REG - Portmeirion Group - Preliminary Results
17/03/2022 07:00
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RNS Number : 0539F Portmeirion Group PLC 17 March 2022
17 March 2022
Portmeirion Group PLC
('the Group')
Preliminary results for the year ended 31 December 2021
Record revenue performance and profit recovery delivered
Full year dividend restored
Financial summary
2021 2020 2019
£m £m £m
Revenue 106.0 87.9 92.8
Headline profit before tax(1) 7.2 1.4 7.4
Profit/(loss) before tax 6.0 (0.2) 7.1
EBITDA 10.7 5.1 11.4
Headline basic earnings per share(1) 38.85p 4.96p 56.32p
Basic earnings per share 23.58p (6.02)p 54.66p
Dividends paid and proposed per share in respect of the year 13.00p Nil 8.00p
Headlines:
Financial
· Record Group revenue of £106.0 million in the year to 31 December
2021, an increase of 21% over the prior year (2020: £87.9 million) and 14%
over pre Covid-19 level (2019: £92.8 million).
· Excellent Q4 seasonal trading performance despite ongoing global supply
chain inflation and disruption, demonstrating the strength of consumer demand
for our brands, progress with our online strategy and resilience of our
operations.
· Sales from our own ecommerce platforms increased by 16% over 2020 and
are now 81% above 2019 levels. Online sales now represent 50% of total sales
in our core UK and US markets in the year to 31 December 2021 (2020: 47%,
2019: 30%).
· Headline profit before tax(1) of £7.2 million (2020: £1.4 million,
2019: £7.4 million).
· EBITDA of £10.7 million (2020: £5.1 million, 2019: £11.4 million).
· Headline basic earnings per share(1) of 38.85p (2020: 4.96p, 2019:
56.32p).
· Dividend reinstated with final dividend proposed of 13.00p per share,
bringing total dividends paid and proposed to 13.00p (2020: £nil, 2019:
8.00p).
· Strong balance sheet maintained with net cash of £0.7 million at 31
December 2021 (2020: net cash £0.7 million, 2019: net debt £12.3 million).
Cash generative, which has allowed accelerated investments in our strategic
capabilities.
( )
(1)Headline profit before tax and headline basic earnings per share exclude
exceptional items - see notes 2 and 4.
Operational
· Sales growth across three key markets of the US, UK and South Korea.
Rest of the world sales also performed strongly and are 71% ahead of pre
Covid-19 levels.
· Substantial progress in developing online and digital capabilities,
including ongoing investment in online platforms and warehouse fulfilment
capabilities to support growth.
· Strong growth across all brands, particularly in Spode up 30% over
2020.
· Completed a number of key operational projects; hand and body line
extension at Wax Lyrical, automation investment in our UK ceramic factory and
mezzanine floor installed in our UK distribution centre.
· Extended our long term energy hedging programme to Q1 2024,
insulating the Group against the current volatility in energy prices.
· Continued to deliver an improved carbon emission performance whilst
undertaking a full evaluation of our ESG position in order to deliver a
sustainable forward strategy.
· Our UK businesses both achieved Investor in People (IIP) Platinum
accreditation in recognition of our commitment to leading, supporting and
improving our workforce.
Mike Raybould, Chief Executive commented:
"I am delighted with the significant progress we have made. Our record
sales reflect the strong progress we have made on our strategy whilst
successfully navigating the ongoing disruption from the pandemic. I would like
to thank our employees around the world for their tireless efforts against
this unprecedented backdrop.
We are focused on reaching an ever wider potential customer base - by
developing online sales channels, building out new geographies and leveraging
our brands and new product development more effectively. On each count, I am
pleased to report we have made strong progress in 2021.
We saw a very successful seasonal holiday trading period driven by customers
increasingly searching for our brands online as well as in physical retail
stores. We have a roadmap for developing our brands around the world and the
30% against 2020 (and 33% against 2019) growth in our Spode brand indicates
the potential opportunity ahead.
Our capital investments made in the last 12 months will enable increased
production in the current year and beyond whilst driving improved operating
margins through productivity gains.
We are mindful of the ongoing disruption to global supply chains and cost
pressures including container freight rates. We have long term energy
contracts in place until early 2024 that will protect the business in the
short term from increased energy costs but are watchful that consumers around
the world will require a period of adjustment to the inflationary pressures in
everyday spend. We remain confident we can continue to navigate those
challenges and that our brand strength and the changes we have made to the
business will allow us to continue to grow in the short term with improved
operating margins, and in the long term deliver significant gains in
profitability.
We are also pleased that the strong trading performance and operating cash
generated has allowed us to reintroduce our longstanding dividend to
shareholders."
Portmeirion Group PLC
Chairman and Chief Executive Statements
Trading
2021 was a record sales year for the Group driven by our strategy of reaching
a wider potential customer base through developing our online sales channels,
building new geographical markets and new product launches within our strong
family of brands.
We were pleased to see growth over 2020 and 2019 pre Covid-19 levels in our UK
and US core markets. We experienced a strong seasonal Christmas trading
period, particularly in the US market where new product launches and our
ability to handle drop ship order fulfilment enabled good levels of growth.
The work we did in 2019 and 2020 to safeguard our brands, long term, in South
Korea enabled a robust and sustainable sales performance in 2021 with sales
rising by 43% over the prior year.
