TIDMIGR
RNS Number : 2479G
IG Design Group PLC
24 November 2020
EMBARGOED UNTIL 7.00 AM, 24 NOVEMBER 2020
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the six months ended 30 September 2020
STRONGER THAN EXPECTED H1 PERFORMANCE- FULL YEAR OUTLOOK AHEAD
OF MARKET EXPECTATIONS
IG Design Group plc, one of the world's leading designers,
innovators and manufacturers of Gift Packaging, Celebrations, Craft
& creative play, Stationery, Gifting and related product
categories announces its results for the six months ended 30
September 2020.
As previously announced the Group's reporting currency has moved
to US dollars following the acquisition of CSS Industries, Inc.
('CSS') in March 2020 which increased the US dollar revenues to
over 70% of the Group.
Financial Highlights H1 2021 H1 2020
------------
Revenue $434.6m $309.2m
=============================== ============ ============
Adjusted*
- Profit Before Tax $30.2m $26.1m
============
- Diluted Earnings per Share 22.0c 24.2c
------------------------------- ============ ============
Reported
- Profit Before Tax $17.1m $20.5m
============
- Diluted Earnings per Share 11.4c 19.0c
===============================
Net debt as at the period end $23.2m $106.1m
=============================== ============
Average Leverage 0.2x 1.1x
=============================== ============ ============
Interim Dividend 3.0p (3.9c) 3.0p (3.7c)
------------------------------- ------------ ------------
*Adjusted results are stated before Adjusting items - for
further detail see Alternative Performance Measures reconciliation
within the Detailed Financial Review
-- A stronger than expected start to the 2021 financial year (against revised Covid-19 forecasts)
- First half revenue up 41% year-on-year with Adjusted profit before tax up 16%
- Growth driven by the CSS acquisition, with Covid-19 negatively
impacting trading across the Group, particularly during the first
quarter
- Adjusted diluted Earnings per share at 22.0 cents is down on
prior year reflecting increased shares in issue following CSS
equity raise
-- A strong first half cash management performance, underpinning interim dividend
- Net debt improved $82.9 million on the prior year with Average leverage at 0.2 times
- Interim dividend of 3.0 pence (3.9 cents) at the same level as
last year, despite the uncertainty caused by Covid-19, reflecting
the stronger than expected first half performance of the Group
Operational Highlights
-- Covid-19 plans successfully implemented; we have remained
open, continued to serve customers and have delivered a stronger
than expected financial performance
-- Orderbook is currently in excess of 80% of full year revenue
forecasts; a higher level than this time in the prior year, with
everyday volumes continuing to be strong across the business
-- Continue to focus on revenue growth initiatives including
building on cross-selling opportunities in the US, expanding our
range of sustainable products and developing an increased
e-commerce offering and capability
-- Capital investment spend is lower than in previous years but
we continue to benefit from prior year investments
-- CSS has delivered a strong first half performance with
revenues** broadly flat year-on-year despite Covid-19 and
acquisition synergies are already delivering ahead of schedule.
Outlook
Notwithstanding our caution in relation to the outlook for the
balance of the year as the challenges of Covid-19 continue to
impact the world, the Board are confident that the full year
performance will be ahead of market expectations.
Paul Fineman, CEO, commented:
"In what has been an unprecedented period, what has shone
through is the resilience and agility of our teams and our
businesses. Together, we have managed to overcome numerous
challenges in order to continue the delivery of quality products to
our customers. Their skills and hard work have secured a strong
performance and we take this opportunity to again thank them.
Though it has become more difficult for many to gather together
it is pleasing to see that people's desire to celebrate life's
special occasions has not waned despite the current circumstances.
We've also seen countless families embracing at-home activities
such as sewing or crafting. Similarly, Christmas in 2020 is being
enthusiastically anticipated with customers reporting strong
sell-through of decorations, gift packaging and crackers.
The outlook is encouraging, although we remain aware of
continued global and regional challenges. Thanks to the strength of
our performance in this half, together with our strong future
pipeline, we are now tracking to deliver a full year performance
ahead of market expectations."
Presentations and Overview video
IG Design Group is hosting a webinar for analysts at 0900 hrs
GMT today. If you would like to register please contact
designgroup@almapr.co.uk
The Company is also hosting a webinar for retail investors
tomorrow, Wednesday, 25 November at 1430 hrs GMT. If you would like
to attend please register here:
http://bit.ly/IG_DesignGroup_H1_piworld_investor_webinar
A video overview of the results from the CEO, Paul Fineman, and
CFO, Giles Willits, is available to watch here:
https://www.thedesigngroup.com/half-year-results-video-2020/
** Included the this report are certain prior year figures
related to CSS Industries, Inc. taken from previously published
financial statements.
For further information:
IG Design Group plc 01525 887310
Paul Fineman, Chief Executive
Giles Willits, Chief Financial
Officer
Canaccord Genuity Limited 020 7523 8000
Bobbie Hilliam, NOMAD
Alex Aylen, Sales
Alma PR
Rebecca Sanders-Hewett 020 3405 0205
Susie Hudson designgroup@almapr.co.uk
Sam Modlin
OVERVIEW & OUTLOOK
The first half results follow the exciting year to 31 March
2020, which included significant operational and strategic progress
and great momentum. The six months to 30 September 2020 has of
course been impacted by the Covid-19 pandemic, and our focus has
been not only on ensuring the business successfully manages the
challenges presented by the pandemic but also to continue to
capitalise on the growth opportunities available to the Group while
delivering the CSS integration and forecasted synergies.
It is undoubtedly times like these that demonstrate the strength
of our teams, our processes and especially our ability to deliver,
and our teams have done just that. The Board continues to be
grateful for the attitude and determination of every individual in
the Design Group teams around the world to ensure the business
remains in good shape. We continue to work closely with both our
suppliers and customers to maintain our high levels of service
whilst working to adapt to new requirements and ensuring an
efficient supply chain.
The Board is extremely pleased to be able to report that all of
our businesses are performing better than initial Covid-19
forecasts and despite the additional challenges around the world as
the pandemic continues to impact trading, we remain fully
operational, benefitting from the swift implementation of our
response plans at the outset of the crisis.
The first half can be very much split into two. The first three
months were a challenging time for our teams when they were focused
on working with customers and suppliers to finalise Covid-19
impacted seasonal orders all while maintaining operational
effectiveness and customer service on Everyday products. Not
surprisingly sales dropped significantly in the first quarter as
many retailers were forced to close. However, certain categories
such as Craft and creative play and Gifting performed strongly,
catering well to the demand of consumers looking for
family-friendly entertainment whilst under various
restrictions.
The second quarter saw a return to more normal trends with the
business focused on delivering seasonal orders while continuing to
optimise revenues through Everyday channels. The acquisition of CSS
benefitted the business throughout the period, helping the Group
increase its proportion of Everyday non seasonal revenues while
also introducing the new 'Craft' category to our product portfolio.
Its integration continues to proceed well and is ahead of schedule
in relation to the delivery of synergies, benefitting from the
early and successful unification of the management leadership team
in the Americas from the date of acquisition.
Thanks to the strength of our performance in this half and our
strong future pipeline, notwithstanding our caution in relation to
the outlook for the balance of the year as the challenges of
Covid-19 continue to impact the world, the Board are confident that
the full year performance will be ahead of expectations. Our
trading as we approach Christmas continues to be strong and
customers are reporting good sell-through to date on seasonal as
well as Everyday product lines. Our cash management continues to
deliver seasonal debt levels significantly below the prior year and
as a result the Board expects average leverage to be below 0.5x for
the year to 31 March 2021. The Group is well placed to deliver
continued growth in FY22 and beyond.
COVID-19
Covid-19 continues to have a significant impact on the world,
our trading partners and the Group. As announced at the previous
financial year end (March 2020), we took swift action to ensure the
teams were safe and the business remained financially robust and
ready to benefit in the future for when trading returned to more
normal levels. The business responded well to this challenge and
delivered a performance ahead of our revised projections. It has
maintained safe operations in all territories whilst continuing to
serve our customers successfully. Furthermore, we continue to focus
on developing growth initiatives and delivering synergies following
the CSS acquisition in March 2020.
The impact of Covid-19 on the business in the first half of the
financial year has been significant with trading down across the
Group year-on-year as a result of the pandemic. It is difficult to
calculate the exact extent of Covid-19 on the results, however, the
following movements on revenue have been seen;
- In the first quarter of the current financial year revenues
were down year-on-year across the Group (excluding CSS) by 27.8%.
CSS quarter one sales** were down 11.7%. This reflected the
significant reduction in orders for Everyday products as many
retailers were closed and those retailers which remained open
focused their activities on essential product lines.
- In the second quarter, which is financially a much more
significant trading period for the Group, the business saw revenues
recover strongly with CSS up 2.4% year-on-year in the quarter and
Group revenues (excluding CSS) down just 2.8% on the prior period.
Our orderbook remains ahead of our initial Covid-19 expectations
but down like-for-like in absolute ($) terms against the prior year
as our customers have taken a more cautious outlook to ensure high
sell-through over the Christmas period. Everyday sales have
recovered well, particularly in some key areas such as Craft and
creative play.
The reduced volumes going through the business impacted on the
gross margin percentage as a result of product mix and lower
absorption of overheads into inventory in manufacturing.
Furthermore, despite the Group taking quick action to control costs
and maximise early synergies from the CSS acquisition the fixed
overhead cost base, which is required to support the higher
activity of the Group post the pandemic, increased as a percentage
of revenues. Overall, the Group has delivered a robust adjusted
operating margin at 7.5% (H1 2020: 9.3%), ahead of
expectations.
Where appropriate, the Group has separately identified direct
incremental costs associated with Covid-19 which total $2.0 million
in the first half and have been included in Adjusting items. In
addition, the business has incurred other costs resulting from
Covid-19 and these, alongside Government assistance received
totalling $3.6 million (the majority of which was received into our
business in Australia) have not been included in Adjusting
items.
SUMMARY 2021 INTERIM RESULTS
The Group's results are reported in US dollars for the first
time following the CSS acquisition which increased the US dollar
revenues to over 70% of the Group.
In the first half Revenue increased by 41% to $434.6 million (H1
2020: $309.2 million) including the effect of $149.1 million sales
from CSS, with Adjusted profit before tax up 16.0% year-on-year at
$30.2 million (H1 2020:
$26.1 million). Excluding CSS, Revenue is down 8% reflecting the impact of Covid-19.
Adjusted diluted earnings per share was 22.0 cents (H1 2020:
24.2 cents) which reduced, despite increased profit levels, because
of the higher shares in issue following the equity raise to support
the CSS acquisition in the final quarter of the 2020 financial
year.
The Group ended the half year delivering a significant
year-on-year reduction in net debt at $23.2 million (H1 2020:
$106.1 million) with Average leverage improving to 0.2 times (H1
2020: 1.1 times). This very strong performance primarily reflects
effective cash management actions, including strong management of
working capital and a reduction to our capital investment
programme.
Profit before tax at the half year was $17.1 million (H1 2020:
$20.5 million). This reduction reflects the impact of the increase
year-on-year in Adjusting items to $13.1 million (H1 2020: $5.6
million) which primarily result from the CSS integration costs and
direct incremental Covid-19 associated expenditure. Diluted
earnings per share therefore reduced to 11.4 cents (H1 2020: 19.0
cents).
The Board is pleased to declare an interim dividend, at the same
level as last year, of 3.0 pence (3.9 cents) in respect of the
period to 30 September 2020, reflecting the stronger than expected
first half performance of the Group. The final dividend of 5.75
pence in relation to the year ended 31 March 2020 was paid in
November 2020, later than the prior year reflecting the impact of
Covid-19 and the later than usual Annual General Meeting.
REGIONAL HIGHLIGHTS
Overall, the Group has seen growth in both Revenue and Adjusted
operating profit which increased to $32.4 million (H1 2020: $28.7
million) primarily as a result of the addition of CSS to the Group.
Following the CSS acquisition the reporting structure of the Group
has been reviewed and Group results are now presented as two
reporting segments - DG Americas (DG Americas and CSS) and DG
International (comprising UK and associated Asian operations,
Europe, and Australia).
Segmental Revenue Adjusted Operating Adjusted
Profit Operating
Margin
% Group H1 H1 H1 H1 H1
revenue 2021 2020 % growth 2021 2020 % growth H1 2021 2020
======
74% DG Americas $m 321.6 183.8 75% 19.5 17.7 11% 6.1% 9.6%
======
27% DG International $m 115.5 128.4 (10%) 15.1 13.2 15% 13.1% 10.3%
====== ========= ====== ========= ======
Elims /
Central
(1%) costs $m (2.5) (3.0) (2.2) (2.2)
====== ======
100% Total $m 434.6 309.2 41% 32.4 28.7 13% 7.5% 9.3%
========= ================= === ====== ====== ========= ====== ====== ========= ======== ======
Design Group Americas
The CSS acquisition has transformed the scale of our business in
the US, which now accounts for nearly three quarters of the Group's
revenue. Following the acquisition in March 2020 the US team
focused on the rapid integration of the two businesses under the
unified senior leadership team comprising both CSS and Design Group
executives. This integration is ahead of plan and is forecast to
deliver synergies, identified at the time of the acquisition, ahead
of expectations. These synergies include workforce rationalisation,
cost savings associated with no longer running CSS as a listed
business, site closure savings, scale-based purchasing upside and
the early benefit from commercial opportunities resulting from
combining the two businesses.
