TIDMIGR
RNS Number : 7455B
IG Design Group PLC
11 June 2019
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the year ended 31 March 2019
Organic and acquisitive growth drives record revenue and profits
alongside 42% increased dividend
IG Design Group plc, one of the world's leading designers,
innovators and manufacturers of Gift Packaging, Celebrations,
Stationery and Creative Play products, Giftware and related product
categories announces its results for the year ended 31 March
2019.
Financial Highlights
-- Revenue up 37% to GBP448.4 million (2018: GBP327.5 million), with 9.8% organic growth
-- Adjusted operating profit* increased by 41% to GBP 32.6 million (2018: GBP23.2 million)
- Adjusted operating margin* is up 0.2 percentage points to 7.3% (2018: 7.1%)
-- Adjusted profit before tax* up 39% to GBP30.3 million (2017: GBP21.8million)
-- Adjusted earnings per share* up 33% to 29.3p (2018: 22.1p)
-- Adjusted cash generated from operations GBP50.5 million
(2018: GBP22.6 million) funding capital expenditure of GBP7.9
million (2018: GBP9.4 million)
-- Average leverage* improved to 1.3 times (2018: 1.5 times)
with year-end net cash balance up GBP12.7 million to GBP17.1
million (2018: GBP4.4 million)
-- Final dividend per share increased by 50% to 6.00p (2018:
4.00p), delivering total dividend in respect of the year of 8.50p
per share up 42% (2018: 6.00p). Dividend cover is 3.4 times.
*(stated before exceptional items, amortisation of acquired
intangibles and LTIP charges)
Reported Results
-- As a result of exceptional costs of GBP8.4 million, primarily
related to the acquisition of Impact Innovation, Inc. ("Impact")
and the subsequent restructuring in the US, profit before tax
decreased to GBP17.3 million (2018: GBP19.7 million), in line with
market guidance
-- Fully diluted earnings per share 16.0p (2018: 20.5p)
Operational Highlights
-- All regions delivered sales and profit growth
- Outstanding performance in USA, Europe and Australia with on-going growth in the UK
-- Continued geographic and customer diversification:
- With growth in all regions, revenues by destination outside of
the UK are at 78% (2018: 73%), with 22% remaining UK based.
- Traded with in excess of 11,000 customers, with more than 750
million units of consumer products sold in over 210,000 stores
across 80 countries.
-- Strategic growth projects successfully executed in all regions:
- Acquisition of Impact in USA in August 2018. Operational synergies delivering to plan
- Doubling of revenues of 'not-for-resale' consumable products
globally to GBP20 million, including UK manufactured paper bags
- 24% increase to GBP197 million in sales of non-Christmas
merchandise, including significant growth in the sale of Creative
Play products
- Successful initial phase upgrade of IT systems in USA
Post-period Highlights
-- New increased banking facility agreed supporting future growth, both organic and M&A
Paul Fineman, CEO, commented:
"We have generated sales of more than 750 million units of
consumer products across over 50,000 individually designed items.
This tremendous level of innovation, together with our ability to
manage and leverage considerable scale, has resulted in our
business meeting ambitious targets and achieving record revenues,
profit, cash generation and EPS. As a consequence, we have
significantly enhanced our full year dividend up 42% to 8.50p.
Having successfully concluded, in August 2018, the acquisition
of Impact in the USA, I am particularly pleased that we have 'hit
the ground running' in terms of delivering on our plans for
operational and commercial synergies that were identified at the
time of the acquisition; an excellent example of collaboration and
team work amongst our new and enlarged team in the US.
As ever, our eye is on the future and we continue to invest to
enhance our competitive advantage. We have delivered GBP7.9 million
of capital expenditure projects within the year and have additional
exciting fast payback investments taking place in 2020.
Furthermore, our investment in our team continues at pace with the
focus on leveraging scale and driving innovation.
Supported by an ever strengthening balance sheet, our business
remains very well placed to continue to grow both organically and
through carefully considered M&A opportunities and we look
forward to the future with enthusiasm and optimism."
For further information:
IG Design Group plc 01525 887310
Paul Fineman, Chief Executive
Giles Willits, Chief Financial
Officer
Canaccord Genuity Limited 020 7523 8000
Bobbie Hilliam - NOMAD
Alex Aylen - Sales
Alma PR
Rebecca Sanders-Hewett 020 3405 0205
Susie Hudson designgroup@almapr.co.uk
Sam Modlin
EXECUTIVE REVIEW
Overview
We are pleased to report that the Group has achieved another
excellent year of adjusted profit and adjusted earnings per share
growth as a result of strong performances from all regions. It is
particularly pleasing to have delivered significant organic growth
whilst also benefiting from the transformational acquisition of
Impact Innovations Inc. ('Impact') and other capital investments
across the Group. The diversified nature of our business, alongside
excellent customer relationships, the strength of our design and
innovation capabilities and our focus on service have combined to
make this another record year for IG Design Group plc.
Furthermore, our focus on cash generation has resulted in a
significant increase in our year-end cash, and delivered a further
reduction in average leverage, despite increased capital and
acquisition investment.
During the year, Group revenue increased by 37% to GBP448.4
million (2018: GBP327.5 million) with adjusted profit before tax
increasing by 39% to GBP30.3 million (2018: GBP21.8 million).
Adjusted earnings per share increased 33% to 29.3p (2018: 22.1p).
Average leverage improved from 1.5 times to 1.3 times, whilst the
year-end positive net cash balance increased from GBP4.4 million in
2018 to GBP17.1 million in 2019, reflecting the effectiveness of
our focus on converting profit into cash and the highly cash
generative dynamics within our business.
Reported profit before tax reduced from GBP19.7 million in 2018
to GBP17.3 million in the current year, primarily as a result of
the exceptional cost associated with the acquisition of Impact and
the subsequent restructuring in the US. Reported diluted earnings
per share is 16.0p (2018: 20.5p).
The results are testament to our successful focus on the Group's
key strategic drivers; working with the winners in both existing
and new channels and markets; design and innovation, growing
existing, new and adjacent product categories; and efficiency and
scale, investing in state--of-the-art machinery across the globe,
growing our scale through acquisitions and leveraging synergies
from these.
The combination of reduced average leverage and strong cash
generation has underpinned a 42% increase in the dividend from a
level of 6.00p for 2018 to a total of 8.50p for 2019. This increase
not only reflects the growth in the business but also the
commitment to reduce dividend cover, which decreased to 3.4 times
compared to 3.7 times in the prior year.
Our strategy
Our business is successful as a result of our focus on growing
by maximising the impact of our key strategic drivers, which
underpin the Group's ethos and are broken down into three key
areas:
Working with the winners
We are focused on increasing our revenue and profitability
through growth in both existing and new channels and markets by
ensuring we maintain excellent relationships with our key
customers, as well as developing relationships with new customers.
We want to be part of our customers' success stories. As the retail
market evolves and progresses, we work closely with our key
customers with the aim of being their partner of choice going
forward. Our top 10 customers now account for 48% of our global
revenues (2018: 39%).
In order to do this, we need to have the capability to
manufacture and/or source a broad range of products, leveraging
from improved sourcing processes as our business grows. Many of our
customers work across multiple territories and have global
ambitions. As such, our geographic and channel diversity in key
markets is essential to help support our customers as they grow.
Our businesses are experts in their territories and we ensure that
we know what works well for our customers in each of those
markets.
To continue our growth trajectory with our customers, we follow
key market trends including the increase in consumer demand for
mainstream mass and discount retailers, as well as specialist
'experiential' retailers and e-commerce opportunities.
Our focus on working with the winners helps ensure we are
benefiting as our customers continue to grow. But it also requires
us to decide who we will not work with and this has been especially
important during a year that has witnessed challenging retail
markets, with a number of high profile retailers facing financial
troubles. This is highlighted by our low bad debt write offs at
0.1% of revenues.
The Impact acquisition has resulted in a strengthening of our
relationship with Walmart, the largest retailer in the world. With
over 11,000 stores worldwide, Walmart is our largest customer, and
now accounts for approximately 20% of the Group's revenue. Our
focus on great customer service is a must for maintaining and
developing all relationships, and we were delighted that Impact was
awarded Walmart Supplier of the Year in March 2019. Next year will
see us continue to grow our business with Walmart.
Design & innovation
Our customers, as do their customers, look to us to be at the
forefront of product design and innovation. This means we look to
develop the best designs for innovative and quality products, while
maintaining a focus on value and consumer appeal.
The Group has succeeded in growing revenues through developing
new and adjacent category products as well as increasing revenues
in existing product areas. The addition of Impact product
categories has strengthened the Group's ability to offer a complete
'one-stop-shop' to customers including products not previously
forming part of the Group's portfolio such as Seasonal décor. We
also continue to diversify our product range by focusing on
occasions other than Christmas that are celebrated across the globe
throughout the year with 'minor seasons' now generating over GBP20
million in global sales.
During the year we again saw a significant increase in revenues
in the US from our focus on our Creative play and related products
business. We are now looking to leverage across all of the
territories in which we operate around the world, while also
further expanding our 'not-for-resale' products revenue which has
now broadened in terms of product offering and geographical
reach.
Technological development is a key part of this strategy and
this extends to adapting to changes in consumer habits and being
dynamic in providing customers with new channels to purchase their
celebration products. We have been busy developing new celebration
product offers that work online and will be trialling these with
customers during the remainder of the 2019 calendar year.
Coupled with innovation in product design, we have also
increased our focus on developing more sustainable products and
improved sourcing, manufacturing and distribution to reduce our
global carbon footprint. We believe this focus is not only the
right strategy to help the environment but can also be a source of
competitive advantage. Recent highlights include developing a
completely recyclable cracker range for customers in the UK,
removing plastic from a selection of product packaging, removing
non-recyclable glitter from a number of wrap, bag and card ranges
and reducing the size of wrap cores to further rationalise shipping
volumes and cost. We are committed to continuously increasing our
attention to the environmental impact of the Group and have
recently established an Environmental Taskforce that will be
working with third party specialist organisations. We wish to
ensure that we can be regarded by our customers as leaders in
bringing improved sustainable product solutions to all product
categories in the Group's portfolio.
Efficiency & scale
As we grow we remain intent on driving up operating margins
through investment in processes and people as well as by unlocking
synergies following acquisitions, using our global reach and
capabilities to leverage Group economies of scale.
The year has seen significant capital investment across the
Group totalling GBP7.9 million (2018: GBP9.4 million). Key areas
included investment in further bag making equipment in the UK to
support the growth of our 'not--for--resale' business, in new paper
converting lines in the Netherlands and the continued investment in
our US IT capabilities. As ever, we look for quick return projects
that help increase our capacity, improve our efficiency and deliver
a better service.
In addition we are building the capabilities of the team around
the Group. In the US this included the excellent team at Impact,
and a new Chief Information Officer. In Asia we have introduced a
newly created position of Global Procurement Managing Director and
at Group we have added a Group Legal Counsel to the team. These new
positions help extend the strength of the teams around the world
bringing new skills that will ensure we are properly resourced to
deliver our strategy.
Furthermore, the acquisition of Impact was a pivotal moment for
the Group further extending the geographical diversity of the
business. Impact is one of the leading suppliers of gift wrap and
seasonal décor products in the US, with long standing relationships
with major US retailers. Following the acquisition in August 2018,
the Group has proceeded quickly with the integration of Impact with
our existing US business, combining manufacturing operations into
one facility in Memphis and we are already seeing the benefits from
the synergies and the increased scale of the overall business,
including successes in cross selling Impact products across the
Group.
Targets for growth
Our strategy focuses on delivering the following key commitments
to shareholders:
-- double--digit growth in adjusted earnings per share - over
the past five years we have averaged 28% annual growth;
-- maintaining average leverage between 1.0 times and 2.0 times
- since 2015 the Group's leverage has reduced from 4.1 times to 1.3
times for the year ended 31 March 2019; and
-- a progressive dividend policy targeting dividend cover of 2.5
times earnings per share in the near future - in 2019, dividend
cover reduced to 3.4 times.
Outlook
The Group is focused on continuing to deliver year-on-year
growth and we are greatly encouraged with prospects for this trend
to continue in 2020 and beyond. Despite the ongoing challenging
retail marketplace, and geo--political uncertainties, our order
book across the business shows pleasing growth year-on-year. In the
US we continue our focus on delivering the synergies from the
acquisition of Impact and the subsequent restructuring of the
business. This includes further investment in our IT systems,
taking delivery of our new printing press in the US and further
restructuring and rationalisation of processes.
We continue to invest in building the capability and strength of
our teams around the world to ensure we remain agile to the
opportunities that will deliver further successes. In particular,
in the US we have recently recruited new senior management to lead
our sales and manufacturing teams.
We continue to set ourselves ambitious targets and remain
focused on creating value for all stakeholders through the delivery
of our strategy. We are excited by the positive start to the new
financial year and the potential to drive the business forward
through compelling M&A opportunities.
Operational regional highlights
Our Group looks to leverage our global scale as a diversified,
design-led, multi-product category and multi-channel business
supported by world class manufacturing and sourcing operations.
With an effective mix of creativity and reliability, our teams
strive to deliver commercially successful design, product
development and innovation across our global customer base. The
success of this can be seen by the resulting growth in all of our
regions in the year ended 31 March 2019.
Segmental revenue Adjusted operating Adjusted margin
profit
---------------------- ---------------------- -----------------
% Group 2019 2018
revenue 2019 2018 % growth 2019 2018 % growth % %
------- ------------- ----- ----- ----- -------- ----- ----- -------- -------- -------
50% Americas $m 289.9 158.8 83% 20.0 12.7 57% 6.9% 8.0%
28% UK GBPm 127.1 123.3 3% 8.1 7.9 3% 6.4% 6.4%
14% Europe EURm 73.0 58.5 25% 10.0 7.5 33% 13.7% 12.9%
9% Australia AU$m 70.3 63.1 11% 7.7 5.0 54% 10.9% 7.9%
Elims/Central
(1%) costs GBPm (5.5) (4.8) - (4.1) (4.0) - - -
------- ------------- ----- ----- ----- -------- ----- ----- -------- -------- -------
100% Total GBPm 448.4 327.5 37% 32.6 23.2 41% 7.3% 7.1%
------- ------------- ----- ----- ----- -------- ----- ----- -------- -------- -------
Americas
Our Americas business has undergone significant change in 2019.
With the Impact acquisition we have doubled the size of the US
business, leading to a significant restructure to merge our
manufacturing facilities into one location, as well as affecting
the planned ERP systems implementation.
Despite all of this change, the US has delivered strong results
with revenue increasing 83% to $289.9 million (2018: $158.8
million), of which $114.9 million related to the Impact
acquisition. Adjusted operating profit followed a similar trend, up
57% at $20.0 million (2018: $12.7 million). The Americas now
accounts for 50% (2018: 37%) of the Group's revenues. Adjusted
operating margins at 6.9% were down on the previous year primarily
reflecting the acquisition of Impact and the mix of product
revenues. Going into 2020 margins are set to improve reflecting the
full year of Impact, the delivery of synergies following the
acquisition and subsequent US restructuring, as well as further
improvements in product mix toward higher margin categories.
The Group has shown good organic growth across all channels, but
in particular in our Creative play offering in the Americas. Anker
Play Products, launched as a start up in July 2016, delivered its
first year of profit within just three years from launch.
This is a particularly pleasing start and is set to continue
with the 2020 order book already looking very promising as we
continue to develop our offering both in the Americas as well as
globally.
The most prominent story for the US business is the acquisition
of Impact. Formerly a competitor of Design Group in the US gift
wrap sector, the combined synergies and expertise we now have as a
result of the acquisition puts us on a great footing going
forward.
The integration of facilities is going to plan, with gift wrap
manufacturing operations now under one roof in our Memphis
facilities. This underpins our drive to improve efficiencies in our
manufacturing processes in the region, and further capital
investment is underway in this respect with the delivery of the new
state-of-the-art printing press scheduled for the final quarter of
the 2019 calendar year. Since the acquisition in August 2018 we
have already seen the delivery of identified operational synergies
in line with expectations, as well as strong revenue growth in
their two main product categories and excellent growth of Impact's
'not-for-resale' category which achieved record revenue levels. We
remain firmly on track to deliver by 2021 annual operational
savings of $5 million.
The addition of Impact and their extended product offering
allows the Group to offer adjacent product categories to our
customer base and provides good cross-selling opportunities which
we will continue to develop over the coming years having already
seen early success in Seasonal décor in the UK.
The new ERP system has gone live in the business, with
additional roll-out and development by the end of 2020. The new
system will not only drive further efficiencies from one
standardised operating platform but also increase the US business'
capacity and is a key enabler for the growth plans in this
territory.
We continue to monitor the developments of the ongoing trade
discussions between the US and Chinese governments. The business
has been highly pro-active in implementing mitigation strategies
and has to date, successfully managed the effect of the 10% tariffs
introduced in September 2018, and is currently reviewing the full
extent of the recent increase of tariffs to 25%. We expect the
financial effect to be limited to the usual financial contingencies
maintained by the Group and that the successful strategies we have
adopted to date continue to be effective.
UK
Sales volumes and values continue to grow in our UK business
which now accounts for 28% (2018: 38%) of our overall Group
revenue. Sales in the UK increased 3% to GBP127.1 million (2018:
GBP123.3 million) delivering adjusted operating profit up 3% at
GBP8.1 million (2018: GBP7.9 million) in a very challenging retail
market.
The unification of the UK business continues to evolve, and this
year saw a further rationalisation of the UK team and further
development of processes and activities to leverage our scale in
the UK. Whilst we are seeing benefits from the move towards
increased cohesiveness, as can be seen in the revenue and profit
growth, the market is still very competitive reflected by our flat
adjusted operating margins.
Our 'not-for-resale' bags initiative, launched in 2018,
continues to be a growth area for the UK business. We have invested
in an additional bag machine this financial year, underpinning our
view that this is an excellent opportunity to grow the business
with a new product offering and develop relationships with new
customers. Sales in this product category alone have grown 53%
compared to 2018. We expect 2020 to see further growth in bag
production volumes with new customers.
Additional product innovation this financial year includes the
development and launch of our sustainable product portfolio which
includes stationery made from recycled materials.
Europe
Our business in Europe delivered another excellent performance
in 2019 accounting for 14% (2018: 16%) of the Group's revenue.
Sales increased 25% to EUR73.0 million (2018: EUR58.5 million) with
adjusted operating margins up to 13.7% (2018: 12.9%). As a result
adjusted operating profit was up 33% to EUR10.0 million (2018:
EUR7.5 million). This is driven by organic growth and an excellent
example of the Group's 'working with the winners' strategy in
action.