We have continued our transformation to a more online and digital based
business and were delighted to see 16% sales growth in our own branded
websites despite high street retail stores reopening. 50% of total sales in
our core UK and US markets now go through all online channels (2020: 47%,
2019: 30%). Developing a deeper direct relationship with the end consumer
represents a huge opportunity for the Group and we will continue to invest in
our capabilities in this area. Our website customer lists grew by 25% in 2021
and by over 220,000 (110%) on a two year basis versus 2019. With the
opportunity of repeat purchases this is a key KPI for the Group and a positive
indicator of future sales growth potential.
The benefit of our diversified sales channels and increasing the number of
routes to market enabled a strong rebound in profitability in 2021 despite the
well-publicised disruption and significant cost increases in global supply
chains, particularly in container sea freight. The strength and depth of
experience of our supply chain teams around the world really shone through and
enabled our Q4 sales to beat our forecasts.
Full year headline profit before tax(1) was £7.2 million (2020: £1.4
million).
We are confident in our long-term strategy for growth and have a strong
balance sheet to support our ambitions. The Group continues to be cash
generative and we maintained a net cash positive position after net capital
expenditure of £4.6 million during the year.
Financial Headlines
· Revenue was £106.0 million, an increase of 21% on 2020 and 14% on
2019 pre Covid-19 levels.
· Like-for-like sales increased by 19% over the prior year.
· Own platform website sales increased by 16% to £11.4 million (2020:
£9.8 million) and by 81% on a YO2Y basis.
· Headline basic earnings per share(1) was 38.85p per share (2020:
4.96p).
· Final dividend proposed of 13.00p per share, bringing total dividends
paid and proposed to 13.00p (2020: £nil, 2019: 8.00p).
(1)Headline profit before tax and headline basic earnings per share exclude
exceptional items - see notes 2 and 4.
Dividend
The Board remains committed to a sustainable dividend policy with an
appropriate level of cover. Our policy will ensure that we retain and invest
enough capital in our business to drive long-term growth in our brands. We
currently consider that a level of cover at or close to three times the
dividends paid and proposed for the year is the appropriate rate for the
medium term to allow increased investment whilst providing a return for
shareholders.
During the Covid-19 pandemic we determined not to pay a dividend due to the
impact and disruption on our business.
Due to the strong trading performance and cash generation, the Board are
recommending a final dividend of 13.00p (2020: £nil). Total dividends paid
and proposed for the year would therefore be 13.00p (2020: £nil).
The Board
The Board keeps its composition and performance under constant review so as to
ensure that we have the appropriate skills, experience and resources to
deliver on our four main board requirements of: setting strategy, reviewing
progress against strategy, monitoring the resources required to deliver the
strategy and complying with relevant requirements be they legal or otherwise.
We undertake a formal board effectiveness review each year.
In order to promote best practice, each of the relevant committee meetings are
now chaired by one of the Non-executive directors; Andrew Andrea chairs the
Audit Committee, Angela Luger the Nomination Committee and Clare Askem the
Remuneration Committee.
Environmental, Social and Governance (ESG)
We are focused on doing business ethically and sustainably - for our
shareholders, the environment, our people, our customers, our suppliers and
the communities we operate in. The Group has a long history of innovation and
a strong track record of continual improvements in ESG.
We have made a very conscious decision to go beyond minimum compliance with
our ESG requirements and push our progress to a more targeted, deliverable
strategy. Throughout 2021, we worked to better understand the materiality of
our impacts and to make well-informed choices in focusing our resources and
efforts to deliver tangible strides towards a more sustainable world. We have
made significant progress in recent years in reducing our energy usage,
reducing carbon emission per tonne of sales product by 12% over 2020, and are
committed and look forward to publishing our ambitions in key areas later this
year. We are dedicated to delivering further significant improvements in
energy consumption and carbon emissions in the coming years.
Our commitment to our people, ethics and governance are unfaltering, supported
by our policies and processes. Further details on our corporate culture and
its integration within the Group can be found on our website,
www.portmeiriongroup.com, and in our annual report and accounts in the Section
172(1) statement - Engaging with key stakeholders to deliver long term
success, in the Our commitment to ESG section and the Corporate Governance
Statement.
We are again immensely proud of and thankful to all our people and teams for
their commitment and hard work throughout 2021. Our results, safety records
and staff well-being are testimony to all their efforts.
The Group is a committed member of the Quoted Companies Alliance ("QCA") and
has chosen to apply the QCA Corporate Governance Code as the most appropriate
for our size and structure. We have complied with the principles of the QCA
code throughout 2021 and continue to do so. Further details of our approach to
governance can be found on our website and in our annual report and accounts.
The Board consider our governance procedures to be appropriate for a company
of our size, however we are always open to improvement and welcome feedback
from shareholders.
Operational Overview
Revenue for the Group increased by 21% to £106.0 million (2020: £87.9
million).
The US is our largest geographical market representing 40% of Group sales. In
translated figures, sales in the US increased by 27% to £42.5 million (2020:
£33.5 million) due to the benefit of increased online channel sales and
successful product range extensions. Sales of our ever popular Spode Christmas
Tree range, loved for generations as part of the ritual of family seasonal
celebrations, grew strongly as we reached ever more customers through online
sales and new extensions to the range.
