TIDMIGR
RNS Number : 5495I
IG Design Group PLC
27 November 2018
EMBARGOED UNTIL 7.00 AM, 27 NOVEMBER 2018
IG Design Group plc
(the "Company", the "Group" or "Design Group")
Results for the six months ended 30 September 2018
Organic growth and acquisition of Impact Innovations delivers
76% underlying profits growth and full year upgrade
IG Design Group plc, one of the world's leading designers,
innovators and manufacturers of celebrations, gifting, stationery
and creative play products, is pleased to announce its results for
the six months ended 30 September 2018.
Financial Highlights
-- Reported revenue up 23% to GBP205.2 million (H1 2018: GBP166.5 million)
- driven by organic growth(a) of 4% and the acquisition of
Impact Innovations Inc. ("Impact")
-- Underlying operating profit(b) increased 71% to GBP19.0 million (H1 2018: GBP11.1 million)
- reflecting 35% organic growth(a) and the peak trading period of Impact
-- Underlying operating margin increased to 9.3% (H1 2018: 6.7%)
-- Underlying profit before tax(b) up 76% to GBP18.5 million (H1 2018: GBP10.5 million)
-- Profit before tax up 48% to GBP14.0 million (H1 2018: GBP9.5 million)
-- Underlying fully diluted earnings per share(b) up 79% at 19.5p (H1 2018: 10.9p)
-- Net debt at the half year in line with expectations at
GBP100.0 million (H1 2018: GBP70.2 million), reflecting the
acquisition of Impact and seasonal working capital requirements.
Adjusting for acquisitions and foreign exchange movements half year
debt was at GBP75.3 million
-- Average leverage(c) during the 12 month period to 30
September 2018 was 1.3 times (12 months to 30 September 2017: 1.9
times)
-- Interim dividend per share increased by 25% to 2.5p (H1 2018: 2.0p)
Strategic and Operational Highlights
-- Sales and profits growth delivered across all regions with
particularly strong overall performances in Europe, the USA and
Australia
-- The acquisition of Impact, a leading supplier of gift
packaging and seasonal décor products in the US, completed on 31
August 2018, supported by the successful completion of the GBP50
million equity placing;
- integration of Impact and Design Group Americas progressing
well, with synergies expected to be delivered on time or
sooner;
- consolidation of the manufacturing operations underway with
production moving to Memphis, and conditional sale of Design Group
America's facilities in Midway, Georgia;
- commitment to investing in our printing capabilities in
Memphis in line with management's plan;
-- The Group's growth strategy has continued to be well executed:
- the new state-of-the art printing press in the Netherlands is
now fully operational and supporting record levels of production
volume and improved efficiencies;
- the full integration of Biscay in Australia delivering targeted synergies;
- an on time go-live of phase one of the new enterprise IT system in the USA; and
- the new initiative of 'not-for-resale' paper bags in the UK
resulting in increased volumes with a strong pipeline of new
customers.
Outlook
-- Organic growth and stronger performance from Impact
anticipated to deliver earnings ahead of market expectations.
Paul Fineman, CEO, commented:
"Our overall performance during the first half of the year has
been particularly pleasing. Alongside the completion of a milestone
acquisition in the USA, we have seen robust organic growth
particularly in higher margin product categories and an excellent
return on investment coming through from the many efficiency
initiatives undertaken.
The acquisition of Impact was a landmark moment for the Company
and, since completion, our teams have been effective in
implementing the integration and leveraging the increased scale we
now have as the world's largest consumer gift packaging business.
The potential synergies identified at the time of the acquisition
are expected to be delivered in line with or ahead of schedule.
With strong forward visibility and confidence in full year
prospects across profits growth and cash generation, we are pleased
to report that the interim dividend per share will be increased by
25% to 2.5p.
We go into the second half with a record order book and
meaningful operational and commercial initiatives in full swing
throughout the Group. As a result we are pleased to announce the
Group's full year forecasted earnings are anticipated to be ahead
of market expectations. The Board is confident that our
stakeholders should expect more of the same going forward, as these
results are a product of the ongoing investment made in the Group.
We have great confidence that we remain very well placed for future
growth both organically and through well considered M&A
opportunities."
(a) organic growth calculated on like for like exchange
rates
(b) stated before exceptional items and LTIP charges. A
reconciliation to reported (IFRS) results is included in the
Executive review
(c) calculated as the twelve month average net debt divided by
the last twelve months EBITDA before exceptional items and LTIP
charges as at the half year to 30 September 2018
For further information:
IG Design Group plc 01525 887310
Paul Fineman, CEO
Giles Willits, CFO
Cenkos Securities plc 020 7397 8900
Stephen Keys, Corporate Finance
Alma PR
Rebecca Sanders-Hewett 020 3405 0209
Susie Hudson
Sam Modlin
Notes to Editors
IG Design Group plc (LON: IGR), the largest consumer gift
packaging business in the world, is a designer, innovator and
manufacturer of products that help people celebrate life's special
occasions. Design Group works with more than 10,000 customers in
over 80 countries throughout the UK, Europe, Australia, Asia and
the Americas. Its products are found in over 200,000 retail
outlets, including several of the world's biggest retailers, for
example Walmart, Tesco, Amazon, Carrefour, Lidl and Aldi. Its
brand, Tom Smith, also holds the Royal Warrant for the supply of
Christmas crackers and Christmas wrapping paper to the Royal
family.
Design Group is a diverse business operating across multiple
regions, categories, seasons and brands. Its four core categories
are: Celebrations, Stationery and Creative Play, Gifting, and
Not-for-resale paper bags. It offers customers a full end-to-end
service from design through to distribution, offering both branded
and bespoke products from the value-focused through to the
higher-margin ends of the market. The recently completed
acquisition of Impact Innovations Inc. has significantly increased
the scale of the Group and added to the Celebrations category with
seasonal home décor product range providing a further opportunity
for growth.
The Company was admitted to the Alternative Investment Market of
the London Stock Exchange in 1995 under the name 'International
Greetings plc' and rebranded to IG Design Group plc in 2016. For
further information please visit www.thedesigngroup.com
EXECUTIVE REVIEW
Overview
The Group has delivered excellent results for the first half of
the year, with continued sales and profit growth across all regions
driving a significant increase in earnings per share. We are
particularly delighted with the performance of the Group's recent
acquisition, Impact Innovations Inc. ("Impact"), and the
contribution it has already made to the Group. The integration of
Impact with our existing US business is well underway and we are on
track to deliver the expected synergies on time or sooner.
During the first six months of the year, revenue increased by
23% to GBP205.2 million with underlying profit before tax
increasing by 76% to GBP18.5 million (H1 2018: GBP10.5 million).
The most significant factor driving the year-on-year profit
improvement was the increase in the Group's underlying operating
margin to 9.3% (H1 2018: 6.7%). This was driven in part by the
timing of the Impact acquisition during its peak trading period and
the strength of the Group's business model, including the broad and
diverse nature of our customer base, product categories and brands
supported by our focus on efficiency, product mix and innovation.
