REG - Portmeirion Group - Preliminary Results
23/03/2023 07:15
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RNS Number : 9318T Portmeirion Group PLC 23 March 2023
23 March 2023
Portmeirion Group PLC
(the "Group")
Preliminary results for the year ended 31 December 2022
Another record sales year shows continued resilience of our
brands and strong global demand
Portmeirion Group PLC, the owner, designer, manufacturer and omni-channel
retailer of leading homeware brands in global markets, is pleased to announce
its preliminary results for the year ended 31 December 2022.
Financial summary
2022 2021 2019
£m £m £m
Revenue 110.8 106.0 92.8
Headline profit before tax(1) 8.0 7.2 7.4
Profit before tax 7.0 6.0 7.1
EBITDA 12.1 10.7 11.4
Headline basic earnings per share(1) 46.59p 38.85p 56.32p
Basic earnings per share 40.39p 23.58p 54.66p
Dividends paid and proposed per share in respect of the year 15.50p 13.00p 8.00p
Headlines:
Financial
● Record Group revenue of £110.8 million in the year to 31 December 2022, an
increase of 5% over the prior year (2021: £106.0 million) and 19% over pre
Covid-19 level (2019: £92.8 million).
● Headline operating margin(1) increased from 7.2% to 7.8% and we reiterate our
long-term ambition to improve the operating margin to 12.5%.
● Excellent Christmas and Thanksgiving trading period with strong demand across
our portfolio of consumer goods brands.
● Sales from online platforms continue to grow despite physical retail stores
reopening, and now represent 51% of total sales in our core UK and US markets
in the year to 31 December 2022 (2021: 50%, 2019: 30%).
● Headline profit before tax(1) of £8.0 million now ahead of pre-Covid levels
(2021: £7.2 million, 2019: £7.4 million).
● Total dividends paid and proposed of 15.50p per share, a 19% increase over the
prior year (2021: 13.00p, 2019: 8.00p), reflecting improved trading
performance during the year. Final dividend proposed of 12.00p per share.
● Inventory levels remain elevated at year end to avoid supply chain disruption
and this is expected to normalise in 2023.
● Strong balance sheet and significant headroom within current borrowing
facilities.
(1)Headline profit before tax, headline operating margin and headline basic
earnings per share exclude exceptional items - see notes 2 and 4.
Operational
● Improved productivity in Stoke-on-Trent ceramic factory as we start to obtain
the benefits from automation capex.
● Encouraging growth from South Korea, Canada and China, following strategic
focus on international markets.
● AromaWorks London brand and intellectual property acquisition in August 2022
adding scale and synergies to home fragrance operations.
● Collaboration between Spode and Kit Kemp Design Studio for an initial period
of five years, with launch date set for April 2023.
● New product launches continue to represent more than 10% of Group sales,
including new collections to celebrate the 50(th) anniversary of Portmeirion
Botanic Garden.
Current Trading & Outlook
● Trading in the first few months of 2023 is in line with our expectations and
our forward order books remain healthy.
● Seeing an encouraging customer outlook although remain cautious due to the
ongoing macroeconomic uncertainty.
● Remain focused on long-term growth and margin improvement opportunity and
confident in continued progress against our strategy.
Mike Raybould, Chief Executive commented:
"I am delighted that our brands continue to resonate so well with customers
around the world despite the tougher economic backdrop. We have benefited from
our diversified, global sales geography with 75% of sales now outside of the
UK. We saw strong sell through during our seasonal / Christmas trading with
increased online penetration and successful new product extensions. Ongoing
productivity improvements in our UK ceramic factory with the continued
investment in automation, together with our long-term energy price hedge in
place until Q1 FY24, helped us to mitigate higher input cost inflation and
still grow operating margins.
We have a strong new product pipeline and look forward to launching our new
product ranges over the next 18 months. Our ambition is to support and extend
our key heritage ranges including Portmeirion Botanic Garden and Spode
Christmas Tree as well as taking further share in contemporary product
categories. We will launch our Spode tableware and giftware collaboration with
leading British interior designer Kit Kemp in New York and London in April
2023.
Trading for the first few months of 2023 remains in line with our expectations
and we enter the new year with a healthy forward order book. We continue to
focus on delivering on our significant long-term growth and margin improvement
opportunity. The macroeconomic uncertainty looks to continue however our
global diversification, strong balance sheet and encouraging customer outlook
means we are well positioned for the year ahead."
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 portmeirion@hudsonsandler.com
Nick Moore
Emily Brooker
Shore Capital: +44 (0) 207 408 4090
(Nominated Adviser and Joint Broker):
Patrick Castle Corporate Advisory
Lucy Bowden Corporate Broking
Malachy McEntyre
Singer Capital Markets
(Joint Broker): +44 (0) 207 496 3000
Peter Steel Investment Banking
Asha Chotai
NOTES TO EDITOR:
Portmeirion Group PLC is a leading, omni-channel British ceramics manufacturer
and retailer of leading homeware brands.