Our UK market is our second largest market and in 2021 accounted for 31% of
Group sales at £32.9 million (2020: £31.8 million), an increase of 3% over
the prior year. Excluding the sales of hand sanitiser in 2020 in response to
the Covid-19 pandemic, UK market sales increased by 14%.
As previously reported, we took action in 2019 and 2020 to reduce levels of
parallel shipping into our South Korean market, enabling overstocks to
subside. This allowed for a much more robust and sustainable level of sales in
2021, with good sell through to the end consumer. Sales into South Korea were
£18.7 million (2020 £13.1 million, 2019: £20.8 million). We are pleased
that the steps we took to stabilise this important market have been successful
and we expect to see growth from a much more solid base in the coming years.
Products and brands
Our brands and product ranges are key assets and a major economic driver for
the Group. Our six major brands - Portmeirion, Spode, Wax Lyrical, Nambé,
Royal Worcester and Pimpernel - have over 750 years of combined history and
are sold across the world. Their design and appeal are timeless and are much
loved in homes around the world.
We see significant potential to grow the sales footprints of our brands in the
future and have developed more structured roadmaps in the past 18 months to
help deliver on this potential. Our roadmaps include developing our heritage
ranges such as Portmeirion Botanic Garden and Spode Christmas Tree as well as
more contemporary ranges and licensed collaboration ranges. We are fortunate,
in Spode Christmas Tree and Portmeirion Botanic Garden, to have two of the
most successful and long selling ranges in the global tableware category.
Portmeirion Botanic Garden was first launched in 1972 and remains our largest
selling range. We estimate there are over 50 million pieces of Botanic Garden
in use worldwide today and there is a strong repeating sales element. To mark
its 50th year in 2022 we will be launching new range extensions to further
support and grow the appeal and longevity of this historic range.
The brand work we have done should allow us to accelerate and leverage our
brand portfolio across our diversified sales channels and markets. We are
pleased to see the early benefits of our work in 2021. Our Spode brand, which
celebrated its 250th anniversary in 2020, grew strongly in 2021, with sales up
30% on 2020 (up 33% on 2019). Key drivers included new product development and
line extensions within the ever popular Spode Christmas Tree range, new
contemporary range launches and the benefit of increased availability on
online channels. Similarly sales in our Pimpernel brand were up 28% and 26% on
a two year basis.
Strategic areas of focus
Our commercial strategy is focused on reaching more customers on more
occasions through:
· developing online sales channels;
· building new markets and geography;
· new product launches/new categories; and
· leveraging our brands more effectively.
Our operating strategy supports our commercial strategy and is to build
additional capabilities and increased efficiency/productivity in everything we
do.
As a result, our twin financial goals are:
1. consistent and sustainable sales growth; and
2. improved operating margins, thereby converting sales more effectively
into profit.
We have continued increased investment in these strategic areas despite the
short-term challenges of Covid-19, as we believe this will enable the Group to
prosper in the long-term.
As a result, the strategic capabilities of the business have taken a huge step
forward in the past eighteen months. We have significantly expanded our online
sales and digital marketing teams and re-organised our core market and export
sales teams to more effectively leverage our brands.
As we increasingly reach more end customers directly, we are able to build an
ever stronger emotional affinity for our brands and products and get much
improved feedback that helps us curate our ranges and design tomorrow's
products more effectively.
We are heavily investing in automation in our factories and warehouses,
building further capacity and efficiencies in production and increasing our
drop ship online warehouse fulfilment capabilities.
DRIVING SALES GROWTH THROUGH REACHING MORE CUSTOMERS ON MORE OCCASIONS
1. Developing online sales channels
Our brands are known and loved around the world. There is a huge opportunity
to reach more potential customers through online channels including our own
branded websites. The benefit of building an increasingly direct relationship
with the end consumer allows us to continue to communicate after the first
purchase, building a long term relationship with the customer. Increasingly we
see potential customers searching for 'our brand names' when searching online
for products within the categories we operate in. This affinity for our brands
and what they stand for is an important point of difference that we can
leverage further as we develop our web systems, data and analytics.
We have continued to invest through 2021 in improving our website sales
platforms and digital marketing assets. In the UK and US we have established
web sales platforms for all our core brands. Website sales increased by 16% in
2021, building on the significant growth we achieved in 2020 when retail
stores were shut for much of the year. On a two year basis, our own website
sales are up 81%. For our two core markets in the UK and US, sales through all
online channels (including third party retailer websites) increased to 50% for
the first time (2020: 47%, 2019: 30%).
In addition, we have built extra warehouse capacity for online/drop ship order
fulfilment that, for the UK, will allow us to ship approximately double the
number of direct to consumer parcels per day in the second half of 2022.
We have an ongoing roadmap of development to further boost our online sales
and digital marketing for all our brands. In 2022, we expect to launch new
websites in the UK, building on the website re-platforming project we executed
in the US in 2020. We are also working on improved CRM and launching Customer
VIP club programmes in 2022.
2. Building new markets and geography
Our products are sold in more than 70 countries around the world, however, our
three largest markets of the UK, US and South Korea account for 89% of all
Group sales.
We restructured our international sales teams in 2020 with a focus on
developing more sizeable rest of world markets over the next three to five
years.