Excluding the effect of foreign exchange and Impact since
acquisition, Group sales increased by 4% and underlying profit
before tax increased by 38%. The business remains focused on the
ongoing improvement in annual operating margins.
Average leverage(a) improved to 1.3 times for the twelve month
period to 30 September 2018 from 1.9 times for the comparative
period in 2017. Net debt increased in the first half of the year in
line with expectations to GBP100.0 million (H1 2018: GBP70.2
million) primarily reflecting the acquisitions of Impact and Biscay
and the anticipated seasonal cash outflow in the business. The
seasonal cash outflow reflects the timing of the half year which
coincides with the Group's peak working capital requirement. This
increase in inventory and accounts receivable is in line with the
Group's annual working capital cycle and will convert to cash in
the second half.
Underlying fully diluted earnings per share were up by 79% to
19.5p (H1 2018: 10.9p). Fully diluted earnings per share were up by
41% to 14.0p (H1 2018: 9.9p).
A final dividend of 4.0p was paid in September 2018 in respect
of the year ended 31 March 2018, making a total dividend of 6.0p
for 2017/18 with dividend cover at 3.6 times compared to 4.0 times
in the prior year. The Board is pleased to declare an interim
dividend of 2.5p in respect of the half year ended 30 September
2018 (H1 2018: 2.0p).
(a) Calculated as the twelve month average net debt divided by
the last twelve months EBITDA before exceptional items and LTIP
charges.
Our strategy
Our business has been built through developing our core
capabilities, including design and innovation, having a broad
product offering, maintaining geographic and channel diversity in
key markets, leveraging our global scale and focusing on developing
value and award-winning services for our customers.
Our future growth focuses on taking advantage of key market and
industry trends, which include the opportunities from technological
developments in our product categories, retailer consolidation,
consumer focus on design and innovation and the potential from
industry consolidation.
Together our core strengths and the market dynamics offer the
Group significant opportunities to grow the business - as such our
strategy focuses on the following:
-- Working with the winners:
- increasing revenue through organic growth with both existing
and new customers, suppliers and product areas benefiting from the
shifting retail marketplace.
-- Design and innovation:
- developing new opportunities in new channels and adjacent product categories; and
- expanding our presence in the growing market for celebration events throughout the year.
-- Efficiency and scale:
- driving margins through investment in process and people; and
- pursuing accretive M&A opportunities focused on unlocking
synergies through economies of scale and strengthening our
'one-stop-shop' position with customers.
Our strategy focuses on delivering the following key commitments
to shareholders:
-- sustained double-digit growth in earnings attributable to shareholders;
-- maintaining average leverage between 1.0 and 2.0 times; and
-- a progressive dividend policy and our commitment of moving
dividend cover over time towards at least 2.5 times earnings per
share.
During the first half of this year, the Group continued to
deliver on its strategy, specifically growing revenue organically
across the UK, Europe and Australia alongside the successful
acquisitions of Biscay and Impact, both made over the last twelve
months and delivering strongly so far.
Investment in our new state-of-the-art printing press in the
Netherlands, which was installed in March 2018, is already
supporting record levels of production volumes and increased
efficiencies. Innovation in product design, and the introduction of
new licenses continues across the Group, highlighted by the recent
launch of the new Ferrero Rocher cracker range and augmented
reality creative play products.
Outlook
The order book for the Group is ahead of last year and in line
with management expectations. As such, the business has excellent
visibility in relation to the balance of the year's revenues. Our
focus during the remaining peak period is on operational execution
while developing further opportunities for the balance of the year
and beyond.
The Group expects all regions to achieve year-on-year growth in
revenue and profits. Underpinned by organic growth and stronger
performance from Impact, the Board is pleased to announce the
Group's full year forecasted earnings are anticipated to be ahead
of market expectations and will show significant growth over the
prior year. We anticipate that the Group will deliver another year
of strong cash conversion, with average leverage expected to be no
more than 1.3 times underlying EBITDA at the year end.
Operational regional summary
Looking across the regions, we are pleased to report growth in
both revenue and margin for each region. Overall, the Group saw a
significant improvement in the operating margin across all
territories, which increased to 9.3% of revenue compared to 6.7% in
the prior year period.
Segmental sales Profit(a) Margin
% Group H1 2019 H1 2018
revenue H1 2019 H1 2018 % growth H1 2019 H1 2018 % growth % %
---------------------- ---- -------- ------- -------- -------- ------- -------- ------- -------
30% UK and Asia GBPm 60.6 59.3 2.3 4.9 4.7 5.7 8.1 7.9
49% Americas $m 131.6 91.3 44.1 13.5 7.5 80.0 10.3 8.2
Organic $m 88.9 91.3 (2.6) 7.5 7.5 (0.6) 8.4 8.2
Impact $m 42.7 - - 6.1 - - 14.2 -
13% Europe EURm 30.7 24.5 25.4 3.8 2.2 75.9 12.3 8.8
10% Australia AU$m 36.7 30.9 18.8 3.8 2.0 85.1 10.3 6.6
Elims/central
(2%) costs GBPm (3.8) (2.5) - (2.0) (2.3) - - -
------- ------------- ---- -------- ------- -------- -------- ------- -------- ------- -------
100% Total GBPm 205.2 166.5 23.2 19.0 11.1 70.9 9.3 6.7
------- ------------- ---- -------- ------- -------- -------- ------- -------- ------- -------
(a) Segmental profit is calculated as operating profit before
exceptional items, LTIP charges and management recharge.
UK and Asia
Our UK and Asia business continued to drive up sales volumes and
accounted for 30% (H1 2018: 36%) of Group revenue for the half
year. Sales in the UK and Asia increased 2.3% to GBP60.6 million
(H1 2018: GBP59.3 million) delivering a profit up 5.7% at GBP4.9
million (H1 2018: GBP4.7 million), a particularly pleasing
performance given the volatility of the UK retail market over the
period. Margin increases in the region have started to flow through
following the unification of the previously separately managed
businesses, as expected.
The 'not-for-resale' bags initiative has performed strongly,
with brands such as Superdry and Joules using our facilities for
production, leading the business to invest in a second bag line to
go live in calendar quarter four 2019. Continued focus on growth
opportunities in our existing product offering as well as
initiatives to enter into related product categories remain the key
priorities for this region as we enter the second half of the year
and beyond.
As a group, the effects of Brexit are currently expected to be
very much limited to its impact on movements in sterling on the
foreign currency markets and the potential operational effects it
might have on our UK business. The UK business now accounts for
less than 30% of Group revenue and does not have any significant
trading flows with European customers or suppliers. Despite this,
the UK business has already developed a number of contingency
strategies which include moving to UK based suppliers, re-routing
imports to western ports and limited stock build in relation to raw
material paper supplies. The Group continues to watch developments
and prepare accordingly.