Based in Stoke-on-Trent, United Kingdom, the Group owns six unrivalled
heritage and contemporary brands, with 750+ years of collective heritage;
Portmeirion, Spode, Royal Worcester, Pimpernel, Wax Lyrical and Nambé.
The Group serves markets across the world, with global demand driven by
diversified international markets including the key geographies of the US, UK
and South Korea.
Portmeirion Group has a proven capital-light, well developed and self-funded
growth strategy focused on building a wider customer base and growing the
sales footprint of its brands, through:
· Building and growing international sales markets
· Developing online sales channels in core markets
· Designing and launching new product to widen appeal and take market
share
· Leveraging brands and extensive product ranges
Portmeirion Group PLC
Chairman and Chief Executive Statements
Trading
2022 was another record sales year for the Group as our strategy of developing
geographic sales markets and increasing online sales penetration continues to
yield benefits.
Sales grew by 5% over 2021 and are now 19% above 2019 pre-Covid levels as our
portfolio of brands showed their resilience and continued to resonate globally
with consumers.
We experienced another strong seasonal Christmas and Thanksgiving trading
period - particularly in the US, now our largest sales market and representing
40% of the Group's turnover. Our Spode Christmas Tree range, first launched in
1938, remains a US market favourite and continues to grow driven by new
product launches and increased online exposure through retailer websites and
our own ecommerce channels. It is noticeable that whilst being seasonally
weighted, the festive period is also our most reliable in terms of forecasting
sales with a large number of repeat customers returning each year to place
orders to add to their collections.
Our South Korean sales market grew strongly and is now back to historical
levels of trading as we continue to innovate and introduce new product ranges
and increase online exposure.
In our core UK and US markets we have continued to see the benefits of growth
in online channel exposure despite physical retail reopening in 2022 - with
51% of all sales going through online channels (2021: 50%, 2019: 30%).
Our ability to pass on price rises and achieve factory productivity gains from
capital investments, together with the strength and depth of our supply chain
experience in managing high input cost inflation, has allowed us to grow
headline profits by 11% over 2021 and increase operating margins by 8%.
Full year headline profit before tax(1) was £8.0 million (2021: £7.2
million).
We are confident that we can continue to grow our sales footprint over the
next 3-5 years driven by new geographic markets, further online channel
penetration and product innovation within our core markets. Simultaneously, we
are focused on our long-term objective of growing our operating margins back
to historical highs of around 12.5% (2022: 7.8%, 2021: 7.2%).
Financial Headlines
Revenue for the year ended 31 December 2022 was up by 5% from 2021 and 19%
from pre Covid-19 levels at £110.8 million, in line with market consensus.
This has been achieved by a strong Christmas trading period, as well as
continued growth of our online sales platforms, especially in our core UK and
US markets (51% of total sales in 2022). Our long-term ambition is to improve
operating margins to 12.5% and this has moved in the right direction with
headline operating margins(1) increasing to 7.8% (2021: 7.2%). Additionally,
headline basic earnings per share(1) was 46.59p per share (2021: 38.85p, 2019:
56.32p).
(1)Headline profit before tax, headline operating margin 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
sufficient 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.
Due to the improved trading performance in the year, the Board is recommending
a final dividend of 12.00p (2021: 13.00p). Total dividends paid and proposed
for the year would therefore be 15.50p per share, an increase of 19% over the
prior year (2021: 13.00p).
The Board
On 22 March 2023, in the interest of our continued commitment to good
practice, the Board appointed Angela Luger as the Senior Non-executive
Director. Angela has been a Non-executive Director since 2019. During
2022, we strengthened our Global commercial leadership with the appointment
of Bill Robedee as Global Sales Director in addition to his role as President
of Portmeirion North America.
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 regulatory or governance requirements be
they legal or otherwise. We undertake a formal board effectiveness review each
year.
Environmental, Social and Governance (ESG)
We are focused on being an ethical and sustainable business and recognise our
responsibility to our shareholders, employees, customers, communities and the
people that bring our products into their homes. We believe that operating in
a sustainable way across the environment, all people and communities is
critical to the long-term health of our business and the world we operate
in. Following analysis work over the last two years, we are now at a pivotal
stage in developing and delivering a sustainability plan for our global
business. In Q2 2023, we will be announcing our Crafting a Better Future
sustainable business strategy and roadmap.
The Group has a long history of innovation and a strong track record of
continual improvements in ESG. Focusing on our operation with the highest
energy usage, being the Stoke-on-Trent tableware manufacturing facility, we
were pleased to see a further reduction in carbon emission per tonne of
saleable product by 10% in 2022 over 2021. 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 is unfaltering, supported
by our policies and processes. Further details about 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.
