REG - IG Design Group PLC - Trading Update

IG DesignAnnouncement

26/01/2022 07:05

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RNS Number : 6280Z  IG Design Group PLC  26 January 2022

26 January 2022

 

IG Design Group plc

("Design Group", the "Company" or the "Group")

 

Trading Update

 

 

IG Design Group plc, one of the world's leading designers, innovators and
manufacturers of celebrations, craft, gifting, stationery and creative play
products, today issues a trading update for the nine months ended 31 December
2021.

 

The Group has continued to deliver good revenue growth in the nine-month
period to 31 December 2021 with revenue at $828 million, up 12% like-for-like
on the prior year. The Group's focus on delivering high customer service
standards in the run up to Christmas, despite the challenging macroeconomic
supply chain issues, has helped its customers achieve strong sell through of
their seasonal product ranges and underpins the Company's continued long term
relationships with them.

 

Nevertheless, the Group experienced further supply chain delays and headwinds
which resulted in a significant volume of seasonal orders being processed and
shipped in a shorter time window than previously envisaged, thereby incurring
fulfilment related cost premiums. During the same period craft sales in the US
fell below the higher prior year Covid-19 levels, a trend that is now forecast
to continue into the final quarter of the financial year.

 

As a result, and despite the International business performing in line with
expectations, the US division has incurred significant supply chain costs,
specifically in relation to freight, labour and raw materials, which alongside
the lower craft revenues has resulted in Group adjusted operating margins in
the nine-month period of 4%, down 460 bps year on year.

 

This year to date performance, together with the expectation of the
continuation of the cost headwinds and lower craft sales in the final quarter,
means the Group now expects its full year FY22 adjusted operating profit to
reduce to a breakeven position, resulting in full year earnings significantly
below current market expectations.

 

Based on this updated guidance there will be no final dividend payment in
relation to the current year, however, beyond FY22 the Group plans to continue
paying dividends in line with its existing policy.

 

It is expected that these external challenges will continue into FY23 bringing
heightened uncertainty and it therefore remains too early to give firm
guidance on FY23 financial performance. Consumer demand remains strong and
discussions with customers and suppliers to mitigate the headwinds are
progressing. The Board will provide a further update to the markets in April
2022 as part of the year end trading update.

 

In addition to ongoing commercial and operational initiatives to mitigate
margin and supply chain challenges, the Board has taken the decision to review
the priorities and plans in the US to ensure the business is adopting the best
route moving forward. While the Board believes the Group's overall strategy
remains correct, the review will ensure the business is best placed to return
the Group to the financial performance expected. The Board will provide
further updates to the market in due course.

 

As at 31 December 2021 the Group was in a net cash position reflecting normal
working capital reduction following the seasonal peak. Further to the guidance
provided above, the current expected year end net cash position is forecast to
be around $40 million.

 

The Board is making good progress with the replacement CFO search process and
can also announce that Giles Willits has signalled his intention to extend his
notice period with the business, given the unprecedented macroeconomic
challenges.

 

Paul Fineman, Group CEO, commented:

 

"To say that I and the whole Board are disappointed with our financial
performance over FY22 to date is a huge understatement. Without any end to the
supply and cost challenges in sight we cannot simply wait for these external
challenges to improve. We have therefore instigated a review of our US
operations, analysing our cost base and identifying improvements that can be
made quickly. We remain confident in our long term strategy but with the
current challenges unlikely to ease in the short term we plan to undertake
this review to ensure it remains appropriate. We will update on progress over
the next few months."

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU No.
596/2014) which is part of UK law by virtue of the European Union (withdrawal)
Act 2018. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

 

For further information, please contact:

 

 IG Design Group plc                                       Tel: 0152 588 7310
 Paul Fineman, Chief Executive Officer
 Giles Willits, Chief Financial Officer

 Canaccord Genuity Limited (Nominated Adviser and Broker)  Tel: 0207 523 8000
 Bobbie Hilliam, NOMAD

 Alex Aylen, Sales

 Alma PR                                                   Tel: 0203 405 0205
 Susie Hudson

Sam Modlin

 

 

About IG Design Group plc

 

IG Design Group plc, the largest consumer gift packaging business in the
world, is a designer, innovator and manufacturer of products that help people
celebrate life's special occasions. Design Group works with more than 11,000
customers in over 80 countries throughout the UK, Europe, Australia and the
USA.

 

Its products are found in over 210,000 retail outlets, including several of
the world's biggest retailers, for example Walmart, Target, Amazon, Costco,
Lidl and Aldi. Its brand, Tom Smith, also holds the Royal Warrant for the
supply of Christmas crackers and Christmas wrapping paper to the Royal family.
Design Group is a diverse business operating across multiple regions,
categories, seasons and brands.

 

Its five major product categories are: Celebrations, Gifting, Craft &
creative play, Stationery and 'Not-for-resale' consumables. It offers
customers a full end-to-end service from design through to distribution,
offering both branded and bespoke products from the value-focused through to
the higher-margin ends of the market.

 

The Company was admitted to the Alternative Investment Market of the London
Stock Exchange in 1995 under the name 'International Greetings plc' and
rebranded to IG Design Group plc in 2016. For further information please
visit www.thedesigngroup.com.

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