1.8 million as expected.
We are not currently planning to make any further acquisitions in the coming
financial year as we focus on improving our existing operations.
Capital expenditure of GBP2.2 million was a reduction of GBP5.3 million from the
previous year, as we have deliberately revised our policy on capex payback
requirement. We expect our capital expenditure this year to be at a similar
level. We realised GBP0.9 million from asset sales in the year, and continue to
make strong attempts to sell excess plant and machinery and surplus property at
our UK factory.
Equity attributable to shareholders amounted to GBP41.3 million compared to
GBP67.3 million (as restated) last year.
Treasury Operations
The Group successfully renegotiated its bank facilities during the year and we
are delighted that it continues to receive the support of its bankers. Our
facility with HSBC is to continue at least until 31 July 2010. In December 2008,
GBP36 million of the GBP90 million facility was extended for a minimum of two
years to December 2010 and converted to an asset backed loan facility. In August
2008, we secured an additional asset backed loan facility with ING bank secured
for three years on debtors and stock and for twenty years secured on property.
The directors have confidence that the current bank facilities are sufficient to
meet the Group's needs for the foreseeable future.
Sheryl Tye
Finance Director
Consolidated income statement
year ended 31 March 2009
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | 2009 | 2009 | 2009 | | 2008 | 2008 | 2008 |
| | | | | | | restated | restated | restated |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | Before | Significant | Total | | Before | Significant | Total |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | significant | items | | | significant | items | |
| | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | items | (note | | | items | (note | |
| | | | 4) | | | | 4) | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | Note | GBP000 | GBP000 | GBP000 | | GBP000 | GBP000 | GBP000 |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Continuing operations | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Revenue | 2 | 216,917 | - | 216,917 | | 191,709 | - | 191,709 |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Cost of sales | | (180,318) | (8,360) | (188,678) | | (158,948) | (4,309) | (163,257) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Gross Profit | | 36,599 | (8,360) | 28,239 | | 32,761 | (4,309) | 28,452 |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | 16.9% | | 13.0% | | 17.1% | | 14.8% |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Selling expenses | | (12,189) | (3,206) | (15,395) | | (14,361) | (95) | (14,456) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Administration expenses | | (22,046) | (9,431) | (31,477) | | (24,248) | (3,324) | (27,572) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Other operating Income | | 1,267 | - | 1,267 | | 989 | 4,200 | 5,189 |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Profit/(loss) on sales | | 324 | (16) | 308 | | 31 | 257 | 288 |
| of fixed assets | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Operating profit/(loss) | | 3,955 | (21,013) | (17,058) | | (4,828) | (3,271) | (8,099) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Finance expenses | | (4,402) | (1,436) | (5,838) | | (3,778) | - | (3,778) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Share of profit of | | 120 | - | 120 | | 509 | - | 509 |
| associates (net of tax) | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Loss before tax | | (327) | (22,449) | (22,776) | | (8,097) | (3,271) | (11,368) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Income tax | | (164) | (1,453) | (1,617) | | 1,579 | 1,287 | 2,866 |
| (charge)/credit | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Loss from continuing | | (491) | (23,902) | (24,393) | | (6,518) | (1,984) | (8,502) |
| operations | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Discontinued operations | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Loss from discontinued | 5 | (2,649) | (1,297) | (3,946) | | (1,432) | (2,964) | (4,396) |
| operations (net of tax) | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Loss for the year | | (3,140) | (25,199) | (28,339) | | (7,950) | (4,948) | (12,898) |
| attributable to equity | | | | | | | | |
| holders of the parent | | | | | | | | |
| company | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Loss per ordinary share | 8 | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Basic & Diluted | | | | (59.0 | | | | (27.6 |
| | | | | p) | | | | p) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| | | | | | | | | |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Continuing operations | | | | (50.8 p) | | | | (18.2 |
| | | | | | | | | p) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
| Discontinued operations | | | | (8.2p) | | | | (9.4p) |
+------------------------------+------+-------------+-------------+-----------+---+-------------+-------------+-----------+
Consolidated statement of changes in equity
year ended 31 March 2009
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| | Share | Share | Merger | Capital | Hedging | Translation | Retained | Total |
| | capital | premium | reserve | redemption | reserve | reserve | earnings | equity |
| | | | | reserve | | | | attributable |
| | | | | | | | | to equity |
| | | | | | | | | holders of |
| | | | | | | | | the parent |
| | | | | | | | | company |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Balance at 1 April | 2,353 | 3,006 | 15,533 | 1,340 | (125) | (1,485) | 46,679 | 67,301 |
| 2008 as restated | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Effective changes in | - | - | - | - | 125 | - | - | 125 |
| fair value of cash | | | | | | | | |
| flow hedge (net of | | | | | | | | |
| tax) | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Exchange adjustment | - | - | - | - | - | 1,707 | - | 1,707 |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Net income recognised | - | - | - | - | 125 | 1,707 | - | 1,832 |
| directly in equity | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Loss for the year | - | - | - | - | - | - | (28,339) | (28,339) |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Total income and | - | - | - | - | 125 | 1,707 | (28,339) | (26,507) |
| expense recognised for | | | | | | | | |
| the year | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Dividends paid | - | - | - | - | - | - | - | - |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Equity settled share | - | - | - | - | - | - | 19 | 19 |
| based payments | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Impairment | - | - | (1,045) | - | - | - | 1,045 | - |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Shares issued | 72 | - | 397 | - | - | - | - | 469 |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Balance at 31 March | 2,425 | 3,006 | 14,885 | 1,340 | - | 222 | 19,404 | 41,282 |
| 2009 | | | | | | | | |
+------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
The amount of the merger reserve that relates to the Glitterwrap investment has
been transferred to retained earnings due to the impairment of the Goodwill, as
explained in note 7.
Consolidated statement of changes in equity restated
year ended 31 March 2008 restated
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| | Share | Share | Merger | Capital |Hedging |Translation |Retained | Total |
| |capital |premium |reserve |redemption |reserve | reserve |earnings | equity |
| | | | | reserve | | | | attributable |
| | | | | | | | | to equity |
| | | | | | | | | holder of |
| | | | | | | | | the parent |
| | | | | | | | | company |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Balance at 1 April | 2,317 | 2,515 | 13,416 | 1,340 | - | (2,997) | 65,246 | 81,837 |
| 2007 previously reported | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Prior year adjustment | - | - | - | - | - | - | (886) | (886) |
| (note 3) | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Balance at 1 April 2007 | 2,317 | 2,515 | 13,416 | 1,340 | - | (2,997) | 64,360 | 80,951 |
| restated | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Effective changes in | - | - | - | - | (125) | - | - | (125) |
| fair value of cash flow | | | | | | | | |
| hedge (net of tax) | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Exchange adjustment | - | - | - | - | - | 1,512 | - | 1,512 |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Net income recognised | - | - | - | - | (125) | 1,512 | - | 1,387 |
| directly in equity | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Loss for the year | - | - | - | - | - | - | (12,038) | (12,038) |
| previously reported | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Prior year adjustment | - | - | - | - | - | - | (860) | (860) |
| (note 3) | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Loss for the year | - | - | - | - | - | - | (12,898) | (12,898) |
| restated | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Total income and expense | - | - | - | - | (125) | 1,512 | (12,898) | (11,511) |
| recognised for the year | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Dividends paid | - | - | - | - | - | - | (4,570) | (4,570) |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Equity settled share | - | - | - | - | - | - | (213) | (213) |
| based payments | | | | | | | | |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Shares issued | 36 | 491 | 2,117 | - | - | - | - | 2,644 |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
| Balance at 31 March 2008 | 2,353 | 3,006 | 15,533 | 1,340 | (125) | (1,485) | 46,679 | 67,301 |
+--------------------------+---------+---------+---------+------------+---------+-------------+----------+--------------+
Merger reserve
The merger reserve comprises the premium on shares issued in relation to
business combinations.
Capital redemption reserve
The capital redemption reserve comprises amounts transferred from retained
earnings in relation to the redemption of preference shares.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change
in the fair value of cash flow hedging instruments related to hedged
transactions that have not yet occurred.