The commitment of our employees to making beautiful products ethically is
valued by the Board and we thank them for their efforts in delivering record
results. Our culture and staff well-being initiatives support our ethos to
be an employer of choice. This is demonstrated by both our UK businesses
being Investor in People Platinum level accredited.
We have complied with the principles of the Quoted Companies Alliance ("QCA")
Corporate Governance Code throughout 2022 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 considers our governance procedures to
be appropriate for a company of our size, however we are always open to
improvement and welcome feedback and engagement with all shareholders.
Shareholders are encouraged to contact us via the email address
shareholderenquiries@portmeiriongroup.com
(mailto:shareholderenquiries@portmeiriongroup.com) .
Operational Overview
Revenue for the Group increased by 5% to £110.8 million (2021: £106.0
million).
The US is our largest geographical market representing 40% of Group sales. In
translated figures, sales in the US increased by 3% to £43.8 million (2021:
£42.5 million) with the continued benefit of online channel penetration and
new product launches. 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 channels
and new SKU extensions to the range.
Our UK market is our second largest market and in 2022 accounted for 25% of
Group sales at £28.3 million (2021: £32.9 million), a decrease of 14% over
the prior year as UK consumers reacted to cost of living pressures.
Sales into South Korea increased to £26.7 million (2021: £18.7 million) and
have recovered back to historical levels following the steps we took in
2019/20 to stabilise and maintain sales at a sustainable level in this
important market. Sales benefited from our strategy of increasing online
channel exposure and the sale of new and different ranges outside of our core
Portmeirion Botanic Garden tableware ranges including home fragrance and more
contemporary ranges. Portmeirion Botanic Garden remains a hugely popular range
in South Korea and ranks as one of the very top 'online search terms' in the
tableware category.
Products and brands
Our brands and product ranges are a major economic asset for the Group. Our
six major brands -
Portmeirion, Spode, Wax Lyrical, Nambé, Royal Worcester and Pimpernel
together have over 750 years of combined history. Their designs are well
recognised and loved by consumers around the world.
We have a number of product ranges that have huge longevity and long running
customer repeat purchase. Portmeirion Botanic Garden was launched 50 years ago
and continues to sell well around the world today. Spode Christmas Tree
launched in 1938 is a top US Christmas tableware range. We continue to design
new extensions to ensure these ranges remain relevant for consumers and to
extend their appeal around the world. Together the two ranges account for
approximately 40% of sales and are two of the most successful global tableware
ranges, providing the Group with a very reliable base of sales each year.
Additionally, we have a growing portfolio of contemporary product ranges,
including Sophie Conran for Portmeirion, and an exciting roadmap of new
product planned for launch over the next 18 months.
We are focused on growing both our heritage range sales footprint and
increasing our contemporary market share through new product development,
increasing online sales channel penetration and developing new geographical
markets.
Our Spode brand, which is 252 years old, grew by 4% in 2022 and is now 39% up
on 2019 pre Covid levels. We expect Spode to continue to grow in the next 3-5
years.
Our Nambé brand, acquired during 2019, grew by 13% as we continue to execute
on sales synergies and is now 17% above its pre-acquisition sales base at
constant currency.
Sales from our home fragrance division, Wax Lyrical, fell by 7% as its UK
customer base continued to be impacted by Covid and the impact of the cost of
living crisis hit consumer spending in the home fragrances category. In the
second half of 2022, we acquired the brand of AromaWorks London, which
operates in the adjacent health and wellbeing category with customers
including Waitrose, Holland and Barrett and Champneys. The acquisition is
expected to drive sales and operational synergies from 2023. Further
commentary on our plans to improve the performance of our home fragrance
division is set out below.
A list of our current ranges can be found at www.portmeirion.co.uk and
www.spode.co.uk. Customers in the United States should go to
www.portmeirion.com and www.nambe.com. (http://www.nambe.com/) Customers in
Canada should go to www.haustopia.com. (http://www.haustopia.com/)
Current Trading & Outlook
We remain cautious against the backdrop of ongoing economic uncertainty and
the impact of world events on consumer spending. However, we have been
encouraged by our customer outlook at trade shows around the world in recent
weeks including their feedback on our new product pipeline. In addition there
are signs that global supply chain disruption and general overstocking in
retailers are subsiding. Similarly global shipping costs are trending back to
historical levels.
Our sales in the first few months of 2023 are in line with our expectations
and forward order books remain healthy.
We are pleased with the strategic progress we have made and remain confident
in our long term strategy.
Group Strategy
We believe we have a significant opportunity to grow the sales footprint of
our business over the next 3-5 years. We will do that by continuing to develop
our key heritage ranges through product extensions and developing new sales
channels to reach more customers.
