TIDMIGR
RNS Number : 1957T
IG Design Group PLC
23 November 2021
EMBARGOED UNTIL 7.00 AM, 23 NOVEMBER 2021
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the six months ended 30 September 2021
IG Design Group plc, one of the world's leading designers,
innovators and manufacturers of Gift Packaging, Celebrations, Craft
& creative play, Stationery, Gifting and related product
categories announces its results for the six months ended 30
September 2021.
Financial Highlights H1 2022 H1 2021
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Revenue $483.9m $434.6m
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Adjusted*
- Profit Before Tax $19.9m $30.2m
===========
- Diluted Earnings per Share 13.6 cents 22.0 cents
------------------------------- =========== ===========
Reported
- Profit Before Tax $18.9m $17.1m
===========
- Diluted Earnings per Share 12.3 cents 11.4 cents
===============================
Net debt as at the period end $58.8m $23.2m
=============================== ===========
Interim Dividend 1.25 pence 3.0 pence
------------------------------- ----------- -----------
*Adjusted results are stated before Adjusting items - for
further detail see Alternative Performance Measures reconciliation
within the Detailed Financial Review
-- A challenging first half with significant cost headwinds and
supply chain limitations directly leading to lower than expected
revenue and reduced year-on-year operating margins despite strong
demand
- First half revenue up 11% year-on-year reflecting primarily
strong trading in the four months to July
- Lower operating margins resulted in Adjusted profit before tax down at $19.9 million
- Adjusted earnings per share at 13.6 cents reflecting lower
year-on-year profit performance
- Profit before tax at the half year up 11% at $18.9 million (H1
2021: $17.1 million) driven by lower Adjusting items in the
period
- A robust first half cash management performance with net debt
at $58.8 million (H1 2021: $23.2 million) reflecting the growth in
the order book year-on-year and associated increase in normal
seasonal working capital outflow
- Interim dividend of 1.25 pence (1.68 cents) in line with our dividend policy
Strategic & Operational Highlights
-- Increased demand with order book at the end of October at 91%
of full-year forecast, higher than this time last year
-- Cost headwinds impact partially offset through commercial
negotiation, earlier inventory commitments and other initiatives
whilst establishing margin-improving mitigations for FY23
-- Very strong relationship with customers retained, with
positive feedback received on the Group's response to supply chain
challenges
-- Everyday volumes remain robust across the business, however,
lower year-on-year craft sales in the first half in comparison to
the boosted Covid-19 related craft revenues in prior year
-- Focus on the Group's sustainable product offering saw strong
sales of the Eco-nature (TM) range in the UK and the business
awarded Tesco's Supplier Partner Award for Sustainability
-- DG Americas recognised as Walmart Supplier of the Year for
2021, and integration continues to unlock CSS acquisition
synergies
Outlook
-- Overall uncertainty remains over cost inflation along with
raw material and transport shortages, however Christmas deliveries
are on track to be with customers on time as the Group maintains
its first-class customer service and consumer demand remains strong
for the balance of the year
-- The Group remains on track to fully recoup the revenues
delayed from the first half in the second half of the year, however
as previously communicated operating margins are expected to remain
depressed throughout FY22
Paul Fineman, CEO, commented:
"Demand is strong across our business and FY22 remains on track
to achieve record revenues. Despite being constrained at the half
year by extraordinary supply chain challenges, our opportunity for
long-term profitable growth remains undiminished.
As with many businesses our current priority is managing the
supply shortages and extreme inflationary pressures. Whilst in the
short term we are not seeing an overall improvement in these
dynamics, it is certain at some stage supply issues will improve
and we will mitigate the cost pressures although it would be
foolhardy to predict exactly when that will be. We therefore
continue to focus on customer service and quality of our product
propositions, both of which are key to the long term success of the
business. We are confident our strategy remains the right one in
the longer term and we remain committed to the goals outlined in
the Growth plan announced in June this year."
Presentations and Overview video
IG Design Group is hosting a webinar for analysts at 1100 GMT
today, Tuesday, 23 November. If you would like to register please
contact designgroup@almapr.co.uk
The Company is also hosting a webinar for retail investors
today, Tuesday, 23 November at 1300 GMT. If you would like to
attend please register here: https://bit.ly/IGR_H1_1pm
A video overview of the results from the CEO, Paul Fineman, and
CFO, Giles Willits, is available to watch here:
https://bit.ly/IGR_H1_overview
For further information:
IG Design Group plc 01525 887310
Paul Fineman, Chief Executive
Officer
Giles Willits, Chief Financial
Officer
Canaccord Genuity Limited 020 7523 8000
Bobbie Hilliam, NOMAD
Alex Aylen, Sales
Alma PR
Susie Hudson 020 3405 0205
Sam Modlin designgroup@almapr.co.uk
OVERVIEW
This has been a challenging first half for the Group. Despite
continued strong demand from our customers, we have seen bottom
line performance decline year-on-year as the business navigates
unprecedented cost headwinds and ongoing supply chain availability
issues. However, our 'Working with the winners' strategy continues
to underpin the Group's performance, and this has proven ever more
critical during this period of current economic uncertainty. We
have retained our focus on maintaining strong customer service and
have received positive feedback from our customers in response to
all we are doing for them. The revenue growth in the first half is
testament to the hard work throughout the Group from all of our
teams as they work with our customers and suppliers to minimise, as
best possible, the incremental supply chain costs and logistical
challenges impacting the world economy.
SUMMARY 2022 INTERIM RESULTS
Revenue increased by 11% in the first half of the financial year
to $483.9 million (H1 2021: $434.6 million) driven by a
particularly strong four months of trading to July which saw sales
up over 25% against the softer Covid-19 impacted performance in the
prior year. However, despite our robust order book, trading in the
next two months of August and September, which are traditionally
the largest trading months of the financial year, was severely
impacted by supply chain issues, most significantly the
availability and related costs of sea freight containers to ship
customers' seasonal orders. This resulted in first half revenues
missing our expectations as the timing of deliveries was pushed
into the second half of the financial year. Revenue in the period
is also up 5% on proforma revenues (including CSS prior to
ownership) for the six months to 30 September 2019.
Adjusted profit before tax at $19.9 million (H1 2021: $30.2
million) was down 34% year-on-year despite the stronger revenues
reflecting the significant impact that the operating cost headwinds
have had on operating margins across the Group. The largest
challenge has been the rapid increase in sea container rates which
are up over 500% year-on-year, alongside substantially increased
raw material costs in particular paper and polypropylene as well as
labour shortages which have resulted in inflationary pressures in
our manufacturing and distribution operations. As a result,
Adjusted earnings per share was 13.6 cents (H1 2021: 22.0 cents)
following the reduced Adjusted profit trend.
The Group ended the half year with net debt at $58.8 million (H1
2021: $23.2 million). The increase in net debt at the period end
reflects the expected working capital requirements of the business,
as the size of the order book year-on-year increases, particularly
in manufacturing which was most impacted by Covid-19 in the prior
year.
Profit before tax at the half year was up 11% year-on-year at
$18.9 million (H1 2021: $17.1 million) primarily as a result of the
significant reduction in Adjusting items to $1.0 million in the
period (H1 2021: $13.1 million), delivering diluted earnings per
share up 8% at 12.3 cents (H1 2021: 11.4 cents).
The Board is pleased to declare an interim dividend of 1.25
pence (1.68 cents) in respect of the period to 30 September 2021,
in line with the Group's dividend policy. The final dividend of
5.75 pence (7.92 cents) in relation to the year ended 31 March 2021
was paid in October 2021.
OUTLOOK
The Group continues to see strong demand with its order book at
the end of October up on the prior year at 91% of full-year
forecast and Christmas deliveries remaining on track. However, the
impact of the globally incurred cost headwinds continue to be felt
throughout the Group alongside increased expectations of Covid-19
lockdowns in Europe. Operating margins in the second half are
expected to continue to be depressed compared with the prior year.
The Board is taking a prudent stance and is forecasting that these
challenges will continue into FY23, although it remains difficult
at this time to estimate the financial impact. As such, as
previously communicated, the Group continues to expect FY22
full-year operating margins to be 175-225 basis points lower
year-on-year resulting in full-year earnings being significantly
below the prior year. In the longer term the strong demand from
customers and our commitment to maintaining first-class customer
service, positions the Group well to exploit any improvement in
market conditions. We remain committed to the goals outlined in the
Growth Plan announced in June.
BOARD UPDATE
Stewart Gilliland and Clare Askem joined the Board in July and
Stewart became Chair of the Group as John Charlton stepped down at
our AGM in September. In July the Group also announced that Elaine
Bond would be stepping down from the Board at the end of December
and the search for a Non-Executive Director to replace Elaine is
well underway.
As per the Group's announcement in August, Giles Willits will be
leaving the Group in February 2022 and the search for his
replacement is progressing well.
REGIONAL HIGHLIGHTS
Overall, revenue has grown across all areas of the Group as
every region recovers from the impact of Covid-19 in the prior year
and customer demand returns to pre-pandemic levels, however,
Adjusted operating profit at $22.2 million (H1 2021: $32.4 million)
is down reflecting the operational challenges seen around the
business, primarily being significantly increased freight, raw
material and labour costs.
Segmental Revenue Adjusted Operating Adjusted
Profit Operating
Margin
%
Group H1 H1 H1
revenue H1 2022 2021 % growth 2022 2021 % growth H1 2022 H1 2021
72% DG Americas $m 347.5 321.6 8% 13.1 19.5 (33%) 3.8% 6.1%
28% DG International $m 136.9 115.5 19% 11.5 15.1 (24%) 8.4% 13.1%
====== ========= ====== ========= ========
Elims /
Central
0% costs $m (0.5) (2.5) (2.4) (2.2)
====== ======
100% Total $m 483.9 434.6 11% 22.2 32.4 (32%) 4.6% 7.5%
========= ================= ===
Design Group Americas
In the first half of the financial year revenue grew 8% to
$347.5 million (H1 2021: $321.6 million) as customer orders
normalised post the Covid-19 pandemic in the prior year,
particularly with growth in sales of décor, paper and 'impulse buy'
offerings with key customers. However, Adjusted operating profit at
$13.1 million is down compared to last year (H1 2021: $19.5
million) with Adjusted operating margin declining to 3.8% (H1 2021:
6.1%) primarily as a result of the aforementioned significant cost
challenges in freight costs and the raw material and labour wage
rate inflation. Whilst the US business has undertaken mitigating
actions in the period, the unprecedented scale of the increases has
outweighed these initiatives.