Revenue has grown significantly in the first half of this year,
up 75% on the prior year at $321.6 million (H1 2020: $183.8
million) with the additional revenues from CSS of $149.1 million
contributing to the scale of the business. Due to the nature of the
CSS integration in the US it is not possible to accurately provide
a like-for-like year-on-year profit performance split between the
two US businesses. Adjusted operating profit at $19.5 million was
ahead of last year (H1 2020: $17.7 million), with CSS contributing
to profits for the first time. Adjusted operating margin declined
to 6.1% from 9.6% as at 30 September 2020 reflecting the impact of
Covid-19, which has reduced volumes.
The impact of Covid-19 on our Americas business has seen some
facilities closed for periods of time at the height of the pandemic
from March through to July. The US government assistance provided
support to the workforce focused on payments direct to the
individual rather than through the employer and as such no
government assistance has been received directly by the Americas
business during the period. Furthermore, an unintended impact of
the US government assistance direct to the individual is that
additional costs have been incurred to encourage employees to
return to work rather than remain at home receiving the government
assistance. This, alongside incremental cleaning and PPE
expenditure has added significant cost to the running of the US
manufacturing facilities in the first half of the year, of which
$1.4 million has been treated as an Adjusting item.
The area where the US government's Covid-19 package provided
benefit to the businesses was an extension of the time period in
which operating losses could be carried back for tax purposes,
generating a substantial tax refund for the group of c.$17 million.
As at 30 September we have received the first of three payments
with a second instalment received in October. We expect to have
received the entire tax refund by the end of the financial
year.
Since the end of the half year our business in the US has
experienced an IT incident that has impacted operations resulting
in some shipping delays. We expect that these delayed shipments
will be mostly caught up, but that there could be some missed sales
and additional costs of operating. As a result, there will be some
costs in the second half (which will be treated as Adjusting
items), against which we anticipate receiving insurance recoveries
in FY22. The financial impact of the IT incident is not anticipated
to be material to the overall financial performance of the Group
during the period.
Despite the challenges in the period, the business continues to
move forward, with the focus at half year being the execution of
our Christmas product offerings and this is in full swing as we
approach the Christmas season. Our new state-of-the-art printing
press in Memphis which came online in March 2020 has had its first
full six months of manufacturing and as a result of this capital
investment, the team in Memphis are able to print higher volumes,
more efficiently.
Furthermore, during the first half the Americas has seen growth
through the successful development of our seasonal gifting and
décor product ranges under the X&O brand. In addition,
following the CSS acquisition, the business has benefitted from the
increased scale of the e-tailer and online platforms of bricks and
mortar retailers and is now focused on building on the CSS
e-commerce experience to re-launch and develop a refreshed and
expanded offering across the Americas Group.
In addition, areas of focus for the second half include
cross-selling opportunities amongst the enlarged Americas Group
including geographical expansion into Canada and Latin America, as
well as between the Americas and International.
Design Group International
The combination of our UK, European and Australian businesses
under the Design Group International umbrella allows the Group to
benefit from an integrated management and operational structure as
well as to position us for future growth across this segment. Our
International businesses account for over a quarter of the Group's
revenues, and as anticipated due to the impact of Covid-19 on our
business, Revenues for the DG International business were down 10%
on the prior year at $115.5 million (H1 2020: $128.4 million).
However, Adjusted operating profit was up 14.5% at $15.1 million
(H1 2020: $13.2 million), reflecting variations in product mix
alongside a focus on overhead expenditure and in part as a result
of government assistance received in certain territories.
Despite the impact of Covid-19, the UK had a robust first half
revenue and margin performance, with good seasonal orders delivered
on schedule. It has continued to extend its focus on sustainability
with the expansion of its 'eco-nature' brand and has further built
its online offering through Amazon. It also undertook a significant
restructuring of the organisation, the costs of which have been
treated as Adjusting items. Europe has performed well, supported by
the stronger than expected performance of its major customers who
have also traded robustly, after the initial lockdowns in Europe.
Operationally, it has also been supported by the commissioning of
the new 'Robowrap' investment which has helped drive improved
productivity. Australia has performed ahead of expectations and was
able to maintain good margins in the circumstances. It also took
early action following the Covid-19 lockdown to reorganise some of
its operations to manage costs.
The impact of Covid-19 operationally has varied across the
businesses within the DG International group. Across all
manufacturing sites, we have seen lower volume throughput which has
reduced overhead absorption into inventory and caused efficiency
levels to drop as further rigor and process is required to ensure
the safety of all of our employees on the manufacturing floor. This
includes shorter shifts to allow for clean down and sanitising all
equipment and areas before the subsequent shift moves in. Of this
expenditure incremental costs directly associated with Covid-19 of
$0.5 million have been included as an Adjusting item.
Our warehouse in Australia is situated in Melbourne, Victoria
which had further lockdown restrictions imposed as the number of
cases rose. Although this impacted productivity as the warehouse
was not able to operate at full capacity, the team in Australia has
managed to mitigate the impact of this using extra shifts to ensure
volume throughput was not lost.
Parts of the DG International group have received government
assistance where available to mitigate as much as possible the need
to reduce the workforce around the Group. In total the
International division received $3.6 million of government
assistance in the period, which has helped offset the additional
costs incurred across the Group.
OUR PRODUCTS AND BRANDS
Pivotal to the Group's 'working with the winners' strategy is
the continuous refreshing of our well-diversified, yet
complementary product portfolio. This keeps us at the forefront of
our customers' minds and makes us an attractive 'supplier of
choice' for our retail partners. The first half split of revenue
highlights how the Group has transformed its mix of revenue toward
everyday based categories including Craft & creative play and
Gifting.
Revenue by product H1 2021 H1 2020
category
=============================== ================== ==================
Celebrations 59% $256.8m 76% $235.2m
=============================== ======== ======== ======== ========
Craft & creative play 21% $90.0m 5% $14.1m
=============================== ======== ======== ======== ========
Stationery 4% $15.6m 7% $20.9m
=============================== ======== ======== ======== ========
Gifting 14% $64.3m 9% $29.1m
=============================== ======== ======== ======== ========
'Not-for-resale' consumables 2% $7.9m 3% $9.9m
=============================== ======== ======== ======== ========
Total $434.6m $309.2m
=============================== ======== ======== ======== ========
Our product offering was further enhanced at the end of the last
financial year as a result of the acquisition of CSS, and we
introduced a new Craft product category throughout the Group. The
benefits and the growth to the Group in this category, which
includes creative play, has meant increased sales in these areas
during the last six months as many households were in lockdown and
turned to creative play products to entertain children whilst
schools were closed as well as reigniting or taking up new hobbies
in the crafting arena. 'Not-for-resale' consumables had a
challenging first half with our retail customers in this category
closed for much of the first quarter, resulting in lower
year-on-year orders.
Revenues associated with seasonal products, whilst increasing,
have reduced as a percentage of the total product portfolio helping
drive forward one of our key strategic performance indicators,
being diversifying seasonality within the business.
DETAILED FINANCIAL REVIEW
The Group's results are reported in US dollars for the first
time following the CSS acquisition and the subsequent increased
concentration of the Group revenues and earnings in US dollars.
Prior year comparatives throughout this report have been presented
in US dollars. Note 14 in this report contains the relevant
comparatives for financial year 2020 in both US dollar and sterling
denomination.
The Group has delivered ahead of our Covid-19 expectations in
the first half of the year.
H1 2021 H1 2020
Reported Adjusting Adjusted Reported Adjusting Adjusted
Items Items
$m $m $m $m $m $m
Revenue 434.6 - 434.6 309.2 - 309.2
Gross profit 83.7 0.9 84.6 63.0 0.6 63.6
Overheads (64.4) 12.2 (52.2) (39.9) 5.0 (34.9)
--------- ---------- --------- --------- ---------- ---------
Operating profit 19.3 13.1 32.4 23.1 5.6 28.7
Finance charge (2.2) - (2.2) (2.6) - (2.6)
--------- ---------- --------- --------- ---------- ---------
Profit before
tax 17.1 13.1 30.2 20.5 5.6 26.1
Tax (4.8) (2.9) (7.7) (4.6) (1.3) (5.9)
Profit after
tax 12.3 10.2 22.5 15.9 4.3 20.2
------------------ --------- ---------- --------- --------- ---------- ---------
Group Revenue for the period of $434.6 million grew 41%
year-on-year reflecting the contribution of CSS, acquired on 3
March 2020. Excluding CSS, organic Revenue declined by 8% as a
result of the impact of Covid-19. Adjusted operating profit for the
Group increased by 13.3% to $32.4 million (H1 2020: $28.7 million)
with Adjusted operating margin down year-on-year at 7.5% (H1 2020:
9.3%). Gross margin fell in the half year, largely as a result of
customer/product mix, and lower overhead absorption into inventory,
to 19.3% (H1 2020: 20.4%). Adjusted overheads as a percentage of
revenue increased to 12.0% (H1 2020: 11.3%). Overall Adjusted
profit before tax increased 16.0% to $30.2 million (H1 2020: $26.1
million) largely due to increased profits from the CSS acquisition
although offset by the impact of Covid-19 on the Group. Half year
Profit before tax was $17.1 million (H1 2020: $20.5 million)
primarily reflecting the impact of the increase year-on-year in
Adjusting items to $13.1 million (H1 2020: $5.6 million).
Finance expenses
Finance costs of $2.2 million are lower compared to the prior
year of $2.6 million. This primarily reflects the lower level of
debt held in the year, offset by an increased impact of IFRS 16
charges associated with CSS leases.
Adjusting items
Adjusting items are material items of unusual or non-recurring
nature which represent gains or losses which are separately
presented by virtue of their nature, size and/or incidence. The
Group has incurred Adjusting items in the period to 30 September
2020 totalling $13.1 million (H1 2020: $5.6 million). These items
are as follows:
Adjusting Items H1 2021 H1 2020
================================================= ======== ========
Losses/(gains) and transaction costs relating
to acquisitions and disposals of businesses $0.9m $0.7m
================================================= ======== ========
Acquisition integration and restructuring costs $5.5m $1.2m
================================================= ======== ========
Impairment of assets $0.1m -
================================================= ======== ========
Incremental Covid-19 costs $2.0m -
================================================= ======== ========
Amortisation of acquired intangibles $2.2m $1.8m
================================================= ======== ========
LTIP charges $2.4m $1.9m
================================================= ======== ========
Total $13.1m $5.6m
================================================= ======== ========
Losses/(gains) and transaction costs relating to acquisitions
and disposals of businesses - $0.9 million (H1 2020: $0.7
million)
In the period, costs of $0.1 million associated with the
acquisition of CSS were incurred relating to advisor fees. In
addition, $0.5 million of acquisition related employee payments
from the Impact Innovations Inc. transaction in 2019 which lock in
and incentivise legacy talent. Finally, an additional $0.3 million
of transaction costs associated with the disposal of Zhejiang
Shaoxing Royal Arts and Crafts Co. Ltd were incurred.
Acquisition integration and restructuring costs - $5.5 million
(H1 2020: $1.2 million)
The main costs relate to the integration of CSS into the
enlarged DG Americas as new team structures have been put in place.
There have also been associated temporary staff costs and
recruitment costs as roles are being filled.
The CSS business includes a large portfolio of owned and leased
sites, and part of the integration project includes the
consolidation of these locations resulting in the impairment of
lease assets and the ongoing costs associated with the closure of
sites as well as the lease liability interest costs.
The UK undertook a reorganisation in light of Covid-19 for which
the costs have been treated as Adjusting items. In addition, in
Australia a similar reorganisation was made in the first half of
the financial year.
Impairment of assets - $0.1 million (H1 2020: $nil)
In light of the impact of Covid-19 on the business, a review of
inventory, trade receivables and fixed assets was undertaken at 31
March 2020. Inventories were assessed for the net realisable value
and an impairment of $7.4 million was taken. Similarly trade
receivables were assessed for their expected credit loss in line
with IFRS 9 and an impairment of $3.8 million was taken. As at 30
September 2020, this assessment continues, and for trade
receivables any impairment taken at the year end that was not
required has been reversed ($3.1 million) alongside any additional
debtors as at the reporting date who are now considered higher risk
for which an impairment has been taken ($3.9 million). Inventories
continue to be assessed for net realisable value, with sell-through
of provided inventory of $1.8 million being offset against further
inventory risk of $1.2 million recognised. Given the seasonality of
our business and the high proportion of Christmas related sales,
further assessment will be undertaken by the end of the financial
year.