Secondly, we are focused on increasing our market share in contemporary and
giftware homewares through developing and launching beautifully designed new
products and leveraging these new ranges across our existing global sales
infrastructure.
Further detail on executing our growth strategy
1. Geography - building and growing sales markets outside of our three
core markets of US, UK and South Korea
Rest of World sales markets (excluding Russia and Eastern Europe) grew by 6%
in 2022 and are 81% up on 2019. Our products are sold in more than 80
countries around the world. Our three core markets of UK, US and South Korea
account for 89% of Group sales.
We see a significant opportunity to grow the contribution from 'rest of world'
sales markets over the next 3-5 years. In the last two years, we have
appointed new distributor partners in China and Malaysia and are excited about
the prospects of reaching more customers in these regions.
Sales in our Canadian market grew by 23% in 2022 as we continue to benefit
from the acquisition in 2020 of a long-standing joint venture, with the
ability to leverage synergies from our North American team.
2. Online - further developing online sales channels in our core markets
reaching more potential customers on more occasions
In our core UK and US markets, sales through online channels now represent 51%
(2021: 50%, 2019: 30%). In South Korea we have increased online channel
presence in 2022 driving sales growth in this market.
We continue to build long-term direct to consumer relationships through our
own ecommerce sites in the UK and US. In the UK we launched new websites in
2022 that will improve customer journey, conversion and our ability to
retarget customers for future purchases. In 2022, our own ecommerce sales
represented 14.2% of total sales in the UK and US (2021: 14.6%, 2019: 9.7%),
which was an 8% reduction on 2021 sales as physical retail reopened, but still
up a very healthy 63% on 2019 pre-Covid levels.
Our key Christmas ranges are now more widely available on retailer websites -
a key component of our excellent sell through across the recent 2022 seasonal
holidays. This in turn provides strong momentum and encouragement for
increased retailer buys for 2023.
3. Designing and launching new product - widening the appeal with our
existing customer base and taking market share
Sales from new product launches and extensions to existing ranges account for
over 10% of the Group's sales and we have a strong roadmap of new launches for
the next 18 months.
Product launch extensions to our core heritage ranges (Portmeirion Botanic
Garden and Spode Christmas Tree) sold well during 2022 and both ranges benefit
from significant repeat purchasing as consumers seek to add to their
collection. We have already finalised further new product extensions for
launch during 2023.
We have an exciting portfolio of contemporary tableware, giftware and home
fragrance to launch over the next 12-18 months that we believe will help us
take market share in core markets. This includes our Spode Kit Kemp
collaboration which launches in April 2023, new stoneware tableware ranges for
Portmeirion and new lines for each of our well established Sophie Conran for
Portmeirion, Royal Worcester Wrendale Designs and Sara Miller London for
Portmeirion ranges.
We were excited to launch home fragrance and hand and body products under our
Portmeirion Botanic Garden brand in 2022 and expect these to grow in 2023,
particularly in our South Korean market.
4. Leveraging our brands
We are working on establishing our Nambé brand outside of its core US market,
growing our key Spode Christmas Tree range outside of the US market,
leveraging our high organic brand awareness in South Korea over new ranges and
on cross sell opportunities to grow basket size for our own ecommerce
platforms.
Our Nambé brand grew, again, by 13% on 2021 and is now 17% above 2019
pre-acquisition sales levels at constant currency despite disruption to sales
markets from Covid. We continue to expand product ranges and sales
distribution channels.
Further detail on returning our operating margins to 12.5% in the long term
There is a significant opportunity for us to improve operating margins back to
historical highs of 12.5% over the long-term (2022: 7.8%) with a medium-term
target of reaching 10%. We will do this by:
1. Improving productivity in our UK factories through investment in
automation to reduce manual handling
We have accelerated capital investment in our Stoke-on-Trent tableware factory
over the past 2 years, investing in automation and projects that reduce manual
handling and increase our pieces output per labour hour with a roadmap of
further projects for the next 2 years. Average project pay back is 3 years or
less and together with our ability to leverage our factory's capacity as we
grow sales this will drive up operating margins for the Group.
Productivity in our Stoke-on-Trent factory increased by 2% in 2022 and by 13%
versus pre-Covid levels.
2. Leveraging our fixed cost base as we grow top line sales
We see a significant opportunity to further grow our sales footprint over the
next 3-5 years which will enable us to leverage spare capacity in our
factories and our existing sales and distribution infrastructure around the
world.
3. Improving the profitability of our home fragrance division back to
pre-Covid levels
Wax Lyrical, our home fragrance division, that manufactures fragranced
candles, diffusers and hand and body products in our factory in Cumbria was
significantly impacted by the closure of much of its customer base due to
Covid. Concentrated in physical retail, the nature of the product meant there
was a much lower transition to online sales channels than with our core
tableware business. Sales decreased by 8% in 2022 and are still 23% below
pre-Covid levels. Due to cost reduction initiatives, profit contribution was
£0.5 million better than in 2021, albeit a small loss before tax was incurred
and some way short of pre-Covid levels of profitability.
