REG - IG Design Group PLC - Interim Results
23/11/2021 07:00
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RNS Number : 1957T IG Design Group PLC 23 November 2021
EMBARGOED UNTIL 7.00 AM, 23 NOVEMBER 2021
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the six months ended 30 September 2021
IG Design Group plc, one of the world's leading designers, innovators and
manufacturers of Gift Packaging, Celebrations, Craft & creative play,
Stationery, Gifting and related product categories announces its results for
the six months ended 30 September 2021.
Financial Highlights H1 2022 H1 2021
Revenue $483.9m $434.6m
Adjusted*
- Profit Before Tax $19.9m $30.2m
- Diluted Earnings per Share 13.6 cents 22.0 cents
Reported
- Profit Before Tax $18.9m $17.1m
- Diluted Earnings per Share 12.3 cents 11.4 cents
Net debt as at the period end $58.8m $23.2m
Interim Dividend 1.25 pence 3.0 pence
*Adjusted results are stated before Adjusting items - for further detail see
Alternative Performance Measures reconciliation within the Detailed Financial
Review
· A challenging first half with significant cost headwinds and supply
chain limitations directly leading to lower than expected revenue and reduced
year-on-year operating margins despite strong demand
- First half revenue up 11% year-on-year reflecting
primarily strong trading in the four months to July
- Lower operating margins resulted in Adjusted profit before
tax down at $19.9 million
- Adjusted earnings per share at 13.6 cents reflecting lower
year-on-year profit performance
- Profit before tax at the half year up 11% at $18.9 million
(H1 2021: $17.1 million) driven by lower Adjusting items in the period
- A robust first half cash management performance with net
debt at $58.8 million (H1 2021: $23.2 million) reflecting the growth in the
order book year-on-year and associated increase in normal seasonal working
capital outflow
- Interim dividend of 1.25 pence (1.68 cents) in line with
our dividend policy
Strategic & Operational Highlights
· Increased demand with order book at the end of October at 91% of
full-year forecast, higher than this time last year
· Cost headwinds impact partially offset through commercial negotiation,
earlier inventory commitments and other initiatives whilst establishing
margin-improving mitigations for FY23
· Very strong relationship with customers retained, with positive
feedback received on the Group's response to supply chain challenges
· Everyday volumes remain robust across the business, however, lower
year-on-year craft sales in the first half in comparison to the boosted
Covid-19 related craft revenues in prior year
· Focus on the Group's sustainable product offering saw strong sales of
the Eco-nature™ range in the UK and the business awarded Tesco's Supplier
Partner Award for Sustainability
· DG Americas recognised as Walmart Supplier of the Year for 2021, and
integration continues to unlock CSS acquisition synergies
Outlook
· Overall uncertainty remains over cost inflation along with raw material
and transport shortages, however Christmas deliveries are on track to be with
customers on time as the Group maintains its first-class customer service and
consumer demand remains strong for the balance of the year
· The Group remains on track to fully recoup the revenues delayed from
the first half in the second half of the year, however as previously
communicated operating margins are expected to remain depressed throughout
FY22
Paul Fineman, CEO, commented:
"Demand is strong across our business and FY22 remains on track to achieve
record revenues. Despite being constrained at the half year by extraordinary
supply chain challenges, our opportunity for long-term profitable growth
remains undiminished.
As with many businesses our current priority is managing the supply shortages
and extreme inflationary pressures. Whilst in the short term we are not seeing
an overall improvement in these dynamics, it is certain at some stage supply
issues will improve and we will mitigate the cost pressures although it would
be foolhardy to predict exactly when that will be. We therefore continue to
focus on customer service and quality of our product propositions, both of
which are key to the long term success of the business. We are confident our
strategy remains the right one in the longer term and we remain committed to
the goals outlined in the Growth plan announced in June this year."
Presentations and Overview video
IG Design Group is hosting a webinar for analysts at 1100 GMT today, Tuesday,
23 November. If you would like to register please
contact designgroup@almapr.co.uk (mailto:designgroup@almapr.co.uk)
The Company is also hosting a webinar for retail investors today, Tuesday, 23
November at 1300 GMT. If you would like to attend please register here:
https://bit.ly/IGR_H1_1pm (https://bit.ly/IGR_H1_1pm)
A video overview of the results from the CEO, Paul Fineman, and CFO, Giles
Willits, is available to watch here: https://bit.ly/IGR_H1_overview
(https://bit.ly/IGR_H1_overview)
For further information:
IG Design Group plc 01525 887310
Paul Fineman, Chief Executive Officer
Giles Willits, Chief Financial Officer
Canaccord Genuity Limited 020 7523 8000
Bobbie Hilliam, NOMAD
Alex Aylen, Sales
Alma PR
Susie Hudson 020 3405 0205
Sam Modlin designgroup@almapr.co.uk (mailto:designgroup@almapr.co.uk)
OVERVIEW
This has been a challenging first half for the Group. Despite continued strong
demand from our customers, we have seen bottom line performance decline
year-on-year as the business navigates unprecedented cost headwinds and
ongoing supply chain availability issues. However, our 'Working with the
winners' strategy continues to underpin the Group's performance, and this has
proven ever more critical during this period of current economic uncertainty.
We have retained our focus on maintaining strong customer service and have
received positive feedback from our customers in response to all we are doing
for them. The revenue growth in the first half is testament to the hard work
throughout the Group from all of our teams as they work with our customers and
suppliers to minimise, as best possible, the incremental supply chain costs
and logistical challenges impacting the world economy.
SUMMARY 2022 INTERIM RESULTS
Revenue increased by 11% in the first half of the financial year to $483.9
million (H1 2021: $434.6 million) driven by a particularly strong four months
of trading to July which saw sales up over 25% against the softer Covid-19
impacted performance in the prior year. However, despite our robust order
book, trading in the next two months of August and September, which are
traditionally the largest trading months of the financial year, was severely
impacted by supply chain issues, most significantly the availability and
related costs of sea freight containers to ship customers' seasonal orders.
This resulted in first half revenues missing our expectations as the timing of
deliveries was pushed into the second half of the financial year. Revenue in
the period is also up 5% on proforma revenues (including CSS prior to
ownership) for the six months to 30 September 2019.
Adjusted profit before tax at $19.9 million (H1 2021: $30.2 million) was down
34% year-on-year despite the stronger revenues reflecting the significant
impact that the operating cost headwinds have had on operating margins across
the Group. The largest challenge has been the rapid increase in sea container
rates which are up over 500% year-on-year, alongside substantially increased
raw material costs in particular paper and polypropylene as well as labour
shortages which have resulted in inflationary pressures in our manufacturing
and distribution operations. As a result, Adjusted earnings per share was 13.6
cents (H1 2021: 22.0 cents) following the reduced Adjusted profit trend.
The Group ended the half year with net debt at $58.8 million (H1 2021: $23.2
million). The increase in net debt at the period end reflects the expected
working capital requirements of the business, as the size of the order book
year-on-year increases, particularly in manufacturing which was most impacted
by Covid-19 in the prior year.
Profit before tax at the half year was up 11% year-on-year at $18.9 million
(H1 2021: $17.1 million) primarily as a result of the significant reduction in
Adjusting items to $1.0 million in the period (H1 2021: $13.1 million),
delivering diluted earnings per share up 8% at 12.3 cents (H1 2021: 11.4
cents).
The Board is pleased to declare an interim dividend of 1.25 pence (1.68 cents)
in respect of the period to 30 September 2021, in line with the Group's
dividend policy. The final dividend of 5.75 pence (7.92 cents) in relation to
the year ended 31 March 2021 was paid in October 2021.
OUTLOOK
The Group continues to see strong demand with its order book at the end of
October up on the prior year at 91% of full-year forecast and Christmas
deliveries remaining on track. However, the impact of the globally incurred
cost headwinds continue to be felt throughout the Group alongside increased
expectations of Covid-19 lockdowns in Europe. Operating margins in the second
half are expected to continue to be depressed compared with the prior year.
The Board is taking a prudent stance and is forecasting that these challenges
will continue into FY23, although it remains difficult at this time to
estimate the financial impact. As such, as previously communicated, the Group
continues to expect FY22 full-year operating margins to be 175-225 basis
points lower year-on-year resulting in full-year earnings being significantly
below the prior year. In the longer term the strong demand from customers and
our commitment to maintaining first-class customer service, positions the
Group well to exploit any improvement in market conditions. We remain
committed to the goals outlined in the Growth Plan announced in June.
BOARD UPDATE
Stewart Gilliland and Clare Askem joined the Board in July and Stewart became
Chair of the Group as John Charlton stepped down at our AGM in September. In
July the Group also announced that Elaine Bond would be stepping down from the
Board at the end of December and the search for a Non-Executive Director to
replace Elaine is well underway.
As per the Group's announcement in August, Giles Willits will be leaving the
Group in February 2022 and the search for his replacement is progressing
well.
