TIDMIGR
RNS Number : 4536I
International Greetings PLC
03 July 2013
3(rd) July 2013
International Greetings PLC
Preliminary Results for the year ended 31 March 2013
International Greetings PLC ('International Greetings' or 'the
Group'), one of the world's leading designers, innovators and
manufacturers of gift packaging and greetings, stationery and
creative play products, announces its audited Preliminary Results
for the year ended 31 March 2013.
Financial Highlights:
* Revenue from continued operations increased by 2% to
GBP225.2 million
* Operating profit after exceptional items up 34% to
GBP9.1 million (2012: GBP6.8 million)
* Profit after tax and exceptional items up GBP2.7
million to GBP4.1 million (2012: GBP1.4 million)
* Fully diluted earnings per share before exceptional
items increased 16% to 7.8 pence (2012: 6.7 pence)
* Net debt up just GBP0.2 million to GBP42.1 million
(2012: GBP41.9 million) despite the effect of
exchange rates (GBP0.6 million) and the investment in
working capital to fund new everyday contracts and
low season manufacturing opportunities
Operational Highlights:
* Continued double digit growth in sales and profits in
USA
* Completion of China factory relocation
* Gift packaging and greetings product sales exceed
GBP150 million
* Major GBP6 million gift wrap capital investment
project commenced in the UK
* Pressure on margins fully mitigated through effective
cost control
Paul Fineman, CEO commented:
"We are pleased to report another year of progress in which our
manufacturing businesses continued to produce record volumes of
product and importantly we achieved our key objective of double
digit earnings per share growth.
"It was a pivotal year in the Group's development as we
commenced a compelling programme of investment in manufacturing in
the USA and the UK having completed a major factory relocation in
China and significant investments in Europe and Australia. We have
secured increased funding on improved terms to facilitate this.
"Our new three year plan is on track to delivery double digit
cumulative average growth in earnings per share, whilst remaining
committed to debt reduction and leverage below two times
debt/EBITDA. We have identified new opportunities for incremental
growth and shall continue to deploy our resources and energy in
accelerating and enhancing this process."
For further information, please contact:
International Greetings plc Tel: 01525 887310
Paul Fineman, Chief Executive
Anthony Lawrinson, Chief Financial
Officer
Cenkos Securities plc Tel: 0207 397 8900
Bobbie Hilliam
Adrian Hargrave
FTI Consulting Tel: 020 7831 3113
Jonathon Brill
Georgina Goodhew
Chairman's statement
A year of continued reorganisation and alignment, as we
strengthen our foundations for profitable growth.
I am pleased to report that Fiscal 2013 has been a year of
continued effective reorganisation of our Group, as we strengthen
our foundations and commit to further capital expenditure and
investment. These measures will assist us in achieving increased
manufacturing efficiencies and improved profitability going
forward.
Revenues for the year ended 31 March 2013 rose by 2% to GBP225
million from continuing operations. Operating profit after
exceptional items was up 34% to GBP9.1 million, whilst profit after
exceptional items and tax increased from GBP1.4 million for the
year ended 31 March 2012 to GBP4.1 million, in the year under
review.
In my statement last year, I reported that an important part of
our strategy was to focus on improving our operating and
manufacturing efficiencies, in order to increase our profits going
forward. To this end, during the year we completed the relocation
of our factory in China, which will improve our efficiency and cost
effectiveness during 2014 and thereafter.
The investment we made to install stateof the art printing
equipment in our gift wrap manufacturing facility in Holland is
delivering the benefits we anticipated and providing confidence
going forward. As a consequence, in April 2013 we placed the order
to install identical printing presses in our UK gift wrap
manufacturing plant, which will deliver significant improvements in
efficiency for the future. The markets in which we operate
throughout the world continue to be very competitive and
challenging. In this respect, we shall continue to look at ways to
reduce costs and unnecessary expense, whilst doing all that we can
to increase revenues.
During the year we strengthened our Board with the appointment
of Phil Dutton as a Non Executive Director in May 2012. Phil is
also Chair of our Audit Committee and a member of our Remuneration
Committee. We also appointed Lance Burn and Rich Eckman to our Main
Board. Lance is Managing Director of our largest subsidiary in
Europe - IGUK and also Managing Director of our recently relocated
facility in China. Rich is Managing Director of IGUSA - our
subsidiary in the USA. IGUK and IGUSA have significantly improved
profitability under Lance and Rich's management.
These appointments, working together with our existing Board
members, now give us a better balance and composition of the Board.
I wish Phil, Lance and Rich every success and fulfilment within
their responsibilities and I look forward to working with them. I
should like to thank all my colleagues on the Board for their hard
work, commitment, loyalty and support to our Group, but also to me
personally. I also wish to place on record our thanks and
appreciation to all our employees within the Group. It is through
their efforts and support that our Group continues to make progress
and we are grateful for their loyalty.
Finally, I thank our shareholders, bankers, customers, suppliers
and advisers for their loyalty and contributions to all our
businesses throughout the world. We never forget that this group of
persons always have a choice and we remain very mindful of their
support, which we value greatly.
John Charlton
Chairman
Chief Executive Officer's review
Growing today and investing for the future.
I am pleased to report a year of progress on many fronts
resulting in the achievement of our key objective of double digit
earnings per share growth, with operating profit after exceptional
items of GBP9.1 million, up 34%.
Sales revenue at GBP225 million was achieved through a
continuing focus on offering exceptional value to our customers and
consumers across the globe.
Our manufacturing businesses continued to produce record volumes
of product. The year saw the completion of the relocation of our
gift bags, greetings cards and Christmas cracker manufacturing
plant in China and the first season of production in Holland using
our new high speed, high definition printing facility. This initial
phase of investments into enhanced environmentally friendly gift
wrap production has now been followed by a second phase in the UK
where our project to install identical technology has now
commenced, allowing us to compete whilst providing market leading
service and value.
Geographical highlights
UK and Asia
The UK and Asia business accounted for 53% (2012: 54%) of the
Group's revenue for the year. The collaborative efforts of our UK
businesses and China based manufacturing and sourcing facilities
has resulted in securing, for the first time, significant
commitments from all of the UK major blue chip grocers for products
designed for the forthcoming 2013 Christmas season.
Additionally we are delighted to have continued recent years'
growth in the everyday greeting cards category and our credibility
in this area is demonstrated by a two year commitment received for
everyday cards from the UK's largest GBP1 only multiple
retailer.
Whilst we continue to enjoy a major share of the UK's gift wrap
market, we have also secured significant incremental business for
the supply of everyday gift wrap to one of the world's largest home
furnishings retailers.
Mainland Europe
Mainland Europe continues to be the most challenging of our key
markets with revenue at 13% of Group sales (2012: 13%).
Nevertheless, an encouraging initial year of production
utilising new state of the art machinery in Holland has resulted in
the award of significant incremental business for 2013/14 when
volumes are expected to increase despite market conditions.
USA
Our ambitious plans for sales and profit growth were achieved in
the USA with revenue exceeding 22% of Group sales (2012: 20%). Once
again, growth was delivered across all market segments, including
over 750 new 'upscale' customers as well as further growth with the
$1 specialist retail sector.
The businesses outstanding innovation and customer service was
recognised by the world's third largest retailer, Target
Corporation, with a Vendor Partner Award, demonstrating that we
continue to grow whilst focusing on delivering customer needs. The
ongoing growth in demand for gift wrap manufactured within our
operations based in Savannah, Georgia, will be further supported by
a GBP0.5m fast pay back capital investment programme during
2013.