Translation reserve
The translation reserve comprises all foreign currency differences arising from
the translation of the Financial Statements of foreign operations.
Consolidated balance sheet
as at 31 March 2009
+-----------------------------------------------+------+------------+----------+
| | | 2009 | 2008 |
+-----------------------------------------------+------+------------+----------+
| | | | restated |
+-----------------------------------------------+------+------------+----------+
| | Note | GBP000 | GBP000 |
+-----------------------------------------------+------+------------+----------+
| Non-current assets | | | |
+-----------------------------------------------+------+------------+----------+
| Property, plant and equipment | 6 | 39,722 | 42,871 |
+-----------------------------------------------+------+------------+----------+
| Intangible assets | 7 | 30,380 | 35,544 |
+-----------------------------------------------+------+------------+----------+
| Investments in associates | | 3,086 | 3,106 |
+-----------------------------------------------+------+------------+----------+
| Deferred tax assets | | 2,885 | 4,169 |
+-----------------------------------------------+------+------------+----------+
| Total non-current assets | | 76,073 | 85,690 |
+-----------------------------------------------+------+------------+----------+
| Current assets | | | |
+-----------------------------------------------+------+------------+----------+
| Inventory | | 51,913 | 57,022 |
+-----------------------------------------------+------+------------+----------+
| Income tax receivable | | - | 1,221 |
+-----------------------------------------------+------+------------+----------+
| Trade and other receivables | | 28,464 | 32,312 |
+-----------------------------------------------+------+------------+----------+
| Cash and cash equivalents | | 2,060 | 2,137 |
+-----------------------------------------------+------+------------+----------+
| Assets classified as held for sale | | - | 1,718 |
+-----------------------------------------------+------+------------+----------+
| Total current assets | | 82,437 | 94,410 |
+-----------------------------------------------+------+------------+----------+
| Total assets | | 158,510 | 180,100 |
+-----------------------------------------------+------+------------+----------+
| Equity | | | |
+-----------------------------------------------+------+------------+----------+
| Share capital | | 2,425 | 2,353 |
+-----------------------------------------------+------+------------+----------+
| Share premium | | 3,006 | 3,006 |
+-----------------------------------------------+------+------------+----------+
| Reserves | | 16,447 | 15,263 |
+-----------------------------------------------+------+------------+----------+
| Retained earnings | | 19,404 | 46,679 |
+-----------------------------------------------+------+------------+----------+
| Total equity attributable to equity holders | | 41,282 | 67,301 |
| of the parent company | | | |
+-----------------------------------------------+------+------------+----------+
| Non-current liabilities | | | |
+-----------------------------------------------+------+------------+----------+
| Loans and borrowings | | 11,156 | 1,843 |
+-----------------------------------------------+------+------------+----------+
| Deferred income | | 3,801 | 4,752 |
+-----------------------------------------------+------+------------+----------+
| Provisions | | 1,067 | 1,345 |
+-----------------------------------------------+------+------------+----------+
| Other financial liabilities | | 1,192 | 2,806 |
+-----------------------------------------------+------+------------+----------+
| Total non-current liabilities | | 17,216 | 10,746 |
+-----------------------------------------------+------+------------+----------+
| Current liabilities | | | |
+-----------------------------------------------+------+------------+----------+
| Bank overdraft | | 58,351 | 64,898 |
+-----------------------------------------------+------+------------+----------+
| Loans and borrowings | | 1,091 | 241 |
+-----------------------------------------------+------+------------+----------+
| Deferred income | | 952 | 954 |
+-----------------------------------------------+------+------------+----------+
| Provisions | | - | 510 |
+-----------------------------------------------+------+------------+----------+
| Income tax payable | | 494 | 59 |
+-----------------------------------------------+------+------------+----------+
| Trade and other payables | | 26,356 | 21,698 |
+-----------------------------------------------+------+------------+----------+
| Other financial liabilities | | 12,768 | 13,693 |
+-----------------------------------------------+------+------------+----------+
| Total current liabilities | | 100,012 | 102,053 |
+-----------------------------------------------+------+------------+----------+
| Total liabilities | | 117,228 | 112,799 |
+-----------------------------------------------+------+------------+----------+
| Total equity and liabilities | | 158,510 | 180,100 |
+-----------------------------------------------+------+------------+----------+
Consolidated cash flow statement
as at 31 March 2009
+---------------------------------------------+------+------------+----------+
| | | 2009 | 2008 |
+---------------------------------------------+------+------------+----------+
| | | | restated |
+---------------------------------------------+------+------------+----------+
| | Note | GBP000 | GBP000 |
+---------------------------------------------+------+------------+----------+
| Cash flows from operating activities | | | |
+---------------------------------------------+------+------------+----------+
| Loss for the year | | (28,339) | (12,898) |
+---------------------------------------------+------+------------+----------+
| Adjustments for: | | | |
+---------------------------------------------+------+------------+----------+
| Depreciation | 6 | 5,058 | 5,938 |
+---------------------------------------------+------+------------+----------+
| Impairment of tangible fixed assets | 6 | 4,441 | 821 |
+---------------------------------------------+------+------------+----------+
| Amortisation of intangible assets | 7 | 387 | 221 |
+---------------------------------------------+------+------------+----------+
| Impairment of intangible assets | 7 | 5,763 | - |
+---------------------------------------------+------+------------+----------+
| Negative goodwill recognised | | - | (189) |
+---------------------------------------------+------+------------+----------+
| Financial expenses - continuing operations | | 5,838 | 3,778 |
+---------------------------------------------+------+------------+----------+
| Financial expenses - discontinued | | 150 | 83 |
| operations | | | |
+---------------------------------------------+------+------------+----------+
| Foreign exchange losses | | (409) | (70) |
+---------------------------------------------+------+------------+----------+
| Share of profit of associates - continuing | | (120) | (509) |
| operations | | | |
+---------------------------------------------+------+------------+----------+
| Share of loss of associates - discontinued | | - | 899 |
| operations | | | |
+---------------------------------------------+------+------------+----------+
| Impairment on discontinued associate | | - | 3,969 |
| included within assets held for sale | | | |
+---------------------------------------------+------+------------+----------+
| Income tax credit - discontinued operations | | - | (1,743) |
+---------------------------------------------+------+------------+----------+
| Income tax charge/(credit) - continuing | | 1,617 | (2,866) |
| operations | | | |
+---------------------------------------------+------+------------+----------+
| Profit on sale of property, plant and | | (308) | (288) |
| equipment | | | |
+---------------------------------------------+------+------------+----------+
| Equity settled share-based payment | | 19 | (213) |
+---------------------------------------------+------+------------+----------+
| Operating loss before changes in working | | (5,903) | (3,067) |
| capital and provisions | | | |
+---------------------------------------------+------+------------+----------+
| Change in trade and other receivables | | 7,856 | 7,834 |
+---------------------------------------------+------+------------+----------+
| Change in inventory | | 6,858 | (2,362) |
+---------------------------------------------+------+------------+----------+
| Change in trade and other payables | | 4,889 | 3,834 |
+---------------------------------------------+------+------------+----------+
| Change in provisions and deferred income | | (1,779) | (478) |
+---------------------------------------------+------+------------+----------+
| Cash generated from operations | | 11,921 | 5,761 |
+---------------------------------------------+------+------------+----------+
| Tax received/(paid) | | 1,862 | (1,533) |
+---------------------------------------------+------+------------+----------+
| Interest and similar charges paid | | (5,429) | (4,191) |
+---------------------------------------------+------+------------+----------+
| Net cash inflow from operating activities | | 8,354 | 37 |
+---------------------------------------------+------+------------+----------+
| Cash flow from investing activities | | | |
+---------------------------------------------+------+------------+----------+
| Proceeds from sale of property plant and | | 944 | 5,114 |
| equipment | | | |
+---------------------------------------------+------+------------+----------+
| Acquisition of subsidiary, including | | (469) | (11,187) |
| overdrafts acquired | | | |
+---------------------------------------------+------+------------+----------+
| Acquisition of shares in associates | | (781) | (8,252) |
+---------------------------------------------+------+------------+----------+
| Proceeds from the sale of intangible assets | | - | 205 |
+---------------------------------------------+------+------------+----------+
| Acquisition of intangible assets | | (453) | (155) |
+---------------------------------------------+------+------------+----------+
| Acquisition of property plant and equipment | | (1,725) | (7,295) |
| | | | |
+---------------------------------------------+------+------------+----------+
| Receipt of government grants | | - | 1,960 |
+---------------------------------------------+------+------------+----------+
| Receipts from sales of investments | | 1,796 | 20 |
+---------------------------------------------+------+------------+----------+
| Dividends received from associates | | 166 | - |
+---------------------------------------------+------+------------+----------+
| Net cash outflow from investing activities | | (522) | (19,590) |
+---------------------------------------------+------+------------+----------+
| Cash flows from financing activities | | | |
+---------------------------------------------+------+------------+----------+
| Change in borrowings | | (470) | (433) |
+---------------------------------------------+------+------------+----------+
| Payment of finance lease liabilities | | (52) | (132) |
+---------------------------------------------+------+------------+----------+
| New bank loans raised | | 10,224 | - |
+---------------------------------------------+------+------------+----------+
| Dividends paid | | - | (4,570) |
+---------------------------------------------+------+------------+----------+
| Net cash inflow/(outflow) from financing | | 9,702 | (5,135) |
| activities | | | |
+---------------------------------------------+------+------------+----------+
| Net increase/(decrease) in cash and cash | | 17,534 | (24,688) |
| equivalents | | | |
+---------------------------------------------+------+------------+----------+
| Cash and cash equivalents at 1 April | | (62,761) | (35,567) |
+---------------------------------------------+------+------------+----------+
| Effect of exchange rate fluctuations on | | (11,064) | (2,506) |
| cash held | | | |
+---------------------------------------------+------+------------+----------+
| Cash and cash equivalents at 31 March | | (56,291) | (62,761) |
+---------------------------------------------+------+------------+----------+
Notes
1. Accounting policies
International Greetings PLC is a company incorporated in the UK.