REGIONAL HIGHLIGHTS
Overall, revenue has grown across all areas of the Group as every region
recovers from the impact of Covid-19 in the prior year and customer demand
returns to pre-pandemic levels, however, Adjusted operating profit at $22.2
million (H1 2021: $32.4 million) is down reflecting the operational challenges
seen around the business, primarily being significantly increased freight, raw
material and labour costs.
Segmental Revenue Adjusted Operating Profit Adjusted Operating Margin
% Group revenue H1 2022 H1 2021 % growth H1 2022 H1 2021 % growth H1 2022 H1 2021
72% DG Americas $m 347.5 321.6 8% 13.1 19.5 (33%) 3.8% 6.1%
28% DG International $m 136.9 115.5 19% 11.5 15.1 (24%) 8.4% 13.1%
0% Elims / Central costs $m (0.5) (2.5) (2.4) (2.2)
100% Total $m 483.9 434.6 11% 22.2 32.4 (32%) 4.6% 7.5%
Design Group Americas
In the first half of the financial year revenue grew 8% to $347.5 million (H1
2021: $321.6 million) as customer orders normalised post the Covid-19 pandemic
in the prior year, particularly with growth in sales of décor, paper and
'impulse buy' offerings with key customers. However, Adjusted operating profit
at $13.1 million is down compared to last year (H1 2021: $19.5 million) with
Adjusted operating margin declining to 3.8% (H1 2021: 6.1%) primarily as a
result of the aforementioned significant cost challenges in freight costs and
the raw material and labour wage rate inflation. Whilst the US business has
undertaken mitigating actions in the period, the unprecedented scale of the
increases has outweighed these initiatives.
The US business continues to focus on the consolidation and integration of the
Design Group Americas team post the CSS acquisition, which was completed at
the end of the 2020 financial year. The integration, which was planned over
three years, has continued to make good progress in the period, although some
projects have been delayed as a result of the impact of Covid-19 alongside
operational challenges in the current year. The first half of the 2022
financial year has seen a further strengthening of the management team with
the addition of both Chief Commercial Officer and Chief Revenue Officer roles.
This allows the business to focus on growing revenues with key customers
whilst underpinning one of the key pillars of our strategy, 'Design &
Innovation', through further improvements in our product portfolio. An example
of this was the team winning a Louie Award for Best Greeting Card Design for
our NIQUEA.D™ premium greeting card range.
The CSS integration of operations continues to deliver, with specific site
closures and consolidation being the key activities in the first half. The
move of our Midway distribution facility to Shorewood was successfully
completed at the beginning of the financial year, with the majority of the
Americas group's catalogue and replenishment businesses now being run solely
from one facility. All costs associated with this move were incurred in the
prior year.
Furthermore, there has also been ongoing work in bringing the Americas group's
printing, converting and wrap distribution under one roof in Byhalia,
Mississippi. The second phase of the project commenced in the first half of
this year moving the converting business from our Memphis facility with the
intention to move our UTECO printing press in the second half of the year. The
costs associated with this move have been treated as an Adjusting item. These
moves will see increased efficiencies and help manage the increased volumes
that are being produced. Future areas of focus include the consolidation of
the sewing patterns business into one site in the US which is in its early
stages of preparation as at 30 September 2021.
As the world starts to resume 'business as usual' post Covid-19, the Americas
team has made good progress with regards to unused CSS buildings.
Specifically, at the design office in Budd Lake, New Jersey, the majority of
the office space has now been exited with part of the original lease cancelled
delivering savings to the business in rental cash outflows going forward. In
addition, cash savings will be made from the sub-letting of the former CSS
head office at Plymouth Meeting. The relevant proportions of impairments taken
in respect of these properties have been reversed in the period through
Adjusting items. In respect of other sites exited as part of the acquisition
and the corresponding asset impaired, that have not yet been sub-let, these
continue to be actively marketed.
Covid-19 continues to impact our Americas manufacturing and distribution
sites. We therefore remain vigilant in implementing Covid-19 protocols to
ensure we meet the primary objective of employee safety.
As the business navigates the cost challenges presented in the current
environment, the focus remains on executing our Christmas deliveries to
customers, while also expanding the group's cross-selling opportunities around
both the Americas group as well as the International business and continuing
to build our online presence, in particular with the launch of
SomethingDelightful.com, a holistic platform for our craft brands.
Design Group International
We are continuing to see the benefits of the integrated operational and
management structure from the combination of our UK, European and Australian
businesses under the Design Group International ('International') umbrella.
This accounts for over a quarter of the Group's total revenues in the first
half of the financial year.
Revenues for the International business grew year-on-year following the
decline seen in the prior year due to the impact of Covid-19. First half
revenues were up 19% on the prior year at $136.9 million (H1 2021: $115.5
million). Adjusted operating profit, however, reduced year-on-year to $11.5
million (H1 2021: $15.1 million), reflecting the same additional operational
cost challenges that have also been experienced in the Americas. In addition,
the prior year included $3.6 million of government assistance received which
has not been replicated in the first half of the current financial year.
Revenue growth has been seen across all parts of the International business.
The UK business has seen sales of the Eco-nature™ products progressing well,
with items quickly selling out in stores. This is extremely encouraging and
forms part of the focus of the Group's Commercial Forum as we concentrate on
the design of more sustainable products for roll out across the Group. As with
the rest of the Group, the main focus of the UK business is the shipping of
our customers' Christmas commitments, with particular pressure as a result of
labour shortages alongside freight delays. In Europe, our business continues
to grow through its focus on working with the winning customers who have
resumed their growth plans post the pandemic. In addition, productivity and
efficiency in our manufacturing facilities continue to improve following
capital investment in prior years.
Despite starting the financial year strongly, progress in our Australian
business has slowed as a result of multiple and prolonged lockdowns in many
regions across the country. Non-essential retail remained closed from July
through to September whilst the Australian Government focused, and continues
to focus, on improving vaccination rates. This has slowed sales growth in the
territory, however despite this, the business continues to perform well, with
sales still ahead of the prior year.
OUR PRODUCTS AND BRANDS
Despite the supply chain challenges experienced in the first half, it is good
to see growth in our Celebrations and Gifting categories as families and
friends come back together to celebrate life's special occasions. The Group
prides itself on having a well-diversified portfolio, which has supported us
throughout the pandemic as our 'stay-at-home' products in the Craft &
creative play category kept families and individuals entertained throughout
multiple lockdowns. It is therefore not a surprise to see Craft & creative
play year-on-year category sales normalise compared to the higher volumes
experienced during prolonged lockdowns in 2020.
In the first half, as always, our seasonality drives the overall product mix
with Christmas products making up 46% of the first half sales. However, this
is lower than the prior year reflecting the later than planned seasonal
shipments as a result of container availability and other global supply chain
limitations. Everyday products continue to make up 50% of our product mix in
the first half and this trend is expected to continue throughout the remainder
of the year.
Revenue by product category H1 2022 H1 2021
Celebrations 64% $311.6m 62% $267.6m
Craft & creative play 15% $73.2m 18% $79.3m
Gifting 9% $42.3m 8% $35.4m
'Not-for-resale' consumables 7% $32.4m 7% $32.2m
Stationery 5% $24.4m 5% $20.1m
Total $483.9m $434.6m
Note: Prior year figures have been restated to reflect more appropriate
comparatives.
DETAILED FINANCIAL REVIEW
The Group performance is behind expectations for the first half of the year as
a result of the cost headwinds, operational challenges faced by the Group and
wider macroeconomic environment.
H1 2022 H1 2021
Reported Adjusting Items Adjusted Reported Adjusting Items Adjusted
$m $m $m $m $m $m
Revenue 483.9 - 483.9 434.6 - 434.6
Gross profit 78.6 (0.1) 78.5 83.7 0.9 84.6
Overheads (57.2) 0.9 (56.3) (64.4) 12.2 (52.2)
Operating profit 21.4 0.8 22.2 19.3 13.1 32.4
Finance charge (2.5) 0.2 (2.3) (2.2) - (2.2)
Profit before tax 18.9 1.0 19.9 17.1 13.1 30.2
Tax (5.2) 0.3 (4.9) (4.8) (2.9) (7.7)
Profit after tax 13.7 1.3 15.0 12.3 10.2 22.5
Group revenue for the period of $483.9 million grew 11% year-on-year
reflecting a bounce back in sales post the pandemic that impacted the first
half of the prior year. Adjusted operating profit for the Group decreased by
32% to $22.2 million (H1 2021: $32.4 million) with Adjusted operating margin
down year-on-year at 4.6% (H1 2021: 7.5%). Gross margin fell in the half year,
as a result of increased operational costs, to 16.2% (H1 2021: 19.3%).
Adjusted overheads as a percentage of revenue decreased slightly to 11.6% (H1
2021: 12.0%). Overall Adjusted profit before tax decreased 34% to $19.9
million (H1 2021: $30.2 million).
