TIDMIGR
RNS Number : 8519G
International Greetings PLC
04 July 2012
4(th) July 2012
International Greetings PLC
Preliminary Results for the year ended 31 March 2012
International Greetings PLC ('International Greetings' or 'the
Group'), one of the world's leading designers, innovators and
manufacturers of gift packaging and greetings, stationery and
creative play products, announces its audited Preliminary Results
for the year ended 31 March 2012.
Financial Highlights:
* Sales up 2% to GBP221 million from continuing
operations Gross profit margins up from 17.4% to
19.3%
* Operating profit before exceptional items up 33% to
GBP10.7 million (2011: GBP8.1million)
* Profit before exceptional items and tax up 37% to
GBP7.1 million (2011: GBP5.2million)
* Profit before tax from continuing operations GBP3.2
million (2011: GBP4.3 million) after exceptional
items of GBP3.9 million
* Underlying earnings per share excluding exceptional
items, discontinued operations and before the benefit
of one off tax credits up 1.6p from 5.5p to 7.2p
* Earnings per share at 0.3p (2011: 7.5p) after
exceptional items of GBP3.9 million (2011: GBP0.9
million)
* Debt down 6% to GBP41.7 million (2011: GBP44.4
million) and year end leverage at 2.8 times (2011:
3.5 times)
* Cash generated from operations of GBP11.5 million
(2011: GBP10.7 million)
* Cash generated from operations excluding exceptional
items GBP15.4 million (2011: GBP12.4 million)
Operational Highlights:
* Gift packaging sales continue to increase, with gift
wrap volumes exceeding 2 billion linear feet
* Global sales of Everyday single cards have grown by
33%
* Worldwide customer base has expanded to over 80
countries
* Effective action to combat cost inflation, resulting
in increased gross margins
* Relocation of factory in China and installation of
state of the art printing press in Holland completed.
Paul Fineman, CEO commented:
"I am delighted to report another year of robust, sustained
growth across the Group, with operating profit, before exceptional
items, exceeding market expectations.
"Our focus on efficiency, excellent standards of customer
service and product innovation, has allowed us to achieve growth in
both sales and profits, whilst debt continues to decrease as our
cash generation increases. The investments we have made in
relocating our manufacturing facilities in China, merging our
sourcing facilities in Hong Kong and installing a state of the art
gift wrap manufacturing plant in Holland, will enable us to remain
highly competitive in the future and ensure that we continue to
drive efficiencies across the Group.
"We have now established an organisation, strategy and culture
to sustain existing sales streams and drive profitable expansion of
our global businesses, which are increasingly working together to
drive efficiencies and harness opportunities. We are encouraged by
the start to our current trading year, the robust forward
visibility of our order book and the continued momentum across the
markets in which we operate and we remain focused on delivering
ever-increasing shareholder value."
For further information, please contact:
International Greetings plc Tel: 01707 630617
Paul Fineman, Chief Executive
Anthony Lawrinson, Chief Financial
Officer
Cenkos Securities plc Tel: 0207 397 8900
Bobbie Hilliam
Adrian Hargrave
Arden Partners plc Tel: 020 7614 5917
Richard Day
Jamie Cameron
FTI Consulting Tel: 020 7831 3113
Jonathon Brill
Georgina Goodhew
A year of continued progress to deliver improved Shareholder
Value
I am proud and privileged to have been appointed Chairman of our
Group, following the retirement of my predecessor, Keith James,
during September 2011. It is therefore very pleasing for me to
report that the Group has made good progress, with profits before
exceptional items and tax, increasing by 37% over the prior year to
reach GBP7.1 million. At the same time our balance sheet continues
to strengthen, showing a reduction in net debt and an improvement
in our leverage ratio.
Revenues for the year ended 31 March 2012 rose by 2% to GBP221
million, from continuing operations. Operating profit before
exceptional items was up 33% to GBP10.7 million and GBP6.8 million
after exceptional items whilst as stated, profit before exceptional
items and tax was up 37% to GBP7.1 million and GBP3.2 million after
exceptional items. Debt fell by 6% to GBP41.7 million and cash
generated from operations, excluding exceptional items, rose to
GBP15.4 million, compared with GBP12.4 million the previous
year.
Following the restructuring of the Group over the past several
years, our focus now is on improving efficiency, developing sales
and growing profits in the areas of our business where we are
committed to be true market leaders, whilst continuing to look at
every opportunity to improve our cost effectiveness in competitive
and challenging markets. It is therefore a continuous strategy that
we seek out initiatives to improve our margins, as a consequence of
reducing our cost of goods by implementing manufacturing
efficiencies, creative product development and effective sourcing
techniques. To these ends, during the year we have made significant
investments to relocate our manufacturing facilities in China and
install a state of the art gift wrap printing press in our company
in Holland. Within each of the countries that we operate, we see
that consumers and, as a consequence our retail customers, are
increasingly looking for 'value for money' in the products that
they purchase. Accordingly, we challenge the management in all our
businesses to find ways to not only look for sales and profit
opportunities, but also to deliver improved gross margins.
As previously advised, Keith James retired as our Chairman
following the Annual General Meeting in September 2011. Keith
joined the Board in 2004 and was appointed Chairman in 2006. I
should like to place on record our thanks and appreciation for the
significant contribution that he made to the Group during that
period. Under his leadership, the Group successfully carried out
some essential reorganisation and restructuring and is now well
placed to go forwards. I wish Keith a long, happy and healthy
period of retirement.
During the year three of our Executive Directors also left our
Group. Charles Uwakaneme, who played an important role in the
reorganisation of our businesses in the UK and continental Europe,
retired at the same time as Keith James. Sheryl Tye, our Group
Finance Director left in September, having played a vital part in
the restructuring of our finances, systems, controls and management
reporting over the past three years. Martin Hornung, who joined our
Group 22 years ago following our acquisition of the cracker company
Brite Sparks was responsible for our manufacturing and sourcing
offices in China and Hong Kong; Martin left in December 2011. We
also saw the departure of Chris Howell from our Board, following
his three year term of office. Chris joined as a Non-Executive
Director in 2009 and was Chair of our Audit Committee. I should
like to thank each of them for their contributions to our various
successes over the years and their loyalty and support. On behalf
of The Board, we wish them every success for the future.
However, I am delighted to welcome three new Directors to the
Board. Anthony Lawrinson joined as Chief Finance Officer in October
2011. Anthony previously held the same role with Reliance Security
Group Limited and prior to that O2 Airwave. Elaine Bond joined as a
Non-Executive Director in February 2012. Elaine is also a
Non-Executive Director of Yorkshire Ambulance Service and was
previously Group Operations Director of UK Greetings Ltd - the UK's
largest manufacturer of greeting cards, gift wrap and related
social expression products. Phil Dutton joined as a Non-Executive
Director in May 2012 and is also Chair of our Audit Committee. Phil
was previously Finance Director of Matalan Plc, Finance Director of
Asda Stores and more recently Group Finance Director of Punch
Taverns Plc. I wish all three every success and fulfilment on
joining our Board and look forward to working with them.
I should like to thank my colleagues on the Board for their hard
work and support that they have given to me personally and for
their loyalty, commitment and contributions to the Group.
Similarly, I wish to record our thanks and appreciation to all our
staff within the Group for their loyalty, efforts and support.
It is through their hard work that we are making the progress
that I am able to report. Finally, I thank our shareholders,
bankers, customers, suppliers and advisors for their loyalty and
continuing support to our businesses throughout the world that
comprise International Greetings Plc.
John Charlton
Chairman
Chief Executive's review
Focussing on growth
I am pleased to report that we have delivered another year of
solid growth with excellent progress achieved across our portfolio
of activity. As a result, operating profit, before exceptional
items, has exceeded market expectations, whilst we have also
continued our trend, in recent years, of generating increased
levels of cash and reducing debt.
The sustained increase in gross margins, sales and
profitability, reflects the strong platform we now have in place
across the business. This, combined with our ability to design and
engineer commercially appealing product solutions and develop
innovative and added value categories, has enabled us to deliver
sustained growth at Group level since 2008.
Despite continued inflationary pressures on our cost base, we
have achieved improved efficiencies, particularly through
reorganisation in the UK and Hong Kong and investment in
manufacturing in China and Holland. These actions have enabled us
to maintain our ability to profitably compete in commoditised
markets, whilst providing exceptional value and excellent service
to our customers on a worldwide basis.
The encouraging growth outlined above has been achieved despite
the continued challenging market conditions and we remain focused
on identifying and delivering new and significant opportunities for
accelerating future profits growth.
