REG - IG Design Group PLC - Full Year Results
25/06/2024 07:00
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RNS Number : 6785T IG Design Group PLC 25 June 2024
EMBARGOED UNTIL 25(th) JUNE 2024
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the year ended 31 March 2024
Second successful year in the three-year turnaround journey, with improving
operational efficiency and simplification of the business
IG Design Group plc, one of the world's leading designers, innovators and
manufacturers across various celebration and creative categories announces its
audited results for the year ended 31 March 2024.
Financial highlights for the year ended 31 March 2024:
Financial Highlights FY2024 FY2023
Revenue $800.1m $890.3m
Adjusted((a))
‐ Operating profit $31.1m $16.1m
‐ Profit before tax $25.9m $9.2m
‐ Diluted earnings/(loss) per share 16.3c (0.2)c
Reported
‐ Operating profit $29.0m $(12.0)m
‐ Profit/(loss) before tax $23.8m $(18.9)m
‐ Diluted earnings/(loss) per share 36.6c (28.6)c
Net cash as at the year end $95.2m $50.5m
(a) Adjusted results exclude the impact of adjusting items - for further
detail see alternative performance measures reconciliation within the detailed
financial review
· Improved profits and margin recovery across both DG Americas and DG
International despite a challenging backdrop of subdued consumer sentiment in
some key markets and sea-freight volatility;
· Significant adjusted operating profit improvement driven by continued positive
momentum in DG International, ongoing restructuring initiatives in DG
Americas, and improved sourcing;
· Adjusted operating profit margin rose to 3.9%, up 210 bps on prior year;
· Delivered on customer commitments, but 10% revenue decline, predominantly in
DG Americas H1 FY2024 following H2 FY2023 trends, but encouragingly H2 FY2024
broadly flat;
· Net cash of $95.2m demonstrating significant year-on-year improvement,
reflecting continued strong working capital management;
· In line with the Board's previous guidance, no dividend declared for the year.
Operational & strategic highlights
· Second successful year in the three-year turnaround journey, with improving
operational efficiency and simplification of the business;
· New Group CFO, Rohan Cummings, joined the Board in July 2023;
· Relaunch of the Group's purpose, vision, mission and values to support the new
strategy and better leverage Group resources and capabilities;
· Establishment of Operating Board and distinct Forums to lead the execution of
the new growth-focused strategy;
· Increased focus on improving capabilities to win and retain business in order
to grow revenue;
Outlook
· Starting to pivot from the focus on the turnaround, to executing the new
growth-focused strategy;
· The growth focused strategy is expected to deliver sales, profit and margin
growth over FY2025, despite
- the economic backdrop continuing to be challenging with subdued consumer
sentiment expected to persist in some key markets;
- sea-freight volatility, both in terms of availability and rates; and
- increased risk from consolidation in the retail environment in some markets -
making winning with the winners a critical strategy
· Strengthening of the business over recent years leaves the Group well placed
to withstand economic and operational challenges as they arise;
· Announcing the closure of in-house manufacturing in China in FY2025;
· FY2025 orderbook at 69% of budgeted revenues (FY2024: 62%) indicates continued
strong customer relationships
· The Board remains confident that the Group will meet its aspiration to return
to pre-Covid-19 adjusted operating profit margins of 4.5% by 31 March 2025;
· As set out in the interim results, the Company has a clear growth-focused
strategy through to March 2027 targeting annual sales of over $900 million
whilst delivering an adjusted operating profit margin of over 6%.
Stewart Gilliland, Chair, commented:
"I am proud to share another year of success on the Group's journey to restore
its profits, margins and financial strength, whilst also building a more
resilient business model. The year has also seen the start of balancing our
focus on the recovery journey with establishing a longer-term strategy to
return the Group to sustainable growth, which is requiring a lot of consistent
effort from everyone across the organisation. So, I would like to thank my
colleagues throughout the Group for their hard work in delivering this year's
strong results and the progress on our strategy.
With an invigorated senior leadership across the Group, our financing secured
and a strengthened and stable Board, the Group is well-set to complete its
recovery over the coming year; and embark on an exciting growth-focused
strategy for the years beyond. Whilst the global political-economic backdrop
could be better, the continued support of our customers and suppliers, who are
working closely with our talented teams, positions us well to deliver better
shareholder value. Finally, I thank our shareholders for their continued
patience and support as the business re-positions itself for growth off a more
resilient foundation."
For further information, please contact:
IG Design Group plc Tel: +44 (0)1525 887310
Paul Bal, Chief Executive Officer
Rohan Cummings, Chief Financial Officer
Canaccord Genuity Limited (Nomad and Broker) Tel: +44 (0)20 7523 8000
Bobbie Hilliam
Alex Orr
Alma Strategic Communications
Rebecca Sanders-Hewett Tel: +44 (0)20 3405 0205
Sam Modlin designgroup@almastrategic.com
Josh Royston
Overview
This is the second year in our three-year turnaround journey, and I am pleased
to report continued strong progress in improving our operational efficiency
whilst also simplifying the business. As we have done this we have delivered
on our customer commitments and, through deeper collaboration, we have further
developed some of the longstanding relationships that we have. We have
continued to improve margins, delivered significant profit growth, and
generated more cash than we had expected. Adjusted profit before tax is up
183% to $25.9 million (FY2023: $9.2 million). Margin recovery remains a key
focus, and the 94% increase in adjusted operating profit to $31.1 million
(FY2023: $16.1 million) translated into a 210 basis point rise in adjusted
operating profit margin to 3.9% (FY2023: 1.8%). We therefore remain confident
that we will restore, by 31 March 2025, the Group's adjusted operating profit
margin to at least the 4.5% that was the proforma pre-Covid-19 margin
following the acquisition of CSS Industries Inc. ('CSS') in March 2020.
I am pleased to report that both divisions contributed to the increased
profits. The two main drivers behind this result remain the continued positive
momentum in DG International, and the benefits coming from the turnaround
initiatives that are continuing in the DG Americas division.
The achievement is all the more greater as our teams have had to overcome some
significant challenges in the second half of the year that were on top of the
weaker consumer sentiment in a number of our key markets. First, disruption to
shipping routes, both in the Middle East and around Panama, and the
consequential spiking of freight costs. And secondly, managing credit risk in
the increasingly competitive US retail environment.
Revenue was impacted by continued soft demand in a number of key markets, with
continental Europe proving the exception. As a result, Group revenue at $800.1
million was 10% lower at reported exchange rates, or 11% lower in constant
currency terms. Almost all of the decline was experienced in the DG Americas
division.
Another strong year of cash generation resulted in the Group ending the year
with a net cash balance of $95.2 million (FY2023: $50.5 million). This
improvement stems from continued progress in better managing working capital
levels, especially inventory. Following the FY2024 re-financing, there is
sufficient funding for our requirements.
Board changes
Rohan Cummings joined the Board as Chief Financial Officer in July 2023. He
has made a good start, leveraging his prior experience with a listed business.
Our strategy
The year saw us start the transition from our recent focus on the short-term
(three year) turnaround strategy initiated in June 2022, to what will come
next and our new growth-focused strategy that was first announced this time
last year.
The stronger financial performance that we are achieving points to a more
resilient platform being established from which we will grow the business in a
more sustainable manner. It was therefore appropriate to introduce a new
growth-focused strategy that builds on the turnaround work that has been
undertaken so far. The overall objective of our new strategy is to deliver
sustained profitable sales growth that is primarily driven by organic efforts;
and that is underpinned by a resilient and less complex business model.
Outlook
Two years into the Group's three-year turnaround, we remain confident that we
will restore, by 31 March 2025, the Group's adjusted operating profit margin
to at least the 4.5% that was the proforma pre-Covid-19 margin following the
acquisition of CSS in March 2020. Our actual aspiration is to deliver 5.0% by
March 2025, and this should return the Group to its historic highest level of
profit delivery, which was an adjusted profit before tax of c$35.8 million
delivered in FY2019.
Furthermore, we hope to see the Group return to profitable revenue growth
during FY2025 as the restructured DG Americas division emerges stronger, and
better equipped with the capabilities required to build a more sustainable,
growing and profitable business.
We do expect subdued consumer sentiment to persist in some key markets until
the economic backdrop improves. We also expect freight rates to remain above
normal levels whilst the Middle East remains unstable, and we remain cautious
with regards to the stability of some participants in the US retail market.
Nevertheless, we believe the strengthened Group is better placed to withstand
the drag from these headwinds and we remain encouraged by the orderbook
representing 69% of FY2025's budgeted revenues (62% at this stage last year).
Looking further ahead, the financial impact from the successful execution of
the new strategy suggests that by 31 March 2027, the Group should have
delivered three consecutive years of profitable sales growth, with targeted
annual sales around $900 million by that time; whilst delivering an adjusted
operating profit margin of over 6%. This translates to an adjusted profit
before tax exceeding $50 million. We also expect strong cash conversion to
continue, with average annual leverage being no more than 1.0x under normal
conditions. These aspirations will be further defined as we make progress with
the new strategy.
Our continued progress would not be possible without the strong commitment and
sheer hard work of our teams across the world. This is particularly true of
the present as we balance the turnaround initiatives underway with the new
strategic initiatives that will take us beyond that recovery. There is also a
need to embrace changes in the way that the Group has traditionally worked,
and develop new capabilities. I thank my colleagues everywhere for the way in
which they are adapting to all of this.
Summary FY2024 results
Revenue at reported rates fell by 10%, which includes small positive currency
effects. In constant currency terms, the decline was 11% with the main driver
being a 16% decline in DG Americas. This reduction in DG Americas was
experienced almost entirely during the first half of the year, with the second
half of the year only 1% down. In constant currency terms, the smaller DG
International division was 3% down over the year, mainly due to softness in
the UK and Australian markets, with continental Europe proving more resilient.
The declines are mainly driven by two factors, firstly softer consumer demand
influencing our customers' expectations for Seasonal sales on top of their
already reduced Everyday products purchasing. Secondly, in the US and the UK
markets, we are experiencing increased risk from retailers in distress, and
this has forced us to take a more cautious approach when selling into some of
our customers. Notwithstanding these specific factors, we must continue to
adapt to a more competitive pricing landscape by becoming increasingly more
efficient and productive.
The Group's adjusted operating profit margin rose 210 basis points to 3.9%,
with the growth coming from both divisions. In DG Americas the 90 basis point
rise in the adjusted operating profit margin to 1.4% mainly reflected the
benefits coming from the continued restructuring and turnaround initiatives.
The 420 basis points rise in the adjusted operating profit margin to 10.8% in
DG International came from a combination of the return to profitability in the
UK following a number of turnaround initiatives, as well as continued strong
trading momentum in continental Europe. The improved operating profits, helped
by strong cash generation, kept interest costs below last year, and resulted
in an adjusted profit before tax of $25.9 million (FY2023: $9.2 million), a
183% increase. Taking into account the tax charge, this resulted in an
adjusted diluted earnings per share of 16.3 cents (FY2023: loss of 0.2 cents).
The year's adjusting items, as they relate to profit before tax, are
significantly lower than last year, and result in a net cost of $2.1 million
(FY2023: $28.1 million). They are limited to the amortisation of acquired
intangibles and a net cost resulting from integration and restructuring costs.
In the current year adjusting items as they relate to taxation are a credit of
$21.8 million, which together with the improvement in adjusted profit before
tax, results in diluted reported earnings per share to 36.6 cents (FY2023:
28.6 cents loss). The taxation adjusting item credit mainly results from the
recognition of deferred tax assets on items which no longer have any
restrictions on use.
The Group ended the year with a net cash balance of $95.2 million (FY2023:
$50.5 million). The significant improvement reflects our continued focus on
cash generation and better management, especially through working capital
optimisation. Correspondingly, average leverage for the year has improved to 0
times (FY2023: 0.6 times), reflecting the average net cash position of the
Group over the year.
As the Group remains on a path to margin and profit recovery, and given the
challenging retail market persisting in the important US market plus some
other markets, the Board is not recommending a dividend in respect of the year
ended 31 March 2024.
Regional highlights
Overall, there was a reduction in Group revenue of 10% but with adjusted
operating profit significantly up to $31.1 million (FY2023: $16.1 million)
This profit improvement stems from the ongoing execution of turnaround
activities in DG Americas, which are reducing the division's cost base, plus
continued strong momentum in most of the DG International businesses. The
split between our DG Americas and DG International divisions is as follows:
Segmental Revenue Adjusted Operating Profit/ (Loss) Adjusted Operating Margin
% Group revenue FY2024 FY2023 % growth FY2024 FY2023 % growth FY2024 FY2023
% %
63% DG Americas $m 500.3 593.0 (15.6%) 6.8 2.9 131.9% 1.4% 0.5%
37% DG International $m 299.8 299.6 0.1% 32.3 19.8 62.7% 10.8% 6.6%
Elims / Central costs $m - (2.3) (8.0) (6.6) -
100% Total $m 800.1 890.3 (10.1%) 31.1 16.1 93.8% 3.9% 1.8%
Design Group Americas
This division, which makes up nearly two-thirds of the Group's total revenues,
saw its revenue decline 16% to $500.3 million (FY2023: $593.0 million). This
was mainly driven by reduced consumer demand for certain categories,
especially in the first half of the year, which is a continuation of the trend
noticed in the second half of the previous year. The softness spread from
Everyday product categories to Seasonal ones this year, as our main customers
ordered more cautiously ahead of seasonal peaks, especially Christmas 2023.
Whilst volume across almost all categories was lower, the categories
particularly impacted were Party (especially seasonal décor) and Gift
packaging (especially ribbons and bows). The other factor behind the reduction
in revenue during the year was the rollover impact of the division exiting
unprofitable product sub-categories in the previous year. In the second half
of the year, these effects were much less, with revenue only down 1% during
that period. The management of our credit risk exposure weighed on revenues,
as some of our US retail customers gave us cause for concern. Reassuringly the
bigger retailers have remained relatively resilient. Another encouraging
signal was our success in the smaller seasons such as Mothers' Day and Easter,
as well as new branding in the Craft category. Improved pricing was difficult
to achieve following last year's catch-up pricing, but there were some
successes in this area, as there were with securing new business.
Notwithstanding the lower revenues and the corresponding impact on profit, DG
Americas delivered an adjusted operating profit of $6.8 million (FY2023: $2.9
million). The main driver of this improvement is the continuation of the
turnaround initiatives initiated over the last two years, coupled with cost
tailwinds as the high inflation of recent years starts to recede in some
areas. The turnaround initiatives continued to simplify the division's
operations, reducing its cost base, and making the division more productive
and efficient, and therefore more competitive. Specific initiatives included
exits from 12 sites identified as surplus such as Clara City (Minesota),
Memphis (Tennessee) and Berwick (Pennsylvania). The last one, being a freehold
site, is now being actively marketed for sale, with another Berwick site
joining the market soon. Other activities include better leveraged sourcing
and procurement and logistics and warehousing; further near-shoring to Mexico;
headcount reductions (of nearly 200) and team restructuring.
In accordance with our new strategy, our commercial organisation and its
capabilities are being revisited, and where necessary, further strengthened
and developed in order to ensure that we have the right structure and mix of
capabilities to support the return to profitable and sustainable sales growth
in the near-term. As a result, our teams are bringing more market insights to
their customer engagement. Our customer relationships remain a cornerstone of
our business model. An example of this being the collaboration with Walmart
with respect to their 'Project Gigaton' sustainability programme, where we
again achieved 'Giga-guru' status.
Excellent progress has also been made in reducing working capital levels
through better efficiency and greater discipline. The year has witnessed
further significant reduction in inventory levels. Credit risk is also under
closer review given the current challenging dynamics across US
retail.
Design Group International
Representing over a third of the Group's revenue, this division largely
comprises the Group's businesses in the United Kingdom, continental Europe,
the Far East and Australia. Its revenue at reported rates was only marginally
higher, at $299.8 million (FY2023: $299.6 million). At constant rates of
exchange, the division experienced a 3% reduction during the year. Continuing
softness in the UK and Australia markets during the year was only partially
offset by continued volume-driven strong gains in continental Europe.
Adjusted operating profit at reported exchange rates of $32.3 million (FY2023:
$19.8 million), was up significantly by 63%. At constant currency rates it was
up 54%. This result is driven by the continued strong trading performance
across our continental European businesses. This is more than offset by the
softness in the UK and Australian markets. But notwithstanding the tougher
retail market in the UK, our business there made a turnaround, returning to
profitability through a number of initiatives. These initiatives included:
reducing complexity in the business model and the product assortment,
restructuring shift patterns, and releasing surplus warehousing. The latter
has allowed us to market for sale a freehold site. Taken together, these
actions have reduced the physical footprint, headcount and cost-base, thereby
rendering the business more competitive.
DG UK's revenue for the year was down by just under 8% as consumer sentiment
regarding non-food shopping remained subdued throughout the year. This
sentiment affected both Seasonal and Everyday categories and products.
Declines were evident across the assortment, though the more discretionary
categories such as Party were most affected. Moreover, given the market
environment, price rises were rare. There was marked progress with our efforts
to counter the muted consumer sentiment: we collaborated well with major
customer Tesco in bringing their revived Paperchase concept to their stores,
earning DG UK the Tesco 2023 Supplier Innovation award; Eco Nature(TM)
continued to grow sales and contribution and was introduced to more national
retailers; the business model was challenged to better serve the more
fragmented Independents channel; a 'pocket-money' Activity range was
developed; and the production site is now embracing the more sustainable and
durable Smartwrap(TM) solution. The team also continues to work on future
design and innovation ideas in both product and packaging with local
universities. As part of the Group's drive to simplify our business model and
improve efficiency, margins and standards, DG UK management recently completed
a comprehensive review of its manufacturing operation in China and proposed
its closure. The Board has accepted the proposal to permanently cease in-house
manufacturing in China during the coming year. Our third-party sourcing
activities will continue and alternative, cost-effective solutions for these
product lines are being secured. Considering the timing of the decision being
post period, this matter is being treated as a post-balance sheet event, and a
further update will be given when FY2025 interim results are published.
DG Europe continues to benefit from strong demand from our more value-oriented
key customers in the current economic climate. The business enjoyed revenue
growth of 2% over the year. With pricing under pressure this growth was mainly
volume driven, especially in the Homeware category, and further supported by
the broadened assortment. This volume growth is driving further efficiency
gains, enhanced by strategic investments during the year, encompassing: the
increasingly popular, successful and sustainable Smartwrap(TM) solution, new
bag-making capabilities to address customer demands for near-shoring, and
warehousing. Cost tailwinds and smarter sourcing also helped raise margins.
This part of the Group also made material advances in managing working capital
levels, especially inventory.
DG Australia has had to navigate a market that has become increasingly tougher
as consumers reined in spend as inflation and interest rates rose. This was
felt across both main channels, the National Accounts as well as the
Independents. Consequently, revenue in this business was down 9% through the
year, with no prospect for securing higher pricing. However, as with the other
businesses in this division, the combination of 'self-help' initiatives and
cost tailwinds meant margins did advance slightly during the year. Towards the
end of the year the business invested in a new category by acquiring the
assets of a small, local industry player in the essential oils category.
Additionally, the business is preparing to relocate to a more modern warehouse
and main office facility in the coming year.
Our products, brands and channels
The Group is well positioned to be the partner of choice for our retail
customers when it comes to the categories on which we focus our efforts.
During the year, the Group redefined its product categories to reflect a new
architecture for our overall assortment. This also better aligns with our
emerging organisational structures within our business, and therefore our
focus under the new strategy. The change began by categorising our product
offerings into two key groupings or themes: celebrating and creating. Within
each of these themes, there are then three distinct product categories. This
is set out in the table below:
Revenue by product category FY2024 FY2023
Gift packaging 47% $369.2m 45% $396.6m
Party 15% $121.6m 17% $154.0m
Goods not for resale 7% $59.4m 7% $63.9m
Celebrate 69% $550.2m 69% $614.5m
Craft 17% $136.4m 17% $151.6m
Stationery 6% $50.0m 7% $59.2m
Homeware 8% $63.5m 7% $65.0m
Create 31% $249.9m 31% $275.8m
Total $800.1m $890.3m
The overall mix between the six new product categories has not altered much
over the course of the year. Whilst declining by 2% in the year, the most
resilient category has been Homeware, driven by strong demand across the DG
International markets, especially for frames, which grew 11% over the year.
