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RNS
IG Design Group PLC  -  IGR   

Interim Results

Released 07:00 28-Nov-2017

RNS Number : 6550X
IG Design Group PLC
28 November 2017
 

28 November 2017

IG Design Group PLC

(the "Company", the "Group" or "Design Group")
Interim Results

IG Design Group plc, one of the world's leading designers, innovators and manufacturers of gift packaging, greetings, stationery, creative play products and giftware, announces its Interim Results for the six months ended 30 September 2017.

Financial Highlights

·      Sales up 14% to £166.5m from £145.5m

Ø 10% organic growth at like for like FX rates, with the full effect of Lang (acquired mid H1 2016) adding a further 2%

·      Gross profit up 15% to £35.4m from £30.8m

Ø 8% organic growth at like for like FX rates, with the synergies in Lang adding a further 5%

·      Operating profit* up 20% to £11.1m from £9.3m

Ø 11% organic growth at like for like FX rates, with Lang adding 8%

·      PBT* up 27% to £10.5m from £8.2m

Ø 22% organic growth at like for like FX rates, 9% Lang

·      Underlying Earnings Per Share up 14% to 10.9p from 9.6p

Ø 9% organic at like for like FX rates, 7% Lang

·      Net Debt reduced by £6.2m to £70.2m

·      Interim Dividend declared of 2p

 

* before exceptional items and LTIP charges

 

Operational Highlights

 

Group

·        Continued to drive profitable overall organic growth

·        Identified and delivered further commercial, operational and purchasing synergies to enhance profitability

 

UK

·        Sales up 4% at £57.5m with profit* stable, following the integration of our three UK operating businesses

·        State-of-the-art manufacturing equipment producing retailer branded bags is now fully operational on time and   on budget

 

Continental Europe

·        Sales in local currency up 19% to €23.6m with growth in profit* of 26%

·        Second high speed, highly efficient and environmentally friendly printing press is on track and on budget for   installation early in 2018

·        Strong order book in place for the balance of the financial year

 

Australia (JV)

·        Sales in local currency up 13% to A$30.9m with growth in profit* of 17%

·        Growth mainly driven in the robust Independents Channel

·        Completion of the acquisition of Biscay Greetings Pty Limited on track

 

USA

·        Excellent trading performance with overall sales up 18% to $91.3m and profit* up 45%

·        Organic sales and profits* growth of 13% and 27% respectively

·        Synergies following the integration of Lang Companies (acquired July 2016) are being achieved as planned,   resulting in H1 sales up 46% to $16.2m and H1 profit* up 124%

·        Planned investment to upgrade our IT systems in the USA is proceeding on time and on budget and is due for   installation during FY19

 

* before exceptional items and LTIP charges

 

Outlook

Whilst cost headwinds are undoubtedly stronger than ever, our businesses are well positioned to combat these.  A full order book and a strong performance in the first half of the year provides confidence that the Group is fully on track to meet full year market expectations for profit and other key underlying metrics.

 

Paul Fineman, Chief Executive said:

"We are once again delighted to be reporting a robust performance during the first half of the year, with all regions trading profitably and growth being achieved both organically and through acquisition.

 

Our business is diversified by product category, regional activity and by customer channel, all with a common theme of adding value through potent and commercial design, efficient manufacturing, sourcing and excellent customer service.

 

Building on our established track record, we are pleased to be identifying still further compelling investment opportunities to continuously improve efficiency and enhance capability across all territories.

 

We look forward to providing a further update during January and remain committed to creating sustainable value for our shareholders through both organic growth and, when the opportunity arises, through carefully considered acquisitions."

- ENDS -

This announcement contains inside information.

IG Design Group PLC                                           Tel: 01525 887310

Paul Fineman, Chief Executive

Anthony Lawrinson, Chief Financial Officer

Cenkos Securities                                                 Tel: 020 7397 8900

Bobbie Hilliam

Harry Hargreaves

Alma PR                                                               Tel: 020 3865 9668

Rebecca Sanders-Hewett

Susie Hudson

Helena Bogle

                       

 

 

Executive summary

 

Overview

The first half of FY18 has seen a very pleasing performance with growth achieved both organically and through acquisition.

 

Overall, sales and profit before tax, exceptional items and LTIP charges are up 14% and 27% respectively. Underlying, fully diluted earnings per share is up 14% whilst net debt is lower than at the previous half-year period, despite funding the seasonal working capital at the recently acquired Lang business.

 

Performance by region

We are pleased to report that all regions have again traded profitably during the period.

