International Greetings PLC Preliminary Results (1523L)

TIDMIGR

RNS Number : 1523L

International Greetings PLC

02 July 2014

2 July, 2014

International Greetings PLC

Preliminary Results for the year ended 31 March 2014

International Greetings PLC ('International Greetings' or 'the Group'), one of the world's leading designers, innovators and manufacturers of gift packaging and greetings, social expression giftware, stationery and creative play products, announces its audited Preliminary Results for the year ended 31 March 2014.

Financial Highlights:

 
 
     *    Revenue at GBP224.5 million after rationalisation of 
          some non-core activities in the UK 
 
     *    Profit before tax, exceptional items and LTIP charges 
          up 4% to GBP7.6 million (2013: GBP7.3 million) 
 
     *    Gross margin slightly up on prior year at 18.4% 
          (2013: 18.3%) 
 
     *    Fully diluted earnings per share before exceptional 
          items increased 6.4% to 8.3 pence (2013: 7.8 pence) 
 
     *    Cash generated from operations before exceptional 
          items up 101% at GBP15.2 million (2013: GBP7.5 
          million) 
 
     *    Net debt down 12.3% to GBP36.9 million (2013: GBP42.1 
          million) and leverage down 0.4 times to 2.4 times 
          despite major capital investment programme of GBP8.3 
          million (2013: GBP1.9 million)

Operational Highlights:

 
 
     *    Profits in Continental Europe up over 100% reflecting 
          progress achieved since upgrade of gift wrap 
          production facilities in Holland in 2012 
 
     *    Major capital upgrade of our gift wrap manufacturing 
          facilities in Wales remain on time and on budget 
 
     *    Growth achieved with internet based retailers, 
          including the introduction of new products through 
          Ocado and Amazon 
 
     *    Excellent year of production and service levels from 
          relocated factory in China 
 *    Withdrawal from non-core generic book activity in UK 
 
 
     *    Royal Warrant granted to the Tom Smith brand of gift 
          wrapping products

Post period end event:

 
 
     *    Acquisition of trade and certain assets of Enper Gift 
          Wrap BV for EUR1.9 million, in June, 2014, providing 
          further commercial and operational opportunities in 
          European markets

Paul Fineman, CEO commented:

"We are pleased to report a strong year in which all our operating regions traded profitably and delivered excellent cash generation. This was achieved whilst continuing to invest in the Group's infrastructure, to enable us to deliver enhanced future performance. In particular, the transformation of our UK based gift wrap manufacturing operation in Wales marked the completion of the second phase of upgrading our global gift wrap production facilities. This strategic initiative began in Holland in 2012 and has underpinned our strong progress in Continental Europe.

"Our recent acquisition of the trade and certain assets of Enper Gift Wrap, demonstrates our determination to identify new opportunities for profitable incremental growth. As we enter the second year of our new three year plan, we are on plan to deliver double digit cumulative average growth in earnings per share and are ahead of schedule to meet our commitment to reduce debt and leverage below two times debt/EBITDA. We look forward to the future with confidence."

 
 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 
 FTI Consulting                        Tel: 020 7831 3113 
  Jonathon Brill 
  Georgina Goodhew

Chief Executive Officer's review

Key achievements

   --      Focus on cash generation improves leverage by 14% from 2.8 to 2.4 times

-- Net debt improved by GBP5.2 million (12.3%) to GBP36.9 million despite record capital investment (GBP8.3 million) in manufacturing efficiency

   --      On track to meet our three year plan of overall double digit EPS growth 
   --      Profits in Continental Europe up over 100% 
   --      Major capital expenditure project in UK on time and on budget 
   --      Excellent year of production and service levels from recently relocated China factory

-- Announced acquisition of trade and certain assets of Enper Giftwrap BV for EUR1.9 million on 5 June 2014

I am able to report a year in which all regions traded profitably and our objectives, both to meet short term targets and also to create the foundation for incremental profits growth for the future, were met.