The US business continues to focus on the consolidation and
integration of the Design Group Americas team post the CSS
acquisition, which was completed at the end of the 2020 financial
year. The integration, which was planned over three years, has
continued to make good progress in the period, although some
projects have been delayed as a result of the impact of Covid-19
alongside operational challenges in the current year. The first
half of the 2022 financial year has seen a further strengthening of
the management team with the addition of both Chief Commercial
Officer and Chief Revenue Officer roles. This allows the business
to focus on growing revenues with key customers whilst underpinning
one of the key pillars of our strategy, 'Design & Innovation',
through further improvements in our product portfolio. An example
of this was the team winning a Louie Award for Best Greeting Card
Design for our NIQUEA.D(TM) premium greeting card range.
The CSS integration of operations continues to deliver, with
specific site closures and consolidation being the key activities
in the first half. The move of our Midway distribution facility to
Shorewood was successfully completed at the beginning of the
financial year, with the majority of the Americas group's catalogue
and replenishment businesses now being run solely from one
facility. All costs associated with this move were incurred in the
prior year.
Furthermore, there has also been ongoing work in bringing the
Americas group's printing, converting and wrap distribution under
one roof in Byhalia, Mississippi. The second phase of the project
commenced in the first half of this year moving the converting
business from our Memphis facility with the intention to move our
UTECO printing press in the second half of the year. The costs
associated with this move have been treated as an Adjusting item.
These moves will see increased efficiencies and help manage the
increased volumes that are being produced. Future areas of focus
include the consolidation of the sewing patterns business into one
site in the US which is in its early stages of preparation as at 30
September 2021.
As the world starts to resume 'business as usual' post Covid-19,
the Americas team has made good progress with regards to unused CSS
buildings. Specifically, at the design office in Budd Lake, New
Jersey, the majority of the office space has now been exited with
part of the original lease cancelled delivering savings to the
business in rental cash outflows going forward. In addition, cash
savings will be made from the sub-letting of the former CSS head
office at Plymouth Meeting. The relevant proportions of impairments
taken in respect of these properties have been reversed in the
period through Adjusting items. In respect of other sites exited as
part of the acquisition and the corresponding asset impaired, that
have not yet been sub-let, these continue to be actively
marketed.
Covid-19 continues to impact our Americas manufacturing and
distribution sites. We therefore remain vigilant in implementing
Covid-19 protocols to ensure we meet the primary objective of
employee safety.
As the business navigates the cost challenges presented in the
current environment, the focus remains on executing our Christmas
deliveries to customers, while also expanding the group's
cross-selling opportunities around both the Americas group as well
as the International business and continuing to build our online
presence, in particular with the launch of SomethingDelightful.com,
a holistic platform for our craft brands.
Design Group International
We are continuing to see the benefits of the integrated
operational and management structure from the combination of our
UK, European and Australian businesses under the Design Group
International ('International') umbrella. This accounts for over a
quarter of the Group's total revenues in the first half of the
financial year.
Revenues for the International business grew year-on-year
following the decline seen in the prior year due to the impact of
Covid-19. First half revenues were up 19% on the prior year at
$136.9 million (H1 2021: $115.5 million). Adjusted operating
profit, however, reduced year-on-year to $11.5 million (H1 2021:
$15.1 million), reflecting the same additional operational cost
challenges that have also been experienced in the Americas. In
addition, the prior year included $3.6 million of government
assistance received which has not been replicated in the first half
of the current financial year.
Revenue growth has been seen across all parts of the
International business. The UK business has seen sales of the
Eco-nature(TM) products progressing well, with items quickly
selling out in stores. This is extremely encouraging and forms part
of the focus of the Group's Commercial Forum as we concentrate on
the design of more sustainable products for roll out across the
Group. As with the rest of the Group, the main focus of the UK
business is the shipping of our customers' Christmas commitments,
with particular pressure as a result of labour shortages alongside
freight delays. In Europe, our business continues to grow through
its focus on working with the winning customers who have resumed
their growth plans post the pandemic. In addition, productivity and
efficiency in our manufacturing facilities continue to improve
following capital investment in prior years.
Despite starting the financial year strongly, progress in our
Australian business has slowed as a result of multiple and
prolonged lockdowns in many regions across the country.
Non-essential retail remained closed from July through to September
whilst the Australian Government focused, and continues to focus,
on improving vaccination rates. This has slowed sales growth in the
territory, however despite this, the business continues to perform
well, with sales still ahead of the prior year.
OUR PRODUCTS AND BRANDS
Despite the supply chain challenges experienced in the first
half, it is good to see growth in our Celebrations and Gifting
categories as families and friends come back together to celebrate
life's special occasions. The Group prides itself on having a
well-diversified portfolio, which has supported us throughout the
pandemic as our 'stay-at-home' products in the Craft & creative
play category kept families and individuals entertained throughout
multiple lockdowns. It is therefore not a surprise to see Craft
& creative play year-on-year category sales normalise compared
to the higher volumes experienced during prolonged lockdowns in
2020.
In the first half, as always, our seasonality drives the overall
product mix with Christmas products making up 46% of the first half
sales. However, this is lower than the prior year reflecting the
later than planned seasonal shipments as a result of container
availability and other global supply chain limitations. Everyday
products continue to make up 50% of our product mix in the first
half and this trend is expected to continue throughout the
remainder of the year.
Revenue by product H1 2022 H1 2021
category
Celebrations 64% $311.6m 62% $267.6m
======== ========== ========= =============
Craft & creative play 15% $73.2m 18% $79.3m
======== ========== ========= =============
Gifting 9% $42.3m 8% $35.4m
======== ========== ========= =============
'Not-for-resale' consumables 7% $32.4m 7% $32.2m
======== ========== ========= =============
Stationery 5% $24.4m 5% $20.1m
======== ========== ========= =============
Total $483.9m $434.6m
======== ========== ========= =============
Note: Prior year figures have been restated to reflect more
appropriate comparatives.
DETAILED FINANCIAL REVIEW
The Group performance is behind expectations for the first half
of the year as a result of the cost headwinds, operational
challenges faced by the Group and wider macroeconomic
environment.
H1 2022 H1 2021
Reported Adjusting Adjusted Reported Adjusting Adjusted
Items Items
$m $m $m $m $m $m
Revenue 483.9 - 483.9 434.6 - 434.6
Gross profit 78.6 (0.1) 78.5 83.7 0.9 84.6
Overheads (57.2) 0.9 (56.3) (64.4) 12.2 (52.2)
--------- ---------- --------- --------- ---------- ---------
Operating profit 21.4 0.8 22.2 19.3 13.1 32.4
Finance charge (2.5) 0.2 (2.3) (2.2) - (2.2)
--------- ---------- --------- --------- ---------- ---------
Profit before tax 18.9 1.0 19.9 17.1 13.1 30.2
Tax (5.2) 0.3 (4.9) (4.8) (2.9) (7.7)
Profit after tax 13.7 1.3 15.0 12.3 10.2 22.5
------------------- --------- ---------- --------- --------- ---------- ---------
Group revenue for the period of $483.9 million grew 11%
year-on-year reflecting a bounce back in sales post the pandemic
that impacted the first half of the prior year. Adjusted operating
profit for the Group decreased by 32% to $22.2 million (H1 2021:
$32.4 million) with Adjusted operating margin down year-on-year at
4.6% (H1 2021: 7.5%). Gross margin fell in the half year, as a
result of increased operational costs, to 16.2% (H1 2021: 19.3%).
Adjusted overheads as a percentage of revenue decreased slightly to
11.6% (H1 2021: 12.0%). Overall Adjusted profit before tax
decreased 34% to $19.9 million (H1 2021: $30.2 million).
Half year profit before tax was up 11% at $18.9 million (H1
2021: $17.1 million) primarily reflecting the reduction in
Adjusting items by $12.1 million to $1.0 million (H1 2021: $13.1
million) offset by the impact of the lower adjusted operating
margins.
Finance expenses
After adjusting for $0.2 million of lease liability interest
relating to impaired exited Americas' properties, finance costs at
$2.3 million are only marginally higher than the prior year at $2.2
million reflecting good cash management despite supporting an
increased level of seasonal working capital.
Adjusting items
Adjusting items are material items of unusual or non-recurring
nature which represent gains or losses which are separately
presented by virtue of their nature, size and/or incidence. The
Group has Adjusting items in the period to 30 September 2021
totalling $1.0 million (H1 2021: $13.1 million). These items are as
follows:
Adjusting Items H1 2022 H1 2021
Losses/(gains) and transaction costs relating
to acquisitions and disposals of businesses $3.6m $0.9m
Acquisition integration and restructuring (income)/costs ($2.0m) $5.5m
======== ========
(Reversal of impairment)/Impairment of assets ($0.9m) $0.1m
======== ========
Incremental Covid-19 costs - $2.0m
======== ========
Insurance income from IT security incident ($0.7m) -
======== ========
Amortisation of acquired intangibles $1.4m $2.2m
======== ========
Share based payments (credits)/charges ($0.4m) $2.4m
======== ========
Total $1.0m $13.1m
======== ========
Losses/(gains) and transaction costs relating to acquisitions
and disposals of businesses - $3.6 million (H1 2021: $0.9
million)
In the period, the Group has incurred expenditure relating to
potential and previous acquisitions in the first half totalling
$3.3 million. In particular, $3.1 million of costs were incurred in
relation to an aborted transaction. In addition, the final tranche
of acquisition related employee payments which lock in and
incentivise legacy talent relating to the Impact Innovations Inc.
transaction in 2019 have been incurred ($0.3 million) as we
celebrate our third anniversary of the acquisition.
