REG - IG Design Group PLC - Interim Results
26/11/2024 07:00
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RNS Number : 5864N IG Design Group PLC 26 November 2024
EMBARGOED UNTIL 26(th) NOVEMBER 2024
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the six months ended 30 September 2024
IG Design Group plc, one of the world's leading designers, innovators and
manufacturers across various celebration and creative categories announces its
unaudited results for the six months ended 30 September 2024 ('the period').
Financial highlights for the six months ended 30 September 2024:
Financial Highlights HY2025 HY2024
Revenue $393.1m $444.1m
Adjusted((a))
Operating profit $14.7m $38.2m
Profit before tax $13.3m $34.8m
Diluted earnings per share 11.2c 25.0c
Reported
Operating profit $7.1m $37.5m
Profit before tax $5.7m $34.1m
Diluted earnings per share 4.1c 24.4c
Net cash/(debt) as at the period end $7.4m $(15.1)m
((a)) Adjusted results exclude the impact of adjusting items - for further
detail see alternative performance measures reconciliation within the detailed
financial review
· Group revenue decline mainly impacted by previously communicated trends of a
competitive US retail environment experiencing subdued consumer sentiment
along with some timing
· Lower profits driven primarily by reduced revenue coupled with ongoing
material cost headwinds; with initiatives underway to improve profitability in
the second half of the year
· Adjusting items totalling $7.6 million (HY2024: $0.7 million) relate to the
closure of the China manufacturing site and restructuring in DG Americas
· Net cash of $7.4 million is a significant year-on-year improvement, with
continued strong cash management
Operational & strategic highlights
· Transformation of the Group continues, with particular focus on the DG
Americas division
· DG Americas CEO recruitment progressing well
· Closure of in-house China operations well underway with seasonal manufacturing
successfully completed and orders shipped on schedule
· Broader roll-out of our "shrink-free" Smartwrap(TM) innovation, resulting in a
reduction of 29 tonnes of plastic in the period
· Increased focus on bringing value to our categories through licencing and
branding, as well as the online channel
· Strategic investment in new bag-making capabilities in Europe now operational,
supporting customer demand for near-shoring solutions
· Developing supplier networks in Mexico and India
Outlook
· Remain on track to return adjusted operating profit margins to proforma
pre-pandemic levels of at least 4.5% in FY2025
· Business simplification, efficiency and cost-saving initiatives will drive
profit recovery in H2 such that we expect to deliver a profit in that period,
compared to a loss in that period last year
· The challenging market conditions and retail trends experienced in the period
are expected to continue in H2
· It is too early to comment on what impact, positive or negative, any future
changes in international trade tariffs resulting from the incoming US
administration will have on the Group
Stewart Gilliland, Chair, commented:
"Our focus on our path to growth remains steadfast, being a strategy of
winning with the winning retailers and reducing the complexity across our
business. We have made good progress throughout our turnaround, particularly
as we remain on track to return margins to pre-pandemic levels, and although
the broader conditions have perhaps become more difficult, our ambition has
not abated.
The challenging macroeconomic backdrop has undoubtably impacted the confidence
of retailers, but we are focused on navigating this landscape by prioritising
the essentials of improved delivery, increased collaboration and price
competitiveness, to a strong customer base with who we have longstanding
relationships.
Whilst the economic landscape remains uncertain, we continue to strengthen our
business model to better withstand market challenges and this, coupled with
our strong customer relationships and the commitment of our team, continue to
fill me with confidence that we will deliver profit growth.
I would like to extend my gratitude to my colleagues, whose hard work has been
essential in helping to drive the Group forward and continuing to advance on
our turnaround journey."
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
Harry Pardoe
Alma Strategic Communications
Rebecca Sanders-Hewett Tel: +44 (0)20 3405 0205
Sam Modlin designgroup@almastrategic.com
Will Merison
Overview
In the first half of the year, the Group experienced an 11% decline in revenue
driven by the previously communicated subdued consumer demand, which resulted
in cautious retailer ordering across some key markets, predominantly in the
US, and somewhat in the UK and Australia. Alongside this, prudent trading
decisions have been made in the US market when working with customers that
posed increased credit risk. These factors, coupled with some markedly
increased costs over the period, such as freight, resulted in a 62% drop in
adjusted operating profit to $14.7 million. Revenue in DG Americas declined
14%, across both seasonal and everyday categories, while DG International
declined 6%, with growth in continental Europe offsetting softening in the UK
and Australia markets.
Despite these pressures, operational improvements are underway which will
deliver further benefits and margin improvements in the second half of the
year, with key strategic initiatives, such as the cessation of in-house
manufacturing in China and a restructuring in DG Americas, beginning to take
effect. The second half of the year should also see some softening in freight
costs.
Net cash continues to be strong, and the Group has been cash positive for the
entire six month period. Cash balances have also exceeded prior year levels,
reflecting another period of strong cash management. The Group expects to end
the year in a strong net cash position.
Many of our teams and our customers have had to work through some very
challenging market conditions, as many consumers still struggle with higher
costs of living, higher interest rates and higher tax burdens over the period.
It is a testament to our teams and their high level of engagement with, and
dedication to the business that the Group is able to better able to navigate
this environment.
Outlook
This is our third year of the Group's three-year turnaround journey and
despite some of the markets we operate in becoming much tougher than when that
journey began, we remain confident that we can restore adjusted operating
profit margin to the Board's aspiration of at least the 4.5% that was the
proforma pre-pandemic margin following the acquisition of CSS in March 2020,
by the end of the year. This represents continued strong year-on-year
improvement in both profit and cash flow compared to the prior financial year,
albeit towards the lower end of the Board's profit expectations set at the
start of the year.
We continue to progress on our strategy, building the capabilities that our
customers value, which will give us competitive advantage and deliver
sustainable profitable revenue growth. However, we must continue with reducing
complexity that does not provide commensurate returns. The goal remains of
creating a more resilient business model that can better withstand market
challenges. Business model simplification, efficiency and cost-saving
initiatives across the Group, especially in DG Americas, will drive profit
recovery in the second half of the year such that we expect to deliver a
profit in that period, compared to a loss in that period last year.
The economic and geo-political backdrop remains fragile and uncertain in some
of our key markets, especially the US, with consumer sentiment understandably
subdued, resulting in a very competitive retail environment. This is prompting
us to remain cautious in how we manage our exposures. However, we remain
encouraged and confident that our strategy of winning with the winning
retailers is the right one. Our orderbook stands at 84% at October 2024 (86%
at this stage last year) which reflects the delayed ordering from customers in
the uncertain market conditions. Despite the slightly reduced orderbook this
year, we remain confident in the strength of our partnership with the winning
retailers. Our strong, longstanding relationships with our customers, along
with price competitiveness, increased collaboration and improved service are
key to navigating the challenges faced as a result of this uncertain
landscape.
During and since the recent US presidential elections, there has been much
speculation and press coverage on the subject of international trade tariffs.