Europe
Our business in Europe continues to go from strength to
strength, delivering strong sales growth of 25.4% and excellent
profit growth of 75.9%, despite continued raw material price
pressures.
Margins of 12.3% (H1 2018: 8.8%) are representative of the
excellent trading relationships that the team in Europe has
cultivated over many years and the benefit of sales mix moving into
higher margin product categories. Margins have been further
enhanced by the new printing press in the Netherlands which has
been operational since the start of the financial year and is
already supporting record production volume and delivering the
planned improved efficiencies. The investment made in the press has
been a key factor in providing the operational capacity to support
the growth in sales and help deliver the region's uplift in margin,
and the Board is very pleased with the financial payback being
achieved on this capital expenditure. Furthermore, our bespoke gift
product offering in Europe continues to achieve record sales levels
and strong year-on-year growth.
Americas
Overall growth in our Americas business is 44.1% year-on-year at
$131.6 million (H1 2018: $91.3 million) driven by the acquisition
of Impact. The US now represent 49% (H1 2018: 42%) of Group
revenue. Organic sales (excluding Impact) of $88.9 million were
2.6% behind last year (H1 2018: $91.3 million) due to the timing of
shipments of customers' orders, which are later in the peak season
this year compared to the previous year with profits broadly
consistent at $7.5 million. As customer orders are now due to be
fulfilled in the second half, the US business is set to achieve
strong year-on-year growth in both sales and profit in the full
year.
The Group acquired 100% of the equity interest in Impact in
August 2018. Impact is a leading supplier of gift packaging and
seasonal décor products in the US. The acquisition has created the
world's largest consumer gift packaging business allowing the Group
to:
-- deliver significant earnings accretion in each of the next
three financial years supported by annual synergies expected to be
in excess of $5.0 million by year three;
-- enable expansion into the growing and adjacent seasonal décor
product category both in North America and in established Design
Group markets around the world;
-- add a complementary yet distinct customer base, and long-term
relationships with major blue-chip US retailers;
-- establish further scale within the US to create a world-class
gift packaging manufacturing capability, leveraging established
Group know-how; and
-- deliver enhanced 'one-stop-shop' product and service solutions for customers.
The purchase price was GBP56.5 million plus a working capital
adjustment, on a debt-free, cash-free basis. Full details of the
assets acquired, which included stock, customer lists and the
Impact brand and associated trade names, can be found in note 7 to
the interim report. The acquisition was funded via a mix of share
placing with institutional investors and local debt facilities.
We are delighted to see the strong performance and contribution
Impact has made in just one month since completion with sales of
$42.7 million (H1 2018: $nil) and profit of $6.1 million (H1 2018:
$nil). This strong performance reflects the success of the business
during its peak sales period. Following the acquisition, the Group
is now fully focused on a rapid and successful integration into the
existing business and pushing forward to achieve expected
synergies. In October 2018 there was the first significant step in
the integration process with the announcement of the consolidation
of our combined manufacturing facilities in the US into our Memphis
facilities and the closure of the operations in Midway, Georgia.
This paves the way for sale of the freehold property in Midway,
which is now under offer ahead of our expectations both in terms of
timing and potential sale proceeds. The closure of the
manufacturing facility in Midway also unlocks a number of
operational savings in line with the expected synergies highlighted
at the time of the acquisition. Alongside this, the Group has
committed to investing in new printing capabilities in Memphis.
In addition, the US business successfully launched a new
enterprise IT system over the period, which will enable the US
business to deliver improved processes and provide the capacity for
further growth.
In October 2018, the US Government introduced a tariff on
certain product imports from China. However, the impact of the
tariffs in relation to our 2018/19 buying cycle is minimal and will
have no material effect on our financial forecasts. There are a
number of product categories supplied by DG Americas that are
affected by these tariffs and as such our team in the US is
developing plans to mitigate the impact of the tariffs on the
business. As we enter the new buying season for 2019/20 we are
confident that our mitigating actions will ensure the Group is able
to continue to deliver its plans in line with its financial
expectations.
Australia
Our business in Australia accounts for 10% of overall Group
sales (H1 2018: 11%) and has now successfully completed the
integration of the Biscay business, acquired in January 2018, and
is capitalising on the synergies arising. Although it is on a
smaller scale than the Impact acquisition, the successful purchase,
integration and management of Biscay is a demonstration of the
Group's ability to execute on successful M&A deals which
deliver real value. The acquisition, together with the strong
market position the business has secured in the higher margin
product category of greetings cards, has led the Australian
business' margin to increase from 6.6% to 10.3%.
Sales for the period at AU$36.7 million were up 18.8%
year-on-year with profits up 85.1% at AU$3.8 million reflecting the
significantly improved margins and operational synergies following
the acquisition.
Our products and brands
We pride ourselves on being a diversified, multi-category,
multi-channel and multi-product manufacturer and supplier with our
activities and sales generated across four core categories:
-- 'Celebrations', including gift packaging, seasonal décor,
greetings and partyware products;
-- 'Stationery and Creative Play', including home, school and office products;
-- 'Gifting', our design-led giftware products category; and
-- 'Bags not-for-resale', focused on branded store bags.
The acquisition of Impact further diversifies our product
portfolio and enhances our 'one-stop-shop' product offering to our
broad customer base by adding seasonal décor products to our
Celebrations category.
.
30 Sep 2018 30 Sep 2017
------------- -------------
Sales by product category % GBPm % GBPm
----------------------------- ---- ------- ---- -------
Celebrations 77 157.3 73 121.8
Stationery and Creative Play 9 19.4 12 20.6
Giftware 10 21.3 12 19.7
Bags 'not-for-resale' 4 7.2 3 4.4
----------------------------- ---- ------- ---- -------
Total 205.2 166.5
----------------------------- ---- ------- ---- -------
The acquisition of Impact drives up the revenue generated on
Christmas specific products, but also adds further strength to our
product base outside of the Christmas category business, with
'everyday' and 'minor seasons' accounting for 41% of our overall
product offering.
Detailed financial review
The Group has delivered a strong financial performance for the
period to 30 September 2018 underpinning our ambitions for future
growth.
30 Sep 30 Sep
2018 2017 %
GBPm GBPm change
----------------------------- ------ ------ ------
Revenue 205.2 166.5 23
Gross profit 44.2 35.4 25
Gross margin 21.5% 21.2%
Overheads (25.2) (24.3) 4
----------------------------- ------ ------ ------
Underlying operating profit 19.0 11.1 71
Underlying finance charge (0.5) (0.6) (17)
----------------------------- ------ ------ ------
Underlying profit before tax 18.5 10.5 76
Exceptional items (3.0) (0.1)
LTIP charges (1.5) (0.9)
----------------------------- ------ ------ ------
Profit before tax 14.0 9.5 48
Tax (3.7) (2.7)
----------------------------- ------ ------ ------
Profit after tax 10.3 6.8 52
----------------------------- ------ ------ ------
Reported revenues for the six months of GBP205.2 million have
grown 23% over the previous year (H1 2018: GBP166.5 million) of
which 4% was underlying organic growth at like-for-like foreign
exchange rates. The main drivers of the underlying growth were our
European and Australian territories, with Impact contributing
GBP32.8 million to the first half's revenues.
