TIDMIGR
RNS Number : 8900Q
International Greetings PLC
23 June 2015
23 June 2015
International Greetings PLC
Preliminary Results for the year ended 31 March 2015
International Greetings PLC ("International Greetings" or the
"Group"), one of the world's leading designers, innovators and
manufacturers of gift packaging and greetings, social expression
giftware, stationery and creative play products, announces its
audited Preliminary Results for the year ended 31 March 2015.
Financial Highlights:
-- Revenue at GBP229.0 million up by GBP4.6 million (2%) or
GBP9.9 million (4.5%) at like for like exchange rates.
-- Profit before tax, exceptional items and LTIP charges up 21%
to GBP9.2 million (2014: GBP7.6 million).
-- Fully diluted earnings per share before exceptional items
increased 29% to 10.7 pence (2014: 8.3 pence).
-- Cash generated from operations before exceptional items up
18% to GBP17.9 million (2014: GBP15.2 million).
-- Net debt down 20% to GBP29.4 million (2014: GBP36.9 million)
and leverage down 0.6 times to 1.8 times, comfortably below our key
target of 2 times and a year ahead of schedule.
-- Return to the dividend list with proposed full year dividend of 1 pence.
Operational Highlights:
-- Completion of major capital investment in production
facilities in Wales on time and on budget.
-- Record volumes of gift packaging and greetings related products sold worldwide.
-- Installation of new gift bag manufacturing facilities in
China to be fully deployed throughout 2015/16.
-- Underlying operating profits in Europe up by 32% following
the successful acquisition and integration of Enper BV Giftwrap in
Holland, announced on 5 June, building upon our capital investment
there in 2012.
-- Major licensing wins throughout the Group including new
franchises with Disney and Universal Studios.
-- A full strength Management Team, together with a considerably
strengthened balance sheet underpins opportunities for on-going
growth both organically and through well considered
acquisitions.
Paul Fineman, CEO commented:
"I am very pleased to report an excellent set of results during
a year in which we have exceeded our goals in profit generation,
debt reduction and earnings per share growth. We have continued to
strengthen the balance sheet and simultaneously identified and
invested in fast payback opportunities within our business. We are
delighted that we can therefore confidently return to the dividend
list a year ahead of schedule.
"The investments we have made during the period mean we are very
much on plan to deliver double digit cumulative average growth in
earnings per share and we remain determined to continue to drive
performance and reduce leverage. We believe we can achieve these
objectives while simultaneously providing a dividend return for
shareholders and investing carefully for further future
growth."
For further information,
please contact:
International Greetings Tel: 01525 887310
PLC
Paul Fineman, Chief
Executive
Anthony Lawrinson,
Chief Financial Officer
Cenkos Securities plc Tel: 0207 397 8900
Bobbie Hilliam
Harry Pardoe
FTI Consulting Tel: 020 3727 1000
Jonathon Brill
Tom Hufton
A full version of the financial statements are available on the
investors section on our website and can be accessed from:
www.internationalgreetings.co.uk.
International Greetings PLC
Results for the year ended 31 March 2015
Our mission
To succeed by design in all that we do. To drive profitable
growth through exceptional customer service, industry leading
innovation and great value.
Financial highlights
Profit before tax, exceptional +21% on 2014
items and LTIP (GBPmillion)
2015 9.2
2014 7.6
2013 7.3
2012 7.1
Underlying diluted earnings +29% on 2014
per share* (pence)
2015 10.7
2014 8.3
2013 7.8
2012 6.7
*Underlying diluted earnings per share is
stated before exceptional items
Cash generated from +18% on 2014
operations (GBPmillion)
2015 17.9
2014 15.2
2013 7.5
2012 11.5
Net debt improvement +20% on 2014
(GBPmillion)
2015 29.4
2014 36.9
2013 42.1
2012 41.9
Operational highlights
-- Completion on time and on budget of major capital investment
in production facilities in Wales
-- Underlying operating profits in Europe up by 32% following
the successful acquisition and integration of Enper Giftwrap
Business in Holland, Summer 2014
-- A full strength management team, together with a considerably
strengthened balance sheet underpins opportunities for ongoing
growth both organically and through further well-considered
acquisitions
-- Installation of new gift bag manufacturing facilities within
our plant in China to be fully deployed in 2015/16
-- Major licensing wins throughout the Group include new
franchises with Disney and Universal Studios
Chief Executive Officer's Review
Delivering strong results today and set for continued future
improvement
Paul Fineman
CEO
Substantial cash generation and debt reduction has triggered the
payment of a dividend.
Key achievements
-- Profit before tax, exceptional items and LTIP increased by 21% to GBP9.2 million
-- Focus on cash generation improved leverage by 25% from 2.4 to 1.8 times
-- On track to meet our three-year plan of overall double digit earnings per share growth
-- Non-UK revenues by customer destination now 67% of total Group revenues
-- Major capital expenditure project in UK completed on time and on budget
-- Excellent year of production and service levels from our recently relocated China factory
-- Acquisition of trade and certain assets of Enper Giftwrap BV
now fully integrated, building upon our capital investment there in
2012
I am very pleased to report an excellent set of results for the
year in which we have exceeded our goals in profit generation, debt
reduction and earnings per share.
This strong performance has been achieved whilst simultaneously
meeting key operational goals that, together with other
initiatives, provide us with further opportunities for future
growth in all areas of Group activity.
We are therefore delighted that during a year in which sales
were up 2% to GBP229.0 million, profit before tax, exceptional
items and LTIP charges increased by 21% to GBP9.2 million, whilst
net debt reduced by 20% from GBP36.9 million in 2014 to GBP29.4
million in 2015, a year ahead of schedule.
Of particular note, is the substantial reduction of leverage
from 2.4 times in 2014 to 1.8 times in 2015, triggering the
re-commencement of dividend payments. This has been achieved
through our continued focus on balancing the delivery of cash
generative sales and profits, reducing leverage and doing so whilst
investing in fast payback opportunities across our business and our
global manufacturing activities in particular.
With fully diluted earnings per share (before exceptional items)
up 29% on the prior year at 10.7p (2014: 8.3p) we are certainly on
track with our three-year plan to deliver overall double digit
earnings per share growth.
Following the completion of the first phase of an upgrade to our
global manufacturing facilities in 2012, with an
environmentally-friendly, high-speed, high-definition gift wrap
printing capability at our operation in Holland, 2014 has seen the
installation of a similar capability within our facility in Wales,
officially opened on 30 April 2014 by Her Majesty the Queen
together with His Royal Highness Prince Phillip. Our management
teams at both facilities have driven efficiencies beyond
expectations and enhanced our competitive position whilst
continuing to deliver excellent quality and service.
We are now carefully evaluating the prospects for the next phase
of similar fast payback investment in the USA, having successfully
executed these comparable projects in Europe.
Geographical highlights
UK and Asia
Our UK and Asia business accounted for 47% (2014: 49%) of the
Group's revenue for the year, and continues to deliver a portfolio
of innovative and highly-competitive products with great efficiency
and industry--leading customer service. This, together with a
compelling offering of our generic, licensed and bespoke customer
brands, has driven margins higher in this region.
Our UK and Far East operations continue to work collaboratively
ensuring we leverage a joined--up commercial and strategic approach
to the market. We continued to strengthen an important competitive
advantage by broadening and upgrading compliance standards within
our existing facilities in China, which led to the record sales of
74 million Christmas crackers produced during the year. We are now
geared for even greater performance levels having invested in
semi--automated processes for cracker manufacturing, which,
together with enhanced production capability in gift bags and
greetings cards, became operational in Spring 2014.
These facilities have enabled us to secure a three-year trading
contract for sole supply of single greeting cards to the UK's
largest GBP1 retail chain, whilst record levels of gift bag orders
have been achieved for shipment during 2015.
We have achieved our objective to provide our customers with the
ability to source a broad portfolio of complementary product
categories from one fully compliant and competitive source.
We will continue to grow sales of licensed products with
stationery and creative play categories being consolidated under
our Copywrite brand in the UK. Sales of the highly popular Frozen
and Despicable Me ranges were noteworthy and continue to thrive
into the new year, alongside a continually refreshed and updated
selection of licensed product ranges.
Mainland Europe
Our businesses in mainland Europe accounted for 16% (2014: 15%)
of the Group's sales.
Although overall market conditions remain challenging, we are
extremely pleased to report a strong performance with excellent
levels of manufacturing efficiency and record sales volumes.
Our second full year of utilising our state--of--the--art
printing facilities based in Holland, together with the delivery
across all categories of innovative highly competitive product
offerings, resulted in a continued growth of market share and the
creation of even greater future opportunities.
The acquisition of the trade and certain assets of Enper
Giftwrap BV, in June 2014, has been fully integrated and has
strengthened our market share in the Benelux. This demonstrates our
commitment to our key strategic objective to be the best and most
successful supplier of gift packaging products in the European
Union and we shall continue to seek similar fast payback investment
opportunities.
We are now actively trading with mainland Europe's ten largest
retail groups and scope exists for our future expansion in existing
and new markets, both with core and developing product
categories.
USA
The USA business accounted for 25% (2014: 24%) of Group's
revenue.
Having achieved double digit sales growth in the recent years,
the strong sales growth continued with USA representing 32% of
Group revenues by destination in 2015 (2014: 31%).
In early June 2014, I announced that Rich Eckman, CEO of
International Greetings, USA had tragically passed away. Rich had
tirelessly lead our USA business during a period of significant
transformation and created a strong platform for future growth.
Considerable scope now exists for enhanced levels of profitability
as well as continued growth in sales revenue under the leadership
of Gideon Schlessinger, who joined us as CEO in April 2015.
Our USA-based gift wrap manufacturing facilities near Savannah
were enhanced by the installation of new automated case packing
equipment, which was fully operational from Spring 2014. We shall
now progress to a further phase of fast payback investment during
the current financial year through the installation of new high
speed, state of the art paper conversion facilities.
The sales growth during the year included expansion within
neighbouring markets in Canada, Mexico and to other South American
regions. In the USA itself, notable growth was achieved within the
major supermarket and discount channels.
We were especially successful in managing working capital, and,
in particular, a 36% reduction in inventory levels was achieved
without any detrimental impact to service levels.
Australia
Whilst the Australian economy experienced an overall slowdown
during the year, our Australian revenues represented 12% of overall
Group sales (2014: 12%).
Our ability to provide our customers with fast turnaround
service levels was underpinned by our relatively recent investment
in our logistics facilities, enabling us to provide unprecedented
levels of order fulfilment to an ever increasing base of retail
customers across the nation.
Having successfully achieved sales growth, our focus is on
executing plans to improve profitability and we are pleased to now
have in place the skillsets and experience required to optimise
future returns.
Revenue by product category, brand and season
We continued to focus on our two core product categories, with
sales of gift packaging and greetings related products accounting
for 73% of Group revenues, whilst stationery and creative play
products delivered 27% of revenues.
Sales of IG's generic brands achieved 39% of overall revenues,
underpinned by the continued success of our Tom Smith brand, which
holds the Royal Warrant for the supply of Christmas crackers and
gift wrapping products to Her Majesty the Queen.
With sales of Everyday products at 44% and Christmas products at
56% of Group revenues, the Group's products are sold to over 5,000
customers in over 100,000 retail stores across more than 80
countries.
Our team
The dedication, enthusiasm and appetite of our team throughout
the Group for ongoing improvement continues to be inspirational and
provides the momentum for future growth across all regions. I am
pleased to have the opportunity to thank all of my colleagues for
another year of excellent progress and all other stakeholders,
including our customers, shareholders, suppliers, advisers and
bankers for their continued and much appreciated support.
Our strategy
Our strategic objectives are well documented and detailed in the
of the financial statements. They have been consistently applied
and provide the foundation for the Group's recent years of ongoing
improved performance.
The future
We are very pleased to have successfully completed the second
year of a three--year plan, with outcomes effectively a year ahead
of schedule. We are in good shape to deliver against our target of
overall double digit cumulative average growth in earnings per
share and have significantly reduced debt well beyond original plan
levels with leverage now below two times debt/EBITDA. We are
delighted to be able to resume dividend payments with a final
dividend of 1p per share recommended for the year ended 31 March
2015.
Having considerably strengthened our financial position and
management team, opportunities exist to grow in all regions, both
organically and through well considered acquisitions.
We are determined to continue to drive performance and our Group
is now positioned to deliver ongoing improvements, leveraging our
achievement and investments made in recent years.
Paul Fineman
Chief Executive Officer
22 June 2015
Financial Review
Delivering our financial promises - ahead of schedule
Anthony Lawrinson
Chief Financial Officer
This year, we have achieved our goal to reduce year-end leverage
below two times, grown underlying earnings per share by 29% and
reintroduced a dividend - all ahead of schedule.
Key achievements
-- Sales up 2% on prior year (4.5% at constant exchange rates)
-- Profit before tax, exceptional items and LTIP charges up 21%
at GBP9.2 million (2014: GBP7.6 million)
-- Fully diluted earnings per share before exceptional items
increased 29% to 10.7p (2014: 8.3p)
-- Cash generated from operations up over 18% at GBP17.9 million (2014: GBP15.2 million)
-- Net debt down 20% to GBP29.4 million (2014: GBP36.9 million)
with leverage at 1.8 times (2014: 2.4 times) comfortably below our
key target of two times
-- Return to the dividend list with proposed full year dividend of 1 pence
Group performance
Building on a sound performance and an important investment in
Wales last year, the Group has again delivered strong results, not
only in terms of profit and our key earnings per share growth
target, but pivotally reducing leverage below our key target of two
times.
Our businesses in the UK (including Asia) and Europe have
delivered excellent performances, built on foundations of
well-considered investment and faultless execution of both organic
investment and the integration of our acquisition made early in the
financial year. Our businesses in the USA and Australia are still
not achieving their full potential, providing further opportunity
to improve. We have already begun the initial process of further
investment in the USA to support that improvement now that the
leadership there has been bolstered with a new CEO. We now have
sufficient confidence in the financial strength of the business to
return to the dividend list - a year ahead of schedule. The Group's
ability to generate cash should now be strong enough to support
continued deleveraging, ongoing investment in growth and a
sustainable dividend.
Continuing operations
Revenues for the year to 31 March 2015 were slightly up from
GBP224 million in 2014 to GBP229 million. At constant exchange
rates on overseas earnings this increase was greater at GBP10
million or 4.5%. Revenue in the UK segment again fell as we seek to
focus on the preferred mix of sales and optimise profitability in
our most mature markets. In underlying currencies sales in every
other segment again grew well between 10% and 12% though with
differing impacts to profitability. In Europe, our market leading
printing platform continues to provide competitive advantage
enhanced further by the integration of the trade and certain assets
of Enper Giftwrap BV (a small local competitor that was acquired
during the year) and good growth in other non-manufactured
categories through deep customer relationships. Our Australian JV
and USA business both grew revenue well, but both can do more to
achieve our expected level of net margin on this additional
business.
Gross profit margin before exceptional items at 17.5% is down on
the prior year (2014: 18.4%) much as we saw at the half-year point.
Although net pre--tax profit margins have improved to 3.7% (2014:
3.3%) the Group margin effect reflects the mix of lower margin
sales growth in Australia and USA and in both geographies we
believe there is opportunity to do more to improve this,
particularly in the USA now that we have a new CEO in place.
Meanwhile margins in the UK and European segments developed well
reflecting mainly efficiencies, economies of scale and careful mix
management. The Group aims to improve margins commercially by
increasing the balance of own brand products and non--Christmas
business but efficiencies in sourcing and manufacturing will
continue to contribute, especially following the investment in
Wales where we will see the full effect of the investment in
2015/16.
An important dynamic to margin also continues to be the level of
FOB business delivered directly to major customers at ports in
China. This type of business continues to grow in all territories
especially in the USA with the major value chains.
This typically attracts lower gross margins but it is a means of
retaining or winning large volumes of business, in a manner that
avoids other costs and risks associated with domestic delivery;
winning this business can therefore enhance net margins and return
on capital even as gross margins are diluted.
Overheads (before exceptional items and LTIP charges) have
decreased year--on--year by a pleasing 7.6% or GBP2.4 million
reflecting in particular continuing initiatives in the mature UK
market. Tight cost control is a feature of our business and
opportunities to remove or reduce costs are constantly sought out,
with new costs only incurred where actual or prospective value can
be demonstrated.
As a result of the above, underlying operating profit before
exceptional items and LTIP charges increased by nearly 11% to
GBP11.9 million. Operating profit after exceptional items and LTIP
charges increased even more markedly by 14% to GBP10.0 million
(2014: GBP8.8 million).
Exceptional items during the year amounted to GBP1.2 million
before tax (2014: GBP2.3 million) and this charge was lower than
planned as a result of our strong execution. The majority of the
charge related to the investment programme in high-definition
printing in Wales and the associated restructuring, with smaller
amounts relating to the restructuring of the leadership team in the
USA following the death of the previous CEO, and the acquisition of
the Enper Giftwrap business in the Netherlands. Of this charge, a
significant element represents accelerated depreciation and thus
the actual cash element was lower at GBP1.1 million even after
including outflows deferred from last year.