We are pleased to report early positive results with our rest of world sales
growing by 27% in 2021 and we expect to see further strong growth in the next
three years. In 2021, we appointed a new distributor for all our brands in
China and we are excited to work with them on developing new customers in this
region. We have also seen good growth in 2021 in a number of other markets
including Australia and Scandinavia.
3. New product launches
Developing and launching new products and extending existing ranges is a key
strategic driver for sales growth. We have implemented new global processes
for product development and launch and have a future pipeline of development
going out two years.
In 2021 we managed to keep our product launch programmes on track despite
ongoing disruption to supply chains and sales markets from Covid-19. This
included a new Sophie Conran for Portmeirion tableware range, extensions to
our ever popular Spode Christmas Tree range, a new Spode range: Creatures of
Curiosity and new ranges for our Wax Lyrical and Nambé brands.
Part of our strategic focus in this area is to see an improved sales
contribution from new product launches. In 2021, new products launched (within
the last 12 months) generated over 10% of total Group sales. In 2022 we
celebrate the 50th anniversary of Portmeirion Botanic Garden and will be
launching new products under this range as well as substantial new launches
across our other brands.
We continue to focus on changing and improving packaging formats for our
products to enhance our customer proposition for online channels.
4. Leveraging our brands more effectively
Telling the story to the end consumer of what our brands and product ranges
stand for, increasingly in online channels, represents a significant
opportunity for the Group. We have increased resource, brand marketing and
digital marketing spend over the past two years and this will continue to
support our growth ambitions - and allow us to reach more potential end
customers on more occasions than ever before.
We are looking to leverage the Group's infrastructure more effectively across
all our consumer brands including the more recent acquisitions: Wax Lyrical
and Nambé.
In 2021, we combined UK sales teams across our tableware brands and home
fragrance division to allow more effective sales synergies.
Nambé brand sales increased by 23% to record a five year high despite ongoing
disruption from Covid-19 to sales markets through increased distribution,
including online and better stock availability.
Home fragrance sales, excluding hand sanitiser ranges (production started in
2020 in reaction to the pandemic), grew by 5% in 2021. Our Wax Lyrical brand
has been impacted by Covid-19 enforced retail closures for much of 2020 and
2021, however, we expect to see a return to growth in 2022 as restrictions are
lifted.
In addition, we now produce home fragrance products under our Sophie Conran
for Portmeirion and Royal Worcester Wrendale Designs tableware ranges. In
2022, we also expect to launch home fragrance products as an extension to our
hugely successful Portmeirion Botanic Garden range as part of our celebrations
of Botanic Garden's 50th year.
All of our brands grew in 2021 and we are pleased to see the early and
positive signs from our efforts to leverage our brands more effectively, with
Spode and Pimpernel sales up 33% and 26% respectively on a two year basis.
BUILDING OUR OPERATIONAL CAPABILITIES AND EFFICIENCIES
In order to support our growth and to deliver higher operating margins, the
Group has a clear plan to deliver increased production capacity, improved
productivity, lower costs per unit and increased capabilities.
We have increased capital investment in our operations in the past 24 months.
In our Stoke-on-Trent manufacturing facility we have designed new automation
that will add capacity and lower costs and reliance on manual labour. Despite
delays in final assembly of robotics due to the global shortage in silicon
chips, a number of these projects went live in late 2021 and early 2022.
Further investments are in progress for 2022 and 2023. As well as delivering
much increased levels of production output these investments will also support
our goal of reducing our cost per unit by at least 10%.
In our home fragrance manufacturing site, in Cumbria, we completed the build
of a new hand and body liquid production facility in the second half of 2021.
This facility will add capacity for production of core existing ranges of reed
diffusers and also allow the production and sales of hand and body liquid
soaps for the first time.
The experience and skills of our operations and supply chain teams shone
through 2021 as the business successfully coped with the immense disruption to
global supply chains and container freight shipping. The fact that the
business had a very strong Christmas trading period, resulting in a record
sales year for the Group, is a testament to the immense efforts and experience
of our teams.
We have a roadmap for increasing warehouse capacity for drop ship/online order
fulfilment in both our key UK and US markets. The first phase of this -
building a large mezzanine floor extension in our UK warehouse - was completed
in Q4 2021 and will support expected online sales growth in 2022.
In 2021, we continued to focus on improved procurement to drive efficiencies
in spending. In the first half of the year we also extended our long term
energy hedging programme to Q1 2024, insulating the Group against the current
volatility in energy prices.
Outlook
We are pleased with the progress we have made in 2021 - not only navigating
the ongoing challenges of Covid-19 as evidenced by our record sales
performance but also our continued track record on execution of our long term
strategy.
We remain cognisant of ongoing economic uncertainty, in particular the
challenges to the consumer of the rising costs of living including energy and
fuel costs, and the ongoing impact of the war in Ukraine. Likewise that it
will take time for global supply chains and container freight costs to
stabilise following Covid-19 and return to some sort of normality. We have
long term energy contracts in place until early 2024 that will protect the
business in the short term from increased energy costs but are watchful that
consumers around the world will require a period of adjustment to the
inflationary pressures in everyday spend.
However, we believe our investments in our brands, digital and online presence
and increasingly diversified sales channels and geography will enable us to
more than offset the afore-mentioned challenges and continue to grow in 2022
and over the coming years. Our operational investments in 2021 will enable
growth in production output and productivity in 2022 which, together with our
proven supply chain, should provide a solid foundation for future progress,
including further opportunities to improve margin.