 

Americas

 

·    An excellent trading performance with sales up 18% to $91.3 million and underlying profit(a) up 45% to $7.1 million

·    This includes organic growth of sales up 13% and profits up 27%

·    The integration of The Lang Companies (Lang) acquired in July 2016 has progressed very well resulting in sales in the first half up 46% to $16.2 million and profit up 124% to $2.1 million

·    The planned investment to upgrade our IT systems in the USA is proceeding on time and on budget and is due for installation during FY19

 

Europe

 

·    Sales in local currency up 19% to €23.6 million with growth in underlying profit(a) of 26% to €2.0 million

·    A second high speed, highly efficient, printing press is on track for delivery and on budget for installation early in 2018

·    A strong order book is in place for the balance of the financial year

 

Australia

 

·    Sales in local currency up 13% to AUD30.9 million with growth in underlying profit(a) of 17% to AUD2.0 million

·    Growth mainly driven by the robust Independents channel

·    The completion of the acquisition of Biscay Greetings Pty Limited is on track to take place in January 2018

 

UK

 

·    Sales up 4% at £57.5 million with underlying profit(a) remaining stable at £4.2 million, reflecting the initial impact of the integration of our three UK operating businesses

·    Our UK business continues to work handinhand with our manufacturing facility in China, which continues to efficiently supply record volumes of gift bags and greetings cards, as well as high volumes of crackers

·    Stateoftheart manufacturing equipment producing retailer branded bags to be given to consumers is now fully operational, having been installed on time and on budget in our manufacturing facility in Wales

 

(a)  Underlying profit is stated before exceptional items and LTIP charges.

 

Central costs

Reflect investment to broaden and strengthen our ability to support growth both organically and through M&A activity.

 

Financial review

Reported sales are up 14% to £166.5 million on the prior period (2016 H1: £145.5 million) with some favourable timing differences in the USA assisting. Organic growth (excluding Lang) represents 10% of this growth with foreign exchange translation effects accounting for 2% and the acquisition in 2016 of Lang a further 2%. Lang was only owned for half of the period in H1 last year. As usual, there are geographical variations but overall phasing of delivery to customers appears to be slightly ahead of prior years.

 

Gross margins increased from £30.8 million to £35.4 million which was stable as a percentage of sales at 21.2%.

 

Overhead costs are higher at £25.3 million (2016 H1: £22.5 million). This is largely driven by a) the impact of Lang ownership for the full period (£0.8 million); b) the effect of overseas costs translated at current exchange rates; and c) our recent investments in people, rebranding and growth opportunities.

 

The LTIP charge is a largely non-cash accounting charge and we exclude the effect of this when measuring underlying trends in profitability. As a percentage of sales, and after removing the effect of the LTIP charge, overhead costs were flat at 15%.

 

Operating profit before exceptional costs and LTIP charges again improved strongly by 20% to £11.1 million (2016 H1: £9.3 million) while profit before tax, exceptional items and LTIP charges was up 27% to £10.5 million from £8.2 million in the equivalent period last year. This strong trading position at the end of the first half of the year is firmly underpinning management's expectations for the full year.

 

The exceptional cost during the period was £0.1 million (2016 H1: £0.6 million credit) mainly reflecting costs associated with the acquisition of Biscay.

 

After allowing for exceptional items in the period, profit before tax and after exceptional items and LTIP charges was £9.5 million, up 20% on the prior year (2016 H1: £7.9 million).

 

Reconciliation to underlying measures

 

Unaudited

Unaudited

Twelve

 

six months

six months

 months

 

 ended

ended

ended

 

30 Sept

30 Sept

31 Mar

 

2017

2016

2017

 

£m

£m

£m

Profit before tax

9.5

7.9

13.0

Exceptional items

0.1

(0.6)

1.1

LTIP charges

0.9

0.9

2.2

Underlying profit

10.5

8.2

16.3

 

 

Unaudited

Unaudited

Twelve

 

six months

six months

 months

 

 ended

ended

ended

 

30 Sept

30 Sept

31 Mar

 

2017

2016

2017

 

pence

pence

pence

Fully diluted EPS

9.9

9.5

15.0

Cost per share on exceptional items

0.0

(1.0)

0.4

Costs per share on LTIP charge

1.0

1.1

2.8

Underlying EPS

10.9

9.6

18.2

 

Finance expenses in the period were again substantially lower on the prior year period at £0.6 million (2016 H1: £1.1 million) reflecting the continued effect of improved borrowing costs, efficient use of our lower cost asset-based lending working capital facilities and lower average indebtedness. We also agreed to extend the term of our global facilities in May 2017 by a further year to June 2020. The facility is capable of extension for one further year on the same terms should the parties agree.

 

The effective underlying tax rate (before exceptional items and LTIP charges) was 28% (2016 H1: 24%), slightly below the blended prevailing rate which based upon the current mix of Group profits would be 28.5%. We now anticipate by the year end that all US losses will have been used with only £3.4 million of tax losses unutilised in the UK. If growth is heavily fuelled by our US business as is our expectation, the blended tax rate could continue to rise; however, should US tax rates be significantly reduced as is currently under review, this could provide a material additional advantage to the Group's earnings after tax. Cash tax is increasingly becoming payable at the prevailing rate in most of our geographic regions of operation as historical losses are fully utilised although this will be not be evident in the US or UK until 2018/19.

 

Stated before exceptional items and LTIP charges, basic earnings per share were ahead of expectations and much improved at 11.3p (2016 H1: 9.8p). The equivalent statutory outcome was 10.2p (2016 H1: 9.7p) after exceptional items and LTIP charges. Our primary measure of performance is underlying fully diluted earnings per share (stated before exceptional items and LTIP charges) and this was up 14% to 10.9p (2016 H1: 9.6p). The half year EPS outcome benefits slightly from the timing of profitability for reasons explained above.