Underlying operating profit of GBP19.0 million increased by 71%,
of which 35% was organic growth at constant exchange rates (H1
2018: GBP11.1 million). Impact, since the completion of the
acquisition, generated GBP4.7 million of operating profit in the
period. Underlying operating profit margins at the half year grew
to 9.3% (H1 2018: 6.7%). We continue to focus on overhead
management and have kept overhead costs largely in line
year-on-year despite the overall growth in the business.
Underlying profit before tax at GBP18.5 million (H1 2018:
GBP10.5 million) is up 76% year-on-year. Profit before tax
increased 48% year-on-year to GBP14.0 million (H1 2018: GBP9.5
million). Profit after tax for the six months to 30 September 2018
increased by 52% to GBP10.3 million (H1 2018: GBP6.8 million).
Finance charge
The Group continues to benefit from having the whole Group
(except for our Australia business) under a single banking deal
with competitive interest rates. Underlying finance costs
(excluding finance related exceptional items) were 17% lower than
the prior half year at GBP0.5 million (H1 2018: GBP0.6 million),
reflecting lower average debt levels year-on-year despite the
continued growth in the Group and increases during the period in
the base rates in our core markets.
Exceptional items
The exceptional costs incurred to 30 September of GBP3.0 million
(including exceptional finance costs but excluding the effect of
tax) largely relate to the restructure of the US business linked to
the acquisition of Impact. Exceptional costs of GBP0.3 million
relate to the finance costs and include legal fees associated with
the financing of the acquisition of Impact.
As the Group focuses on delivering the synergies targeted as
part of the acquisition, it is anticipated that between GBP7-8
million of exceptional costs will be incurred by the end of the
integration of which the significant majority will be incurred in
the current financial year.
LTIP charges
A charge of GBP1.5 million has been incurred in the year to date
(H1 2018: GBP0.9 million), the increase primarily reflecting the
growth in the share price year-on-year and increased vesting
assumptions driven by improved performance.
Taxation
The tax charge for the half year is GBP3.7 million (H1 2018:
GBP2.7 million) with the effective tax charge on underlying profit
before tax at 24% (H1 2018: 28%). This is in line with the weighted
blend of statutory rates in the countries in which we operate. The
reduction year-on-year primarily reflects the increased trading in
the US where the federal tax rate reduced on 1 January 2018. The
Group continues to anticipate a full-year effective tax rate of
c.24%.
Earnings per share
Underlying fully diluted earnings per share grew 79% to 19.5p
(H1 2018: 10.9p) reflecting the strong financial performance in the
first half of the year. This increase is significantly affected by
the acquisition of Impact during the period. The timing of the
acquisition of Impact during its peak trading delivered a higher
proportion of its annual profit in the period from acquisition to
the close of the half year, with the effect of the equity raise
only impacting from the time of the placing. Excluding the effect
of the acquisition from the calculation, the underlying earnings
per share calculation would deliver a 35% increase year-on-year.
Basic earnings per share were 14.4p (H1 2018:10.2p).
30 Sep 30 Sep
2018 2017
pence pence
-------------------------------------------- ------ ------
Underlying fully diluted earnings per share 19.5 10.9
Cost per share on LTIP charge (1.9) (1.0)
Cost per share on exceptional items (3.6) -
-------------------------------------------- ------ ------
Fully diluted earnings per share 14.0 9.9
-------------------------------------------- ------ ------
Dividends
On the back of the strong financial performance, the Board is
pleased to announce an interim dividend of 2.5p (H1 2018: 2.0p) up
25% year-on-year.
Return on capital employed
The Group remains focused on improving the return on capital
employed ("ROCE") in the business, and each region has its own
target to improve its return on the average net capital employed.
Overall, the Group saw the twelve month return on average net
capital employed (excluding Impact) increase to 24.1% from 18.7% in
the prior year period. The calculation of ROCE is based on the
Group's underlying profit before interest and tax divided into the
average net capital employed (excluding cash, provisions and
intangible assets).
Cash flow and net cash
Due to the seasonal nature of our business, the Group's net debt
position at the half year is higher than the year end. Net debt at
30 September 2018 was GBP100.0 million (H1 2018: GBP70.2 million)
of which GBP75.3 million represents the underlying element
excluding foreign exchange and the funding of the acquisitions of
Impact and Biscay. This GBP5.1 million increase over the prior year
represents timing and growth in the underlying business. Average
leverage, being the twelve month average net debt divided by the
last twelve months EBITDA as at the half year to 30 September 2018
was 1.3 times, down from 1.9 times for the comparative prior year
period, demonstrating the continued focus on our balance sheet and
working capital management throughout the year.
As at 30 September 2018, cash used by our operations was GBP76.5
million (H1 2018: GBP64.5 million).
30 Sep 30 Sep
2018 2017
GBPm GBPm
---------------------------------------------------- ------- ------
EBITDA(a) 22.1 13.7
Change in trade and other receivables (108.5) (90.3)
Change in inventory (32.3) (21.4)
Change in creditors, provisions and accruals 43.9 33.8
Exceptional items from operations (1.1) (0.1)
LTIP (0.6) (0.2)
---------------------------------------------------- ------- ------
Cash used by operations (76.5) (64.5)
Proceeds from sale of property, plant and equipment 0.5 -
Net capital expenditure (3.6) (3.8)
Business acquired (67.1) -
Tax paid (2.2) (1.5)
Interest paid (0.6) (0.7)
Dividends paid to non-controlling interests - (0.6)
Equity dividends paid (2.6) (1.7)
Proceeds from issue of share capital 48.3 -
Other (0.6) (0.1)
---------------------------------------------------- ------- ------
Movement in net debt (104.4) (72.9)
Opening net cash 4.4 2.7
---------------------------------------------------- ------- ------
Closing net debt (100.0) (70.2)
---------------------------------------------------- ------- ------
(a) Before exceptional items and LTIP charges.
Working capital
The management of working capital across the Group remains a
priority. The main driver of the working capital outflow in the
year was the increase in trade debtors and inventory, partially
offset by increased trade creditors, which reflects the overall
growth of the business year-on-year and the phasing of sales around
the half year period end.
Capital expenditure
Over the course of the past six months we have continued to
invest in the growth of the business. In the first half we have
spent GBP3.6 million (H1 2018: GBP3.8 million), with significant
capital projects during the period including:
-- a new gift wrap converting line in Europe; and
-- the new ERP system implementation programme in the US.
Full-year guidance remains between GBP10 million and GBP12
million.