The European business has some excellent trading relationships
with key leading retailers across the region. For example, Anchor,
our business in the Netherlands selling on-trend photo frames and
photo--based gift accessories, has built on its relationship with
its main customer, a fast-growing international non-food discounter
with stores across Europe. Anchor has been a key business partner
throughout their historic and continued growth. Sales in this area
have achieved another record level this financial year.
In addition, our Celebrations business in the Netherlands, which
is benefiting from its investment in a new state--of--the-art
printing press in March 2018, has also focused on extending
category offerings, increasing SKUs and developing new business
with key customers, including a fast-growing major discount
grocer.
Australia
Sales in Australia achieved record levels, up 11% year-on--year
at AU$70.3 million (2018: AU$63.1 million), with adjusted operating
margins improving at 10.9% (2018: 7.9%), delivering adjusted
operating profit up 54% at AU$7.7 million (2018: AU$5.0 million).
Our business in Australia accounted for 9% of overall Group revenue
(2018: 11%).
The acquisition of Biscay Pty Limited ('Biscay') in January 2018
has delivered the expected synergies and growth in our Australian
business despite market headwinds. Margins have improved as a
result of focus in improved product mix.
The Australian business faces challenging market conditions with
some rationalisation of our national accounts. As such we expect
revenues to step back in 2020 with resulting effect on operating
profits, albeit the effect on EPS will be tempered by the ownership
structure in this region.
Our products and brands
31 March 2019 31 March 2018
--------------- ---------------
Revenue by product category % GBPm % GBPm
----------------------------- ---- --------- ---- ---------
Celebrations 77 345.3 74 243.5
Stationery and creative play 8 36.9 10 31.2
Gifting 11 46.3 13 42.6
'Not-for-resale' consumables 4 19.9 3 10.2
----------------------------- ---- --------- ---- ---------
Total 448.4 327.5
----------------------------- ---- --------- ---- ---------
Part of the Group's ongoing strategy is to be partner of choice
to our customers which means providing our broad customer base with
a 'one--stop--shop' product offering which is a compelling blend of
great design and value for money products across all our
categories. This was further enhanced this year with the
acquisition of Impact, adding Seasonal décor to our product
categories.
A key focus, more so than ever before, both this year and going
forward is the development of innovative and design--led products
that are highly attractive to our customers, and in turn to their
customers. This, combined with our proven ability to deliver first
class customer service continues to drive our business forward.
Our culture is one of ongoing improvement, with a determination
to perpetually 'raise the bar' in all aspects of our business and
this continues to be a mantra we firmly adhere to. With our
development of sustainable and recycled products and offering
acetate free, fully recyclable packaging where possible, we aim to
set an industry standard when it comes to environmental
approach.
Since last year, we have evolved even further as 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, greetings, seasonal
décor and partyware products;
-- 'Stationery and creative play', including home, school and office products;
-- 'Gifting', our design--led giftware products category; and
-- 'Not-for-resale' consumables focused on branded store bags,
and now point of purchase products.
All our core product categories grew in the year with strong
growth specifically in Stationery and creative play and Gifting
driven by our focus on new higher margin sales initiatives in these
areas.
This year, excluding 'not-for-resale' consumables, we estimate
that over 750 million items, from over 50,000 SKUs have been
manufactured, sourced and delivered to our customers during the
year, of which 31%, GBP137.4 million sales, carry our Group's
generic and licensed brands. Particular growth year--on--year has
been in Celebrations, Creative play products and our new Seasonal
décor offering.
The business successfully continued to broaden the sales
generated throughout the year outside of specific Christmas based
products increasing sales generated in our 'Everyday' and 'Minor
seasons' by 24% year--on--year, which together account for 44% of
the total revenues of the Group.
The increasing retail focus on celebrating Valentines, Easter,
and other than Christmas events led to revenues for these occasions
exceeding GBP20 million. This is an exciting growth opportunity for
all the business units across the Group.
The Group has a strong team of experts within our sourcing and
manufacturing operations based in Hong Kong and China, together
with a broadening base throughout Asia, which was further enhanced
by Impact's sourcing team which joined us in September 2018. The
sourcing teams have maintained their continued performance record
and delivered excellent standards of service that further boosts
ongoing loyalty of our large customer base.
Our team
Design Group wouldn't be what it is without the passion, drive
and determination of our talented teams across the globe in all
disciplines. They are the key to our success and we continue to
further invest in our teams by building on their core capabilities.
We are, once again, hugely thankful to all of our colleagues for
their contribution during what has been another year of exceptional
performance in ever more challenging and competitive markets.
Alternative performance measures
This review includes alternative performance measures ('APMs')
that are presented in addition to the standard IFRS metrics. The
Directors believe that these APMs provide important additional
information regarding the adjusted performance of the business
including trends, performance and position of the Group. APMs are
used to enhance the comparability of information between reporting
periods and segmental business units by adjusting for exceptional
or uncontrollable factors which affect IFRS measures, to aid the
understanding of the Group's performance. Consequently, APMs are
used by the Directors and management for strategic and performance
analysis, planning, reporting and reward setting.
The APMs are adjusted profit, adjusted EBITDA, adjusted
operating profit and adjusted EPS. The definitions of APMs used are
listed below:
-- Adjusted EPS - Fully diluted earnings per share before tax,
exceptional items, acquisition amortisation and LTIP charges
-- Adjusted profit - Profit before tax, exceptional items,
acquisition amortisation and LTIP charges
-- Adjusted operating profit - Profit before interest, tax,
exceptional items, acquisition amortisation and LTIP charges
-- Adjusted EBITDA - EBITDA before exceptional items and LTIP charges
Exceptional items
These include acquisition related costs and reorganisation and
restructuring costs. These items are excluded to present the
performance of the business in a consistent manner and in line with
how the business is managed and measured on a day-to-day basis.
They are typically gains or costs associated with events that
are not considered to form part of the core operations, or are
considered to be a 'non-recurring' event (although they may span
several accounting periods). Further detail can be seen in note 10
to the financial statements.
Acquisition related costs
Costs directly associated with acquisitions, including legal and
advisory fees on deals, form part of our reported results on an
IFRS basis. These costs, however, in our view form part of the
capital transaction and as they are not attributed to investment
value under IFRS 3, they are excluded from our adjusted measures
for the purposes of reporting underlying results. Similarly, where
acquisitions have employee related payments (exclusive of LTIPs)
which lock in and incentivise legacy talent, we have also excluded
these costs. As these costs are employment linked, they are treated
as an expense and form part of the IFRS results, however, as with
transaction costs, we do not consider these to form part of the
underlying results of the business. In accordance with IFRS 3, on
acquisition, businesses need to be fair valued, which can result in
an uplift to stock on hand relating to sales orders already
attached to the acquired stock. This uplift will distort the
margins associated with the stock, and typically unwinds quickly as
stock is sold soon after acquisition. The unwind of the stock
uplift is excluded from our adjusted results as we deem this to be
a cost of the acquisition.
Reorganisation and restructuring costs
In order to maximise efficiencies, as well as recognise
synergies from acquisitions, certain projects are undertaken to
achieve these.
These are projects outside of the normal operations of the
business and typically are very sizeable in terms of costs. This is
particularly relevant during a large scale restructuring that can
result in some disruption to the normal business (for example
manufacturing patterns) leading to operational inefficiencies
occurring in this time frame. If we deem this to be the case, we
will present the details and associated costs of the projects
separately in our financial statements and exclude them from our
adjusted measures.
LTIP costs
As part of our senior management remuneration, the Group operate
a Long Term Incentive Plan ('LTIP') in the form of options for
ordinary shares of the Group. In accordance with accounting
principles, despite this plan not being a cash cost to the
business, a share--based payments charge is taken to the income
statement. We consider that these charges do not form part of the
underlying operational costs and therefore exclude them from our
adjusted measures.
Acquisition amortisation costs
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer lists and
brands which form part of the intangible value of the acquired
business but are not part of the acquired balance sheet. These
intangible assets are then amortised to the income statement over
an appropriately judged period. These are not operational costs
relating to the running of the acquired business and are directly
related to the accounting for the acquisition. As such we exclude
them from the underlying results of the business.
A full reconciliation between our adjusted and reported results
is provided below:
31 March 31 March
2019 2018
Notes GBPm GBPm
------------------ ----- -------- --------
Adjusted EBITDA 38.7 28.0
Exceptional items 10 (8.3) 0.5
LTIP charges 25 (3.0) (2.2)
------------------ ----- -------- --------
EBITDA 27.4 26.3
------------------ ----- -------- --------
Notes GBPm GBPm
--------------------------- ----- ----- -----
Adjusted profit before tax 30.3 21.8
Exceptional items 10 (8.4) 0.5
Acquisition amortisation 12 (1.6) (0.4)
LTIP charges 25 (3.0) (2.2)
--------------------------- ----- ----- -----
Reported profit before tax 17.3 19.7
--------------------------- ----- ----- -----
GBPm GBPm
-------------------------- ----- -----
Adjusted profit after tax 23.2 15.6
Exceptional items (6.4) 0.8
Acquisition amortisation (0.7) (0.3)
LTIP charges (2.8) (1.8)
-------------------------- ----- -----
Reported profit after tax 13.3 14.3
-------------------------- ----- -----
Notes Pence Pence
------------------------------------------------ ----- ----- -----
Adjusted EPS 29.3 22.1
Exceptional items (including tax effect) 23 (8.6) 1.4
Acquisition amortisation (including tax effect) 23 (0.9) (0.3)
LTIP charges (including tax effect) 23 (3.8) (2.7)
------------------------------------------------ ----- ----- -----
Reported diluted EPS 16.0 20.5
------------------------------------------------ ----- ----- -----
The APMs are also used in a number of the Group's performance
metrics detailed below:
-- Adjusted overheads - Selling expense, administration expense
and other operating income excluding exceptional items, acquisition
amortisation and LTIP charges
-- Adjusted operating margin - Adjusted operating profit divided by revenue
-- Cash conversion - Adjusted cash generated from operations divided by adjusted EBITDA
-- Return on capital employed - Adjusted operating profit
divided by monthly average net capital employed (excluding cash and
intangibles)
-- Average leverage - Average debt divided by adjusted EBITDA
-- Dividend cover - Adjusted EPS divided by total dividends for the year
-- Interest cover - Adjusted finance charge divided by adjusted profit
Detailed financial review
The Group has delivered another excellent performance in the
financial year to 31 March 2019.
31 March 31 March
2019 2018 %
GBPm GBPm change
---------------------------- -------- -------- ------
Revenue 448.4 327.5 37
Gross profit 84.6 70.0 21
Overheads (52.0) (46.8) 11
---------------------------- -------- -------- ------
Adjusted operating profit 32.6 23.2 41
Adjusted operating margin % 7.3% 7.1%
Finance charge (2.3) (1.4) 67
---------------------------- -------- -------- ------
Adjusted profit before tax 30.3 21.8 39
Exceptional items (8.4) 0.5
Acquisition amortisation (1.6) (0.4)
LTIP charges (3.0) (2.2)
---------------------------- -------- -------- ------
Profit before tax 17.3 19.7 (12)
Tax (4.0) (5.4)
---------------------------- -------- -------- ------
Profit after tax 13.3 14.3 (8)
---------------------------- -------- -------- ------
Revenues for the year of GBP448.4 million have grown 37% over
the previous year (2018: GBP327.5 million) of which 9.8% relates to
organic growth and the remainder as a result of the acquisition of
Impact. At like-for-like foreign exchange rates the overall revenue
increase is the same. Adjusted operating profit increased by 41% to
GBP32.6 million (2018: GBP23.2 million) and 40% at like--for--like
exchange rates. Adjusted operating profit margins increased to 7.3%
(2018: 7.1%) as we continue to focus on higher margin product
categories along with increased efficiencies and a drive on cost
management. Gross margins fell in the year, largely as a result of
the effect of the acquisition of Impact and product mix to 18.9%
(2018: 21.4%). Overheads as a percentage of revenue reduced to
11.7% compared to 14.4% in the prior year.
Overall our adjusted profit before tax increased 39% in the year
to GBP30.3 million (2018: GBP21.8 million) reflecting the strong
performance of the business. Our reported profit before tax at
GBP17.3 million (2018: GBP19.7 million) declined year-on--year
reflecting the exceptional cost of GBP8.4 million (2018:
exceptional gain GBP0.5 million), amortisation of assets acquired
through business combinations of GBP1.6 million (2018: GBP0.4
million) and an LTIP charge of GBP3.0 million (2018: GBP2.2
million). Adjusted profit after tax increased 49% to GBP23.2
million (2018: GBP15.6 million) with reported profit after tax for
the year at GBP13.3 million (2018: GBP14.3 million).
Finance charge
Finance costs at GBP2.3 million (excluding arrangement fees of
GBP0.2 million relating to the additional facility to fund the
Impact acquisition, which are included in exceptional costs below)
compared to GBP1.4 million in the prior year. This reflects the
increase in central banks' base rates and the higher average debt
of the Group following the acquisition of Impact. Adjusted interest
cover was 14.1 times in 2019, compared to 16.7 times in 2018
reflecting the additional cost of the debt for the Impact
acquisition.
Exceptional items
The Group incurred exceptional costs in the year totalling
GBP8.4 million (2018: exceptional gain of GBP0.5 million).
The costs related to three items:
-- Acquisition of Impact (GBP2.4 million) - legal and due
diligence fees and deferred employee related amounts associated
with locking in and incentivising the legacy Impact team.
-- Restructure of our US operations (GBP5.6 million) - these
include the costs for closure of our manufacturing facility in
Midway and relocation of equipment and personnel to Impact's
manufacturing site in Memphis, Tennessee. Along with manufacturing
inefficiencies associated with the start up of converting
operations (including machine calibration and operator training).
In addition the costs include redundancies and the sale of the
Midway freehold property less associated costs.
-- UK unification - GBP0.4 million of costs associated with
relocating a part of our UK business to another site and associated
redundancies with the move.
The net cash outflow in the year associated with exceptional
costs was GBP0.3 million, which includes the GBP4.8 million cash
inflow from the sale of our Midway site in Georgia.
LTIP charges
LTIP charges have increased in the year to GBP3.0 million (2018:
GBP2.2 million). The increase reflects the higher share price
alongside an increase in the number of shares granted compared to
the prior year.
Taxation
The Group aims to manage its tax affairs in an open and
transparent manner, including being fully compliant with all
applicable rules and regulations in tax jurisdictions in which it
operates. We have not entered into any tax avoidance or otherwise
aggressive tax planning schemes and the Group continues to operate
its tax affairs in this manner.
The tax charge is GBP4.0 million compared to GBP5.4 million in
the prior year. The year-on-year reduction is driven by the
increased exceptional costs in the year, part of which are
allowable for tax purposes. The effective tax rate on adjusted
profits is 23.4% (2018: 28.4%). The reduction primarily reflects
the impact of the lower US federal tax rate following the US tax
reform in January 2018. Overall tax paid in comparison to the prior
year increased slightly to GBP3.7 million (2018: GBP3.1 million)
largely as a result of higher profitability in tax paying
territories including Europe and Australia.
Earnings per share
Adjusted, fully diluted earnings per share grew 33% to 29.3p
(2018: 22.1p) reflecting the improved adjusted profitability of the
business. Reported basic earnings per share are 16.0p (2018:
21.4p).
Dividends
The Board is pleased to announce a final dividend of 6.00p
(2018: 4.00p) bringing our total dividend in respect of the year to
8.50p per share, up 42% (2018: 6.00p). This represents 3.4 times
dividend cover compared to 3.7 times in 2018. This improvement in
pay-out is in line with our progressive dividend policy and our
commitment of moving our dividend cover over time towards at least
two and a half times adjusted earnings per share.
Return on capital employed
Improving the return on capital employed is one of our promises
to the shareholders and in line with this each region has its own
target to improve its return on capital employed. Overall, the
Group saw the return on capital employed increase to 24.3% in 2019
from 22.5% in 2018.
Cash flow and net cash
At 31 March 2019, the net cash position has improved by GBP12.7
million to GBP17.1 million compared to the prior year at GBP4.4
million. This reflects the improved adjusted profit performance in
the year, with adjusted EBITDA up 38% to GBP38.7 million (2018:
GBP28.0 million) and strong net working capital inflows which
together delivered an outstanding EBITDA to operating cash
conversion of 130.5%.
31 March 31 March
2019 2018
GBP000 GBP000
---------------------------------------------------- -------- --------
Adjusted EBITDA 38.7 28.0
Change in trade and other receivables 25.6 (9.1)
Change in inventory 4.3 0.4
Change in creditors, provisions and accruals (18.1) 3.3
---------------------------------------------------- -------- --------
Adjusted cash generated from operations 50.5 22.6
Exceptional items from operations (5.0) (0.5)
LTIP (0.7) (0.4)
---------------------------------------------------- -------- --------
Cash generated from operations 44.8 21.7
Proceeds from sale of property, plant and equipment 5.3 2.6
Net capital expenditure (7.9) (9.4)
Business acquired (66.8) (5.1)
Cash acquired with acquisition 1.2 -
Tax paid (3.7) (3.1)
Interest paid (including exceptional items) (2.1) (1.5)
Dividends paid to non-controlling interests (1.1) (0.6)
Equity dividends paid (4.6) (3.0)
Proceeds from issue of share capital 48.3 0.1
Other (0.7) (0.3)
---------------------------------------------------- -------- --------
Movement in net cash 12.7 1.4
Opening net cash 4.4 3.0
---------------------------------------------------- -------- --------
Closing net cash 17.1 4.4
---------------------------------------------------- -------- --------
Working capital
The main driver for the working capital movements in the year
was the Impact acquisition. We acquired Impact on 31 August 2018 at
the peak of their working capital cycle when trade receivables,
inventory and creditors were close to their highest annual level.
As a result following acquisition the Group benefited from a net
Impact related working capital inflow of GBP24.8 million as
inventory was despatched and receivables were collected from
customers, over and above funding the creditor payments. Excluding
the cash inflow from the Impact acquisition there was a net working
capital outflow of GBP13.0 million, reflecting the need for
additional working capital to support the growth of the business
year-on-year.
In the ever-challenging retail environment it is even more
important to ensure we actively track debtor days and credit rating
profiles to ensure we mitigate our exposure to credit risk with
regard to our debtors. As a result we kept bad debt write off to
less that 0.1% of revenue (2018: 0.1%), a testament to our active
credit risk management process.
Stock levels increased year--on--year, largely due to Impact,
however excluding this, our UK and Europe businesses have built up
stock levels earlier in the production cycle than normal to gain
further efficiencies from our high--speed printing operations, and
to mitigate against the potential risks to our supply chain
relating to Brexit.