Our biggest product category, Gift packaging, experienced a decline in cards
and ribbons & bows, but some growth in our core category of giftwrap. The
greatest decline was experienced in the Party category driven by less demand
for seasonal décor, as well as partyware. The decline in Craft resulted from
activity and sewing patterns affected by our decision in DG Americas to more
tightly manage credit risk in US retail. Stationery sales were down in DG
Americas in line with the overall sales trend in that division. Similarly, the
drop in Goods not for resale mostly occurred in DG Americas.
Revenue by customer channel FY2024 FY2023
Value & Mass 70% $559.7m 67% $597.1m
Independents 16% $130.7m 17% $153.7m
Specialists 11% $88.5m 14% $120.4m
Online 3% $21.2m 2% $19.1m
Total $800.1m $890.3m
Value & Mass is our main channel, and in the present economic climate at
retail it was more resilient than other 'bricks and mortar' channels. The
greatest decline in volume and revenue was experienced in the Specialist
channel, reflecting ongoing consolidation of the retail environment, coupled
with our decision to manage US retail credit risk. Revenue through our online
presence has grown by 11% this year.
Revenue by season FY2024 FY2023
Christmas 42% $337.2m 42% $374.7m
Minor seasons 8% $66.0m 9% $76.5m
Everyday 50% $396.9m 49% $439.1m
Total $800.1m $890.3m
There is very little change in our seasonality, with Christmas remaining a key
season.
Revenue by brand FY2024 FY2023
Licensed 11% $85.3m 9% $82.2m
Customer own brand / bespoke 51% $407.7m 54% $474.3m
DG brand 38% $307.1m 37% $333.8m
Total $800.1m $890.3m
In the search for levers to increase the value of our overall assortment,
there is an increase in licenced products in DG Americas.
Sustainability
The Group's sustainability framework 'Helping design a better future',
launched in FY2021, helps to guide our approach to sustainability by
identifying three pillars that will deliver a more sustainable future. These
three pillars are People, Product and Planet.
The Group's sustainability strategy is underpinned by our overall aim to
minimise our impact on the environment by constantly challenging ourselves to
find ways in which we can use our scale and people to influence and drive
positive, proactive change in the markets into which we sell as well as
source. We understand that our impact and responsibilities extend beyond our
immediate surroundings, into the lives of our employees, the environment, and
our local and global communities. We continue to believe we have a moral as
well as a commercial necessity to strive for the highest standards of ethical
behaviour and to innovate to reduce the environmental impact of our
operations, to protect and preserve our planet, for this and future
generations.
We continue to refine the Group's approach to sustainability and the
associated key performance sustainability indicators (KPIs). We report our
performance against these and the progress the Group has made during the year
in the Sustainability report in the Annual Report and Financial Statements for
FY2024.
While we take pride in our progress, we acknowledge that we are still in the
early stages in our journey and there is more to be done. We will continue to
develop our sustainability framework, particularly by refining our KPIs,
setting targets, and establishing goals to foster positive transformation and
strive to be the most sustainable we can be. Through transparent reporting,
continual improvement and, in time, introducing measurable goals, we aim to
integrate sustainability seamlessly into every aspect of our operations,
ensuring that our actions today lay the foundation for a better future.
Integrating sustainability into our business strategy not only aligns with our
core values but also gives us competitive advantage and resilience. In line
with our new strategy of being the partner of choice and winning together, we
will refine our approach to sustainability by also looking through the lenses
of our key customers. We will evaluate how our sustainability strategies align
with theirs and how we can achieve our mutual sustainability goals. These
insights will shape our future priorities, allowing us to better set our own
aspirations and targets, whilst continuing successful collaborations with key
customers.
People
Our people are key to the success of our business. In times of transformation
and change, especially as the backdrop remains challenging, it is even more
important to ensure that we are recognising performance and loyalty while
investing in the many talented individuals and teams across the Group.
In such circumstances, it is also vital that we engage with our talent and
understand their sentiments. Last year we launched the first Group-wide
employee engagement survey: 'Your Voice, Our Future'. There was a pleasing
level of participation, and the feedback revealed that despite the significant
changes underway, our teams remained positive about their roles, Design Group
as an employer, and its future. The survey also provided managers with areas
to further improve the working environment, such as investing further in
training and development which have been addressed. Subsequently, we have
decided to enhance and expand the survey, incorporating more questions and
investing in an online tool to facilitate the survey process, analysis and
reporting. This aims to streamline the exercise and deliver greater value to
us more quickly. The next survey is scheduled for the summer of 2024.
Other notable achievements in FY2024 include our main DG Europe manufacturing
site winning the Kartoflex Safety Award, received from the unions associated
with the business in recognition of its safety record and work practices. Our
efforts with respect to strengthening health and safety practices have
resulted in a 10% reduction in accidents compared to the previous year.
Looking beyond our established and growing leadership development initiatives,
we are also focusing on technical development opportunities, especially in DG
UK. This includes establishing a local academy along the lines of the very
successful DG Europe Academy. Furthermore, we have continued to celebrate the
uniqueness of our staff by launching a global equality, diversity and
inclusion calendar of events to better co-ordinate celebrations and raise
awareness across the Group. This year we celebrated International Women's Day
globally, with the #inspireinclusion campaign celebrating diversity,
empowerment and the achievements of women across our business. Taking
inspiration from the successful DG Americas intranet, DG UK also launched an
intranet.
Facilitating easier cross-business communication and collaboration amongst our
teams continues to be a focus so we can better leverage our collective skills,
capabilities, experience and best practice. This will further facilitate the
work of the cross-business Forums which are helping accelerate our progress.
It should also be recognised that these Forums are also providing
opportunities for personal development and providing a more enriching and
stimulating work experience. As a further enabler to better leveraging the
capabilities of our teams across our various businesses, we have
re-articulated the Group's purpose, vision, mission and values. These also
align with the new growth-focused strategy. Over the coming year both will be
further embedded across the Group.
Product
There is no question that the nature of our products and their packaging
requires us to be innovative in our design to create more sustainable
solutions and collections to promote to our customers and theirs. A notable
achievement is the development of our shrink-free wrapping paper, which
eliminates plastic waste through the use of recyclable paper labels. Last
year's launch of Smartwrap™ in continental Europe has found huge traction
with our customers' own sustainability agenda. In continental Europe over half
of our giftwrap customers bought the solution during the year, and this is set
to continue growing into the future. Roll-out has started in DG UK, with
similarly huge interest from our customers, and roll-out to DG Americas is the
next step. Beyond the win in terms of sustainability, the solution physically
protects the roll in transportation and on-shelf, enhancing its appeal at
retail. Our Eco Nature(TM) ranges in the UK have continued to perform well,
growing revenue by 25% to over $2 million during the year, as well as improved
margins. We will look to further improve our sustainable solutions in these
markets where there is traction with consumers. Numerous other initiatives are
underway finding innovative solutions with both customers and external
specialists and academic institutions to continue to reduce the environmental
impact of our products and their packaging.
Planet
Climate Change is now seen by our management teams as a principal risk,
acknowledging our responsibility to protect and preserve our planet and its
environment, as well as the sustainability of our business. We have made
further progress this year towards compliance with Non-Financial and
Sustainability Information Statement (NFSIS) of the Companies Act, which is
aligned with Task Force on Climate-related Financial Disclosures (TCFD)
reporting, with the integration of climate-related risk assessment into our
existing, wider risk management process. Further to this the Group has made
considerable progress in calculating and reporting our scope 1 and 2
greenhouse gas emissions. This achievement marks a crucial step in our
commitment to understanding and reducing our environmental impact. By
assessing these emissions and recognising the importance of understanding our
scope 3 emissions, we can implement targeted strategies to mitigate our carbon
footprint, demonstrating our dedication to sustainability and responsible
business practices. Another notable achievement in FY2024 was DG Americas
helping its biggest customer, Walmart, achieve its Project Gigaton goals for
carbon emissions reduction, six years ahead of schedule. In a similar fashion
we are working closely with a growing number of other customers to jointly
achieve similar achievements and good outcomes.
Detailed financial review
The Group's financial results are summarised below, setting out both the
reported and the adjusted results.
FY2024 FY2023
Reported Adjusting items Adjusted Reported Adjusting items Adjusted
$m $m $m $m $m $m
Revenue 800.1 - 800.1 890.3 - 890.3
Gross profit 141.6 0.5 142.1 131.7 1.4 133.1
Overheads (112.6) 1.6 (111.0) (143.7) 26.7 (117.0)
Operating profit/(loss) 29.0 2.1 31.1 (12.0) 28.1 16.1
Net finance costs (5.2) - (5.2) (6.9) - (6.9)
Profit/(loss) before tax 23.8 2.1 25.9 (18.9) 28.1 9.2
Tax 13.3 (21.8) (8.5) (7.6) (0.2) (7.8)
Profit/(loss) after tax 37.1 (19.7) 17.4 (26.5) 27.9 1.4
Operating profit/(loss) 29.0 2.1 31.1 (12.0) 28.1 16.1
Impairment of goodwill - - - 29.1 (29.1) -
Depreciation and impairment of PPE and software 13.5 - 13.5 14.6 - 14.6
Depreciation and impairment of right of use assets 16.0 0.5 16.5 18.4 (0.7) 17.7
Acquisition amortisation 1.8 (1.8) - 2.8 (2.8) -
EBITDA 60.3 0.8 61.1 52.9 (4.5) 48.4
Diluted earnings/(loss) per share 36.6c (20.3)c 16.3c (28.6)c 28.4c (0.2)c
Revenue for the year ended 31 March 2024 declined by 10% to $800.1 million
(FY2023: $890.3 million) driven by a softening of consumer demand in a number
of markets, with the only exception being continental Europe. Revenue in DG
Americas declined 26% in the first half of the year and stabilised during the
second half with a 1% decline. Although the revenue in reported currency in DG
International was in line with the prior year, at constant currency revenues
they were down 3%, reflective of continuing softness in the UK and Australian
markets, offset in part by a strong performance in continental Europe.
Constant currency Group revenues reduced by 11% year‑on‑year.
Adjusted operating profit increased 94% year-on-year to $31.1 million
(FY2023: $16.1 million) and adjusted gross margin increased to 17.8% (FY2023:
14.9%). Despite the lower revenues and the corresponding loss of margin, the
improvement in profit is largely as a result of our turnaround activities
across a number of markets, which are reducing our cost base. This reduction
is supported by sourcing benefits as the high inflation of recent years starts
to recede in some areas, offset partially by inflation in staff costs. DG
International delivered strong trading within continental Europe and in
addition benefited from turnaround initiatives within the DG UK operations. DG
Americas benefited from the turnaround initiatives which more than offset the
impacts of weaker trading performance. Inventory provisions made in the year
were $13.4 million (FY2023: $19.3 million) and inventory provision releases
were $4.5 million (FY2023: $6.3 million), with the reductions reflecting
lower inventory levels as working capital was more tightly managed.
Adjusted operating margin at 3.9% (FY2023: 1.8%) was up year‑on-year,
reflecting the higher gross margins and continued cost management. Overall
adjusted profit before tax was $25.9 million (FY2023: $9.2 million) with the
improvement reflective of the strong performance in DG International as well
as benefits from the turnaround initiatives in DG Americas. The Group finished
the year with a reported profit before tax of $23.8 million (FY2023: loss
before tax of $18.9 million). The adjusting items of $2.1 million (FY2023:
$28.1 million) are significantly lower than the prior year, with the prior
year reflecting the (non-cash) impairment of goodwill of $29.1 million.
Further details of the adjusting items are detailed below.
Adjusted profit after tax was $17.4 million (FY2023: $1.4 million) with the
reported profit after tax for the year at $37.1 million (FY2023: loss after
tax at $26.5 million). Profit after tax in the current year benefitted from
the recognition of deferred tax assets on items which no longer have any
restrictions on use, which have been treated as adjusting.
Adjusted net finance costs
Adjusted net finance costs were lower than the prior year, being $5.2 million
(FY2023: $6.9 million). Despite higher average interest rates, the average
net debt/cash was significantly more favourable, largely due to improvements
in working capital management.
Adjusting items
Adjusting items are material items or items of an 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's adjusting items in
the year to 31 March 2024 result in a net charge before tax of $2.1 million
compared to $28.1 million in the prior year. Details of adjusting items are
included below:
Adjusting items FY2024 FY2023
$m $m
Integration and restructuring costs/(income) 0.3 (2.0)
Amortisation of acquired intangibles 1.8 2.8
Goodwill impairment - 29.1
Losses/(gains) and transaction costs relating to acquisitions and disposals of - (1.5)
businesses
Reversal of impairment of assets - (0.2)
IT security incident income - (0.1)
Total 2.1 28.1
Integration and restructuring costs/(income) - $0.3 million (FY2023: $2.0
million credit)
In order to realise synergies from acquisitions, or existing businesses,
integration and restructuring projects are respectively 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 it is appropriate that
costs associated with projects of this nature be included as adjusting items.
The net costs incurred in the year relate to the reorganisation and business
simplification in DG Americas and the reorganisation of the DG UK and Asia
businesses as follows:
Reversal of impairment - Following the integration of DG Americas' sites in
FY2021, a portion of a leased site in Budd Lake, New Jersey was exited, and
the right-of-use asset was impaired. In the period ended 31 March 2024, the
landlord reacquired a portion of the impaired site resulting in a reversal of
impairment of $0.6 million (FY2023: $nil).
DG Americas and DG UK business reorganisation - Further costs were incurred
following the March 2023 announcements of business reorganisation and
simplification. In the year the DG Americas business had further restructuring
costs, relating to staff, of $0.7 million (FY2023: $0.8 million), and the DG
UK business (and its subsidiary in Asia) incurred further restructuring costs
of $0.2 million (FY2023: $0.7 million), which also related to staff.
Site closures (FY2023) - In April 2022, a property in Manhattan, Kansas was
sold for proceeds of $6.7 million resulting in a profit on disposal of $4.6
million recognised as an adjusting item. In addition to this there was a loss
on sale of equipment of $0.1 million in relation to assets disposed of during
the exit of a site in Clara City, Minnesota. Additionally, in FY2023 costs of
$0.3 million and a $0.8 million impairment to a right-of-use asset were
incurred in relation to the relocation and closure of these sites, as well as
the consolidation of other US sites.
Amortisation of acquired intangibles - $1.8 million charge (FY2023: $2.8
million charge)
Under UK IFRS, as part of the acquisition of a company, it is necessary to
identify intangible assets such as customer lists and trade names 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 their useful economic lives. These are not operational
costs relating to the running of the acquired business and are directly
related to the accounting for the acquisition. As such, we include these as
adjusting items. In the current year, the amortisation relates to brands
acquired as part of the acquisition of Impact Innovations Inc. (Impact), with
the tradenames and brands related to CSS fully amortised in the prior year.
Goodwill impairment - $nil (FY2023: $29.1 million charge)
In the prior year an impairment of $29.1 million was recorded to write down
the goodwill from historical acquisitions in the UK and Asia
cash-generating-unit (CGU). This followed the deterioration of the results
experienced in the DG UK and Asia CGU in the second half of 2023 which
impacted its longer-term forecasts for future cash flows, and was further
exacerbated by the significant increase in the discount rate, mainly as a
result of higher interest rates.
Losses/(gains) and transaction costs relating to acquisitions and disposals of
businesses - $nil (FY2023: $1.5 million credit)
In the prior year $1.5 million of insurance income was received relating to
the Impact Innovations, Inc acquisition Representations & Warranties
insurance settlement relating to accounting and tax issues present at
acquisition.
Reversal of impairment of assets - $nil (FY2023: $0.2 million credit)
In the prior year a credit of $0.2 million was recognised relating to reversal
of Covid-19 related impairments no longer required. There are no remaining
provisions relating to these costs.
IT security incident income - $nil (FY2023: $0.1 million credit)
The IT security incident which occurred in DG Americas in October/November
2020 resulted in one-off costs of $2.2 million being incurred during the year
ended 31 March 2021. This did not include the lost profits incurred as a
result of downtime in the business for which an insurance claim was made. In
the prior year further insurance income was received of $0.1 million in
relation to this incident. The treatment of this income as adjusting, followed
the previous treatment of the one-off costs as adjusting.
Taxation
The Group aims to manage its tax affairs in an open and transparent manner,
with the objective of full compliance with all applicable rules and
regulations in tax jurisdictions in which it operates. We have not entered
into any tax avoidance or otherwise aggressive tax planning schemes and the
Group continues to operate its tax affairs in this manner.
The Group's adjusted tax charge for the year is $8.5 million (FY2023:
$7.8 million) against an adjusted profit before tax of $25.9 million (FY2023:
$9.2 million). This equates to an adjusted ETR of 32.9% (FY2023: 85.1%).
Deferred tax assets relating to the entities in the UK (both UK trading and
PLC) are not being recognised due to the lack of sufficient compelling
evidence to suggest their recognition at this time. Consequently, the absence
of tax relief on current year tax losses in the UK, together with the impact
of movements in uncertain tax positions and permanent items in DG Americas,
inflates the adjusted effective tax charge for the Group. The profits in DG
Europe and Australia, which are considerable contributors to adjusted profit
before tax, are taxed at higher statutory tax rates (25.8% and 30%
respectively). Further details of this tax charge are set out in note 11.
The taxation credit in adjusting items of $21.8 million mainly relates to the
recognition of deferred tax assets in DG Americas. On the acquisition of CSS
in 2020 there were certain deferred tax attributes that were subject to
restrictions. We have engaged with our advisors and have confidence that there
are no remaining restrictions and these attributes are available for use. It
should be noted that the use of these attributes is subject to an annual
limitation which spreads their usage over an approximately 40-year period
which started in FY2020.
Tax paid in the year was $5.2 million (FY2023: $7.3 million). This is
$2.1 million lower than the prior year, reflecting temporary payment timing
differences. Had this timing difference not occurred, the payments would have
been higher than prior year, reflective of profits in the Group's tax-paying
jurisdictions.
Earnings per share
Diluted adjusted earnings per share at 16.3 cents (FY2023: loss per share 0.2
cents) is improved year-on-year driven by the substantial improvement in the
underlying profit after tax. Diluted earnings per share at 36.6 cents (FY2023:
loss per share 28.6 cents) is higher than prior year, reflective of the
improved underlying performance, the current year tax benefit recognised as
adjusting, as well as the absence of the significant adjusting items of the
prior year. Further details are set out in note 21.
Dividend
Whilst the Group remains on its path to profit and margin recovery, and given
the challenging retail environment persisting in the US and some other
markets, the Board are not recommending a final dividend for the year ended 31
March 2024 (FY2023: nil). As a result, the full‑year dividend is nil
(FY2023: nil).
Return on capital employed
Improving the return on capital employed continues to be a key target for each
of the business units as well as the Group overall. The Group saw the return
on capital employed increase year-on-year to 12.4% (FY2023: 5.6%), reflecting
the improved profitability and our efforts to reduce our working capital
requirements.
Cash flow and net cash
The Group ended the year with its net cash balance at $95.2 million (FY2023:
$50.5 million). The year‑on‑year cash balance significantly increased as
a result of the higher EBITDA contribution and the further improvements in
working capital management resulting in adjusted cash generated from
operations being significantly higher at $89.3 million (FY2023:
$60.4 million).