It is not yet clear how the tariff regime in the US will change, nor how other
countries will respond to any changes. Therefore, the Board cannot yet comment
on how this will affect our future trading. As a domestic manufacturer of a
number of categories there may be some positive impact that offsets any
potential inflationary consequences. As the incoming new US Government's plans
are communicated, we will then be in a position to evaluate the opportunities
and risks that any changing tariffs will present.
The Group has reviewed the implications of the recent budget announcement by
the UK Government. As part of its forecasting, the Board anticipated some of
the changes that were announced such as the increase in the National Minimum
Wage. The reduction in the National Insurance threshold was not anticipated,
and when combined with the rise in the employers' National Insurance rate to
15% the effect is to add c.$0.7 million to the Group's annual operating costs
from next year.
Regional highlights
Revenue in the period declined 11% reflecting the continuation of trends seen
last year including lower consumer demand leading to reduced ordering by our
retail customers, as well as our careful management of our credit risk
exposure to some customers. This decrease in revenue, coupled with increased
sourcing, manufacturing and freight costs resulted in an adjusted operating
profit decline of 62% to $14.7 million. The split between our DG Americas and
DG International divisions is as follows:
Segmental Revenue Adjusted Operating Profit/ (Loss) Adjusted Operating Margin
% Group revenue HY2025 HY2024 % growth HY2025 HY2024 % growth HY2025 HY2024
62% DG Americas $m 241.8 282.4 (14)% 1.7 16.6 (90)% 0.7% 5.9%
38% DG International $m 151.3 161.7 (6)% 16.9 25.3 (33)% 11.2% 15.7%
Elims / Central costs $m - - (3.9) (3.7) -
100% Total $m 393.1 444.1 (11)% 14.7 38.2 (62)% 3.7% 8.6%
Design Group Americas
The DG Americas division, which makes up 62% of Group revenue, continued to
face revenue challenges during the period, with a 14% revenue decline to
$241.8 million (HY2024: $282.4 million). This decrease is driven by reduced
demand across both seasonal and everyday categories as our retail customers
ordered more cautiously in light of the economic backdrop and subdued consumer
sentiment. Whilst mix and pricing was positive, as we sought to recover
margin, volume was down significantly as customers reduced order quantities.
Some of this volume decline may be attributable to the uncertainty felt in the
run-up to the recent US presidential elections, though this is difficult to
gauge. Whilst we won additional tenders, the market remains very competitive
which has also reduced volumes and resulted in net lost business. Further to
this, our cautious approach to managing credit risk exposure, given the
current economic conditions, further impacted revenues. The year-on-year
revenue decline spans various product categories, most significantly impacting
more discretionary spend such as ribbons & bows (within gift packaging),
stationery and partyware (within party). This was particularly evident in the
value and mass channel, but which is expected to see some recovery in the
second half of the year as that channel gains most in the present consumer
climate. The Independents channel also experienced lower consumer demand, and
this looks more prolonged. Despite the challenges, there were positive
developments with craft and patterns continuing to perform well, and core gift
wrap showed resilience. It is also pleasing to see e-commerce sales have grown
year-on-year, reflecting our increased strategic focus on this.
The loss of revenue resulted in adjusted operating profit falling to $1.7m in
the period. Rising raw material, manufacturing and freight costs put further
pressure on profitability as they could not be fully recovered through pricing
given the market environment. While we successfully reduced overheads, these
savings were not enough to offset the combined impact of lower sales and cost
headwinds in the period, especially sea and road freight. There are further
business optimisation benefits that will materialise in the second half of the
year, resulting from initiatives such as the recent restructuring of the
commercial team to simplify and better align it with our simplified business
model. We are also continuing our site reviews, with two freehold properties
currently on the market. These efforts, amongst others, should benefit profits
in the second half of the year and the adjusted operating margin of 0.7%
should improve by the end of the financial year.
Following the departure of the DG Americas CEO in July 2024, we have been
actively recruiting a successor to accelerate and complete the division's
transformation and return it to profitable revenue growth. The process is
advancing well. In the interim, the US leadership team is reporting directly
to Paul Bal who is visiting the US regularly. To facilitate this, other Board
members and senior leaders are supporting Paul by covering some of his
Group-wide responsibilities.
Alongside the focus of developing our e-commerce capabilities, DG Americas has
continued to develop and broaden its supplier base. Near-shoring efforts
concentrated on Mexico continue, and we are establishing a sourcing team in
India.
Design Group International
DG International, which contributes over a third of the Group's revenue at
$151.3 million, experienced a 6% decline in revenue compared to the prior
year. This performance also reflects a continuation of the trends seen last
year, with growth from key customers in continental Europe helping to offset
ongoing softness in the UK and Australian markets. Whilst volume was only
slightly lower, pricing came under pressure compared to last year.
In the UK, following an extended period of high inflation, interest rates and
the cost of living crisis, consumer spending has continued to be suppressed,
particularly in more discretionary product categories such as party supplies.
Retailers have adopted a cautious approach to ordering, focusing on managing
inventory levels amid the weaker demand. In Australia, while the economy has
begun to show signs of recovery, consumer confidence remains subdued due to
household debt concerns and cost pressures, leading to similarly cautious
ordering patterns in non-essential categories. Continental Europe, by
contrast, has remained more resilient, driven by relatively resilient consumer
sentiment and supported by our strategy of winning alongside the winning
retailers.
As a result of these regional dynamics, DG International's homeware category
and activity products (within craft) performed strongly, gift packaging
delivered a stable performance, while the party category experienced the most
significant decline. Additionally, some orders have shifted into the second
half of the year, further impacting first-half comparisons, but benefitting
the second half.
Adjusted operating profit for the period was $16.9 million, down 33% from the
prior year. The adjusted operating margin of 11.2% was 450 bps lower,
primarily due to higher cost headwinds, particularly in freight, which more
than offset raw material cost savings, and could not be fully offset through
sales price recovery. Notwithstanding the tougher retail environment, our
International division has made operational improvements, including
restructuring shift patterns and better utilising or releasing surplus
warehousing space. These initiatives have helped mitigate some of the
pressures from rising costs. Additionally, as announced in June, the Board
took the strategic decision to cease in-house manufacturing in China to reduce
business complexity and streamline operations. The lower volumes produced
through the China site in the first half resulted in lower profits compared to
the prior period, but winding down the facility is expected to yield
significant benefits in the second half as no further costs will be incurred
with respect to the running of the site, and we therefore avoid the typical
seasonality-driven losses from this period.
Looking ahead, further improvements are anticipated in the second half of the
year from the aforementioned exit of in-house manufacturing in China, as well
as freight costs also turning more favourable. Therefore, although margins
were compressed in the first half, we are confident that recovery will be seen
by year-end as these operational efficiencies and strategic shifts such as the
wider roll-out of our "shrink-free" Smartwrap(TM) innovation begin to
materialise and support the strong trading performance, particularly in
continental Europe.
Our products, brands and channels
The Group is well-positioned to be the partner of choice for our retail
customers providing a diverse, yet complementary, product portfolio. As
regulatory and societal requirements become more onerous, we believe that we
are best placed to reliably service an increasingly complex market place for
our product categories.