We have a strong balance sheet, positive cash flow and a clear and focused
strategy which we believe will enable us to grow profitably over the short and
medium term.
Dick
Steele
Mike Raybould
Non-executive
Chairman Chief
Executive
This announcement contains inside information for the purposes of the retained
UK version of the EU Market Abuse Regulation No 596/2014 (UK MAR).
ENQUIRIES:
Portmeirion Group PLC:
Mike Raybould, Chief Executive +44 (0) 1782 743 443 mraybould@portmeiriongroup.com
David Sproston, Group Finance Director +44 (0) 1782 743 443 dsproston@portmeiriongroup.com
Hudson Sandler:
Dan de Belder +44 (0) 207 796 4133 ddebelder@hudsonsandler.com
Nick Moore nmoore@hudsonsandler.com
Panmure Gordon +44 (0) 207 886 2500
(Nominated Adviser and Broker):
Freddy Crossley Corporate Finance
Rupert Dearden Corporate Broking
Singer Capital Markets
(Joint Broker): +44 (0) 207 496 3000
Peter Steel / Asha Chotai Investment Banking
Rachel Hayes
Financial Review
Following the challenging backdrop of disruption and lockdowns of 2020, the
year started with the UK back in lockdown and significant inflation and
disruption to both supply chains and labour markets.
Set against this, the Group continued to invest in our strategy, confident in
our ability to generate growth and make progress against our strategic
targets.
We saw ongoing demand for our brands, growing well across all key geographical
markets and further increases in online channel sales.
Revenue
Revenue for the year ended 31 December 2021 totalled £106.0 million, an
increase of 21% over the prior year (2020: £87.9 million) and is now 14%
above pre-pandemic levels (2019: £92.8 million).
The Group has benefited from additional sales from recent acquisitions; Nambé
was acquired in July 2019 and Portmeirion Canada was fully acquired in August
2020. On a like-for-like basis revenue was 19% ahead of 2020.
Sales in our US market are translated from US dollars into sterling at the
average daily exchange rate. In 2021, sterling was stronger against the US
dollar than in 2020, therefore at a constant currency rate the Group's
like-for-like sales would have been 22% higher.
Geographical sales performance was strong overall and we saw growth across our
three key markets of the US, UK and South Korea.
The UK and US markets both achieved record sales levels, driven by online
where 50% of sales in these markets were via online channels (2020: 47%, 2019:
30%).
In South Korea, sales increased by 43% to £18.7 million (2020: £13.1
million) as consumer demand recovered from the prior year. We remain confident
that this is a sustainable base from which we can grow sales going forward.
Rest of the world markets increased by 27% to £12.0 million (2020: £9.4
million). This was driven by strong sales in Canada following the acquisition
of the remaining 50% of our distribution partner in 2020.
Profit
Headline profit before taxation(1) was £7.2 million, a significant
improvement over the 2020 level of £1.4 million and broadly in line with the
pre-pandemic level in 2019 of £7.4 million. Statutory profit before taxation
was £6.0 million (2020: loss before taxation £0.2 million, 2019: profit
before taxation £7.1 million).
This strong profit performance was despite ongoing disruption within a number
of our key sales markets.
In the UK, retail stores were closed for the first quarter of the year, and in
Canada for much of the first half of the year. This restricted sales channels,
although we were able to compensate for these shortfalls due to strong trading
performance elsewhere, including online sales in the UK and US.
The well-publicised supply chain inflation and delays impacted our markets
around the world, with container freight rates at five times 2019 levels.
Covid-19 restrictions and isolation periods also impacted absence rates in our
factories and warehouses, which in turn disrupted sales fulfilment and
production efficiency.
Set against these significant challenges, the Group managed this disruption
incredibly well and delivered a record sales performance, with profit before
taxation in line with 2019 levels.
(1)Headline profit before taxation excludes exceptional items - see note 4.
Interest and financing costs
Finance costs for the Group decreased by £0.1 million to £0.6 million (2020:
£0.7 million) due to reduced borrowing facilities as long term loans were
repaid.
We expect to see finance costs continue to reduce as long term loans are
repaid.
Taxation
The charge for taxation for the year was £2.7 million (2020: £0.5 million).
The increased charge is due to the improved profit performance over the prior
year and the one-off impact of the change in UK corporation tax rate from 19%
to 25% which caused a deferred tax charge of £1.1 million.
Dividends
The Board proposes a final dividend of 13.00p per share (2020: £nil) giving a
total dividend for the year of 13.00p (2020: £nil). The final dividend is
expected to be paid on 26 May 2022 to shareholders on the register on 22 April
2022 with an ex-dividend date of 21 April 2022.
We are reintroducing the dividend at a cover of three times in order to
balance our ongoing investment behind our growth strategy with providing a
positive return to shareholders.
Cash generation and net debt
At 31 December 2021, the Group had a net cash balance of £0.7 million
(comprising cash and cash equivalents of £7.6 million less borrowings of
£6.9 million). This compares to a net cash balance of £0.7 million at the
prior year end.
The Group continues to be cash generative; operating cash generated was £8.7
million (2020: £8.7 million) despite the increased cost of inventory due to
container freight prices.