 

Capital expenditure in the six months was £3.8 million (2016 H1: £3.0 million), somewhat higher than the prior period as we seek out opportunities to invest in efficiency. Notably we have taken delivery of new machinery in Wales to manufacture retail branded bags ("Notforsale" consumables) as part of our diversification into new adjacent product categories. This equipment was already fully operational at 30 September 2017 with a strong order book in place. Orders have also been confirmed and deposits placed for a second high definition, high speed, printing press in Europe and to implement a new ERP system in our US business. Both are expected to yield attractive paybacks.

 

Cash used by operations was £64.5 million (2016 H1: £54.2 million) reflecting the growing scale of the business and the seasonal funding of the newly acquired Lang business. The underlying cash dynamic reflects the usual phasing of production, geared heavily towards H1. As always this is impacted by the high variability year to year of the exact timing of customer delivery requirements.

 

Cash flows associated with interest, tax and dividends in aggregate were up from £2.9 million in 2016 H1 to £4.5 million, with increases in dividend payments (including a modest amount to our joint venture partner) and taxation accounting for £1 million each while interest payments continue to decline.

 

Despite the increasing working capital need, net debt at 30 September 2017 was lower than the prior year at £70.2 million (2016 H1: £76.4 million). This results from strong underlying trading cash flows and tight disciplines around working capital control.

 

Recent exchange rate translation effects have depressed underlying profits by a modest £0.1 million compared with the prior year.

 

Our focus on reduction of average leverage has not wavered and having achieved our long term target last year, two years ahead of schedule, we will now continue to target a level of average debt of between 1.5 and 2.5 times EBITDA.

 

Dividend

A final dividend for the year ended 31 March 2017 of 2.75p per share was paid in September 2017 making the total for the year 4.5p. The Board is pleased to declare an interim dividend of 2p per share in respect of H1 2017/18 (2017 H1: 1.75p) in line with our intention to steadily increase total dividends. This will be paid on 18 January 2018 to shareholders on the register on 8 December 2017.

 

Directorate changes

As previously announced in July, Anthony Lawrinson indicated his intention to retire from his role as Chief Financial Officer for family reasons, after six years with the Group. The Board is pleased to have announced alongside these financial results that it intends to appoint Giles Willits as its new Chief Financial Officer effective from 2nd January 2018. Anthony is continuing in his role until early January 2018 and he has agreed to provide additional transitional support in order to ensure an orderly handover.  

 

The Board would like to thank Anthony for the diligence, commitment and dedication he has shown over the past six years. He has made a significant contribution to the Group, supporting its turnaround, global diversification and subsequent stellar growth, executing its M&A strategy and creating a robust finance function which will serve the Group well over the coming years. We wish him well for the future.

 

Current trading outlook

We are once again delighted to be reporting a robust performance during the first half of the year, with all regions trading profitably and growth being achieved both organically and through the successful integration of Lang which we acquired in July 2016.

 

Our business is diversified by product category, regional and seasonal activity as well as by customer channel, all with a common theme of adding value through creating products with potent and highly commercial designs, efficient manufacturing and sourcing and excellent customer service.

 

Whilst we have delivered fast payback through investment in capital equipment, we are really pleased to be identifying further compelling investment opportunities to continuously improve efficiency and enhance capability across all territories.

 

We look forward to providing a further update during January 2018 and creating sustainable value for our shareholders through both organic growth and, when the opportunity arises, through carefully considered acquisitions.

Paul Fineman

Chief Executive Officer

 

28 November 2017

 

Anthony Lawrinson

Chief Financial Officer

 

28 November 2017

Consolidated income statement

six months ended 30 September 2017

 

 

Unaudited six months

Unaudited six months

Twelve months

 

ended 30 Sep 2017

ended 30 Sep 2016

ended 31 Mar 2017

 

Before

Exceptional

 

Before

Exceptional

 

Before

Exceptional

 

 

exceptional

items

 

exceptional

items

 

exceptional

items

 

 

items

(note 3)

Total

items

(note 3)

Total

items

(note 3)

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

Revenue

166,530

-

166,530

145,525

-

145,525

310,992

-

310,992

Cost of sales

(131,168)

-

(131,168)

(114,730)

-

(114,730)

(247,058)

(1,532)

(248,590)

Gross profit

35,362

-

35,362

30,795

-

30,795

63,934

(1,532)

62,402

 

21.2%

 

21.2%

21.2%

 

21.2%

20.6%

 

20.1%

Selling expenses

(9,383)

-

(9,383)

(8,317)

-

(8,317)

(19,019)

-

(19,019)

Administration expenses

(15,910)

(88)

(15,998)

(14,172)

563

(13,609)

(29,832)

495

(29,337)

Other operating income

179

-

179

99

-

99

210

-

210

Operating profit/(loss)

10,248

(88)

10,160

8,405

563

8,968

15,293

(1,037)

14,256

Finance expenses

(660)

-

(660)

(1,045)

-

(1,045)

(1,229)

-

(1,229)

Profit/(loss) before tax

9,588

(88)

9,500

7,360

563

7,923

14,064

(1,037)

13,027

Income tax (charge)/credit

(2,737)

4

(2,733)

(1,792)

26

(1,766)

(3,480)

761

(2,719)