Finance expenses (before exceptional charges) in the year were
14% lower at GBP2.7 million (2014: GBP3.2 million) reflecting the
full year effect of improved margins negotiated with banks last
year but importantly also lower average indebtedness and more
effective use of lower cost facilities. Notes 8 and 17 to the
financial statements provide further information.
Underlying profit before tax, exceptional items and LTIP charges
was up 21% to GBP9.2 million (2014: GBP7.6 million) while profit
before tax was up 41% to GBP7.3 million (2014: GBP5.2 million)
after charging exceptional items of GBP1.2 million (2014: GBP2.3
million) and LTIP charges of GBP0.6 million (2014: GBP0.1
million).
Taxation
The headline taxation charge is slightly down at GBP1.3 million
(2014: GBP1.5 million) though of course on a higher profit base so
the overall tax charge has dropped significantly to 18.4%
reflecting the ability to access tax losses through improved
profitability and also fuller tax relief on exceptional items. The
effective underlying tax charge on profits before exceptional items
is also lower than the prior year at 20.0% (2014: 24.6%), again
because greater profitability means more tax losses are now
accessible.
The current geographical profile of Group profits before
exceptional items at current local rates of tax would result in an
underlying blended tax rate of just under 25.9%. However, there are
still tax losses in the USA with a current tax value of GBP1.7
million and in the UK and Asian segment with a current tax value of
GBP0.3 million, not yet recognised in the balance sheet. The
opportunity to recognise and utilise these as profitability is
sustained and improves, will continue to suppress the actual tax
rate for some time to come.
Actual taxation paid in cash during the year was greater than
the prior year at GBP1.3 million (2014: GBP0.1 million) as our
businesses in Australia, the Netherlands and China do not have
sufficient losses to shield all of their profits - plus our
Australian business took tax relief against the write off of a
material bad debt in the prior year, reducing cash tax payable in
that year only. With improving and sustained profitability, all of
our businesses are likely to pay some cash tax in future periods,
though this will continue to be mitigated in the UK and Asia and
especially the USA by losses brought forward.
Profit for the year
Net profit for the year increased by a very material 60% to
GBP6.0 million (2014: GBP3.7 million), even after removing the
effect of exceptional items and LTIP charges the underlying
profitability still improved by 30% to GBP7.5 million (2014: GBP5.7
million).
Earnings per share and dividends
Basic earnings per share were 9.7p (2014: 5.2p). After removing
the effect of exceptional items, the adjusted earnings per share
were 11.2p (2014: 8.5p) representing an increase of 32%.
Employee share options from the 2008 incentive scheme of
1,589,285 have vested but not yet been exercised as at 31 March
2015. Additionally 1,107,652 shares now vest in respect of the
2012--15 long term incentive plan and more shares may vest in
future periods in respect of the 2014--17 and any subsequent
schemes. As these are exercised, earnings per share will trend
towards the fully diluted level and the Company targets growth in
this fully diluted metric (before exceptional items) as a primary
goal which ensures that incentive plan outcomes and shareholder
interests remain aligned. Details of share plans can be found in
note 25 to the financial statements.
Fully diluted earnings per share (stated before exceptional
items) were 10.7p, up 29% on the prior year (2014: 8.3p), and well
ahead of schedule.
The ratio of year end net debt to EBITDA (leverage) was 1.8
times, below our key target of two times, a year ahead of schedule.
Accordingly the Board is pleased to propose a final dividend of 1p
per share for the year (2014: nil) which will be paid during
September, subject to shareholder approval. Clearly this dividend
is comfortably covered by underlying earnings and there should be
scope to increase this in future periods while still investing in
growth and managing average leverage still lower. The Board has
determined that any dividend will always be covered not less than
three times by underlying earnings per share and the Company
currently intends to trend towards this level of pay--out over
time. However, dividend policy will be balanced against the
attractive opportunities to invest in efficiency and growth that
continue to present themselves and the desire to further reduce
average net leverage, which is still regarded as higher than is
optimal.
Balance sheet and cash flow
Net debt at 31 March 2015 was again much improved at GBP29.4
million (2014: GBP36.9 million) and this improvement would have
been even stronger at like--for--like exchange rates. As referenced
above leverage fell accordingly to 1.8 times from 2.4 times in the
prior year. This is a very strong performance and well ahead of our
plan despite investment in a small acquisition during the year.
US dollar exchange rate movement in the year effectively
increased US dollar debt reported in sterling, partly offset by
movement in euro exchange rates on euro denominated debt. Notes 17
and 26 to the financial statements provide further information.
Year--end net debt included amounts denominated in US dollar of
$7.9 million (2014: $25.5 million) and in euros of EUR7.2 million
(2014: EUR5.8 million). The year--end exchange rates were $1.48
(2014: $1.67) and EUR1.38 (2014: EUR1.21). Therefore at
like-for-like exchange rates debt would have improved by a further
GBP1.5 million.
Working capital management continues to be a priority.
Outstanding debtors are monitored closely, both to maximise cash
but also to reduce our credit risk. Trade debtors increased to
GBP18.3 million (2014: GBP16.1 million) at the year end. Sales
towards the end of the year were stronger in the USA in contrast to
the prior year when we experienced extraordinarily adverse weather
conditions.
The charge for bad and doubtful debts in the year was GBP0.1
million or less than 0.1% of turnover.
Net stock levels after provisioning for older stock reduced
significantly by 4.7% from GBP48.5 million to GBP46.2 million.
Stock levels fell particularly in the USA, more than reversing an
increase we experienced in the prior year related to lower sales as
a result of the poor weather conditions in Q4.
Older stock (measured as over 15 months since last purchase)
fell slightly to GBP5.6 million (2014: GBP5.8 million).
Provisioning remains adequate and similar to prior periods. Our
businesses consistently achieve 100% recovery against written down
values of old stock.
Group cash generated from operations was again very strong at
GBP17.9 million (2014: GBP15.2 million), reflecting the strength of
operating profitability and assisted by a net reduction in working
capital of GBP2.1 million (2014: reduction of GBP0.7 million).
Investment in capital expenditure was lower than depreciation
during the year at GBP2.3 million and much lower than the prior
year (2014: GBP8.3 million), in which year we incurred the bulk of
the investment in two new state--of--the--art printing presses and
associated facilities at our gift wrap manufacturing operation in
Wales. The Group continues to invest wherever we see strong returns
and improved efficiencies. The manufacturing platforms across all
our sites in China, UK and Europe are up to date underpinning our
competitive position and yet we still see further opportunities for
bolt on capital investment in these locations to add further
capability. However, the greatest opportunity remains the USA where
we have recently approved the next phase of an investment programme
and are currently considering plans to do more.
With the investment in Wales complete, our site at Aberbargoed
may shortly become available for sale, offering the opportunity to
release cash in the near future. In addition the Group is in the
third year of a five--year period by which a company has the option
to purchase part of another under utilised site (net book value
GBP0.8 million) for a price of GBP2.4 million. This is also
generating premium income of GBP0.1 million p.a. over the option
period, recognised within other operating income.
Equity attributable to shareholders has increased to GBP59.7
million from GBP53.5 million predominantly reflecting profits
generated in the year.
Leverage* (pre improved 25% on 2014
exceptional items
and LTIP)
2015 1.8
2014 2.4
2013 2.8
2012 2.8
2011 3.6
*Leverage is calculated before exceptional
items and LTIP charge
Risks and key performance indicators
Our areas of primary focus are:
-- improved earnings attributable to shareholders, which we aim
to achieve through top-line growth and mix management in selected
markets and channels together with strong cost and gross margin
management; and
-- lower average leverage measured as the ratio of average net
debt to pre--exceptional EBITDA, which we aim to achieve through
improved profitability together with close management of our
working capital and focussed investment.
Operationally this means a focus on:
-- nurturing valuable relationships: monitoring the
profitability, product mix and service delivered in respect of our
customer base; growing those relationships in existing and new
territories and product categories;
-- creating a toolbox of expertise: ensuring that we have market
leading design and product capability in our categories, sharing
knowledge through common platforms;
-- providing best quality, value and service: monitoring and
benchmarking the key elements of our cost bases, buying or
manufacturing as efficiently and effectively as possible from a
total cost perspective across the whole season so that we can
deliver great value to customers and strong returns to
shareholders;
-- balancing our business: we monitor the mix and profitability
in each of our businesses across season, brand and product
categories, seeking out those opportunities that yield the best
returns on our scarce capital while rooting out those activities
that consume resources for little or no gain; and
-- providing differentiated product offerings: across the value, mass and upscale markets.
Foreign exchange impact to profit and earnings
Our diverse geographical revenue and profit streams continue to
provide us with market resilience but naturally this carries with
it the volatility of currency.
As noted above in the context of net debt, foreign exchange
rates can impact significantly in the year on the translation of
our overseas figures relative to prior years with the US dollar
rate moving from 1.67 to 1.48 during the year, the euro from 1.21
to 1.38 and the Australian dollar rate moving from 1.80 to 1.95. As
noted above this change in rates had a material impact on the
sterling value of sales although the impact to net profit during
the year was modest at only GBP0.2 million because the Group
matches the currency of costs and funding where possible. However,
the significantly weaker euro rates at the end of the year are
likely to impact more materially in next year's results through the
translation of overseas earnings.
Additionally, the relative strength of the US dollar against
other currencies can materially impact purchase prices out of
China. This is most noticeable in the weakness of the euro and
Australian dollar and our European and Australian businesses are
finding their margins are squeezed through substantial FX headwinds
on bought in product from the Far East. It is a feature of our
business that we innovate, invest and commercially redesign product
to combat this effect but this can take more than one season.
Treasury operations
The Group operates with four supportive bankers, each addressing
one of our geographic segments. Current global facilities
comprise:
-- term facilities at Group level in sterling and US dollar,
repayable in tranches with bullets in May 2018;
-- leasing facilities for seven and five years respectively in
the UK and Netherlands for key plant and machinery;
-- asset-backed facilities secured on the stock and debtors of
the relevant operating businesses in each segment, all of which
have at least one more year to run and are usually renewed for two
to three years at a time; and
-- a revolving multi--currency credit facility and overdraft to
manage peak working capital requirements; these are renewed in May
annually.
These facilities provide the Group with the operational
flexibility it requires in a highly-seasonal business on a
cost-effective basis. As noted above, interest margins have been
falling as leverage has improved and the Group works with its
lenders to find the most cost-effective solutions to its working
capital needs. Accessing the lowest cost facilities more
effectively had a material benefit in the current year.
There are financial covenants attached to our facilities and the
Group comfortably complied with these throughout the year. These
covenants include:
-- debt service, being the ratio of cash flow available to
finance costs on a rolling twelve-month basis;
-- interest cover, being the ratio of earnings before interest,
depreciation and amortisation to interest on a rolling twelve-month
basis;
-- leverage, being the ratio of debt to pre--exceptional EBITDA
on a rolling twelve-month basis; and
-- appropriate local covenants in the individual businesses,
which have asset-backed facilities.
The Group has various interest rate swaps denominated in US
dollar, sterling and euros to improve certainty over interest
charges. The Group adopts hedge accounting for some of these
instruments. No new interest rate contracts were entered into
during the year. The Group also actively manages FX transaction
exposure in each of its businesses, with advice and support from
the central treasury team.
Note 26 to the financial statements provides further information
in respect of treasury matters.
Conclusion
The Group delivered another very strong year, building on past
achievements, placing us a full year ahead of schedule and thus
able to declare a dividend for the first time in many years. Net
debt and earnings per share performance were especially pleasing
and continued outperformance in the arena of cash management is
providing the Group with additional flexibility and options to
create value for shareholders in the future.
Anthony Lawrinson
Chief Financial Officer
22 June 2015
Chairman's Corporate Governance Review
Continuing to promote a culture of respect, integrity, openness
and honesty
John Charlton
Chairman
Dear shareholder,
As already stated, we are very pleased with the performance of
our Group during the year ended 31 March 2015. It was particularly
pleasing that we achieved our profit and earnings per share goals
and at the same time reduced our debt and improved our leverage
ratio. Our capital expenditure projects within our manufacturing
facilities in Holland and the UK have been well implemented,
thereby improving our operating efficiencies and we believe that we
have strengthened our position as being one of the world's leading
designers, manufacturers, importers and distributors of each of the
core product categories on which we focus.
As Chairman, one of my important roles is to lead the Board and
help promote a culture within each of the businesses in our Group
of respect, integrity, openness, honesty and enjoyment, in the way
that we communicate with our customers, suppliers, shareholders,
advisers and of course all our associates. The Board continues to
operate under a governance structure, which is designed to be
flexible and efficient in creating sustainable long-term growth in
shareholder value.
Corporate governance
The UK Corporate Governance Code (formerly the Combined Code)
sets out standards of good practice in relation to board leadership
and effectiveness, remuneration, accountability and relations with
shareholders.
Whilst there is no obligation for AIM--listed companies to
comply with this Code, your Board endorses the principles of
effective corporate governance and is committed to maintaining the
highest standards of ethics, and professional competence. That
said, your Directors do not consider that full compliance with all
aspects of the Code is appropriate for our Group at this stage of
its development, but we shall keep the matter under review and
continue to develop procedures and policies as the Group grows.
Board of Directors
The principal duty of the Board is to represent and protect the
interests of the Company's shareholders. The Board plays an
important role in working with management to ensure that our
businesses are well governed, financially strong, that we mitigate
any risks that our managers identify and that we strike a balance
between achieving our short-term objectives and longer-term growth
and development. As a consequence, the Board works closely with
management in developing proposals on strategy for each of our
businesses and for our Group, as a whole.
Division of responsibilities
There is a distinct and defined division of responsibilities
between the Chairman and the Chief Executive Officer ("CEO"). The
Chairman is primarily responsible for the effective working of the
Board and the CEO for the operational management of the business
and for the implementation of the agreed strategy.
Composition of the Board
As advised within last year's annual report, it was with immense
sadness that I had to report that our Board colleague Rich Eckman
passed away on 1 June 2014. There were no other changes to the
composition of our Board. We operate with three Executive Directors
balanced by three Non--Executive Directors, with myself then as
Chairman. Our Non--Executive Directors have an important role in
constructively challenging and helping to develop proposals on
strategy; on scrutinising management's performance in meeting
agreed goals and objectives and the monitoring of performance
reports.
I also need to advise that Phil Dutton, one of our
Non--Executive Directors will not be seeking re-election at our
forthcoming Annual General Meeting. Phil is currently residing in
the USA and has now informed us that he will continue to live in
the USA, thus making attendance at Board Meetings and involvement
in International Greetings PLC matters impractical. Phil was
appointed to our Board in May 2012.
Phil currently chairs our Audit Committee and is also a member
of our Remuneration Committee. Whilst Phil will not be stepping
down from our Board until 16 September, I should like to place on
record the valuable contribution he has made to our Board and
committees these past three years and the support that he has given
to our Group. We wish Phil and his family every success.
The Board has two committees - Remuneration and Audit. Our
Remuneration and Compensation Committee is now chaired by Elaine
Bond, one of our Non--Executive Directors and the Committee
comprises Phil Dutton, another of our Non--Executive Directors and
myself. Our Audit Committee comprises Elaine Bond and myself and is
chaired by Phil Dutton.
The Audit Committee satisfies itself on the integrity of
financial information and that controls and risk management systems
are robust and defensible. The Committee meets as required during
the year and at least twice with the Group's external auditor. Its
role is to review the interim and final financial statements for
approval by the Board, to ensure that operational and financial
controls are functioning properly, and to provide the forum through
which the Group's external auditor reports to the Board.
The Remuneration Committee ("RemCom") determines appropriate
levels of remuneration and compensation for Executive Directors.
The Committee meets as required during the year and this year was
heavily involved in agreeing the positions within our senior
management team that should participate in our Long Term Incentive
Plan ("LTIP"), together with the level of awards. RemCom is also
responsible for agreeing the performance criteria for the annual
bonuses and LTIP for Executive Directors and senior management.
Anders Hedlund also holds the position of Non--Executive
Director on the Board. Anders Hedlund is presumed not independent
because, as founder, he has served on the Board since the Company's
inception, he holds significant interests in the shareholding of
the Company and he also fulfils a consultancy role within one of
the Group's businesses.
As at the date of this report, all of the other Non--Executive
Directors are considered independent under the UK Corporate
Governance Code.
Board process and information
The Board met six times during the year, including an in depth
review of FY16 budgets with senior management over three days. The
Board aims to meet at least six times a year for formal Board
meetings and up to five further times in between for informal
business reviews, to review budgets and to focus on strategy. Where
possible and cost effective, the Board tries to meet on the
premises of various of its subsidiaries during the year, which
provides an opportunity for the Directors to visit our businesses
and meet with the senior management.