Australia
Artwrap in Australia accounted for 12% (2012: 13%) of the
Group's revenue for the year. Sales volumes were impacted by the
voluntary insolvency of a material customer which gave rise to an
exceptional charge in the year. However, a speedy response to this
setback and a focus on other market opportunities bodes well for
the future.
Customers and licences
More than 500 million units of our products are now sold in over
100,000 retail outlets and in over 80 countries worldwide.
Our generic brands have grown in popularity and now represent
56% of our sales. Licenced brands remain an important and
successful area in our portfolio with 2013 once again seeing growth
in sales of Peppa Pig products and a very strong performance of
Hello Kitty and Moshi Monster product categories.
Whilst new customers are continually introduced across all
markets, we are enjoying the benefits of close relationships with
longterm, well established and growing customers.
Our team
We embrace the changing dynamics across global markets and
benefit from the passion and commitment of our teams across all
businesses. I thank them, once again, for their ingenuity and
enthusiasm as we continue to grow and strive to 'raise the bar'
across all aspects of our business.
Our strategy
The focal points of our strategy remain as relevant today as
ever. Our targets are to dominate the gift packaging and value
stationery markets in which we operate by:
-- nurturing the mutually valuable relationships we enjoy with
our customers, suppliers and stakeholders;
-- creating a toolbox of marketing, design, product and brand category expertise;
-- providing best quality, value and service through optimum
product development, manufacturing, sourcing and supply;
-- giving our teams across the world the knowledge and tools
needed to achieve their goals; and
-- balancing our business, through sustainable and growing sales
across geographic regions, seasons, product categories and
brands.
The future
We are at an exciting stage of our Group's development and have
begun a compelling programme of investment in manufacturing in
Europe, the USA and the UK and have completed a major factory
relocation in China. This has been achieved whilst securing
increased funding on improved terms.
Our new three year plan is on track to deliver double digit
cumulative average growth in earnings per share, whilst remaining
committed to debt reduction and leverage below two times
debt/EBITDA.
We have identified new opportunities for incremental growth and
shall continue to deploy our resources and energy in accelerating
and enhancing this process.
Paul Fineman
CEO
Financial review
Driving growth in earnings
Group performance
Our constant focus on margins, operating profits and cash
management has underpinned and supported steady improvement to the
financial position of the business despite the insolvency of a
material customer in Australia. The Company has demonstrated its
ability to withstand such events, execute significant operational
change (in China and Europe) and still deliver double digit growth
in underlying earnings per share. Furthermore, with improved
financial leverage and more cost effective funding facilities in
the UK, the Company now has the flexibility to take advantage of
operationally compelling low season manufacturing and to invest in
selected future growth opportunities such as that now under way at
our site in Wales.
Continuing operations
Revenues from continuing operations for the year to 31 March
2013 were up slightly by 2% to GBP225.2 million (2012: GBP220.8
million). Sales from the UK, Europe and Australia all fell
slightly, the latter due to the insolvency of a major customer but
continued strong double digit growth in North America more than
outweighed these.
Gross profit margin before exceptional items has fallen back
slightly to 18.3% (2012: 19.3%) reflecting the mix effect of lower
sales in our Australian joint venture (0.7%) where margins have
historically been better, but also higher freight costs to
Europe/UK during the year (0.4%), a risk that was identified in
last year's report. However, this margin level is still well ahead
of the 2011 level of 17.4%. The Company aims to improve margins by
increasing the balance of own brand products and non Christmas
business. Success in the former goal, together with innovative
design engineering to price points have helped us to otherwise
successfully combat deflationary pressure on selling prices and
inflationary pressure on raw materials and goods sourced from the
Far East.
An important dynamic to margin is also the level of FOB business
delivered directly to major customers to ports in China. This
increased by half during the year. This typically attracts lower
gross margins but also avoids other costs and risks associated with
domestic delivery and tends to slightly enhance net margins and
returns on capital.
Overheads pre exceptionals have decreased year on year by a net
of GBP1.0 million, reflecting tight cost control and substantially
mitigating the margin effect identified above. Cost savings were
greater in the UK while modest investment occurred in our growing
US market. Cost control remains tight and opportunities to remove
or reduce costs are constantly sought out and new costs are only
incurred where actual or prospective value can be demonstrated.
Operating profit before exceptional items was flat at GBP10.7
million due to the net effect of the above items. However, after
exceptional items, operating profit was up 34% to GBP9.1 million
(2012: GBP6.8 million).
Exceptional items during the year amounted to GBP1.6 million
before tax (2012: GBP3.9 million). As previously announced these
relate to:
-- a bad debt of GBP0.5 million in Australia after a major
customer went into voluntary administration;
-- costs of GBP0.9 million associated with disruption to operations in China; and
-- management restructuring in our UK businesses (GBP0.2
million) which is expected to result in a payback of less than one
year.
The administration process of the major customer in Australia
has been resolved; prompt terms of trade and a formal charge over
goods supplied provided significant mitigation. The customer has
now restructured and our business still trades with the successor
entity with similar protections, though at a much reduced level of
activity.
Following the relocation of our factory in China and senior
management changes, significant disruption occurred and additional
cost was incurred late in the season to ensure that customer
service was maintained, underpinning strong 2013 season orders.
Finance expenses in the year were lower at GBP3.5 million (2012:
GBP3.6 million) despite the full year effect of bank charges for
longer dated facilities. This reflected the effect of strong cash
control throughout the year but in particular two reductions in
margin during the year as key leverage targets were achieved. Notes
4 and 11 to the financial statements provide further
information.
Profit before exceptional items and tax was up 3% to GBP7.3
million (2012: GBP7.1 million).
Profit before tax from continuing operations was up 79% to
GBP5.7 million (2012: GBP3.2 million) after charging exceptional
items of GBP1.6 million (2012: GBP3.9 million).
Taxation
The headline taxation charge of GBP1.6 million (2012: GBP1.8
million) or 28.2% arises because of the exceptional costs
associated with the disruption to operations in China, where no
taxation relief has been recognised as the prospect of this
crystallising is low.
The effective underlying tax charge on profits before
exceptional items is lower at 26% (2012: 27.5%). Actual taxation
paid in cash during the year amounted to GBP0.9 million (2012:
GBP1.1 million) and arose entirely in Australia.
The current geographical profile of Group profits before
exceptional items at current local rates of tax would result in an
underlying blended tax rate of just under 30%. However, there are
still tax losses in the USA with a current tax value of GBP2.2
million and in the UK with a current tax value of GBP0.9 million,
not yet recognised in the balance sheet. The opportunity to
recognise and utilise these as profitability is sustained and
improves, will suppress the actual tax rate for some time to
come.
Profit for the year
Profit for the year was up 188% to GBP4.1 million (2012: GBP1.4
million). This was after charging GBP1.3 million (2012: GBP3.7
million) in respect of exceptional items.
Earnings per share and dividends
Basic earnings per share were 6.0p (2012: 0.3p). After removing
the effect of exceptional items, the adjusted earnings per share
increased to 8.1p (2012: 7.2p) representing an increase of
12.5%.
Employee share options of 3.0 million had vested but not yet
been exercised as at 31 March 2013. As these are exercised,
earnings per share will trend towards the fully diluted level and
the Company targets growth in this fully diluted metric as a
primary goal. Fully diluted earnings per share (stated before
exceptional items) were 7.8p, up a pleasing 16% on the prior year
(2012: 6.7p).