Reconciliation of underlying and reported statutory (IFRS)
results
A reconciliation between underlying and reported statutory
results is provided below:
30 Sep 30 Sep
2018 2017
GBPm GBPm
----------------------------- ------ ------
Underlying profit before tax 18.5 10.5
Exceptional items (3.0) (0.1)
LTIP charges (1.5) (0.9)
----------------------------- ------ ------
Profit before tax 14.0 9.5
----------------------------- ------ ------
Statement of Directors' responsibilities
We confirm to the best of our knowledge that:
-- the condensed interim set of financial statements has been
prepared in accordance with IAS 34 "Interim Financial Reporting" as
adopted by the European Union;
-- the interim report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of the principal risks and
uncertainties for the remaining six months of the year); and
-- the interim report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties transactions
and changes therein).
By order of the Board
Paul Fineman Giles Willits
Chief Executive Officer Chief Financial Officer
26 November 2018 26 November 2018
CONSOLIDATED INCOME STATEMENT
Six months ended 30 September 2018
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2018 2017 2018
Note GBP000 GBP000 GBP000
----------------------------- ---- ---------- ---------- ---------
Revenue 205,238 166,530 327,516
Cost of sales (161,754) (131,168) (257,532)
----------------------------- ---- ---------- ---------- ---------
Gross profit 43,484 35,362 69,984
21.2% 21.2% 21.4%
Selling expenses (10,557) (9,383) (20,005)
Administration expenses (18,363) (15,998) (30,346)
Other operating income 284 179 1,477
----------------------------- ---- ---------- ---------- ---------
Operating profit 14,848 10,160 21,110
Finance expenses (827) (660) (1,392)
----------------------------- ---- ---------- ---------- ---------
Profit before tax 14,021 9,500 19,718
Income tax charge 5 (3,757) (2,733) (5,384)
----------------------------- ---- ---------- ---------- ---------
Profit for the period 10,264 6,767 14,334
----------------------------- ---- ---------- ---------- ---------
Attributable to:
Owners of the Parent Company 9,553 6,432 13,545
Non--controlling interests 711 335 789
----------------------------- ---- ---------- ---------- ---------
Operating profit analysed as:
Underlying operating profit 19,011 11,122 22,828
Exceptional items 3(2,661) (88) 539
LTIP charges (1,502) (874) (2,257)
------------------------------ ------- ------ -------
Operating profit 14,848 10,160 21,110
------------------------------ ------- ------ -------
Finance expenses analysed as:
Underlying finance expenses (547) (660) (1,392)
Exceptional items 3(280) - -
------------------------------ ----- ----- -------
Finance expenses (827) (660) (1,392)
------------------------------ ----- ----- -------
Earnings per ordinary share
Unaudited six months Unaudited six months Twelve months
ended 30 Sep 2018 ended 30 Sep 2017 ended 31 Mar 2018
---------------------- ---------------------- -------------------
Diluted Basic Diluted Basic Diluted Basic
Note pence pence pence pence pence pence
------------------------------------------- ---- ------------ -------- ------------ -------- ---------- -------
Underlying earnings per share excluding
exceptional items and LTIP charges 19.5 20.1 10.9 11.3 21.8 22.9
Cost per share on LTIP charge (1.9) (2.0) (1.0) (1.1) (2.7) (2.9)
------------------------------------------- ---- ------------ -------- ------------ -------- ---------- -------
Underlying earnings per share excluding
exceptional items 17.6 18.1 9.9 10.2 19.1 20.0
Cost per share on exceptional items (3.6) (3.7) - - 1.4 1.4
------------------------------------------- ---- ------------ -------- ------------ -------- ---------- -------
Earnings per share 6 14.0 14.4 9.9 10.2 20.5 21.4
------------------------------------------- ---- ------------ -------- ------------ -------- ---------- -------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 September 2018
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------------------------------------------------- ---------- ---------- -------
Profit for the period 10,264 6,767 14,334
Other comprehensive income:
------------------------------------------------------------------------------------- ---------- ---------- -------
Exchange difference on translation of foreign operations (net of tax) 611 (573) (1,632)
Transfer to profit and loss on maturing cash flow hedges (net of tax) 27 (271) (271)
Net loss on cash flow hedges (net of tax) (630) (110) (27)
------------------------------------------------------------------------------------- ---------- ---------- -------
Other comprehensive income for period, net of tax, items which may be reclassified to
profit
and loss in subsequent periods 8 (954) (1,930)
------------------------------------------------------------------------------------- ---------- ---------- -------
Total comprehensive income for the period, net of tax 10,272 5,813 12,404
Attributable to:
Owners of the Parent Company 9,476 5,676 12,001
Non--controlling interests 796 137 403
------------------------------------------------------------------------------------- ---------- ---------- -------
10,272 5,813 12,404
------------------------------------------------------------------------------------- ---------- ---------- -------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 September 2018
Share
premium
and capital Non--
Share redemption Merger Hedging Translation Retained Shareholder controlling
capital reserve reserves reserves reserve earnings equity interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
At 31 March 2018 3,194 9,815 17,164 (27) 1,305 65,404 96,855 3,661 100,516
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Profit for the
period - - - - - 9,553 9,553 711 10,264
Other
comprehensive
income - - - (603) 526 - (77) 85 8
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Total
comprehensive
income for the
year - - - (603) 526 9,553 9,476 796 10,272
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Equity-settled
share-based
payments - - - - - 1,014 1,014 - 1,014
Tax on
equity-settled
share-based
payments - - - - - (286) (286) - (286)
Shares issued 641 63,065 - - - - 63,706 - 63,706
Disposal of
minority
interest - - - - - - - (110) (110)
Options exercised 79 18 - - - (68) 29 - 29
Equity dividends
paid - - - - - (2,597) (2,597) - (2,597)
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
At 30 September
2018 3,914 72,898 17,164 (630) 1,831 73,020 168,197 4,347 172,544
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Six months ended 30 September 2017
Share
premium
and Non--
capital
Share redemption Merger Hedging Translation Retained Shareholder controlling
capital reserve reserves reserves reserve earnings equity interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------- ------- ---------- -------- -------- ----------- -------- ----------- ----------- -------
At 31 March 2017 3,132 9,769 17,164 271 2,551 53,330 86,217 3,833 90,050
------------------- ------- ---------- -------- -------- ----------- -------- ----------- ----------- -------
Profit for the
period - - - - - 6,432 6,432 335 6,767
Other comprehensive
income - - - (381) (375) - (756) (198) (954)
------------------- ------- ---------- -------- -------- ----------- -------- ----------- ----------- -------
Total comprehensive
income for the
period - - - (381) (375) 6,432 5,676 137 5,813
------------------- ------- ---------- -------- -------- ----------- -------- ----------- ----------- -------
Equity--settled
share--based
payments - - - - - 594 594 - 594
Tax on
equity--settled
share--based
payments - - - - - 424 424 - 424
Options exercised 31 - - - - (31) - - -