Last year, we redefined our product categories to reflect a new structure for
our overall assortment, centred around two key themes: 'Celebrate' and
'Create'. This realignment is supported by our evolving organisational
structures, and it allows for more strategic focus on commercial and
competitive opportunities. Each of these themes is further divided into three
distinct product categories, ensuring clarity and alignment within our
business. This is set out in the table below:
Revenue by product category HY2025 HY2024
Gift packaging 45% $178.3m 44% $197.5m
Party 11% $45.4m 13% $57.7m
Goods not for resale 7% $27.4m 7% $30.1m
Celebrate 63% $251.1m 64% $285.3m
Craft 17% $65.0m 16% $70.4m
Stationery 6% $22.8m 7% $30.1m
Homeware 14% $54.2m 13% $58.3m
Create 37% $142.0m 36% $158.8m
Total $393.1m $444.1m
On the whole, the overall mix across the six new product categories remains
largely consistent with last year. Celebrate, in particular Gift packaging,
continues to be the Group's leading product category comprising gift wrap,
gift bags, ribbons & bows and cards. Whilst Gift packaging has declined
10% in the period, over half of this is considered phasing and is expected to
recover in the second half of the year. The decline in the Party and
Stationery categories reflect the underlying market conditions for more
discretionary spend areas, with the former particularly impacted by the
softened trading in the UK and Australia, and the latter most significantly
impacted by the lower customer orders in the US. Our Craft category has
remained resilient, despite being affected by the difficult US retail
environment.
Revenue by customer channel HY2025 HY2024
Value & Mass 71% $280.4m 72% $317.6m
Independents 16% $61.9m 16% $71.4m
Specialists 10% $39.9m 10% $46.6m
Online 3% $10.9m 2% $8.5m
Total $393.1m $444.1m
The Value & Mass channel, which represents over 70% of Group revenue, saw
a decline of $37.2m in the period, largely due to a generally subdued market
and lower customer ordering, though some of this reduction is anticipated to
shift into the second half of the year. Despite the economic pressures, this
channel demonstrated more resilience compared to the other 'brick and mortar'
channels. The Specialist channel faced the steepest decline (14%), reflecting
ongoing consolidation of the retail environment, especially in the US, coupled
with our decision to more prudently manage US retail credit risk. Pleasingly,
the Online channel revenue grew by 28% in the period, which is reflective of
our strategic focus on this channel, starting with our Craft assortments.
Revenue by season HY2025 HY2024
Christmas 50% $196.4m 50% $223.3m
Minor seasons 4% $17.2m 4% $19.2m
Everyday 46% $179.5m 46% $201.6m
Total $393.1m $444.1m
In the period there has been very little change to our seasonality, with all
seasons impacted to some degree by the revenue decline. Christmas revenue
decline is driven by our customers ordering more cautiously ahead of seasonal
peaks reflecting weakened consumer sentiment. Everyday sales are also
experiencing similar consumer sentiment challenges, however they have also
been particularly impacted by our credit risk exposure management of certain
US retail customers.
Revenue by brand HY2025 HY2024
Licensed 12% $47.7m 10% $45.2m
Customer own brand / bespoke 52% $205.9m 55% $243.1m
DG brand 36% $139.5m 35% $155.8m
Total $393.1m $444.1m
Licensed sales grew in the period with pockets of growth across the Group
reflecting our efforts to maintain and grow value across our overall product
assortment. We have extended our relationships in this area, particularly in
DG Americas, in some cases through collaborations with our larger customers.
This is an area we continue to seek and explore further opportunities in.
There is also increased focus on further strengthening our existing brands
such as Tom Smith®.
Environmental, Social and Governance (ESG)
The Group's sustainability framework, "Helping Design a Better Future,"
continues to guide our sustainability efforts across three key pillars:
People, Product, and Planet. Our strategy remains focused through bringing our
scale and influence to bear, especially when in collaboration with our
customers. We recognise that our responsibilities extend to our employees,
communities, and the environment, and we are committed to upholding the
highest ethical standards whilst minimising environmental impact and driving
positive change.
Our sustainability approach is ever evolving, in the FY2024 Annual Report we
continued to report progress against our key performance indicators (KPIs).
While we take pride in our progress, we acknowledge that we are still in the
early stages in our journey and there is always more that can be done. We will
continue to develop our sustainability framework, both internally-driven, but
also in collaboration with our customers' priorities and agendas in this area.
Specifically, this means refining our priorities and 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 remain central to our success, and we have furthered our investment in
employee engagement, leadership, and technical development initiatives. We are
proud of key achievements, such as a 10% reduction in accidents last year.
During the period, we conducted our first, full and comprehensive Group-wide
staff engagement survey which had a pleasingly high engagement rate of 78%.
The findings from the survey are now being followed-up with further engagement
and action-planning to make Design Group an even better place to work. As a
further enabler for increased Group-wide collaboration and leverage, we have
re-articulated the Group's purpose, vision, mission and values, and these now
better align with the new growth-focused strategy, and are being embedded
across the Group.
Our product innovations have driven sustainability improvements, notably the
expansion of our shrink-free Smartwrap™ solution, with over half of our
continental European gift wrap customers buying the solution in FY2024. And
now with the rollout in DG UK progressing well, and trials underway in DG
Americas, the growth is expected to continue into the future. The roll-out of
Smartwrap™ during the period has saved over 29 tonnes of plastic by removing
the shrink film from the end consumer giftwrap packaging. These innovations
align with, and help deliver, our customers' sustainability goals. During the
period we have also initiated a PIMS (Product Information Management System)
project to develop a Group-wide platform for capturing product information to
better support traceability and provenance.
Within Planet, we have made progress in managing climate-related risks and
reporting scope 1 and 2 emissions, while collaborating with major customers to
meet their initial environmental targets ahead of schedule. This marks a
significant step in our commitment to sustainability, as we work toward a more
sustainable future for both the business and the planet. Further to this,
during the period, we have seen solar panelling introduced in our contract
manufacturing sites in Mexico which make further progress on reducing
greenhouse gas emissions.
Detailed financial review
The Group's financial results are summarised below, setting out both the
reported and the adjusted results.
HY2025 HY2024
Reported Adjusting items Adjusted Reported Adjusting items Adjusted
$m $m $m $m $m $m
Revenue 393.1 - 393.1 444.1 - 444.1
Gross profit 65.1 2.2 67.3 93.0 0.4 93.4
Overheads (58.0) 5.4 (52.6) (55.5) 0.3 (55.2)
Operating profit 7.1 7.6 14.7 37.5 0.7 38.2
Net finance costs (1.4) - (1.4) (3.4) - (3.4)
Profit before tax 5.7 7.6 13.3 34.1 0.7 34.8
Tax (1.3) (0.9) (2.2) (9.5) (0.2) (9.7)
Profit after tax 4.4 6.7 11.1 24.6 0.5 25.1
Operating profit 7.1 7.6 14.7 37.5 0.7 38.2
Depreciation and impairment of PPE and software 6.8 (0.8) 6.0 6.9 - 6.9
Depreciation and impairment of right of use assets 7.7 - 7.7 7.6 0.6 8.2
Acquisition amortisation 0.9 (0.9) - 0.9 (0.9) -
EBITDA 22.5 5.9 28.4 52.9 0.4 53.3
Diluted earnings per share 4.1c 7.1c 11.2c 24.4c 0.6c 25.0c
Revenue for the period ended 30 September 2024 declined by 11% to
$393.1 million (HY2024: $444.1 million) driven by ongoing economic
challenges, subdued consumer sentiment, and careful management of credit risk
exposure. Revenue at constant currency was down 12%.