No dividend was paid during the year (2012: GBPnil) and the
Board does not propose a final dividend for the year. The other
primary focus remains the reduction of leverage from the current
level of 2.8 times EBITDA to below 2.0 times EBITDA. At this point,
the Board will consider whether it is appropriate to resume
dividends.
Balance sheet and cash flow
Net debt at 31 March 2013 was steady at GBP42.1 million (2012:
GBP41.9 million) and leverage steady at 2.8 times despite the
effect of exchange rates and investment in working capital towards
year end to fund operationally compelling manufacturing
opportunities and new contracts. Note 11 provides further
information.
Year end net debt included amounts denominated in US dollars of
$22.6 million (2012: $20.7 million) and in euros of EUR12.4 million
(2012: EUR11.0 million). The year end exchange rates were $1.52
(2012: $1.60) and EUR1.19 (2012: EUR1.20). Allowing for this, debt
stated at constant exchange rates would have been GBP0.8 million
lower.
Working capital management continues to be a priority.
Outstanding debtors are monitored closely, both to maximise cash
but also to reduce our credit risk. Trade debtors increased to
GBP18.8 million (2012: GBP17.1 million) at the year end. This
increase related partly to a change in payment terms to one major
customer in the USA but also to sales made pursuant to a material
new contract in the UK (see also below relating to stock).
The charge for bad and doubtful debts in the year was GBP0.3
million or just 0.1% of turnover, excluding the exceptional bad
debt in Australia.
Gross stock levels increased by 13.5% from GBP47.3 million to
GBP53.8 million including GBP1 million relating to the effect of
exchange rates. The underlying increase reflected further success
in obtaining early firm customer orders, which allowed more factory
production to begin for the coming season ahead of the traditional
summer peak. This allowed more efficient use of resources
throughout the year, reducing costs. However, of even greater
impact was the effect of a material new everyday contract which
required that product be manufactured and bought in during Q4 to
meet customer demand early in the new financial year.
Older stock (measured as over 15 months since last purchase)
remained stable at GBP5.5 million (2012: GBP5.2 million). Our
businesses have consistently achieved in excess of 100% recovery
against written down values of old stock, indicating adequate
provisioning levels.
Group cash generated from operations was GBP7.5 million (2012:
GBP11.5 million) which as noted above reflects an increase in
trading working capital employed by GBP5.7 million (2012: decrease
GBP0.2 million) as a result of higher stock and debtor balances at
year end. This related to new everyday contracts, required to meet
customer demand in late Q4 and early Q1 of the new financial year,
and to manufacturing opportunities during the 'low' season January
to March.
Net investment in capital expenditure was just GBP1.7 million
(2012: GBP4.3 million), well below depreciation and the prior year,
which reflected the investment in a new stateof the art printing
press at our gift wrap manufacturing operation in Europe.
Investments approved for the financial year 2013/14 include GBP6
million (net of grants) for our manufacturing site in Wales to
mirror the technology installed in 2012/13 in Europe and a further
GBP0.5 million investment in our fast growing US business. Both
investments will provide efficiencies and enhance our ability to
provide market leading service and value, with the benefits arising
after commissioning in the 2014 calendar season and beyond.
The UK investment will also result in a consolidation of our
operations, freeing up one site for potential sale. The market
value of this site is estimated to be in excess of GBP1 million. In
addition the Company has granted a five year option to purchase
part of another under utilised site (net book value c. GBP1
million) to a power company at a price of GBP2.4 million and
generating premium income of GBP0.5 million over the option
period.
Equity attributable to shareholders has increased to GBP51.9
million from GBP47.8 million predominantly reflecting profits
generated in the year.
Risks and key performance indicators
Our areas of primary focus are:
-- improved earnings attributable to shareholders, which we aim
to achieve through top line growth in selected markets and channels
together with strong cost and gross margin management; and
-- lower leverage measured as the ratio of net debt to pre
exceptional EBITDA, which we aim to achieve through improved
profitability together with close management of our working
capital.
Operationally we are increasing the spread of our revenue base
and enhancing our margins by seeking to balance our business
across:
-- different territories - revenue to "rest of world"
destinations has increased materially in recent years (see note
2);
-- different products - although stationery and creative play
products have dropped to 31% of turnover following particular
strength in the gift packaging and greetings segment this year (see
note 2);
-- more everyday products across the year - everyday product
reverted to 47% of sales in the year after an increase last year to
49% but a material new everyday contract will impact in 2013/14;
and
-- brands - the profile of IG brands and licensed products
continues to grow with sales in this category now representing 56%
of our revenue up from 54% last year.
Treasury operations
In August 2011 the principal bank of the Group provided extended
and longer dated facilities, providing a sound capital foundation
with a maturity profile to suit the Group's needs. In April 2013
the bank agreed to further extend those facilities as follows:
-- an additional GBP5 million term loan, repayable over three
years, with a final repayment coterminous with the main
facility;
-- an extension to August 2015 of the asset backed loan facility
secured on the stock and debtors of the two largest UK
businesses;
-- a one year renewal of the revolving multicurrency credit
facility of up to GBP28.9 million and the multi currency overdraft
facility of up to GBP5 million; and
-- credit approval to provide an additional GBP3.25 million hire
purchase facility repayable over seven years to fund new printing
equipment in our site in Wales, once delivered to site.
These facilities provided the Group with improved terms and
operational headroom but more importantly, the capability to fund a
material new investment at our manufacturing site in Wales. The
like for like blended interest rate on the existing term facilities
improved by 1% during the year as a result of achieving specified
leverage targets. Margins and fees on other existing and new
facilities with the principal bank were also improved to match.
There are financial covenants attached to our facilities and the
Group comfortably complied with these throughout the year. These
covenants include:
-- debt service, being the ratio of cash flow available to
finance costs on a rolling twelve month basis;
-- interest cover, being the ratio of earnings before interest,
depreciation and amortisation to interest on a rolling twelve month
basis;
-- leverage being the ratio of debt to preexceptional EBITDA on
a rolling twelve month basis; and
-- in the individual businesses which have asset backed loans,
covenants of pre exceptional EBITDA before interest, depreciation
on a rolling twelve month basis compared with the forecast, and the
dilution of credit notes as a percentage of invoices issued.
The Group has various interest rate swaps denominated in US
dollars, sterling and euros to improve certainty over interest
charges. The Group adopts hedge accounting for these instruments.
No new interest rate contracts were entered into during the
year.
Overall a solid year with strong development in net profits and
earnings per share, providing a strong platform for new investment
and growth.