In order to improve factory utilisation we purchased the brand and certain
assets of AromaWorks London out of administration in August 2022. By the end
of 2022, we had successfully closed the AromaWorks factory and migrated its
product lines to be made and absorbed within existing capacity at our Wax
Lyrical factory. We expect this will drive better recovery of fixed overheads
and, together with commercial product initiatives underway, will return Wax
Lyrical to profitability in 2023. We are excited by our new Portmeirion
Botanic Garden home fragrance and hand and body ranges that launched during
2022 and expect these new ranges to make a more significant contribution over
the coming years.
We expect the home fragrance category to recover over the next few years as
the cost of living pressures ease which together with the initiatives above
will have a positive impact on the Group's operating margins.
Dick
Steele
Mike Raybould
Non-executive Chairman
Chief Executive
Financial Review
In 2022, the Group continued to progress against our strategic targets,
demonstrating a resilient performance against significant macro-economic
challenges following the Covid-19 pandemic and the cost of living crisis.
Unsurprisingly, all of our major sales markets were impacted to some extent by
large increases in energy costs and other inflationary pressures.
Set against this, we continued to invest in our strategy in order to deliver
both sales growth and operating margin improvement.
Revenue
Revenue for the year ended 31 December 2022 totalled £110.8 million, an
increase of 5% over the prior year (2021: £106.0 million) and 19% above
pre-pandemic levels (2019: £92.8 million).
The Group benefited from a small amount of sales from the acquisition of the
AromaWorks London brand and intellectual property in August 2022 and the
impact of weaker sterling compared to the US dollar, which increased our
revenue but not profitability.
Geographical sales performance reflected the benefit of our diversified sales
markets, with growth in South Korea and Rest of World markets more than
offsetting weaker performance in the UK.
The US, our largest sales market, grew again by 3% to £43.8 million (2021:
£42.5 million) which is another record sales performance, albeit benefitting
from a favourable retranslation in sterling from US dollars.
UK sales declined by 14% against a challenging retail environment as inflation
soared and consumers battled against the rising cost of living.
In South Korea, sales increased by 43% to £26.7 million (2021: £18.7
million) as we expanded our number of ranges and opened new online
distribution routes. We continue to monitor sales out data from our
distributors and remain confident of further progress going forward in this
important market.
Rest of World markets increased to £12.1 million (2021: £12.0 million).
Following the outbreak of war in Ukraine, our sales in Eastern Europe were
negatively impacted; excluding these markets rest of world sales increased by
6%. Against this, we again performed strongly in Canada and saw growth in
China and Malaysia as we began to work with new distribution partners.
Profit
Headline profit before taxation(1) was £8.0 million, an 11% improvement over
the 2021 level of £7.2 million and now ahead of the pre-pandemic level in
2019 of £7.4 million. Statutory profit before taxation was £7.0 million
(2021: £6.0 million, 2019: £7.1 million).
This improved profit performance was driven by sales growth and operating
margin improvement. The major markets in which the Group operates were all
impacted by macro-economic factors, with supply chain costs at an all-time
high combined with significant labour, material and energy cost inflation. The
Group was able to drive efficiency and cost savings in order to balance these
challenges, which led to an operating margin improvement from 7.2% to 7.8%.
(1)Headline profit before taxation excludes exceptional items - see note 4.
Interest and financing costs
Finance costs for the Group increased by £0.4 million to £1.0 million (2021:
£0.6 million) as borrowings increased and interest rates rose significantly,
which both increased the cost of borrowing and the interest on lease
liabilities.
With UK interest rates continuing to rise we expect a higher charge in 2023
before falling back to historical levels going forward as long term loans
mature.
Taxation
The charge for taxation for the year was £1.4 million (2021: £2.7 million),
an effective tax rate of 20% (2021: 46%). The reduced tax charge is mainly due
to the one-off impact of the change in UK corporation tax rate from 19% to 25%
in the prior year which caused an additional deferred tax charge of £1.1
million.
Dividends
The Board proposes a final dividend of 12.00p per share (2021: 13.00p) giving
a total dividend for the year of 15.50p per share (2021: 13.00p). The final
dividend is expected to be paid on 30 May 2023 to shareholders on the register
on 21 April 2023 with an ex-dividend date of 20 April 2023.
We continue to consider that a dividend at a cover of three times is
appropriate 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 2022, the Group had net debt of £10.1 million (comprising cash
and cash equivalents of £1.7 million less borrowings of £11.8 million). This
compares to a net cash balance of £0.7 million at the prior year end.