The Group financial statements consolidate those of the Company and its
subsidiariies (together referred to as the "Group") and equity account for the
Group's interest in associates.
The Group financial statements have been prepared and approved by the Directors
in accordance with the International Financial Reporting Standards as adopted by
the EU (adopted IFRSs).
The accounting policies set out on pages 22 to 29 in the Annual Report and
Accounts for the year ended 31 March 2008 have been applied consistently to all
periods presented in this statement.
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 March 2009 or 2008 but is derived from
those accounts. Statutory accounts for 2008 have been delivered to the registrar
of companies, and those for 2009 will be delivered in due course. The auditors
have reported on those accounts; their reports were (i) unqualified, (ii) did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report and (iii) did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
Going Concern basis
The financial statements have been prepared on the going concern basis,
notwithstanding the loss for the year of GBP28.3 million, and net current
liabilities of GBP17.6 million.
As in previous years, the Group relies primarily on an overdraft facility for
its working capital needs. The Board has prepared a working capital forecast
which shows that the borrowing requirement of the Group increases steadily over
the period August 2009 to late October 2009 and peaks in late October 2009 due
to the seasonality of the business, before then reducing. Over this period due
to production lead times the orders for pre Christmas delivery have largely been
received and therefore the principal sensitivities considered in the forecasts
relate to a) the exchange rate between the US dollar and Sterling for both trade
and borrowing requirements; and b) costs savings leading to margin improvement
and overhead reduction being secured.
Due to the impact of the sensitivities identified above on the available
headroom, the Board have obtained confirmation that the group facility will be
temporarily increased over the period August to October 2009 from GBP90 million
to a maximum of GBP98 million to cover peak working capital requirements. The
Group's principal bank has also stated that it would be willing to consider
providing further short term funding should it be required over the peak period.
Additionally, the bank have also confirmed that, subject to the on demand nature
of the facility, a) it is their present intention that the facility will be made
available until 31 July 2010 when the continued availability and level of
facilities will be reviewed; and b) assuming that the business continues to
perform in line with expectations, that the facility will be renewed (at a level
adequate to meet the Group's funding requirement). The Directors consider that
this will enable the Company to continue to meet its liabilities as they fall
due for payment.
The Directors have also identified a number of mitigating actions that could be
taken if required should actual performance fall short of the sensitised
forecasts. They are also exploring options with third parties to improve
liquidity and working capital.
After making enquiries, the Directors have a reasonable expectation that the
company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the annual report and financial statements.
Further information regarding the Group's business activities together with the
factors likely to affect its future development, performance and position is set
out in the Chief Executive's Statement. Further information regarding the
financial position of the Group, its cash flows, liquidity position and
borrowing faciilities are described in the Financial review.
Adopted IFRSs not yet applied
The following adopted IFRSs were endorsed and available for early application
but have not been applied by the Group in these Financial Statements. Their
adoption is not expected to have a material effect on the Financial Statements
unless otherwise indicated:
* IFRS 8 'Operating Segments' (mandatory for years commencing on or after 1
January 2009). The impact of this standard is to change the way operating
segments are presented in the Financial Statements. The standard requires
disclosure of segment information based on the internal reports regularly
reviewed by Management in order to assess each segment's performance and to
allocate resources to them. This standard will be adopted for the year ending 31
March 2010. Currently the Group presents segment information in respect of its
geographical segments which is not dissimilar to the way it reports on the
business internally (see note 2).
* Amendments to IFRS 2 'Share based payment - Vesting Conditions and
Cancellations' (mandatory for years commencing on or after 1 January 2009). The
impact of these amendments is to change the definition of vesting conditions in
IFRS 2 to clarify that vesting conditions are limited to service conditions and
performance conditions. Conditions other than service or performance conditions
are considered non-vesting conditions. Therefore, if all vesting conditions are
met, then the entity will recognise the grant date fair value of the
equity-settled share-based payment as compensation cost even if the counterparty
does not become entitled to the share-based payment due to a failure to meet a
non-vesting condition. This standard will be adopted for the year ending 31
March 2010.
* Revised IAS 1 'Presentation of Financial Statements' (mandatory for years
commencing on or after 1 January 2009). The impact of this revision is to
prescribe the basis of presentation of general purpose Financial Statements. The
amendments require companies to present both a Statement of Changes In Equity
(SOCIE) and either a statement of comprehensive income or an income statement
accompanied by a statement of other comprehensive income. Previously companies
were required to present only one of either a Statement of Recognised Income and
Expenses (SORIE) or a SOCIE. This standard will be adopted for the year ending
31 March 2010. Currently the Group presents a SOCIE only.
2. Segmental information
Segmental information is presented in respect of the Group's geographical
segments which are the primary basis of segmental reporting.
Geographical analysis
The results below are allocated based on the region in which the businesses are
located; this reflects the Group's management and internal reporting structure.
The disclosure has been extended in the current year with appropriate
comparative changes in that the UK, Europe and Asia are now reported separately.
There is no financial impact of this change apart from the disaggregation of the
prior year segments. Details of prior year adjustments are given in note 3.
Intra segment pricing is determined on an arm's length basis. Segment results
include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis.