The positive operating cash flows allowed the Group to continue to invest
behind our strategic goals; net capital expenditure was £4.6 million in the
year (2020: £2.8 million). This included the new hand and body line extension
at our home fragrance factory in the Lake District, factory automation
investments in our Stoke-on-Trent ceramic factory and a new mezzanine floor at
our main UK distribution site.
Bank facilities
The Group has agreed debt facilities with Lloyds Bank which totalled £22
million at the balance sheet date. This consists of a £10 million revolving
credit facility available until February 2025, a £5 million overdraft on an
annual renewal cycle and a £10 million term loan repayable by January 2025 of
which £7 million was outstanding at the year end. The overdraft and revolving
credit facilities were not being utilised at 31 December 2021.
Our business remains seasonal due to the second half weighting of our sales.
We therefore experienced, in common with previous years, a working capital
swing of around £8 million during the year as we built inventory to match our
sales demand. At the year end we had available cash and borrowing headroom of
£22.6 million. We believe our committed funding lines more than adequately
addresses this seasonal dynamic and is prudent.
Assets and liabilities
We had a net working capital outflow of £2.3 million which was driven by
increased inventory over the prior year. Increased receivable balances were
largely offset by increased payable balances due to an increase in year on
year trading activity.
Our inventory balance increased to £29.2 million (2020: £27.3 million) which
was predominantly caused by supply chain inflation due to increased raw
material and finished goods prices inflating the cost of goods. We continue to
monitor supply chain disruption and the impact it may have on our inventory
costs and lead times.
We continue to make contributions to our closed defined benefit pension scheme
and paid £1.35 million during the year, with agreed contributions of £0.9
million for 2022.
At the 2020 year end we had an accounting deficit of £2.7 million which had
increased due to a fall in the discount rate used to calculate scheme
liabilities, which is based on corporate bond yields.
As yields have recovered following the pandemic, we now have a £0.9 million
pension surplus under IAS 19. We continue to evaluate ways to de-risk the
volatility in the scheme, with a medium term aim to reach low-dependency.
At the year end we held treasury shares with a book value of £0.4 million in
order to satisfy employee share option schemes, which had been bought at an
average price of £1.87 per share, equating to 218,645 shares, having used
8,330 during the year. In addition, we also hold 234,523 shares in The
Portmeirion Employees' Share Trust. These shares have a book value of £2.7
million, having been bought at an average cost of £11.58 each. The balance of
these shares did not move during the year.
Goodwill and intangible assets on our balance sheet largely represent the
value of the acquired brands of Spode, Royal Worcester, Wax Lyrical and
Nambé, as well as computer software investment including our online webstore
and associated infrastructure. The balance of intangible assets increased
during the year as we continued to invest in our UK and US websites and
systems.
Treasury and risk management
The impact of transactional currency flows on the Group's profit is not
material due to the natural matching of revenue and costs across our global
businesses. In the year sterling strengthened against both the US dollar and
euro, but this had no material impact on Group profit.
When any anticipated exposure arises, our policy is to use appropriate hedging
instruments to mitigate that risk. We have a robust approach to managing risk
to deliver our strategy as explained in our annual report and accounts.
David Sproston
Group Finance Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2021
Notes 2021 2020
£'000 £'000
106,018
Revenue 3 87,854
Operating costs before exceptionals (98,375) (85,661)
7,643
Headline operating profit(1) 2,193
Exceptional items 4
- restructuring costs (1,036) (1,288)
- acquisition costs - (104)
- share issue costs - (55)
- Covid-19 costs - (176)
- GMP equalisation (197) -
6,410
Operating profit 570
12
Interest income 13
Finance costs 5 (580) (740)
Profit on sale of fixed assets 120 -
Share of results of associated undertakings - (75)
Headline profit before tax(1) 7,195 1,391
Exceptional items 4
- restructuring costs (1,036) (1,288)
- acquisition costs - (104)
- share issue costs - (55)
- Covid-19 costs - (176)
- GMP equalisation (197) -
Profit/(loss) before tax 5,962 (232)
Tax (2,721) (503)
Profit/(loss) for the year attributable to equity holders 3,241 (735)
Earnings per share 2
Basic 23.58p (6.02)p
Diluted 23.49p (6.02)p
Headline earnings per share(1) 2
Basic 38.85p 4.96p
Diluted 38.71p 4.95p
Dividends proposed and paid per share 6 13.00p 0.00p
All the above figures relate to continuing operations.
(1) Headline operating profit is statutory operating profit of £6,410,000
(2020: £570,000) add exceptional items of £1,233,000 (2020: £1,623,000).