Capital expenditure
During the year we invested GBP7.9 million (2018: GBP9.4
million). The key projects include:
-- the acquisition of new converting lines in the Netherlands;
-- the introduction of a second bag machine in our UK factory to
provide 'not-for-resale' branded bags for retailers; and
-- a new ERP system in the US.
There are also smaller capital projects that we have invested in
throughout the year and in all cases we seek rapid payback from our
investment and monitor projects closely both during implementation
and then through the payback period to ensure we achieve the
expected returns.
Impact acquisition and associated share capital issue
In August 2018 the Group acquired 100% of the equity of Impact
Innovations Inc. The deal completed for total consideration of
$73.5 million on a cash and debt free basis representing a 4.9x
adjusted EBITDA multiple with an additional working capital and
other adjustment. In total, cash totalling GBP66.8 million was paid
in the year for the business. The acquisition was funded using a
combination of debt and an equity share placing. The net proceeds
from the share issue were GBP48.3 million. Full details of the
assets acquired, which included stock, customer lists and the
Impact brand, can be found in note 31 to the consolidated financial
statements.
Average leverage and treasury
As our business is very seasonal in nature we spend a period of
our year in a net debt position and therefore average leverage is
the key measure the Group adopts in relation to debt. We seek to
maintain our average leverage position in the range between 1.0
times and 2.0 times over the long term. Average leverage for the
year to 31 March 2019 was 1.3 times, down from 1.5 times in the
prior year, demonstrating the continued focus on our balance sheet
and working capital management throughout the year.
On 5 June 2019 we entered into a new three year Group facility
with a club of five banks chosen to reflect and support the
geographical spread of the Group. HSBC continue to be a significant
partner and have been joined in the new facility by NatWest, BNP
Paribas, Sun Trust and PNC.
The new Group facilities, which run to May 2022 comprise:
-- a revolving credit facility ('RCF A') of $80.0 million;
-- a further flexible RCF ('RCF B') with availability varying
from month to month of up to GBP85.0 million. This RCF is flexed to
meet our working capital requirements during those months when
inventory is being built within our annual business cycle and is
nil when not required minimising carry costs; and
-- the existing invoice financing arrangements in Hong Kong
which will remain in place for a minimum of the first year.
In total, the available facilities at approximately GBP160
million are more than sufficient to cover our peak requirements.
Being partially framed in US dollars they provide a hedge against
currency movements. The facilities, which do not amortise with
time, include an additional uncommitted amount to finance potential
acquisitions.
There are financial covenants, tested quarterly, attached to the
facilities as follows:
-- interest cover, being the ratio of earnings before interest,
depreciation and amortisation to interest on a rolling twelve-month
basis; and
-- leverage, being the ratio of debt to adjusted EBITDA on a rolling twelve--month basis.
There is a further covenant tested monthly in respect of the
working capital 'RCF B' by which available asset cover must not
fall below agreed levels relative to amounts drawn.
The Group currently has no interest rate hedges in place and
elects to accept floating interest rates across a range of
currencies. While we will keep this under review, our debt is at
its lowest point in many years and is planned to fall further
relative to profitability. While global rates are rising, they
remain low and interest margins have further capacity to fall as
leverage performance improves and we are therefore comfortable with
this position.
Foreign exchange
The overall impact on revenue and profits from currency
movements is not significant. However, we adopt an active hedging
policy where required. In particular, cash flow hedging ensures
further foreign exchange movements remain mitigated as far as
possible. A reasonable proportion of this hedging is achieved
through natural hedges whereby our purchases and sales in US
dollars are offset. The balance of our hedging is achieved through
forward exchange contracts and similar derivatives.
New accounting standards
IFRS 16 'Leases' is effective for accounting periods beginning
on or after 1 January 2019. The Group plans on adopting the
modified retrospective approach. The estimated impact to profit
before tax for the 2020 financial year is a reduction of between
GBPnil and GBP1.0 million. Non--current assets are expected to
increase by GBP31.0 million and gross liabilities are expected to
increase by GBP35.0 million. The Group has elected not to recognise
right of use assets and lease liabilities for short-term leases or
low-value assets and will continue to expense the lease payments
associated with these leases on a straight-line basis over the term
of the lease.
Financial position and going concern basis
The Group's net assets increased by GBP75.1 million to GBP175.6
million at 31 March 2019 (31 March 2018: GBP100.5 million).
The Directors acknowledge guidance issued by the Financial
Reporting Council relating to going concern. The Directors consider
it appropriate to prepare the consolidated financial statements on
a going concern basis, as set out in note 1 to the consolidated
financial statements.
Paul Fineman
Chief Executive Officer (CEO)
Giles Willits
Chief Financial Officer (CFO)
CONSOLIDATED INCOME STATEMENT
YEARED 31 MARCH 2019
2019 2018
Note GBP000 GBP000
----------------------------- ---- --------- ---------
Revenue 4 448,362 327,516
Cost of sales (365,533) (257,532)
----------------------------- ---- --------- ---------
Gross profit 82,829 69,984
Selling expenses (23,095) (20,005)
Administration expenses (40,596) (30,346)
Other operating income 7 620 1,477
----------------------------- ---- --------- ---------
Operating profit 5 19,758 21,110
Finance expenses 8 (2,476) (1,392)
----------------------------- ---- --------- ---------
Profit before tax 17,282 19,718
Income tax charge 9 (4,031) (5,384)
----------------------------- ---- --------- ---------
Profit for the year 13,251 14,334
----------------------------- ---- --------- ---------
Attributable to:
Owners of the Parent Company 11,925 13,545
Non-controlling interests 1,326 789
----------------------------- ---- --------- ---------
Operating profit analysed as:
Adjusted operating profit 32,646 23,199
Exceptional items 10 (8,274) 539
Acquisition amortisation 12 (1,609) (371)
LTIP charges 25 (3,005) (2,257)
------------------------------ ------- -------
Operating profit 19,758 21,110
------------------------------ ------- -------
Finance expenses analysed as:
Adjusted finance expenses (2,318) (1,392)
Exceptional items 10 (158) -
------------------------------ ------- -------
Finance expenses (2,476) (1,392)
------------------------------ ------- -------
Earnings per ordinary share
2019 2018
-------------- --------------
Diluted Basic Diluted Basic
Note pence pence pence pence
------------------- ---- ------- ----- ------- -----
Earnings per share 23 16.0 16.2 20.5 21.1
------------------- ---- ------- ----- ------- -----
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 MARCH 2019
2019 2018
GBP000 GBP000
------------------------------------------------------------ ------ -------
Profit for the year 13,251 14,334
Other comprehensive income:
Exchange difference on translation of foreign operations
(net of tax) 240 (1,632)
Transfer to profit and loss on maturing cash flow hedges
(net of tax) 27 (271)
Net gain/(loss) on cash flow hedges (net of tax) 118 (27)
Other comprehensive income for period, net of tax items
which may be reclassified to profit and loss in subsequent
periods 385 (1,930)
------------------------------------------------------------ ------ -------
Total comprehensive income for the year, net of tax 13,636 12,404
Attributable to:
Owners of the Parent Company 12,372 12,001
Non-controlling interests 1,264 403
------------------------------------------------------------ ------ -------
13,636 12,404
------------------------------------------------------------ ------ -------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 MARCH 2019
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 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
payment (note
25) - - - - - 1,677 1,677 - 1,677
Tax on
equity-settled
share-based
payments - - - - - (111) (111) - (111)
Options exercised
(note 22) 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
Profit for the
year - - - - - 11,925 11,925 1,326 13,251
Other
comprehensive
income - - - 145 302 - 447 (62) 385
----------------- ------- ----------- -------- -------- ----------- -------- ----------- ----------- --------
Total
comprehensive
income for the
year - - - 145 302 11,925 12,372 1,264 13,636
Equity-settled
share-based
payment (note
25) - - - - - 2,333 2,333 - 2,333
Tax on
equity-settled
share-based
payments - - - - - 764 764 - 764
Shares issued 641 63,065 - - - - 63,706 - 63,706
Recognition of
non-controlling
interest - - - - - - - 311 311
Disposal of
minority
interest - - - - - - - (110) (110)
Options exercised
(note 22) 83 18 - - - (72) 29 - 29
Equity dividends
paid - - - - - (4,553) (4,553) (1,075) (5,628)
----------------- ------- ----------- -------- -------- ----------- -------- ----------- ----------- --------
At 31 March 2019 3,918 72,898 17,164 118 1,607 75,801 171,506 4,051 175,557
----------------- ------- ----------- -------- -------- ----------- -------- ----------- ----------- --------
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 during the year.
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 qualify for hedge
accounting and have not yet matured.
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 2019
2019 2018
Note GBP000 GBP000
---------------------------------------------------- ---- ------- -------
Non-current assets
Property, plant and equipment 11 39,835 35,499
Intangible assets 12 83,690 36,547
Deferred tax assets 13 3,610 2,663
---------------------------------------------------- ---- ------- -------
Total non-current assets 127,135 74,709
---------------------------------------------------- ---- ------- -------
Current assets
Inventory 14 69,571 49,311
Trade and other receivables 15 45,405 37,369
Derivative financial assets 26 129 113
Cash and cash equivalents 16 19,458 9,031
---------------------------------------------------- ---- ------- -------
Total current assets 134,563 95,824
---------------------------------------------------- ---- ------- -------
Total assets 261,698 170,533
---------------------------------------------------- ---- ------- -------
Equity
Share capital 22 3,918 3,194
Share premium 71,558 8,475
Capital redemption reserve 1,340 1,340
Reserves 18,889 18,442
Retained earnings 75,801 65,404
---------------------------------------------------- ---- ------- -------
Equity attributable to owners of the Parent Company 171,506 96,855
---------------------------------------------------- ---- ------- -------
Non-controlling interests 4,051 3,661
---------------------------------------------------- ---- ------- -------
Total equity 175,557 100,516
---------------------------------------------------- ---- ------- -------
Non-current liabilities
Loans and borrowings 17 1,421 3,781
Deferred income 18 751 998
Provisions 19 2,671 894
Other financial liabilities 20 1,817 1,440
Deferred tax liability 13 692 373
---------------------------------------------------- ---- ------- -------
Total non-current liabilities 7,352 7,486
---------------------------------------------------- ---- ------- -------
Current liabilities
Loans and borrowings 17 953 894
Deferred income 18 99 99
Provisions 19 1,090 429
Income tax payable 3,370 3,364
Trade and other payables 21 58,563 38,757
Other financial liabilities 20 14,714 18,988
---------------------------------------------------- ---- ------- -------
Total current liabilities 78,789 62,531
---------------------------------------------------- ---- ------- -------
Total liabilities 4 86,141 70,017
---------------------------------------------------- ---- ------- -------
Total equity and liabilities 4 261,698 170,533
---------------------------------------------------- ---- ------- -------
These financial statements were approved by the Board of
Directors on 10 June 2019 and were signed on its behalf by:
Paul Fineman Giles Willits
Director Director
Notes 1 to 32 form part of the financial statements.
CONSOLIDATED CASH FLOW STATEMENT
YEARED 31 MARCH 2019
2019 2018
Note GBP000 GBP000
------------------------------------------------------ ---- -------- --------
Cash flows from operating activities
Profit for the year 13,251 14,334
Adjustments for:
Depreciation 11 5,328 4,345
Amortisation of intangible assets 12 2,309 818
Impairment of goodwill 12 - 36
Finance expenses 8 2,476 1,392
Income tax charge 9 4,031 5,384
Profit on sales of property, plant and equipment (6) (1,953)
Loss on disposal of intangible fixed assets 331 1
Equity-settled share-based payment 25 3,005 2,257
------------------------------------------------------ ---- -------- --------
Operating profit after adjustments for non-cash items 30,725 26,614
Change in trade and other receivables 25,616 (9,133)
Change in inventory 6,508 819
Change in trade and other payables (17,949) 3,612
Change in provisions and deferred income (137) (199)
------------------------------------------------------ ---- -------- --------
Cash generated from operations 44,763 21,713
Tax paid (3,694) (3,099)
Interest and similar charges paid (2,053) (1,483)
------------------------------------------------------ ---- -------- --------
Net cash inflow from operating activities 39,016 17,131
------------------------------------------------------ ---- -------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 5,312 2,596
Acquisition of businesses 31 (66,809) (5,145)
Cash acquired with acquisition 1,208 -
Acquisition of intangible assets 12 (2,190) (1,377)
Acquisition of property, plant and equipment 11 (5,699) (7,992)
Receipt of government grants - 15
------------------------------------------------------ ---- -------- --------
Net cash outflow from investing activities (68,178) (11,903)
------------------------------------------------------ ---- -------- --------
Cash flows from financing activities
Proceeds from issue of share capital 22 48,348 71
Repayment of secured borrowings (2,350) (165)
Payment of finance lease liabilities - (46)
New bank loans raised - 5,108
Loan arrangement fees (30) (111)
Equity dividends paid 24 (4,553) (3,000)
Dividends paid to non-controlling interests (1,075) (575)
------------------------------------------------------ ---- -------- --------
Net cash inflow from financing activities 40,340 1,282
------------------------------------------------------ ---- -------- --------
Net increase in cash and cash equivalents 11,178 6,510
Cash and cash equivalents at beginning of period 9,031 2,743
Effect of exchange rate fluctuations on cash held (751) (222)
------------------------------------------------------ ---- -------- --------
Cash and cash equivalents at end of the period 16 19,458 9,031
------------------------------------------------------ ---- -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARED 31 MARCH 2019
1 Accounting policies
IG Design Group plc (the 'Company') is a public limited company,
incorporated and domiciled in England and Wales. The Company's
ordinary shares are listed on the Alternative Investment Market
('AIM').
These financial statements consolidate those of the Company and
its subsidiaries (together referred to as the '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.
In forming their conclusion that the business is and will remain
a going concern, the Directors have reviewed the budgets and
forecasts prepared and sensitivity analysis thereon. The business
is highly seasonal and this results in peak funding demands.
On 5 June 2019, to meet the funding requirements, the business
has refinanced with a banking group comprising HSBC, NatWest, BNP
Paribas, Sun Trust and PNC Bank as part of a three year deal.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for at least twelve months
from the date of signing these financial statements. 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 derivative financial instruments which are stated at
their fair value.
Changes in accounting policies
The majority of 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 2018 with the exception of
IFRS 9 (Financial Instruments) and IFRS 15 (Revenue from Contracts
with Customers) which were new accounting standards adopted for the
first time in these financial statements with IFRS 15 being adopted
retrospectively. Accounting policies have been updated to reflect
the new standards although there was no material impact of adopting
either standard.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
considers all facts and circumstances in assessing whether it has
the power to control the relevant activities of investee and to
benefit from the results thereof, including rights arising from
shareholder agreements, contractual arrangements and potential
voting rights held by the Group. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences to the date that control
ceased.
Business combinations are accounted for using the acquisition
method as at the date on which control is transferred to the
Group.
For acquisitions on or after 1 January 2010, the Group measures
goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non--controlling interests in the acquiree; plus
-- if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the result is negative, a 'bargain purchase' gain is
recognised immediately in the income statement.
Provisional fair values allocated at a reporting date are
finalised within twelve months of the acquisition date.
Foreign currency translation
The consolidated financial statements are presented in pounds
sterling, which is the Company's functional currency and the
Group's presentational currency.
Transactions in foreign currencies are translated at the foreign
exchange rate prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the foreign exchange rate
prevailing at that date. Foreign exchange differences arising on
translation are recognised in the income statement.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated at foreign exchange rates prevailing at the balance
sheet date. The revenues and expenses of foreign operations are
translated at an average rate for the period where this rate
approximates to the foreign exchange rates prevailing at the dates
of the transactions. Exchange differences arising from this
translation of foreign operations, and of related qualifying
hedges, are taken directly to the translation reserve. They are
released into the income statement upon disposal or loss of control
and on maturity or disposal of the hedge, respectively.
Exchange differences arising from a monetary item receivable
from or payable to a foreign operation, the settlement of which is
neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation
and are recognised in other comprehensive income in the translation
reserve. The cumulative translation differences previously
recognised in other comprehensive income (or where the foreign
operation is part of a subsidiary, the parent's interest in the
cumulative translation differences) are released into the income
statement upon disposal of the foreign operation or on loss of
control of the subsidiary that includes the foreign operation.
Financial instruments (policy adopted from 1 April 2018)
(i) Recognition and initial measurement
Trade receivables are initially recognised when they are
originated. All other financial assets and financial liabilities
are initially recognised when the Company becomes a party to the
contractual provisions of the instrument. A financial asset (unless
it is a trade receivable without a significant financing component)
or financial liability is initially measured at fair value, plus,
for an item not at fair value through profit or loss ('FVTPL'),
transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing
component is initially measured at the transaction price less
attributable transaction costs.
(ii) Classification and subsequent measurement
Financial assets
a) Classification
On initial recognition, a financial asset is classified as
measured at amortised cost or FVTPL.
Financial assets are not reclassified subsequent to their
initial recognition unless the Group changes its business model for
managing financial assets in which case all affected financial
assets are reclassified on the first day of the first reporting
period following the change in the business model.
A financial asset is measured at amortised cost if it meets both
of the following conditions:
-- it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
-- its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets not classified as measured at amortised
cost are measured at FVTPL. This includes all derivative financial
assets. Investments in subsidiaries are carried at cost less
impairment in accordance with IFRS 9.
b) Subsequent measurement and gains and losses
Financial assets at FVTPL - these assets (other than derivatives
designated as hedging instruments) are subsequently measured at
fair value. Net gains and losses, including any interest or
dividend income, are recognised in profit or loss.
Financial assets at amortised cost - These assets are
subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and
impairment are recognised in profit or loss. Any gain or loss on
derecognition is recognised in profit or loss.
Classification of financial instruments issued by the Group
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL if
it is classified as held-for-trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised
cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss.
Any gain or loss on derecognition is also recognised in profit or
loss.
Trade and other receivables
The Group have trade receivables without significant financing
components. These assets are recognised initially at transaction
price less attributable transaction costs. Trade and other
receivables are subsequently reviewed for recoverability and
impairment with any losses taken to profit and loss immediately. If
the arrangement constitutes a financing transaction, for example if
payment is deferred beyond normal business terms, then it is
measured at the present value of future payments discounted at a
market rate of instrument for a similar debt instrument.
Trade and other payables
Trade and other payables are stated at their nominal value which
is considered to be their fair value. Subsequent to initial
recognition they are measured at amortised cost using the effective
interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Bank
overdrafts that are repayable on demand and form an integral part
of the Group's cash management are included as a component of cash
and cash equivalents for the purposes of the cash flow
statement.
Interest--bearing borrowings
Interest--bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to initial
recognition, interest--bearing borrowings are stated at amortised
cost using the effective interest method.
Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value.
The gain or loss on remeasurement to fair value is recognised
immediately in the income statement. However, where derivatives
qualify for hedge accounting, recognition of any resultant gain or
loss depends on the nature of the item being hedged.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or
liability, or a highly probable forecast transaction, the effective
part of any gain or loss on the derivative financial instrument is
recognised as other comprehensive income in the hedging reserve.
Any ineffective portion of the hedge is recognised immediately in
the income statement.
Amounts previously recognised in other comprehensive income are
transferred to the income statement in the periods when the hedged
item affects profit or loss (for instance when the forecast sale
that is hedged takes place).
When a hedging instrument expires or is sold, terminated or
exercised, or the entity revokes designation of the hedge
relationship but the hedged forecast transaction is still expected
to occur, the cumulative gain or loss at that point remains in
other comprehensive income and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction
is no longer expected to take place, the cumulative unrealised gain
or loss recognised in other comprehensive income is recognised in
the income statement immediately.
Impairment of financial instruments
The Company recognises loss allowances for expected credit
losses ('ECLs') on financial assets measured at amortised cost. The
Company measures loss allowances at an amount equal to lifetime
ECLs, except for other debt securities and bank balances for which
credit risk (i.e. the risk of default occurring over the expected
life of the financial instrument) has not increased significantly
since initial recognition, which are measured as twelve-month ECLs.
Loss allowances for trade receivables and contract assets are
always measured at an amount equal to lifetime ECLs. When
determining whether the credit risk of a financial asset has
increased significantly since initial recognition and when
estimating ECLs, the Company considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Company's historical experience and
informed credit assessment and including forward--looking
information.
Lifetime ECLs are the ECLs that result from all possible default
events over the expected life of a financial instrument.
twelve-month ECLs are the portion of ECLs that result from default
events that are possible within the twelve months after the
reporting date (or a shorter period if the expected life of the
instrument is less than twelve months). The maximum period
considered when estimating ECLs is the maximum contractual period
over which the Company is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses.
Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the
entity in accordance with the contract and the cash flows that the
Company expects to receive). ECLs are discounted at the effective
interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial
assets carried at amortised cost are credit--impaired. A financial
asset is 'credit-impaired' when one or more events that have a
detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Write-offs
The gross carrying amount of a financial asset is written off
(either partially or in full) to the extent that there is no
realistic prospect of recovery.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and impairment losses.
Where separately identifiable parts of an item of property,
plant and equipment have different useful lives, they are accounted
for as separate items of property, plant and equipment.
Leases in which the Group assumes substantially all the risks
and rewards of ownership of the leased asset are classified as
finance leases.
Where land and buildings are held under finance leases the
accounting treatment of the land is considered separately from that
of the buildings. Leased assets acquired by way of a finance lease
are stated at an amount equal to the lower of their fair value and
the present value of the minimum lease payments at inception of the
lease, less accumulated depreciation and impairment losses. Lease
payments are accounted for as described below.
Depreciation is charged to the income statement on a
straight--line basis over the estimated useful lives of each part
of an item of property, plant and equipment. The estimated useful
lives are as follows:
25-30 years
* freehold buildings
life of lease
* leasehold land and buildings
4-25 years
* plant and equipment
3-5 years
* fixtures and fittings
4 years
* motor vehicles
No depreciation is provided on freehold land.
Included within plant and machinery are assets with a range of
depreciation rates. These rates are tailored to the nature of the
assets to reflect their estimated useful lives.
Depreciation methods, useful lives and residual values are
reviewed at each balance sheet date.
Business combinations and goodwill
Subject to the transitional relief in IFRS 1, all business
combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries.
In respect of business acquisitions that have occurred since 1
April 2006, goodwill represents the difference between the cost of
the acquisition and the fair value of the net identifiable assets
acquired.
Identifiable intangibles are those which can be sold separately
or which arise from legal rights regardless of whether those rights
are separable.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash--generating units and is not
amortised but is tested every half year for impairment.
In respect of acquisitions prior to 1 April 2006, goodwill is
included on the basis of its deemed cost, which represents the
amount recorded under UK GAAP at that time which was broadly
comparable save that only separable intangibles were recognised and
goodwill was amortised. Goodwill written off to reserves under UK
GAAP prior to 1998 has not been reinstated.
If the cost of an acquisition is less than the fair value of the
Group's share of the net assets of the subsidiary acquired, the
difference is recognised directly in the income statement.
Computer software
Computer software is capitalised at its initial cost and
amortised over its useful life.
Other intangible assets
Expenditure on internally generated goodwill and brands is
recognised in the income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are
stated at cost less accumulated amortisation and impairment
losses.
Amortisation
Amortisation is charged to the income statement on a
straight--line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. All other intangible
assets are amortised from the date they are available for use. The
estimated useful lives are as follows:
3-5 years
* Computer software
3-5 years
* Trade names
3-15 years
* Customer lists
Amortisation charges are included under 'administrative
expenses' in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on a weighted average and includes expenditure
incurred in acquiring the inventories and bringing them to their
existing location and condition. In the case of manufactured
inventories and work in progress, cost includes an appropriate
share of overheads based on normal operating capacity.
Impairment of non-financial assets excluding inventories and
deferred tax
The carrying amounts of the Group's assets other than
inventories and deferred tax assets are reviewed at each balance
sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable
amount is estimated.
An impairment loss is recognised whenever the carrying amount of
an asset or its cash--generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income
statement.
Impairment losses recognised in respect of cash--generating
units are allocated first to reduce the carrying amount of any
goodwill allocated to cash--generating units and then to reduce the
carrying amount of the other assets in the unit on a pro rata
basis. A cash--generating unit is the smallest identifiable group
of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets.
The recoverable amount of the Group's assets is the greater of
their fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre--tax discount rate that reflects
current market assessments of the time, value of money and the
risks specific to the asset.
For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the
cash--generating unit to which the asset belongs.
An impairment in respect of goodwill is not reversed. In respect
of other assets, an impairment is reversed when there is an
indication that the impairment may no longer exist and there has
been a change in the estimates used to determine the recoverable
amount. An impairment is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment had been recognised.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event and it is probable that an outflow of economic benefits
will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected
future cash flows at a pre--tax rate that reflects current market
assessments of the time value of money and, where appropriate, the
risks specific to the liability. Where discounting is used, the
increase in the provision due to the passage of time is recognised
as borrowing costs.
Revenue recognition
During the year, as required by IFRS, a new accounting standard
has been adopted retrospectively - IFRS 15 Revenue from Contracts
with Customers. This introduces the concept of a performance
obligation which is effectively a written or unwritten contract for
a good or a service.
The Group recognise revenue on sales of Celebration, Stationery
and creative play, Giftware and 'Not-for-resale' consumable
products across four geographical segments. Typically the products
that we supply form the only performance obligations within a
customer agreement, and although the Group can provide ancillary
services such as merchandising, these are not separately
identifiable obligations. Revenue recognised in respect of these
obligations represents the amounts, net of discounts, allowances
for volume and promotional rebates and other payments to customers
(excluding value added tax) derived from the provision of goods and
services to customers during the year.
Revenue is generated solely from contracts with customers and is
measured based on the consideration specified in a contract with a
customer. The Group recognises revenue when it transfers control
over a good to a customer.
We evaluate our Revenue with customers based on the five-step
model under IFRS 15 Revenue from Contracts with Customers: (1)
identify the contract with the customer; (2) identify the
performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to separate
performance obligations; and (5) recognise revenues when (or as)
each performance obligation is satisfied.
Provisions are made for volume and promotional rebates where
they have been agreed or are reasonably likely to arise, based upon
actual and forecast sales. Revenue is only recognised when highly
probable that a significant reversal in the amount of cumulative
revenue will not be required.
Where goods are sold on a sale or return basis, revenue is
initially booked net of any expectation of the proportion that will
be returned by the customer, which is based on historical
experience. This is updated for the final value of returns on
payment by the customer. Where goods are sold on a consignment
basis, the revenue is booked when the goods have been sold by the
customer.
The Group disaggregates its revenue across four geographical
segments. Geographical information about revenues from external
customers can be found in note 4.
Government grants
Government grants for specific expenses are recognised in the
profit and loss in the same period as the relevant expense or when
there is reasonable assurance that the Company will comply with the
conditions attached to it and that the grant will be received.
Capital-based government grants (i.e. those relating to depreciable
assets) are usually included within other financial liabilities in
the balance sheet and recognised in profit or loss over the periods
and in the proportions in which depreciation expense on those
assets is recognised.
Supplier income
The Group does not have material retrospective supplier
incentive arrangements, but where these do arise, they are
recognised within cost of sales on an accruals basis as earned for
each relevant supplier rebate.
Expenses
Operating lease payments
Payments made and lease incentives received under operating
leases are recognised in the income statement on a straight--line
basis over the term of the lease.
Finance lease payments
Minimum lease payments are apportioned between the finance
charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining
balance of the liability.
Finance income and expenses
Finance expenses comprise interest payable, finance charges on
finance leases, amortisation of capitalised fees, and unwinding of
discounts on provisions.
Net movements in the fair value of derivatives which have not
been designated as an effective hedge, and any ineffective portion
of fair value movement on derivatives designated as a hedge are
also included within finance income or expense.
Interest income and interest payable is recognised in the income
statement as it accrues, using the effective interest method.
Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case it is
recognised in other comprehensive income or equity
respectively.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the
initial recognition of goodwill; the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit
other than in a business combination; and differences relating to
investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
Dividend distribution
Final dividends to shareholders of IG Design Group plc are
recognised as a liability in the period that they are approved by
shareholders.
Employee benefits
Pensions
The Group operates a defined contribution personal pension
scheme. The assets of this scheme are held separately from those of
the Group in an independently administered fund. The pension charge
represents contributions payable by the Group to the fund.
The Netherlands subsidiary operates an industrial defined
benefit fund, based on average wages, that has an agreed maximum
contribution. The pension fund is a multi--employer fund and there
is no contractual or constructive obligation for charging the net
defined benefit cost of the plan to participating entities other
than an agreed maximum contribution for the period, that is shared
between employer (4/7) and employees (3/7).
The Dutch Government is not planning to make employers fund any
deficits in industrial pension funds; accordingly the Group treats
the scheme as a defined contribution scheme for disclosure
purposes. The Group recognises a cost equal to its contributions
payable for the period.
Share--based payment transactions
The cost of equity-settled transactions with employees is
measured by reference to the fair value of the options at the date
on which they are granted.
The fair value is determined by using an appropriate pricing
model. The fair value cost is then recognised over the vesting
period, ending on the date on which the relevant employees become
fully entitled to the award.
The quantum of awards expected to vest and the relevant cost
charged is reviewed annually such that at each balance sheet date
the cumulative expense is the relevant share of the expected total
cost, pro-rated across the vesting period.
No expense is recognised for awards that are not expected to
ultimately vest, for example due to an employee leaving or business
performance targets not being met. The annual expense for equity
settled transactions is recognised in the income statement with a
corresponding entry in equity.
Social security charges on share--based incentives
Employer's social security charges are accrued, where
applicable, at a rate which management expects to be the prevailing
rate when share--based incentives are exercised and is based on the
latest market value of options expected to vest or having already
vested.
Own shares held by Employee Benefit Trust
Transactions of the Group-sponsored 'International Greetings
Employee Benefit Trust' are included in the Group financial
statements. In particular, the trust's purchases and sales of
shares in the Company are debited and credited directly to
equity.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale are capitalised as part of the cost of the respective asset.
Costs directly attributable to the arrangement of new borrowing
facilities are included within the fair value of proceeds received
and amortised over the life of the relevant facilities. Other
borrowing costs which can include costs associated with the
extension of existing facilities are expensed in the period they
occur.
Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds.
Use of non-GAAP measures
These financial statements include alternative performance
measures ('APMs') that are presented in addition to the standard
GAAP metrics. The Directors believe that these APMs provide
important additional information regarding the underlying
performance of the business including trends, performance and
position of the Group. APMs are used to enhance the comparability
of information between reporting periods and segmental business
units by adjusting for exceptional or uncontrollable factors which
affect IFRS measures, to aid the understanding of the Group's
performance. Consequently, APMs are used by the Directors and
management for strategic and performance analysis, planning,
reporting and reward setting. The APMs are adjusted profit,
adjusted EBITDA, adjusted operating profit and adjusted EPS. The
adjustments made to these adjusted results are:
Exceptional items
These include acquisition related costs and reorganisation and
restructuring costs. These items are excluded to present the
performance of the business in a consistent manner and in line with
how the business is managed and measured on a day-to-day basis.
They are typically gains or costs associated with events that are
not considered to form part of the core operations, or are
considered to be a 'non-recurring' event (although they may span
several accounting periods). Further detail can be seen in note 10
to the financial statements.
Acquisition related costs
Costs directly associated with acquisitions, including legal and
advisory fees on deals, form part of our reported results on an
IFRS basis. These costs however, in our view, form part of the
capital transaction, and as they are not attributed to investment
value under IFRS 3, they are excluded from our adjusted measures
for the purposes of reporting underlying results. Similarly, where
acquisitions have employee related payments (exclusive of LTIPs)
which lock in and incentivise legacy talent, we have also excluded
these costs. As these costs are employment linked, they are treated
as an expense and form part of the IFRS results, however, as with
transaction costs, we do not consider these to form part of the
underlying results of the business. In accordance with IFRS 3, on
acquisition, businesses need to be fair valued, which can result in
an uplift to stock on hand relating to sales orders already
attached to the acquired stock. This uplift will distort the
margins associated with the stock, and typically unwinds quickly as
stock is sold soon after acquisition. The unwind of the stock
uplift is excluded from our adjusted results as we deem this to be
a cost of the acquisition.
Reorganisation and restructuring costs
In order to maximise efficiencies as well as recognise synergies
from acquisitions, certain projects are undertaken to achieve
these.
These are projects outside of the normal operations of the
business and typically are very sizeable in terms of costs. This is
particularly relevant during a large scale restructuring that can
result in some disruption to the normal business (for example
manufacturing patterns) leading to operational inefficiencies
occurring in this time frame.
If we deem this to be the case, we will present the details and
associated costs of the projects separately in our financial
statements and exclude them from our adjusted measures.
IFRS 2 (LTIP) costs
As part of our senior management remuneration, the Group operate
a Long Term Incentive Plan ('LTIP') in the form of options for
ordinary shares of the Group. In accordance with accounting
principles, despite this plan not being a cash cost to the
business, a share--based payments charge is taken to the income
statement. We consider that these charges do not form part of the
underlying operational costs and therefore exclude them from our
adjusted measures.
Acquisition amortisation costs
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer lists and
brand which form part of the intangible value of the acquired
business but are not part of the acquired balance sheet. These
intangible assets are then amortised to the income statement over
an appropriately judged period. These are not operational costs
relating to the running of the acquired business and are directly
related to the accounting for the acquisition. As such we exclude
them from the underlying results of the business. 2019 is the first
year that these costs have been included given the significant
acquisition of Impact Innovations, Inc.
Like-for-like comparators
Figures quoted at like-for-like exchange rates are calculated by
retranslating the previous year's figures at the current year's
exchange rates.
New standards and interpretations not applied
Management continually reviews the impact of newly published
standards and amendments and considers, where applicable,
disclosure of their impact on the Group. At the date of the
authorisation of these financial statements, the following
standards and interpretations that are relevant to the Group, which
have not been applied in these financial statements, were in issue
but not yet effective.
New or amended EU endorsed accounting standards
The Group has adopted IFRS 15 Revenue from Contracts with
Customers from 1 April 2018. The standard has not had a material
effect on the Group's financial statements.
The Group has adopted IFRS 9 Financial Instruments. The standard
sets out a single impairment model to ensure expected credit losses
on financial instruments are always recognised as soon as they are
forecast.
The Group has assessed the credit risk around the financial
instruments and expected credit losses under IFRS 9 compared the
credit loss provisioning method formerly used under IAS 39
Financial Instruments: Recognition and Measurement and has not
found a material difference. As a result prior year balances have
not been restated and there has been no material impact on the
Group's Income statement, Balance sheet and Cash flow
statement.
New accounting standards not yet adopted
IFRS 16 Leases
IFRS 16 Leases is effective for annual reporting periods
beginning on or after 1 January 2019 and replaces IAS 17 Leases.
The Group will adopt IFRS 16 from 1 April 2019. For lessees, the
new standard requires leases to be recognised on the balance sheet
as a right-of-use asset (representing the right to use the leased
item) and a liability, representing the obligation to make future
lease payments. Under IFRS 16, the operating lease expense will be
replaced with a depreciation charge for the right-of-use asset and
interest expense on the lease liability.
The Group plans on adopting the modified retrospective approach.
The estimated impact to profit before tax for the 2020 financial
year is a reduction of between GBPnil and GBP1.0 million.
Non--current assets are expected to increase by GBP31.0 million and
gross liabilities are expected to increase by GBP35.0 million. The
Group has elected not to recognise right of use assets and lease
liabilities for short-term leases or low-value assets and will
continue to expense the lease payments associated with these leases
on a straight-line basis over the term of the lease.
To be
Effective adopted
New and amended accounting standards endorsed by the date by the
EU Group
---------------------------------------------------------- --------- -------
IFRS 16 Leases 1 Jan 1 Apr
2019 2019
IFRIC 23 Uncertainty over Income Tax Treatments 1 Jan 1 Apr
2019 2019
Prepayment features with Negative Compensation (Amendments 1 Jan 1 Apr
to IFRS 9) 2019 2019
Long-term Interests in Associates and Joint Ventures 1 Jan 1 Apr
(Amendments to IAS 28) 2019 2019
Annual Improvements to IFRSs 2015-2017 Cycle
(Amendments to IFRSs 3 & 11, IASs 12 & 23) 1 Jan 1 Apr
2019 2019
---------------------------------------------------------- --------- -------
No other standards, interpretations or amendments, other than
IFRS 16, which have been issued but are not yet effective are
expected to significantly impact the Group's results or assets and
liabilities and are not expected to require significant
disclosure.
2 Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 1, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
The estimates and assumptions that have had a significant
bearing on the financial statements in the current year or could
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Critical judgements in applying the Group's accounting
policies
The following are the critical judgements that the Directors
have made in the process of applying the Group's accounting
policies and that have the most significant effect on the amounts
recognised in the financial statements.
Consolidation of less than 100% owned subsidiaries
Where the Company owns less than 100% of the share capital and
voting rights of Group companies, the decision of whether or not
the investee should be treated as a subsidiary and consolidated in
full in the Group accounts requires judgement. Management consider
the individual facts and circumstances relating to the ability to
control and benefit from the risks and rewards of investee trading
in determining the appropriate treatment, which is then adopted
consistently and reviewed annually for any changes in these facts
and circumstances.