Half year profit before tax was up 11% at $18.9 million (H1 2021: $17.1
million) primarily reflecting the reduction in Adjusting items by $12.1
million to $1.0 million (H1 2021: $13.1 million) offset by the impact of the
lower adjusted operating margins.
Finance expenses
After adjusting for $0.2 million of lease liability interest relating to
impaired exited Americas' properties, finance costs at $2.3 million are only
marginally higher than the prior year at $2.2 million reflecting good cash
management despite supporting an increased level of seasonal working capital.
Adjusting items
Adjusting items are material items of unusual or non-recurring nature which
represent gains or losses which are separately presented by virtue of their
nature, size and/or incidence. The Group has Adjusting items in the period to
30 September 2021 totalling $1.0 million (H1 2021: $13.1 million). These items
are as follows:
Adjusting Items H1 2022 H1 2021
Losses/(gains) and transaction costs relating to acquisitions and disposals of $3.6m $0.9m
businesses
Acquisition integration and restructuring (income)/costs ($2.0m) $5.5m
(Reversal of impairment)/Impairment of assets ($0.9m) $0.1m
Incremental Covid-19 costs - $2.0m
Insurance income from IT security incident ($0.7m) -
Amortisation of acquired intangibles $1.4m $2.2m
Share based payments (credits)/charges ($0.4m) $2.4m
Total $1.0m $13.1m
Losses/(gains) and transaction costs relating to acquisitions and disposals of
businesses - $3.6 million (H1 2021: $0.9 million)
In the period, the Group has incurred expenditure relating to potential and
previous acquisitions in the first half totalling $3.3 million. In particular,
$3.1 million of costs were incurred in relation to an aborted transaction. In
addition, the final tranche of acquisition related employee payments which
lock in and incentivise legacy talent relating to the Impact Innovations Inc.
transaction in 2019 have been incurred ($0.3 million) as we celebrate our
third anniversary of the acquisition.
Acquisition integration and restructuring (income)/costs - $(2.0) million
credit (H1 2021: $5.5 million)
The main costs continue to relate to the integration of CSS into the enlarged
DG Americas.
The CSS business includes a large portfolio of owned and leased sites, and
part of the integration project includes the consolidation of these locations.
As certain sites were closed and exited since acquisition, in the absence of
being able to sub-lease or break leases, this resulted in impairments of lease
assets in the prior financial year. In the period to 30 September 2021 we have
been able to partially exit some of the property we lease in Budd Lake, New
Jersey as well as sub-lease our site in Plymouth Meeting. This has resulted in
a reversal of the lease asset impairments of $2.2 million through Adjusting
items. Ongoing costs associated with the properties we have exited continue to
be treated as Adjusting items. The total value of assets relating to the
remaining impaired properties as at 30 September 2021 is $7.0 million.
Other costs associated with the ongoing consolidation of operations around the
group, have been incurred as the enlarged printing and converting business has
been moved from Memphis to a larger facility in Byhalia, Mississippi that also
houses distribution which before was performed out of temporary warehouses.
(Reversal of impairment)/impairment of assets - $(0.9) million credit (H1
2021: $0.1 million)
As at 31 March 2021, the Group was carrying $1.5 million of provisions in
relation to the impairment of trade receivables and $3.3 million in respect of
inventory due to the impact of Covid-19 on the ability to collect receivables
and sell-through inventory. During the period, $0.9 million of receivables
impairment has been reversed as it is no longer required.
Incremental Covid-19 costs - $nil (H1 2021: $2.0 million)
In the prior year, the Group identified certain costs relating to direct
labour costs that were incremental as a result of the pandemic, and these were
included in Adjusting items. The most significant element of these costs
related to additional 'hazard pay' labour costs across our manufacturing
facilities in the USA and Mexico in order to ensure our employees returned to
work. No incremental costs associated with Covid-19 have been treated as
Adjusting items in the first half of FY22.
Insurance income from IT security incident - $(0.7) million credit (H1 2021:
$nil)
The IT security incident which occurred in the Americas in October 2020
resulted in one-off costs being incurred, specifically in relation to crisis
management and legal support, the costs of engaging a negotiator, forensics
and containment costs, data recovery costs including specialists and
server/hardware repair and replacement. In order to manage the crisis, we also
had the IT teams working 24/7 to get systems back online. As well as the costs
of the incident recovery, there are also fines and penalties from delayed
shipments to customers and expedited freight costs to avoid some delays. These
costs were all treated as Adjusting items in the second half of the prior
year. The Group also incurred lost sales associated with the IT outage which
did not form part of our Adjusting items costs.
The Group has made insurance claims under two policies in relation to the
incident. As at 30 September 2021, both claims had been filed with the
relevant insurer. On 1 October, the Group received confirmation from one
insurer that they would be paying £0.5 million ($0.7 million) in full for the
claim. As such, this met the definition of an asset as at the period end and
the Group recognised this income in Adjusting items as at the half year.
Amortisation of acquired intangibles - $1.4 million (H1 2021: $2.2 million)
Under IFRS, as part of the acquisition of a company, it is necessary to
identify intangible assets such as customer relationships and brands which
form part of the intangible value of the acquired business but are not part of
the acquired balance sheet. These intangible assets are then amortised to the
income statement over an appropriately judged period. These are not
operational costs relating to the running of the acquired business and are
directly related to the accounting for the acquisition. These include
tradenames and brands acquired as part of the acquisition of Impact
Innovations Inc. and CSS Industries Inc. in the USA. As such we include these
as Adjusting items.
Share based payments (credits)/charges - $(0.4) million credit (H1 2021: $2.4
million)
As part of our senior management remuneration, the Group operates a Long Term
Incentive Plan ('LTIP') including the Value Creation Scheme ('VCS') created in
the prior year, in the form of options for ordinary shares of the Group. In
accordance with accounting principles, despite this plan not being a cash cost
to the business, a share‑based payments charge or credit is taken to the
income statement. We consider that these credits and charges do not form part
of the underlying operational costs and therefore include these as Adjusting
items.
Based on the latest outlook for the business no charge has been accrued in
relation to either the performance-based LTIP or the VCS in the first half and
all prior year accruals have been released. As a result there is a share-based
payment credit for the period of $(0.4) million which consists of a principal
IFRS 2 credit of $(0.1) million and a credit in relation to employer's social
security of $(0.3) million based on the share price at the end of the
reporting period.
Taxation
The taxation charge for the half year was $5.2 million (H1 2021: $4.8 million)
with the effective tax rate on profit before tax at 27.5% (H1 2021: 28.1%).
The effective rate on Adjusted profit before tax is 24.4% (H1 2021: 25.4%).
The rate change in the UK from 19% to 25%, effective April 2023 has been
substantively enacted as at the reporting date, and as such the deferred tax
assets which will unwind from 1 April 2023, have been remeasured at the new
rate. This has resulted in a reduction to the tax charge for the period. The
potential federal tax rate increase in the USA has not yet been enacted,
however if approved before 31 March 2022, it may increase the Group's overall
effective tax rate for the full year.
Earnings per share
Adjusted earnings per share at 13.6 cents are down 38% on the prior year (H1
2021: 22.0 cents) primarily as a result of the lower profits. Diluted earnings
per share are 12.3 cents (H1 2021: 11.4 cents). The reconciliation between
Reported and Adjusted earnings per share can be seen below:
Earnings per share H1 2022 H1 2021
Earnings attributable to equity holders of the Company $12.1m $11.2m
Adjustments
Adjusting items (net of non-controlling interest effect) $1.0m $13.2m
Tax charge/(relief) on adjustments (net of non-controlling interest effect) $0.3m ($2.9m)
Adjusted earnings $13.4m $21.5m
Weighted average number of shares
Basic weighted average number of shares outstanding 98.1m 97.7m
Dilutive effect of employee share option plans 0.1m 0.3m
Diluted weighted average ordinary shares 98.2m 98.0m
Earnings per share
Basic earnings per share 12.3c 11.5c
Adjustment 1.4c 10.5c
Basic adjusted earnings per share 13.7c 22.0c
Diluted earnings per share 12.3c 11.4c
Adjusted earnings per share 13.6c 22.0c
Cash flow and net debt
As at 30 September 2021 net debt (excluding IFRS 16 lease liabilities) was
$58.8 million, higher than the prior year of $23.2 million as a result of the
recovery of trading post-pandemic and the resultant higher working capital
requirements of the Group.
Cash flow H1 2022 H1 2021
Adjusted EBITDA $39.8m $49.7m
Movements in working capital ($152.3m) ($104.9m)
Adjusted cash used by operations ($112.5m) ($55.2m)
Adjusting items ($4.5m) ($10.4m)
Cash used by operations ($117.0m) ($65.6m)
Capital expenditure (net of disposals of property, plant and equipment) ($3.1m) ($3.4m)
Tax (paid)/received ($3.5m) $2.9m
Interest paid (including Adjusting items) ($1.8m) ($1.9m)
Lease liabilities principle repayments ($8.4m) ($7.2m)
Dividends paid (including non-controlling interests) ($2.7m) -
FX and other $1.2m ($0.4m)
Movement in net cash ($135.3m) ($75.6m)
Opening net cash $76.5m $52.4m
Closing net cash ($58.8m) ($23.2m)
Working capital
Despite the increased Everyday business the Group still has a significant
level of seasonal activity 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 as manufacturing,
distribution and shipping of Christmas products builds, peaking in October.