Incremental Covid-19 costs - $2.0 million (H1 2020: $nil)
The Covid-19 outbreak has developed rapidly in 2020, with
measures taken around the world to contain the virus affecting
economic activity. The Group has been affected in every territory
in which we operate and the impact on the general economic
environment and the reduced demand of goods from our customers as
well as the closures of our businesses has had a significant
impact. Certain costs relating to incremental direct labour have
been identified that have impacted the financial results of the
business during the year to date, equal to $2.0 million. The most
significant element of these costs totalled $1.3 million relating
to additional labour costs across our manufacturing facilities in
the USA, Mexico and India.
Management have taken a judgement not to include government
assistance received in the period as an Adjusting item, as whilst
the amounts received were incremental, the underlying employee
expenditure would likely not have been incurred if the government
assistance was not received.
Amortisation of acquired intangibles - $2.2 million (H1 2020:
$1.8 million)
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer
relationships and brands which form part of the intangible value of
the acquired business but are not part of the acquired balance
sheet. These intangible assets are then amortised to the income
statement over an appropriately judged period. These are not
operational costs relating to the running of the acquired business
and are directly related to the accounting for the acquisition.
These include tradenames and brands acquired as part of the
acquisition of Impact Innovations Inc. and CSS Industries Inc. in
the USA and Biscay Pty Greetings Ltd in Australia. As such we
include these as Adjusting items.
In addition, in accordance with IFRS 3, on acquisition,
businesses need to be fair valued, which can result in an uplift to
stock on hand relating to sales orders already attached to the
acquired stock. This uplift will distort the margins associated
with the stock, and typically unwinds quickly as stock is sold soon
after acquisition. The unwind of the stock uplift ($0.6 million)
associated with the CSS acquisition is included as an Adjusting
item, consistent with the treatment adopted with the Impact
acquisition. This has fully unwound as at 30 September 2020.
LTIP charges - $2.4 million (H1 2020: $1.9 million)
As part of our senior management remuneration, the Group
operates a Long Term Incentive Plan ('LTIP') in the form of options
for ordinary shares of the Group. In accordance with accounting
principles, despite this plan not being a cash cost to the
business, a share -- based payments charge or credit is taken to
the income statement. We consider that these charges do not form
part of the underlying operational costs and therefore include
these as Adjusting items.
The LTIP charge for the period was $2.4 million which consists
of a principal IFRS 2 charge of $2.2 million and an employer's
social security charge of $0.2 million.
Taxation
The taxation charge for the half year was $4.8 million (H1 2020:
$4.6 million) with the effective tax charge on Adjusted profit
before tax at 25.4% (H1 2020: 22.5%). The rate is higher than the
weighted blend of statutory rates in the countries in which we
operate as a result of estimated permanent disallowable deductions
for tax purposes. The effective rate on Profit before tax is 28.1%
(H1 2020: 22.2%).
Earnings per share
Adjusted earnings per share at 22.0 cents were down 9% on the
prior year (H1 2020: 24.2 cents) primarily as a result of a higher
diluted share number following the share raise in early 2020.
Diluted earnings per share are 11.4 cents (H1 2020: 19.0 cents).
The reconciliation between Reported and Adjusted earnings per share
can be seen below:
Earnings per share H1 2021 H1 2020
========================================================= ======== ========
Earnings attributable to equity holders of
the Company $11.2m $15.3m
========================================================= ======== ========
Adjustments
========================================================= ======== ========
Adjusting items (net of non-controlling interest
effect) $13.2m $5.5m
========================================================= ======== ========
Tax charge/(relief) on adjustments (net of
non-controlling interest effect) ($2.9m) ($1.3m)
========================================================= ======== ========
Adjusted earnings $21.5m $19.5m
========================================================= ======== ========
Weighted average number of shares
=========================================================
Basic weighted average number of shares outstanding 97.7m 80.0m
========================================================= ========
Dilutive effect of employee share option
plans 0.3m 0.4m
========================================================= ======== ========
Diluted weighted average ordinary shares 98.0m 80.4m
========================================================= ======== ========
Basic earnings per share 11.5c 19.1c
========================================================= ========
Impact of Adjusting items 10.5c 5.3c
========================================================= ======== ========
Basic adjusted earnings per share 22.0c 24.4c
========================================================= ======== ========
Diluted earnings per share 11.4c 19.0c
========================================================= ======== ========
Diluted adjusted earnings per share 22.0c 24.2c
========================================================= ======== ========
Cash flow and net debt
As at 30 September 2020 net debt (excluding IFRS 16 lease
liabilities) was $23.2 million, significantly better than the prior
year of $106.1 million. Average leverage as at the half year was
0.2 times from 1.1 times for the comparative prior period
reflecting an improved Adjusted EBITDA alongside the year-on-year
reduction in average debt.
Cashflow H1 2021 H1 2020
========================================= ========== ==========
Adjusted EBITDA $49.7m $37.2m
========================================= ========== ==========
Movements in working capital ($104.9m) ($139.8m)
========================================= ========== ==========
Adjusted cash used by operations ($55.2m) ($102.6m)
========================================= ========== ==========
Adjusting items ($10.4m) ($1.9m)
========================================= ========== ==========
Cash used by operations ($65.6m) ($104.5m)
========================================= ========== ==========
Capital expenditure (net of disposals
of property, plant and equipment) ($3.4m) ($5.1m)
========================================= ========== ==========
Tax received/(paid) $2.9m ($3.0m)
========================================= ========== ==========
Interest paid ($1.9m) ($2.1m)
========================================= ========== ==========
Payments of lease liabilities ($7.2m) ($3.9m)
========================================= ========== ==========
Dividends paid (including those paid to
non-controlling interests) - ($5.9m)
========================================= ========== ==========
FX and other ($0.4m) ($3.8m)
=========================================
Movement in net debt ($75.6m) ($128.3m)
========================================= ========== ==========
Opening net cash $52.4m $22.2m
========================================= ========== ==========
Closing net debt ($23.2m) ($106.1m)
========================================= ========== ==========
Working capital
The Group's working capital movement this half year was impacted
by the acquisition of CSS. The net working capital outflow in the
half year was $104.9 million (H1 2020: $139.8 million). Stripping
out the effect of CSS on working capital movements there was an
underlying outflow of $74.4 million in the first half of 2021. This
lower working capital movement reflects the reduced year-on-year
seasonal working capital build as a result of the impact of
Covid-19 alongside the stronger cash management disciplines across
the Group.
In the current Covid-19 environment the Group continues to
actively track debtors and credit risk profiles of all of our
customers to ensure we try to mitigate as far as possible any
additional exposure to credit risk.
Adjusting items
During the first half of the year there was $10.4 million (H1
2020: $1.9 million) net cash outflow in relation to Adjusting items
of which $4.5 million related to cash outflow for costs accrued at
the year end. The significant majority of the total outflow related
to the restructuring and synergy realisation costs associated with
the CSS acquisition.
Capital expenditure
During the first half of the year the Group invested $3.4
million (H1 2020: $5.1 million). The majority of this spend was in
DG Americas on the fit out of the newly leased site in Mississippi,
Tennessee.
Cash tax
During the first half of the year the Group benefited from a net
cash inflow of tax as a result of US tax repayments following
claims made by CSS under the CARES Act. The total cash amounts
received at 30 September 2020 was $3.2 million. The Group made tax
payments of $0.3 million which compares to a tax payment of $3.0
million in the prior year. The reduced cash tax payments are
directly as a result of lower earnings driven by Covid-19.
Dividend payments
As part of the Covid-19 cash actions taken by the Group the
timing of the final dividend payment in relation to the year ended
31 March 2020 was moved from September 2020 to November 2020. As
such no payment was made in the first half of the financial year
compared to a $5.9 million outflow in the prior year.
Financial position and going concern basis
The Group has a banking facility (refinanced in January 2020)
which runs to May 2022 and includes a revolving credit facility
('RCF') of $95 million, a further flexible RCF of up to GBP130
million, flexible to meet working capital requirements during peak
manufacturing, and a maximum limit of $18 million invoice financing
arrangement in Hong Kong. The Group also has access to supplier
financing arrangements which we utilise at certain times of the
year.
The Group has been fully compliant with all banking covenants
associated with these facilities and has not required, nor
requested, any covenant waivers associated with the impact of
Covid-19 on the Group results.
In light of the ongoing Covid-19 pandemic, as with the financial
statements for 31 March 2020, the Directors have paid particularly
close attention to their assessment of going concern in preparation
of these financial statements.
The Group is currently trading ahead of forecasts used to
consider the going concern assessment. These forecasts which have
been reviewed in detail by the Board, and take into account the
significant seasonal working capital cycle of the business, have
been sensitised to reflect potential adverse downturns in the
current assumptions including the second wave of the pandemic.
Management has also produced a maximum stress forecast which has
been deliberately engineered to challenge the Group's liquidity
position and covenant performance during the forecast period. These
forecasts and additional analysis demonstrated that there is
sufficient excess headroom for the Group to meet its obligations as
they fall due for a forecast period of more than twelve months
beyond the date of these accounts. As such, the Directors do not
see any practical, regulatory or legal restrictions which would
limit their ability to fund the different regions of the business
as required.
Accordingly, the Directors have continued to adopt the going
concern basis of accounting in preparing the financial
statements.
Principal risks and uncertainties
Risk is an inherent part of business, especially as Design Group
aim to continue to deliver growth around the world. The Group
actively monitors the risk related to its business and the
environment in which it operates, as our continued success is
influenced by how well we manage our risks. As at 30 September
2020, the Group's principal risks and uncertainties, as detailed in
the Group's financial statements for the year ended 31 March 2020
are still active risks and there have been no material movements in
these risks during the first half of this financial year. These
will be reviewed again at year end, however, the Group do not
expect there to be any significant change in the principal risks
and uncertainties by the end of the year.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that:
-- The condensed interim set of financial statements has been
prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union;
-- The interim report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- The interim report includes a fair review of the information
required by DTR 4.2.8R (disclosures of related parties transactions
and any changes therein).
Alternative performance measures
This review includes alternative performance measures ('APMs')
that are presented in addition to the standard IFRS metrics. The
Directors believe that these APMs provide important additional
information regarding the adjusted performance of the business
including trends, performance and position of the Group. APMs are
used to enhance the comparability of information between reporting
periods and segmental business units by adjusting for exceptional
or uncontrollable factors which affect IFRS measures, to aid the
understanding of the Group's performance. Consequently, APMs are
used by the Directors and management for strategic and performance
analysis, planning, reporting and reward setting. APMs reflect the
results of the business excluding Adjusting items, which are items
that are material and of an unusual or non-recurring nature.
The APMs and the definitions used are listed below:
-- Adjusted EBITDA - EBITDA before Adjusting items
-- Adjusted operating profit - Profit before finance charges, tax and Adjusting items
-- Adjusted profit before tax - Profit before tax and Adjusting items
-- Adjusted profit after tax - Profit after tax before Adjusting
items and associated tax effect
-- Adjusted earnings per share - Fully diluted earnings per
share before Adjusting items and associated tax effect
In addition, the Group uses APMs in order to calculate other key
performance metrics including:
-- Average leverage - Rolling twelve month average bank debt
(being average debt measured before lease liabilities) divided by
rolling twelve month Adjusted EBITDA reduced for lease payments
-- Adjusted operating margin - Adjusted operating profit divided by revenue
Adjusting items
Further details of the items categorised as Adjusting items are
disclosed in more detail in note 3.
A full reconciliation between our adjusted and reported results
is provided below:
APM Reconciliation H1 2021 H1 2020
===================================== ========= ========
Adjusted EBITDA $49.7m $37.2m
Adjusting items ($10.0m) ($3.8m)
EBITDA $39.7m $33.4m
------------------------------------- --------- --------
Adjusted operating profit $32.4m $28.7m
Adjusting items ($13.1m) ($5.6m)
Reported operating profit $19.3m $23.2m
------------------------------------- --------- --------
Adjusted profit before tax $30.2m $26.1m
Adjusting items ($13.1m) ($5.6m)
Reported profit before tax $17.1m $20.5m
------------------------------------- --------- --------
Adjusted profit after tax $22.2m $20.2m
Adjusting items ($10.2m) ($4.3m)
Reported profit after tax $12.3m $15.9m
------------------------------------- --------- --------
Adjusted earnings per share 22.0c 24.2c
Adjusting items (10.6c) (5.2c)
Reported diluted earnings per share 11.4c 19.0c
===================================== ========= ========
** Included in this report are certain prior year figures
related to CSS Industries, Inc. taken from previously published
financial statements.
CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHSED 30 SEPTEMBER 2020
Unaudited six months ended Unaudited restated(a) six Twelve months restated(a)
30 Sep 2020 months ended 30 Sep 2019 ended 31 Mar 2020
Note $000 $000 $000
--------------------------- ---- --------------------------- -------------------------- --------------------------
Revenue 2 434,635 309,220 624,340
Cost of sales (350,937) (246,186) (530,109)
--------------------------- ---- --------------------------- -------------------------- --------------------------
Gross profit 83,698 63,034 94,231
Selling expenses (21,584) (13,374) (33,766)
Administration expenses (46,480) (27,089) (58,868)
Other operating income 4 3,909 503 927
Profit on disposal of
property, plant and
equipment 10 - 246
(Loss)/profit on disposal
of subsidiary (208) - 1,836
Operating profit 3 19,345 23,074 4,606
Finance expenses (2,265) (2,616) (5,479)
--------------------------- ---- --------------------------- -------------------------- --------------------------
Profit/(loss) before tax 17,080 20,458 (873)
Income tax (charge)/credit 5 (4,801) (4,535) 18,276
--------------------------- ---- --------------------------- -------------------------- --------------------------
Profit for the period 12,279 15,923 17,403
--------------------------- ---- --------------------------- -------------------------- --------------------------
Attributable to:
Owners of the Parent
Company 11,222 15,297 16,461
Non-controlling interests 1,057 626 942
--------------------------- ---- --------------------------- -------------------------- --------------------------
Earnings per ordinary share
Note Unaudited six months ended 30 Unaudited restated(a) six months Twelve months restated(a) ended
Sept 2020 ended 30 Sep 2019 31 Mar 2020
-------- ---- --------------------------------- -------------------------------- ---------------------------------
Basic 8 11.5c 19.1c 19.9c
-------- ---- --------------------------------- -------------------------------- ---------------------------------
Diluted 8 11.4c 19.0c 19.8c
-------- ---- --------------------------------- -------------------------------- ---------------------------------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2020
Unaudited Unaudited Twelve
six months restated(a) months
ended six months restated(a)
30 Sep ended ended
2020 30 Sep 31
2019 Mar 2020
$000 $000 $000
------------------------------------------- ----------- ------------ ------------
Profit for the period 12,279 15,923 17,403
Other comprehensive income:
Exchange difference on translation of
foreign operations (net of tax) (4,144) (4,031) 3,112
Recycling translation reserves on disposal
of subsidiary - - 42
Transfer to profit and loss on maturing
cash flow hedges (net of tax) 127 (490) (490)
Net unrealised (loss)/gain on cash flow
hedges (net of tax) (391) (64) 657
-------------------------------------------- ----------- ------------ ------------
Other comprehensive (expense)/income for
the period, net of tax items which may
be reclassified to profit and loss in
subsequent periods (4,408) (4,585) 3,321
-------------------------------------------- ----------- ------------ ------------
Total comprehensive income for the period,
net of tax 7,871 11,338 20,724
Attributable to:
Owners of the Parent Company 6,143 10,860 20,372
Non-controlling interests 1,728 478 352
-------------------------------------------- ----------- ------------ ------------
7,871 11,338 20,724
------------------------------------------- ----------- ------------ ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2020
Attributable to the owners of the Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
-------
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 1 April 2020
(restated(a) ) 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
Profit for the
period - - - - - 11,222 11,222 1,057 12,279
Other
comprehensive
(expense)/ income - - - (264) (4,815) - (5,079) 671 (4,408)
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Total
comprehensive
income for the
period - - - (264) (4,815) 11,222 6,143 1,728 7,871
Transactions with
owners in their
capacity as owners
Equity-settled
share-based
payments - - - - - 2,309 2,309 - 2,309
Tax on
equity-settled
share-based
payments - - - - - (266) (266) - (266)
Recognition of
non-controlling
interests - - - - - - - 276 276
Options exercised 14 - - - - (14) - - -
Exchange
differences on
opening balances 268 9,647 1,799 - - - 11,714 - 11,714
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 30 September
2020 6,256 225,064 41,974 56 (9,204) 126,954 391,100 6,647 397,747
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
SIX MONTHSED 30 SEPTEMBER 2019
Attributable to the owners of the Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
-------
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 31 March 2019
(restated(a) ) 5,093 74,962 42,119 153 (8,133) 108,763 222,957 5,266 228,223
Impact of adopting
IFRS 16 - - - - - (2,427) (2,427) (572) (2,999)
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Restated equity at
1 April 2019 5,093 74,962 42,119 153 (8,133) 106,336 220,530 4,694 225,224
Profit for the
period - - - - - 15,297 15,297 626 15,923
Other
comprehensive
expense - - - (554) (3,883) - (4,437) (148) (4,585)
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Total
comprehensive
income for the
period - - - (554) (3,883) 15,297 10,860 478 11,338
Transactions with
owners in their
capacity as owners
Equity-settled
share-based
payments - - - - - 1,491 1,491 - 1,491
Tax on
equity-settled
share-based
payments - - - - - 314 314 - 314
Recognition of
non-controlling
interests - - - - - - - 121 121
Options exercised 44 - - - - (44) - - -
Equity dividends
paid - - - - - (5,868) (5,868) - (5,868)
Exchange
differences on
opening balances (274) (4,037) (2,268) - - - (6,579) - (6,579)
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 30 September
2019 (restated(a)
) 4,863 70,925 39,851 (401) (12,016) 117,526 220,748 5,293 226,041
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
YEARED 31 MARCH 2020
Attributable to the owners of the Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
--------
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 31 March 2019
(restated(a) ) 5,093 74,962 42,119 153 (8,133) 108,763 222,957 5,266 228,223
Impact of
adopting IFRS 16 - - - - - (2,427) (2,427) (572) (2,999)
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Restated equity
at 1 April 2019 5,093 74,962 42,119 153 (8,133) 106,336 220,530 4,694 225,224
Profit for the
year - - - - - 16,461 16,461 942 17,403
Other
comprehensive
income/(expense) - - - 167 3,744 - 3,911 (590) 3,321
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Total
comprehensive
income for the
year - - - 167 3,744 16,461 20,372 352 20,724
Transactions with
owners in their
capacity as
owners
Equity-settled
share-based
payments - - - - - (287) (287) - (287)
Tax on
equity-settled
share-based
payments - - - - - 213 213 - 213
Derecognition of
non-controlling
interests - - - - - - - (403) (403)
Shares issued 1,117 150,145 - - - - 151,262 - 151,262
Options exercised 45 - - - - (45) - - -
Equity dividends
paid - - - - - (8,975) (8,975) - (8,975)
Exchange
differences on
opening balances (281) (9,690) (1,944) - - - (11,915) - (11,915)
------------- --------
At 31 March 2020
(restated(a) ) 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2020
Unaudited Unaudited restated(a) Restated(a) Restated(a)
as at 30 as at 30 as at 31 as at 31
Sep 2020 Sep 2019 Mar 2020 Mar 2019
Note $000 $000 $000 $000
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Non-current assets
Property, plant and equipment 90,383 50,769 92,622 51,786
Intangible assets 140,315 106,482 140,504 110,503
Right-of-use assets 105,882 43,771 82,742 -
Long-term assets 6,308 - 6,223 -
Deferred tax assets 22,351 5,126 18,135 4,693
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total non-current assets 365,239 206,148 340,226 166,982
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Current assets
Inventory 187,717 157,703 141,911 90,442
Trade and other receivables 281,556 200,664 110,047 64,641
Income tax receivable 15,138 - 18,377 -
Derivative financial assets 9 556 511 412 168
Cash and cash equivalents 6 76,770 145,117 83,200 110,910
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total current assets 561,737 503,995 353,947 266,161
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total assets 2 926,976 710,143 694,173 433,143
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Equity
Share capital 6,256 4,863 5,974 5,093
Share premium 223,327 69,277 213,755 73,220
Capital redemption reserve 1,737 1,648 1,662 1,742
Merger reserve 41,974 39,851 40,175 42,119
Hedging reserve 56 (401) 320 153
Translation reserve (9,204) (12,016) (4,389) (8,133)
Retained earnings 126,954 117,526 113,703 108,763
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Equity attributable to owners of the Parent
Company 391,100 220,748 371,200 222,957
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Non-controlling interests 6,647 5,293 4,643 5,266
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total equity 397,747 226,041 375,843 228,223
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Non-current liabilities
Loans and borrowings 7 (389) 899 (219) 1,847
Lease liabilities 99,946 42,097 78,418 -
Deferred income 586 678 561 976
Provisions 5,422 3,094 5,161 3,472
Other financial liabilities 9,354 868 6,784 2,362
Deferred tax liabilities 1,572 906 1,314 900
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total non-current liabilities 116,491 48,542 92,019 9,557
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Current liabilities
Bank overdraft 6 45,180 125,522 31,003 85,614
Loans and borrowings 7 55,219 124,755 (3) 1,239
Lease liabilities 19,799 7,531 16,995 -
Deferred income 496 437 162 129
Provisions 1,150 1,149 2,717 1,417
Income tax payable 13,522 7,417 5,482 6,202
Trade and other payables 230,494 147,732 121,962 76,135
Other financial liabilities 46,878 21,017 47,993 24,627
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total current liabilities 412,738 435,560 226,311 195,363
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total liabilities 2 529,229 484,102 318,330 204,920
------------------------------------------------ ---- --------- --------------------- ----------- -----------
Total equity and liabilities 926,976 710,143 694,173 433,143
------------------------------------------------ ---- --------- --------------------- ----------- -----------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHSED 30 SEPTEMBER 2020
Unaudited six months ended 30 Unaudited restated(a) Twelve
Sep 2020 six months ended 30 Sep 2019 months restated(a)
ended 31
Mar 2020
Note $000 $000 $000
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Cash flows from operating
activities
Profit for the period 12,279 15,923 17,403
Adjustments for:
Depreciation and impairment
of property, plant and
equipment 6,678 3,845 8,880
Depreciation of right-of-use
assets 9,370 4,043 8,911
Amortisation of intangible
assets 4,258 2,444 4,816
Finance expenses 2,265 2,616 5,479
Income tax charge/(credit) 4,801 4,535 (18,276)
Loss/(profit) on disposal of
a business 208 - (1,836)
(Profit)/loss on sales of
property, plant and
equipment (10) 9 (246)
Loss on disposal of
intangible fixed assets 1 - 1
Equity-settled share-based
payments 2,477 1,908 (252)
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Operating profit after
adjustments for non-cash
items 42,327 35,323 24,880
Change in trade and other
receivables (169,524) (143,430) 9,841
Change in inventory (42,133) (71,244) 1,532
Change in trade and other
payables, provisions and
deferred income 105,217 74,861 1,592
Cash (used by)/generated from
operations (64,113) (104,490) 37,845
Tax received/(paid) 2,857 (2,984) (5,993)
Interest and similar charges
paid (1,927) (2,092) (5,090)
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Net cash (outflow)/inflow
from operating activities (63,183) (109,566) 26,762
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Cash flow from investing
activities
Proceeds from sale of
property, plant and
equipment 30 25 767
Acquisition of businesses
(net of cash acquired) - - (112,251)
Acquisition of intangible
assets (737) (1,126) (3,738)
Acquisition of property,
plant and equipment (2,729) (4,041) (10,463)
Net cash outflow from
investing activities (3,436) (5,142) (125,685)
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Cash flows from financing
activities
Proceeds from issue of share
capital - - 152,535
Repayment of secured
borrowings (1,025) (627) (1,917)
Net movement in previous
credit facilities - 48,230 48,230
Repayment of previous credit
facilities - (48,230) (48,230)
Net movement in new credit
facilities 55,730 123,903 -
Payment of lease liabilities (8,772) (3,868) (8,430)
Loan arrangement fees - (737) (1,571)
Equity dividends paid - (5,868) (8,975)
Net cash inflow from
financing activities 45,933 112,803 131,642
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Net (decrease)/increase in
cash and cash equivalents (20,686) (1,905) 32,719
Cash and cash equivalents at
beginning of the period 52,197 25,296 25,296
Effect of exchange rate
fluctuations on cash held 79 (3,796) (5,818)
----------------------------- ---- ----------------------------- ----------------------------- -------------------
Cash and cash equivalents at
end of the period 6 31,590 19,595 52,197
----------------------------- ---- ----------------------------- ----------------------------- -------------------
(a) the Group's reporting currency has moved to US Dollars
following the acquisition of CSS in March 2020 which increased the
US dollar revenues to over 70% of the Group and therefore primary
statements have been restated from sterling to US dollar. See note
14 to this interim report for the comparative primary statements
from the prior year as previously presented in sterling. In
addition, all prior year comparative notes to the accounts have
been restated throughout this report.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2020
1 Accounting policies
Basis of Preparation
The financial information contained in this interim report does
not constitute statutory accounts as defined in Section 435 of the
Companies Act 2006 and is unaudited.