Operating cash flow was negatively impacted by working capital during the
year; operating cash generated was £1.7 million (2021: £8.7 million), the
reduction primarily due to a net increase of £9.9 million in inventory over
the year (to match our sales demand amongst other factors as explained below).
We continued to invest in our strategic goals and spent a net £6.0 million on
capital expenditure as well as acquiring the brand and intellectual property
of AromaWorks London in order to drive more scale through our home fragrance
factory. The capital expenditure included the installation of automation
equipment in our Stoke-on-Trent factory and the development costs of our new
UK websites.
Bank facilities
The Group has agreed debt facilities with Lloyds Bank which totaled £27.5
million at the balance sheet date, having extended our facilities during the
year in order to provide additional headroom given inflationary supply chain
pressures. These facilities consist of a £10.0 million revolving credit
facility available until February 2025, a £6.25 million overdraft and a
£6.25 million trade finance facility on an annual renewal cycle, and a £10
million term loan repayable by January 2025 of which £5.0 million was
outstanding at the year end. The revolving credit facility remained undrawn at
31 December 2022.
Our business remains seasonal due to the second half weighting of our sales.
Consistent with previous years, we experienced a working capital swing of
around £10.0 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 £17.4
million. We believe our committed funding lines more than adequately addresses
this seasonal dynamic and are prudent.
Assets and liabilities
We had a net working capital outflow of £10.3 million driven by increased
inventory over the prior year. About two thirds of this increase was caused by
foreign currency retranslation and supply chain cost increases, mainly
container freight rates and material increases.
The remainder was early purchasing for additional stock depth of key lines,
which meant we exited the year with a higher stock balance. With improving
supply chains, we expect stock balances to reduce during 2023 and end the year
broadly in line with 2021 volumes.
We continue to make contributions to our closed defined benefit pension scheme
and paid £0.9 million during the year.
There has been a significant level of volatility in the pension scheme
valuation during 2022, particularly as a result of the UK 'mini-budget' in
September which brought particular disruption to bond yields.
At the year end we had an accounting surplus of £0.3 million, which was a
reduction from the surplus of £0.9 million reported in 2021. At a gross
level, both assets and liabilities fell materially as equities reduced in
value and the discount rate used to calculate scheme liabilities, which is
based on corporate bond yields, increased significantly. 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 210,282 shares, having used
8,363 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 and acquired the brand and intellectual property of AromaWorks London.
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 weakened against both the US dollar and euro,
which increases our sterling revenue upon retranslation 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 2022
Notes 2022 2021
£'000 £'000
110,820
Revenue 3 106,018
Operating costs before exceptionals (102,154) (98,375)
8,666
Headline operating profit(1) 7,643
Exceptional items 4
- restructuring costs (958) (1,036)
- acquisition costs (76) -
- GMP equalisation - (197)
7,632
Operating profit 6,410
29
Interest income 12
Finance costs 5 (956) (580)
Profit on sale of fixed assets - 120
Other income 265 -
Headline profit before tax(1) 8,004 7,195
Exceptional items 4
- restructuring costs (958) (1,036)
- acquisition costs (76) -
- GMP equalisation - (197)
Profit before tax 6,970 5,962
Tax (1,415) (2,721)
Profit for the year attributable to equity holders 5,555 3,241
Earnings per share 2
Basic 40.39p 23.58p
Diluted 40.35p 23.49p
Headline earnings per share 2
Basic 46.59p 38.85p
Diluted 46.54p 38.71p
Dividends proposed and paid per share 6 15.50p 13.00p
All the above figures relate to continuing operations.
(1) Headline operating profit is statutory operating profit of £7,632,000
(2021: £6,410,000) add exceptional items of £1,034,000 (2021: £1,233,000).