Adjusted operating profit decreased 62% year-on-year to $14.7 million
(HY2024: $38.2 million). The reduction in revenue as well as rising
manufacturing and freight costs put pressure on profitability, and while we
successfully reduced overheads, these savings were not enough to offset the
combined impact of lower sales and cost headwinds in the period. Furthermore,
the lower volumes produced through the China site, following the strategic
decision to exit in-house manufacturing, impacted profits, but will yield
benefits in the second half of the year with no further operating costs
expected to be incurred with respect to the running of the site. Adjusted
gross margin at 17.1% (HY2024: 21.0%) and adjusted operating margin at 3.7%
(HY2024: 8.6%) are both down year‑on-year, reflecting the increase in costs
and phasing shift in profitability into the second half of the year.
Similarly, the above, combined with higher adjusting items in the period,
resulted in an operating profit of $7.1 million (HY2024: $37.5 million). The
adjusting items of $7.6 million (HY2024: $0.7 million) are higher than the
prior year, with costs being incurred in the current year to allow for the
restructuring across the Group to drive business simplification. Further
details of the adjusting items are detailed below.
The above resulted in an adjusted profit before tax of $13.3 million (HY2024:
$34.8 million) and a reported profit before tax of $5.7 million (HY2024: $34.1
million). Adjusted profit after tax was $11.1 million (HY2024: $25.1 million)
with the reported profit after tax for the period at $4.4 million (HY2024:
$24.6 million).
Net finance costs
Net finance costs were lower than the prior year, being $1.4 million (HY2024:
$3.4 million). The average net cash was significantly more favourable,
largely due to a strong opening cash position.
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 to
operating profit for the six months ended 30 September 2024 include a net
expense of $7.6 million (HY2024: $0.7 million) as a result of the following
events:
Adjusting items HY2025 HY2024
$m $m
Integration and restructuring (costs)/income (6.7) 0.2
Amortisation of acquired intangibles (0.9) (0.9)
Total (7.6) (0.7)
Integration and restructuring costs - $6.7 million (HY2024: $0.2 million
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 costs incurred in HY2025 relate to the restructuring of the DG Americas
and DG UK (and its subsidiaries in Asia) businesses:
DG Americas business reorganisation: In the period ended 30 September 2024
further restructuring costs, relating to staff, of $2.2 million have been
recognised in DG Americas. In addition, a further $0.2 million of costs have
been incurred in relation to a warehouse consolidation project.
China site closure - Following the announcement in June 2024 of the closure of
Huizhou Gift International Greetings Co Ltd a subsidiary of DG UK, the
business has incurred $4.3 million of restructuring costs in the period ended
30 September 2024. Of this $4.3 million, $3.0 million relates to staff costs,
$0.8 million relates to asset write-downs, and $0.5m relates to other closure
costs. The asset write-down resulted from assets classified as held for sale
during the period being measured at the lower of their carrying amount and
fair value less costs to sell at the time of reclassification.
Amortisation of acquired intangibles - $0.9 million charge (HY2024: $0.9
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).
Taxation
The taxation charge for the half year on profit before tax is $1.3 million
(HY2024: $9.5 million) with the effective tax rate at 23.3% (HY2024: 27.9%).
The taxation charge on adjusted profit before tax is $2.2 million (HY2024:
$9.7 million) with the effective tax rate at 16.2% (HY2024: 27.8%).
The changes in profit mix across the various territories as well as the
changes across territories in the H1/H2 split are the main drivers that impact
the effective tax rate. The effective tax rate in the UK is currently 0% as
deferred tax is not recognised, and the H1/H2 profit split in this territory
is the largest contributor to the low effective rate in the period.
The key driver behind the higher effective tax rate between adjusted and
reported profit is adjusting items for which no tax relief has been
attributed. These are the costs associated with the China site closure given
there will be no future profits to offset these costs against and there is no
tax loss carry back claim in China.
Earnings per share
Diluted adjusted earnings per share at 11.2 cents (HY2024: 25.0 cents) is
reduced year-on-year driven by the decline in the underlying profit after tax
for the period. Diluted earnings per share at 4.1 cents (HY2024: 24.4 cents)
which is lower than adjusted diluted earnings per share reflects the adjusting
items charge in the period. Further details are set out in note 9.
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 is not recommending an interim dividend for the period
ended 30 September 2024 (HY2024: nil).
The Group currently intends to provide an update to its capital allocation
policy alongside the publication of the FY2025 results.
Cash flow and net cash
The Group ended the period with its net cash balance at $7.4 million (HY2024:
$15.1 million net debt). The year‑on‑year cash balance improved as a
result of a stronger opening cash position. While there were some improvements
in working capital these were more than offset by lower profit levels.
Cash flow HY2025 HY2024
$m $m
Adjusted EBITDA 28.4 53.3
Add back for share-based payment charge 0.7 0.6
Movements in working capital (96.2) (99.5)
Adjusted cash used by operations (67.1) (45.6)
Adjusting items within cash used by operations (4.7) (1.8)
Cash used by operations (71.8) (47.4)
Capital expenditure (net of disposals of property, plant and equipment) (3.1) (5.2)
Tax paid (3.2) (1.3)
Interest paid (1.0) (2.3)
Lease liabilities principal repayments (8.4) (9.7)
Dividends paid (including those paid to non-controlling interests) (0.7) -
FX and other 0.4 0.3
Movement in net cash/(debt) (87.8) (65.6)
Opening net cash 95.2 50.5
Closing net cash/(debt) 7.4 (15.1)
Working capital
Working capital levels of the Group increase steadily in the first half of the
year as manufacturing of seasonal product builds ahead of distribution. The
second half of the year then sees the borrowing levels of the Group decline
and typically move to a net cash position as Christmas-related receivables are
collected. The working capital outflow in the period was $96.2 million
(HY2024: $99.5 million), with a continued focus on working capital management
across the Group.
Adjusting items within cash generated from operations
During the period there was a $4.7 million net cash outflow (HY2024: $1.8
million) in relation to adjusting items, in the current year these cash
outflows mainly relate to the closure of the manufacturing site in China, as
well as staff redundancy costs in DG Americas. In the prior year, the $1.8
million outflow mainly related to costs incurred in previous years. Further
detail on adjusting items can be seen above.
Capital expenditure
Capital expenditure in the period was lower than the prior year at $3.1
million (HY2024: $5.2 million) with the strategic investments in the
innovative Smartwrap™ solution the most notable expenditure in the period.