Cash flow FY2024 FY2023
$m $m
Adjusted EBITDA 61.1 48.4
Add back for share-based payment charge 1.5 0.8
Movements in working capital 26.7 11.2
Adjusted cash generated from operations 89.3 60.4
Adjusting items within cash generated from operations (1.9) (1.4)
Cash generated from operations 87.4 59.0
Adjusting items within investing and financing activities - 8.3
Capital expenditure (net of disposals of property, plant and equipment) (9.9) (5.8)
Acquisition of non-controlling interest - (3.0)
Acquisition of business (0.5) -
Tax paid (5.2) (7.3)
Interest paid (4.5) (5.3)
Lease liabilities principal repayments (18.4) (20.4)
Dividends paid (including those paid to non-controlling interests) - (3.0)
Purchase of own shares (3.5) (0.9)
FX and other (0.7) (1.3)
Movement in net cash 44.7 20.3
Opening net cash 50.5 30.2
Closing net cash 95.2 50.5
Working capital
The working capital cash inflow improved from $11.2 million in the prior year
to $26.7 million. This was driven by the continued focus on overall working
capital management across the Group, especially in reducing the level of
inventory held.
The Group continues to actively track debtors and credit risk profiles of all
of our customers to mitigate as far as possible any additional exposure to
credit risk. This is especially the case in the US market, where there is
increasing competition within the retail environment. Doubtful debt write off
was only slightly higher in the year at 0.2% of revenue (FY2023: less than
0.1%), reflecting our continued proactive approach to managing credit risk
exposure under current market conditions.
Capital expenditure
Capital expenditure in the year increased in relation to the prior year at
$9.9 million (FY2023: $5.8 million), with investment in ERP and manufacturing
capabilities, including strategic investment in the innovative Smartwrap™
solution and bag-making technology. Capital expenditure in FY2025 is expected
to be slightly higher with further investment in our ERP, further roll-out of
Smartwrap™, as well as relocation to a new warehouse facility for our DG
Australia operations.
Acquisition of business
On 15 January 2024, IG Design Group Australia Pty Ltd acquired the trade and
assets of a small, local industry player in essential oils manufacturing and
wholesale for $0.5 million. This small "bolt-on" M&A opportunity
accelerated entry into a new, attractive product category.
Purchase of own shares
The IG Design Group plc Employee Benefit Trust purchased 2 million ordinary
shares at a cost of $3.5 million (FY2023: $0.9 million). These shares are to
be held by the trust to help meet future obligations arising under the
Company's long-term incentive plan.
Average leverage
Average leverage is a key measure for the Group measuring the seasonality of
our working capital demands across the business and the need to ensure the
Group manages its peak funding requirements within its bank facility limits.
As at 31 March 2024 average leverage was 0 times (FY2023: 0.6 times), which
reflects the average net cash position of the Group over the year of $27.7
million (FY2023: average net debt $17.1 million).
Our measure of average leverage excludes lease liabilities from our
measurement of debt, and we reduce adjusted EBITDA for lease payments. This
methodology is consistent with the prior year.
Banking facilities
On 2 June 2023, the Group entered into a $125.0 million three-year
refinancing with HSBC and NatWest banks. This facility is structured as an
Asset Backed Lending (ABL) arrangement secured with an all-assets lien over
Group assets in the USA and an all-assets security over Group assets in the
UK. The Group also extended its overdraft facility provided by HSBC. On 3
November 2023 the Group made an operational amendment to the ABL arrangement
and signed a supplemental agreement to convert and increase the overdraft to
£17.0 million RCF facility between 17 June 2024 and 16 August 2024. This
amendment offers flexibility during the months where the Group has a
requirement for funding while having limited access into the ABL.
Further details are set out in note 15.
Foreign exchange exposure management
The Groups foreign exchange (FX) exposure is split into two areas:
Translational FX exposure - The Group's reporting currency is US dollars and
the translation exposure is the result of the requirement for the Group to
report its results in one currency. This necessitates the translation of our
regional business units' local currency financial results into the Group's
adopted reported currency. For disclosure purposes, the constant currency
amounts recalculate the prior year by using the exchange rates of the current
year to enhance the comparability of information between reporting periods.
The overall impact on revenue and profits from currency movements in 2024 when
compared to 2023 is that the decrease in revenue would have been $12.6 million
higher if 2023 revenues are translated at 2024 foreign currency exchange
rates, and the growth in adjusted profit before tax would have been
$0.6 million lower.
Transactional FX exposure - This FX exposure is managed carefully by the Group
as it can result in additional cash outflows if not managed appropriately. In
response to this risk the Group adopts an active hedging policy to ensure
foreign exchange movements remain mitigated as far as possible. In addition, a
reasonable proportion of this hedging is achieved through natural hedges
whereby our purchases and sales in US dollars are offset. The balance of our
hedging is achieved through forward exchange contracts and similar
derivatives.
Restatement of comparative amounts
The Group has restated its prior year figures to reflect the potential
liabilities relating to pre-acquisition era duties, interest, and penalties in
a foreign subsidiary of the DG Americas division. These estimates involved
assessing historical data, interpreting relevant tax and legal regulations,
and considering potential outcomes of discussions with tax authorities. Given
the complexity and uncertainty surrounding these liabilities, management has
utilised external professional advice to ensure that the provisions are
reasonable and reflect the most probable outcomes. Adjustments to these
estimates may be required in future periods as new information becomes
available or as circumstances change.
This adjustment has resulted in a restatement of goodwill, as the initial
acquisition accounting did not include a provision in relation to this
potential liability. Consequently, the opening balance sheet has been adjusted
by $5.8 million to restate the goodwill at acquisition (refer note 9) and a
provision of $5.5 million (refer note 17) has been raised. In addition, the
post-acquisition impacts on retained earnings of $456,000 and on translation
reserve of $802,000 have been adjusted in the statement of changes in equity
accordingly.
Financial position and going concern basis
The Group's net assets increased by $34.8 million to $369.5 million at
31 March 2024 (FY2023: $334.7 million(restated)). As the Group enters the
third year of its turnaround strategy, the Directors have continued to pay
close attention to their assessment of going concern in preparation of these
financial statements. The Group is appropriately capitalised at the year end
with a net cash position of $95.2 million.
The Directors of the Group have performed an assessment of the overall
position and future forecasts for the purposes of going concern. The going
concern assessment has been performed using the Group's FY2025 and FY2026
budgets and plans. These forecasts have been reviewed in detail by the Board
and take into account the seasonal working capital cycle of the business. They
have been sensitised to reflect severe but plausible adverse downturns in the
current assumptions including the potential impact of a significant disruption
in one of our major customer's business, as well as a significant shift in the
phasing of sales in DG Americas business segments, beyond those risks already
factored into the budgets and plans.
The base forecasts and additional sensitivity analysis have been tested
against the ABL facility limits and covenants. The analysis demonstrated that
the Group has sufficient headroom for it to meet its obligations as they fall
due for a forecast period of more than twelve months beyond the date of
signing these accounts and will also be compliant with all covenants within
this time frame. 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 as the Group has sufficient resources.
Accordingly, the Directors have continued to adopt the going concern basis of
accounting in preparing the financial statements.
Non-adjusting post balance sheet events
On 24 June 2024, the Board made the decision to permanently cease in-house
manufacturing in China during the coming year. This decision was made
following a comprehensive review of its manufacturing operation in China.
Alternative performance measures
This review includes alternative performance measures (APMs) that are
presented in addition to the standard UK IFRS metrics. The Directors believe
that these APMs provide important additional information regarding the
underlying 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 UK 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 or
items of an unusual or non-recurring nature.
The APMs and the definitions used are listed below:
· Adjusted EBITDA - Profit/(loss) before finance charges, tax,
depreciation, amortisation, impairment (EBITDA) and adjusting items
· Adjusted gross profit - Gross profit before adjusting items
· Adjusted operating profit/(loss) - Profit/(loss) before finance
charges, tax and adjusting items
· Adjusted profit/(loss) before tax - Profit/(loss) before tax and
adjusting items
· Adjusted profit/(loss) after tax - Profit/(loss) after tax before
adjusting items and associated tax effect
· Adjusted tax - Tax before adjusting items
· Diluted adjusted earnings/(loss) per share - Diluted
earnings/(loss) per share before adjusting items and associated tax effect
· Adjusted overheads - Selling costs, administration expenses,
other operating income, profit/(loss) on disposal of property, plant and
equipment (overheads) before adjusting items
· Adjusted cash generated from operations - Cash generated from
operations before the associated cash impact of those adjusting items
· Net cash - Cash and cash equivalents, bank overdraft and loan
arrangement fees
In terms of these APMs, a full reconciliation between our adjusted and
reported results is provided in the detailed financial review above, from
which the following key performance metrics have been derived:
· Adjusted gross margin - Adjusted gross profit divided by revenue
· Adjusted operating margin - Adjusted operating profit divided by
revenue
· Adjusted EBITDA margin - Adjusted EBITDA divided by revenue
· Cash conversion - Adjusted cash generated from operations divided
by adjusted EBITDA
In addition, the Group calculates the following key performance measures,
which are also APMs, using the above definitions:
· Return on capital employed - Adjusted operating profit divided by
monthly average net capital employed (where capital employed is net assets
excluding net cash and intangible assets)
· Average leverage - Average bank debt (being average debt measured
before lease liabilities) divided by adjusted EBITDA reduced for lease
payments
Further details of the items categorised as adjusting items are disclosed in
more detail in note 3.
Rohan Cummings
Director
24 June 2024
Statement of Directors' responsibilities in respect of the financial
statements
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with UK-adopted international accounting standards
and the company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland", and applicable law).
Under company law, Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 102 have been followed for the
Company financial statements, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's and Company's transactions
and disclose with reasonable accuracy at any time the financial position of
the group and company and enable them to ensure that the financial statements
comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
In the case of each director in office at the date the directors' report is
approved:
· so far as the director is aware, there is no relevant audit
information of which the group's and company's auditors are unaware; and
· they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that the group's and company's auditors are aware of that
information.
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 MARCH 2024
2024 2023
Note $000 $000
Revenue 2 800,051 890,309
Cost of sales (658,532) (758,569)
Gross profit 141,519 131,740
Selling expenses (44,143) (47,097)
Administration expenses - costs (70,045) (75,112)
Administration expenses - impairment of goodwill 3 - (29,100)
Other operating income 5 1,903 2,951
(Loss)/profit on disposal of property, plant and equipment 3 (238) 4,595
Operating profit/(loss) 3 28,996 (12,023)
Finance income 6 1,065 -
Finance costs 6 (6,219) (6,873)
Profit/(loss) before tax 23,842 (18,896)
Income tax credit/(charge) 7 13,277 (7,563)
Profit/(loss) for the year 37,119 (26,459)
Attributable to:
Owners of the Parent Company 35,625 (27,987)
Non-controlling interests 1,494 1,528
Earnings/(loss) per ordinary share
Note 2024 2023
Basic 21 36.8c (28.6c)
Diluted 21 36.6c (28.6c)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 2024
2024 2023
Note $000 $000
Profit/(loss) for the year 37,119 (26,459)
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss
Re-measurement of defined benefit pension and health benefit schemes 23 (48) (37)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translation of foreign operations (5,502) 10,621
Transfer to profit and loss on maturing cash flow hedges (285) (683)
Net unrealised gain on cash flow hedges 292 419
Income tax relating to these items - -
(5,495) 10,357
Other comprehensive (expense)/income for the year, net of tax (5,543) 10,320
Total comprehensive income/(expense) for the year, net of tax 31,576 (16,139)
Attributable to:
Owners of the Parent Company 30,237 (17,024)
Non-controlling interests 1,339 885
31,576 (16,139)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MARCH 2024
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 2023 (restated) 6,059 214,845 40,069 38 (396) 67,577 328,192 6,530 334,722
Profit for the year - - - - - 35,625 35,625 1,494 37,119
Other comprehensive expense - - - 4 (5,344) (48) (5,388) (155) (5,543)
Total comprehensive income/(expense) for the year - - - 4 (5,344) 35,577 30,237 1,339 31,576
Transactions with owners in their capacity as owners
Equity-settled share-based payments (note 2) - - - - - 1,432 1,432 - 1,432
Purchase of own shares (note 29) - - - - - (3,548) (3,548) - (3,548)
Options exercised (note 20) 16 - - - - (16) - - -
Exchange differences on opening balances 126 4,365 814 - - - 5,305 - 5,305
At 31 March 2024 6,201 219,210 40,883 42 (5,740) 101,022 361,618 7,869 369,487
In line with the Group's accounting policies, share capital, share premium,
capital redemption reserve, merger reserve and hedging reserve are translated
into US dollars at the rates of exchange at each balance sheet date and the
resulting cumulative exchange differences are included in translation reserve.
Merger reserve
The merger reserve comprises premium on shares issued in relation to business
combinations.
Capital redemption reserve
The capital redemption reserve comprises amounts transferred from retained
earnings in relation to the redemption of preference shares. For ease of
presentation, the amount of $1.7 million relating to the capital redemption
reserve has been included within the column of share premium and capital
redemption reserve in the balances at the end of the year (2023: $1.7
million). The only movement in this balance relates to foreign exchange.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net
change in the fair value of cash flow hedging instruments related to hedged
transactions that qualify for hedge accounting and have not yet matured.
Translation reserve
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements of foreign operations.
Shareholders' equity
Shareholders' equity represents total equity attributable to owners of the
Parent Company.
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 2022 6,373 228,143 42,549 299 (12,459) 96,806 361,711 7,999 369,710
Restatement (note1) - - - - 802 (456) 346 - 346
Restated at 1 April 2022 6,373 228,143 42,549 299 (11,657) 96,350 362,057 7,999 370,056
(Loss)/income for the year - - - - - (27,987) (27,987) 1,528 (26,459)
Other comprehensive income/(expense) - - - (261) 11,261 (37) 10,963 (643) 10,320
Total comprehensive (expense)/income for the year - - - (261) 11,261 (28,024) (17,024) 885 (16,139)
Change in ownership interest
Option over non-controlling interest - - - - - 3,069 3,069 - 3,069
Acquisition of non-controlling interest - - - - - (3,558) (3,558) 607 (2,951)
Transactions with owners in their capacity as owners
Equity-settled share-based payments (note 23) - - - - - 656 656 - 656
Purchase of own shares (note 29) - - - - - (865) (865) - (865)
Options exercised (note 20) 51 - - - - (51) - - -
Equity dividends paid (note 27) - - - - - - - (2,961) (2,961)
Exchange differences on opening balances (365) (13,298) (2,480) - - - (16,143) - (16,143)
At 31 March 2023 6,059 214,845 40,069 38 (396) 67,577 328,192 6,530 334,722
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2024
Restated((a)) Restated((a))
2024 2023 2022
Note $000 $000 $000
Non-current assets
Property, plant and equipment 8 67,062 70,306 78,911
Intangible assets 9 74,754 77,133 113,206
Right-of-use assets 10 59,115 69,332 86,731
Long-term assets 13 4,648 5,647 5,105
Deferred tax assets 11 39,099 15,401 16,317
Total non-current assets 244,678 237,819 300,270
Current assets
Asset held for sale 8 1,786 - 2,150
Inventory 12 165,401 206,426 230,885
Trade and other receivables 13 89,523 92,402 127,850
Income tax receivable 2,522 2,428 1,234
Derivative financial assets 24 68 340 316
Cash and cash equivalents 14 157,365 85,213 50,179
Total current assets 416,665 386,809 412,614
Total assets 2 661,343 624,628 712,884
Non-current liabilities
Loans and borrowings 15 (817) - (20)
Lease liabilities 10 51,751 62,717 80,215
Deferred income 16 1,837 2,038 523
Provisions 17 2,796 5,474 5,016
Other financial liabilities 18 14,307 19,071 21,557
Deferred tax liabilities 11 150 221 381
Total non-current liabilities 70,024 89,521 107,672
Current liabilities
Bank overdraft 14 63,655 34,979 20,380
Loans and borrowings 15 (700) (250) (340)
Lease liabilities 10 15,595 17,470 19,628
Deferred income 16 214 263 465
Provisions 17 7,527 6,801 6,804
Income tax payable 12,356 6,918 7,359
Trade and other payables 19 86,101 92,977 143,318
Other financial liabilities 18 37,084 41,227 37,542
Total current liabilities 221,832 200,385 235,156
Total liabilities 2 291,856 289,906 342,828
Net assets 369,487 334,722 370,056
Equity
Share capital 20 6,201 6,059 6,373
Share premium 217,518 213,187 226,382
Capital redemption reserve 1,692 1,658 1,761
Merger reserve 40,883 40,069 42,549
Hedging reserve 42 38 299
Translation reserve (5,740) (396) (11,657)
Retained earnings 101,022 67,577 96,350
Equity attributable to owners of the Parent Company 361,618 328,192 362,057
Non-controlling interests 7,869 6,530 7,999
Total equity 369,487 334,722 370,056
(a) Restated - see note 1 for further details
The consolidated financial statements were approved by the Board of Directors
on 24 June 2024 and were signed on its behalf by:
Rohan Cummings
Director
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 MARCH 2024
2024 2023
Note $000 $000
Cash flows from operating activities
Profit/(loss) for the year 37,119 (26,459)
Adjustments for:
Depreciation of property, plant and equipment 8 12,326 12,532
Depreciation and impairment/(reversal of impairment) of right-of-use assets 10 15,917 18,471
Amortisation of intangible assets 9 3,032 4,817
Goodwill impairment 9 - 29,100
Net finance costs 6 5,154 6,873
Income tax (credit)/charge 7 (13,277) 7,563
Loss/(profit) on disposal of property, plant and equipment 238 (4,595)
Equity-settled share-based payments - expense 23 1,502 805
Add back income from insurance settlement 3 - (1,500)
Operating profit after adjustments for non-cash items 62,011 47,607
Change in trade and other receivables 3,997 36,929
Change in inventory 40,361 17,790
Change in trade and other payables, provisions and deferred income (18,966) (43,352)
Cash generated from operations 87,403 58,974
Tax paid (5,159) (7,307)
Interest and similar charges paid (4,536) (5,270)
Net cash inflow from operating activities 77,708 46,397
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 782 6,809
Acquisition of business 28 (496) -
Acquisition of intangible assets 9 (442) (368)
Acquisition of property, plant and equipment 8 (10,254) (5,459)
Proceeds from insurance settlement 3 - 1,500
Net cash (outflow)/inflow from investing activities (10,410) 2,482
Cash flows from financing activities
Acquisition of non-controlling interest - (2,951)
Purchase of own shares 29 (3,548) (865)
Lease liabilities principal repayments 10 (18,422) (20,428)
Loan arrangement fees 14 (2,045) (1,079)
Dividends paid to non-controlling interests - (2,961)
Net cash outflow from financing activities (24,015) (28,284)
Net increase in cash and cash equivalents 43,283 20,595
Cash and cash equivalents and bank overdrafts at beginning of the year 14 50,234 29,799
Effect of exchange rate fluctuations on cash held 193 (160)
Cash and cash equivalents and bank overdrafts at end of the year 14 93,710 50,234
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED 31 MARCH 2024
1 Accounting policies
a. Basis of preparation
The consolidated financial statements of IG Design Group plc have been
prepared in accordance with UK-adopted international accounting standards with
the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The preparation of financial statements that conform with adopted UK IFRS
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of income and expense during the reporting period. Although
these estimates are based on management's best knowledge of the amount, event
or actions, actual results may ultimately differ from those estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis (see
critical accounting judgements and estimates section below). 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).
The financial information set out in this document does not constitute
statutory accounts for IG Design Group plc for the year ended 31 March 2024
but is extracted from the Annual Report and Financial Statements. The Annual
Report and Financial Statements 2023 will be delivered to the Registrar of
Companies in due course. The auditors' report on those accounts was
unqualified and neither drew attention to any matters by way of emphasis nor
contained a statement under either Section 498(2) of Companies Act 2006
(accounting records or returns inadequate or accounts not agreeing with
records and returns), or section 498(3) of Companies Act 2006 (failure to
obtain necessary information and explanations).
The accounting policies used in the preparation of these financial statements
are detailed below. These policies have been consistently applied to all
financial years presented.