Key sources of estimation uncertainty
There are no key assumptions concerning the future, and other
key sources of estimation uncertainty at the balance sheet date,
that have significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial
year. Other sources of estimation uncertainty are discussed in the
strategic report and below.
Provision for slow moving inventory
The Group has guidelines for providing for inventory which may
be sold below cost due to its age or condition. Directors assess
the inventory at each location and in some cases decide that there
are specific reasons to provide more than the guideline levels, or
less if there are specific action plans in place which mean the
guideline provision level is not required. Determining the level of
inventory provision requires an estimation of likely future
realisable value of the inventory in various time frames and
comparing with the cost of holding stock for those time frames.
Regular monitoring of stock levels, the ageing of stock and the
level of the provision is carried out by the Directors. Details of
inventory carrying values are provided in note 14. At the year end
the Group has provisions of GBP8,827,000 (2018: GBP7,757,000) over
the total inventory value.
Share--based payments
The Directors are required to estimate the fair value of the
awards granted and the quantum of awards expected to vest. This
entails the use of pricing models for the fair value calculation
and the Directors use specialist advisers to support on this
calculation where the pricing model is complex. The estimate of
awards expected to vest requires judgement and is reliant on the
accuracy of management forecasts. Details of the key assumptions
made in the measurement of share--based payments are provided in
note 25.
Taxation
There are many transactions and calculations for which the
ultimate tax determination is uncertain. Significant judgement is
required in determining the Group's tax assets and liabilities.
Deferred tax assets have been recognised to the extent they are
recoverable based on profit projections for future years. Income
tax liabilities for anticipated issues have been recognised based
on estimates of whether additional tax will be due. Notwithstanding
the above, the Group believes that it will recover tax assets and
has adequate provision to cover all risks across all business
operations. See note 13 for more details.
3 Financial risk management
See note 26 for additional information about the Group's
exposure to each of these risks and the ways in which they are
managed. Below are key financial risk management areas:
-- currency risk is mitigated by a mixture of forward contracts,
spot currency purchases and natural hedges;
-- liquidity risk is managed by monitoring daily cash balances,
weekly cash flow forecasts, regular reforecasting of monthly
working capital and regular dialogue with the Group's banks;
and
-- credit risk is managed by constant review of key debtors and banking with reputable banks.
4 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, seasonal décor, design--led
giftware, and 'not--for--resale' consumables.
For management purposes the Group is organised into four
geographic business units.
The results in this note are allocated based on the region in
which the businesses are located; this reflects the Group's
management and internal reporting structure. The Group has a China
factory and Asian procurement operations which are overseen by our
UK operational management team and we therefore continue to include
UK owned and managed Asian operations within the internal reporting
of the UK operations, comprising one operating segment.
Since the acquisition of Impact Innovations, Inc. the Group now
has a second China factory (wholly owned) and Asian procurement
which form part of Impact's operations and therefore is included in
the overall US segment.
Inter--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 adjusted
operating profit before management recharges. Interest and tax are
managed on a Group basis and not split between reportable segments.
However the related financial liability and cash has been allocated
out into the reportable segments as this is how they are managed by
the Group.
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 is offset
within 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
&
UK(a) Europe USA(a) Australia eliminations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Year ended 31 March
2019
Revenue - external 123,006 63,188 223,101 39,067 - 448,362
- inter segment 4,112 1,377 - - (5,489) -
------------------------ -------- --------- --------- --------- ------------ --------
Total segment revenue 127,118 64,565 223,101 39,067 (5,489) 448,362
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Segment result before
exceptional items,
acquisition
amortisation, LTIP
charges
and management
recharge 8,073 8,871 15,522 4,278 (4,098) 32,646
Exceptional items (8,274)
Acquisition
amortisation (1,609)
LTIP charges (3,005)
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Operating profit 19,758
Finance expenses (2,318)
Finance expense treated
as exceptional (158)
Income tax (4,031)
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Profit for the year
ended
31 March 2019 13,251
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Balances at 31 March
2019
Segment assets 188,766 19,240 36,306 13,776 3,610 261,698
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Segment liabilities (28,295) (10,457) (35,931) (7,396) (4,062) (86,141)
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
Capital expenditure
additions
- property, plant and
equipment 2,635 901 1,780 383 - 5,699
- property, plant and
equipment
on acquisition of
business - - 9,313 - - 9,313
- intangible assets 285 12 1,893 - - 2,190
- intangible assets on
acquisition of
business - - 47,042 - - 47,042
Depreciation 2,333 920 1,452 623 - 5,328
Amortisation 167 35 1,781 326 - 2,309
----------------------- ---------------------- -------- --------- --------- --------- ------------ --------
(a) Including Asian manufacturing and sourcing.
Central
&
UK(a) Europe USA Australia eliminations Group
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, acquisition
amortisation,
LTIP charges and
management
recharge 7,899 6,697 9,608 2,998 (4,003) 23,199
Exceptional items 539
Acquisition
amortisation (371)
LTIP charges (2,257)
----------------------- ----------------------- --------- -------- --------- --------- ------------ ---------
Operating profit 21,110
Net finance expenses (1,392)
Income tax (5,384)
----------------------- ----------------------- --------- -------- --------- --------- ------------ ---------
Profit for 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 2,786 333 795 - 7,992
- property, plant and
equipment
on acquisition of
business - - -- 798 - 798
- intangible assets 109 50 1,218 - - 1,377
- intangible assets on
acquisition of business - - - 2,624 - 2,624
Depreciation 2,229 722 871 523 - 4,345
Amortisation 219 27 474 98 - 818
----------------------- ----------------------- --------- -------- --------- --------- ------------ ---------
(a) Including Asian manufacturing and sourcing.
-- Capital expenditure consists of additions of property, plant
and equipment, intangible assets and goodwill.
-- The Group has one customer that accounts for 18% of the total
Group revenues. In the year ended 31 March 2019 total sales to that
customer were GBP79,138,000 (2018: GBP15,978,000). This customer
falls solely within the USA operating segment above. No other
single customer accounts for over 10% of total sales.
-- The assets and liabilities that have not been allocated to
segments consist of deferred tax assets GBP3,160,000 (2018:
GBP2,663,000), income tax payable of GBP3,370,000 (2018:
GBP3,364,000) and deferred tax liability GBP692,000 (2018:
GBP373,000).
Geographical information
The Group's information about its segmental assets (non-current
assets excluding deferred tax assets and other financial assets)
and revenue by customer destination and product are detailed
below:
Non-current assets
--------------------
2019 2018
GBP000 GBP000
------------ ---------- --------
UK and Asia 40,539 40,126
USA 61,559 9,076
Europe 16,350 16,610
Australia 5,077 6,234
------------ ---------- --------
123,525 72,046
------------ ---------- --------
Revenue by customer destination
2019 2018 2019 2018
GBP000 GBP000 % %
------------------ ------- ------- ---- ----
UK 97,260 89,292 22 27
USA 235,092 136,782 53 42
Europe 68,314 58,080 15 18
Australia 37,707 36,972 8 11
Rest of the world 9,989 6,390 2 2
------------------ ------- ------- ---- ----
448,362 327,516 100 100
------------------ ------- ------- ---- ----
All revenue arose from the sale of goods.
5 Expenses and auditor's remuneration
Included in profit are the following charges/(credits):
2019 2018
Note GBP000 GBP000
-------------------------------------------------- ---- ------ ------
Depreciation 11 5,328 4,345
Loss on sales of property, plant and equipment
and intangible assets 325 17
Release of deferred grant income 7 (247) (99)
Amortisation of intangible assets 12 2,309 818
Operating lease payment - minimum lease payment 27 4,865 5,289
Sub-lease rental income 7 (583) (710)
Write down of inventories to net realisable value 14 4,173 5,491
Reversal of previous write downs on inventory 14 (478) (197)
Loss on foreign exchange 814 373
-------------------------------------------------- ---- ------ ------
Auditor's remuneration:
2019 2018
GBP000 GBP000
------------------------------------------------------- ------ ------
Amounts receivable by auditor and its associates in
respect of:
Audit of these financial statements 90 37
Audit of financial statements of subsidiaries pursuant
to legislation
- Overseas subsidiaries 326 184
- UK subsidiaries 66 51
Tax services 40 31
Services relating to corporate finance transactions - 54
Other services 10 5
------------------------------------------------------- ------ ------
6 Staff numbers and costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
Number of employees
---------------------
2019 2018
---------------------------- ---------- ---------
Selling and administration 641 520
Production and distribution 1,723 1,434
---------------------------- ---------- ---------
2,364 1,954
---------------------------- ---------- ---------
The aggregate payroll costs of these persons were as
follows:
2019 2018
Note GBP000 GBP000
------------------------------------------------ ---- ------ ------
Wages and salaries 62,083 51,283
Share-based payments - Long Term Incentive Plan 25 3,005 2,257
Social security costs 4,795 3,950
Other pension costs 3,532 3,634
------------------------------------------------ ---- ------ ------
73,415 61,124
------------------------------------------------ ---- ------ ------
7 Other operating income
2019 2018
Note GBP000 GBP000
--------------------------------------------------- ---- ------ ------
Grant income received 247 99
Sub-lease rentals credited to the income statement 583 710
Other (210) (424)
--------------------------------------------------- ---- ------ ------
620 385
Exceptional items 10 - 1,092
--------------------------------------------------- ---- ------ ------
620 1,477
--------------------------------------------------- ---- ------ ------
8 Finance expenses
2019 2018
GBP000 GBP000
------------------------------------------------------- ------ ------
Interest payable on bank loans and overdrafts 2,334 946
Other similar charges (74) 332
Finance charges in respect of finance leases - 2
Unwinding of fair value discounts 86 80
------------------------------------------------------- ------ ------
Interest payable under the effective interest method 2,346 1,360
Derivative financial instruments at fair value through
the income statement (28) 32
------------------------------------------------------- ------ ------
2,318 1,392
Exceptional items 158 -
------------------------------------------------------- ------ ------
2,476 1,392
------------------------------------------------------- ------ ------
9 Taxation
Recognised in the income statement
2019 2018
GBP000 GBP000
---------------------------------------------------------- ------- ------
Current tax charge
Current year 4,770 3,355
Adjustments for previous periods 38 128
---------------------------------------------------------- ------- ------
4,808 3,483
---------------------------------------------------------- ------- ------
Deferred tax charge/(credit)
Origination and reversal of temporary differences (617) 1,986
Adjustments in respect of previous periods (160) (85)
---------------------------------------------------------- ------- ------
(777) 1,901
---------------------------------------------------------- ------- ------
Total tax in income statement 4,031 5,384
---------------------------------------------------------- ------- ------
Total tax charge/(credit) on adjusted items
Total tax on profit before exceptional items, acquisition
amortisation and LTIP costs 7,094 6,188
Total tax on exceptional items (2,038) (238)
Total tax on acquisition amortisation (847) (121)
Total tax on LTIP costs (178) (445)
---------------------------------------------------------- ------- ------
Total tax in income statement 4,031 5,384
---------------------------------------------------------- ------- ------
Reconciliation of effective tax rate
2019 2018
GBP000 GBP000
----------------- ------ ------
Profit
before
tax 17,282 19,718
----------------- ------ ------
Profit
before
tax multiplied
by the
standard
rate of
corporation
tax rate
of 19%
in the
UK (2018:
19%) 3,284 3,746
Effects
of:
Income
not taxable (88) (502)
Expenses
not deductible
for tax
purposes 208 249
Movement
in unrecognised
tax assets 296 270
Effect
of tax
rate changes 33 593
Differences
between
UK and
overseas
tax rates 1,053 1,637
Movement
in uncertain
tax provision (408) (400)
Local
tax incentives (100) (108)
Other
items (125) (90)
Adjustments
in respect
of previous
periods (122) (11)
----------------- ------ ------
Total
tax in
income
statement 4,031 5,384
----------------- ------ ------
10 Exceptional items
These include acquisition related costs and reorganisation and
restructuring costs. These items are excluded to present the
performance of the business in a consistent manner and in line with
how the business is managed and measured on a day-to-day basis.
They are typically gains or costs associated with events that are
not considered to form part of the core operations, or are
considered to be a 'non-recurring' event (although they may span
several accounting periods).
Acquisition related costs
Costs associated with acquisitions, including legal and advisory
fees on deals, form part of our reported results on an IFRS basis.
These costs, however, in our view form part of the capital
transaction and as they are not attributed to investment value
under IFRS 3, they are excluded from our adjusted measures for the
purposes of reporting underlying results. Similarly, where
acquisitions have employee related payments (exclusive of LTIPs)
which lock in and incentivise legacy talent, we have also excluded
these costs. As these costs are employment linked, they are treated
as an expense and form part of the IFRS results, however, as with
transaction costs, we do not consider these to form part of the
underlying results of the business. In accordance with IFRS 3, on
acquisition, businesses need to be fair valued, which can result in
an uplift to stock on hand relating to sales orders already
attached to the acquired stock. This uplift will distort the
margins associated with the stock, and typically unwinds quickly as
stock is sold soon after acquisition. The unwind of the stock
uplift is excluded
from our adjusted results as we deem this to be a cost of the
acquisition.
Reorganisation and restructuring costs
In order to maximise efficiencies, as well as recognise
synergies from acquisitions, certain projects are undertaken to
achieve these. These are projects outside of the normal operations
of the business and typically are very sizeable in terms of costs.
This is particularly relevant during a large scale restructuring
that can result in some disruption to the normal business (for
example manufacturing patterns) leading to operational
inefficiencies occurring in this time frame. If we deem this to be
the case, we will present the details and associated costs of the
projects separately in our financial statements and exclude them
from our adjusted measures.
Other
Cost of Selling Admin finance
sales expenses expenses expenses Total
Year ended 31 March 2019 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ------- -------- -------- -------- --------
Transaction costs(a) - - (2,254) (158) (2,412)
UK unification(b) - - (428) - (428)
US restructure(c) (1,748) (222) (3,622) - (5,592)
---------------------------- ------- -------- -------- -------- --------
Total before tax (1,748) (222) (6,304) (158) (8,432)
---------------------------- ------- -------- -------- -------- --------
Income tax credit 2,038
---------------------------- ------- -------- -------- -------- --------
Exceptional items after tax (6,394)
---------------------------- ------- -------- -------- -------- --------
(a) Transaction costs relating predominantly to the acquisition of Impact Innovations Inc.
(b) Remaining unification cost associated with relocating a part
of our UK business to another site and associated redundancies with
the move.
(c) The restructure of our US operations including the profit on
sale of our manufacturing facility in Midway and closure costs. The
cost of relocating equipment and personnel to Memphis, Tennessee
along with manufacturing inefficiencies associated with the start
up of converting operations. The charge relating to the unwind of
the inventory fair value adjustment arising on acquisition and
final charges in relation to the Lang integration.
Other
Admin operating
expenses income Total
Year ended 31 March 2018 GBP000 GBP000 GBP000
---------------------------- -------- --------- ------
Transaction costs(d) (553) - (553)
Sale of Hirwaun property(e) - 1,092 1,092
---------------------------- -------- --------- ------
Total before tax (553) 1,092 539
---------------------------- -------- --------- ------
Income tax credit 238
---------------------------- -------- --------- ------
Exceptional items after tax 777
---------------------------- -------- --------- ------
(d) Transaction costs relate predominantly to the acquisition of
the trade and certain assets of Biscay Greetings Pty Limited
(Biscay) and of the remaining costs from the acquisition of
Lang.
(e) The exceptional gain on the sale of the Hirwaun property in
Wales, comprises of the sale proceeds net of any related costs
including restructuring for the rationalisation of operations to
suit the revised footprint.
The cash flow effect on exceptional items
There was GBP287,000 net outflow on the current year's cash flow
(2018: GBP1,637,000 inflow) which included GBP473,000 (2018:
GBP350,000) of outflow deferred from last year.
11 Property, plant and equipment
Land and buildings Plant Fixtures Motor
and and
--------------------
Freehold Leasehold equipment fittings vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- --------- --------- --------- -------- -------- --------
Cost
Balance at 1 April 2017 21,393 10,501 48,172 3,460 955 84,481
Additions 432 138 6,588 804 30 7,992
Disposals (1,903) - (4,148) (216) (18) (6,285)
Additions on acquisition
of business - - 424 27 347 798
Transfers to computer software - - - 294 - 294
Effect of movements in foreign
exchange 174 (1,006) (963) (128) (60) (1,983)
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 1 April 2018 20,096 9,633 50,073 4,241 1,254 85,297
Additions 1,078 126 3,712 550 233 5,699
Disposals (405) (8,252) (352) (285) (351) (9,645)
Additions on acquisition
of business 462 - 8,851 - - 9,313
Transfers between fixed asset
categories (57) 83 (43) 17 - -
Transfers to computer software - - (620) - - (620)
Effect of movements in foreign
exchange (127) 636 351 62 (8) 914
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 31 March 2019 21,047 2,226 61,972 4,585 1,128 90,958
------------------------------- --------- --------- --------- -------- -------- --------
Depreciation and impairment
Balance at 1 April 2017 (11,511) (5,036) (32,268) (2,575) (484) (51,874)
Depreciation charge for the
year (749) (470) (2,590) (389) (147) (4,345)
Disposals 1,349 - 4,079 205 9 5,642
Transfers to computer software - - - (239) - (239)
Effect of movements in foreign
exchange (67) 447 544 76 18 1,018
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 1 April 2018 (10,978) (5,059) (30,235) (2,922) (604) (49,798)
Depreciation charge for the
year (769) (414) (3,478) (502) (165) (5,328)
Disposals 152 3,769 86 248 84 4,339
Transfers between fixed asset
categories 6 - 35 (41) - -
Transfers to computer software - - 170 - - 170
Effect of movements in foreign
exchange 57 (301) (224) (44) 6 (506)
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 31 March 2019 (11,532) (2,005) (33,646) (3,261) (679) (51,123)
------------------------------- --------- --------- --------- -------- -------- --------
Net book value
Balance at 31 March 2019 9,515 221 28,326 1,324 449 39,835
------------------------------- --------- --------- --------- -------- -------- --------
At 31 March 2018 9,118 4,574 19,838 1,319 650 35,499
------------------------------- --------- --------- --------- -------- -------- --------
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.
Security
All freehold properties are subject to a fixed charge.