The second half of the year sees the borrowing of the Group decline and move
to typically a cash positive position as we collect our debtors through
January to March.
The net working capital outflow in the half year was $152.3 million (H1 2021:
$104.9 million). This higher working capital movement reflects the expected
increased year-on-year seasonal working capital build as a result of a
recovery in revenues to more normalised levels as prior year revenues were
impacted by Covid-19. The Group, however, continues to maintain good cash
management discipline including actively monitoring our debtors and credit
risk profiles.
Adjusting items
During the first half of the year there was a $4.5 million (H1 2021: $10.4
million) net cash outflow in relation to Adjusting items of which $1.7 million
related to cash outflow for costs deferred from previous years. The
significant majority of the total outflow related to the restructuring and
synergy realisation costs associated with the CSS acquisition.
Capital expenditure
During the first half of the year the Group invested $3.1 million (H1 2021:
$3.4 million). This spend was relatively even around the Group and related to
smaller, maintenance-type spend.
Cash tax
The Group made tax payments of $3.5 million which compares to a tax repayment
of $2.9 million in the prior year, which was the result of US tax repayments
following claims made by DG Americas under the CARES Act.
Dividend payments
The outflow in the first half of the financial year relates to a dividend paid
from DG Australia, which is 50% owned by the Group, to the other 50%
shareholder. In the prior year no dividends had been paid or received in the
first half of the year as part of the Covid-19 cash management undertaken by
the Group.
Financial position and going concern basis
The Group has a banking facility, extended in May 2021, which runs to June
2023 and includes a revolving credit facility ('RCF') of $95 million, a
further flexible RCF of up to £130 million, flexible to meet working capital
requirements during peak manufacturing, and a maximum limit of $18 million
invoice financing arrangement in Hong Kong. The Group also has access to
supplier financing arrangements which we utilise at certain times of the year.
The Group has been fully compliant with all banking covenants associated with
these facilities and has not required, nor requested, any covenant waivers
associated with the impact of Covid-19 on the Group results.
The Group prepared budgets and plans for FY22 and FY23 at 31 March 2021 and
these have been refined and revisited during the period; most recently ahead
of the Group's trading update in October. A going concern assessment as at 30
September 2021 has been produced using these latest forecasts which have been
reviewed by the Board, and take into account the significant seasonal working
capital cycle of the business and the cost headwinds the Group is currently
experiencing. These forecasts show the Group operating within the existing
facilities and complying with covenants for the forecast periods, and
accordingly the financial statements have been prepared on a going concern
basis.
These latest forecasts are not without risk as the Group completes its
seasonal peak trading period to 31 December 2021, and although these forecasts
have built in the later profile of cash receipts from customers to reflect the
delayed sales experienced in the first half and the anticipated incremental
costs, there remains uncertainty in relation to the scale of certain cost
headwinds and timing in net cash receipts in the forecast.
For the purposes of assessing a severe but plausible downside to the base case
projections, these forecasts have been sensitised by including, a longer
continuation and further worsening of the cost headwinds the Group has seen in
the first half which could result in an adverse impact on forecast EBITDA and
net debt. The severe but plausible downside case has been used to assess
immediate and longer term compliance with the Group's banking covenants, as
well as ensuring the Group has sufficient liquidity within its existing loan
facilities. Further details on the facilities and the financial covenants
attached are included in Note 7. The Board has also considered and implemented
as required, mitigating actions available to the Group including further cost
saving initiatives and more stringent cash management strategies to ensure the
Group maintains sufficient headroom against its financial covenants.
After considering the severe but plausible downside case, the Directors have a
reasonable expectation that they will meet the immediate and longer term
covenant tests ensuring the Group has access to sufficient liquidity.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that these condensed
interim financial statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting' and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred during the first six
months and their impact on the condensed set of financial statements, and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
• material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
Alternative performance measures
This review includes alternative performance measures ('APMs') that are
presented in addition to the standard IFRS metrics. The Directors believe that
these APMs provide important additional information regarding the adjusted
performance of the business including trends, performance and position of the
Group. APMs are used to enhance the comparability of information between
reporting periods and segmental business units by adjusting for exceptional or
uncontrollable factors which affect IFRS measures, to aid the understanding of
the Group's performance. Consequently, APMs are used by the Directors and
management for strategic and performance analysis, planning, reporting and
reward setting. APMs reflect the results of the business excluding Adjusting
items, which are items that are material and of an unusual or non-recurring
nature.
The APMs and the definitions used are listed below:
· Adjusted EBITDA - EBITDA before Adjusting items
· Adjusted operating profit - Profit before finance charges, tax and
Adjusting items
· Adjusted profit before tax - Profit before tax and Adjusting items
· Adjusted profit after tax - Profit after tax before Adjusting items
and associated tax effect
· Adjusted earnings per share - Fully diluted earnings per share before
Adjusting items and associated tax effect
In addition, the Group uses APMs in order to calculate other key performance
metrics including:
· Adjusted operating margin - Adjusted operating profit divided by
revenue
Adjusting items
Further details of the items categorised as Adjusting items are disclosed in
more detail in note 3.
A full reconciliation between our adjusted and reported results is provided
below:
H1 2022 H1 2021
Adjusted EBITDA $39.8m $49.7m
Adjusting items ($1.6m) ($10.0m)
EBITDA $38.2m $39.7m
Adjusted operating profit $22.2m $32.4m
Adjusting items ($0.8m) ($13.1m)
Reported operating profit $21.4m $19.3m
Adjusted profit before tax $19.9m $30.2m
Adjusting items ($1.0m) ($13.1m)
Reported profit before tax $18.9m $17.1m
Adjusted profit after tax $15.0m $22.5m
Adjusting items ($1.3m) ($10.2m)
Reported profit after tax $13.7m $12.3m
Adjusted earnings per share 13.6c 22.0c
Adjusting items (1.3c) (10.6c)
Reported diluted earnings per share 12.3c 11.4c
CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED 30 SEPTEMBER 2021
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note $000 $000 $000
Revenue 2 483,908 434,635 873,216
Cost of sales (405,287) (350,937) (719,396)
Gross profit 78,621 83,698 153,820
Selling expenses (21,792) (21,584) (43,909)
Administration expenses (35,859) (46,480) (93,659)
Other operating income 4 427 3,909 4,066
(Loss)/profit on disposal of property, plant and equipment (17) 10 (256)
Loss on disposal of subsidiary - (208) (208)
Operating profit 3 21,380 19,345 19,854
Finance expenses (2,495) (2,265) (5,179)
Profit before tax 18,885 17,080 14,675
Income tax 5 (5,191) (4,801) (4,234)
Profit for the period 13,694 12,279 10,441
Attributable to:
Owners of the Parent Company 12,063 11,222 8,207
Non-controlling interests 1,631 1,057 2,234
Earnings per ordinary share
Unaudited Unaudited Twelve
six months six months months
ended ended ended
Note 30 Sep 2021 30 Sep 2020 31 Mar 2021
Basic 8 12.3c 11.5c 8.4c
Diluted 8 12.3c 11.4c 8.4c
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS ENDED 30 SEPTEMBER 2021
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Profit for the period 13,694 12,279 10,441
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss
Remeasurement of defined benefit pension and health benefit schemes - - (32)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translation of foreign operations (net of tax) 3,799 (4,144) (15,769)
Transfer to profit and loss on maturing cash flow hedges (net of tax) 58 127 863
Net unrealised gain/(loss) on cash flow hedges (net of tax) 395 (391) (1,269)
4,252 (4,408) (16,175)
Other comprehensive income/(expense) for the period, net of tax 4,252 (4,408) (16,207)
Total comprehensive income/(expense) for the period, net of tax 17,946 7,871 (5,766)
Attributable to:
Owners of the Parent Company 16,616 6,143 (9,081)
Non-controlling interests 1,330 1,728 3,315
17,946 7,871 (5,766)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED 30 SEPTEMBER 2021
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 2021 6,667 239,142 44,600 (86) (21,239) 114,438 383,522 8,497 392,019
Profit for the period - - - - - 12,063 12,063 1,631 13,694
Other comprehensive
income/(expense) - - - 453 4,100 - 4,553 (301) 4,252
Total comprehensive income for the period - - - 453 4,100 12,063 16,616 1,330 17,946