Headline profit before tax is statutory profit before tax of £6,970,000
(2021: £5,962,000) add exceptional items of £1,034,000 (2021: £1,233,000).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
2022 2021
£'000 £'000
Profit for the year 5,555 3,241
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of net defined benefit pension scheme liability (1,517) 2,505
Deferred tax relating to items that will not be reclassified subsequently to 380 267
profit or loss
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations 2,466 64
Deferred tax relating to items that may be reclassified subsequently to profit - 45
or loss
Other comprehensive income for the year 1,329 2,881
Total comprehensive income for the year attributable to equity holders 6,884 6,122
CONSOLIDATED BALANCE SHEET
31 December 2022
2022 2021
£'000 £'000
Non-current assets
Goodwill 9,416 8,978
Intangible assets 8,581 7,126
Property, plant and equipment 16,842 14,398
Right-of-use assets 5,869 6,409
Pension scheme surplus 317 910
Total non-current assets 41,025 37,821
Current assets
Inventories 41,117 29,224
Trade and other receivables 19,887 19,243
Current income tax asset 792 662
Cash and cash equivalents 1,681 7,616
Total current assets 63,477 56,745
104,502 94,566
Total assets
Current liabilities
Trade and other payables (16,469) (16,245)
Lease liabilities (1,696) (1,695)
Borrowings (8,789) (1,986)
Total current liabilities (26,954) (19,926)
Non-current liabilities
Deferred tax liability (3,230) (2,609)
Lease liabilities (4,654) (5,119)
Borrowings (2,981) (4,965)
Total non-current liabilities (10,865) (12,693)
(37,819) (32,619)
Total liabilities
Net assets 66,683 61,947
Equity
Called up share capital 710 710
Share premium account 18,344 18,344
Investment in own shares (3,108) (3,124)
Share-based payment reserve 148 128
Translation reserve 3,652 1,186
Retained earnings 46,937 44,703
Total equity 66,683 61,947
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share-based payment
Share Investment in own shares reserve
Share premium £'000 £'000 Translation Retained
capital account reserve earnings Total
£'000 £'000 £'000 £'000 £'000
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 1 January 2022 710 18,344 (3,124) 128 1,186 44,703 61,947
Profit for the year - - - - - 5,555 5,555
Other comprehensive income for the year 2,466 (1,137) 1,329
- - - -
Total comprehensive income for the year
- - - - 2,466 4,418 6,884
Dividends paid - - - - - (2,269) (2,269)
Increase in share-based payment reserve
- - - 91 - - 91
Transfer on exercise or lapse of options
- - - (71) - 71 -
Shares issued under employee share schemes
- - 16 - - (16) -
Deferred tax on share- based payment
- - - - - 30 30
At 31 December 2022 710 18,344 (3,108) 148 3,652 46,937 66,683
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
2022 2021
£'000 £'000
Operating profit 7,632 6,410
Adjustments for:
Depreciation of property, plant and equipment 1,810 1,652
Depreciation of right-of-use assets 1,881 1,933
Amortisation of intangible assets 813 698
Charge for share-based payments 91 64
Charge for GMP equalisation - 197
Exchange (loss)/gain (559) 36
Loss on sale of tangible fixed assets 251 17
Operating cash flows before movements in working capital 11,919 11,007
Increase in inventories (9,869) (2,071)
Decrease/(increase) in receivables 239 (3,960)
(Decrease)/increase in payables (643) 3,707
Cash generated from operations 1,646 8,683
Contributions to defined benefit pension scheme (900) (1,350)
Interest paid (686) (368)
Income taxes paid (300) (461)
Net cash (outflow)/inflow from operating activities (240) 6,504
Investing activities
Interest received 5 12
Purchase of property, plant and equipment (4,093) (4,511)
Proceeds from disposal of property, plant and equipment - 786
Purchase of intangible assets (1,933) (843)
Other income 265 -
Acquisition of subsidiary (821) -
Net cash outflow from investing activities (6,577) (4,556)
Financing activities
Equity dividends paid (2,269) -
Principal elements of lease payments (1,864) (1,927)
Drawdown of short term borrowings 6,803 -
Repayments of borrowings (2,000) (4,000)
Net cash inflow/(outflow) from financing activities 670 (5,927)
Net decrease in cash and cash equivalents (6,147) (3,979)
Cash and cash equivalents at beginning of year 7,616 11,590
Effect of foreign exchange rate changes 212 5
Cash and cash equivalents at end of year 1,681 7,616
NOTES TO THE PRELIMINARY RESULTS
1. This announcement was approved by the Board of
Directors on 22 March 2023.
1.1 The financial information set out above does not
constitute the Company's statutory accounts for the years ended 31 December
2022 or 2021, but is derived from those accounts. Statutory accounts for
2021 have been delivered to the Registrar of Companies and those for 2022 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 2022 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 2022.
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 debt of £10.1 million
(comprising cash and cash equivalents of £1.7 million less borrowings of
£11.8 million) and had unutilised bank facilities with available funding of
£15.7 million. Operating cash generation was impacted during the year by an
adverse working capital movement and was therefore £1.6 million (2021: £8.7
million), although we expect this movement to largely reverse in 2023.
The Group sells into over 80 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 38% of its products and sources the remainder from a range of
third-party suppliers.
There remains ongoing challenges in our sales markets around the world caused
by the negative impact of the cost of living crisis, but the Group's
performance continues to remain resilient and we are well diversified with
significant funding headroom available.
The Group has also produced a sensitivity analysis to its cash flow forecast
based upon possible downside scenarios. We have modelled a 10% sales reduction
to assess the potential impact of a significant downturn in trading
performance similar to the reduction experienced in 2020 during the Covid-19
pandemic and is therefore considered a very prudent case. This demonstrated
the Group still has sufficient headroom within borrowing facilities and loan
covenants.