12 Intangible assets
Computer Trade Customer Other
Goodwill software names lists intangibles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- -------- -------- ------ -------- ----------- --------
Cost
Balance at 1 April 2017 42,474 4,151 320 680 133 47,758
Additions - 1,377 - - - 1,377
Additions on acquisition
of businesses 1,703 - 197 724 - 2,624
Transfer from fixed assets - (294) - - - (294)
Disposals - (40) - - - (40)
Effect of movements in foreign
exchange (809) (325) (44) (110) - (1,288)
------------------------------- -------- -------- ------ -------- ----------- --------
Balance at 1 April 2018 43,368 4,869 473 1,294 133 50,137
Additions - 2,190 - - - 2,190
Additions on acquisition
of businesses 28,042 - 1,846 17,154 - 47,042
Transfer from fixed assets - 620 - - - 620
Disposals (33) (940) - - - (973)
Effect of movements in foreign
exchange 404 246 20 44 - 714
------------------------------- -------- -------- ------ -------- ----------- --------
Balance at 31 March 2019 71,781 6,985 2,339 18,492 133 99,730
------------------------------- -------- -------- ------ -------- ----------- --------
Amortisation and impairment
Balance at 1 April 2017 (10,443) (3,204) (80) (260) (90) (14,077)
Amortisation for the year - (447) (120) (233) (18) (818)
Impairments (36) - - - - (36)
Transfers from fixed assets - 239 - - - 239
Disposals - 39 - - - 39
Effect of movements in foreign
exchange 785 228 14 36 - 1,063
------------------------------- -------- -------- ------ -------- ----------- --------
Balance at 1 April 2018 (9,694) (3,145) (186) (457) (108) (13,590)
Amortisation for the year - (700) (392) (1,214) (3) (2,309)
Transfers from fixed assets - (170) - - - (170)
Disposals 33 609 - - - 642
Effect of movements in foreign
exchange (475) (101) (11) (26) - (613)
------------------------------- -------- -------- ------ -------- ----------- --------
Balance at 31 March 2019 (10,136) (3,507) (589) (1,697) (111) (16,040)
------------------------------- -------- -------- ------ -------- ----------- --------
Net book value
------------------------------- -------- -------- ------ -------- ----------- --------
Balance at 31 March 2019 61,645 3,478 1,750 16,795 22 83,690
------------------------------- -------- -------- ------ -------- ----------- --------
At 31 March 2018 33,674 1,724 287 837 25 36,547
------------------------------- -------- -------- ------ -------- ----------- --------
The aggregate carrying amounts of goodwill allocated to each
geographical segment are as follows:
2019 2018
GBP000 GBP000
------------ ------ ------
UK and Asia 25,600 25,600
Europe 5,248 5,329
USA 28,042 -
Australia 2,755 2,745
------------ ------ ------
Total 61,645 33,674
------------ ------ ------
Impairment
The Group tests goodwill each 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 cash--generating
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, which are based on past experience and future
expectations. The Group then extrapolates cash flows for the
following five years plus a terminal value based on a conservative
estimate of market growth of 0.5% (2018: between 0.5% and
2.0%).
Generally the Group's post tax weighted average cost of capital
('WACC') is 8% and this has been compared to other similar
companies and is felt to be appropriate.
The cash--generating units used the following pre--tax discount
rates which are derived from an estimate of the Group's future WACC
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:
2019 2018
------------ ----- -----
UK and Asia 10.9% 10.4%
Europe 11.7% 10.7%
USA 12.5% -
Australia 13.4% 12.4%
------------ ----- -----
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 sensitivity assessment; with these
changes in assumptions there is still considerable headroom and no
indication of impairment.
13 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Property, Tax losses Share--based Other timing
plant
and equipment carried payments differences(a) Total
forward
-------------------------- ------------- ---------- ------------ -------------- -------
At 1 April 2018 (1,137) 584 1,943 900 2,290
(Charge)/credit to income
statement (2,653) 1,103 1,004 1,325 779
(Charge)/credit to equity (115) 187 (358) 135 (151)
-------------------------- ------------- ---------- ------------ -------------- -------
At 31 March 2019 (3,905) 1,874 2,589 2,360 2,918
-------------------------- ------------- ---------- ------------ -------------- -------
Deferred tax liabilities (4,159) - - (205) (4,364)
Deferred tax assets 254 1,874 2,589 2,565 7,282
-------------------------- ------------- ---------- ------------ -------------- -------
(3,905) 1,874 2,589 2,360 2,918
-------------------------- ------------- ---------- ------------ -------------- -------
Property, Tax losses Share--based Other timing
plant
and equipment carried payments differences(a) Total
forward
-------------------------- ------------- ---------- ------------ -------------- -------
At 1 April 2017 (1,173) 1,794 1,949 2,303 4,873
(Charge)/credit to income
statement 75 (1,152) 150 (974) (1,901)
(Charge)/credit to equity (39) (58) (156) (216) (469)
Acquisitions - - - (213) (213)
-------------------------- ------------- ---------- ------------ -------------- -------
At 31 March 2018 (1,137) 584 1,943 900 2,290
-------------------------- ------------- ---------- ------------ -------------- -------
Deferred tax liabilities (1,318) - - (140) (1,458)
Deferred tax assets 181 584 1,943 1,040 3,748
-------------------------- ------------- ---------- ------------ -------------- -------
(1,137) 584 1,943 900 2,290
-------------------------- ------------- ---------- ------------ -------------- -------
(a) Other timing differences include a closing balance of
GBP905,000 (2018: GBP819,000) in respect of provision for doubtful
debts and GBP1,851,000 (2018: GBP1,086,000) provision for
inventory.
Deferred tax is presented net on the balance sheet in so far as
a right of offset exists. The net deferred tax asset is
GBP3,610,000 (2018: GBP2,663,000) and the net deferred tax
liability is GBP692,000 (2018: GBP373,000).
The deferred tax asset in respect of tax losses carried forward
at 31 March 2019 of GBP1,874,000 (2018: GBP584,000) comprises UK
tax losses of GBP991,000 (2018: GBP440,000) and US losses of
GBP883,000 (2018: GBP144,000). The majority of the US tax losses
carried forward will become irrecoverable in March 2029. 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. 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 UK losses of
GBP574,000 (2018: GBP310,000), GBP369,000 (2018: GBP490,000) in
respect of China, and GBP235,000 (2018: GBP221,000) in respect of
Asia.
A deferred tax liability of GBP237,000 (2018: GBP153,000) has
been recognised based on the tax cost of remitting earnings from
China. No other deferred tax liability has been recognised on
unremitted earnings of the overseas subsidiaries as if all
unremitted earnings were repatriated with immediate effect, no
other tax charge would be payable. A 17% UK corporate tax rate was
substantively enacted on 6 September 2016 and will replace the
current effective rate of 19% from 1 April 2020. A reduction in the
US federal corporation tax rate from 35% to 21% was announced in
2017 and enacted effective 1 January 2018. These rate reductions
have been reflected in the calculation of deferred tax at the
balance sheet date.
Included within current tax liabilities is GBP1,263,000 (2018:
GBP1,670,000) in respect of uncertain tax positions. This consists
of various tax risks which individually are not material. These
risks arise because the Group operates in a complex multinational
tax environment. The position is reviewed on an ongoing basis and
generally these tax positions are released at the end of the
relevant territories' statute of limitations.
A total tax credit of GBP764,000 has been recognised through the
statement of changes in equity in respect of share--based payments
(consisting of a deferred tax debit and current tax credit of
(GBP358,000) and GBP1,122,000 respectively).
There are no deferred tax balances with respect to cash flow
hedges.
14 Inventory
2019 2018
GBP000 GBP000
------------------------------ ------ ------
Raw materials and consumables 19,242 6,325
Work in progress 7,818 8,927
Finished goods 42,511 34,059
------------------------------ ------ ------
69,571 49,311
------------------------------ ------ ------
Of the GBP69,571,000 (2018: GBP49,311,000) stock value
GBP63,001,000 (2018: GBP46,984,000) is held at cost and
GBP6,570,000 (2018: GBP2,327,000) is held at net realisable value.
The write down in the year of inventories to net realisable value
amounted to GBP4,173,000 (2018: GBP5,491,000). The reversal of
previous write downs amounted to GBP478,000 (2018: GBP197,000). The
reversal is due to the inventory being either used or sold.
Materials, consumables, changes in finished goods and work in
progress recognised as a cost of sale amounted to GBP323,486,000
(2018: GBP228,776,000).
15 Trade and other receivables
2019 2018
GBP000 GBP000
------------------------------- ------ ------
Trade receivables 39,778 32,490
Prepayments and accrued income 4,822 1,553
Other receivables 171 3,015
VAT receivable 634 311
------------------------------- ------ ------
45,405 37,369
------------------------------- ------ ------
The Group had receivable financing arrangements in the UK,
Europe, the US and Hong Kong. None of this facility was drawn at 31
March 2019 (2018: GBPnil).
Please see note 17 for more details of the banking
facilities.
There are no trade receivables in the current year (2018:
GBPnil) expected to be recovered in more than twelve months.
The Group's exposure to credit and currency risks and provisions
for doubtful debts related to trade and other receivables is
disclosed in note 26.
16 Cash and cash equivalents/bank overdrafts
2019 2018
GBP000 GBP000
-------------------------------------------------- ------ ------
Cash and cash equivalents per cash flow statement 19,458 9,031
-------------------------------------------------- ------ ------
Net cash
2019 2018
Note GBP000 GBP000
----------------------------------------- ---- ------- -------
Cash and cash equivalents 19,458 9,031
Bank loans and overdrafts 17 (2,405) (4,780)
Loan arrangement fees 31 105
----------------------------------------- ---- ------- -------
Net cash as used in the financial review 17,084 4,356
----------------------------------------- ---- ------- -------
The Group's exposure to interest rate risk and sensitivity
analysis for financial assets and liabilities are disclosed in note
26.
The bank loans and 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. See note 17 for further details of the
Group's loans and overdrafts.
17 Loans and borrowings
This note provides information about the contractual terms of
the Group's interest--bearing loans and borrowings. For more
information about the Group's exposure to interest rate and foreign
currency risk, see note 26.
2019 2018
GBP000 GBP000
----------------- ------ ------
Non-current
liabilities
Secured
bank loans 1,421 3,791
Loan arrangement
fees - (10)
----------------- ------ ------
1,421 3,781
----------------- ------ ------
Current
liabilities
Current
portion
of secured
bank loans 984 989
Loan arrangement
fees (31) (95)
----------------- ------ ------
953 894
----------------- ------ ------
Terms and debt repayment schedule
2019 2018
GBP000 GBP000
---------------- ------ ------
Due within
one year:
Bank loans
and borrowings 984 989
Due between
one and
two years:
Secured
bank loans 984 989
Due between
two and
five years:
Secured
bank loans 437 2,802
---------------- ------ ------
2,405 4,780
---------------- ------ ------
Changes in liabilities from financing activities
Loan
Loans arrangement
and
borrowings fees
GBP000 GBP000
---------------------------------------- ---------- -----------
Balance at 1 April 2017 - (271)
Changes from financing cash flows
New bank loans raised 5,108 -
Repayment of borrowings (165) -
New loan arrangement fees - (111)
Other changes
Amortisation of loan arrangement fees - 277
Effect of movements in foreign exchange (163) -
---------------------------------------- ---------- -----------
Balance at 1 April 2018 4,780 (105)
Changes from financing cash flows
Repayment of borrowings (2,350) -
New loan arrangement fees - (30)
Other changes
Amortisation of loan arrangement fees - 104
Effect of movements in foreign exchange (25) -
---------------------------------------- ---------- -----------
Balance at 31 March 2019 2,405 (31)
---------------------------------------- ---------- -----------
Secured bank loans
The wholly owned Group during the year was funded by HSBC. The
facilities comprise:
-- a three--year revolving credit facility ('RCF') for GBP28
million which is sufficient to fund the Group's core financing
requirements;
-- receivables financing arrangements for an initial term of
three years in the UK, Europe, USA and Hong Kong; and
-- a further flexible 'working capital' RCF with availability
varying from month to month to meet requirements during the
seasonal inventory build. This is reviewed annually but capable of
extension to match the maturity of the core RCF.
While the facilities have no overall limit in total the Group,
estimates the effectively available facilities at over GBP139.0
million, more than sufficient to cover the peak requirements. The
facilities have flexible elements within them that mean they can
grow with the Group's requirements.
The facility was capable of extension for two further years at
the same terms should the parties agree. The second one year
extension was agreed in May 2018. This takes the date for maturity
of the facility to May 2021.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on. The RCF facilities are secured
with a fixed and floating charge over all other assets of the
Group. The facilities do not amortise with time.
There are financial covenants, tested quarterly, attached to the
existing facilities as follows:
-- interest cover, being the ratio of earnings before interest,
depreciation and amortisation to interest on a rolling
twelve--month basis; and
-- leverage, being the ratio of debt to pre--exceptional EBITDA
on a rolling twelve-month basis.
There is a further covenant tested monthly in respect of the
working capital RCF by which available asset cover must not fall
below agreed levels relative to amounts drawn.
In January 2018, the Group's Australia business obtained a
secured loan from Westpac of GBP5,108,000 (AU$9,000,000). This is
repayable monthly over a five year period. It is subject to a
variable interest rate linked to the Australian base rate.
GBP2,350,000 was repaid during the year which, along with GBP25,000
exchange movement results in a balance at 31 March 2019 of
GBP2,405,000 (AU$4,400,000).
On 5 June we entered into a new three year Group facility with a
club of five banks chosen to reflect and support the geographical
spread of the Group. HSBC continue to be significant partner and
have been joined in the new facility by NatWest, BNP Paribas, Sun
Trust and PNC.
The new Group facilities, which run to May 2022, comprises
of:
-- a revolving credit facility ('RCF A') of $80.0 million;
-- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to GBP85.0 million.
This RCF is flexed to meet our working capital requirements during
those months when inventory is being built within our annual
business cycle and is nil when not required, minimising carry
costs; and
-- the existing invoice financing arrangements in Hong Kong
which will remain in place for a minimum of the first year.
In total, the available facilities at approximately GBP160
million are more than sufficient to cover our peak requirements.
Being partially framed in US dollars they provide a hedge against
currency movements. The facilities, which do not amortise with
time, include an additional uncommitted amount to finance potential
acquisitions.
18 Deferred income
2019 2018
GBP000 GBP000
---------------------------------------- ------ ------
Included within non-current liabilities
Deferred grant income 751 998
---------------------------------------- ------ ------
Included within current liabilities
Deferred grant income 99 99
---------------------------------------- ------ ------
The deferred grant income is in respect of government grants
relating to the development of the site in Wales.
19 Provisions
Property Other Total
GBP000 GBP000 GBP000
---------------- -------- ------ ------
Balance
at 1 April
2018 986 337 1,323
Additions
on acquisition
of business 2,197 - 2,197
Reclassified
from other
creditors 180 - 180
Provisions
made in
the year 67 335 402
Provisions
released
during
the year (9) (340) (349)
Unwinding
of fair
value
discounts 86 - 86
Provisions
utilised
during
the year (71) - (71)
Effect
of movements
in foreign
exchange (2) (5) (7)
---------------- -------- ------ ------
Balance
at 31
March
2019 3,434 327 3,761
---------------- -------- ------ ------
2019 2018
GBP000 GBP000
------------ ------ ------
Non-current 2,671 894
Current 1,090 429
------------ ------ ------
3,761 1,323
------------ ------ ------
The property provision represents the estimated reinstatement
cost of six of the Group's leasehold properties under fully
repairing leases and a provision for an onerous lease for one of
those properties. A professional valuation was performed during
2016 for one of the leasehold properties and the provision was
reassessed and is stated after discounting. GBP935,000 (2018:
GBP882,000) of the non--current balance relates to a lease expiring
in 2036; the balance relates to items between one and five
years.
Other provisions represent management's best estimate in respect
of minor claims arising in the normal course of business.
20 Other financial liabilities
2019 2018
GBP000 GBP000
----------------------------------------------------------- ------ ------
Included within non-current liabilities
Other creditors and accruals 1,817 1,440
----------------------------------------------------------- ------ ------
Included within current liabilities
Other creditors and accruals 14,712 18,832
Interest rate swaps and forward foreign currency contracts
carried at fair value through the income statement - 40
Interest rate swaps and forward foreign exchange contracts
carried at fair value through the hedging reserve 2 116
----------------------------------------------------------- ------ ------
14,714 18,988
----------------------------------------------------------- ------ ------
21 Trade and other payables
2019 2018
GBP000 GBP000
---------------------------------------------------------- ------ ------
Trade payables 57,336 37,056
Other payables including income taxes and social security 947 817
VAT payable 280 884
---------------------------------------------------------- ------ ------
58,563 38,757
---------------------------------------------------------- ------ ------
22 Share capital
Authorised share capital at 31 March 2019 and 2018 was
GBP6,047,443 divided into 120,948,860 ordinary shares of 5p
each.
Ordinary shares
-----------------
In thousands of shares 2019 2018
---------------------------------------------------- -------- -------
In issue at 1 April 63,890 62,642
Options exercised during the year 1,655 1,248
Share issue as part of the consideration for Impact
Innovations, Inc. 3,017 -
Share placing 9,804 -
---------------------------------------------------- -------- -------
In issue at 31 March - fully paid 78,366 63,890
---------------------------------------------------- -------- -------
2019 2018
GBP000 GBP000
----------------------------------- ------ ------
Allotted, called up and fully paid
Ordinary shares of GBP0.05 each 3,918 3,194
----------------------------------- ------ ------
Of the 78,366,000 shares in the Company, 31,000 (2018: 31,000)
are held by the International Greetings Employee Benefit Trust.
Share options exercised during the year resulted in 200,000
ordinary shares being issued (2018: 510,000) which generated cash
proceeds of GBP28,000 (2018: GBP71,000).
LTIP options exercised during the year resulted in 1,455,000
ordinary shares being issued at nil cost (2018: 738,000 ordinary
shares being issued at nil cost).
On 31 August 2018, the Group acquired Impact Innovations, Inc.
Part of the consideration was settled by 3,017,000 shares.
On 29 August 2018, the Group raised GBP31,926,000 (before
expenses) by way of a share placing of 6,260,000 new ordinary
shares at a price of GBP5.10 per share. On 19 September 2018, the
Group raised an additional GBP18,074,000 (before expenses)
by way of a share placing of 3,544,000 new ordinary shares at a
price of GBP5.10 per share.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
23 Earnings per share
2019 2018
-------------- --------------
Diluted Basic Diluted Basic
pence pence pence pence
---------------------------------------------- ------- ----- ------- -----
Adjusted earnings per share excluding
exceptional items, acquisition amortisation
and LTIP charges(a) 29.3 29.6 22.1 22.7
Cost per share on exceptional items (8.6) (8.7) 1.4 1.4
---------------------------------------------- ------- ----- ------- -----
Adjusted earnings per share excluding
acquisition amortisation and LTIP charges(b) 20.7 20.9 23.5 24.1
Cost per share on acquisition amortisation (0.9) (0.9) (0.3) (0.2)
---------------------------------------------- ------- ----- ------- -----
Adjusted earnings per share excluding
LTIP charges(c) 19.8 20.0 23.2 23.9
Cost per share on LTIP charge (3.8) (3.8) (2.7) (2.8)
---------------------------------------------- ------- ----- ------- -----
Earnings per share(d) 16.0 16.2 20.5 21.1
---------------------------------------------- ------- ----- ------- -----
(a) Excludes exceptional items, acquisition amortisation and
LTIP charges of GBP12,891,000 (2018: GBP1,889,000) and tax relief
attributable to those items of GBP3,016,000 (2018: GBP765,000), to
give adjusted profit (including the effect of non-controlling
interest) of GBP21,800,000 (2018: GBP14,669,000).