Dialogue occurs regularly between Directors outside of scheduled
meetings. Meeting agendae include review and approval of minutes
recorded, matters arising, a review of material operational matters
relating to our businesses and other special items for discussion
or consideration. Board papers are usually circulated at least
three business days in advance to allow Directors adequate time to
prepare.
The Board receives operational and financial information and
reports from the CEO/Chief Financial Officer to assist in
monitoring and assessing the ongoing performance of the business on
a monthly basis.
Accountability and audit
All Directors have accepted a duty of care and accountability to
act in the interests of the Company. As stated, the Audit Committee
oversees how the Board monitors risk and reviews the adequacy of
the risk management framework.
Risk management
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Group's risk management systems, policies and
procedures are established to identify and analyse the risks faced
by the Group, to set appropriate risk limits and controls, and to
monitor the risks and adherence to limits. Such a system is
designed to manage, rather than eliminate the risk of failure to
achieve business objectives and, can only provide a reasonable and
not absolute assurance against material misstatement or loss.
Risk management processes are reviewed regularly by the Audit
Committee to reflect changes in market conditions and the Group's
activities. The Board's oversight covers all controls, including
financial, operational and compliance controls and general risk
management. It is based principally on reviewing reports from
management to consider whether significant risks are identified,
evaluated, managed and controlled and whether any significant
weaknesses are promptly remedied and indicate the need for more
extensive monitoring.
Finally, whilst providing an overview of the policies and
procedures that we adopt in following good corporate governance, I
wish to thank my fellow Directors for their hard work, commitment,
loyalty and support that they give to our Group. I also wish to
place on record once again our thanks and appreciation to all our
employees throughout the Group. It is through their efforts and
support that we continue to make the progress that we have. We
value greatly their commitment and loyalty. I should also take this
opportunity to thank our shareholders, bankers, customers,
suppliers and advisers for their input and contributions to all our
businesses throughout the world. We never take their support for
granted and we are grateful for the excellent working relationship
and partnership that we enjoy with them.
John Charlton
Chairman
22 June 2015
Director's report
The Directors present their annual report and the audited
financial statements for the year ended 31 March 2015.
Likely future developments
See strategic report in the financial statements.
Financial risk
See strategic report in the financial statements.
Dividends
No interim dividend was paid (2014: nil). The Directors are
recommending a final dividend of 1p per share (2014: nil). If
approved it will be paid in September 2015 to shareholders on the
register at the close of business on 10 July 2015.
Capital structure
Details of the issued share capital, together with details of
movements in the Company's issued share capital during the year are
shown in note 22. The Company has one class of ordinary shares
which carry no right to fixed income. Each share carries the right
to one vote at general meetings of the Company.
There are no specific restrictions on the size of a holding nor
on the transfer of shares, which are both governed by the general
provisions of the Articles of Association and prevailing
legislation.
Details on share--based payments are set out in note 25 to the
financial statements and the Directors' remuneration report. No
person has any special rights or control over the Company's share
capital and all issued shares are fully paid.
Directors and Directors' interests
The Directors who held office during the year were as
follows:
Elaine Bond Rich Eckman*
Lance Burn Paul Fineman
John Charlton Anders Hedlund
Phil Dutton Anthony Lawrinson
*Rich Eckman passed away on 1 June 2014.
In accordance with the Company's Articles of Association, Elaine
Bond will stand for re-election at the forthcoming Annual General
Meeting.
Phil Dutton will not stand for re-election and will stand down
on 16 September 2015.
The Directors who held office during the year had the following
direct interests in the ordinary shares of the Company:
Interest at end of Interest at beginning
year of year
-------------------------------------------------- --------------------------------------------------
Executive LTIP LTIP Executive LTIP LTIP
Not Not
Share yet Share yet
Ordinary Options Vested vested Ordinary Options Vested vested
shares 2008(e) 2012--2015(e) 2014--2017(e) shares 2008(e) 2012--2015(e) 2014--2017(e)
----------- --------- --------- ------------- ------------- --------- --------- ------------- -------------
Lance
Burn - - - 262,083 - - - -
John
Charlton
(a) 620,000 - - - 620,000 - - -
Richard
Eckman
(b) - - - - - 200,000 - -
Paul
Fineman
(c) 4,239,249 214,285 - - 4,239,249 214,285 - -
Anders
Hedlund
(d) 448 - - - 448 - - -
Anthony
Lawrinson 60,000 - 1,107,652 283,334 60,000 - - -
----------- --------- --------- ------------- ------------- --------- --------- ------------- -------------
In addition to the above holdings:
(a) 57,500 (2014: 57,500) shares are held by the wife of John
Charlton.
(b) Rich Eckman passed away on 1 June 2014. Rich Eckman's
200,000 options were exercised by his estate on 24 September 2014
in accordance with the scheme rules.
(c) Paul Fineman owns a non--beneficial interest in 174,608
(2014: 174,608) ordinary shares of 5p each.
(d) 17,142,640 (2014: 17,142,640) and 5,275,116 (2014:
5,275,116) ordinary shares of 5p each are respectively registered
in the names of AC Artistic Limited ("Artistic") and Malios
Limited, companies incorporated in the British Virgin Islands, and
under the ultimate control of the Hedlund family. In addition to
the Hedlund family's beneficial interest set out above, the Hedlund
family is also interested in a further 1,150,790 ordinary shares,
representing a further 1.98% of the current issued share capital of
the Company. These ordinary shares are held by West Coast Trust, a
trust for the benefit of Anders Hedlund's adult children, which
holds 900,790 ordinary shares and Claes Hedlund, Anders Hedlund's
brother, who owns 250,000 ordinary shares. In total the Hedlund
family is interested in 23,568,994 ordinary shares, representing
40.49% of the current issued share capital of Company.
(e) For details of the Executive Share Option and LTIP Schemes
see page 27 to 31 of the financial statements
No shares were purchased by Directors between 31 March 2015 and
the date of this annual report.
Employees
The Group recognises the benefits of keeping employees informed
on matters affecting them as employees and on the various factors
affecting the performance of the Group. This is achieved through
employee briefings that are held in most businesses at least twice
a year and regular team briefings.
The Group conforms to current employment laws on the employment
of disabled persons and, where we are informed of any employee
disability, management makes all reasonable efforts to accommodate
that employee's requirements.
Health and safety
The Group is committed to maintaining high standards of health
and safety in every area of the business.
It is the aim of the Group to exceed the requirements of health
and safety legislation and we have established a Group Board level
health and safety co--ordinator to ensure continuous improvement of
health and safety across the Group.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, its performance and
position are set out in the Chief Executive Officer's review. The
financial position of the Group, its cash flows, liquidity position
and its management of both working capital and capital expenditure
are set out in the financial review. Details of bank loans and
borrowings are given in note 17 to the financial statements and
liquidity risks are given in note 26 to the financial
statements.
The Group relies on its banks for financial support and is
confident that the facilities in place are sufficient to meet its
needs for the foreseeable future (see note 1 to the financial
statements). Accordingly the Directors continue to adopt the going
concern basis in preparing the financial statements.
Purchase of own shares
The Directors are authorised to make market purchases of the
Company's own shares under an authority granted at the last Annual
General Meeting. The Directors will seek renewal of this authority
at the forthcoming Annual General Meeting. During the year the
Company did not buy back any of its shares. If passed, the
resolution would give the Company authority to purchase in the
market up to 5,820,490 ordinary shares (representing approximately
10% of the Company's issued share capital).
Any shares purchased under this authority would either be
treated as cancelled (and the number of shares in issue reduced
accordingly) or held in treasury, available for re--sale by the
Company or transferred to an employees' share scheme. This general
authority, if approved, would expire on the date of the Company's
2016 Annual General Meeting or, if earlier, 15 months from the date
the resolution is passed. The Directors presently intend that a
resolution to renew this authority will be proposed at next year's
Annual General Meeting and at each succeeding Annual General
Meeting.
Auditor
The Directors who held office at the date of approval of this
annual report confirm that, so far as they are each aware, there is
no relevant audit information of which the Company's auditor is
unaware and, each Director has taken all the steps that ought to
have been taken as a Director to make himself aware of any relevant
audit information and to establish that the Company's auditor is
aware of that information. This confirmation is given and should be
interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006.
By order of the Board
Anthony Lawrinson
Director
22 June 2015
Consolidated income statement
year ended 31 March 2015
2015 2014
----------------------------------- -----------------------------------
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 10) Total items (note 10) Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Revenue 4 229,025 - 229,025 224,462 - 224,462
Cost of sales (189,048) (592) (189,640) (183,238) (2,006) (185,244)
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 39,977 (592) 39,385 41,224 (2,006) 39,218
17.5% 17.2% 18.4% 17.5%
Selling expenses (11,063) - (11,063) (12,108) - (12,108)
Administration expenses (18,395) (716) (19,111) (19,191) - (19,191)
Other operating income 7 745 73 818 737 147 884
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Operating profit/(loss) 5 11,264 (1,235) 10,029 10,662 (1,859) 8,803
Finance expenses 8 (2,726) - (2,726) (3,177) (439) (3,616)
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) before tax 8,538 (1,235) 7,303 7,485 (2,298) 5,187
Income tax (charge)/credit 9 (1,708) 362 (1,346) (1,840) 381 (1,459)
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for the period 6,830 (873) 5,957 5,645 (1,917) 3,728
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Owners of the Parent Company 5,605 3,010
Non-controlling interests 352 718
----------------------------- ----- ----------- ----------- --------- ----------- ----------- ---------
2015 2014
--------------- ---------------
Notes Diluted Basic Diluted Basic
--------------------- ----- ------- ------ ------- ------
Adjusted earnings
per share excluding
exceptional items
and LTIP charges 23 11.5p 12.0p 8.4p 8.6p
Cost per share on
LTIP charges 23 (0.8p) (0.8p) (0.1p) (0.1p)
--------------------- ----- ------- ------ ------- ------
Adjusted earnings
per share excluding
exceptional items 23 10.7p 11.2p 8.3p 8.5p
Cost per share on
exceptional items 23 (1.4p) (1.5p) (3.2p) (3.3p)
Earnings per share 9.3p 9.7p 5.1p 5.2p
--------------------- ----- ------- ------ ------- ------
Consolidated statement of comprehensive income
year ended 31 March 2015
2015 2014
GBP000 GBP000
--------------------------------------------------------------------------------------------- -------- --------
Profit for the year 5,957 3,728
Other comprehensive income:
--------------------------------------------------------------------------------------------- -------- --------
Exchange difference on translation of foreign operations (net of tax) (1,405) (2,257)
Transfer to profit and loss on maturing cash flow hedges (net of tax) 577 451
Net profit/(loss) on cash flow hedges (net of tax) 572 (577)
--------------------------------------------------------------------------------------------- -------- --------
Other comprehensive income for period, net of tax items which may be reclassified to profit
and loss in subsequent periods (256) (2,383)
Total comprehensive income for the period, net of tax 5,701 1,345
Attributable to:
Owners of the Parent Company 5,601 1,366
Non-controlling interests 100 (21)
--------------------------------------------------------------------------------------------- -------- --------
5,701 1,345
--------------------------------------------------------------------------------------------- -------- --------
Consolidated statement of changes in equity
year ended 31 March 2015
Share
premium
and capital Non--
Share redemption Merger Hedging Translation Retained Shareholder controlling
capital reserve reserves reserves reserve earnings equity interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
At 1 April 2013 2,838 4,658 17,164 (451) 846 26,833 51,888 4,684 56,572
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Profit for the
year - - - - - 3,010 3,010 718 3,728
Other
comprehensive
income - - - (126) (1,518) - (1,644) (739) (2,383)
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Total
comprehensive
income for the
year - - - (126) (1,518) 3,010 1,366 (21) 1,345
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Equity--settled
share--based
payment (note 25) - - - - - 82 82 - 82
Options exercised
(note 22) 58 118 - - - - 176 - 176
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Equity dividends
paid - - - - - - - (1,014) (1,014)
At 31 March 2014 2,896 4,776 17,164 (577) (672) 29,925 53,512 3,649 57,161
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Profit for the
year - - - - - 5,605 5,605 352 5,957
Other
comprehensive
income - - - 1,149 (1,153) - (4) (252) (256)
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Total
comprehensive
income for the
year - - - 1,149 (1,153) 5,605 5,601 100 5,701
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Equity--settled
share--based
payment (note 25) - - - - - 512 512 - 512
Options exercised
(note 22) 14 25 - - - - 39 - 39
Equity dividends
paid - - - - - - - (829) (829)
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
At 31 March 2015 2,910 4,801 17,164 572 (1,825) 36,042 59,664 2,920 62,584
------------------ ------- ----------- -------- -------- ----------- -------- ----------- ----------- -------
Merger reserve
The merger reserve comprises premium on shares issued in
relation to business combinations.
Capital redemption reserve
The capital redemption reserve comprises amounts transferred
from retained earnings in relation to the redemption of preference
shares. For ease of presentation, the amount of GBP1.34 million
relating to the capital redemption reserve has been included within
the column of share premium and capital redemption reserve in the
balances at both the beginning and end of each year, with no
movements.
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet
occurred.
Translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations.
Shareholders' equity
Shareholders' equity represents total equity attributable to
owners of the Parent Company.
Consolidated balance sheet
as at 31 March 2015
As at As at
31 March 31 March
2015 2014
Notes GBP000 GBP000
----------------------------------------------------- ------ --------- ---------
Non--current assets
Property, plant and equipment 11 29,875 32,049
Intangible assets 12 31,692 31,950
Deferred tax assets 13 4,121 3,665
----------------------------------------------------- ------ --------- ---------
Total non--current assets 65,688 67,664
----------------------------------------------------- ------ --------- ---------
Current assets
Inventory 14 46,162 48,460
Trade and other receivables 15 21,525 19,690
Derivative financial assets 779 -
Cash and cash equivalents 16 2,846 8,111
----------------------------------------------------- ------ --------- ---------
Total current assets 71,312 76,261
----------------------------------------------------- ------ --------- ---------
Total assets 137,000 143,925
----------------------------------------------------- ------ --------- ---------
Equity
Share capital 22 2,910 2,896
Share premium 3,461 3,436
Reserves 17,251 17,255
Retained earnings 36,042 29,925
----------------------------------------------------- ------ --------- ---------
Equity attributable to owners of the Parent Company 59,664 53,512
----------------------------------------------------- ------ --------- ---------
Non--controlling interests 2,920 3,649
----------------------------------------------------- ------ --------- ---------
Total equity 62,584 57,161
----------------------------------------------------- ------ --------- ---------
Non--current liabilities
Loans and borrowings 17 23,089 28,145
Deferred income 18 1,277 1,592
Provisions 19 862 860
Other financial liabilities 20 3,466 4,202
----------------------------------------------------- ------ --------- ---------
Total non--current liabilities 28,694 34,799
----------------------------------------------------- ------ --------- ---------
Current liabilities
Bank overdraft 16 1,568 2,529
Loans and borrowings 17 3,546 9,695
Deferred income 18 632 1,202
Provisions 19 106 165
Income tax payable 2,192 2,052
Trade and other payables 21 26,868 25,818
Other financial liabilities 20 10,810 10,504
----------------------------------------------------- ------ --------- ---------
Total current liabilities 45,722 51,965
----------------------------------------------------- ------ --------- ---------
Total liabilities 74,416 86,764
----------------------------------------------------- ------ --------- ---------
Total equity and liabilities 137,000 143,925
----------------------------------------------------- ------ --------- ---------
These financial statements were approved by the Board of
Directors on 22 June 2015 and were signed on its behalf by:
Paul Fineman Anthony Lawrinson
Director Director
Consolidated cash flow statement
year ended 31 March 2015
2015 2014
Notes GBP000 GBP000
----------------------------------------------------------- ------ --------- --------
Cash flows from operating activities
Profit for the year 5,957 3,728
Adjustments for:
Depreciation 11 4,535 5,032
Amortisation of intangible assets 12 428 576
Finance expenses 8 2,726 3,616
Income tax charge 9 1,346 1,459
(Profit)/loss on sales of property, plant and equipment 5 206 (53)
(Profit)/loss on external sale of intangible fixed assets 10 57
Equity--settled share--based payment 25 623 82
----------------------------------------------------------- ------ --------- --------
Operating profit after adjustments for non--cash items 15,831 14,497
Change in trade and other receivables (1,269) 1,520
Change in inventory 3,223 (722)
Change in trade and other payables 1,409 (48)
Change in provisions and deferred income (1,343) (84)
----------------------------------------------------------- ------ --------- --------
Cash generated from operations 17,851 15,163
Tax paid (1,263) (60)
Interest and similar charges paid (2,775) (3,221)
----------------------------------------------------------- ------ --------- --------
Net cash inflow from operating activities 13,813 11,882
----------------------------------------------------------- ------ --------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 55 140
Acquisition of businesses 29 (1,451) -
Acquisition of intangible assets 12 (234) (206)
Acquisition of property, plant and equipment (2,322) (5,085)
Receipt of government grants 401 1,049
----------------------------------------------------------- ------ --------- --------
Net cash outflow from investing activities (3,551) (4,102)
----------------------------------------------------------- ------ --------- --------
Cash flows from financing activities
Proceeds from issue of share capital 39 176
Repayment of secured borrowings (7,133) (5,646)
Net movement in credit facilities (4,840) (2,671)
Payment of finance lease liabilities (599) (296)
New bank loans raised 365 5,000
Loan arrangement fees (183) (180)
Dividends paid to non--controlling interests (829) (1,014)
----------------------------------------------------------- ------ --------- --------
Net cash (outflow)/inflow from financing activities (13,180) (4,631)
----------------------------------------------------------- ------ --------- --------
Net increase in cash and cash equivalents (2,918) 3,149
Cash and cash equivalents at beginning of period 5,582 1,965
Effect of exchange rate fluctuations on cash held (1,386) 468
----------------------------------------------------------- ------ --------- --------
Cash and cash equivalents at 31 March 16 1,278 5,582
----------------------------------------------------------- ------ --------- --------
Notes to the financial statements
year ended 31 March 2015
1 Accounting policies
The financial information included in this preliminary statement
of results does not constitute statutory accounts within the
meaning of Section 435 of the Companies Act 2006 (the "Act"). The
financial information for the year ended 31 March 2015 has been
extracted from the financial statements on which an unqualified
audit opinion has been issued.