The Group interim report has been prepared and approved by the
Directors in accordance with International Financial Reporting
Standards as adopted by the EU ('Adopted IFRS'). The financial
information for the year ended 31 March 2020 is extracted from the
statutory accounts of the Group for that financial year and has
been restated into US dollar. See the Presentation Currency section
below for further detail. The auditor's report was (i) unqualified;
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report; and (iii) did not contain a statement under Section 498 (2)
of the Companies Act 2006. The interim report does not include all
the information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements for the year ended 31 March 2020. The
audited annual accounts have been delivered to the Registrar of
Companies.
The preparation of financial statements that conform with
adopted IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of income and
expense during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results may ultimately differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and future periods if
relevant.
For the purposes of these financial statements 'Design Group' or
'the Group' means IG Design Group plc ('the Company') and its
subsidiaries. The Company's ordinary shares are listed on the
Alternative Investment Market ('AIM').
Seasonality of the Business
The business of the Group is seasonal and although revenues
accrue relatively evenly in both halves of the year, working
capital requirements including inventory levels increase steadily
in the first half from July and peaks in October as manufacturing
and distribution of Christmas products builds ahead of shipping.
The second half of the year sees the borrowing of the Group decline
and move to typically a cash positive position as we collect our
debtors through January to March.
Presentation Currency
The Company has changed the presentation currency of the Group
from pound sterling to US dollar effective 1 April 2020. Following
the acquisition of CSS Industries Inc., a significant majority of
the Group earnings is now denominated in US dollars. Management
believes that the presentation currency change will give investors
and other stakeholders a clearer understanding of the Group's
financial performance over time. In addition, the change will
reduce the volatility of the Group's earnings due to foreign
exchange movements, in relation to the translation of foreign
currency balances.
The currency translation reserve was set to zero at 1 April 2006
on transition to IFRS and has been restated as if the Group had
reported in US dollars since that date. Share capital, share
premium, capital redemptions reserve, merger reserve and hedging
reserve are translated into US dollars at the rates of exchange at
the balance sheet date and the resulting exchange differences are
included in other reserves.
The functional currency of the parent company remains as
sterling as it is located in the United Kingdom and substantially
all of its cash flows, assets and liabilities are denominated in
sterling, as well as its share capital. As such, the Parent
Company's functional currency differs to that of the Group's
reporting currency.
Since the change in reporting currency has been applied
retrospectively all comparative numbers in these consolidated
interim accounts have been restated into US dollar. Note 14 sets
out the key primary statements with both sterling and US dollar
comparatives for the six months ended 30 September 2019 and year
ended 31 March 2020.
Going Concern
Cash balances and borrowings are detailed in notes 6 and 7.
On 5 June 2019, to meet the funding requirements of the Group,
the business refinanced with a banking group comprising HSBC,
NatWest, BNP Paribas, Sun Trust and PNC Bank as part of a three
year deal. This facility was then subsequently amended and extended
on 17 January 2020 with the same banking group to accommodate the
acquisition of CSS Industries Inc. The facilities run to May 2022
and comprise of a revolving credit facility ('RCF') of $95.0
million, a further flexible RCF of up to GBP130.0 million flexible
to meet the Group's working capital requirements during peak
manufacturing, and a maximum limit of $18.0 million invoice
financing arrangement in Hong Kong. We also have access to supplier
financing arrangements from certain customers which we utilise at
certain times of the year. These arrangements are subject to the
continuing support of the customers banking partners and therefore
could be withdrawn at short notice.
The Directors have prepared detailed plans and forecasts for a
period of at least twelve months from the date of signing these
financial statements. The plans reflect the seasonal operating
cycle of the business and assume continuity of supply chain. They
also benefit from the diverse geographic spread of the Group and
the high proportion of revenues generated from retailers who have
remained open during the Covid-19 crisis. The base case forecasts
broadly assume a recovery over the remainder of this financial year
but to a generally recessionary environment. The Group is currently
trading ahead of forecasts used to consider the going concern
assessment. The forecasts show the Group has more than sufficient
liquidity. In light of the ongoing Covid-19 pandemic, these
forecasts have been sensitised to reflect severe but plausible
adverse downturns in the current assumptions including the impact
of the second wave of the pandemic and associated lockdown in the
UK and Europe as well as the cyber incident in the US. Management
has also produced a maximum stress forecast which has been
deliberately engineered to challenge the Group's liquidity and
leverage covenant positions during the forecast period. Further
analysis has been prepared in relation to the mitigating actions
open to the Group in the event of a scenario which is worse than
the sensitivities already modelled. These mitigating actions
include short term sales action, cutting discretionary spend
further, headcount reductions and reduction in investment such as
capex.
These forecasts and additional analysis including mitigating
actions demonstrated that the Group has sufficient excess headroom
for the Group to meet its obligations as they fall due for a
forecast period of more than twelve months beyond the date of
signing these accounts.
Based on these models, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, and accordingly
have adopted the going concern basis in preparing the consolidated
financial statements. This disclosure has been prepared in
accordance with the Financial Reporting Council's UK Corporate
Governance Code.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim report are consistent with those followed in preparation of
the Group's annual financial statements for the year ended 31 March
2020.
2 Segmental information
The Group has one material business activity being the design,
manufacture and distribution of Celebration, Craft & creative
play, Stationery, Gifting and 'Not-for-resale' consumable
products.
Following the acquisition of CSS, the business has been
restructured with the consolidation of the UK, European and
Australian businesses under one operating segment: International.
As such the Board has re-evaluated the reporting segments for the
Group and for management purposes the Group is now organised into
two geographic reporting segments. These are the segments as
reported to, and evaluated by, the Chief Operating Decision Makers
for the Group.
The acquisition of CSS Industries Inc. has seen additional
entities in various locations around the world including Asia,
Australia, UK, India and Mexico. Management review the results for
CSS as one consolidated unit and this forms part of the Americas
segment for the purpose of segmental reporting.
Inter -- segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Financial performance of each segment is measured on adjusted
operating profit before management recharges. Interest and tax are
managed on a Group basis and not split between reportable segments.
However, the related financial liability and cash has been
allocated out into the reportable segments as this is how they are
managed by the Group.
Segment assets are all non - current and current assets,
excluding deferred tax and income tax, which are shown in the
eliminations column. Inter - segment receivables and payables are
not included within segmental assets and liabilities as they
eliminate on consolidation.
Central
&
Americas(a) International eliminations Group
$000 $000 $000 $000
----------------------------------- ---------------- ----------- ------------- ------------ ---------
Six months ended 30 September
2020
Revenue - external 321,572 113,063 - 434,635
- inter segment - 2,443 (2,443) -
---------------------------------- ----------------- ----------- ------------- ------------ ---------
Total segment revenue 321,572 115,506 (2,443) 434,635
----------------------------------- ---------------- ----------- ------------- ------------ ---------
Segment result before adjusting
items and management recharges 19,550 15,140 (2,224) 32,466
Adjusting items (note 3) (13,121)
Operating profit 19,345
Finance expenses (2,265)
Income tax (4,801)
----------------------------------- ---------------- ----------- ------------- ------------ ---------
Profit for six months ended
30 September 2020 12,279
----------------------------------- ---------------- ----------- ------------- ------------ ---------
Balances at 30 September 2020
Segment assets 563,866 282,583 80,527 926,976
----------------------------------- ---------------- ----------- ------------- ------------ ---------
Segment liabilities (316,758) (148,970) (63,501) (529,229)
----------------------------------- ---------------- ----------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 1,519 1,210 - 2,729
- intangible assets 700 37 - 737
- right-of-use assets 29,639 679 - 30,318
Depreciation - property, plant
and equipment 3,917 2,760 1 6,678
Amortisation - intangible assets 3,988 270 - 4,258
Depreciation - right-of-use
assets 6,756 2,579 35 9,370
Central
&
Americas International eliminations Group
(a)
$000 $000 $000 $000
---------------------------------- ---------------- --------- ------------- ------------ ---------
Six months ended 30 September
2019
Revenue - external 183,837 125,383 - 309,220
- inter segment - 2,999 (2,999) -
--------------------------------- ----------------- --------- ------------- ------------ ---------
Total segment revenue 183,837 128,382 (2,999) 309,220
---------------------------------- ---------------- --------- ------------- ------------ ---------
Segment result before adjusting
items and management recharges 17,600 13,222 (2,167) 28,655
Adjusting items (note 3) (5,581)
Operating profit 23,074
Finance expenses (2,616)
Income tax (4,535)
---------------------------------- ---------------- --------- ------------- ------------ ---------
Profit for the six months
ended 30 September 2019 15,923
---------------------------------- ---------------- --------- ------------- ------------ ---------
Balances at 30 September 2019
Segment assets 293,067 282,311 134,765 710,143
---------------------------------- ---------------- --------- ------------- ------------ ---------
Segment liabilities (195,082) (164,295) (124,725) (484,102)
---------------------------------- ---------------- --------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 1,021 3,016 4 4,041
- intangible assets 894 146 86 1,126
- right-of-use assets 640 2,663 33 3,336
Depreciation - property, plant
and equipment 1,243 2,599 3 3,845
Amortisation - intangible
assets 2,120 324 - 2,444
Depreciation - right-of-use
assets 1,787 2,223 33 4,043
---------------------------------- ---------------- --------- ------------- ------------ ---------
Central
&
Americas(a) International eliminations Group
$000 $000 $000 $000
------------------------------- ---------------- ----------- ------------- ------------ ---------
Year ended 31 March
2020
Revenue - external 355,917 268,423 - 624,340
- inter segment - 7,071 (7,071) -
---------------------------- ------------------- ----------- ------------- ------------ ---------
Total segment revenue 355,917 275,494 (7,071) 624,340
------------------------------- ---------------- ----------- ------------- ------------ ---------
Segment result before adjusting
items and management recharge 20,064 24,877 (4,017) 40,924
Adjusting items (note
3) (36,318)
Operating profit 4,606
Finance expenses (5,479)
Income tax 18,276
------------------------------- ---------------- ----------- ------------- ------------ ---------
Profit for the year
ended 31 March 2020 17,403
------------------------------- ---------------- ----------- ------------- ------------ ---------
Balances at 31 March
2020
Segment assets 423,642 210,380 60,151 694,173
----------------------------- ------------------ ----------- ------------- ------------ ---------
Segment liabilities (199,584) (95,410) (23,336) (318,330)
----------------------------- ------------------ ----------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 3,372 7,087 4 10,463
- property, plant and equipment
on acquisition of business 40,570 - - 40,570
- intangible assets 3,419 236 83 3,738
- intangible assets on acquisition
of business 5,960 - - 5,960
- right-of-use assets 790 6,515 33 7,338
- right-of-use assets on acquisition
of business 40,650 - - 40,650
Depreciation - property, plant
and equipment 3,034 5,411 3 8,448
Impairment - 432 - 432
Amortisation - intangible
assets 4,341 475 - 4,816
Depreciation - right-of-use
assets 4,222 4,619 70 8,911
------------------------------ ----------------- ----------- ------------- ------------ ---------
(a) Including overseas entities for the Americas operating segment
3 Operating profit and adjusting items
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
$000 $000 $000
------------------------------ ----------- ----------- --------
Operating profit analysed as:
Adjusted operating profit 32,466 28,655 40,924
Adjusting items (13,121) (5,581) (36,318)
------------------------------- ----------- ----------- --------
Operating profit 19,345 23,074 4,606
------------------------------- ----------- ----------- --------
Adjusting items
Six months ended 30 Loss on sale of Other finance Total
September 2020 Cost of sales Selling expenses Admin expenses subsidiary expenses
$000 $000 $000 $000 $000 $000
Losses/(gains) and
transaction costs
relating to
acquisitions and
disposals of
businesses(1) - - 674 208 - 882
Acquisition
integration and
restructuring
costs(2) 33 - 5,478 - - 5,511
Impairment of
assets(3) - 52 - - - 52
Incremental
Covid-19 costs(4) 926 - 1,048 - - 1,974
Amortisation of
acquired
intangibles(5) - - 2,225 - - 2,225
LTIP charge(6) - - 2,477 - - 2,477
Adjusting items 959 52 11,902 208 - 13,121
------------------- ------------- ---------------- -------------- ------------------- ------------------- ------
Six months ended 30 Loss Other Total
September 2019 Cost Selling expenses Admin expenses on sale of finance expenses
of sales subsidiary
$000 $000 $000 $000 $000 $000
Losses/(gains) and
transaction costs
relating to
acquisitions and
disposals of
businesses(1) - - 685 - - 685
Acquisition
integration and
restructuring
costs(2) 563 - 642 - - 1,205
Amortisation of
acquired
intangibles (5) - - 1,783 - - 1,783
LTIP charge(6) - - 1,908 - - 1,908
Adjusting items 563 - 5,018 - - 5,581
-------------------- ---------- ------------------ ---------------- -------------------- ----------------- -----
Year ended 31 March Profit Other Total
2020 Cost Selling expenses Admin expenses on sale of finance expenses
of sales subsidiary
$000 $000 $000 $000 $000 $000
Losses/(gains) and
transaction costs
relating to
acquisitions and
disposals of
businesses(1) 32 - 5,918 (1,836) - 4,114
Acquisition
integration and
restructuring
costs(2) 7,066 - 4,960 - - 12,026
Impairment of
assets(3) 8,021 3,789 - - - 11,810
Incremental Covid-19
costs(4) 327 - 292 - - 619
Amortisation of
acquired
intangibles (5) - - 3,573 - - 3,573
LTIP credits(6) - - (252) - - (252)
US tariffs(7) 4,428 - - - - 4,428
-------------------- ---------- ------------------ ---------------- ------------------- ----------------- ------
Adjusting items 19,874 3,789 14,491 (1,836) - 36,318
-------------------- ---------- ------------------ ---------------- ------------------- ----------------- ------
Adjusting items are separately presented by virtue of their
nature, size and/or incidence (per each operating segment). These
items are material items of an unusual or non-recurring nature
which represent gains or losses and are presented to allow for the
review of the performance of the business in a consistent manner
and in line with how the business is managed and measured on a
day-to-day basis and allow the reader to obtain a clearer
understanding of the underlying results of the ongoing Group's
operations. They are typically gains or costs associated with
events that are not considered to form part of the core operations,
or are considered to be a 'non-recurring' event (although they may
span several accounting periods).