Acquisition integration and restructuring (income)/costs -
$(2.0) million credit (H1 2021: $5.5 million)
The main costs continue to relate to the integration of CSS into
the enlarged DG Americas.
The CSS business includes a large portfolio of owned and leased
sites, and part of the integration project includes the
consolidation of these locations. As certain sites were closed and
exited since acquisition, in the absence of being able to sub-lease
or break leases, this resulted in impairments of lease assets in
the prior financial year. In the period to 30 September 2021 we
have been able to partially exit some of the property we lease in
Budd Lake, New Jersey as well as sub-lease our site in Plymouth
Meeting. This has resulted in a reversal of the lease asset
impairments of $2.2 million through Adjusting items. Ongoing costs
associated with the properties we have exited continue to be
treated as Adjusting items. The total value of assets relating to
the remaining impaired properties as at 30 September 2021 is $7.0
million.
Other costs associated with the ongoing consolidation of
operations around the group, have been incurred as the enlarged
printing and converting business has been moved from Memphis to a
larger facility in Byhalia, Mississippi that also houses
distribution which before was performed out of temporary
warehouses.
(Reversal of impairment) / impairment of assets - $(0.9) million
credit (H1 2021: $0.1 million)
As at 31 March 2021, the Group was carrying $1.5 million of
provisions in relation to the impairment of trade receivables and
$3.3 million in respect of inventory due to the impact of Covid-19
on the ability to collect receivables and sell-through inventory.
During the period, $0.9 million of receivables impairment has been
reversed as it is no longer required.
Incremental Covid-19 costs - $nil (H1 2021: $2.0 million)
In the prior year, the Group identified certain costs relating
to direct labour costs that were incremental as a result of the
pandemic, and these were included in Adjusting items. The most
significant element of these costs related to additional 'hazard
pay' labour costs across our manufacturing facilities in the USA
and Mexico in order to ensure our employees returned to work. No
incremental costs associated with Covid-19 have been treated as
Adjusting items in the first half of FY22.
Insurance income from IT security incident - $(0.7) million
credit (H1 2021: $nil)
The IT security incident which occurred in the Americas in
October 2020 resulted in one-off costs being incurred, specifically
in relation to crisis management and legal support, the costs of
engaging a negotiator, forensics and containment costs, data
recovery costs including specialists and server/hardware repair and
replacement. In order to manage the crisis, we also had the IT
teams working 24/7 to get systems back online. As well as the costs
of the incident recovery, there are also fines and penalties from
delayed shipments to customers and expedited freight costs to avoid
some delays. These costs were all treated as Adjusting items in the
second half of the prior year. The Group also incurred lost sales
associated with the IT outage which did not form part of our
Adjusting items costs.
The Group has made insurance claims under two policies in
relation to the incident. As at 30 September 2021, both claims had
been filed with the relevant insurer. On 1 October, the Group
received confirmation from one insurer that they would be paying
GBP0.5 million ($0.7 million) in full for the claim. As such, this
met the definition of an asset as at the period end and the Group
recognised this income in Adjusting items as at the half year.
Amortisation of acquired intangibles - $1.4 million (H1 2021:
$2.2 million)
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer
relationships and brands which form part of the intangible value of
the acquired business but are not part of the acquired balance
sheet. These intangible assets are then amortised to the income
statement over an appropriately judged period. These are not
operational costs relating to the running of the acquired business
and are directly related to the accounting for the acquisition.
These include tradenames and brands acquired as part of the
acquisition of Impact Innovations Inc. and CSS Industries Inc. in
the USA. As such we include these as Adjusting items.
Share based payments (credits)/charges - $(0.4) million credit
(H1 2021: $2.4 million)
As part of our senior management remuneration, the Group
operates a Long Term Incentive Plan ('LTIP') including the Value
Creation Scheme ('VCS') created in the prior year, in the form of
options for ordinary shares of the Group. In accordance with
accounting principles, despite this plan not being a cash cost to
the business, a share -- based payments charge or credit is taken
to the income statement. We consider that these credits and charges
do not form part of the underlying operational costs and therefore
include these as Adjusting items.
Based on the latest outlook for the business no charge has been
accrued in relation to either the performance-based LTIP or the VCS
in the first half and all prior year accruals have been released.
As a result there is a share-based payment credit for the period of
$(0.4) million which consists of a principal IFRS 2 credit of
$(0.1) million and a credit in relation to employer's social
security of $(0.3) million based on the share price at the end of
the reporting period.
Taxation
The taxation charge for the half year was $5.2 million (H1 2021:
$4.8 million) with the effective tax rate on profit before tax at
27.5% (H1 2021: 28.1%). The effective rate on Adjusted profit
before tax is 24.4% (H1 2021: 25.4%). The rate change in the UK
from 19% to 25%, effective April 2023 has been substantively
enacted as at the reporting date, and as such the deferred tax
assets which will unwind from 1 April 2023, have been remeasured at
the new rate. This has resulted in a reduction to the tax charge
for the period. The potential federal tax rate increase in the USA
has not yet been enacted, however if approved before 31 March 2022,
it may increase the Group's overall effective tax rate for the full
year.
Earnings per share
Adjusted earnings per share at 13.6 cents are down 38% on the
prior year (H1 2021: 22.0 cents) primarily as a result of the lower
profits. Diluted earnings per share are 12.3 cents (H1 2021: 11.4
cents). The reconciliation between Reported and Adjusted earnings
per share can be seen below:
Earnings per share H1 2022 H1 2021
Earnings attributable to equity holders
of the Company $12.1m $11.2m
========
Adjustments
Adjusting items (net of non-controlling
interest effect) $1.0m $13.2m
Tax charge/(relief) on adjustments (net
of non-controlling interest effect) $0.3m ($2.9m)
======== ========
Adjusted earnings $13.4m $21.5m
======== ========
Weighted average number of shares
Basic weighted average number of shares
outstanding 98.1m 97.7m
Dilutive effect of employee share option
plans 0.1m 0.3m
======== ========
Diluted weighted average ordinary shares 98.2m 98.0m
======== ========
Earnings per share
Basic earnings per share 12.3c 11.5c
Adjustment 1.4c 10.5c
======== ========
Basic adjusted earnings per share 13.7c 22.0c
======== ========
Diluted earnings per share 12.3c 11.4c
======== ========
Adjusted earnings per share 13.6c 22.0c
======== ========
Cash flow and net debt
As at 30 September 2021 net debt (excluding IFRS 16 lease
liabilities) was $58.8 million, higher than the prior year of $23.2
million as a result of the recovery of trading post-pandemic and
the resultant higher working capital requirements of the Group.
Cash flow H1 2022 H1 2021
Adjusted EBITDA $39.8m $49.7m
==========
Movements in working capital ($152.3m) ($104.9m)
========== ==========
Adjusted cash used by operations ($112.5m) ($55.2m)
========== ==========
Adjusting items ($4.5m) ($10.4m)
========== ==========
Cash used by operations ($117.0m) ($65.6m)
========== ==========
Capital expenditure (net of disposals
of property, plant and equipment) ($3.1m) ($3.4m)
========== ==========
Tax (paid)/received ($3.5m) $2.9m
========== ==========
Interest paid (including Adjusting items) ($1.8m) ($1.9m)
========== ==========
Lease liabilities principle repayments ($8.4m) ($7.2m)
========== ==========
Dividends paid (including non-controlling ($2.7m) -
interests)
========== ==========
FX and other $1.2m ($0.4m)
Movement in net cash ($135.3m) ($75.6m)
Opening net cash $76.5m $52.4m
========== ==========
Closing net cash ($58.8m) ($23.2m)
========== ==========
Working capital
Despite the increased Everyday business the Group still has a
significant level of seasonal activity and although revenues accrue
relatively evenly in both halves of the year, working capital
requirements, including inventory levels, increase steadily in the
first half from July as manufacturing, distribution and shipping of
Christmas products builds, peaking in October. The second half of
the year sees the borrowing of the Group decline and move to
typically a cash positive position as we collect our debtors
through January to March.
The net working capital outflow in the half year was $152.3
million (H1 2021: $104.9 million). This higher working capital
movement reflects the expected increased year-on-year seasonal
working capital build as a result of a recovery in revenues to more
normalised levels as prior year revenues were impacted by Covid-19.
The Group, however, continues to maintain good cash management
discipline including actively monitoring our debtors and credit
risk profiles.
Adjusting items
During the first half of the year there was a $4.5 million (H1
2021: $10.4 million) net cash outflow in relation to Adjusting
items of which $1.7 million related to cash outflow for costs
deferred from previous years. The significant majority of the total
outflow related to the restructuring and synergy realisation costs
associated with the CSS acquisition.
Capital expenditure
During the first half of the year the Group invested $3.1
million (H1 2021: $3.4 million). This spend was relatively even
around the Group and related to smaller, maintenance-type
spend.
Cash tax
The Group made tax payments of $3.5 million which compares to a
tax repayment of $2.9 million in the prior year, which was the
result of US tax repayments following claims made by DG Americas
under the CARES Act.
Dividend payments
The outflow in the first half of the financial year relates to a
dividend paid from DG Australia, which is 50% owned by the Group,
to the other 50% shareholder. In the prior year no dividends had
been paid or received in the first half of the year as part of the
Covid-19 cash management undertaken by the Group.
Financial position and going concern basis
The Group has a banking facility, extended in May 2021, which
runs to June 2023 and includes a revolving credit facility ('RCF')
of $95 million, a further flexible RCF of up to GBP130 million,
flexible to meet working capital requirements during peak
manufacturing, and a maximum limit of $18 million invoice financing
arrangement in Hong Kong. The Group also has access to supplier
financing arrangements which we utilise at certain times of the
year.
The Group has been fully compliant with all banking covenants
associated with these facilities and has not required, nor
requested, any covenant waivers associated with the impact of
Covid-19 on the Group results.