International Greetings PLC is a public limited company,
incorporated and domiciled in England and Wales. The Company's
ordinary shares are listed on AIM.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group"). The
Company financial statements present information about the Company
as a separate entity and not about its Group.
The Group financial statements have been prepared and approved
by the Directors in accordance with EU adopted International
Financial Reporting Standards. The Company has elected to prepare
its Company financial statements in accordance with UK GAAP; these
are presented in the financial statements.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements.
Judgements made by the Directors in the application of these
accounting policies that have significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed in the policies
below.
Going concern basis
The financial statements have been prepared on the going concern
basis.
The borrowing requirement of the Group increases steadily over
the period from July and peaks in October, due to the seasonality
of the business, as the sales of wrap and crackers are mainly for
the Christmas market, before then reducing.
As with any company placing reliance on external entities for
financial support, the Directors acknowledge that there can be no
certainty that this support will continue although, at the date of
approval of this report, they have no reason to believe that it
will not do so.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting
in preparing the financial statements.
Measurement convention
The financial statements are prepared on the historical cost
basis except that derivative financial instruments are stated at
their fair value.
Changes in accounting policies
The accounting policies adopted in the preparation of the
financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 March 2015, except for the adoption of new standards and
interpretations as of 1 April 2015.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Generally
there is a presumption that a majority of voting rights result in
control. To support this presumption, and when the Group has less
than a majority of the voting or similar rights of an investee, the
Group considers all facts and circumstances in assessing whether it
has the power to control an investee, including rights arising from
shareholder agreements, contractual arrangements and potential
voting rights held by the Group. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases.
Foreign currency translation
The consolidated financial statements are presented in pounds
sterling, which is the Company's functional currency and the
Group's presentational currency.
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are translated at the foreign exchange rate
ruling at that date. Foreign exchange differences arising on
translation are recognised in the income statement.
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated at foreign exchange rates ruling at the balance sheet
date. The revenues and expenses of foreign operations are
translated at an average rate for the period where this rate
approximates to the foreign exchange rates ruling at the dates of
the transactions. Exchange differences arising from this
translation of foreign operations, and of related qualifying
hedges, are taken directly to the translation reserve. They are
released into the income statement upon disposal.
Exchange differences arising from a monetary item receivable
from or payable to a foreign operation, the settlement of which is
neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation
and are recognised in other comprehensive income in the translation
reserve. The cumulative translation differences previously
recognised in other comprehensive income (or where the foreign
operation is part of a subsidiary, the parent's interest in the
cumulative translation differences) are released into the income
statement upon disposal of the foreign operation or on loss of
control of the subsidiary that includes the foreign operation.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity
(i.e. forming part of shareholders' funds) only to the extent that
they meet the following two conditions:
(a) they include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the Company's
own equity instruments, it is either a non--derivative that
includes no obligation to deliver a variable number of the
Company's own equity instruments or is a derivative that will be
settled by the Company's exchanging a fixed amount of cash or other
financial assets for a fixed number of its own equity
instruments.
To the extent that this definition is not met, the proceeds of
issue are classified as a financial liability. Where the instrument
so classified takes the legal form of the Company's own shares, the
amounts presented in these financial statements for called up share
capital and share premium exclude amounts in relation to those
shares.
Trade and other receivables
Where it is likely to be materially different from the nominal
value, trade and other receivables are recognised initially at fair
value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method, less any
impairment losses.
Trade and other payables
Where it is likely to be materially different from the nominal
value, trade and other payables are recognised initially at fair
value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits. Bank overdrafts that are repayable on demand and form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents for the purposes of the cash
flow statement.
Interest--bearing borrowings
Interest--bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to initial
recognition, interest--bearing borrowings are stated at amortised
cost using the effective interest method.
Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value.
The gain or loss on re--measurement to fair value is recognised
immediately in the income statement. However, where derivatives
qualify for hedge accounting, recognition of any resultant gain or
loss depends on the nature of the item being hedged.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or
liability, or a highly probable forecast transaction, the effective
part of any gain or loss on the derivative financial instrument is
recognised as other comprehensive income in the hedging reserve.
Any ineffective portion of the hedge is recognised immediately in
the income statement.
Amounts previously recognised in other comprehensive income are
transferred to the income statement in the periods when the hedged
item affects profit or loss (for instance when the forecast sale
that is hedged takes place). The gain or loss relating to the
effective portion of forward foreign exchange contract hedging
export sales is recognised in the income statement within "sales".
However, when the forecast transaction that is hedged results in
the recognition of a non--financial asset (for example, inventory),
the gains or losses previously recognised in other comprehensive
income are transferred from other comprehensive income and included
in the initial measurement of the cost of the asset. The deferred
amounts are ultimately recognised in cost of goods sold (in case of
inventory).
When a hedging instrument expires or is sold, terminated or
exercised, or the entity revokes designation of the hedge
relationship but the hedged forecast transaction is still expected
to occur, the cumulative gain or loss at that point remains in
other comprehensive income and is recognised in accordance with the
above policy when the transaction occurs. If the hedged transaction
is no longer expected to take place, the cumulative unrealised gain
or loss recognised in other comprehensive income is recognised in
the income statement immediately.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items of
property, plant and equipment.
Leases in which the Group assumes substantially all the risks
and rewards of ownership of the leased asset are classified as
finance leases. Where land and buildings are held under finance
leases the accounting treatment of the land is considered
separately from that of the buildings. Leased assets acquired by
way of a finance lease are stated at an amount equal to the lower
of their fair value and the present value of the minimum lease
payments at inception of the lease, less accumulated depreciation
and impairment losses. Lease payments are accounted for as
described below.
Depreciation is charged to the income statement on a
straight--line basis over the estimated useful lives of each part
of an item of property, plant and equipment. The estimated useful
lives are as follows:
-- freehold buildings 25-30 years
-- leasehold land and buildings life of lease
-- plant and equipment four-25 years
-- fixtures and fittings three-five years
-- motor vehicles four years
No depreciation is provided on freehold land.
Included within plant and machinery are assets with a range of
depreciation rates. These rates are tailored to the nature of the
assets to reflect their estimated useful lives.
Depreciation methods, useful lives and residual values are
reviewed at each balance sheet date.
Intangible assets and goodwill
Subject to the transitional relief in IFRS 1, all business
combinations are accounted for by applying the purchase method.
Goodwill represents amounts arising on acquisition of subsidiaries.
In respect of business acquisitions that have occurred since 1
April 2006, goodwill represents the difference between the cost of
the acquisition and the fair value of the net identifiable assets
acquired. Identifiable intangibles are those which can be sold
separately or which arise from legal rights regardless of whether
those rights are separable.
Goodwill is stated at cost less any accumulated impairment
losses. Goodwill is allocated to cash--generating units and is not
amortised but is tested every half year for impairment.
In respect of acquisitions prior to 1 April 2006, goodwill is
included on the basis of its deemed cost, which represents the
amount recorded under UK GAAP which was broadly comparable save
that only separable intangibles were recognised and goodwill was
amortised. Goodwill written off to reserves under UK GAAP prior to
1998 has not been reinstated.
If the cost of an acquisition is less than the fair value of the
Group's share of the net assets of the subsidiary acquired, the
difference is recognised directly in the income statement.
Other intangible assets
Expenditure on internally generated goodwill and brands is
recognised in the income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are
stated at cost less accumulated amortisation and impairment
losses.
The main classes of intangible assets are computer software and
publishing imprints.
Amortisation
Amortisation is charged to the income statement on a
straight--line basis over the estimated useful lives of intangible
assets unless such lives are indefinite. The estimated useful life
of computer software ranges between three and five years. Other
intangible assets are amortised from the date they are available
for use. The estimated useful lives are three to five years.
Amortisation charges are included under "administrative
expenses" in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on a combination of weighted average and the
first--in first--out principle and includes expenditure incurred in
acquiring the inventories and bringing them to their existing
location and condition. In the case of manufactured inventories and
work in progress, cost includes an appropriate share of overheads
based on normal operating capacity.
Impairment
The carrying amounts of the Group's assets other than
inventories and deferred tax assets are reviewed at each balance
sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable
amount is estimated.
For goodwill, the recoverable amount is estimated at each
half--year.
An impairment loss is recognised whenever the carrying amount of
an asset or its cash--generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income
statement.
Impairment losses recognised in respect of cash--generating
units are allocated first to reduce the carrying amount of any
goodwill allocated to cash--generating units and then to reduce the
carrying amount of the other assets in the unit on a pro rata
basis. A cash--generating unit is the smallest identifiable group
of assets that generates cash inflows that are largely independent
of the cash inflows from other assets or groups of assets.
The recoverable amount of the Group's assets is the greater of
their fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to
their present value using a pre--tax discount rate that reflects
current market assessments of the time, value of money and the
risks specific to the asset. For an asset that does not generate
largely independent cash inflows, the recoverable amount is
determined for the cash--generating unit to which the asset
belongs.
An impairment in respect of goodwill is not reversed. In respect
of other assets, an impairment is reversed when there is an
indication that the impairment may no longer exist and there has
been a change in the estimates used to determine the recoverable
amount. An impairment is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment had been recognised.
Provisions
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event and it is probable that an outflow of economic benefits
will be required to settle the obligation. A provision for
restructuring is recognised when the Group has approved a detailed
and formal restructuring plan and announced its main provisions. If
the effect is material, provisions are determined by discounting
the expected future cash flows at a pre--tax rate that reflects
current market assessments of the time value of money and, where
appropriate, the risks specific to the liability. Where discounting
is used, the increase in the provision due to the passage of time
is recognised as borrowing costs.
Deferred consideration
Where considered material, the Group calculates deferred
consideration by discounting it to its fair value. This fair value
is used to calculate the total purchase consideration and hence the
goodwill figure. As the discount unwinds it is charged as a finance
expense within the income statement and added to the deferred
consideration creditor.
Revenue recognition
Revenue represents the amounts, net of discounts, allowances for
volume and promotional rebates and other payments to customers
(excluding value added tax) derived from the provision of goods and
services to customers during the year. Sales of goods are
recognised when a Group entity has despatched products to the
customer, legal title has passed and the collectability of the
related receivable is reasonably assured. Provisions are made for
volume and promotional rebates where they have been agreed or are
reasonably likely to arise, based upon actual and forecast
sales.
Exceptional items
Exceptional items are those items of financial performance
which, because of size or incidence, require separate disclosure to
enable underlying performance to be assessed.
Discontinued operations
A discontinued operation is a component of the Group's business
that represents a separate major line of business or geographical
area that has been disposed of or is held for sale, or is a
subsidiary acquired exclusively with a view to resale.
Classification as discontinued operation occurs upon disposal or
when the operation meets the criteria to be classified as held for
sale, if earlier.
When an operation is classified as a discontinued operation, the
comparative income statement is represented as if the operation had
been discontinued from the start of the comparative period.
Government grants
Capital--based government grants are included within other
financial liabilities in the balance sheet and credited to
operating profit over the estimated useful economic lives of the
assets to which they relate.
Supplier income
The Group does not have material retrospective supplier
incentive arrangements but where these do arise, they are
recognised within cost of sales on an accruals basis as earned for
each relevant supplier rebate.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the
income statement on a straight--line basis over the term of the
lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense.
Finance lease payments
Minimum lease payments are apportioned between the finance
charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining
balance of the liability.
Finance income and expenses
Finance expenses comprise interest payable, finance charges on
finance leases and unwinding of the discount on provisions and
deferred consideration. Finance income comprises interest
receivable on funds invested and dividend income.
Net movements in the fair value of derivatives which have not
been designated as an effective hedge, and any ineffective portion
of fair value movement on derivatives designated as a hedge are
also included within finance income or expense.
Interest income and interest payable is recognised in profit or
loss as it accrues, using the effective interest method. Dividend
income is recognised in the income statement on the date the
entity's right to receive payments is established. Foreign currency
gains and losses are reported on a net basis.
Taxation
Tax on the profit or loss for the year comprises current and
deferred tax. Tax is recognised in the income statement except to
the extent that it relates to items recognised in other
comprehensive income or directly in equity, in which case it is
recognised in other comprehensive income or equity
respectively.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. The following
temporary differences are not provided for: the initial recognition
of goodwill; the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit other than in a
business combination; and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax provided is
based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted
or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
Dividend distribution
Final dividends to shareholders of International Greetings PLC
are recognised as a liability in the period that they are approved
by shareholders.
Employee benefits
Pensions
The Group operates a defined contribution personal pension
scheme. The assets of this scheme are held separately from those of
the Group in an independently administered fund. The pension charge
represents contributions payable by the Group to the fund.
The Netherlands subsidiary operates an industrial defined
benefit fund, based on average wages, that has an agreed maximum
contribution. The pension fund is a multi--employer fund and there
is no contractual or constructive obligation for charging the net
defined benefit cost of the plan to participating entities other
than an agreed maximum contribution for the period, that is shared
between employer (4/7) and employees (3/7). The Dutch Government is
not planning to make employers fund any deficits in industrial
pension funds; accordingly the Group treats the scheme as a defined
contribution scheme for disclosure purposes. The Group recognises a
cost equal to its contributions payable for the period.
Share--based payment transactions
The cost of equity--settled transactions with employees is
measured by reference to the fair value at the date on which they
are granted and is recognised as an expense over the vesting
period, which ends on the date on which the relevant employees
become fully entitled to the award. Fair value is determined by
using an appropriate pricing model. In valuing equity--settled
transactions, no account is taken of any service and performance
(vesting conditions), other than performance conditions linked to
the price of the shares of the Company (market conditions). Any
other conditions which are required to be met in order for an
employee to become fully entitled to an award are considered to be
non--vesting conditions. Like market performance conditions,
non--vesting conditions are taken into account in determining the
grant date fair value.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
vesting condition or a non--vesting condition, which are treated as
vesting irrespective of whether or not the market vesting condition
or non--vesting condition is satisfied, provided that all other
non--market vesting conditions are satisfied.
At each balance sheet date before vesting, the cumulative
expense is calculated, representing the extent to which the vesting
period has expired and management's best estimate of the
achievement or otherwise of non--market vesting conditions and of
the number of equity instruments that will ultimately vest or, in
the case of an instrument subject to a market condition or a
non--vesting condition, be treated as vesting as described above.
The movement in cumulative expense since the previous balance sheet
date is recognised in the income statement, with a corresponding
entry in equity.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale are capitalised as part of the cost of the respective assets.
All other borrowing costs are expensed in the period they occur.
Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
New standards
There are no IFRS or IFRIC interpretations or amendments
effective for the first time this financial year that have any
material impact on the Group.
New standards and interpretations not applied
Management continually reviews the impact of newly published
standards and amendments and considers, where applicable,
disclosure of their impact on the Group.
The following standards, interpretations and amendments issued
by the IASB have an effective date after the date of these
financial statements and are considered by management to be
relevant to the Group:
To be
Effective adopted by
New pronouncement date the Group
-------------------------------------------------------------------------------------------- ----------- -----------
Annual Improvements 2010--2012 Cycle 1 Jul 2014 1 Apr 2015
Annual Improvements 2011--2013 Cycle 1 Jul 2014 1 Apr 2015
Annual Improvements 2012--2014 Cycle* 1 Jan 2016 1 Apr 2016
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and
Amortisation* 1 Jan 2016 1 Apr 2016
IFRS 15 Revenue from Contracts with Customers* 1 Jan 2017 1 Apr 2017
IFRS 9 Financial Instruments* 1 Jan 2018 1 Apr 2018
-------------------------------------------------------------------------------------------- ----------- -----------
* Not yet endorsed by EFRAG.
