TIDMIGR
RNS Number : 2254D
IG Design Group PLC
20 June 2023
20 June 2023
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the year ended 31 March 2023
IG Design Group plc, one of the world's leading designers,
innovators and manufacturers of Gift packaging, Celebrations, Craft
& creative play, Stationery, Gifting and related product
categories announces its audited results for the year ended 31
March 2023.
Highlights for the year ended 31 March 2023
Financial Highlights FY2023 FY2022
=============================== ========= ========
Revenue $890.3m $965.1m
Adjusted(a)
- Profit/(loss) before tax $9.2m ($1.3m)
- Diluted loss per share (0.2c) (7.7c)
Reported
- (Loss)/profit before tax ($18.9m) $2.2m
- Diluted loss per share (28.6c) (3.3c)
Net cash as at the period end $50.5m $30.2m
Full year dividend - 1.7c
Average leverage 0.6x 1.0x
------------------------------- --------- --------
(a) Adjusted results exclude the impact of adjusting items - for
further detail see alternative performance measures reconciliation
within the detailed financial review
-- Adjusted profit before tax was significantly ahead of initial
expectations mostly driven by strong trading in Europe, and further
benefits from ongoing restructuring initiatives in the US
-- We delivered on customer commitments, but reported revenues
were down by nearly 8% (4% on constant currency) mainly as a result
of adverse foreign currency movements, lower second-half volumes in
DG Americas and the strategic decision to continue to exit from
unprofitable contracts in the US
-- Margins improved due to continued efforts to manage costs,
simplify the business and some recovery of prices in the face of
continued high cost inflation
-- Reported profit before tax was significantly impacted by a
non-cash, one-off write-down of the historic goodwill in the UK
business
-- The Group remained net cash positive at year-end, at $50.5
million, with the strong year-on-year improvement reflecting better
working capital management
-- In line with the Board's previous guidance, no dividend is
being declared for the year (FY2022: 1.25 pence)
-- Post year end, the Group announced that it had completed the
refinancing of its banking facilities to June 2026 which has
secured access to appropriate financing to support the seasonal
working capital cycle
-- Board changes include the appointment of Paul Bal, previously
Group CFO, as Group CEO from April 2023; Rohan Cummings joins as
Group CFO from July 2023; Lance Burn stepped down as Interim Group
COO at the end of March 2023; and Claire Binyon joined as an
independent Non-Executive Director in June 2022
-- Senior management team strengthened with the appointments of
new CEO and CFO for DG Americas and two new MDs within the DG
International businesses
-- Supported our workforce through additional cost of living enhancements
Outlook
-- The immediate priority of the Group remains continued
recovery in its financial performance with particular focus on DG
Americas, where the leadership team has been strengthened
-- The FY2024 orderbook continues to build, at 62% of budgeted
revenues (FY2022: 71%), reflecting a return to more normalised
phasing of orders between H1 and H2 than experienced last year, as
customers expect more stable supply chains
-- Inflation remains an issue, with pricing challenges in all
markets, but especially so in the UK
-- A new strategy to restore sustainable, profitable growth is
being developed and cascaded through the Group
-- During FY2024, the Board anticipates continued progress with
its aspiration to return to pre-pandemic operating profit margins
by the end of FY2025
Stewart Gilliland, Non-Executive Chair, commented:
"FY2023 was a strong year of recovery and delivery by the Group,
notwithstanding continued economic challenges across our markets.
Last year's decision to place stronger, immediate focus on
recovering margins, simplifying the business model and better
managing working capital delivered results ahead of our
expectations. I thank our teams across the Group for their
extraordinary efforts. Our aspiration to return to pre-pandemic
operating margins by the end of FY2025 remains, and we hope to
continue growing profits and margins in FY2024 despite the
continuing tough market back-drop and the uncertainty it is
creating for our customers and our consumers.
We have made good progress in strengthening our leadership
teams, both at Board and local level, and especially so in the US.
We have been able to attract high calibre individuals as well as
promote talent from within. With more stability in future
leadership, we are able to outline a new strategy designed to
return the Group to more sustainable and profitable growth,
building on the recovery that is underway. We have a refreshed
team, scale that we can leverage, very strong customer
relationships, and have recently secured longer-term financing, all
of which gives us a stronger foundation from which to build a more
resilient business."
For further information:
IG Design Group plc 01525 887310
Paul Bal, Chief Executive Officer
and Chief Financial Officer
Stewart Gilliland, Non-Executive
Chair
Canaccord Genuity Limited 020 7523 8000
Bobbie Hilliam, NOMAD
Alma PR
Josh Royston 020 3405 0205
Sam Modlin designgroup@almapr.co.uk
Pippa Crabtree
EXECUTIVE REVIEW
Overview
Twelve months ago, as we looked at the coming year, it was
expected to be a year where our focus would be on stabilising the
Group's falling profitability. It is therefore pleasing to report
that during the year ended 31 March 2023 we have stabilised
profitability, delivering a significant improvement in adjusted
profit before tax ($9.2 million up from $1.3 million loss in the
prior year). This highlights a good start in the journey to
turnaround performance, growing profitability and margins as a
result.
Whilst FY2023 was not without its challenges, as consumer demand
weakened in the last quarter in some markets and paper and
energy-driven costs continued to rise, the Group has delivered
adjusted profit growth ahead of our earlier expectations. The
adjusted operating profit more than quadrupled to $16.1 million,
with the reported operating loss at $12.0 million which includes a
non-cash $29.1 million impairment of goodwill. Adjusted operating
profit margins similarly more than quadrupled to 1.8%. The Group
remains on track to meet its aspiration to return to pre-pandemic
operating profit margins by FY2025.
The two main drivers behind this result were stronger than
anticipated trading within DG International, notably in continental
Europe, and benefits coming from the turnaround initiatives
underway in the DG Americas division which resulted in the division
returning to profitability. During the year we have strengthened
the DG Americas leadership team and are currently in the process of
doing the same in DG international. These improvements more than
offset a weakening in the UK market in the last quarter of the
year, predominantly driven by lower consumer demand, and will have
consequences for the outlook for the year ahead. It has also led to
a significant non-cash write-down of historically acquired goodwill
in that market. Adverse currency movements and softening of demand
in some of our markets are reflected in the year's revenue
performance. Group revenue was down 4% in constant currency (8% in
reported terms) versus prior year. Much of the revenue decline was
experienced in DG Americas, where revenue was 10% lower. This
resulted from a combination of the strategic decision to exit
loss-making business, as well as lower volume in the second half of
the year. DG International, though down 3% in reported revenue,
grew 10% in constant currency with growth in all markets on a
full-year basis.
The improved profit generation has been complemented by better
than expected cash generation, with the Group ending the year with
a net cash balance of $50.5 million, a year-on-year improvement of
over $20.0 million. Improving working capital management has been a
focus for the year, and this should continue to deliver further
benefits in the year ahead. We have just completed a re-financing
of the Group, which secures the funding of our working capital
cycle for at least 3 years. Further details of the new arrangements
are set out in note 15.
As previously anticipated, in light of the Group's current
position on the path to profit recovery and the challenges around
reduced consumer demand, the Board is not proposing a dividend in
respect of the year ended 31 March 2023.
Board changes
Paul Bal was appointed Group Chief Financial Officer (CFO),
joining the Board in May 2022. Giles Willits, the outgoing CFO left
at the end of June 2022.
In November 2022, following an extensive selection process
involving internal and external candidates, Paul Bal was appointed
Group Chief Executive Officer (CEO), effective from April 2023 when
the Chair of the Board, Stewart Gilliland, stepped down from the
Interim Executive Chair role that he had assumed in June 2022.
Rohan Cummings will be joining the Board in July 2023 as the new
Group CFO. Rohan joins the Group from Devro Limited (formerly Devro
plc which was listed on the LSE), a global leader in the supply of
collagen casing and films, where he has been the group's CFO since
2020. Rohan has extensive PLC experience, as well as significant
commercial and strategic capabilities having worked in complex
global operations.
Lance Burn, Interim Chief Operating Officer (COO), stepped down
from the Board at the end of March 2023, and will stay with the
Group to the end of October 2023. The Board is very grateful for
his dedication and contribution to the business for over a decade,
and especially as it navigated the various challenges of the past
eighteen months. The leadership team of DG Americas, which Lance
had been supporting since March 2022, has been strengthened with
the appointment of a new DG Americas CEO and CFO. The DG
International leadership team is also being strengthened, and this
will remove the requirement for a COO.
Claire Binyon joined as a Non-Executive Director in June
2022.
Incentive schemes
The Value Creation Scheme (VCS) was terminated in June 2022 as
it was no longer aligning the interests of shareholders and
employees, and all awards were cancelled.
Awards under a new Long-Term Incentive Plan (2022-2025 LTIP)
were granted on 11 August 2022. This incentive plan is considered a
more appropriate and standard mechanism to align interests and
reward sustained future financial delivery and value creation.
Further details are set out in note 23.
Our strategy
The challenges experienced in FY2022 caused the Board to revisit
its priorities, plans, strategy and aspirations. The sheer speed
and scale of the impact required an immediate pivot toward quickly
making the Group's operations more resilient. This was done with a
5-point focus on:
-- reducing complexity and better leveraging expertise and scale, and improving mix,
-- improving margins,
-- a more resilient supply chain,
-- lowering working capital levels, and
-- strong leadership and management teams at all levels of the Group.
Good overall progress has been made in these areas, ahead of our
expectations. This is witnessed through the delivery of the
improved profit margins, stronger cash generation in the year, and
strengthening leadership. The current difficult economic
environment, with pressure on consumer spend, dictates that we must
continue to concentrate on these areas for now.
Nevertheless, given the long planning cycles associated with our
business, we must look beyond our current goal of recovering to
pre-pandemic operating profit margins, and chart a course that will
also grow the business. To that end, in late 2022, the Board
commissioned a strategic exercise using professional external
support. The output from that exercise has been articulated into a
high-level strategy aimed at returning the Group to profitable
growth over the coming 3 to 4 years.
In summary, the new strategy concentrates on two areas:
-- being the partner of choice for our customers, by
strengthening and better leveraging our unique business model,
particularly where there is opportunity for competitive advantage,
and
-- winning together with our customers, through better execution
and developing sustained category value
The strategy is being rolled-out across the business units over
the summer and will be driven through a combination of centrally
co-ordinated as well as local initiatives. At the half-year, we
hope to share with shareholders further details of our progress as
well as sharing case studies further down the line to highlight
some of the initiatives underway. Further details on the new
strategy are set out in the Annual Report and Financial Statements
for 2023.
Outlook
FY2023's financial performance exceeded our aspirations for the
year. Not only was the profit decline stabilised, but it was also
turned around. This performance puts us ahead in our journey to
restore pre-pandemic operating profit margins in FY2025. The Board
does however now expect FY2024 to present continued demand and
pricing challenges given the depressed consumer demand experienced
in several of our markets since Christmas 2022. This may temper
some of our progress during FY2024, but we still anticipate further
operating profit growth and margin improvement over the full year.
Within the year, we anticipate a return to a more normalised H1/H2
split, reversing the accelerated ordering experienced in H1 FY2023.
The Board remains encouraged by the enduring strength of our
longstanding customer relationships, which has already generated an
orderbook representing 62% of FY2024's budgeted revenues (71% at
this stage last year). We still believe our FY2025 operating profit
margin aspiration to be achievable. Additional support to deliver
this will come from the new strategy as initiatives get
underway.
The combination of continued improvements in cash generation and
management, as well as the terms of the new financing arrangements
should limit the rise in financing costs being driven by higher
market interest rates. Over the coming year average net debt should
continue to reduce from the current levels of c$17.0 million. This
means that operating profit gains in the year ahead should
substantially pass through to improved adjusted profit before
tax.
The Board still aspires to return to paying dividends, but based
on the immediate outlook, and the need to strengthen the business
model, the Board does not expect to be in a position to do so
during FY2024.
Summary FY2023 results
Revenue at reported rates fell by 8%, due in part to adverse
currency effects. The decline in constant currency terms was 4%,
with a 10% decline in DG Americas more than offsetting the 10%
growth in the smaller DG International division. The decline
resulted from a combination of softer consumer demand in the later
stages of the year in some markets more than offsetting growth in
others, coupled with a conscious exit from unprofitable or very low
margin business in DG Americas.
The Group's adjusted operating profit margin rose 140 basis
points, to 1.8%, with the growth coming from DG Americas returning
to profitability, as the various restructuring and turnaround
initiatives gained traction and delivered benefits. Consequently,
DG Americas' adjusted operating profit margin rose 230 basis points
to 0.5%. Some slippage in the DG International adjusted operating
profit margin predominantly reflected the adverse foreign exchange
effects and the tougher UK market. The improved operating profits,
helped by better cash generation, kept interest costs below
expectation and resulted in an adjusted profit before tax of $9.2m,
versus last year's loss of $1.3m. Taking into account the tax
charge, this resulted in a small adjusted diluted loss per share of
0.2 cents versus last year's loss of 7.7 cents.
The year's adjusting items are a net cost of $28.1 million
(FY2022: $3.5 million credit). This mainly results from the
non-cash write-down of the goodwill allocated to the UK and Asia
Cash-Generating Unit (CGU); offset by insurance receipts related to
a prior acquisition, net proceeds from surplus site disposals and
other business restructurings, some minor prior year provision
releases; and the amortisation of acquired intangibles.
The goodwill write-down results in an enlarged reported loss
before tax of $18.9 million (FY2022: $2.2 million profit). The
effective tax rate for the year is largely distorted by the mix of
profits and losses generated across the jurisdictions in which the
Group operates and certain loss making units not realising a tax
benefit due to restrictions on recognition of deferred tax assets.
The diluted reported loss per share of 28.6 cents (FY2022: loss of
3.3 cents) reflects the reported loss, driven by the goodwill
write-down.
The Group ended the year with a net cash balance of $50.5
million (FY2022: $30.2 million), reflecting our focus on cash
generation and management, especially through working capital
improvements. Correspondingly, average leverage for the year has
improved to 0.6 times (FY2022: 1.0 times), also benefitting from
the improved (both pre-IFRS 16 basis and post) EBITDA.
As the Group is still on a path to profit-recovery and given the
challenging retail outlook in a number of markets, the Board is not
recommending a dividend in respect of the year end 31 March
2023.
Regional highlights
Overall, there was a reduction in Group revenue of 8% with
adjusted operating profit up to $16.1 million (FY2022: $3.8
million) as the Group benefits from the execution of the turnaround
in DG Americas. The split between our DG Americas and DG
International segments is as follows:
Segmental revenue Adjusted operating Adjusted
profit/(loss) operating
margin
========= ================= ==== ========================== ========================== ================
%
Group % %
revenue FY2023 FY2022 growth FY2023 FY2022 growth FY2023 FY2022
========= ================= ==== ======= ======= ======== ======= ======= ======== ======= =======
66% DG Americas $m 593.0 659.0 (10.0%) 2.9 (11.7) 124.9% 0.5% (1.8%)
34% DG International $m 299.6 307.9 (2.7%) 19.8 20.8 (4.8%) 6.6% 6.8%
Elims
/ Central
- costs $m (2.3) (1.8) (6.6) (5.3)
100% Total $m 890.3 965.1 (7.7%) 16.1 3.8 321.2% 1.8% 0.4%
========= ================= ==== ======= ======= ======== ======= ======= ======== ======= =======
Design Group Americas
Our business in the US, which makes up about two-thirds of the
Group's total revenues, saw revenue decline 10% to $593.0 million
(FY2022: $659.0 million). This was driven by a combination of
softer demand for certain categories in the second-half of the
year, as well as the conscious decision to exit loss-making,
marginally profitable, and unduly onerous business. Categories
particularly impacted by these factors were Celebrations and Craft
& creative play, the latter having benefitted from the Covid-19
lockdowns in recent years. These declines more than offset the
benefits that came from catch-up pricing through two waves in order
to recover margins lost in the previous year.
Despite the decline in revenues, DG Americas returned to
profitability, and delivered an adjusted operating profit of $2.9
million (FY2022: loss of $11.7 million). The drivers behind this
turnaround are benefits coming from the various initiatives set in
motion last year following the collapse in the division's
profitability. The initiatives focused on delivering pricing,
cost-savings and simplifying our commercial proposition. They
delivered benefits of c$56 million at an adjusted operating profit
level in the year. The initiatives included: the closure of 4
surplus sites; sale of the Manhattan, Kansas site in April 2022 for
net proceeds of $6.7 million, yielding a profit on disposal of $4.6
million; further utilisation of Mexican facilities for
near-shoring; more effective procurement and shipment; and a net
headcount reduction of 100. In addition, our category teams were
reorganised and underpinned with additional support for product
development, design, sales and account management. New initiatives
and opportunities continue to be identified, and the Design Group
Americas team expects further value to be generated from these
activities in FY2024 and beyond. Capabilities are also being
developed and strengthened to support future profitable revenue
growth. This is being complemented by further reorganisation,
investment in technology, and training and development of our
commercial organisation to streamline our product cycles and
improve execution in the retail environment.
Good progress was also made with working capital reduction,
especially with inventory levels and trade receivables.
On 23 May 2022, the Group purchased the remaining 49% interest
in Anker Play Products LLC (APP), bringing our total ownership to
100%. This was completed pursuant to the exercise of a put option
by the holder of the 49%, which the Group was legally obliged to
purchase under a 2017 agreement. APP develops and sources craft
products, toys and games for the US retail market. The transaction,
made through DG Americas, was satisfied by a cash payment of $3.0
million funded from existing banking facilities.
Design Group International
This division largely comprises the Group's businesses in the
United Kingdom, continental Europe, the Far East and Australia. It
saw a 3% revenue year-on-year decline at reported rates, to $299.6
million. The main driver of this decline was adverse foreign
currency impacts due to the strength of the US dollar versus all of
the other key currencies transacted by the businesses in the
segment. At constant exchange rates, revenues were up 10%, with
increases experienced in all key markets. The second half of the
year saw marked softening in DG UK, and a slight reduction in our
DG Australia joint venture as the economic environment deteriorated
and put pressure on consumer discretionary spend.
Adjusted operating profit at $19.8 million (FY2022: $20.8
million) was down 5%. However at constant currency rates adjusted
operating profit was up 10%. This result was driven by the strong
trading performance from our businesses operating in continental
Europe, which did not experience the same degree of softness in the
second half of the year. Consumer sentiment in Europe was more
resilient, and our key customers emerged as "winners" in the
current value-focused retail environment. The weakness in the UK
market in the second half of the year was volume-driven and meant
DG International's adjusted operating profit margin retreated
slightly by 20 basis points to 6.6%.
DG UK's revenue for the year grew just over 5%, but the second
half was challenging as demand declined after Christmas. As a
result, the business only delivered a small operating profit with
continued inflation in paper and energy costs largely offsetting
improved pricing. Our key brands in the UK have continued to
perform well with Eco Nature(TM) sales and profits growing 10% and
11% respectively, with more details set out in the section on
sustainability in the Annual Report and Financial Statements for
2023. Our premium Tom Smith(R) brand celebrated the 175(th)
birthday of the Christmas cracker, holding a Royal Warrant for the
supply of Christmas crackers to the Royal Household since 1906.
Recently DG UK was proud to receive Tesco's supplier innovation
award for our collaborative work on category development. Looking
ahead, in response to the demand challenges experienced in the
second half, we have recently undertaken a restructuring of the UK
business, which represents c15% of the Group's FY2023 revenues. The
intention is to develop a more competitive and agile business model
that is better suited to today's UK retail environment. Whilst this
has regrettably involved a net headcount reduction of 31, the
leadership team is being strengthened. The business has also formed
a creative collaboration with the University of Northampton to
leverage their capabilities as well as foster relationships with up
and coming design talent.
DG Europe benefitted from strong demand from our more
value-orientated key customers which are winning in the current
economic climate. The business enjoyed very strong revenue growth
of 18%, which included improved pricing to recover continued
inflation in paper and energy prices. Adjusted operating profit
grew 41%, and margins improved further, as the team continues to
adopt a continuous improvement approach, combined with high
automation.
Similarly, DG Australia saw revenue growth of 5% as its
Independents customer channel grew market share. The business
continues to be active in new product development, developing a
compelling assortment. Unfortunately, labour shortages and cost
inflation in that market reduced adjusted operating profits by
10%.
Our products, brands and channels
The Group continues to aspire to be our retail customers'
"partner of choice" for our categories, and our diverse product
portfolio is a good demonstration of this.
Revenue by product category FY2023 FY2022
------------------------------ -------------- --------------
Celebrations 60% $533.7m 63% $604.1m
Craft & creative play 17% $150.8m 16% $154.3m
Stationery 5% $45.0m 4% $44.8m
Gifting 11% $96.9m 10% $94.4m
'Not-for-resale' consumables 7% $63.9m 7% $67.5m
------------------------------ ---- -------- ---- --------
Total $890.3m $965.1m
------------------------------ ---- -------- ---- --------
The 12% decline in the Celebrations category was driven by the
sales performance in DG Americas, with declines in most
product-types, but especially giftwrap and ribbons & bows. This
more than offset the growth in these product types in all DG
International markets and the progress with cards in DG Americas.
Whilst stationery remained stable, giftware gains were driven by
photo frames in DG International. The decline in 'not-for-resale'
consumables came from reduced demand for floral packaging in DG
Americas. The Craft & creative play category continued to
normalise from Covid-pandemic lockdown highs.
Revenue by customer channel FY2023 FY2022
----------------------------- -------------- --------------
Value & mass 67% $597.1m 67% $643.9m
Specialist 14% $120.4m 15% $144.4m
Independents 17% $153.7m 16% $156.5m
Online 2% $19.1m 2% $20.3m
----------------------------- ---- -------- ---- --------
Total $890.3m $965.1m
----------------------------- ---- -------- ---- --------
The Value & mass channel saw a small decline of 7% driven by
the adverse DG Americas dynamics. This more than offset good
progress in all of the DG International businesses where this
channel benefitted from recent consumer-driven focus on value.
Similarly, the 17% decline in Specialists is largely driven by DG
Americas, where we consciously exited unprofitable business,
offsetting the progress in continental Europe. Overall, our top 20
customers represent 68% of our sales (FY2022: 68%).