(b) Excludes acquisition amortisation and LTIP charges of
GBP4,459,000 (2018: GBP2,589,000) and tax relief attributable to
those items of GBP978,000 (2018: GBP554,000), to give adjusted
profit (including the effect of non-controlling interest) of
GBP15,406,000 (2018: GBP15,580,000).
(c) Excludes LTIP charges of GBP3,005,000 (2018: GBP2,257,000)
and tax relief attributable to those items of GBP178,000 (2018:
GBP445,000), to give adjusted profit (including the effect of
non-controlling interest) of GBP14,752,000 (2018:
GBP15,357,000).
(d) The basic earnings per share is based on the profit
attributable to equity holders of the Company of GBP11,925,000
(2018: GBP13,545,000) and the weighted average number of ordinary
shares in issue of 73,661,000 (2018: 64,538,000) calculated as
follows:
In thousands of shares 2019 2018
------------------------------------------------------ ------ ------
Issued ordinary shares at 1 April 63,890 62,642
Shares held by Employee Benefit Trust (31) (31)
Shares relating to share options 2,506 1,927
Shares issued as part of the consideration for Impact 1,752 -
Shares issued in respect of share placing 5,544 -
------------------------------------------------------ ------ ------
Weighted average number of shares at 31 March 73,661 64,538
------------------------------------------------------ ------ ------
Diluted earnings per share
The average number of share options under the Executive share
options 2008 scheme outstanding in the year is nil (2018: 612,795
at an average exercise price of 14p). The average number of share
options under the LTIP scheme outstanding in the year is 1,366,118
(2018: 1,371,743) at nil cost. The diluted earnings per share is
calculated assuming all these options were exercised, and taking
into account LTIP awards whose specified performance conditions
were satisfied at the end
of the reporting period of 723,632 share options. At 31 March
2019 the diluted number of shares was 74,385,000
(2018: 66,358,000).
24 Dividends paid and proposed
A final dividend for year ending 31 March 2018 of 4.00p (for
year ending 31 March 2017: 2.75p) was paid on 6 September 2018. An
interim dividend of 2.50p was paid on 18 January 2019 (2018:
2.00p). The Directors are recommending a final dividend of 6.00p
per share in respect of the year ended 31 March 2019 (2018: 4.00p).
If approved it will be paid in September 2019 to shareholders on
the register at the close of business on 2 August 2019.
2019 2018
----------------- -----------------
Pence Pence
per share GBP000 per share GBP000
----------------------------------------- --------- ------ --------- ------
Final equity dividend for prior year 4.00 2,597 2.75 1,734
Interim equity dividend for current year 2.50 1,956 2.00 1,266
----------------------------------------- --------- ------ --------- ------
Dividends paid in the year 4,553 3,000
----------------------------------------- --------- ------ --------- ------
2019 2018
----------------- -----------------
Pence Pence
Proposed for approval at Annual General per share GBP000 per share GBP000
Meeting
---------------------------------------- --------- ------ --------- ------
Final equity dividend for the current
year 6.00 4,702 4.00 2,556
---------------------------------------- --------- ------ --------- ------
25 Share--based payments
Executive share options 2008
Options to subscribe for ordinary shares of a nominal value of
5p each were granted, pursuant to the Company's approved and
unapproved employee share option schemes, which are exercisable at
dates ranging from December 2011 to December 2018 and at an
exercise price of 14.00p.
There were no performance conditions attached to the approved
options (other than continued employment). For the unapproved
options awarded to Executive Directors there were conditions
related to profitability for the two years to March 2011. These
conditions were fully met.
As at 31 March 2019 there were no approved options outstanding
(2018: 200,000) with a weighted average contractual life of 0 years
(2018: 0.7 years). No share options were granted under this scheme
during the year (2018: nil).
The number and weighted average exercise prices of share options
are as follows:
2019 2018
------------------- -------------------
Weighted Weighted
average average
exercise Number of exercise Number of
price price
pence options pence options
------------------------------ -------- --------- -------- ---------
Outstanding at the beginning
of the period 14.00 200,000 14.00 710,000
Exercised during the period 14.00 (200,000) 14.00 (510,000)
------------------------------ -------- --------- -------- ---------
Outstanding at the end of the
period 14.00 - 14.00 200,000
------------------------------ -------- --------- -------- ---------
Exercisable at the end of the
period 14.00 - 14.00 200,000
------------------------------ -------- --------- -------- ---------
The weighted average share price at the date of exercise of
share options exercised during the period was 547.8p
(2018: 376.0p).
Long Term Incentive Plan
On 31 March 2014, the Group announced the introduction of a new
Long Term Incentive Plan ('LTIP'). Under the LTIP, options to
subscribe for ordinary shares of a nominal value of 5p each
('ordinary shares') may be awarded annually to Executive Board
Directors of the Company, Managing Directors and other selected
senior management team members within the Group. Ordinary shares
only vest to the degree that stretching performance conditions are
met. The maximum dilution under the LTIP is 15% over a ten year
period, excluding an award made under the 2012-2015 LTIP, of which
1,107,652 share options have vested. The scheme rules, which have
been agreed by the Remuneration Committee, include reasonable
provisions in the event of change of control, suitable flexibility
to modify performance targets in specified situations and also a
mechanism for claw-back under certain circumstances. The Board
retains the flexibility to buy ordinary shares through an Employee
Benefit Trust to mitigate future dilution should it need to do
so.
The performance period for each award under the LTIP is three
years. The cost to employees of ordinary shares issued under the
LTIP if the performance criteria are met is nil. In principle the
number of ordinary shares to be granted to each employee under the
LTIP will not be more than 325% in value of the relevant employee's
salary base. The maximum opportunity available is up to 175% for
the CEO and for other Executive Directors up to 150% of base
salary. For the 2018-21 scheme grant B there is an outperformance
element of up to 50% of the initial grant.
Vested LTIP schemes - outstanding options
Exercise
Number of price
ordinary shares pence Exercise dates
------------------------- --------------- -------- -----------------
2014-2017 LTIP scheme 273,921 nil June 2017-August
2024
2015-2018 LTIP scheme 577,832 nil June 2018-January
2028
2016-2019 LTIP scheme(a) 723,632 nil June 2019-January
2028
------------------------- --------------- -------- -----------------
1,575,385
------------------------- --------------- -------- -----------------
All performance criteria have been met for the above
schemes.
2019 2018
---------------------- -------------------
Weighted Weighted
average average
exercise Number of exercise Number of
price price
pence options pence options
------------------------------------- --------- ----------- -------- ---------
Outstanding at the beginning
of the period nil 2,306,034 nil 1,830,351
Options vesting during the period(a) nil 723,632 nil 1,213,794
Exercised during the period nil (1,454,281) nil (738,111)
------------------------------------- --------- ----------- -------- ---------
Outstanding at the end of the
period nil 1,575,385 nil 2,306,034
------------------------------------- --------- ----------- -------- ---------
Exercisable at the end of the
period nil 1,575,385 nil 2,306,034
------------------------------------- --------- ----------- -------- ---------
(a) The shares relating to the 2016-2019 scheme formally vest on
5 June 2019 following the Remuneration Committee and Audit
Committee approval of the results of the year ended 31 March
2019.
Scheme details for LTIPs in vesting periods during the year
During the financial year to 31 March 2019 there were three LTIP
schemes still within their vesting periods (2018: three).
The award and performance targets for these are in the tables
below.
Awards
2016-2019 2017-2020 2018-2021
------------------ ------------------ -----------------
Grant Grant Grant Grant Grant Grant
A B A B A B
------------------------------- --------- ------- -------- -------- -------- -------
Fair value per share (GBP) 1.82 4.04 3.71 4.04 5.55 5.56
Number of participants awarded 23 1 24 2 20 5
Initial award 827,220 72,885 347,101 297,844 151,859 633,372
Dividend shares awarded 23,283 2,714 7,097 7,053 575 2,708
Lapses and forfeitures (202,470) - (48,797) - (18,280) -
------------------------------- --------- ------- -------- -------- -------- -------
Expected to vest as at 31
March 2019 648,033 75,599 305,401 304,897 134,154 636,080
------------------------------- --------- ------- -------- -------- -------- -------
Expected to vest as at 31
March 2018 720,395 75,582 347,278 304,829 - -
------------------------------- --------- ------- -------- -------- -------- -------
The LTIP awards 'Grant A' were made in 2017, 2018 and 2019
respectively. The LTIP awards 'Grant B' were made in January 2018
to Paul Fineman in respect of the 2015-2018 and 2016-2019 schemes
and to Paul Fineman and Giles Willits in respect of the 2017-2020
scheme. There was also a 'Grant B' award in respect of the
2018-2021 scheme to Paul Fineman, Giles Willits, Lance Burn and the
other two member of the Executive Committee in November 2018.
The grant date fair value of the options granted in the year
assuming they are to vest in full is GBP4,364,000 (2018:
GBP3,191,000). The exercise price is nil.
Performance targets
Awards are granted with threshold and stretch targets. 25% of
the weighted awards vests if the relevant threshold target is
achieved with straight-line vesting of the balance up to 100% of
the weighted award if the stretch target is achieved. The EPS(a)
target for the 2016-2019 scheme is the sole exception to this: the
threshold of 7.5% CAGR(b) pays out at 0%, with the award vesting
straight-line from here to 100% at stretch.
The 'Grant B' of the 2018-2021 scheme also includes a super
stretch target which will vest in accordance with the following
bands relating to CAGR(b) in EPS(a) :
-- more than 17% but not more than 20%: 10% x number of shares
in respect of which the base award vests;
-- more than 20% but not more than 22.5%: 22% x number of shares
in respect of which the base award vests;
-- more than 22.5% but not more than 25%: 35% x number of shares
in respect of which the base award vests; and
-- more than 25%: 50% x number of shares in respect of which the base award vests.
Weighting Threshold Stretch Super stretch
-------------- --------- ------------ ------------- -------------
2016-19 scheme
EPS(a) 60% CAGR(b) 7.5% CAGR(a) 17.5%
PBT(a) 40% CAGR(b) 10% CAGR(a) 17.5%
-------------- --------- ------------ ------------- -------------
2017-20 scheme
EPS(a) 100% CAGR(b) 10% CAGR(a) 17.5%
-------------- --------- ------------ ------------- -------------
2018-21 scheme
EPS(a) 100% CAGR(b) 10% CAGR(a) 17.0% CAGR(a) 25.0%
-------------- --------- ------------ ------------- -------------
(a) EPS before LTIP charges and Board approved exceptional items.
(b) CAGR = compound annual growth rate.
Share-based payments charges
The total expense recognised for the period arising from
equity--settled share--based payments are as follows:
2019 2018
GBP000 GBP000
------------------------------------------------------ ------ ------
Charge in relation to the 2015-2018 LTIP scheme - 913
Charge in relation to the 2016-2019 LTIP scheme 637 473
Charge in relation to the 2017-2020 LTIP scheme 1,083 291
Charge in relation to the 2018-2021 LTIP scheme 613 -
------------------------------------------------------ ------ ------
Equity-settled share-based payments 2,333 1,677
Social security charge on 2008 executive share option
awards - 29
Social security charge on LTIP awards 672 551
------------------------------------------------------ ------ ------
Total equity-settled share-based payments 3,005 2,257
------------------------------------------------------ ------ ------
Social security charges on share-based payments
Social security is accrued, where applicable, at a rate which
management expects to be the prevailing rate when
share-based incentives are exercised and is based on the latest
market value of options expected to vest or having
already vested.
The total social security accrual outstanding at the year end in
respect of share-based payment transactions was GBP1,088,000 (2018:
GBP1,197,000).
26 Financial instruments
Derivative financial assets
2019 2018
GBP000 GBP000
------------------------------------------------------ ------ ------
Financial assets designated at fair value through the
income statement 129 113
------------------------------------------------------ ------ ------
a) Fair values of financial instruments
The carrying values for each class of financial assets and
financial liabilities in the balance sheet, which are given below,
are not considered to be materially different to their fair
values.
As at 31 March 2019, the Group had derivative contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of an asset of GBP129,000 (2018:
GBP113,000) and a liability of GBP2,000 (2018: GBP156,000).
Derivative financial instruments
The fair value of forward exchange contracts is assessed using
valuation models taking into account market inputs such as foreign
exchange spot and forward rates, yield curves and forward interest
rates.
Fair value hierarchy
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers and investment securities.
The Group's exposure to credit risk is managed by dealing only
with banks and financial institutions with strong credit ratings.
The Group's financial credit risk is primarily attributable to its
trade receivables.
The main customers of the Group are large and mid--sized
retailers, other manufacturers and wholesalers of greetings
products, service merchandisers and trading companies. The Group
has established procedures to minimise the risk of default of trade
receivables including detailed credit checks undertaken before new
customers are accepted and rigorous credit control procedures after
sale. These processes have proved effective in minimising the level
of provisions for doubtful debts required.
The amounts presented in the balance sheet are net of allowances
for doubtful receivables estimated by the Group's management, based
on prior experience and their assessment of the current economic
environment.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. Therefore, the maximum exposure to credit risk at
the balance sheet date was GBP59,536,000 (2018: GBP44,649,000)
being the total of the carrying amount of financial assets,
excluding equity investments above.
The maximum exposure to credit risk for trade receivables at the
balance sheet date by geographic region was:
2019 2018
GBP000 GBP000
------------ ------ ------
UK and Asia 8,998 10,685
USA 21,614 12,863
Europe 5,303 4,549
Australia 3,863 4,393
------------ ------ ------
39,778 32,490
------------ ------ ------
Credit quality of financial assets and impairment losses
There was no change to the level of provision for doubtful debts
upon the adoption of IFRS 9.
The ageing of trade receivables at the balance sheet date
was:
2019 2018
----------------------------- ------------------------------
Expected Provisions Expected Provisions
for for
loss rate Gross doubtful loss rate Gross doubtful
debts debts
% GBP000 GBP000 % GBP000 GBP000
------------------- --------- ------ ---------- --------- ------- ----------
Not past due 0.6 31,666 (200) - 19,786 -
Past due 0-60 days 5.4 6,854 (369) 1.0 10,404 (100)
61-90 days 18.4 1,601 (295) 14.8 628 (93)
More than 90 days 90.9 5,727 (5,206) 24.7 2,476 (611)
------------------- --------- ------ ---------- --------- ------- ----------
13.2 45,848 (6,070) 2.4 33,294 (804)
------------------- --------- ------ ---------- --------- ------- ----------
There were no unimpaired balances outstanding at 31 March 2019
(2018: GBPnil) where the Group had renegotiated the terms of the
trade receivable.
The provisions for doubtful debts more than 90 days include
GBP3,700,000 relating to doubtful debts in the opening balance
sheet of Impact Innovations, Inc.
Expected credit loss assessment
For the Group's trade receivables, expected credit losses are
measured using a provisioning matrix based on the reason the trade
receivable is past due. The provision matrix rates are based on
actual credit loss experience over the past three years and
adjusted, when required, to take into account current
macro-economic factors. The Group applies experienced credit
judgement that is determined to be predictive of the risk of loss
to assess the expected credit loss, taking into account external
ratings, financial statements and other available information.
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
2019 2018
GBP000 GBP000
---------------------------------------- ------ ------
Balance at 1 April 804 822
Charge for the year 1,697 434
Unused amounts reversed (51) (237)
Acquisition of businesses 3,724 -
Amounts written off (407) (149)
Effects of movement in foreign exchange 303 (66)
---------------------------------------- ------ ------
Balance at 31 March 6,070 804
---------------------------------------- ------ ------
The allowance account for trade receivables is used to record
provisions for doubtful debts unless the Group is satisfied that no
recovery of the amount owing is possible; at that point the amounts
considered irrecoverable are written off against the trade
receivables directly.
c) Liquidity risk
Financial risk management
The Group's policy with regard to liquidity ensures adequate
access to funds by maintaining an appropriate mix of short--term
and longer--term facilities, which are reviewed on a regular basis.
The maturity profile and details of debt outstanding at 31 March
2019 are set out in note 17.
The following are the contractual maturities of financial
liabilities, including estimated interest payments:
Carrying Contractual One year One to Two to More than
two five
amount cash flows or less years years five years
31 March 2019 Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ---- -------- ----------- -------- ------- ------ ----------
Non-derivative financial
liabilities
Secured bank loans
- Australian dollar(a) 2,405 (2,532) (1,069) (1,023) (440) -
Other financial liabilities(b) 20 16,529 (16,529) (14,712) (373) (171) (1,273)
Trade payables(b) 21 57,336 (57,336) (57,336) - - -
Other payables(b) 21 1,227 (1,227) (1,227) - - -
Derivative financial
liabilities
Forward foreign exchange
contracts carried at
fair value through
the hedging reserve(b) 2 (248) (248) - - -
------------------------------- ---- -------- ----------- -------- ------- ------ ----------
77,499 (77,872) (74,592) (1,396) (611) (1,273)
------------------------------- ---- -------- ----------- -------- ------- ------ ----------
(a) Nominal interest rate 4.49%.
(b) Measured at Level 2.
Carrying Contractual One year One to Two to More than
two five
amount cash flows or less years years five years
31 March 2018 Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ---- -------- ----------- -------- ------- ------- ----------
Non-derivative financial
liabilities
Secured bank loans
- Australian dollar(a) 4,780 (5,242) (1,162) (1,121) (2,959) -
Other financial liabilities(b) 20 20,272 (20,272) (18,832) (176) (10) (1,254)
Trade payables(b) 21 37,056 (37,056) (37,056) - - -
Other payables(b) 21 1,701 (1,701) (1,701) - - -
Derivative financial
liabilities
Forward foreign exchange
contracts carried at
fair value through
the income statement(b) 40 - - - - -
Forward foreign exchange
contracts carried at
fair value through
the hedging reserve(b) 116 (5,835) (5,835) - - -
------------------------------- ---- -------- ----------- -------- ------- ------- ----------
63,965 (70,106) (64,586) (1,297) (2,969) (1,254)
------------------------------- ---- -------- ----------- -------- ------- ------- ----------
(a) Nominal interest rate 3.57%.