Our team was focused on balancing the delivery of cash generative sales and profits, reducing leverage and doing so whilst investing in fast payback opportunities across our global manufacturing activities. This has required the careful management of working capital whilst simultaneously delivering continued excellent standards of customer service.

We are therefore delighted that a year in which sales were GBP224.5 million and profit before tax, exceptional items and LTIP charges was GBP7.6 million, net debt reduced by 12% (from GBP42.1 million in 2013 to GBP36.9 million in 2014) whilst leverage has reduced from 2.8 times in 2013 to 2.4 times in 2014. This is a particularly satisfactory result when capital expenditure increased by GBP6.4 million to GBP8.3 million in 2014 from GBP1.9 million in 2013. We now look forward to reaping the significant future benefits of this through manufacturing efficiencies and product quality.

In 2012, we commenced the first phase of an upgrade to our global manufacturing facilities with an environmentally friendly, high speed, high definition giftwrap printing capability at our operation in Holland. 2014 has seen the installation of a similar capability within our facility in Wales. This major project has been completed on time and on budget.

We were privileged and absolutely delighted that Her Majesty the Queen together with His Royal Highness Prince Phillip officially opened our new Welsh facilities on 30 April 2014 - an event that captured the transformation of our business, our confidence in the future and the enthusiasm and energy of our team.

Geographical highlights

UK and ASIA

The UK and Asia business accounted for 49% (2013 53%) of the Group's revenue for the year, with the cohesive efforts of our manufacturing, sourcing, operational and commercial teams once again delivering industry leading customer service. We were pleased to receive the Sainsbury's Gold Standard Award acknowledging this exemplary supplier performance.

The ever closer collaboration between our UK and Far East based operations ensures a joined up commercial and strategic approach to the market. Our competitive advantage in the UK was further enhanced by focussed investments at our existing facilities in China this included semi automated processes for cracker manufacturing together with enhanced production capability in gift bags.

Both investments were operational from Spring 2014. This provides our customers with the ability to source a broad portfolio of complementary product categories from one fully compliant and competitive source.

Towards the end of the year, reflecting our strategy to focus on product categories with scope for profitable growth, we withdrew from a small noncore product category in generic books under the Alligator brand. We will continue to grow the larger licensed product segment, consolidating under our Copywrite brand in the UK.

Our broadening customer base showed growth achieved with Internet based retailers, including the introduction of new products through Ocado and Amazon.

Mainland Europe

Our mainland European businesses accounted for 15% (2013: 13%) of the Group's sales.

Although overall market conditions have not improved we are delighted to report an outstanding outcome with strong efficiencies and record volumes.

A first full year of utilising our new state-of-the-art printing facilities based in Holland, together with the creation across all categories of innovative highly customer focused product offerings, resulted in increased market share and the creation of even greater future opportunities.

In June 2014, we were delighted to announce the acquisition of the trade and certain assets of Enper Giftwrap, strengthening our market share in the Benelux and a further demonstration of our commitment to delivering a key strategic objective to be the best and most successful supplier of gift packaging products in the European Union.

Having now established relationships with mainland Europe's ten largest retail Groups who trade in our product categories, scope now exists for our future expansion in existing and new markets, both with core and developing product categories.

USA

The US business accounted for 24% (2013: 22%) of the Group's revenue. Strong sales growth continued, building on recent years of double digit progress with 31% of Group revenues by destination in 2014 (2013: 27%). However the final quarter proved to be very challenging with extreme weather conditions impacting results in what was otherwise on track to be a record trading year. Sales developed well during the year, including to neighbouring markets in Canada, Mexico and to other South American regions, but higher margin sales in the US of Everyday product categories were largely rescheduled and therefore below expectations during the final three months of the trading year.

Nevertheless positive progress was made on several fronts during the year. We completed negotiation of banking facilities with Sun Trust on improved terms, building on improvements achieved with HSBC in April 2013.

To further enhance production efficiencies, we installed new automated case packing equipment in our Savannah operation, which was fully operational from Spring 2014.

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