Geographical highlights
UK and Asia
The UK and Asia business accounted for 53% (2011: 54%) of the
Group's revenue for the year. Sales were sustained following strong
growth in the prior year, driven by a notable expansion and
contribution in product categories targeted at entry level price
points, which led to record-breaking volumes and efficient
manufacturing.
The year saw a particularly strong performance in our gift
packaging and greetings categories, with a 70% increase in our
sales of single greeting cards in the UK market. We expect this
growth to continue following the commencement of trading in the
area of personalised, digital, on-line greetings, and the expansion
of our portfolio of products and service within this market
place.
Within the UK, our businesses engaged in the stationery,
creative play and gift categories have continued to improve
profitability, by focusing on operational efficiency and a
collaborative approach to sales and product development.
The ever-closer cooperation of our UK and Asia based operations,
enabled us to provide on-time, in full deliveries throughout the
year, whilst reducing our cost base through the merger and
reorganisation of our Hong Kong based sourcing, quality control and
customer liaison facilities.
The relocation of our China based manufacturing facilities from
Shenzhen to Huizhou, will result in the establishment of a lower
cost base that will enable us to remain competitive, whilst
providing the highest standards of quality and service to our
global customers.
Mainland Europe
In what is currently the most challenging of our main markets,
mainland Europe accounted for 13% (2011: 15%) of the Group's
revenue for the year, representing a fall in revenue of 13%.
Nevertheless, tight control of overheads and margins ensured that
all of our European businesses were profitable and the purchase and
timely installation of a new, highly efficient gift wrap
manufacturing plant in Holland, has enabled us to establish new
opportunities for reduced cost and profitable expansion.
However, as in other regions, value and mass market retailers
have proved to be most resilient to economic conditions, and we
have established and nurtured important relationships with many of
the key pan-European retail groups which will serve us well going
forward.
USA
The USA operations accounted for 20% (2011: 19%) of the Group's
revenue for the year. Sales increased by 13% and profits improved
significantly on the prior year, continuing the trend established
in 2011.
Growth was delivered across all business segments, and from an
operational perspective, we achieved good execution of production,
procurement and shipping.
Whilst our business has enjoyed growth with our major customers,
including the world's largest retailers, we have developed and
expanded our trading base, with over a thousand new customers
established over the last two years. In addition, we have also
developed incremental product categories and customer channels for
future growth. Of particular note is the growth achieved with
retailers specialising in $1 priced merchandise, where we provide
great design and value to a fast growing market.
Australia
Artwrap Australia accounted for 13% (2011: 12%) of the Group's
revenue for the year. Sales increased by 16%, in a currently
resilient marketplace and the business continued to expand its
customer base throughout Australia, New Zealand and the Pacific
Region.
To support future growth and deliver greater efficiency, we have
invested in fast payback improvements to our Melbourne based
logistics facilities, that are planned to have an impact in the
next financial year and beyond.
Customers and licences
We have once again seen the expansion in our global sales of
products developed under our portfolio of International Greetings'
own generic brands, thus enabling us to leverage our designs and
product development on a worldwide basis.
At the same time, we have enjoyed considerable success in the
areas of licensed product categories, and during the year, in
addition to strong sales of well-established 'perennial'
characters, we have seen excellent performance in the sales of a
wide selection of our Peppa Pig(TM) products, and the recently
introduced Monster High(TM) range. Our licensed characters and
brands in 2012/13, continues to help us provide our customers with
a superb choice of generic licensed and bespoke products.
Whilst we have long established relationships with many of the
world's major retailers, there remains significant opportunity for
us to expand our business with existing customers, as well as with
targeted new customers and channels. We remain fully aware of the
changing dynamics in the market place and have established a
flexible and efficient manufacturing and sourcing base to meet the
needs of our customers in a competitive market place, offering
global scale with local knowledge and service.
Our team
Our teams across the Group have continued to meet the challenges
of combatting cost inflation, whilst providing the highest
standards of product and service to customers whose focus and main
areas of growth have been in entry level price point categories.
This has been reflected in the impressive growth of our gross
margins through the combination of driving efficiency and adding
value through innovation.
I take the opportunity of thanking our teams for their energy,
enthusiasm and commitment in continuing to drive our business
forward.
Our strategy
Our 5 key focus points enable us to achieve high standards and
reach the targets we set ourselves:
-- Nurturing the mutually valuable relationships we enjoy with our customers,
suppliers and stakeholders.
-- Creating a 'toolbox' of marketing, design, product and brand category
expertise.
-- Providing best quality value and service through optimum product development,
manufacturing, sourcing and supply.
-- Giving our teams across the world the knowledge and tools needed to
achieve their goals.
-- Balancing our business, through sustainable and growing sales across
geographic regions, seasons, product categories and brands.
Designed to succeed
The disciplines and processes that have been put in place in
recent years to enable us to significantly reduce debt and improve
leverage remain important to us. We have now established an
organisation, strategy and culture to sustain existing income
streams and drive profitable expansion of our global businesses,
which are increasingly working together to drive efficiencies and
harness opportunities.
Whilst one of our core competencies is our ability to design
commercially appealing products that meet the needs of our
customers and consumers, we have focused our energies to ensure
that all aspects of our business - operational, financial and
commercial - are designed to succeed.
I am delighted that our 2011/12 results were ahead of market
expectations and we are focused on achieving continued sustained
growth across the business during 2012/13 and beyond. We remain
focused on identifying new opportunities and implementing plans for
future growth and ultimately on continuing to drive shareholder
value.
Paul Fineman
CEO
Financial review
Increasing profit, decreasing leverage
Group performance
Our focus on margins, operating profits and cash management has
resulted in further steady improvement to the financial position of
the business. Net debt as a multiple of pre-exceptional EBITDA has
fallen to under 2.8 times (2011: 3.5 times) at the year-end and our
portfolio of international businesses has provided financial
resilience in tough trading markets.
Continuing operations
Revenues from continuing operations for the year to 31 March
2012 were up slightly by 2% to GBP220.8 million (2011: GBP216.9
million). External sales from the UK were maintained following
strong growth in the prior year (+8%). Europe was our most
difficult marketplace where external sales fell 13%. However, this
was more than offset by excellent sales growth at our US and
Australian operations of +13% and +16% respectively.
Gross profit margin has increased significantly to 19.3% (2011:
17.4%) and reflects continued margin recovery in the UK but also
margin development in USA and especially Australia. Geographical
diversity, an improving mix of own brand products and innovative
design engineering to price points have created this result in
markets where we have seen deflationary pressure on selling prices
and inflationary pressure on raw materials and goods sourced from
the Far East.
Favourable sea freight rates in 2011/12 have helped to offset
these pressures but this benefit is not continuing in the current
year. Increasing rates will make further gross margin improvement
more difficult in the year ahead.
Overheads in absolute terms have increased year-on-year by
GBP1.1 million, excluding the effect of currency (GBP0.8 million).
However, this primarily reflects the effect of benefits in 2010/11
which did not recur in 2011/12, increasing spend on medium term
business development opportunities and investment in people
(particularly sales) in our growing US and Australian markets. Cost
control remains tight and the opportunity to generate substantial
improvements to profitability with limited investment in our
overhead base remains clear. Opportunities to remove or reduce
costs are constantly sought out and new costs only incurred where
actual or prospective value can be demonstrated.
Operating profit before exceptional items increased by 33% to
GBP10.7 million (2011: GBP8.1 million). After exceptional items,
operating profit was GBP6.8 million (2011: GBP7.2 million).
Exceptional items during the year amounted to GBP3.9 million
before tax (2011: GBP0.9 million). As previously announced these
relate to:
-- restructuring relating to Board Directors and senior personnel within
our UK businesses (GBP1.2 million) which is expected to result in annual
savings of GBP0.6 milion; and
-- the relocation of our factory in China and associated restructuring
of management (GBP2.7 million). This included relocation/redundancy
costs, relocation of equipment and costs of exit from our previous
leasehold arrangements.
The significant investment to relocate our factory within China
will materially reduce rental and labour costs, generating both
absolute savings and mitigating the effect of labour inflation that
would otherwise have been experienced. Payback is expected to be
approximately 2 years.
Finance expenses in the year were GBP3.6 million (2011: GBP2.9
million) despite falling year end debt. This change reflects
increased costs and margins associated with the refinancing and
extension of our banking facilities to longer maturities (GBP0.4
million) but also unrealised market movements on Euro denominated
interest rate swaps, which were not hedge accounted (GBP0.3
million). Notes 8 and 20 to the financial statements provide
further information.