Revenue by season FY2023 FY2022
------------------- -------------- --------------
Christmas 42% $374.7m 40% $390.9m
Minor seasons 9% $76.5m 7% $65.8m
Everyday 49% $439.1m 53% $508.4m
------------------- ---- -------- ---- --------
Total $890.3m $965.1m
------------------- ---- -------- ---- --------
The reversal of the trend seen in recent years towards more
Everyday business reflects the pressures experienced in certain
markets post-Christmas 2022, particularly in DG UK. There was also
a general reduction in DG Americas revenues, offsetting strong
progress in DG Europe, with photo frames in particular.
Revenue by brand FY2023 FY2022
---------------------------- -------------- --------------
Licensed 9% $82.2m 9% $84.2m
Customer own brand/Bespoke 54% $474.3m 48% $459.8m
Design Group/Generic brand 37% $333.8m 43% $421.1m
---------------------------- ---- -------- ---- --------
Total $890.3m $965.1m
---------------------------- ---- -------- ---- --------
The reduction in DG branded sales reflects the adverse DG
Americas revenue dynamics, which more than offset the gains in all
DG International markets.
Sustainability
The Board launched the Group's sustainability framework 'helping
design a better future' in FY2021, which defined the Group's
approach by identifying three pillars that will deliver a more
sustainable future. These three pillars are People, Product and
Planet.
The Group's sustainability strategy is underpinned by our
overall aim to minimise our impact on the environment by constantly
challenging ourselves to find ways in which we can use our scale
and people to influence and drive positive, proactive change. We
understand that our impact and responsibilities extend beyond our
immediate surroundings, into the lives of our employees, the
environment, and our local and global communities. We continue to
believe we have a moral as well as a commercial necessity to strive
for the highest standards of ethical behaviour and to innovate to
reduce the environmental impact of our operations to protect and
preserve our planet, for this and future generations.
Over the past year we have continued to refine the Group's
approach to sustainability and the associated key performance
sustainability indicators (KPIs). We report our performance against
these and the progress the Group has made during the year as seen
in the Sustainability report in the Annual Report and Financial
Statements for 2023. We recognise that we are on a sustainability
journey so as we move forward, we'll seek to further enhance the
metrics we monitor whilst also looking to set targets by which to
measure our success.
In the year we have made more progress in our journey towards
compliance with Taskforce for Climate-related Financial Disclosures
(TCFD) through the completion of a risk assessment exercise to
identify the Group's climate-related risks and opportunities over
the short, medium and long term. In future this will be integrated
into our wider risk management processes.
People - Our people are key to the success of our business, and
in the challenging times we are facing it is even more important to
ensure that we are recognising performance and loyalty, and
investing in the many talented individuals and teams across the
Group. Given the "cost of living crisis" being experienced across
the world, we took various additional steps in our businesses, over
and above the normal, to try and mitigate the impact on our
employees and their families.
This year saw the launch of the first Group-wide employee
engagement survey: "Your Voice, Our Future". There was a pleasing
78% participation rate, and it was encouraging to learn that
despite the significant changes taking place across the business,
our teams remain positive about their roles, Design Group as a
place to work, and its future. The survey has also provided
management with areas for further improving the working
environment, and these are now being followed-up.
Other notable achievements in FY2023 include the launch of the
"DG Bravo" recognition programme in DG Americas, training
opportunities such as our leadership development programmes for
emerging leaders in DG UK and DG Americas, and a women's
development network providing training opportunities for aspiring
female leaders in DG Americas. Extending beyond leadership, the DG
Europe Academy has had another successful year with internal
training programmes available for our employees to develop their
knowledge and skills across a range of topics. DG UK has trained
mental health first aiders across the business and run a monthly
health programme focused on both mental and physical wellbeing with
challenges for employees to get involved with.
Product - There is no question that the nature of our products
requires us to be innovative in our design to create more
sustainable solutions and collections to promote to our customers
and theirs. A notable achievement is the continued development of
our shrink-free wrapping paper, which eliminates plastic waste
through the use of recyclable paper labels, with the launch of
Smartwrap(TM) in continental Europe this year. This complements our
Eco Nature(TM) ranges already established in the UK which have
continued to perform well. We will look to further improve our
sustainable solutions in these markets where there is traction with
consumers. Numerous other initiatives are underway finding
innovative solutions with both customers and external specialists
and academic institutions to continue to reduce the environmental
impact of our products. For example, in DG Europe, all plastic
frames now have 100% recycled frames.
Planet - The Group has formally incorporated Climate Change as a
principal risk (formerly an emerging risk) acknowledging our
responsibility to protect and preserve our planet and its
environment, as well as the sustainability of our business. Notable
achievements in FY2023 include DG Europe being awarded Ecocert's
climate neutral status on their giftwrap collections following
investment in innovative Smartwrap(TM) technology to provide
next-generation shrink-free solutions. This, coupled with DG UK and
DG Europe powering their manufacturing, warehousing, and office
facilities with 100% renewable electricity, drives us forward on
our journey towards net zero emissions. In the area of sea freight,
DG Europe is seeking to achieve carbon neutrality on half of its
shipments. Finally, also testament to our efforts was DG Americas
achieving Walmart's Giga-Guru status, recognising our collaboration
with our biggest customer in the area of supply chain carbon
reduction.
Detailed financial review
The Group's financial results are summarised below, setting out
both the reported and the adjusted results.
FY2023 FY2022
================================== ==================================
Reported Adjusting Adjusted Reported Adjusting Adjusted
items items
$m $m $m $m $m $m
============================= ========= ============ ========= ========= ============ =========
Revenue 890.3 - 890.3 965.1 - 965.1
Gross profit 131.7 1.4 133.1 122.2 (2.5) 119.7
Overheads (143.7) 26.7 (117.0) (114.5) (1.4) (115.9)
--------- ------------ --------- --------- ------------ ---------
Operating (loss)/profit (12.0) 28.1 16.1 7.7 (3.9) 3.8
Finance charge (6.9) - (6.9) (5.5) 0.4 (5.1)
--------- ------------ --------- --------- ------------ ---------
(Loss)/profit before
tax (18.9) 28.1 9.2 2.2 (3.5) (1.3)
Tax (7.6) (0.2) (7.8) (2.5) (0.8) (3.3)
--------- ------------ ---------
(Loss)/profit after
tax (26.5) 27.9 1.4 (0.3) (4.3) (4.6)
----------------------------- --------- ------------ --------- --------- ------------ ---------
Operating (loss)/profit (12.0) 28.1 16.1 7.7 (3.9) 3.8
Impairment of goodwill 29.1 (29.1) - - - -
Depreciation and impairment
of PPE and software 14.6 - 14.6 16.4 0.3 16.7
Depreciation and impairment
of right of use assets 18.4 (0.7) 17.7 15.3 2.5 17.8
Acquisition amortisation 2.8 (2.8) - 2.8 (2.8) -
--------- ------------ --------- --------- ------------ ---------
EBITDA 52.9 (4.5) 48.4 42.2 (3.9) 38.3
----------------------------- --------- ------------ --------- --------- ------------ ---------
Diluted loss per share (28.6c) 28.4c (0.2c) (3.3c) (4.4c) (7.7c)
Revenue for the year ended 31 March 2023 reduced by 8% to $890.3
million (FY2022: $965.1 million) driven by combination of adverse
foreign exchange movements in DG International, the strategic
decision to exit loss-making business in DG Americas, and lower
volume in the second half of the year in a number of our markets.
Constant currency Group revenues reduced by 4% year -- on --
year.
Adjusted operating profit saw an increase year-on-year to $16.1
million (FY2022: $3.8 million) and adjusted gross margin increased
to 14.9% (FY2022: 12.4%), reflecting stronger than anticipated
trading within DG International particularly continental Europe,
benefits from the turnaround initiatives in DG Americas and some
catch-up pricing to offset some of the inflation continuing in our
inputs. Inventory provisions made in the year were $19.3 million
(FY2022: $18.3 million) and inventory provision releases were $6.3
million (FY2022: $5.0 million). Adjusted overheads as a percentage
of revenue increased to 13.1% (FY2022: 12.0%). Adjusted operating
margin at 1.8% (FY2022: 0.4%) was up year-on-year, reflecting the
higher gross margins and cost management. Overall adjusted profit
before tax was $9.2 million (FY2022: loss before tax $1.3 million).
The Group finished the year with a reported loss before tax of
$18.9 million (FY2022: profit before tax of $2.2 million). This is
significantly adverse to the improvement in adjusted profit before
tax reflecting the (largely non-cash) adjusting items in the
current year of $28.1 million compared to a net credit of $3.5
million in the prior year. Further details of the adjusting items
are detailed below.
Adjusted profit after tax was $1.4 million (FY2022: adjusted
loss after tax of $4.6 million) with loss after tax for the year at
$26.5 million (FY2022: $0.3 million).
Finance charges
Finance costs were higher than the prior year at $6.9 million
(FY2022: $5.5 million), resulting from higher financing costs at
$4.0 million (FY2022: $2.0 million) which reflected the significant
increase in interest rates during the year. The IFRS 16 related
lease liability interest was marginally lower than the prior year
at $2.9 million (FY2022: $3.5 million), of which $0.4 million was
treated as an adjusting item in the prior year.
Adjusting items
Adjusting items are material items or items of an unusual or
non-recurring nature which represent gains or losses which are
separately presented by virtue of their nature, size and/or
incidence. The Group's adjusting items in the year to 31 March 2023
result in a (largely non-cash) net charge of $28.1 million compared
to a net credit of $3.5 million in the prior year. Details of all
adjusting items are included below:
Adjusting Items FY2023 FY2022
=============================================================== ======== ========
Goodwill impairment $29.1m -
(Gains)/losses and transaction costs relating to acquisitions
and disposals of businesses ($1.5m) $3.7m
Acquisition integration and restructuring
(income)/costs ($2.0m) ($1.7m)
Reversal of impairment
of assets ($0.2m) ($2.6m)
IT security incident
income ($0.1m) ($5.7m)
Amortisation of acquired
intangibles $2.8m $2.8m
Total $28.1m ($3.5m)
==================================================================== ======== ========
Goodwill impairment - $29.1 million charge
In the year an impairment of $29.1 million has been recorded to
write down the goodwill from historical acquisitions in the UK and
Asia CGU.
Following the deterioration of the result experienced in UK and
Asia CGU already referred to, especially in the second half of
FY2023, the longer-term impacts on the forecasts for future cash
flows have resulted in an impairment. The calculation was further
exacerbated by the significant increase in the discount rate,
mainly as a result of higher interest rates. Further details of
this impairment are set out in note 9.
(Gains)/losses and transaction costs relating to acquisitions
and disposals of businesses - $1.5 million credit (FY2022: $3.7
million charge)
In the year $1.5 million of insurance income was received
relating to the Impact Innovations, Inc acquisition Representations
& Warranties insurance settlement relating to accounting and
tax issues present at acquisition.
Acquisition integration and restructuring (income)/costs - $2.0
million credit (FY2022: $1.7 million credit)
In order to realise synergies from acquisitions, or existing
businesses, integration and restructuring projects are respectively
undertaken that aim to deliver future savings and efficiencies for
the Group. These are projects outside of the normal operations of
the business and typically incur one-time costs to ensure
successful implementation. As such it is appropriate that costs
associated with projects of this nature be included as adjusting
items. The costs incurred in the year relate to the reorganisation,
business simplification and impairment expenses in DG Americas and
the reorganisation of the DG UK businesses as follows:
Site closures - In April 2022, the Manhattan, Kansas property
was sold for proceeds of $6.7 million resulting in a profit on
disposal of $4.6 million recognised as an adjusting item. In March
2023, a decision was made to exit a surplus site in Clara City,
Minnesota. This resulted in an impairment of the right-of-use asset
associated with the underlying lease of $0.8 million. Additional
costs of $0.3 million were incurred in relation to the relocation
and closure of these sites, as well as the consolidation of other
US sites.
DG America and DG UK business reorganisation - In the year
further restructuring costs, relating to staff, of $0.8 million
have been recognised in DG Americas following the announcement of
further business reorganisation. Similarly, in March 2023 the UK
business internally announced a business simplification in light of
the downturn of the UK market outlook, resulting in the recognition
of one-off restructuring costs of $0.7 million.
Reversal of impairment of assets - $0.2 million credit (FY2022:
$2.6 million credit)
At the onset of the Covid-19 pandemic a review of inventory,
trade receivables and fixed assets was undertaken. Inventories were
assessed at 31 March 2020 for the net realisable value and an
impairment of $7.4 million was recognised. Trade receivables were
assessed for their expected credit loss in line with IFRS 9 and an
impairment of $3.8 million was recognised. The UK's bag-line
machines were impaired by $0.3 million based on expected future
cash flows associated with the 'not-for-resale' consumables
business.
In the year a credit of $0.2 million has been recognised
relating to reversal of impairments no longer required. There are
no remaining provisions relating to these costs.
IT security incident income - $0.1 million credit (FY2022: $5.7
million credit)
The IT security incident which occurred in DG Americas in
October/November 2020 resulted in one-off costs of $2.2 million
being incurred during the year ended 31 March 2021. This did not
include the lost profits incurred as a result of downtime in the
business for which an insurance claim was made. In the year final
insurance income was received of $0.1 million in relation to this
incident.
Amortisation of acquired intangibles - $2.8 million charge
(FY2022: $2.8 million charge)
Under UK IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer lists and
trade names which form part of the intangible value of the acquired
business but are not part of the acquired balance sheet. These
intangible assets are then amortised to the income statement over
their useful economic lives. These are not operational costs
relating to the running of the acquired business and are directly
related to the accounting for the acquisition. These comprise
mainly trade names and brands acquired as part of the acquisition
of Impact Innovations Inc. (Impact) and CSS Industries Inc. (CSS)
in the USA.
Taxation
The Group aims to manage its tax affairs in an open and
transparent manner, with the objective of full compliance with all
applicable rules and regulations in tax jurisdictions in which it
operates. We have not entered into any tax avoidance or otherwise
aggressive tax planning schemes and the Group continues to operate
its tax affairs in this manner.
The Group's adjusted tax charge for the year is $7.8 million
(FY2022: $3.3 million) against an adjusted profit before tax of
$9.2 million (FY2022: loss of $1.3 million). Deferred tax assets
relating to the entities in the UK (both UK trading and PLC) are
not being recognised as the assessment of future taxable profits
shows insufficient future taxable profits against which to utilise
the deferred tax assets. Consequently, the absence of tax relief on
current year tax losses significantly inflates the effective tax
charge for the Group. The profits in DG Europe and Australia, which
are the main contributors to adjusted profit before tax, are taxed
at higher statutory tax rates (25.8% and 30% respectively). In DG
Americas, the impact of movements in uncertain tax positions
together with permanent items adds to the tax charge. Further
details of this tax charge are set out in note 11.
Tax paid in the year was $7.3 million (FY2022: $5.2 million).
This is $2.1 million higher than the prior year, reflecting higher
profits in the Group's tax-paying jurisdictions.
Loss per share
Diluted adjusted loss per share at 0.2 cents (FY2022: 7.7 cents)
is improved year-on-year driven by the significantly higher
adjusted earnings attributable to equity holders of the Company.
Diluted loss per share at 28.6 cents (FY2022: 3.3 cents) is
significantly lower than adjusted, reflecting the adjusting items
charge in the FY2023 year. Further details are set out in note
21.
Dividend
In light of the Group's current position on the path to profit
and margin recovery, and the challenges due to forecast reduced
consumer demand in certain markets, the Board are not recommending
a final dividend (FY2022: nil). As a result, the full-year dividend
is nil (FY2022: 1.68 cents (1.25 pence) based on the interim
dividend which was paid in January 2022).
Return on capital employed
Improving the return on capital employed continues to be a key
target for each of the business units as well as the Group overall.
The Group saw the return on capital employed increase year-on-year
to 5.6% (FY2022: 1.3%), reflecting the improved profitability and
our efforts to reduce our working capital requirements.
Cash flow and net cash
The Group ended the year with its net cash balance at $50.5
million (FY2022: $30.2 million). The significant increase in the
cash balance year -- on -- year is a direct result of the higher
EBITDA contribution and the improved working capital management
resulting in adjusted cash generated from operations significantly
higher at $60.4 million (FY2022: $5.8 million).
Cash flow FY2023 FY2022
======================================================= ========= =========
Adjusted EBITDA $48.4m $38.3m
Add back for share-based payment
charge/(credit) $0.8m ($0.8m)
Movements in working
capital $11.2m ($31.7m)
Adjusted cash generated
from operations $60.4m $5.8m
Adjusting items within cash generated from operations ($1.4m) ($1.9m)
Cash generated from
operations $59.0m $3.9m
Adjusting items within investing and
financing activities $8.3m ($4.3m)
Capital expenditure (net of disposals of property,
plant and equipment) ($5.8m) ($8.3m)
Acquisition of non-controlling ($3.0m) -
interest
Tax paid ($7.3m) ($5.2m)
Interest paid ($5.3m) ($4.2m)
Lease liabilities principal
repayments ($20.4m) ($16.8m)
Dividends paid (including those paid to
non-controlling interests) ($3.0m) ($12.6m)
Purchase of own ($0.9m) -
shares
FX and other ($1.3m) $1.2m
Movement in net cash $20.3m ($46.3m)
Opening net
cash $30.2m $76.5m
================================================================ ========= =========
Closing net
cash $50.5m $30.2m
================================================================ ========= =========
Working capital
The working capital cash flow improved from a $31.7 million
outflow in the prior year to a $11.2 million inflow. This was
driven primarily by improved working capital management across the
Group. The lowering of working capital levels will remain a focus
of the Group.
More than ever, the Group continues to actively track debtors
and credit risk profiles of all of our customers to mitigate as far
as possible any additional exposure to credit risk. Doubtful debt
write off in the year was less than 0.1% of revenue (FY2022: 0.2%),
reflecting our continued proactive approach to mitigating credit
risk exposure.
Capital expenditure
Capital expenditure in the year reduced in relation to the prior
year at $5.8 million (FY2022: $8.3 million). There were no
significant capital projects in the year to 31 March 2023. Capital
expenditure in FY2024 is expected to be higher with investment in
new ERP and manufacturing capabilities.
Average leverage
Average leverage is a key measure for the Group measuring the
seasonality of our working capital demands across the business and
the need to ensure the Group manages its peak funding requirements
within its bank facility limits. As at 31 March 2023 average
leverage was 0.6 times, improved from 1.0 times in the prior year.
This reflects the improvement in adjusted EBITDA compared to the
prior year and stabilised average debt at $17.1 million (FY2022:
$17.2 million).
Our measure of average leverage excludes lease liabilities from
our measurement of debt and we reduce adjusted EBITDA for lease
payments. This mirrors the approach taken by our banks in measuring
leverage for the purposes of the banking facilities and therefore
is considered the most relevant measure for management to
adopt.
Banking facilities
On 1 June 2022 the Company amended and extended the term of its
revolving credit facility, and operated under revised covenants
during the financial year. The Group operated well within these
covenant requirements with excess headroom throughout the year.
On 2 June 2023, the Group announced the successful negotiation
of a $125.0 million three-year refinancing with HSBC and NatWest
banks. The new facility is structured as an Asset Backed Lending
(ABL) arrangement secured with an all-assets lien in the USA and an
all-assets security in the UK. The Group has also extended its
overdraft facility provided by HSBC. This facility replaces the
previous revolving credit facilities originally agreed in 2019.
The new facility carries an initial bank margin of 1.75% to
2.25%, based on average excess availability (plus 0.1% spread
adjustment) over the forward-looking term rate based on the US
Secured Overnight Financing Rate (SOFR) which is lower than the
margins on the 2019 facilities.
The Board believes that the new ABL facility, which flexes in
line with the receivables in the USA, provide more than sufficient
headroom to fund the Group's working capital needs over the period
of the facility.
Further details are set out in note 15.
Foreign exchange exposure management
Our foreign exchange (FX) exposure is split into two areas:
Translational FX exposure - This exposure is the result of the
requirement for the Group to report its results in one currency.
This necessitates the translation of our regional business units'
local currency financial results into the Group's adopted reported
currency. The Group's reporting currency is US dollars in light of
the fact that a significant proportion of the Group's revenues and
profits are in US dollars. There remains a smaller part of the
Group whose functional currency is something other than US dollars.
The constant currency results recalculate the prior year based on
the exchange rates of the current year to enhance the comparability
of information between reporting periods. The overall impact on
revenue and profits from currency movements in FY2023 when compared
to FY2022 is significant relative to the balances. The increase in
revenue would have been $36.4 million higher if FY2022 revenues are
translated at FY2023 foreign currency exchange rates, and the
growth in adjusted loss before tax would have been $2.4 million
higher.
Transactional FX exposure - This FX exposure is managed
carefully by the Group as it can result in additional cash outflows
if not managed appropriately. In response to this risk the Group
adopts an active hedging policy to ensure foreign exchange
movements remain mitigated as far as possible. In addition, a
reasonable proportion of this hedging is achieved through natural
hedges whereby our purchases and sales in US dollars are offset.
The balance of our hedging is achieved through forward exchange
contracts and similar derivatives.
Financial position and going concern basis
The Group's net assets decreased by $35.3 million to $334.4
million at 31 March 2023 (FY2022: $369.7 million), primarily
reflecting impairment of goodwill in the current year.
As at the 31 March 2023 balance sheet date, in light of the
FY2023 results and the outlook for FY2024, the Directors have paid
particularly close attention to their assessment of going concern
in preparation of these financial statements. The Group is
appropriately capitalised at the year end with a net cash position
of $50.5 million.
The Directors of the Group have performed an assessment of the
overall position and future forecasts for the purposes of going
concern. The going concern assessment has been performed using the
Group's FY2024 and FY2025 budgets and plans. These forecasts have
been reviewed in detail by the Board and take into account the
seasonal working capital cycle of the business. They have been
sensitised to reflect severe but plausible adverse downturns in the
current assumptions including the potential impact of a significant
disruption in one of our major customer's business, as well as
increased inflationary pressures in the DG International and DG
Americas business segments, beyond those risks already factored
into the budgets and plans. The base forecasts and additional
sensitivity analysis have been tested against the ABL facility
limits and covenants. The analysis demonstrated that the Group has
sufficient headroom for the Group to meet its obligations as they
fall due for a forecast period of more than twelve months beyond
the date of signing these accounts and will also be compliant with
all covenants within this time frame and beyond. As such, the
Directors do not see any practical regulatory or legal restrictions
which would limit their ability to fund the different regions of
the business as required as the Group has sufficient resources.
Accordingly, the Directors have continued to adopt the going
concern basis of accounting in preparing the financial
statements.