Profit/(loss) for the period

6,851

(84)

6,767

5,568

589

6,157

10,584

(276)

10,308

Attributable to:

 

 

 

 

 

 

 

 

 

Owners of the Parent Company

 

 

6,432

 

 

5,865

 

 

9,650

Noncontrolling interests

 

 

335

 

 

292

 

 

658

 

Earnings per ordinary share

 

Unaudited six months

 Unaudited six months

Twelve months

 

ended 30 Sep 2017

ended 30 Sep 2016

ended 31 Mar 2017

 

Diluted

Basic

Diluted

Basic

Diluted

Basic

Earnings per share

9.9p

10.2p

9.5p

9.7p

15.0p

15.7p

 

 

 

Consolidated statement of comprehensive income

six months ended 30 September 2017

 

 

Unaudited

Unaudited

Twelve

 

six months

six months

months

 

ended

 ended

ended

 

30 Sep

30 Sep

31 Mar

 

2017

2016

2017

 

£000

£000

£000

Profit for the period

6,767

6,157

10,308

Other comprehensive income:

 

 

 

Exchange difference on translation of foreign operations (net of tax)

(573)

3,069

3,213

Transfer to profit and loss on maturing cash flow hedges (net of tax)

(271)

223

223

Net loss on cash flow hedges (net of tax)

(110)

(580)

271

Other comprehensive income for period, net of tax, items which may be reclassified to profit and loss in subsequent periods

(954)

2,712

3,707

Total comprehensive income for the period, net of tax

5,813

8,869

14,015

Attributable to:

 

 

 

Owners of the Parent Company

5,676

8,107

12,795

Noncontrolling interests

137

762

1,220

 

5,813

8,869

14,015

 

 

Consolidated statement of changes in equity

six months ended 30 September 2017

 

 

 

Share

 

 

 

 

 

 

 

 

 

premium

 

 

 

 

 

 

 

 

 

and capital

 

 

 

 

 

Non

 

 

Share

redemption

Merger

Hedging

Translation

Retained

Shareholder

controlling

 

 

capital

reserve

reserves

reserves

reserve

earnings

equity

interest

Total 

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

At 31 March 2017

 3,132

 9,769

 17,164

 271

 2,551

 53,330

 86,217

 3,833

90,050

Profit for the period

-

-

-

-

-

6,432

6,432

335

6,767

Other comprehensive income

-

-

-

(381)

(375)

-

 (756)

(198)

(954)

Total comprehensive income for the period

-

-

-

(381)

(375)

6,432

5,676

137

5,813

Equitysettled sharebased payment

-

-

-

-

-

594

594

-

594

Tax on equitysettled  sharebased payment

-

-

-

-

-

424

424

-

424

Options exercised

31

-

-

-

-

(31)

-

-

-

Equity dividends paid

-

-

-

-

-

(1,734)

(1,734)

 (575)

(2,309)

At 30 September 2017

3,163

9,769

17,164

(110)

2,176

59,015

91,177

3,395

94,572

 

six months ended 30 September 2016

 

 

 

Share

 

 

 

 

 

 

 

 

 

premium

 

 

 

 

 

 

 

 

 

and capital

 

 

 

 

 

Non

 

 

Share

redemption

Merger

Hedging

Translation

Retained

Shareholder

controlling

 

 

capital

reserve

reserves

reserves

reserve

earnings

equity

interest

Total 

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

At 31 March 2016

 2,963

 4,852

 17,164

 (223)

 (100)

 43,346

 68,002

 3,370

71,372

Profit for the period

 -

-

-

-

-

 5,865

 5,865

 292

6,157

Other comprehensive income

-

-

-

 (357)

 2,599

-

 2,242

 470

2,712

Total comprehensive income for the period

-

-

-

 (357)

 2,599

 5,865

 8,107

 762

8,869

Equitysettled sharebased payment

-

-

-

-

-

 514

 514

 -

514

Tax on equitysettled  sharebased payment

-

-

-

-

-

 850

 850

 -

850

Shares issued

150

 4,883

-

-

-

 -

 5,033

 -

5,033

Options exercised

 19

 34

-

-

-

 -

 53

 -

53

Equity dividends paid

-

-

-

-

-

 (1,039)

 (1,039)

 (260)

(1,299)

At 30 September 2016

 3,132

 9,769

 17,164

 (580)

 2,499

 49,536

 81,520

 3,872

85,392

 

year ended 31 March 2017

 

 

 

Share

 

 

 

 

 

 

 

 

 

premium

 

 

 

 

 

 

 

 

 

and capital

 

 

 

 

 

Non

 

 

Share

redemption

Merger

Hedging

Translation

Retained

Shareholder

controlling

 

 

capital

reserve

reserves

reserves

reserve

earnings

equity

interest

Total

 

£000

£000

£000

£000

£000

£000

£000

£000

£000

At 1 April 2016

2,963

 4,852

 17,164

 (223)

 (100)