These costs/(gains) relating to the period ended 30 September
2020 are broken down as follows;
(1) Losses/(gains) and transaction costs relating to
acquisitions and disposals of businesses
Costs directly associated with acquisitions, including legal and
advisory fees on deals, form part of our reported results on an
IFRS basis. These costs however, in the Board's view, form part of
the capital transaction, and as they are not attributed to
investment value under IFRS 3, they are included as an adjusting
item. Similarly, where acquisitions have employee related payments
(exclusive of LTIPs) which lock in and incentivise legacy talent,
we also include these costs as Adjusting items. Furthermore, gains
or losses on the disposal of businesses, including any transaction
costs associated with the disposal are treated as Adjusting
items.
In the period, costs of $133,000 associated with the acquisition
of CSS were incurred relating to advisor fees. In addition,
$542,000 of acquisition related employee payments from the Impact
Innovations Inc. transaction in 2019 which lock in and incentivise
legacy talent. Finally, an additional $207,000 of transaction costs
associated with the disposal of Zhejiang Shaoxing Royal Arts and
Crafts Co. Ltd ('Shaoxing') were incurred.
As at 30 September 2019, the Group incurred $685,000 of
transaction costs primarily relating to acquisition related
employee payments from the Impact Innovations Inc. transaction in
2019 which lock in and incentivise legacy talent as well as other
M&A related costs. As at 31 March 2020 the total net cost
incurred by the Group was $4.1 million, including costs associated
with the acquisition of CSS Industries Inc. along with the profit
on disposal of Shaoxing.
(2) Acquisition integration and restructuring costs
In order to realise synergies from acquisitions, integration
projects are undertaken that aim to deliver future savings and
efficiencies for the Group. These are projects outside of the
normal operations of the business and typically incur one-time
costs to ensure successful implementation. As such the Board
considers it is appropriate that costs associated with projects of
this nature be included as Adjusting items.
The main costs relate to the integration of CSS into the
enlarged DG Americas as new team structures have been put in place.
There have also been associated temporary staff costs and
recruitment costs as roles are being filled. These costs amounted
to $3.4 million in the period.
The CSS business includes a large portfolio of owned and leased
sites, and part of the integration project includes the
consolidation of these locations resulting in the impairment of
lease assets and the ongoing costs associated with the closure of
sites as well as the lease liability interest costs. In the period,
the site in Nashville, Tennessee was closed and the associated
impairment of the lease asset and ongoing costs associated with the
mothballing of the site as well as the lease liability interest
costs have been treated as Adjusting items amounting to $1.4
million in the period. This is consistent with the treatment
adopted when other sites have been closed.
The UK undertook a reorganisation in light of Covid-19 for which
the costs have been treated as Adjusting items. In addition, in
Australia a similar reorganisation was made in the first half of
the financial year. The total costs associated with the
reorganisations in the period was $798,000.
As at 30 September 2019, the Group had incurred $1.2 million of
acquisition integration costs, and by 31 March 2020 $12.0 million
of costs relating to the integration of manufacturing facilities in
Memphis, transition and retention costs as well as costs relating
to the CSS integration.
(3) Impairment of assets
In light of the impact of Covid-19 on the business, a review of
inventory, trade receivables and fixed assets was undertaken at the
year end. Inventories were assessed at 31 March 2020 for the net
realisable value and an impairment of $7.4 million was taken in
relation to aged and obsolete inventory. Similarly trade
receivables were assessed for their expected credit loss in line
with IFRS 9 and an impairment of $3.8 million was taken. In
addition, an impairment of $667,000 was taken as at 31 March 2020
in relation to inventory related assets and certain fixed
assets.
As at 30 September 2020, this assessment continues, and for
trade receivables any impairment taken at the year end that was not
required has been reversed ($3.1 million) alongside any additional
debtors as at the reporting date who are now considered higher risk
for which an impairment has been taken ($3.9 million). Inventories
continue to be assessed for net realisable value, with sell-
through of provided inventory of $1.8 million being netted against
further inventory risk of $1.2 million recognised. Given the
seasonality of our business and the high proportion of Christmas
related sales, further assessment will be undertaken by the end of
the financial year.
(4) Incremental Covid-19 costs
The Covid-19 outbreak has developed rapidly in 2020, with
measures taken around the world to contain the virus affecting
economic activity. The Group has been affected in every territory
in which we operate and the impact on the general economic
environment and the reduced demand of goods from our customers as
well as the closures of our businesses has had a significant
impact. Certain costs relating to incremental direct labour have
been identified that have impacted the financial results of the
business during the year to date, equal to $2.0 million. The most
significant element of these costs totalled $1.3 million relating
to additional labour costs across our manufacturing facilities in
the USA, Mexico and India. The US government assistance provided
support to the workforce focused on payments direct to the
individual rather than through the employer and as such no
government assistance has been received directly by the Americas
business during the period. Furthermore, an unintended impact of
the US government assistance direct to the individual is that
additional costs have been incurred to encourage employees to
return to work rather than remain at home receiving the government
assistance. Similarly in Mexico and India, government mandates has
meant that no workforce reductions have been allowed by law and
labour costs, that otherwise would not have been, have been
incurred as a result. Other incremental costs include $432,000 of
costs associated with direct labour inefficiencies and shorter
shifts in our manufacturing sites to allow for clean down and
sanitising all equipment and areas before the subsequent shift move
in as well as $228,000 of additional cleaning and PPE costs.
Management have taken a judgement not to include government
assistance received in the period as an Adjusting item, as whilst
the amounts received were incremental, the underlying employee
expenditure would likely not have been incurred if the government
assistance was not received.
In the year ended 31 March 2020, $619,000 of direct incremental
costs associated with Covid-19 had been incurred by the Group.
(5) Amortisation of acquired intangibles
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer
relationships and brands which form part of the intangible value of
the acquired business but are not part of the acquired balance
sheet. These intangible assets are then amortised to the income
statement over an appropriately judged period. These are not
operational costs relating to the running of the acquired business
and are directly related to the accounting for the acquisition.
These include tradenames and brands acquired as part of the
acquisition of Impact Innovations Inc. and CSS Industries Inc. in
the USA and Biscay Pty Greetings Ltd in Australia. As such we
include these as Adjusting items. Note that the trade names
acquired as part of the acquisition of The Lang Companies Inc. were
fully amortised in the prior year.
In addition, in accordance with IFRS 3, on acquisition,
businesses need to be fair valued, which can result in an uplift to
stock on hand relating to sales orders already attached to the
acquired stock. This uplift will distort the margins associated
with the stock, and typically unwinds quickly as stock is sold soon
after acquisition. The unwind of the stock uplift ($0.6 million)
associated with the CSS acquisition is included as an Adjusting
item, consistent with the treatment adopted with the Impact
acquisition. This has fully unwound as at 30 September 2020.
(6) LTIP charges
As part of our senior management remuneration, the Group operate
a Long Term Incentive Plan ('LTIP') in the form of options for
ordinary shares of the Group. In accordance with accounting
principles, despite this plan not being a cash cost to the business
a share -- based payments charge or credit is taken to the income
statement. We consider that these charges and the associated social
security charges do not form part of the underlying operational
costs and therefore include these as Adjusting items.
The LTIP charge for the period to 30 September 2020 is $2.4
million which consists of a principal IFRS 2 charge of $2.2 million
and an employer's social security charge of $0.2 million.
As at 30 September 2019, $1.9 million of LTIP charges had been
incurred and by the 31 March 2020, these charges had been reversed
and instead a credit of ($0.3) million had been taken.
The cash flow effect on adjusting items
There was $10.4 million net outflow on the current period's cash
flow (H1 2020: $1.9 million) which included $4.5 million (H1 2020:
$591,000) of outflow deferred from last year.
4 Other operating income
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
$000 $000 $000
--------------------------------------------------- ----------- ----------- -------
Grant income received 64 317 380
Sub-lease rentals credited to the income statement 178 177 358
Government assistance 3,578 - -
Other 89 9 189
Total other operating income 3,909 503 927
--------------------------------------------------- ----------- ----------- -------
5 Taxation
Recognised in the income statement
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
$000 $000 $000
---------------------------------------------------- ----------- ----------- -------
Current tax (charge)/credit
Current income tax (charge)/credit (8,625) (4,533) 14,458
Deferred tax credit/(charge)
Relating to origination and reversal of temporary
differences 3,824 (2) 3,818
---------------------------------------------------- ----------- ----------- -------
Total tax in the income statement (4,801) (4,535) 18,276
---------------------------------------------------- ----------- ----------- -------
Total tax (charge)/credit on adjusting items
Total tax on profit before adjusting items (7,677) (5,860) (7,113)
Total tax on adjusting items 2,876 1,325 8,053
Adjusting item - tax credit (US tax loss carryback) - - 17,336
Total tax in income statement (4,801) (4,535) 18,276
---------------------------------------------------- ----------- ----------- -------
6 Cash and cash equivalents/bank overdrafts
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 March
2020 2019 2020
$000 $000 $000
-------------------------------------------------- ----------- ----------- ---------
Cash and cash equivalents 76,770 145,117 83,200
Bank overdrafts (45,180) (125,522) (31,003)
-------------------------------------------------- ----------- ----------- ---------
Cash and cash equivalents per cash flow statement 31,590 19,595 52,197
-------------------------------------------------- ----------- ----------- ---------
Net cash
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
$000 $000 $000
------------------------------------------------ ----------- ----------- -------
Cash and cash equivalents 31,590 19,595 52,197
Bank loans and overdrafts (55,802) (126,268) (987)
Loan arrangement fees 972 614 1,209
------------------------------------------------ ----------- ----------- -------
Net (debt)/cash as used in the financial review (23,240) (106,059) 52,419
------------------------------------------------ ----------- ----------- -------
The bank loans and overdrafts are secured by a fixed charge on
certain of the Group's land and buildings, a fixed charge on
certain of the Group's book debts and a floating charge on certain
of the Group's other assets. See note 7 for further details of the
Group's loans and borrowings.
7 Loans and borrowings
This note provides information about the contractual terms of
the Group's interest - bearing loans and borrowings.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
$000 $000 $000
-------------------------------------- ----------- ----------- -------
Non-current liabilities
Secured bank loans - 1,149 432
Loan arrangement fees (389) (250) (651)
-------------------------------------- ----------- ----------- -------
(389) 899 (219)
-------------------------------------- ----------- ----------- -------
Current liabilities
Asset backed loan 10,451 11,248 -
Revolving credit facilities 45,279 112,655 -
Current portion of secured bank loans 72 1,216 555
-------------------------------------- ----------- ----------- -------
Bank loans and borrowings 55,802 125,119 555
Loan arrangement fees (583) (364) (558)
-------------------------------------- ----------- ----------- -------
55,219 124,755 (3)
-------------------------------------- ----------- ----------- -------
Secured bank loans
On 5 June 2019, the Group entered into a new three year Group
facility with a club of five banks chosen to reflect and support
the geographical spread of the Group. The banks within the club are
HSBC, NatWest, BNP Paribas, Sun Trust and PNC.
On 17 January 2020 a facility increase was agreed to support the
acquisition of CSS Industries Inc. on 3 March 2020 and to
accommodate the enlarged Group.
The facilities, which run to May 2022, comprises of:
-- a revolving credit facility ('RCF A') of $95.0 million;
-- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to GBP130.0 million.
This RCF is flexed to meet our working capital requirements during
those months when inventory is being built within our annual
business cycle and is $nil when not required, minimising carry
costs; and
-- an invoice financing arrangement in Hong Kong maximum limit
$18.0 million but dependent on level of eligible receivables
In total, the accessible facilities are approximately $276.7
million (maximum $281.4 million) and are more than sufficient to
cover our peak requirements. Being partially denominated in US
dollar they also provide a hedge against currency movements. The
facilities, which do not amortise with time, include an additional
uncommitted amount to finance potential acquisitions.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on. The RCF facilities are secured
with a fixed and floating charge over all other assets of the
Group. Revolving credit facilities are classified as current
liabilities as the Group expects to settle these amounts within 12
months.
