Interesting and accretive acquisition for IG Design. c8% EPS accretive to Mar 19 EPS

Thursday, Sep 21 2017 by

IG Design announced the acquisition of Biscay Greetings Ltd Pty for AUD$9m or £5.5m.

from the Biscay website

"Biscay Greetings Pty Ltd commenced operations in 1971
We pride ourselves on being one of the leading card companies in Australia.
The vast majority of our products are manufactured locally.
Our customer service and commitment is of the highest quality.
Biscays comprehensive range of products are outstanding value, and best prices.
We have a trained sales team that offers friendly service and advice.
Our sales team and warehousing are located Australia wide."

so it looks like a good fit with IG Desgins own business which says on its website:

"We are Design Group – we design, manufacture, source and distribute a wide range of products for life’s important occasions, to transform special moments into memories.
We’re a diverse group of companies operating across multiple regions, categories, seasons and brands. We work with the best retailers in the world, offering a full end-to-end service from design through to distribution. Our products are found within three core categories: Celebrations, Stationery and Creative Play, and Gifting."

The Financials
IG Design is paying $9m or £5.5m of which £3m is stock and fixed assets. Operating profits before tax were AUD $2.9m (£1.7m). So this looks to me like a v good deal at 3.2x EBT. In fact is it too good to be true? I wonder if a layer of cost is being left out as the IG Design uses the less often used "operating profit before tax". IGD does point out it will have to provide £1.8m of working capital. Maybe thats the reason why it has bought Biscay at such a low multiple? I will do some digging on this. 

If i can get comfort on the financials then I think this is a great deal. It neatly fits into IGDs product set. IGD already has operations in Australia which means they can integrate it quickly. Also its about 8% earnings accretive on my back of the fag packet maths. So the ple multiple to Mar 19 falls from c16x to c 14x . Combine that with a record order book and I can see the shares reasserting their previous highs.

If anyone knows anything else re the Biscay financials, then I would be interested to hear. 



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IG Design Group plc, formerly International Greetings plc, is engaged in the design, manufacture and distribution of gift packaging and greetings; stationery and creative play products, and design-led giftware. The Company's geographic segments include UK and Asia; Europe; USA, and Australia. The Company sells its products in over 150,000 stores across approximately 80 countries. It also offers a portfolio of licensed and customer bespoke products suitable for sale through multi channel distribution. The Company's products include crackers, pens and pencils, stickers, single cards and gift wrap. The Company offers its products under the brands A Star, B Stationery, Papercraft and Pepperpot. Its subsidiaries include Artwrap Pty Ltd, International Greetings UK Ltd, International Greetings USA, Inc, International Greetings Asia Ltd, The Huizhou Gift International Greetings Company Limited, Hoomark BV, Anchor International BV and Hoomark S.p.z.o.o. more »

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3 Posts on this Thread show/hide all

runthejoules 22nd Sep 1 of 3

Thanks Veg. I bought tfd recently and this was a nice surprise. I'll follow this for any other well-informed comment.

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VegPatch 22nd Sep 2 of 3

i was hoping Paul would make one of his miraculous 4am comments on the acquisition. But alas no
Its Friday so i know Graham does most of the deep thinking today.

but one can hope



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VegPatch 22nd Sep 3 of 3

Spoke to a City contact of mine this afternoon. He pointed out that the Biscay acquisition is being done by their 50% JV in Australia. So my 8% accretion is closer to 4%. Apologies for my over optimism.

Also acquisitions in this space are usually at 5-6x EBITDA. Turned another way, what does that suggest about IG Designs own valuation ? I guess the acquisitions are typically of smaller, private businesses so command a lower multiple. But its worth bearing in mind if the multiple were to run away with itself!

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