Anthony Lawrinson
CFO
Consolidated income statement
year ended 31 March 2013
2013 2012
----------------------------------- -----------------------------------
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note Total items (note Total
6) 6)
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Continuing operations
Revenue 2 225,211 - 225,211 220,755 - 220,755
Cost of sales (183,941) (953) (184,894) (178,190) - (178,190)
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 41,270 (953) 40,317 42,565 - 42,565
18.3% 17.9% 19.3% 19.3%
Selling expenses (12,790) (455) (13,245) (13,003) - (13,003)
Administration expenses (18,789) (195) (18,984) (19,580) (3,635) (23,215)
Other operating income 3 803 - 803 678 - 678
Profit/(loss) on disposal
of property, plant and
equipment 252 - 252 63 (283) (220)
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Operating profit/(loss) 10,746 (1,603) 9,143 10,723 (3,918) 6,805
Finance expenses 4 (3,466) - (3,466) (3,635) - (3,635)
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) before
tax 7,280 (1,603) 5,677 7,088 (3,918) 3,170
Income tax (charge)/credit 5 (1,890) 289 (1,601) (1,948) 195 (1,753)
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) from continuing
operations for the period 5,390 (1,314) 4,076 5,140 (3,723) 1,417
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Owners of the Parent
Company 3,401 177
Non controlling interests 675 1,240
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Earnings per ordinary
share
2013 2012
Notes Diluted Basic Diluted Basic
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Adjusted earnings per
share excluding exceptional
items 12 7.8p 8.1p 6.7p 7.2p
Loss per share on exceptional
items 12 (2.0p) (2.1p) (6.4p) (6.9p)
Earnings per share from
continuing operations 12 5.8p 6.0p 0.3p 0.3p
Earnings per share 12 5.8p 6.0p 0.3p 0.3p
------------------------------ ----- ----------- ----------- --------- ----------- ----------- ---------
Consolidated statement of comprehensive income
year ended 31 March 2013
2013 2012
GBP000 GBP000
---------------------------------------------- ------ ------
Profit for the year 4,076 1,417
Other comprehensive income:
Exchange difference on translation of foreign
operations 633 (88)
Net loss on cash flow hedges (net of tax) (5) (322)
Other comprehensive income for period, net
of tax 628 (410)
Total comprehensive income for the period,
net of tax 4,704 1,007
Attributable to:
Owners of the Parent Company 3,796 (475)
Non
controlling interests 908 1,482
---------------------------------------------- ------ ------
4,704 1,007
---------------------------------------------- ------ ------
Consolidated statement of changes in equity
year ended 31 March 2013
Share
premium
and Non
capital
Share redemption Merger Hedging Translation Retained Shareholder controlling
capital reserve reserve reserve reserve earnings equity interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- -------- ---------- ------- ------- ----------- --------------- ----------- ----------- -------
At 1 April
2011 2,698 4,386 17,164 (124) 776 23,190 48,090 4,220 52,310
Profit for the
year - - - - - 177 177 1,240 1,417
Other
comprehensive
income - - - (322) (330) - (652) 242 (410)
-------------- -------- ---------- ------- ------- ----------- --------------- ----------- ----------- -------
Total
comprehensive
income for
the year - - - (322) (330) 177 (475) 1,482 1,007
Equity settled
share
based payment - - - - - 43 43 - 43
Options
exercised 52 94 - - - - 146 - 146
Equity
dividends
paid - - - - - - - (958) (958)
-------------- -------- ---------- ------- ------- ----------- --------------- ----------- ----------- -------
At 31 March
2012 2,750 4,480 17,164 (446) 446 23,410 47,804 4,744 52,548
Profit for the
year - - - - - 3,401 3,401 675 4,076
Other
comprehensive
income - - - (5) 400 - 395 233 628
-------------- -------- ---------- ------- ------- ----------- --------------- ----------- ----------- -------
Total
comprehensive
income for
the year - - - (5) 400 3,401 3,796 908 4,704
Equity settled
share
based payment - - - - - 22 22 - 22
Options
exercised 88 178 - - - - 266 - 266
Equity
dividends
paid - - - - - - - (968) (968)
-------------- -------- ---------- ------- ------- ----------- --------------- ----------- ----------- -------
At 31 March
2013 2,838 4,658 17,164 (451) 846 26,833 51,888 4,684 56,572
-------------- -------- ---------- ------- ------- ----------- --------------- ----------- ----------- -------
Merger reserve
The merger reserve comprises 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. For ease of presentation, the amount of GBP1.34 million
relating to the capital redemption reserve has been included within
the column of share premium and capital redemption reserve in the
balances at both the beginning and end of each year, with no
movements.
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.
Shareholders' equity
Shareholders' equity represents total equity attributable to
owners of the Parent Company.
Consolidated balance sheet
as at 31 March 2013
As at As at
31 March 31 March
2013 2012
Notes GBP000 GBP000
------------------------------------- ----- -------- --------
Non current assets
Property, plant and equipment 7 29,993 31,533
Intangible assets 8 32,795 32,916
Deferred tax assets 9 4,250 4,640
------------------------------------- ----- -------- --------
Total non current assets 67,038 69,089
------------------------------------- ----- -------- --------
Current assets
Inventory 50,114 42,628
Trade and other receivables 23,285 20,942
Cash and cash equivalents 10 2,301 3,168
------------------------------------- ----- -------- --------
Total current assets 75,700 66,738
------------------------------------- ----- -------- --------
Total assets 142,738 135,827
------------------------------------- ----- -------- --------
Equity
Share capital 2,838 2,750
Share premium 3,318 3,140
Reserves 18,899 18,504
Retained earnings 26,833 23,410
------------------------------------- ----- -------- --------
Equity attributable to owners of the
Parent Company 51,888 47,804
------------------------------------- ----- -------- --------
Non
controlling interests 4,684 4,744
------------------------------------- ----- -------- --------
Total equity 56,572 52,548
------------------------------------- ----- -------- --------
Non current liabilities
Loans and borrowings 11 29,479 33,622
Deferred income 1,329 1,879
Provisions 862 1,003
Other financial liabilities 1,803 447
------------------------------------- ----- -------- --------
Total non current liabilities 33,473 36,951
------------------------------------- ----- -------- --------
Current liabilities
Bank overdraft 10 336 1,945
Loans and borrowings 11 12,847 9,329
Deferred income 550 550
Provisions 107 317
Income tax payable 904 855
Trade and other payables 28,995 23,133
Other financial liabilities 8,954 10,199
------------------------------------- ----- -------- --------
Total current liabilities 52,693 46,328
------------------------------------- ----- -------- --------
Total liabilities 86,166 83,279
------------------------------------- ----- -------- --------
Total equity and liabilities 142,738 135,827
------------------------------------- ----- -------- --------
These financial statements were approved by the Board of
Directors on 26 June 2013 and were signed on its behalf by:
P Fineman A Lawrinson
Director Director
Company number 1401155
Consolidated cash flow statement
year ended 31 March 2013
2013 2012
Notes GBP000 GBP000
------------------------------------------- -------------------- ------- --------
Cash flows from operating activities
Profit for the year 4,076 1,417
Adjustments for:
Depreciation 7 3,807 3,753
Amortisation of intangible assets 8 494 534
Finance expenses - continuing operations 4 3,466 3,635
Income tax charge - continuing operations 5 1,601 1,753
(Profit)/loss on sales of property,
plant and equipment (252) 220
Loss on external sale of intangible
fixed assets - 4
Profit on disposal of assets held for
resale - (8)
Equity settled share based payment 22 43
------------------------------------------- -------------------- ------- --------
Operating profit after adjustments
for non cash items 13,214 11,351
Change in trade and other receivables (1,965) 224
Change in inventory (7,171) 2,840
Change in trade and other payables 4,356 (1,799)
Change in provisions and deferred income (901) (1,102)
------------------------------------------- -------------------- ------- --------
Cash generated from operations 7,533 11,514
Tax paid (937) (1,131)
Interest and similar charges paid (3,285) (3,491)
Receipts from sales of property for
resale - 528
------------------------------------------- -------------------- ------- --------
Net cash inflow from operating activities 3,311 7,420
------------------------------------------- -------------------- ------- --------
Cash flow from investing activities
Proceeds from sale of property plant
and equipment 421 122
Acquisition of intangible assets 8 (242) (399)
Acquisition of property, plant and
equipment 7 (1,884) (4,015)
------------------------------------------- -------------------- ------- --------
Net cash outflow from investing activities (1,705) (4,292)
------------------------------------------- -------------------- ------- --------
Cash flows from financing activities
Proceeds from issue of share capital 266 146
Repayment of secured borrowings (4,060) (1,473)
Net movement in credit facilities 2,748 (27,785)
Payment of finance lease liabilities (115) (49)
New bank loans raised - 30,170
New finance leases (a) 1,764 -
Loan arrangement fees (444) (370)
Payment of deferred consideration - (111)
Dividends paid to non
controlling interests (968) (918)
------------------------------------------- -------------------- ------- --------
Net cash outflow from financing activities (809) (390)
------------------------------------------- -------------------- ------- --------
Net increase in cash and cash equivalents 797 2,738
Cash and cash equivalents at beginning
of period 1,223 (1,735)
Effect of exchange rate fluctuations
on cash held (55) 220
------------------------------------------- -------------------- ------- --------
Cash and cash equivalents at 31 March 10 1,965 1,223
------------------------------------------- -------------------- ------- --------
(a) In the prior year fixed assets of GBP1,764,000 shown as
acquisition of property, plant and equipment were purchased, cash
inflow from new finance leases represents proceeds received in
respect of these assets which are now held by the Group under
finance leases.