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | UK | Europe | USA | Asia | Eliminations | Group |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Year ended 31 March 2009 | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Continuing operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Revenue - external | 126,114 | 34,211 | 43,143 | 13,449 | - | 216,917 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| - intra segment | 2,530 | 2,544 | - | 7,090 | (12,164) | - |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Total segment revenue | 128,644 | 36,755 | 43,143 | 20,539 | (12,164) | 216,917 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment result before | 2,346 | 1,871 | (686) | 111 | 313 | 3,955 |
| significant items and | | | | | | |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Significant items | (8,612) | (707) | (9,837) | (1,857) | - | (21,013) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment result from | (6,266) | 1,164 | (10,523) | (1,746) | 313 | (17,058) |
| continuing operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Pre-tax loss from | - | - | (3,946) | - | - | (3,946) |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment result | (6,266) | 1,164 | (14,469) | (1,746) | 313 | (21,004) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Pre-tax loss from | | | | | | 3,946 |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Net finance expenses | | | | | | (5,838) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Share of profit of | | | | | | 120 |
| associates | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Income tax | | | | | | (1,617) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Loss from continuing | | | | | | (24,393) |
| operations year ended 31 | | | | | | |
| March 2009 | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Balances at 31 March 2009 | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Continuing operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment assets | 86,304 | 28,396 | 28,882 | 18,219 | (6,377) | 155,424 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Investment in associate | 3,086 | - | - | - | - | 3,086 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment assets from | 89,390 | 28,396 | 28,882 | 18,219 | (6,377) | 158,510 |
| continuing operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment assets from | - | - | - | - | - | - |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment assets | 86,390 | 28,396 | 28,882 | 18,219 | (6,377) | 155,510 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment liabilities | (46,217) | (27,753) | (49,261) | (1,309) | 7,312 | (117,228) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Capital expenditure | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| - property, plant and | 519 | 515 | 266 | 425 | - | 1,725 |
| equipment | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| - intangible | 145 | 218 | 90 | - | - | 453 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Depreciation | 2,502 | 1,003 | 980 | 573 | - | 5,058 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Amortisation | 105 | 2 | 280 | - | - | 387 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Impairment of fixed | 600 | 51 | 2,121 | 1,669 | - | 4,441 |
| assets | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Impairment of Intangible | - | 68 | 5,695 | - | - | 5,763 |
| assets | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | UK | Europe | USA | Asia | Eliminations | Group |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Year ended 31 March 2008 | | | | | | |
| restated | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Revenue - external | 119,693 | 33,460 | 33,050 | 5,506 | - | 191,709 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| - intra segment | 5,395 | 7,197 | - | 8,469 | (21,061) | - |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Total segment revenue | 125,088 | 40,657 | 33,050 | 13,975 | (21,061) | 191,709 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment result before | (10,509) | 2,748 | (274) | 2,068 | 1,139 | (4,828) |
| significant items and | | | | | | |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Significant items | 1,731 | (4,087) | (1,039) | (11) | 135 | (3,271) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment result from | (8,778) | (1,339) | (1,313) | 2,057 | 1,274 | (8,099) |
| continuing operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Pre-tax loss from | (1,238) | - | (4,901) | - | - | (6,139) |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment result | (10,016) | (1,339) | (6,214) | 2,057 | 1,274 | (14,238) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Pre-tax loss from | | | | | | 6,139 |
| discontinued operations | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Net finance expenses | | | | | | (3,778) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Share of profit of | | | | | | 509 |
| associates | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Income tax | | | | | | 2,866 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Loss from continuing | | | | | | (8,502) |
| operations year ended 31 | | | | | | |
| March 2008 | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Balances at 31 March 2008 | | | | | | |
| restated | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment assets | 84,528 | 40,909 | 37,523 | 18,811 | (1,671) | 180,100 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Segment liabilities | (30,250) | (40,575) | (38,155) | (4,055) | 236 | (112,799) |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Capital expenditure | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| - property, plant and | 2,954 | 2,815 | 1,205 | 321 | - | 7,295 |
| equipment | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| - intangible | 11 | 61 | 83 | - | - | 155 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Depreciation | 2,732 | 1,979 | 827 | 400 | - | 5,938 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Amortisation | 72 | 68 | 81 | - | - | 221 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Impairment of fixed | 420 | 401 | - | - | - | 821 |
| assets | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Geographical analysis of | | | | | | |
| turnover by destination | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | 2009 | 2008 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | restated |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | GBP000 | GBP000 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | | |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| UK | | | | | 97,642 | 94,198 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| USA | | | | | 49,276 | 47,353 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Europe | | | | | 65,744 | 46,528 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| Rest of the world | | | | | 4,255 | 3,630 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
| | | | | | 216,917 | 191,709 |
+---------------------------+----------+----------+----------+---------+--------------+-----------+
The group has one material business segment being the design and manufacture of
greetings and related products.
3. Prior year adjustments and reclassifications
a) During the year the Group has conducted a detailed review of the application
of its accounting policies in respect of inventory valuation and provisioning.
During the course of this review material errors were discovered in two of the
operating companies. These companies operate standard costing systems for
finished goods and at period ends the inventory valuation is adjusted to reflect
the actual costs incurred in the year in order to replicate the Group policy of
first-in first-out.
In IG USA it was discovered that there were material errors in the way this
adjustment was made as it did not take account of when stock was manufactured.
This resulted in inventory being overvalued by GBP860,000 in the year ended 31
March 2008. There was no impact as at 31 March 2007.
In Hoomark there was an error in the calculation of cost for a major raw
material and overheads in stock. When investigated it was discovered that this
error had been present for several years. This resulted in the opening inventory
for both 2007 and 2008 being overvalued by GBP1,189,000 with an impact on
opening reserves of GBP886,000 net of tax. There was no effect on the 2008
income statement.
b) In order to comply with IFRS the discontinued Party business has been removed
from continuing operations for both years, and shown separately. The 2008
discontinued business already included the discontinued UK and US retail
business and the Halloween Express associate which was sold in April 2008.
c) Additionally, following a review of our accounts the Board has reconsidered
the disclosure of certain items within our accounts in order to bring greater
clarity and to standardise reporting across the different types of business.
iAs described in the previous year's financial reviews, the company was in
receipt of insurance proceeds to cover lost ongoing business following a fire in
the UK factory in 2005. The effect on the income statement of these proceeds was
taken as a reduction in the cost of sales over the three years to which the
insurance proceeds related. In 2008 the impact of these proceeds on the income
statement was GBP4.2 million. Due to its size, the Board has decided it is more
appropriate to disclose this receipt within the 2008 comparative as a
significant item.
iiWe now show all distribution costs (warehousing and freight), and all costs of
design and production of stock within cost of sales. This has resulted in a
re-categorisation between overheads and cost of sales in the 2008 comparative
figures.
iiiAs part of the review of inventory it was discovered that the reporting of
engravings used in the printing machines was not consistent across the group,
with amounts included in fixed assets, inventory or prepayments. The Group now
shows all its engravings within inventory as work in progress due to its short
but variable useful life. The prior year comparative has been adjusted to
reflect this with GBP614,000 moving from fixed assets and GBP1,467,000 moving
from prepayments.