(b) Measured at Level 2.
The following table shows the facilities for bank loans,
overdrafts, asset--backed loans and revolving credit
facilities:
31 March 2019 31 March 2018
----------------------------------------- -----------------------------------------
Facility Facility
used used
Carrying contractual Facility Total Carrying contractual Facility Total
amount cash flows unused facility amount cash flows unused facility
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- -------- ----------- -------- -------- -------- ----------- -------- --------
Secured bank
loans 2,405 (2,532) - (2,532) 4,780 (5,242) - (5,242)
Corporate revolving
credit facilities -- - (29,602) (29,602) - - (19,622) (19,622)
Receivables
financing -- - (15,967) (15,967) - - (17,981) (17,981)
Bank overdraft -- - (3,249) (3,249) - - (3,654) (3,654)
-------------------- -------- ----------- -------- -------- -------- ----------- -------- --------
2,405 (2,532) (48,818) (51,350) 4,780 (5,242) (41,257) (46,499)
-------------------- -------- ----------- -------- -------- -------- ----------- -------- --------
The receivables financing facilities are dependent upon the
levels of the relevant receivables.
The major bank facilities vary in the year depending on forecast
debt requirements. The maximum limit across all facilities with the
major bank was GBP139.0 million (2018: GBP127.9 million).
At 31 March 2019 the facility amounted to GBP45.6 million (2018:
GBP37.6 million).
Additional facilities were available at other banks of GBP3.2
million (2018: GBP3.7 million).
On 5 June 2019 we entered into a new three year Group banking
facility, see note 17 for more information.
d) Cash flow hedges
The following table indicates the periods in which the cash
flows associated with cash flow hedging instruments are expected to
occur:
Carrying Contractual One year
amount cash flows or less
31 March 2019 GBP000 GBP000 GBP000
---------------------------- -------- ----------- --------
Forward exchange contracts:
Liabilities 2 (248) (248)
---------------------------- -------- ----------- --------
Carrying Contractual One year
amount cash flows or less
31 March 2018 GBP000 GBP000 GBP000
---------------------------- -------- ----------- --------
Forward exchange contracts:
Liabilities 116 (5,835) (5,835)
---------------------------- -------- ----------- --------
The Group has forward currency hedging contracts outstanding at
31 March 2019 designated as hedges of expected future purchases in
US dollars and Chinese renminbi and sales in euros for which the
Group has firm commitments. The forward currency contracts are
being used to hedge the foreign currency risk of the firm
commitments.
The terms of the forward currency hedging contracts have been
negotiated to match the terms of the commitments.
The cash flow hedges of the expected future purchases in 2020
were assessed to be highly effective and as at 31 March 2019 a net
unrealised gain of GBP118,000 (2018: GBP27,000 loss) with related
deferred tax credit of GBPnil (2018: GBPnil) was included in other
comprehensive income in respect of these hedging contracts.
e) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments.
The Group hedges a proportion, as deemed appropriate by
management, of its sales and purchases of inventory denominated in
foreign currency by entering into foreign exchange contracts. Such
foreign exchange contracts typically have maturities of less than
one year.
The Group rarely hedges profit translation exposure, since such
hedges provide only a temporary deferral of the effects of movement
in foreign exchange rates. Similarly, the Group does not hedge its
long--term investments in overseas assets.
However, the Group holds loans that are denominated in the
functional currency of certain overseas entities.
The Group's exposure to foreign currency risk is as follows.
This is based on the carrying amount for monetary financial
instruments, except derivatives, when it is based on notional
amounts.
Sterling Euro US dollar Other Total
31 March 2019 Notes GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ----- -------- ------- --------- ------- --------
Cash and cash equivalents 16 65,845 (4,617) (46,596) 4,826 19,458
Trade receivables 15 7,731 5,403 22,793 3,851 39,778
Other receivables 966 22 1,651 40 2,679
Financial assets at fair
value through the income
statement 110 - - 19 129
Secured bank loans 17 - - - (2,405) (2,405)
Loan arrangement fees 17 31 - - - 31
Trade payables 21 (10,494) (7,013) (30,378) (9,451) (57,336)
Other payables 21 (541) (409) - (277) (1,227)
-------------------------- ----- -------- ------- --------- ------- --------
Balance sheet exposure 63,648 (6,614) (52,530) (3,397) 1,107
-------------------------- ----- -------- ------- --------- ------- --------
Sterling Euro US dollar Other Total
31 March 2018 Note GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ---- -------- ------- --------- ------- --------
Cash and cash equivalents 16 1,040 22 3,237 4,732 9,031
Trade receivables 15 9,337 4,525 14,053 4,575 32,490
Other receivables 1,169 25 574 - 1,768
Financial assets at fair
value through the income
statement 85 - - 28 113
Secured bank loans 17 - - - (4,780) (4,780)
Loan arrangement fees 17 105 - - - 105
Trade payables 21 (10,009) (5,368) (16,260) (5,419) (37,056)
Other payables 21 (978) (497) - (226) (1,701)
-------------------------- ---- -------- ------- --------- ------- --------
Balance sheet exposure 749 (1,293) 1,604 (1,090) (30)
-------------------------- ---- -------- ------- --------- ------- --------
The following significant exchange rates applied during the
year:
Average rate Reporting date
spot rate
-------------- ----------------
2019 2018 2019 2018
---------- ------ ------ ------- -------
Euro 1.13 1.14 1.16 1.14
US dollar 1.31 1.34 1.30 1.40
---------- ------ ------ ------- -------
Sensitivity analysis
A 10% weakening of the following currencies against sterling at
31 March 2019 would have affected equity and profit or loss by the
amounts shown below. This calculation assumes that the change
occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
This analysis assumes that all other variables, in particular
other exchange rates and interest rates, remain constant. The
analysis was performed on the same basis for 31 March 2018.
Equity Profit/(loss)
-------------- ---------------
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
---------- ------ ------ ------- ------
Euro 601 118 6 (879)
US dollar 4,775 (146) 883 (521)
---------- ------ ------ ------- ------
On the basis of the same assumptions, a 10% strengthening of the
above currencies against sterling at 31 March 2019 would have
affected equity and profit or loss by the following amounts:
Equity Profit/(loss)
---------------- ----------------
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
---------- -------- ------ -------- ------
Euro (735) (144) (8) 1,075
US dollar (5,837) 178 (1,079) 637
---------- -------- ------ -------- ------
Profile
At the balance sheet date the interest rate profile of the
Group's interest-bearing financial instruments was:
2019 2018
Note GBP000 GBP000
-------------------------- ---- ------- -------
Variable rate instruments
Financial assets 19,458 9,031
Financial liabilities (2,405) (4,780)
Loan arrangement fees 31 105
-------------------------- ---- ------- -------
Net debt 16 17,084 4,356
-------------------------- ---- ------- -------
A change of 50 basis points (0.5%) in interest rates in respect
of financial assets and liabilities at the balance sheet date would
have affected equity and profit or loss by the amounts shown below.
This calculation assumes that the change occurred at the balance
sheet date and had been applied to risk exposures existing at that
date.
This analysis assumes that all other variables, in particular
foreign currency rates, remain constant and considers the effect on
financial instruments with variable interest rates, financial
instruments at fair value through profit or loss. The analysis is
performed on the same basis for 31 March 2018.
Sensitivity analysis
2019 2018
GBP000 GBP000
--------------- ------ ------
Equity
Increase 85 21
Decrease - -
Profit or loss
Increase 85 21
Decrease - -
--------------- ------ ------
f) Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. The Group is dependent on the
continuing support of its bankers for working capital facilities
and so the Board's major objective is to keep borrowings within
these facilities.
The Board manages as capital its trading capital, which it
defines as its net assets plus net debt. Net debt is calculated as
total debt (bank overdrafts, loans and borrowings as shown in the
balance sheet), less cash and cash equivalents. The banking
facilities with our principal bank have covenants relating to
interest cover, cash flow cover and leverage, and our articles
currently permit borrowings (including letter of credit facilities)
to a maximum of four times equity.
Equity
-------------------
2019 2018
Note GBP000 GBP000
------------------------------------------------ ---- --------- --------
Net assets attributable to owners of the Parent
Company 171,506 96,855
Net cash 16 (17,084) (4,356)
------------------------------------------------ ---- --------- --------
Trading capital 154,422 92,499
------------------------------------------------ ---- --------- --------
The main areas of capital management relate to the management of
the components of working capital including monitoring inventory
turn, age of inventory, age of trade receivables, balance sheet
reforecasting, monthly profit and loss, weekly cash flow forecasts
and daily cash balances. Major investment decisions are based on
reviewing the expected future cash flows and all major capital
expenditure requires sign off by the CFO and CFO or above certain
limits, by the Board. There were no major changes in the Group's
approach to capital management during the year. A particular focus
of the Group is leverage measured as the ratio of average monthly
net debt to EBITDA before exceptional items, acquisition
amortisation and LTIP charges.
27 Operating leases
Non-cancellable operating lease rentals are payable as
follows:
2019 2018
GBP000 GBP000
--------------------------- ------ ------
Less than one year 5,236 5,108
Between one and five years 10,257 9,925
More than five years 16,443 17,807
--------------------------- ------ ------
31,936 32,840
--------------------------- ------ ------
Non-cancellable operating leases are receivable as follows:
2019 2018
GBP000 GBP000
--------------------------- ------ ------
Between one and five years 837 1,728
--------------------------- ------ ------
The Group leases a number of warehouse and factory facilities as
well as vehicles and office equipment under operating leases. The
leases of warehouse and factory facilities typically have an option
to renew at the end of the lease term with lease payments subject
to five--yearly rent reviews.
One of the leased properties has been sublet by the Group and
part of a second. The main sub--leases have periods to run of
between one and five years. Sub--lease payments of GBP583,000
(2018: GBP710,000) were received during the financial year.
During the year, GBP4,865,000 was recognised as an expense in
the income statement in respect of operating leases (2018:
GBP5,289,000).
28 Capital commitments
At 31 March 2019, the Group had outstanding authorised capital
commitments to purchase plant and equipment for GBP2,647,000 (2018:
GBP551,000).
29 Related parties
2019 2018
GBP000 GBP000
---------------------------------------- ------ ------
Sale of goods:
Hedlunds Pappers Industri AB 69 172
Festive Productions Ltd 12 24
Hedlund Import AB 2,955 2,718
S A Greetings (South African Greetings) 126 91
---------------------------------------- ------ ------
3,162 3,005
---------------------------------------- ------ ------
Purchase of goods:
Mattr Media Ltd 56 62
---------------------------------------- ------ ------
56 62
---------------------------------------- ------ ------
Receivables
Hedlund Import AB 29 17
S A Greetings (South African Greetings) 31 -
---------------------------------------- ------ ------
Balance at 31 March 60 17
---------------------------------------- ------ ------
Identity of related parties and trading
Hedlund Import AB and AB Alrick-Hedlund are under the ultimate
control of the Hedlund family who are a major shareholder in the
Company. Anders Hedlund is a director of Hedlunds Pappers Industri
AB which is under the ultimate control of the Hedlund family.
Festive Productions Ltd is a subsidiary undertaking of Malios
Holding AG, a company under the ultimate control of the Hedlund
family.
John Charlton is Chairman of SA Greetings (pty) Ltd and Elaine
Bond is a shareholder.
During the year the Company paid GBP56,000 (2018: GBP62,000) for
marketing services to Mattr Media Ltd, a company controlled by
Joshua Fineman, who is the son of the Group CEO.
The above trading takes place in the ordinary course of business
and on normal commercial terms.
Other related party transactions
Directors of the Company and their immediate relatives have an
interest in 34% (2018: 45%) of the voting shares of the
Company.
30 Subsidiary with significant non--controlling interest
The Company has two subsidiary companies which have a material
non-controlling interest, IG Design Group Australia Pty Ltd
('Australia') and Anker Play Products LLC ('APP'). Summary
financial information in relation to Australia and APP is shown
below.
2019 2018
--------------------------- ---------
Australia APP Total Australia
Non-controlling interest - balance sheet GBP000 GBP000 GBP000 GBP000
as at 31 March
----------------------------------------- --------- ------- ------- ---------
Non-current assets 4,582 16 4,598 5,538
Current assets 10,052 3,219 13,271 7,637
Current liabilities (6,755) (2,600) (9,355) (5,604)
Non-current liabilities (143) - (143) (45)
----------------------------------------- --------- ------- ------- ---------
2019 2018
------------------------- ---------
Australia APP Total Australia
Non-controlling interest - comprehensive GBP000 GBP000 GBP000 GBP000
income for the year ended 31 March
----------------------------------------- --------- ------ ------ ---------
Revenue 39,067 11,078 50,145 36,972
Profit after tax 2,434 531 2,965 1,265
Total comprehensive income 2,229 531 2,760 1,345
----------------------------------------- --------- ------ ------ ---------
2019 2018
------------------------- ---------
Australia APP Total Australia
Non-controlling interest - cash flow for GBP000 GBP000 GBP000 GBP000
the year ended 31 March
----------------------------------------- --------- ------ ------ ---------
Net increase/(decrease) in cash and cash
equivalents 444 (35) 409 550
----------------------------------------- --------- ------ ------ ---------
2019 2018
-------------------------- ---------
Australia APP Total Australia
Non-controlling interest GBP000 GBP000 GBP000 GBP000
---------------------------------------------- --------- ------ ------- ---------
1 April 3,661 - 3,661 3,833
Share of profits for the year 1,326 - 1,326 789
Other comprehensive income (10) - (10) 40
Recognition of non-controlling interest - 311 311 -
Disposal of Urban Dollar (110) - (110) -
Dividend paid to the non-controlling interest (1,075) - (1,075) (575)
Currency translation (52) - (52) (426)
---------------------------------------------- --------- ------ ------- ---------
31 March 3,740 311 4,051 3,661
---------------------------------------------- --------- ------ ------- ---------
31 Acquisitions of subsidiaries
Acquisitions in the current period
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 GBP82.2 million ($107.2
million), GBP66.8 million paid in cash and the remaining GBP15.4
million settled in shares in IG Design Group plc. The consideration
(excluding the working capital adjustment) 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,
Target, Kroger and Meijer, all of which have been in place for in
excess of 20 years. Walmart is expected to account for nearly 20%
of total Group revenue 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 31 March 2019, Impact
contributed sales of GBP88,693,000 to the consolidated Group
revenue for the period ended 31 March 2019. If the acquisition had
occurred on 1 April 2018, Group revenue would have been
GBP489,756,000. Following the restructuring of the US business to
combine manufacturing facilities into one operation, it is no
longer possible to separately disclose the profit of the Impact
business.
Effect of acquisition of Impact
The acquisition had the following effect on the Group's assets
and liabilities.
Recognised
fair values
on acquisition
GBP000
---------------------------------------- --------------
Property, plant and equipment 9,313
Intangible assets 19,000
Inventories 26,295
Trade and other receivables 31,966
Cash 1,208
Trade and other payables (31,433)
Provisions (2,197)
---------------------------------------- --------------
Net identifiable assets and liabilities 54,152
---------------------------------------- --------------
Consideration paid in shares 15,385
Consideration paid in cash 66,809
Total consideration 82,194
---------------------------------------- --------------
Goodwill 28,042
---------------------------------------- --------------
Fair value adjustments were made to trade names, customer
relationships and inventory.
The valuation techniques used for measuring the fair value of
material assets acquired were as follows:
-- property, plant and equipment has been valued using market
comparison and cost techniques. The valuation model considers
market prices for similar items when they are available, and
depreciated replacement costs when appropriate. Depreciated
replacement cost reflects adjustments for physical deterioration as
well as functional and economic obsolescence;
-- intangible assets are made up of customer relationships which
have been valued using a Multi-period Excess Earnings Method
('MEEM') approach and brands valued using the relief-from royalty
method; and
-- inventories have been valued at book value being cost to
buy/manufacture, less provisions where this is above net realisable
value. This is felt to be materially aligned with market value.
The goodwill recognised above includes certain intangible assets
that cannot be separately identified and measured due to their
nature. This includes control over the acquired business, the
skills and experience of the assembled workforce, the increase in
scale, significant synergies and the future growth opportunities
that the business provide to the Group's operations. The goodwill
recognised arises in the USA and is deductible for tax purposes
(capitalised and written down over 15 years).
If new information is obtained within one year of the date of
acquisition about the facts and circumstances that existed at the
date of acquisition which identifies adjustments to the fair values
above or any additional provisions that existed at the date of the
acquisition, then the accounting for the acquisition will be
revised.
Acquisitions in the prior year
On 9 January 2018, the Group acquired the trade and certain
assets of Biscay Greetings Pty Limited ('Biscay'), a leading
greetings card and paper products business based in Australia.
The acquisition, made through IG Design Group Australia Pty
Limited, was satisfied by a cash consideration of GBP5.1 million
(AU$8.9 million) using local debt facilities. The consideration
represented 2.7x EBITDA for the year ended 30 June 2017 although an
injection of working capital of up to GBP1.7 million (AU$3.0
million) might also be required.
Biscay provides greetings cards and related products to an
extensive base of almost 2,000 customers through regional,
wholesale, and independent retail channels across Australia and New
Zealand.
From the date of acquisition to 31 March 2018 the Biscay
business contributed GBP1,253,000 to the revenue of the Group. If
the acquisition had occurred on 1 April 2017, Group revenue for the
year ended 31 March 2018 would have been GBP334,854,000. The trade
of Biscay has been incorporated into that of IG Design Group
Australia Pty Limited and therefore it is not possible to disclose
separately the profit of the Biscay business.
Effect of acquisition of Biscay
The acquisition had the following effect on the Group's assets
and liabilities:
Recognised
fair values
on acquisition
GBP000
---------------------------------------- --------------
Property, plant and equipment 798
Intangible assets 921
Inventories 2,149
Trade and other payables (213)
Deferred tax liabilities (213)
---------------------------------------- --------------
Net identifiable assets and liabilities 3,442
---------------------------------------- --------------
Total cash consideration paid 5,145
---------------------------------------- --------------
Goodwill 1,703
---------------------------------------- --------------
There has been no adjustment to the fair value relating to the
Biscay acquisition.
32 Non-adjusting post balance sheet events
On 5 June 2019 we entered into a new three year Group facility
with a club of five banks chosen to reflect and support the
geographical spread of the Group. HSBC continue to be significant
partner and have been joined in the new facility by NatWest, BNP
Paribas, Sun Trust and PNC. See note 17 for further details.
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
FR GMGMVLGKGLZM
(END) Dow Jones Newswires
June 11, 2019 02:01 ET (06:01 GMT)
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