Equity dividends
paid - - - - - (1,734) (1,734) (575) (2,309)
------------------- ------- ---------- -------- -------- ----------- -------- ----------- ----------- -------
At 30 September
2017 3,163 9,769 17,164 (110) 2,176 59,015 91,177 3,395 94,572
------------------- ------- ---------- -------- -------- ----------- -------- ----------- ----------- -------
Year ended 31 March 2018
Share
premium
and capital Non--
Share redemption Merger Hedging Translation Retained Shareholder controlling
capital reserve reserves reserves reserve earnings equity interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
At 1 April 2017 3,132 9,769 17,164 271 2,551 53,330 86,217 3,833 90,050
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Profit for the
year - - - - - 13,545 13,545 789 14,334
Other
comprehensive
income - - - (298) (1,246) - (1,544) (386) (1,930)
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Total
comprehensive
income for the
year - - - (298) (1,246) 13,545 12,001 403 12,404
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Equity--settled
share--based
payments - - - - - 1,677 1,677 - 1,677
Tax on
equity--settled
share--based
payments - - - - - (111) (111) - (111)
Options exercised 62 46 - - - (37) 71 - 71
Equity dividends
paid - - - - - (3,000) (3,000) (575) (3,575)
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
At 31 March 2018 3,194 9,815 17,164 (27) 1,305 65,404 96,855 3,661 100,516
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
CONSOLIDATED BALANCE SHEET
As at 30 September 2018
Unaudited Unaudited
as at as at As at
30 Sep 30 Sep 31 Mar
2018 2017 2018
Note GBP000 GBP000 GBP000
Non--current assets
Property, plant and equipment 45,221 33,270 35,499
Intangible assets 79,190 33,879 36,547
Deferred tax assets 2,909 4,640 2,663
---------------------------------------------------- ---- --------- --------- -------
Total non--current assets 127,320 71,789 74,709
---------------------------------------------------- ---- --------- --------- -------
Current assets
Inventory 110,233 70,197 49,311
Trade and other receivables 183,571 120,422 37,369
Derivative financial assets 341 188 113
Cash and cash equivalents 4 1,591 2,282 9,031
---------------------------------------------------- ---- --------- --------- -------
Total current assets 295,736 193,089 95,824
---------------------------------------------------- ---- --------- --------- -------
Total assets 423,056 264,878 170,533
---------------------------------------------------- ---- --------- --------- -------
Equity
Share capital 3,914 3,163 3,194
Share premium 71,558 8,429 8,475
Capital redemption reserve 1,340 1,340 1,340
Reserves 18,365 19,230 18,442
Retained earnings 73,020 59,015 65,404
---------------------------------------------------- ---- --------- --------- -------
Equity attributable to owners of the Parent Company 168,197 91,177 96,855
---------------------------------------------------- ---- --------- --------- -------
Non--controlling interests 4,347 3,395 3,661
---------------------------------------------------- ---- --------- --------- -------
Total equity 172,544 94,572 100,516
---------------------------------------------------- ---- --------- --------- -------
Non--current liabilities
Loans and borrowings 4 3,315 (39) 3,781
Deferred income - 1,048 998
Provisions 1,113 883 894
Other financial liabilities 1,762 1,960 1,440
Deferred tax liability 2,110 584 373
---------------------------------------------------- ---- --------- --------- -------
Total non--current liabilities 8,300 4,436 7,486
---------------------------------------------------- ---- --------- --------- -------
Current liabilities
Bank overdraft 4 2,498 6,409 -
Loans and borrowings 4 95,824 66,055 894
Deferred income 1,047 152 99
Provisions 1,009 455 429
Income tax payable 3,676 3,337 3,364
Trade and other payables 118,421 72,763 38,757
Other financial liabilities 19,737 16,699 18,988
---------------------------------------------------- ---- --------- --------- -------
Total current liabilities 242,212 165,870 62,531
---------------------------------------------------- ---- --------- --------- -------
Total liabilities 250,512 170,306 70,017
---------------------------------------------------- ---- --------- --------- -------
Total equity and liabilities 423,056 264,878 170,533
---------------------------------------------------- ---- --------- --------- -------
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 September 2018
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------------------- ---------- ---------- --------
Cash flows from operating activities
Profit for the year 10,264 6,767 14,334
Adjustments for:
Depreciation 2,316 2,198 4,345
Amortisation of intangible assets 737 347 818
Impairment of goodwill - - 36
Finance expenses 827 660 1,392
Income tax charge 3,757 2,733 5,384
Profit on sales of property, plant and equipment (4) (2) (1,953)
Loss on external sale of intangible fixed assets 311 - 1
Equity--settled share--based payment 1,502 874 2,257
------------------------------------------------------- ---------- ---------- --------
Operating profit after adjustments for non--cash items 19,710 13,577 26,614
Change in trade and other receivables (108,524) (90,306) (9,133)
Change in inventory (32,335) (21,358) 819
Change in trade and other payables 44,700 33,601 3,612
Change in provisions and deferred income (80) (45) (199)
------------------------------------------------------- ---------- ---------- --------
Cash (used by)/generated from operations (76,529) (64,531) 21,713
Tax paid (2,236) (1,501) (3,099)
Interest and similar charges paid (605) (734) (1,483)
------------------------------------------------------- ---------- ---------- --------
Net cash (outflow)/inflow from operating activities (79,370) (66,766) 17,131
------------------------------------------------------- ---------- ---------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 515 27 2,596
Acquisition of businesses (67,055) - (5,145)
Acquisition of intangible assets (1,044) (462) (1,377)
Acquisition of property, plant and equipment (2,507) (3,372) (7,992)
Receipt of government grants - 15 15
------------------------------------------------------- ---------- ---------- --------
Net cash outflow from investing activities (70,091) (3,792) (11,903)
------------------------------------------------------- ---------- ---------- --------
Cash flows from financing activities
Proceeds from issue of share capital 48,348 - 71
Repayment of secured borrowings (500) - (165)
Net movement in credit facilities 94,868 66,265 -
Payment of finance lease liabilities - (17) (46)
New bank loans raised - - 5,108
Loan arrangement fees (30) (67) (111)
Equity dividends paid (2,597) (1,734) (3,000)
Dividends paid to non-controlling interests - (575) (575)
------------------------------------------------------- ---------- ---------- --------
Net cash inflow from financing activities 140,089 63,872 1,282
------------------------------------------------------- ---------- ---------- --------
Net (decrease)/increase in cash and cash equivalents (9,372) (6,686) 6,510
Cash and cash equivalents at beginning of period 9,031 2,743 2,743
Effect of exchange rate fluctuations on cash held (566) (184) (222)
------------------------------------------------------- ---------- ---------- --------
Cash and cash equivalents at end of the period (907) (4,127) 9,031
------------------------------------------------------- ---------- ---------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
Six months ended 30 September 2018
1 Accounting policies
Basis of preparation
The financial information contained in this interim report does
not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006 and is unaudited.