The effect of the prior year adjustments and reclassifications are detailed
below:
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | 2008 | | | | 2008 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | previously | | | | restated |
| | stated | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | Before | Note a) | Note b) | Note c) | Before |
| | | | | i) & ii) | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | significant | | Party | Changes | significant |
| | | | | in | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | items | Inventory | discontinued | disclosure | items |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Continuing operations | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Revenue | 194,168 | - | (2,459) | - | 191,709 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Cost of sales | (148,366) | (860) | 1,521 | (11,243) | (158,948) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Gross Profit | 45,802 | (860) | (938) | (11,243) | 32,761 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | 23.6% | | | | 17.1% |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Selling expenses | (16,041) | - | 688 | 992 | (14,361) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Administration expenses | (30,096) | - | 200 | 5,648 | (24,248) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Other operating Income | 617 | - | - | 372 | 989 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Profit on sales of fixed | - | - | - | 31 | 31 |
| assets | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Operating profit/(loss) | 282 | (860) | (50) | (4,200) | (4,828) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Finance expenses | (3,861) | - | 83 | - | (3,778) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Share of profit of | 509 | - | - | - | 509 |
| associates (net of tax) | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| (Loss)/profit before tax | (3,070) | (860) | 33 | (4,200) | (8,097) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Income tax | 1,591 | - | (12) | - | 1,579 |
| credit/(charge) | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| (Loss)/profit from | (1,479) | (860) | 21 | (4,200) | (6,518) |
| continuing operations | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Discontinued operations | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Loss from discontinued | (1,411) | - | (21) | - | (1,432) |
| operations (net of tax) | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Loss for the year | (2,890) | (860) | - | (4,200) | (7,950) |
| attributable to equity | | | | | |
| holders of the parent | | | | | |
| company | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | Significant | Note a) | Note b) | Note c) | Significant |
| | | | | i) & ii) | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | items | | Party | Changes | items |
| | | | | in | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | | Inventory | discontinued | disclosure | restated |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Continuing operations | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Revenue | - | - | - | - | - |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Cost of sales | (4,309) | - | - | - | (4,309) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Gross Loss | (4,309) | - | - | - | (4,309) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Selling expenses | (95) | - | - | - | (95) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Administration expenses | (3,324) | - | - | - | (3,324) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Other operating income | 257 | - | - | 3,943 | 4,200 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Profit on sales of fixed | - | - | - | 257 | 257 |
| assets | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Operating (loss)/profit | (7,471) | - | - | 4,200 | (3,271) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Finance expenses | - | - | - | - | - |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Share of profit of | - | - | - | - | - |
| associates (net of tax) | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| (Loss)/profit before tax | (7,471) | - | - | 4,200 | (3,271) |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Income tax credit | 1,287 | - | - | - | 1,287 |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| (Loss)/profit from | (6,184) | - | - | 4,200 | (1,984) |
| continuing operations | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Discontinued operations | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| Loss from discontinued | (2,964) | - | - | - | (2,964) |
| operations (net of tax) | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
| (Loss)/profit for the | (9,148) | - | - | 4,200 | (4,948) |
| year attributable to | | | | | |
| equity holders of parent | | | | | |
| company | | | | | |
+---------------------------+-------------+-----------+--------------+------------+-------------+
Impact on Earnings per share
The above changes had the following effect on earnings per share:
+---------------------------+------------+-----------+--------------+------------+------------+
| | 2008 | Note a) | Note b) | Note c) | 2008 |
+---------------------------+------------+-----------+--------------+------------+------------+
| | previously | Inventory | Party | Changes | restated |
| | stated | | discontinued | in | |
| | | | | disclosure | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Adjusted basic loss per | (3.2p) | (1.9p) | 0.1p | (8.9p) | (13.9p) |
| share excluding | | | | | |
| significant items and | | | | | |
| discontinued operations | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Loss per share on | (13.2p) | 0.0p | 0.0p | 8.9p | (4.3p) |
| significant items | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Loss per share on | (9.3p) | 0.0p | (0.1p) | 0.0p | (9.4p) |
| discontinued operations | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Basic loss per share | (25.7p) | (1.9p) | 0.0p | 0.0p | (27.6p) |
+---------------------------+------------+-----------+--------------+------------+------------+
| Diluted loss per share | (25.7p) | (1.9p) | 0.0p | 0.0p | (27.6p) |
+---------------------------+------------+-----------+--------------+------------+------------+
+---------------------------+------------+-----------+--------------+------------+------------+
| Balance Sheet | 2008 | Note a) | Note b) | Note c) | 2008 |
| | | | | iii) | |
+---------------------------+------------+-----------+--------------+------------+------------+
| | previously | | Party | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| | stated | Inventory | discontinued | Engravings | restated |
+---------------------------+------------+-----------+--------------+------------+------------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Assets | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Property, plant and | 43,485 | - | - | (614) | 42,871 |
| equipment | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Intangible assets | 35,544 | - | - | - | 35,544 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Investments in associates | 3,106 | - | - | - | 3,106 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Deferred tax assets | 4,169 | - | - | - | 4,169 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Inventory | 56,990 | (2,049) | - | 2,081 | 57,022 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Income tax receivable | 918 | 303 | - | - | 1,221 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Trade and other | 33,779 | - | - | (1,467) | 32,312 |
| receivables | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Cash and cash equivalents | 2,137 | - | - | - | 2,137 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Assets classified as held | 1,718 | - | - | - | 1,718 |
| for sale | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Total assets | 181,846 | (1,746) | - | - | 180,100 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Equity | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Share capital | 2,353 | - | - | - | 2,353 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Share premium | 3,006 | - | - | - | 3,006 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Reserves | 15,263 | - | - | - | 15,263 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Retained earnings brought | 60,463 | (886) | - | - | 59,577 |
| forward | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Loss for the year | (12,038) | (860) | - | - | (12,898) |
+---------------------------+------------+-----------+--------------+------------+------------+
| Retained earnings carried | 48,425 | (1,746) | - | - | 46,679 |
| forward | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Total equity attributable | 69,047 | (1,746) | - | - | 67,301 |
| to equity holders of the | | | | | |
| parent company | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
| Total liabilities | 112,799 | - | - | - | 112,799 |
+---------------------------+------------+-----------+--------------+------------+------------+
| Total equity and | 181,846 | (1,746) | - | - | 180,100 |
| liabilities | | | | | |
+---------------------------+------------+-----------+--------------+------------+------------+
4. Significant items
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | Cost | Selling | Admin | Other | Profit | Finance | Total |
| | of | | | | or | | |
| | | | | | loss | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | sales | expenses | expenses | operating | on | expenses | |
| | | | | | disposal | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | | | | income | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| 2009 | | | | | | | |
| Continuing | | | | | | | |
| operations | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Impairments in | | | | | | | |
| respect of | | | | | | | |
| restructuring | | | | | | | |
| of operational | | | | | | | |
| activities: | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| US | - | - | 5,695 | - | - | - | 5,695 |
| goodwill | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| US | 2,121 | - | - | - | - | - | 2,121 |
| fixed | | | | | | | |
| assets | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| US | 911 | - | - | - | - | - | 911 |
| engravings | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Latvian | 1,669 | - | - | - | - | - | 1,669 |
| printing | | | | | | | |
| press | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| UK | 600 | - | - | - | - | - | 600 |
| fixed | | | | | | | |
| assets | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | 5,301 | - | 5,695 | - | - | - | 10,996 |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Other | | | | | | | |
| costs | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Restructuring | 1,693 | 277 | 1,067 | - | 16 | - | 3,053 |
| of | | | | | | | |
| operational | | | | | | | |
| activities | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Debtors | 252 | 2,889 | - | - | - | - | 3,141 |
| in | | | | | | | |
| administration | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Financial | - | - | 1,220 | - | - | 1,417 | 2,637 |
| restructuring | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Restructuring | 157 | - | 1,416 | - | - | - | 1,573 |
| of management | | | | | | | |
| functions | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Asia | 957 | 40 | 33 | - | - | 19 | 1,049 |
| supplier | | | | | | | |
| disruption | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | 8,360 | 3,206 | 9,431 | - | 16 | 1,436 | 22,449 |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Income | | | | | | | 1,453 |
| tax | | | | | | | |
| charge | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | | | | | | | 23,902 |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| 2008 | | | | | | | |
| Continuing | | | | | | | |
| operations | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| restated | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| UK | 1,507 | 95 | 1,085 | - | - | - | 2,687 |
| restructuring | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Latvia | 1,988 | - | 1,185 | - | - | - | 3,173 |
| closure | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Integration | 814 | - | 735 | - | - | - | 1,549 |
| of | | | | | | | |
| acquisitions | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Aborted | - | - | 319 | - | - | - | 319 |
| acquisition | | | | | | | |
| costs | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Profit | - | - | - | - | (257) | - | (257) |
| on | | | | | | | |
| disposal | | | | | | | |
| of | | | | | | | |
| property, | | | | | | | |
| plant and | | | | | | | |
| equipment | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Insurance | - | - | - | (4,200) | - | - | (4,200) |
| proceeds | | | | | | | |
| - | | | | | | | |
| compensation | | | | | | | |
| for loss of | | | | | | | |
| gross profit | | | | | | | |
| due to a | | | | | | | |
| fire in 2005 | | | | | | | |
| (see note 3) | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | 4,309 | 95 | 3,324 | (4,200) | (257) | | 3,271 |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| Income | | | | | | | (1,287) |
| tax | | | | | | | |
| credit | | | | | | | |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
| | | | | | | | 1,984 |
+----------------+--------+-----------+----------+-----------+----------+----------+---------+
The Group incurred the following significant items in respect of continuing
operations:
Year ended 31 March 2009
The restructuring and refocusing of the business in the UK and Latvia, which was
started last year, was completed in March 2009, on time and to plan. Some
restructuring also took place in our US operations with a focus on reducing
costs and enhancing margins.