Capital expenditure in the second half of the year is expected to be higher
with further investment in Smartwrap™, as well as continued ERP investment,
and relocation to a new warehouse facility for our DG Australia operations.
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 HY2025
when compared to HY2024 is that the decrease in revenue would have been $2.9
million higher if HY2024 revenues are translated at HY2025 foreign currency
exchange rates, and the decline in adjusted profit before tax would have been
$0.4 million higher.
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
Last year end the Group 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. The same
year-end adjustments have been included as opening balance adjustments to our
interim account. 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.
Refer to note 1 for additional information.
Financial position and going concern basis
The Group's net assets increased by $24.0 million to $379.9 million at
30 September 2024 (HY2024: $355.9 million restated). 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 period end with a net cash position of $7.4 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 potential sales impacts
from macroeconomic and subdued consumer sentiment in DG Americas, 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.
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.
Risk
The Group operates a decentralised model where the risk management framework
is well-established, with a bottom-up approach starting within each business
unit and the Group team and Board playing an overarching role to ensure
oversight. This allows for risks to be managed within the Board's tolerance
and appetite levels, as well as ensuring risk management is embedded within
strategic and operational decision making. The risk management framework,
along with the principal risks and uncertainties faced by the Group, remain in
line with those set out on pages 64 to 69 of our annual report and financial
statements 2024.
The key risks for the Group at present continue to be: Macroeconomic
uncertainty and Strategy. Macroeconomic uncertainty continues to be high
following the succession of geopolitical events impacting our business across
our suppliers, customers, consumers and workforce. The outlook is also set to
remain uncertain in the immediate future, which is also impacting consumers
with a high inflationary environment and subdued sentiment. We therefore need
to able to respond appropriately to external market conditions whilst
maintaining a clear focus on delivering our strategy, focusing on winning with
the winning retailers. Given the journey we are on to address the Group
strategy, this risk remains crucial ensure sustainable profit growth is
achieved.
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,
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.
By order of the Board
Rohan Cummings
Director
25 November 2024
CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHS ENDED 30 SEPTEMBER 2024
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
Note $000 $000 $000
Revenue 2 393,069 444,050 800,051
Cost of sales (327,953) (351,069) (658,532)
Gross profit 65,116 92,981 141,519
Selling expenses (20,890) (22,168) (44,143)
Administration expenses (37,439) (33,885) (70,045)
Other operating income 5 438 522 1,903
(Loss)/profit on disposal of property, plant and equipment 2 (246) 24 (238)
Profit on disposal of leases 70 27 -
Operating profit 3 7,049 37,501 28,996
Finance income 605 235 1,065
Finance cost (1,958) (3,683) (6,219)
Profit before tax 5,696 34,053 23,842
Income tax charge 6 (1,328) (9,485) 13,277
Profit for the period 4,368 24,568 37,119
Attributable to:
Owners of the Parent Company 3,974 23,911 35,625
Non-controlling interests 394 657 1,494
Earnings per ordinary share
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
Note
Basic 9 4.2c 24.6c 36.8c
Diluted 9 4.1c 24.4c 36.6c
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS ENDED 30 SEPTEMBER 2024
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Profit for the period 4,368 24,568 37,119
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Re-measurement of defined benefit pension and health benefit schemes - - (48)
Items that may be reclassified subsequently to profit or loss
Exchange difference on translation of foreign operations (10,174) (186) (5,502)
Transfer to profit and loss on maturing cash flow hedges 137 139 (285)
Net unrealised (loss)/gain on cash flow hedges (95) (407) 292
Income tax relating to these items - - -
(10,132) (454) (5,495)
Other comprehensive expense for the period, net of tax (10,132) (454) (5,543)
Total comprehensive (expense)/income for the period, net of tax (5,764) 24,114 31,576
Attributable to:
Owners of the Parent Company (6,628) 23,713 30,237
Non-controlling interests 864 401 1,339
(5,764) 24,114 31,576
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED 30 SEPTEMBER 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 2024 6,201 219,210 40,883 42 (5,740) 101,022 361,618 7,869 369,487
Profit for the period - - - - - 3,974 3,974 394 4,368
Other comprehensive (expense)/income - - - 42 (10,644) - (10,602) 470 (10,132)
Total comprehensive (expense)/income for the period - - - 42 (10,644) 3,974 (6,628) 864 (5,764)
Transactions with owners in their capacity as owners
Equity-settled share-based payments - - - - - 640 640 - 640
Tax on equity-settled share-based payments - - - - - 13 13 - 13
Options exercised 2 - - - - (2) - - -
Equity dividends paid - - - - - - - (668) (668)
Exchange differences on opening balances 377 13,352 2,490 - - - 16,219 - 16,219
At 30 September 2024 6,580 232,562 43,373 84 (16,384) 105,647 371,862 8,065 379,927
SIX MONTHS ENDED 30 SEPTEMBER 2023
Attributable to the owners of the Parent Company
Share
premium
and capital Non-
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
At 31 March 2023 6,059 214,845 40,069 38 (1,198) 68,033 327,846 6,530 334,376
Restatement (note 1) - - - - 802 (456) 346 - 346
At 1 April 2023 (restated note 1) 6,059 214,845 40,069 38 (396) 67,577 328,192 6,530 334,722
Profit for the period - - - - - 23,911 23,911 657 24,568
Other comprehensive (expense)/income - - - (271) 73 - (198) (256) (454)
Total comprehensive income/(expense) for the period - - - (271) 73 23,911 23,713 401 24,114
Transactions with owners in their capacity as owners
Equity-settled share-based payments - - - - - 599 599 - 599
Tax on equity-settled share-based payments - - - - - (5) (5) - (5)
Options exercised 16 - - - - (16) - - -
Exchange differences on opening balances (79) (2,878) (537) - - - (3,494) - (3,494)
At 30 September 2023 5,996 211,967 39,532 (233) (323) 92,066 349,005 6,931 355,936
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 - note 1) 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 - - - - - 1,432 1,432 - 1,432
Purchase of own shares - - - - - (3,548) (3,548) - (3,548)
Options exercised 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 policy, 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
reserves.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2024
Restated((a))
Unaudited Unaudited
as at as at As at
30 Sep 2024 30 Sep 2023 31 Mar 2024
Note $000 $000 $000
Non-current assets
Property, plant and equipment 60,855 66,961 67,062
Intangible assets 74,134 75,277 74,754
Right-of-use assets 54,212 62,106 59,115
Long-term assets 3,906 5,236 4,648
Deferred tax assets 39,035 12,164 39,099
Total non-current assets 232,142 221,744 244,678
Current assets
Asset held for sale 5,573 1,612 1,786
Inventory 217,921 218,794 165,401
Trade and other receivables 217,896 252,343 89,523
Income tax receivable 2,491 1,964 2,522
Derivative financial assets 10 403 664 68
Cash and cash equivalents 7 48,827 71,566 157,365
Total current assets 493,111 546,943 416,665
Total assets 2 725,253 768,687 661,343
Non-current liabilities
Loans and borrowings 8 (495) (1,005) (817)
Lease liabilities 47,601 54,836 51,751
Deferred income 1,738 1,930 1,837
Provisions 2,902 2,985 2,796
Other financial liabilities 10,961 14,082 14,307
Deferred tax liabilities 153 163 150
Total non-current liabilities 62,860 72,991 70,024
Current liabilities
Bank overdraft 7 40,677 64,261 63,655
Loans and borrowings 8 1,257 23,397 (700)
Lease liabilities 14,373 15,988 15,595