The Group interim report has been prepared and approved by the
Directors in accordance with International Financial Reporting
Standards as adopted by the EU ("Adopted IFRS"). The financial
information for the year ended 31 March 2018 is extracted from the
statutory accounts of the Group for that financial year and does
not constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The auditor's report was (i) unqualified; (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report;
and (iii) did not contain a statement under Section 498 (2) of the
Companies Act 2006.
The interim report does not include all the information and
disclosures required in the annual financial statements and should
be read in conjunction with the Group's annual financial statements
for the year ended 31 March 2018.
Going concern basis
The borrowing requirement of the Group increases steadily over
the period from July and peaks in October, due to the seasonality
of the business, as 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 interim 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.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim report are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 March 2018.
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, and design--led
giftware.
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.
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 income or expense 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, which are shown in the
eliminations column. Where cash shown in one segment, nets under
the Group's banking facilities against overdrafts in other
segments, the elimination is shown in the eliminations column.
Inter--segment receivables and payables are eliminated
similarly.
Central
and
UK and Europe USA Australia eliminations Group
Asia
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Six months ended 30 September 2018
Revenue - external 58,092 25,934 100,730 20,482 - 205,238
- inter segment 2,516 1,274 - - (3,790) -
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Total segment revenue 60,608 27,208 100,730 20,482 (3,790) 205,238
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Segment result before exceptional items, LTIP
charges and management recharge 4,936 3,369 10,639 2,116 (2,049) 19,011
Exceptional items (2,661)
LTIP charges (1,502)
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Operating profit 14,848
Finance expenses (547)
Finance expense treated as exceptional (280)
Income tax (3,757)
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Profit for the six months ended 30 September 2018 10,264
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Balances at 30 September 2018
Segment assets 162,740 41,712 144,908 70,001 2,909 422,270
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Segment liabilities (7,524) (34,995) (146,425) (54,996) (5,786) (249,726)
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 1,911 338 9,479 212 - 11,940
- intangible assets 117 10 917 - - 1,044
Depreciation 1,095 428 473 320 - 2,316
Amortisation 94 15 466 162 - 737
---------------------------------------------------- ------- -------- --------- --------- ------------ ---------
Central
and
UK and Europe USA Australia eliminations Group
Asia
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Six months ended 30 September 2017
Revenue - external 57,516 20,817 69,713 18,484 - 166,530
- inter segment 1,737 786 - - (2,523) -
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Total segment revenue 59,253 21,603 69,713 18,484 (2,523) 166,530
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Segment result before exceptional items, LTIP
charges and management recharge 4,670 1,918 5,592 1,227 (2,285) 11,122
Exceptional items (88)
LTIP charges (874)
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Operating profit 10,160
Net finance expenses (660)
Income tax (2,733)
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Profit for the six months ended 30 September 2017 6,767
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Balances at 30 September 2017
Segment assets 147,275 32,870 63,985 16,108 4,640 264,878
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Segment liabilities (62,018) (28,276) (65,247) (10,844) (3,921) (170,306)
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Capital expenditure
- property, plant and equipment 2,263 789 124 196 - 3,372
- intangible assets 32 10 420 - - 462
Depreciation 1,192 341 425 240 - 2,198
Amortisation 92 25 219 11 - 347
-------------------------------------------------- -------- --------- --------- --------- ------------ ---------
Central
and
UK and Europe USA Australia eliminations Group
Asia
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Year ended 31 March 2018
Revenue - external 119,283 50,977 120,284 36,972 - 327,516
- inter segment 4,031 786 - - (4,817) -
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Total segment revenue 123,314 51,763 120,284 36,972 (4,817) 327,516
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Segment result before exceptional items, LTIP
charges and management recharge 7,899 6,689 9,322 2,921 (4,003) 22,828
Exceptional items 539
LTIP charges (2,257)
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Operating profit 21,110
Net finance expenses (1,392)
Income tax (5,384)
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Profit for the year ended 31 March 2018 14,334
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Balances at 31 March 2018
Segment assets 123,310 15,146 14,064 15,350 2,663 170,533
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Segment liabilities (31,916) (8,695) (15,983) (9,686) (3,737) (70,017)
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
Capital expenditure additions
- property, plant and equipment 4,078 2,786 333 1,593 - 8,790
- intangible assets 109 50 1,218 2,624 - 4,001
Depreciation 2,229 722 871 523 - 4,345
Amortisation 219 27 474 98 - 818
--------------------------------------------------- --------- -------- --------- --------- ------------ --------
3 Exceptional items
Six months ended 30 Sep 2018 Six months Twelve
months
----------------------------------------------
Cost of Selling Admin Finance ended ended
sales expenses expenses expenses Total 30 Sep 31 Mar
2017 2018
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000(d) GBP000(e)
---------------------------- ------- -------- -------- -------- ------- ---------- ---------
Transaction costs(a) - - (1,701) (280) (1,981) (88) (553)
US restructure(b) (698) (148) (114) - (960) - -
Sale of Hirwaun property(c) - - - - - - 1,092
---------------------------- ------- -------- -------- -------- ------- ---------- ---------
Total before tax (698) (148) (1,815) (280) (2,941) (88) 539
Income tax credit 479 4 238
---------------------------- ------- -------- -------- -------- ------- ---------- ---------
(2,462) (84) 777
---------------------------- ------- -------- -------- -------- ------- ---------- ---------
Transaction costs relating predominantly to the acquisition of
Impact Innovations Inc. in the current year (including the charge
relating to the unwind of the inventory fair value adjustment see
note 7) and the acquisition of the trade and certain assets of
Biscay Greetings Pty Ltd and the remaining costs from the
acquisition of the Lang Companies Inc. in the prior year.
The restructure of the US operations linked to the acquisition
of Impact Innovations Inc. and the final charges in relation to the
Lang integration.
The exceptional gain on the sale of the Hirwaun property in
Wales comprises the sale proceeds net of any related costs
including restructuring for the rationalisation of operations to
suit the revised footprint.
Transaction costs for the six months to 30 September 2017 were
included within admin expenses.
Prior year transaction costs were included in admin expenses,
gain on sale of Hirwaun property was included within other
operating income.
