TIDMIGR
RNS Number : 9130B
IG Design Group PLC
15 June 2021
EMBARGOED UNTIL 7.00 AM, 15 JUNE 2021
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the year ended 31 March 2021
A robust performance with profit growth; new Growth Plan
unveiled
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 results for the year ended 31 March
2021.
Financial Highlights for the year ended 31 March 2021
Financial Highlights* 2021 2020
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Revenue $873.2m $624.3m
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Adjusted**
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- Profit before tax $37.0m $35.4m
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- Diluted earnings per share 25.9c 32.7c
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Reported
========
- Profit/(loss) before tax $14.7m ($0.9m)
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- Diluted earnings per share 8.4c 19.8c
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Net cash as at the period end $76.5m $52.4m
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Dividend 8.75p 8.75p
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Average leverage 0.0x 0.9x
------------------------------- -------- --------
*The Group's reporting currency has moved to US dollars
following the acquisition of CSS Industries, Inc. ('CSS') in March
2020
**Adjusted Results are before Adjusting Items - for further
detail see Alternative Performance Measures reconciliation within
the Detailed Financial Review
-- Revenue up 40% year-on-year driven by a full year's trading
of CSS since acquisition, with like-for-like revenues (excluding
CSS) 5% down reflecting the impact of Covid-19 across the
Group
-- Adjusted profit before tax up 4%, with reported profit
before tax up $15.6 million on the prior year
-- Adjusted diluted earnings per share reduced in line with
market expectations driven primarily by an increase in
the number of shares in issue following the equity raise
relating to the CSS acquisition
-- Strong cash generation and zero average leverage strengthening
the final position of the Group
-- The Board is recommending a final dividend of 5.75 pence
which delivers a full year dividend of 8.75 pence in line
with the prior year, reflecting the Group's strong cash
generation
Strategic & Operational Highlights
-- Strong product and channel development during the year
with over 100,000 SKUs sold including new innovative card
ranges in the US, Eco-nature(TM) brand of sustainable products
launched in UK alongside growth in e-commerce activities
across key markets
-- Craft & creative play categories delivered good revenue
growth providing customers and their consumers with much
needed entertainment throughout multiple lockdowns across
the world
-- CSS acquisition synergies accelerated in the year with
a focus on integration - c.$10 million delivered since
acquisition
-- Launch of the Group's sustainability framework - 'helping
design a better future'
Outlook
-- The Group is announcing its new Growth Plan which targets:
o driving revenues beyond $1.5 billion - c.30% organic
growth, balance from M&A
o doubling the Group's Adjusted EBITDA
-- Assuming the current progress is maintained in the 'reopening'
of regional economies in which our businesses operate,
the Board expects to deliver a strong financial performance
in the 2022 financial year
Paul Fineman, CEO, commented:
"In what has been a uniquely challenging year, I am very pleased
with what the Group has achieved. We have continued to deliver for
our customers, not only on time and in full, but also with agility
and whilst providing new, innovative products. We have prioritised
the health of our teams whilst also continuing to progress our
strategic initiatives. We have made great strides integrating CSS
into the business and unlocking the synergies. And lastly, we have
delivered a financial performance in line with expectations for our
shareholders.
Over several years, Design Group has become known as an
ambitious growth company, and in order to maintain this reputation
we must continue to set ourselves higher goals; this is why I am
delighted to be announcing today our Growth Plan, which includes
delivering revenue over $1.5 billion and doubling our Adjusted
EBITDA.
Much of this growth is set to come from M&A activity, which
we have never been better positioned for as the key industry
consolidator. Our management team has built a strong track record
of successful acquisition and integration, and our scale and market
position represent a compelling offering for businesses within our
industry. We are also now in a strong financial position with zero
average leverage. Numerous organic initiatives are also well
underway that will help us reach our targets, including the
acceleration of our e-commerce offering, reinvigoration of our
Craft brands and products, and the expansion of our sustainable
ranges.
Whilst there remain challenges ahead, many of them the ongoing
impact of Covid-19, the hard work and creativity of our teams gives
us great confidence in the future."
A video overview of the results from the CEO, Paul Fineman, and
CFO, Giles Willits, is available to watch here:
https://bit.ly/IGR_FY21_overview
For further information:
IG Design Group plc 01525 887310
Paul Fineman, Chief Executive
Officer
Giles Willits, Chief Financial
Officer
Canaccord Genuity Limited 020 7523 8000
Bobbie Hilliam, NOMAD
Alex Aylen, Sales
Alma PR
Susie Hudson 020 3405 0205
Sam Modlin designgroup@almapr.co.uk
OVERVIEW
As was the case with many businesses, 2021 has been a
challenging year for the Group, but we have successfully adapted
our working practices and our short term priorities to accommodate
for the impact of Covid-19. In addition, despite the pandemic, the
Group has continued to make progress in relation to developing new
strategic targets while focusing on our growth drivers including
new product and channel development, our sustainability agenda and
the integration of the transformational acquisition of CSS.
The impact of Covid-19 at the beginning of the 2021 financial
year saw the Group initially focus on strengthening operationally
and financially for the volatile period ahead. Our initial priority
was to ensure that our teams were operating in safe environments
across the world while working closely with our trading partners to
maintain the supply of product to our customers. Throughout the
financial year, most of our office-based teams have worked
remotely, while our operational teams in manufacturing and
warehousing successfully maintained operations - following a short
period of initial closure - despite more restricted working
practices.
Financially we have delivered in line with our upgraded
expectations with strong revenue growth, up 40%, driven by the
addition of CSS to the Group. This has in turn driven good growth
in our Adjusted and reported profits. In addition, we have
strengthened our balance sheet, having successfully navigated our
peak working capital period, finishing the year with $76.5 million
net cash balance and zero average leverage which leaves us well
positioned to pursue further growth opportunities.
We have continued to move forward and during the year have reset
our strategic ambitions to double the size of the group. Key
strategic achievements in the year have included working with our
customers to develop new brands and new sustainable product ranges,
the completion of our common printing platform across UK, EU and US
which leverages our scale, reaching over one billion of units of
product outsourced and enhancing our existing e-commerce platform
for the anticipated growth in this channel. Front of mind has been
our focus on the sustainability agenda and 2021 saw the launch of
our new People, Product, Planet framework which marks the next
stage in our Environmental Social and corporate Governance
journey.
2021 has also demonstrated the resilience and strength of our
teams around the world. Our teams' commitment and ability to
deliver in the most challenging of circumstances has helped ensure
the Group ends the financial year safer and stronger, and the Board
extends its gratitude to every individual at Design Group for their
positive attitude during the past 12 months. The Group would also
like to sincerely thank John Charlton, our Chairman, who retires in
September 2021, for all his support and commitment over his tenure
and the legacy he leaves behind. We wish John well in his future
endeavors and will announce his successor in due course.
OUTLOOK
Looking ahead, whilst the Group continues to remain cautious
about the ongoing effect of Covid-19 and its associated impact on
raw material and freight pricing, we are extremely encouraged by
the resilience of our diverse customer base and our broad product
portfolio, with our orderbook for the 2022 financial year already
over 60% of our 2022 forecast. Assuming the current progress is
maintained in the 'reopening' of regional economies in which our
businesses operate, the Board expects to deliver significant
year-on-year growth in both revenues and earnings in the 2022
financial year, in line with current management expectations.
SUMMARY 2021 FINANCIAL RESULTS
This year the Group has changed its reporting currency following
the CSS acquisition, with results now reported in US dollars
(formerly pound sterling). Revenue increased by 40% to $873.2
million (2020: $624.3 million) reflecting the full year effect from
the CSS acquisition which was completed in March 2020.
Like-for-like revenues of the Group (excluding CSS) for the
financial year were down 5%, with proforma CSS revenues
year-on-year down 1%, reflecting the impact of Covid-19. The lower
like-for-like sales volumes and the associated change in customer
and product mix, alongside reduced overhead absorption into
inventory, reduced Adjusted gross margins, while the impact of
operational deleverage further reduced Adjusted operating margins
to 4.8% (2020: 6.6%). As a result, Adjusted profit before tax was
up only 4.4% year-on-year to $37.0 million (2020: $35.4
million).
Adjusted earnings per share reduced to 25.9 cents (2020: 32.7
cents), primarily reflecting the increase in the number of shares
in issue following the equity raise relating to the CSS acquisition
in the final quarter of the 2020 financial year.
The Group finished the year with a net cash balance of $76.5
million (2020: $52.4 million) with Average leverage for the year at
0.0 times (2020: 0.9 times) reflecting the effective focus on cash
management during the year especially during the businesses' peak
working capital period. Furthermore, the Group was pleased in May
2021 to extend the existing banking facilities for a further 12
months to June 2023.
Adjusting items in 2021, which primarily related to the
integration and restructuring costs associated with the CSS
acquisition, were $14.0 million lower than the prior year at $22.3
million (2020: $36.3 million). The Group has separately identified
incremental costs of $1.5 million directly associated with Covid-19
and have included these in Adjusting items. During the year the
business has incurred other inefficiencies and expenditure because
of the pandemic and these costs are partially offset by government
assistance received of $3.6 million (primarily in Australia) both
of which are included in Adjusted profit.
The Group finished the year with a profit before tax up $15.6
million year-on-year at $14.7 million (2020: loss of $0.9 million)
but despite this increase diluted earnings per share were down at
8.4 cents (2020: 19.8 cents) reflecting the impact of the one-time
CSS tax benefit in the 2020 financial year alongside the increased
number of shares in issue in 2021 following the CSS equity raise in
2020.
The Board is pleased to recommend a final dividend of 5.75 pence
reflecting the strong financial position of the Group. This
delivers a full year dividend of 8.75 pence in line with the prior
year.
OUR STRATEGY
The success of the Group over recent years has been possible due
to our focus on the three drivers that underpin our strategy;
working with the winners, design & innovation and efficiency
& scale, which together support our ability to deliver our
commitments to shareholders being:
-- double-digit growth in Adjusted earnings per share on a 3 year CAGR basis
-- maintaining Average leverage below 2.0 times
-- targeting dividend cover of 2.5 times Adjusted earnings per share
Despite the impact of Covid-19 the Group has continued to
deliver progress in relation to two of our shareholder commitments
with average leverage reducing to 0.0 times and the Group
maintaining its strong dividend record. However, the impact of the
pandemic on earnings and the increase in the number of shares in
issue following the CSS acquisition did result in a reduced
year-on-year earnings per share performance.
The Board continues to believe in the importance of our
commitments to shareholders and will continue to measure against
these priorities. In addition, the Board is pleased to announce the
Group's new Growth Plan targets.
Growth Plan
The Group is targeting to double EBITDA (on a post IFRS 16
basis) to over $150 million (2021: $77.5 million) through a mix of
strong organic growth and M&A activity. We are focused on
driving revenues beyond $1.5 billion (2021: $873.2 million) through
c.30% organic growth, with the balance from M&A. We also aim to
drive Adjusted EBITDA margins up through a focus on margin mix,
efficiency and improved sourcing. To achieve these goals we will
retain the same focus on our three strategic pillars as
follows:
Working with the winners
We are focused on increasing our revenue and profitability
through growth in both existing and new channels and markets by
ensuring we maintain excellent and omni-channel relationships with
our key customers, as well as developing relationships with new
customers. We want to be part of our customers' success stories. As
the retail market evolves and progresses, we will continue to work
closely with our key customers with the aim of being their partner
of choice going forward. Our top 20 customers now account for 67%
of our global revenues (2020: 61%).
In order to do this, we need to have the capability to
manufacture and/or source a broad range of products, leveraging
improved sourcing processes as our business grows. Many of our
customers have global ambitions working across multiple territories
and channels. As such, our geographic and channel diversity in key
markets is essential to help support our customers as they grow.
Our teams are experts in their local territories and categories and
we work hard to ensure that we know what works well for our
customers in each of these markets.
To continue our growth trajectory with our customers, we follow
key market trends including the increase in consumer demand from
mainstream mass and discount retailers, as well as specialist
retailers in specific categories. In addition, technological
development is a key part of this strategy and this extends to
adapting to changes in consumer habits and being dynamic in
providing new channels to purchase our products, and specifically
e-commerce opportunities.
The CSS acquisition has resulted in a strengthening of our
relationship with our largest customer, and the largest retailer in
the world Walmart, which now accounts for approximately 24% (2020:
22%) of the Group's revenue. We were proud to once again be awarded
with Walmart's 'Supplier of the Year' for seasonal products,
reflecting the cross-discipline achievements, innovation and
standards delivered by our team despite the additional challenges
presented by Covid-19.
Our key strategic initiatives to support our growth ambitions
within this pillar are:
- Further growing revenues with our top retail partners as their
'one-stop' partner for all things celebration, gift and craft
- Extending our footprint across new regions and channels
- Focusing on generating significant growth through e-commerce opportunities
Design & innovation
Our customers look to us to be at the forefront of product
design and innovation. This means we aim to develop innovative and
quality products, while maintaining a focus on value and appealing
designs.
The Group has succeeded in growing revenues through developing
new and adjacent category products as well as increasing revenues
in existing product areas. The addition of CSS product categories
has strengthened the Group's ability to offer a complete portfolio
of products to customers including ranges not previously forming
part of the Group's portfolio such as Craft. We aim to continue to
diversify our product range by focusing on Everyday related
occasions and Minor Seasons.
Coupled with innovation in product design, we have also
increased our focus on developing more sustainable products and
improved sourcing, manufacturing and distribution to reduce our
global carbon footprint in line with our newly launched
sustainability framework, detailed below. We believe this focus is
not only the right strategy to help protect the environment but can
also be a source of competitive advantage. Recent successes include
the launch with the UK's largest retailer of our Eco Nature(TM)
brand in the UK. We wish to ensure that we can be regarded by our
customers as leaders in bringing improved sustainable product
solutions to all product categories in the Group's portfolio.
Brands are increasingly an important differentiator both for
existing customers but also as we look to grow our revenues online.
As such we are increasing our focus on developing both existing and
new brands across multiple categories. We have recently launched
our new NIQUEA.D cards brand in the US and are actively engaged in
refreshing our key Craft brands in 2022.
Our key strategic initiatives to support our growth ambitions
within this pillar are:
- Extending our offering in existing and adjacent categories
including Home Accessories, Gift, Party, Cards, Craft &
creative play and Toys
- Refreshing and re-energising our Craft brands and product ranges
- Developing brands to support growth both with retail customers and online
- Investing in our development of new sustainable product ranges
Efficiency & scale
As we grow we remain intent on driving up operating margins
through investment in processes and people as well as bringing in
new product categories and unlocking synergies through acquisition,
using our global reach and capabilities to leverage Group economies
of scale.
We continue to see opportunities to invest in technology and
manufacturing to further improve the competitive advantage we have
already developed across our manufacturing facilities. However,
where we see external sourcing opportunities being advantageous we
will not hesitate to focus our efforts on building on our existing
supplier relationships as well as further developing our
network.