-- IFRS 9 'Financial Instruments' replaces the existing
requirements in IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 includes revised guidance on the classification
and measurement of financial instruments, including the new
expected credit loss model for calculating impairment of financial
assets, and the new general hedge accounting requirements. IFRS 9
is effective for annual periods beginning on or after 1 January
2018. The Group are currently assessing the impact of IFRS 9.
-- IFRS 15: IFRS 15 replaces existing IFRS revenue recognition
requirements in IAS 18 Revenue. The standard applies to all revenue
contracts and provides a model for the recognition and measurement
of sales of some non--financial assets (e.g. disposals of property,
plant and equipment). The core principle of IFRS 15 is that revenue
is recognised to depict the transfer of promised goods or services
to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or
services. Application is required for annual periods beginning on
or after 1 January 2017. The Group are currently assessing the
impact of IFRS 15.
No other standards, interpretations or amendments which have
been issued but are not yet effective are expected to significantly
impact the Group's results or assets and liabilities and are not
expected to require significant disclosure.
2 Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are
described in note 1, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of revision and future periods
if the revision affects both current and future periods.
The estimates and assumptions that have had a significant
bearing on the financial statements in the current year or could
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below:
Critical judgements in applying the Group's accounting
policies
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Exceptional items
The Directors have chosen to separate certain items of financial
performance which they believe, because of size or incidence,
require separate disclosure to enable underlying performance to be
assessed. These items are fully described in note 10.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the balance sheet date, that have
significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year,
are discussed in the strategic report and below.
Impairment of goodwill and property, plant and equipment
Determining whether goodwill and property, plant and equipment
are impaired requires an estimation of the value in use of the
cash-generating units to which goodwill has been allocated or to
which property, plant and equipment belong. The value in use
calculation requires the entity to estimate the future cash flows
expected to arise from the cash--generating unit and a suitable
discount rate in order to calculate present value. The carrying
amount of goodwill at the balance sheet date was GBP31.1 million
(2014: GBP31.2 million). No impairment (2014: nil) was required.
The carrying amount of property, plant and equipment was GBP29.9
million (2014: GBP32.0 million). No impairment loss (2014: nil) was
required, (see note 12).
Provision for slow moving inventory
The Group has guidelines for providing for inventory which may
be sold below cost due to its age or condition. Directors assess
the inventory at each location and in some cases decide that there
are specific reasons to provide more than the guideline levels, or
less if there are specific action plans in place which mean the
guideline provision level is not required. Determining the level of
inventory provision requires an estimation of likely future
realisable value of the inventory in various time frames and
comparing with the cost of holding stock for those time frames.
Regular monitoring of stock levels, the ageing of stock and the
level of the provision is carried out by the Directors. Details of
inventory carrying values are provided in note 14. At the year end,
stock purchased more than 15 months previously had decreased from
GBP5.8 million to GBP5.6 million and the Group has provisions of
GBP3.8 million (2014: GBP3.3 million) over the total inventory
value.
Share--based payments
The Directors are required to estimate the fair value of
services received in return for share options granted to employees
that are measured by reference to the fair value of share options
granted. For the long term incentive plan the estimate of the fair
value is based on the share price on the date the scheme was
approved and the proportion of shares expected to vest. Details of
the key assumptions made in the measurement of share--based
payments are provided in note 25.
Taxation
There are many transactions and calculations for which the
ultimate tax determination is uncertain. Significant judgement is
required in determining the Group's tax assets and liabilities.
Deferred tax assets have been recognised to the extent they are
recoverable based on profit projections for future years. Income
tax liabilities for anticipated issues have been recognised based
on estimates of whether additional tax will be due. Notwithstanding
the above, the Group believes that it will recover tax assets and
has adequate provision to cover all risks across all business
operations. See note 13 for more details.
3 Financial risk management
Risk management is discussed in the strategic report and a
discussion of risks and uncertainties can be found in the financial
statements, along with the Group's key risks. See note 26 for
additional information about the Group's exposure to each of these
risks and the ways in which they are managed. Below are key
financial risk management areas:
-- currency risk is mitigated by a mixture of forward contracts,
spot currency purchases and natural hedges;
-- liquidity risk is managed by monitoring daily cash balances,
weekly cash flow forecasts, regular reforecasting of monthly
working capital and regular dialogue with the Group's banks;
and
-- credit risk is managed by constant review of key debtors and banking with reputable banks.
4 Segmental information
The Group has one material business activity being the design,
manufacture and distribution of gift packaging and greetings,
stationery and creative play products.
For management purposes the Group is organised into four
geographic business units.
The results below are allocated based on the region in which the
businesses are located; this reflects the Group's management and
internal reporting structure. The decision was made during 2011 to
focus Asia as a service provider of manufacturing and procurement
operations, whose main customers are our UK businesses. Both the
China factory and the majority of the Hong Kong procurement
operations are now overseen by our UK operational management team
and we therefore continue to include Asia within the internal
reporting of the UK operations, such that UK and Asia comprise an
operating segment. The Chief Operating Decision Maker is the
Board.
Intra--segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Financial performance of each segment is measured on operating
profit. Interest expense or revenue and tax are managed on a Group
basis and not split between reportable segments. 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 receivable. These are shown
in the eliminations column. Where cash is shown in one segment,
which nets under the Group's banking facilities, against overdrafts
in other segments, the elimination is shown in the eliminations
column. Similarly inter--segment receivables and payables are
eliminated.
UK and Asia Europe USA Australia Eliminations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Year ended 31 March 2015
Revenue
- external 108,255 35,871 57,921 26,978 - 229,025
- inter segment 1,572 180 - - (1,752) -
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Total segment revenue 109,827 36,051 57,921 26,978 (1,752) 229,025
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Segment result before exceptional items 5,258 3,263 2,409 1,092 - 12,022
Exceptional items (786) (99) (350) - - (1,235)
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Segment result 4,472 3,164 2,059 1,092 - 10,787
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Central administration costs (758)
Net finance expenses (2,726)
Income tax (1,346)
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Profit for the year ended 31 March 2015 5,957
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Balances at 31 March 2015
Segment assets 101,139 15,692 8,242 7,806 4,121 137,000
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Segment liabilities (36,695) (9,957) (21,725) (3,721) (2,318) (74,416)
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
Capital expenditure
- property, plant and
equipment 1,562 355 325 80 - 2,322
- intangible 157 12 25 40 - 234
Depreciation 2,862 731 714 228 - 4,535
Amortisation 282 41 64 41 - 428
------------------------------------------- ------------ --------- ---------- ---------- ------------- ---------
UK and Asia Europe USA Australia Eliminations Group
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Year ended 31 March 2014
Revenue
- external 110,516 34,396 53,153 26,397 - 224,462
- inter segment 1,583 292 - - (1,875) -
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Total segment revenue 112,099 34,688 53,153 26,397 (1,875) 224,462
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Segment result before exceptional items 3,533 2,556 3,026 2,107 - 11,222
Exceptional items (1,859) - - - - (1,859)
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Segment result 1,674 2,556 3,026 2,107 - 9,363
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Central administration costs (560)
Net finance expenses (3,616)
Income tax (1,459)
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Profit for the year ended 31 March 2014 3,728
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Balances at 31 March 2014
Segment assets 105,987 15,983 10,395 8,230 3,330 143,925
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Segment liabilities (47,428) (10,390) (24,730) (2,499) (1,717) (86,764)
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
Capital expenditure
- property, plant and equipment 6,923 296 952 153 - 8,324
- intangible 225 20 111 - - 356
Depreciation 3,403 750 653 226 - 5,032
Amortisation 386 59 47 84 - 576
----------------------------------------- ------------ ---------- ---------- ---------- ------------- ---------
(a) Capital expenditure consists of additions of property, plant
and equipment, intangible assets and goodwill.
(b) No single customer accounts for over 10% of total sales.
(c) The assets and liabilities that have not been allocated to
segments consist of deferred tax assets GBP4,121,000 (2014:
GBP3,665,000) and income tax payable of GBP2,192,000 (2014:
GBP2,052,000). In addition, the assets and liabilities include the
VAT debtor of GBP126,000 (2014: GBP335,000) (creditor) to reflect
the net position of the Group.
(d) No operating segment has been aggregated in determining
reportable segments.
(e) Central recharges are included within the result of the
segment that takes the recharge. The balance of the central costs
are not allocated to segments.
Geographical information
The Group's information about its segmental assets (non--current
assets excluding deferred tax assets and other financial assets)
and turnover by customer destination and product are detailed
below:
Non--current assets
----------------------
2015 2014
GBP000 GBP000
------------- ---------- ----------
UK and Asia 40,655 42,087
USA 6,568 6,245
Europe 12,727 13,756
Australia 1,617 1,911
------------- ---------- ----------
61,567 63,999
------------- ---------- ----------
Turnover by customer destination
Turnover
------------------
2015 2014 2015 2014
GBP000 GBP000 % %
--------------------------- -------- -------- ----- -----
UK 75,419 75,488 33 33
USA 73,473 69,849 32 31
Europe 48,148 46,996 21 21
Australia and New Zealand 26,978 26,397 12 12
Rest of the world 5,007 5,732 2 3
--------------------------- -------- -------- ----- -----
229,025 224,462 100 100
--------------------------- -------- -------- ----- -----
Turnover by product
2015 2014 2015 2014
GBP000 GBP000 % %
--------------------------------------- -------- --------- ----- -----
Gift packaging and greetings 167,627 157,503 73 70
Stationery and creative play products 61,398 66,959 27 30
--------------------------------------- -------- --------- ----- -----
229,025 224,462 100 100
--------------------------------------- -------- --------- ----- -----
5 Expenses and auditor's remuneration
Included in profit are the following charges/(credits):
2015 2014
Notes GBP000 GBP000
------------------------------ ------ ------- -------
Depreciation 11 4,535 5,032
Profit on sales of property,
plant and equipment and
intangible assets (216) (4)
Release of deferred grant
income 7 (645) (570)
Amortisation of intangible
assets 12 428 576
Operating lease payment
- minimum lease payment 27 3,765 4,307
Sub--lease rental income 7 (447) (304)
Write down of inventories
to net realisable value 14 2,565 2,963
Reversal of previous write
downs on inventory 14 (224) (226)
Loss on foreign exchange 896 411
------------------------------ ------ ------- -------
Auditor's remuneration:
2015 2014
GBP000 GBP000
----------------------------------------------------------------------- ------- -------
Amounts receivable by auditor and its associates in respect of:
Audit of these financial statements 42 42
Audit of financial statements of subsidiaries pursuant to legislation
- overseas subsidiaries 136 138
- UK subsidiaries 58 58
Other services relating to taxation 12 -
----------------------------------------------------------------------- ------- -------
6 Staff numbers and costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
Number of employees
----------------------
2015 2014
----------------------------- ---------- ----------
Selling and administration 370 401
Production and distribution 1,323 1,400
----------------------------- ---------- ----------
1,693 1,801
----------------------------- ---------- ----------
The aggregate payroll costs of these persons were as
follows:
2015 2014
Note GBP000 GBP000
-------------------------------------------------- ----- ------- -------
Wages and salaries 36,848 37,165
Share--based payments - long term incentive plan 25 623 82
Social security costs 2,899 3,050
Other pension costs 2,676 2,498
-------------------------------------------------- ----- ------- -------
43,046 42,795
-------------------------------------------------- ----- ------- -------
For information on Directors' remuneration please refer to the
sections titled "Executive share options" and "Directors'
remuneration" within the Directors' remuneration report.
7 Other operating income
2015 2014
GBP000 GBP000
----------------------------------------------------- ------- -------
Grant income received 645 570
Sub--lease rentals credited to the income statement 447 304
Other (347) (137)
----------------------------------------------------- ------- -------
745 737
Exceptional items 73 147
----------------------------------------------------- ------- -------
818 884
----------------------------------------------------- ------- -------
8 Finance expenses
2015 2014
GBP000 GBP000
----------------------------------- ------- -------
Interest payable on bank loans
and overdrafts 2,106 2,463
Other similar charges 421 528
Finance charges in respect
of finance leases 190 110
Unwinding of fair value discounts 14 7
----------------------------------- ------- -------
Interest payable under the
effective interest method 2,731 3,108
Derivative financial instruments
at fair value through income
statement (5) 69
----------------------------------- ------- -------
2,726 3,177
Exceptional items - 439
----------------------------------- ------- -------
2,726 3,616
----------------------------------- ------- -------
9 Taxation
Recognised in the income statement
2015 2014
GBP000 GBP000
------------------------------------------------ ------- -------
Current tax expenses
Current year - UK corporation tax (1) 173
Current year - foreign tax 1,264 1,372
Adjustments for prior years 215 (324)
------------------------------------------------ ------- -------
1,478 1,221
------------------------------------------------ ------- -------
Deferred tax expense
Original and reversal of temporary differences 123 390
Adjustments in respect of previous periods (255) (152)
------------------------------------------------ ------- -------
(132) 238
------------------------------------------------ ------- -------
Total tax in income statement 1,346 1,459
------------------------------------------------ ------- -------
Reconciliation of effective tax rate
2015 2014
GBP000 GBP000
-------------------------------------------------------------------------------------------- ------- -------
Profit before tax 7,303 5,187
-------------------------------------------------------------------------------------------- ------- -------
Profit before tax multiplied by the standard rate of corporation tax rate of 21% in the UK
(2014: 23%) 1,534 1,193
Effects of:
Expenses not deductible for tax purposes 277 219
Previously unrecognised tax assets (984) (295)
Deferred tax effect on tax rate changes 131 213
Differences between UK and overseas tax rates 363 200
Other items 64 405
Adjustments in respect of prior years (39) (476)
-------------------------------------------------------------------------------------------- ------- -------
Total tax in income statement 1,346 1,459
-------------------------------------------------------------------------------------------- ------- -------
10 Exceptional items
Loss
on
disposal
of
Other property,
Cost plant
of Admin Operating and
sales expenses income equipment Total
2015 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ------- --------- ---------- ---------- -------
Restructuring of
operational activities
Efficiency programmes
in the UK and Asia
(a) 481 145 (73) 233 786
Management restructuring
in the USA (b) 111 239 - - 350
Costs relating to
acquisition of Enper
Giftwrap Business
(c) - 99 - - 99
-------------------------- ------- --------- ---------- ---------- -------
Total before tax 592 483 (73) 233 1,235
-------------------------- ------- --------- ---------- ---------- -------
Income tax credit (362)
-------------------------- ------- --------- ---------- ---------- -------
873
-------------------------- ------- --------- ---------- ---------- -------
Other
Cost of operating Finance
sales income expenses Total
2014 GBP000 GBP000 GBP000 GBP000
------------------------------------------- -------- ---------- --------- -------
Restructuring of operational activities
Efficiency programmes in the UK (a) 2,006 (147) - 1,859
Accelerated amortisation of bank fees (d) - - 439 439
------------------------------------------- -------- ---------- --------- -------
Total restructuring costs 2,006 (147) 439 2,298
------------------------------------------- -------- ---------- --------- -------
Income tax credit (381)
------------------------------------------- -------- ---------- --------- -------
1,917
------------------------------------------- -------- ---------- --------- -------
(a) Costs associated with major upgrade to manufacturing
facilities in Wales they include accelerated depreciation of
GBP571,000 (2014: GBP1,174,00). Other operating income relates to
accelerated release of a grant.
(b) Costs associated with restructuring the leadership team in
the USA.
(c) Costs relating to acquisition of trade and certain assets of
Enper Giftwrap BV.
(d) Accelerated amortisation of bank arrangement fees as a
result of renegotiating banking facilities to fund the investment
in Wales.
Impact of exceptional items on cash flow
There was a GBP1,114,000 impact on the current years cash flow
(2014: GBP201,000) which included GBP812,000 of outflow deferred
from last year. GBP200,000 of the current year's exceptional item
remains to be paid in 2015/16. In 2014 exceptional items of
GBP201,000 were included in that year's cash flow.