The Group prepared budgets and plans for FY22 and FY23 at 31
March 2021 and these have been refined and revisited during the
period; most recently ahead of the Group's trading update in
October. A going concern assessment as at 30 September 2021 has
been produced using these latest forecasts which have been reviewed
by the Board, and take into account the significant seasonal
working capital cycle of the business and the cost headwinds the
Group is currently experiencing. These forecasts show the Group
operating within the existing facilities and complying with
covenants for the forecast periods, and accordingly the financial
statements have been prepared on a going concern basis.
These latest forecasts are not without risk as the Group
completes its seasonal peak trading period to 31 December 2021, and
although these forecasts have built in the later profile of cash
receipts from customers to reflect the delayed sales experienced in
the first half and the anticipated incremental costs, there remains
uncertainty in relation to the scale of certain cost headwinds and
timing in net cash receipts in the forecast.
For the purposes of assessing a severe but plausible downside to
the base case projections, these forecasts have been sensitised by
including, a longer continuation and further worsening of the cost
headwinds the Group has seen in the first half which could result
in an adverse impact on forecast EBITDA and net debt. The severe
but plausible downside case has been used to assess immediate and
longer term compliance with the Group's banking covenants, as well
as ensuring the Group has sufficient liquidity within its existing
loan facilities. Further details on the facilities and the
financial covenants attached are included in Note 7. The Board has
also considered and implemented as required, mitigating actions
available to the Group including further cost saving initiatives
and more stringent cash management strategies to ensure the Group
maintains sufficient headroom against its financial covenants.
After considering the severe but plausible downside case, the
Directors have a reasonable expectation that they will meet the
immediate and longer term covenant tests ensuring the Group has
access to sufficient liquidity.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that these
condensed interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and that the interim management
report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report.
Alternative performance measures
This review includes alternative performance measures ('APMs')
that are presented in addition to the standard IFRS metrics. The
Directors believe that these APMs provide important additional
information regarding the adjusted performance of the business
including trends, performance and position of the Group. APMs are
used to enhance the comparability of information between reporting
periods and segmental business units by adjusting for exceptional
or uncontrollable factors which affect IFRS measures, to aid the
understanding of the Group's performance. Consequently, APMs are
used by the Directors and management for strategic and performance
analysis, planning, reporting and reward setting. APMs reflect the
results of the business excluding Adjusting items, which are items
that are material and of an unusual or non-recurring nature.
The APMs and the definitions used are listed below:
-- Adjusted EBITDA - EBITDA before Adjusting items
-- Adjusted operating profit - Profit before finance charges, tax and Adjusting items
-- Adjusted profit before tax - Profit before tax and Adjusting items
-- Adjusted profit after tax - Profit after tax before Adjusting
items and associated tax effect
-- Adjusted earnings per share - Fully diluted earnings per
share before Adjusting items and associated tax effect
In addition, the Group uses APMs in order to calculate other key
performance metrics including:
-- Adjusted operating margin - Adjusted operating profit divided by revenue
Adjusting items
Further details of the items categorised as Adjusting items are
disclosed in more detail in note 3.
A full reconciliation between our adjusted and reported results
is provided below:
H1 2022 H1 2021
Adjusted EBITDA $39.8m $49.7m
======== =========
Adjusting items ($1.6m) ($10.0m)
======== =========
EBITDA $38.2m $39.7m
======== =========
Adjusted operating profit $22.2m $32.4m
======== =========
Adjusting items ($0.8m) ($13.1m)
======== =========
Reported operating profit $21.4m $19.3m
======== =========
Adjusted profit before tax $19.9m $30.2m
======== =========
Adjusting items ($1.0m) ($13.1m)
======== =========
Reported profit before tax $18.9m $17.1m
======== =========
Adjusted profit after tax $15.0m $22.5m
======== =========
Adjusting items ($1.3m) ($10.2m)
======== =========
Reported profit after tax $13.7m $12.3m
======== =========
Adjusted earnings per share 13.6c 22.0c
======== =========
Adjusting items (1.3c) (10.6c)
======== =========
Reported diluted earnings per share 12.3c 11.4c
======== =========
CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHSED 30 SEPTEMBER 2021
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
Note $000 $000 $000
--------------------------------------- ---- ---------- ---------- ---------
Revenue 2 483,908 434,635 873,216
Cost of sales (405,287) (350,937) (719,396)
--------------------------------------- ---- ---------- ---------- ---------
Gross profit 78,621 83,698 153,820
Selling expenses (21,792) (21,584) (43,909)
Administration expenses (35,859) (46,480) (93,659)
Other operating income 4 427 3,909 4,066
(Loss)/profit on disposal of property,
plant and equipment (17) 10 (256)
Loss on disposal of subsidiary - (208) (208)
--------------------------------------- ---- ---------- ---------- ---------
Operating profit 3 21,380 19,345 19,854
Finance expenses (2,495) (2,265) (5,179)
--------------------------------------- ---- ---------- ---------- ---------
Profit before tax 18,885 17,080 14,675
Income tax 5 (5,191) (4,801) (4,234)
--------------------------------------- ---- ---------- ---------- ---------
Profit for the period 13,694 12,279 10,441
--------------------------------------- ---- ---------- ---------- ---------
Attributable to:
Owners of the Parent Company 12,063 11,222 8,207
Non-controlling interests 1,631 1,057 2,234
--------------------------------------- ---- ---------- ---------- ---------
Earnings per ordinary share
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
Note 2021 2020 2021
-------- ---- ---------- ---------- ------
Basic 8 12.3c 11.5c 8.4c
-------- ---- ---------- ---------- ------
Diluted 8 12.3c 11.4c 8.4c
-------- ---- ---------- ---------- ------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2021
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
--------------------------------------------------------- ----------- ----------- -----------
Profit for the period 13,694 12,279 10,441
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or
loss
Remeasurement of defined benefit pension and health
benefit schemes - - (32)
Items that may be reclassified subsequently to profit
or loss
Exchange difference on translation of foreign operations
(net of tax) 3,799 (4,144) (15,769)
Transfer to profit and loss on maturing cash flow
hedges (net of tax) 58 127 863
Net unrealised gain/(loss) on cash flow hedges (net
of tax) 395 (391) (1,269)
--------------------------------------------------------- ----------- ----------- -----------
4,252 (4,408) (16,175)
--------------------------------------------------------- ----------- ----------- -----------
Other comprehensive income/(expense) for the period,
net of tax 4,252 (4,408) (16,207)
Total comprehensive income/(expense) for the period,
net of tax 17,946 7,871 (5,766)
Attributable to:
Owners of the Parent Company 16,616 6,143 (9,081)
Non-controlling interests 1,330 1,728 3,315
--------------------------------------------------------- ----------- ----------- -----------
17,946 7,871 (5,766)
--------------------------------------------------------- ----------- ----------- -----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2021
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
-------
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 1 April
2021 6,667 239,142 44,600 (86) (21,239) 114,438 383,522 8,497 392,019
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Profit for
the period - - - - - 12,063 12,063 1,631 13,694
Other
comprehensive
income/(expense) - - - 453 4,100 - 4,553 (301) 4,252
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Total
comprehensive
income for
the period - - - 453 4,100 12,063 16,616 1,330 17,946
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Transactions
with owners
in their capacity
as owners
Equity-settled
share-based
payments - - - - - (121) (121) - (121)
Tax on
equity-settled
share-based
payments - - - - - (237) (237) - (237)
Options exercised 11 - - - - (11) - - -
Equity dividends
paid - - - - - - - (2,650) (2,650)
Exchange
differences
on opening
balances (149) (5,339) (996) - - - (6,484) - (6,484)
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 30 September
2021 6,529 233,803 43,604 367 (17,139) 126,132 393,296 7,177 400,473
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
SIX MONTHSED 30 SEPTEMBER 2020
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
-------
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 1 April
2020 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Profit for
the period - - - - - 11,222 11,222 1,057 12,279
Other
comprehensive
(expense)/income - - - (264) (4,815) - (5,079) 671 (4,408)
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Total
comprehensive
income for
the period - - - (264) (4,815) 11,222 6,143 1,728 7,871
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Transactions
with owners
in their capacity
as owners
Equity-settled
share-based
payments - - - - - 2,309 2,309 - 2,309
Tax on
equity-settled
share-based
payments - - - - - (266) (266) - (266)
Recognition
of
non-controlling
interests - - - - - - - 276 276
Options exercised 14 - - - - (14) - - -
Exchange
differences
on opening
balances 268 9,647 1,799 - - - 11,714 - 11,714
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 30 September
2020 6,256 225,064 41,974 56 (9,204) 126,954 391,100 6,647 397,747
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
YEARED 31 MARCH 2021
Attributable to the owners of the Parent
Company
-----------------------------------------------------------------------------
Share
premium
and
capital Non-
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
--------------------- ------- ---------- ------- ------- ------------- ---------- --------------- ----------- --------
At 1 April 2020 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
--------------------- ------- ---------- ------- ------- ------------- ---------- --------------- ----------- --------
Profit for the year - - - - - 8,207 8,207 2,234 10,441
Other comprehensive
(expense)/income - - - (406) (16,850) (32) (17,288) 1,081 (16,207)
--------------------- ------- ---------- ------- ------- ------------- ---------- --------------- ----------- --------
Total comprehensive
(expense)/income
for the year - - - (406) (16,850) 8,175 (9,081) 3,315 (5,766)
--------------------- ------- ---------- ------- ------- ------------- ---------- --------------- ----------- --------
Transactions with
owners in their
capacity as owners
Equity-settled
share-based
payments - - - - - 3,668 3,668 - 3,668
Tax on equity-settled
share-based payments - - - - - 214 214 - 214
Recognition of
non-controlling
interests - - - - - - - 539 539
Options exercised 34 - - - - (34) - - -
Equity dividends
paid - - - - - (11,288) (11,288) - (11,288)
Exchange differences
on opening balances 659 23,725 4,425 - - - 28,809 - 28,809
--------------------- ------- ---------- ------- ------- ------------- ---------- --------------- ----------- --------
At 31 March 2021 6,667 239,142 44,600 (86) (21,239) 114,438 383,522 8,497 392,019
--------------------- ------- ---------- ------- ------- ------------- ---------- --------------- ----------- --------
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2021
Unaudited
Unaudited restated(a)
as at as at As at
30 Sep 30 Sep 31 Mar
2021 2020 2021
Note $000 $000 $000
------------------------------ ---- --------- ------------ --------
Non-current assets
Property, plant and equipment 83,098 89,505 88,203
Intangible assets 111,066 116,025 114,874
Right-of-use assets 89,388 105,882 95,380
Long-term assets 6,321 6,308 5,721
Deferred tax assets 16,116 19,039 18,357
------------------------------ ---- --------- ------------ --------
Total non-current assets 305,989 336,759 322,535
------------------------------ ---- --------- ------------ --------
Current assets
Inventory 259,893 215,220 176,165
Trade and other receivables 298,009 281,556 129,219
Income tax receivable 1,283 15,138 2,368
Derivative financial assets 9 375 556 207
Cash and cash equivalents 6 96,340 76,770 132,760
------------------------------ ---- --------- ------------ --------
Total current assets 655,900 589,240 440,719
------------------------------ ---- --------- ------------ --------
Total assets 2 961,889 925,999 763,254
------------------------------ ---- --------- ------------ --------
Equity
Share capital 6,529 6,256 6,667
Share premium 231,999 223,327 237,296
Capital redemption reserve 1,804 1,737 1,846
Merger reserve 43,604 41,974 44,600
Hedging reserve 367 56 (86)
Translation reserve (17,139) (9,204) (21,239)
Retained earnings 126,132 126,954 114,438
------------------------------ ---- --------- ------------ --------
Equity attributable to owners
of the Parent Company 393,296 391,100 383,522
------------------------------ ---- --------- ------------ --------
Non-controlling interests 7,177 6,647 8,497
------------------------------ ---- --------- ------------ --------
Total equity 400,473 397,747 392,019
------------------------------ ---- --------- ------------ --------
a) In the preparation of these interim financial statements,
comparative amounts have been restated to reflect the finalisation
of the CSS acquisition accounting made in the year ended 31 March
2021 financial statements.