Impairment
* As a result of the closure of the Party business, and the current performance of
the US business, the Board has fully impaired the goodwill acquired on
Glitterwrap, leading to a charge to the income statement of GBP5.7 million (see
note 7 for details of this calculation).
* US printing and conversion machinery (GBP2.1 million) and related engraving for
cylinders (GBP0.9 million) have also been impaired as the business focuses on a
revised manufacturing strategy.
* A large and high quality printing machine was transferred during the year from
Latvia to China, however as there is no longer the requirement in China to use
the machine as it was originally intended, the asset has been impaired down to
its value in use by GBP1.7 million.
* As a result of the restructuring of UK Greetings division plant and machinery
that is no longer in use and is estimated to have no resale value, was impaired
by GBP0.6 million.
Other costs
* As a result of restructuring the manufacturing activities, mainly in the UK
Greetings Division, GBP2.6 million of staff redundancy costs were incurred. A
further GBP0.5 million was incurred on write downs of stock transferred from
Latvia and the disposal and relocation of assets
* Due to the current economic climate the Group has experienced an unprecedented
number of mainly UK based high street retailers going into administration. This
cost the Group GBP3.1 million of which GBP1.8 million was in respect of the
collapse of Woolworths. This includes a write down of Woolworths branded stock
of GBP0.3 million.
* To restructure its Bank financing the Group incurred substantial additional bank
facility fees and related charges of GBP1.4 million, with a further GBP1.2
million being incurred on advisors to both the Bank and the Board.
* The Group has restructured the Board and strengthened the senior financial
management both centrally and at an operating company level. The Group incurred
termination fees of GBP1.2 million, just under half of which relate to Directors
with a further GBP0.4 million incurred in respect of recruitment costs and
interim senior management.
* The disruption of supply of goods from Asian subcontractors during the peak
supply period cost the Group GBP1.0 million. The costs relate to incremental
expenditure incurred by switching to alternative suppliers and for air freight
to customers. One supplier suffered a fire and two experienced severe financial
difficulties. The Group is currently in the process of submitting an insurance
claim in relation to the fire.
Income Tax
The income tax charge for the year of GBP1,453,000 (2008: GBP1,287,000 credit)
is due to a provision of GBP1,708,000 against US losses bought forward due to
the restructuring of US manufacturing activities. This is offset by GBP255,000
of net credits from the other business segments.
Year ended 31 March 2008
UK restructuring costs relate primarily to the integration of the Group's UK
Christmas gift wrap, cracker and cards operations into one division and
rationalisation changes in order to maintain competitveness. The costs consist
primarily of losses on impairment and disposal of property, plant and equipment,
stock write-downs and personnel-related costs.
Lativa closure costs relate to the closure of the Group's Latvian production
facility and the resulting transfer of equipment and production to other parts
of the Group. The costs consist primarily of losses on impairment and disposal
of property, plant and equipment, and stock write-downs, machinery relocation
and personnel-related costs.
The costs of integration of acquisitions relate to the integration of
Glitterwrap, Pinwheel and Weltec into the Group's existing operations. The costs
consist primarily of range rationalisation and personnel-related costs.
5. Discontinued operations
US Party Business
As part of the acquisition of Glitterwrap in 2007 the Group obtained a party
tableware and accessory operation "Party". Although part of the same legal
entity, this was a separate business. At the beginning of October 2008
management took the decision to discontinue Party as it was not seen to be a
core activity of the Group, was underperforming and was unlikely to perform in
future. The significant item relates primarily to inventory write downs of
GBP565,000, staff termination costs and property closure expenditure. During the
year ended 31 March 2009 the business had cash outflows from operating
activities of GBP2,149,000 (2008: 2,090,000) and cash outflows from financing
activities of GBP52,000 (2008:GBP254,000).
+--------------------------+-----------+-----------+------------+-----------+-----------+
| | 2009 | 2008 | 2008 | 2008 | 2008 |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| | US Party | UK | Associate | US Party | Total |
| | | seasonal | | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| | business | retail | investment | business | |
| | | | in | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| | | | Halloween | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| | | | Express | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Revenue | 2,206 | 580 | - | 2,459 | 3,039 |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Expenses | (4,855) | (1,311) | - | (2,492) | (3,803) |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Loss before significant | (2,649) | (731) | - | (33) | (764) |
| items | | | | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Share of associate | - | - | (899) | - | (899) |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Income tax credit | - | 219 | - | 12 | 231 |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Profit after tax before | (2,649) | (512) | (899) | (21) | (1,432) |
| significant items | | | | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Significant items (net | (1,297) | (355) | (2,609) | - | (2,964) |
| of tax) | | | | | |
+--------------------------+-----------+-----------+------------+-----------+-----------+
| Loss for the year | (3,946) | (867) | (3,508) | (21) | (4,396) |
+--------------------------+-----------+-----------+------------+-----------+-----------+
Year ended 31 March 2008
UK seasonal retail and internet
This division had been established during the course of 2007, but was
discontinued when it did not meet expectations.
During the year ended 31 March 2008, this division had cash outflows from
operating activities of GBP715,000 and cash outflows from financing activities
of GBP15,000.
Halloween Express
On 27 July 2007, the Group acquired 50% of the issued share capital of Halloween
Express Inc, a franchise retailer of Halloween products based in the USA.
Initial consideration of GBP1,373,000 was paid through a combination of cash and
the issue of 119,948 new ordinary shares.
During the year ended 31 March 2008 further sums totalling GBP5,514,000 were
paid to Halloween Express in order to fund its operations. The Group's share of
the associate's losses was GBP899,000, net of tax.
The carrying value of the investment was written down to the recoverable amount
of GBP1,718,000 and was sold in April 2008.
The UK seasonal retail significant items related to the closure of the operation
and consisted primarily of stock write-downs and personnel related costs. The
Halloween Express significant item related to the write-down of the Group's
investment in the associate. The tax credits in relation to the significant
items were GBP152,000 and GBP1,360,000 respectively.