11 Property, plant and equipment
Land and buildings
---------------------
Plant and Fixtures and Motor
Freehold Leasehold equipment fittings Vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Cost
Balance at 1 April 2013 21,803 7,749 49,803 1,339 683 81,377
Additions 1,839 107 6,011 270 97 8,324
Disposals - (24) (67) (563) (79) (733)
Reclassification from computer software - - - (389) - (389)
Effect of movements in foreign exchange (166) (690) (1,563) (210) (59) (2,688)
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Balance at 1 April 2014 23,476 7,142 54,184 447 642 85,891
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Additions 566 161 1,311 175 109 2,322
Disposals - (9) 12,512 (41) (104) (12,666)
Additions on acquisition of businesses - - 328 - 14 342
Transfers between categories - 269 (234) (35) - -
Effect of movements in foreign exchange (922) 913 823 (73) (48) 693
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Balance at 31 March 2015 23,120 8,476 43,900 473 613 76,582
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Depreciation and impairment
Balance as at 1 April 2013 (9,770) (2,301) (38,094) (787) (432) (51,384)
Depreciation charge for the year (1,307) (482) (2,762) (416) (65) (5,032)
Disposals - 8 65 548 25 646
Reclassification from computer software - - - 359 - 359
Effect of movements in foreign exchange 46 225 1,090 177 31 1,569
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Balance at 1 April 2014 (11,031) (2,550) (39,701) (119) (441) (53,842)
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Depreciation charge for the year (892) (520) (2,731) (282) (110) (4,535)
Disposals - 9 12,264 48 84 12,405
Transfers between categories - (269) 234 35 - -
Effect of movements in foreign exchange 287 (361) (767) 61 45 (735)
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Balance at 31 March 2015 (11,636) (3,691) (30,701) (257) (422) (46,707)
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Net book value
Balance at 31 March 2015 11,484 4,785 13,199 216 191 29,875
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
At 31 March 2014 12,445 4,592 14,483 328 201 32,049
----------------------------------------- --------- ---------- ---------- ------------- --------- ---------
Depreciation is charged to either cost of sales, selling costs
or administration costs within the income statement depending on
the department to which the assets relate.
Leased plant and machinery
The net book value of property, plant and equipment included an
amount of GBP5,328,000 (2014: GBP4,894,000) in respect of assets
held under finance leases.
Security
All freehold properties are subject to a fixed charge.
12 Intangible assets
Computer Other
Goodwill software intangibles Total
GBP000 GBP000 GBP000 GBP000
--------------------------------------------------- --------- --------- ------------ ---------
Cost
Balance at 1 April 2013 40,700 3,225 498 44,423
Additions - 356 - 356
Reclassification to property, plant and equipment - 389 - 389
Disposals - (197) (467) (664)
Effect of movements in foreign exchange (874) (132) (7) (1,013)
--------------------------------------------------- --------- --------- ------------ ---------
Balance at 1 April 2014 39,826 3,641 24 43,491
Additions - 234 - 234
Additions on acquisition of businesses 509 - 80 589
Disposals - (108) - (108)
Effect of movements in foreign exchange (83) 54 (2) (31)
--------------------------------------------------- --------- --------- ------------ ---------
Balance at 31 March 2015 40,252 3,821 102 44,175
--------------------------------------------------- --------- --------- ------------ ---------
Amortisation and impairment
Balance at 1 April 2013 (9,157) (2,182) (289) (11,628)
Amortisation for the year - (536) (40) (576)
Reclassification to property, plant and equipment - (359) - (359)
Disposals - 76 323 399
Effect of movements in foreign exchange 529 92 2 623
--------------------------------------------------- --------- --------- ------------ ---------
Balance at 1 April 2014 (8,628) (2,909) (4) (11,541)
Amortisation for the year - (406) (22) (428)
Disposals - 98 - 98
Effect of movements in foreign exchange (565) (49) 2 (612)
--------------------------------------------------- --------- --------- ------------ ---------
Balance at 31 March 2015 (9,193) (3,266) (24) (12,483)
--------------------------------------------------- --------- --------- ------------ ---------
Net book value
Balance at 31 March 2015 31,059 555 78 31,692
--------------------------------------------------- --------- --------- ------------ ---------
At 31 March 2014 31,198 732 20 31,950
--------------------------------------------------- --------- --------- ------------ ---------
The aggregate carrying amounts of goodwill allocated to each
geographical segment are as follows:
2015 2014
GBP000 GBP000
------------- ------- -------
UK and Asia 25,600 25,600
Europe 4,409 4,461
Australia 1,050 1,137
------------- ------- -------
Total 31,059 31,198
------------- ------- -------
Impairment
The Group tests goodwill each half year for impairment, or more
frequently if there are indications that goodwill might be
impaired.
For the purposes of impairment testing, goodwill considered
significant in comparison to the Group's total carrying amount of
such assets has been allocated to the business unit, or group of
business units, that are expected to benefit from the synergies of
the combination (see table on page 56 of the financial statements),
which represents the lowest level within the Group at which the
goodwill is monitored for internal management purposes, and is
referred to below as a cash-generating unit. During the last few
years the businesses have begun to work more closely with each
other, exploiting the synergies that arise. The recoverable amounts
of cash-generating units are determined from the higher of value in
use and fair value less costs to sell.
The Group prepares cash flow forecasts for each cash--generating
unit derived from the most recent financial budgets for the
following three years which are approved by the Board. The key
assumptions in those budgets are sales, margins achievable and
overhead costs, which are based on past experience and future
expectations. The Group then extrapolates cash flows for the
following seven years based on a conservative estimate of market
growth of 2% (2014: 2%).
The cash--generating units used the following pre--tax discount
rate which are derived from an estimate of the Group's future
average weighted cost of capital adjusted to reflect the market
assessment of the risks specific to the current estimated cash
flows over the same period.
Pre--tax discount rates used were:
2015 2014
------------- ------ ------
UK and Asia 13.7% 12.7%
Europe 13.3% 14.3%
Australia 16.3% 14.3%
------------- ------ ------
All of the cash--generating units' values in use were determined
to be higher than fair value less costs to sell, thus this was used
as the recoverable amount. In all businesses the carrying value of
the goodwill was supported by the recoverable amount and there are
currently no reasonably foreseeable changes to assumptions that
would give rise to an impairment of the carrying value.
The Directors do not believe a reasonably possible change to the
assumptions would give rise to an impairment. The Directors have
considered a 3% movement in the discount rate and a flat budget
growth rate assumption in their assessment.
13 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Assets Liabilities Net
---------------- ------------------ ----------------
2015 2014 2015 2014 2015 2014
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------- ------- -------- -------- ------- -------
Property, plant and equipment 1,119 1,317 (1,246) (1,304) (127)
Capital gains deferred - - (280) (294) (280) (294)
Tax loss carried forward 3,334 2,488 - - 3,334 2,488
Other temporary differences 1,194 1,458 - - 1,194 1,458
------------------------------- ------- ------- -------- -------- ------- -------
Net tax assets/(liabilities) 5,647 5,263 (1,526) (1,598) 4,121 3,665
------------------------------- ------- ------- -------- -------- ------- -------
The deferred tax asset in respect of tax losses carried forward
at 31 March 2015 of GBP3,334,000 (2014: GBP2,219,000) is comprised
of UK tax losses of GBP773,000 (2014: GBP530,000) and US losses of
GBP2,561,000 (2014: GBP1,689,000). US tax losses carried forward
will become irrecoverable in March 2027. UK tax losses may be
carried forward indefinitely. The deferred tax assets have been
recognised where the Board considers there is sufficient evidence
that taxable profits will be available against which the tax losses
can be utilised. The Board expects that the tax losses will be
recoverable against future profits but given the level of tax
losses brought forward, recoverability has been assessed on the
basis of expected profits currently forecast. Deferred tax assets
in respect of taxable losses that are expected to be recovered
outside this forecast period have not been recognised. This
includes unrecognised deferred tax assets in respect of brought
forward UK losses of GBP272,000 (2014: GBP310,000) and GBP1,719,000
(2014: GBP2,194,000) in respect of brought forward US tax
losses.
No deferred tax is recognised on unremitted earnings of overseas
subsidiaries. Overseas reserves can now be repatriated to the UK
with no tax cost. If all overseas earnings were repatriated with
immediate effect, no tax charge (2014: nil) would be payable.
The Finance Act 2013, which provides for reductions in the main
rate of corporation tax from 23% to 21% effective from 1 April 2014
and to 20% effective from 1 April 2015, was substantively enacted
on 2 July 2013. These rate reductions have been reflected in the
calculation of deferred tax at the balance sheet date.
There are no deferred tax balances with respect to cash flow
hedges.
Movement in deferred tax during the year
1 April Recognised Recognised 31 March
2014 in income in the SOCI* 2015
GBP000 GBP000 GBP000 GBP000
------------------------------- -------- ----------- ------------- ---------
Property, plant and equipment 13 (143) 3
Capital gains deferred (294) 14 - (280)
Tax loss carried forward 2,488 358 488 3,334
Other temporary differences 1,458 (97) (167) 1,194
------------------------------- -------- ----------- ------------- ---------
Net tax assets 3,665 132 324 4,121
------------------------------- -------- ----------- ------------- ---------
Movement in deferred tax during the prior year
1 April Recognised Recognised 31 March
2013 in income in the SOCI* 2014
GBP000 GBP000 GBP000 GBP000
------------------------------- -------- ----------- -------------- ---------
Property, plant and equipment 320 (635) 328 13
Capital gains deferred (472) 322 (144) (294)
Tax loss carried forward 3,277 (504) (285) 2,488
Other temporary differences 1,125 579 (246) 1,458
------------------------------- -------- ----------- -------------- ---------
Net tax assets 4,250 (238) (347) 3,665
------------------------------- -------- ----------- -------------- ---------
*SOCI - statement of comprehensive income
14 Inventory
2015 2014
GBP000 GBP000
------------------ ------- -------
Raw materials
and consumables 5,495 4,531
Work in progress 7,414 9,435
Finished goods 33,253 34,494
------------------ ------- -------
46,162 48,460
------------------ ------- -------
Of the GBP46,162,000 (2014: GBP48,460,000) stock value
GBP41,896,000 (2014: GBP43,870,000) is held at cost and
GBP4,266,000 (2014: GBP4,590,000) is held at net realisable value.
The write down of inventories to net realisable value amounted to
GBP2,565,000 (2014: GBP2,963,000). The reversal of previous write
downs amounted to GBP224,000 (2014: GBP226,000). The reversal is
due to the inventory being either used or sold.
Materials, consumables, changes in finished goods and work in
progress recognised as a cost of sale amounted to GBP162,340,000
(2014: GBP158,590,000).
Part of the Group's funding is via asset--backed loans from our
bankers. These loans are secured on part of the inventory and trade
receivables of the UK, European and American businesses. The amount
of the inventory that is used to secure an asset--backed loan is
GBP38,043,000 (2014: GBP42,298,000). In addition bank loans to
Hoomark and International Greetings USA are secured on a freehold
property and contents, including inventory, therein.
Refer to note 17 for outstanding balance on asset--backed loans
and details of the secured bank loans.
15 Trade and other receivables
2015 2014
GBP000 GBP000
-------------------------------- ------- -------
Trade receivables 18,281 16,078
Prepayments and accrued income 1,226 1,770
Other receivables 2,018 1,699
VAT receivable - 143
-------------------------------- ------- -------
21,525 19,690
-------------------------------- ------- -------
Part of the Group's funding is via asset--backed loans from our
bankers. These loans are secured on part of the inventory and trade
receivables of the UK, European and American businesses. The amount
of the trade receivables that is used to secure the asset--backed
loans is GBP15,223,000 (2014: GBP12,469,000).
Refer to note 17 for outstanding balance on asset--backed
loans.
There are no trade receivables in the current year (2014: nil)
expected to be recovered in more than twelve months.
The Group's exposure to credit and currency risks and impairment
losses related to trade and other receivables is disclosed in note
26.
16 Cash and cash equivalents/bank overdrafts
2015 2014
GBP000 GBP000
--------------------------- -------- --------
Cash and cash equivalents 2,846 8,111
Bank overdrafts (1,568) (2,529)
--------------------------- -------- --------
Cash and cash equivalents
per cash flow statement 1,278 5,582
--------------------------- -------- --------
Net debt
2015 2014
Note GBP000 GBP000
--------------------------- ----- --------- ---------
Cash and cash equivalents 2,846 8,111
Bank loans and overdrafts 17 (28,537) (40,622)
Loan arrangement
fees 334 253
Finance leases (4,016) (4,689)
--------------------------- ----- --------- ---------
Net debt as used
in the financial
review (29,373) (36,947)
--------------------------- ----- --------- ---------
The Group's exposure to interest rate risk and sensitivity
analysis for financial assets and liabilities are disclosed in note
26.
The bank overdrafts are secured by a fixed charge on certain of
the Group's land and buildings, a fixed charge on certain of the
Group's book debts and a floating charge on certain of the Group's
other assets.
17 Loans and borrowings
This note provides information about the contractual terms of
the Group's interest--bearing loans and borrowings. For more
information about the Group's exposure to interest rate and foreign
currency risk, see note 26.
2015 2014
GBP000 GBP000
--------------------------------------- ------- -------
Non--current liabilities
Secured bank loans 23,259 28,222
Loan arrangement fees (170) (77)
--------------------------------------- ------- -------
23,089 28,145
--------------------------------------- ------- -------
Current liabilities
Asset--backed loan 544 5,336
Current portion of secured bank loans 3,166 4,535
--------------------------------------- ------- -------
Bank loans and borrowings 3,710 9,871
Loan arrangement fees (164) (176)
--------------------------------------- ------- -------
3,546 9,695
--------------------------------------- ------- -------
The asset--backed loans are secured on the inventory and
receivables of the larger business units within the UK, USA and
European business segments.
Following the negotiations of modified banking facilities in
August 2014, the Group accrued additional arrangement fees which
are being spread over the life of the facility.
Terms and debt repayment schedule
2015 2014
Repayment analysis of bank loans and overdrafts Note GBP000 GBP000
------------------------------------------------- ----- ------- -------
Due within one year:
Bank loans and borrowings (see below) 3,710 9,871
Bank overdrafts 16 1,568 2,529
Due between one and two years:
Secured bank loans (see below) 5,318 6,071
Due between two and five years:
Secured bank loans (see below) 15,087 18,525
Due after more than five years:
Secured bank loans (see below) 2,854 3,626
------------------------------------------------- ----- ------- -------
28,537 40,622
------------------------------------------------- ----- ------- -------
In August 2014 the Group extended the maturity profile of its
core borrowings as reflected in loans 5 and 6 shown below:
Secured bank loans
Bank overdraft and ABL
Included in the above table are bank overdrafts and ABL balances
of GBP1,568,000 (2014: GBP2,529,000) and GBP544,000 (2014:
GBP5,336,000). Overdrafts are secured on the assets of the Group,
ABL balances are secured over inventory and trade receivable
balances (see notes 14 and 15 for further details).
Loan 1
The principal of GBP176,000 (2014: GBP303,000) is repayable
monthly on a reducing balance basis over a 15--year period, ending
in March 2016. The loan is secured over the freehold land and
buildings and the contents therein of International Greetings USA,
Inc. and is subject to a variable rate of interest linked to the US
Federal Funds Rate (US FFR). The currency of denomination of the
loan is US dollars.
Loan 2
The principal of GBP132,000 (2014: GBP275,000) is repayable
monthly on a reducing balance basis over a nine--year period ending
in March 2016. The loan is secured over the freehold land and
buildings and the content therein of International Greetings USA,
Inc. and is subject to a variable rate of interest linked to the US
FFR. The currency of denomination of the loan is US dollars.
Loan 3
A new loan of GBP365,000 was taken out during the year and is
secured over part of the plant and machinery of International
Greetings USA. The principle of GBP328,000 (2014: nil) was
outstanding at 31 March 2015 and is repayable over a five--year
period ending September 2019. It is subject to a variable rate of
interest linked to the US FRR. The currency of denomination of the
loan is US dollars.
Loan 4
The principal of GBP4,483,000 (2014: GBP5,486,000) is repayable
quarterly over a 20--year period ending in July 2028. The loan is
secured over the freehold land and buildings and the content
therein of Hoomark BV and is subject to a variable rate of interest
linked to EURIBOR, that has been swapped to a fixed rate for a
notional amount of GBP5,072,000 (2014: GBP5,785,000) over a period
of five years ending in January 2017. The currency of denomination
of the loan is euros.
Loan 5
The principal of GBP9,010,000 is repayable in May 2018.
GBP6,925,000 is denominated in sterling and GBP2,085,000 is
denominated in US dollars. They are subject to a variable interest
rate linked to LIBOR except for the element that has been swapped.
At 31 March 2015 the Group had an interest rate cap on a notional
amount of GBP8 million, and a notional amount of $8 million,
whereby interest payable has been capped at 1.5% on both notional
amounts.
Loan 6
The principal of GBP12,297,000 is repayable and amortised to May
2017. GBP7,229,000 is denominated in sterling and GBP5,068,000 is
denominated in US dollars. They are subject to a variable interest
rate linked to LIBOR except for the elements that have been
swapped. At 31 March 2015, the Group had an interest rate swap in
place with a notional amount of GBP0.6 million whereby it receives
a floating rate of interest based on LIBOR and pays a fixed rate of
interest at 0.92% on the notional amount. The terms of the hedge
have been negotiated to match the terms of the commitments. At 31
March 2015, the Group had an interest rate swap in place with a
notional amount of $2.8 million whereby it receives a floating rate
of interest based on LIBOR and pays a fixed rate of interest at
0.77% on the notional amount.