M&A is a significant driver for our growth plans and we
focus our acquisition activities on targeting companies that sit
within the broad categories of Celebration, Craft & creative
play and Gifting which will fit well alongside our existing product
ranges and offer the opportunity to deliver to our customers the
benefits of being part of the Design Group family of businesses.
The Group is now the key industry consolidator, with a track record
of successful acquisitions and integration, as well as a strong
management team providing appropriate bandwidth in this area. We
focus on companies of scale that have leading market positions in
product categories that we believe it will be difficult for us to
grow into organically and can demonstrate strong management with
the potential upside of synergies. We also look to acquire brands
that can strengthen our product offering with customers or help
differentiate our online proposition with consumers. We also
recognise that businesses with established e-commerce activities
could accelerate our online growth ambitions.
Our key strategic initiatives to support our growth ambitions
within this pillar are:
- Acquiring companies or brands in adjacent categories or channels, unlocking synergies
- Ensuring we have the right people and teams to fully benefit
from the opportunities ahead of us
- Investing in capital projects that improve manufacturing efficiencies
- Optimising SKU numbers to maximise profitability by category
- Leveraging scale for improved sourcing
SUSTAINABILITY
As a Group with an ever-expanding reach, 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 take seriously these
responsibilities and strive for the highest standards of ethical
behaviour to protect and support our employees, our communities,
and our planet. We believe that every one of us has a shared
responsibility to protect and preserve our planet and its
environment, for this and future generations.
During the year we have developed a framework to help shape the
Group's approach to sustainability, to help us manage the risks and
challenges faced as well as seize the expected opportunities.
Design Group's sustainability framework, 'helping design a better
future', will work alongside our strategy of working with the
winners, design & innovation and efficiency & scale. The
framework will also enable us to demonstrate, monitor and improve
our performance to drive our business forward sustainably. It is
underpinned by the United Nations Sustainable Development Goals
(SDGs) and has identified three key themes: people, product and
planet.
People - The many talented individuals and teams within Design
Group make us the successful business we are today. We understand
the value and importance of creating an open, comfortable, fair and
progressive working environment and to continue to invest in the
people who give us so much. The communities where our Group
businesses are based, and where many of our team members call home,
are important to us. We aim to give back in all of the communities
where Design Group is present, continuously taking actions and
promoting initiatives to leave a positive impact.
Notable achievements in 2021 include the continued success of
our 'Design Group Academy' which runs in Europe and the UK promotes
and encourages development of all their employees. Similarly in the
US we run a tuition reimbursement programme helping our employees
bolster their qualifications. Charitable donations around the Group
this year have continued in the form of both monetary donations as
well as products, including our US ribbons company continuing to
donate ribbons to hospitals, homeless shelters, business, charities
and individuals to make face coverings to protect against
Covid-19.
Product - We recognise that the nature of many of our products
make it even more important that we leverage our innovation to
create sustainable collections to promote to our customers and
beyond. As the world develops, populations are consuming more which
becomes an issue when a large proportion of goods are not only
single-use but also not recycled. This leads to more waste going to
landfill and being burned, contributing to global warming and
contamination of our oceans. Design Group are committed to promote
positive change; to use sustainable sources, to design sustainable
ranges and reduce the use of single-use plastics across both our
products and their packaging.
Notable achievements in 2021 include plastic-free gift wrap
packaging being rolled out to key customers in the UK, as well as
the Group working with leading retailers of the world, such as
Walmart, to reduce plastic packaging on our products in the US. The
Group is accredited by the Forest Stewardship Council ('FSC') who
ensure our timber and timber products are legally harvested and
sourced, and wherever possible, certified or recycled material is
purchased. We are also making strides in transitioning to the sole
use of FSC paper in our products.
Planet - We believe we have a responsibility to protect and
preserve our planet and its environment and that our success as a
company significantly depends on it. The global climate change
threat is a result of many years of unsustainable activity by the
world's growing population. We have the ambition to reduce our
impact on our surroundings to promote the longevity of the planet
for future generations. This will be a journey for the Group as we
learn of new methods to improve our operations resulting in
reduction of greenhouse gas emissions as well as less waste sent to
landfills.
Notable achievements in 2021 include the installation of our new
printing press installed late last year in the US, which will save
over 32,000 metric tonnes of CO(2) emissions over the next ten
years. Our emissions in the UK are also 16% lower compared to 2020.
The shift in our manufacturing sites to LED lighting, along with
high-speed doors to segregate different parts of the factories and
improve temperature regulation are ongoing across all of our active
sites in the Group.
Over the next 12 months we will be working to refine the
sustainability framework and finalise the specific KPI's that we
will hold ourselves accountable to in the future. More details can
be found in the 2021 Annual Report.
REGIONAL HIGHLIGHTS
Overall, the Group has seen growth in both revenue and Adjusted
operating profit, which increased to $42.0 million (2020: $40.9
million) primarily because of the addition of CSS to the Group. The
Group results are now presented as two reporting segments - DG
Americas (including overseas operations for the DG Americas Group)
and DG International (comprising UK and associated Asian
operations, Europe and Australia) as follows;
Segmental Revenue Adjusted Operating Adjusted
Profit Operating
Margin
% Group %
revenue 2021 2020 growth 2021 2020 % growth 2021 2020
=====
% %
71% DG Americas $m 614.0 355.9 73% 21.0 20.1 5% 3.4% 5.6%
=====
30% DG International $m 265.3 275.5 (4%) 25.8 24.9 4% 9.7% 9.0%
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Elims
/ Central
(1%) costs $m (6.1) (7.1) (4.8) (4.1)
====== ======
100% Total $m 873.2 624.3 40% 42.0 40.9 3% 4.8% 6.6%
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Design Group Americas
The scale of our business in the US has been transformed with
the acquisition of CSS, and the Americas business now accounts for
over 70% of the Group's total revenues. Revenue has grown 73%
year-on-year to $614.0 million (2020: $355.9 million), driven by
the additional sales from CSS at $299.6 million (2020: $19.9
million). Like-for-like revenues, excluding CSS, fell 6.4%
reflecting the impact of Covid-19 in the year. Proforma CSS
revenues were 1% down year-on-year. Despite the revenue increase,
the impact of Covid-19 resulted in Adjusted operating profit at
$21.0 million marginally ahead of the prior year (2020: $20.1
million) and included a full year effect of CSS and the benefit of
CSS synergies. Due to the nature of the CSS integration in the US
it is not possible to accurately provide a like-for-like comparison
year-on-year for profit performance split between the two
businesses.
The newly integrated team in the US has focused on the following
key areas during 2021:
Managing the business through Covid-19 - The pandemic
significantly impacted the US business resulting in a decline in
like-for-like sales volumes alongside a change in the mix of sales
between customers and product categories and operational deleverage
including reduced absorption of overheads into inventory. All of
which drove a decline in Adjusted operating margin from 5.6% in
2020 to 3.4% in 2021. During the financial year Covid-19 had an
impact on our manufacturing and distribution facilities which were
closed for periods of time in the year impacting production
efficiencies and overhead absorption rates, whilst many of our
office-based teams including the sales and design teams, have
remained working from home for the entire year. The focus during
this time remained on maximising commercial opportunities and on
the delivery of customer orders on time and in full which was
recognised once again by Walmart awarding the US team 'Supplier of
the Year' in January 2021. The US business benefitted during the
year from the increased demand for Craft & creative play
products as consumers stayed home, in particular our own brands
such as Perler and Anker Play Products Kids Create which saw
significantly increased volumes. However, this only partially
offset the impact of both reduced order frequencies from those
retailers who remained shut during lockdown and lower order
quantities from some customers for seasonal product categories. One
positive upside during this difficult trading period, particularly
during the Christmas season, is that retailers experienced higher
than normal sell through levels which provides a positive tailwind
in relation to the orderbook for the 2021 Christmas period.
Operationally, the US business has seen its first full year of
the state-of-the-art printing press in Memphis, and despite the
challenges presented by Covid-19 and the lower than expected
volumes, over 300 million more linear feet of wrap was printed
in-house year-on-year. The US team also expanded operations to a
new site in Byhalia, Tennessee which enlarges the Americas group's
converting and distribution capacity and is set to deliver further
efficiencies in the future.
The US Government Covid-19 Coronavirus Aid, Relief and Economic
Security (' CARES') Act provided support to our workforce via
direct payments to individuals as opposed to employees via the
employer. As such, no government assistance relating to job
retention has been received by the US business. Furthermore, an
unintended consequence of the direct to individual assistance meant
that additional costs have been incurred by the Group to encourage
some members of our teams back into work rather than remaining at
home receiving the government CARES package. This, alongside
incremental cleaning costs and personal protection equipment
expenditure, has added significant incremental cost to the running
of our business this year and $1.4 million of these costs have been
treated as Adjusting items in the year.
The Group has benefitted from the US Government's Covid-19
support package following the extension to the time period in which
operating losses could be carried back for tax purposes, generating
a substantial tax refund that the Group recognised at the end of
the 2020 financial year totalling $17.3 million. The majority of
this ($16.5 million), plus associated interest of $0.2 million, has
been received during the 2021 year generating a one-time cash
inflow, which helped substantially offset the CSS integration cash
costs in the year.
Despite the general improvement in trading conditions as the
Covid-19 vaccine programme rolls out across the US, our Americas
business continues to experience challenging trading conditions as
a result of some of the associated impacts from Covid-19 on raw
material costs and freight charges. Although these headwinds only
had a limited impact on 2021 it is expected that the 2022 financial
year will be more challenging from a cost inflation perspective
than initially expected although the business is focused on
mitigating these pressures through a mix of product engineering,
renegotiation and in certain situations, price increases.
Integrating CSS and realising synergy opportunities -
Immediately following the acquisition of CSS in March 2020, a new
unified management structure was announced which created a new
senior leadership team comprising of both CSS and Design Group
executives and also combined all the functional teams across the US
group. Alongside these changes an Americas Executive Committee was
established which included Group executives who meet regularly with
the senior US team to review progress. These changes facilitated
the rapid implementation of the CSS integration plan, helping
accelerate the delivery of synergies following the acquisition.
The first year of the integration plan has to date unlocked
c.$10 million of cost savings and synergies from the acquisition,
with more to achieve over the next 3 years. Specifically, savings
have included workforce rationalisation, cost savings associated
with no longer running CSS as a US listed business and the savings
from physical integration of the two businesses which included
consolidating our Midway facility into our Shorewood distribution
centre, the closure of excess office sites in the US in Nashville,
Budd Lake and Plymouth Meeting and the reduction in the number of
Hong Kong sourcing offices. Further savings are due to be delivered
in 2022 including additional site rationalisation and in 2023 with
cross selling opportunities.
Developing new product categories and expanding into e-commerce
channels - During the year significant progress has been made in
design and innovation including the launch of our new card brand,
NIQUEA.D, which targets the higher end of the card category,
further expansion of our Impulse seasonal events and home
accessories offering and the continued success of our creative play
brand Anker Play Products. In addition, in the coming year, the
business will see the relaunch of its e-commerce activities and a
refresh to our approach to selling craft products and sewing
patterns. All these initiatives, alongside the more general
economic recovery following the pandemic give us confidence that
the Americas business is well set to deliver good revenue growth in
2022 and beyond.
Dealing with the IT incident - As previously communicated, in
October 2020 the US business suffered from an IT security incident
impacting operations and in particular the distribution centres
that deal with daily replenishment of orders to customers. The
business was impacted for a number of weeks which resulted in lost
sales and costs associated with remediation. These remediation
costs have been treated as an Adjusting item and it is anticipated
that these costs and the lost profits associated with the incident
are expected to be recovered via insurance claims to be made during
2022. Since the incident the Group has further enhanced its IT
security controls and procedures, including the installation of
upgraded market leading cyber security software.
Looking ahead, despite some cost headwinds expected, the
business is well positioned to benefit from new trading
opportunities and further efficiencies and synergies that together
we expect will deliver a significant year-on-year revenue and
profit uplift in the 2022 financial year.
Design Group International
During 2021 we restructured the business to create a new
International division, led by the newly created executive position
of CEO International. This combination of our UK, European and
Australian businesses under one umbrella will allow the Group to
benefit from an integrated management and operational structure,
leveraging on each territory's strengths and skills and positions
the Group for future growth across this segment.
Revenues for the International business were down 4% on the
prior year at $265.3 million (2020: $275.5 million) due to the
impact of Covid-19. However, despite lower sales volumes which
reduced cash margins, and resulted in lower overhead absorption
into inventory and operational deleverage, alongside Covid-19
related manufacturing inefficiencies, Adjusted operating profit at
$25.8 million was up 4% (2020: $24.9 million) as a result of the
positive impact of favourable product mix and a focus on managing
overhead costs down.
The impact of Covid-19 has varied across the territories within
DG International, however, the common factor from lower sales was
reduced production volumes within our manufacturing sites. In
particular, this has resulted in lower margins as a result of the
associated inefficiencies resulting from Covid-19. In order to
ensure we have met customer orders on time and in full,
manufacturing has continued throughout the year aside from the
short periods when shut downs were required due to government
mandated lockdowns or Covid-19 outbreaks. In order to keep
manufacturing sites open, we have had to make significant changes
to the way in which we operate in order to ensure we comply with
regulations and maintain employee safety on site. This has included
shorter shifts to allow time for a full and thorough sanitising of
our machinery and sites, as well as ensuring there is no cross over
between shifts while each shift maintains a Covid-19 'bubble'. Of
these additional costs and inefficiencies only the incremental
health and safety related costs amounting to $0.1 million have been
treated as Adjusting items during the year. Furthermore, the change
in shift patterns resulted in sites having to catch-up production
which incurred incremental labour costs reducing Adjusted margins
despite the benefit of government assistance payments. The
International group reacted quickly to the pandemic and the
resultant impact on the business and during the early part of the
financial year delivered a workforce rationalisation, the costs of
which have been treated as Adjusting items.
Around the DG International group, the UK was the most
significantly impacted by Covid-19 with revenue down 14%,
reflecting the relatively higher seasonal sales mix of the
business, resulting in lower operating profit year-on-year as a
result of the knock on impact on margin performance. Despite this,
the business delivered a strong service performance to customers
who subsequently experienced excellent sell-through over the
Christmas period. We have also grown our sustainable product ranges
further with a focus on the Eco-Nature(TM) brand as well as the
Kids Create 'recycle and create' arts and crafts ranges which will
help support growth in the 2022 financial year. Australia, which of
all our regions was the least impacted by Covid-19, delivered a
robust trading performance with sales flat year-on-year and
improved margins. This success has been supported by the release of
new product ranges including scented candles and diamond art, as
well as strong sales of partyware items, demonstrating our ability
to respond quickly to our customers' needs during the pandemic.