Profit before exceptional items and tax was up 37% to GBP7.1
million (2011: GBP5.2 million).
Profit before tax from continuing operations was GBP3.2 million
(2011: GBP4.3 million) after charging exceptional items of GBP3.9
million (2011: GBP0.9 million).
Taxation
The headline taxation charge of GBP1.75 million (2011: credit
GBP0.7 million) or 55.3% arises because of the exceptional costs
associated with the factory relocation in China, where no taxation
relief has been recognised as the prospect of this crystallising is
low.
The effective underlying tax charge on profits before
exceptional items is 27.5% (2011: tax credit 8%) with the prior
period benefitting from recognition of deferred tax assets relating
to historical losses in the US and loss carry-backs in Europe.
Actual taxation paid in cash during the year amounted to GBP1.1
million (2011: GBP0.4 million) and arose almost entirely in
Australia.
The current geographical profile of Group profits before
exceptional items at current local rates of tax would result in an
underlying blended tax rate of approximately 31%. However, there
are still losses in the US and UK with a current tax value of
GBP4.8 million, not yet recognised in the balance sheet and the
opportunity to recognise and utilise these as profitability
improves will suppress the actual tax rate for some time to
come.
Profit for the year
Profit for the year was GBP1.4 million (2011: GBP4.9 million).
However, this was after charging GBP3.7 million (2011: GBP0.6
million) in respect of exceptional items.
Earnings per share and dividends
The basic earnings per share was 0.3p (2011: 7.5p). After
removing the effect of exceptional items, the adjusted earnings per
share increases to 7.2p (2011: 8.9p). However, the effect of the
prior year taxation credit as compared with current year charge was
to increase adjusted earnings per share in the prior year by
approximately 3.4p. This means that the true underlying change in
earnings per share is an increase from 5.5p to 7.2p.
A large proportion of employee share options vested in December
2011 and as these are exercised, earnings per share will trend
towards the fully diluted levels. At 31 March 2012, 1.0 million
shares had been exercised with a further 4.5 million shares which
had vested but not yet been exercised.
No dividend was paid during the year (2011: GBPNil) and the
Board does not propose a final dividend for the year. The primary
focus remains the reduction of leverage from the current level of
2.8 times EBITDA to below 2.0 times EBITDA. At this point, the
Board will consider whether it is appropriate to resume
dividends.
Balance sheet and cash flow
Net debt at 31 March 2012 reduced by 6% to GBP41.7 million
(2011: GBP44.4 million).
Year-end net debt includes amounts denominated in US dollars of
$20.7 million (2011: $21.4 million), and in euros of EUR11.0
million (2011: EUR14.9 million). The year-end exchange rates were
$1.60 (2011: $1.61), and EUR1.20 (2011: EUR1.13).
Working capital management continues to be a priority.
Outstanding debtors are monitored closely, both to maximise cash
but also to reduce our credit risk. Trade debtors fell slightly to
GBP17.1 million (2011: GBP17.4 million) on slightly increased sales
with foreign exchange rates representing one third of this small
reduction. The charge for bad and doubtful debts in the year was
minimal and at year end debtors net of provisions in excess of 60
days overdue at GBP0.4m accounted for just 2.5% of the debtor
balance, reflecting continuous and careful attention to this
risk.
Gross stock levels declined by 8.2% from GBP51.6 million to
GBP47.3 million. This is despite the fact that, as last year,
success in obtaining early firm customer orders allowed more
factory production to begin for the coming season ahead of the
traditional summer peak. This allows more efficient use of
resources throughout the year, reducing costs.
Older stock (measured as over 15 months since last purchase)
fell by a further 35% (2011: 25% reduction) to GBP5.2 million
(2011: GBP8.1 million). Our businesses have consistently achieved
in excess of 100% recovery against written down values of old
stock, indicating adequate provisioning levels.
Group cash generated from operations was GBP11.5 million (2011:
GBP10.7 million). Stated before outflows relating to exceptional
items, cash generated from operations was stronger still at GBP15.4
million (2011: GBP12.4 million).
Capital expenditure was slightly above depreciation but remains
relatively low at GBP4.4 million for the year (2011: GBP2.7
million). This reflects the investment in a new state of the art
printing press at our gift-wrap manufacturing operation in Europe
and modest capital costs associated with the setup of our new
factory location in China. Both investments will improve
efficiencies and further enhance our competitive portfolio of
products and services.
The property in the US purchased last year and held for resale
was disposed of in the year realising GBP0.5m.
Equity attributable to shareholders has decreased from GBP48.1
million to GBP47.8 million. The reduction arises despite profits
generated because of reductions to unrealised hedging and
translation reserves.
Risks and key performance indicators
Our areas of primary focus are:
-- improved profitability, which we aim to achieve through top line growth
in selected markets and channels together with strong cost and gross
margin management; and
-- lower leverage measured as the ratio of net debt to pre-exceptional
EBITDA, which we aim to achieve through improved profitability together
with close management of our working capital.
Operationally we are increasing the spread of our revenue base
and enhancing our margins by seeking to balance our business
across:
-- different territories - turnover to UK destinations has fallen to 39%
from 41% (see note 4);
-- different products - stationery and creative play products account
for 33% of turnover (see note 4);
-- more every-day products across the year - despite the strength of gift-wrap
sales, which are strongly seasonal, every-day product represents 49%
of revenue, up from 47% last year; and
-- brands - the profile of IG brands and licensed products continues to
grow with sales in this category now representing 54% of our revenue
up from 52% last year.
Treasury operations
As announced in last year's annual report, in July 2011 the
principal bank of the Group agreed to restructure and extend its
facilities as follows, providing a sound capital foundation with a
maturity profile to suit the Group's needs:
-- two term loans, totalling GBP29.9 million, split between US dollars
and sterling, and repayable over five years, with a GBP14.9 million
repayment on the fifth anniversary;
-- a two year asset backed loan facility secured on the stock and debtors
of the two largest UK businesses;
-- a one year rolling revolving multi-currency credit facility of up to
GBP33.4 million; and
-- a one year rolling multi-currency overdraft facility of up to GBP5
million.
The blended interest rate on these facilities in 2011/12 was
just over 4% and the short term element of these facilities was
renewed on improved terms in May 2012, which will slightly lower
the blended rate in the forthcoming year and provides significant
additional headroom, giving the Group the flexibility to take
advantage of value enhancing supplier and customer terms where
appropriate.
Additionally, access to facilities was diversified through the
addition of a US bank in July 2011 who provide a three year asset
backed loan facility of up to $25 million, at a rate of 2.5% over
US LIBOR.
There are financial covenants attached to our facilities and the
Group comfortably complied with these throughout the year. These
covenants include:
-- debt service, being the ratio of cash flow available to finance costs
on a rolling twelve month basis;
-- interest cover, being the ratio of earnings before interest, depreciation
and amortisation to interest on a rolling twelve month basis;
-- leverage being the ratio of debt to pre-exceptional EBITDA on a rolling
twelve month basis; and
-- in the individual businesses which have asset backed loans, covenants
of pre-exceptional EBITDA before interest, depreciation on a rolling
twelve month basis compared with the forecast, and the dilution of
credit notes as a percentage of invoices issued.
The Group has entered into various interest rate swaps
denominated in US dollars and sterling and renewed others in Euros
to improve certainty over interest charges. This also provided the
opportunity to adopt hedge accounting where previously fluctuations
had been experienced associated with unrealised market
movements.