1 Accounting policies
International Greetings plc is a public limited company,
incorporated and domiciled in England and Wales. The Company's
ordinary shares are listed on AIM.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group"). The
Company financial statements present information about the Company
as a separate entity and not about its Group.
The Group financial statements have been prepared and approved
by the Directors in accordance with EU adopted International
Financial Reporting Standards.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements.
Judgements made by the Directors in the application of these
accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed in the policies
below.
Going concern basis
The financial statements have been prepared on the going concern
basis.
The borrowing requirement of the Group increases steadily over
the period from July and peaks in September and October, due to the
seasonality of the business, as the sales of wrap and crackers are
mainly for the Christmas market, before then reducing.
As with any company placing reliance on external entities for
financial support, the Directors acknowledge that there can be no
certainty that this support will continue although, at the date of
approval of this report, they have no reason to believe that it
will not do so.
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.
Thus, they continue to adopt the going concern basis of accounting
in preparing the financial statements.
Measurement convention
The financial statements are prepared on the historical cost
basis except that financial instruments used for hedging are stated
at their fair value.
Changes in accounting policies
The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 March 2012, except for the adoption of new standards and
interpretations as of 1 April 2012.
2 Segmental information
The Group has one material business activity being the design,
manufacture and distribution of gift packaging and greetings,
stationery and creative play products.
For management purposes the Group is organised into four
geographic business units.
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 decision was made during 2011 to
focus Asia as a service provider of manufacturing and procurement
operations, whose main customers are our UK businesses. Both the
China factory and the majority of the Hong Kong procurement
operations are now overseen by our UK operational management team
and we therefore continue to include Asia within the internal
reporting of the UK operations, such that UK and Asia comprise an
operating segment. The Chief Operating Decision Maker is the
Board.
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.
Financial performance of each segment is measured on operating
profit. Interest expense or revenue and tax are managed on a Group
basis and not split between reportable segments.
Segment assets are all non current and current assets, excluding
deferred tax and income tax receivable. Where cash is shown in one
segment, which nets under the Group's banking facilities, against
overdrafts in other segments, the elimination is shown in the
eliminations column. Similarly intersegment receivables and
payables are eliminated.
UK and Europe USA Australia Eliminations Group
Asia
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- --------- --------- ---------- ------------ --------
Year ended 31 March
2013
Continuing operations
Revenue - external 118,765 28,499 50,104 27,843 - 225,211
- inter segment 1,433 143 - - (1,576) -
----------------------- --------- --------- --------- ---------- ------------ --------
Total segment revenue 120,198 28,642 50,104 27,843 (1,576) 225,211
----------------------- --------- --------- --------- ---------- ------------ --------
Segment result before
exceptional items 3,974 1,151 3,796 2,431 - 11,352
Exceptional items (1,084) - (64) (455) - (1,603)
----------------------- --------- --------- --------- ---------- ------------ --------
Segment result 2,890 1,151 3,732 1,976 - 9,749
----------------------- --------- --------- --------- ---------- ------------ --------
Central administration
costs (606)
Net finance expenses (3,466)
Income tax (1,601)
----------------------- --------- --------- --------- ---------- ------------ --------
Profit from continuing
operations for the
year ended 31 March
2013 4,076
----------------------- --------- --------- --------- ---------- ------------ --------
Balances at 31 March
2013
Continuing operations
----------------------- --------- --------- --------- ---------- ------------ --------
Segment assets 100,336 17,605 11,170 9,852 3,775 142,738
----------------------- --------- --------- --------- ---------- ------------ --------
Segment liabilities (41,297) (14,025) (27,286) (3,129) (429) (86,166)
----------------------- --------- --------- --------- ---------- ------------ --------
Capital expenditure
- property, plant and
equipment 795 153 230 706 - 1,884
- intangible 159 11 40 32 - 242
Depreciation 2,237 716 644 210 - 3,807
Amortisation 310 57 39 88 - 494
----------------------- --------- --------- --------- ---------- ------------ --------
UK and Europe USA Australia Eliminations Group
Asia
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- --------- --------- --------- --------- ------------ ---------
Year ended 31 March
2012
Continuing operations
Revenue - external 117,007 29,147 45,044 29,557 - 220,755
- inter segment 4,746 1,009 - - (5,755) -
----------------------- --------- --------- --------- --------- ------------ ---------
Total segment revenue 121,753 30,156 45,044 29,557 (5,755) 220,755
----------------------- --------- --------- --------- --------- ------------ ---------
Segment result before
exceptional items 4,089 1,712 3,248 3,613 - 12,662
Exceptional items (3,068) - - - - (3,068)
----------------------- --------- --------- --------- --------- ------------ ---------
Segment result 1,021 1,712 3,248 3,613 - 9,594
----------------------- --------- --------- --------- --------- ------------ ---------
Central administration
costs (1,939)
Central administration
exceptional items (850)
Net finance expenses (3,635)
Income tax (1,753)
----------------------- --------- --------- --------- --------- ------------ ---------
Profit from continuing
operations year ended
31 March 2012 1,417
----------------------- --------- --------- --------- --------- ------------ ---------
Balances at 31 March
2012
Continuing operations
----------------------- --------- --------- --------- --------- ------------ ---------
Segment assets 97,100 16,885 6,224 11,317 4,301 135,827
----------------------- --------- --------- --------- --------- ------------ ---------
Segment liabilities (40,562) (13,950) (25,029) (3,222) (516) (83,279)
----------------------- --------- --------- --------- --------- ------------ ---------
Capital expenditure
- property, plant and
equipment 1,185 2,437 331 62 - 4,015
- intangible 263 30 87 19 - 399
Depreciation 2,135 742 696 180 - 3,753
Amortisation 368 57 24 85 - 534
----------------------- --------- --------- --------- --------- ------------ ---------
(a) Capital expenditure consists of additions of property, plant
and equipment, intangible assets and goodwill.
(b) No single customer accounts for over 10% of total sales.
(c) The assets and liabilities that have not been allocated to
segments consist of deferred tax assets GBP4,250,000 (2012:
GBP4,640,000) and income tax payable of GBP904,000 (2012:
GBP855,000). In addition, the assets and liabilities have been
grossed up for VAT of GBP475,000 (2012: GBP399,000) to reflect the
net position of the Group.
(d) No operating segment has been aggregated in determining
reportable segments.
(e) Central recharges are included within the result of the
segment that takes the recharge. The balance of the central costs
are not allocated to segments.