Alternative performance measures
This review includes alternative performance measures (APMs)
that are presented in addition to the standard UK IFRS metrics. The
Directors believe that these APMs provide important additional
information regarding the underlying performance of the business
including trends, performance and position of the Group. APMs are
used to enhance the comparability of information between reporting
periods and segmental business units by adjusting for exceptional
or uncontrollable factors which affect UK IFRS measures, to aid the
understanding of the Group's performance. Consequently, APMs are
used by the Directors and management for strategic and performance
analysis, planning, reporting and reward setting. APMs reflect the
results of the business excluding adjusting items, which are items
that are material or of an unusual or non-recurring nature.
The APMs and the definitions used are listed below:
-- Adjusted EBITDA - Profit/(loss) before finance charges, tax,
depreciation, amortisation, impairment (EBITDA) and adjusting
items
-- Adjusted gross profit - Gross profit before adjusting items
-- Adjusted operating profit/(loss) - Profit/(loss) before
finance charges, tax and adjusting items
-- Adjusted profit/(loss) before tax - Profit/(loss) before tax and adjusting items
-- Adjusted profit/(loss) after tax - Profit/(loss) after tax
before adjusting items and associated tax effect
-- Adjusted tax - Tax before adjusting items
-- Diluted adjusted earnings/(loss) per share - Diluted
earnings/(loss) per share before adjusting items and associated tax
effect
-- Adjusted overheads - Selling costs, administration expenses,
other operating income, profit/(loss) on disposal of property,
plant and equipment (overheads) before adjusting items
-- Adjusted cash generated from operations - Cash generated from
operations before the associated cash impact of those adjusting
items
-- Net cash - Cash and cash equivalents, bank overdraft and loan arrangement fees
In terms of these APMs, a full reconciliation between our
adjusted and reported results is provided in the detailed financial
review above, from which the following key performance metrics have
been derived:
-- Adjusted gross margin - Adjusted gross profit divided by revenue
-- Adjusted operating margin - Adjusted operating profit divided by revenue
-- Adjusted EBITDA margin - Adjusted EBITDA divided by revenue
-- Cash conversion - Adjusted cash generated from operations divided by adjusted EBITDA
In addition, the Group calculates the following key performance
measures using the above APMs:
-- Return on capital employed - Adjusted operating profit
divided by monthly average net capital employed (where capital
employed is net assets excluding net cash and intangible
assets)
-- Average leverage - Average bank debt (being average debt
measured before lease liabilities) divided by adjusted EBITDA
reduced for lease payments
Further details of the items categorised as adjusting items are
disclosed in more detail in note 3.
Paul Bal
Director
19 June 2023
Statement of directors' responsibilities in respect of the
financial statements
The directors are responsible for preparing the Annual report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the Group financial statements in accordance with UK
-- adopted international accounting
standards and the Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102 "The Financial
Reporting Standard applicable in the UK and Republic of Ireland",
and applicable law). Under company law, directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Company
and of the profit or loss of the Group for that period. In
preparing the financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable UK -- adopted international
accounting standards have been followed for the Group financial
-- statements and United Kingdom Accounting Standards,
comprising FRS 102 have been followed for the Company financial
statements, subject to any material departures disclosed and
explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The directors are responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group's and Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. The directors are responsible
for the maintenance and integrity of the company's website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Directors' confirmations
In the case of each director in office at the date the
directors' report is approved:
-- so far as the director is aware, there is no relevant audit
information of which the Group's and Company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a director in order to make themselves aware of any relevant
audit information and to establish that the Group's and Company's
auditors are aware of that information.
CONSOLIDATED INCOME STATEMENT
YEARED 31 MARCH 2023
2023 2022
Note $000 $000
--------------------------------------------- ---- --------- ---------
Revenue 2 890,309 965,093
Cost of sales (758,569) (842,926)
--------------------------------------------- ---- --------- ---------
Gross profit 131,740 122,167
Selling expenses (47,097) (48,305)
Administration expenses - costs (75,112) (66,604)
Administration expenses - impairment of
goodwill 3 (29,100) -
Other operating income 5 2,951 870
Profit/(loss) on disposal of property, plant
and equipment 3 4,595 (436)
Operating (loss)/profit 3 (12,023) 7,692
Finance expenses 6 (6,873) (5,491)
--------------------------------------------- ---- --------- ---------
(Loss)/profit before tax (18,896) 2,201
Income tax charge 7 (7,563) (2,517)
--------------------------------------------- ---- --------- ---------
Loss for the year (26,459) (316)
--------------------------------------------- ---- --------- ---------
Attributable to:
Owners of the Parent Company (27,987) (3,277)
Non-controlling interests 1,528 2,961
--------------------------------------------- ---- --------- ---------
Loss per ordinary share
Note 2023 2022
--------------------------------------------- ---- --------- ---------
Basic 21 (28.6c) (3.3c)
Diluted 21 (28.6c) (3.3c)
--------------------------------------------- ---- --------- ---------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 MARCH 2023
2023 2022
$000 $000
--------------------------------------------------------- -------- -----
Loss for the year (26,459) (316)
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or
loss
Re-measurement of defined benefit pension and health
benefit schemes (37) (715)
Items that may be reclassified subsequently to profit
or loss
--------------------------------------------------------- -------- -----
Exchange difference on translation of foreign operations 10,621 8,686
Transfer to profit and loss on maturing cash flow
hedges (683) (301)
Net unrealised gain on cash flow hedges 419 686
Income tax relating to these items - -
--------------------------------------------------------- -------- -----
10,357 9,071
--------------------------------------------------------- -------- -----
Other comprehensive income for the year, net of tax 10,320 8,356
--------------------------------------------------------- -------- -----
Total comprehensive income for the year, net of
tax (16,139) 8,040
Attributable to:
Owners of the Parent Company (17,024) 5,173
Non-controlling interests 885 2,867
--------------------------------------------------------- -------- -----
(16,139) 8,040
--------------------------------------------------------- -------- -----
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 MARCH 2023
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
------------- ----------- --------
and capital Non-
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 1 April 2022 6,373 228,143 42,549 299 (12,459) 96,806 361,711 7,999 369,710
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Loss for the
year - - - - - (27,987) (27,987) 1,528 (26,459)
Other
comprehensive
income/(expense) - - - (261) 11,261 (37) 10,963 (643) 10,320
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Total
comprehensive
(expense)/income
for the year - - - (261) 11,261 (28,024) (17,024) 885 (16,139)
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Change in
ownership
interest
Option over
non-controlling
interest (note
18) - - - - - 3,069 3,069 3,069
Acquisition
of
non-controlling
interest (note
28) - - - - - (3,558) (3,558) 607 (2,951)
Transactions
with owners
in their capacity
as owners
Equity-settled
share-based
payments (note
23) - - - - - 656 656 - 656
Purchase of
own shares (note
29) - - - - - (865) (865) - (865)
Options exercised
(note 20) 51 - - - - (51) - - -
Equity dividends
paid (note 27) - - - - - - - (2,961) (2,961)
Exchange
differences
on opening
balances (365) (13,298) (2,480) - - - (16,143) - (16,143)
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 31 March
2023 6,059 214,845 40,069 38 (1,198) 68,033 327,846 6,530 334,376
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
In line with the Group's accounting policies, share capital,
share premium, capital redemption reserve, merger reserve and
hedging reserve are translated into US dollars at the rates of
exchange at each balance sheet date and the resulting cumulative
exchange differences are included in translation reserve.
Merger reserve
The merger reserve comprises premium on shares issued in
relation to business combinations.
Capital redemption reserve
The capital redemption reserve comprises amounts transferred
from retained earnings in relation to the redemption of preference
shares. For ease of presentation, the amount of $1.7 million
relating to the capital redemption reserve has been included within
the column of share premium and capital redemption reserve in the
balances at the end of the year (2022: $1.8 million). The only
movement in this balance relates to foreign exchange.
Hedging reserve
The hedging reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that qualify for hedge
accounting and have not yet matured.
Translation reserve
The translation reserve comprises all foreign currency
differences arising from the translation of the financial
statements of foreign operations.
Shareholders' equity
Shareholders' equity represents total equity attributable to
owners of the Parent Company.
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
--------
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 1 April 2021 6,667 239,142 44,600 (86) (21,239) 114,438 383,522 8,497 392,019
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
(Loss)/profit for
the year - - - - - (3,277) (3,277) 2,961 (316)
Other
comprehensive
income/(expense) - - - 385 8,780 (715) 8,450 (94) 8,356
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Total
comprehensive
income/(expense)
for the year - - - 385 8,780 (3,992) 5,173 2,867 8,040
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Transactions with
owners in their
capacity as
owners
Option over
non-controlling
interest (note
18) - - - - - (3,069) (3,069) - (3,069)
Equity-settled
share-based
payments (note
23) - - - - - 241 241 - 241
Derecognition of
deferred tax
asset -
share-based
payments (note
11) - - - - - (1,179) (1,179) - (1,179)
Derecognition of
deferred tax
asset - IFRS 16
(note 11) - - - - - (346) (346) - (346)
Options exercised
(note 20) 13 - - - - (13) - - -
Equity dividends
paid (note 22) - - - - - (9,274) (9,274) (3,365) (12,639)
Exchange
differences on
opening balances (307) (10,999) (2,051) - - - (13,357) - (13,357)
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 31 March 2022 6,373 228,143 42,549 299 (12,459) 96,806 361,711 7,999 369,710
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2023
2023 2022
Note $000 $000
-------------------------------------------- ------- ------- --------
Non-current assets
Property, plant and equipment 8 70,306 78,911
Intangible assets 9 71,325 107,398
Right-of-use assets 10 69,332 86,731
Long-term assets 13 5,647 5,105
Deferred tax assets 11 15,401 16,317
-------------------------------------------- ------- ------- --------
Total non-current assets 232,011 294,462
-------------------------------------------- ------- ------- --------
Current assets
Asset held for sale 8 - 2,150
Inventory 12 206,426 230,885
Trade and other receivables 13 92,402 127,850
Income tax receivable 2,428 1,234
Derivative financial assets 24 340 316
Cash and cash equivalents 14 85,213 50,179
-------------------------------------------- ------- ------- --------
Total current assets 386,809 412,614
-------------------------------------------- ------- ------- --------
Total assets 2 618,820 707,076
-------------------------------------------- ------- ------- --------
Non-current liabilities
Loans and borrowings 15 - (20)
Lease liabilities 10 62,717 80,215
Deferred income 16 2,038 523
Provisions 17 5,474 5,016
Other financial liabilities 18 19,071 21,557
Deferred tax liabilities 11 221 381
-------------------------------------------- ------- ------- --------
Total non-current liabilities 89,521 107,672
-------------------------------------------- ------- ------- --------
Current liabilities
Bank overdraft 14 34,979 20,380
Loans and borrowings 15 (250) (340)
Lease liabilities 10 17,470 19,628
Deferred income 16 263 465
Provisions 17 1,339 1,342
Income tax payable 6,918 7,359
Trade and other payables 19 92,977 143,318
Other financial liabilities 18 41,227 37,542
-------------------------------------------- ------- ------- --------
Total current liabilities 194,923 229,694
-------------------------------------------- ------- ------- --------
Total liabilities 2 284,444 337,366
-------------------------------------------- ------- ------- --------
Net Assets 334,376 369,710
-------------------------------------------- ------- ------- --------
Equity
Share capital 20 6,059 6,373
Share premium 213,187 226,382
Capital redemption reserve 1,658 1,761
Merger reserve 40,069 42,549
Hedging reserve 38 299
Translation reserve (1,198) (12,459)
Retained earnings 68,033 96,806
-------------------------------------------- ------- ------- --------
Equity attributable to owners of the Parent
Company 327,846 361,711
Non-controlling interests 6,530 7,999
-------------------------------------------- ------- ------- --------
Total equity 334,376 369,710
-------------------------------------------- ------- ------- --------
The consolidated financial statements were approved by the Board
of Directors on 19 June 2023 and were signed on its behalf by:
Paul Bal
Director
CONSOLIDATED CASH FLOW STATEMENT
YEARED 31 MARCH 2023
2023 2022
Note $000 $000
------------------------------------------------------- ---- -------- --------
Cash flows from operating activities
Loss for the year (26,459) (316)
Adjustments for:
Depreciation and impairment/(reversal of
impairment) of property, plant and equipment 8 12,532 13,378
Depreciation and impairment/(reversal of
impairment) of right-of-use assets 10 18,471 15,284
Amortisation of intangible assets 9 4,817 5,817
Goodwill impairment 9 29,100 -
Finance expenses 6 6,873 5,491
Income tax charge 7 7,563 2,517
(Profit)/loss on disposal of property, plant
and equipment (4,595) 436
Equity-settled share-based payments - expense/(income) 23 805 (848)
Add back income from insurance settlement 3 (1,500) -
------------------------------------------------------- ---- -------- --------
Operating profit after adjustments for non-cash
items 47,607 41,759
Change in trade and other receivables 36,929 (994)
Change in inventory 17,790 (58,096)
Change in trade and other payables, provisions
and deferred income (43,352) 21,237
------------------------------------------------------- ---- -------- --------
Cash generated from operations 58,974 3,906
Tax paid (7,307) (5,205)
Interest and similar charges paid (5,270) (4,626)
------------------------------------------------------- ---- -------- --------
Net cash inflow/(outflow) from operating
activities 46,397 (5,925)
------------------------------------------------------- ---- -------- --------
Cash flow from investing activities
Proceeds from sale of property, plant and
equipment 6,809 131
Acquisition of intangible assets 9 (368) (381)
Acquisition of property, plant and equipment 8 (5,459) (8,140)
Proceeds from insurance settlement 3 1,500 -
------------------------------------------------------- ---- -------- --------
Net cash inflow/(outflow) from investing
activities 2,482 (8,390)
------------------------------------------------------- ---- -------- --------
Cash flows from financing activities
Acquisition of non-controlling interest 28 (2,951) -
Purchase of own shares 29 (865) -
Lease liabilities principal repayments 10 (20,428) (20,717)
Loan arrangement fees 14 (1,079) (494)
Equity dividends paid 22 - (9,274)
Dividends paid to non-controlling interests (2,961) (3,365)
------------------------------------------------------- ---- -------- --------
Net cash outflow from financing activities (28,284) (33,850)
------------------------------------------------------- ---- -------- --------
Net increase/(decrease) in cash and cash
equivalents 20,595 (48,165)
Cash and cash equivalents and bank overdrafts
at beginning of the year 14 29,799 75,727
Effect of exchange rate fluctuations on cash
held (160) 2,237
------------------------------------------------------- ---- -------- --------
Cash and cash equivalents and bank overdrafts
at end of the year 14 50,234 29,799
------------------------------------------------------- ---- -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARED 31 MARCH 2023
1 Accounting policies
a. Basis of preparation
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards ('UK IFRS'), with future changes
being subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK IFRS in its consolidated financial statements on
1 April 2021. The consolidated financial statements have been
prepared in accordance with UK-adopted international accounting
standards with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
The preparation of financial statements that conform with
adopted UK IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of income and
expense during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results may ultimately differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis (see Critical accounting judgements and estimates section
below). Revisions to accounting estimates are recognised in the
period in which the estimate is revised and future periods if
relevant.
For the purposes of these financial statements 'Design Group' or
'the Group' means IG Design Group plc ('the Company') and its
subsidiaries. The Company's ordinary shares are listed on the
Alternative Investment Market (AIM).
The financial information set out in this document does not
constitute statutory accounts for IG Design Group plc for the year
ended 31 March 2023 but is extracted from the Annual Report and
Financial Statements. The Annual Report and Financial Statements
2023 will be delivered to the Registrar of Companies in due course.
The auditors' report on those accounts was unqualified and neither
drew attention to any matters by way of emphasis nor contained a
statement under either Section 498(2) of Companies Act 2006
(accounting records or returns inadequate or accounts not agreeing
with records and returns), or section 498(3) of Companies Act 2006
(failure to obtain necessary information and explanations).
The accounting policies used in the preparation of these
financial statements are detailed below. These policies have been
consistently applied to all financial years presented.
Presentation currency
The presentation currency of the Group is US dollars.
The functional currency of the Parent Company remains as pound
sterling as it is located in the United Kingdom and substantially
all of its cash flows, assets and liabilities are denominated in
pound sterling, as well as its share capital. As such, the Parent
Company's functional and presentational currency differs to that of
the Group's reporting currency.
Seasonality of the business
The business of the Group is seasonal and although revenues
accrue relatively evenly in both halves of the year, working
capital requirements including inventory levels increase steadily
in the first half from July and peak in October as manufacturing
and distribution of Christmas products builds ahead of
distribution. The second half of the year sees the borrowing of the
Group decline and move to typically a cash positive position as the
Group collects its receivables through January to March.
Going concern
The Group financial statements have been prepared on a going
concern basis as the Directors have a reasonable expectation that
the Group has adequate resources to continue trading for a period
of at least twelve months from the date of this report, based on an
assessment of the overall position and future forecasts for the
going concern period. This assessment has also considered the
overall level of Group borrowings and covenant requirements, the
flexibility of the Group to react to changing market conditions and
ability to appropriately manage any business risks.
On 5 June 2023, the business entered into a new banking facility
with HSBC and NatWest bank as part of a three-year deal to meet the
funding requirements of the Group. This facility comprises an Asset
Backed Lending (ABL) arrangement with a maximum facility amount of
$125.0 million. Cash balances, borrowing and the financial
covenants applicable to the facility are detailed in notes 14 and
15.
In addition to the above facility, the Group has also increased
its unsecured overdraft facility provided by HSBC to GBP16.5
million, which reduces to GBP8.5 million from August 2023. As such,
after making appropriate enquires, the Directors do not see any
practical, regulatory or legal restrictions which would limit their
ability to fund the different regions of the business as required
as the Group has sufficient resources.
We also have access to supplier financing arrangements from
certain customers which we utilise at certain times of the year.
The largest of these supplier financing arrangements are subject to
the continuing support of the customers' banking partners and
therefore could be withdrawn at short notice. As the new ABL
arrangement is linked to trade debtors, any withdrawal of these
facilities would be largely offset as the borrowing base under the
facility would increase.
The Directors have assessed detailed plans and forecasts up to
30 September 2024. These forecasts reflect the fact that the Group
has now returned to profitability and continues the journey to more
robust performance, growing profitability and margins as a result.
They also reflect the seasonal operating cycle of the business and
further recovery associated with the DG Americas plan.
These forecasts have been sensitised to reflect severe but
plausible adverse downturns in the current assumptions.
Specifically, the severe but plausible downside scenario has taken
account of the following risks:
-- the potential impact of a significant disruption in one of
our major customer's business, reflected in a c$20-$25 million
reduction in sales performance and related cash and working capital
impacts; and
-- the potential impact over peak periods by of the effects of
inflation on disposable incomes and demand for products in the DG
International and DG Americas business segments, reflected in a
c$40 million reduction of sales.
In the severe but plausible scenario modelled, there remains
sufficient headroom in our forecast liquidity, and sufficient
headroom under the covenant requirements.
Based on this assessment, the Directors have formed a judgement
that there is a reasonable expectation the Group will have adequate
resources to continue in operational existence for the foreseeable
future.
Changes in accounting policies
There have been no changes to accounting policies during the
year.
Other standards and interpretations
The Group also adopted the following new pronouncements at the
start of the year, which did not have any material impact on the
Group's financial statements:
-- Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
-- Onerous contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
-- Annual Improvements to IFRS Standards 2018-2020
-- Reference to the Conceptional; Framework - Amendments to IFRS 3
Certain new accounting standards and interpretations have been
published that are not yet effective and have not been early
adopted by the Group. These standards are not expected to have a
material impact on the entity in the current or future reporting
periods and on foreseeable future transactions.
b. Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control
exists when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Specifically, the Group
controls an investee if, and only if, the Group has power over
the investee (i.e. existing rights that give it the current ability
to direct the relevant activities of the investee), exposure, or
rights, to variable returns from its involvement with the investee
and the ability to use its power over the investee to affect its
returns. The financial statements of subsidiaries which we consider
the Group to have control are included in the consolidated
financial statements from the date that control commences until the
date that control ceases.
(ii) Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or
income and expense arising from intragroup transactions are
eliminated in preparing the consolidated financial statements.
(iii) Business combinations
Business combinations are accounted for using the acquisition
method as at the date on which control is transferred to the
Group.
The Group measures goodwill at the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non -- controlling interests in the acquiree; plus
-- if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
When the result is negative, a 'bargain purchase' gain is
recognised immediately in the income statement.
Provisional fair values allocated at a reporting date are
finalised within twelve months of the acquisition date.
c. Foreign currency
Items included in the financial statements of the Group's
subsidiaries are measured using the currency of the primary
economic environment in which the subsidiary operates ('functional
currency').
The consolidated financial statements are presented in US
dollars.
(i) Foreign currency transactions
Transactions in foreign currencies are recorded at the rate of
exchange at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet
date are translated into the functional currency of the entity at
the exchange rate prevailing at that date and recognised in the
income statement unless hedge accounting criteria apply (see policy
for financial instruments).
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on consolidation, are
translated into US dollars at the exchange rate prevailing at the
balance sheet date. The revenues and expenses of foreign operations
are translated at an average rate for the period where this rate
approximates to the foreign exchange rates prevailing at the dates
of the transactions.
Share capital, share premium, capital redemption reserve, merger
reserve are denominated in pounds sterling, the Parent Company's
functional currency. They are translated into US dollars at the
rates of exchange at each balance sheet date and the resulting
cumulative exchange differences are included in translation
reserve.
(iii) Net investment in foreign operations
Exchange differences on retranslation at the closing rate of the
opening balances of overseas entities are taken to other
comprehensive income, as are exchange differences arising on
related foreign currency borrowings and derivatives designated as
qualifying hedges, to the extent that they are effective. They are
released into the income statement upon disposal or loss of control
and on maturity or disposal of the hedge respectively.
Exchange differences arising from a monetary item receivable
from or payable to a foreign operation, the settlement of which is
neither planned nor likely in the foreseeable future, are
considered to form part of a net investment in a foreign operation
and are recognised in other comprehensive income in the translation
reserve. The cumulative translation differences previously
recognised in other comprehensive income (or where the foreign
operation is part of a subsidiary, the parent's interest in the
cumulative translation differences) are released into the income
statement upon disposal of the foreign operation or on loss of
control of the subsidiary that includes the foreign operation.
Other exchange differences are taken to the income statement.
d. Financial instruments
Interest-bearing loans and borrowings and other financial
liabilities (excluding derivatives and put options over
non-controlling interests) are held at amortised cost, unless they
are included in a hedge accounting relationship.