Restatement of comparative amounts
The Group has restated its prior year figures to reflect the potential
liabilities relating to pre-acquisition era duties, interest, and penalties in
a foreign subsidiary of the DG Americas division. This adjustment has resulted
in a restatement of goodwill, as the initial acquisition accounting did not
include a provision in relation to this potential liability. Consequently, the
31 March 2022 balance sheet has been adjusted by $5.8 million to restate the
goodwill at acquisition (refer note 9) and a provision of $5.5 million (refer
note 17) has been raised. In addition, the post-acquisition impacts on
retained earnings of $456,000 and on translation reserve of $802,000 have been
adjusted in the statement of changes in equity accordingly.
Presentation currency
The presentation currency of the Group is US dollars.
The functional currency of the Parent Company remains as pound sterling as it
is located in the United Kingdom and substantially all of its cash flows,
assets and liabilities are denominated in pound sterling, as well as its share
capital. As such, the Parent Company's functional and presentational currency
differs to that of the Group's reporting currency.
Seasonality of the business
The business of the Group is seasonal and although revenues accrue relatively
evenly in both halves of the year, working capital requirements including
inventory levels increase steadily in the first half from July and peak in
October as manufacturing and distribution of Christmas products builds ahead
of distribution. The second half of the year sees the borrowing of the Group
decline and move to typically a cash positive position as the Group collects
its receivables through January to March.
Going concern
The Group financial statements have been prepared on a going concern basis as
the Directors have a reasonable expectation that the Group has adequate
resources to continue trading for a period of at least twelve months from the
date of this report, based on an assessment of the overall position and future
forecasts for the going concern period. This assessment has also considered
the overall level of Group borrowings and covenant requirements, the
flexibility of the Group to react to changing market conditions and ability to
appropriately manage any business risks.
On 5 June 2023, the business entered into a new banking facility with HSBC and
NatWest bank as part of a three-year deal to meet the funding requirements of
the Group. This facility comprises an Asset Backed Lending (ABL) arrangement
with a maximum facility amount of $125.0 million. On 3 November 2023 the Group
made an operational amendment to the ABL arrangement and signed a supplemental
agreement to convert and increase the overdraft to a £17.0 million RCF
facility between 17 June 2024 and 16 August 2024. This amendment offers
flexibility during the months where the Group has a requirement for funding
while having limited access into the ABL. Cash balances, borrowing and the
financial covenants applicable to the facility are detailed in notes 14 and
15.
In addition to the above facility, the Group also increased its unsecured
overdraft facility provided by HSBC to £16.5 million, which reduced to £8.5
million from August 2023. As such, after making appropriate enquires, 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 as the Group has sufficient resources.
The Group also has access to supplier financing arrangements from certain
customers which we utilise at certain times of the year. The largest of these
supplier financing arrangements are subject to the continuing support of the
customers' banking partners and therefore could be withdrawn at short notice.
As the new ABL arrangement is linked to trade debtors, any withdrawal of these
facilities would be largely offset as the borrowing base under the facility
would increase.
The Directors have assessed detailed plans and forecasts up to 30 September
2025. These forecasts reflect the fact that the Group has now returned to
profitability and continues the journey to more robust performance, growing
profitability and margins as a result. They also reflect the seasonal
operating cycle of the business and further recovery associated with the DG
Americas plan.
These forecasts have been sensitised to reflect severe but plausible adverse
downturns in the current assumptions. Specifically, the severe but plausible
downside scenario has taken account of the following risks:
· the potential impact of a significant disruption in one of our
major customer's business, reflected in a c$15-$20 million reduction in sales
performance and related cash and working capital impacts; and
· the potential impact of a significant shift in the phasing of sales
in DG Americas business segments, and its resulting impact on both cash flow
and facility availability over the peak periods, reflected in a c$31 million
reduction in receivables at the height of impact.
In the severe but plausible scenario modelled, there remains sufficient
headroom in our forecast liquidity, and sufficient headroom under the covenant
requirements.
Based on this assessment, the Directors have formed a judgement that there is
a reasonable expectation the Group will have adequate resources to continue in
operational existence for the foreseeable future.
Changes in accounting policies
There have been no changes to accounting policies during the year.
Other standards and interpretations
The Group also adopted the following new pronouncements at the start of the
year, which did not have any material impact on the Group's financial
statements:
· IFRS 17 Insurance Contract
· Narrow scope amendments to IAS 1, IAS 8 and IFRS Practice statement
2
· Amendments to IAS 'Taxation', relating to deferred tax related to
assets and liabilities arising from a single transaction
· Amendments to IAS8 Accounting policies, changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
· Amendments to IAS 12 - international tax reform - pillar two model
rules
Certain new accounting standards and interpretations have been published that
are not yet effective and have not been early adopted by the Group. These
standards are not expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future transactions.
b. Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the
Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power
over the investee. Specifically, the Group controls an investee if, and only
if, the Group has power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the investee),
exposure, or rights, to variable returns from its involvement with the
investee and the ability to use its power over the investee to affect its
returns. The financial statements of subsidiaries, which we consider the Group
to have control, are included in the consolidated financial statements from
the date that control commences until the date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expense
arising from intragroup transactions are eliminated in preparing the
consolidated financial statements.
(iii) Business combinations
Business combinations are accounted for using the acquisition method as at the
date on which control is transferred to the Group.
The Group measures goodwill at the acquisition date as:
· the fair value of the consideration transferred; plus
· the recognised amount of any non‑controlling interests in the
acquiree; plus
· if the business combination is achieved in stages, the fair value
of the existing equity interest in the acquiree; less
· the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the result is negative, a 'bargain purchase' gain is recognised
immediately in the income statement.
Provisional fair values allocated at a reporting date are finalised within
twelve months of the acquisition date.
c. Foreign currency
Items included in the financial statements of the Group's subsidiaries are
measured using the currency of the primary economic environment in which the
subsidiary operates ('functional currency').
The consolidated financial statements are presented in US dollars.
(i) Foreign currency transactions
Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are translated into the
functional currency of the entity at the exchange rate prevailing at that date
and recognised in the income statement unless hedge accounting criteria apply
(see policy for financial instruments).
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated into US dollars at
the exchange rate prevailing at the balance sheet date. The revenues and
expenses of foreign operations are translated at an average rate for the
period where this rate approximates to the foreign exchange rates prevailing
at the dates of the transactions.
Share capital, share premium, capital redemption reserve, merger reserve are
denominated in pounds sterling, the Parent Company's functional currency. They
are translated into US dollars at the rates of exchange at each balance sheet
date and the resulting cumulative exchange differences are included in
translation reserve.
(iii) Net investment in foreign operations
Exchange differences on retranslation at the closing rate of the opening
balances of overseas entities are taken to other comprehensive income. They
are released into the income statement upon disposal of the entities.
Exchange differences arising on foreign currency borrowings and derivatives
designated as qualifying hedges are taken to other comprehensive income to the
extent that they are effective. They are released into the income statement on
maturity or disposal of the hedge.
Exchange differences arising from a monetary item receivable from or payable
to a foreign operation, the settlement of which is neither planned nor likely
in the foreseeable future, are considered to form part of a net investment in
a foreign operation and are recognised in other comprehensive income in the
translation reserve. The cumulative translation differences previously
recognised in other comprehensive income (or where the foreign operation is
part of a subsidiary, the parent's interest in the cumulative translation
differences) are released into the income statement upon disposal of the
foreign operation or on loss of control of the subsidiary that includes the
foreign operation. Other exchange differences are taken to the income
statement.
d. Financial instruments
Interest-bearing loans and borrowings and other financial liabilities
(excluding derivatives and put options over non-controlling interests) are
held at amortised cost, unless they are included in a hedge accounting
relationship.
Derivatives are measured initially at fair value. Subsequent measurement in
the financial statements depends on the classification of the derivative as
follows:
(i) Fair value hedges
Where a derivative is used to hedge the foreign exchange exposure of a
monetary asset or liability, any gain or loss on the derivative is recognised
in the income statement.
(ii) Cash flow hedges
Where a derivative is designated as a hedging instrument in a cash flow hedge,
the change in fair value is recognised in other comprehensive income to the
extent that it is effective and any ineffective portion is recognised in the
income statement. Where the underlying transaction results in a financial
asset, accumulated gains and losses are recognised in the income statement in
the same period as the hedged item affects profit or loss.
Where the hedged item results in a non-financial asset, the accumulated gains
and losses previously recognised in other comprehensive income are included in
the initial carrying value of the asset.
(iii) Unhedged derivatives
The movements in the fair value of unhedged derivatives are charged/credited
to the income statement.
The potential cash payments relating to put options issued by the Group over
the non-controlling interest of subsidiary companies acquired are measured at
estimated fair value and accounted for as financial liabilities. Subsequent to
initial recognition, any changes to the carrying amount of non‑controlling
interest put option liabilities are recognised through equity.
e. Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Bank overdrafts that are
repayable on demand and form an integral part of the Group's cash management
are included as part of cash and cash equivalents in the statement of cash
flows.
f. Loans and borrowings
Loans and borrowings are initially measured at cost (which is equal to fair
value at inception) and are subsequently measured at amortised cost using the
effective interest method.
g. Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently
measured at amortised cost, which is generally equivalent to recognition at
nominal value less impairment loss calculated using the expected loss model.
The Group applies a simplified model to recognise lifetime expected credit
losses for its trade receivables and other receivables, including those due in
greater than twelve months, by making an accounting policy election. For any
receivables not expected to be paid, an expected credit loss of 100% is
recognised at the point this expectation arises. For all other receivables,
the expected loss is calculated based on reasonable and supportable
information that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and analysis, based on
the Group's historical experience and informed credit assessment and including
forward‑looking information.
h. Trade and other payables
Trade payables are non-interest bearing and are recognised initially at fair
value and subsequently at amortised cost.
i. Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and impairment losses. Where parts of an item of property, plant and equipment
or other assets have different useful lives, they are accounted for as
separate items. The carrying values of property, plant and equipment and other
assets are periodically reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable.
Property, plant and equipment are depreciated over their estimated remaining
useful lives on a straight-line basis using the following estimated useful
lives:
Land and buildings
- Freehold land Not depreciated
- Buildings 25-30 years
or life of lease
Plant and equipment 4-25 years
Fixtures and fittings
3-5 years
Motor vehicles 4 years
The assets' useful lives and residual values are reviewed, and adjusted if
appropriate, at each balance sheet date. Included within plant and equipment
are assets with a range of depreciation rates. These rates are tailored to the
nature of the assets to reflect their estimated useful lives.
Where the Group identifies assets held for sale, they are held at the lower of
current value and fair value less costs to sell.
j. Lease liabilities and lease right‑of-use assets
The Group leases various offices, warehouses, equipment and motor vehicles.
Rental contracts are typically made for fixed periods of one to 20 years but
may have extension options as described below. Lease terms are negotiated on
an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants, but leased
assets may not be used as security for borrowing purposes.
Leases greater than twelve months in length, and those not of low value, are
recognised as a lease right-of‑use asset with the associated future lease
payment terms recognised as a lease liability. The right-of-use assets and the
associated lease liabilities are recognised by unwinding the future lease
payments at the rate implicit to the lease or, if the rate implicit to the
lease cannot be readily determined, at the relevant incremental borrowing
rate.
Lease liabilities include the net present value of the following lease
payments:
· fixed payments (including in substance fixed payments), less any
lease incentives receivable;
· amounts expected to be payable by the lessee under residual value
guarantees;
· the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option; and
· payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease right-of-use assets are amortised over their useful economic lives
or the lease term, whichever is shorter. The lease liabilities are
derecognised by applying the future lease payments.
Extension and termination options are included in a number of property and
equipment leases across the Group. These terms are used to maximise
operational flexibility in terms of managing contracts. The majority of
extension and termination options held are exercisable only by the Group and
not by the respective lessor. In determining the lease term, management
considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in the lease
term if the lease is reasonably certain to be extended (or not terminated).
The assessment is reviewed if a significant event or a significant change in
circumstances occurs which affects this assessment and that is within the
control of the lessee.
Rentals associated with leases that are of low value or less than twelve
months in length are expensed to the income statement on a straight-line
basis. The associated lease incentives are amortised in the income statement
over the life of the lease.
On acquisition, right-of-use assets and lease liabilities are recognised in
accordance with IFRS 16. The acquired lease liability is measured as if the
lease contract was a new lease at the acquisition date. The right-of-use asset
is measured at an amount equal to the recognised lease liability.
The right‑of‑use asset is adjusted to reflect any favourable or
unfavourable terms of the lease relative to market terms.
Right-of-use assets are impaired in line with the impairment accounting policy
below.
k. Intangible assets
(i) Goodwill
Goodwill is stated at cost less any impairment losses.
Acquisitions are accounted for using the purchase method. For acquisitions
that have occurred since 1 January 2004, goodwill represents the difference
between the fair value of the assets given in consideration and the fair value
of identifiable assets, liabilities and contingent liabilities of the
acquiree. For acquisitions made before 1 January 2004, goodwill is included on
the basis of its deemed cost, which represents the amount previously recorded
under UK GAAP.
The Group has expensed costs attributable to acquisitions in the income
statement. Given their one‑off nature, these costs are generally presented
within adjusting items.
(ii) Acquired intangible assets
An intangible asset acquired in a business combination is recognised at fair
value. Intangible assets principally relate to customer relationships, which
are valued using discounted cash flows based on historical customer attrition
rates, and trade names/brand, which are valued using an income approach. The
cost of intangible assets is amortised through the income statement on a
straight‑line basis over their estimated useful economic life and as these
are assets directly attributed to the acquisition of a business, the
amortisation costs are also presented within adjusting items.
(iii) Other intangible assets
Other intangible assets which are not acquired through a business combination
are recognised at cost, to the extent it is probable that the expected future
economic benefits attributable to the asset will flow to the Group and that
its cost can be measured reliably, and amortised on a straight-line basis over
their estimated useful economic life.
Intangibles are amortised over their estimated remaining useful lives on a
straight-line basis as follows:
Goodwill
Not
amortised
Computer
software 3-5
years
Trade names 3-5 years
Customer relationships 3-15 years
Other intangibles 3-5 years
Customer relationships are wide ranging in useful economic lives, from shorter
relationships derived from smaller acquisitions to the long relationship with
Walmart acquired as part of the acquisition of Impact Innovations, Inc.
('Impact') in August 2018.
l. Impairment
All assets are reviewed regularly to determine whether there is any indication
of impairment. Goodwill is tested for impairment annually.
An impairment loss is recognised whenever the carrying amount of a
non‑financial asset or the cash‑generating unit (CGU) to which it belongs
exceeds its recoverable amount, being the greater of value in use and fair
value less costs to sell, and is recognised in the income statement. Value in
use is estimated based on future cash flows discounted using a pre-tax
discount rate based upon the Group's weighted average cost of capital.
Financial assets are assessed for impairment using the expected credit loss
model which requires expected credit losses and changes to expected credit
losses at each reporting date to reflect changes in credit risk since initial
recognition.
The reversal of an impairment loss should be recognised if there has been a
sustainable change in the estimates used to determine the asset's recoverable
amount since the last impairment test was carried out. Impairment losses
relating to goodwill are not permitted to be reversed.
m. Inventories
Inventories are valued at the lower of cost (on a weighted average basis) and
net realisable value. For work‑in‑progress and finished goods, cost
includes an appropriate proportion of labour cost and overheads based on
normal operating capacity. For acquisitions, inventory acquired will be
assessed for fair value in accordance with IFRS 3 and if applicable an uplift
applied to inventory on hand relating to sales orders already attached to the
acquired inventory. The unwind of the uplift in value is treated as an
adjusting item.
n. Income tax
Income tax in the income statement comprises current and deferred tax. Income
tax is recognised in the income statement except to the extent that it relates
to items recognised in equity or other comprehensive income.
Current tax is the expected tax payable on the taxable income for the year
using the applicable tax rates enacted or substantively enacted at the balance
sheet date and any adjustment to tax payable in prior years. Deferred tax is
provided, using the balance sheet liability method, on temporary differences
arising between the tax bases and the carrying amounts of assets and
liabilities in the financial statements. The following temporary differences
are not provided for: initial recognition of goodwill not deductible for tax
purposes; the initial recognition of assets or liabilities that affect neither
accounting nor taxable profit or loss other than in a business combination;
and differences relating to investments in subsidiaries to the extent that
they will not reverse in the foreseeable future.
Deferred tax is determined using tax rates that are expected to apply when the
related deferred tax asset or liability is settled, using the applicable tax
rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profit will be available against which the asset can be
utilised. Deferred tax assets are impaired to the extent that it is no longer
probable that the related tax benefits will be realised.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against liabilities and when
they relate to income taxes levied by the same tax authority and the Group
intends to settle its current tax assets and liabilities on a net basis.
o. Revenue
Revenue from the sale of goods is recognised in the income statement net of
expected discounts, rebates, refunds, credits, price concessions or other
similar items, when the associated performance obligation has been satisfied,
and control of the goods has been transferred to the customer.
The Group recognises revenue on sales of Celebrations, Craft & creative
play, Stationery, Gifting and 'Not‑for‑resale' consumable products across
two reporting segments. Typically, the products that we supply form the only
performance obligations within a customer agreement, and although the Group
can provide ancillary services such as merchandising, these are not separately
identifiable obligations. Each customer arrangement/contract is assessed to
identify the performance obligations being provided to the customer. Where
distinct performance obligations are deemed to exist, an element of revenue is
apportioned to that obligation.
Revenue from sales is recognised based on the price specified in the contract,
net of any estimated volume discounts, rebates and sell-through provisions.
Accumulated experience is used to estimate and provide for these discounts,
using the expected value method, and revenue is only recognised to the extent
that it is highly probable that a significant reversal will not occur. A
refund liability (included in trade and other payables) is recognised for
these items payable to customers based on sales made in the period. No
significant element of financing is deemed present as the majority of sales
are made with credit terms of 30‑120 days, which is consistent with market
practice.
A significant part of the Group's businesses sell goods on a
'free‑on‑board' (FOB) basis, where the Group as the seller makes its goods
ready for collection at its premises on an agreed upon sales date and the
buyer incurs all transportation and handling costs and bears the risks for
bringing the goods to their chosen destination. In this situation, revenue is
recognised on collection by the customer.
Where the Group operates non‑FOB terms with customers, revenue is recognised
when the control of the goods has been transferred to the customer. These
terms include consignment stock agreements, where revenue is recognised upon
the customer removing goods from consignment stock.
p. Finance income and costs
Finance income and expense is recognised in the income statement as it
accrues. Finance costs comprise interest payable, finance charges on finance
leases, interest on lease liabilities, amortisation of capitalised fees and
unwinding of discounts on provisions. Net movements in the fair value of
derivatives which have not been designated as an effective hedge, and any
ineffective portion of fair value movement on derivatives designated as a
hedge, are also included within finance income or expense.
q. Supplier financing
The Group is party to supplier financing arrangements with one of its key
customers. This arrangement is considered non-recourse factoring and on
receipt of payment from the banks the associated trade receivable is
derecognised in accordance with IFRS 9.
r. Segment reporting
A segment is identified on the basis of internal reports that are regularly
reviewed by the Board in order to allocate resources to the segment and assess
its performance.
s. Pensions
(i) Defined contribution schemes
Obligations for contributions to defined contribution pension schemes are
expensed to the income statement as incurred.
(ii) Defined benefit schemes
Two pension schemes, one of which is in the Netherlands and the other in the
UK, are defined benefit schemes.
The Netherlands subsidiary operates an industrial defined benefit fund, based
on average wages, that has an agreed maximum contribution. The pension fund is
a multi‑employer fund and there is no contractual or constructive obligation
for charging the net defined benefit cost of the plan to participating
entities other than an agreed maximum contribution for the period, that is
shared between employer (4/7) and employees (3/7).
The Dutch Government is not planning to make employers fund any deficits in
industrial pension funds; accordingly, the Group treats the scheme as a
defined contribution scheme for disclosure purposes. The Group recognises a
cost equal to its contributions payable for the period.