Geographical information
The Group's information about its segmental assets (non current
assets excluding deferred tax assets and other financial assets)
and turnover by customer destination and product are detailed
below:
Non
current assets
-----------------
2013 2012
GBP000 GBP000
-------------------------- -------- -------
UK and Asia 39,276 40,889
USA 6,492 6,589
Europe 14,483 15,008
Australia and New Zealand 2,537 1,963
-------------------------- -------- -------
62,788 64,449
-------------------------- -------- -------
Turnover by customer destination
Turnover
----------------
2013 2012 2013 2012
GBP000 GBP000 % %
-------------------------- ------- ------- ---- ----
UK 87,050 84,648 39 39
USA 58,976 58,389 27 26
Europe 39,362 39,797 17 18
Australia and New Zealand 27,843 29,557 12 13
Rest of the world 11,980 8,364 5 4
-------------------------- ------- ------- ---- ----
225,211 220,755 100 100
-------------------------- ------- ------- ---- ----
Turnover by product
2013 2012 2013 2012
GBP000 GBP000 % %
----------------------------- -------- -------- ---- ----
Gift packaging and greetings 154,947 148,531 69 67
Stationery and creative play
products 70,264 72,224 31 33
----------------------------- -------- -------- ---- ----
Total 225,211 220,755 100 100
----------------------------- -------- -------- ---- ----
3 Other operating income
2013 2012
GBP000 GBP000
--------------------------------------------------- ------ ------
Grant income received 550 550
Sub lease rentals credited to the income statement 191 70
Other 62 58
--------------------------------------------------- ------ ------
803 678
--------------------------------------------------- ------ ------
4 Finance expenses
2013 2012
GBP000 GBP000
----------------------------------------------- ------ ------
Interest payable on bank loans and overdrafts 2,676 2,756
Other similar charges 719 699
Finance charges in respect of finance leases 57 3
Unwinding of fair value discounts 57 -
----------------------------------------------- ------ ------
Interest payable under the effective interest
method 3,509 3,458
Derivative financial instruments at fair value
through income statement (43) 177
----------------------------------------------- ------ ------
3,466 3,635
----------------------------------------------- ------ ------
5 Taxation
Recognised in the income statement
2013 2012
GBP000 GBP000
----------------------------------------------- ------ ------
Current tax expenses
Current year - UK corporation tax - -
Current year - foreign tax 516 991
Adjustments for prior years 482 798
----------------------------------------------- ------ ------
998 1,789
----------------------------------------------- ------ ------
Deferred tax expense
Original and reversal of temporary differences 887 (473)
Adjustments in respect of previous periods (284) 437
----------------------------------------------- ------ ------
603 (36)
----------------------------------------------- ------ ------
Total tax in income statement 1,601 1,753
----------------------------------------------- ------ ------
Reconciliation of effective tax rate
2013 2012
GBP000 GBP000
----------------------------------------------- ------- -------
Profit before tax 5,677 3,170
----------------------------------------------- ------- -------
Profit before tax multiplied by the standard
rate of corporation tax rate of 24% in the
UK (2012: 26%) 1,362 824
Effects of:
Expenses not deductible for tax purposes 38 27
Unrecognised tax losses 684 1,016
Benefit of unrecognised deferred tax on losses
and temporary differences (1,220) (1,826)
Deferred tax effect on tax rate changes 35 92
Differences between UK and overseas tax rates 396 349
Other items 108 36
Adjustments in respect of prior years 198 1,235
----------------------------------------------- ------- -------
Total tax in income statement 1,601 1,753
----------------------------------------------- ------- -------
6 Exceptional items
Cost of Selling Admin
sales expenses expenses Total
2013 continuing operations GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------- --------- -------- -------
Restructuring of operational activities
- bad debt (a) - 455 - 455
- China factory disruptions (b) 953 - - 953
- management restructuring (c) - - 195 195
---------------------------------------- ------- --------- -------- -------
Total restructuring costs 953 455 195 1,603
---------------------------------------- ------- --------- -------- -------
Income tax credit (289)
---------------------------------------- ------- --------- -------- -------
1,314
---------------------------------------- ------- --------- -------- -------
Cost of Selling Admin
sales expenses expenses Total
2012 continuing operations GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------- --------- -------- -------
Restructuring of operational activities
- redundancies (d) - - 1,201 1,201
- loss on disposal of leasehold
land and buildings in China (e) - - 283 283
- China factory move (f) - - 2,434 2,434
---------------------------------------- ------- --------- -------- -------
Total restructuring costs - - 3,918 3,918
---------------------------------------- ------- --------- -------- -------
Income tax credit (195)
---------------------------------------- ------- --------- -------- -------
3,723
---------------------------------------- ------- --------- -------- -------
(a) Bad debt arising from major customer entering
administration.
(b) Costs associated with disruption caused by a strike in the
China factory.
(c) Redundancy costs arising from restructuring of management at
a UK subsidiary.
(d) Redundancies relating to the termination costs of key
executives who left the business following a review of Board
responsibilities and as a result of business reorganisation in the
UK subsidiaries.
(e) Loss on disposal of leasehold land and buildings in China as
a result of the decision to relocate the China factory.
(f) Costs associated with moving the China factory.
7 Property, plant and equipment
Land and buildings
--------------------
Plant and Fixtures Motor
and
Freehold Leasehold equipment fittings vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- --------- --------- -------- -------- --------
Cost
Balance at 1 April
2011 22,315 6,971 45,895 2,023 853 78,057
Additions 141 723 2,832 194 125 4,015
Disposals - (721) (658) (947) (263) (2,589)
Effect of movements
in foreign exchange (483) 226 277 52 7 79
--------------------- --------- --------- --------- -------- -------- --------
Balance at 1 April
2012 21,973 7,199 48,346 1,322 722 79,562
Additions 47 220 1,288 257 72 1,884
Disposals (302) (66) (559) (437) (134) (1,498)
Transfers between
categories - - (103) 103 - -
Effect of movements
in foreign exchange 85 396 831 94 23 1,429
--------------------- --------- --------- --------- -------- -------- --------
Balance at 31
March 2013 21,803 7,749 49,803 1,339 683 81,377
--------------------- --------- --------- --------- -------- -------- --------
Depreciation and
impairment
Balance as at
1 April 2011 (8,123) (1,968) (35,010) (843) (595) (46,539)
Depreciation charge
for the year (930) (333) (1,848) (546) (96) (3,753)
Disposals - 528 653 859 207 2,247
Effect of movements
in foreign exchange 89 (51) (16) (16) 10 16
--------------------- --------- --------- --------- -------- -------- --------
Balance at 1 April
2012 (8,964) (1,824) (36,221) (546) (474) (48,029)
Depreciation charge
for the year (921) (415) (1,893) (499) (79) (3,807)
Disposals 149 66 546 435 133 1,329
Transfers between
categories - - 91 (91) - -
Effect of movements
in foreign exchange (34) (128) (617) (86) (12) (877)
--------------------- --------- --------- --------- -------- -------- --------
Balance at 31
March 2013 (9,770) (2,301) (38,094) (787) (432) (51,384)
--------------------- --------- --------- --------- -------- -------- --------
Net book value
At 31 March 2013 12,033 5,448 11,709 552 251 29,993
--------------------- --------- --------- --------- -------- -------- --------
At 31 March 2012 13,009 5,375 12,125 776 248 31,533
--------------------- --------- --------- --------- -------- -------- --------
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 GBP1,850,000 (2012: GBP160,000) in respect of assets held
under finance leases.
Security
All freehold properties are subject to a fixed charge.