Anthony Lawrinson
Group CFO
Consolidated income statement
year ended 31 March 2012
2012
---------------------------
Before 2012 2011 2011
exceptional Exceptional Before Exceptional
items items 2012 exceptional items 2011
GBP000 (note 6) Total items (note Total
6)
Note Before GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Continuing operations
Revenue 2 220,755 - 220,755 216,857 - 216,857
Cost of sales (178,190) - (178,190) (179,108) (27) (179,135)
------------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Gross profit 42,565 - 42,565 37,749 (27) 37,722
19.3% 19.3% 17.4% 17.4%
Selling expenses (13,003) - (13,003) (12,698) (401) (13,099)
Administration expenses (19,580) (3,635) (23,215) (18,021) (472) (18,493)
Other operating income 3 678 - 678 1,019 - 1,019
Profit on disposal
of plant and equipment 63 - 63 - - -
(Loss)/profit on
sales of property,
plant and equipment - (283) (283) 33 - 33
--------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Operating profit/(loss) 10,723 (3,918) 6,805 8,082 (900) 7,182
Finance expenses 4 (3,635) - (3,635) (2,917) - (2,917)
--------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Profit/(loss) before
tax 7,088 (3,918) 3,170 5,165 (900) 4,265
Income tax credit/(charge) 5 (1,948) 195 (1,753) 426 267 693
--------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Profit/(loss) from
continuing operations 5,140 (3,723) 1,417 5,591 (633) 4,958
Loss from discontinued
operations (net of
tax) 7 - - - (100) - (100)
--------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Profit/(loss) for the
period 5,140 (3,723) 1,417 5,491 (633) 4,858
------------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Attributable to:
Owners of the Parent Company 177 4,010
Non-controlling interests 1,240 848
----------------------------------------------------------- ---------- --------------------------------------
Earnings per ordinary share
Diluted Basic Diluted Basic
----------------------------------------------------- ------- -------- -------
Adjusted earnings per share excluding
exceptional items and discontinued
operations 13 6.7p 7.2p 8.2p 8.9p
Loss per share on exceptional
items 13 (6.4p) (6.9p) (1.1p) (1.2p)
Earnings per share from continuing
operations 13 0.3p 0.3p 7.1p 7.7p
Loss per share on discontinued
operations 13 - - (0.2p) (0.2p)
Earnings per share 13 0.3p 0.3p 6.9p 7.5p
--------------------------------------- --- ------- ------- -------- -------
Consolidated statement of comprehensive income
year ended 31 March 2012
2012 2011
GBP000 GBP000
----------------------------------------------------------------- -------
Profit for the year 1,417 4,858
Other comprehensive income:
Recycling translation reserves on closure of subsidiary - (97)
Exchange difference on translation of foreign operations (88) 529
Net profit/(loss) on cashflow hedges (322) (124)
Other comprehensive income for period, net of tax (410) 308
Total comprehensive income for the period, net of tax 1,007 5,166
Attributable to:
Owners of the Parent Company (475) 4,300
Non-controlling interests 1,482 866
--------------------------------------------------------- ------ -------
1,007 5,166
----------------------------------------------------------------- -------
Consolidated statement of changes in equity
year ended 31 March 2012
Share
premium
and
capital Non-
Share redemption Merger Hedging Translation Retained Shareholder controlling
capital reserve reserves reserves reserve earnings equity interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- -------- ---------- --------- --------- ----------- --------- ----------- ----------- -------
At 1 April 2010 2,608 4,346 16,216 - 362 19,071 42,603 3,354 45,957
Profit for the
year - - - - - 4,010 4,010 848 4,858
Other
comprehensive
income - - - (124) 414 - 290 18 308
--------------- -------- ---------- --------- --------- ----------- --------- ----------- ----------- -------
Total
comprehensive
income for the
year - - - (124) 414 4,010 4,300 866 5,166
Equity-settled
share-based
payment - - - - - 109 109 - 109
Shares issued 74 - 948 - - - 1,022 - 1,022
Options
exercised 16 40 - - - - 56 - 56
--------------- -------- ---------- --------- --------- ----------- --------- ----------- ----------- -------
At 31 March
2011 2,698 4,386 17,164 (124) 776 23,190 48,090 4,220 52,310
Profit for the
year - - - - - 177 177 1,240 1,417
Other
comprehensive
income - - - (322) (330) - (652) 242 (410)
--------------- -------- ---------- --------- --------- ----------- --------- ----------- ----------- -------
Total
comprehensive
income for the
year - - - (322) (330) 177 (475) 1,482 1,007
Equity-settled
share-based
payment - - - - - 43 43 - 43
Shares issued - - - - - - - - -
Options
exercised 52 94 - - - - 146 - 146
Equity
dividends
paid - - - - - - - (958) (958)
--------------- -------- ---------- --------- --------- ----------- --------- ----------- ----------- -------
At 31 March
2012 2,750 4,480 17,164 (446) 446 23,410 47,804 4,744 52,548
--------------- -------- ---------- --------- --------- ----------- --------- ----------- ----------- -------
Merger reserve
The merger reserve comprises premium on shares issued in
relation to business combinations. In the prior year the additions
are in relation to the final deferred consideration for the
Glitterwrap business.
Capital redemption reserve
The capital redemption reserve comprises amounts transferred
from retained earnings in relation to the redemption of preference
shares. For ease of presentation, the amount of GBP1.34 million
relating to the capital redemption reserve has been included within
the column of share premium and capital redemption reserve in the
balances at both the beginning and end of each year, with no
movements.
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet
occurred.
Translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations.
Shareholders' equity
Shareholders' equity represents total equity attributable to
owners of the Parent Company.
Consolidated balance sheet
as at 31 March 2012
As at As a
31 March 31 March
2012 2011
Notes GBP000 GBP000
------------------------------------------------------- -------- ---------
Non-current assets
Property, plant and equipment 8 31,533 31,518
Intangible assets 9 32,916 33,385
Deferred tax assets 10 4,640 4,616
------------------------------------------------- ---- -------- ---------
Total non-current assets 69,089 69,519
------------------------------------------------------- -------- ---------
Current assets
Inventory 42,628 45,582
Assets classified as held for sale - 497
Trade and other receivables 20,942 21,494
Cash and cash equivalents 11 3,168 1,885
------------------------------------------------- ---- -------- ---------
Total current assets 66,738 69,458
------------------------------------------------------- -------- ---------
Total assets 135,827 138,977
------------------------------------------------------- -------- ---------
Equity
Share capital 2,750 2,698
Share premium 3,140 3,046
Reserves 18,504 19,156
Retained earnings 23,410 23,190
------------------------------------------------------- -------- ---------
Equity attributable to owners of the Parent Company 47,804 48,090
------------------------------------------------------- -------- ---------
Non-controlling interests 4,744 4,220
------------------------------------------------------- -------- ---------
Total equity 52,548 52,310
------------------------------------------------------- -------- ---------
Non-current liabilities
Loans and borrowings 12 33,622 8,377
Deferred income 1,879 2,429
Provisions 1,003 1,847
Other financial liabilities 447 375
------------------------------------------------- ---- -------- ---------
Total non-current liabilities 36,951 13,028
------------------------------------------------------- -------- ---------
Current liabilities
Bank overdraft 11 1,945 3,620
Loans and borrowings 12 9,329 34,312
Deferred income 550 550
Provisions 317 -
Income tax payable 855 162
Trade and other payables 23,133 25,353
Other financial liabilities 10,199 9,642
------------------------------------------------- ---- -------- ---------
Total current liabilities 46,328 73,639
------------------------------------------------------- -------- ---------
Total liabilities 83,279 86,667
------------------------------------------------------- -------- ---------
Total equity and liabilities 135,827 138,977
------------------------------------------------------- -------- ---------
These financial statements were approved by the Board of
Directors on 27 June 2012 and were signed on its behalf by:
P Fineman A Lawrinson Company number
Director Director 1401155
Consolidated cash flow statement
year ended 31 March 2012
2012 2011
Notes GBP000 GBP000
-------------------------------------------------------------- --------- --------
Cash flows from operating activities
Profit for the year 1,417 4,858
Adjustments for:
Depreciation 8 3,753 4,108
Amortisation of intangible assets 9 534 331
Finance expenses - continuing operations 4 3,635 2,917
Finance expenses - discontinued operations 7 - 26
Recycling of translation reserves on closure of subsidiary - (97)
Income tax charge/(credit) - continuing operations 5 1,753 (693)
Loss/(profit) on sales of property, plant and equipment 220 (33)
Loss on external sale of intangible fixed assets 4 -
Profit on disposal of assets held for resale (8) -
Impairments of assets held for resale - 238
Equity-settled share-based payment 43 109
--------------------------------------------------------- --- --------- --------
Operating profit after adjustments for non-cash items 11,351 11,764
Change in trade and other receivables 224 173
Change in inventory 2,840 (303)
Change in trade and other payables (1,799) (381)
Change in provisions and deferred income (1,102) (518)
-------------------------------------------------------------- --------- --------
Cash generated from operations 11,514 10,735
Tax paid (1,131) (420)
Interest and similar charges paid (3,491) (3,226)
Receipts from sales of property for resale 528 -
Acquisition of property for resale - (780)
--------------------------------------------------------- --- --------- --------
Net cash inflow from operating activities 7,420 6,309
-------------------------------------------------------------- --------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 122 73
Acquisition of intangible assets 9 (399) (521)
Acquisition of property plant and equipment 8 (4,015) (1,900)
--------------------------------------------------------- --- --------- --------
Net cash outflow from investing activities (4,292) (2,348)
-------------------------------------------------------------- --------- --------
Cash flows from financing activities
Proceeds from issue of share capital 146 56
Repayment of secured borrowings (1,473) (947)
Net repayment of credit facilities (27,785) (3,222)
Payment of finance lease liabilities (49) (113)
New bank loans raised 30,170 -
Loan arrangement fees (370) -
Payment of deferred consideration (111) -
Dividends paid to non-controlling interests (918) -
-------------------------------------------------------------- --------- --------
Net cash outflow from financing activities (390) (4,226)
-------------------------------------------------------------- --------- --------
Net increase in cash and cash equivalents 2,738 (265)
Cash and cash equivalents at beginning of period (1,735) (993)
Effect of exchange rate fluctuations on cash held 220 (477)
-------------------------------------------------------------- --------- --------
Cash and cash equivalents at 31 March 11 1,223 (1,735)
--------------------------------------------------------- --- --------- --------
Notes to the financial statements
year ended 31 March 2012
1 Accounting policies
International Greetings plc is a public limited company,
incorporated and domiciled in England and Wales. The Company's
ordinary shares are listed on AIM.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group"). The
Company financial statements present information about the Company
as a separate entity and not about its group.