Following the acquisition of CSS, on 3 March 2020, the Group also administers
a defined benefit scheme in the UK.
The net obligation for this scheme is calculated by estimating the amount of
the future benefit that employees have earned in return for their service in
the current and prior periods; that benefit is discounted to determine its
present value, and the fair value of the scheme assets is deducted. The
calculation is performed by a qualified independent actuary.
t. Share-based payments
The cost of equity-settled transactions with employees is measured by
reference to the fair value of the options at the date on which they are
granted. The fair value is determined by using an appropriate pricing model.
The fair value cost is then recognised over the vesting period, ending on the
date on which the relevant employees become fully entitled to the award.
The quantum of awards expected to vest and the relevant cost charged is
reviewed annually such that at each balance sheet date the cumulative expense
is the relevant share of the expected total cost, pro-rated across the vesting
period.
No expense is recognised for awards that are not expected to ultimately vest,
for example due to an employee leaving or business performance targets not
being met. The annual expense for equity-settled transactions is recognised in
the income statement with a corresponding entry in equity.
In the event that any scheme is cancelled, the Group recognises immediately
the amount that otherwise would have been recognised for services received
over the remainder of the vesting period. The Group calculates this charge
based on the number of the awards expected to achieve the performance
conditions immediately before the award was cancelled.
Employer social security charges are accrued, where applicable, at a rate
which management expects to be the prevailing rate when share‑based
incentives are exercised and is based on the latest market value of options
expected to vest or those already vested.
Deferred tax assets are recognised in respect of share-based payment schemes
when deferred tax assets are recognised in that territory.
u. Investment in own shares
The shares held in the Group's Employee Benefit Trust (IG Employee Share
Trustee Limited) for the purpose of fulfilling obligations in respect of share
option plans are treated as belonging to the Company and are deducted from its
retained earnings. The cost of shares held directly (treasury shares) is also
deducted from retained earnings.
v. Provisions
A provision is recognised when there is a probable legal or constructive
obligation as a result of a past event and a reliable estimate can be made of
the outflow of resources that will be required to settle the obligation. If
the effect is material, provisions are determined by discounting the expected
future cash flows at a pre‑tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks specific to the
liability.
Where discounting is used, the increase in the provision due to the passage of
time is recognised as borrowing costs.
w. Government grants
Government grants are recognised when it is reasonable to expect that the
grants will be received and that all related conditions will be met, usually
on submission of a valid claim for payment. Government grants in respect of
capital expenditure are included within deferred income on the balance sheet
and are released to the income statement on a straight-line basis over the
expected useful lives of the relevant assets.
x. Dividends
Dividends are recognised as a liability in the period in which they are
approved by the shareholders of the Company (final dividend) or paid (interim
dividend).
y. Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalised as part of the cost of
the respective asset. Costs directly attributable to the arrangement of new
borrowing facilities are included within the fair value of proceeds received
and amortised over the life of the relevant facilities. Other borrowing costs,
which can include costs associated with the extension of existing facilities,
are expensed in the period they occur.
Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds.
z. Use of non-GAAP measures
These financial statements include alternative performance measures (APMs)
that are presented in addition to the standard GAAP metrics.
The Directors believe that these APMs provide important additional information
regarding the underlying 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 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. The APMs are Adjusted EBITDA, Adjusted operating
profit/(loss), Adjusted profit/(loss) before tax, Adjusted profit/(loss) after
tax and Adjusted earnings/(loss) per share.
Adjusting items are items that are material and/or, in the judgement of the
Directors, of an unusual or non‑recurring nature. These items are adjusted
to present 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. They
are 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) including fair value
adjustments to acquisitions.
Further detail of adjusting items can be seen in note 3 to the financial
statements.
aa. Like-for-like comparators
Figures quoted at like-for-like exchange rates are calculated by retranslating
the prior year figures at the current year exchange rates.
Key accounting judgements and estimates
The following provides information on those policies that management considers
key because of the level of judgement and estimation required which often
involves assumptions regarding future events which can vary from what is
anticipated. The Directors believe that the financial statements reflect
appropriate judgements and estimates and provide a true and fair view of the
Group's performance and financial position.
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately below), that the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements.
Accounting judgements
(i) Adjusting items
Judgement is required to determine whether items are appropriately classified
as adjusting items and that the values assigned are appropriate. Adjusting
items relate to impairments of assets, costs associated with acquisitions or
disposals, and significant items by virtue of their size or incidence.
Adjusting items are approved by the Board. Further details on the rationale
for classification are disclosed in note 3.
(ii) Taxation
Judgement is required in determining the Group's tax assets and liabilities.
Deferred tax assets have been recognised to the extent that management believe
that they are recoverable based on profit projections for future years. These
forecasts are consistent with those used elsewhere in the financial statements
(including impairment). Note 11 provides information on the gross temporary
differences and unused tax losses on which deferred tax assets have not been
recognised.
Accounting estimates
(i) Taxation
Included within current tax liabilities are estimations related to uncertain
tax positions. These calculations are based on management's best estimates of
potential tax liabilities that could arise in the future. These estimates are
reassessed when facts and circumstances change.
(ii) Lease asset impairments
The Group has impaired the right‑of‑use assets in respect of several
properties that the Group has exited as part of the ongoing DG Americas
integration. This is based on the properties themselves being a CGU in line
with IAS 36 as they are being actively marketed for sub‑tenants.
The impairments are assessed at each reporting date and if necessary reversed
should there be available sub‑tenants for the properties, or early
termination agreed with the landlord.
A portion of an impaired lease in Budd Lake, New Jersey was reacquired by the
Landlord, resulting in a reversal of impairment of $553,000. In the year to 31
March 2023, the decision was made to exit Clara City, Minnesota in the year,
resulting in a lease impairment of $757,000. As at 31 March 2024, for the
remaining impaired properties, the Group had no offers from potential
sub-tenants and given that this position is expected to continue for the
foreseeable future, these leased properties remain impaired in full. As at 31
March 2024, if there was a reversal of the remaining impaired right-of-use
assets, the right‑of-use assets would increase by $2.0 million (2023: $4.7
million).
(iii) Provision for slow-moving inventory
The Group has guidelines for providing for inventory which may be sold below
cost due to its age or condition.
The Directors assess the inventory at each location and in some cases decide
that there are specific reasons to provide more than the guideline levels, or
less if there are specific action plans in place which mean the guideline
provision level is not required. Determining the level of inventory provision
requires an estimation of likely future realisable value of the inventory in
various time frames and comparing with the cost of holding inventory for those
time frames.
This is not a precise estimate and is based on best data at the time of
recognition. Regular monitoring of inventory levels, the ageing of inventory
and the level of the provision is carried out by the Directors to reassess
this estimate. The assumptions made in relation to the current period are
consistent with those in the prior year. As at 31 March 2024, inventory
provisions were $31.1 million against a gross inventory value of $196.5
million (2023: $36.5 million provision, $243.2 million gross inventory value).
This provision estimate is subject to potential material change, for example
if market conditions change because expected customer demand fluctuates, or
shipping delays reduce our ability to deliver on time and in full.
(iv) Provision for pre-acquisition era duties
In preparing the financial statements, management has made significant
estimates and assumptions to determine the potential liability for duties,
penalties and interest related to pre-acquisition periods. These estimates
involve assessing historical data, interpreting relevant tax and legal
regulations, and considering potential outcomes of discussions with tax
authorities. Given the complexity and uncertainty surrounding these
liabilities, management has utilised external consultations to ensure that the
provisions are reasonable and reflect the most probable outcomes.
The provision raised comprises three elements: a provision for duties of $0.7
million, a provision for interest thereon of $1.9 million, and a provision for
penalties of $2.8 million. There is less variability around the duties and
interest portion of the provision. The provision for penalties however
contains a degree of uncertainty until realisation. Should the authorities
apply the harshest possible range of penalties, the penalties could reach up
to $30.0 million. We consider the potential of this to be extremely remote
given the facts and circumstances surrounding the matter. The provision raised
of $2.8 million is managements' best estimate based on the facts and
circumstances and professional advice obtained and adjustments to these
estimates may be required in future periods as new information becomes
available or as circumstances change.
2 Segmental information
The Group has one material business activity, being the design, manufacture
and distribution of Celebrations, Craft & creative play, Stationery,
Gifting and 'Not-for-resale' consumable products.
The business operates under two reporting segments which are reported to, and
evaluated by, the Chief Operating Decision Makers for the Group. The DG
Americas segment includes overseas operations in Asia, Australia, UK, India
and Mexico, being the overseas entities of US companies. The DG International
segment comprises the consolidation of the separately owned businesses in the
UK, Asia, Europe and Australia.
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.
DG DG Central and
Americas((a)) International eliminations Group
$000 $000 $000 $000
Year ended 31 March 2024
Revenue - external 500,310 299,741 - 800,051
- inter-segment - 33 (33) -
Total segment revenue 500,310 299,774 (33) 800,051
Segment profit/(loss) before adjusting items 6,768 32,257 (7,927) 31,098
Adjusting items (note 3) (1,892) (210) - (2,102)
Operating profit/(loss) 4,876 32,047 (7,927) 28,996
Finance income 1,065
Finance costs (6,219)
Income tax 13,277
Profit for the year ended 31 March 2024 37,119
Balances at 31 March 2024
Segment assets 353,706 194,348 113,289 661,343
Segment liabilities (138,722) (78,443) (74,691) (291,856)
Capital expenditure additions
- property, plant and equipment 5,483 6,327 53 11,863
- property, plant and equipment on acquisition of business - 84 - 84
- intangible assets 390 52 - 442
- intangible assets on acquisition of business - 278 - 278
- right-of-use assets 4,389 2,224 - 6,613
Depreciation - property, plant and equipment 6,776 5,526 24 12,326
Amortisation - intangible assets 2,897 135 - 3,032
Depreciation - right-of-use assets 11,525 4,938 7 16,470
Reversal of impairment - right-of-use assets (553) - - (553)
(Loss)/profit on disposal of property, plant and equipment (279) 41 - (238)
(a) Including overseas entities for the Americas operating segment.
DG DG Central and
Americas((a)) International eliminations Group
$000 $000 $000 $000
Year ended 31 March 2023
Revenue - external 592,954 297,355 - 890,309
- inter-segment - 2,283 (2,283) -
Total segment revenue 592,954 299,638 (2,283) 890,309
Segment profit/(loss) before adjusting items 2,918 19,827 (6,696) 16,049
Adjusting items (note 3) 1,701 (29,773) - (28,072)
Operating (loss)/profit 4,619 (9,946) (6,696) (12,023)
Finance costs (6,873)
Income tax (7,563)
Loss for the year ended 31 March 2023 (26,459)
Balances at 31 March 2023
Segment assets (restated)((c)) 376,084 201,650 46,894 624,628
Segment liabilities (restated)((c)) (161,515) (96,588) (31,803) (289,906)
Capital expenditure additions
- property, plant and equipment 2,452 2,941 66 5,459
- intangible assets 331 37 - 368
- right-of-use assets 727 4,094 24 4,845
Depreciation - property, plant and equipment 7,291 5,226 15 12,532
Amortisation - intangible assets 4,673 144 - 4,817
Impairment - intangible assets - 29,100 - 29,100
Depreciation - right-of-use assets 12,615 5,090 9 17,714
Impairment - right-of-use assets 757 - - 757
Profit on disposal of property, plant and equipment((b)) 4,493 102 - 4,595
(a) Including overseas entities for the Americas operating segment.
(b) Includes $4.6 million relating to the profit on sale of a property
owned by the Group in Manhattan, Kansas; see note 3.
(c) Restated see note 1 for further details.
· The Group has one customer that accounts for 24% (2023: 24%) of
the total Group revenues. In the year ended 31 March 2024 total sales to that
customer were $193.4 million (2023: $215.2 million). This customer falls
solely within the DG Americas operating segment above. No other single
customer accounts for over 10% of total sales.
· The assets and liabilities that have not been allocated to
segments include deferred tax assets of $39.1 million (2023: $15.4 million),
income tax receivable of $2.5 million (2023: $2.4 million), income tax payable
of $12.4 million (2023: $6.9 million) and deferred tax liabilities of $150,000
(2023: $221,000).
The Group's information about its segmental assets (non-current assets
excluding deferred tax assets and other long-term assets) and revenue by
customer destination are detailed below:
Non-current assets
Restated((b))
2024 2023
$000 $000
USA((a)) 136,520 150,459
UK 27,713 29,030
Netherlands 27,587 25,086
Other 9,111 12,196
200,931 216,771
(a) These figures include overseas entities relating to the DG Americas
operating segment. The overseas entities element is not material, and this
information is not readily available.
(b) Restated - see note 1 for further details.
Revenue by customer destination
2024 2023 2024 2023
$000 $000 % %
Americas((a)) 526,203 607,470 66 68
UK 88,827 94,524 11 11
Rest of the world 185,021 188,315 23 21
800,051 890,309 100 100
(a) Included within Americas is $498.5 million (2023: $577.2 million)
relating to the country, USA.
All revenue arose from the sale of goods.
3 Operating expenses and adjusting items
Included in the income statement are the following charges/(credits):
2024 2023
Note $000 $000
Depreciation of tangible fixed assets 8 12,326 12,532
Depreciation of right-of-use assets 10 16,470 17,714
(Reversal of impairment)/impairment of right-of-use assets 10 (553) 757
Loss/(profit) on disposal of property, plant and equipment and intangible 238 (4,595)
assets
Release of deferred grant income 5 (211) (111)
Goodwill impairment 9 - 29,100
Amortisation of intangible assets - software 9 1,225 2,066
Amortisation of intangible assets - other 9 1,807 2,751
Sub-lease rental income 5 (687) (1,253)
Provision for obsolete and slow-moving inventory 12 13,422 19,295
Reversal of previous write downs of inventory 12 (4,548) (6,436)
Loss on foreign exchange 835 719
Total administration expenses of $70.0 million (2023: $104.2 million) includes
$nil million (2023: $29.1 million) goodwill impairment as noted above.
2024 2023
$000 $000
Operating profit analysed as:
Adjusted operating profit 31,098 16,049
Adjusting items (2,102) (28,072)
Operating profit/(loss) 28,996 (12,023)
Adjusting items
Profit on disposal of
Admin
Admin Other property, expenses
Cost of expenses operating plant and - impairment of
sales - costs income equipment goodwill Total
Year ended 31 March 2024 $000 $000 $000 $000 $000 $000
Integration and restructuring costs/(income)((1))
548 (249) - - - 299
Amortisation of acquired intangibles((2))
- 1,803 - - - 1,803
Adjusting items 548 1,554 - - - 2,102
Profit on Admin
Admin Other disposal of expenses
Cost of expenses operating property, plant - impairment of
Year ended sales - costs income and equipment goodwill Total
31 March 2023 $000 $000 $000 $000 $000 $000
Integration and restructuring costs/(income)((1)) 1,479 1,031 - (4,493) - (1,983)
Amortisation of acquired intangibles((2)) - 2,751 - - - 2,751
Losses/(gains) and transaction costs relating to acquisitions and disposals of - - (1,500) - - (1,500)
businesses((3))
IT security incident income((4)) - (142) - - - (142)
Goodwill impairment((5)) - - - - 29,100 29,100
Reversal of impairment of assets((6)) (154) - - - - (154)
Adjusting items 1,325 3,640 (1,500) (4,493) 29,100 28,072
Adjusting items are separately presented by virtue of their nature, size
and/or incidence. 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 (gains)/losses are broken down as follows:
(1) Integration and restructuring costs/(income)
In order to realise synergies from acquisitions, or existing businesses,
integration and restructuring projects are respectively 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, it is appropriate that
costs associated with projects of this nature be included as adjusting items.
The income/costs incurred relate to the reorganisation and business
simplification in DG Americas and the reorganisation of the DG UK and Asia
businesses as follows:
Reversal of impairment: Following the integration of DG Americas' sites in
FY2021, a portion of a leased site in Budd Lake, New Jersey, was exited, and
the right-of-use asset was impaired. In the period ended 31 March 2024, the
landlord reacquired a portion of the impaired site resulting in a reversal of
impairment of $553,000.
DG Americas and DG UK business reorganisation: Further costs were incurred
following the March 2023 announcements of business reorganisation and
simplification. In the period ended 31 March 2024, the DG Americas business
had further restructuring costs, relating to staff, of $642,000 (2023:
$782,000) and the DG UK business (and its subsidiary in Asia) incurred further
restructuring costs of $210,000 (2023: $713,000), which also related to staff.
Site closures: In FY2023, a property in Manhattan, Kansas was sold for
proceeds of $6.7 million, resulting in a profit on disposal of $4.6 million
recognised as an adjusting item. In addition to this there was a loss on sale
of equipment of $100,000 in relation to assets disposed of during the exit of
a site in Clara City, Minnesota. Additionally, in FY2023 costs of $273,000 and
a $757,000 impairment to a right-of-use asset were incurred in relation to the
relocation and closure of these sites, as well as the consolidation of other
US sites.
(2) Amortisation of acquired intangibles
Under IFRS, as part of the acquisition of a company, it is necessary to
identify intangible assets such as customer lists and trade names 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 their useful economic lives. These are not operational
costs relating to the running of the acquired business and are directly
related to the accounting for the acquisition. As such, we include these as
adjusting items. In the current year, the amortisation relates to brands
acquired as part of the acquisition of Impact, with the tradenames and brands
related to CSS having been fully amortised in the prior year.
(3) 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. Furthermore, gains or losses on the disposal of businesses,
including any transaction costs associated with the disposal, are treated as
adjusting items.
In FY2023, $1.5 million of insurance income was received in relation to the
Impact Innovations, Inc (Impact) Representations and Warranties insurance
settlement in connection with accounting and tax issues present at acquisition
in August 2018.
(4) IT security incident income
The IT security incident which occurred in DG Americas in October/November
2020 resulted in one-off costs of $2.2 million being incurred during the year
ended 31 March 2021. This did not include the lost profits incurred as a
result of downtime in the business for which an insurance claim was made. In
FY2023 further insurance income was received of $142,000 in relation to this
incident. The treatment of this income as adjusting, follows the previous
treatment of the one-off costs as adjusting.
(5) Goodwill impairment
In FY2023 an impairment of $29.1 million was recorded to write down the
goodwill from historical acquisitions in the UK and Asia Cash-Generating Unit
(CGU).
This followed the deterioration of the results experienced in the DG UK and
Asia CGU in the second half of 2023 which impacted its longer-term forecasts
for future cash flows, and was further exacerbated by the significant increase
in the discount rate, mainly as a result of higher interest rates.
(6) Reversal of impairment of assets
In FY2023 a credit of $154,000 was recognised relating to the reversal of
Covid-19 related impairments no longer required. There are no remaining
provisions relating to these costs.
The cash flow effect of adjusting items
There was a $2.1 million net outflow in the current period's cash flow (2023:
$6.9 million net inflow) relating to adjusting items which included $1.5
million outflow (2023: $1.1 million) deferred from prior years.
Auditors' remuneration:
2024 2023
$000 $000
Amounts receivable by auditor and its associates in respect of:
Audit of these financial statements 1,610 1,192
Audit of financial statements of subsidiaries pursuant to legislation
- Overseas subsidiaries 155 145
Other audit related assurance services - review of interim report 117 85
4 Staff numbers and costs
The average monthly number of persons employed by the Group (including
Directors) during the year, analysed by category, was as follows:
Number of employees
2024 2023
Selling and administration 1,105 1,215
Production and distribution 1,661 1,877
Temporary and agency staff 535 624
3,301 3,716
The aggregate payroll costs of these persons were as follows:
2024 2023
Note $000 $000
Wages and salaries 147,261 151,284
Share-based payments 23 1,502 805
Social security costs 13,878 12,993
Other pension costs 2,950 3,176
Temporary employee costs 10,662 15,023
176,253 183,281
For information on Directors' remuneration please refer to the section titled
'Directors' remuneration' within the Directors' remuneration report within the
Group's audited financial statements.