Previous amounts outstanding at 31 March 2014 were GBP14,859,000
repayable in May 2016, GBP8,035,000 repayable over two years to May
2015 and GBP4,000,000 repayable over three years to May 2016.
18 Deferred income
2015 2014
GBP000 GBP000
------------------------------------------ ------- -------
Included within non--current liabilities
Deferred grant income 1,277 1,592
------------------------------------------ ------- -------
Included within current liabilities
Deferred grant income 619 620
Other deferred income 13 582
------------------------------------------ ------- -------
Deferred grant income 632 1,202
------------------------------------------ ------- -------
The deferred grant income is in respect of government grants
relating to the development of the site in Wales. This is being
amortised in line with depreciation on the new investment. All
conditions on the old grant have been met and there is no
requirement to repay. It is being amortised in line with the
depreciation on the site development.
19 Provisions
Property
GBP000
------------------------- ---------
Balance at 1 April 2014 1,025
Unwinding of fair value
discounts 14
Provisions utilised
during the year (71)
Balance at 31 March
2015 968
------------------------- ---------
2015 2014
GBP000 GBP000
-------------- ------- -------
Non--current 862 860
Current 106 165
-------------- ------- -------
968 1,025
-------------- ------- -------
The provision represents the estimated reinstatement cost of two
of the Group's leasehold properties under fully repairing leases
and provision for an onerous lease for one of those properties. A
professional valuation was performed during 2012 for one of the
leasehold properties and the provision was reassessed and is stated
after discounting. GBP664,000 of the non--current balance relates
to a lease expiring in 2025, the balance relates to items between
two and five years.
20 Other financial liabilities
2015 2014
GBP000 GBP000
---------------------------------------------------------------------------------------------- ------- -------
Included within non--current liabilities
Finance lease 3,390 4,087
Other creditors and accruals 76 115
---------------------------------------------------------------------------------------------- ------- -------
3,466 4,202
---------------------------------------------------------------------------------------------- ------- -------
Included within current liabilities
Finance lease 626 602
Other creditors and accruals 9,867 9,210
Interest rate swaps and forward foreign currency contracts carried at fair value through the
income statement 110 115
Interest rate swaps and forward foreign exchange contracts carried at fair value through the
hedging reserve 207 577
---------------------------------------------------------------------------------------------- ------- -------
10,810 10,504
---------------------------------------------------------------------------------------------- ------- -------
Finance lease liabilities
Finance lease liabilities are payable as follows:
Minimum Minimum
lease lease
payments Interest Principal payments Interest Principal
2015 2015 2015 2014 2014 2014
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- --------- --------- ---------- --------- --------- ----------
Less than one year 781 (155) 626 795 (193) 602
Between one and five years 3,268 (317) 2,951 3,538 (400) 3,138
More than five years 444 (5) 439 968 (19) 949
---------------------------- --------- --------- ---------- --------- --------- ----------
4,493 (477) 4,016 5,301 (612) 4,689
---------------------------- --------- --------- ---------- --------- --------- ----------
During the prior year two new finance leases were entered into
for GBP3,239,000 to fund new printing machines in the Group's
facilities in Wales. The interest rate on these leases is
3.88%.
21 Trade and other payables
2015 2014
GBP000 GBP000
-------------------------- ------- -------
Trade payables 25,887 25,031
Other payables including
income taxes and social
security 981 787
-------------------------- ------- -------
26,868 25,818
-------------------------- ------- -------
22 Share capital
Authorised share capital at 31 March 2015 and 2014 was
GBP6,047,443 divided into 120,948,860 ordinary shares of 5p
each.
Ordinary shares
------------------
In thousands of shares 2015 2014
In issue at 1 April 57,926 56,768
Options exercised during the
year 280 1,158
In issue at 31 March - fully
paid 58,206 57,926
------------------------------ -------- --------
2015 2014
GBP000 GBP000
------------------------------------ ------- -------
Allotted, called up and fully paid
Ordinary shares of GBP0.05 each 2,910 2,896
------------------------------------ ------- -------
Share options exercised during the year amounted to 280,000
(2014: 1,158,000) which generated cash proceeds of GBP39,000 (2014:
GBP176,000).
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
23 Earnings per share
2015 2014
----------------- -----------------
Diluted Basic Diluted Basic
---------------------- -------- ------- -------- -------
Adjusted earnings
per share excluding
exceptional items
and LTIP charges 11.5p 12.0p 8.4p 8.6p
Cost per share on
LTIP charge (0.8p) (0.8p) (0.1p) (0.1p)
---------------------- -------- ------- -------- -------
Adjusted earnings
per share excluding
exceptional items 10.7p 11.2p 8.3p 8.5p
Cost per share on
exceptional items (1.4p) (1.5p) (3.2p) (3.3p)
---------------------- -------- ------- -------- -------
Earnings per share 9.3p 9.7p 5.1p 5.2p
---------------------- -------- ------- -------- -------
The basic earnings per share is based on the profit attributable
to equity holders of the Company of GBP5,605,000 (2014:
GBP3,010,000) and the weighted average number of ordinary shares in
issue of 58,071,000 (2014: 57,519,000) calculated as follows:
2015 2014
-------------------------- ------- -------
Issued ordinary shares
at 1 April 57,926 56,768
Shares issued in respect
of exercising of share
options 145 751
-------------------------- ------- -------
Weighted average number
of shares at 31 March 58,071 57,519
-------------------------- ------- -------
Adjusted basic earnings per share excludes exceptional items
charged of GBP1,235,000 (2014: GBP2,298,000) and the tax relief
attributable to those items of GBP362,000 (2014: GBP381,000), to
give adjusted profit of GBP6,478,000 (2014: GBP4,927,000).
Diluted earnings per share
The average number of share options outstanding in the year is
1,723,833 (2014: 2,281,351), at an average exercise price of 17.4p
(2014: 19.6p). The diluted earnings per share is calculated
assuming all these options were exercised, and taking into account
LTIP awards whose specified performance conditions were satisfied
at the end of the reporting period. At 31 March the diluted number
of shares was 60,531,000 (2014: 59,098,460).
24 Dividends paid and proposed
No dividends were paid in the year (2014: nil). The Directors
are recommending a final dividend of 1p (2014: nil). If approved,
the dividend will be paid in September 2015 to shareholders on the
register at the close of business on 10 July 2015.
2015 2014
---------------- ----------------
Pence Pence
---------------------------- ------- ------- ------- -------
Proposed for approval per per
at Annual General Meeting share GBP000 share GBP000
Final equity dividend
for current year 1.00 582 - -
---------------------------- ------- ------- ------- -------
25 Share--based payments
Executive Share Options 2008
Options to subscribe for ordinary shares have been granted,
pursuant to the Company's approved and unapproved Employee Share
Option Schemes, which are exercisable at dates ranging up to
January 2021. At 31 March 2015, outstanding options were as
follows:
Number of Exercise Exercise
ordinary shares price (p) dates
------------- ---------------- ---------- --------------------------------
Approved: 1,382,140 14 December 2011 - December 2018
38,000 31.25 July 2012 - July 2019
12,000 50 September 2012 - September 2019
48,387 62 January 2014 - January 2021
Unapproved: 107,145 14 December 2011 - December 2018
1,613 62 January 2014 - January 2021
------------- ---------------- ---------- --------------------------------
1,589,285
------------- ---------------- ---------- --------------------------------
All share--based payments are equity--settled.
There were no performance conditions attached to the approved
options (other than continued employment). Conditions related to
profitability for the two years to March 2011 were attached to the
unapproved options awarded to Executive Directors and these
conditions have now been fully met.
For the share options outstanding at 31 March 2015, the weighted
average remaining contract life was 3.8 years (2014: 4.7
years).
The numbers and weighted average exercise prices of share
options are as follows:
2015 2014
---------------------------- -----------------------------
Weighted Weighted Weighted
average Number of average Number of
exercise price options exercise price options
-------------------------------------------- --------------- ----------- --------------- ------------
Outstanding at the beginning of the period 17p 1,874,285 17p 3,141,956
Approved options granted during the period 0p - 0p -
Unapproved options granted in the period 0p - 0p -
Lapsed during the year 14p (5,000) 58p (110,000)
Exercised during the period 14p (280,000) 15p (1,157,671)
-------------------------------------------- --------------- ----------- --------------- ------------
Outstanding at the end of the period 16p 1,589,285 16p 1,874,285
-------------------------------------------- --------------- ----------- --------------- ------------
Exercisable at the end of the period 16p 1,589,285 16p 1,874,285
-------------------------------------------- --------------- ----------- --------------- ------------
The weighted average share price at the date of exercise of
share options exercised during the period was 73.7p (2014:
47.4p).
No share options were granted during the year or the previous
year.
Long--Term Incentive Plan (LTIP)
On 31 March 2014, International Greetings PLC announced the
introduction of a new Long Term Incentive Plan ("LTIP"). Under the
LTIP, ordinary shares of 5p each ("ordinary shares") may be awarded
annually to Executive Board Directors of the Company, Managing
Directors and other selected senior management team members within
the Group. Ordinary shares only vest to the degree that stretching
performance conditions are met. The maximum dilution under the LTIP
is 15% over a ten--year period, excluding the award to Anthony
Lawrinson set out below and disregarding prior option schemes. The
scheme rules which have been agreed by the Remuneration Committee
include reasonable provisions in the event of change of control,
suitable flexibility to modify performance targets in specified
situations and also a mechanism for claw--back under certain
circumstances. The Board retains the flexibility for the Employee
Benefit Trust to buy ordinary shares to mitigate future
dilution.
The performance period for each award under the LTIP is expected
to be three years. The cost to employees of ordinary shares issued
under the LTIP, if the performance criterion is met, will be nil.
In principle the number of ordinary shares to be granted to each
employee under the LTIP will not in value be more than a 100% of
the relevant employee's salary based on the relevant share price at
the time of grant, although the rules allow an upper maximum of
150%.
Under the scheme, the Company also announced that it intends to
issue up to 1,400,000 ordinary shares to Anthony Lawrinson, a
Director of the Company. The arrangement forms part of Anthony
Lawrinson's remuneration package agreed at the time of his
appointment to the Board in October 2011. Vesting is conditional
upon and proportionate to the cumulative average growth in fully
diluted earnings per share before exceptional items over a defined
period from 1 April 2012 to 31 March 2015 with a cumulative average
growth rate (CAGR) of 20% required for the whole amount to vest.
The cost to Anthony Lawrinson of any ordinary shares issued under
the LTIP will be nil.
The award periods now in place under the LTIP are as
follows:
-- 2012--2015: Anthony Lawrinson only
The three year CAGR from 1 April 2012 to 31 March 2015 has been
calculated to be 16.93% based on the scheme rules, resulting in
1,107,652 shares vesting. The balance of 392,348 will lapse.
-- 2014--2017: provisional share awards totalling 1,297,698 shares
Share awards totalling 1,297,698 were issued during the year to
18 members of the leadership teams across the Group. The
performance condition applied is CAGR in fully diluted earnings per
share before exceptional items and this must be not less than 10%
for any initial vesting to take place and up to 20% for the whole
amount to vest.
The charge for the LTIP granted during the year was based on the
share price on the date the scheme was approved and the expected
number of shares to vest.
The total expenses recognised for the period arising from
equity--settled share--based payments are as follows:
2015 2014
GBP000 GBP000
------------------------------ ------- -------
Charge in relation to the
2012--15 LTIP scheme 483 82
Charge in relation to the
2014--17 LTIP scheme 29 -
Equity--settled share--based
payments 512 82
National Insurance charge
on LTIP awards 111 -
------------------------------ ------- -------
623 82
------------------------------ ------- -------
26 Financial instruments
a) Fair values of financial instruments
The carrying values for each class of financial assets and
financial liabilities in the balance sheet, which are given below,
are not considered to be materially different to their fair
values.
As at 31 March 2015, the Group had derivative contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of an asset of GBP779,000 and a liability
of GBP317,000 (2014: liability of GBP692,000).
Derivative financial instruments
The fair value of forward exchange contracts is assessed using
valuation models taking into account market inputs such as foreign
exchange spot and forward rates, yield curves and forward interest
rates.
Fair value hierarchy
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers and investment securities.
The Group's exposure to credit risk is managed by dealing only
with banks and financial institutions with strong credit ratings.
The Group's financial credit risk is primarily attributable to its
trade receivables.
The Group has no significant concentration of credit risk
exposure as revenues are split across a large number of customers
in different geographical areas. The main customers of the Group
are large and mid--sized retailers, other manufacturers and
wholesalers of greetings products, service merchandisers and
trading companies. The Group has established procedures to minimise
the risk of default of trade receivables including detailed credit
checks undertaken before new customers are accepted and rigorous
credit control procedures after sale. These processes have proved
effective in minimising the level of impairments required.
The amounts presented in the balance sheet are net of allowances
for doubtful receivables estimated by the Group's management, based
on prior experience and their assessment of the current economic
environment.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. Therefore, the maximum exposure to credit risk at
the balance sheet date was GBP23,924,000 (2014: GBP25,888,000)
being the total of the carrying amount of financial assets.
The maximum exposure to credit risk for trade receivables at the
balance sheet date by geographic region was:
2015 2014
GBP000 GBP000
------------- ------- -------
UK and Asia 7,754 6,850
USA 5,327 4,237
Europe 2,823 2,306
Australia 2,377 2,685
------------- ------- -------
18,281 16,078
------------- ------- -------
Credit quality of financial assets and impairment losses
The ageing of trade receivables at the balance sheet date
was:
2015 2014
--------------------- ---------------------
Gross Impairment Gross Impairment
GBP000 GBP000 GBP000 GBP000
------------- -------- ----------- -------- -----------
Not past
due 14,020 (8) 11,408 (5)
Past due
0--90 days 3,704 (48) 4,025 (46)
More than
90 days 766 (153) 926 (230)
------------- -------- ----------- -------- -----------
18,490 (209) 16,359 (281)
------------- -------- ----------- -------- -----------
There were no unimpaired balances outstanding at 31 March 2015
(2014: nil) where the Group had renegotiated the terms of the trade
receivable.
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
2015 2014
GBP000 GBP000
------------------------- ------- -------
Balance at 1 April 281 464
Charge for the year 154 310
Unused amounts reversed (105) (211)
Amounts written off (118) (270)
Effects of movement
in foreign exchange (3) (12)
------------------------- ------- -------
Balance at 31 March 209 281
------------------------- ------- -------
The allowance account for trade receivables is used to record
impairment losses unless the Group is satisfied that no recovery of
the amount owing is possible; at that point the amounts considered
irrecoverable are written off against the trade receivables
directly.
c) Liquidity risk
Financial risk management
The Group's policy with regard to liquidity ensures adequate
access to funds by maintaining an appropriate mix of short--term
and longer--term facilities, which are reviewed on a regular basis.
The maturity profile and details of debt outstanding at 31 March
2015 is set out in note 17.
The following are the contractual maturities of financial
liabilities, including estimated interest payments:
More than
Nominal five years
interest Carrying Contractual One year One to two Two to 31 March
rate amount Cash flows or less years five years 2015
Notes % GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
Non--derivative
financial
liabilities
Secured bank
loans -
sterling 2.9 - 3.1 14,154 (14,596) (1,493) (2,982) (10,121) -
Secured bank
loans - US
dollar 3.1 - 3.5 7,788 (8,099) (1,453) (2,183) (4,463) -
Secured bank
loans - euros 4.3 4,483 (6,137) (585) (644) (1,518) (3,390)
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
Total secured
bank loans 17 26,425 (28,832) (3,531) (5,809) (16,102) (3,390)
Finance leases 20
- sterling
leases 3.9 2,773 (3,084) (523) (526) (1,591) (444)
- euro leases 4.9 1,242 (1,408) (257) (257) (894) -
- other leases 6.0 1 (1) (1) - - -
Other financial
liabilities 9,943 (9,943) (9,868) (75) - -
Trade payables 21 25,887 (25,887) (25,887) - - -
Other payables 21 981 (981) (981) - - -
Asset--backed
loans 2.1 - 3.5 544 (544) (544) - - -
Bank overdraft 1.0 - 3.9 1,568 (1,568) (1,568) - - -
Derivative
financial
liabilities
Financial
liabilities at
fair value
through the
income statement
- interest rate
swaps (a) 110 - - - - -
Financial
liabilities
carried at fair
value through
the hedging
reserve -
interest rate
swaps
(a) 207 - - - - -
Forward foreign
exchange
contracts
carried at fair
value through
the hedging
reserve (779) (17,710) (17,710) - - -
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
68,902 (89,958) (60,870) (6,667) (18,587) (3,834)
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
(a) The interest rate swaps with fair values of GBP110,000 and
GBP207,000 mature over a period of three years ending January
2017.