Derivatives are measured initially at fair value. Subsequent
measurement in the financial statements depends on the
classification of the derivative as follows:
(i) Fair value hedges
Where a derivative is used to hedge the foreign exchange
exposure of a monetary asset or liability, any gain or loss on the
derivative is recognised in the income statement.
(ii) Cash flow hedges
Where a derivative is designated as a hedging instrument in a
cash flow hedge, the change in fair value is recognised in other
comprehensive income to the extent that it is effective and any
ineffective portion is recognised in the income statement. Where
the underlying transaction results in a financial asset,
accumulated gains and losses are recognised in the income statement
in the same period as the hedged item affects profit or loss.
Where the hedged item results in a non-financial asset the
accumulated gains and losses previously recognised in other
comprehensive income are included in the initial carrying value of
the asset.
(iii) Unhedged derivatives
The movements in the fair value of unhedged derivatives are
charged/credited to the income statement.
The potential cash payments relating to put options issued by
the Group over the non-controlling interest of subsidiary companies
acquired are measured at estimated fair value and accounted for as
financial liabilities. Subsequent to initial recognition, any
changes to the carrying amount of non -- controlling interest put
option liabilities are recognised through equity.
e. Cash and cash equivalents
Cash and cash equivalents comprise cash balances. Bank
overdrafts that are repayable on demand and form an integral part
of the Group's cash management are included as part of cash and
cash equivalents in the statement of cash flows.
f. Loans and borrowings
Loans and borrowings are initially measured at cost (which is
equal to fair value at inception) and are subsequently measured at
amortised cost using the effective interest method.
g. Trade and other receivables
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost, which is generally
equivalent to recognition at nominal value less impairment loss
calculated using the expected loss model.
The Group applies a simplified model to recognise lifetime
expected credit losses for its trade receivables and other
receivables, including those due in greater than twelve months, by
making an accounting policy election. For any receivables not
expected to be paid, an expected credit loss of 100% is recognised
at the point this expectation arises. For all other receivables,
the expected loss is calculated based on reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on the Group's historical experience and
informed credit assessment and including forward -- looking
information.
h. Trade and other payables
Trade payables are non-interest bearing and are recognised
initially at fair value and subsequently at amortised cost.
i. Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and impairment losses. Where parts of an
item of property, plant and equipment or other assets have
different useful lives, they are accounted for as separate items.
The carrying values of property, plant and equipment and other
assets are periodically reviewed for impairment when events or
changes in circumstances indicate that the carrying values may not
be recoverable.
Property, plant and equipment are depreciated over their
estimated remaining useful lives on a straight-line basis using the
following estimated useful lives:
Land and buildings - Freehold land Not depreciated
- Buildings 25-30 years or life of lease
Plant and equipment 4-25 years
Fixtures and fittings 3-5 years
Motor vehicles 4 years
----------------------------------------- ----------------------------
The assets' useful lives and residual values are reviewed, and
adjusted if appropriate, at each balance sheet date. Included
within plant and equipment are assets with a range of depreciation
rates. These rates are tailored to the nature of the assets to
reflect their estimated useful lives.
Where the Group identifies assets held for sale, they are held
at the lower of current value and fair value less costs to
sell.
j. Lease liabilities and lease right-of-use assets
The Group leases various offices, warehouses, equipment and
motor vehicles. Rental contracts are typically made for fixed
periods of one to 20 years but may have extension options as
described below. Lease terms are negotiated on an individual basis
and contain a wide range of different terms and conditions. The
lease agreements do not impose any covenants, but leased assets may
not be used as security for borrowing purposes.
Leases greater than twelve months in length, and those not of
low value, are recognised as a lease right-of -- use asset with the
associated future lease payment terms recognised as a lease
liability. The right-of-use assets and the associated lease
liabilities are recognised by unwinding the future lease payments
at the rate implicit to the lease or, if the rate implicit to the
lease cannot be readily determined, at the relevant incremental
borrowing rate.
Lease liabilities include the net present value of the following
lease payments:
-- fixed payments (including in substance fixed payments), less
any lease incentives receivable;
-- amounts expected to be payable by the lessee under residual value guarantees;
-- the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
-- payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease right-of-use assets are amortised over their useful
economic lives or the lease term, whichever is shorter. The lease
liabilities are derecognised by applying the future lease
payments.
Extension and termination options are included in a number of
property and equipment leases across the Group. These terms are
used to maximise operational flexibility in terms of managing
contracts. The majority of extension and termination options held
are exercisable only by the Group and not by the respective lessor.
In determining the lease term, management considers all facts and
circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated). The assessment is reviewed if a significant
event or a significant change in circumstances occurs which affects
this assessment and that is within the control of the lessee.
Rentals associated with leases that are of low value or less
than twelve months in length are expensed to the income statement
on a straight-line basis. The associated lease incentives are
amortised in the income statement over the life of the lease.
On acquisition, right-of-use assets and lease liabilities are
recognised in accordance with IFRS 16. The acquired lease liability
is measured as if the lease contract was a new lease at the
acquisition date. The right-of-use asset is measured at an amount
equal to the recognised lease liability.
The right -- of -- use asset is adjusted to reflect any
favourable or unfavourable terms of the lease relative to market
terms.
Right-of-use assets are impaired in line with the impairment
accounting policy below.
k. Intangible assets
(i) Goodwill
Goodwill is stated at cost less any impairment losses.
Acquisitions are accounted for using the purchase method. For
acquisitions that have occurred since 1 January 2004, goodwill
represents the difference between the fair value of the assets
given in consideration and the fair value of identifiable assets,
liabilities and contingent liabilities of the acquiree. For
acquisitions made before 1 January 2004, goodwill is included on
the basis of its deemed cost, which represents the amount
previously recorded under UK GAAP.
The Group has expensed costs attributable to acquisitions in the
income statement. Given their one -- off nature, these costs are
generally presented within adjusting items.
(ii) Acquired intangible assets
An intangible asset acquired in a business combination is
recognised at fair value to the extent it is probable that the
expected future economic benefits attributable to the asset will
flow to the Group and that its cost can be measured reliably.
Intangible assets principally relate to customer relationships,
which are valued using discounted cash flows based on historical
customer attrition rates, and trade names/brand, which are valued
using an income approach. The cost of intangible assets is
amortised through the income statement on a straight -- line basis
over their estimated useful economic life and as these are assets
directly attributed to the acquisition of a business, the
amortisation costs are also presented within adjusting items.
(iii) Other intangible assets
Other intangible assets which are not acquired through a
business combination are recognised at cost to the extent it is
probable that the expected future economic benefits attributable to
the asset will flow to the Group and that its cost can be measured
reliably, and amortised on a straight-line basis over their
estimated useful economic life.
Intangibles are amortised over their estimated remaining useful
lives on a straight-line basis as follows:
Goodwill Not amortised
Computer software 3-5 years
Trade names 3-5 years
Customer relationships 3-15 years
Other intangibles 3-5 years
---------------------- -------------
Customer relationships are wide ranging in useful economic
lives, from shorter relationships derived from smaller acquisitions
to the long relationship with Walmart acquired as part of the
acquisition of Impact Innovations, Inc. ('Impact') in August
2018.
l. Impairment
All assets are reviewed regularly to determine whether there is
any indication of impairment. Goodwill is tested for impairment
annually.
An impairment loss is recognised whenever the carrying amount of
a non-financial asset or the cash -- generating unit (CGU) to which
it belongs exceeds its recoverable amount, being the greater of
value in use and fair value less costs to sell, and is recognised
in the income statement. Value in use is estimated based on future
cash flows discounted using a pre-tax discount rate based upon the
Group's weighted average cost of capital.
Financial assets are assessed for impairment using the expected
credit loss model which requires expected credit losses and changes
to expected credit losses at each reporting date to reflect changes
in credit risk since initial recognition.
The reversal of an impairment loss should be recognised if there
has been a change in the estimates used to determine the asset's
recoverable amount since the last impairment test was carried out.
Impairment losses relating to goodwill are not permitted to be
reversed.
m. Inventories
Inventories are valued at the lower of cost (on a weighted
average basis) and net realisable value. For work -- in -- progress
and finished goods, cost includes an appropriate proportion of
labour cost and overheads based on normal operating capacity. For
acquisitions, inventory acquired will be assessed for fair value in
accordance with IFRS 3 and if applicable an uplift applied to
inventory on hand relating to sales orders already attached to the
acquired inventory. The unwind of the uplift in value is treated as
an adjusting item.
n. Income tax
Income tax in the income statement comprises current and
deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised in equity
or other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year using the applicable tax rates enacted or
substantively enacted at the balance sheet date and any adjustment
to tax payable in prior years. Deferred tax is provided, using the
balance sheet liability method, on temporary differences arising
between the tax bases and the carrying amounts of assets and
liabilities in the financial statements. The following temporary
differences are not provided for: initial recognition of goodwill
not deductible for tax purposes, the initial recognition of assets
or liabilities that affect neither accounting nor taxable profit or
loss other than in a business combination, and differences relating
to investments in subsidiaries to the extent that they will not
reverse in the foreseeable future. Deferred tax is determined using
tax rates that are expected to apply when the related deferred tax
asset or liability is settled, using the applicable tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profit will be available against which
the asset can be utilised. Deferred tax assets are impaired to the
extent that it is no longer probable that the related tax benefits
will be realised.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
liabilities and when they relate to income taxes levied by the same
tax authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
o. Revenue
Revenue from the sale of goods is recognised in the income
statement net of expected discounts, rebates, refunds, credits,
price concessions or other similar items, when the associated
performance obligation has been satisfied, and control of the goods
has been transferred to the customer.
The Group recognises revenue on sales of Celebrations, Craft
& creative play, Stationery, Gifting and 'Not -- for -- resale'
consumable products across two reporting segments. Typically the
products that we supply form the only performance obligations
within a customer agreement, and although the Group can provide
ancillary services such as merchandising, these are not separately
identifiable obligations. Each customer arrangement/contract is
assessed to identify the performance obligations being provided to
the customer. Where distinct performance obligations are deemed to
exist, an element of revenue is apportioned to that obligation.
Revenue from sales is recognised based on the price specified in
the contract, net of any estimated volume discounts, rebates and
sell-through provisions. Accumulated experience is used to estimate
and provide for these discounts, using the expected value method,
and revenue is only recognised to the extent that it is highly
probable that a significant reversal will not occur. A refund
liability (included in trade and other payables) is recognised for
these items payable to customers based on sales made in the period.
No significant element of financing is deemed present as the
majority of sales are made with credit terms of 30 -- 120 days,
which is consistent with market practice.
A significant part of the Group's businesses sell goods on a
'free -- on -- board' (FOB) basis, where the Group as the seller
makes its goods ready for collection at its premises on an agreed
upon sales date and the buyer incurs all transportation and
handling costs and bears the risks for bringing the goods to their
chosen destination. In this situation, revenue is recognised on
collection by the customer.
Where the Group operates non -- FOB terms with customers,
revenue is recognised when the control of the goods has been
transferred to the customer. These terms include consignment stock
agreements, where revenue is recognised upon the customer removing
goods from consignment stock.
p. Finance income and expense
Finance income and expense is recognised in the income statement
as it accrues. Finance expenses comprise interest payable, finance
charges on finance leases, interest on lease liabilities,
amortisation of capitalised fees, and unwinding of discounts on
provisions. Net movements in the fair value of derivatives which
have not been designated as an effective hedge, and any ineffective
portion of fair value movement on derivatives designated as a
hedge, are also included within finance income or expense.
q. Supplier financing
The Group is party to supplier financing arrangements with one
of its key customers. This arrangement is considered non-recourse
factoring and on receipt of payment from the banks the associated
trade receivable is derecognised in accordance with IFRS 9.
r. Segment reporting
A segment is identified on the basis of internal reports that
are regularly reviewed by the Board in order to allocate resources
to the segment and assess its performance.
s. Pensions
(i) Defined contribution schemes
Obligations for contributions to defined contribution pension
schemes are expensed to the income statement as incurred.
(ii) Defined benefit schemes
Two pension schemes, one of which is in the Netherlands and the
other in the UK, are defined benefit schemes.
The Netherlands subsidiary operates an industrial defined
benefit fund, based on average wages, that has an agreed maximum
contribution. The pension fund is a multi -- employer fund and
there is no contractual or constructive obligation for charging the
net defined benefit cost of the plan to participating entities
other than an agreed maximum contribution for the period, that is
shared between employer (4/7) and employees (3/7).
The Dutch Government is not planning to make employers fund any
deficits in industrial pension funds; accordingly, the Group treats
the scheme as a defined contribution scheme for disclosure
purposes. The Group recognises a cost equal to its contributions
payable for the period.
Following the acquisition of CSS, on 3 March 2020, the Group
also administers a defined benefit scheme in the UK.
The net obligation for this scheme is calculated by estimating
the amount of the future benefit that employees have earned in
return for their service in the current and prior periods; that
benefit is discounted to determine its present value, and the fair
value of the scheme assets is deducted. The calculation is
performed by a qualified independent actuary.
t. Share-based payments
The cost of equity-settled transactions with employees is
measured by reference to the fair value of the options at the date
on which they are granted. The fair value is determined by using an
appropriate pricing model. The fair value cost is then recognised
over the vesting period, ending on the date on which the relevant
employees become fully entitled to the award.
The quantum of awards expected to vest and the relevant cost
charged is reviewed annually such that at each balance sheet date
the cumulative expense is the relevant share of the expected total
cost, pro-rated across the vesting period.
No expense is recognised for awards that are not expected to
ultimately vest, for example due to an employee leaving or business
performance targets not being met. The annual expense for
equity-settled transactions is recognised in the income statement
with a corresponding entry in equity.
In the event that any scheme is cancelled, the Group recognises
immediately the amount that otherwise would have been recognised
for services received over the remainder of the vesting period. The
Group calculates this charge based on the number of the awards
expected to achieve the performance conditions immediately before
the award was cancelled.
Employer social security charges are accrued, where applicable,
at a rate which management expects to be the prevailing rate when
share -- based incentives are exercised and is based on the latest
market value of options expected to vest or those already
vested.
Deferred tax assets are recognised in respect of share-based
payment schemes when deferred tax assets are recognised in that
territory.
u. Investment in own shares
The shares held in the Group's Employee Benefit Trust (IG
Employee Share Trustee Limited) for the purpose of fulfilling
obligations in respect of share option plans are treated as
belonging to the Company and are deducted from its retained
earnings. The cost of shares held directly (treasury shares) is
also deducted from retained earnings.
v. Provisions
A provision is recognised when there is a probable legal or
constructive obligation as a result of a past event and a reliable
estimate can be made of the outflow of resources that will be
required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected future cash
flows at a pre -- tax rate that reflects current market assessments
of the time value of money and, where appropriate, the risks
specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognised as
borrowing costs.
w. Government grants
Government grants are recognised when it is reasonable to expect
that the grants will be received and that all related conditions
will be met, usually on submission of a valid claim for payment.
Government grants in respect of capital expenditure are included
within deferred income on the balance sheet and are released to the
income statement on a straight-line basis over the expected useful
lives of the relevant assets. Grants of a revenue nature, other
than those associated with Covid-19, are credited to the income
statement so as to match them with the expenditure to which they
relate. Covid-19 related grants are recognised gross in either
other operating income or cost of sales.
x. Dividends
Dividends are recognised as a liability in the period in which
they are approved by the shareholders of the Company (final
dividend) or paid (interim dividend).
y. Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale are capitalised as part of the cost of the respective asset.
Costs directly attributable to the arrangement of new borrowing
facilities are included within the fair value of proceeds received
and amortised over the life of the relevant facilities. Other
borrowing costs, which can include costs associated with the
extension of existing facilities, are expensed in the period they
occur.
Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds.
z. Use of non-GAAP measures
These financial statements include alternative performance
measures (APMs) that are presented in addition to the standard GAAP
metrics.
The Directors believe that these APMs provide important
additional information regarding the underlying performance of the
business including trends, performance and position of the Group.
APMs are used to enhance the comparability of information between
reporting periods and segmental business units by adjusting for
factors which affect IFRS measures, to aid the understanding of the
Group's performance. Consequently, APMs are used by the Directors
and management for strategic and performance analysis, planning,
reporting and reward setting. The APMs are Adjusted EBITDA,
Adjusted operating profit/(loss), Adjusted profit/(loss) before
tax, Adjusted profit/(loss) after tax and Adjusted earnings/(loss)
per share.
Adjusting items are items that are material and/or, in the
judgement of the Directors, of an unusual or non -- recurring
nature. These items are adjusted to present the performance of the
business in a consistent manner and in line with how the business
is managed and measured on a day -- to -- day basis. They are gains
or costs associated with events that are not considered to form
part of the core operations, or are considered to be a
non-recurring event (although they may span several accounting
periods) including fair value adjustments to acquisitions.
Further detail of adjusting items can be seen in note 3 to the
financial statements.
aa. Like-for-like comparators
Figures quoted at like-for-like exchange rates are calculated by
retranslating the prior year figures at the current year exchange
rates.
Critical accounting judgements and estimates
The following provides information on those policies that
management considers critical because of the level of judgement and
estimation required which often involves assumptions regarding
future events which can vary from what is anticipated. The
Directors believe that the financial statements reflect appropriate
judgements and estimates and provide a true and fair view of the
Group's performance and financial position.
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements.
Accounting judgements
(i) Adjusting items
Judgement is required to determine whether items are
appropriately classified as adjusting items and that the values
assigned are appropriate. Adjusting items relate to impairments of
assets, costs associated with acquisitions or disposals, and
significant items by virtue of their size or incidence. Adjusting
items are approved by the Board. Further details on the rationale
for classification are disclosed in note 3.
(ii) Goodwill impairment assessment
In reaching the conclusion that the Fair Value less Costs to
Sell (FVLCTS) model does not yield a higher recoverable amount than
the Value in Use (VIU) model, management considered various
factors, including current market conditions, observable market
prices, and assumptions related to potential buyers' perspectives.
The judgment was applied in assessing the relevance and reliability
of the market-based approach, immediate sale perspective, and
market participant assumptions within the FVLCTS model.
Additionally, management considered the associated costs and time
required for the sale process, considering a conservative and
realistic assumption.
The conclusion was reached based on management's experience,
market knowledge, and the assessment of available data and
information. While the judgments exercised by management were made
in good faith and believed to be reasonable, actual results may
differ from these judgments due to inherent uncertainties and
external factors affecting market conditions.
The assessment of the future impacts of climate change is
undoubtedly another area where judgement must be applied. The
evolving and dynamic nature of climate change, along with the
uncertainties surrounding future regulatory frameworks,
technological advancements, and market dynamics, make it difficult
to precisely predict the medium and long-term effects on our
financial performance, assets, and liabilities.
While the judgments exercised by management were made in good
faith and believed to be reasonable, actual results may differ from
these judgments due to inherent uncertainties and external factors
affecting climate change.
The disclosures in Note 9 provide further details regarding the
key assumptions and judgments made by management in determining the
recoverable amount of goodwill related to the CGUs of the
Group.
Accounting estimates
(i) Intangible assets - Goodwill
Goodwill is not amortised but is tested annually for impairment,
along with the finite-lived intangible assets and other assets of
the Group's CGUs. An estimate is required in identifying the events
which indicate potential impairment, and in assessing fair value of
individual assets when allocating an impairment loss in a CGU or
groups of CGUs. Tests for impairment are based on discounted cash
flows and assumptions (including discount rates and growth
prospects) which are inherently subjective. They involve a degree
of uncertainty, and changes in these estimates could have a
material impact on the financial statements in future periods. The
Group performs various sensitivity analyses in respect of the tests
for impairment, as detailed in note 9.
(ii) Taxation
Estimates are required in determining the Group's tax assets and
liabilities . Deferred tax assets have been recognised to the
extent that management believe that they are recoverable based on
profit projections for future years. These forecasts are consistent
with those used elsewhere in the financial statements (including
impairment). Note 11 provides information on the gross temporary
differences and unused tax losses on which deferred tax assets have
not been recognised.
Included within current tax liabilities are estimations related
to uncertain tax positions. These calculations are based on
management's best estimates of potential tax liabilities that could
arise in the future. These estimates are reassessed when facts and
circumstances change.
(iii) Lease asset impairments
The Group has impaired the right -- of -- use assets in respect
of several properties that the Group has exited as part of the
ongoing DG Americas integration. This is based on the properties
themselves being a CGU in line with IAS 36 as they are being
actively marketed for sub -- tenants. The impairments are assessed
at each reporting date and if necessary reversed should there be
available sub -- tenants for the properties, or early termination
agreed with the landlord.
The decision was made to exit Clara City, Minnesota in the year,
resulting in a lease impairment of $757,000. In the year to 31
March 2022, there was a $2.5 million impairment reversal. As at 31
March 2023, for the remaining impaired properties, the Group had no
offers from potential sub-tenants and given that this position is
expected to continue for the foreseeable future, these leased
properties remain impaired in full. As at 31 March 2023, if there
was a reversal of the remaining impaired right-of-use assets, the
right -- of-use assets would increase by $4.7 million (2022: $6.5
million).
(iv) Provision for slow-moving inventory
The Group has guidelines for providing for inventory which may
be sold below cost due to its age or condition.
The Directors assess the inventory at each location and in some
cases decide that there are specific reasons to provide more than
the guideline levels, or less if there are specific action plans in
place which mean the guideline provision level is not required.
Determining the level of inventory provision requires an estimation
of likely future realisable value of the inventory in various time
frames and comparing with the cost of holding inventory for those
time frames. This is not a precise estimate and is based on best
data at the time of recognition. Regular monitoring of inventory
levels, the ageing of inventory and the level of the provision is
carried out by the Directors to reassess this estimate. The
assumptions made in relation to the current period are consistent
with those in the prior year. As at 31 March 2023, inventory
provisions were $36.5 million against a gross inventory value of
$243.2 million (2022: $38.4 million provision, $269.3 million gross
inventory value). This provision estimate is subject to potential
material change, for example if market conditions change because
expected customer demand fluctuates, or shipping delays reduce our
ability to deliver on time and in full.
2 Segmental information
The Group has one material business activity, being the design,
manufacture and distribution of Celebrations, Craft & creative
play, Stationery, Gifting and 'Not-for-resale' consumable
products.
The business operates under two reporting segments which are
reported to, and evaluated by, the Chief Operating Decision Makers
for the Group. The DG Americas segment includes overseas operations
in Asia, Australia, UK, India and Mexico, being the overseas
entities of US companies. The DG International segment comprises
the consolidation of the separately owned businesses in the UK,
Asia, Europe and Australia.