Europe has had another solid year with revenue broadly flat and
operating profit marginally up despite the challenges of Covid-19
and many of our retail partners having been closed for periods of
time during the year. This reflects both the growth of our winning
retail partners but also the benefits of our investment in
'Robowrap' which despite the impact of lower volumes delivered
improved productivity across the entire end-to-end giftwrap
manufacturing process.
Parts of the DG International group have received government
assistance where available to mitigate as much as possible the need
to reduce the workforce across the Group. In total the
International division received $3.6 million of government
assistance in the period (the majority of which was in our
Australia business) which has helped offset the additional costs
and lost profit across the whole Group).
OUR PRODUCTS, BRANDS AND CHANNELS
This year has seen the Group deliver good progress in
diversifying our product portfolio, further enhancing our position
as a 'Supplier of choice' for our retail partners.
Revenue by product 2021 2020
category
==================== -------------- --------------
Celebrations 60% $521.6m 75% $469.3m
==================== ==== ======== ==== ========
Craft & creative
play 18% $155.3m 7% $37.9m
==================== ==== ======== ==== ========
Stationery 4% $34.6m 4% $26.9m
==================== ==== ======== ==== ========
Gifting 12% $104.8m 11% $69.4m
==================== ==== ======== ==== ========
'Not-for-resale'
consumables 6% $56.9m 3% $20.8m
==================== ==== ======== ==== ========
Total $873.2m $624.3m
==================== ==== ======== ==== ========
The acquisition of CSS significantly increased our sales in
Craft & creative play which was further heightened by the
pandemic as consumers moved to buying craft related product during
the various lockdowns around the world. In particular, the closure
of schools over the past year has meant households have turned to
products that will entertain families whilst at home, and crafting
and creative play has featured heavily in their buying decisions.
In addition, as many families have been spending more time in their
homes, the sale of Home Accessories which sits as part of our
Gifting category has also increased year-on-year.
However, although overall Celebrations sales have increased
year-on-year reflecting the acquisition of CSS, on a like-for-like
basis they declined 11% due to the impact of Covid-19 on group
celebration events throughout the year and in particular lower
seasonal orders from retailers in relation to Christmas 2020. This
trend was also seen in the 'Not-for-resale' consumables category
where, despite the addition of CSS which increased total revenues
in the category year-on-year, the like-for-like result was
negatively impacted as retail and wholesale customers remained
closed for long periods during the year resulting in lower
year-on-year orders.
Revenue by customer 2021 2020
channel
===================== -------------- --------------
Value & Mass 56% $492.0m 64% $398.6m
===================== ==== ======== ==== ========
Grocer 9% $82.0m 13% $81.1m
===================== ==== ======== ==== ========
Craft 11% $94.6m 2% $13.5m
===================== ==== ======== ==== ========
Online 3% $22.6m 1% $5.6m
===================== ==== ======== ==== ========
Other 21% $182.0m 20% $125.5m
===================== ==== ======== ==== ========
Total $873.2m $624.3m
===================== ==== ======== ==== ========
The CSS acquisition has not only broadened the product
categories we sell but also the retailer channels we sell into,
enhancing our Craft and Online channels. We have also strengthened
our relationship with some of our biggest customers, including
Walmart who now account for 24% of revenues. Overall, our top 20
customers now account for 67% of the Group's sales compared to 61%
in 2020.
Revenue by season 2021 2020
=================== -------------- --------------
Christmas 43% $375.4m 56% $348.1m
=================== ==== ======== ==== ========
Minor seasons 7% $59.7m 5% $32.4m
=================== ==== ======== ==== ========
Everyday 50% $438.1m 39% $243.8m
=================== ==== ======== ==== ========
Total $873.2m $624.3m
=================== ==== ======== ==== ========
The Group has significantly changed the mix of its sales since
the CSS acquisition which has a profile much more balanced toward
Everyday. As a result, the Group's earnings and working capital
requirements are a lot less focused on the Christmas season.
Revenue by type 2021 2020
======================= -------------- --------------
Manufactured in-house 33% $291.3m 35% $222.1m
======================= ==== ======== ==== ========
Sourced 67% $581.9m 65% $402.2m
======================= ==== ======== ==== ========
Total $873.2m $624.3m
======================= ==== ======== ==== ========
Despite CSS having higher levels of sales generated from
manufacturing compared to the Group before the acquisition, the
overall percentage mix of revenues in 2021 from manufacturing have
not significantly changed year-on-year. This is the result of
Covid-19 impacting those categories in which the Group
manufactures, particularly seasonal Christmas product such as gift
wrap. Year-on-year like-for-like revenues excluding CSS were in
total 5% down but sales from products that were manufactured by the
Group were 15% lower compared to revenues from products that we
sourced being broadly flat. The higher decline in manufacturing
volumes, as explained above, has a disproportionate impact on
margin through lower absorption of costs into inventory and also
operational deleverage.
Revenue by brand 2021 2020
------------------------ -------------- --------------
Licensed 12% $104.8m 9% $55.6m
======================== ==== ======== ==== ========
Customer own brand
/ bespoke 48% $418.1m 64% $400.0m
======================== ==== ======== ==== ========
Design Group / Generic
brand 40% $350.3m 27% $168.7m
======================== ==== ======== ==== ========
Total $873.2m $624.3m
======================== ==== ======== ==== ========
A review of revenues by brand type highlights a positive shift
for the Group which has been supported not only by the CSS
acquisition, which has more generic brand products but also by the
focus of our teams on developing new and expanding existing generic
brands within the Group. Overall, this focus has seen generic brand
products increase to 40% of Group revenues, with licensed product
sales increasing to 12%.
DETAILED FINANCIAL REVIEW
The Group's results are presented in US dollars for the full
year following the acquisition of CSS and the resulting increased
concentration of the Group revenues and earnings in US dollars.
Prior year comparatives throughout the financial statements have
been presented in US dollars. Note 30 in the financial statements
contains the relevant comparatives for the financial year 2020 in
both US dollar and pound sterling denomination.
2021 2020
Reported Adjusting Adjusted Reported Adjusting Adjusted
Items Items
$m $m $m $m $m $m
Revenue 873.2 - 873.2 624.3 - 624.3
Gross profit 153.8 (1.0) 152.8 94.2 19.9 114.1
Overheads (133.9) 23.1 (110.8) (89.6) 16.4 (73.2)
--------- ---------- --------- --------- ---------- ---------
Operating profit 19.9 22.1 42.0 4.6 36.3 40.9
Finance charges (5.2) 0.2 (5.0) (5.5) - (5.5)
--------- ---------- --------- --------- ---------- ---------
Profit before tax 14.7 22.3 37.0 (0.9) 36.3 35.4
Tax (4.3) (5.1) (9.4) 18.3 (25.4) (7.1)
--------- ---------- ---------
Profit after tax 10.4 17.2 27.6 17.4 10.9 28.3
------------------- --------- ---------- --------- --------- ---------- ---------
Revenue for the year ended 31 March 2021 grew 40% to $873.2
million (2020: $624.3 million) driven primarily by the full year
effect of CSS sales following its acquisition on 3 March 2020.
Like-for-like revenues (excluding CSS) declined 5% reflecting the
impact of Covid-19 on the Group during the 2021 financial year.
Proforma CSS revenues were down just 1% year-on-year. Constant
currency Group revenues grew 38% primarily reflecting the stronger
pound sterling compared to the prior year. Adjusted operating
profit increased by 3% to $42.0 million (2020: $40.9 million)
reflecting the full year impact of CSS, however, Adjusted gross
margin declined to 17.5% (2020: 18.3%) largely as a result of the
impact of Covid-19 on customer and product mix alongside lower
overhead absorption into inventory. Adjusted overheads as a
percentage of revenue increased to 12.7% (2020: 11.7%) representing
the impact of Covid-19 related operational deleverage across the
Group despite the success of delivering synergy related cost
savings from the CSS integration which resulted in lower absolute
proforma overheads year-on-year. As a result, Adjusted operating
margin at 4.8% (2020: 6.6%) was down year-on-year. Overall Adjusted
profit before tax was up 4.4% at $37.0 million (2020: $35.4
million) despite the impact of Covid-19. On a constant currency
basis Adjusted profit before tax was $0.4m up at like -- for --
like exchange rates.
The Group finished the year with profit before tax of $14.7
million (2020: loss of $0.9 million) reflecting the increase in
Adjusted profit before tax and the significant reduction in
Adjusting items year-on-year which at $22.3 million were $14.0
million lower than the prior year. Further details of the Adjusting
items are detailed below.
Adjusted profit after tax was $27.6 million (2020: $28.3
million) with profit after tax for the year at $10.4 million (2020:
$17.4 million).
Finance expenses
Finance costs were marginally lower than the prior year at $5.2
million (2020: $5.5 million) including a $1.6 million increase in
IFRS 16 related lease liability interest following the CSS
acquisition from $2.1 million to $3.7 million. Excluding IFRS 16
lease liability interest the underlying finance costs were down
$1.9 million to $1.5 million (2020: $3.4 million) reflecting the
successful reduction in debt throughout the year. Adjusted interest
cover after stripping out IFRS 16 charges was 25.0 times in 2021
compared to 11.9 times in the prior year reflecting the reduced
finance charges. Interest income relating to the US tax refunds has
been treated as income in Adjusting items.
Adjusting items
Adjusting items are material items of 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 2021 are $14.0
million lower than the prior year at $22.3 million (2020: $36.3
million). The significant movements relate to the increased costs
associated with the CSS integration and restructuring and the IT
incident in the US, offset by the release of surplus Covid-19
related impairments taken in the prior year and no adjustment for
tariff costs in the year. In addition, as a result of the impact of
Covid-19 on the Long Term Incentive Plan performance criteria there
was a significantly lower share-based payment charge in the prior
year. Details of all Adjusting items are included below:
Adjusting Items 2021 2020
------------------------------------------------- -------- --------
Losses/(gains) and transaction costs relating
to acquisitions and disposals of businesses $0.3m $4.1m
================================================= ======== ========
Acquisition integration and restructuring costs $15.4m $12.1m
================================================= ======== ========
(Reversal of impairment)/impairment of assets ($5.8m) $11.8m
================================================= ======== ========
Incremental Covid-19 costs $1.5m $0.6m
================================================= ======== ========
IT security incident costs $2.2m -
================================================= ======== ========
US tariffs - $4.4m
================================================= ======== ========
Amortisation of acquired intangibles $4.5m $3.6m
================================================= ======== ========
Share-based payment charge/(credit) $4.2m ($0.3m)
================================================= ======== ========
Total $22.3m $36.3m
================================================= ======== ========
Losses/(gains) and transaction costs relating to acquisitions
and disposals of businesses - $0.3 million (2020: $4.1 million)
In the year, a charge of $0.3 million relating primarily to
additional transaction costs associated with the disposal of
Zhejiang Shaoxing Royal Arts and Crafts Co. Ltd has been incurred
along with expenditure relating to other potential acquisitions
reviewed in the year.
Acquisition integration and restructuring costs - $15.4 million
(2020: $12.1 million)
In order to realise synergies from acquisitions, integration
projects are 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 the costs
associated with projects of this nature are included as Adjusting
items.
The main costs in the year relate to the integration of CSS into
the enlarged DG Americas business. These include integration
consultancy expenditure, severance and temporary labour costs, as
the newly integrated team structures following the acquisition have
been established, and the impact of the impairment of the lease
assets and costs associated with the closure of excess sites. On
acquisition the CSS business had a large portfolio of owned and
leased sites, and as part of the integration sites in Nashville,
Tennessee; Midway, Georgia; Budd Lake, New Jersey and Hong Kong
have been closed. In addition, costs associated with the
consolidation of the Midway distribution operations into Shorewood
are included.
Furthermore, in the UK and Australia, as a result of Covid-19,
workforce restructuring costs were treated as Adjusting items.
(Reversal of impairment)/impairment of assets - $(5.8) million
(credit) (2020: $11.8 million)
In the prior year, in light of the unknown impact of Covid-19 on
the business at the time, a review of inventory and trade
receivables was undertaken resulting in impairment charges in
relation to inventories of $7.4 million and trade receivables of
$3.8 million. As at 31 March 2021, $2.4 million of the trade
receivables impairment has been reversed as it is no longer
required and following a review of sell-through rates in respect of
inventory $4.0 million was released. These releases are partially
offset by $0.6 million of additional Covid-19 related impairment
charges taken in the 2021 year.
Incremental Covid-19 costs - $1.5 million (2020: $0.6
million)
The Covid-19 outbreak developed rapidly in 2020 and continued
into the first calendar quarter of 2021, with measures taken around
the world to contain the virus affecting economic activity. The
Group has been affected in every territory in which we operate and
the impact on the general economic environment and the reduced
demand of goods from our customers as well as the closures of our
businesses has had a significant impact. Certain costs relating to
direct labour costs that were incremental, equal to $0.9 million
were included in Adjusting items. The most significant element of
these costs relate to additional 'hazard pay' labour costs across
our manufacturing facilities in the USA and Mexico in order to
ensure our employees have returned to work.
In addition, laws were passed in India and Mexico that meant no
workforce reductions were allowed during closed/lockdown periods
which meant higher employee costs were being incurred than
ordinarily would have in that situation. This resulted in the
business incurring direct incremental costs of labour whilst not
producing anything and incurring periods of significant downtime.
When employees returned to work post lockdown labour costs were
paid again once production started, effectively doubling the costs
to produce.
US tariffs - $nil (2020: $4.4 million)
There is no adjustment for US tariff costs in the year ended 31
March 2021. In the year ended 31 March 2020 there was an adjustment
of $4.4 million reflecting the rapid evolution of tariffs during
that year with no advance warning. The timing of the introduction
of tariffs meant a majority of our purchase orders had already been
agreed with customers and suppliers effectively creating a
situation where the US business was locked into commitments that
could not be renegotiated. This impact has not been repeated in the
financial year ended 31 March 2021 as the business was able to
better mitigate the effect of tariffs.
IT security incident costs - $2.2 million (2020: $nil)
The IT security incident which occurred in the Americas business
in October/November 2020 resulted in one-off costs specifically in
relation to crisis management, legal, forensic, and data recovery
costs including server/hardware repair and replacement. In
addition, there were IT overtime costs, customer penalties from
delayed shipments and expedited freight costs to avoid delays.
These costs have been treated as an Adjusting item in 2021. The
lost sales associated with the IT outage do not form part of the
Adjusting items, however, will form part of our claim under
insurance policies which is currently in preparation.
Amortisation of acquired intangibles - $4.5 million (2020: $3.6
million)
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer lists and
brands 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
an appropriately judged period. 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
Innovations Inc. ('Impact') and CSS in the USA and Biscay Pty
Greetings Ltd in Australia. As such we include these as Adjusting
items.
In addition, in accordance with IFRS 3, on acquisition,
businesses need to be fair valued, which can result in an uplift to
stock on hand relating to sales orders already attached to the
acquired stock. This uplift will distort the margins associated
with the stock, and typically unwinds quickly as stock is sold soon
after acquisition. The unwind of the stock uplift ($1.4 million)
associated with the CSS acquisition is included as an Adjusting
item, consistent with the treatment adopted with the Impact
acquisition. This fully unwound as at 30 September 2020.
