REG - IG Design Group PLC - Post Close Trading Update

IG DesignAnnouncement

27/04/2022 07:16

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RNS Number : 4498J  IG Design Group PLC  27 April 2022

27 April 2022

 

IG Design Group plc

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

 

Post Close Trading Update

 

IG Design Group plc, one of the world's leading designers, innovators and
manufacturers of celebrations, craft, gifting, stationery and creative play
products, today issues a post close trading update for the year ended 31 March
2022.

 

The Group has delivered a strong revenue performance for the year at $963
million, up 10% like-for-like year on year and up 6% on proforma FY20 sales.
The International business grew 15% with increases across all regions and
particular strength in Europe and Australia. The Americas business was up 7%,
reflecting growth in Celebrations and Gifting offset by lower year on year
Craft sales. This performance reflects the Group's continued delivery of high
service levels to its customers despite the challenging macroeconomic supply
chain issues.

 

Group operating margin is expected to be 0.5% delivering Group operating
profit(1) marginally ahead of previously communicated expectations, reflecting
a stronger than anticipated performance in the USA. The Group expects to
report a small adjusted loss before tax(1) for the year.

 

As a result of the lower than previously expected future earnings in the USA,
the Group will book in FY22 a non-cash one-time reversal of deferred tax
assets, meaning that adjusted post-tax losses and adjusted loss per share are
expected to be significantly below market expectations.

 

Financial position

 

The Group closed the year with a net cash balance of $30 million, down year on
year reflecting inventory-related working capital absorption. This relates to
the Group's response to continuing supply chain challenges, which have
required raw material purchases to be brought forward to support the strong
seasonal orderbook and the inflationary impact on the cost of inventory.

 

The Group is in the process of finalising a facility waiver amendment in
anticipation of the 2022 seasonal working capital requirements and an
extension to March 2024 of the existing banking arrangements which run
currently to June 2023. It is expected that these will be completed in the
near term.

 

Board appointments

 

The Board was pleased to recently announce the appointment of Paul Bal as
Group CFO and looks forward to his arrival on 3 May 2022. He will join Lance
Burn, Interim Group COO, in leading the business on a day-to-day basis. We are
also pleased to announce the appointment of Claire Binyon to the Board as a
Non-Executive Director, effective from 1 June 2022 (please refer to the
separate announcement).

 

The search for the Group CEO is underway and in the interim period the Company
is pleased to announce that Stewart Gilliland has agreed to step into the role
of Interim Executive Chair from June 2022 to December 2022, further bolstering
the executive team capacity.

 

USA strategy

 

In the USA, the team are focused on delivering three key priorities to drive
an improvement in the financial performance of the business which is expected
to return the USA back to an operating margin of c.5-6% by FY25:

 

i) balancing customer pricing to supply chain cost inflation

ii) driving immediate and longer term cost savings

iii) addressing the commercial proposition to align the product offering to
the new price:cost environment by simplifying the commercial architecture,
driving margin and reducing inventories.

 

The business has had good success in mitigating a significant proportion of
the ongoing cost pressures through discussions with customers. Progress has
also been achieved including a restructuring of the US commercial,
manufacturing and supply chain operations, which while removing costs also
better aligns and accelerates decision making and improves accountability. In
addition, operational cost savings have been implemented reducing external
storage and freight handling expenditure while also ensuring in-house
manufacturing is well prepared for the forthcoming season.

 

Outlook

 

The Group expects to deliver a marginal operating profit improvement in FY23,
which reflects the progress being made in the USA, with the adjusted loss
before tax expected to be broadly flat on the Group's FY22 results, driven
primarily by increased finance charges in the year ahead. Average debt of the
Group is expected to increase to c.$75-$80 million across the 12 months to 31
March 2023, compared to c.$15m in FY22 reflecting the expected higher working
capital requirements of the Group throughout FY23.

 

The Board expects FY23 to continue to present external supply chain challenges
bringing uncertainty across the Group, however, customer demand remains
strong, particularly in relation to our important contracted seasonal
orderbook.

 

The Group expects to announce its full year results on 28 June 2022.

 

Stewart Gilliland, Chair, commented:

 

"It has been a challenging FY22 with the business weathering significant cost
headwinds but delivering good revenue growth and fantastic service to our
customers. There is no doubt that the ongoing external supply chain and
geo-political situation creates uncertainty in the retail consumer goods
sector, however the work that is being undertaken in the US, and across all
regions, positions the Group well to mitigate these challenges and provides
the foundations for a far more positive longer term outlook for the Group.

 

Notwithstanding the difficulties faced, the Group's leading position in the
market remains unchanged. We continue to work collaboratively with our
customers to efficiently advance our manufacturing and product sourcing,
ensuring we deliver exceptional product and service. I am confident the Group
will return to profitable growth, and I look forward to providing further
insight into the strategic plans in the USA and across the whole Group at the
full year results announcement in June."

 

 

(1 )Now includes the credit/(charge) relating to share based incentives.

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU No.
596/2014) which is part of UK law by virtue of the European Union (withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

For further information, please contact:

 

 IG Design Group plc                                       Tel: 0152 588 7310
 Stewart Gilliland, Chair

 Giles Willits, Chief Financial Officer

 Canaccord Genuity Limited (Nominated Adviser and Broker)  Tel: 0207 523 8000
 Bobbie Hilliam, NOMAD

 Alex Aylen, Sales

 Alma PR                                                   Tel: 0203 405 0205
 Susie Hudson

Sam Modlin

 Rebecca Sanders-Hewett

 

 

About IG Design Group plc

 

IG Design Group plc, the largest consumer gift packaging business in the
world, is a designer, innovator and manufacturer of products that help people
celebrate life's special occasions. Design Group works with more than 11,000
customers in over 80 countries throughout the UK, Europe, Australia and the
USA.

 

Its products are found in over 210,000 retail outlets, including several of
the world's biggest retailers, for example Walmart, Target, Amazon, Costco,
Lidl and Aldi. Its brand, Tom Smith, also holds the Royal Warrant for the
supply of Christmas crackers and Christmas wrapping paper to the Royal family.
Design Group is a diverse business operating across multiple regions,
categories, seasons and brands.

 

Its five major product categories are: Celebrations, Gifting, Craft &
creative play, Stationery and 'Not-for-resale' consumables. It offers
customers a full end-to-end service from design through to distribution,
offering both branded and bespoke products from the value-focused through to
the higher-margin ends of the market.

 

The Company was admitted to the Alternative Investment Market of the London
Stock Exchange in 1995 under the name 'International Greetings plc' and
rebranded to IG Design Group plc in 2016. For further information please
visit www.thedesigngroup.com.

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