AS AT 30 SEPTEMBER 2021
Unaudited
Unaudited restated(a)
as at as at As at
30 Sep 30 Sep 31 Mar
2021 2020 2021
Note $000 $000 $000
------------------------------ ---- --------- ----------- -------
Non-current liabilities
Loans and borrowings 7 (195) (389) (103)
Lease liabilities 85,647 99,946 94,582
Deferred income 627 586 486
Provisions 5,222 5,422 5,742
Other financial liabilities 19,963 9,354 15,526
Deferred tax liabilities 2,513 1,572 2,115
------------------------------ ---- --------- ----------- -------
Total non-current liabilities 113,777 116,491 118,348
------------------------------ ---- --------- ----------- -------
Current liabilities
Bank overdraft 6 70,511 45,180 57,033
Loans and borrowings 7 84,840 55,219 (620)
Lease liabilities 18,687 19,799 19,340
Deferred income 839 496 424
Provisions 1,446 1,479 1,617
Income tax payable 8,444 13,522 10,061
Trade and other payables 223,821 229,188 120,763
Other financial liabilities 39,051 46,878 44,269
------------------------------ ---- --------- ----------- -------
Total current liabilities 447,639 411,761 252,887
------------------------------ ---- --------- ----------- -------
Total liabilities 2 561,416 528,252 371,235
------------------------------ ---- --------- ----------- -------
Total equity and liabilities 961,889 925,999 763,254
------------------------------ ---- --------- ----------- -------
a) In the preparation of these interim financial statements,
comparative amounts have been restated to reflect the finalisation
of the CSS acquisition accounting made in the year ended 31 March
2021 financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHSED 30 SEPTEMBER 2021
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
Note $000 $000 $000
------------------------------------------- ---- ---------- ---------- --------
Cash flows from operating activities
Profit for the period 13,694 12,279 10,441
Adjustments for:
Depreciation and impairment of property,
plant and equipment 6,916 6,678 13,535
Depreciation of right-of-use assets 6,783 9,370 24,047
Amortisation of intangible assets 3,158 4,258 6,918
Finance expenses 2,495 2,265 5,179
Income tax charge 5,191 4,801 4,234
Loss on disposal of a business - 208 208
Loss/(profit) on sales of property,
plant and equipment 17 (10) 165
Loss on disposal of intangible fixed
assets - 1 106
Equity-settled share-based payments (418) 2,477 4,192
------------------------------------------- ---- ---------- ---------- --------
Operating profit after adjustments
for non-cash items 37,836 42,327 69,025
Change in trade and other receivables (171,325) (169,524) (11,914)
Change in inventory (85,790) (42,133) 1,772
Change in trade and other payables,
provisions and deferred income 104,669 105,217 (4,504)
------------------------------------------- ---- ---------- ---------- --------
Cash (used by)/generated from operations (114,610) (64,113) 54,379
Tax (paid)/received (3,464) 2,857 14,353
Interest and similar charges paid (1,994) (1,927) (4,082)
------------------------------------------- ---- ---------- ---------- --------
Net cash (outflow)/inflow from operating
activities (120,068) (63,183) 64,650
------------------------------------------- ---- ---------- ---------- --------
Cash flow from investing activities
Proceeds from sale of property, plant
and equipment 128 30 147
Acquisition of intangible assets (236) (737) (1,000)
Acquisition of property, plant and
equipment (2,968) (2,729) (7,390)
------------------------------------------- ---- ---------- ---------- --------
Net cash outflow from investing activities (3,076) (3,436) (8,243)
------------------------------------------- ---- ---------- ---------- --------
Cash flows from financing activities
Repayment of secured borrowings - (1,025) (1,158)
Net movement in credit facilities 85,441 55,730 -
Lease liabilities principle repayments (10,532) (8,772) (19,184)
Loan arrangement fees (494) - -
Equity dividends paid - - (11,288)
Dividends paid to non-controlling
interest (2,650) - -
------------------------------------------- ---- ---------- ---------- --------
Net cash inflow/(outflow) from financing
activities 71,765 45,933 (31,630)
------------------------------------------- ---- ---------- ---------- --------
Net (decrease)/increase in cash and
cash equivalents (51,379) (20,686) 24,777
Cash and cash equivalents at beginning
of the period 75,727 52,197 52,197
Effect of exchange rate fluctuations
on cash held 1,481 79 (1,247)
------------------------------------------- ---- ---------- ---------- --------
Cash and cash equivalents at end
of the period 6 25,829 31,590 75,727
------------------------------------------- ---- ---------- ---------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2021
1 Accounting policies
Basis of preparation
The financial information contained in this interim report does
not constitute statutory accounts as defined in Section 435 of the
Companies Act 2006 and is unaudited.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards (UK IFRS), with future changes
being subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK IFRS in its consolidated financial statements on
1 April 2021. This change constitutes a change in accounting
framework. However, there is no impact on recognition, measurement
or disclosure in the period reported as a result of the change in
framework. This condensed consolidated interim financial report for
the half-year reporting period ended 30 September 2021 has been
prepared in accordance with the UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. The financial information for the year
ended 31 March 2021 is extracted from the statutory accounts of the
Group for that financial year. 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 2021. The audited annual accounts have been delivered to the
Registrar of Companies.
The preparation of financial statements that conform with
adopted UK IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of income and
expense during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results may ultimately differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and future periods if
relevant.
For the purposes of these financial statements 'Design Group' or
'the Group' means IG Design Group plc ('the Company') and its
subsidiaries. The Company's ordinary shares are listed on the
Alternative Investment Market (AIM).
Seasonality of the business
The business of the Group is seasonal and although revenues
accrue relatively evenly in both halves of the year, working
capital requirements, including inventory levels, increase steadily
in the first half from July and peak in October as manufacturing
and distribution of Christmas products builds ahead of shipping.
The second half of the year sees the borrowing of the Group decline
and move to typically a cash positive position as we collect our
debtors through January to March.
Restatement of comparative amounts
In the preparation of these interim financial statements,
comparative amounts have been restated to reflect the finalisation
of the CSS acquisition accounting made in the year ended 31 March
2021 financial statements.
Presentation currency
The currency translation reserve was set to zero at 1 April 2006
on transition to IFRS and has been restated as if the Group had
reported in US dollars since that date. Share capital, share
premium, capital redemptions reserve, merger reserve and hedging
reserve are translated into US dollars at the rates of exchange at
the balance sheet date and the resulting exchange differences are
included in other reserves.
The functional currency of the Parent Company remains as
sterling as it is located in the United Kingdom and substantially
all of its cash flows, assets and liabilities are denominated in
sterling, as well as its share capital. As such, the Parent
Company's functional currency differs to that of the Group's
reporting currency.
Going concern
Information regarding the financial position of the Group, its
cash flows, liquidity position and borrowing facilities are
described in the detailed financial review. Cash balances and
borrowings are detailed in notes 6 and 7.
On 5 June 2019, to meet the funding requirements of the Group,
the business refinanced with a banking group comprising HSBC,
NatWest, Citigroup (who replaced BNP Paribas), Truist Bank (as
successor by merger to SunTrust Bank) and PNC Bank as part of a
three year deal. This facility was then subsequently amended and
extended on 17 January 2020 with the same banking group to
accommodate the acquisition of CSS. The facilities were then
further extended in May 2021 to run to June 2023 and comprise of a
revolving credit facility ('RCF') of $95.0 million, a further
flexible RCF of up to GBP130.0 million to meet the Group's working
capital requirements during peak manufacturing, and a maximum limit
of $18.0 million invoice financing arrangement in Hong Kong. We
also have access to supplier financing arrangements from certain
customers which we utilise at certain times of the year. These
supplier financing arrangements are subject to the continuing
support of the customers' banking partners and therefore could be
withdrawn at short notice.
The Group prepared budgets and plans for FY22 and FY23 at 31
March 2021 and these have been refined and revisited during the
period; most recently ahead of the Group's trading update in
October. A going concern assessment as at 30 September 2021 has
been produced using these latest forecasts which have been reviewed
by the Board, and take into account the significant seasonal
working capital cycle of the business and the cost headwinds the
Group is currently experiencing. These forecasts show the Group
operating within the existing facilities and complying with
covenants for the forecast periods, and accordingly the financial
statements have been prepared on a going concern basis.