There are financial covenants, tested quarterly, attached to the
existing facilities as follows:
-- interest cover, being the ratio of adjusted earnings before
interest, depreciation and amortisation (EBITDA), as defined by the
banking facility, to interest on a rolling twelve--month basis;
and
-- leverage, being the ratio of debt to adjusted EBITDA, as
defined by the banking facility, on a rolling twelve-month
basis.
Covenants are measured on pre IFRS16 accounting definitions.
There is a further covenant tested monthly in respect of the
working capital RCF by which available asset cover must not fall
below agreed levels relative to amounts drawn.
In January 2018, the Group's Australia business obtained a
secured loan from Westpac of $6.5 million (AU$9.0 million). This is
repayable monthly over a five year period. It is subject to a
variable interest rate linked to the Australian base rate. $1.0
million was repaid during the period which, along with $110,000
exchange movement results in a balance at 30 September 2020 of
$72,000 (AU$100,000). The Australia business also borrows from
Westpac for financing working capital and the current facility
level is AU$5.0 million from January to June and AU$10.0 million
July to December.
Loan arrangement fees represent the unamortised costs in
arranging the Group facilities. These fees are being amortised on a
straight line basis over the terms of the facilities.
8 Earnings per share
Unaudited Unaudited Twelve
six months six months months ended
ended 30 ended 30 31 Mar 2020
Sep 2020 Sep 2019
$000 $000 $000
----------------------------------------- ------------ ------------ --------------
Earnings
Earnings attributable to equity
holders of the Company 11,222 15,297 16,461
Adjustments
Adjusting items (net of non-controlling
interest effect) 13,199 5,485 35,964
Tax charge/(relief) on adjustments
(net of non-controlling interest
effect) (2,899) (1,296) (7,946)
Adjusting item - tax credit (US
tax loss carryback) - - (17,336)
----------------------------------------- ------------ ------------ --------------
Adjusted earnings 21,522 19,486 27,143
----------------------------------------- ------------ ------------ --------------
Weighted average number of shares
Basic weighted average number of
shares outstanding 97,700 79,960 82,605
Dilutive effect of employee share
option plans 327 441 476
Diluted weighted average ordinary
shares 98,027 80,401 83,081
----------------------------------------- ------------ ------------ --------------
Earnings per share (cents)
Basic earnings per share 11.5 19.1 19.9
Adjustment 10.5 5.3 12.9
----------------------------------------- ------------ ------------ --------------
Basic adjusted earnings per share 22.0 24.4 32.8
----------------------------------------- ------------ ------------ --------------
Diluted earnings per share 11.4 19.0 19.8
----------------------------------------- ------------ ------------ --------------
Diluted adjusted earnings per share 22.0 24.2 32.7
----------------------------------------- ------------ ------------ --------------
Adjusted earnings per share is provided to reflect the
underlying earnings performance of the Group.
In thousands of shares Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
--------------------------------------------- ----------- ----------- -------
Issued ordinary shares at 1 April 96,367 78,366 78,366
Shares held by Employee Benefit Trust - - -
Shares relating to share options 1,333 1,594 1,594
Shares issued in respect of share placing - - 2,645
--------------------------------------------- ----------- ----------- -------
Weighted average number of shares at the end
of the period 97,700 79,960 82,605
--------------------------------------------- ----------- ----------- -------
Diluted earnings per share
The diluted earnings per share is calculated taking into account
LTIP awards whose specified conditions were satisfied at the end of
the reporting period of 327,000 (H1 2020: 441,000) share options.
At 30 September 2020 the diluted number of shares was 98.0 million
(H1 2020: 80.4 million).
9 Financial instruments
Derivative financial instruments
The fair value of forward exchange contracts is assessed using
valuation models taking into account market inputs such as foreign
exchange spot and forward rates, yield curves and forward interest
rates.
Fair value hierarchy
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
All other financial assets and liabilities are measured at
amortised cost.
The Group held the following financial instruments at fair value
at 30 September 2020:
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2020 2019 2020
Forward exchange contracts carrying amount $000 $000 $000
------------------------------------------- ----------- ----------- -------
Derivative financial assets 556 511 412
Derivative financial liabilities (538) (814) (9)
------------------------------------------- ----------- ----------- -------
10 Capital commitments
At 30 September 2020, the Group had outstanding authorised
capital commitments to purchase plant and equipment for $1.1
million (H1 2020: $4.6 million).
11 Related parties
As at 30 September 2020, there are no changes to the related
parties or types of transactions as disclosed at 31 March 2020.
12 Acquisitions and disposals of subsidiaries
Acquisitions in the prior year
On 3 March 2020, the Group acquired 100% of the equity of CSS
Industries, Inc. ("CSS"), a creative consumer products company,
focused on the craft, gift and seasonal categories predominately
within the US.
As disclosed in the financial statements as at 31 March 2020,
the provisional effect of acquisition of CSS is as follows:
Provisional
fair values
recognised
on acquisition
$000
---------------------------------------- --------------
Property, plant and equipment 40,570
Right-of-use assets 40,650
Intangible assets 5,960
Inventories 56,630
Trade and other receivables 65,296
Doubtful debt provision (2,231)
Cash 10,538
Trade and payables (75,186)
Provisions (5,167)
Income taxes (3,828)
Deferred tax 8,797
Lease liabilities (47,344)
---------------------------------------- --------------
Net identifiable assets and liabilities 94,685
---------------------------------------- --------------
Consideration paid in shares -
Consideration paid in cash 122,789
---------------------------------------- --------------
Total consideration 122,789
---------------------------------------- --------------
Goodwill 28,104
---------------------------------------- --------------
Contingent liabilities of GBP3.6 million were recognised as part
of the business combination relating to reinstatement costs of
leased buildings, potential change of control penalties,
potential environmental claims and potential litigation. The
liabilities
have the potential to unwind over one to five years and contain
estimates. There has been no material movement in these liabilities
as at 30 September 2020.
In addition, as at 30 September 2020, no measurement period
adjustment has been made. A review of the provisional acquisition
accounting as stated in the financial statements to 31 March 2020
is ongoing, with particular focus on inventory as the business
sells through any acquired inventory. As this assessment needs to
be ongoing throughout the year, if appropriate, any measurement
period adjustments will be made in the second half of the year.
13 Non-adjusting post balance sheet events
After the end of the reporting period, and prior to the
authorisation of this interim report on 24 November 2020, the Group
has declared an interim dividend of 3.0 pence (3.9 cents) per share
(H1 2020: 3.0 pence (3.7 cents)).
14 Presentation currency
The Company has changed the presentation currency of the Group
from pound sterling to US dollars effective 1 April 2020. Following
the acquisition of CSS Industries Inc., a significant majority of
the Group earnings is now denominated in US dollars. Management
believes that the presentation currency change will give investors
and other stakeholders a clearer understanding of the Design
Group's financial performance over time. In addition, the change
will reduce the volatility of the Group's earnings due to foreign
exchange movements, in relation to the translation of foreign
currency balances.
Detailed below are the key primary statements with both pound
sterling and US dollar comparatives for both six months ended 30
September 2019 and the year ended 31 March 2020.
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Twelve Twelve
six months six months months months
ended ended ended ended
30 Sep 2019 30 Sep 2019 31 Mar 31 Mar
2020 2020
$000 GBP000 $000 GBP000
-------------------- ---------------------- ---------------------- ---------------------- ----------------------
Revenue 309,220 248,371 624,340 494,234
Cost of sales (246,186) (197,597) (530,109) (419,131)
-------------------- ---------------------- ---------------------- ---------------------- ----------------------
Gross profit 63,034 50,774 94,231 75,103
Selling expenses (13,374) (10,658) (33,766) (26,523)
Administration
expenses (27,089) (21,336) (58,868) (46,409)
Other operating
income 503 398 927 735
Profit on disposal
of property,
plant and equipment - - 246 188
Profit on disposal
of subsidiary - - 1,836 1,486
Operating profit 23,074 19,178 4,606 4,580
Finance expenses (2,616) (2,083) (5,479) (4,317)
-------------------- ---------------------- ---------------------- ---------------------- ----------------------
Profit /(loss)
before tax 20,458 17,095 (873) 263
Income tax
(charge)/credit (4,535) (3,792) 18,276 14,547
-------------------- ---------------------- ---------------------- ---------------------- ----------------------
Profit for the
period 15,923 13,303 17,403 14,810
-------------------- ---------------------- ---------------------- ---------------------- ----------------------
Attributable to:
Owners of the Parent
Company 15,297 12,799 16,461 14,060
Non-controlling
interests 626 504 942 750
-------------------- ---------------------- ---------------------- ---------------------- ----------------------
Earnings per ordinary share
Unaudited Unaudited Twelve months Twelve months
six months six months ended ended
ended ended 31 Mar 2020 31 Mar 2020
30 Sep 2019 30 Sep
2019
-------- --------------------- -------------------- -------------------------- -------------------------
Basic 19.1c 16.0p 19.9c 17.0p
-------- --------------------- -------------------- -------------------------- -------------------------
Diluted 19.0c 16.0p 19.8c 16.9p
-------- --------------------- -------------------- -------------------------- -------------------------
Adjusted Earnings per ordinary share
Unaudited Unaudited
six months six months Twelve months Twelve months
ended ended ended ended
30 Sep 2019 30 Sep 2019 31 Mar 2020 31 Mar 2020
-------- ---------------------- ---------------------- -------------------------- -------------------------
Basic 24.4c 20.2p 32.8c 27.0p
-------- ---------------------- ---------------------- -------------------------- -------------------------
Diluted 24.2c 20.1p 32.7c 26.9p
-------- ---------------------- ---------------------- -------------------------- -------------------------
EXECUTIVE REVIEW INCOME STATEMENT
Twelve
Unaudited Unaudited months Twelve
six months six months ended months
ended ended 31 Mar ended
30 Sep 2019 30 Sep 2019 2020 31 Mar 2020
$m GBPm $m GBPm
---------------- ----------------------- ------------------------- ---------------------- -----------------------
Revenue 309.2 248.4 624.3 494.2
Gross profit 63.6 51.3 114.1 90.9
Overheads (34.9) (27.7) (73.2) (57.5)
Adjusted
operating
profit 28.7 23.6 40.9 33.4
Finance expenses (2.6) (2.1) (5.5) (4.3)
---------------- ----------------------- ------------------------- ---------------------- -----------------------
Adjusted profit
/(loss) before
tax 26.1 21.5 35.4 29.1
Adjusting items (5.6) (4.4) (36.3) (28.8)
---------------- ----------------------- ------------------------- ---------------------- -----------------------
Profit /(loss)
before tax 20.5 17.1 (0.9) 0.3
---------------- ----------------------- ------------------------- ---------------------- -----------------------
Income tax
credit/(charge) (4.6) (3.8) 18.3 14.5
---------------- ----------------------- ------------------------- ---------------------- -----------------------
Profit for the
period 15.9 13.3 17.4 14.8
---------------- ----------------------- ------------------------- ---------------------- -----------------------
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Twelve Twelve
six months six months months ended months
ended ended 31 Mar ended
30 Sep 2019 30 Sep 2019 2020 31 Mar 2020
$000 GBP000 $000 GBP000
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Non-current
assets
Property, plant
and equipment 50,769 41,276 92,622 74,695
Intangible
assets 106,482 86,570 140,504 113,309
Right-of-use
assets 43,771 35,586 82,742 66,728
Long-term assets - - 6,223 5,019
Deferred tax
assets 5,126 4,167 18,135 14,624
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total
non-current
assets 206,148 167,599 340,226 274,375
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Current assets
Inventory 157,703 128,213 141,911 114,445
Trade and other
receivables 200,664 163,143 110,047 88,748
Income tax
receivable - - 18,377 14,820
Derivative
financial
assets 511 415 412 332
Cash and cash
equivalents 145,117 117,982 83,200 67,098
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total current