 43,346

 68,002

 3,370

71,372

Profit for the year

-

-

-

-

-

 9,650

 9,650

 658

10,308

Other comprehensive income

-

-

-

 494

 2,651

-

 3,145

 562

3,707

Total comprehensive income for the year

-

-

-

 494

 2,651

 9,650

 12,795

 1,220

14,015

Equitysettled sharebased payment

-

-

-

-

-

 1,555

 1,555

-

1,555

Tax on equitysettled sharebased payments

-

-

-

-

-

 913

 913

-

913

Shares issued

 150

 4,883

-

-

-

-

 5,033

-

5,033

Options exercised

19

 34

-

-

-

-

 53

-

53

Capital contribution from noncontrolling investor

-

-

-

-

-

-

-

 110

110

Equity dividends paid

-

-

-

-

-

 (2,134)

 (2,134)

 (867)

(3,001)

At 31 March 2017

3,132

 9,769

 17,164

 271

 2,551

 53,330

 86,217

 3,833

90,050

 

 

Consolidated balance sheet

as at 30 September 2017

 

 

 

Unaudited

Unaudited

 

 

 

as at

as at

As at

 

 

30 Sep

30 Sep

31 March

 

 

2017

2016

2017

 

Note

£000

£000

£000

Noncurrent assets

 

 

 

 

Property, plant and equipment

 

33,270

33,450

32,607

Intangible assets

 

33,879

33,733

33,681

Deferred tax assets

 

4,640

4,426

5,398

Total noncurrent assets

 

71,789

71,609

71,686

Current assets

 

 

 

 

Inventory

 

70,197

74,355

49,475

Trade and other receivables

 

120,422

105,810

29,622

Derivative financial assets

 

188

86

307

Cash and cash equivalents

4

2,282

5,381

3,659

Total current assets

 

193,089

185,632

83,063

Total assets

 

264,878

257,241

154,749

Equity

 

 

 

 

Share capital

 

3,163

3,132

3,132

Share premium

 

8,429

8,429

8,429

Reserves

 

20,570

20,423

21,326

Retained earnings

 

59,015

49,536

53,330

Equity attributable to owners of the Parent Company

 

91,177

81,520

86,217

Noncontrolling interests

 

3,395

3,872

3,833

Total equity

 

94,572

85,392

90,050

Noncurrent liabilities

 

 

 

 

Loans and borrowings

4

(39)

(254)

(39)

Deferred income

 

1,048

1,133

1,083

Provisions

 

883

872

881

Other financial liabilities

 

1,960

2,242

1,911

Deferred tax liability

 

584

352

525

Total noncurrent liabilities

 

4,436

4,345

4,361

Current liabilities

 

 

 

 

Bank overdraft

4

6,409

4,576

916

Loans and borrowings

4

66,055

75,250

(232)

Deferred income

 

152

150

111

Provisions

 

455

220

441

Income tax payable

 

3,337

2,809

3,153

Trade and other payables

 

72,763

64,975

37,450

Other financial liabilities

 

16,699

19,524

18,499

Total current liabilities

 

165,870

167,504

60,338

Total liabilities

 

170,306

171,849

64,699

Total equity and liabilities

 

264,878

257,241

154,749

 

 

Consolidated cash flow statement

six months ended 30 September 2017

 

 

Unaudited

Unaudited

Twelve

 

six months

six months

months

 

ended

ended

ended

 

30 Sep

30 Sep

31 Mar

 

2017

2016

2017

 

£000

£000

£000

Cash flows from operating activities

 

 

 

Profit for the year

6,767

6,157

10,308

Adjustments for:

 

 

 

Depreciation

2,198

1,809

4,571

Amortisation of intangible assets

347

328

798

Finance expenses

660

1,045

1,229

Negative goodwill release to income

-

(1,067)

(1,271)

Income tax charge

2,733

1,766

2,719

(Profit)/loss on sales of property, plant and equipment

(2)

15

24

Loss on external sale of intangible fixed assets

-

-

51

Equitysettled sharebased payment

874

870

2,216

Operating profit after adjustments for noncash items

13,577

10,923

20,645

Change in trade and other receivables

(90,306)

(78,676)

(772)

Change in inventory

(21,358)

(22,863)

2,670

Change in trade and other payables

33,601

36,436

8,940

Change in provisions and deferred income

(45)

(58)

44

(Cash used by)/cash generated from operations

(64,531)

(54,238)

31,527

Tax paid

(1,501)

(525)

(2,003)

Interest and similar charges paid

(734)

(1,060)

(1,867)

Net cash (outflow)/inflow from operating activities

(66,766)

(55,823)

27,657

Cash flow from investing activities

 

 

 

Proceeds from sale of property, plant and equipment

27

48

58

Acquisition of businesses

-

(2,669)

(2,669)

Capital contribution from noncontrolling investor

-

-

110

Acquisition of intangible assets

(462)

(77)

(534)

Acquisition of property, plant and equipment

(3,372)

(2,914)

(4,633)

Receipt of government grants

15

39

40

Net cash outflow from investing activities

(3,792)

(5,573)

(7,628)

Cash flows from financing activities

 

 

 

Net proceeds from issue of share capital

-

5,086

5,086

Repayment of secured borrowings

-

(21,774)

(21,774)

Net movement in credit facilities

66,265

68,575

(795)

Payment of finance lease liabilities

(17)

(229)

(2,383)

Loan arrangement fees

(67)

(287)

(319)

Equity dividends paid

(1,734)

(1,039)

(2,134)

Dividends paid to noncontrolling interests

(575)

(260)

(867)

Net cash inflow/(outflow) from financing activities

63,872

50,072

(23,186)

Net decrease in cash and cash equivalents

(6,686)

(11,324)

(3,157)

Cash and cash equivalents at beginning of period

2,743

6,872

6,872

Effect of exchange rate fluctuations on cash held

(184)

5,257

(972)

Cash and cash equivalents at end of the period

(4,127)

805

2,743

 

 

Notes to the interim financial statements

 

1 Accounting policies

Basis of preparation

The financial information contained in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and is unaudited.