Headline profit before tax is statutory profit before tax of £5,962,000
(2020: £232,000 loss before tax) add exceptional items of £1,233,000 (2020:
£1,623,000).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2021
2021 2020
£'000 £'000
Profit/(loss) for the year 3,241 (735)
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of net defined benefit pension scheme liability 2,505 (3,208)
Deferred tax relating to items that will not be reclassified subsequently to 267
profit or loss
843
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 64 (525)
Deferred tax relating to items that may be reclassified subsequently to profit 45
or loss
(26)
Other comprehensive income/(loss) for the year 2,881 (2,916)
Total comprehensive income/(loss) for the year attributable to equity holders 6,122 (3,651)
CONSOLIDATED BALANCE SHEET
31 December 2021
2021 2020
£'000 £'000
Non-current assets
Goodwill 8,978 8,978
Intangible assets 7,126 6,976
Property, plant and equipment 14,398 12,197
Right-of-use assets 6,409 6,910
Pension scheme surplus 910 -
Deferred tax asset - 119
Total non-current assets 37,821 35,180
Current assets
Inventories 29,224 27,313
Trade and other receivables 19,243 15,269
Current income tax asset 662 579
Cash and cash equivalents 7,616 11,590
Total current assets 56,745 54,751
94,566 89,931
Total assets
Current liabilities
Trade and other payables (16,245) (12,601)
Lease liabilities (1,695) (2,143)
Borrowings (1,986) (3,972)
Total current liabilities (19,926) (18,716)
Non-current liabilities
Pension scheme deficit - (2,721)
Deferred tax liability (2,609) (738)
Lease liabilities (5,119) (5,096)
Borrowings (4,965) (6,951)
Total non-current liabilities (12,693) (15,506)
(32,619) (34,222)
Total liabilities
Net assets 61,947 55,709
Equity
Called up share capital 710 710
Share premium account 18,344 18,344
Investment in own shares (3,124) (3,140)
Share-based payment reserve 128 152
Translation reserve 1,186 1,077
Retained earnings 44,703 38,566
Total equity 61,947 55,709
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share-based payment
Share Investment in own shares £'000 reserve
Share premium £'000 Translation Retained
capital account reserve earnings Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2020 555 7,310 (3,146) 87 1,628 41,664 48,098
Loss for the year - - - - - (735) (735)
Other comprehensive loss for the year
- - - - (551) (2,365) (2,916)
Total comprehensive loss for the year
- - - - (551) (3,100) (3,651)
Unclaimed dividends written back
- - - - - 4 4
Issue of own shares 155 11,074 - - - - 11,229
Cost of issue of own shares
- (40) - - - - (40)
Increase in share-based payment reserve
- - - 86 - (21) 65
Transfer on exercise or lapse of options
- - - (21) - 21 -
Shares issued under employee share schemes
- - 6 - - (6) -
Deferred tax on share- based payment
- - - - - 4 4
At 1 January 2021 710 18,344 (3,140) 152 1,077 38,566 55,709
Profit for the year - - - - - 3,241 3,241
Other comprehensive income for the year 109 2,772 2,881
- - - -
Total comprehensive income for the year
- - - - 109 6,013 6,122
Increase in share-based payment reserve
- - - 64 - - 64
Transfer on exercise or lapse of options
- - - (88) - 88 -
Shares issued under employee share schemes
- - 16 - - (16) -
Deferred tax on share- based payment
- - - - - 52 52
At 31 December 2021 710 18,344 (3,124) 128 1,186 44,703 61,947
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
2021 2020
£'000 £'000
Operating profit 6,410 570
Adjustments for:
Depreciation of property, plant and equipment 1,652 1,634
Depreciation of right-of-use assets 1,933 2,037
Amortisation of intangible assets 698 848
Charge for share-based payments 64 65
Charge for GMP equalisation 197 -
Exchange gain/(loss) 36 (100)
Loss on sale of tangible fixed assets 17 12
Operating cash flows before movements in working capital 11,007 5,066
(Increase)/decrease in inventories (2,071) 171
(Increase)/decrease in receivables (3,960) 4,398
Increase/(decrease) in payables 3,707 (913)
Cash generated from operations 8,683 8,722
Contributions to defined benefit pension scheme (1,350) (900)
Interest paid (368) (497)
Income taxes paid (461) (125)
Net cash inflow from operating activities 6,504 7,200
Investing activities
Interest received 12 12
Purchase of property, plant and equipment (4,511) (2,556)
Proceeds from disposal of property, plant and equipment 786 -
Purchase of intangible assets (843) (196)
Acquisition of subsidiary - (541)
Net cash outflow from investing activities (4,556) (3,281)
Financing activities
Equity dividends paid - -
Issue of own shares - 11,229
Costs taken directly through reserves - (40)
New bank loans raised - 5,000
Principal elements of lease payments (1,927) (2,084)
Repayments of borrowings (4,000) (7,581)
Net cash (outflow)/inflow from financing activities (5,927) 6,524
Net (decrease)/increase in cash and cash equivalents (3,979) 10,443
Cash and cash equivalents at beginning of year 11,590 1,151
Effect of foreign exchange rate changes 5 (4)
Cash and cash equivalents at end of year 7,616 11,590
NOTES TO THE PRELIMINARY RESULTS
1. This announcement was approved by the Board of
Directors on 16 March 2022.
1.1 The financial information set out above does not
constitute the Company's statutory accounts for the years ended 31 December
2021 or 2020, but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies and those for 2021 will
be delivered following the Company's Annual General Meeting. The auditors
have reported on those accounts: their reports were unqualified, did not draw
attention to any matters by way of emphasis and did not contain a statement
under Sections 498(2) or (3) of the Companies Act 2006.
1.2 For the year ended 31 December 2021 the Group has
prepared its annual report and accounts in accordance with accounting
standards in conformity with the requirements of the Companies Act 2006
(International Financial Reporting Standards).
This financial information has been prepared in accordance with the accounting
policies stated in the Group's financial statements for the year ended 31
December 2021.