Share-based payment charge/(credit) - $4.2 million (2020: ($0.3)
million credit)
As part of our senior management remuneration, the Group operate
a Long Term Incentive Plan ('LTIP'), including the newly created
Value Creation Scheme ('VCS'), in the form of options for ordinary
shares of the Group. In accordance with accounting principles,
despite this plan not being a cash cost to the business (except for
associated social security costs), a share -- based payment charge
or credit is taken to the income statement. We consider that these
charges do not form part of the underlying operational costs and
therefore include these as Adjusting items.
The share based payment charge for the period is $4.2 million
which consists of a principal IFRS 2 charge of $3.7 million and an
employer social security charge of $0.5 million. The principal
charge relates only to those schemes that have not yet vested but
are expected to achieve some or all of their vesting criteria. The
social security charge relates to both unvested options (but as per
the principal charge are expected to achieve their criteria) as
well as vested but not yet exercised options and is driven by the
share price.
The credit in the 2020 financial year of $0.3 million was driven
by the impact of Covid-19 on the performance criteria of the
2018-2021 and 2019-2022 LTIP schemes which resulted in no charge
for the 2019-2022 scheme and a reversal of the previous charge in
relation to the 2018-2021 scheme. Following the review of
performance criteria the full updated charge for the 2018-2021 LTIP
scheme has been taken in 2021, alongside the first charge for the
VCS, announced in January 2021. No charge has been taken in respect
of the 2019-2022 scheme during the year as the performance metrics
have not been met, however it is expected that a full charge in
relation to the 2019-2022 scheme will be taken in 2022 once the
Remuneration Committee has reviewed performance criteria.
Taxation
The Group aims to manage its tax affairs in an open and
transparent manner, including being fully compliant 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.
In the prior year, the Group had a tax credit (treated as an
adjusting item) of $17.3 million driven by the US CARES Act which
came into effect on 25 March 2020 which, as part of the stimulus
package, extended the time period for which Net Operating Losses
(NOLs) could be carried back against profits in US businesses. As
part of the acquisition of CSS, the Group inherited substantial
NOLs in CSS which were then able to be carried back against
historical profits.
During the year $16.5 million of the claim has been received
along with $0.2 million of interest from the Inland Revenue Service
in the USA. This has been treated as an Adjusting item cash inflow
and is netted off against the other Adjusting items cash outflows
within the cash flow summary statement below.
The effective tax rate on Adjusted profit before tax is 25.4%
(2020: 20.1%) largely as a result of the concentration of Adjusted
profits in the Americas attracting a c.24% tax rate at the Adjusted
profit level. It is noted that following the recent announcement in
relation to the US Covid-19 assistance package, US federal tax
rates are expected to increase from 21% to up to 28% potentially
from the end of this calendar year. This, if enacted, is expected
to increase the Group's effective tax rate in 2022. The effective
tax rate on reported profit before tax is 28.8% largely due to the
mix of profits in higher tax rate jurisdictions.
Excluding the NOL refund, overall tax paid was $3.8 million
lower than the prior year at $2.2 million (2020: $6.0 million)
resulting from tax refunds in Hong Kong and India from overpayments
in prior years as well as lower anticipated profits in the Group's
cash tax paying jurisdictions, in particular in Australia and
Europe, for which catch up payments will be made in the 2022
financial year.
Earnings per share
Adjusted earnings per share at 25.9 cents (2020: 32.7 cents) are
lower year-on-year driven by marginally lower Adjusted earnings
attributable to equity holders of the Company and as a result of
the full year effect of the increased number of shares in issue
following the equity raise in January 2020 to support the CSS
acquisition. Diluted earnings per share are 8.4 cents (2020: 19.8
cents) reflecting the benefit of the one-time NOL tax refund in the
prior year. The reconciliation between reported and Adjusted
earnings per share is shown below:
Earnings per share 2021 2020
=============================================== -------- ---------
Earnings attributable to equity holders
of the Company $8.2m $16.5m
=============================================== ======== =========
Adjustments
===============================================
Adjusting items (net of non-controlling
interest effect) $22.4m $36.0m
=============================================== =========
Tax charge/(relief) on adjustments (net
of non-controlling interest effect) ($5.2m) ($7.9m)
=============================================== ======== =========
Adjusting item - tax credit (US tax loss
carryback) - ($17.3m)
=============================================== ======== =========
Adjusted earnings $25.4m $27.3m
=============================================== ======== =========
Weighted average number of shares
===============================================
Basic weighted average number of shares
outstanding 97.7m 82.6m
=============================================== =========
Dilutive effect of employee share option
plans 0.4m 0.5m
=============================================== ======== =========
Diluted weighted average ordinary shares 98.1m 83.1m
=============================================== ======== =========
Earnings per share
===============================================
Basic earnings per share 8.4c 19.9c
=============================================== =========
Adjustment 17.6c 12.9c
=============================================== ======== =========
Basic adjusted earnings per share 26.0c 32.8c
=============================================== ======== =========
Diluted earnings per share 8.4c 19.8c
=============================================== ======== =========
Diluted adjusted earnings per share 25.9c 32.7c
=============================================== ======== =========
Dividend
The Board is recommending a final dividend of 5.75 pence
reflecting the strong year-end financial position and outlook of
the Group. This delivers a full year dividend of 8.75 pence in line
with the prior year (2020: 8.75 pence).
Return on capital employed
Improving the return on capital employed continues to be a key
target for each of the business units. Overall, the Group saw the
return on capital employed reduce year-on-year to 17.6% (2020:
20.3%) resulting from the impact of Covid-19 on the operating
profits of the Group in a year that also saw a higher level of
capital employed following the acquisition of CSS.
Cash flow and net cash
The Group ended the year with its net cash balance up $24.1
million to $76.5 million (2020: $52.4 million). The cash
improvement reflects the year-on-year growth in EBITDA alongside
reduced capital expenditure and a lower cash outflow year-on-year
in relation to Adjusting items. Cash conversion was 88.7% (2020:
91.1%) with Adjusted cash generated from operations of $68.7
million (2020: $54.2 million).
Cash flow 2021 2020
=================================================== --------- ----------
Adjusted EBITDA $77.5m $59.5m
=================================================== ========= ==========
Movements in working capital ($8.8m) ($5.3m)
=================================================== ========= ==========
Adjusted cash generated from operations $68.7m $54.2m
=================================================== ========= ==========
Adjusting items ($1.0m) ($16.6m)
=================================================== ========= ==========
Cash generated from operations $67.7m $37.6m
=================================================== ========= ==========
Capital expenditure (net of disposals
of property, plant and equipment) ($8.1m) ($13.7m)
=================================================== ========= ==========
Business acquired (including cash on acquisition) - ($112.3m)
=================================================== ========= ==========
Tax received/(paid) ($2.2m) ($6.0m)
=================================================== ========= ==========
Interest paid (including Adjusting items) ($4.3m) ($5.1m)
=================================================== ========= ==========
Payments of lease liabilities ($15.9m) ($8.4m)
=================================================== ========= ==========
Dividends paid ($11.3m) ($9.0m)
=================================================== ========= ==========
Proceeds from issue of share capital - $152.5m
=================================================== ========= ==========
FX and other ($1.8m) ($5.4m)
===================================================
Movement in net cash $24.1m $30.2m
=================================================== ========= ==========
Opening net cash $52.4m $22.2m
=================================================== ========= ==========
Closing net cash $76.5m $52.4m
=================================================== ========= ==========
Working capital
The working capital movement in the 2021 year reflects the first
full year of trading in relation to CSS, delivering an outflow in
the year of $8.8 million (2020: $5.3 million). In the 2020 year the
timing of the acquisition in March 2020 resulted in a one-time
inflow of $9.3 million in relation to CSS. The 2021 working capital
outflow reflects the phasing of sales year-on-year which has seen
higher sales in the last quarter in the Americas and inventory
build which has started earlier than in previous years reflecting
the proactive response taken to ensure customers are not impacted
by transportation delays at ports.
In the current Covid-19 environment 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 0.5%
of revenue (2020: 0.3%), a testament to our continued proactive
approach to dealing with credit risk.
Capital expenditure
As part of our Covid-19 plan to manage cash during the pandemic
our investment in capital expenditure was managed carefully
resulting in a reduction of $5.8 million to $8.4 million (2020:
$14.2 million). In addition, the prior year included two
significant projects; the printing press in the US and the
automated converting line project in the Netherlands. There were no
significant capital projects in the year to 31 March 2021. Capital
expenditure in 2022 is expected to return to more normal levels in
the range $8.0 - $10.0 million.
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. The Group has a stated aim to
maintain our average leverage below 2.0 times over the long term
and over the past five years has made significant progress in
reducing leverage beyond this point. As at 31 March 2021 Average
leverage was 0.0 times, down from 0.9 times in the prior year. This
reflects an improvement in the Adjusted EBITDA compared to the
prior year and a considerable reduction in average bank debt from
$43.6 million in 2020 to $2.2 million in 2021. This reduction
partly reflects the impact of the CSS acquisition across the year,
which is less seasonal than the legacy Design Group business, but
also the impact of the additional equity raise in January 2020 to
fund the CSS transaction.
Our measure of Average leverage excludes the impact of IFRS 16
and as such we exclude lease liabilities from our measurement of
debt and reduce Adjusted EBITDA for lease payments. This mirrors
the approach taken by the 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
The Group maintains its banking facility through a club of five
banks chosen to reflect and support the geographical spread of the
Group. The banks within the club are HSBC, NatWest, Citigroup (who
replaced BNP Paribas), Truist Bank (as successor by merger to
SunTrust Bank) and PNC. In May 2021, the facilities were extended
for another year to June 2023.
The facilities, comprise:
- a revolving credit facility ('RCF A') of $95.0 million;
- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to GBP130.0 million.
This RCF is flexed to meet our working capital requirements during
those months when inventory is being built within our annual
business cycle and is GBPnil when not required, minimising carry
costs; and
- an invoice financing arrangement in Hong Kong maximum limit
$18.0 million but dependent on level of eligible receivables
In total, the accessible facilities at approximately $290.0
million are considered more than sufficient to cover the Group's
peak requirements. The facilities, which do not amortise with time,
include an additional uncommitted amount to help finance potential
acquisitions.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on. The RCF facilities are secured
with a fixed and floating charge over all other assets of the
Group.
There are financial covenants (measured on pre IFRS 16
accounting definitions), tested quarterly, attached to the existing
facilities as follows:
1. interest cover, being the ratio of adjusted earnings before
interest, tax, depreciation and amortisation (EBITDA), as defined
by the banking facility, to interest on a rolling twelve month
basis; and
2. leverage, being the ratio of debt to adjusted EBITDA, as
defined by the banking facility, on a rolling twelve-month
basis.
There is a further 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.
We also have access to supplier financing arrangements from
certain customers which we utilise at certain times of the
year.
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. As of this financial year, the Group moved its reporting
currency to US dollars in light of the fact that a significant
proportion of the Group's revenues and profits are now in US
dollar. This change aims to significantly reduce, although not
eradicate, the potential exposure of the Group to translational
currency movements going forward. There is still part of the
business whose functional currency is something other than US
dollar however, the overall impact on revenue and profits from
currency movements in 2021 when compared to 2020 is not significant
relative to the balances. Revenue in 2020 would have been $10.6
million higher if translated at 2021 FX rates, with 2020 Adjusted
profit before tax $1.2 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 further 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 increased by $16.2 million to $392.0
million at 31 March 2021 (2020: $375.8 million) primarily
reflecting the increased cash generated within the Group along with
increased debtors at the year end following strong sales in the
last quarter.
As at the 31 March 2021 balance sheet date, in light of the
continued Covid-19 pandemic, the Directors have paid particularly
close attention to their assessment of going concern in preparation
of these financial statements. The Group is well capitalised at the
year end with a net cash position of $75.7 million ($132.8 million
of cash and $57.1 million of bank overdraft excluding loan
arrangement fees).
Going concern forecasts have been produced using the Group's
2022 and 2023 budgets and plans. These forecasts which have been
produced and reviewed in detail by the Board, and take into account
the seasonal working capital cycle of the business, have been
sensitised to reflect severe but plausible adverse downturns in the
current assumptions including the potential for a further Covid-19
related lockdown as well as another IT security incident in the
Group. These forecasts and additional analysis demonstrated that
the Group has sufficient excess 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 covenants. 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 IFRS metrics. The
Directors believe that these APMs provide important additional
information regarding the adjusted 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 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 and of an unusual or non-recurring nature.
The APMs and the definitions used are listed below:
-- Adjusted EBITDA - EBITDA before Adjusting items
-- Adjusted operating profit - Profit before finance charges, tax and Adjusting items
-- Adjusted profit before tax - Profit before tax and Adjusting items
-- Adjusted profit after tax - Profit after tax before Adjusting
items and associated tax effect
-- Adjusted earnings per share - Fully diluted earnings per
share before Adjusting items and associated tax effect
In addition, the Group uses APMs in order to calculate other key
performance metrics including:
-- Average leverage - Average bank debt (being average debt
measured before lease liabilities) divided by Adjusted EBITDA
reduced for lease payments
-- Cash conversion - Adjusted cash generated from operations divided by Adjusted EBITDA.
-- Adjusted operating margin - Adjusted operating profit divided by revenue
-- Return on capital employed - Adjusted operating profit
divided by monthly average net capital employed (excluding cash and
intangibles)
-- Adjusted interest cover - Adjusted operating profit divided
by finance charges (excluding IFRS 16 and one-time interest
income)
Adjusting items
Further details of the items categorised as Adjusting items are
disclosed in note 3.
A full reconciliation between our adjusted and reported results
is provided below:
APM Reconciliation 2021 2020
===================================== --------- ---------
Adjusted EBITDA $77.5m $59.5m
Adjusting items ($11.7m) ($32.2m)
EBITDA $65.8m $27.3m
------------------------------------- --------- ---------
Adjusted operating profit $42.0m $40.9m
Adjusting items ($22.1m) ($36.3m)
Reported operating profit $19.9m $4.6m
------------------------------------- --------- ---------
Adjusted profit before tax $37.0m $35.4m
Adjusting items ($22.3m) ($36.3m)
Reported profit before tax $14.7m ($0.9m)
------------------------------------- --------- ---------
Adjusted profit after tax $27.6m $28.3m
Adjusting items $(17.2)m ($10.9m)
Reported profit after tax $10.4m $17.4m
------------------------------------- --------- ---------
Adjusted earnings per share 25.9c 32.7c
Adjusting items (17.5c) (12.9c)
Reported diluted earnings per share 8.4c 19.8c
===================================== ========= =========
The financial information set out in this document does not
constitute statutory accounts for IG Design Group Plc for the
period ended 31 March 2021 but is extracted from the Annual Report
and Accounts 2021. The Annual Report and Accounts 2021 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).