Deferred income 513 437 214
Provisions 6,549 9,088 7,527
Income tax payable 10,464 11,531 12,356
Trade and other payables 173,765 177,463 86,101
Other financial liabilities 34,868 37,595 37,084
Total current liabilities 282,466 339,760 221,832
Total liabilities 2 345,326 412,751 291,856
Net Assets 379,927 355,936 369,487
Equity
Share capital 6,580 5,996 6,201
Share premium 230,767 210,331 217,518
Capital redemption reserve 1,795 1,636 1,692
Merger reserve 43,373 39,532 40,883
Hedging reserve 84 (233) 42
Translation reserve (16,384) (323) (5,740)
Retained earnings 105,647 92,066 101,022
Equity attributable to owners of the Parent Company 371,862 349,005 361,618
Non-controlling interests 8,065 6,931 7,869
Total equity 379,927 355,936 369,487
a) Restated - see note 1 for further details
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHS ENDED 30 SEPTEMBER 2024
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
Note $000 $000 $000
Cash flows from operating activities
Profit for the period 4,368 24,568 37,119
Adjustments for:
Depreciation of property, plant and equipment 6,473 6,159 12,326
Depreciation of right-of-use assets 7,689 7,626 15,917
Amortisation of intangible assets 1,231 1,603 3,032
Net finance cost 1,353 3,448 5,154
Income tax charge/(credit) 1,328 9,485 (13,277)
Loss/(profit) on disposal of property, plant and equipment 246 (24) 238
Profit on disposal of leases (70) (27) -
Equity-settled share-based payments 725 630 1,502
Operating profit after adjustments for non-cash items 23,343 53,468 62,011
Change in trade and other receivables (125,359) (163,254) 3,997
Change in inventory (48,337) (14,596) 40,361
Change in trade and other payables, provisions and deferred income 78,512 76,974 (18,966)
Cash (used by)/generated from operations (71,841) (47,408) 87,403
Tax paid (3,167) (1,272) (5,159)
Interest and similar charges paid (979) (2,267) (4,536)
Net cash (outflow)/inflow from operating activities (75,987) (50,947) 77,708
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 81 42 782
Acquisition of business - - (496)
Acquisition of intangible assets (6) (93) (442)
Acquisition of property, plant and equipment (3,209) (5,123) (10,254)
Net cash (outflow)/inflow from investing activities (3,134) (5,174) (10,410)
Cash flows from financing activities
Purchase of own shares - - (3,548)
Net movement in credit facilities 2,000 24,000 -
Lease liabilities principal repayments (8,376) (9,666) (18,422)
Loan arrangement fees - (1,873) (2,045)
Dividends paid to non-controlling interest (668) - -
Net cash (outflow)/inflow from financing activities (7,044) 12,461 (24,015)
Net (decrease)/increase in cash and cash equivalents (86,165) (43,660) 43,283
Cash and cash equivalents and bank overdrafts at beginning of the period 93,710 50,234 50,234
Effect of exchange rate fluctuations on cash held 605 731 193
Cash and cash equivalents and bank overdrafts at end of the period 8,150 7,305 93,710
7
NOTES TO THE INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 SEPTEMBER 2024
1. Accounting policies
Basis of preparation
The condensed 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. Statutory accounts for the year ended 31 March
2024 were approved by the board of directors on 24 June 2024 and delivered
to the Registrar of Companies. The report of the auditors on those accounts
was unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under section 498 of the Companies Act 2006. These
interim financial statements have been reviewed, not audited.
This condensed consolidated interim financial report for the half-year
reporting period ended 30 September 2024 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 interim report does not
include all of the notes of the type normally included in an annual financial
report. Accordingly, this report is to be read in conjunction with the annual
report for the year ended 31 March 2024, which has been prepared in accordance
with UK-adopted international accounting standards and the requirements of the
Companies Act 2006, and any public announcements made by IG Design Group plc
during the interim reporting period.
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. IG Design plc
is a company limited by shares, incorporated and domiciled in the UK. Its
registered office is Howard House, Howard Way, Interchange Park, Newport
Pagnell, MK16 9PX. Its shares are listed on the Alternative Investment
Market (AIM).
Seasonality of the business
The business of the Group is seasonal and although revenues generally 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 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.
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
30 September 2023 balance sheet has been adjusted by $5.8 million to restate
the goodwill (included with in intangible assets) at acquisition and a
provision of $5.5 million (included within current liabilities) has been
raised. In addition, the post-acquisition impact 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 and functional 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.
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 above. Cash balances and borrowings are detailed in notes 7
and 8.
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 approval of these financial statements, 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 offered
flexibility during the months where the Group may have had 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 7 and
8.
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 31 March 2026.
These forecasts reflect the fact that the Group has returned to profitability
and continues to grow profitability and margins as a result. They also reflect
the seasonal operating cycle of the business and further stabilisation
associated with the DG Americas plan, following the decline in performance in
the first half of the year.
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$10 million reduction in sales
performance and related cash and working capital impacts; and
· the potential of further impacts resulting from the macroeconomic
environment and subdued consumer sentiment in DG Americas, reflected in a c$40
million reduction in sales and with associated effects on facility headroom.
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.
Significant accounting policies
The accounting policies adopted in the preparation of the interim report are
consistent with those of the previous financial year and corresponding interim
reporting period and the adoption of new and amended standards. A number of
new or amended standards became applicable for the current reporting period.
The Group did not have to change its accounting policies or make retrospective
adjustments as a result of adopting these standards.
2. Segmental information
The Group has one material business activity, being the design, manufacture
and distribution of various celebration and creative 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, the UK,
India and Mexico, being the overseas entities of US companies. The DG
International segment comprises the consolidation of the separately owned
business 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
liabilities and cash have 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 2024
Revenue - external 241,765 151,304 - 393,069
- inter-segment - - - -
Total segment revenue 241,765 151,304 - 393,069
Segment profit/(loss) before adjusting items 1,654 16,928 (3,922) 14,660
Adjusting items (note 3) (3,270) (4,341) - (7,611)
Operating profit/(loss) (1,616) 12,587 (3,922) 7,049
Finance income 605
Finance costs (1,958)
Income tax (1,328)
Profit for the six months ended 30 September 2024 4,368
Balances at 30 September 2024
Segment assets 411,186 244,920 69,147 725,253
Segment liabilities (199,201) (135,263) (10,862) (345,326)
Capital expenditure additions
- property, plant and equipment 1,349 1,855 5 3,209
- intangible assets - 6 - 6
- right-of-use assets 2,228 292 - 2,520
Depreciation - property, plant and equipment 3,207 3,253 13 6,473
Amortisation - intangible assets 1,190 41 - 1,231
Depreciation - right-of-use assets 5,273 2,412 4 7,689
(Loss)/profit on disposal of property, plant and equipment (258) 12 - (246)
(a) Including overseas entities for the DG Americas operating segment.