Inter -- segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Financial performance of each segment is measured on adjusted
operating profit before management recharges. Interest and tax are
managed on a Group basis and not split between reportable segments.
However, the related financial liability and cash has been
allocated out into the reportable segments as this is how they are
managed by the Group.
Segment assets are all non-current and current assets, excluding
deferred tax and income tax, which are shown in the eliminations
column. Inter -- segment receivables and payables are not included
within segmental assets and liabilities as they eliminate on
consolidation.
DG DG Central
and
Americas(a) International eliminations Group
$000 $000 $000 $000
-------------------------------------------------------- ----------- ------------- ------------ ---------
Year ended 31 March 2023
Revenue - external 592,954 297,355 - 890,309
- inter-segment - 2,283 (2,283) -
-------------------------------------------------------- ----------- ------------- ------------ ---------
Total segment revenue 592,954 299,638 (2,283) 890,309
-------------------------------------------------------- ----------- ------------- ------------ ---------
Segment profit/(loss) before adjusting items 2,918 19,827 (6,696) 16,049
Adjusting items (note 3) 1,701 (29,773) - (28,072)
-------------------------------------------------------- ----------- ------------- ------------ ---------
Operating (loss)/profit 4,619 (9,946) (6,696) (12,023)
Finance expenses (6,873)
Income tax (7,563)
-------------------------------------------------------- ----------- ------------- ------------ ---------
Loss for the year ended 31 March 2023 (26,459)
-------------------------------------------------------- ----------- ------------- ------------ ---------
Balances at 31 March 2023
Segment assets 370,276 201,650 46,894 618,820
-------------------------------------------------------- ----------- ------------- ------------ ---------
Segment liabilities (156,053) (96,588) (31,803) (284,444)
-------------------------------------------------------- ----------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 2,452 2,941 66 5,459
- intangible assets 331 37 - 368
- right-of-use assets 727 4,094 24 4,845
Depreciation - property, plant and equipment 7,291 5,226 15 12,532
Amortisation - intangible assets 4,673 144 - 4,817
Impairment - intangible assets - 29,100 - 29,100
Depreciation - right-of-use assets 12,615 5,090 9 17,714
Impairment - right-of-use assets 757 - - 757
Profit on disposal of property, plant and equipment (b) 4,493 102 - 4,595
-------------------------------------------------------- ----------- ------------- ------------ ---------
(a) Including overseas entities for the Americas operating segment.
(b) Includes $4.6 million relating to the profit on sale of a
property owned by the Group in Manhattan, Kansas; see note 3
DG DG Central
and
Americas(a) International eliminations Group
$000 $000 $000 $000
------------------------------------------------------- ----------- ------------- ------------ ---------
Year ended 31 March 2022
Revenue - external 658,953 306,140 - 965,093
- inter-segment 16 1,725 (1,741) -
------------------------------------------------------- ----------- ------------- ------------ ---------
Total segment revenue 658,969 307,865 (1,741) 965,093
------------------------------------------------------- ----------- ------------- ------------ ---------
Segment (loss)/profit before adjusting items (11,738) 20,836 (5,290) 3,808
Adjusting items (note 3) 5,667 1,570 (3,353) 3,884
------------------------------------------------------- ----------- ------------- ------------ ---------
Operating (loss)/profit (6,071) 22,406 (8,643) 7,692
Finance expenses (5,105)
Finance expenses treated as an adjusting item (note 3) (386)
Income tax (2,517)
------------------------------------------------------- ----------- ------------- ------------ ---------
Loss for the year ended 31 March 2022 (316)
------------------------------------------------------- ----------- ------------- ------------ ---------
Balances at 31 March 2022
Segment assets 451,270 237,625 18,181 707,076
------------------------------------------------------- ----------- ------------- ------------ ---------
Segment liabilities (212,083) (100,500) (24,783) (337,366)
------------------------------------------------------- ----------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 5,237 2,860 43 8,140
- intangible assets 223 158 - 381
- right-of-use assets 4,331 4,850 - 9,181
Depreciation - property, plant and equipment 7,803 5,891 11 13,705
Reversal of impairment - property, plant and equipment - (327) - (327)
Amortisation - intangible assets 5,634 183 - 5,817
Depreciation - right-of-use assets 12,406 5,352 18 17,776
Impairment - right-of-use assets - - 22 22
Reversal of impairment - right-of-use assets (2,514) - - (2,514)
------------------------------------------------------- ----------- ------------- ------------ ---------
(a) Including overseas entities for the Americas operating segment.
-- The Group has one customer that accounts for 24% (2022: 23%)
of the total Group revenues. In the year ended 31 March 2023 total
sales to that customer were $215.2 million (2022: $223.9 million).
This customer falls solely within the DG Americas operating segment
above. No other single customer accounts for over 10% of total
sales.
-- The assets and liabilities that have not been allocated to
segments include deferred tax assets of $15.4 million (2022: $16.3
million), income tax receivable of $2.4 million (2022: $1.2
million), income tax payable of $6.9 million (2022: $7.4 million)
and deferred tax liabilities of $221,000 (2022: $381,000).
The Group's information about its segmental assets (non-current
assets excluding deferred tax assets and other long-term assets)
and revenue by customer destination are detailed below:
Non-current assets
--------------------
2023 2022
$000 $000
----------------- --------- ---------
DG Americas(a) 144,651 166,823
DG International 66,312 106,217
210,963 273,040
----------------- --------- ---------
a) These figures include overseas entities relating to the DG
Americas operating segment. The overseas entities element is not
material, and this information is not readily available.
Non-current assets
--------------------
DG International is made up as follows: 2023 2022
$000 $000
---------------------------------------- --------- ---------
UK 29,030 65,103
Netherlands 25,086 24,642
Other 12,196 16,472
---------------------------------------- --------- ---------
66,312 106,217
---------------------------------------- --------- ---------
Revenue by customer destination
2023 2022 2023 2022
$000 $000% %
------------------ ------- ------- --- ----
Americas(a) 607,470 665,059 68 69
UK 94,524 112,539 11 12
Rest of the world 188,315 187,495 21 19
------------------ ------- ------- ---- ----
890,309 965,093 100 100
------------------ ------- ------- ---- ----
a) Included within Americas is $577.2 million (2022: $637.7
million) relating to the country, USA.
All revenue arose from the sale of goods.
3 Operating expenses and adjusting items
Included in the income statement are the following
charges/(credits):
2023 2022
Note $000 $000
---------------------------------------------------- ---- ------- -------
Depreciation of tangible fixed assets 8 12,532 13,705
Reversal of impairment of tangible fixed
assets 8 - (327)
Depreciation of right-of-use assets 10 17,714 17,776
Impairment/(reversal of impairment) of right-of-use
assets 10 757 (2,492)
(Profit)/loss on disposal of property, plant
and equipment and intangible assets (4,595) 436
Release of deferred grant income 5 (111) 17
Goodwill impairment 9 29,100 -
Amortisation of intangible assets - software 9 2,066 2,980
Amortisation of intangible assets - other 9 2,751 2,837
Sub-lease rental income 5 (1,253) (752)
Write down of inventories to net realisable
value 12 19,295 18,285
Reversal of previous write downs of inventory 12 (6,436) (6,219)
Loss on foreign exchange 719 602
---------------------------------------------------- ---- ------- -------
Total administration expenses of $104.2 million (2022: $66.6
million) includes $29.1 million (2022: $nil) goodwill impairment as
noted above.
2023 2022
$000 $000
------------------------------ -------- -----
Operating profit analysed as:
Adjusted operating profit 16,049 3,808
Adjusting items (28,072) 3,884
------------------------------ -------- -----
Operating (loss)/profit (12,023) 7,692
------------------------------ -------- -----
Adjusting items
Profit
on
disposal Admin
Admin Other of property, expenses
Cost of Selling expenses operating plant - impairment
Year ended sales expenses - costs income and equipment of goodwill Total
31 March 2023 $000 $000 $000 $000 $000 $000 $000
----------------------- ------- --------- --------- ---------- -------------- ------------- -------
Goodwill impairment(1) - - - - - 29,100 29,100
Losses/(gains)
and transaction
costs relating
to acquisitions
and disposals
of businesses(2) - - - (1,500) - - (1,500)
Acquisition
integration
and restructuring
(income)/costs(3) 1,479 - 1,031 - (4,493) - (1,983)
Reversal of
impairment
of assets(4) (154) - - - - - (154)
IT security
incident income(5) - - (142) - - - (142)
Amortisation
of acquired
intangibles(6) - - 2,751 - - - 2,751
----------------------- ------- --------- --------- ---------- -------------- ------------- -------
Adjusting
items 1,325 - 3,640 (1,500) (4,493) 29,100 28,072
----------------------- ------- --------- --------- ---------- -------------- ------------- -------
Other Loss on Other
Cost of Selling Admin operating disposal finance
Year ended sales expenses Expenses income of plant expenses Total
- costs
31 March 2022 $000 $000 $000 $000 $000 $000 $000
------------------------------------------------- ------- -------- -------- --------- -------- -------- -------
Losses/(gains) and transaction costs relating to
acquisitions and disposals of businesses(2) - - 3,710 - - (15) 3,695
Acquisition integration and restructuring
(income)/costs(3) (980) - (1,336) (124) 348 401 (1,691)
(Reversal of impairment)/impairment of assets(4) (1,544) (1,112) - - - - (2,656)
IT security incident (income)/costs(5) - - (5,683) - - - (5,683)
Amortisation of acquired intangibles(6) - - 2,837 - - - 2,837
------------------------------------------------- ------- -------- -------- --------- -------- -------- -------
Adjusting items (2,524) (1,112) (472) (124) 348 386 (3,498)
------------------------------------------------- ------- -------- -------- --------- -------- -------- -------
Adjusting items are separately presented by virtue of their
nature, size and/or incidence (per each operating segment). These
items are material or of an unusual or non-recurring nature which
represent gains or losses and are presented to allow for the review
of the performance of the business in a consistent manner and in
line with how the business is managed and measured on a day-to-day
basis and allow the reader to obtain a clearer understanding of the
underlying results of the ongoing Group's operations. They are
typically gains or costs associated with events that are not
considered to form part of the core operations, or are considered
to be a 'non-recurring' event (although they may span several
accounting periods).
These (gains)/losses relating to the year ended 31 March 2023
are broken down as follows:
(1) Goodwill impairment
In the year an impairment of $29.1 million has been recorded to
write down the goodwill from historical acquisitions in the UK and
Asia Cash-Generating Unit (CGU).
Following the deterioration of the result experienced in UK and
Asia CGU, especially in the second half of FY2023, the longer-term
impacts on the forecasts for future cash flows have resulted in an
impairment. The calculation was further exacerbated by the
significant increase in the discount rate, mainly as a result of
higher interest rates. See note 9 for further details.
(2) Losses/(gains) and transaction costs relating to
acquisitions and disposals of businesses
Costs directly associated with acquisitions, including legal and
advisory fees on deals, form part of our reported results on an
IFRS basis. These costs, however, in the Board's view, form part of
the capital transaction, and as they are not attributed to
investment value under IFRS 3, they are included as an adjusting
item. Similarly, where acquisitions have employee related payments
(exclusive of Long Term Incentive Plans) which lock in and
incentivise legacy talent, we also include these costs as adjusting
items. Furthermore, gains or losses on the disposal of businesses,
including any transaction costs associated with the disposal, are
treated as adjusting items.
In the year, $1.5 million of insurance income was received
relating to the Impact Innovations, Inc (Impact) Representations
and Warranties insurance settlement in connection with accounting
and tax issues present at acquisition in August 2018.
In the year to 31 March 2022, the Group incurred expenditure
relating to acquisitions totalling $3.7 million, of which $113,000
related to previous successful acquisitions and the balance related
to aborted acquisitions. In addition, the final tranche of
acquisition related employee payments which lock in and incentivise
legacy talent relating to the Impact acquisition in August 2018 was
incurred ($278,000).
(3) Acquisition integration and restructuring (income)/costs
In order to realise synergies from acquisitions, or existing
businesses, integration and restructuring projects are respectively
undertaken that aim to deliver future savings and efficiencies for
the Group. These are projects outside of the normal operations of
the business and typically incur one-time costs to ensure
successful implementation. As such it is appropriate that costs
associated with projects of this nature be included as adjusting
items. The costs incurred in the year relate to the reorganisation,
business simplification and impairment expenses in DG Americas and
the reorganisation of the DG UK businesses as follows:
Profit on sale of property, plant and equipment - In April 2022,
the Kansas, Manhattan property was sold for proceeds of $6.7
million resulting in a profit on disposal of $4.6 million
recognised as an adjusting item. In addition to this there was a
loss on sale of equipment of $100,000 in relation to assets
disposed of during the exit of a site in Clara City, Minnesota.
Site closure costs - In March 2023, a decision was made to exit
a site in Clara City, Minnesota. This resulted in an impairment of
the right-of-use asset associated with the underlying lease of
$757,000. Additional costs of $273,000 were incurred in relation to
the relocation and closure of this site, the Kansas, Manhattan
site, as well as the consolidation of other US sites.
DG Americas and DG UK business reorganisation - In the year
further integration costs, relating to people, of $782,000 have
been recognised in DG Americas following the announcement of
further business reorganisation. Similarly, in March 2023 the UK
business internally announced a business simplification in light of
the downturn of the UK outlook, resulting in the recognition of
one-off people costs of $713,000.
In the year to 31 March 2022, adjusting items relate to the
integration of CSS into the enlarged DG Americas business. Two
previously impaired properties were sub-let, resulting in a
reversal of the impairment, net of associated provisions for costs
to run the exited sites, of $2.8 million. In the year to 31 March
2022, ongoing net costs relating to these impaired and sub-leased
properties were treated as adjusting items, however given the
immaterial and recurring nature of these ongoing net costs the
Group will no longer include these as adjusting items.
In the year to 31 March 2022, costs associated with the ongoing
consolidation of operations around the Group were incurred. These
included the enlarged printing and converting business moving from
Memphis to a larger facility in Byhalia, Mississippi that also
houses distribution. In addition, costs associated with the exit of
the owned property in Manhattan, Kansas to consolidate our pattern
printing facilities into one site were incurred. The total costs
associated with this integration were $1.1 million. The remaining
costs incurred in the prior year relate to severance costs
associated with the wider DG Americas restructure programme.
(4) Reversal of impairment of assets
At the onset of the Covid-19 pandemic a review of inventory,
trade receivables and fixed assets was undertaken. Inventories were
assessed at 31 March 2020 for the net realisable value and an
impairment of $7.4 million was recognised. Trade receivables were
assessed for their expected credit loss in line with IFRS 9 and an
impairment of $3.8 million was recognised. The UK's bag line
machines were impaired by $348,000 based on expected future cash
flows associated with the 'Not-for-resale' consumables
business.
In the year a credit of $154,000 has been recognised relating to
reversal of impairments no longer required. During the year to 31
March 2022 there were reversals of impairment amounting to a $2.7
million credit. There are no remaining provisions relating to these
costs.
(5) IT security incident income
The IT security incident which occurred in DG Americas in
October/November 2020 resulted in one-off costs of $2.2 million
being incurred during the year ended 31 March 2021. This did not
include the lost profits incurred as a result of downtime in the
business for which an insurance claim was made. In the year further
insurance income was received of $142,000 (FY2022: $5.7 million) in
relation to this incident. The treatment of this income as
adjusting, follows the previous treatment of the one-off costs as
adjusting.
(6) Amortisation of acquired intangibles
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer lists and
trade names which form part of the intangible value of the acquired
business but are not part of the acquired balance sheet. These
intangible assets are then amortised to the income statement over
their useful economic lives. These are not operational costs
relating to the running of the acquired business and are directly
related to the accounting for the acquisition. These include trade
names and brands acquired as part of the acquisition of Impact and
CSS in the USA. As such, we include these as adjusting items.
The cash flow effect of adjusting items
There was a $6.9 million net inflow in the current period's cash
flow (FY2022: $6.2 million outflow) relating to adjusting items
which included $1.1m (FY2022: $3.3 million) deferred from prior
years. $1.4 million outflow is included within cash generated from
operations (2022: $1.9 million) and $8.3 million inflow is included
within investing and financing activities (2022: $4.3 million
outflow).
Auditors' remuneration:
2023 2022
$000 $000
---------------------------------------------------------------------- ----- -----
Amounts receivable by auditor and its associates in respect of:
Audit of these financial statements 1,192 1,021
Audit of financial statements of subsidiaries pursuant to legislation
- Overseas subsidiaries 145 87
- UK subsidiaries - 103
Other audit related services - review of interim report 85 80
---------------------------------------------------------------------- ----- -----
4 Staff numbers and costs
The average monthly number of persons employed by the Group
(including Directors) during the year, analysed by category, was as
follows:
Number of employees
---------------------
2023 2022
---------------------------- ---------- ---------
Selling and administration 1,215 1,264
Production and distribution 1,877 2,051
Temporary and agency staff 624 747
---------------------------- ---------- ---------
3,716 4,062
---------------------------- ---------- ---------
The aggregate payroll costs of these persons were as
follows:
2023 2022
Note $000 $000
------------------------- ---- ------- -------
Wages and salaries 151,284 159,197
Share-based payments 23 805 (848)
Social security costs 12,993 14,123
Other pension costs 3,176 3,300
Temporary employee costs 15,023 20,057
------------------------- ---- ------- -------
183,281 195,829
------------------------- ---- ------- -------
For information on Directors' remuneration please refer to the
section titled 'Directors' remuneration' within the Directors'
remuneration report within the Group's audited financial
statements.
5 Other operating income
2023 2022
$000 $000
---------------------------------------------- ----- ----
Grant income 111 (17)
Sub-lease rental income 1,253 628
Government assistance - 125
Other 87 10
---------------------------------------------- ----- ----
Other operating income before adjusting items 1,451 746
Adjusting items (note 3) 1,500 124
---------------------------------------------- ----- ----
2,951 870
---------------------------------------------- ----- ----
6 Finance expenses
2023 2022
$000 $000
---------------------------------------------------------------------------- ----- -----
Interest payable on bank loans and overdrafts 1,992 598
Other similar charges 1,854 1,352
Lease liability interest 2,903 3,078
Unwinding of fair value discounts 106 80
---------------------------------------------------------------------------- ----- -----
Interest payable under the effective interest method 6,855 5,108
Derivative financial instruments at fair value through the income statement 18 (3)
---------------------------------------------------------------------------- ----- -----
Finance expenses before adjusting items 6,873 5,105
Adjusting items (note 3) - 386
---------------------------------------------------------------------------- ----- -----
6,873 5,491
---------------------------------------------------------------------------- ----- -----
7 Income tax charge
Recognised in the income statement
2023 2022
$000 $000
-------------------------------------------------- ----- -------
Current tax charge/(credit)
Current year 6,910 3,898
Adjustments in respect of previous years 65 (12)
-------------------------------------------------- ----- -------
6,975 3,886
-------------------------------------------------- ----- -------
Deferred tax charge/(credit)
Derecognition of deferred tax assets - 2,308
Origination and reversal of temporary differences (1) (3,664)
Adjustments in respect of previous periods 589 (13)
-------------------------------------------------- ----- -------
588 (1,369)
-------------------------------------------------- ----- -------
Total tax in income statement 7,563 2,517
-------------------------------------------------- ----- -------
Total tax charge on adjusting items
Total tax on profit before adjusting items 7,806 3,333
Total tax on adjusting items (243) (816)
-------------------------------------------------- ----- -------
Total tax charge in income statement 7,563 2,517
-------------------------------------------------- ----- -------
Reconciliation of effective tax rate
2023 2022
$000 $000
------------------------------------------------------ -------- -------
(Loss)/profit before tax (18,896) 2,201
------------------------------------------------------ -------- -------
Profit before tax multiplied by the standard rate
of corporation tax of 19% in the UK (2022: 19%) (3,590) 418
Effects of:
Income not taxable (50) (320)
Expenses not deductible for tax purposes - impairment 5,529 -
Expenses not deductible for tax purposes - other 629 94
Derecognition of deferred tax assets - 2,308
Effect of tax rate changes - (170)
Differences between UK and overseas tax rates 1,701 946
Movement in uncertain tax provisions 716 (1,531)
Other items (210) (182)
Adjustments in respect of previous periods 654 (25)
Current year losses for which no deferred tax asset
is recognised 2,184 979
------------------------------------------------------ -------- -------
Total tax charge in income statement 7,563 2,517
------------------------------------------------------ -------- -------
See note 11 for further details.
8 Property, plant and equipment
Land and buildings Plant and Fixtures Motor
and
--------------------
Freehold Leasehold equipment fittings vehicles Total
$000 $000 $000 $000 $000 $000
---------------------------------------- --------- --------- --------- -------- -------- ---------
Cost
Balance at 1 April 2021 48,514 5,571 114,193 9,889 2,395 180,562
Additions 625 842 5,719 844 110 8,140
Transfer to assets held for sale (2,150) - (664) - - (2,814)
Transfer to intangible fixed assets - - - (156) - (156)
Disposals (54) (764) (3,878) (3,097) (53) (7,846)
Effect of movements in foreign exchange (1,357) 43 (2,544) (134) (61) (4,053)
---------------------------------------- --------- --------- --------- -------- -------- ---------
Balance at 31 March 2022 45,578 5,692 112,826 7,346 2,391 173,833
Additions 285 271 3,888 710 305 5,459
Disposals - (195) (55) (972) (219) (1,441)
Effect of movements in foreign exchange (986) (302) (3,502) (365) (139) (5,294)
---------------------------------------- --------- --------- --------- -------- -------- ---------
Balance at 31 March 2023 44,877 5,466 113,157 6,719 2,338 172,557
---------------------------------------- --------- --------- --------- -------- -------- ---------
Depreciation and impairment
Balance at 1 April 2021 (18,189) (3,712) (61,666) (7,206) (1,586) (92,359)
Depreciation charge for the year (2,027) (990) (9,068) (1,377) (243) (13,705)
Reversal of impairment in the year - - 327 - - 327
Reclassification between categories (327) - 136 265 (74) -
Transfers from intangible fixed assets - - - (30) - (30)
Disposals 53 739 3,411 3,182 20 7,405
Transfer to assets held for sale - - 664 - - 664
Effect of movements in foreign exchange 818 (57) 1,785 188 42 2,776
---------------------------------------- --------- --------- --------- -------- -------- ---------
Balance at 31 March 2022 (19,672) (4,020) (64,411) (4,978) (1,841) (94,922)
Depreciation charge for the year (1,930) (892) (8,569) (934) (207) (12,532)
Disposals - 186 37 940 214 1,377
Effect of movements in foreign exchange 728 200 2,556 232 110 3,826
---------------------------------------- --------- --------- --------- -------- -------- ---------
Balance at 31 March 2023 (20,874) (4,526) (70,387) (4,740) (1,724) (102,251)
---------------------------------------- --------- --------- --------- -------- -------- ---------
Net book value
---------------------------------------- --------- --------- --------- -------- -------- ---------
At 31 March 2023 24,003 940 42,770 1,979 614 70,306
---------------------------------------- --------- --------- --------- -------- -------- ---------
At 31 March 2022 25,906 1,672 48,415 2,368 550 78,911
---------------------------------------- --------- --------- --------- -------- -------- ---------
During the prior year a property in Manhattan, Kansas with a net
book value of $2.2 million was reclassified to assets held for
sale. The sale completed on 28 April 2022 (see note 3 for further
details).