 

The Group interim report has been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRS"). The financial information for the year ended 31 March 2017 is extracted from the statutory accounts of the Group for that financial year and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The auditor's report was (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under Section 498 (2) of the Companies Act 2006.

 

The interim report does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2017.

 

Going concern basis

The borrowing requirement of the Group increases steadily over the period from July and peaks in October, due to the seasonality of the business, as sales of wrap and crackers are mainly for the Christmas market, before then reducing.

 

As with any company placing reliance on external entities for financial support, the Directors acknowledge that there can be no certainty that this support will continue, although, at the date of approval of this interim report, they have no reason to believe that it will not do so.

 

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

Significant accounting policies

The accounting policies adopted in the preparation of the interim report are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2017.

  

2 Segmental information

The Group has one material business activity being the design, manufacture and distribution of gift packaging and greetings, stationery and creative play products, and designled giftware.

 

For management purposes the Group is organised into four geographic business units.

 

The results below are allocated based on the region in which the businesses are located; this reflects the Group's management and internal reporting structure. The decision was made during 2011 to focus Asia as a service provider of manufacturing and procurement operations, whose main customers are our UK businesses.

 

Both the China factory and the majority of the Hong Kong procurement operations are now overseen by our UK operational management team and we therefore continue to include Asia within the internal reporting of the UK operations, such that UK and Asia comprise an operating segment.

 

Intrasegment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

Financial performance of each segment is measured on operating profit. Interest income or expense and tax are managed on a Group basis and not split between reportable segments.

 

Segment assets are all noncurrent and current assets, excluding deferred tax and income tax, which are shown in the eliminations column. Where cash shown in one segment, nets under the Group's banking facilities against overdrafts in other segments, the elimination is shown in the eliminations column. Intersegment receivables and payables are eliminated similarly.

 

 

 

UK and Asia

Europe

USA

Australia

Eliminations

Group

 

£000

£000

£000

£000

£000

£000

Six months ended 30 September 2017

 

 

 

 

 

 

Revenue

- external

57,516

 20,817

 69,713

 18,484

-

 166,530

- inter segment

1,737

 786

-

-

 (2,523)

-

Total segment revenue

59,253

 21,603

 69,713

 18,484

 (2,523)

 166,530

Segment result before exceptional items

4,003

 1,684

 5,132

 1,227

-

 12,046

Exceptional items

-

-

 (12)

 (76)

-

(88)

Segment result

 4,003

 1,684

 5,120

 1,151

-

 11,958

Central administration costs

 

 

 

 

 

(1,798)

Net finance expenses

 

 

 

 

 

(660)

Income tax

 

 

 

 

 

 (2,733)

Profit for the six months ended 30 September 2017

 

 

 

 

 

6,767

Balances at 30 September 2017

 

 

 

 

 

 

Segment assets

147,275

32,870

63,985

16,108

4,640

264,878

Segment liabilities

(62,018)

 (28,276)

 (65,247)

 (10,844)

 (3,921)

(170,306)

Capital expenditure

 

 

 

 

 

 

- property, plant and equipment

2,263

 789

 124

 196

-

 3,372

- intangible

32

 10

 420

-

-

 462

Depreciation

1,192

 341

 425

 240

-

 2,198

Amortisation

92

 25

 219

 11

-

 347

 

 

UK and Asia

Europe

USA

Australia

Eliminations

Group

 

£000

£000

£000

£000

£000

£000

Six months ended 30 September 2016

 

 

 

 

 

 

Revenue

- external

55,117

 16,545

 58,560

 15,303

-

 145,525

- inter segment

1,448

 224

 -

-

 (1,672)

-

Total segment revenue

 56,565

 16,769

 58,560

 15,303

 (1,672)

 145,525

Segment result before exceptional items

 4,000

 1,258

 3,758

 1,020

-

 10,036

Exceptional items

 -

 -

 563

-

-

563

Segment result

 4,000

 1,258

 4,321

 1,020

-

 10,599

Central administration costs

 

 

 

 

 

(1,631)

Net finance expenses

 

 

 

 

 

(1,045)

Income tax

 

 

 

 

 

(1,766)

Profit for the six months ended 30 September 2016

 

 

 

 

 

6,157

Balances at 30 September 2016

 

 

 

 

 

 

Segment assets

139,043

31,989

66,914

14,869

4,426

257,241

Segment liabilities

 (78,480)

 (12,426)

 (69,222)

 (8,560)

 (3,161)

(171,849)

Capital expenditure

 

 

 

 

 

 