Transactions with owners in their capacity as owners
Equity-settled share-based payments - - - - - (121) (121) - (121)
Tax on equity-settled share-based payments - - - - - (237) (237) - (237)
Options exercised 11 - - - - (11) - - -
Equity dividends paid - - - - - - - (2,650) (2,650)
Exchange differences on opening balances (149) (5,339) (996) - - - (6,484) - (6,484)
At 30 September 2021 6,529 233,803 43,604 367 (17,139) 126,132 393,296 7,177 400,473
SIX MONTHS ENDED 30 SEPTEMBER 2020
Attributable to the owners of the Parent Company
Share
premium
and capital Non-
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 April 2020 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
Profit for the period - - - - - 11,222 11,222 1,057 12,279
Other comprehensive
(expense)/income - - - (264) (4,815) - (5,079) 671 (4,408)
Total comprehensive income for the period - - - (264) (4,815) 11,222 6,143 1,728 7,871
Transactions with owners in their capacity as owners
Equity-settled share-based payments - - - - - 2,309 2,309 - 2,309
Tax on equity-settled share-based payments - - - - - (266) (266) - (266)
Recognition of non-controlling interests - - - - - - - 276 276
Options exercised 14 - - - - (14) - - -
Exchange differences on opening balances 268 9,647 1,799 - - - 11,714 - 11,714
At 30 September 2020 6,256 225,064 41,974 56 (9,204) 126,954 391,100 6,647 397,747
YEAR ENDED 31 MARCH 2021
Attributable to the owners of the Parent Company
Share
premium
and capital Non-
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 1 April 2020 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
Profit for the year - - - - - 8,207 8,207 2,234 10,441
Other comprehensive (expense)/income - - - (406) (16,850) (32) (17,288) 1,081 (16,207)
Total comprehensive (expense)/income for the year - - - (406) (16,850) 8,175 (9,081) 3,315 (5,766)
Transactions with owners in their capacity as owners
Equity-settled share-based payments - - - - - 3,668 3,668 - 3,668
Tax on equity-settled share-based payments - - - - - 214 214 - 214
Recognition of non-controlling interests - - - - - - - 539 539
Options exercised 34 - - - - (34) - - -
Equity dividends paid - - - - - (11,288) (11,288) - (11,288)
Exchange differences on opening balances 659 23,725 4,425 - - - 28,809 - 28,809
At 31 March 2021 6,667 239,142 44,600 (86) (21,239) 114,438 383,522 8,497 392,019
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2021
Unaudited Unaudited
restated((a))
as at as at As at
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note $000 $000 $000
Non-current assets
Property, plant and equipment 83,098 89,505 88,203
Intangible assets 111,066 116,025 114,874
Right-of-use assets 89,388 105,882 95,380
Long-term assets 6,321 6,308 5,721
Deferred tax assets 16,116 19,039 18,357
Total non-current assets 305,989 336,759 322,535
Current assets
Inventory 259,893 215,220 176,165
Trade and other receivables 298,009 281,556 129,219
Income tax receivable 1,283 15,138 2,368
Derivative financial assets 9 375 556 207
Cash and cash equivalents 6 96,340 76,770 132,760
Total current assets 655,900 589,240 440,719
Total assets 2 961,889 925,999 763,254
Equity
Share capital 6,529 6,256 6,667
Share premium 231,999 223,327 237,296
Capital redemption reserve 1,804 1,737 1,846
Merger reserve 43,604 41,974 44,600
Hedging reserve 367 56 (86)
Translation reserve (17,139) (9,204) (21,239)
Retained earnings 126,132 126,954 114,438
Equity attributable to owners of the Parent Company 393,296 391,100 383,522
Non-controlling interests 7,177 6,647 8,497
Total equity 400,473 397,747 392,019
a) In the preparation of these interim financial statements,
comparative amounts have been restated to reflect the finalisation of the CSS
acquisition accounting made in the year ended 31 March 2021 financial
statements.
AS AT 30 SEPTEMBER 2021
Unaudited
Unaudited restated((a))
as at as at As at
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note $000 $000 $000
Non-current liabilities
Loans and borrowings 7 (195) (389) (103)
Lease liabilities 85,647 99,946 94,582
Deferred income 627 586 486
Provisions 5,222 5,422 5,742
Other financial liabilities 19,963 9,354 15,526
Deferred tax liabilities 2,513 1,572 2,115
Total non-current liabilities 113,777 116,491 118,348
Current liabilities
Bank overdraft 6 70,511 45,180 57,033
Loans and borrowings 7 84,840 55,219 (620)
Lease liabilities 18,687 19,799 19,340
Deferred income 839 496 424
Provisions 1,446 1,479 1,617
Income tax payable 8,444 13,522 10,061
Trade and other payables 223,821 229,188 120,763
Other financial liabilities 39,051 46,878 44,269
Total current liabilities 447,639 411,761 252,887
Total liabilities 2 561,416 528,252 371,235
Total equity and liabilities 961,889 925,999 763,254
a) In the preparation of these interim financial statements, comparative
amounts have been restated to reflect the finalisation of the CSS acquisition
accounting made in the year ended 31 March 2021 financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 SEPTEMBER 2021
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
Note $000 $000 $000
Cash flows from operating activities
Profit for the period 13,694 12,279 10,441
Adjustments for:
Depreciation and impairment of property, plant and equipment 6,916 6,678 13,535
Depreciation of right-of-use assets 6,783 9,370 24,047
Amortisation of intangible assets 3,158 4,258 6,918
Finance expenses 2,495 2,265 5,179
Income tax charge 5,191 4,801 4,234
Loss on disposal of a business - 208 208
Loss/(profit) on sales of property, plant and equipment 17 (10) 165
Loss on disposal of intangible fixed assets - 1 106
Equity-settled share-based payments (418) 2,477 4,192
Operating profit after adjustments for non-cash items 37,836 42,327 69,025
Change in trade and other receivables (171,325) (169,524) (11,914)
Change in inventory (85,790) (42,133) 1,772
Change in trade and other payables, provisions and deferred income 104,669 105,217 (4,504)
Cash (used by)/generated from operations (114,610) (64,113) 54,379
Tax (paid)/received (3,464) 2,857 14,353
Interest and similar charges paid (1,994) (1,927) (4,082)
Net cash (outflow)/inflow from operating activities (120,068) (63,183) 64,650
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 128 30 147
Acquisition of intangible assets (236) (737) (1,000)
Acquisition of property, plant and equipment (2,968) (2,729) (7,390)
Net cash outflow from investing activities (3,076) (3,436) (8,243)
Cash flows from financing activities
Repayment of secured borrowings - (1,025) (1,158)
Net movement in credit facilities 85,441 55,730 -
Lease liabilities principle repayments (10,532) (8,772) (19,184)
Loan arrangement fees (494) - -
Equity dividends paid - - (11,288)
Dividends paid to non-controlling interest (2,650) - -
Net cash inflow/(outflow) from financing activities 71,765 45,933 (31,630)
Net (decrease)/increase in cash and cash equivalents (51,379) (20,686) 24,777
Cash and cash equivalents at beginning of the period 75,727 52,197 52,197
Effect of exchange rate fluctuations on cash held 1,481 79 (1,247)
Cash and cash equivalents at end of the period 6 25,829 31,590 75,727
NOTES TO THE INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 SEPTEMBER 2021
1 Accounting policies
Basis of preparation
The financial information contained in this interim report does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006 and is
unaudited.
On 31 December 2020, IFRS as adopted by the European Union at that date was
brought into UK law and became UK-adopted International Accounting Standards
(UK IFRS), with future changes being subject to endorsement by the UK
Endorsement Board. The Group transitioned to UK IFRS in its consolidated
financial statements on 1 April 2021. This change constitutes a change in
accounting framework. However, there is no impact on recognition, measurement
or disclosure in the period reported as a result of the change in framework.
This condensed consolidated interim financial report for the half-year
reporting period ended 30 September 2021 has been prepared in accordance with
the UK-adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority. The financial
information for the year ended 31 March 2021 is extracted from the statutory
accounts of the Group for that financial year. The auditor's report was: (i)
unqualified; (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under Section 498 (2) of the Companies Act
2006. The interim report does not include all the information and
disclosures required in the annual financial statements and should be read in
conjunction with the Group's annual financial statements for the year
ended 31 March 2021. The audited annual accounts have been delivered to the
Registrar of Companies.
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.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised and future periods if relevant.
For the purposes of these financial statements 'Design Group' or 'the Group'
means IG Design Group plc ('the Company') and its subsidiaries. The Company's
ordinary shares are listed on the Alternative Investment Market (AIM).
Seasonality of the business
The business of the Group is seasonal and although revenues accrue relatively
evenly in both halves of the year, working capital requirements, including
inventory levels, increase steadily in the first half from July and peak in
October as manufacturing and distribution of Christmas products builds ahead
of shipping. The second half of the year sees the borrowing of the Group
decline and move to typically a cash positive position as we collect our
debtors through January to March.
Restatement of comparative amounts
In the preparation of these interim financial statements, comparative amounts
have been restated to reflect the finalisation of the CSS acquisition
accounting made in the year ended 31 March 2021 financial statements.