Depreciation is charged to cost of sales, selling costs or
administration costs within the income statement depending on the
department to which the assets relate.
Security
Certain freehold properties with a cost of $13.2 million in the
UK were subject to a fixed charge in support of the RCF banking
facility.
9 Intangible assets
Computer Trade Customer Other
Goodwill software names relationships intangibles Total
$000 $000 $000 $000 $000 $000
--------------------- -------- -------- ------- ------------- ----------- --------
Cost
Balance at 1 April
2021 102,284 14,541 5,262 24,101 178 146,366
Additions - 381 - - - 381
Transfer from fixed
assets - 156 - - - 156
Disposals - (484) - - - (484)
Effect of movements
in foreign exchange (2,216) (101) (4) (15) (7) (2,343)
--------------------- -------- -------- ------- ------------- ----------- --------
Balance at 31 March
2022 100,068 14,493 5,258 24,086 171 144,076
Additions - 272 - - 96 368
Disposals - (224) - - - (224)
Effect of movements
in foreign exchange (2,662) (186) (27) (99) (6) (2,980)
--------------------- -------- -------- ------- ------------- ----------- --------
Balance at 31 March
2023 97,406 14,355 5,231 23,987 261 141,240
--------------------- -------- -------- ------- ------------- ----------- --------
Amortisation and
impairment
Balance at 1 April
2021 (13,319) (8,290) (3,281) (6,453) (149) (31,492)
Amortisation charge
for the year - (2,980) (1,034) (1,803) - (5,817)
Transfer to fixed
assets - 30 - - - 30
Disposals - 317 - - - 317
Effect of movements
in foreign exchange 168 89 5 15 7 284
--------------------- -------- -------- ------- ------------- ----------- --------
Balance at 31 March
2022 (13,151) (10,834) (4,310) (8,241) (142) (36,678)
Amortisation charge
for the year - (2,066) (948) (1,803) - (4,817)
Impairments (29,100) - - - - (29,100)
Disposals - 224 - - - 224
Effect of movements
in foreign exchange 165 163 27 99 2 456
--------------------- -------- -------- ------- ------------- ----------- --------
Balance at 31 March
2023 (42,086) (12,513) (5,231) (9,945) (140) (69,915)
--------------------- -------- -------- ------- ------------- ----------- --------
Net book value
At 31 March 2023 55,320 1,842 - 14,042 121 71,325
--------------------- -------- -------- ------- ------------- ----------- --------
At 31 March 2022 86,917 3,659 948 15,845 29 107,398
--------------------- -------- -------- ------- ------------- ----------- --------
Computer software relates to purchased software and people costs
associated with the implementation of software.
The aggregate carrying amounts of goodwill allocated to each CGU
are as follows:
2023 2022
$000 $000
------------ ------ ------
UK and Asia 2,561 33,618
Europe 6,543 6,688
USA 42,872 42,872
Australia 3,344 3,739
------------ ------ ------
55,320 86,917
------------ ------ ------
All goodwill balances have arisen as a result of acquisitions
and are not internally generated.
Impairment
The Group tests goodwill each year for impairment, or more
frequently if there are indications that goodwill might be
impaired.
For the purposes of impairment testing, goodwill has been
allocated to the business unit, or group of business units, that
are expected to benefit from the synergies of the combination,
which represents the lowest level within the Group at which the
goodwill is monitored for internal management purposes and is
referred to below as a CGU. The recoverable amounts of CGUs are
determined from the higher of value in use and fair value less
costs to sell.
The Group has prepared budgets and forecasts for each CGU for
the next three years and these have been reviewed and approved by
management and the Board as appropriate. The key assumptions in
those forecasts are sales, margins achievable and overhead costs,
which are based on past experience, more recent performance and
future expectations.
Climate change poses various challenges and opportunities that
could affect the future cash flows and value in use of our assets,
including goodwill. The potential impacts of climate change will,
by their very nature, continue to evolve and develop. At this stage
of our climate change journey, our modelling primarily focuses on
capturing the immediate and more readily quantifiable impacts of
climate change on our operations and financial performance. We
recognise that there may be additional medium to long-term effects
that are not explicitly accounted for in our current models. This
assessment involves inherent uncertainties, and we will continue to
monitor, reassess and report on the possible impact of climate
change on the Group in future reporting periods. The assessment of
climate change risks and their financial implications is an
evolving area, and conclusions may be subject to change as new
information becomes available.
The key assumptions in deriving value in use from cash flow
projections are the sales growth, EBITDA margins, discount rate
applied and the long-term expected growth rates for the business.
Long-term growth rates are set no higher than the long-term
economic growth projections of the countries in which the
businesses operate. Management apply pre-tax discount rates in
value in use estimation that reflect current market assessments of
the time value of money and the risks specific to the CGUs and
businesses under review.
The Group's post -- tax weighted average cost of capital (WACC)
is 11.1% (2022: 7.6%). This has been compared to other similar
companies and is believed by the Directors to be appropriate. The
CGUs use the following pre-tax discount rates which are derived
from an estimate of the Group's post-tax WACC adjusted for the
relevant tax rate for each CGU.
Pre-tax discount rates used were:
2023 2022
------------ ----- -----
UK and Asia 14.6% 9.5%
Europe 14.9% 10.0%
USA 14.7% 10.1%
Australia 15.8% 10.8%
------------ ----- -----
Long-term growth rates used were:
2023 2022
------------ ---- ----
UK and Asia 2.0% 2.0%
Europe 2.1% 1.5%
USA 2.2% 1.6%
Australia 2.3% 2.2%
------------ ---- ----
An impairment charge of $29.1 million has been recognised
against the goodwill allocated to the UK and Asia CGU (FY2022:
$nil). The combination of lower forecast expectation of the UK and
Asia CGU, following the deterioration of the results in this CGU in
the second half of the year, and the significant increase in the
discount rate is driving an impairment of the goodwill related to
the CGU.
The following reasonably possible changes in key estimation
assumptions used in the VIU model would impact the impairment
charge related to the UK and Asia CGU as follows:
-- A 200bps increase in the pre-tax discount rate would increase
the impairment by $4.5 million, a 200bps decrease in the pre-tax
discount rate would decrease the impairment by $6.2 million
-- A reduction in the growth rate to 0.5%, applied into
perpetuity, would increase the impairment by $2.7 million
-- A 7.5% reduction/increase in forecast cash flows would
increase/reduce the impairment by $2.5 million
In all other CGUs, the carrying value of the goodwill was
supported by the recoverable amount and the Directors do not
believe a reasonably possible change to the assumptions would give
rise to an impairment. The Directors have considered a 200bps
movement in the discount rate, a 0.5% growth rate applied to the
terminal value, and a 7.5% movement in forecast cash flows. With
these changes in assumptions there is significant headroom in the
remaining CGUs and no indication of impairment.
The cash flows in the base case forecast of the other CGUs would
need to be significantly lower throughout the forecasted period to
trigger an impairment, with all other assumptions being the
same.
The Group has evaluated the application of a FVLCTS model in
relation to the UK and Asia CGU and concluded that this model would
not yield a higher recoverable amount compared to the VIU model.
While there were no recent observable comparable market prices,
management believe that under the current market and economic
conditions a potential buyer through arms-length negotiation would
apply much more prudence in their risk perceptions and much lower
expectations of future opportunities in evaluating the fair value
of the CGU. This coupled with associated costs to sell provides the
basis for conclusion.
10 Right-of-use assets and lease liabilities
Right-of-use assets
Land and Plant and Motor Office
buildings machinery vehicles equipment Total
$000 $000 $000 $000 $000
------------------------------- --------- --------- -------- --------- --------
Net book value at 1 April
2021 92,888 1,296 380 816 95,380
Additions 8,510 256 284 131 9,181
Disposals (1,231) - - - (1,231)
Transfers between categories (109) 1 (11) 119 -
Depreciation charge (16,718) (498) (290) (270) (17,776)
Reversal of impairment 2,492 - - - 2,492
Effect of movements in foreign
exchange (1,263) (63) 25 (14) (1,315)
------------------------------- --------- --------- -------- --------- --------
Net book value at 31 March
2022 84,569 992 388 782 86,731
Additions 4,329 241 197 78 4,845
Disposals (1,922) - - - (1,922)
Depreciation charge (16,820) (436) (233) (225) (17,714)
Impairment (757) - - - (757)
Transfer between categories 215 - 22 (237) -
Effect of movements in foreign
exchange (1,783) (34) (19) (15) (1,851)
------------------------------- --------- --------- -------- --------- --------
Net book value at 31 March
2023 67,831 763 355 383 69,332
------------------------------- --------- --------- -------- --------- --------
Additions include lease modifications and extensions of $822,000
(2022: $5.4 million).
Income statement
The income statement shows the following charges/(credits)
relating to leases:
2023 2022
$000 $000
------------------------------------------------ ------ -------
Interest expense (included in finance expenses) 2,903 3,479
Depreciation charge 17,714 17,776
Impairment/(reversal of impairment) 757 (2,492)
Expense relating to short-term leases 121 126
------------------------------------------------ ------ -------
Of the interest expense detailed above, $nil (2022: $401,000)
has been treated as an adjusting item as it relates to exited
properties from the DG Americas integration.
Low-value lease costs were negligible in the year.
At 31 March 2023, the Group had estimated lease commitments for
leases not yet commenced of $nil (2022: $nil).
Movement in lease liabilities
2023 2022
$000 $000
---------------------------------------- -------- --------
Balance at 1 April 99,843 113,922
Cash flow - financing activities (20,428) (20,717)
Additions 4,845 9,353
Disposals (2,011) (1,280)
Effect of movements in foreign exchange (2,062) (1,435)
---------------------------------------- -------- --------
Balance at 31 March 80,187 99,843
---------------------------------------- -------- --------
2023 2022
$000 $000
------------------------ ------ ------
Non-current liabilities 62,717 80,215
Current liabilities 17,470 19,628
------------------------ ------ ------
80,187 99,843
------------------------ ------ ------
Total cash outflow in relation to leases is as follows:
2023 2022
$000 $000
---------------------------------------------------------------- ------ ------
Included in financing activities - payment of lease liabilities 20,428 20,717
Included in interest and similar charges paid 2,903 3,479
Short-term leases 121 126
---------------------------------------------------------------- ------ ------
23,452 24,322
---------------------------------------------------------------- ------ ------
Commitments for minimum lease payments in relation to
non-cancellable low-value or short-term leases are payable as
follows:
2023 2022
$000 $000
--------------------------- ---- ----
Less than one year 30 126
Between one and five years - -
More than five years - -
--------------------------- ---- ----
30 126
--------------------------- ---- ----
Income from sub-leasing right-of-use assets
During the year sub-lease income from right-of-use assets was as
follows:
2023 2022
$000 $000
------------------------------------------------------------------ ----- ----
Sub-lease income in the year from sub-leasing right-of-use assets 1,253 752
------------------------------------------------------------------ ----- ----
Of the sub-lease income detailed above, $nil (2022: $124,000)
has been treated as an adjusting item as relates to exited
properties from the DG Americas integration.
Non-cancellable operating lease rentals are receivable as
follows:
2023 2022
$000 $000
--------------------------- ----- -----
Less than one year 655 422
Between one and five years 1,148 1,542
--------------------------- ----- -----
1,803 1,964
--------------------------- ----- -----
11 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Property,
plant
and equipment Tax losses
and intangible carried Share-based Doubtful Other timing
assets forward payments debts differences(a) Total
$000 $000 $000 $000 $000 $000
------------------------------------ -------------- ---------- ----------- -------- -------------- -------
At 1 April 2021 5,375 8,391 1,684 1,354 (562) 16,242
Credit/(charge) to income statement (1,659) (77) (956) (1,348) 5,409 1,369
(Charge)/credit to equity 33 (745) (728) - (235) (1,675)
------------------------------------ -------------- ---------- ----------- -------- -------------- -------
At 31 March 2022 3,749 7,569 - 6 4,612 15,936
------------------------------------ -------------- ---------- ----------- -------- -------------- -------
Deferred tax liabilities (335) - - - (90) (425)
Deferred tax assets 4,084 7,569 - 6 4,702 16,361
------------------------------------ -------------- ---------- ----------- -------- -------------- -------
3,749 7,569 - 6 4,612 15,936
------------------------------------ -------------- ---------- ----------- -------- -------------- -------
Property,
plant
and equipment Tax losses
and intangible carried Share-based Doubtful Other timing
assets forward payments debts differences(a) Total
$000 $000 $000 $000 $000 $000
------------------------------------ -------------- ---------- ----------- -------- -------------- ------
At 1 April 2022 3,749 7,569 - 6 4,612 15,936
(Charge)/credit to income statement 251 (224) - - (615) (588)
(Charge)/credit to equity 9 - - (1) (176) (168)
------------------------------------ -------------- ---------- ----------- -------- -------------- ------
At 31 March 2023 4,009 7,345 - 5 3,821 15,180
------------------------------------ -------------- ---------- ----------- -------- -------------- ------
Deferred tax liabilities (277) - - - (3) (280)
Deferred tax assets 4,286 7,345 - 5 3,824 15,460
------------------------------------ -------------- ---------- ----------- -------- -------------- ------
4,009 7,345 - 5 3,821 15,180
------------------------------------ -------------- ---------- ----------- -------- -------------- ------
(a) Other timing differences include a deferred tax asset
closing balance of $0.6 million (2022: $0.6 million) in respect of
provision for inventory and $2.6 million (2022: $3.4 million) in
respect of leases.
Deferred tax is presented net on the balance sheet in so far as
a right of offset exists.
2023 2022
$000 $000
--------------------------- ------ ------
Net deferred tax asset 15,401 16,317
Net deferred tax liability (221) (381)
--------------------------- ------ ------
15,180 15,936
--------------------------- ------ ------
Deferred tax assets and liabilities are treated as non-current
as it is expected that they will be recovered or settled more than
twelve months after the reporting date.
The deferred tax asset in respect of tax losses carried forward
at 31 March 2023 of $7.3 million (2022: $7.6 million) comprises
deferred tax assets in relation to US tax losses of $7.0 million
(2022: $7.2 million) and Asia tax losses of $345,000 (2022:
$337,000). All of these recognised tax losses may be carried
forward indefinitely. The deferred tax assets have been recognised
in the territories where the Board considers there is sufficient
evidence that taxable profits will be available against which the
tax losses can be utilised. The Group has prepared budgets and
forecasts for the next three years. The key assumptions in those
forecasts are sales, margins achievable and overhead costs, which
are based on past experience, more recent performance and future
expectations. The Group then extrapolates profits for the future
years based on the long-term growth rates applicable to the
relevant territories.
In the prior year, all previously recognised deferred tax assets
in the UK were derecognised as a result of the assessment of future
taxable profits against which the asset could unwind. This position
continues in the current year in the UK and so deferred tax assets
have not been recognised on current year tax losses.
In the UK there are gross temporary differences of $990,000
(2022: $100,000) and unused tax losses, with no expiry date, of
$28.6 million (2022: $20.8 million) on which deferred tax assets
have not been recognised.
In the DG Americas segment there are gross temporary differences
of $63.3 million (2022: $59.6 million) and unused tax losses, with
no expiry date, of $20.0 million (2022: $25.0 million) on which
deferred tax assets have not been recognised. This is as a result
of restrictions under the US change in ownership rules following
the acquisition of CSS in 2020. Deferred tax assets are recognised
in respect of unrestricted temporary differences and tax losses and
are supported by forecast future taxable profits.
No deferred tax liability (2022: $88,000) has been recognised in
relation to the tax cost of remitting earnings (forecast dividends)
from China to the UK. No other deferred tax liability has been
recognised on unremitted earnings of the overseas subsidiaries as,
if all unremitted earnings were repatriated with immediate effect,
no other tax charge would be payable.
The standard rate of corporation tax in the UK has risen to 25%
effective from 1 April 2023. Given that no deferred tax is
recognised in the UK, this does not impact the deferred tax
measurement at the balance sheet date.
Included within current tax liabilities is $5.2 million (2022:
$4.5 million) in respect of uncertain tax positions. These risks
arise because the Group operates in a complex multinational tax
environment. The amount consists of various tax risks which
individually are not material. The position is reviewed on an
ongoing basis and generally these tax positions are released at the
end of the relevant territories' statute of limitations. During the
year, there has been a net increase in the Group's total provision
of $0.7 million.
No deferred tax charge was recognised through the statement of
changes in equity. In the prior year a deferred tax charge of $1.5
million was recognised through the statement of changes in equity
as a result of the derecognition of deferred tax asset balances in
relation to share-based payments and IFRS 16 adoption which were
initially recognised through the statement of changes in equity in
previous years. There are no deferred tax balances with respect to
cash flow hedges.
12 Inventory
2023 2022
$000 $000
------------------------------ ------- -------
Raw materials and consumables 36,139 37,586
Work in progress 32,676 28,925
Finished goods 137,611 164,374
------------------------------ ------- -------
206,426 230,885
------------------------------ ------- -------
During the year, materials, consumables, changes in finished
goods and work in progress of $649.7 million (2022: $701.1 million)
were recognised as an expense and included in cost of sales.
Inventories have been assessed as at 31 March 2023 and overall
an expense of $12.9 million has been recognised in the year (2022:
$12.1 million). This consists of the addition of new provisions for
slow moving and obsolete inventory of $19.3 million (2022: $18.3
million), offset by the reversal of previous Covid-19 inventory
provisions of $0.1 million (2022: $1.2 million), and the release of
previous slow moving and obsolete inventory provisions amounting to
$6.3 million (2022: $5.0 million) due to inventory either being
used or sold.
13 Long-term assets and trade and other receivables
Long term assets are as follows:
2023 2022
$000 $000
------------------------- ----- -----
Acquisition indemnities 1,622 990
Security deposits 1,632 1,607
Insurance related assets 2,393 2,508
------------------------- ----- -----
5,647 5,105
------------------------- ----- -----
Acquisition indemnities relate to previous acquisitions made by
CSS and indemnities provided by the seller. Security deposits
relate to leased properties and insurance related assets including
a corporate owned life insurance policy.
Trade and other receivables are as follows:
2023 2022
$000 $000
-------------------------------------------------- ------ -------
Trade receivables 80,973 115,317
Prepayments, other receivables and accrued income 10,212 11,627
VAT receivable 1,217 906
-------------------------------------------------- ------ -------
92,402 127,850
-------------------------------------------------- ------ -------
The Group has receivable financing arrangements in Hong Kong.
None of this facility was drawn at 31 March 2023 (2022: $nil).
The Group is party to supplier financing arrangements with one
of its key customers and the associated balances are recognised as
trade receivables until receipt of the payment from the bank, at
which point the receivable is derecognised. At 31 March 2023, $7.0
million had been drawn down on this arrangement (2022: $6.0
million).
Please see note 15 for more details of the banking
facilities.
There are no trade receivables in the current year (2022: $nil)
expected to be recovered in more than twelve months.
The Group's exposure to credit and currency risks and provisions
for doubtful debts related to trade and other receivables is
disclosed in note 24.
14 Cash and cash equivalents/bank overdrafts
2023 2022
$000 $000
---------------------------------------------------------------------- -------- --------
Cash and cash equivalents 85,213 50,179
Bank overdrafts (34,979) (20,380)
---------------------------------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts per cash flow statement 50,234 29,799
---------------------------------------------------------------------- -------- --------
Net cash
2023 2022
$000 $000
------------------------------------------------------------- ------ ------
Cash and cash equivalents 50,234 29,799
Loan arrangement fees 250 360
------------------------------------------------------------- ------ ------
Net cash as used in the financial review cash flow statement 50,484 30,159
------------------------------------------------------------- ------ ------
The Group's exposure to interest rate risk and sensitivity
analysis for financial assets and liabilities are disclosed in note
24.
The bank loans and overdrafts are secured by a fixed charge on
certain of the Group's land and buildings, a fixed charge on
certain of the Group's book debts and a floating charge on certain
of the Group's other assets. See note 15 for further details of the
Group's loans and overdrafts.
Changes in net cash
Loan Other assets
arrangement Cash/bank
fees overdrafts Total
$000 $000 $000
---------------------------------------- ----------- ------------ --------
Balance at 1 April 2021 723 75,727 76,450
Cash flows 494 (48,165) (47,671)
Effect of other items
Amortisation of loan arrangement fees (824) - (824)
Effect of movements in foreign exchange (33) 2,237 2,204
------------------------------------------ ----------- ------------ --------
Balance at 31 March 2022 360 29,799 30,159
Cash flows 1,079 20,595 21,674
Effect of other items
Amortisation of loan arrangement fees (1,143) - (1,143)
Effect of movements in foreign exchange (46) (160) (206)
------------------------------------------ ----------- ------------ --------
Balance at 31 March 2023 250 50,234 50,484
------------------------------------------ ----------- ------------ --------
15 Loans and borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings. For more
information about the Group's exposure to interest rate and foreign
currency risk, see note 24.
2023 2022
$000 $000
-------------------------------------- ----- -----
Non-current liabilities
Secured bank loans - -
Loan arrangement fees - (20)
-------------------------------------- ----- -----
- (20)
-------------------------------------- ----- -----
Current liabilities
Current portion of secured bank loans - -
Loan arrangement fees (250) (340)
-------------------------------------- ----- -----
(250) (340)
-------------------------------------- ----- -----
Secured bank loans
The Group entered into a new banking facility on 5 June 2023,
this facility comprises an Asset Backed Lending ("ABL") arrangement
with a maximum facility amount of $125.0 million. The facility with
HSBC and Nat West banks has an original term of three years, with
the option of submitting two extension notices to extend the
facility twice, each by a period of one year.