- property, plant and equipment

 1,085

 226

 554

 1,049

 -

 2,914

- intangible

26

-

 49

 2

-

 77

Depreciation

 885

 349

 424

 151

-

 1,809

Amortisation

 131

 21

 165

 11

-

 328

 

 

UK and Asia

Europe

USA

Australia

Eliminations

Group

 

£000

£000

£000

£000

£000

£000

Year ended 31 March 2017

 

 

 

 

 

 

Revenue

- external

114,113

 45,497

 117,831

 33,551

 -

 310,992

- inter segment

2,904

 227

 -

 -

 (3,131)

-

Total segment revenue

117,017

 45,724

 117,831

 33,551

 (3,131)

 310,992

Segment result before exceptional items

5,541

 4,490

 6,119

 1,710

-

 17,860

Exceptional items

-

-

 (1,037)

-

-

(1,037)

Segment result

5,541

 4,490

 5,082

 1,710

-

 16,823

Central administration costs

 

 

 

 

 

(2,567)

Net finance expenses

 

 

 

 

 

(1,229)

Income tax

 

 

 

 

 

(2,719)

Profit for the year ended 31 March 2017

 

 

 

 

 

10,308

Balances at 31 March 2017

 

 

 

 

 

 

Segment assets

95,760

20,413

21,461

11,717

5,398

154,749

Segment liabilities

(10,934)

 (16,382)

 (27,952)

 (5,753)

 (3,678)

(64,699)

Capital expenditure

 

 

 

 

 

 

- property, plant and equipment

 1,866

 687

 812

 1,268

-

 4,633

- intangible

184

 36

 263

 51

-

 534

Depreciation

1,813

 1,081

 1,306

 371

-

 4,571

Amortisation

194

 45

 536

 23

-

 798

 

 

3 Exceptional items

 

Six months

Six months

Twelve months

 

ended

ended

ended

 

30 Sep

30 Sep

31 Mar

 

2017

2016

2017

 

£000

£000

£000

Acquisition of Biscay Greetings Pty Ltd

 

 

 

Transaction costs(a)

76

-

-

Acquisition of Lang Companies Inc.

 

 

 

Transaction and restructuring costs(b)

-

504

722

Gain on bargain purchase(c)

-

(1,067)

(1,271)

Restructuring of American operations(d)

12

-

1,586

Total before tax

88

(563)

1,037

Income tax credit

(4)

(26)

(761)

 

84

(589)

276

(a)   Transaction costs relating to the acquisition of the Biscay business.

(b)   Transaction and restructuring costs relating to the acquisition of the Lang business.

(c)   Gain on the bargain purchase on the acquisition of the Lang business (see note 7 for further details).

(d)   Restructuring of American printing platform.

 

 

4 Cash, loans and borrowings

Net debt

 

 

Six months

Six months

Twelve months

 

ended

ended

ended

 

30 Sep

30 Sep

31 Mar

 

2017

2016

2017

 

£000

£000

£000

Cash and cash equivalents

2,282

5,381

3,659

Bank overdrafts

(6,409)

(4,576)

(916)

Cash and cash equivalents per cash flow statement

(4,127)

805

2,743

Bank loans and borrowings

(66,265)

(75,402)

-

Loan arrangement fees

249

406

271

Finance leases

(30)

(2,200)

(45)

Net debt as used in the executive summary

(70,173)

(76,391)

2,969

 

Split between current and noncurrent

 

Six months

Six months

Twelve months

 

ended

ended

ended

 

30 Sep

30 Sep

31 Mar

 

2017

2016

2017

 

£000

£000

£000

Noncurrent liabilities

 

 

 

Loan arrangement fees

39

254

39

 

39

254

39

Current liabilities

 

 

 

Asset backed loan

(36,374)

(51,043)

-

Revolving credit facilities

(29,891)

(24,359)

-

Bank loans and borrowings

(66,265)

(75,402)

-

Loan arrangement fees

210

152

232

 

(66,055)

(75,250)

232

Finance leases of £30,000 (2016: £2,200,000) are included within other financial liabilities and are split £1,000 (2016: £1,703,000) noncurrent and £29,000 (2016: £497,000) current.

 

Loan arrangement fees represent the unamortised costs in arranging the threeyear Group facilities which commenced in June 2016 and the unamortised costs relating to a oneyear extension.

 

 

5 Taxation

 

Six months

Six months

Twelve months

 

ended

ended

ended

 

30 Sep

30 Sep

31 Mar

 

2017

2016

2017

 

£000

£000

£000

Current tax expenses

 

 

 

Current income tax charge

2,082

1,376

3,132

Deferred tax expense

 

 

 

Relating to original and reversal of temporary differences

651

390

(413)

Total tax in income statement

2,733

1,766

2,719

Taxation for the six months to 30 September 2017 is based on the effective rate of taxation, which is estimated to apply in each country for the year ended 31 March 2018.

