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RNS Number : 6831T IG Design Group PLC 17 January 2025
17 January 2025
IG Design Group plc
(the 'Company' or 'Design Group')
Trading Update
IG Design Group plc, one of the world's leading designers, innovators and
manufacturers across various celebration and creative categories, announces an
update on trading for the period covering the nine months ended 31 December
2024 (the "Period"), material developments since then, and an update on its
outlook for the year ending 31 March 2025.
Key trading and operational developments:
· Transformation of the Group continues to plan, with business simplification,
efficiency and cost-saving initiatives particularly focused on the turnaround
of the DG Americas division
· Challenging market conditions and retail trends experienced in H1 across a
number of our markets have continued into H2, and they have more than offset
the benefits resulting from such initiatives
· Trading across both divisions since H1 has been impacted negatively over the
important Christmas season, with DG Americas particularly affected, due to
challenging retail conditions affecting customers
Post-period key trading and operational developments:
· As we previously communicated, a number of our retail customers in the very
competitive US retail market have experienced considerable distress, and have
in recent weeks entered protective arrangements or bankruptcy procedures. This
week, a major (4th largest) customer of our DG Americas division has
re-entered Chapter 11 protection. These events have required DG Americas to
establish significant provisions, circa $15m, to offset its exposure to the
amounts receivable from such customers as well as the inventory associated
with them
· Furthermore, the sales performance of our categories at the retail level
during the Christmas season versus customer expectations is also leading a
number of retail customers to reduce or delay their forward ordering,
impacting our future revenue projections, production scheduling and cost
absorption
· As recently announced, Sue Buchta, the new CEO for DG Americas, has now joined
the organisation. Sue brings an exceptional breadth of leadership experience
and commercial acumen from a career in the consumer products industry. With
her onboarding well underway, Sue will build on the turnaround plan, with a
particular focus on how our strategy returns DG Americas to profitable growth.
Outlook:
· Given the aforementioned events, as well as the continuation of challenging
retail conditions across both divisions, overall Group revenue for the year
ending 31 March 2025 is now expected to be c10% below last year, and therefore
below expectations, with both divisions expected to experience decline, with
DG Americas estimated to decline c13%, and DG International decline c1%
· Correspondingly, FY25 adjusted profit is now expected to be significantly
impacted, with profit delivery for the full year around break-even, and well
below last year, as well as being significantly below current market
expectations (believed to be $32.0m)
· Whilst the Group was on track to deliver its strategic expectations of
returning margins to above proforma pre-pandemic levels of at least 4.5% in
FY25, this will now not be realised and our aspirations will have to be
re-planned and re-set
· A strong net cash position is still expected to remain at the year-end, albeit
being lower than previous expectations given the reduced profit delivery and
expected lower receivables recovery due to customer in protective arrangements
or bankruptcy procedures. The Company also continues to expect cash proceeds
from property disposals.
· As communicated at results, it remains 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
· Under these challenging circumstances, at this stage, and until the recent
events are more fully assessed, the Board is no longer able to provide
guidance for the years beyond FY25. Pending any other material developments,
the Group will provide a further update on its results for the year ending 31
March 2025 in late April 2025, with fuller reporting on 17 June 2025 ("FY25")
which will include revised management expectations for FY26. Following the
recent trading performance of DG America, the Group would now expect to write
down the carrying value of its DG Americas division as part of its FY25.
Stewart Gilliland, Chair, commented:
"We have been making good progress throughout our turnaround, focusing on our
path to growth, developing a strategy of winning with the winning retailers
and reducing the complexity across our business. However, the continuing
challenging retail backdrop, especially in the US market has undoubtably
impacted the performance, position and confidence of many of our customers -
with clear winners and losers emerging. Whilst we do work with a significant
proportion of the winners, our exposure to some of those finding things more
challenging means that we are exposed to changing fortunes in the retail
space.
"We're very pleased to have someone of Sue's calibre leading our Americas
division. As a passionate and innovative leader, we are confident that her
experience both in our industry and adjacent industries will bring further
momentum to the transformation of this business.
"These developments and their impact on the Group are clearly very
disappointing, and we will continue to strengthen our business model to better
withstand the emerging market reality. Notwithstanding external factors,
fundamentally, our business is robust and we remain focused on our strong
customer relationships, and with the continued commitment of our strengthening
team, we will re-map our path to stronger and more consistent delivery.
"The Board is committed to re-introducing future guidance at the appropriate
time.
"I express my gratitude to my colleagues for their hard work over these recent
weeks."
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 Tel: +44 (0)20 3405 0209
Rebecca Sanders-Hewett designgroup@almastrategic.com (mailto:designgroup@almastrategic.uk)
Sam Modlin
Will Merison
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