The Group has also increased its unsecured overdraft facility
provided by HSBC to GBP16.5 million, which reduces to GBP8.5
million from August 2023.
Interest charged on the new Asset Backed lending facility is
based, at the option of the Group, on one of two methods:
-- A margin of between 1.75% and 2.25%, based on average excess
availability, plus a 0.1% credit spread adjustment, plus the US
Secured Overnight Financing Rate ("SOFR"); or
-- A margin of between 0.75% and 1.25% based on average excess
availability, plus a rate based on the higher of: the HSBC prime
rate, the Federal Funds rate plus 0.5%, or SOFR plus 1%.
A further commitment/non-utilisation fee is charged at 0.25%
where facility usage is greater than 50% of the maximum credit
line, and 0.375% where facility usage is less than 50% of the
maximum credit line.
The financial covenant within the facility agreement, which is a
minimum fixed charge coverage ratio of 1.0 times, is only triggered
if the remaining availability of the facility is less than the
higher of $12.5 million or 12.5% of the borrowing base.
The ABL is secured with an all-assets lien on all existing and
future assets of the loan parties. The loan parties are Anker Play
Products, LLC, Berwick Offray, LLC, BOC Distribution, Inc., C. R.
Gibson, LLC, CSS Industries, Inc., IG Design Group (Lang), Inc., IG
Design Group Americas, Inc., IG Design Group plc, IG Design Group
UK Limited, Impact Innovations, Inc., Lion Ribbon Company, LLC,
Paper Magic Group, Inc., Philadelphia Industries, Inc., Simplicity
Creative Corp., The Lang Companies, Inc., The McCall Pattern
Company, Inc.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on (see note 13). The Group also
has an invoice financing arrangement in Hong Kong with a maximum
limit of $18.0 million, dependent on level of eligible receivables.
This facility is being cancelled in line with the terms of the new
financing arrangement.
On 1 June 2022, the Company had extended and amended the terms
of its existing banking agreement to 31 March 2024. These
facilities were cancelled on 5 June 2023. These facilities were
maintained through a club of five banks: HSBC, NatWest, Citigroup
(who replaced BNP Paribas), Truist Bank (as successor by merger to
SunTrust Bank) and PNC. As part of the June 2022 extension,
covenants were revised for the period to 31 March 2023 and the
amended facilities comprised:
-- a revolving credit facility ('RCF A') reduced from $95.0 million to $90.0 million; and
-- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to a maximum level
of GBP92.0 million (reduced from a maximum level of GBP130
million). This RCF was flexed to meet our working capital
requirements during those months when inventory was being built
within our annual business cycle and was GBPnil when not required,
minimising carrying costs.
The RCFs were secured with a fixed and floating charge over the
assets of the Group. Amounts drawn under RCFs were classified as
current liabilities as the Group expected to settle these amounts
within twelve months.
The covenants under the extended and amended RCF facility, which
operated to 31 March 2023, were as follows:
-- minimum adjusted earnings before interest, depreciation and
amortisation (Adjusted EBITDA), as defined by the banking facility,
measured quarterly at the end of June, September, December and
March, which required the Group to be within $10.0 million of its
Adjusted EBITDA budget at each quarter end, based on the last
twelve-month Adjusted EBITDA performance at each measurement point;
and
-- minimum liquidity level, which required the Group to maintain
a minimum of $35.0 million of headroom to the maximum available
facility on a monthly basis.
From April 2023 the Group reverted to the previous RCF
covenants. Given the cancellation of the RCF on 5 June 2023, these
covenants are no longer applicable.
There was a further RCF covenant tested monthly in respect of
the working capital RCF by which available asset cover must not
fall below agreed levels relative to amounts drawn.
All covenants under the RCF were measured on pre-IFRS 16
accounting definitions.
The cancelled facility agreement had also stipulated that any
dividends to be paid by the Group during the remaining term of the
agreement would require majority lender approval.
The Group has remained comfortably in compliance with all of
these covenants up its cancellation.
16 Deferred income
2023 2022
$000 $000
---------------------------------------- ----- ----
Included within non-current liabilities
Deferred grant income 2,038 523
---------------------------------------- ----- ----
Included within current liabilities
Deferred grant income 211 414
Other deferred income 52 51
---------------------------------------- ----- ----
263 465
---------------------------------------- ----- ----
The deferred grant income is in respect of government grants
relating to the development of the Penallta site in Wales and the
Byhalia site in Mississippi. The conditions for the Wales grant
were all fully met in January 2019 and for the Byhalia site in
January 2023. Deferred income is being released in line with the
depreciation of the assets for which the grant is related to.
17 Provisions
Property Other Total
$000 $000 $000
---------------------------------------- -------- ----- -----
Balance at 1 April 2022 6,247 111 6,358
Provisions made in the year 723 282 1,005
Provisions released during the year (287) (99) (386)
Unwinding of fair value discounts 106 - 106
Provisions utilised during the year (200) (5) (205)
Effect of movements in foreign exchange (70) 5 (65)
---------------------------------------- -------- ----- -----
Balance at 31 March 2023 6,519 294 6,813
---------------------------------------- -------- ----- -----
2023 2022
$000 $000
------------ ----- -----
Non-current 5,474 5,016
Current 1,339 1,342
------------ ----- -----
6,813 6,358
------------ ----- -----
The property provision represents the estimated reinstatement
cost of 14 of the Group's leasehold properties under fully
repairing leases (2022: 14). Of the non-current balance, $2.2
million (2022: $1.4 million) relates to a lease expiring in 2036;
the remainder relates to provisions unwinding between one and five
years.
18 Other financial liabilities
2023 2022
$000 $000
---------------------------------------------- ------ ------
Included within non-current liabilities
Other creditors and accruals 19,071 21,557
---------------------------------------------- ------ ------
Included within current liabilities
Other creditors and accruals 40,912 34,455
Liability to acquire non-controlling interest - 3,069
Forward exchange contracts carried
at fair value through the income statement 28 -
Forward exchange contracts carried
at fair value through the hedging reserve 287 18
41,227 37,542
---------------------------------------------- ------ ------
At 31 March 2022, a $3.1 million liability to acquire a
non-controlling interest had been recognised in relation to a put
option that existed over the 49% of the share capital of Anker Play
Products LLC ('APP') not owned by the Group; this was extinguished
when the remaining 49% share of APP was purchased see note 28 for
further details.
19 Trade and other payables
2023 2022
$000 $000
----------------------------------------- ------ -------
Trade payables 89,754 138,902
Other payables including social security 2,719 3,821
VAT payable 504 595
----------------------------------------- ------ -------
92,977 143,318
----------------------------------------- ------ -------
20 Share capital
Authorised share capital at 31 March 2023 and 2022 was GBP6.0
million, 121.0 million ordinary shares of 5p each.
Ordinary shares
-----------------
In thousands of shares 2023 2022
---------------------------------- -------- -------
In issue at 1 April 97,062 96,858
Options exercised during the year 932 204
---------------------------------- -------- -------
In issue at 31 March - fully paid 97,994 97,062
---------------------------------- -------- -------
2023 2022
$000 $000
----------------------------------- ----- -----
Allotted, called up and fully paid
Ordinary shares of GBP0.05 each 6,059 6,373
----------------------------------- ----- -----
Of the 98.0 million shares in the Company, 1.0 million (2022:
31,000) are held by IG Employee Share Trustee Limited (the
'Employee Benefit Trust').
Long Term Incentive Plan (LTIP) options exercised during the
year resulted in 932,000 ordinary shares issued at nil cost (2022:
204,000 ordinary shares issued at nil cost).
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
21 Loss per share
2023 2022
$000 $000
------------------------------------------------------------------- -------- -------
Earnings/(loss)
Loss attributable to equity holders of the Company (27,987) (3,277)
Adjustments
Adjusting items (net of non-controlling interest effect) 28,072 (3,498)
Tax relief on adjustments (net of non-controlling interest effect) (243) (816)
------------------------------------------------------------------- -------- -------
Adjusted loss attributable to equity holders of the Company (158) (7,591)
------------------------------------------------------------------- -------- -------
In thousands of shares 2023 2022
--------------------------------------------------- ------ ------
Issued ordinary shares at 1 April 97,062 96,858
Shares relating to share options 1,242 1,260
Less: shares held by Employee Benefit Trust (536) -
--------------------------------------------------- ------ ------
Weighted average number of shares for the purposes
of calculating basic EPS 97,768 98,118
Effect of dilutive potential shares - share awards - -
Weighted average number of shares for the purposes
of calculating diluted EPS 97,768 98,118
--------------------------------------------------- ------ ------
There are 209,000 (2022: 119,000) share options which are not
included in the calculation of diluted earnings per share because
they are antidilutive.
2023 2022
Cents Cents
--------------------------------------- ------ -----
Loss per share
Basic loss per share (28.6) (3.3)
Impact of adjusting items (net of tax) 28.4 (4.4)
--------------------------------------- ------ -----
Basic adjusted loss per share (0.2) (7.7)
--------------------------------------- ------ -----
Diluted loss per share (28.6) (3.3)
Diluted adjusted loss per share (0.2) (7.7)
--------------------------------------- ------ -----
Adjusted loss per share are provided to reflect the underlying
earnings performance of the Group.
Basic earnings/(loss) per share
Basic EPS is calculated by dividing the profit for the year
attributable to ordinary shareholders by the weighted average
number of shares outstanding during the period, excluding own
shares held by the Employee Benefit Trust.
Diluted earnings/(loss) per share
Diluted EPS is calculated by dividing the profit for the year
attributable to ordinary shareholders by the weighted average
number of shares outstanding during the period, plus the weighted
average number of ordinary shares that would be issued on the
conversion of the potentially dilutive shares.
22 Dividends paid and proposed
No dividends were paid in the current year and the Directors are
not recommending the payment of a final dividend in respect of the
year ended 31 March 2023.
2023 2022
---------------------------- ---------------------------
Pence Cents Pence Cents
per share per share $000 per share per share $000
---------- ---------------------------------------------------- ---- --------- --------- -----
Final equity dividend for prior year - - - 5.75 7.92 7,630
Interim equity dividend for current year - - - 1.25 1.68 1,644
----------------------------------------- ---------- ---------- ---- --------- --------- -----
Dividends paid in the year - 9,274
----------------------------------------------------------------- ---- --------- --------- -----
2023 2022
---------------------------- --------------------------
Proposed for approval at Annual Pence Cents Pence Cents
General Meeting per share per share $000 per share per share $000
------------------------------------------- ---------- ---------- ---- --------- --------- ----
Final equity dividend for the current year - - - - - -
------------------------------------------- ---------- ---------- ---- --------- --------- ----
23 Employee benefits
Post-employment benefits
The Group administers a defined benefit pension plan that was
inherited through the acquisition of CSS and covers certain
employees of a UK subsidiary. The scheme closed to future accrual
on 31 December 2012. This is a separate trustee administered fund
holding the pension scheme assets to meet long-term pension
liabilities. The plan assets held in trust are governed by UK
regulations and responsibility for governance of the plan,
including investment decisions and contribution schedules, lies
with the group of trustees. The assets of the scheme are invested
in the SPI With-Profits Fund, which is provided by Phoenix Life
Limited.
An actuarial valuation was updated on an approximate basis at 31
March 2023, by a qualified actuary, independent of the scheme's
sponsoring employer.
The major assumptions used by the actuary are shown below.
Present values of defined benefit obligation, fair value of
assets and defined benefit asset/(liability)
2023 2022
$000 $000
-------------------------------------------- ------- -------
Fair value plan of assets 3,269 3,241
Present value of defined benefit obligation (1,245) (1,858)
-------------------------------------------- ------- -------
Surplus in plan 2,024 1,383
Surplus not recognised (2,024) (1,383)
-------------------------------------------- ------- -------
Net defined benefit asset to be recognised - -
-------------------------------------------- ------- -------
In accordance with IAS 19, the surplus on the plan has not been
recognised on the basis it is not expected to be recovered, as the
Group does not have an unconditional right to any refund, with the
previously recognised asset being derecognised in the prior
year.
Reconciliation of opening and closing balances of the defined
benefit obligation
2023 2022
$000 $000
---------------------------------------------------------- ------- -------
Defined benefit obligation as at 1 April (1,858) (2,528)
Interest expense (48) (50)
Benefits payments from plan assets - 384
Actuarial gains due to changes in demographic assumptions 10 52
Actuarial gains due to changes in financial assumptions 645 205
Effect of experience adjustments (113) (18)
Effect of movement in foreign exchange 119 97
---------------------------------------------------------- ------- -------
Defined benefit obligation as at 31 March (1,245) (1,858)
---------------------------------------------------------- ------- -------
Reconciliation of opening and closing balances of the fair value
of plan assets
2023 2022
$000 $000
----------------------------------------- ----- -----
Fair value of plan assets as at 1 April 3,241 3,615
Interest income 85 75
Return on plan assets 74 33
Contributions by the Company 61 68
Benefits payments from plan assets - (384)
Admin expenses paid from plan assets (7) (7)
Effect of movement in foreign exchange (185) (159)
----------------------------------------- ----- -----
Fair value of plan assets as at 31 March 3,269 3,241
----------------------------------------- ----- -----
A total of $30,000 (2022: $18,000) has been credited to Group
operating profit during the year, including $7,000 (2022: $7,000)
of expense netting against net interest income of $37,000 (2022:
$25,000).
The principal assumptions used by the independent qualified
actuary for the purposes of IAS 19 are as follows:
2023 2022
------------------------ ----- -----
Increase in salaries - -
Increase in pensions - -
- at RPI capped at 5% 3.70% 3.80%
- at CPI capped at 5% 2.40% 2.75%
- at CPI capped at 2.5% 2.40% 2.50%
Discount rate 4.80% 2.80%
Inflation rate - RPI 3.30% 3.65%
Inflation rate - CPI 2.40% 2.75%
------------------------ ----- -----
Due to the timescale covered, the assumptions may not be borne
out in practice.
The life expectancy assumptions (in number of years) used to
estimate defined benefit obligations at the year end are as
follows:
2023 2022
-------------------------------------- ---- ----
Male retiring today at age 60 26.1 26.4
Female retiring today at age 60 28.0 28.5
Male retiring in 20 years at age 60 27.6 27.9
Female retiring in 20 years at age 60 29.6 30.1
-------------------------------------- ---- ----
In addition to the defined benefit pension scheme there is also
a small post-retirement healthcare scheme operated in the US, which
was also inherited through the acquisition of CSS. In total, the
amounts taken through the Group's statement of comprehensive income
can be seen below:
2023 2022
$000 $000
-------------------------------------------------------- ---- -----
UK pension scheme
Actuarial losses on defined benefit pension scheme (53) (73)
Derecognition of defined benefit pension scheme surplus - (664)
US health scheme 16 22
-------------------------------------------------------- ---- -----
(37) (715)
-------------------------------------------------------- ---- -----
Long Term Incentive Plans
The Group operates a Long Term Incentive Plan (LTIP). Under the
LTIP, nil cost options and conditional awards over ordinary
shares
of 5 pence each ('ordinary shares') in the capital of the
Company are awarded to Executive Board Directors of the Company and
other selected senior management team members within the Group.
During the year, awards were granted under the 2022-2025 LTIP
scheme.
The performance period for each award under the LTIP is three
years. The cost to employees of ordinary shares issued under the
LTIP if the LTIP vests is nil. In principle, the number of ordinary
shares to be granted to each employee under the LTIP will not be
more than 265% (and 325% in exceptional cases) of the relevant
employee's base annual salary. The maximum opportunity available
under the 2022-2025 scheme is up to 125% of base salary for the CFO
and Interim COO.
The Value Creation Scheme (VCS) that was introduced in February
2021, was cancelled effective 28 June 2022.
On 29 September 2022, the trustee of the IG Design Group Plc
Employee Benefit Trust (the 'EBT'), purchased 1 million ordinary
shares of 5 pence each at an average price of 77.50 pence per
ordinary share. These ordinary shares are to be held in the EBT and
are intended to be used to satisfy the exercise of share options by
employees.
Vested LTIP schemes - outstanding options
Exercise
Number price
of
ordinary pence Exercise dates
shares
---------------------- -------- -------- --------------------
2017-2020 LTIP scheme nil July 2020 - August
48,025 2027
2018-2021 LTIP scheme nil June 2021 - November
262,071 2028
---------------------- -------- -------- --------------------
310,096
---------------------- -------- -------- --------------------
All performance criteria have been met for the above
schemes.
2023 2022
-------------------- -------------------
Weighted Weighted
average average
exercise Number exercise Number of
price of price
pence options pence options
-------------------------------- --------- --------- -------- ---------
Outstanding at 1 April nil 1,088,123 nil 1,291,728
Options vesting during the year nil 154,139 nil -
Exercised during the year nil (932,166) nil (203,605)
-------------------------------- --------- --------- -------- ---------
Outstanding at 31 March nil 310,096 nil 1,088,123
-------------------------------- --------- --------- -------- ---------
Exercisable at 31 March nil 310,096 nil 1,088,123
-------------------------------- --------- --------- -------- ---------
Scheme details for plans in vesting periods during the year
During the financial year to 31 March 2023 there were two LTIP
awards still within their vesting period (2022: two).
Awards
2020-2022 2022-2025
Grant date Sep 2020 Aug 2023,
and Dec 2023,
Jan 2021 Feb 2023
Fair value per share (GBP) 5.57 1.00
Number of participants 2 67
Initial award 150,000 2,567,747
Dividend shares 4,139 -
Lapses and forfeitures - (47,043)
Exercises and releases (154,139) -
--------------------------------------------- --------- ----------
Potential to vest as at 31 March 2023 - 2,520,704
--------------------------------------------- --------- ----------
Potential to vest as at 31 March 2022 151,465 -
--------------------------------------------- --------- ----------
Weighted average remaining contractual life
of options outstanding at
the end of the year Nil 3.17 years
--------------------------------------------- --------- ----------
The grant date fair value of the LTIP awards granted in the
year, assuming they are to vest in full, is $3.0 million.
The grant date fair values of the 2022-2025 scheme were
determined using the following factors:
Share price (GBP) 1.14
Exercise price Nil
Expected term 3 years (additional 2 years
for holding period)
Risk-free interest rate 1.84% (1.98% for awards
with holding period)
Expected dividend yield 0%
------------------------ ---------------------------
LTIP performance targets
The 2020-2022 scheme, granted to two individuals, had only a
service condition, being 1 April 2020 to 30 June 2022. It vested on
30 June 2022.
Individuals were granted performance share awards under the
2022-2025 scheme. Some individuals were also awarded restricted
share awards which are not subject to any performance condition
(other than an underpin condition) and the vesting is dependent on
a continued service requirement. The vesting of performance share
awards are subject to a continued service requirement. The extent
of vesting is subject to performance against performance
conditions.
The performance share awards are weighted two-thirds towards a
Relative Total Shareholder Return ('TSR') metric and one-third
Earnings Per Share metric as the performance measures. The TSR
metric is a measurement of TSR by the Group relative to a peer
group of the FTSE SmallCap excluding Investment Trusts.
For the Relative TSR measure, qualifying performance is within
the median quartile on a straight-line sliding scale with 25% of
entitlement vesting at a 50(th) percentile (median) ranking rising
to 100% vesting at a 75(th) percentile (upper quartile) ranking
performance.
For the EPS measure, there is a performance range for the
Adjusted EPS metric in absolute value terms, modelled from the
recovery plan presented at the time of the FY2023 Budget after
inclusion of relevant LTIP charges. Upper and lower limits were
modelled for FY25 EPS performance (reflecting a 3-year performance
period of FY2023, FY2024 and FY2025), with 25% vesting at Threshold
of 19 cents EPS and a straight-line sliding scale to Maximum at 27
cents.
An underpin condition was also applied to the awards that allows
the Committee to reduce vesting levels if it determines that
vesting outcomes reflect unwarranted windfall gains from share
price movements.
Share-based payments charges/(credits)
The total expense/(credit) recognised for the year arising from
equity -- settled share -- based payments is as follows:
2023 2022
$000 $000
---------------------------------------------------------- ---- -------
Charge in relation to the 2020-2022 LTIP scheme 166 723
Credit in relation to the VCS - (482)
Charge in relation to the 2022-2025 LTIP scheme 490 -
---------------------------------------------------------- ---- -------
Equity-settled share-based payments charge/(credit) 656 241
Social security charge/(credit) 149 (1,089)
---------------------------------------------------------- ---- -------
Total equity-settled share-based payments charge/(credit) 805 (848)
---------------------------------------------------------- ---- -------
Deferred tax assets are recognised on share-based payment
schemes when deferred tax assets are recognised in that territory
(see note 11).
Social security charges/(credits) on share-based payments
Social security is accrued, where applicable, at a rate which
management expects to be the prevailing rate when share -- based
incentives are exercised and is based on the latest market value of
options expected to vest or having already vested.
The total social security accrual outstanding at the year end in
respect of share-based payment transactions was $160,000 (2022:
$137,000).
24 Financial instruments
Derivative financial assets
a) Fair values of financial instruments
The carrying values for each class of financial assets and
financial liabilities in the balance sheet are not considered to be
materially different to their fair values.
As at 31 March 2023, the Group had derivative contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of an asset of $340,000 (2022: $316,000)
and a liability of $315,000 (2022: $18,000).
Derivative financial instruments
The fair value of forward exchange contracts is assessed using
valuation models taking into account market inputs such as foreign
exchange spot and forward rates, yield curves and forward interest
rates.
Fair value hierarchy
Financial instruments which are recognised at fair value
subsequent to initial recognition are grouped into Levels 1 to 3
based on the degree to which the fair value is observable. The
three levels are defined as follows:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers and investment securities.
The Group's exposure to credit risk is managed by dealing only
with banks and financial institutions with strong credit ratings.
The Group's financial credit risk is primarily attributable to its
trade receivables.
The main customers of the Group are large and mid -- sized
retailers, other manufacturers and wholesalers of greetings
products, service merchandisers and trading companies. The Group
has established procedures to minimise the risk of default of trade
receivables including detailed credit checks undertaken before new
customers are accepted and rigorous credit control procedures after
sale. These processes have proved effective in minimising the level
of provisions for doubtful debts required.
The amounts presented in the balance sheet are net of allowances
for doubtful receivables estimated by the Group's management, based
on prior experience and their assessment of the current economic
environment.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. Therefore, the maximum exposure to credit risk at
the balance sheet date was $172.2 million (2022: $170.9 million)
being the total of the carrying amount of financial assets.