The Group financial statements have been prepared and approved
by the Directors in accordance with EU adopted International
Financial Reporting Standards. The Company has elected to prepare
its Company financial statements in accordance with UK GAAP.
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. Following the restructure of its principal banking
facilities in July 2011 the Group now shows net current assets of
GBP20.4 million (2011: net current liabilities of GBP4.2
million).
The borrowing requirement of the Group increases steadily over
the period from July and peaks in September and October, due to the
seasonality of the business, as the sales of wrap and crackers are
mainly for the Christmas market, before then reducing.
As with any company placing reliance on external entities for
financial support, the Directors acknowledge that there can be no
certainty that this support will continue although, at the date of
approval of this report, they have no reason to believe that it
will not do so.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting
in preparing the financial statements.
Measurement convention
The financial statements are prepared on the historical cost
basis except that financial instruments used for hedging are stated
at their fair value.
Changes in accounting policies
The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 March 2011, except for the adoption of new standards and
interpretations as of 1 April 2011.
The Group maintains facilities with a range of maturities,
counter-parties and currencies to suit its needs.
These include long dated facilities against specialise capital
assets, medium term facilities (4-5 years) forming the majority and
shorter dated working capital of 1-3 years. This provides the Group
with a sound basis for trading.
The short term element (overdraft and RCF) of these facilities
was renewed on improved terms in May 2012, which will slightly
lower the blended rate in the forthcoming year and provides
significant additional headroom.
IAS 24 Related Party Disclosures (Amendment)
The amended standard clarifies the definition of a related party
to simplify the identification of such relationships and to
eliminate inconsistencies in its application. This amendment did
not have any impact on the financial position or performance of the
Group.
2 Segmental information
The Group has one material business activity being the design,
manufacture and distribution of gift packaging and greetings,
stationery and creative play products.
For management purposes the Group is organised into four
geographic business units.
The results below are allocated based on the region in which the
businesses are located; this reflects the Group's management and
internal reporting structure. The decision was made last year to
focus Asia as a service provider of manufacturing and procurement
operations, whose main customers are our UK businesses. Both the
China factory and the majority of the Hong Kong procurement
operations are now overseen by our UK operational management team
and we therefore continue to include Asia within the internal
reporting of the UK operations, such that UK and Asia comprise an
operating segment. The Chief Operating Decision Maker is the
Board.
Intra-segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Financial performance of each segment is measured on operating
profit. Interest expense or revenue and tax are managed on a Group
basis and not split between reportable segments.
Segment assets are all non-current and current assets, excluding
deferred tax and income tax receivable. Where cash is shown in one
segment, which nets under the Group's banking facilities, against
overdrafts in other segments, the elimination is shown in the
eliminations column. Similarly inter-segment receivables and
payables are eliminated.
UK & Asia Europe USA Australia Eliminations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------------- --------- --------- ---------- ------------- ---------
Year ended 31 March 2012
Continuing operations
Revenue - external 117,007 29,147 45,044 29,557 - 220,755
-------------
- inter-segment 4,746 1,009 - - (5,755) -
-------------------------------------- --------- --------- --------- ---------- ------------- ---------
Total segment revenue 121,753 30,156 45,044 29,557 (5,755) 220,755
--------------------------------------- --------- --------- --------- ---------- ------------- ---------
Segment result before exceptional
items and discontinued operations 4,089 1,712 3,248 3,613 - 12,662
Exceptional items (3,068) - - - - (3,068)
--------------------------------------- --------- --------- --------- ---------- ------------- ---------
Segment result 1,021 1,712 3,248 3,613 - 9,594
--------------------------------------- --------- --------- --------- ---------- ------------- ---------
Central administration costs (1,939)
Central administration exceptional
items (850)
Net finance expenses (3,635)
Income tax (1,753)
--------------------------------------- ---------------------------------------------------------------------
Profit from continuing operations
for the year ended 31 March
2012 1,417
Balances at 31 March 2012
Continuing operations
--------------------------------------------------------------------------------------------------------------
Segment assets 97,100 16,885 6,224 11,317 4,301 135,827
--------------------------------------- --------- --------- --------- ---------- ------------- ---------
Segment liabilities (40,562) (13,950) (25,029) (3,222) (516) (83,279)
--------------------------------------- --------- --------- --------- ---------- ------------- ---------
Capital expenditure
- property, plant and equipment 1,185 2,437 331 62 - 4,015
- intangible 263 30 87 19 - 399
Depreciation 2,135 742 696 180 - 3,753
Amortisation 368 57 24 85 - 534
--------------------------------------- --------- --------- --------- ---------- ------------- ---------
UK & Asia Europe USA Australia Eliminations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------------- --------- --------- ---------- ------------- ------------
Year ended 31 March 2011
Continuing operations
Revenue - external 117,806 33,493 39,980 25,578 - 216,857
--------------------
- inter-segment 2,599 - - - (2,599) -
-------------------------------------- --------- --------- --------- ---------- ------------- ------------
Total segment revenue 120,405 33,493 39,980 25,578 (2,599) 216,857
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
Segment result before exceptional
items and discontinued operations 2,673 2,107 2,096 2,455 - 9,331
Exceptional items (510) - (238) - - (748)
Segment result from continuing
operations 2,163 2,107 1,858 2,455 - 8,583
Pre-tax loss from discontinued
operations - (100) - - - (100)
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
Segment result 2,163 2,007 1,858 2,455 - 8,483
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
Pre-tax loss from discontinued
operations 100
Central administration costs (1,249)
Central administration exceptional
items (152)
Net finance expenses (2,917)
Income tax 693
--------------------------------------- ------------------------------------------------------------------------
Profit from continuing operations
year ended 31 March 2011 4,958
Balances at 31 March 2011
continuing operations
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
Segment assets 100,853 18,112 6,272 9,438 4,302 138,977
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
Segment liabilities (41,243) (15,721) (27,245) (2,611) 153 (86,667)
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
Capital expenditure
- property, plant and equipment 1,334 297 231 279 - 2,141
- intangible 307 17 16 181 - 521
Depreciation 2,346 821 780 161 - 4,108
Amortisation 161 44 64 62 - 331
Impairment of fixed property,
plant and equipment - - 238 - - 238
--------------------------------------- --------- --------- --------- ---------- ------------- ------------
(a) Capital expenditure consists of additions of property, plant and equipment,
intangible assets and goodwill.
(b) No single customer accounts for over 10% of total sales.
(c) The assets and liabilities that have not been allocated to segments
consist of deferred tax assets of GBP4,640,000 (2011: GBP4,617,000)
and income tax payable of GBP855,000 (2011: GBP162,000). In addition,
the assets and liabilities have been grossed up for VAT of GBP399,000
(2011: GBP315,000) to reflect the net position of the Group.
(d) No operating segment has been aggregated in determining reportable
segments.
(e) Central recharges are included within the result of the segment that
takes the recharge. The balance of the central costs are not allocated
to segments.
(f) The 2011 comparatives have been amended to reflect revision to the
inter-segmental reporting and eliminations between the segments.