A copy of these results is available on
https://www.thedesigngroup.com .
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
international accounting standards in conformity with the
requirements of the Companies Act 2006 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 international accounting standards
in conformity with the requirements of the Companies Act 2006 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 also 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 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.
CONSOLIDATED INCOME STATEMENT
YEARED 31 MARCH 2021
Restated(a)
2021 2020
Note $000 $000
--------------------------------------------- ---- --------- -----------
Revenue 2 873,216 624,340
Cost of sales (719,396) (530,109)
--------------------------------------------- ---- --------- -----------
Gross profit 153,820 94,231
Selling expenses (43,909) (33,766)
Administration expenses (93,659) (58,868)
Other operating income 5 4,066 927
(Loss)/profit on disposal of property, plant
and equipment (256) 246
(Loss)/profit on disposal of subsidiary 28 (208) 1,836
--------------------------------------------- ---- --------- -----------
Operating profit 3 19,854 4,606
Finance expenses 6 (5,179) (5,479)
--------------------------------------------- ---- --------- -----------
Profit/(loss) before tax 14,675 (873)
Income tax (charge)/credit 7 (4,234) 18,276
--------------------------------------------- ---- --------- -----------
Profit for the year 10,441 17,403
--------------------------------------------- ---- --------- -----------
Attributable to:
Owners of the Parent Company 8,207 16,461
Non-controlling interests 2,234 942
--------------------------------------------- ---- --------- -----------
Earnings per ordinary share
Restated(a)
Note 2021 2020
-------- ---- ----- -----------
Basic 21 8.4c 19.9c
-------- ---- ----- -----------
Diluted 21 8.4c 19.8c
-------- ---- ----- -----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 MARCH 2021
Restated(a)
2021 2020
$000 $000
--------------------------------------------------------- -------- -----------
Profit for the year 10,441 17,403
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or
loss
Remeasurement of defined benefit pension and health
benefit schemes (32) -
Items that may be reclassified subsequently to profit
or loss
Exchange difference on translation of foreign operations
(net of tax) (15,769) 3,112
Recycling translation reserves on disposal of subsidiary - 42
Transfer to profit and loss on maturing cash flow
hedges (net of tax) 863 (490)
Net unrealised (loss)/gain on cash flow hedges (net
of tax) (1,269) 657
--------------------------------------------------------- -------- -----------
(16,175) 3,321
--------------------------------------------------------- -------- -----------
Other comprehensive (expense)/income for the year,
net of tax (16,207) 3,321
Total comprehensive (expense)/income for the year,
net of tax (5,766) 20,724
Attributable to:
Owners of the Parent Company (9,081) 20,372
Non-controlling interests 3,315 352
--------------------------------------------------------- -------- -----------
(5,766) 20,724
--------------------------------------------------------- -------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 MARCH 2020
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
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Equity at 1 April
2019 5,093 74,962 42,119 153 (8,133) 106,336 220,530 4,694 225,224
Profit for the
year - - - - - 16,461 16,461 942 17,403
Other
comprehensive
income/(expense) - - - 167 3,744 - 3,911 (590) 3,321
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Total
comprehensive
income for the
year - - - 167 3,744 16,461 20,372 352 20,724
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Transactions with
owners in their
capacity as
owners
Equity-settled
share-based
payments (note
23) - - - - - (287) (287) - (287)
Tax on
equity-settled
share-based
payments
(note 11) - - - - - 213 213 - 213
Derecognition of
non-controlling
interests (note
27) - - - - - - - (403) (403)
Shares issued
(note
20) 1,117 150,145 - - - - 151,262 - 151,262
Options exercised
(note 20) 45 - - - - (45) - - -
Equity dividends
paid (note 22) - - - - - (8,975) (8,975) - (8,975)
Exchange
differences
on opening
balances (281) (9,690) (1,944) - - - (11,915) - (11,915)
-----------------
At 31 March 2020
(restated)(a) 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY continued
YEARED 31 MARCH 2021
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 2020
(restated)(a) 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
------------------- ------- ---------- ------- ------- ----------- -------- ------------- ----------- --------
Profit for the year - - - - - 8,207 8,207 2,234 10,441
Other comprehensive
(expense)/income - - - (406) (16,850) (32) (17,288) 1,081 (16,207)
------------------- ------- ---------- ------- ------- ----------- -------- ------------- ----------- --------
Total comprehensive
(expense)/income
for the year - - - (406) (16,850) 8,175 (9,081) 3,315 (5,766)
------------------- ------- ---------- ------- ------- ----------- -------- ------------- ----------- --------
Transactions with
owners in their
capacity as owners
Equity-settled
share-based
payments (note 23) - - - - - 3,668 3,668 - 3,668
Tax on
equity-settled
share-based
payments
(note 11) - - - - - 214 214 - 214
Recognition of
non-controlling
interests (note
27) - - - - - - - 539 539
Options exercised
(note 20) 34 - - - - (34) - - -
Equity dividends
paid (note 22) - - - - - (11,288) (11,288) - (11,288)
Exchange
differences
on opening
balances 659 23,725 4,425 - - - 28,809 - 28,809
------------------- ------- ---------- ------- ------- ----------- -------- ------------- ----------- --------
At 31 March 2021 6,667 239,142 44,600 (86) (21,239) 114,438 383,522 8,497 392,019
------------------- ------- ---------- ------- ------- ----------- -------- ------------- ----------- --------
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 $1.8 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 (2020: $1.7 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. 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 other reserves.
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2021
Restated(a) Restated(a)
2021 2020 2019
Note $000 $000 $000
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Non-current assets
Property, plant and equipment 8 88,203 91,744 51,786
Intangible assets 9 114,874 116,214 110,503
Right-of-use assets 10 95,380 82,742 -
Long term assets 13 5,721 6,223 -
Deferred tax assets 11 18,357 18,135 4,693
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total non-current assets 322,535 315,058 166,982
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Current assets
Inventory 12 176,165 169,414 90,442
Trade and other receivables 13 129,219 110,047 64,641
Income tax receivable 2,368 18,377 -
Derivative financial assets 24 207 412 168
Cash and cash equivalents 14 132,760 83,200 110,910
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total current assets 440,719 381,450 266,161
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total assets 2 763,254 696,508 433,143
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Equity
Share capital 20 6,667 5,974 5,093
Share premium 237,296 213,755 73,220
Capital redemption reserve 1,846 1,662 1,742
Merger reserve 44,600 40,175 42,119
Hedging reserve (86) 320 153
Translation reserve (21,239) (4,389) (8,133)
Retained earnings 114,438 113,703 108,763
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Equity attributable to owners of
the Parent Company 383,522 371,200 222,957
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Non-controlling interests 8,497 4,643 5,266
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total equity 392,019 375,843 228,223
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Non-current liabilities
Loans and borrowings 15 (103) (219) 1,847
Lease liabilities 10 94,582 78,418 -
Deferred income 16 486 561 976
Provisions 17 5,742 5,161 3,472
Other financial liabilities 18 15,526 6,784 2,362
Deferred tax liabilities 11 2,115 4,626 900
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total non-current liabilities 118,348 95,331 9,557
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Current liabilities
Bank overdraft 14 57,033 31,003 85,614
Loans and borrowings 15 (620) (3) 1,239
Lease liabilities 10 19,340 16,995 -
Deferred income 16 424 162 129
Provisions 17 1,617 3,046 1,417
Income tax payable 10,061 5,482 6,202
Trade and other payables 19 120,763 120,656 76,135
Other financial liabilities 18 44,269 47,993 24,627
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total current liabilities 252,887 225,334 195,363
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total liabilities 2 371,235 320,665 204,920
----------------------------------------------------------------------------- ---- -------- ----------- -----------
Total equity and liabilities 763,254 696,508 433,143
----------------------------------------------------------------------------- ---- -------- ----------- -----------
The consolidated financial statements were approved by the Board
of Directors on 14 June 2021 and were signed on its behalf by:
Paul Fineman Giles Willits
Director Director
CONSOLIDATED CASH FLOW STATEMENT
YEARED 31 MARCH 2021
Restated(a)
2021 2020
Note $000 $000
------------------------------------------------- ---- -------- -----------
Cash flows from operating activities
Profit for the year 10,441 17,403
Adjustments for:
Depreciation and impairment of property,
plant and equipment 8 13,535 8,880
Depreciation and impairment of right-of-use
assets 10 24,047 8,911
Amortisation of intangible assets 9 6,918 4,816
Finance expenses 6 5,179 5,479
Income tax charge/(credit) 7 4,234 (18,276)
Loss/(profit) on disposal of a business 28 208 (1,836)
Loss/(profit) on disposal of property, plant
and equipment 165 (246)
Loss on disposal of intangible fixed assets 106 1
Equity-settled share-based payments/(income) 23 4,192 (252)
------------------------------------------------- ---- -------- -----------
Operating profit after adjustments for non-cash
items 69,025 24,880
Change in trade and other receivables (11,914) 9,841
Change in inventory 1,772 1,532
Change in trade and other payables, provisions
and deferred income (4,504) 1,592
------------------------------------------------- ---- -------- -----------
Cash generated from operations 54,379 37,845
Tax received/(paid) 14,353 (5,993)
Interest and similar charges paid (4,082) (5,090)
------------------------------------------------- ---- -------- -----------
Net cash inflow from operating activities 64,650 26,762
------------------------------------------------- ---- -------- -----------
Cash flow from investing activities
Proceeds from sale of property, plant and
equipment 147 767
Acquisition of businesses (net of cash acquired) - (112,251)
Acquisition of intangible assets 9 (1,000) (3,738)
Acquisition of property, plant and equipment 8 (7,390) (10,463)
------------------------------------------------- ---- -------- -----------
Net cash outflow from investing activities (8,243) (125,685)
------------------------------------------------- ---- -------- -----------
Cash flows from financing activities
Proceeds from issue of share capital - 152,535
Repayment of secured borrowings 14 (1,158) (1,917)
Net movement in previous credit facilities - 48,230
Repayment of previous credit facilities - (48,230)
Payment of lease liabilities 10 (19,184) (8,430)
Loan arrangement fees 14 - (1,571)
Equity dividends paid 22 (11,288) (8,975)
------------------------------------------------- ---- -------- -----------
Net cash (outflow)/inflow from financing
activities (31,630) 131,642
------------------------------------------------- ---- -------- -----------
Net increase in cash and cash equivalents 24,777 32,719
Cash and cash equivalents at beginning of
the year 14 52,197 25,296
Effect of exchange rate fluctuations on cash
held (1,247) (5,818)
------------------------------------------------- ---- -------- -----------
Cash and cash equivalents at end of the year 14 75,727 52,197
------------------------------------------------- ---- -------- -----------
(a) The Group's reporting currency has moved to US Dollars
following the acquisition of CSS Industries, Inc. ('CSS') in March
2020 which increased the US dollar revenues to over 70% of the
Group and therefore primary statements have been restated from
pound sterling to US dollar. See note 30 for the comparative
primary statements from the prior year as previously presented in
pound sterling. All prior year comparative notes to the accounts
have been restated throughout this report to reflect the currency
change. In addition, certain balances have been restated to reflect
the changes to the acquisition accounting of CSS. See notes 1 and
28 for more detail.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARED 31 MARCH 2021
1 Accounting policies
a. Basis of preparation
The consolidated financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 ("IFRS"). The
Company has elected to prepare its individual Company financial
statements in accordance with Financial Reporting Standard 102
('FRS 102').
The financial statements are prepared under the historical cost
convention except for derivatives which are stated at fair value
and retirement benefit obligations which are valued in accordance
with IAS 19 Employee Benefits.
The preparation of financial statements that conform with
adopted 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.
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') in the United Kingdom.
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.
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 with the
exception of leases in the year ended 31 March 2019, when IFRS 16
had not been adopted.
Restatement of comparative amounts
Acquisition accounting
In the preparation of these financial statements, comparative
amounts have been restated to reflect the finalisation of the CSS
acquisition accounting (note 28).
Presentation currency
The Company has changed the presentation currency of the Group
from pound sterling to US dollar effective 1 April 2020. Following
the acquisition of CSS a significant majority of the Group earnings
is now denominated in US dollars. Management believes that the
presentation currency change will give investors and other
stakeholders a clearer understanding of the Group's financial
performance over time. In addition, the change will reduce the
volatility of the Group's earnings arising from foreign exchange
movements, in relation to the translation of foreign currency
balances.
The currency translation reserve was set to zero at 1 April 2006
on transition to IFRS and has been restated as if the Group had
reported in US dollars since that date. 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 other reserves.
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.
Since the change in reporting currency has been applied
retrospectively all comparative numbers in these consolidated
financial statements have been restated into US dollar. Note 30
sets out the key primary statements with both pound sterling and US
dollar comparatives for the year ended 31 March 2020.
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 peaks in October as manufacturing
and distribution of Christmas products builds ahead of shipping.
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
Information regarding the financial position of the Group, its
cash flows, liquidity position, and borrowing facilities are
described in the Detailed Financial Review above. Note 24 to the
financial statements includes the Group's objectives, policies and
processes for managing its capital, its financial risk management
objectives, details of its financial instruments and hedging
activities and exposures to credit, market and liquidity risk. Cash
balances and borrowings are detailed in notes 14 and 15.
On 5 June 2019, to meet the funding requirements of the Group,
the business refinanced with a banking group comprising HSBC,
NatWest, Citigroup (who replaced BNP Paribas), Truist Bank (as
successor by merger to SunTrust Bank) and PNC Bank as part of a
three year deal. This facility was then subsequently amended and
extended on 17 January 2020 with the same banking group to
accommodate the acquisition of CSS. The facilities were then
further extended in May 2021 to run to June 2023 and comprise of a
revolving credit facility ('RCF') of $95.0 million, a further
flexible RCF of up to GBP130.0 million to meet the Group's working
capital requirements during peak manufacturing, and a maximum limit
of $18.0 million invoice financing arrangement in Hong Kong. We
also have access to supplier financing arrangements from certain
customers which we utilise at certain times of the year. These
supplier financing arrangements are subject to the continuing
support of the customers' banking partners and therefore could be
withdrawn at short notice.
The Directors have prepared detailed plans and forecasts from
the date of signing these financial statements up to 31 March 2023.
The plans reflect the seasonal operating cycle of the business and
assume continuity of the supply chain. They also benefit from the
diverse geographic spread of the Group and the high proportion of
revenues generated from retailers who have remained open during the
Covid-19 crisis. Going concern forecasts have been produced using
the Group's 2022 and 2023 budgets and plans. These forecasts which
have been produced and reviewed in detail by the Board take into
account the seasonal working capital cycle of the business and have
been sensitised to reflect severe but plausible adverse downturns
in the current assumptions including the potential for a further
Covid-19 related lockdown as well as another IT security incident
in the Group. These forecasts and additional analysis demonstrated
that the Group has sufficient excess headroom to meet its
obligations as they fall due, for a forecast period of more than
twelve months beyond the date of signing these financial
statements. 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.