 

 

6 Earnings per share

 

Six months ended

Six months ended

Twelve months ended

 

30 Sep 2017

30 Sep 2016

31 Mar 2017

 

Diluted

Basic

Diluted

Basic

Diluted

Basic

 

pence

pence

pence

pence

pence

pence

Underlying earnings per share excluding exceptional items and LTIP charges

10.9

11.3

9.6

9.8

18.2

19.0

Cost per share on LTIP charge

(1.0)

(1.1)

(1.1)

(1.1)

(2.8)

(2.9)

Underlying earnings per share excluding exceptional items

9.9

10.2

8.5

8.7

15.4

16.1

Earnings per share on exceptional items

-

-

1.0

1.0

(0.4)

(0.4)

Earnings per share

9.9

10.2

9.5

9.7

15.0

15.7

 

The basic earnings per share is based on the profit attributable to equity holders of the Parent Company of £6,432,000 (2016: £5,865,000) and the weighted average number of ordinary shares in issue of 62,868,000 (2016: 60,442,000) calculated as follows:

 

As at

As at

As at

 

30 Sep

30 Sep

31 Mar

In thousands of shares

2017

2016

2017

Issued ordinary shares at 1 April

62,642

59,257

59,257

Shares issued in respect of exercising of share options

226

136

260

Shares issued in respect of share placing

-

1,049

 2,022

Weighted average number of shares at end of the period

62,868

60,442

61,539

Total number of executive share options, over 5p ordinary shares, in issue at 30 September 2017 was 710,000 (2016: 710,000).

 

Total number of Long Term Incentive Plan ("LTIP") options, over 5p ordinary shares, in issue at 30 September 2017 was 1,213,013 (2016: 500,000).

 

Underlying basic earnings per share excludes exceptional items and LTIP charges of £924,000 (2016: £307,000) and tax relief attributable to those items of £196,000 (2016: £209,000) to give underlying profits of £7,160,000 (2016: 5,963,000).

 

 

7 Acquisitions of businesses

Biscay Greetings Pty Limited

On 21 September 2017 IG Design Group plc announced that it had signed a contract to acquire the trade and certain assets of Biscay Greetings Pty Limited, a leading greetings card and paper products business based in Australia. Completion will take place in January 2018.

 

The acquisition, to be made through Design Group's Australian joint venture Artwrap, will be satisfied by a cash consideration of AUD9.0 million (£5.5 million) using local debt facilities. Stock and fixed assets acquired are estimated at a market value of AUD5.0 million (£3.1 million) with the balance of the consideration to be treated as intangible assets and goodwill. The consideration represents 2.7x EBITDA for the year ended 30 June 2017 although an injection of working capital of up to AUD3.0 million (£1.8 million) will 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.

 

The Lang Companies Inc.

On 11 July 2016, the Group acquired all of the shares capital of The Lang Companies Inc, ("Lang") for a cash consideration of £2,669,000 ($3,443,000). Acquisition costs of £260,000 were incurred during the period and expensed in the income statement as an exceptional item. Lang is a designled supplier of highquality branded consumer home décor and lifestyle products, based in the USA. Lang is a natural fit with the Group, being a designled company with complementary products and markets. There are natural synergy opportunities with the Group in sourcing and cross selling. In the period from acquisition to 31 March 2017, Lang contributed net profit of £528,000 to the consolidated Group net profit for the year ended 31 March 2017. If the acquisition had occurred on 1 April 2016, Group revenue would have been £316,160,000 and net profit would have been £9,224,000. In determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the acquisition occurred on 1 April 2016.

 

Effect of acquisition

The acquisition had the following effect on the Group's assets and liabilities:

 

Recognised 

 

fair values 

 

on acquisition

 

£000

Property, plant and equipment

292

Intangible assets

1,230

Inventories

2,967

Trade and other receivables

6,005

Trade and other payables

(5,742)

Deferred tax liabilities

(812)

Net identifiable assets and liabilities

3,940

Total cash consideration paid

2,669

Gain on bargain purchase recognised immediately in the income statement

1,271

The gain on bargain purchase arose as a result of the sum of the net assets acquired being greater than the amount paid. This was possible due to the low number of potential acquirers for the business.

 

 

Directors and advisers

 

John Charlton

NonExecutive Chairman

 

Anders Hedlund

Founder and NonExecutive  Deputy Chairman

 

Paul Fineman

Chief Executive Officer

 

Anthony Lawrinson

Chief Financial Officer and Company Secretary

 

Lance Burn

Executive Director

 

Elaine Bond

NonExecutive Director

 

Mark Tentori

NonExecutive Director

 

Financial and nominated adviser and broker

Cenkos Securities Plc

6, 7, 8, Tokenhouse Yard

London EC2R 7AS

 

Auditor

KPMG LLP

Altius House

One North Fourth Street

Milton Keynes MK9 1NE

 

Public Relations

Alma PR

Aldwych House

71-91 Aldwych

London WC2B 4HN

 

Legal Adviser

Bird & Bird LLP

12 New Fetter Lane

London EC4A 1JP

 

Registered office

No 7, Water End Barns

Water End

Eversholt MK17 9EA

 

IG Design Group plc is registered in England and Wales, number 1401155

 

Share registrar

Link Asset Services

The Registry

34 Beckenham Road

Beckenham BR3 4TU

 

By phone - UK - 0871 664 0300, from overseas call +44 (0) 371 664 0300 calls cost 12p per minute plus your phone company's access charge. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales.

 

By email - enquiries@linkgroup.co.uk

 

Visit us online at

thedesigngroup.com

                                                                                   


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Interim Results - RNS