DG Central &
DG Americas((a)) International eliminations Group
$000 $000 $000 $000
Six months ended 30 September 2023
Revenue - external 282,392 161,658 - 444,050
- inter-segment - 33 (33) -
Total segment revenue 282,392 161,691 (33) 444,050
Segment profit/(loss) before adjusting items 16,568 25,315 (3,640) 38,243
Adjusting items (note 3) (742) - - (742)
Operating profit/(loss) 15,826 25,315 (3,640) 37,501
Finance income 235
Finance costs (3,683)
Income tax (9,485)
Profit for the six months ended 30 September 2023 24,568
Balances at 30 September 2023
Segment assets (restated)((b)) 474,630 249,221 44,836 768,687
Segment liabilities (restated)((b)) (246,665) (137,278) (28,808) (412,751)
Capital expenditure additions
- property, plant and equipment 3,659 1,418 46 5,123
- intangible assets 59 34 - 93
- right-of-use assets 1,207 144 - 1,351
Depreciation - property, plant and equipment 3,483 2,664 12 6,159
Amortisation - intangible assets 1,533 70 - 1,603
Depreciation - right-of-use assets 5,691 2,484 4 8,179
Reversal of impairment - right-of-use assets (553) - - (553)
Profit on disposal of property, plant and equipment - 24 - 24
(a) Including overseas entities for the DG Americas operating segment.
(b) Restated - see note 1 for further details.
DG Central &
DG 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
Loss 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 DG Americas operating segment.
Total administration expenses are $37.4 million (HY2024: $33.9 million;
FY2024: $70.0 million), which includes $0.8 million (HY2024: nil, FY2024: nil)
loss on re-measurement of assets held for sale (see note 3 for further
details).
3. Operating profit and adjusting items
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Operating profit analysed as:
Adjusted operating profit 14,660 38,243 31,098
Adjusting items (7,611) (742) (2,102)
Operating profit 7,049 37,501 28,996
Adjusting items
Profit on
Selling Admin Other disposal of
Cost of expenses expenses operating property, plant
Six months ended sales - costs - costs income and equipment Total
30 September 2024 $000 $000 $000 $000 $000 $000
Acquisition integration and restructuring costs((1)) 2,197 876 3,603 - 33 6,709
Amortisation of acquired intangibles((2)) - - 902 - - 902
Adjusting items 2,197 876 4,505 - 33 7,611
Profit on
Selling Admin Other disposal of
Cost of expenses expenses operating property, plant
Six months ended sales - costs - costs income and equipment Total
30 September 2023 $000 $000 $000 $000 $000 $000
Acquisition integration and restructuring costs/(income)((1)) 394 - (554) - - (160)
Amortisation of acquired intangibles((2)) - - 902 - - 902
Adjusting items 394 - 348 - - 742
Profit on
Selling Admin Other disposal of
Cost of expenses expenses operating property, plant
Year ended sales - costs - costs income and equipment Total
31 March 2024 $000 $000 $000 $000 $000 $000
Acquisition 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
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 (gains)/losses are broken down as follows:
(1) Acquisition integration and restructuring costs - $6.7 million (HY2024:
$0.2 million 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 costs incurred in HY2025 relate to the restructuring of DG Americas and DG
UK (and its subsidiary in Asia) businesses:
DG Americas business reorganisation - $2.4 million (HY2024: $0.4 million): In
the period ended 30 September 2024 further restructuring costs, relating to
staff, of $2.2 million have been recognised in DG Americas. In addition, a
further $0.2 million of costs have been incurred in relation to a warehouse
consolidation project, effecting warehouses in South Centre and Hagerstown.
(HY2024: $0.4 million).
China site closure - $4.3 million (HY2024: $nil): Following the announcement
in June 2024 of the closure of Huizhou Gift International Greetings Co Ltd a
subsidiary of DG UK, the business has incurred $4.3 million of restructuring
costs in the period ended 30 September 2024. Of this $4.3 million, $3.0
million relates to staff costs, $0.8 million relates to asset write-downs, and
$0.5m relates to other closure costs. The asset write-down resulted from
assets classified as held for sale during the period being measured at the
lower of their carrying amount and fair value less costs to sell at the time
of reclassification. This is a level 2 measurement as per the fair value
hierarchy set out in note 10. These are not considered operational costs
relating to the running of the business and are directly related to the
accounting for the closure.
Reversal of impairment - $nil (HY2024: $0.6 million credit: 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 in HY2024 of $0.6 million.
(2) Amortisation of acquired intangibles - $0.9 million charge (HY2024
$0.9 million)
Under IFRS, as part of the acquisition of a company, it is necessary to
identify intangible assets such as customer lists and brands which form part
of the intangible value of the acquired business, but which 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 considered
operational costs relating to the running of the acquired business and are
directly related to the accounting for the acquisition. These include brands
acquired as part of the acquisition of Impact Innovations Inc.
The cash flow effect of adjusting items
There was a $4.7 million net outflow in the current period's cash flow
(HY2024: $1.8 million, FY2024: $2.1 million) relating to adjusting items which
included $249,000 outflow (HY2023: $1.4 million, FY2024: $1.5 million)
deferred from prior years.
4. Share based payments charges
The total expense recognised for the period arising from equity-settled
share-based payments is as follows:
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Charge in relation to the 2022-2025 LTIP scheme 249 452 778
Charge in relation to the 2023-2026 LTIP scheme 287 147 654
Charge in relation to the 2024-2027 LTIP scheme 104 - -
Equity-settled share-based payments charge 640 599 1,432
Social security charge 85 31 70
Total equity-settled share-based payments charge 725 630 1,502
In August 2024, the 2024-2027 LTIP scheme was granted. The 2024-2027 LTIP
scheme is subject to certain performance criteria being achieved during a
three-year period: relative Total Shareholder Return versus FTSE SmallCap
(excluding Investment Trusts) constituents; and EPS growth, with an 'underpin'
condition to reduce vesting levels if unwarranted 'windfall gains' from share
price movements arise. There is a two-year holding period for certain
individuals.
5. Other operating income
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Grant income received 117 105 211
Sub-lease rental income 232 352 687
Other 89 65 1,005
Total other operating income 438 522 1,903
6. Taxation
Recognised in the income statement
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Current tax charge
Current income tax charge 1,185 6,351 10,531
Deferred tax charge/(credit)
Origination and reversal of temporary differences 143 3,134 (23,808)
Total tax in the income statement 1,328 9,485 (13,277)
Total tax charge/(credit) on adjusting items
Total tax on profit before adjusting items 2,161 9,670 8,528
Total tax on adjusting items (833) (185) (21,805)
Total tax charge/(credit) in the income statement 1,328 9,485 (13,277)
The tax expense has been calculated by applying the effective rate of tax
which is expected to apply for the year ended 31 March 2025 by jurisdiction,
using rates substantively enacted by 30 September 2024. The income tax expense
is recognised based on management's estimate of the weighted average effective
annual income tax rate expected for the full financial year. The estimated
average annual tax rate used for the period to 30 September 2024 was 23.3%
(HY2024: 27.9%). The changes in profit mix across the various territories as
well as the changes across territories in the H1/H2 split are the main drivers
that impact the effective tax rate. The tax effect of adjusting items are
recognised in the same period as the relevant adjusting item.