6. Property, plant and equipment
+--------------------------------+----------+--------+--+-----------+----------+----------+----------+
| | | | | | | |
+--------------------------------+-------------------+--+-----------+----------+----------+----------+
| | | | | | | |
+--------------------------------+-------------------+--+-----------+----------+----------+----------+
| | Land and | Plant | Fixtures | Motor | Total |
| | buildings | and | | | |
+--------------------------------+----------------------+-----------+----------+----------+----------+
| | Freehold | Leasehold | equipment | and | Vehicles | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| | | | restated | fittings | | restated |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Cost | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 1 April 2007 | 17,888 | 6,430 | 42,098 | 5,073 | 1,876 | 73,365 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Acquisitions through business | - | - | 11 | 573 | - | 584 |
| combinations | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Additions | 2,271 | 497 | 4,090 | 344 | 93 | 7,295 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Disposals | (173) | (33) | (2,671) | (155) | (531) | (3,563) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Transfer to stock | - | - | (1,886) | - | - | (1,886) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Effect of movements in foreign | 959 | 85 | 1,691 | 147 | 41 | 2,923 |
| exchange | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 31 March 2008 | 20,945 | 6,979 | 43,333 | 5,982 | 1,479 | 78,718 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 1 April 2008 | 20,945 | 6,979 | 43,333 | 5,982 | 1,479 | 78,718 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Additions | 300 | 257 | 879 | 280 | 9 | 1,725 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Disposals | (174) | (2,106) | (1,185) | (304) | (672) | (4,441) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Transfers between fixed asset | - | - | (219) | 219 | - | - |
| categories | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Effect of movements in foreign | 1,112 | 2,194 | 5,284 | 2,012 | 60 | 10,662 |
| exchange | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 31 March 2009 | 22,183 | 7,324 | 48,092 | 8,189 | 876 | 86,664 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Depreciation and impairment | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 1 April 2007 | (4,872) | (971) | (21,845) | (3,141) | (986) | (31,815) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Depreciation charge for the | (779) | (412) | (3,352) | (1,005) | (390) | (5,938) |
| year | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Disposals | - | 33 | 1,546 | 347 | 411 | 2,337 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Impairment | - | - | (821) | - | - | (821) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Transfer to stock | - | - | 1,272 | - | - | 1,272 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Effect of movements in foreign | (41) | (22) | (748) | (48) | (23) | (882) |
| exchange | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 31 March 2008 | (5,692) | (1,372) | (23,948) | (3,847) | (988) | (35,847) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance as at 1 April 2008 | (5,692) | (1,372) | (23,948) | (3,847) | (988) | (35,847) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Depreciation charge for the | (856) | (295) | (2,864) | (839) | (204) | (5,058) |
| year | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Disposals | 118 | 1,737 | 1,183 | 261 | 506 | 3,805 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Impairment | - | (30) | (4,398) | (11) | (2) | (4,441) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Transfers between fixed asset | - | - | 38 | (38) | - | - |
| categories | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Effect of movements in foreign | (106) | (410) | (3,231) | (1,601) | (53) | (5,401) |
| exchange | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Balance at 31 March 2009 | (6,536) | (370) | (33,220) | (6,075) | (741) | (46,942) |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| Net book value | | | | | | |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| At 31 March 2008 | 15,253 | 5,607 | 19,385 | 2,135 | 491 | 42,871 |
+--------------------------------+----------+-----------+-----------+----------+----------+----------+
| At 31 March 2009 | 15,647 | 6,954 | 14,872 | 2,114 | 135 | 39,722 |
+--------------------------------+----------+--------+--+-----------+----------+----------+----------+
Depreciation is charged to either cost of sales, selling costs or administration
costs within the income statement depending on the department to which the
assets relate.
Leased plant and machinery
The net book value of property, plant and equipment included an amount of
GBP25,000 (2008: GBP348,000) in respect of assets held under finance leases.
Impairment
The 2008 impairment relates to the write down of plant and equipment following
the closure of the Group's production facility in Latvia. The impairment in 2009
relates to a) GBP1.7 million in respect of further write down of printing
equipment following the closure of the Group's production facility in Latvia and
the transfer of equipment to China where there is not longer the requirement to
use the machine as intended and b) GBP0.6 million in respect of plant and
equipment that is no longer in use in the UK, and has no resale value.
Additionally due to a change in production strategy all the US assets were
the subject of an impairment review. This led to an impairment of printing and
conversion equipment of GBP2.1 million. Details of the value in use calculation
is given in note 7. The losses have been included within cost of goods sold in
the income statement within significant items.
Security
At 31 March 2009 freehold properties with a carrying amount of GBP15,647,000
(2008: GBP8,729,000) are subject to a fixed charge.
7. Intangible assets
+------------------------------------+-----+----------+----------+-------------+----------+
| | | | Computer | Other | |
+------------------------------------+-----+----------+----------+-------------+----------+
| | | Goodwill | software | intangibles | Total |
+------------------------------------+-----+----------+----------+-------------+----------+
| | | GBP000 | GBP000 | GBP000 | GBP000 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Cost | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 1 April 2007 | | 30,642 | 1,047 | - | 31,689 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Acquisitions through business | | 5,840 | - | 737 | 6,577 |
| combinations | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Adjustment in respect of previous | | 788 | - | - | 788 |
| acquisitions | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Additions | | - | 155 | - | 155 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Disposals | | - | - | (205) | (205) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Effect of movements in foreign | | (35) | - | - | (35) |
| exchange | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 31 March 2008 | | 37,235 | 1,202 | 532 | 38,969 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 1 April 2008 | | 37,235 | 1,202 | 532 | 38,969 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Additions | | - | 453 | - | 453 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Disposals | | - | - | (71) | (71) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Effect of movements in foreign | | 1,657 | 184 | 10 | 1,851 |
| exchange | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 31 March 2009 | | 38,892 | 1,839 | 471 | 41,202 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Amortisation and impairment | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 1 April 2007 | | (2,489) | (715) | - | (3,204) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Amortisation for the year | | - | (168) | (53) | (221) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Effect of movements in foreign | | - | - | - | - |
| exchange | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 31 March 2008 | | (2,489) | (883) | (53) | (3,425) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 1 April 2008 | | (2,489) | (883) | (53) | (3,425) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Amortisation for the year | | - | (338) | (49) | (387) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Impairment | | (5,695) | - | (68) | (5,763) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Disposals | | - | - | 71 | 71 |
+------------------------------------+-----+----------+----------+-------------+----------+
| Effect of movements in foreign | | (1,189) | (132) | 3 | (1,318) |
| exchange | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| Balance at 31 March 2009 | | (9,373) | (1,353) | (96) | (10,822) |
+------------------------------------+-----+----------+----------+-------------+----------+
| Net book value | | | | | |
+------------------------------------+-----+----------+----------+-------------+----------+
| At 31 March 2008 | | 34,746 | 319 | 479 | 35,544 |
+------------------------------------+-----+----------+----------+-------------+----------+
| At 31 March 2009 | | 29,519 | 486 | 375 | 30,380 |
+------------------------------------+-----+----------+----------+-------------+----------+
Impairment
The impairment in the year primarily relates to the goodwill acquired on the
acquisition of Glitterwrap, within the USA segment, see note 4 for further
details. The aggregate carrying amounts of goodwill allocated to each segment
are as follows:
+------------------------------------------------------+-----+--+---------+----------+
| | | | 2009 | 2008 |
+------------------------------------------------------+-----+--+---------+----------+
| | | | GBP000 | GBP000 |
+------------------------------------------------------+-----+--+---------+----------+
| UK segment | | | | |
+------------------------------------------------------+-----+--+---------+----------+
| Anker International Plc | | | 16,410 | 16,410 |
+------------------------------------------------------+-----+--+---------+----------+
| Alligator Books Ltd | | | 6,445 | 6,445 |
+------------------------------------------------------+-----+--+---------+----------+
| Multiple UK units without significant goodwill | | | 2,745 | 2,745 |
+------------------------------------------------------+-----+--+---------+----------+
| Total UK segment | | | 25,600 | 25,600 |
+------------------------------------------------------+-----+--+---------+----------+
| US segment | | | | |
+------------------------------------------------------+-----+--+---------+----------+
| Glitterwrap | | | - | 5,103 |
+------------------------------------------------------+-----+--+---------+----------+
| Hysil Manufacturing Inc | | | - | 116 |
+------------------------------------------------------+-----+--+---------+----------+
| Total US segment | | | - | 5,219 |
+------------------------------------------------------+-----+--+---------+----------+
| European segment | | | | |
+------------------------------------------------------+-----+--+---------+----------+
| Hoomark Gift-wrap Partners BV | | | 2,528 | 2,528 |
+------------------------------------------------------+-----+--+---------+----------+
| Multiple European units without significant goodwill | | | 1,391 | 1,399 |
+------------------------------------------------------+-----+--+---------+----------+
| Total European segment | | | 3,919 | 3,927 |
+------------------------------------------------------+-----+--+---------+----------+
| Total goodwill | | | 29,519 | 34,746 |
+------------------------------------------------------+-----+--+---------+----------+
Impairment testing for cash generating units containing goodwill
The Group tests goodwill annually for impairment, or more frequently if there
are indications that goodwill might be impaired. For the purposes of impairment
testing, goodwill considered significant in comparison to the Group's total
carrying amount of such assets has been allocated to the business unit, or group
of business units, that are expected to benefit from the synergies of the
combination (see table above), which represents the lowest level within the
Group at which the goodwill is monitored for internal management purposes, and
is referred to below as a cash generating unit. This has changed from the
previous year, where the cash generating units were deemed to be the subsidiary
on the acquisition of which the goodwill arose. During the year the businesses
have begun to work more closely with each other, exploiting the synergies that
arise. The recoverable amounts of cash generating units are determined from the
higher of value in use and fair value less costs to sell.