Based on these models, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future, and accordingly
have adopted the going concern basis in preparing the consolidated
financial statements. This disclosure has been prepared in
accordance with the Financial Reporting Council's UK Corporate
Governance Code.
Changes in accounting policies
There have been no changes to accounting policies during the
year.
b. Basis of consolidation
Other standards and interpretations
The Group also adopted the following new pronouncements during
2021, which did not have any material impact on the Group's
financial statements:
amendments to IFRS 3, 'Business combinations' revising the
definition of a business
amendments to IAS 1, 'Presentation of financial statements', and
IAS 8, 'Accounting policies, changes in accounting estimates and
errors' revising the definition of material
amendments to IFRS 9, IAS 39 and IFRS 17: A two phase project
assessing the effects of the interest rate benchmark reform
amendments to the Conceptual framework
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
(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. The
financial statements of subsidiaries are included in the 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 prepared in
US dollar (as described above).
(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 dollar 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.
(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) 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
Unhedged derivatives are charged/credited to the income
statement.
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
Land and buildings - 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.
j. Lease liabilities and lease right-of-use assets
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.
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.
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.
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
Customer relationships 3-15 years
Trade names/brands 3-5 years
Other intangibles - software 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').
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 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 were 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.
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 stock
on hand relating to sales orders already attached to the acquired
stock. 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 reduced 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 Celebration, 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 sales
are made with credit terms of 30 -- 60 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.
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.
u. Investment in own shares
The shares held in the Group's Employee Benefit Trust 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) are 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 the carrying amount of the related property, plant and
equipment, 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, Adjusted
profit before tax, Adjusted profit after tax and Adjusted earnings
per share.
Adjusting items are items that are material and, 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).
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.
Accounting estimates
(i) Business combinations and intangible assets
IFRS 3 requires the identification of acquired intangible assets
as part of a business combination. The methods used to value such
intangible assets require the use of estimates and judgements such
as customer attrition, cash flow generation from the existing
relationships with customers and returns on other assets. Future
results are impacted by the amortisation periods adopted and
changes to the estimated useful lives would result in different
effects on the income statement and balance sheet.
Goodwill is not amortised but is tested annually for impairment,
along with the finite-lived intangible assets and other assets of
the Group's cash -- generating units. Tests for impairment are
based on discounted cash flows and assumptions (including discount
rates and growth prospects) which are inherently subjective. An
estimate is also required in identifying the events which indicate
potential impairment, and in assessing fair value of individual
assets when allocating an impairment loss in a cash-generating unit
or groups of cash-generating units. The Group performs various
sensitivity analyses in respect of the tests for impairment, as
detailed in note 9.
The useful lives of the Group's finite -- lived intangible
assets are reviewed following the tests for impairment
annually.
Judgement and estimates may also be required in determining the
fair value of other assets acquired and liabilities (including
contingent liabilities) assumed. In determining the fair value of
assets and liabilities acquired from the acquisition of CSS (see
detail in note 28), the directors have had to make a number of
important judgements. These judgements, which are inherently
subjective, have included assessing at the date of acquisition
future cash flows and synergies from a market participant's
perspective and assessing an appropriate discount rate to apply to
those cash flows. Judgements have also been taken around the level
of potential inventory obsolescence (described below) and the level
of economic obsolescence applied to the valuation of plant and
equipment. Different assumptions applied and judgements taken could
have led to materially different values.
(ii) Taxation
There are many transactions and calculations for which the
ultimate tax determination is uncertain. Estimates are required in
determining the Group's tax assets and liabilities. Deferred tax
assets have been recognised to the extent that they are recoverable
based on profit projections for future years. Income tax
liabilities for anticipated issues have been recognised based on
estimates of whether additional tax will be due. Notwithstanding
the above, the Group believes that it will recover tax assets and
has adequate provision to cover all tax risks across all business
operations. See note 11 for more details.
(iii) Lease asset impairments
The Group has impaired the right-of-use assets in respect of
several properties that the Group have exited as part of the
ongoing integration following the CSS acquisition. This is based on
the properties themselves being a cash generating unit in line with
IAS 36 as they are being actively marketed for subtenants. As at 31
March 2021, the Group has had no offers from potential subtenants
and given that this position is expected to continue for the
foreseeable future, these leased properties have been impaired in
full. The total asset impairment in 2021 is $6.0 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 stock for those time frames,
this is not a precise estimate and is based on best data at the
time of recognition. Regular monitoring of stock levels, the ageing
of stock 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. In addition, in light of Covid-19, further assessment
of the recoverability of any aged inventory has been undertaken as
at 31 March 2021. As at 31 March 2021, inventory provisions were
$46 million against a gross inventory value of $222 million (2020:
$49 million provision, $210 million gross inventory value). This
provision estimate is subject to potential material change, for
example if market conditions change because Covid-19 restrictions
result in customer store closures, or expected customer demand
fluctuates. A 10% change in the provision would create a difference
of $4m.
Accounting judgements
(i) Adjusting items
Judgement is required to determine whether items should be
included within Adjusting items by virtue of their size or
incidence.
Specific judgements have been made in the estimates associated
with Adjusting items and further details of the items categorised
as Adjusting items and how estimates have been made are disclosed
in note 3.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
YEARED 31 MARCH 2021
2 Segmental information
The Group has one material business activity being the design,
manufacture and distribution of Celebration, Craft & creative
play, Stationery, Gifting and 'Not-for-resale' consumable
products.
Following the acquisition of CSS, the business has been
restructured with the consolidation of the UK, European and
Australian businesses under one operating segment: International.
As such the Board has re-evaluated the reporting segments for the
Group and for management purposes the Group is now organised into
two reporting segments. These are the segments as reported to, and
evaluated by, the Chief Operating Decision Makers for the
Group.
The acquisition of CSS has seen additional entities in various
locations around the world including Asia, Australia, UK, India and
Mexico. This forms part of the Americas segment for the purpose of
segmental reporting.
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.
Central
and
DG Americas(a) DG International eliminations Group
$000 $000 $000 $000
----------------------------------------- -------------- ---------------- ------------ ---------
Year ended 31 March 2021
Revenue - external 613,909 259,307 - 873,216
- inter segment 66 5,995 (6,061) -
------------------------------------------- -------------- ---------------- ------------ ---------
Total segment revenue 613,975 265,302 (6,061) 873,216
------------------------------------------- -------------- ---------------- ------------ ---------
Segment result before adjusting items
and management recharge 21,015 25,767 (4,760) 42,022
Adjusting items (note 3) (22,168)
------------------------------------------- -------------- ---------------- ------------ ---------
Operating profit 19,854
Finance expenses (5,016)
Finance expenses treated as an Adjusting
item (note 3) (163)
Income tax (4,234)
------------------------------------------- -------------- ---------------- ------------ ---------
Profit for the year ended 31 March
2021 10,441
------------------------------------------- -------------- ---------------- ------------ ---------
Balances at 31 March 2021
Segment assets 469,192 230,590 63,472 763,254
------------------------------------------- -------------- ---------------- ------------ ---------
Segment liabilities (216,940) (86,553) (67,742) (371,235)
------------------------------------------- -------------- ---------------- ------------ ---------
Capital expenditure additions
* property, plant and equipment 4,589 2,711 90 7,390
* intangible assets 963 37 - 1,000
- right-of-use assets 30,207 2,733 - 32,940
Depreciation - property, plant and
equipment 7,760 5,774 1 13,535
Amortisation - intangible assets 6,510 408 - 6,918
Depreciation - right-of-use assets 12,739 5,265 74 18,078
Impairment - right-of-use assets 5,969 - - 5,969
------------------------------------------- -------------- ---------------- ------------ ---------
Including overseas entities for the Americas operating
segment.
Central
and
DG Americas(a) DG International eliminations Group
$000 $000 $000 $000
-------------------------------------- -------------- ---------------- ------------ ---------
Year ended 31 March 2020
Revenue - external 355,917 268,423 - 624,340
- inter segment - 7,071 (7,071) -
---------------------------------------- -------------- ---------------- ------------ ---------
Total segment revenue 355,917 275,494 (7,071) 624,340
---------------------------------------- -------------- ---------------- ------------ ---------
Segment result before adjusting items
and management recharge 20,064 24,877 (4,017) 40,924
Adjusting items (note 3) (36,318)
---------------------------------------- -------------- ---------------- ------------ ---------
Operating profit 4,606
Finance expenses (5,479)
Income tax 18,276
---------------------------------------- -------------- ---------------- ------------ ---------
Profit for year ended 31 March 2020 17,403
---------------------------------------- -------------- ---------------- ------------ ---------
Balances at 31 March 2020
Segment assets (restated)(b) 425,977 210,380 60,151 696,508
---------------------------------------- -------------- ---------------- ------------ ---------
Segment liabilities (restated)(b) (198,607) (95,410) (26,648) (320,665)
---------------------------------------- -------------- ---------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 3,372 7,087 4 10,463
- property, plant and equipment on
acquisition of business
(restated)(b) 39,692 - - 39,692
- intangible assets 3,419 236 83 3,738
- intangible assets on acquisition
of business 5,960 - - 5,960
- right-of-use assets 790 6,515 33 7,338
- right-of-use assets on acquisition
of business 40,650 - - 40,650
Depreciation - property, plant and
equipment 3,034 5,411 3 8,448
Impairment - property, plant and
equipment - 432 - 432
Amortisation - intangible assets 4,341 475 - 4,816
Depreciation - right-of-use assets 4,222 4,619 70 8,911
---------------------------------------- -------------- ---------------- ------------ ---------
a) Including overseas entities for the Americas operating segment.
b) For more detail please refer to note 1
The Group has one customer that accounts for 24% (2020: 22%) of
the total Group revenues. In the year ended 31 March 2021 total
sales to that customer were $211.9 million (2020: $134.2 million).
This customer falls solely within the 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 $18.4 million (2020: $18.1
million), income tax receivable $2.4 million (2020: $18.4 million),
income tax payable of $10.1 million (2020: $5.5 million) and
deferred tax liability $2.1 million (2020: $4.6 million).
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
--------------------
Restated(a)
2021 2020
$000 $000
----------------- ------- -----------
DG Americas 184,331 181,704
DG International 114,126 108,996
298,457 290,700
----------------- ------- -----------
a) For more detail please refer to note 1
Revenue by customer destination
2021 2020 2021 2020
$000 $000% %
------------------ ------- ------- --- ----
Americas 621,734 382,950 71 61
Rest of the world 251,482 241,390 29 39
873,216 624,340 100 100
------------------ ------- ------- ---- ----
All revenue arose from the sale of goods.
3 Operating expenses and adjusting items
Included in the income statement are the following
charges/(credits):
2021 2020
Note $000 $000
---------------------------------------------- ---- ------ -------
Depreciation of tangible fixed assets 8 13,535 8,448
Depreciation and impairment of right-of-use
assets 10 24,047 8,911
Loss/(profit) on sales of property, plant
and equipment and intangible assets 165 (246)
Release of deferred grant income 5 (130) (380)
Amortisation of intangible assets - software 9 3,840 1,243
Sub-lease rental income 5 (559) (358)
Write down of inventories to net realisable
value (non-adjusting) 12 19,287 6,846
Reversal of previous write downs of inventory 12 (427) (4,933)
(Income)/loss on foreign exchange (483) 1,055
Adjusting items 22,331 36,318
---------------------------------------------- ---- ------ -------
2021 2020
$000 $000
------------------------------ -------- --------
Operating profit analysed as:
Adjusted operating profit 42,022 40,924
Adjusting items (22,168) (36,318)
------------------------------ -------- --------
Operating profit 19,854 4,606
------------------------------ -------- --------
Adjusting items
Other
Cost of Selling Admin Loss on finance
sales expenses expenses disposal expenses Total
Year ended 31 March 2021 $000 $000 $000 $000 $000 $000
------------------------------------- ------- -------- -------- -------- -------- -------
Losses/(gains) and transaction
costs relating to acquisitions
and disposals of businesses(1) - - 74 208 - 282
Acquisition integration
and restructuring costs/(income)(2) 993 (162) 14,402 91 163 15,487
(Reversal of impairment)/impairment
of assets (3) (3,709) (2,100) - - - (5,809)
Incremental Covid-19
costs(4) 603 - 913 - - 1,516
IT security incident
costs(5) 1,107 - 1,093 - - 2,200
Amortisation of acquired
intangibles(6) - - 4,463 - - 4,463
Share-based payment charges
(7) - - 4,192 - - 4,192
Adjusting items (1,006) (2,262) 25,137 299 163 22,331
------------------------------------- ------- -------- -------- -------- -------- -------
Profit
on Other
Cost of Selling Admin sale of finance
sales expenses expenses business expenses Total
Year ended 31 March
2020 $000 $000 $000 $000 $000 $000
-------------------------------- ------- -------- -------- -------- -------- ------
Losses/(gains) and transaction
costs relating to acquisitions
and disposals of businesses(1) 32 - 5,918 (1,836) - 4,114
Acquisition integration
and restructuring costs(2) 7,066 - 4,960 - - 12,026
Impairment of assets
(3) 8,021 3,789 - - - 11,810
Incremental Covid-19
costs(4) 327 - 292 - - 619
Amortisation of acquired
intangibles(6) - - 3,573 - - 3,573
Share-based payment
credits(7) - - (252) - - (252)
US tariffs(8) 4,428 - - - - 4,428
-------------------------------- ------- -------- -------- -------- -------- ------
Adjusting items 19,874 3,789 14,491 (1,836) - 36,318
-------------------------------- ------- -------- -------- -------- -------- ------
Adjusting items are separately presented by virtue of their
nature, size and incidence (per each operating segment). These
items are material items 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 losses/(gains) relating to the year ended 31 March 2021
are broken down as follows:
(1) 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.
An additional $208,000 of transaction costs associated with the
disposal of Zhejiang Shaoxing Royal Arts and Crafts Co. Ltd
('Shaoxing') were incurred during the year along with expenditure
in relation to any other potential acquisitions reviewed in the
year.
For the year ended 31 March 2020 the total net cost incurred by
the Group was $4.1 million, including costs associated with the
acquisition of CSS, along with acquisition related employee
payments from the Impact transaction and the profit on disposal of
Shaoxing.
(2) Acquisition integration and restructuring costs/(income)
In order to realise synergies from acquisitions, integration
projects are 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 the Board
considers it is appropriate that costs associated with projects of
this nature be included as Adjusting items.
The main costs in the year relate to the integration of CSS into
the enlarged DG Americas business. These include integration
consultancy expenditure, severance and temporary labour costs, as
the newly integrated team structures following the acquisition have
been established, and the impact of the impairment of the lease
assets and costs associated with the closure of excess sites. On
acquisition the CSS business had a large portfolio of owned and
leased sites, and as part of the integration sites in Nashville,
Tennessee; Midway, Georgia; Budd Lake, New Jersey and Hong Kong
have been closed. In addition, costs associated with the
consolidation of the Midway distribution operations into Shorewood
are included.