More than
Nominal five years
interest Carrying Contractual One year One to two Two to 31 March
rate amount Cash flows or less years five years 2015
Notes % GBP000 GBP000 GBP000 GBP000 GBP000 Notes
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
Non--derivative
financial
liabilities
Secured bank
loans -
sterling 3.4--3.8 17,900 (18,833) (2,359) (3,898) (12,576) -
Secured bank
loans - US
dollar 3.1--3.6 9,372 (9,936) (1,908) (2,053) (5,975) -
Secured bank
loans - euros 4.3 5,485 (7,023) (574) (574) (1,649) (4,226)
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
Total secured
bank loans 17 32,757 (35,792) (4,841) (6,525) (20,200) (4,226) 17
Finance leases 20
- sterling
leases 3.9 3,176 (3,614) (529) (529) (1,588) (968)
- euro leases 4.8 1,505 (1,679) (258) (258) (1,163) -
- other leases 6.0 8 (8) (8) - - -
Other financial
liabilities 9,325 (9,325) (9,210) (115) - -
Trade payables 21 25,031 (25,031) (25,031) - - -
Other payables 21 787 (787) (787) - -
Asset--backed
loans 1.7 - 3.5 5,336 (5,336) (5,336) - - -
Bank overdraft 1.5 - 5.1 2,529 (2,529) (2,529) - - -
Derivative
financial
liabilities
Financial
liabilities at
fair value
through the
income statement
- interest rate
swaps (a) 49 - - - -
Financial
liabilities
carried at fair
value through
the hedging
reserve -
interest rate
swaps
(a) 399 - - - -
Forward foreign
exchange
contracts
carried at fair
value through
the income
statement 66 (150) (150) - -
Forward foreign
exchange
contracts
carried at fair
value through
the hedging
reserve 178 (21,374) (21,374) - - -
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
81,146 (105,625) (70,053) (7,427) (22,951) (5,194)
----------------- ------ ----------- ------------ ------------ ----------- ----------- ----------- -----------
(a) The interest rate swaps with fair values of GBP49,000 and
GBP399,000 mature over a period of three years ending January
2017.
The following shows the facilities for bank loans, overdrafts,
asset--backed loans and revolving credit facilities:
31 March 2015 31 March 2014
---------------------------------------------- ----------------------------------------------
Facility Facility
Carrying used contractual Facility Total Carrying used contractual Facility Total
amount cash flows unused facility amount cash flows unused facility
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- -------- ---------------- -------- -------- -------- ---------------- -------- --------
Secured bank loans
(see above) 26,425 (28,832) - (28,832) 32,757 (35,792) - (35,792)
Asset--backed loans 544 (544) (16,533) (17,077) 5,336 (5,336) (9,283) (14,619)
Revolving credit
facilities - - - - - - (500) (500)
Bank overdraft 1,568 (1,568) (4,972) (6,540) 2,529 (2,529) (4,537) (7,066)
---------------------- -------- ---------------- -------- -------- -------- ---------------- -------- --------
28,537 (30,944) (21,505) (52,449) 40,622 (43,657) (14,320) (57,977)
---------------------- -------- ---------------- -------- -------- -------- ---------------- -------- --------
The asset--backed loan facilities are dependent upon the levels
of the relevant inventory and receivables.
The major bank facilities vary in the year depending on forecast
debt requirements. The maximum limit across all facilities with the
major bank was GBP74 million (2014: GBP74 million). At 31 March
2015 the facility amounted to GBP35.3 million (2014: GBP42.9
million).
Additional facilities were available at other banks of GBP14.7
million (2014: GBP17.0 million), including asset--backed loans
according to the level of receivables and inventory.
The short term overdraft, RCF and the asset--backed loan
elements of those facilities was renewed on improved terms in May
2014, which will slightly lower the blended rate in the forthcoming
year.
The asset--backed loan facilities are to be renewed on:
-- UK - May 2016;
-- USA - August 2017; and
-- Europe - July 2017.
d) Cash flow hedges
The following table indicates the periods in which the cash
flows associated with cash flow hedging instruments are expected to
occur:
Carrying Contractual One year
amount cash flows or less
31 March 2015 GBP000 GBP000 GBP000
----------------------------- --------- ------------ ---------
Interest rate swaps:
Liabilities 207 - -
Forward exchange contracts:
Assets 779 (17,710) (17,710)
----------------------------- --------- ------------ ---------
Carrying Contractual One year
amount cash flows or less
31 March 2014 GBP000 GBP000 GBP000
----------------------------- --------- ------------ ---------
Interest rate swaps:
Liabilities 399 - -
Forward exchange contracts:
Liabilities 178 (21,374) (21,374)
----------------------------- --------- ------------ ---------
At 31 March 2015 the Group had an interest rate swap in place
with a notional amount of EUR7 million (GBP5.1 million), whereby it
receives a floating rate of interest based on EURIBOR and pays a
fixed rate of interest at 2.29% on the notional amount. This swap
is to hedge the exposure to changes in the interest rate. The terms
of the hedge have been negotiated to match the terms of the
commitments. The fair value of the swap at the balance sheet date
was a liability of GBP207,000.
The Group has forward currency hedging contracts outstanding at
31 March 2015 designated as hedges of expected future purchases in
US dollars and Chinese renminbi for which the Group has firm
commitments. The forward currency contracts are being used to hedge
the foreign currency risk of the firm commitments.
The terms of the forward currency hedging contracts have been
negotiated to match the terms of the commitments.
The cash flow hedges of the expected future purchases in 2015/16
were assessed to be highly effective and as at 31 March 2015 a net
unrealised gain of GBP779,000 with related deferred tax credit of
nil was included in other comprehensive income in respect of these
hedging contracts.
e) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments.
The Group hedges a proportion, as deemed appropriate by
management, of its UK subsidiaries' sales and purchases of
inventory denominated in foreign currency by entering into foreign
exchange contracts. Such foreign exchange contracts typically have
maturities of less than one year.
The Group rarely hedges profit translation exposure, since such
hedges provide only a temporary deferral of the effects of movement
in foreign exchange rates. Similarly, the Group does not hedge its
long--term investments in overseas assets.
However, the Group holds loans that are denominated in the
functional currency of certain overseas entities.
The Group's exposure to foreign currency risk is as follows.
This is based on the carrying amount for monetary financial
instruments except derivatives when it is based on notional
amounts.
Sterling Euro US dollar Other Total
31 March 2015 Notes GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------------------- ------ --------- -------- ---------- -------- ---------
Cash and cash equivalents 16 1,960 789 89 8 2,846
Trade receivables 15 6,827 2,742 6,179 2,533 18,281
Other receivables 1,140 22 4 - 1,166
Financial assets at fair value through income statement 779 - - - 779
Secured bank loans 17 (14,154) (4,483) (7,788) - (26,425)
Loan arrangement fees 17 256 - 78 - 334
Finance leases 20 (2,773) (1,242) - (1) (4,016)
Asset--backed loans 17 - (58) (486) - (544)
Bank overdrafts 16 (346) (386) 282 (1,118) (1,568)
Trade payables 21 (11,341) (3,020) (7,419) (4,107) (25,887)
Other payables 21 (678) (303) - - (981)
Financial liabilities at fair value through hedging
reserve 20 (207) - - - (207)
-------------------------------------------------------- ------ --------- -------- ---------- -------- ---------
Balance sheet exposure (18,537) (5,939) (9,061) (2,685) (36,222)
-------------------------------------------------------- ------ --------- -------- ---------- -------- ---------
Sterling Euro US dollar Other Total
31 March 2014 Notes GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------------------------------- ------ --------- -------- ---------- -------- ---------
Cash and cash equivalents 16 1,010 5,006 674 1,421 8,111
Trade receivables 15 4,939 2,284 5,896 2,959 16,078
Other receivables 1,296 51 21 70 1,438
Secured bank loans 17 (17,900) (5,485) (9,372) - (32,757)
Loan arrangement fees 17 155 - 98 - 253
Finance leases 20 (3,176) (1,505) (6) (2) (4,689)
Asset--backed loans 17 1,007 (3,572) (2,771) - (5,336)
Bank overdrafts 16 1,657 801 (3,918) (1,069) (2,529)
Trade payables 21 (11,834) (3,262) (7,433) (2,502) (25,031)
Other payables 21 (549) (238) - - (787)
Financial liabilities at fair value through hedging
reserve 20 (577) - - - (577)
-------------------------------------------------------- ------ --------- -------- ---------- -------- ---------
Balance sheet exposure (23,972) (5,920) (16,811) 877 (45,826)
-------------------------------------------------------- ------ --------- -------- ---------- -------- ---------
The following significant exchange rates applied during the
year:
Reporting date
Average rate spot rate
--------------- -----------------
2015 2014 2015 2014
Euro 1.29 1.19 1.38 1.21
US dollar 1.61 1.59 1.48 1.67
----------- ------- ------ -------- -------
Sensitivity analysis
A 10% weakening of the following currencies against sterling at
31 March 2015 would have increased equity and profit or loss by the
amounts shown below. This calculation assumes that the change
occurred at the balance sheet date and had been applied to risk
exposures existing at that date. This is translational
exposure.
This analysis assumes that all other variables, in particular
other exchange rates and interest rates, remain constant. The
analysis is performed on the same basis for 31 March 2014.
Equity Profit/(loss)
------------------ ----------------
2015 2014 2015 2014
GBP000 GBP000 GBP000 GBP000
----------- ------- --------- ------- -------
Euro 127 (285) (25) (148)
US dollar 824 (1,528) (617) (247)
----------- ------- --------- ------- -------
On the basis of the same assumptions, a 10% strengthening of the
above currencies against sterling at 31 March 2015 would have
decreased equity and profit or loss by the following amounts:
Equity Profit/(loss)
------------------- ----------------
2015 2014 2015 2014
GBP000 GBP000 GBP000 GBP000
----------- -------- --------- ------- -------
Euro (155) 349 31 181
US dollar (1,007) (1,868) 754 302
----------- -------- --------- ------- -------
Interest rate risk
Profile
At the balance sheet date the interest rate profile of the
Group's interest--bearing financial instruments was:
2015 2014
Note GBP000 GBP000
--------------------------- ----- --------- ---------
Fixed rate instruments
Financial liabilities (20,969) (24,757)
Variable rate instruments
Financial assets 2,846 8,111
Financial liabilities (7,568) (15,865)
Loan arrangement fees 334 253
Finance leases (4,016) (4,689)
--------------------------- ----- --------- ---------
Net debt 16 (29,373) (36,947)
--------------------------- ----- --------- ---------
The fixed rate borrowings above are shown after taking account
of interest rate swaps and interest rate caps (see note 17 for
details).
A change of 50 basis points (0.5%) in interest rates at the
balance sheet date would have decreased equity and profit or loss
by the amounts shown below. This calculation assumes that the
change occurred at the balance sheet date and had been applied to
risk exposures existing at that date.
This analysis assumes that all other variables, in particular
foreign currency rates, remain constant and considers the effect on
financial instruments with variable interest rates, financial
instruments at fair value through profit or loss. The analysis is
performed on the same basis for 31 March 2014.
2015 2014
GBP000 GBP000
---------------- ------- -------
Equity
Increase - -
Decrease 24 68
Profit or loss
Increase - -
Decrease 24 68
---------------- ------- -------
f) Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. The Group is dependent on the
continuing support of its bankers for working capital facilities
and so the Board's major objective is to keep borrowings within
these facilities.
The Board manages as capital its trading capital, which it
defines as its net assets plus net debt. Net debt is calculated as
total debt (bank overdrafts, loans and borrowing as shown in the
balance sheet), less cash and cash equivalents. The banking
facilities with our principal bank have covenants relating to
interest cover, cash flow cover and leverage, and our articles
currently permit borrowings (including letter of credit facilities)
to a maximum of four times equity.
Equity
------------------
2015 2014
Note GBP000 GBP000
Net assets
attributable
to owners
of the Parent
Company 59,664 53,512
Net debt 16 29,373 36,947
----------------- ----- -------- --------
Trading capital 89,037 90,459
----------------- ----- -------- --------
The main areas of capital management revolve around the
management of the components of working capital including
monitoring inventory turn, and months' production or cost of sales
outstanding, age of inventory, age of trade receivables, balance
sheet reforecasting, monthly profit and loss, weekly cash flow
forecasts and daily cash balances. Major investment decisions are
based on reviewing the expected future cash flows and all major
capital expenditure requires sign off by the Chief Executive
Officer and Chief Financial Officer. There were no major changes in
the Group's approach to capital management during the year. A
particular focus of the Group is leverage measured as the ratio of
net debt to pre--exceptional EBITDA which is measured on a monthly
basis.
27 Operating leases
Non--cancellable operating lease rentals are payable as
follows:
2015 2014
GBP000 GBP000
----------------- ------- -------
Less than one
year 3,389 3,921
Between one and
five years 9,871 8,737
More than five
years 7,476 9,178
----------------- ------- -------
20,736 21,836
----------------- ------- -------
The Group leases a number of warehouse and factory facilities as
well as vehicles and office equipment under operating leases. The
leases of warehouse and factory facilities typically have an option
to renew at the end of the lease term and lease payments are
subject to five--yearly rent reviews.
One of the leased properties has been sublet by the Group and
part of a second. The sub--leases have periods to run of more than
five years. Sub--lease payments of GBP447,000 (2014: GBP303,000)
are expected to be received during the financial year.
During the year GBP3,765,000 was recognised as an expense in the
income statement in respect of operating leases (2014:
GBP4,307,000).
28 Capital commitments
At 31 March 2015, the Group had outstanding authorised capital
commitments to purchase plant and equipment for GBP313,000 (2014:
GBP1,076,000).
29 Acquisition of business
On 5 June 2015, the Group acquired the trade and certain assets
of Enper Giftwrap BV for a cash consideration of GBP1,451,000
(EUR1,854,000). The fair value of the identifiable assets and
liabilities acquired as at the date of acquisition were:
GBP000
--------------------------------------------- -------
Intangible fixed assets 80
Plant and equipment 342
Stock 684
Accruals (54)
Finance lease acquired (110)
--------------------------------------------- -------
Total identifiable net assets at fair value 942
--------------------------------------------- -------
Goodwill arising on acquisition (note 12) 509
--------------------------------------------- -------
Total purchase consideration transferred 1,451
--------------------------------------------- -------
Cash consideration 1,451
--------------------------------------------- -------
Transaction costs of GBP99,000 have been expensed and are
included in administrative expenses as an exceptional item.
From the date of acquisition to 31 March 2015 the Enper Giftwrap
business acquired contributed GBP2,481,000 of turnover of the
Group.
If the combination had taken place at the beginning of the year
the consolidated turnover of the Group would have been
GBP229,490,000.
The trade of Enper Giftwrap has been incorporated into that of
Hoomark BV. It is not possible to separate out and disclose
separately the profit of the Enper Giftwrap business.
30 Related parties
2015 2014
GBP000 GBP000
------------------------------ ------- -------
Sale of goods:
AB Alrick - Hedlund 245 413
Hedlunds Pappers Industri AB 97 62
Festive Productions Ltd 55 57
Hedlund Import AB 8,078 8,186
------------------------------ ------- -------
8,475 8,718
------------------------------ ------- -------
Purchase of goods:
AB Alrick - Hedlund - 706
Hedlund Import AB 20 173
------------------------------ ------- -------
20 879
------------------------------ ------- -------
Receivables
AB Alrick - Hedlund - 11
Hedlunds Pappers Industri AB 4 1
------------------------------ ------- -------
Balance at 31 March 2014 4 12
------------------------------ ------- -------
Payables
Hedlund Import AB (144) (436)
------------------------------ ------- -------
Balance at 31 March 2014 (144) (436)
------------------------------ ------- -------
Identity of related parties and trading
Hedlund Import AB and AB Alrick - Hedlund are under the ultimate
control of the Hedlund family. Anders Hedlund is a Director of
Hedlunds Pappers Industri AB which is under the ultimate control of
the Hedlund family. Festive Productions Ltd is a subsidiary
undertaking of Malios Holding AG, a company under the ultimate
control of the Hedlund family.
Phil Dutton, Non--Executive Director, is married to Judith
McKenna who was Executive Vice President of Strategy and
International Development at Walmart International and is now
Executive Vice President, Chief Development Officer of Walmart US.
Walmart are a significant customer of the Group.
The above trading takes place in the ordinary course of business
and on normal commercial terms.
Other related party transactions
Directors of the Company and their immediate relatives have an
interest in 49% (2014: 50%) of the voting shares of the Company.
The shareholdings of Directors are shown in the Directors' report
in the financial statements. No other shares were issued to
Directors during the year (2014: nil).
Directors' remuneration
2015 2014
GBP000 GBP000
------------------------------ ------- -------
Remuneration 1,543 1,941
Share--based payments - LTIP 578 82
Pension contributions 83 71
Employer national insurance
contributions on the above
remuneration 207 242
------------------------------ ------- -------
2,411 2,336
------------------------------ ------- -------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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