assets 503,995 409,753 353,947 285,443
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total assets 710,143 577,352 694,173 559,818
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Equity
Share capital 4,863 3,954 5,974 4,818
Share premium 69,277 56,323 213,755 172,383
Capital
redemption
reserve 1,648 1,340 1,662 1,340
Merger reserve 39,851 32,399 40,175 32,399
Hedging reserve (401) (326) 320 258
Translation
reserve (12,016) 2,375 (4,389) 7,383
Retained
earnings 117,526 83,400 113,703 80,794
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Equity
attributable to
owners
of the Parent
Company 220,748 179,465 371,200 299,375
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Non-controlling
interests 5,293 4,305 4,643 3,744
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total equity 226,041 183,770 375,843 303,119
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Non-current
liabilities
Loans and
borrowings 899 731 (219) (177)
Lease
liabilities 42,097 34,225 78,418 63,241
Deferred income 678 552 561 452
Provisions 3,094 2,516 5,161 4,163
Other financial
liabilities 868 706 6,784 5,471
Deferred tax
liabilities 906 736 1,314 1,059
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total
non-current
liabilities 48,542 39,466 92,019 74,209
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Current
liabilities
Bank overdraft 125,522 102,051 31,003 25,004
Loans and
borrowings 124,755 101,427 (3) (2)
Lease
liabilities 7,531 6,123 16,995 13,705
Deferred income 437 355 162 131
Provisions 1,149 934 2,717 2,191
Income tax
payable 7,417 6,030 5,482 4,399
Trade and other
payables 147,732 120,109 121,962 98,357
Other financial
liabilities 21,017 17,087 47,993 38,705
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total current
liabilities 435,560 354,116 226,311 182,490
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total
liabilities 484,102 393,582 318,330 256,699
---------------- ------------------------ ------------------------- ------------------------- -----------------------
Total equity and
liabilities 710,143 577,352 694,173 559,818
---------------- ------------------------ ------------------------- ------------------------- -----------------------
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Twelve Twelve
six months six months months months
ended ended ended ended
30 Sep 2019 30 Sep 2019 31 Mar 2020 31 Mar 2020
$000 GBP000 $000 GBP000
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Cash flows from
operating activities
Profit for the year 15,923 13,303 17,403 14,810
Adjustments for:
Depreciation and
impairment 3,845 3,041 8,880 6,994
Depreciation of
right-of-use assets 4,043 3,208 8,911 7,014
Amortisation of
intangible assets 2,444 1,944 4,816 3,796
Finance expenses 2,616 2,083 5,479 4,317
Income tax
charge/(credit) 4,535 3,792 (18,276) (14,547)
Profit on disposal of
subsidiary - - (1,836) (1,486)
Loss/(profit) on
disposal of property,
plant and equipment 9 7 (246) (188)
Loss on disposal of
intangible fixed
assets - - 1 1
Equity-settled
share-based payments 1,908 1,513 (252) (202)
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Operating profit after
adjustments for
non-cash items 35,323 28,891 24,880 20,509
Change in trade and
other receivables (143,430) (116,210) 9,841 629
Change in inventory (71,244) (56,065) 1,532 705
Change in trade and
other payables,
provisions and
deferred income 74,861 61,502 1,592 5,913
Cash (used
by)/generated from
operations (104,490) (81,882) 37,845 27,756
Tax paid (2,984) (2,297) (5,993) (4,749)
Interest and similar
charges paid (2,092) (1,672) (5,090) (3,996)
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Net cash
(outflow)/inflow from
operating activities (109,566) (85,851) 26,762 19,011
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Cash flow from
investing activities
Proceeds from sale of
property, plant and
equipment 25 21 767 595
Acquisition of
businesses (net of
cash acquired) - - (112,251) (87,696)
Acquisition of
intangible assets (1,126) (908) (3,738) (2,997)
Acquisition of
property, plant and
equipment (4,041) (3,171) (10,463) (8,133)
Net cash outflow from
investing activities (5,142) (4,058) (125,685) (98,231)
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Cash flows from
financing activities
Proceeds from issue of
share capital - - 152,535 116,924
Repayment of secured
borrowings (627) (497) (1,917) (1,505)
Net movement in
previous credit
facilities 48,230 37,976 48,230 37,976
Repayment of previous
credit facilities (48,230) (37,976) (48,230) (37,976)
Net movement in new
credit facilities 123,903 100,734 - --
Payment of lease
liabilities (3,868) (3,055) (8,430) (6,622)
Loan arrangement fees (737) (598) (1,571) (1,234)
Equity dividends paid (5,868) (4,732) (8,975) (7,104)
Net cash inflow from
financing activities 112,803 91,852 131,642 100,459
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Net (decrease)/increase
in cash and cash
equivalents (1,905) 1,943 32,719 21,239
Cash and cash
equivalents at
beginning of the
period 25,296 19,458 25,296 19,458
Effect of exchange rate
fluctuations on cash
held (3,796) (5,470) (5,818) 1,397
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
Cash and cash
equivalents at end of
the period 19,595 15,931 52,197 42,094
----------------------- -------------------------- -------------------------- ----------------------- -----------------------
ADJUSTED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Twelve Twelve
six months six months months months
ended ended ended ended
30 Sep 30 Sep 31 Mar 31 Mar
2019 2019 2020 2020
$m GBPm $m GBPm
Adjusted EBITDA 37.2 30.4 59.5 48.1
Movements in working capital (139.8) (110.7) (5.3) (7.5)
------------------------------------- ------------ ------------ -------- --------
Adjusted cash (used by)/generated
from operations (102.6) (80.3) 54.2 40.6
Adjusting items (1.9) (1.6 ) (16.6) (13.1)
------------------------------------- ------------ ------------ -------- --------
Cash (used by)/generated from
operations (104.5) (81.9) 37.6 27.5
Capital expenditure (net of
disposals of property, plant
and equipment) (5.1) (4.1) (13.7) (10.7)
Business acquired (including
cash on acquisition) - - (112.3) (87.7)
Tax paid (3.0) (2.3) (6.0) (4.7)
Interest paid (2.1) (1.7) (5.1) (4.0)
Payments of lease liabilities (3.9) (3.1) (8.4) (6.6)
Dividends paid (including those
paid to non controlling interests) (5.9) (4.7) (9.0) (7.1)
Proceeds from issue of share
capital - - 152.5 116.9
FX and other (3.8) (5.5) (5.4) 1.6
------------------------------------- ------------ ------------ -------- --------
Movement in net (debt)/cash (128.3) (103.3) 30.2 25.2
Opening net cash 22.2 17.1 22.2 17.1
------------------------------------- ------------ ------------ -------- --------
Closing net (debt)/cash (106.1) (86.2) 52.4 42.3
------------------------------------- ------------ ------------ -------- --------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Twelve Twelve
six months six months months months
ended ended ended ended
30 Sep 30 Sep 31 Mar 31 Mar
2019 2019 2020 2020
$000 GBP000 $000 GBP000
Profit for the period 15,923 13,303 17,403 14,810
Other comprehensive income:
Exchange difference on translation
of foreign operations (net of tax) (4,031) 860 3,112 5,450
Recycling translation reserves on
disposal of subsidiary - - 42 34
Transfer to profit and loss on maturing
cash flow hedges (net of tax) (490) (377) (490) (377)
Net unrealised (loss)/gain on cash
flow hedges (net of tax) (64) (67) 657 517
Other comprehensive income for the
period, net of tax items which may
be reclassified to profit and loss
in subsequent periods (4,585) 416 3,321 5,624
Total comprehensive income for the
year, net of tax 11,338 13,719 20,724 20,434
Attributable to:
Owners of the Parent Company 10,860 13,123 20,372 19,976
Non-controlling interests 478 596 352 458
11,338 13,719 20,724 20,434
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2019 - US dollar
Attributable to the owners of the Parent Company
Share
premium
and Non-
capital
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 31 March 2019 5,093 74,962 42,119 153 (8,133) 108,763 222,957 5,266 228,223
Impact of
adopting IFRS
16 - - - - - (2,427) (2,427) (572) (2,999)
Restated equity
at 31 March
2019 5,093 74,962 42,119 153 (8,133) 106,336 220,530 4,694 225,224
Profit for the
year - - - - - 15,297 15,297 626 15,923
Other
comprehensive
income - - - (554) (3,883) - (4,437) (148) (4,585)
Total
comprehensive
income for the
year - - - (554) (3,883) 15,297 10,860 478 11,338
Transactions
with owners in
their capacity
as owners
Equity-settled
share-based
payments - - - - - 1,491 1,491 - 1,491
Tax on
equity-settled
share-based
payments - - - - - 314 314 - 314
Recognition of
non-controlling
interests - - - - - - - 121 121
Options
exercised 44 - - - - (44) - - -
Equity dividends
paid - - - - - (5,868) (5,868) - (5,868)
Exchange
differences on
opening
balances (274) (4,037) (2,268) - - - (6,579) - (6,579)
At 30 September
2019 4,863 70,925 39,851 (401) (12,016) 117,526 220,748 5,293 226,041
SIX MONTHSED 30 SEPTEMBER 2019 - Sterling
Attributable to the owners of the Parent Company
Share
premium
and Non-
capital
Share redemption Merger Hedging Translation Retained. Shareholders' controlling
-------
capital reserve reserve reserve reserve earnings equity interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- ------- ---------- --------
At 31 March 2019 3,918 57,663 32,399 118 1,607 75,801 171,506 4,051 175,557
Impact of
adopting IFRS
16 - - - - - (1,867) (1,867) (440) (2,307)
---------------- ------- ---------- --------
Restated equity
at 31 March
2019 3,918 57,663 32,399 118 1,607 73,934 169,639 3,611 173,250
Profit for the
year - - - - - 12,799 12,799 504 13,303
Other
comprehensive
income - - - (444) 768 - 324 92 416
---------------- ------- ---------- --------
Total
comprehensive
income for the
year - - - (444) 768 12,799 13,123 596 13,719
Transactions
with owners in
their capacity
as owners
Equity-settled
share-based
payments - - - - - 1,180 1,180 - 1,180
Tax on
equity-settled
share-based
payments - - - - - 255 255 - 255
Recognition of
non-controlling
interests - - - - - - - 98 98
Options
exercised 36 - - - - (36) - - -
Equity dividends
paid - - - - - (4,732) (4,732) - (4,732)
At 30 September
2019 3,954 57,663 32,399 (326) 2,375 83,400 179,465 4,305 183,770
---------------- ------- ---------- --------
YEARED 31 MARCH 2020 - US dollar
Attributable to the owners of the Parent Company
Share
premium
and Non-
capital
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
----------------
At 31 March 2019 5,093 74,962 42,119 153 (8,133) 108,763 222,957 5,266 228,223
Impact of
adopting IFRS
16 - - - - - (2,427) (2,427) (572) (2,999)
----------------
Restated equity
at 1 April 2019 5,093 74,962 42,119 153 (8,133) 106,336 220,530 4,694 225,224
Profit for the
year - - - - - 16,461 16,461 942 17,403
Other
comprehensive
income - - - 167 3,744 - 3,911 (590) 3,321
---------------- ------- ---------- --------
Total
comprehensive
income for the
year - - - 167 3,744 16,461 20,372 352 20,724
Transactions
with owners in
their capacity
as owners
Equity-settled
share-based
payments - - - - - (287) (287) - (287)
Tax on
equity-settled
share-based
payments - - - - - 213 213 - 213
Derecognition of
non-controlling
interests - - - - - - - (403) (403)
Shares issued 1,117 150,145 - - - - 151,262 - 151,262
Options
exercised 45 - - - - (45) - - -
Equity dividends
paid - - - - - (8,975) (8,975) - (8,975)
Exchange
differences on
opening
balances (281) (9,690) (1,944) - - - (11,915) - (11,915)
At 31 March 2020 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
YEARED 31 MARCH 2020 - Sterling
Attributable to the owners of the Parent Company
Share
premium
and Non-
capital
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------- -------- ---------- --------
At 31 March 2019 3,918 57,663 32,399 118 1,607 75,801 171,506 4,051 175,557
Impact of
adopting IFRS
16 - - - - - (1,867) (1,867) (440) (2,307)
---------------- -------- ---------- --------
Restated equity
at 1 April 2019 3,918 57,663 32,399 118 1,607 73,934 169,639 3,611 173,250
Profit for the
year - - - - - 14,060 14,060 750 14,810
Other
comprehensive
income - - - 140 5,776 - 5,916 (292) 5,624
---------------- -------- ---------- --------
Total
comprehensive
income for the
year - - - 140 5,776 14,060 19,976 458 20,434
Transactions
with owners in
their capacity
as owners
Equity-settled
share-based
payments - - - - - (231) (231) - (231)
Tax on
equity-settled
share-based
payments - - - - - 171 171 - 171
Derecognition of
non-controlling
interests - - - - - - - (325) (325)
Shares issued 864 116,060 - - - - 116,924 - 116,924
Options
exercised 36 - - - - (36) - - -
Equity dividends
paid - - - - - (7,104) (7,104) - (7,104)
At 31 March 2020 4,818 173,723 32,399 258 7,383 80,794 299,375 3,744 303,119
---------------- -------- ---------- --------
, the news service of the London Stock Exchange. RNS is approved by
the Financial Conduct Authority to act as a Primary Information
Provider in the United Kingdom. Terms and conditions relating to
the use and distribution of this information may apply. For further
information, please contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FFFFLLTLVFII
(END) Dow Jones Newswires
November 24, 2020 02:00 ET (07:00 GMT)
Ig Design (LSE:IGR)
Historical Stock Chart
From Apr 2024 to May 2024
Ig Design (LSE:IGR)
Historical Stock Chart
From May 2023 to May 2024