We have also considered a reverse stress-tested scenario to try and assess the
amount of sales reduction required before the Group begins to approach maximum
facility and covenant headroom. This demonstrated sales could reduce by more
than 20% before we breached facility limits or any covenants.
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 2022 Earnings Earnings 2021 Earnings
£'000 Weighted per share £'000 Weighted per share
average (pence) average (pence)
number of number of
shares shares
Basic earnings per share 5,555 13,753,233 40.39 3,241 13,747,450 23.58
Effect of dilutive securities:
employee share options - 14,773 - - 49,235 -
Diluted earnings per share 5,555 13,768,006 40.35 3,241 13,796,685 23.49
Earnings 2022 Earnings Earnings 2021 Earnings
£'000 Weighted per share £'000 Weighted per share
average (pence) average (pence)
number of number of
shares shares
Headline basic earnings per share 6,407 13,753,233 46.59 5,341 13,747,450 38.85
Effect of dilutive securities:
employee share options - 14,773 - - 49,235 -
Headline diluted earnings per share 6,407 13,768,006 46.54 5,341 13,796,685 38.71
The calculation of basic and diluted headline earnings per share is based on
the following data:
( )
2022 2021
£'000 £'000
Profit for the year attributable to equity holders 5,555 3,241
Add back/(deduct):
Exceptional items 1,034 1,233
Tax effect of exceptional items (182) (223)
Exceptional impact of remeasuring deferred tax balances from 19% to 25% - 1,090
Headline earnings 6,407 5,341
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 2022 2021
£'000 £'000
59,753 59,686
UK
North America 51,067 46,332
110,820 106,018
Geographical market 2022 2021
£'000 £'000
28,255 32,871
United Kingdom
United States 43,783 42,492
South Korea 26,656 18,680
Rest of the World 12,126 11,975
110,820 106,018
4. Exceptional items
Exceptional items by type are as follows:
2022 2021
£'000 £'000
958 1,036
Restructuring costs
Acquisition costs 76 -
GMP equalisation costs - 197
1,034 1,233
5. Finance costs
2022 2021
£'000 £'000
Interest paid 686 361
Interest on lease liabilities 270 192
Net interest expense on pension scheme asset - 27
956 580
NOTES TO THE PRELIMINARY RESULTS
Continued
6. Dividends
The Directors recommend that a final dividend for 2022 of 12.00p (2021:
13.00p) per ordinary share be paid. The final dividend will be paid, subject
to shareholders' approval, on 30 May 2023, to shareholders on the register at
the close of business on 21 April 2023. This dividend has not been included as
a liability in these financial statements. The total dividend paid and
proposed for the year is 15.50p per share (2021: 13.00p).
7. Reconciliation of earnings before interest, tax,
depreciation and amortisation (EBITDA)
2022 2021
£'000 £'000
Operating profit 7,632 6,410
Add back:
Depreciation 3,691 3,585
Amortisation 813 698
Earnings before interest, tax, depreciation and amortisation 12,136 10,693
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.
In the prior year, 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 and was
included as a credit within operating costs. There were no related credits in
2022.
NOTES TO THE PRELIMINARY RESULTS
Continued
9. Acquisition of AromaWorks trade and assets
On 12 August 2022, the Group acquired 100% of the trade and assets of
AromaWorks for a net consideration of £821,000.
The acquisition provides the Group with additional scale in the home fragrance
market and strategically complements its existing home fragrance operation.
The acquisition terms do not include any contingent consideration or deferred
consideration arrangements. Details of the total consideration and the
provisional fair values of the assets and liabilities acquired are as follows:
Net assets acquired Fair value adjustment £'000 Initial fair value of assets acquired
£'000 £'000
Inventory 268 (117) 151
Identifiable intangible assets 309 - 309
Deferred tax on intangible assets (77) - (77)
Total identifiable assets 500 (117) 383
Goodwill 438 438
Total consideration 821
£'000
Satisfied by:
Cash and cash equivalents 821
Total consideration transferred 821
Consideration consists of £438,000 paid to the administrators for the trade
and assets of AromaWorks. The remaining consideration includes contributions
made to suppliers and customers to ensure ongoing trade.
The goodwill of £438,000 arising from the acquisition consists of the
anticipated synergies of combining the existing Group operations with those of
AromaWorks. This will include shared product development, distribution
channels, access to new customers and other operational synergies.
Acquisition related costs (included in exceptional costs) amounted to
£76,000.
AromaWorks contributed £731,000 revenue and £49,000 profit before tax for
the period between the date of acquisition and the balance sheet date.
NOTES TO THE PRELIMINARY RESULTS
Continued
10. Post balance sheet events
There are no post balance sheet events.
11. Availability of annual report and accounts
The accounts for the year ended 31 December 2022 will be posted to
shareholders on or before 14 April 2023 and laid before the Company at the
Annual General Meeting on 23 May 2023. 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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