5 Other operating income
2024 2023
$000 $000
Grant income 211 111
Sub-lease rental income 687 1,253
Other items 1,005 87
Other operating income before adjusting items 1,903 1,451
Adjusting items (note 3) - 1,500
1,903 2,951
Included in Other items is insurance income of $850,000 relating to a claim
for damaged inventory.
6 Finance income and costs
Finance income 2024 2023
$000 $000
Interest receivable on bank deposits 971 -
Derivative financial instruments at fair value through the income statement 94 -
1,065 -
Finance costs 2024 2023
$000 $000
Interest payable on bank loans and overdrafts 1,567 1,992
Other similar charges 2,248 1,854
Lease liability interest 2,336 2,903
Unwinding of fair value discounts 68 106
Interest payable under the effective interest method 6,219 6,855
Derivative financial instruments at fair value through the income statement - 18
6,219 6,873
7 Income tax charge
Recognised in the income statement
2024 2023
$000 $000
Current tax charge
Current year 10,295 6,910
Adjustments in respect of previous years 236 65
10,531 6,975
Deferred tax (credit)/charge
Recognition of deferred tax assets (21,313)
Origination and reversal of temporary differences (1,165) (1)
Adjustments in respect of previous periods (1,330) 589
(23,808) 588
Total tax in income statement (13,277) 7,563
Total tax charge on adjusting items
Total tax on profit before adjusting items 8,528 7,806
Total tax on adjusting items (21,805) (243)
Total tax (credit)/charge in income statement (13,277) 7,563
Reconciliation of effective tax rate
2024 2023
$000 $000
Profit/(Loss) before tax 23,842 (18,896)
Profit before tax multiplied by the standard rate of corporation tax of 25% in 5,961 (3,590)
the UK (2023: 19%)
Effects of:
Income not taxable (11) (50)
Expenses not deductible for tax purposes - impairment - 5,529
Expenses not deductible for tax purposes - other 1,018 629
Derecognition of deferred tax assets - -
Effect of tax rate changes - -
Differences between UK and overseas tax rates (137) 1,701
Movement in uncertain tax provisions 1,585 716
Recognition of deferred tax assets (21,313)
Other items (36) (210)
Adjustments in respect of previous periods (1,094) 654
Current year losses for which no deferred tax asset is recognised 750 2,184
Total tax (credit)/charge in income statement (13,277) 7,563
See note 11 for further details.
OECD Pillar Two
On 20 June 2023, the Finance (No.2) Act 2023 was enacted in the UK, including
legislation to implement the OECD Pillar Two
income taxes and will come into effect from 1 April 2024. This UK legislation
includes an income inclusion rule, which is designed to ensure a minimum
effective tax rate of 15% in each country in which the Group operates (Pillar
Two income taxes). Similar legislation is being enacted by other governments
around the world. The Group is within the scope of this legislation. The Group
has applied the mandatory temporary exception in the Amendments to IAS 12
issued in May 2023 and endorsed in July 2023, and has not recognised or
disclosed information about deferred tax assets or liabilities relating to
Pillar Two income taxes.
There is no current tax impact on the financial statements as at 31 March 2024
because the rules do not apply to the Group until 1 April 2024. Based on an
assessment of the data for the year ended 31 March 2023, the Group has a
qualifying Country by Country report (CbCR) and all territories have passed
the transitional safe harbours. The Group also expects to have qualifying CbCR
reports for the subsequent years for which the transitional safe harbours are
available and therefore has the opportunity for each year to potentially meet
the transitional safe harbours. Based on an initial assessment of the
provisional data for the year ended 31 March 2024, as well as the forecast
data, we do not expect the impact of Pillar Two income taxes to be material.
8 Property, plant and equipment
Land and buildings Plant and Fixtures and Motor
Freehold Leasehold equipment fittings vehicles Total
$000 $000 $000 $000 $000 $000
Cost
Balance at 1 April 2022 45,578 5,692 112,826 7,346 2,391 173,833
Additions 285 271 3,888 710 305 5,459
Disposals - (195) (55) (972) (219) (1,441)
Effect of movements in foreign exchange (986) (302) (3,502) (365) (139) (5,294)
Balance at 31 March 2023 44,877 5,466 113,157 6,719 2,338 172,557
Additions 443 285 10,535 400 200 11,863
Additions on acquisitions of a business - - 84 - - 84
Transfer to assets held for sale (2,656) - - - - (2,656)
Disposals - - (2,163) (193) (133) (2,489)
Effect of movements in foreign exchange 169 (103) 76 - (18) 124
Balance at 31 March 2024 42,833 5,648 121,689 6,926 2,387 179,483
Depreciation and impairment
Balance at 1 April 2022 (19,672) (4,020) (64,411) (4,978) (1,841) (94,922)
Depreciation charge for the year (1,930) (892) (8,569) (934) (207) (12,532)
Disposals - 186 37 940 214 1,377
Effect of movements in foreign exchange 728 200 2,556 232 110 3,826
Balance at 31 March 2023 (20,874) (4,526) (70,387) (4,740) (1,724) (102,251)
Depreciation charge for the year (1,899) (738) (8,934) (545) (210) (12,326)
Transfer to assets held for sale 870 - - - - 870
Disposals - - 1,164 194 111 1,469
Effect of movements in foreign exchange (173) 98 (110) (5) 7 (183)
Balance at 31 March 2024 (22,076) (5,166) (78,267) (5,096) (1,816) (112,421)
Net book value
At 31 March 2024 20,757 482 43,422 1,830 571 67,062
At 31 March 2023 24,003 940 42,770 1,979 614 70,306
During the year a property in Berwick, Pennsylvania (DG Americas) with a net
book value of $1.6 million and a property in Hirwaun, Wales (DG International)
with a net book value of $174,000 were reclassified to assets held for sale.
Both properties are no longer needed to meet the requirements of the business
and are currently being actively marketed for sale with a sale expected within
the next financial year. The carrying values are less than fair value less
costs to sell so no impairment loss has been recognised.
Depreciation is charged to cost of sales, selling costs or administration
costs within the income statement depending on the department to which the
assets relate.
Included in Other financial liabilities (note 18) is $1.6 million (2023:
£nil) fixed asset creditor.
Security
Certain freehold properties with a cost of $13.6 million in the UK were
subject to a fixed charge in support of the ABL banking facility, other fixed
assets are secured with an all-assets lien on all existing and future assets
of the loan parties (see note 15 for further details).
9 Intangible assets
Computer Trade Customer Other
Goodwill software names relationships intangibles Total
$000 $000 $000 $000 $000 $000
Cost
Balance at 1 April 2022 100,068 14,493 5,258 24,086 171 144,076
Restatement (note 1) 5,808 5,808
Balance at 1 April 2022 (restated) 105,876 14,493 5,258 24,086 171 149,884
Additions - 272 - - 96 368
Disposals - (224) - - - (224)
Effect of movements in foreign exchange (2,662) (186) (27) (99) (6) (2,980)
Balance at 31 March 2023 (restated) 103,214 14,355 5,231 23,987 261 147,048
Additions - 361 - - 81 442
Additions on acquisition of business 206 - 50 22 - 278
Disposals - (1,748) - - - (1,748)
Effect of movements in foreign exchange 576 (6) (8) (22) (2) 538
Balance at 31 March 2024 103,996 12,962 5,273 23,987 340 146,558
Amortisation and impairment
Balance at 1 April 2022 (13,151) (10,834) (4,310) (8,241) (142) (36,678)
Amortisation charge for the year - (2,066) (948) (1,803) - (4,817)
Impairments (29,100) - - - - (29,100)
Disposals - 224 - - - 224
Effect of movements in foreign exchange 165 163 27 99 2 456
Balance at 31 March 2023 (42,086) (12,513) (5,231) (9,945) (140) (69,915)
Amortisation charge for the year - (1,225) (3) (1,804) - (3,032)
Disposals - 1,742 - - - 1,742
Effect of movements in foreign exchange (632) 4 6 21 2 (599)
Balance at 31 March 2024 (42,718) (11,992) (5,228) (11,728) (138) (71,804)
Net book value
At 31 March 2024 61,278 970 45 12,259 202 74,754
At 31 March 2023 (restated) 61,128 1,842 - 14,042 121 77,133
Computer software relates to purchased software and people costs associated
with the implementation of software.
The aggregate carrying amounts of goodwill allocated to each CGU are as
follows:
Restated((a))
2024 2023
$000 $000
UK and Asia 2,613 2,561
Europe 6,525 6,543
USA 48,680 48,680
Australia 3,460 3,344
61,278 61,128
(a) Restated see note 1 for further details
All goodwill balances have arisen as a result of acquisitions and are not
internally generated.
Impairment
The Group tests goodwill each year for impairment, or more frequently if there
are indications that goodwill might be impaired.
For the purposes of impairment testing, goodwill has been allocated to the
business unit, or group of business units, that are expected to benefit from
the synergies of the combination, which represents the lowest level within the
Group at which the goodwill is monitored for internal management purposes and
is referred to below as a CGU. The recoverable amounts of CGUs are determined
from the higher of value in use and fair value less costs to sell.
The Group has prepared budgets and forecasts for each CGU for the next three
years and these have been reviewed and approved by management and the Board as
appropriate. The key assumptions in those forecasts are sales, margins
achievable and overhead costs, which are based on past experience, more recent
performance and future expectations.
Climate change poses various challenges and opportunities that could affect
the future cash flows and value in use of our assets, including goodwill. The
potential impacts of climate change will, by their very nature, continue to
evolve and develop. At this stage of our climate change journey, our modelling
primarily focuses on capturing the immediate and more readily quantifiable
impacts of climate change on our operations and financial performance. We
recognise that there may be additional medium to long-term effects that are
not explicitly accounted for in our current models. This assessment involves
inherent uncertainties, and we will continue to monitor, reassess and report
on the possible impact of climate change on the Group in future reporting
periods. The assessment of climate change risks and their financial
implications is an evolving area, and conclusions may be subject to change as
new information becomes available.
The key assumptions in deriving value in use from cash flow projections are
the sales growth, EBITDA margins, discount rate applied and the long-term
expected growth rates for the business. Long-term growth rates are set no
higher than the long‑term economic growth projections of the countries in
which the businesses operate. Management apply pre-tax discount rates in value
in use estimation that reflect current market assessments of the time value of
money and the risks specific to the CGUs and businesses under review.
The Group's post‑tax weighted average cost of capital (WACC) is 10.8% (2023:
11.1%). This has been compared to other similar companies and is believed by
the Directors to be appropriate. The CGUs use the following pre-tax discount
rates which are derived from an estimate of the Group's post-tax WACC adjusted
for the relevant tax rate for each CGU.
Pre-tax discount rates used were:
2024 2023
UK and Asia 14.3% 14.6%
Europe 14.5% 14.9%
USA 14.4% 14.7%
Australia 15.4% 15.8%
Long-term growth rates used were:
2024 2023
UK and Asia 2.0% 2.0%
Europe 2.0% 2.1%
USA 2.1% 2.2%
Australia 2.5% 2.3%
There is no impairment in the current year. In the prior year an impairment
charge of $29.1 million was recognised against the goodwill allocated to the
UK and Asia CGU. The combination of lower forecast expectation of the UK and
Asia CGU, following the deterioration of the results in this CGU in the second
half of FY2023, and the significant increase in the discount rate drove an
impairment of the goodwill related to the CGU.
In all CGUs, the carrying value of the goodwill was supported by the
recoverable amount and the Directors do not believe a reasonably possible
change to the assumptions would give rise to an impairment. The Directors have
considered a 200 basis points movement in the discount rate, a reduction of
0.5% in the growth rate applied to the terminal value, and a 7.5% movement in
forecast cash flows. With these changes in assumptions, there is significant
headroom in all of the CGUs and no indication of impairment.
10 Right-of-use assets and lease liabilities
Right-of-use assets
Land and Plant and Motor Office
buildings machinery vehicles equipment Total
$000 $000 $000 $000 $000
Net book value at 1 April 2022 84,569 992 388 782 86,731
Additions 4,329 241 197 78 4,845
Disposals (1,922) - - - (1,922)
Depreciation charge (16,820) (436) (233) (225) (17,714)
Impairment (757) - - - (757)
Transfers between categories 215 - 22 (237) -
Effect of movements in foreign exchange (1,783) (34) (19) (15) (1,851)
Net book value at 31 March 2023 67,831 763 355 383 69,332
Additions 6,252 154 165 42 6,613
Disposals (1,119) - - (21) (1,140)
Depreciation charge (15,752) (340) (208) (170) (16,470)
Reversal of impairment 553 - - - 553
Effect of movements in foreign exchange 237 (35) 13 12 227
Net book value at 31 March 2024 58,002 542 325 246 59,115
Additions include lease modifications and extensions of $122,000 (2023:
$822,000).
Income statement
The income statement shows the following charges/(credits) relating to leases:
2024 2023
$000 $000
Interest expense (included in finance costs) 2,336 2,903
Depreciation charge 16,470 17,714
(Reversal)/impairment (see note 3) (553) 757
Expense relating to short-term leases 152 121
Low-value lease costs were negligible in the year.
At 31 March 2024, the Group had estimated lease commitments for leases not yet
commenced of $17.3 million (2023: $nil).
Movement in lease liabilities
2024 2023
$000 $000
Balance at 1 April 80,187 99,843
Cash flow - financing activities (18,422) (20,428)
Additions 6,613 4,845
Disposals (1,167) (2,011)
Effect of movements in foreign exchange 135 (2,062)
Balance at 31 March 67,346 80,187
2024 2023
$000 $000
Non-current liabilities 51,751 62,717
Current liabilities 15,595 17,470
67,346 80,187
Total cash outflow in relation to leases is as follows:
2024 2023
$000 $000
Included in financing activities - payment of lease liabilities 18,422 20,428
Included in interest and similar charges paid 2,336 2,903
Short-term leases 152 121
20,910 23,452
Commitments for minimum lease payments in relation to non-cancellable
low-value or short-term leases are payable as follows:
2024 2023
$000 $000
Less than one year 38 30
Between one and five years - -
More than five years - -
38 30
During the year sub-lease income from right-of-use assets was as follows:
2024 2023
$000 $000
Sub-lease income in the year from sub-leasing right-of-use assets 687 1,253
Non-cancellable operating lease rentals are receivable as follows:
2023 2023
$000 $000
Less than one year 401 655
Between one and five years 985 1,148
1,386 1,803
11 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant
and equipment Tax losses
and intangible carried Share-based Doubtful Other timing
assets forward payments debts differences((a)) Total
$000 $000 $000 $000 $000 $000
At 1 April 2022 3,749 7,569 - 6 4,612 15,936
Credit/(charge) to income statement 251 (224) - - (615) (588)
(Charge)/credit to equity 9 - - (1) (176) (168)
At 31 March 2023 4,009 7,345 - 5 3,821 15,180
Deferred tax liabilities (277) - - - (3) (280)
Deferred tax assets 4,286 7,345 - 5 3,824 15,460
4,009 7,345 - 5 3,821 15,180
Property, plant
and equipment Tax losses
and intangible carried Share-based Doubtful Other timing
assets forward payments debts differences((a)) Total
$000 $000 $000 $000 $000 $000
At 1 April 2023 4,009 7,345 - 5 3,821 15,180
Credit/(charge)/ to income statement 822 15,530 - (4) 7,460 23,808
(Charge)/credit to equity 3 - - - (42) (39)
At 31 March 2024 4,834 22,875 - 1 11,239 38,949
Deferred tax liabilities (191) - - - (3) (194)
Deferred tax assets 5,025 22,875 - 1 11,242 39,143
4,834 22,875 - 1 11,239 38,949
(a) Other timing differences include a deferred tax asset closing balance
of $534,000 (2023: $583,000) in respect of provision for inventory and $1.7
million (2023: $2.6 million) in respect of leases.
Deferred tax is presented net on the balance sheet in so far as a right of
offset exists.
2024 2023
$000 $000
Net deferred tax asset 39,099 15,401
Net deferred tax liability (150) (221)
38,949 15,180
Deferred tax assets and liabilities are treated as non-current as it is
expected that they will be recovered or settled more than twelve months after
the reporting date.
The deferred tax asset in respect of tax losses carried forward at 31 March
2024 of $22.9 million (2023: $7.3 million) comprises deferred tax assets in
relation to US tax losses of $22.5 million (2023: $7.0 million) and Asia tax
losses of $345,000 (2023: $345,000). All of these recognised tax losses may be
carried forward indefinitely. The deferred tax assets have been recognised in
the territories where the Board considers there is sufficient evidence that
taxable profits will be available against which the tax losses can be
utilised. The Group has prepared budgets and forecasts for the next three
years. The key assumptions in those forecasts are sales, margins achievable
and overhead costs, which are based on past experience, more recent
performance and future expectations. The Group then extrapolates profits for
the future years based on the long-term growth rates applicable to the
relevant territories.
In DG Americas, $21.3 million of previously unrecognised deferred tax assets
were recognised. On the acquisition of CSS Industries in FY2020 there were
certain deferred tax attributes that were subject to restrictions. We have
engaged with our advisors and have confidence that there are no remaining
restrictions, and these deferred tax assets are available for use. It should
be noted that the use of these attributes is subject to an annual limitation
which spreads their usage over an approximately 40-year period which started
in FY2020.
In FY2023, in the DG Americas segment, there were gross temporary differences
of $63.3 million and unused tax losses, with no expiry date, $20.0 million on
which deferred tax assets were not recognised.
In the UK there are gross temporary differences of $671,000 (2023: $990,000)
and unused tax losses, with no expiry date, of $36.0 million (2023: $28.6
million) on which deferred tax assets have not been recognised. Deferred tax
assets in the UK are not being recognised due to the lack of sufficient
compelling evidence to suggest their recognition at this time.
No deferred tax liability (2023: $nil) has been recognised in relation to the
tax cost of remitting earnings (forecast dividends) from China to the UK. No
other deferred tax liability has been recognised on unremitted earnings of the
other overseas subsidiaries as, if all unremitted earnings were repatriated
with immediate effect, no other tax charge would be payable. The full
potential deferred tax liability in respect of unremitted earnings is $355,000
(2023:$222,000).
The standard rate of corporation tax in the UK rose to 25% effective from 1
April 2023. Given that no deferred tax is recognised in the UK, this did not
impact the deferred tax measurement.
Included within current tax liabilities is $6.7 million (2023: $5.2 million)
in respect of uncertain tax positions. These risks arise because the Group
operates in a complex multinational tax environment. The amount consists of
various tax risks which individually are not material. The position is
reviewed on an ongoing basis and generally these tax positions are released at
the end of the relevant territories' statute of limitations.
No deferred tax charge was recognised through the statement of changes in
equity and there are no deferred tax balances with respect to cash flow
hedges.
12 Inventory
2024 2023
$000 $000
Raw materials and consumables 25,022 36,139
Work in progress 25,909 32,676
Finished goods 114,470 137,611
165,401 206,426
During the year, materials, consumables, changes in finished goods and work in
progress of $558.3 million (2023: $649.7 million) were recognised as an
expense and included in cost of sales.
Inventories have been assessed as at 31 March 2024 and overall an expense of
$8.9 million has been recognised in the year (2023: 12.9 million). This
consists of the addition of new provisions for slow moving and obsolete
inventory of $13.4 million (2023: $19.3 million), offset by the reversal of
previous Covid-19 inventory provisions of $nil million (2023: $0.1 million),
and the release of previous slow moving and obsolete inventory provisions
amounting to $4.5 million (2023: $6.3 million) due to inventory either being
used or sold.
13 Long-term assets and trade and other receivables
Long-term assets are as follows:
2024 2023
$000 $000
Acquisition indemnities 1,052 1,622
Security deposits 1,164 1,632
Insurance related assets 2,432 2,393
4,648 5,647
Acquisition indemnities relate to previous acquisitions made by CSS and
indemnities provided by the seller. Security deposits relate to leased
properties and Insurance related assets include a corporate owned life
insurance policy.