In respect of vacant leased properties, marketing for
sub-tenancy is ongoing. As at 31 March 2021, the Group has had no
offers from potential subtenants and given that this position is
expected to continue for the foreseeable future, these leased
properties have been impaired in full.
The tax refund as a result of the US Covid-19 Coronavirus Aid,
Relief and Economic Security ('CARES') Act, recognised as an
Adjusting tax credit in the prior year, was received during the
year ended 31 March 2021. The refund also attracted interest income
which has been recognised in Adjusting items in the period.
Furthermore, in the UK and Australia, as a result of Covid-19,
workforce restructuring costs were treated as Adjusting items.
For the year ended 31 March 2020 $12.0 million of costs relating
to the integration of manufacturing facilities in Memphis (which
has now largely concluded), transition and retention costs as well
as costs relating to the CSS integration were recognised as
Adjusting items.
(3) (Reversal of impairment)/impairment of assets
In light of the unknown impact of Covid-19 on the business, a
review of inventory, trade receivables and fixed assets was
undertaken at the last financial year end. Inventories were
assessed at 31 March 2020 for the net realisable value and an
impairment of $7.4 million was taken. Similarly trade receivables
were assessed for their expected credit loss in line with IFRS 9
and an impairment of $3.8 million was taken.
As at 31 March 2021 $2.4 million of the trade receivables
impairment has been reversed as it is no longer required and
following a review of sell-through rates in respect of inventory
$4.0 million was released. These releases are partially offset by
$599,000 of additional Covid-19 related impairment charges taken
during the year.
(4) Incremental Covid-19 costs
The Covid-19 outbreak developed rapidly in 2020 and continued
into the first calendar quarter of 2021, with measures taken around
the world to contain the virus affecting economic activity. The
Group has been affected in every territory in which we operate and
the impact on the general economic environment and the reduced
demand of goods from our customers as well as the closures of our
businesses has had a significant impact. Certain incremental costs
relating to direct labour equal to $0.9 million are included in
Adjusting items. The most significant element of these costs relate
to additional 'hazard pay' labour costs across our manufacturing
facilities in the USA and Mexico in order to ensure our employees
have returned to work.
In addition, laws were passed in India and Mexico that meant no
workforce reductions were allowed during closed/lockdown periods
which meant higher employee costs were being incurred than
ordinarily would have in that situation. This resulted in the
business incurring direct incremental costs of labour whilst not
producing anything and incurring periods of significant downtime.
When employees returned to work post lockdown labour costs were
paid again once production started, effectively doubling the costs
to produce.
The Board have taken a judgement not to include government
assistance received in the period as an Adjusting item as the
underlying employee expenditure would not have been incurred if the
government assistance was not received.
In the year ended 31 March 2020, $619,000 of direct incremental
costs associated with Covid-19 had been incurred by the Group.
(5) IT security incident costs
The IT security incident which occurred in the Americas business
in October/November 2020 resulted in one-off costs specifically in
relation to crisis management, legal, forensic, and data recovery
costs including server/hardware repair and replacement. In
addition, there were IT overtime costs, customer penalties from
delayed shipments and expedited freight costs to avoid delays.
These costs have been treated as an Adjusting item in 2021. The
lost sales associated with the IT outage do not form part of the
Adjusting items, however, will form part of our claim under
insurance policies which is currently in preparation. No insurance
proceeds have been recognised in the year and any future proceeds
received associated with Adjusting items will be recognised in
Adjusting items.
(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
brands 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
an appropriately judged period. 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 and Biscay Pty Greetings Ltd in Australia. As such
we include these as Adjusting items. Note that the trade names
acquired as part of the acquisition of The Lang Companies Inc. were
fully amortised in the prior year.
In addition, in accordance with IFRS 3, on acquisition,
businesses need to be fair valued, which can result in an uplift to
stock on hand relating to sales orders already attached to the
acquired stock. This uplift will distort the margins associated
with the stock, and typically unwinds quickly as stock is sold soon
after acquisition. The unwind of the stock uplift ($1.4 million)
associated with the CSS acquisition is included as an Adjusting
item, consistent with the treatment adopted with the Impact
acquisition. This fully unwound as at 31 March 2021.
(7) Share-based payment charges/(credits)
As part of our senior management remuneration, the Group
operates a Long Term Incentive Plan ('LTIP') including the newly
created Value Creation Scheme ('VCS') in the form of options for
ordinary shares of the Group. In accordance with accounting
principles, despite this plan not being a cash cost to the business
(except for associated social security costs), a share -- based
payment charge or credit is taken to the income statement. We
consider that these charges do not form part of the underlying
operational costs and therefore include these as Adjusting items.
The share based payment charge for the period is $4.2 million which
consists of a principal IFRS 2 charge of $3.7 million and an
employer's social security charge of $524,000.
As at 31 March 2020, a credit of ($0.3) million had been
taken.
(8) US tariffs
There is no adjustment for US tariff with China (s301) costs in
the year ended 31 March 2021. In the year ended 31 March 2020 there
was an adjustment of $4.4 million reflecting the rapid evolution of
tariffs during that year with no advance warning. The timing of the
introduction of tariffs meant a majority of our purchase orders had
already been agreed with customers and suppliers effectively
creating a situation where the US business was locked into
commitments that could not be renegotiated. This impact has not
been repeated in the financial year ended 31 March 2021 as the
business was able to better mitigate the effect of tariffs.
The cash flow effect of adjusting items
There was $1.0 million net outflow in the current year cash flow
(2020: $16.6 million) relating to Adjusting items. The net outflow
included an inflow relating to the US tax NOL refunds received in
the year, as well as outflow of $6.4 million (2020: $899,000
deferred from the prior year.)
Auditors' remuneration:
2021 2020
$000 $000
Amounts receivable by auditor and its associates
in respect of:
Audit of these financial statements 947 908
Audit of financial statements of subsidiaries pursuant
to legislation
- Overseas subsidiaries 182 127
- UK subsidiaries 88 89
Other audit related services 65 57
Taxation compliance services 498 279
All other taxation advisory services 114 43
Services relating to corporate finance transactions - 694
------------------------------------------------------- ---- ----
Additional audit fees were charged in the year of $221,000
relating to the 2019/2020 financial audit. These are not included
in the above table.
4 Staff numbers and costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
Number of employees
---------------------
2021 2020
---------------------------- ---------- ---------
Selling and administration 1,244 700
Production and distribution 2,849 1,858
---------------------------- ---------- ---------
4,093 2,558
---------------------------- ---------- ---------
The aggregate payroll costs of these persons were as
follows:
2021 2020
Note $000 $000
---------------------- ---- ------- -------
Wages and salaries 152,406 94,095
Share-based payments 23 4,192 (252)
Social security costs 13,114 7,678
Other pension costs 2,835 4,086
---------------------- ---- ------- -------
172,547 105,607
---------------------- ---- ------- -------
Included within the employee numbers above are 500 (2020: 713)
of agency staff that are employed temporarily during peak
manufacturing season mainly in Huizhou, the costs associated with
these employees total $2.7 million (2020; $4.0 million) and are
included in the total payroll costs above.
For information on Directors' remuneration please refer to the
section titled 'Directors' remuneration' within the Directors'
remuneration report within the Group's Annual Report, which forms
part of these audited financial statements.
5 Other operating income
2021 2020
$000 $000
------------------------ ----- ----
Grant income received 130 380
Sub-lease rental income 559 358
Government assistance 3,263 -
Other 114 189
------------------------ ----- ----
4,066 927
------------------------ ----- ----
$274,000 of government assistance has been included within cost
of sales.
6 Finance expenses
2021 2020
$000 $000
------------------------------------------------------- ----- -----
Interest payable on bank loans and overdrafts 569 2,532
Other similar charges 1,036 383
Lease liability interest 3,334 2,043
Unwinding of fair value discounts 79 86
------------------------------------------------------- ----- -----
Interest payable under the effective interest method 5,018 5,044
Derivative financial instruments at fair value through
the income statement (2) 435
------------------------------------------------------- ----- -----
Finance expenses before Adjusting items 5,016 5,479
------------------------------------------------------- ----- -----
Adjusting items (note 3) 163 -
5,179 5,479
------------------------------------------------------- ----- -----
7 Taxation
Recognised in the income statement
2021 2020
$000 $000
---------------------------------------------------- ------- --------
Current tax charge/(credit)
Current year 6,077 (13,829)
Adjustments in respect of previous years (73) (606)
---------------------------------------------------- ------- --------
6,004 (14,435)
---------------------------------------------------- ------- --------
Deferred tax (credit)
Origination and reversal of temporary differences (1,724) (3,283)
Adjustments in respect of previous years (46) (558)
---------------------------------------------------- ------- --------
(1,770) (3,841)
---------------------------------------------------- ------- --------
Total tax in income statement 4,234 (18,276)
---------------------------------------------------- ------- --------
Total tax charge/(credit) on adjusting items
Total tax on profit before adjusting items 9,410 7,113
Total tax on adjusting items (5,176) (8,053)
Adjusting item - tax credit (US tax loss carryback) - (17,336)
Total tax charge/(credit) in income statement 4,234 (18,276)
---------------------------------------------------- ------- --------
Reconciliation of effective tax rate
2021 2020
$000 $000
------------------------------------------------------ ------ --------
Profit/(loss) before tax 14,675 (873)
------------------------------------------------------ ------ --------
Profit/(loss) before tax multiplied by the standard
rate of corporation tax rate of 19% in the UK (2020:
19%) 2,788 (166)
Effects of:
Income not taxable (184) (433)
Expenses not deductible for tax purposes 568 778
Effect of tax rate changes - (155)
Differences between UK and overseas tax rates 1,290 546
Movement in uncertain tax provision 175 (580)
Other items (284) 234
Adjustments in respect of previous periods (119) (1,164)
US tax loss carryback - (17,336)
------------------------------------------------------ ------ --------
Total tax charge/(credit) in income statement 4,234 (18,276)
------------------------------------------------------ ------ --------
8 Property, plant and equipment
Land and buildings Fixtures
Plant and and Motor
--------------------
Freehold Leasehold equipment fittings vehicles Total
$000 $000 $000 $000 $000 $000
------------------------------- --------- --------- --------- -------- -------- --------
Cost
Balance at 1 April 2019 27,361 2,894 80,564 5,502 1,466 117,787
Additions 766 260 8,610 510 317 10,463
Additions on acquisition
of business (note 28)
(restated)(a) 20,471 1,194 17,500 334 193 39,692
Transfers between fixed
asset categories (1,541) - 529 515 497 -
Transfers to computer
software - - - 2,891 - 2,891
Disposals - - (1,509) (221) (157) (1,887)
Disposal of a business
(note 28) - - (482) - - (482)
Effect of movements in
foreign exchange (868) (17) (2,223) (199) (117) (3,424)
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 1 April 2020
(restated)(a) 46,189 4,331 102,989 9,332 2,199 165,040
Additions 146 1,118 3,200 2,797 129 7,390
Transfer between categories - - 2,279 (2,279) - -
Disposals - (61) (203) (528) (195) (987)
Effect of movements in
foreign exchange 2,179 183 5,928 567 262 9,119
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 31 March 2021 48,514 5,571 114,193 9,889 2,395 180,562
------------------------------- --------- --------- --------- -------- -------- --------
Depreciation and impairment
Balance at 1 April 2019 (14,992) (2,607) (43,739) (3,780) (883) (66,001)
Depreciation charge for
the year (1,179) (250) (5,997) (808) (214) (8,448)
Impairment charge for
the year - - (432) - - (432)
Transfers between fixed
asset categories 670 (16) (79) (190) (385) -
Transfers to computer
software - - - (2,185) - (2,185)
Disposals - - 1,146 89 135 1,370
Disposal of a business
(note 28) - - 349 - - 349
Effect of movements in
foreign exchange 564 71 1,214 143 59 2,051
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 1 April 2020 (14,937) (2,802) (47,538) (6,731) (1,288) (73,296)
Depreciation charge for
the year (1,874) (773) (8,353) (2,231) (304) (13,535)
Transfers between fixed
asset categories - - (1,806) 1,806 - -
Disposals - 30 96 376 173 675
Effect of movements in
foreign exchange (1,378) (167) (4,065) (426) (167) (6,203)
------------------------------- --------- --------- --------- -------- -------- --------
Balance at 31 March 2021 (18,189) (3,712) (61,666) (7,206) (1,586) (92,359)
------------------------------- --------- --------- --------- -------- -------- --------
Net book value
At 31 March 2021 30,325 1,859 52,527 2,683 809 88,203
------------------------------- --------- --------- --------- -------- -------- --------
At 31 March 2020 (restated)(a) 31,252 1,529 55,451 2,601 911 91,744
------------------------------- --------- --------- --------- -------- -------- --------
a) For more detail please refer to note 1
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 are subject to a fixed charge in
support of the 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 2019 95,921 10,169 2,141 24,040 172 132,443
Additions - 3,738 - - - 3,738
Additions on acquisition
of business
(note 28) (restated)(a) 3,814 2,860 3,100 - - 9,774
Transfer from fixed
assets - (2,891) - - - (2,891)
Disposals - (309) - - - (309)
Effect of movements
in foreign exchange (2,361) (189) (29) (119) (8) (2,706)
------------------------------- -------- -------- ------- ------------- ----------- --------
Balance at 1 April 2020
(restated)(a) 97,374 13,378 5,212 23,921 164 140,049
Additions - 1,000 - - - 1,000
Disposals - (153) - - - (153)
Effect of movements
in foreign exchange 4,910 316 50 180 14 5,470
------------------------------- -------- -------- ------- ------------- ----------- --------
Balance at 31 March
2021 102,284 14,541 5,262 24,101 178 146,366
------------------------------- -------- -------- ------- ------------- ----------- --------
Amortisation and impairment
Balance at 1 April 2019 (13,177) (5,647) (766) (2,206) (144) (21,940)
Amortisation charge
for the year - (1,243) (1,434) (2,139) - (4,816)
Transfers from fixed
assets - 2,185 - - - 2,185
Disposals - 308 - - - 308
Effect of movements
in foreign exchange 169 165 23 68 3 428
------------------------------- -------- -------- ------- ------------- ----------- --------
Balance at 1 April 2020 (13,008) (4,232) (2,177) (4,277) (141) (23,835)
Amortisation charge
for the year - (3,840) (1,057) (2,021) - (6,918)
Disposals - 47 - - - 47
Effect of movements
in foreign exchange (311) (265) (47) (155) (8) (786)
------------------------------- -------- -------- ------- ------------- ----------- --------
Balance at 31 March
2021 (13,319) (8,290) (3,281) (6,453) (149) (31,492)
------------------------------- -------- -------- ------- ------------- ----------- --------
Net book value
At 31 March 2021 88,965 6,251 1,981 17,648 29 114,874
------------------------------- -------- -------- ------- ------------- ----------- --------
At 31 March 2020 (restated)(a) 84,366 9,146 3,035 19,644 23 116,214
------------------------------- -------- -------- ------- ------------- ----------- --------
a) For more detail please refer to note 1
Computer software relates to purchased software and people costs
associated with the implementation of software.