The financial statements have been prepared on the historical cost basis, with
the exception of derivative financial instruments which are stated at their
fair value.
1.3 At the year end the Group had net cash of £0.7 million
(comprising cash and cash equivalents of £7.6 million less borrowings of
£6.9 million) and had unutilised bank facilities with available funding of
£15.0 million. Operating cash generation was strong during the year at £8.7
million (2020: £8.7 million).
The Group sells into over 70 countries worldwide and has a spread of
customers and sales channels within its major UK and US markets with
adequate credit insurance cover in export markets where required. The
Group manufactures approximately 40% of its products and sources the remainder
from a range of third-party suppliers.
Following the negative impact on trading in 2020 caused by the Covid-19
pandemic, the Group's performance rebounded strongly despite ongoing
disruption in key sales markets and to supply chain and labour markets.
However, the Group is well diversified and retains a strong balance sheet with
significant funding headroom available.
The Group has also produced a sensitivity analysis to its cash flow forecast
based upon current trading conditions, including the impact of the current war
in Ukraine, and to allow for further potential impact of Covid-19; this
demonstrated the Group still has sufficient headroom within borrowing
facilities.
After making enquiries and reviewing budgets and forecasts for the Group, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.
NOTES TO THE PRELIMINARY RESULTS
Continued
2. Earnings per share
The calculation of basic and diluted earnings per share is based on the
following data:
Earnings 2021 Earnings Earnings 2020 Earnings
£'000 Weighted per share £'000 Weighted per share
average (pence) average (pence)
number of number of
shares shares
Basic earnings per share 3,241 13,747,450 23.58 (735) 12,208,723 (6.02)
Effect of dilutive securities:
employee share options - 49,235 - - - -
Diluted earnings per share 3,241 13,796,685 23.49 (735) 12,208,723 (6.02)
Earnings 2021 Earnings Earnings 2020 Earnings
£'000 Weighted per share £'000 Weighted per share
average (pence) average (pence)
number of number of
shares shares
Headline basic earnings per share 5,341 13,747,450 38.85 605 12,208,723 4.96
Effect of dilutive securities:
employee share options - 49,235 - - 8,335 -
Headline diluted earnings per share 5,341 13,796,685 38.71 605 12,217,058 4.95
The calculation of basic and diluted headline earnings per share is based on
the following data:
( )
2021 2020
£'000 £'000
Profit/(loss) for the year attributable to equity holders 3,241 (735)
Add back/(deduct):
Exceptional items 1,233 1,623
Tax effect of exceptional items (223) (283)
Exceptional impact of remeasuring deferred tax balances from 19% to 25% 1,090 -
Headline earnings 5,341 605
NOTES TO THE PRELIMINARY RESULTS
Continued
3. Segmental analysis
The following tables provide an analysis of the Group's revenue by operating
segment and geographical market, irrespective of the origin of the products:
Operating segment 2021 2020
£'000 £'000
59,686 52,918
UK
North America 46,332 34,936
106,018 87,854
Geographical market 2021 2020
£'000 £'000
32,871 31,845
United Kingdom
United States 42,492 33,493
South Korea 18,680 13,071
Rest of the World 11,975 9,445
106,018 87,854
4. Exceptional items
Exceptional items by type are as follows:
2021 2020
£'000 £'000
1,036 1,288
Restructuring costs
Acquisition costs - 104
Share issue costs - 55
Covid-19 costs - 176
GMP equalisation costs 197 -
1,233 1,623
5. Finance costs
2021 2020
£'000 £'000
Interest paid 361 561
Interest on lease liabilities 192 179
Net interest expense on pension scheme asset 27 -
580 740
NOTES TO THE PRELIMINARY RESULTS
Continued
6. Dividends
The Directors recommend that a final dividend for 2021 of 13.00p (2020: £nil)
per ordinary share be paid. The final dividend will be paid, subject to
shareholders' approval, on 26 May 2022, to shareholders on the register at the
close of business on 22 April 2022. This dividend has not been included as a
liability in these financial statements.
7. Reconciliation of earnings before interest, tax,
depreciation and amortisation (EBITDA)
2021 2020
£'000 £'000
Operating profit 6,410 570
Add back:
Depreciation 3,585 3,671
Amortisation 698 848
Earnings before interest, tax, depreciation and amortisation 10,693 5,089
8. Government grants
Government grants were receivable as part of Government initiatives to provide
financial support as a result of Covid-19 lockdowns. There are no future
related costs in respect of these grants which are receivable solely as
compensation for past expenses.
The Group received funding from the UK Government's 'Coronavirus Job Retention
Scheme' and retail support grants, the US Government's 'Paycheck Protection
Programme' and the Canadian Government's 'Emergency Wage Subsidy'. In total
this support amounted to £316,000 (2020: £3,475,000) and is included as a
credit within operating costs.
9. Post balance sheet events
Subsequent to the year end, the Group agreed an extension to its existing
£10,000,000 revolving credit facility until February 2025.
10. Availability of annual report and accounts
The accounts for the year ended 31 December 2021 will be posted to
shareholders on or before 1 April 2022 and laid before the Company at the
Annual General Meeting on 19 May 2022. Copies will be available from the
Company Secretary at Portmeirion Group PLC, London Road, Stoke-on-Trent,
Staffordshire, ST4 7QQ, or from the website www.portmeiriongroup.com.
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