Trade and other receivables are as follows:
2024 2023
$000 $000
Trade receivables 77,565 80,973
Prepayments, other receivables and accrued income 11,444 10,212
VAT receivable 514 1,217
89,523 92,402
The Group is party to supplier financing arrangements with one of its key
customers and the associated balances are recognised as trade receivables
until receipt of the payment from the bank, at which point the receivable is
derecognised. At 31 March 2024 nothing had been drawn down on this
arrangement (2023: $7.0 million).
Please see note 15 for more details of the banking facilities.
There are no trade receivables in the current year (2023: $nil) expected to be
recovered in more than twelve months.
The Group's exposure to credit and currency risks and provisions for doubtful
debts related to trade and other receivables is disclosed in note 24.
14 Cash and cash equivalents/bank overdrafts
2024 2023
$000 $000
Cash and cash equivalents 157,365 85,213
Bank overdrafts (63,655) (34,979)
Cash and cash equivalents and bank overdrafts per cash flow statement 93,710 50,234
Net cash
2024 2023
$000 $000
Cash and cash equivalents 93,710 50,234
Loan arrangement fees 1,517 250
Net cash as used in the financial review cash flow statement 95,227 50,484
The Group's exposure to interest rate risk and sensitivity analysis for
financial assets and liabilities are disclosed in note 24.
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
15 for further details of the Group's loans and overdrafts.
Changes in net cash
Loan Other assets
arrangement cash/bank
fees overdrafts Total
$000 $000 $000
Balance at 1 April 2022 360 29,799 30,159
Cash flows 1,079 20,595 21,674
Effect of other items
Amortisation of loan arrangement fees (1,143) - (1,143)
Effect of movements in foreign exchange (46) (160) (206)
Balance at 31 March 2023 250 50,234 50,484
Cash flows 2,261 42,250 44,511
Effect of other items
Amortisation of loan arrangement fees (1,000) - (1,000)
Effect of movements in foreign exchange 6 1,226 1,232
Balance at 31 March 2024 1,517 93,710 95,227
15 Loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings. For more information about the Group's
exposure to interest rate and foreign currency risk, see note 24.
2024 2023
$000 $000
Non-current liabilities
Secured bank loans - -
Loan arrangement fees (817) -
(817) -
Current liabilities
Current portion of secured bank loans - -
Loan arrangement fees (700) (250)
(700) (250)
Secured bank loans
Facilities utilised in current period
The Group entered into a new banking facility on 5 June 2023, this facility
comprises an Asset Backed Lending ("ABL") arrangement with a maximum facility
amount of $125.0 million. The facility with HSBC and NatWest banks has a term
of three years. On 3 November 2023 the Group made an operational amendment to
the ABL arrangement and signed a supplemental agreement to convert and
increase the overdraft to a £17.0 million RCF facility between 17 June 2024
and 16 August 2024. This amendment does not increase the maximum facility
amount and offers flexibility during the months where the Group has a
requirement for funding while having limited access into the ABL.
The Group also increased its unsecured overdraft facility provided by HSBC to
£16.5 million, which reduced to £8.5 million from August 2023. If the option
to access the RCF facility is exercised, the amounts drawn on the overdraft
facility and RCF facility may not exceed £17.0 million.
Interest charged on the Asset Backed lending facility is based, on one of two
methods dependant on the duration of the Group's borrowing request submission:
· a margin of between 1.75% and 2.25%, based on average excess
availability, plus a 0.1% credit spread adjustment, plus the US Secured
Overnight Financing Rate ("SOFR"); or
· a margin of between 0.75% and 1.25% based on average excess
availability, plus a rate based on the higher of: the HSBC prime rate, the
Federal Funds rate plus 0.5%, or SOFR plus 1%.
A further commitment/non-utilisation fee is charged at 0.25% where facility
usage is greater than 50% of the maximum credit line and 0.375% where facility
usage is less than 50% of the maximum credit line.
Interest on the RCF is charged at a margin of 2.5% plus Sterling Overnight
Index Average ("SONIA").
The financial covenant within the ABL agreement, which is a minimum fixed
charge coverage ratio of 1.0 times, is only triggered if the remaining
availability of the facility is less than the higher of $12.5 million or
12.5% of the borrowing base. The amendment to the facility on 3 November 2023,
reduced the remaining availability trigger point to $6.5 million over a two
month period.
The financial covenants within the RCF agreement are as follows:
· a minimum fixed charge coverage ratio of 1.0 times, calculated
for the 12 month period to the most recent quarterly reporting period; and
· an asset cover ratio of no less than 200% calculated as at the
date of the last monthly reporting period.
The ABL and RCF are secured with an all-assets lien on all existing and future
assets of the loan parties. The loan parties are Anker Play Products, LLC,
Berwick Offray, LLC, BOC Distribution, Inc., C. R. Gibson, LLC, CSS
Industries, Inc., IG Design Group (Lang), Inc., IG Design Group Americas,
Inc., IG Design Group plc, IG Design Group UK Limited, Impact Innovations,
Inc., Lion Ribbon Company, LLC, Paper Magic Group, Inc., Philadelphia
Industries, Inc., Simplicity Creative Corp., The Lang Companies, Inc., The
McCall Pattern Company, Inc.
Invoice financing arrangements are secured over the trade receivables that
they are drawn on. The Group also had an invoice financing arrangement in Hong
Kong with a maximum limit of $18.0 million, dependent on level of eligible
receivables. This facility was cancelled on 13 October 2023 in line with the
terms of the new financing arrangement.
Loan arrangement fees represent the unamortised costs in arranging the Group
facilities. These fees are being amortised on a straight-line basis over the
terms of the facilities.
The Group is party to supplier financing arrangements with a number of its key
customers and the associated balances are recognised as trade receivables
until receipt of the payment from the bank, at which point the receivable is
derecognised.
Facilities utilised in prior periods
On 1 June 2022, the Company had extended and amended the terms of its existing
banking agreement to 31 March 2024. These facilities were cancelled on 5 June
2023. These facilities were maintained through a club of five banks: HSBC,
NatWest, Citigroup (who replaced BNP Paribas), Truist Bank (as successor by
merger to SunTrust Bank) and PNC. The amended facilities comprised:
· a revolving credit facility ('RCF A') reduced from $95.0 million
to $90.0 million; and
· a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to a maximum level of £92.0
million (reduced from a maximum level of £130 million). This RCF was flexed
to meet our working capital requirements during those months when inventory
was being built within our annual business cycle and was £nil when not
required, minimising carrying costs.
The RCFs were secured with a fixed and floating charge over the assets of the
Group. Amounts drawn under RCFs were classified as current liabilities as the
Group expected to settle these amounts within twelve months.
From April 2023 covenants were tested quarterly and were as follows:
· interest cover, being the ratio of adjusted earnings before
interest, depreciation and amortisation (adjusted 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.
There was 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. These covenants were measured on pre-IFRS 16 accounting
definitions.
Given the cancellation of the RCF on 5 June 2023, these covenants are no
longer applicable. The Group has remained comfortably in compliance with all
of these covenants up until its cancellation.
16 Deferred income
2024 2023
$000 $000
Included within non-current liabilities
Deferred grant income 1,837 2,038
Included within current liabilities
Deferred grant income 211 211
Other deferred income 3 52
214 263
The deferred grant income is in respect of government grants relating to the
development of the Penallta site in Wales and the Byhalia site in Mississippi.
The conditions for the Wales grant were all fully met in January 2019 and for
the Byhalia site in January 2023. Deferred income is being released in line
with the depreciation of the assets for which the grant is related to.
17 Provisions
Restated((a)) Restated((a))
Property Duties, interest and penalties Other Total
$000 $000 $000 $000
Balance at 1 April 2022 6,247 - 111 6,358
Restatement (note 1) - 5,462 - 5,462
Balance at 1 April 2022 (restated) 6,247 5,462 111 11,820
Provisions made in the year 723 - 282 1,005
Provisions released during the year (287) - (99) (386)
Unwinding of fair value discounts 106 - - 106
Provisions utilised during the year (200) - (5) (205)
Effect of movements in foreign exchange (70) - 5 (65)
Balance at 1 April 2023 (restated) 6,519 5,462 294 12,275
Provisions made in the year 288 - 442 730
Provisions released during the year (2,004) - (294) (2,298)
Unwinding of fair value discounts 68 - - 68
Provisions utilised during the year (490) - - (490)
Effect of movements in foreign exchange 41 - (3) 38
Balance at 31 March 2024 4,422 5,462 439 10,323
Restated((a))
2024 2023
$000 $000
Non-current 2,796 5,474
Current 7,527 6,801
10,323 12,275
(a) The prior year comparatives above have been restated as disclosed in note
1.
The property provision represents the estimated reinstatement cost of 14 of
the Group's leasehold properties under fully repairing leases (2023: 14). Of
the non-current balance, $2.0 million (2023: $2.2million) relates to a lease
expiring in 2036; the remainder relates to provisions unwinding between one
and five years.
The Duties, interest and penalties provision represents the potential
liabilities relating to pre-acquisition era duties owed in a foreign
subsidiary of the DG Americas division estimated at $5.5 million. This
provision reflects management's best estimate of the costs expected to be
incurred to settle these obligations. This provision required significant
estimation assumptions and is subject to change as new information becomes
available or as circumstances evolve. Adjustments to the provision will be
made in the period in which such information or changes arise.
18 Other financial liabilities
2024 2023((a))
$000 $000
Included within non-current liabilities
Rebates and customer claims 11,644 16,698
Employee costs 985 885
Other creditors and accruals 1,678 1,488
14,307 19,071
Included within current liabilities
Employee costs 18,209 18,526
Rebates and customer claims 8,033 12,992
Property costs 2,964 2,859
Fixed asset creditors 1,609 -
Goods in transit 1,154 784
Other creditors and accruals 5,089 5,751
37,058 40,912
Forward foreign currency contracts carried at fair value through the Income - 28
Statement
Forward foreign exchange contracts carried at fair value through the hedging 26 287
reserve
37,084 41,227
(a) The prior year comparatives above have been re-presented to further
disaggregate Other financial liabilities.
19 Trade and other payables
2024 2023
$000 $000
Trade payables 83,301 89,754
Other payables including social security 2,446 2,719
VAT payable 354 504
86,101 92,977
20 Share capital
Authorised share capital at 31 March 2024 and 2023 was £6.0 million, 121.0
million ordinary shares of 5p each.
Ordinary shares
In thousands of shares 2024 2023
In issue at 1 April 97,994 97,062
Options exercised during the year 285 932
In issue at 31 March - fully paid 98,279 97,994
2024 2023
$000 $000
Allotted, called up and fully paid
Ordinary shares of £0.05 each 6,201 6,059
Of the 98.3 million shares in the Company, 3.0 million (2023: 1.0 million) are
held by IG Employee Share Trustee Limited (the 'Employee Benefit Trust').
Long Term Incentive Plan (LTIP) options exercised during the year resulted in
285,000 ordinary shares issued at nil cost (2023: 932,000 ordinary shares
issued at nil cost).
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
21 Earnings/(loss) per share
2024 2023
$000 $000
Earnings/(loss)
Profit/(loss) attributable to equity holders of the Company 35,625 (27,987)
Adjustments
Adjusting items (net of non-controlling interest effect) 2,102 28,072
Tax relief on adjustments (net of non-controlling interest effect) (21,805) (243)
Adjusted earnings/(loss) attributable to equity holders of the Company 15,922 (158)
In thousands of shares 2024 2023
Issued ordinary shares at 1 April 97,994 97,062
Shares relating to share options 314 1,242
Less: shares held by Employee Benefit Trust (1,457) (536)
Weighted average number of shares for the purposes of calculating basic EPS 96,851 97,768
Effect of dilutive potential shares - share awards 563 -
Weighted average number of shares for the purposes of calculating diluted EPS 97,414 97,768
In the prior year, 209,000 share options were not included in the calculation
of diluted earnings per share because they were antidilutive.
2024 2023
Cents Cents
Earnings/(loss) per share
Basic earnings/(loss) per share 36.8 (28.6)
Impact of adjusting items (net of tax) (20.3) 28.4
Basic adjusted earnings/(loss) per share 16.5 (0.2)
Diluted earnings/(loss) per share 36.6 (28.6)
Diluted adjusted earnings/(loss) per share 16.3 (0.2)
Adjusted earnings/(loss) per share are provided to reflect the underlying
earnings performance of the Group.
Basic earnings/(loss) per share
Basic EPS is calculated by dividing the profit for the year attributable to
ordinary shareholders by the weighted average number of shares outstanding
during the period, excluding own shares held by the Employee Benefit Trust.
Diluted earnings/(loss) per share
Diluted EPS is calculated by dividing the profit for the year attributable to
ordinary shareholders by the weighted average number of shares outstanding
during the period, plus the weighted average number of ordinary shares that
would be issued on the conversion of the potentially dilutive shares.
22 Dividends paid and proposed
No dividends were paid in the current year (2023: nil) and the Directors are
not recommending the payment of a final dividend in respect of the year ended
31 March 2024.
23 Employee benefits
Post-employment benefits
The Group administers a defined benefit pension plan that was inherited
through the acquisition of CSS and covers certain employees of a UK
subsidiary. The scheme closed to future accrual on 31 December 2012. This is a
separate trustee administered fund holding the pension scheme assets to meet
long-term pension liabilities. The plan assets held in trust are governed by
UK regulations and responsibility for governance of the plan, including
investment decisions and contribution schedules, lies with the group of
trustees. The assets of the scheme are invested in the SPI With-Profits Fund,
which is provided by Phoenix Life Limited.
An actuarial valuation was updated on an approximate basis at 31 March 2024,
by a qualified actuary, independent of the scheme's sponsoring employer.
The major assumptions used by the actuary are shown below.
Present values of defined benefit obligation, fair value of assets and defined
benefit asset/(liability)
2024 2023
$000 $000
Fair value plan of assets 3,170 3,269
Present value of defined benefit obligation (989) (1,245)
Surplus in plan 2,181 2,024
Surplus not recognised (2,181) (2,024)
Net defined benefit asset to be recognised - -
In accordance with IAS 19, the surplus on the plan has not been recognised on
the basis it is not expected to be recovered, as the Group does not have an
unconditional right to any refund.
Reconciliation of opening and closing balances of the defined benefit
obligation
2024 2023
$000 $000
Defined benefit obligation as at 1 April (1,245) (1,858)
Interest expense (54) (48)
Benefits payments from plan assets 307 -
Actuarial gains due to changes in demographic assumptions 15 10
Actuarial gains due to changes in financial assumptions 18 645
Effect of experience adjustments (5) (113)
Effect of movement in foreign exchange (25) 119
Defined benefit obligation as at 31 March (989) (1,245)
Reconciliation of opening and closing balances of the fair value of plan
assets
2024 2023
$000 $000
Fair value of plan assets as at 1 April 3,269 3,241
Interest income 154 85
Return on plan assets (68) 74
Contributions by the Company 63 61
Benefits payments from plan assets (307) -
Admin expenses paid from plan assets (6) (7)
Effect of movement in foreign exchange 65 (185)
Fair value of plan assets as at 31 March 3,170 3,269
A total of $94,000 (2023: $30,000) has been credited to Group operating profit
during the year, including $6,000 (2023: $7,000) of expense netting against
net interest income of $100,000 (2023: $37,000).
The principal assumptions used by the independent qualified actuary for the
purposes of IAS 19 are as follows:
2024 2023
Increase in salaries - -
Increase in pensions - -
- at RPI capped at 5% 3.30% 3.70%
- at CPI capped at 5% 2.40% 2.40%
- at CPI capped at 2.5% 2.40% 2.40%
Discount rate 4.90% 4.80%
Inflation rate - RPI 3.20% 3.30%
Inflation rate - CPI 2.40% 2.40%
Due to the timescale covered, the assumptions may not be borne out in
practice.
The life expectancy assumptions (in number of years) used to estimate defined
benefit obligations at the year end are as follows:
2024 2023
Male retiring today at age 60 25.8 26.1
Female retiring today at age 60 27.8 28.0
Male retiring in 20 years at age 60 27.4 27.6
Female retiring in 20 years at age 60 29.4 29.6
In addition to the defined benefit pension scheme there is also a small
post-retirement healthcare scheme operated in the US, which was also inherited
through the acquisition of CSS. In total, the amounts taken through the
Group's statement of comprehensive income can be seen below:
2024 2023
$000 $000
UK pension scheme
Actuarial losses on defined benefit pension scheme (55) (53)
US health scheme 7 16
(48) (37)
Long Term Incentive Plans
The Group operates a Long Term Incentive Plan (LTIP). Under the LTIP, nil cost
options and conditional awards over ordinary shares of 5 pence each ('ordinary
shares') in the capital of the Company are awarded to Executive Board
Directors of the Company and other selected senior management team members
within the Group. During the year, awards were granted under the 2023-2026
LTIP scheme.
The performance period for each award under the LTIP is three years. The cost
to employees of ordinary shares issued under the LTIP if the LTIP vests is
nil. In principle, the number of ordinary shares to be granted to each
employee under the LTIP will not be more than 265% (and 325% in exceptional
cases) of the relevant employee's base annual salary. The maximum opportunity
available under the 2022-2025 and 2023-2026 schemes is up to 125% of base
salary for the CEO and CFO.
Between 13 December 2023 and 9 February 2024, the trustee of the IG Design
Group plc Employee Benefit Trust (the 'EBT'), purchased 2 million ordinary
shares of 5 pence each at an average price of £1.40 per ordinary share. These
ordinary shares are to be held in the EBT and are intended to be used to
satisfy the exercise of share options by employees.
Vested LTIP schemes - outstanding options
Exercise
Number of price
ordinary shares pence Exercise dates
2018-2021 LTIP scheme 28,272 nil June 2021 - November 2028
All performance criteria have been met for the above schemes.
2024 2023
Weighted Weighted
average average
exercise price Number of exercise price Number of
pence options pence options
Outstanding at 1 April nil 310,096 nil 1,088,123
Options vesting during the year nil 4,640 nil 154,139
Exercised during the year nil (286,464) nil (932,166)
Outstanding at 31 March nil 28,272 nil 310,096
Exercisable at 31 March nil 28,272 nil 310,096
Scheme details for plans in vesting periods during the year
During the financial year to 31 March 2024 there were two LTIP awards still
within their vesting period (2023: two).
Awards
2022-2025 2023-2026
Aug 2023, Aug 2023,
Dec 2023, Dec 2023,
Grant date Feb 2023 Feb 2023
Fair value per share (£) 1.01 1.08
Number of participants 58 65
Initial award 2,567,747 2,477,864
Lapses and forfeitures (580,459) (63,127)
Potential to vest as at 31 March 2024 1,987,288 2,414,737
Potential to vest as at 31 March 2023 2,520,704 -
Weighted average remaining contractual life of options outstanding at the end 2.13 3.21
of the year
The grant date fair value of the LTIP awards granted in the year, assuming
they are to vest in full, is $3.3 million.
The grant date fair values of the 2023-2026 scheme were determined using the
following factors:
Share price (£) 1.325
Exercise price Nil
Expected term 3 years (additional 2 years for holding period)
Risk-free interest rate 4.68% (4.71% for awards with holding period)
Expected dividend yield 0%
LTIP performance targets
Individuals were granted performance share awards under the 2022-2025 and
2023-2026 schemes. Some individuals were also awarded restricted share awards
which are not subject to any performance condition (other than an underpin
condition) and the vesting is dependent on a continued service requirement.
The vesting of performance share awards are subject to a continued service
requirement. The extent of vesting is subject to performance against
performance conditions.
The performance share awards are weighted two-thirds towards a Relative Total
Shareholder Return ('TSR') metric and one-third Earnings Per Share metric as
the performance measures. The TSR metric is a measurement of TSR by the Group
relative to a peer group of the FTSE SmallCap excluding Investment Trusts.