The maximum exposure to credit risk for trade receivables at the
balance sheet date by reporting segment was:
2023 2022
$000 $000
-------------- ------ -------
DG Americas 53,569 84,966
International 27,404 30,351
-------------- ------ -------
80,973 115,317
-------------- ------ -------
Credit quality of financial assets and impairment losses
The ageing of trade receivables at the balance sheet date
was:
2023 2022
----------------------------- ------------------------------
Expected Provisions Expected Provisions
for for
loss rate Gross doubtful loss rate Gross doubtful
debts debts
% $000 $000% $000 $000
------------------- --------- ------ ---------- -------- ------- ----------
Not past due 0.5 55,263 (250)- 71,429 -
Past due 0-60 days 0.5 14,177 (65)- 26,889 -
61-90 days 4.3 5,645 (243) 2.0 9,721 (195)
More than 90 days 15.5 7,625 (1,179) 4.5 7,825 (352)
------------------- --------- ------ ---------- --------- ------- ----------
2.1 82,710 (1,737) 0.5 115,864 (547)
------------------- --------- ------ ---------- --------- ------- ----------
There were no unimpaired balances outstanding at 31 March 2023
(2022: $nil) where the Group had renegotiated the terms of the
trade receivable. The increase in provision year-on-year is
reflective of the current macroeconomic circumstances.
Expected credit loss assessment
For the Group's trade receivables, expected credit losses are
measured using a provisioning matrix based on the reason the trade
receivable is past due. The provision matrix rates are based on
actual credit loss experience over the past three years and
adjusted, when required, to take into account current
macro-economic factors. The Group applies experienced credit
judgement that is determined to be predictive of the risk of loss
to assess the expected credit loss, taking into account external
ratings, financial statements and other available information. The
Group's trade receivables are unlikely to extend past twelve months
and, as such, for the purposes of expected credit loss modelling,
the lifetime expected credit loss impairments recognised are the
same as a twelve-month expected credit loss.
There have been no significant credit risk movements since
initial recognition of impairments.
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
2023 2022
$000 $000
---------------------------------------- ----- -------
Balance at 1 April 547 3,420
Charge for the year 1,705 277
Unused amounts reversed (59) (1,511)
Amounts utilised (469) (1,627)
Effects of movement in foreign exchange 13 (12)
---------------------------------------- ----- -------
Balance at 31 March 1,737 547
---------------------------------------- ----- -------
The allowance account for trade receivables is used to record
provisions for doubtful debts unless the Group is satisfied that no
recovery of the amount owing is possible; at that point the amounts
considered irrecoverable are written off against the trade
receivables directly.
c) Liquidity risk
Financial risk management
Liquidity risk is the risk that the Group, although solvent,
will encounter difficulties in meeting obligations associated with
the financial liabilities that are settled by delivering cash or
another financial asset. The Group's policy with regard to
liquidity ensures adequate access to funds by maintaining an
appropriate mix of short-term and longer-term facilities, which are
reviewed on a regular basis. The maturity profile and details of
debt outstanding at 31 March 2023 are set out in note 15.
The following are the contractual maturities of financial
liabilities, including estimated interest payments:
Carrying Contractual One year One to Two to More than
two five
amount cash flows or less years years five years
31 March 2023 Note $000 $000 $000 $000 $000 $000
----------------------- ---- -------- ----------- --------- -------- -------- ----------
Non-derivative
financial liabilities
Other financial
liabilities 18 59,983 (59,983) (40,912) (19,032) (36) (3)
Lease liabilities 10 80,187 (84,532) (18,596) (15,258) (26,239) (24,439)
Trade payables 19 89,754 (89,754) (89,754) - - -
Derivative
financial liabilities
Forward foreign
exchange contracts
carried at
fair value
through the
income statement(a) 18 28 (11) (11) - - -
Forward foreign
exchange contracts
carried at
fair value
through the
hedging reserve(a) 18 287 (17,768) (17,768) - - -
----------------------- ---- -------- ----------- --------- -------- -------- ----------
230,239 (252,048) (167,041) (34,290) (26,275) (24,442)
----------------------- ---- -------- ----------- --------- -------- -------- ----------
(a) Measured at Level 2.
Restated(b) Restated(c) Restated(c)
Carrying Contractual One year One to Two to More than
two five
amount cash flows or less years years five years
31 March 2022 Note $000 $000 $000 $000 $000 $000
----------------------- ---- ----------- ----------- ----------- -------- -------- ----------
Non-derivative
financial liabilities
Other financial
liabilities 18 59,081 (59,081) (37,524) (21,523) (32) (2)
Lease liabilities 10 99,843 (112,186) (22,538) (20,669) (37,244) (31,735)
Trade payables 19 138,902 (138,902) (138,902) - - -
Derivative
financial liabilities
Forward foreign
exchange contracts
carried at
fair value
through the
hedging reserve(a) 18 18 (11,759) (11,759) - - -
----------------------- ---- ----------- ----------- ----------- -------- -------- ----------
297,844 (321,928) (210,723) (42,192) (37,276) (31,737)
----------------------- ---- ----------- ----------- ----------- -------- -------- ----------
(a) Measured at Level 2.
(b) Other payables of $4.4 million have been removed from the
above table as they had been misclassified as financial
instruments.
(c) The contractual cash flows relating to the forward foreign
exchange contracts carried at fair value through the hedging
reserve have been restated due to $11.2 million of USD purchases
being excluded in error.
The following table shows the facilities for bank loans,
overdrafts, asset -- backed loans and revolving credit
facilities:
31 March 2023 31 March 2022
----------------------------------------- -------------------------------------------
Facility Facility
used used
Carrying contractual Facility Total Carrying contractual Facility Total
amount cash flows unused facility amount cash flows unused facility
$000 $000 $000 $000 $000 $000 $000 $000
--------------- -------- ----------- -------- -------- -------- ----------- --------- ---------
Corporate
revolving
credit
facilities - - (92,039) (92,039) - - (97,208) (97,208)
Bank overdraft - - (4,502) (4,502) - - (4,909) (4,909)
--------------- -------- ----------- -------- -------- -------- ----------- --------- ---------
- - (96,541) (96,541) - - (102,117) (102,117)
--------------- -------- ----------- -------- -------- -------- ----------- --------- ---------
The receivables financing facilities are dependent upon the
levels of the relevant receivables.
The major bank facilities vary in the year depending on forecast
debt requirements. The maximum limit across all facilities was
$221.8 million (2022: $283.7 million).
At 31 March 2023 the facility amounted to $92.0 million (2022:
$97.2 million).
Additional facilities were available at other banks of $4.5
million (2022: $4.9 million).
On 5 June 2023 the Group banking negotiated new banking
facilities: see note 15 for more information.
The following table shows other facilities that are treated as
contingent liabilities:
31 March 2023 31 March 2022
------------------ ------------------
Facility Utilised Facility Utilised
$000 $000 $000 $000
---------------------------------------------- -------- -------- -------- --------
UK Guarantee 2,164 1,880 2,101 1,996
UK Import line 1,237 - 1,313 -
Foreign Bills 6,184 - 6,566 -
USA Guarantee 5,500 2,980 5,500 2,980
Netherlands Guarantee (Trade and Import line) 653 248 667 121
---------------------------------------------- -------- -------- -------- --------
15,738 5,108 16,147 5,097
---------------------------------------------- -------- -------- -------- --------
d) Cash flow hedges
The following derivative financial instruments were designated
as cash flow hedges:
2023 2022
Forward exchange contracts carrying amount $000 $000
------------------------------------------- ----- ----
Derivative financial assets 340 316
Derivative financial liabilities (315) (18)
------------------------------------------- ----- ----
The Group has forward currency hedging contracts outstanding at
31 March 2023 designated as hedges of expected future purchases in
US dollars for which the Group has firm commitments, as the
derivatives are based on forecasts and an economic relationship
exists at the time the derivative contracts are taken out.
The terms of the forward currency hedging contracts have been
negotiated to match the terms of the commitments.
All contracts outstanding at the year end crystallise within 24
months of the balance sheet date at average prices of 1.08 for US
dollar contracts (2022: 1.14), 6.96 for Chinese renminbi contracts
(2022: not applicable) and not applicable for Japanese yen
contracts (2022: 152.8). At the year end the Group held $17.6
million (2022: $11.2 million), RMB 108.9 million (2022: RMB nil)
and JPY nil (2022: JPY 60.8 million) in hedge relationships.
When assessing the effectiveness of any derivative contracts,
the Group assesses sources of ineffectiveness which include
movements in volumes or timings of the hedged cash flows.
The cash flow hedges of the expected future purchases in the
year were assessed to be highly effective and as at 31 March 2023,
a net unrealised profit of $419,000 (2022: $686,000) with related
deferred tax credit of $nil (2022: $nil) was included in other
comprehensive income in respect of these hedging contracts. Amounts
relating to ineffectiveness recorded in the income statement in the
year were $nil (2022: $nil).
e) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices, will
affect the Group's income or the value of its holdings of financial
instruments.
The Group hedges a proportion, as deemed appropriate by
management, of its sales and purchases of inventory denominated in
foreign currency by entering into foreign exchange contracts. Such
foreign exchange contracts typically have maturities of less than
one year.
The Group rarely hedges profit translation exposure, since such
hedges provide only a temporary deferral of the effects of movement
in foreign exchange rates. Similarly, the Group does not hedge its
long-term investments in overseas assets.
However, the Group holds loans that are denominated in the
functional currency of certain overseas entities.
The Group's exposure to foreign currency risk is as follows.
This is based on the carrying amount for monetary financial
instruments, except derivatives, when it is based on notional
amounts.
US dollar Sterling Euro Other Total
---------------------------- ---- --------- -------- -------- ------- --------
31 March 2023 Note $000 $000 $000 $000 $000
Long-term assets 13 5,647 - - - 5,647
Cash and cash equivalents 14 32,504 17,940 25,443 9,326 85,213
Trade receivables 13 54,528 8,924 12,802 4,719 80,973
Derivative financial assets - 340 - - 340
Bank overdrafts 14 (17,141) (5,419) (12,419) - (34,979)
Loan arrangement fees 15 - 250 - - 250
Trade payables 19 (61,323) (14,650) (9,388) (4,393) (89,754)
Other payables 19 (1,631) (776) (579) (237) (3,223)
---------------------------- ---- --------- -------- -------- ------- --------
Balance sheet exposure 12,584 6,609 15,859 9,415 44,467
---------------------------- ---- --------- -------- -------- ------- --------
US dollar Sterling Euro Other Total
31 March 2022 Note $000 $000 $000 $000 $000
---------------------------- ---- --------- -------- -------- ------- ---------
Long-term assets 13 5,105 - - - 5,105
Cash and cash equivalents 14 32,910 7,447 2,388 7,434 50,179
Trade receivables 13 87,431 12,281 11,014 4,591 115,317
Derivative financial assets - 316 - - 316
Bank overdrafts 14 (295) (14,464) (5,621) - (20,380)
Loan arrangement fees 15 - 360 - - 360
Trade payables 19 (105,299) (16,638) (14,320) (2,645) (138,902)
Other payables 19 (2,418) (1,130) (623) (245) (4,416)
---------------------------- ---- --------- -------- -------- ------- ---------
Balance sheet exposure 17,434 (11,828) (7,162) 9,135 7,579
---------------------------- ---- --------- -------- -------- ------- ---------
The following significant exchange rates applied to US dollar
during the year:
Average rate 31 March spot rate
-------------- --------------------
2023 2022 2023 2022
--------------- ------ ------ --------- ---------
Euro 0.96 0.86 0.92 0.90
Pound sterling 0.83 0.73 0.81 0.76
--------------- ------ ------ --------- ---------
Sensitivity analysis
A 10% weakening of the following currencies against US dollar at
31 March 2023 would have affected equity and profit or loss by the
amounts shown below. This calculation assumes that the change
occurred at the balance sheet date and had been applied to risk
exposures existing at that date.
This analysis assumes that all other variables, in particular
other exchange rates and interest rates, remain constant. The
analysis was performed on the same basis for 31 March 2022.
Equity Loss
-------------- ------------
2023 2022 2023 2022
$000 $000 $000 $000
--------------- ----- ------- ----- -----
Euro 1,442 (651) (296) (551)
Pound sterling 601 (1,075) (251) (3)
--------------- ----- ------- ----- -----
On the basis of the same assumptions, a 10% strengthening of the
currencies against US dollar at 31 March 2023 would have affected
equity and profit or loss by the following amounts:
Equity Profit
-------------- ----------
2023 2022 2023 2022
$000 $000 $000 $000
--------------- ------- ----- ---- ----
Euro (1,762) 796 362 674
Pound sterling (734) 1,314 307 3
--------------- ------- ----- ---- ----
Profile
At the balance sheet date the interest rate profile of the
Group's interest-bearing financial instruments was:
2023 2022
Variable rate instruments Note $000 $000
-------------------------- ---- -------- --------
Financial assets 85,213 50,179
Financial liabilities (34,979) (20,380)
-------------------------- ---- -------- --------
Net cash 14 50,234 29,799
-------------------------- ---- -------- --------
A change of 50 basis points (0.5%) in interest rates in respect
of financial assets and liabilities at the balance sheet date would
have affected equity and profit or loss by the amounts shown below.
This calculation assumes that the change occurred at the balance
sheet date and had been applied to risk exposures existing at that
date.
This analysis assumes that all other variables, in particular
foreign currency rates, remain constant and considers the effect on
financial instruments with variable interest rates and financial
instruments at fair value through profit or loss. The analysis is
performed on the same basis for 31 March 2022.
Sensitivity analysis
2023 2022
$000 $000
--------------- ---- ----
Equity
Increase 251 149
Decrease - -
Profit or loss
Increase 251 149
Decrease - -
--------------- ---- ----
f) Capital management
The Board's policy is to hold a strong capital base so as to
maintain investor, creditor, customer and market confidence and to
sustain future development of the business. The Group is dependent
on the continuing support of its bankers for working capital
facilities and so the Board's major objective is to keep borrowings
within these facilities.
The Board manages as capital its trading capital, which it
defines as its net assets plus net debt. Net debt is calculated as
total debt (bank overdrafts, loans and borrowings as shown in the
balance sheet), less cash and cash equivalents. The banking
facilities with the Group's principal bank have amended covenants
relating to earnings and liquidity cover and previous covenants
relating to interest cover, cash flow cover and leverage, and our
articles currently permit borrowings (including letter of credit
facilities) to a maximum of four times equity.
Equity
------------------
2023 2022
Note $000 $000
-------------------------------------------------------- ---- -------- --------
Net equity attributable to owners of the Parent Company 327,846 361,711
Net cash 14 (50,484) (30,159)
-------------------------------------------------------- ---- -------- --------
Trading capital 277,362 331,552
-------------------------------------------------------- ---- -------- --------
The main areas of capital management relate to the management of
the components of working capital including monitoring inventory
turn, age of inventory, age of trade receivables, balance sheet
reforecasting, monthly profit and loss, weekly cash flow forecasts
and daily cash balances. Major investment decisions are based on
reviewing the expected future cash flows and all major capital
expenditure requires sign off by the Chief Financial Officer, Chief
Executive Officer and Interim Executive Chair, or, above certain
limits, by the Board. There were no major changes in the Group's
approach to capital management during the year. A particular focus
of the Group is average leverage, measured as the ratio of average
monthly net debt before lease liabilities to adjusted EBITDA
reduced for lease payments.
25 Capital commitments
At 31 March 2023, the Group had outstanding authorised capital
commitments to purchase plant and equipment for $3.9 million (2022:
$1.5 million).
26 Related parties
2023 2022
$000 $000
----------------------------- ---- ----
Sale of goods:
Hedlunds Pappers Industri AB 199 566
Festive Productions Ltd 3 -
SA Greetings (Pty) Ltd - 93
----------------------------- ---- ----
202 659
----------------------------- ---- ----
Receivables:
Hedlunds Pappers Industri AB - 23
----------------------------- ---- ----
- 23
----------------------------- ---- ----
Identity of related parties and trading
Hedlund Import AB is under the ultimate control of the Hedlund
family, who are a major shareholder in the Company. Anders Hedlund
is a director of Hedlunds Pappers Industri AB which is under the
ultimate control of the Hedlund family, who are a major shareholder
in the Company. Festive Productions Ltd is a subsidiary undertaking
of Malios Holding AG, a company under the ultimate control of the
Hedlund family.
SA Greetings (Pty) Ltd (South African Greetings) was a related
party by virtue of John Charlton being the Chairman. It is no
longer a related party since the resignation of John Charlton from
the Board on 20 September 2021.
The above trading takes place in the ordinary course of
business.
Other related party transactions
Directors of the Company and their immediate relatives have an
interest in 24% (2022: 24%) of the voting shares of the Company.
The shareholdings of Directors and changes during the year are
shown in the Directors' report within the Group's audited financial
statements.
Directors' remuneration
2023 2022
$000 $000
------------------------------------- ----- -------
Short-term employee benefits 3,158 2,496
Termination benefits - 890
Share-based payments charge/(credit) 224 (1,256)
------------------------------------- ----- -------
3,382 2,130
------------------------------------- ----- -------
27 Non-controlling interests (NCI)
The Group purchased the remaining 49% share of Anker Play
Products LLC ('APP') effective date 1 April 2022 (see note 28 for
further details). Set out below is summarised financial information
for each subsidiary that has non-controlling interests that are
material to the Group. These subsidiaries are IG Design Group
Australia Pty Ltd ('Australia') and APP (up to date of
purchase).
2023 2022
------------------------ -----------------------------
Non-controlling interest - Australia APP Total Australia APP Total
balance sheet as at 31 March $000 $000 $000 $000 $000 $000
----------------------------- --------- ---- ------- --------- -------- --------
Non-current assets 7,283 - 7,283 9,625 1,253 10,878
Current assets 16,007 - 16,007 16,497 15,639 32,136
Current liabilities (7,959) - (7,959) (9,082) (10,706) (19,788)
Non-current liabilities (2,271) - (2,271) (4,355) (894) (5,249)
----------------------------- --------- ---- ------- --------- -------- --------
2023 2022
----------------------- -------------------------
Non-controlling interest - Australia APP Total Australia APP Total
comprehensive income for the year ended 31 March $000 $000 $000 $000 $000 $000
------------------------------------------------- --------- ---- ------ --------- ------ ------
Revenue 49,666 - 49,666 51,296 38,309 89,605
Profit after tax 3,055 - 3,055 3,756 2,211 5,967
Total comprehensive income 1,770 - 1,770 3,568 2,211 5,779
------------------------------------------------- --------- ---- ------ --------- ------ ------
2023 2022
------------------------ -------------------------
Non-controlling interest - Australia APP Total Australia APP Total
cash flow for the year ended 31 March $000 $000 $000 $000 $000 $000
----------------------------------------------------- --------- ---- ------- --------- ----- -------
Cash flows from operating activities 3,978 - 3,978 3,101 602 3,703
Cash flows from investing activities (131) - (131) (357) (224) (581)
Cash flows from financing activities (2,986) - (2,986) (8,348) (63) (8,411)
----------------------------------------------------- --------- ---- ------- --------- ----- -------
Net (decrease)/increase in cash and cash equivalents 861 - 861 (5,604) 315 (5,289)
----------------------------------------------------- --------- ---- ------- --------- ----- -------
2023 2022
Australia APP Total Australia APP Total
Non-controlling interest $000 $000 $000 $000 $000 $000
------------------------------------------ --------- ------- ------- --------- ----- -------
Balance as at 1 April 6,343 1,656 7,999 7,924 573 8,497
Share of profits for the year 1,528 - 1,528 1,878 1,083 2,961
Other comprehensive expense (3) - (3) - - -
Dividend paid to non-controlling interest (698) (2,263) (2,961) (3,365) - (3,365)
Acquisition of non-controlling interest - 607 607 - - -
Currency translation (640) - (640) (94) - (94)
------------------------------------------ --------- ------- ------- --------- ----- -------
Balance as at 31 March 6,530 - 6,530 6,343 1,656 7,999
------------------------------------------ --------- ------- ------- --------- ----- -------
28 Acquisitions
On 23 May 2022, the Group purchased the remaining 49% interest
in APP, bringing its total ownership to 100%. This was completed
pursuant to the exercise of a put option by Maxwell Summers, Inc.,
the holder of the remaining 49% interest, which the Group was
legally obliged to purchase with the exercise of the put option
under the APP Limited Liability Company agreement dated 30 March
2017. Consequently the $3.1 million current financial liability in
respect of the put option in place over the non-controlling
interest was extinguished and the related liability de-recognised,
with a corresponding movement within retained earnings.
The transaction was contractually committed on 23 May 2022, with
an effective date of 1 April 2022. The transaction, made through
the Group's American subsidiary IG Design Group Americas, Inc., was
satisfied with a cash payment of $3.0 million. The consideration
was satisfied from the existing Group banking facilities.
Immediately prior to the purchase, the carrying amount of the
existing 49% non-controlling interest was $607,000. The Group
recognised a decrease in non-controlling interest of $607,000. The
effect on the equity of the owners of the Group was as follows:
2023
$000
----------------------------------------------------------- -----
Carrying amount of non-controlling interest acquired 607
Cash consideration paid 2,951
Excess of consideration paid recognised in the transaction
with the non-controlling
interests reserve within equity 3,558
------------------------------------------------------------ -----
29 Purchase of own shares
On 29 September 2022, the trustee of the IG Design Group Plc
Employee Benefit Trust (the "EBT"), purchased 1 million ordinary
shares of 5 pence each in the Company ("ordinary shares") at an
average price of 77.50 pence per ordinary share. These ordinary
shares are to be held in the EBT and are intended to be used to
satisfy the exercise of share options by employees. The EBT is a
discretionary trust for the benefit of the Company's employees,
including the Directors of the Company. The purchase of ordinary
shares by the EBT has been funded by a loan provided by the Company
from its existing financing facilities. The EBT has waived its
rights to dividend payments.
30 Non-adjusting post balance sheet events
On 5 June 2023, the $90.0 million and GBP92.0 million revolving
credit facilities were replaced by a $125.0 million asset backed
lending arrangement. This facility has an original term of three
years with the option of submitting two extension notices to extend
the facility twice, each by a period of one year. For more details
see note 15.
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END
FR DBGDLGXBDGXC
(END) Dow Jones Newswires
June 20, 2023 02:00 ET (06:00 GMT)
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