These latest forecasts are not without risk as the Group
completes its seasonal peak trading period to 31 December 2021, and
although these forecasts have built in the later profile of cash
receipts from customers to reflect the delayed sales experienced in
the first half and the anticipated incremental costs, there remains
uncertainty in relation to the scale of certain cost headwinds and
timing in net cash receipts in the forecast.
For the purposes of assessing a severe but plausible downside to
the base case projections, these forecasts have been sensitised by
including, a longer continuation and further worsening of the cost
headwinds the Group has seen in the first half which could result
in an adverse impact on forecast EBITDA and net debt. The severe
but plausible downside case has been used to assess immediate and
longer term compliance with the Group's banking covenants, as well
as ensuring the Group has sufficient liquidity within its existing
loan facilities. Further details on the facilities and the
financial covenants attached are included in Note 7. The Board has
also considered and implemented as required, mitigating actions
available to the Group including further cost saving initiatives
and more stringent cash management strategies to ensure the Group
maintains sufficient headroom against its financial covenants.
After considering the severe but plausible downside case, the
Directors have a reasonable expectation that they will meet the
immediate and longer term covenant tests ensuring the Group has
access to sufficient liquidity.
This disclosure has been prepared in accordance with the
Financial Reporting Council's UK Corporate Governance Code.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim report are consistent with those followed in preparation of
the Group's annual financial statements for the year ended 31 March
2021.
2 Segmental information
The Group has one material business activity being the design,
manufacture and distribution of Celebration, Craft & creative
play, Stationery, Gifting and 'Not-for-resale' consumable
products.
The business operates under two reporting segments which are
reported to, and evaluated by, the Chief Operating Decision Makers
for the Group. The DG Americas segment includes overseas operations
in Asia, Australia, UK, India and Mexico, being the overseas
entities of US companies. The DG International segment comprises
the consolidation of the separately owned UK, European and
Australian businesses.
Inter -- segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Financial performance of each segment is measured on Adjusted
operating profit before management recharges. Interest and tax are
managed on a Group basis and not split between reportable segments.
However, the related financial liability and cash has been
allocated out into the reportable segments as this is how they are
managed by the Group.
Segment assets are all non-current and current assets, excluding
deferred tax and income tax, which are shown in the eliminations
column. Inter-segment receivables and payables are not included
within segmental assets and liabilities as they eliminate on
consolidation.
Central
DG &
DG Americas(a) International eliminations Group
$000 $000 $000 $000
---------------------------------------- -------------- ------------- ------------ ---------
Six months ended 30 September 2021
Revenue - external 347,502 136,406 - 483,908
- inter-segment 16 468 (484) -
---------------------------------------- -------------- ------------- ------------ ---------
Total segment revenue 347,518 136,874 (484) 483,908
---------------------------------------- -------------- ------------- ------------ ---------
Segment result before Adjusting
items and management recharges 13,116 11,495 (2,439) 22,172
Adjusting items (note 3) (792)
---------------------------------------- -------------- ------------- ------------ ---------
Operating profit 21,380
Finance expenses (2,297)
Finance expense treated as an Adjusting
item (note 3) (198)
Income tax (5,191)
---------------------------------------- -------------- ------------- ------------ ---------
Profit for the six months ended
30 September 2021 13,694
---------------------------------------- -------------- ------------- ------------ ---------
Balances at 30 September 2021
Segment assets 586,279 282,985 92,625 961,889
---------------------------------------- -------------- ------------- ------------ ---------
Segment liabilities (321,138) (146,704) (93,574) (561,416)
---------------------------------------- -------------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 1,866 1,062 40 2,968
- intangible assets 185 51 - 236
- right-of-use assets 2,281 591 - 2,872
Depreciation - property, plant
and equipment 3,877 3,032 7 6,916
Amortisation - intangible assets 3,087 71 - 3,158
Depreciation - right-of-use assets 6,250 2,714 10 8,974
Impairment - right-of-use assets - - 22 22
Reversal of impairment - right-of-use
assets (2,213) - - (2,213)
---------------------------------------- -------------- ------------- ------------ ---------
Central
DG &
DG Americas(a) International eliminations Group
$000 $000 $000 $000
----------------------------------- -------------- ------------- ------------ ---------
Six months ended 30 September 2020
Revenue - external 321,572 113,063 - 434,635
- inter-segment - 2,443 (2,443) -
----------------------------------- -------------- ------------- ------------ ---------
Total segment revenue 321,572 115,506 (2,443) 434,635
----------------------------------- -------------- ------------- ------------ ---------
Segment result before Adjusting
items and management recharges 19,550 15,140 (2,224) 32,466
Adjusting items (note 3) (13,121)
----------------------------------- -------------- ------------- ------------ ---------
Operating profit 19,345
Finance expenses (2,265)
Income tax (4,801)
----------------------------------- -------------- ------------- ------------ ---------
Profit for the six months ended
30 September 2020 12,279
----------------------------------- -------------- ------------- ------------ ---------
Balances at 30 September 2020
Segment assets (restated(b) ) 562,889 282,583 80,527 925,999
----------------------------------- -------------- ------------- ------------ ---------
Segment liabilities (restated(b)
) (315,781) (148,970) (63,501) (528,252)
----------------------------------- -------------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 1,519 1,210 - 2,729
- intangible assets 700 37 - 737
- right-of-use assets 29,639 679 - 30,318
Depreciation - property, plant
and equipment 3,917 2,760 1 6,678
Amortisation - intangible assets 3,988 270 - 4,258
Depreciation - right-of-use assets 6,756 2,579 35 9,370
----------------------------------- -------------- ------------- ------------ ---------
Central and
DG Americas(a) DG International eliminations Group
$000 $000 $000 $000
----------------------------------------- -------------- ---------------- ------------- ---------
Year ended 31 March 2021
Revenue - external 613,909 259,307 - 873,216
- inter segment 66 5,995 (6,061) -
------------------------------------------- -------------- ---------------- ------------- ---------
Total segment revenue 613,975 265,302 (6,061) 873,216
------------------------------------------- -------------- ---------------- ------------- ---------
Segment result before Adjusting items
and management recharge 21,015 25,767 (4,760) 42,022
Adjusting items (note 3) (22,168)
------------------------------------------- -------------- ---------------- ------------- ---------
Operating profit 19,854
Finance expenses (5,016)
Finance expenses treated as an Adjusting
item (note 3) (163)
Income tax (4,234)
------------------------------------------- -------------- ---------------- ------------- ---------
Profit for the year ended 31 March
2021 10,441
------------------------------------------- -------------- ---------------- ------------- ---------
Balances at 31 March 2021
Segment assets 469,192 230,590 63,472 763,254
------------------------------------------- -------------- ---------------- ------------- ---------
Segment liabilities (216,940) (86,553) (67,742) (371,235)
------------------------------------------- -------------- ---------------- ------------- ---------
Capital expenditure additions
* property, plant and equipment 4,589 2,711 90 7,390
* intangible assets 963 37 - 1,000
- right-of-use assets 30,207 2,733 - 32,940
Depreciation - property, plant and
equipment 7,760 5,774 1 13,535
Amortisation - intangible assets 6,510 408 - 6,918
Depreciation - right-of-use assets 12,739 5,265 74 18,078
Impairment - right-of-use assets 5,969 - - 5,969
------------------------------------------- -------------- ---------------- ------------- ---------
(a) Including overseas entities for the Americas operating segment.
(b) In the preparation of these interim financial statements,
comparative amounts have been restated to reflect the finalisation
of the CSS acquisition accounting made in the year ended 31 March
2021 financial statements.
3 Operating profit and Adjusting items
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
------------------------------ ---------- ---------- --------
Operating profit analysed as:
Adjusted operating profit 22,172 32,466 42,022
Adjusting items (792) (13,121) (22,168)
------------------------------ ---------- ---------- --------
Operating profit 21,380 19,345 19,854
------------------------------ ---------- ---------- --------
Adjusting items
Other
Cost
of Selling Admin Loss on finance
sales expenses expenses disposal expenses Total
Six months ended 30 September
2021 $000 $000 $000 $000 $000 $000
-------------------------------------- ----- -------- -------- -------- -------- -------
Losses/(gains) and transaction
costs relating to acquisitions
and disposals of businesses(1) - - 3,612 - (15) 3,597
Acquisition integration
and restructuring (income)/costs(2) (146) - (2,076) 31 213 (1,978)
(Reversal of impairment)/impairment
of assets (3) - (942) - - - (942)
Insurance income from
IT security incident
(5) - - (687) - - (687)
Amortisation of acquired
intangibles(6) - - 1,418 - - 1,418
Share-based payment (credits)/charges
(7) - - (418) - - (418)
-------------------------------------- ----- -------- -------- -------- -------- -------
Adjusting items (146) (942) 1,849 31 198 990
-------------------------------------- ----- -------- -------- -------- -------- -------
Loss on Other
Cost
of Selling Admin sale of finance
sales expenses expenses subsidiary expenses Total
Six months ended 30 September
2020 $000 $000 $000 $000 $000 $000
-------------------------------- ----- -------- -------- ---------- -------- ------
Losses/(gains) and transaction
costs relating to acquisitions
and disposals of businesses(1) - - 674 208 - 882
Acquisition integration
and restructuring costs(2) 33 - 5,478 - - 5,511
Impairment of assets
(3) - 52 - - - 52
Incremental Covid-19
costs(4) 926 - 1,048 - - 1,974
Amortisation of acquired
intangibles(6) - - 2,225 - - 2,225
Share-based payment charges(7) - - 2,477 - - 2,477
-------------------------------- ----- -------- -------- ---------- -------- ------
Adjusting items 959 52 11,902 208 - 13,121
-------------------------------- ----- -------- -------- ---------- -------- ------
Other
Cost of Selling Admin Loss on finance
sales expenses expenses disposal expenses Total
Year ended 31 March 2021 $000 $000 $000 $000 $000 $000
------------------------------------ ------- -------- -------- -------- -------- -------
Losses/(gains) and transaction
costs relating to acquisitions
and disposals of businesses(1) - - 74 208 - 282
Acquisition integration
and restructuring costs(2) 993 (162) 14,402 91 163 15,487
(Reversal of impairment)/impairment
of assets (3) (3,709) (2,100) - - - (5,809)
Incremental Covid-19
costs(4) 603 - 913 - - 1,516
IT security incident
costs(5) 1,107 - 1,093 - - 2,200
Amortisation of acquired
intangibles(6) - - 4,463 - - 4,463
Share-based payment charges(7) - - 4,192 - - 4,192
Adjusting items (1,006) (2,262) 25,137 299 163 22,331
------------------------------------ ------- -------- -------- -------- -------- -------
Adjusting items are separately presented by virtue of their
nature, size and/or incidence (per each operating segment). These
items are material items of an unusual or non-recurring nature
which represent gains or losses and are presented to allow for the
review of the performance of the business in a consistent manner
and in line with how the business is managed and measured on a
day-to-day basis and allow the reader to obtain a clearer
understanding of the underlying results of the ongoing Group's
operations. They are typically gains or costs associated with
events that are not considered to form part of the core operations,
or are considered to be a 'non-recurring' event (although they may
span several accounting periods).