Presentation currency
The currency translation reserve was set to zero at 1 April 2006 on transition
to IFRS and has been restated as if the Group had reported in US dollars since
that date. Share capital, share premium, capital redemptions reserve, merger
reserve and hedging reserve are translated into US dollars at the rates of
exchange at the balance sheet date and the resulting exchange differences are
included in other reserves.
The functional currency of the Parent Company remains as sterling as it is
located in the United Kingdom and substantially all of its cash flows, assets
and liabilities are denominated in sterling, as well as its share capital. As
such, the Parent Company's functional currency differs to that of the Group's
reporting currency.
Going concern
Information regarding the financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the detailed
financial review. Cash balances and borrowings are detailed in notes 6 and 7.
On 5 June 2019, to meet the funding requirements of the Group, the business
refinanced with a banking group comprising HSBC, NatWest, Citigroup (who
replaced BNP Paribas), Truist Bank (as successor by merger to SunTrust Bank)
and PNC Bank as part of a three year deal. This facility was then subsequently
amended and extended on 17 January 2020 with the same banking group to
accommodate the acquisition of CSS. The facilities were then further extended
in May 2021 to run to June 2023 and comprise of a revolving credit facility
('RCF') of $95.0 million, a further flexible RCF of up to £130.0 million to
meet the Group's working capital requirements during peak manufacturing, and a
maximum limit of $18.0 million invoice financing arrangement in Hong Kong. We
also have access to supplier financing arrangements from certain customers
which we utilise at certain times of the year. These supplier financing
arrangements are subject to the continuing support of the customers' banking
partners and therefore could be withdrawn at short notice.
The Group prepared budgets and plans for FY22 and FY23 at 31 March 2021 and
these have been refined and revisited during the period; most recently ahead
of the Group's trading update in October. A going concern assessment as at 30
September 2021 has been produced using these latest forecasts which have been
reviewed by the Board, and take into account the significant seasonal working
capital cycle of the business and the cost headwinds the Group is currently
experiencing. These forecasts show the Group operating within the existing
facilities and complying with covenants for the forecast periods, and
accordingly the financial statements have been prepared on a going concern
basis.
These latest forecasts are not without risk as the Group completes its
seasonal peak trading period to 31 December 2021, and although these forecasts
have built in the later profile of cash receipts from customers to reflect the
delayed sales experienced in the first half and the anticipated incremental
costs, there remains uncertainty in relation to the scale of certain cost
headwinds and timing in net cash receipts in the forecast.
For the purposes of assessing a severe but plausible downside to the base case
projections, these forecasts have been sensitised by including, a longer
continuation and further worsening of the cost headwinds the Group has seen in
the first half which could result in an adverse impact on forecast EBITDA and
net debt. The severe but plausible downside case has been used to assess
immediate and longer term compliance with the Group's banking covenants, as
well as ensuring the Group has sufficient liquidity within its existing loan
facilities. Further details on the facilities and the financial covenants
attached are included in Note 7. The Board has also considered and implemented
as required, mitigating actions available to the Group including further cost
saving initiatives and more stringent cash management strategies to ensure the
Group maintains sufficient headroom against its financial covenants.
After considering the severe but plausible downside case, the Directors have a
reasonable expectation that they will meet the immediate and longer term
covenant tests ensuring the Group has access to sufficient liquidity.
This disclosure has been prepared in accordance with the Financial Reporting
Council's UK Corporate Governance Code.
Significant accounting policies
The accounting policies adopted in the preparation of the interim report are
consistent with those followed in preparation of the Group's annual financial
statements for the year ended 31 March 2021.
2 Segmental information
The Group has one material business activity being the design, manufacture and
distribution of Celebration, Craft & creative play, Stationery, Gifting
and 'Not-for-resale' consumable products.
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 UK, European and
Australian businesses.
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 Central &
DG Americas((a)) International eliminations Group
$000 $000 $000 $000
Six months ended 30 September 2021
Revenue - external 347,502 136,406 - 483,908
- inter-segment 16 468 (484) -
Total segment revenue 347,518 136,874 (484) 483,908
Segment result before Adjusting items and management recharges 13,116 11,495 (2,439) 22,172
Adjusting items (note 3) (792)
Operating profit 21,380
Finance expenses (2,297)
Finance expense treated as an Adjusting item (note 3) (198)
Income tax (5,191)
Profit for the six months ended 30 September 2021 13,694
Balances at 30 September 2021
Segment assets 586,279 282,985 92,625 961,889
Segment liabilities (321,138) (146,704) (93,574) (561,416)
Capital expenditure additions
- property, plant and equipment 1,866 1,062 40 2,968
- intangible assets 185 51 - 236
- right-of-use assets 2,281 591 - 2,872
Depreciation - property, plant and equipment 3,877 3,032 7 6,916
Amortisation - intangible assets 3,087 71 - 3,158
Depreciation - right-of-use assets 6,250 2,714 10 8,974
Impairment - right-of-use assets - - 22 22
Reversal of impairment - right-of-use assets (2,213) - - (2,213)
DG Central &
DG Americas((a)) International eliminations Group
$000 $000 $000 $000
Six months ended 30 September 2020
Revenue - external 321,572 113,063 - 434,635
- inter-segment - 2,443 (2,443) -
Total segment revenue 321,572 115,506 (2,443) 434,635
Segment result before Adjusting items and management recharges 19,550 15,140 (2,224) 32,466
Adjusting items (note 3) (13,121)
Operating profit 19,345
Finance expenses (2,265)
Income tax (4,801)
Profit for the six months ended 30 September 2020 12,279
Balances at 30 September 2020
Segment assets (restated((b))) 562,889 282,583 80,527 925,999
Segment liabilities (restated((b))) (315,781) (148,970) (63,501) (528,252)
Capital expenditure additions
- property, plant and equipment 1,519 1,210 - 2,729
- intangible assets 700 37 - 737
- right-of-use assets 29,639 679 - 30,318
Depreciation - property, plant and equipment 3,917 2,760 1 6,678
Amortisation - intangible assets 3,988 270 - 4,258
Depreciation - right-of-use assets 6,756 2,579 35 9,370
DG Americas((a)) DG International Central and eliminations Group
$000 $000 $000 $000
Year ended 31 March 2021
Revenue - external 613,909 259,307 - 873,216
- inter segment 66 5,995 (6,061) -
Total segment revenue 613,975 265,302 (6,061) 873,216
Segment result before Adjusting items and management recharge 21,015 25,767 (4,760) 42,022
Adjusting items (note 3) (22,168)
Operating profit 19,854
Finance expenses (5,016)
Finance expenses treated as an Adjusting item (note 3) (163)
Income tax (4,234)
Profit for the year ended 31 March 2021 10,441
Balances at 31 March 2021
Segment assets 469,192 230,590 63,472 763,254
Segment liabilities (216,940) (86,553) (67,742) (371,235)
Capital expenditure additions
- property, plant and equipment 4,589 2,711 90 7,390
- intangible assets 963 37 - 1,000
- right-of-use assets 30,207 2,733 - 32,940
Depreciation - property, plant and equipment 7,760 5,774 1 13,535
Amortisation - intangible assets 6,510 408 - 6,918
Depreciation - right-of-use assets 12,739 5,265 74 18,078
Impairment - right-of-use assets 5,969 - - 5,969
(a) Including overseas entities for the Americas operating segment.
(b) In the preparation of these interim financial statements, comparative
amounts have been restated to reflect the finalisation of the CSS acquisition
accounting made in the year ended 31 March 2021 financial statements.
3 Operating profit and Adjusting items
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Operating profit analysed as:
Adjusted operating profit 22,172 32,466 42,022
Adjusting items (792) (13,121) (22,168)
Operating profit 21,380 19,345 19,854
Adjusting items
Other
Cost of Selling Admin Loss on finance
sales expenses expenses disposal expenses Total
Six months ended 30 September 2021 $000 $000 $000 $000 $000 $000
Losses/(gains) and transaction costs relating to acquisitions and disposals of - - 3,612 - (15) 3,597
businesses((1))
Acquisition integration and restructuring (income)/costs((2)) (146) - (2,076) 31 213 (1,978)
(Reversal of impairment)/impairment of assets((3)) - (942) - - - (942)
Insurance income from IT security incident ((5)) - - (687) - - (687)
Amortisation of acquired intangibles((6)) - - 1,418 - - 1,418
Share-based payment (credits)/charges ((7)) - - (418) - - (418)
Adjusting items (146) (942) 1,849 31 198 990
Loss on Other
Cost of Selling Admin sale of finance
sales expenses expenses subsidiary expenses Total
Six months ended 30 September 2020 $000 $000 $000 $000 $000 $000
Losses/(gains) and transaction costs relating to acquisitions and disposals of - - 674 208 - 882
businesses((1))
Acquisition integration and restructuring costs((2)) 33 - 5,478 - - 5,511
Impairment of assets((3)) - 52 - - - 52
Incremental Covid-19 costs((4)) 926 - 1,048 - - 1,974
Amortisation of acquired intangibles((6)) - - 2,225 - - 2,225
Share-based payment charges((7)) - - 2,477 - - 2,477
Adjusting items 959 52 11,902 208 - 13,121
Other
Cost of Selling Admin Loss on finance
sales expenses expenses disposal expenses Total
Year ended 31 March 2021 $000 $000 $000 $000 $000 $000
Losses/(gains) and transaction costs relating to acquisitions and disposals of - - 74 208 - 282
businesses((1))
Acquisition integration and restructuring costs((2)) 993 (162) 14,402 91 163 15,487
(Reversal of impairment)/impairment of assets((3)) (3,709) (2,100) - - - (5,809)
Incremental Covid-19 costs((4)) 603 - 913 - - 1,516
IT security incident costs((5)) 1,107 - 1,093 - - 2,200
Amortisation of acquired intangibles((6)) - - 4,463 - - 4,463
Share-based payment charges((7)) - - 4,192 - - 4,192
Adjusting items (1,006) (2,262) 25,137 299 163 22,331
Adjusting items are separately presented by virtue of their nature, size
and/or incidence (per each operating segment). These items are material items
of an unusual or non-recurring nature which represent gains or losses and are
presented to allow for the review of the performance of the business in a
consistent manner and in line with how the business is managed and measured on
a day-to-day basis and allow the reader to obtain a clearer understanding of
the underlying results of the ongoing Group's operations. They are typically
gains or costs associated with events that are not considered to form part of
the core operations, or are considered to be a 'non-recurring' event (although
they may span several accounting periods).