Geographical information
The Group's information about its segmental assets (non-current
assets excluding deferred tax assets and other financial assets)
and turnover by customer destination and product are detailed
below:
Non-current assets
---------------------
2012 2011
GBP000 GBP000
---------- ---------- ---------
UK 39,284 39,705
Asia 1,605 1,929
USA 6,589 6,850
Europe 15,008 14,285
Australia 1,963 2,134
---------- ---------- ---------
64,449 64,903
---------------------- ---------
Turnover by customer destination
Turnover
-------------------------- -----------------
2012 2011 2012 2011
--------------------------
% % % %
-------------------------- ------- -------- ----- -----
UK 84,648 89,916 39 41
USA 58,389 53,076 26 25
Europe 39,797 43,711 18 20
Australia and New Zealand 29,557 25,578 13 12
Rest of world 8,364 4,576 4 2
-------------------------- ------- -------- ----- -----
220,755 216,857 100 100
----------------------------------- -------- ----- -----
Turnover by product
Turnover analysis by product
2012 2011 2012 2011
% % % %
------------------------------------------------- -------- ----- -----
Gift packaging and greetings 148,531 142,409 67 66
Stationery and creative play products 72,224 74,448 33 34
--------------------------------------- -------- -------- ----- -----
Total 220,755 216,857 100 100
--------------------------------------- -------- -------- ----- -----
3 Other operating income
2012 2011
GBP000 GBP000
--------------------------------------------------------- -------
Lease premium - 271
Grant income received 550 550
Sub lease rentals credited to the income statement 70 73
Other 58 125
--------------------------------------------------- ---- -------
678 1,019
--------------------------------------------------------- -------
4 Finance expenses
2012 2011
GBP000 GBP000
--------------------------------------------------------------- -------
Interest payable on bank loans and overdrafts 2,756 2,295
Other similar charges 699 751
Finance charges in respect of finance leases 3 4
Interest payable under the effective interest method 3,458 3,050
Derivative financial instruments at fair value through
income statement 177 (133)
------------------------------------------------------- ------ -------
3,635 2,917
--------------------------------------------------------------- -------
5 Taxation
Recognised in the income statement
2012 2011
GBP000 GBP000
------------------------------------------------------- --------
Current tax expenses
Current year - UK corporation tax - -
Current year - foreign tax 991 1,144
Adjustments for prior years (see below) 798 (605)
----------------------------------------------- ------ --------
1,789 539
------------------------------------------------------- --------
Deferred tax expense
Original and reversal of temporary differences (473) (765)
Adjustments in respect of previous periods 437 (467)
----------------------------------------------- ------ --------
(36) (1,232)
------------------------------------------------------- --------
Total tax in income statement 1,753 (693)
----------------------------------------------- ------ --------
Reconciliation of effective tax rate
2012 2011
GBP000 GBP000
------------------------------------------------------------------------ --------
Profit before tax 3,170 4,265
-------------------------------------------------------------- -------- --------
Profit before tax multiplied by the standard rate of
corporation tax of 26% in the UK (2011: 28%) 824 1,194
Effects of:
Expenses not deductible for tax purposes 27 21
Recycle of translation gain on closure of subsidiary - (3)
Unrecognised tax losses 1,016 633
Benefit of unrecognised deferred tax on losses and temporary
difference (1,826) (1,291)
Non-taxable income - (32)
Deferred tax effect on tax rate charges 92 159
Refund carryback due to change in tax law - (427)
Differences between UK and overseas tax rates 349 125
Other items 36 -
Adjustments in respect of prior year 1,235 (1,072)
-------------------------------------------------------------- -------- --------
Total tax in income statement 1,753 (693)
-------------------------------------------------------------- -------- --------
6 Exceptional items
Cost of Selling Admin
sales expenses expenses Total
2012 continuing operations GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- ---------- --------- --------
Restructuring of operational activities
- redundancies (note a) - - 1,201 1,201
- loss on disposal of leasehold land
and buildings in China (note b) - - 283 283
- China factory move (note c) - - 2,434 2,434
-------------------------------------- --------- ---------- --------- --------
Total restructuring costs - - 3,918 3,918
-------------------------------------- --------- ---------- --------- --------
Income tax credit (195)
-------------------------------------- ------------------------------------------
3,723
----------------------------------------------------------------------------------
Cost of Selling Admin
sales expenses expenses Total
2011 continuing operations GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------- -------- --------- --------- --------
Restructuring of operational activities
- redundancies (note d) 27 401 234 662
- impairment of asset for resale
(note e) - - 238 238
----------------------------------------- -------- --------- --------- --------
Total restructuring costs 27 401 472 900
----------------------------------------- -------- --------- --------- --------
Income tax credit (267)
----------------------------------------- ----------------------------------------
633
-----------------------------------------------------------------------------------
(a) Redundancies relate to the termination costs of key executives who
left the business following a review of Board responsibilities and
as a result of business re-organisation in the UK subsidiaries.
(b) Loss on disposal of leasehold land and buildings in China as a result
of the decision to move the China factory.
(c) Costs associated with moving the China factory
(d) The UK design studio moved down to Wales, senior management were made
redundant from our UK operations due to restructuring within those
businesses, and the decision was made to bring the China Factory under
the control of the UK management team, resulting in a senior manager
in Asia being made redundant. These redundancies cost GBP662,000.
(e) During the prior year the Group was called upon to repay the mortgage
of a former senior employee of the US business upon his repatriation
to the UK, according to a guarantee given by the Group about five
years ago. The Group purchased the property and has disposed of it
for GBP528,000.
7 Discontinued operations
2011
GBP000
-------------------------------------------------------------------
Revenue 390
Cost of sales (358)
----------------------------------------------------------- ------
Gross profit 32
Selling expenses (17)
Administration expenses (89)
----------------------------------------------------------- ------
Operating loss (74)
Finance expenses (26)
----------------------------------------------------------- ------
Loss before tax and exceptional items (100)
Income tax -
Loss from discontinued operation before exceptional items (100)
----------------------------------------------------------- ------
The net cash flows attributable to Eickpack are as follows:
2011
GBP000
-------------------------------------------------------
Operating cash flows (13)
Investing cash flows -
--------------------------------------- --------------
Net cash flows (13)
--------------------------------------- --------------
Loss per share from discontinued operation (pence):
Basic (0.2 p)
Diluted (0.2 p)
--------------------------------------- --------------
8 Property, plant and equipment
Land and buildings Plant and Fixtures Motor
and
---------------------
Freehold Leasehold equipment fittings vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- ---------- ---------- --------- --------- ---------
Cost
Balance at 1 April
2010 22,137 8,065 48,644 4,320 988 84,154
Additions 246 6 991 782 116 2,141
Disposals - (605) (2,643) (2,883) (262) (6,393)
Effect of movements
in foreign exchange (68) (495) (1,097) (196) 11 (1,845)
---------------------- --------- ---------- ---------- --------- --------- ---------
Balance at 1 April
2011 22,315 6,971 45,895 2,023 853 78,057
Additions 141 723 2,832 194 125 4,015
Disposals - (721) (658) (947) (263) (2,589)
Effect of movements
in foreign exchange (483) 226 277 52 7 79
---------------------- --------- ---------- ---------- --------- --------- ---------
Balance at 31
March 2012 21,973 7,199 48,346 1,322 722 79,562
---------------------- --------- ---------- ---------- --------- --------- ---------
Depreciation and impairment
Balance as at
1 April 2010 (7,202) (2,351) (36,331) (3,349) (722) (49,955)
Depreciation charge
for the year (920) (349) (2,179) (552) (108) (4,108)
Disposals - 605 2,634 2,876 238 6,353
Effect of movements
in foreign exchange (1) 127 866 182 (3) 1,171
---------------------- --------- ---------- ---------- --------- --------- ---------
Balance at 1 April
2011 (8,123) (1,968) (35,010) (843) (595) (46,539)
Depreciation charge
for the year (930) (333) (1,848) (546) (96) (3,753)
Disposals - 528 653 859 207 2,247
Effect of movements
in foreign exchange 89 (51) (16) (16) 10 16
---------------------- --------- ---------- ---------- --------- --------- ---------
Balance at 31
March 2012 (8,964) (1,824) (36,221) (546) (474) (48,029)
---------------------- --------- ---------- ---------- --------- --------- ---------
Net book value
At 31 March 2012 13,009 5,375 12,125 776 248 31,533
---------------------- --------- ---------- ---------- --------- --------- ---------
At 31 March 2011 14,192 5,003 10,885 1,180 258 31,518
---------------------- --------- ---------- ---------- --------- --------- ---------
Depreciation is charged to either cost of sales, selling costs
or administration costs within the income statement depending on
the department to which the assets relate.
Leased plant and machinery
The net book value of property, plant and equipment included an
amount of GBP160,000 (2011: GBP193,000) in respect of assets held
under finance leases.