4 Cash, loans and borrowings
Net debt
Six months Six months Twelve
months
ended ended ended
30 Sep 30 Sep 31 Mar
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------------------- ---------- ---------- -------
Cash and cash equivalents 1,591 2,282 9,031
Bank overdrafts (2,498) (6,409) -
-------------------------------------------------- ---------- ---------- -------
Cash and cash equivalents per cash flow statement (907) (4,127) 9,031
Bank loans and borrowings (99,201) (66,265) (4,780)
Loan arrangement fees 62 249 105
Finance leases - (30) -
-------------------------------------------------- ---------- ---------- -------
Net debt as used in the executive summary (100,046) (70,173) 4,356
-------------------------------------------------- ---------- ---------- -------
Split between current and non--current
Six months Six months Twelve
months
ended ended ended
30 Sep 30 Sep 31 Mar
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------------------- ---------- ---------- -------
Non--current liabilities
Secured bank loans (3,333) - (3,791)
Loan arrangement fees 18 39 10
-------------------------------------- ---------- ---------- -------
(3,315) 39 (3,781)
-------------------------------------- ---------- ---------- -------
Current liabilities
Asset backed loan (33,920) (36,374) -
Revolving credit facilities (60,948) (29,891) -
Current portion of secured bank loans (1,000) - (989)
-------------------------------------- ---------- ---------- -------
Bank loans and borrowings (95,868) (66,265) (989)
Loan arrangement fees 44 210 95
-------------------------------------- ---------- ---------- -------
(95,824) (66,055) (894)
-------------------------------------- ---------- ---------- -------
Finance leases of GBPnil (H1 2018: GBP30,000) are included
within other financial liabilities and are split GBPnil (H1 2018:
GBP1,000) non--current and GBPnil (H1 2018: GBP29,000) current.
Loan arrangement fees represent the unamortised costs in
arranging the three year Group facilities which commenced in June
2016 and the unamortised costs relating to two one year
extensions.
5 Taxation
Six months Six months Twelve
months
ended ended ended
30 Sep 30 Sep 31 Mar
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------------------------------- ---------- ---------- -------
Current tax expenses
Current income tax charge 2,522 2,082 3,483
Deferred tax expenses
Relating to original and reversal of temporary differences 1,235 651 1,901
----------------------------------------------------------- ---------- ---------- -------
Total tax in income statement 3,757 2,733 5,384
----------------------------------------------------------- ---------- ---------- -------
Taxation for the six months to 30 September 2018 is based on the
effective rate of taxation, which is estimated to apply in each
country for the year ended 31 March 2019.
6 Earnings per share
Six months Six months Twelve months
ended 30 Sep 2018 ended 30 Sep 2017 ended 31 Mar 2018
------------------- ------------------- -------------------
Diluted Basic Diluted Basic Diluted Basic
pence pence pence pence pence pence
------------------------------------------------------- ---------- ------- ---------- ------- ---------- -------
Underlying earnings per share excluding exceptional
items and LTIP charges 19.5 20.1 10.9 11.3 21.8 22.9
Cost per share on LTIP charge (1.9) (2.0) (1.0) (1.1) (2.7) (2.9)
------------------------------------------------------- ---------- ------- ---------- ------- ---------- -------
Underlying earnings per share excluding exceptional
items 17.6 18.1 9.9 10.2 19.1 20.0
Earnings per share on exceptional items (3.6) (3.7) - - 1.4 1.4
Earnings per share 14.0 14.4 9.9 10.2 20.5 21.4
------------------------------------------------------- ---------- ------- ---------- ------- ---------- -------
The basic earnings per share is based on the profit attributable
to equity holders of the Parent Company of GBP9,553,000 (H1 2018:
GBP6,432,000) and the weighted average number of ordinary shares in
issue of 66,361,000 (H1 2018: 62,868,000) calculated as
follows:
As at As at As at
In thousands of shares 30 Sep 30 Sep 31 Mar
2018 2017 2018
-------------------------------------------------------- ------ ------ ------
Issued ordinary shares at 1 April 63,890 62,642 62,642
Shares issued in respect of exercising of share options 668 226 556
Shares issued as part of the consideration for Impact 495 - -
Shares issued in respect of share placing 1,308 - -
-------------------------------------------------------- ------ ------ ------
Weighted average number of shares at end of the period 66,361 62,868 63,198
-------------------------------------------------------- ------ ------ ------
Total number of executive share options, over 5p ordinary
shares, in issue at 30 September 2018 was nil (H1 2018:
710,000).
Total number of Long Term Incentive Plan ("LTIP") options, over
5p ordinary shares, in issue at 30 September 2018 was 944,045 (H1
2018: 1,213,013).
Underlying basic earnings per share excludes exceptional items
and LTIP charges of GBP4,443,000 (H1 2018: GBP924,000) and tax
relief attributable to those items of GBP674,000 (H1 2018:
GBP196,000) to give underlying profits of GBP13,322,000 (H1 2018:
GBP7,160,000).
7 Acquisitions of businesses
Impact Innovations Inc.
On 31 August 2018, the Group acquired 100% of the equity of
Impact Innovations Inc. ("Impact"), a leading supplier of gift
packaging and seasonal décor products in the US.
The acquisition, made through a wholly owned subsidiary of IG
Design Group plc, IG Design Group Americas Inc., was satisfied by
total consideration of GBP82.4 million ($107.2 million), GBP67.0
million paid in cash and the remaining GBP15.4 million settled in
shares in IG Design Group plc. The consideration represents 4.9
times underlying EBITDA multiple.
Founded in 1968 and employing more than 250 staff globally,
Impact is a designer, manufacturer and distributor of seasonal and
special occasions products specialising in paper, fabric and décor.
The Company is headquartered in Clara City, Minnesota, where its
fabric and décor business is located, and its gift wrap
manufacturing, warehousing and distribution facilities are located
in Memphis, Tennessee. Impact has additional manufacturing
operations in Shaoxing, China and offices in Hong Kong. Impact has
long-term relationships with major US retailers, including Walmart,
Shopko, Target, Kroger, and Meijer, all of which have been in place
for in excess of 20 years. Walmart is expected to account for over
15% of total Group turnover following the acquisition.
The Directors believe that the acquisition will:
-- create the world's largest consumer gift packaging business;
-- deliver significant earnings accretion in each of the next three financial years;
-- deliver annual synergies in excess of $5.0 million by year three; and
-- enable expansion into the growing and adjacent seasonal décor
product category both in North America and in established Design
Group markets around the world.
In the period from acquisition to 30 September 2018, Impact
contributed sales of GBP32,841,000 and net profits of GBP3,152,000
to the consolidated Group results for the period ended 30 September
2018. If the acquisition had occurred on 1 April 2018, Group
revenue would have been GBP246,632,000 and net profit would have
been GBP11,589,000. In determining these amounts, management has
assumed that the provisional fair value adjustments that arose on
the date of acquisition would have been the same if the acquisition
had occurred on 1 April 2018.
Effect of acquisition
The acquisition had the following effect on the Group's assets
and liabilities:
Provisional
fair values
recognised
on acquisition
GBP000
---------------------------------------- --------------
Property, plant and equipment 9,433
Intangible assets 20,231
Inventories 27,626
Trade and other receivables 35,439
Trade and other payables (32,420)
---------------------------------------- --------------
Net identifiable assets and liabilities 60,309
---------------------------------------- --------------
Consideration paid in shares 15,385
Consideration paid in cash 67,055
---------------------------------------- --------------
Total consideration 82,440
---------------------------------------- --------------
Goodwill 22,131
---------------------------------------- --------------
The fair value adjustments relate to trade names, customer
relationships and inventory.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LFFLILDLRFIT
(END) Dow Jones Newswires
November 27, 2018 02:01 ET (07:01 GMT)
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