The deferred tax assets in the UK continue not to be recognised based on the
assessment of future taxable profits against which the asset could unwind.
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.
Based on an assessment of the data for the year ended 31 March 2023 undertaken
at 31 March 2024 year end, 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 for the year ended 31 March 2025 and
therefore has not been included in the ETR calculation for the period ended 30
September 2024.
7. Cash and cash equivalents/bank overdrafts
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Cash and cash equivalents 48,827 71,566 157,365
Bank overdrafts (40,677) (64,261) (63,655)
Cash and cash equivalents and bank overdrafts per cash flow statement 8,150 7,305 93,710
Net cash/(net debt)
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Cash and cash equivalents 8,150 7,305 93,710
Bank loans (2,000) (24,000) -
Loan arrangement fees 1,238 1,608 1,517
Net cash/(debt) as used in the financial review cash flow statement 7,388 (15,087) 95,227
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 8
for further details of the Group's loans and borrowings.
8. 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 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Non-current liabilities
Loan arrangement fees (495) (1,005) (817)
(495) (1,005) (817)
Current liabilities
Asset backed loan 2,000 24,000 -
Bank loans and borrowings 2,000 24,000 -
Loan arrangement fees (743) (603) (700)
1,257 23,397 (700)
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 did not increase the maximum facility
amount and offered flexibility during the months where the Group had 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.
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 would have been 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 the two
month period.
The financial covenants within the RCF agreement were 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 for the period it was in operation) is 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.
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.
9. Earnings per share
Unaudited Unaudited Twelve
six months six months months
ended ended((a)) ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
$000 $000 $000
Earnings
Earnings attributable to equity holders of the Company 3,974 23,911 35,625
Adjustments
Adjusting items (net of non-controlling interest effect) 7,611 742 2,102
Tax relief on adjustments (net of non-controlling interest effect) (833) (185) (21,805)
Adjusted earnings attributable to equity holders of the Company 10,752 24,468 15,922
Unaudited Unaudited Twelve
six months six months months
ended ended ended
In thousands of shares 30 Sep 2024 30 Sep 2023 31 Mar 2024
Issued ordinary shares at 1 April 98,279 97,993 97,994
Shares relating to share options 28 315 314
Less: shares held by Employee Benefit Trust (3,028) (1,031) (1,457)
Weighted average number of shares for the purposes of calculating basic EPS 95,279 97,277 96,851
Effect of dilutive potential shares - share awards 1,049 658 563
Weighted average number of shares for the purposes of calculating diluted EPS 96,328 97,935 97,414
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2024 30 Sep 2023 31 Mar 2024
Cents Cents Cents
Earnings per share
Basic earnings per share 4.2 24.6 36.8
Impact of adjusting items (net of tax) 7.1 0.6 (20.3)
Basic adjusted earnings per share 11.3 25.2 16.5
Diluted earnings per share 4.1 24.4 36.6
Diluted adjusted earnings per share 11.2 25.0 16.3
Adjusted earnings per share is provided to reflect the underlying earnings
performance of the Group.
Basic earnings per share
Basic EPS is calculated by dividing the profit for the period 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 per share
Diluted EPS is calculated by dividing the profits for the period attributable
to ordinary shareholdings by the weighted average number of shares outstanding
during the period, excluding own shares held by the Employee Benefit Trust,
plus the weighted average number of ordinary shares that would be issued on
the conversion of the potentially dilutive shares.
10. 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 and certain assets held for sale have been 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 2024, 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 2024 30 Sep 2023 31 Mar 2024
Forward exchange contracts carrying amount $000 $000 $000
Derivative financial assets 403 664 68
Derivative financial liabilities (319) (876) (26)
The Group has forward currency hedging contracts outstanding at 30 September
2024 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.
The Group had assets held for sale at 30 September 2024 of $855,000 (HY2024
$nil), which were measured at Level 2 fair value.
11. Capital commitments
At 30 September 2024, the Group had outstanding authorised capital commitments
to purchase plant and equipment for $4.9 million (HY2024: $4.0 million). At 30
September 2024, the Group has estimated lease commitments for leases not yet
commenced of $18.6 million (HY2024: $16.7 million).
12. Related parties
As at 30 September 2024, there are no changes to the related parties or types
of transactions as disclosed at 31 March 2024.
13. Non-adjusting post balance sheet events
There were no known material non-adjusting events which occurred between the
end of the reporting period and prior to the authorisation of this interim
report.
Independent review report to IG Design Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed IG Design Group plc's condensed consolidated interim
financial statements (the "interim financial statements") for the 6 month
period ended 30 September 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the AIM Rules for Companies.
The interim financial statements comprise:
• the Condensed Consolidated Balance Sheet as at 30 September 2024;
• the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Comprehensive Income for the period then ended;
• the Condensed Consolidated Cash Flow Statement for the period then
ended;
• the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
• the explanatory notes to the interim financial statements.
The interim financial statements have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the AIM Rules for Companies.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim financial statements are the responsibility of, and have been
approved by the directors. The directors are responsible for preparing the
interim financial statements in accordance with the AIM Rules for Companies
which require that the financial information must be presented and prepared in
a form consistent with that which will be adopted in the company's annual
financial statements. In preparing the interim financial statements, the
directors are responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend
to liquidate the group or to cease operations, or have no realistic
alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements based on our review. Our conclusion, including our Conclusions
relating to going concern, is based on procedures that are less extensive than
audit procedures, as described in the Basis for conclusion paragraph of this
report. This report, including the conclusion, has been prepared for and only
for the company for the purpose of complying with the AIM Rules for Companies
and for no other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where expressly
agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Milton Keynes
25 November 2024
REGISTERED OFFICE
Howard House
Howard Way
Interchange Park
Newport Pagnell MK16 9PX
IG Design Group plc
is registered in
England and Wales,
number 1401155
Visit us online at
thedesigngroup.com
ADVISERS
Financial and nominated
adviser and broker
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
Independent auditors
PricewaterhouseCoopers LLP
Exchange House
Central Business Exchange
Midsummer Boulevard
Central Milton Keynes
MK9 2DF
Public relations
Alma Strategic Communications
71-73 Carter Lane
London EC4V 5EQ
Share registrar
Link Group
Central Square
29 Wellington Street
Leeds LS1 4DL
By phone:
UK - 0371 664 0300
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international rate. Lines are open between 9.00 - 17.30, Monday to Friday
excluding public holidays in England and Wales.
By email: enquiries@linkgroup.co.uk (mailto:enquiries@linkgroup.co.uk)
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