Impairment
The impairments are explained in note 6.
Apart from these specific items, all other property, plant and
equipment have been compared with the value in use and no further
impairments are required. The basis for these conclusions are
explained in note 9.
Security
All freehold properties are subject to a fixed charge.
9 Intangible assets
Computer Other
Goodwill software intangibles Total
GBP000 GBP000 GBP000 GBP000
--------------------------------------------------- --------- ------------ ---------
Cost
Balance at 1 April 2010 40,958 2,818 494 44,270
Additions - 521 - 521
Disposals (26) (379) - (405)
Effect of movements in foreign exchange (347) (44) 1 (390)
----------------------------------------- -------- --------- ------------ ---------
Balance at 1 April 2011 40,585 2,916 495 43,996
----------------------------------------- -------- --------- ------------ ---------
Additions - 399 - 399
Disposals - (356) - (356)
Effect of movements in foreign exchange (290) 4 - (286)
----------------------------------------- -------- --------- ------------ ---------
Balance at 31 March 2012 40,295 2,963 495 43,753
----------------------------------------- -------- --------- ------------ ---------
Amortisation and impairment
Balance at 1 April 2010 (9,238) (1,749) (144) (11,131)
Amortisation for the year - (283) (48) (331)
Disposals 26 379 - 405
Effect of movements in foreign exchange 390 57 (1) 446
----------------------------------------- -------- --------- ------------ ---------
Balance at 1 April 2011 (8,822) (1,596) (193) (10,611)
----------------------------------------- -------- --------- ------------ ---------
Amortisation for the year - (486) (48) (534)
Disposals - 352 - 352
Effect of movements in foreign exchange (39) (5) - (44)
----------------------------------------- -------- --------- ------------ ---------
Balance at 31 March 2012 (8,861) (1,735) (241) (10,837)
----------------------------------------- -------- --------- ------------ ---------
Net book value
At 31 March 2012 31,434 1,228 254 32,916
----------------------------------------- -------- --------- ------------ ---------
At 31 March 2011 31,763 1,320 302 33,385
----------------------------------------- -------- --------- ------------ ---------
The aggregate carrying amounts of goodwill allocated to each
geographical segment are as follows:
2012 2011
GBP000 GBP000
-------------------- -------
UK & Asia 25,600 25,600
Europe 4,505 4,842
USA - -
Australia 1,329 1,321
----------- ------- -------
Total 31,434 31,763
----------- ------- -------
Impairment
The Group tests goodwill each half year for impairment, or more
frequently if there are indications that goodwill might be
impaired.
For the purposes of impairment testing, goodwill considered
significant in comparison to the Group's total carrying amount of
such assets has been allocated to the business unit, or group of
business units, that are expected to benefit from the synergies of
the combination (see table above), which represents the lowest
level within the Group at which the goodwill is monitored for
internal management purposes, and is referred to below as a
cash-generating unit. During the last few years the businesses have
begun to work more closely with each other, exploiting the
synergies that arise. The recoverable amounts of cash-generating
units are determined from the higher of value in use and fair value
less costs to sell.
The Group prepares cash flow forecasts for each cash-generating
unit derived from the most recent financial budgets for the
following three years. The key assumptions in these are sales,
margins achievable and overhead costs which are reviewed and
approved by the Board. The Group then extrapolates cash flows for
the following ten years based on a conservative estimate of market
growth of 2% (2011: 2%).
The cash-generating units used the following pre-tax discount
rate which are derived from an estimate of the Group's future
average weighted cost of capital adjusted to reflect the market
assessment of the risks specific to the current estimated cash
flows over the same period.
Pre-tax discount rates used were:
2012 2011
--------------------- ------
UK and Asia 13.2% 13.0%
Europe 15.4% 13.0%
USA 16.7% 13.0%
Australia 14.3% 13.0%
------------- ------ ------
All of the cash-generating units value 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 in budget
growth rate assumption in their assessment.
10 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Assets Liabilities Net
------------------- ----------------- ----------------
2012 2011 2012 2011 2012 2011
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- -------- -------- -------- -------- -------
Property, plant
and equipment 409 591 (1,875) (1,155) (1,466) (564)
Inventory provisions 421 809 - - 421 809
Capital gains
deferred - - (494) (563) (494) (563)
Deferred lease
premium 83 79 - - 83 79
Provisions 722 894 - - 722 894
Tax loss carried
forward 3,817 2,406 - - 3,817 2,406
Other timing differences 1,557 1,555 - - 1,557 1,555
------------------------------ --------- -------- -------- -------- -------- -------
Net tax assets/(liabilities) 7,009 6,334 (2,369) (1,718) 4,640 4,616
------------------------------ --------- -------- -------- -------- -------- -------
The deferred tax asset in respect of tax losses carried forward
at 31 March 2012 of GBP3,817,000 (2011: GBP2,406,000) is comprised
of UK tax losses of GBP1,943,000 (2011: GBP1,982,000) and US losses
of GBP1,874,000 (2011: GBP424,000). US tax losses carried forward
will become irrecoverable in March 2027. UK tax losses may be
carried forward indefinitely. The deferred tax assets have been
recognised where the Board considers there is sufficient evidence
that taxable profits will be available against which the tax losses
can be utilised. The Board expects that the tax losses will be
recoverable against future profits but given the level of tax
losses brought forward recoverability has been assessed on the
basis of expected profits currently forecast on a prudent basis.
Deferred tax assets in respect of taxable losses that are expected
to be recovered outside this forecast period have not been
recognised. This includes unrecognised deferred tax assets in
respect of brought forward UK losses of GBP444,000 (2011:
GBP480,000) and GBP4,421,000 (2011: GBP5,336,000) in respect of
brought forward US tax losses.
No deferred tax asset is recognised in respect of losses for
Hong Kong and China totalling GBP195,000 (2011: GBP103,000) and
China GBP661,000 (2011: GBP530,000). No deferred tax is recognised
on unremitted earnings of overseas subsidiaries. Overseas reserves
can now be repatriated to the UK with no tax cost. If all overseas
earnings were repatriated with immediate effect, no tax charge
(2011: GBPNil) would be payable.
At the balance sheet date the UK government enacted a 2%
reduction in the main rate of UK corporation tax from 26% to 24%
effective from 1 April 2012. The government has also proposed
reducing the UK corporation tax rate by a further 1% per annum to
22% by 1 April 2014. However, these further rate changes had not
been substantively enacted at the balance sheet date and their
effects are not, therefore, included in these financial statements.
We do not expect that the enactment of these changes will have a
material impact on the deferred tax balance of the Group.
There are no deferred tax balances with respect to cash flow
hedges.
Movement in deferred tax during the year
1 April Disposal Recognised Recognised 31 March
of in in
2011 subsidiary income equity 2012
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ----------- ----------- ----------- ---------
Property, plant and equipment (564) - (925) 23 (1,466)
Inventory provisions 809 - (398) 10 421
Capital gains deferred (563) - 69 - (494)
Deferred lease premium 79 - 3 1 83
Provisions 894 - (150) (22) 722
Tax loss carried forward 2,406 - 1,436 (25) 3,817
Other timing differences 1,555 - 1 1 1,557
------------------------------- ------ ----------- ----------- ----------- ---------
Net tax assets 4,616 - 36 (12) 4,640
------------------------------- ------ ----------- ----------- ----------- ---------
Movement in deferred tax during the prior year
Restated Restated
1 April disposal recognised Recognised
of in in 31 March
2010 subsidiary income equity 2011
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- ----------- ----------- ----------- ---------
Property, plant and equipment (1,005) - 430 11 (564)
Inventories 858 (135) 101 (15) 809
Capital gains deferred (606) - 43 - (563)
Deferred lease premium 150 - (76) 5 79
Provisions 482 - 376 36 894
Tax loss carried forward 2,250 - 155 1 2,406
Other timing differences 1,372 - 203 (20) 1,555
------------------------------- -------- ----------- ----------- ----------- ---------
Net tax assets 3,501 (135) 1,232 18 4,616
------------------------------- -------- ----------- ----------- ----------- ---------
11 Cash and cash equivalents/bank overdrafts
2012 2011
GBP000 GBP000
------------------------------------------------------------- --------
Cash and cash equivalents 3,168 1,885
Bank overdrafts (1,945) (3,620)
--------------------------------------------------- -------- --------
Cash and cash equivalents per Cash Flow Statement 1,223 (1,735)
--------------------------------------------------- -------- --------
Net debt
2012 2011
Note GBP000 GBP000
----------------------------------------------- --------- ---------
Cash and cash equivalents 3,168 1,885
Bank loans and overdrafts 12 (45,266) (46,309)
Loan arrangement fees 370 -
------------------------------------------ -------------- ---------
Net debt as used in the Financial Review (41,728) (44,424)
------------------------------------------ -------------- ---------
The bank overdrafts are secured by a fixed charge on certain of
the Group's land and buildings, a fixed charge on certain of the
Group's book debts and a floating charge on certain of the Group's
other assets.