8 Intangible assets
Computer Other
Goodwill software intangibles Total
GBP000 GBP000 GBP000 GBP000
------------------------------- -------- -------- ----------- --------
Cost
Balance at 1 April 2011 40,585 2,916 495 43,996
Additions - 399 - 399
Disposals - (356) - (356)
Effect of movements in foreign
exchange (290) 4 - (286)
------------------------------- -------- -------- ----------- --------
Balance at 1 April 2012 40,295 2,963 495 43,753
Additions - 242 - 242
Disposals - (48) - (48)
Effect of movements in foreign
exchange 405 68 3 476
------------------------------- -------- -------- ----------- --------
Balance at 31 March 2013 40,700 3,225 498 44,423
------------------------------- -------- -------- ----------- --------
Amortisation and impairment
Balance at 1 April 2011 (8,822) (1,596) (193) (10,611)
Amortisation for the year - (486) (48) (534)
Disposals - 352 - 352
Effect of movements in foreign
exchange (39) (5) - (44)
------------------------------- -------- -------- ----------- --------
Balance at 1 April 2012 (8,861) (1,735) (241) (10,837)
Amortisation for the year - (447) (47) (494)
Disposals - 48 - 48
Effect of movements in foreign
exchange (296) (48) (1) (345)
------------------------------- -------- -------- ----------- --------
Balance at 31 March 2013 (9,157) (2,182) (289) (11,628)
------------------------------- -------- -------- ----------- --------
Net book value
At 31 March 2013 31,543 1,043 209 32,795
------------------------------- -------- -------- ----------- --------
At 31 March 2012 31,434 1,228 254 32,916
------------------------------- -------- -------- ----------- --------
The aggregate carrying amounts of goodwill allocated to each
geographical segment are as follows:
2013 2012
GBP000 GBP000
------------ ------ ------
UK and Asia 25,600 25,600
Europe 4,541 4,505
USA - -
Australia 1,402 1,329
------------ ------ ------
Total 31,543 31,434
------------ ------ ------
Impairment
The Group tests goodwill each half year 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. During the last few years 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 cashgenerating
unit derived from the most recent financial budgets for the
following three years which are approved by the Board. The key
assumptions in those budgets are sales, margins achievable and
overhead costs. The Group then extrapolates cash flows for the
following seven years based on a conservative estimate of market
growth of 2% (2012: 2%).
The cash generating units used the following pretax discount
rate which are derived from an estimate of the Group's future
average weighted cost of capital adjusted to reflect the market
assessment of the risks specific to the current estimated cash
flows over the same period.
Pre--tax discount rates used were:
2013 2012
GBP000 GBP000
---------- ------ ------
UK and
Asia 12.7% 13.2%
Europe 15.3% 15.4%
USA 16.7% 16.7%
Australia 14.3% 14.3%
---------- ------ ------
All of the cash--generating units' values in use were determined
to be higher than fair value less costs to sell, thus this was used
as the recoverable amount. In all businesses the carrying value of
the goodwill was supported by the recoverable amount and there are
currently no reasonably foreseeable changes to assumptions that
would give rise to an impairment of the carrying value.
The Directors do not believe a reasonably possible change to the
assumptions would give rise to an impairment. The Directors have
considered a 3% movement in the discount rate and a flat budget
growth rate assumption in their assessment.
9 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Assets Liabilities Net
-------------- ---------------- ---------------
2013 2012 2013 2012 2013 2012
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------ ------ ------- ------- ------ -------
Property, plant
and equipment 1,204 409 (884) (1,875) 320 (1,466)
Capital gains
deferred - - (472) (494) (472) (494)
Tax loss carried
forward 3,278 3,817 (1) - 3,277 3,817
Other timing differences 1,125 2,783 - - 1,125 2,783
----------------------------- ------ ------ ------- ------- ------ -------
Net tax assets/(liabilities) 5,607 7,009 (1,357) (2,369) 4,250 4,640
----------------------------- ------ ------ ------- ------- ------ -------
The deferred tax asset in respect of tax losses carried forward
at 31 March 2013 of GBP2,819,000 (2012: GBP3,817,000) is comprised
of UK tax losses of GBP29,000 (2012: GBP1,943,000) and US losses of
GBP2,790,000 (2012: GBP1,874,000). US tax losses carried forward
will become irrecoverable in March 2027. UK tax losses may be
carried forward indefinitely. The deferred tax assets have been
recognised where the Board considers there is sufficient evidence
that taxable profits will be available against which the tax losses
can be utilised. The Board expects that the tax losses will be
recoverable against future profits but given the level of tax
losses brought forward, recoverability has been assessed on the
basis of expected profits currently forecast. Deferred tax assets
in respect of taxable losses that are expected to be recovered
outside this forecast period have not been recognised. This
includes unrecognised deferred tax assets in respect of brought
forward UK losses of GBP858,000 (2012: GBP444,000) and GBP2,153,000
(2012: GBP4,421,000) in respect of brought forward US tax
losses.
No deferred tax is recognised on unremitted earnings of overseas
subsidiaries. Overseas reserves can now be repatriated to the UK
with no tax cost. If all overseas earnings were repatriated with
immediate effect, no tax charge (2012: GBPnil) would be
payable.
At the balance sheet date the UK government enacted a 2%
reduction in the main rate of UK corporation tax from 26% to 24%
effective from 1 April 2012. The rate is 23% from 1 April 2013 and
the government has also proposed reducing the UK corporation tax
rate by a further 3% per annum to 20% by 1 April 2015. However,
these further rate changes had not been substantively enacted at
the balance sheet date and their effects are not, therefore,
included in these financial statements. The enactment of these
changes would reduce the deferred tax balance of the Group by
GBP0.1 million.
There are no deferred tax balances with respect to cash flow
hedges.
Movement in deferred tax during the year
1 April Recognised Recognised 31 March
2012 in income in equity 2013
GBP000 GBP000 GBP000 GBP000
------------------------------ ------- ---------- ---------- --------
Property, plant and equipment (1,466) 1,778 8 320
Capital gains deferred (494) 22 - (472)
Tax loss carried forward 3,817 (671) 131 3,277
Other timing differences 2,783 (1,732) 74 1,125
------------------------------ ------- ---------- ---------- --------
Net tax assets 4,640 (603) 213 4,250
------------------------------ ------- ---------- ---------- --------
Movement in deferred tax during the prior year
1 April Recognised Recognised 31 March
2011 in income in equity 2012
GBP000 GBP000 GBP000 GBP000
------------------------------ ------- ---------- ---------- --------
Property, plant and equipment (564) (925) 23 (1,466)
Capital gains deferred (563) 69 - (494)
Tax loss carried forward 2,406 1,436 (25) 3,817
Other timing differences 3,337 (544) (10) 2,783
------------------------------ ------- ---------- ---------- --------
Net tax assets 4,616 36 (12) 4,640
------------------------------ ------- ---------- ---------- --------
10 Cash and cash equivalents/bank overdrafts
2013 2012
GBP000 GBP000
---------------------------------------- ------ -------
Cash and cash equivalents 2,301 3,168
Bank overdrafts (336) (1,945)
---------------------------------------- ------ -------
Cash and cash equivalents per cash flow
statement 1,965 1,223
---------------------------------------- ------ -------
Net debt
2013 2012
Note GBP000 GBP000
---------------------------------- ---- -------- --------
Cash and cash equivalents 2,301 3,168
Bank loans and overdrafts 11 (43,215) (45,266)
Loan arrangement fees 553 370
Finance leases (1,777) (126)
---------------------------------- ---- -------- --------
Net debt as used in the Financial
Review (42,138) (41,854)
---------------------------------- ---- -------- --------
The bank overdrafts are secured by a fixed charge on certain of
the Group's land and buildings, a fixed charge on certain of the
Group's book debts and a floating charge on certain of the Group's
other assets.