The Group prepares cash flow forecasts for each cash generating unit derived
from the most recent financial budgets for the following two years. The key
assumptions in these are sales, margins achievable and overhead costs which are
reviewed and approved by the Board. The Group then extrapolates cash flows for
the following years into perpetuity based on a conservative estimate of market
growth of 2% (2008: 3%).
The cash generating units within UK, Europe and Asia, used a pre-tax discount
rate of 13% (2008:15%) which is derived from a prudent estimate of the Group's
future average weighted cost of capital adjusted to reflect the market
assessment of the risks specific to their estimated cashflows over the same
period. The cash generating unit for USA used a discount rate of 16% (2008: 15%)
to represent the higher risk within that business given its recent performance,
and forthcoming change in manufacturing strategy.
Each of the cash generating units' values in use were determined to be higher
than fair value less costs to sell, thus these were used as the recoverable
amounts. In all businesses except for the USA the carrying value of the goodwill
was supported by the recoverable amount.
With the closure of the Party business, and the required change in manufacturing
strategy in the USA the recoverable amount was not able to support the tangible
and intangible fixed assets by GBP7.8 million. The impairment was first
allocated against the Goodwill held, being an impairment of GBP5.7 million, and
the balance to tangible fixed assets, being GBP2.1 million (note 7).
The conclusions were not considered to be sensitive to a 10% change in either
the discount rate or the growth rate.
8. Earnings per share
+--------------------------------------+---------------------+---------+--------------+
| | | 2009 | 2008 |
+--------------------------------------+---------------------+---------+--------------+
| | | | restated |
+--------------------------------------+---------------------+---------+--------------+
| Adjusted basic loss per share excluding significant items | (1.0p) | (13.9p) |
| and discontinued operations | | |
+------------------------------------------------------------+---------+--------------+
| Loss per share on significant items | (49.8p) | (4.3p) |
+------------------------------------------------------------+---------+--------------+
| Loss per share on discontinued operations | (8.2p) | (9.4p) |
+------------------------------------------------------------+---------+--------------+
| Basic loss per share | | (59.0p) | (27.6p) |
+--------------------------------------+---------------------+---------+--------------+
| Diluted loss per share | | (59.0p) | (27.6p) |
+--------------------------------------+---------------------+---------+--------------+
The basic loss per share is based on the loss of GBP28,339,000 (2008 restated:
GBP12,898,000 loss) and the weighted average number of ordinary shares in issue
of 48,017,616 (2008: 46,799,068) calculated as follows:
+----------------------------------------------------------+---------+--------------+
| Weighted average number of shares In thousands of shares | 2009 | 2008 |
+----------------------------------------------------------+---------+--------------+
| Issued ordinary shares at 1 April | 47,057 | 46,331 |
+----------------------------------------------------------+---------+--------------+
| Shares issued in respect of acquisitions | 959 | 460 |
+----------------------------------------------------------+---------+--------------+
| Shares issued in respect of exercising of share options | 2 | 8 |
+----------------------------------------------------------+---------+--------------+
| Weighted average number of shares at 31 March | 48,018 | 46,799 |
+----------------------------------------------------------+---------+--------------+
Adjusted basic loss per share excludes significant items charged of
GBP22,449,000 (2008 restated: GBP3,271,000) the tax charge attributable to those
items largely as a result of writing off previous year's tax losses in the US of
GBP1,453,000 (2008: GBP1,287,000 credit), and the loss on discontinued
operations (net of tax) of GBP3,946,000 (2008 restated: GBP4,396,000).
Share options have not been included in the calculation of fully diluted
earnings per share for 2008 because their inclusion would be
anti-dilutive. There were no share options exercisable at 31 March 2009.
The instruments which could potentially dilute the basic earnings per share but
were not included because they were anti-dilutive are as follows:
+------------------------------------------------+--------------------+--------------+
| | 2009 | 2008 |
+------------------------------------------------+--------------------+--------------+
| Number of shares | | |
+------------------------------------------------+--------------------+--------------+
| Share options | - | 254,794 |
+------------------------------------------------+--------------------+--------------+
9. Liquidity risks
Liquidity risk is the risk that the Group will not be able to meet its financial
obligations as they fall due.
The Group's policy with regard to liquidity has historically been to ensure
adequate access to funds by maintaining appropriate levels of short-term
overdraft facilities, which are reviewed on a regular basis. For 2009 onwards
the Group's policy was to introduce an element of longer term borrowing and
correspondingly reduce its short term overdraft facilities.
The following are the contractual maturities of financial liabilities, including
estimated interest payments:
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| 31 March 2009 | Nominal | Carrying | Contractual | 1 year | 1-2 | 2-5 | More |
| | | | | or | years | years | than |
| | | | | | | | 5 |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Financial | interest | Amount | Cash | Less | | | Years |
| instrument | rate | | flows | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| | | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Non-derivative | | | | | | | |
| financial | | | | | | | |
| liabilities | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Secured bank loans | 5.00% | 1,864 | (2,315) | (421) | (439) | (1,455) | - |
| - Sterling | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Secured bank loans | 2.10% | 2,204 | (2,388) | (319) | (360) | (1,019) | (690) |
| - US Dollar | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Secured bank loans | 4.00% | 8,155 | (10,864) | (688) | (674) | (1,940) | (7,562) |
| - Euros | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Total secured bank | | 12,223 | (15,567) | (1,428) | (1,473) | (4,414) | (8,252) |
| loans | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Finance leases | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| - Sterling leases | 9.00% | 24 | (31) | (14) | (14) | (3) | - |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Other financial | | 13,881 | (13,903) | (12,711) | (1,192) | - | - |
| liabilities | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Trade and other | | 26,356 | (26,356) | (26,356) | - | - | - |
| payables | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Bank overdrafts | 2.39%-6.25% | 58,351 | (58,351) | (58,351) | - | - | - |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Derivative | | | | | | | |
| financial | | | | | | | |
| liabilities | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| Financial | | 79 | (6,000) | (6,000) | - | - | - |
| liabilities at | | | | | | | |
| fair value through | | | | | | | |
| the income | | | | | | | |
| statement | | | | | | | |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
| | | 110,914 | (120,208) | (104,860) | (2,679) | (4,417) | (8,252) |
+--------------------+-------------+----------+-------------+-----------+---------+---------+---------+
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| 31 March 2008 | Nominal | Carrying | Contractual | 1 year | 1-2 | 2-5 | More |
| | | | | or | years | years | than |
| | | | | | | | 5 |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Financial | interest | amount | Cash | less | | | years |
| instrument | rate | | flows | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| | | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Non-derivative | | | | | | | |
| financial | | | | | | | |
| liabilities | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Secured bank loans | 2.26% | 1,805 | (1,845) | (197) | (201) | (591) | (856) |
| - US Dollar | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Other loans | | 203 | (244) | - | - | (244) | - |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Finance leases | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| - Sterling leases | 7%-9% | 76 | (79) | (50) | (29) | - | - |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Other financial | | 16,321 | (16,500) | (13,574) | (2,066) | (860) | - |
| liabilities | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Trade and other | | 21,698 | (21,698) | (21,698) | - | - | - |
| payables | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Bank overdraft | 2.65% - | 64,898 | (64,898) | (64,898) | - | - | - |
| | 5.55% | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Derivative | | | | | | | |
| financial | | | | | | | |
| liabilities | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| Financial | | 411 | (7,230) | (7,230) | - | - | - |
| liabilities at | | | | | | | |
| fair value through | | | | | | | |
| the hedging | | | | | | | |
| reserve | | | | | | | |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
| | | 105,412 | (112,494) | (107,647) | (2,296) | (1,695) | (856) |
+--------------------+------------+----------+-------------+-----------+---------+---------+--------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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