An underpin condition was also applied to the awards that allows the
Remuneration Committee to reduce vesting levels if it determines that vesting
outcomes reflect unwarranted windfall gains from share price movements.
Share-based payments charges/(credits)
The total expense/(credit) recognised for the year arising from
equity‑settled share‑based payments is as follows:
2024 2023
$000 $000
Charge in relation to the 2020-2022 LTIP scheme - 166
Charge in relation to the 2022-2025 LTIP scheme 778 490
Charge in relation to the 2023-2026 LTIP scheme 654 -
Equity-settled share-based payments charge 1,432 656
Social security charge 70 149
Total equity-settled share-based payments charge 1,502 805
Deferred tax assets are recognised on share-based payment schemes when
deferred tax assets are recognised in that territory (see note 11).
Social security charges/(credits) on share-based payments
Social security is accrued, where applicable, at a rate which management
expects to be the prevailing rate when share‑based incentives are exercised
and is based on the latest market value of options expected to vest or having
already vested.
The total social security accrual outstanding at the year end in respect of
share-based payment transactions was $182,000 (2023: $160,000).
24 Financial instruments
Derivative financial assets
a) Fair values of financial instruments
The carrying values for each class of financial assets and financial
liabilities in the balance sheet are not considered to be materially different
to their fair values.
As at 31 March 2024, the Group had derivative contracts, which were measured
at Level 2 fair value subsequent to initial recognition, to the value of an
asset of $68,000 (2023: $340,000) and a liability of $26,000 (2023: $315,000).
Derivative financial instruments
The fair value of forward exchange contracts is assessed using valuation
models taking into account market inputs such as foreign exchange spot and
forward rates, yield curves and forward interest rates.
Fair value hierarchy
Financial instruments which are recognised at fair value subsequent to initial
recognition are grouped into Levels 1 to 3 based on the degree to which the
fair value is observable. The three levels are defined as follows:
· Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities;
· Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly; and
· Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market
data.
b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables from customers
and investment securities.
The Group's exposure to credit risk is managed by dealing only with banks and
financial institutions with strong credit ratings. The Group's financial
credit risk is primarily attributable to its trade receivables.
The main customers of the Group are large and mid‑sized retailers, other
manufacturers and wholesalers of greetings products, service merchandisers and
trading companies. The Group has established procedures to minimise the risk
of default of trade receivables including detailed credit checks undertaken
before new customers are accepted and rigorous credit control procedures after
sale. These processes have proved effective in minimising the level of
provisions for doubtful debts required.
The amounts presented in the balance sheet are net of allowances for doubtful
receivables estimated by the Group's management, based on prior experience and
their assessment of the current economic environment.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit
exposure. Therefore, the maximum exposure to credit risk at the balance sheet
date was $239.6 million (2023: $172.2 million) being the total of the carrying
amount of financial assets.
The maximum exposure to credit risk for trade receivables at the balance sheet
date by reporting segment was:
2024 2023
$000 $000
DG Americas 52,248 53,569
DG International 25,317 27,404
77,565 80,973
Credit quality of financial assets and impairment losses
The ageing of trade receivables at the balance sheet date was:
2024 2023
Expected Provisions for Expected Provisions for
loss rate Gross doubtful debts loss rate Gross doubtful debts
% $000 $000 % $000 $000
Not past due 0.1 57,429 (56) 0.5 55,263 (250)
Past due 0-60 days 0.1 13,513 (14) 0.5 14,177 (65)
61-90 days 12.1 5,616 (677) 4.3 5,645 (243)
More than 90 days 49.8 3,495 (1,741) 15.5 7,625 (1,179)
3.1 80,053 (2,488) 2.1 82,710 (1,737)
There were no unimpaired balances outstanding at 31 March 2024 (2023: $nil)
where the Group had renegotiated the terms of the trade receivable. The
increase in provision year-on-year is reflective of the current macroeconomic
circumstances.
Expected credit loss assessment
For the Group's trade receivables, expected credit losses are measured using a
provisioning matrix based on the reason the trade receivable is past due. The
provision matrix rates are based on actual credit loss experience over the
past three years and adjusted, when required, to take into account current
macro-economic factors. The Group applies experienced credit judgement that is
determined to be predictive of the risk of loss to assess the expected credit
loss, taking into account external ratings, financial statements and other
available information. The Group's trade receivables are unlikely to extend
past twelve months and, as such, for the purposes of expected credit loss
modelling, the lifetime expected credit loss impairments recognised are the
same as a twelve-month expected credit loss.
There have been no significant credit risk movements since initial recognition
of impairments.
The movement in the allowance for impairment in respect of trade receivables
during the year was as follows:
2024 2023
$000 $000
Balance at 1 April 1,737 547
Charge for the year 1,929 1,705
Unused amounts reversed (73) (59)
Amounts utilised (1,112) (469)
Effects of movement in foreign exchange 7 13
Balance at 31 March 2,488 1,737
The allowance account for trade receivables is used to record provisions for
doubtful debts unless the Group is satisfied that no recovery of the amount
owing is possible; at that point the amounts considered irrecoverable are
written off against the trade receivables directly.
c) Liquidity risk
Financial risk management
Liquidity risk is the risk that the Group, although solvent, will encounter
difficulties in meeting obligations associated with the financial liabilities
that are settled by delivering cash or another financial asset. The Group's
policy with regard to liquidity ensures adequate access to funds by
maintaining an appropriate mix of short-term and longer-term facilities, which
are reviewed on a regular basis. The maturity profile and details of debt
outstanding at 31 March 2024 are set out in note 15.
The following are the contractual maturities of financial liabilities,
including estimated interest payments:
Carrying Contractual One year One to two Two to five More than
amount cash flows or less years years five years
31 March 2024 Note $000 $000 $000 $000 $000 $000
Non-derivative financial liabilities
Other financial liabilities 18 51,365 (51,365) (37,057) (14,235) (65) (8)
Lease liabilities 10 67,346 (73,768) (16,083) (20,584) (21,528) (15,573)
Trade payables 19 83,301 (83,301) (83,301) - - -
Derivative financial liabilities
Forward foreign exchange contracts carried at fair value through the hedging 18 26 (12,471) (12,471) - - -
reserve((a))
202,038 (220,905) (148,912) (34,819) (21,593) (15,581)
(a) Measured at Level 2.
Carrying Contractual One year One to two Two to five More than
amount cash flows or less years years five years
31 March 2023 Note $000 $000 $000 $000 $000 $000
Non-derivative financial liabilities
Other financial liabilities 18 59,983 (59,983) (40,912) (19,032) (36) (3)
Lease liabilities 10 80,187 (84,532) (18,596) (15,258) (26,239) (24,439)
Trade payables 19 89,754 (89,754) (89,754) - - -
Derivative financial liabilities
Forward foreign exchange contracts carried at fair value through the income 18 28 (11) (11) - - -
statement((a))
Forward foreign exchange contracts carried at fair value through the hedging 18 287 (17,768) (17,768) - - -
reserve((a))
230,239 (252,048) (167,041) (34,290) (26,275) (24,442)
(a) Measured at Level 2.
The following table shows the facilities for bank loans, overdrafts,
asset‑backed loans and revolving credit facilities:
31 March 2024 31 March 2023
Facility used Facility used
Carrying contractual Facility Total Carrying contractual Facility Total
amount cash flows unused facility amount cash flows unused facility
$000 $000 $000 $000 $000 $000 $000 $000
Corporate revolving credit facilities - - - - - - (92,039) (92,039)
Asset-backed loan facility - - (13,359) (13,359) - - - -
Bank overdrafts - - (17,075) (17,075) - - (4,502) (4,502)
- - (30,434) (30,434) - - (96,541) (96,541)
The ABL facilities vary through the year depending on the level of eligible
receivables. The maximum limit is $125.0 million. At 31 March 2024, the
facility amounted to $13.4 million.
In addition, local overdraft facilities are available, which at 31 March
2024 amounted to $17.1 million.
The prior year had a different facility structure with a maximum limit of
$221.8 million, with $92.0 million available at 31 March 2023, along with
local overdraft facilities of $4.5 million.
On 5 June 2023, the Group banking negotiated new banking facilities: see note
15 for more information.
The following table shows other facilities that are treated as contingent
liabilities:
31 March 2024 31 March 2023
Facility Utilised Facility Utilised
$000 $000 $000 $000
UK Guarantee 3,155 1,918 2,164 1,880
UK Import line 1,262 - 1,237 -
Foreign Bills 6,309 - 6,184 -
USA Guarantee 5,500 2,980 5,500 2,980
Netherlands Guarantee (Trade and Import line) 702 256 653 248
16,928 5,154 15,738 5,108
d) Cash flow hedges
The following derivative financial instruments were designated as cash flow
hedges:
2024 2023
Forward exchange contracts carrying amount $000 $000
Derivative financial assets 68 340
Derivative financial liabilities (26) (315)
The Group has forward currency hedging contracts outstanding at 31 March 2023
designated as hedges of expected future purchases in US dollars for which the
Group has firm commitments, as the derivatives are based on forecasts and an
economic relationship exists at the time the derivative contracts are taken
out.
The terms of the forward currency hedging contracts have been negotiated to
match the terms of the commitments.
All contracts outstanding at the year end crystallise within 24 months of the
balance sheet date at average prices of 1.09 for US dollar to euro contracts
(2023: 1.08), 1.27 for US dollar to GBP contracts (2023 not applicable) and
not applicable for Chinese renminbi contracts (2023: 6.96). At the year end
the Group held $8.6 million for US dollar to euro contracts (2023: $17.6
million), $4.0 million for US dollar to GBP contracts (2023:nil) and RMB nil
(2023: RMB 108.9 million) in hedge relationships.
When assessing the effectiveness of any derivative contracts, the Group
assesses sources of ineffectiveness which include movements in volumes or
timings of the hedged cash flows.
The cash flow hedges of the expected future purchases in the year were
assessed to be highly effective and as at 31 March 2024, a net unrealised
profit of $292,000 (2023: $419,000) with related deferred tax credit of $nil
(2023: $nil) was included in other comprehensive income in respect of these
hedging contracts. Amounts relating to ineffectiveness recorded in the income
statement in the year were $nil (2023: $nil).
e) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices, will affect the Group's
income or the value of its holdings of financial instruments.
The Group hedges a proportion, as deemed appropriate by management, of its
sales and purchases of inventory denominated in foreign currency by entering
into foreign exchange contracts. Such foreign exchange contracts typically
have maturities of less than one year.
The Group rarely hedges profit translation exposure, since such hedges provide
only a temporary deferral of the effects of movement in foreign exchange
rates. Similarly, the Group does not hedge its long-term investments in
overseas assets.
However, the Group holds loans that are denominated in the functional currency
of certain overseas entities.
The Group's exposure to foreign currency risk is as follows. This is based on
the carrying amount for monetary financial instruments, except derivatives,
when it is based on notional amounts.
US dollar Sterling Euro Other Total
31 March 2024 Note $000 $000 $000 $000 $000
Long-term assets 13 4,648 - - - 4,648
Cash and cash equivalents 14 79,173 26,489 35,801 15,902 157,365
Trade receivables 13 54,460 6,994 12,568 3,543 77,565
Derivative financial assets - 68 - - 68
Bank overdrafts 14 (37,137) (8,703) (17,815) - (63,655)
Loan arrangement fees 15 - 1,517 - - 1,517
Trade payables 19 (62,583) (8,033) (10,571) (2,114) (83,301)
Other payables 19 (1,357) (652) (589) (202) (2,800)
Balance sheet exposure 37,204 17,680 19,394 17,129 91,407
US dollar Sterling Euro Other Total
31 March 2023 Note $000 $000 $000 $000 $000
Long-term assets 13 5,647 - - - 5,647
Cash and cash equivalents 14 32,504 17,940 25,443 9,326 85,213
Trade receivables 13 54,528 8,924 12,802 4,719 80,973
Derivative financial assets - 340 - - 340
Bank overdrafts 14 (17,141) (5,419) (12,419) - (34,979)
Loan arrangement fees 15 - 250 - - 250
Trade payables 19 (61,323) (14,650) (9,388) (4,393) (89,754)
Other payables 19 (1,631) (776) (579) (237) (3,223)
Balance sheet exposure 12,584 6,609 15,859 9,415 44,467
The following significant exchange rates applied to US dollar during the year:
Average rate 31 March spot rate
2024 2023 2024 2023
Euro 0.96 0.96 0.92 0.92
Pound sterling 0.83 0.83 0.81 0.81
Sensitivity analysis
A 10% weakening of the following currencies against US dollar at 31 March 2024
would have affected equity and profit or loss by the amounts shown below. This
calculation assumes that the change occurred at the balance sheet date and had
been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular other exchange
rates and interest rates, remain constant. The analysis was performed on the
same basis for 31 March 2023.
Equity Loss
2024 2023 2024 2023
$000 $000 $000 $000
Euro 3,442 1,442 (343) (296)
Pound sterling 1,607 601 (26) (251)
On the basis of the same assumptions, a 10% strengthening of the currencies
against US dollar at 31 March 2024 would have affected equity and profit or
loss by the following amounts:
Equity Loss
2024 2023 2024 2023
$000 $000 $000 $000
Euro (4,207) (1,762) 419 362
Pound sterling (1,964) (734) 32 307
Profile
At the balance sheet date, the interest rate profile of the Group's
interest-bearing financial instruments was:
2024 2023
Variable rate instruments Note $000 $000
Financial assets 157,365 85,213
Financial liabilities (63,655) (34,979)
Net cash 14 93,710 50,234
A change of 50 basis points (0.5%) in interest rates in respect of financial
assets and liabilities at the balance sheet date would have affected equity
and profit or loss by the amounts shown below. This calculation assumes that
the change occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency
rates, remain constant and considers the effect on financial instruments with
variable interest rates and financial instruments at fair value through profit
or loss. The analysis is performed on the same basis for 31 March 2023.
Sensitivity analysis
2024 2023
$000 $000
Equity
Increase 469 251
Decrease - -
Profit or loss
Increase 469 251
Decrease - -
f) Capital management
The Board's policy is to hold a strong capital base so as to maintain
investor, creditor, customer and market confidence and to sustain future
development of the business. The Group is dependent on the continuing support
of its bankers for working capital facilities and so the Board's major
objective is to keep borrowings within these facilities.
The Board manages as capital its trading capital, which it defines as its net
assets plus net debt. Net debt is calculated as total debt (bank overdrafts,
loans and borrowings as shown in the balance sheet), less cash and cash
equivalents. The banking facilities with the Group's principal bank have
amended covenants relating to earnings and liquidity cover and previous
covenants relating to interest cover, cash flow cover and leverage, and our
articles currently permit borrowings (including letter of credit facilities)
to a maximum of four times equity.
Equity
Restated((a))
2024 2023
Note $000 $000
Net equity attributable to owners of the Parent Company 361,618 328,192
Net cash 14 (95,227) (50,484)
Trading capital 266,391 277,708
(a) Restated - see note 1 for further details.
The main areas of capital management relate to the management of the
components of working capital including monitoring inventory turn, age of
inventory, age of trade receivables, balance sheet reforecasting, monthly
profit and loss, weekly cash flow forecasts and daily cash balances. Major
investment decisions are based on reviewing the expected future cash flows and
all major capital expenditure requires sign off by the Chief Financial
Officer, Chief Executive Officer and Interim Executive Chair, or, above
certain limits, by the Board. There were no major changes in the Group's
approach to capital management during the year. A particular focus of the
Group is average leverage, measured as the ratio of average monthly net debt
before lease liabilities to adjusted EBITDA reduced for lease payments.
25 Capital commitments
At 31 March 2024, the Group had outstanding authorised capital commitments to
purchase plant and equipment for $1.8 million (2023: $3.9 million).
26 Related parties
2024 2023
$000 $000
Sale of goods:
Hedlunds Pappers Industri AB 152 199
Festive Productions Ltd 6 3
158 202
There were no outstanding debtor balances in the current year (2023:$nil).
Identity of related parties and trading
Hedlund Import AB is under the ultimate control of the Hedlund family, who are
a major shareholder in the Company. Anders Hedlund is a director of Hedlunds
Pappers Industri AB which is under the ultimate control of the Hedlund family,
who are a major shareholder in the Company. Festive Productions Ltd is a
subsidiary undertaking of Malios Holding AG, a company under the ultimate
control of the Hedlund family.
The above trading takes place in the ordinary course of business.
Other related party transactions
Directors of the Company and their immediate relatives have an interest in 24%
(2023: 24%) of the voting shares of the Company. The shareholdings of
Directors and changes during the year are shown in the Directors' report
within the Group's audited financial statements.
Directors' remuneration
2024 2023
$000 $000
Short-term employee benefits 2,589 3,158
Share-based payments charge 371 224
2,960 3,382
27 Non-controlling interests
Set out below is summarised financial information for each subsidiary that has
non-controlling interests that are material to the Group. The subsidiary is IG
Design Group Australia Pty Ltd ('Australia'). Australia is considered a
subsidiary of the Group, the Group owns 50% of the share capital Australia but
can demonstrate that it has control as required under IFRS. In the prior year
the Group purchased the remaining 49% share of Anker Play Products LLC
('APP').
2024 2023
Non-controlling interest - Australia Australia APP Total
balance sheet as at 31 March $000 $000 $000 $000
Non-current assets 5,976 7,283 - 7,283
Current assets 17,439 16,007 - 16,007
Current liabilities (7,055) (7,959) - (7,959)
Non-current liabilities (621) (2,271) - (2,271)
2024 2023
Non-controlling interest - Australia Australia APP Total
comprehensive income for the year ended 31 March $000 $000 $000 $000
Revenue 43,422 49,666 - 49,666
Profit after tax 2,988 3,055 - 3,055
Total comprehensive income 2,678 1,770 - 1,770
2024 2023
Non-controlling interest - Australia Australia APP Total
cash flow for the year ended 31 March $000 $000 $000 $000
Cash flows from operating activities 5,052 3,978 - 3,978
Cash flows from investing activities (657) (131) - (131)
Cash flows from financing activities (1,628) (2,986) - (2,986)
Net (decrease)/increase in cash and cash equivalents 2,767 861 - 861
2024 2023
Non-controlling interest - Australia Australia APP Total
cash flow for the year ended 31 March $000 $000 $000 $000
Balance as at 1 April 6,530 6,343 1,656 7,999
Share of profits for the year 1,494 1,528 - 1,528
Other comprehensive expense 3 (3) - (3)
Dividend paid to non-controlling interest - (698) (2,263) (2,961)
Acquisition of non-controlling interest - - 607 607
Currency translation (158) (640) - (640)
Balance as at 31 March 7,869 6,530 - 6,530
28 Acquisitions
On the 15 January 2024 IG Design Group Australia Pty Ltd acquired the trade
and assets of Sweetscents, an essentials oils manufacturing and wholesale
business for $496,000.
The fair value of assets acquired:
$000
Fixed assets 84
Trade names and customer relationships 72
Inventory 134
Fair value of assets acquired 290
Consideration paid in cash 496
Goodwill 206
29 Purchase of own shares
Between 13 December 2023 and 9 February 2024, the trustee of the IG Design
Group Plc Employee Benefit Trust (the 'EBT'), purchased 2 million ordinary
share of 5 pence each at an average price of £1.40 per ordinary share. These
ordinary shares are to be held in the EBT and are intended to be used to
satisfy the exercise of share options by employees.
These ordinary shares are to be held in the EBT and are intended to be used to
satisfy the exercise of share options by employees. The EBT is a discretionary
trust for the benefit of the Company's employees, including the Directors of
the Company. The purchase of ordinary shares by the EBT has been funded by a
loan provided by the Company from its existing financing facilities. The EBT
has waived its rights to dividend payments.
30 Non-adjusting post balance sheet events
On 24 June 2024, the Board made the decision to permanently cease in-house
manufacturing in China during the coming year. This decision was made
following a comprehensive review of its manufacturing operation in China.
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