11 Loans and borrowings
This note provides information about the contractual terms of
the Group's interest bearing loans and borrowings.
2013 2012
GBP000 GBP000
------------------------------------------- ------ ------
Non current liabilities
Secured bank loans (see below) 29,775 33,880
Loan arrangement fees (296) (258)
------------------------------------------- ------ ------
29,479 33,622
------------------------------------------- ------ ------
Current liabilities
Asset backed loan 7,683 5,467
Revolving credit facilities 658 -
Current portion of secured bank loans (see
below) 4,763 3,974
------------------------------------------- ------ ------
Bank loans and borrowings (see below) 13,104 9,441
Loan arrangement fees (257) (112)
------------------------------------------- ------ ------
12,847 9,329
------------------------------------------- ------ ------
The asset backed loans are secured on the inventory and
receivables of the larger business units within the UK, USA and
European business segments.
The revolving credit facilities are secured on the assets of the
Group, in the same way as the bank overdraft above. The interest
rate is 3.2% over LIBOR. The facilities are drawn for periods from
one day up to six months.
Following the negotiations of new banking facilities in July
2011, the Group accrued arrangement fees which are being spread
over the life of the facility.
Terms and debt repayment schedule
2013 2012
Repayment analysis of bank loans and Note GBP000 GBP000
overdrafts
-------------------------------------- ---- ------ ------
Due within one year:
Bank loans and borrowings (see below) 13,104 9,441
Bank overdrafts 10 336 1,945
Due between one and two years:
Secured bank loans (see below) 4,725 4,666
Due between two and five years:
Secured bank loans (see below) 20,984 24,807
Due after more than five years:
Secured bank loans (see below) 4,066 4,407
-------------------------------------- ---- ------ ------
43,215 45,266
-------------------------------------- ---- ------ ------
Secured bank loans
Loan 1
The principal of GBP487,000 (2012: GBP588,000) is repayable
monthly on a reducing balance basis over a 15 year period, ending
in March 2016. The loan is secured over the freehold land and
buildings and the contents therein of International Greetings USA,
Inc. and is subject to a variable rate of interest linked to the US
Federal Funds Rate (US FFR). The currency of denomination of the
loan is US dollars.
Loan 2
The principal of GBP470,000 (2012: GBP582,000) is repayable
monthly on a reducing balance basis over a nine year period ending
in March 2016. The loan is secured over the freehold land and
buildings and the content therein of International Greetings USA,
Inc. and is subject to a variable rate of interest linked to the US
FFR. The currency of denomination of the loan is US dollars.
Loan 3
The principal of GBP5,956,000 (2012: GBP6,281,000) is repayable
quarterly over a 20 year period ending in July 2028. The loan is
secured over the freehold land and buildings and the content
therein of Hoomark B.V. and is subject to a variable rate of
interest linked to EURIBOR, that has been swapped to a fixed rate
for a notional amount of GBP5,882,000 (2012: GBP5,833,000) over a
period of three years ending in January 2017. The currency of
denomination of the loan is euros.
Loan 4
The principal of GBP218,000 (2012: GBP510,000) is repayable
monthly over a five year period ending November 2013. The loan is
secured over the plant and machinery of International Greetings UK
Ltd and is subject to a variable rate interest linked to the UK
base rate. The currency of denomination of the loan is
sterling.
Loan 5
The principal of GBP15,208,000 (2012: GBP14,904,000) is
repayable over a five year period with a bullet repayment in May
2016. GBP9,100,000 is denominated in sterling and GBP6,108,000 is
denominated in US dollars. They are subject to a variable interest
rate linked to LIBOR except for the element that has been swapped.
At 31 March 2013 the Group had an interest rate cap on a notional
amount of GBP8 million, and a notional amount of $8 million,
whereby interest payable has been capped at 1.5% on both notional
amounts. The terms of the hedge have been negotiated to match the
terms of the commitments.
Loan 6
The principal of GBP12,199,000 (2012: GBP14,988,000) is
repayable and amortised over a four year period to May 2015.
GBP7,000,000 is denominated in sterling and GBP5,199,000 is
denominated in US dollars. They are subject to a variable interest
rate linked to LIBOR except for the elements that have been
swapped. At 31 March 2013, the Group had an interest rate swap in
place with a notional amount of GBP5.1 million whereby it receives
a floating rate of interest based on LIBOR and pays a fixed rate of
interest at 0.92% on the notional amount. The terms of the hedge
have been negotiated to match the terms of the commitments.
At 31 March 2013, the Group had an interest rate swap in place
with a notional amount of $7.9 million whereby it receives a
floating rate of interest based on LIBOR and pays a fixed rate of
interest at 0.77% on the notional amount. The terms of the hedge
have been negotiated to match the terms of commitment.
12 Earnings per share
2013 2012
--------------- ---------------
Diluted Basic Diluted Basic
----------------------------------- ------- ------ ------- ------
Adjusted earnings per share
excluding exceptional items
and discontinued operations 7.8p 8.1p 6.7p 7.2p
Loss per share on exceptional
items (2.0p) (2.1p) (6.4p) (6.9p)
----------------------------------- ------- ------ ------- ------
Earnings per share from continuing
operations 5.8p 6.0p 0.3p 0.3p
----------------------------------- ------- ------ ------- ------
Earnings per share 5.8p 6.0p 0.3p 0.3p
----------------------------------- ------- ------ ------- ------
The basic earnings per share is based on the profit attributable
to equity holders of the Company of GBP3,401,000 (2012: GBP177,000)
and the weighted average number of ordinary shares in issue of
56,245,000 (2012: 54,206,000) calculated as follows:
Weighted average number of shares in thousands 2013 2012
of shares
----------------------------------------------- ------ ------
Issued ordinary shares at 1 April 55,007 53,967
Shares issued in respect of exercising of
share options 1,238 239
----------------------------------------------- ------ ------
Weighted average number of shares at 31 March 56,245 54,206
----------------------------------------------- ------ ------
Adjusted basic earnings per share excludes exceptional items
charged of GBP1,376,000 (2012: GBP3,918,000) and the tax relief
attributable to those items of GBP221,000 (2012: GBP195,000), to
give adjusted profit of GBP4,556,000 (2012: GBP3,900,000).
Diluted earnings per share
The average number of share options outstanding in the year is
3,664,232 (2012: 5,787,000), at an average exercise price of 19.6p
(2012: 16.9p). The diluted earnings per share is calculated
assuming all these options were exercised. At 31 March the diluted
number of shares was 58,794,617 (2012: 58,486,612).
13 Preliminary information
The financial information in the preliminary statement of
results does not constitute the group's statutory accounts for the
year ended 31 March 2013, but is derived from those accounts and
the accompanying Directors' report. Statutory accounts for the year
ended 31 March 2013 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified and did
not contain statements under Section 498 (2) or Section 498 (3) of
the Companies Act 2006. The financial statements, and this
preliminary statement, of the Group for the year ended 31 March
2013 were authorised for issue by the Board of Directors on 26 June
2013 and the balance sheet was signed on behalf of the Board by A
Lawrinson.
The statutory accounts have been delivered to the Registrar of
Companies in respect of the year ended 31 March 2012. The report of
the auditors was unqualified and did not contain statements under
Section 237 (2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUCWMUPWGQP
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