These losses/(gains) relating to the period ended 30 September 2021 are broken
down as follows:
(1)Losses/(gains) and transaction costs relating to acquisitions and disposals
of businesses
Costs directly associated with acquisitions, including legal and advisory fees
on deals, form part of our reported results on an IFRS basis. These costs
however, in the Board's view, form part of the capital transaction, and as
they are not attributed to investment value under IFRS 3, they are included as
an Adjusting item. Similarly, where acquisitions have employee related
payments (exclusive of Long Term Incentive Plans) which lock in and
incentivise legacy talent, we also include these costs as Adjusting items.
Furthermore, gains or losses on the disposal of businesses, including any
transaction costs associated with the disposal are treated as Adjusting items.
In the period, the Group has incurred expenditure relating to acquisitions in
the first half totalling $3.3 million, of which $113,000 related to previous
acquisitions and the balance relates to aborted acquisitions. In addition, the
final tranche of acquisition related employee payments which lock in and
incentivise legacy talent relating to the Impact Innovations Inc. transaction
in 2019 have been incurred ($278,000) as we celebrate our third anniversary of
the acquisition.
In the year to 31 March 2021 an additional $208,000 of transaction costs
associated with the disposal of Zhejiang Shaoxing Royal Arts and Crafts Co.
Ltd ('Shaoxing') were incurred during the year along with expenditure in
relation to any other potential acquisitions reviewed in the year.
(2)Acquisition integration and restructuring (income)/costs
In order to realise synergies from acquisitions, integration projects are
undertaken that aim to deliver future savings and efficiencies for the Group.
These are projects outside of the normal operations of the business and
typically incur one-time costs to ensure successful implementation. As such
the Board considers it is appropriate that costs associated with projects of
this nature be included as Adjusting items.
The main costs in the period related to the integration of CSS into the
enlarged DG Americas.
The CSS business includes a large portfolio of owned and leased sites, and
part of the integration project includes the consolidation of these locations.
As certain sites were closed and exited since acquisition, in the absence of
being able to sub-lease or break leases this resulted in impairments of lease
assets in the prior financial year. In the period to 30 September 2021 we have
been able to partially exit some of the property we lease in Budd Lake, New
Jersey as well as sub-lease our site in Plymouth Meeting. This has resulted in
a reversal of the lease asset impairments of $2.2 million through Adjusting
items. Ongoing costs associated with the properties we have exited continue to
be treated as Adjusting items.
In respect of the remaining vacant leased properties, marketing for
sub-tenancy is ongoing. As at 30 September 2021, the Group has had no offers
from potential subtenants and given that this position is expected to continue
for the foreseeable future, these leased properties remain impaired in full.
The total value of assets relating to the remaining impaired properties as at
30 September 2021 is $7.0 million.
Other costs associated with the ongoing consolidation of operations around the
group, have been incurred as the enlarged printing and converting business has
been moved from Memphis to a larger facility in Byhalia, Mississippi that also
houses distribution which before was performed out of temporary warehouses.
The main costs in the year to 31 March 2021 also related to the integration of
CSS into the enlarged DG Americas business. These included integration
consultancy expenditure, severance and temporary labour costs, as the newly
integrated team structures following the acquisition have been established,
and the impact of the impairment of the lease assets and costs associated with
the closure of excess sites.
The tax refund as a result of the US Covid-19 Coronavirus Aid, Relief and
Economic Security ('CARES') Act attracted interest income which was recognised
in Adjusting items in the prior year.
Furthermore, in the UK and Australia, as a result of Covid-19, workforce
restructuring costs were treated as Adjusting items in the year to 31 March
2021.
(3)(Reversal of impairment)/impairment of assets
In light of the unknown impact of Covid-19 on the business, a review of
inventory, trade receivables and fixed assets was undertaken at the last two
financial year ends. As at 31 March 2021, the Group was carrying $1.5 million
of provisions in relation to the impairment of trade receivables and $3.3
million in respect of inventory due to the impact of Covid-19 on the ability
to collect receivables and sell-through inventory. During the period, $942,000
of receivables impairment has been reversed as it is no longer required.
As at 31 March 2021 $2.4 million of the trade receivables impairment had been
reversed as it is no longer required and following a review of sell-through
rates in respect of inventory $4.0 million was released. These releases were
partially offset by $599,000 of additional Covid-19 related impairment charges
taken during the year.
(4)Incremental Covid-19 costs
The Covid-19 outbreak developed rapidly in 2020 and continued into the first
calendar quarter of 2021, with measures taken around the world to contain the
virus affecting economic activity. The Group was affected in every territory
in which we operate and the impact on the general economic environment and the
reduced demand of goods from our customers as well as the closures of our
businesses has had a significant impact. Certain incremental costs relating to
direct labour equal to $1.5 million were included in Adjusting items in the
year to 31 March 2021. The most significant element of these costs relate to
additional 'hazard pay' labour costs across our manufacturing facilities in
the USA and Mexico in order to ensure our employees returned to work.
In addition, laws were passed in India and Mexico that meant no workforce
reductions were allowed during closed/lockdown periods which meant higher
employee costs were being incurred than ordinarily would have in that
situation. This resulted in the business incurring direct incremental costs of
labour whilst not producing anything and incurring periods of significant
downtime. When employees returned to work post lockdown labour costs were paid
again once production started, effectively doubling the costs to produce.
(5)Insurance income from IT security incident
The IT security incident which occurred in the Americas business in
October/November 2020 resulted in one-off costs specifically in relation to
crisis management, legal, forensic, and data recovery costs including
server/hardware repair and replacement. In addition, there were IT overtime
costs, customer penalties from delayed shipments and expedited freight costs
to avoid delays. These costs were treated as an Adjusting item in the year to
31 March 2021. The lost sales associated with the IT outage did not form part
of the Adjusting items.
The Group has made insurance claims under two policies in relation to the
incident. As at 30 September 2021, both claims had been filed with the
relevant insurer and on 1 October, the Group received confirmation from one
insurer that they would be paying $687,000 (£500,000) in full for the claim.
As this income met the virtually certain threshold the Group recognised this
income in Adjusting items.
(6)Amortisation of acquired intangibles
Under IFRS, as part of the acquisition of a company, it is necessary to
identify intangible assets such as customer relationships and brands which
form part of the intangible value of the acquired business but are not part of
the acquired balance sheet. These intangible assets are then amortised to the
income statement over an appropriately judged period. These are not
operational costs relating to the running of the acquired business and are
directly related to the accounting for the acquisition. These include
tradenames and brands acquired as part of the acquisition of Impact
Innovations Inc. and CSS Industries Inc. in the USA. As such we include these
as Adjusting items.
In addition, in accordance with IFRS 3, on acquisition, businesses need to be
fair valued, which can result in an uplift to stock on hand relating to sales
orders already attached to the acquired stock. This uplift will distort the
margins associated with the stock, and typically unwinds quickly as stock is
sold soon after acquisition. The unwind of the stock uplift ($1.4 million)
associated with the CSS acquisition was included as an Adjusting item in the
year to 31 March 2021, consistent with the treatment adopted with the Impact
acquisition. This fully unwound as at 31 March 2021.