These losses/(gains) relating to the period ended 30 September
2021 are broken down as follows:
(1) Losses/(gains) and transaction costs relating to
acquisitions and disposals of businesses
Costs directly associated with acquisitions, including legal and
advisory fees on deals, form part of our reported results on an
IFRS basis. These costs however, in the Board's view, form part of
the capital transaction, and as they are not attributed to
investment value under IFRS 3, they are included as an Adjusting
item. Similarly, where acquisitions have employee related payments
(exclusive of Long Term Incentive Plans) which lock in and
incentivise legacy talent, we also include these costs as Adjusting
items. Furthermore, gains or losses on the disposal of businesses,
including any transaction costs associated with the disposal are
treated as Adjusting items.
In the period, the Group has incurred expenditure relating to
acquisitions in the first half totalling $3.3 million, of which
$113,000 related to previous acquisitions and the balance relates
to aborted acquisitions. In addition, the final tranche of
acquisition related employee payments which lock in and incentivise
legacy talent relating to the Impact Innovations Inc. transaction
in 2019 have been incurred ($278,000) as we celebrate our third
anniversary of the acquisition.
In the year to 31 March 2021 an additional $208,000 of
transaction costs associated with the disposal of Zhejiang Shaoxing
Royal Arts and Crafts Co. Ltd ('Shaoxing') were incurred during the
year along with expenditure in relation to any other potential
acquisitions reviewed in the year.
(2) Acquisition integration and restructuring (income)/costs
In order to realise synergies from acquisitions, integration
projects are undertaken that aim to deliver future savings and
efficiencies for the Group. These are projects outside of the
normal operations of the business and typically incur one-time
costs to ensure successful implementation. As such the Board
considers it is appropriate that costs associated with projects of
this nature be included as Adjusting items.
The main costs in the period related to the integration of CSS
into the enlarged DG Americas.
The CSS business includes a large portfolio of owned and leased
sites, and part of the integration project includes the
consolidation of these locations. As certain sites were closed and
exited since acquisition, in the absence of being able to sub-lease
or break leases this resulted in impairments of lease assets in the
prior financial year. In the period to 30 September 2021 we have
been able to partially exit some of the property we lease in Budd
Lake, New Jersey as well as sub-lease our site in Plymouth Meeting.
This has resulted in a reversal of the lease asset impairments of
$2.2 million through Adjusting items. Ongoing costs associated with
the properties we have exited continue to be treated as Adjusting
items.
In respect of the remaining vacant leased properties, marketing
for sub-tenancy is ongoing. As at 30 September 2021, the Group has
had no offers from potential subtenants and given that this
position is expected to continue for the foreseeable future, these
leased properties remain impaired in full. The total value of
assets relating to the remaining impaired properties as at 30
September 2021 is $7.0 million.
Other costs associated with the ongoing consolidation of
operations around the group, have been incurred as the enlarged
printing and converting business has been moved from Memphis to a
larger facility in Byhalia, Mississippi that also houses
distribution which before was performed out of temporary
warehouses.
The main costs in the year to 31 March 2021 also related to the
integration of CSS into the enlarged DG Americas business. These
included integration consultancy expenditure, severance and
temporary labour costs, as the newly integrated team structures
following the acquisition have been established, and the impact of
the impairment of the lease assets and costs associated with the
closure of excess sites.
The tax refund as a result of the US Covid-19 Coronavirus Aid,
Relief and Economic Security ('CARES') Act attracted interest
income which was recognised in Adjusting items in the prior
year.
Furthermore, in the UK and Australia, as a result of Covid-19,
workforce restructuring costs were treated as Adjusting items in
the year to 31 March 2021.
(3) (Reversal of impairment)/impairment of assets
In light of the unknown impact of Covid-19 on the business, a
review of inventory, trade receivables and fixed assets was
undertaken at the last two financial year ends. As at 31 March
2021, the Group was carrying $1.5 million of provisions in relation
to the impairment of trade receivables and $3.3 million in respect
of inventory due to the impact of Covid-19 on the ability to
collect receivables and sell-through inventory. During the period,
$942,000 of receivables impairment has been reversed as it is no
longer required.
As at 31 March 2021 $2.4 million of the trade receivables
impairment had been reversed as it is no longer required and
following a review of sell-through rates in respect of inventory
$4.0 million was released. These releases were partially offset by
$599,000 of additional Covid-19 related impairment charges taken
during the year.
(4) Incremental Covid-19 costs
The Covid-19 outbreak developed rapidly in 2020 and continued
into the first calendar quarter of 2021, with measures taken around
the world to contain the virus affecting economic activity. The
Group was affected in every territory in which we operate and the
impact on the general economic environment and the reduced demand
of goods from our customers as well as the closures of our
businesses has had a significant impact. Certain incremental costs
relating to direct labour equal to $1.5 million were included in
Adjusting items in the year to 31 March 2021. The most significant
element of these costs relate to additional 'hazard pay' labour
costs across our manufacturing facilities in the USA and Mexico in
order to ensure our employees returned to work.
In addition, laws were passed in India and Mexico that meant no
workforce reductions were allowed during closed/lockdown periods
which meant higher employee costs were being incurred than
ordinarily would have in that situation. This resulted in the
business incurring direct incremental costs of labour whilst not
producing anything and incurring periods of significant downtime.
When employees returned to work post lockdown labour costs were
paid again once production started, effectively doubling the costs
to produce.
(5) Insurance income from IT security incident
The IT security incident which occurred in the Americas business
in October/November 2020 resulted in one-off costs specifically in
relation to crisis management, legal, forensic, and data recovery
costs including server/hardware repair and replacement. In
addition, there were IT overtime costs, customer penalties from
delayed shipments and expedited freight costs to avoid delays.
These costs were treated as an Adjusting item in the year to 31
March 2021. The lost sales associated with the IT outage did not
form part of the Adjusting items.
The Group has made insurance claims under two policies in
relation to the incident. As at 30 September 2021, both claims had
been filed with the relevant insurer and on 1 October, the Group
received confirmation from one insurer that they would be paying
$687,000 (GBP500,000) in full for the claim. As this income met the
virtually certain threshold the Group recognised this income in
Adjusting items.
(6) Amortisation of acquired intangibles
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer
relationships and brands which form part of the intangible value of
the acquired business but are not part of the acquired balance
sheet. These intangible assets are then amortised to the income
statement over an appropriately judged period. These are not
operational costs relating to the running of the acquired business
and are directly related to the accounting for the acquisition.
These include tradenames and brands acquired as part of the
acquisition of Impact Innovations Inc. and CSS Industries Inc. in
the USA. As such we include these as Adjusting items.
In addition, in accordance with IFRS 3, on acquisition,
businesses need to be fair valued, which can result in an uplift to
stock on hand relating to sales orders already attached to the
acquired stock. This uplift will distort the margins associated
with the stock, and typically unwinds quickly as stock is sold soon
after acquisition. The unwind of the stock uplift ($1.4 million)
associated with the CSS acquisition was included as an Adjusting
item in the year to 31 March 2021, consistent with the treatment
adopted with the Impact acquisition. This fully unwound as at 31
March 2021.
(7) Share-based payment (credits)/charges
As part of our senior management remuneration, the Group
operates a Long Term Incentive Plan ('LTIP') including the newly
created Value Creation Scheme ('VCS') in the form of options for
ordinary shares of the Group. In accordance with accounting
principles, despite this plan not being a cash cost to the business
(except for associated social security costs), a share -- based
payment charge or credit is taken to the income statement. We
consider that these charges do not form part of the underlying
operational costs and therefore include these as Adjusting items.
The share-based payment credit for the period was ($418,000) which
consists of a principal IFRS 2 credit of ($121,000) and a credit in
relation to employer's social security charge of ($297,000). The
credit in the principal charge relates to the reversal of charges
in the prior year associated with the VCS, based on current outlook
for FY23, and this, plus the share price at the end of the
reporting period, has also led to a credit in relation to
employer's social security charge.
At 31 March 2021, the share based payment charge for the year
was $4.2 million which consists of a principal IFRS 2 charge of
$3.7 million and an employer's social security charge of
$524,000.
The cash flow effect of Adjusting items
There was a $4.5 million net outflow in the current period's
cash flow (H1 2021: $10.4 million) relating to Adjusting items
which included $1.7 million (H1 2021: $4.5 million) deferred from
prior years.