12 Loans and borrowings
2012 2011
GBP000 GBP000
----------------------------------------------------------- -------
Non-current liabilities
Secured bank loans (see below) 33,880 8,377
Loan arrangement fees (258) -
-------------------------------------------------- ------- -------
33,622 8,377
----------------------------------------------------------- -------
Current liabilities
Asset backed loan 5,467 4,449
Revolving credit facilities - 28,901
Current portion of secured bank loans (see below) 3,974 962
-------------------------------------------------- ------- -------
Bank loans and borrowings (see below) 9,441 34,312
Loan arrangement fees (112) -
-------------------------------------------------- ------- -------
9,329 34,312
-------------------------------------------------- ------- -------
The asset backed loans are secured on the inventory and
receivables of the larger business units within the UK and European
business segments.
The revolving credit facilities are secured on the assets of the
Group, in the same way as the bank overdraft above. The interest
rate is 2.5% over LIBOR. The facilities are drawn for periods from
one day up to six months.
Following the negotiations of new banking facilities in July
2011, the Group accrued arrangement fees which are being spread
over the life of the facility.
Terms and debt repayment schedule
2012 2011
Repayment analysis of bank loans and overdrafts GBP000 GBP000
------------------------------------------------ ------- -------
Due within one year:
Bank loans and borrowings (see above) 9,441 34,312
Bank overdrafts (note 11) 1,945 3,620
Due between one and two years:
Secured bank loans (see below) 4,666 975
Due between two and five years:
Secured bank loans (see below) 24,807 2,324
Due after more than five years:
Secured bank loans (see below) 4,407 5,078
------------------------------------------------ ------- -------
45,266 46,309
--------------------------------------------------------- -------
In July 2011 the Group negotiated new facilities with its
principal bank, split between US dollars and sterling comprising a
five year loan of GBP15.2 million with a bullet repayment on the
fifth anniversary, a four year amortising loan of GBP14.8 million,
a one year revolving multi-currency credit facility of up to GBP33
million and a one year rolling multi-currency overdraft facility of
up to GBP5 million, plus a two year asset back loan facility
secured on the UK business inventory and debtors.
We have also secured a three year asset backed loan facility of
up to GBP25 million with a US bank to assist in the funding of the
US business and to mitigate the currency effect on our facility
headroom.
Secured bank loans
Loan 1
The principal of GBP588,000 (2011: GBP730,000) is repayable
monthly on a reducing balance basis over a 15 year period,ending in
March 2016. The loan is secured over the freehold land and
buildings and the contents therein of International Greeting USA
Inc. and is subject to a variable rate of interest linked to the US
Federal Funds Rate (US FFR). The currency of denomination of the
loan is US dollar.
Loan 2
The principal of GBP582,000 (2011: GBP739,000) is repayable
monthly on a reducing balance basis over a nine year period ending
in March 2016. The loan is secured over the freehold land and
buildings and the content therein of International Greeting USA
Inc. and is subject to a variable rate of interest linked to the US
FFR. The currency of denomination of the loan is US dollar.
Loan 3
The principal of GBP6,281,000 (2011: GBP7,069,000) is repayable
quarterly over a 20 year period ending in July 2028. The loan is
secured over the freehold land and buildings and the content
therein of Hoomark B.V. and is subject to a variable rate of
interest linked to EURIBOR, that has been swapped to a fixed rate
for a notional amount of GBP5,833,000 (2011: GBP6,195,000) and a
period of three years ending in January 2017. The currency of
denomination of the loan is euro.
Loan 4
The principal of GBP510,000 (2011: GBP801,000) is repayable
monthly over a five year period ending November 2013. The loan is
secured over the plant and machinery of International Greetings UK
Ltd and is subject to a variable rate interest linked to the UK
base rate. The currency of denomination of the loan is
sterling.
Loan 5
The principal of GBP14,904,000 (2011: Nil) is repayable over a
five year period with a bullet repayment on the fifth anniversary.
GBP9,100,000 is denominated in sterling and GBP5,804,000 is
denominated in US dollars. They are subject to a variable interest
rate linked to LIBOR except for the element that has been swapped.
At 31 March 2012 the Group had an interest rate cap on a notional
amount of GBP8m, and a notional amount of $8m, whereby interest
payable has been capped at 1.5% on both notional amounts. The terms
of the hedge have been negotiated to match the terms of the
commitments.
Loan 6
The principal of GBP14,988,000 (2011: Nil) is repayable and
amortised over a four year period. GBP8,800,000 is denominated in
sterling and GBP6,188,000 is denominated in US dollars. They are
subject to variable interest rate linked to LIBOR except for the
elements that have been swapped. At 31 March 2012, the Group had an
interest rate swap in place with a notional amount of GBP6.9m
whereby it receives a floating rate of interest based on LIBOR, and
pays a fixed rate of interest at 0.92% on the notional amount. The
terms of the hedge have been negotiated to match the terms of the
commitments.
At 31 March 2012, the Group had an interest rate swap in place
with a notional amount of $9.9m whereby it receives a floating rate
of interest based on LIBOR, and pays a fixed rate of interest at
0.77% on notional amount. The terms of the hedge have been
negotiated to match the terms of commitment.
13 Earnings per share
2012 2011
------------------------------------------- ------------------- ----------------
Diluted Basic Diluted Basic
------------------------------------------- -------- --------- -------- -------
Adjusted earnings per share excluding
exceptional items and discontinued
operations 6.7p 7.2p 8.2p 8.9p
Loss per share on exceptional items (6.4p) (6.9p) (1.1p) (1.2p)
------------------------------------------- -------- --------- -------- -------
Earnings per share from continuing
operations 0.3p 0.3p 7.1p 7.7p
Loss per share on discontinued operations 0.0p 0.0p (0.2p) (0.2p)
------------------------------------------- -------- --------- -------- -------
Earnings per share 0.3p 0.3p 6.9p 7.5p
------------------------------------------- -------- --------- -------- -------
The basic earnings per share is based on the profit attributable
to equity holders of the Company of GBP177,000 (2011: GBP4,010,000)
and the weighted average number of ordinary shares in issue of
54,206,000 (2011: 53,127,000) calculated as follows:
Weighted average number of shares in thousands of shares 2012 2011
---------------------------------------------------------- ------- -------
Issued ordinary shares at 1 April 53,967 52,150
Shares issued in respect of acquisitions - 854
Shares issued in respect of exercising of share options 239 123
---------------------------------------------------------- ------- -------
Weighted average number of shares at 31 March 54,206 53,127
---------------------------------------------------------- ------- -------
Adjusted basic earnings per share excludes exceptional items
charged of GBP3,918,000 (2011: GBP900,000), the tax relief
attributable to those items of GBP195,000 (2011: GBP267,000) and
the loss on discontinued operations (net of tax) of GBPNil (2011:
GBP100,000), to give adjusted profit of GBP3,900,000 (2011:
GBP4,743,000).
Diluted earnings per share
The average number of share options outstanding in the year is
5,787,000 (2011: 6,157,000), at an average exercise price of 16.9
pence (2011: 16.4 pence). The diluted earnings per share is
calculated assuming all these options were exercised. At 31 March
the diluted number of shares was 58,486,612 (2011: 57,805,000).
A significant number of shares became exercisable during the
year.
14 Preliminary information
The financial information in the preliminary statement of
results does not constitute the group's statutory accounts for the
year ended 31 March 2012, but is derived from those accounts and
the accompanying Directors' report. Statutory accounts for the year
ended 31 March 2012 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors have
reported on those accounts; their report was unqualified and did
not contain statements under Section 498 (2) or Section 498 (3) of
the Companies Act 2006. The financial statements, and this
preliminary statement, of the Group for the year ended 31 March
2012 were authorised for issue by the Board of Directors on 27 June
2012 and the balance sheet was signed on behalf of the Board by A
Lawrinson.
The statutory accounts have been delivered to the Registrar of
Companies in respect of the year ended 31 March 2011. The report of
the auditors was unqualified and did not contain statements under
Section 237 (2) or (3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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