(7)Share-based payment (credits)/charges
As part of our senior management remuneration, the Group operates a Long Term
Incentive Plan ('LTIP') including the newly created Value Creation Scheme
('VCS') in the form of options for ordinary shares of the Group. In accordance
with accounting principles, despite this plan not being a cash cost to the
business (except for associated social security costs), a share‑based
payment charge or credit is taken to the income statement. We consider that
these charges do not form part of the underlying operational costs and
therefore include these as Adjusting items. The share-based payment credit for
the period was ($418,000) which consists of a principal IFRS 2 credit of
($121,000) and a credit in relation to employer's social security charge of
($297,000). The credit in the principal charge relates to the reversal of
charges in the prior year associated with the VCS, based on current outlook
for FY23, and this, plus the share price at the end of the reporting period,
has also led to a credit in relation to employer's social security charge.
At 31 March 2021, the share based payment charge for the year was $4.2 million
which consists of a principal IFRS 2 charge of $3.7 million and an employer's
social security charge of $524,000.
The cash flow effect of Adjusting items
There was a $4.5 million net outflow in the current period's cash flow (H1
2021: $10.4 million) relating to Adjusting items which included $1.7 million
(H1 2021: $4.5 million) deferred from prior years.
4 Other operating income
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Grant income received - 64 130
Sub-lease rentals income 325 178 559
Government assistance 101 3,578 3,263
Other 1 89 114
Total other operating income 427 3,909 4,066
5 Taxation
Recognised in the income statement
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Current tax charge
Current income tax charge 2,999 8,625 6,004
Deferred tax charge/(credit)
Relating to origination and reversal of temporary differences 2,192 (3,824) (1,770)
Total tax in the income statement 5,191 4,801 4,234
Total tax charge/(credit) on Adjusting items
Total tax on profit before Adjusting items 4,844 7,677 9,410
Total tax on Adjusting items 347 (2,876) (5,176)
Total tax in income statement 5,191 4,801 4,234
The tax expense has been calculated by applying the weighted average tax rate
across jurisdictions which is expected to apply to the Group for the year
ended 31 March 2022 using rates substantively enacted by 30 September 2021.
The tax effect of Adjusting items are recognised in the same period as the
relevant Adjusting item.
In May 2021, the Finance Act 2021 was substantively enacted which included an
increase in the UK corporation tax rate to 25% from 1 April 2023. The
calculation of the estimated effective tax rate for the year ended 31 March
2022 for adjusted profit before tax includes a credit of $754,000 which
relates to the estimated remeasurement of deferred tax items expected to
unwind at 25%. The estimated remeasurement of the deferred tax asset
recognised in relation to share based payments which is expect to unwind after
1 April 2023 results in a credit of $223,000 and $125,000 in the period
through tax on Adjusting items and through the statement of changes in equity
respectively.
6 Cash and cash equivalents/bank overdrafts
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Cash and cash equivalents 96,340 76,770 132,760
Bank overdrafts (70,511) (45,180) (57,033)
Cash and cash equivalents per cash flow statement 25,829 31,590 75,727
Net cash
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Cash and cash equivalents 25,829 31,590 75,727
Bank loans and overdrafts (85,441) (55,802) -
Loan arrangement fees 796 972 723
Net (debt)/cash as used in the financial review (58,816) (23,240) 76,450
The bank loans and overdrafts are secured by a fixed charge on certain of the
Group's land and buildings, a fixed charge on certain of the Group's book
debts and a floating charge on certain of the Group's other assets. See note 7
for further details of the Group's loans and borrowings.
7 Loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Non-current liabilities
Secured bank loans - - -
Loan arrangement fees (195) (389) (103)
(195) (389) (103)
Current liabilities
Asset backed loan 5,477 10,451 -
Revolving credit facilities 79,964 45,279 -
Current portion of secured bank loans - 72 -
Bank loans and borrowings 85,441 55,802 -
Loan arrangement fees (601) (583) (620)
84,840 55,219 (620)
Secured bank facilities
On 5 June 2019, the Group entered into a new three year Group facility with a
club of five banks chosen to reflect and support the geographical spread of
the Group. The banks within the club are HSBC, NatWest, Citigroup (who
replaced BNP Paribas), Truist Bank (as successor by merger to SunTrust Bank)
and PNC.
On 17 January 2020 a facility increase was agreed to support the acquisition
of CSS on 3 March 2020 and to accommodate the enlarged Group.
The facilities, which were extended in May 2021 to run to June 2023, comprise:
· a revolving credit facility ('RCF A') of $95.0 million;
· a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to £130.0 million. This RCF is
flexed to meet our working capital requirements during those months when
inventory is being built within our annual business cycle and is £nil when
not required, minimising carry costs; and
· an invoice financing arrangement in Hong Kong maximum limit $18.0
million but dependent on level of eligible receivables.
In total, the peak accessible facilities are approximately $283.3 million
(maximum $288.0 million) and are more than sufficient to cover our peak
requirements. Being partially denominated in US dollars they also provide a
hedge against currency movements. The facilities, which do not amortise with
time, include an additional uncommitted amount to finance potential
acquisitions.
Invoice financing arrangements are secured over the trade receivables that
they are drawn on. The RCF facilities are secured with a fixed and floating
charge over all other assets of the Group. Amounts drawn under revolving
credit facilities are classified as current liabilities as the Group expects
to settle these amounts within 12 months.
There are financial covenants, tested quarterly, attached to the existing
facilities as follows:
· interest cover, being the ratio of Adjusted earnings before
interest, depreciation and amortisation (EBITDA), as defined by the banking
facility, to interest on a rolling twelve‑month basis; and
· leverage, being the ratio of debt to Adjusted EBITDA, as defined by
the banking facility, on a rolling twelve-month basis.
Covenants are measured on pre IFRS 16 accounting definitions.
There is a further covenant tested monthly in respect of the working capital
RCF by which available asset cover must not fall below agreed levels relative
to amounts drawn.
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 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 30 September 2021 $34.9 million had been drawn down on this
arrangement (H1 2021 $8.5 million).
8 Earnings per share
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
$000 $000 $000
Earnings
Earnings attributable to equity holders of the Company 12,063 11,222 8,207
Adjustments
Adjusting items (net of non-controlling interest effect) 990 13,199 22,358
Tax charge/(relief) on adjustments (net of non-controlling interest effect) 347 (2,899) (5,184)
Adjusted earnings attributable to equity holders of the Company 13,400 21,522 25,381
In thousands of shares 30 Sep 2021 30 Sep 2020 31 Mar 2021
Weighted average number of shares
Basic weighted average number of shares outstanding 98,118 97,700 97,700
Dilutive effect of employee share option plans 79 327 440
Diluted weighted average ordinary shares 98,197 98,027 98,140
30 Sep 2021 30 Sep 2020 31 Mar 2021
Cents Cents Cents
Earnings per share
Basic earnings per share 12.3 11.5 8.4
Adjustment 1.4 10.5 17.6
Basic adjusted earnings per share 13.7 22.0 26.0
Diluted earnings per share 12.3 11.4 8.4
Diluted adjusted earnings per share 13.6 22.0 25.9
Adjusted earnings per share is provided to reflect the underlying earnings
performance of the Group.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
In thousands of shares 30 Sep 2021 30 Sep 2020 31 Mar 2021
Issued ordinary shares at 1 April 96,858 96,367 96,367
Shares relating to share options 1,260 1,333 1,333
Weighted average number of shares at the end of the period 98,118 97,700 97,700
Diluted earnings per share
The diluted earnings per share is calculated taking into account LTIP awards
whose specified conditions were satisfied at the end of the reporting period
of 79,000 (H1 2021: 327,000) share options. At 30 September 2021, the diluted
number of shares was 98.2 million (H1 2021: 98.0 million).
9 Financial instruments
Derivative financial instruments
The fair value of forward exchange contracts is assessed using valuation
models taking into account market inputs such as foreign exchange spot and
forward rates, yield curves and forward interest rates.
Fair value hierarchy
Financial instruments which are recognised at fair value subsequent to initial
recognition are grouped into Levels 1 to 3 based on the degree to which the
fair value is observable. The three levels are defined as follows:
· Level 1: quoted (unadjusted) prices in active markets for identical
assets or liabilities;
· Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly; and
· Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market
data.
All other financial assets and liabilities are measured at amortised cost.
The Group held the following financial instruments at 30 September 2021, which
were measured at level 2 fair value subsequent to initial recognition:
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2021 30 Sep 2020 31 Mar 2021
Forward exchange contracts carrying amount $000 $000 $000
Derivative financial assets 375 556 207
Derivative financial liabilities - (538) (293)
10 Capital commitments
At 30 September 2021, the Group had outstanding authorised capital commitments
to purchase plant and equipment for $553,000 (H1 2021: $1.1 million).
11 Related parties
As at 30 September 2021, there are no changes to the related parties or types
of transactions as disclosed at 31 March 2021.
12 Non-adjusting post balance sheet events
After the end of the reporting period, and prior to the authorisation of this
interim report on 23 November 2021, the Group has declared an interim dividend
of 1.25 pence (1.68 cents) per share (H1 2021: 3.0 pence (3.9 cents)).
REGISTERED OFFICE
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IG Design Group plc
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number 1401155
Visit us online at
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ADVISERS
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Hertfordshire WD17 1JJ
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