4 Other operating income
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
----------------------------- ---------- ---------- ------
Grant income received - 64 130
Sub-lease rentals income 325 178 559
Government assistance 101 3,578 3,263
Other 1 89 114
----------------------------- ---------- ---------- ------
Total other operating income 427 3,909 4,066
----------------------------- ---------- ---------- ------
5 Taxation
Recognised in the income statement
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
-------------------------------------------------- ---------- ---------- -------
Current tax charge
Current income tax charge 2,999 8,625 6,004
Deferred tax charge/(credit)
Relating to origination and reversal of temporary
differences 2,192 (3,824) (1,770)
-------------------------------------------------- ---------- ---------- -------
Total tax in the income statement 5,191 4,801 4,234
-------------------------------------------------- ---------- ---------- -------
Total tax charge/(credit) on Adjusting items
Total tax on profit before Adjusting items 4,844 7,677 9,410
Total tax on Adjusting items 347 (2,876) (5,176)
Total tax in income statement 5,191 4,801 4,234
-------------------------------------------------- ---------- ---------- -------
The tax expense has been calculated by applying the weighted
average tax rate across jurisdictions which is expected to apply to
the Group for the year ended 31 March 2022 using rates
substantively enacted by 30 September 2021. The tax effect of
Adjusting items are recognised in the same period as the relevant
Adjusting item.
In May 2021, the Finance Act 2021 was substantively enacted
which included an increase in the UK corporation tax rate to 25%
from 1 April 2023. The calculation of the estimated effective tax
rate for the year ended 31 March 2022 for adjusted profit before
tax includes a credit of $754,000 which relates to the estimated
remeasurement of deferred tax items expected to unwind at 25%. The
estimated remeasurement of the deferred tax asset recognised in
relation to share based payments which is expect to unwind after 1
April 2023 results in a credit of $223,000 and $125,000 in the
period through tax on Adjusting items and through the statement of
changes in equity respectively.
6 Cash and cash equivalents/bank overdrafts
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
-------------------------------------------------- ---------- ---------- --------
Cash and cash equivalents 96,340 76,770 132,760
Bank overdrafts (70,511) (45,180) (57,033)
-------------------------------------------------- ---------- ---------- --------
Cash and cash equivalents per cash flow statement 25,829 31,590 75,727
-------------------------------------------------- ---------- ---------- --------
Net cash
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
----------------------------------------- ---------- ---------- ------
Cash and cash equivalents 25,829 31,590 75,727
Bank loans and overdrafts (85,441) (55,802) -
Loan arrangement fees 796 972 723
----------------------------------------- ---------- ---------- ------
Net (debt)/cash as used in the financial
review (58,816) (23,240) 76,450
----------------------------------------- ---------- ---------- ------
The bank loans and overdrafts are secured by a fixed charge on
certain of the Group's land and buildings, a fixed charge on
certain of the Group's book debts and a floating charge on certain
of the Group's other assets. See note 7 for further details of the
Group's loans and borrowings.
7 Loans and borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
-------------------------------------- ---------- ---------- ------
Non-current liabilities
Secured bank loans - - -
Loan arrangement fees (195) (389) (103)
-------------------------------------- ---------- ---------- ------
(195) (389) (103)
-------------------------------------- ---------- ---------- ------
Current liabilities
Asset backed loan 5,477 10,451 -
Revolving credit facilities 79,964 45,279 -
Current portion of secured bank loans - 72 -
-------------------------------------- ---------- ---------- ------
Bank loans and borrowings 85,441 55,802 -
Loan arrangement fees (601) (583) (620)
-------------------------------------- ---------- ---------- ------
84,840 55,219 (620)
-------------------------------------- ---------- ---------- ------
Secured bank facilities
On 5 June 2019, the Group entered into a new three year Group
facility with a club of five banks chosen to reflect and support
the geographical spread of the Group. The banks within the club are
HSBC, NatWest, Citigroup (who replaced BNP Paribas), Truist Bank
(as successor by merger to SunTrust Bank) and PNC.
On 17 January 2020 a facility increase was agreed to support the
acquisition of CSS on 3 March 2020 and to accommodate the enlarged
Group.
The facilities, which were extended in May 2021 to run to June
2023, comprise:
-- a revolving credit facility ('RCF A') of $95.0 million;
-- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to GBP130.0 million.
This RCF is flexed to meet our working capital requirements during
those months when inventory is being built within our annual
business cycle and is GBPnil when not required, minimising carry
costs; and
-- an invoice financing arrangement in Hong Kong maximum limit
$18.0 million but dependent on level of eligible receivables.
In total, the peak accessible facilities are approximately
$283.3 million (maximum $288.0 million) and are more than
sufficient to cover our peak requirements. Being partially
denominated in US dollars they also provide a hedge against
currency movements. The facilities, which do not amortise with
time, include an additional uncommitted amount to finance potential
acquisitions.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on. The RCF facilities are secured
with a fixed and floating charge over all other assets of the
Group. Amounts drawn under revolving credit facilities are
classified as current liabilities as the Group expects to settle
these amounts within 12 months.
There are financial covenants, tested quarterly, attached to the
existing facilities as follows:
-- interest cover, being the ratio of Adjusted earnings before
interest, depreciation and amortisation (EBITDA), as defined by the
banking facility, to interest on a rolling twelve--month basis;
and
-- leverage, being the ratio of debt to Adjusted EBITDA, as
defined by the banking facility, on a rolling twelve-month
basis.
Covenants are measured on pre IFRS 16 accounting
definitions.
There is a further covenant tested monthly in respect of the
working capital RCF by which available asset cover must not fall
below agreed levels relative to amounts drawn.
Loan arrangement fees represent the unamortised costs in
arranging the Group facilities. These fees are being amortised on a
straight line basis over the terms of the facilities.
The Group is party to supplier financing arrangements with one
of its key customers and the associated balances are recognised as
trade receivables until receipt of the payment from the bank at
which point the receivable is derecognised. At 30 September 2021
$34.9 million had been drawn down on this arrangement (H1 2021 $8.5
million).
8 Earnings per share
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
$000 $000 $000
---------------------------------------------------- ---------- ---------- -------
Earnings
Earnings attributable to equity holders of
the Company 12,063 11,222 8,207
Adjustments
Adjusting items (net of non-controlling interest
effect) 990 13,199 22,358
Tax charge/(relief) on adjustments (net of
non-controlling interest effect) 347 (2,899) (5,184)
Adjusted earnings attributable to equity
holders of the Company 13,400 21,522 25,381
---------------------------------------------------- ---------- ---------- -------
30 Sep 30 Sep 31 Mar
In thousands of shares 2021 2020 2021
Weighted average number of shares
Basic weighted average number of shares outstanding 98,118 97,700 97,700
Dilutive effect of employee share option
plans 79 327 440
---------------------------------------------------- ---------- ---------- -------
Diluted weighted average ordinary shares 98,197 98,027 98,140
---------------------------------------------------- ---------- ---------- -------
30 Sep 30 Sep 31 Mar
2021 2020 2021
Cents Cents Cents
Earnings per share
Basic earnings per share 12.3 11.5 8.4
Adjustment 1.4 10.5 17.6
---------------------------------------------------- ---------- ---------- -------
Basic adjusted earnings per share 13.7 22.0 26.0
---------------------------------------------------- ---------- ---------- -------
Diluted earnings per share 12.3 11.4 8.4
Diluted adjusted earnings per share 13.6 22.0 25.9
---------------------------------------------------- ---------- ---------- -------
Adjusted earnings per share is provided to reflect the
underlying earnings performance of the Group.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
In thousands of shares 2021 2020 2021
----------------------------------------- ---------- ---------- ------
Issued ordinary shares at 1 April 96,858 96,367 96,367
Shares relating to share options 1,260 1,333 1,333
Weighted average number of shares at the
end of the period 98,118 97,700 97,700
----------------------------------------- ---------- ---------- ------
Diluted earnings per share
The diluted earnings per share is calculated taking into account
LTIP awards whose specified conditions were satisfied at the end of
the reporting period of 79,000 (H1 2021: 327,000) share options. At
30 September 2021, the diluted number of shares was 98.2 million
(H1 2021: 98.0 million).
9 Financial instruments
Derivative financial instruments
The fair value of forward exchange contracts is assessed using
valuation models taking into account market inputs such as foreign
exchange spot and forward rates, yield curves and forward interest
rates.
Fair value hierarchy
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
All other financial assets and liabilities are measured at
amortised cost.
The Group held the following financial instruments at 30
September 2021, which were measured at level 2 fair value
subsequent to initial recognition:
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2021 2020 2021
Forward exchange contracts carrying amount $000 $000 $000
------------------------------------------- ---------- ---------- ------
Derivative financial assets 375 556 207
Derivative financial liabilities - (538) (293)
------------------------------------------- ---------- ---------- ------
10 Capital commitments
At 30 September 2021, the Group had outstanding authorised
capital commitments to purchase plant and equipment for $553,000
(H1 2021: $1.1 million).
11 Related parties
As at 30 September 2021, there are no changes to the related
parties or types of transactions as disclosed at 31 March 2021.
12 Non-adjusting post balance sheet events
After the end of the reporting period, and prior to the
authorisation of this interim report on 23 November 2021, the Group
has declared an interim dividend of 1.25 pence (1.68 cents) per
share (H1 2021: 3.0 pence (3.9 cents)).
REGISTERED OFFICE
Howard House
Howard Way
Interchange Park
Newport Pagnell MK16 9PX
IG Design Group plc
is registered in
England and Wales,
number 1401155
Visit us online at
thedesigngroup.com
ADVISERS
Financial and nominated adviser and broker
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
Independent Auditor
PricewaterhouseCoopers LLP
40 Clarendon Road
Watford
Hertfordshire WD17 1JJ
Public relations
Alma PR
71-73 Carter Lane
London EC4V 5EQ
Share registrar
Link Group
10(th) Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
By phone:
UK +44 (0)371 664 0300
Calls are charged at the standard geographic rate and will vary
by provider. Calls charged outside the United Kingdom will be
charged at the applicable international rate. Lines are open
between 09:00-17:30, Monday to Friday excluding public holidays in
England and Wales.
By email: enquiries@linkgroup.co.uk
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END
IR FLLLLFFLLFBF
(END) Dow Jones Newswires
November 23, 2021 02:00 ET (07:00 GMT)
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