The aggregate carrying amounts of goodwill allocated to each
cash-generating unit group are as follows:
Restated(a)
2021 2020
$000 $000
------------ ------ -----------
UK and Asia 35,240 31,743
Europe 7,056 6,669
USA 42,872 42,875
Australia 3,797 3,079
------------ ------ -----------
88,965 84,366
------------ ------ -----------
a) For more detail please refer to note 1
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 considered
significant in comparison to the Group's total carrying amount of
such assets 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 cash-generating unit group.
The recoverable amounts of cash-generating unit groups are
determined from the higher of value in use and fair value less
costs to sell.
The Group has prepared updated forecasts following the outbreak
of the Covid-19 pandemic for each cash -- generating unit Group for
the following two years and these have been reviewed by the Board.
The key assumptions in those forecasts are sales, margins
achievable and overhead costs, which are based on past experience
and future expectations. The Group then extrapolates cash flows for
the following three years to determine discounted cash flows for
five years plus a terminal value based on a conservative estimate
of market growth of 1.0% (2020: 1.0%).
Generally, the Group's post -- tax weighted average cost of
capital ('WACC') is 6.8% prior to any risk factor, and 7.3% post
application of a 0.5% risk weighting. This has been compared to
other similar companies and is believed to be appropriate by the
Directors.
The cash-generating unit groups used the following pre-tax
discount rates which are derived from an estimate of the Group's
future WACC adjusted to reflect the market assessment of the risks
specific to the current estimated cash flows over the same period
and the relevant tax rate for each cash-generating unit group.
Pre-tax discount rates used were:
2021 2020
UK and Asia 9.1% 8.5%
Europe 9.5% 9.6%
USA 9.5% 9.3%
Australia 10.2% 10.2%
------------ ----- -----
In all businesses, the carrying value of the goodwill was
supported by the recoverable amount and there are currently no
reasonably foreseeable changes to assumptions that would give rise
to an impairment of the carrying value.
The Directors do not believe a reasonably possible change to the
assumptions would give rise to an impairment. The Directors have
considered a 2% movement in the discount rate, a flat budget growth
rate assumption as well as a climate change risk assessment impact
in their sensitivity assessment; with these changes in assumptions
there is still significant headroom and no indication of
impairment.
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
2019 43,858 1,279 634 382 46,153
Additions 6,852 211 150 125 7,338
Additions on acquisition of
business 39,698 619 119 214 40,650
Disposals (20) - - (23) (43)
Disposal of a business (572) - - - (572)
Depreciation charge (7,886) (522) (358) (145) (8,911)
Effect of movements in foreign
exchange (1,802) (33) (15) (23) (1,873)
Net book value at 1 April
2020 80,128 1,554 530 530 82,742
Additions 32,016 298 223 403 32,940
Disposals - - (17) - (17)
Depreciation charge (16,754) (629) (379) (316) (18,078)
Impairment (5,969) - - - (5,969)
Effect of movements in foreign
exchange 3,467 73 23 199 3,762
------------------------------- --------- --------- -------- --------- --------
Net book value at 31 March
2021 92,888 1,296 380 816 95,380
------------------------------- --------- --------- -------- --------- --------
Additions include lease modifications of $2.4 million (2020:
$2.7 million).
Income statement
The income statement shows the following amounts relating to
leases:
2021 2020
$000 $000
------------------------------------------------ ------ -----
Interest expense (included in finance expenses) 3,685 2,043
Depreciation charge 18,078 8,911
Impairment 5,969 -
Expense relating to short term leases 153 3,114
------------------------------------------------ ------ -----
Low value lease costs were negligible in the year.
At 31 March 2021, the Group had estimated lease commitments for
leases not yet commenced of $1.4 million (2020: $16.2 million).
Movement in lease liabilities
2021 2020
$000 $000
---------------------------------------- --------- --------
Balance at 1 April (95,413) -
Recognised on adoption of IFRS 16 - (52,118)
---------------------------------------- --------- --------
(95,413) (52,118)
Cash flow - financing activities 19,184 8,430
Additions (33,200) (7,337)
Additions on acquisition of business - (47,344)
Disposals 17 44
Disposal of a business - 623
Effect of movements in foreign exchange (4,510) 2,289
---------------------------------------- --------- --------
Balance at 31 March (113,922) (95,413)
---------------------------------------- --------- --------
Total cash outflow in relation to leases is as follows:
2021 2020
$000 $000
---------------------------------------------------------------- ------ ------
Included in financing activities - payment of lease liabilities 19,184 8,430
Included in interest and similar charges paid 3,685 2,043
Short term leases 130 3,092
---------------------------------------------------------------- ------ ------
22,999 13,565
---------------------------------------------------------------- ------ ------
Commitments for minimum lease payments in relation to
non-cancellable operating leases are payable as follows:
2021 2020
$000 $000
--------------------------- ---- ----
Less than one year 153 460
Between one and five years - -
More than five years - -
--------------------------- ---- ----
153 460
--------------------------- ---- ----
Income from sub-leasing right-of-use assets
During the year sub-lease income from right-of-use assets was as
follows:
2021 2020
$000 $000
----------------------------------------------------------- ---- ----
Sub-lease income in the year from sub-leasing right-of-use
assets 559 358
----------------------------------------------------------- ---- ----
Non-cancellable operating lease rentals are receivable as
follows:
2021 2020
$000 $000
--------------------------- ---- ----
Less than one year 466 384
Between one and five years 348 405
--------------------------- ---- ----
814 789
--------------------------- ---- ----
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
Share --
and intangible carried based Doubtful Other timing
assets forward payments debts differences(b) Total
$000 $000 $000 $000 $000 $000
--------------------------- -------------- ---------- -------- -------- -------------- -------
At 1 April 2019 (5,769) 2,436 2,253 1,859 3,014 3,793
(Charge)/credit to
income statement (249) 2,042 (136) 2,104 80 3,841
(Charge)/credit to
equity 87 216 (621) (6) 714 390
Acquisitions (restated)(a) 11,344 - - - (5,859) 5,485
--------------------------- -------------- ---------- -------- -------- -------------- -------
At 31 March 2020 5,413 4,694 1,496 3,957 (2,051) 13,509
--------------------------- -------------- ---------- -------- -------- -------------- -------
Deferred tax liabilities (1,546) - - - (186) (1,732)
Deferred tax assets 6,959 4,694 1,496 3,957 (1,865) 15,241
--------------------------- -------------- ---------- -------- -------- -------------- -------
5,413 4,694 1,496 3,957 (2,051) 13,509
--------------------------- -------------- ---------- -------- -------- -------------- -------
Property,
plant
and equipment Tax losses
and intangible carried Share-based Doubtful Other timing
assets forward payments debts differences(b) Total
$000 $000 $000 $000 $000 $000
------------------------- -------------- ---------- ----------- -------- -------------- -------
At 1 April 2020 5,413 4,694 1,496 3,957 (2,051) 13,509
(Charge)/credit to
income statement 96 3,146 33 (2,611) 1,106 1,770
(Charge)/credit to
equity (134) 551 155 8 383 963
At 31 March 2021 5,375 8,391 1,684 1,354 (562) 16,242
------------------------- -------------- ---------- ----------- -------- -------------- -------
Deferred tax liabilities (1,834) - (3) - (4,968) (6,805)
Deferred tax assets 7,209 8,391 1,687 1,354 4,406 23,047
------------------------- -------------- ---------- ----------- -------- -------------- -------
5,375 8,391 1,684 1,354 (562) 16,242
------------------------- -------------- ---------- ----------- -------- -------------- -------
a) For more detail please refer to note 1
b) Other timing differences include a deferred tax closing
balance of $4.1 million (2020: $5.7 million (restated)(a) ) in
respect of provision for inventory and $3.1 million (2020: $1.5
million) in respect of leases.
Deferred tax is presented net on the balance sheet in so far as
a right of offset exists. The net deferred tax asset is $18.4
million (2020: $18.1 million) and the net deferred tax liability is
$2.1 million (2020: $4.6 million (restated)(a) ). 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 2021 of $8.4 million (2020: $4.7 million) comprises UK
tax losses of $3.3 million (2020: $2.3 million), US tax losses of
$5.0 million (2020: $2.2 million) and Asia tax losses of $156,000
(2020: $136,000). All of these recognised tax losses may be carried
forward indefinitely. The deferred tax assets have been recognised
where the Board considers there is sufficient evidence that taxable
profits will be available against which the tax losses can be
utilised. The Board expects that the tax losses will be recoverable
against future profits. There are unrecognised deferred tax assets
in respect of UK losses of $884,000 (2020: $796,000).
In the Americas segment there are gross temporary differences of
$76.4 million (2020: $101.6 million) and unused tax losses, with no
expiry date, of $23.0 million (2020: $9.4 million) on which
deferred tax assets have not been provided. Deferred tax assets
have not been recognised on these primarily as a result of
restrictions under the US change in ownership rules following the
acquisition of CSS.
A deferred tax liability of $101,000 (2020: $99,000) has been
recognised based on the tax cost of remitting earnings from China.
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 UK Budget 2021 announcement on 3 March 2021
included an increase in the UK standard rate of corporation tax to
25% effective from 1 April 2023. Given that these changes were not
substantively enacted at the balance sheet date, deferred tax has
been measured at 19%. If the UK deferred tax was remeasured at the
balance sheet date at 25%, the net deferred tax asset would
increase by $1.2 million.
Included within current tax liabilities is $6.1 million (2020:
$5.9 million) in respect of uncertain tax positions. This consists
of various tax risks of which the majority are individually not
material. As a result of the acquisition of CSS in March 2020,
additional liabilities were recognised in the prior year in respect
of inherited uncertain tax positions. Of these liabilities, there
is one individual liability that is material ($3.1 million). These
risks arise because the Group operates in a complex multinational
tax environment. 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.
A total tax credit of $214,000 (2020: $213,000) has been
recognised through the statement of changes in equity in respect of
share -- based payments consisting of a deferred tax credit of
$214,000 (2020: $179,000 charge) and current tax credit of $nil
(2020: $392,000). In the prior year a deferred tax credit of $1.0
million was recognised through the statement of changes in equity
on adoption of IFRS 16 Leases. There are no deferred tax balances
with respect to cash flow hedges.
12 Inventory
Restated(a)
2021 2020
$000 $000
------------------------------ ------- -----------
Raw materials and consumables 23,219 24,658
Work in progress 27,632 25,011
Finished goods 125,314 119,745
------------------------------ ------- -----------
176,165 169,414
------------------------------ ------- -----------
a) For more detail please refer to note 1
In 2021, materials, consumables, changes in finished goods and
work in progress of $613.3 million (2020: $456.1 million) were
recognised as an expense during the year and included in cost of
sales.
Inventories have been assessed at the 2021 year end and an
impairment of $19.3 million (2020: $6.8 million) has been taken to
reduce the value of inventories to net realisable value and
recognised as an expense. In addition to this, inventories have
been reduced by a further $0.3 million (2020: $7.6 million) due to
the impact of Covid-19, which is offset by previous Covid-19 write
downs which have been reversed of $4.0 million (2020: nil). The
impairment expense in 2021 has been reduced by the reversal of
previous write downs amounting to $0.4 million (2020: $4.9 million)
due to inventory either being used or sold.
13 Long term assets and trade and other receivables
2021 2020
$000 $000
------------------------- ----- -----
Acquisition indemnities 856 720
UK pension surplus 676 598
Security deposits 1,011 1,087
Insurance related assets 3,178 3,818
------------------------- ----- -----
5,721 6,223
------------------------- ----- -----
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:
2021 2020
$000 $000
------------------------------------------------------------- ------- -------
Trade receivables 115,858 96,368
Prepayments, other receivables and accrued income (restated) 13,066 13,268
VAT receivable 295 411
------------------------------------------------------------- ------- -------
129,219 110,047
------------------------------------------------------------- ------- -------
The Group has receivable financing arrangements in Hong Kong.
None of this facility was drawn at 31 March 2021 (2020: $nil).
Please see note 15 for more details of the banking
facilities.
There are no trade receivables in the current year (2020: $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
2021 2020
$000 $000
---------------------------------------------------------------------- -------- --------
Cash and cash equivalents 132,760 83,200
Bank overdrafts (57,033) (31,003)
---------------------------------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts per cash flow statement 75,727 52,197
---------------------------------------------------------------------- -------- --------
Net cash
2021 2020
Note $000 $000
------------------------------------------------------------- ---- ------ ------
Cash and cash equivalents 75,727 52,197
Bank loans and overdrafts 15 - (987)
Loan arrangement fees 723 1,209
------------------------------------------------------------- ---- ------ ------
Net cash as used in the financial review cash flow statement 76,450 52,419
------------------------------------------------------------- ---- ------ ------
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
Loans and arrangement Cash/bank
borrowings fees Sub total overdrafts Total
$000 $000 $000 $000 $000
---------------------------------------- ---------- ----------- --------- ------------ -------
Balance at 1 April 2019 (3,127) 40 (3,087) 25,296 22,209
Cash flows 1,917 1,571 3,488 32,719 36,207
Changes from financing cash flows
Amortisation of loan arrangement fees - (368) (368) - (368)
Effect of movements in foreign exchange 223 (34) 189 (5,818) (5,629)
---------------------------------------- ---------- ----------- --------- ------------ -------
Balance at 1 April 2020 (987) 1,209 222 52,197 52,419
Cash flows 1,158 - 1,158 24,777 25,935
Changes from financing cash flows
Amortisation of loan arrangement fees - (588) (588) - (588)
Effect of movements in foreign exchange (171) 102 (69) (1,247) (1,316)
---------------------------------------- ---------- ----------- --------- ------------ -------
Balance at 31 March 2021 - 723 723 75,727 76,450
---------------------------------------- ---------- ----------- --------- ------------ -------
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.
2021 2020
$000 $000
-------------------------------------- ----- -----
Non-current liabilities
Secured bank loans - 432
Loan arrangement fees (103) (651)
-------------------------------------- ----- -----
(103) (219)
-------------------------------------- ----- -----
Current liabilities
Current portion of secured bank loans - 555
Loan arrangement fees (620) (558)
-------------------------------------- ----- -----
(620) (3)
-------------------------------------- ----- -----
Terms and debt repayment schedule
2021 2020
$000 $000
------------------------------- ---- ----
Due within one year:
Bank loans and borrowings - 555
Due between one and two years:
Secured bank loans - 432
- 987
------------------------------- ---- ----
Secured bank loans
On 5 June 2019, the Group entered into a new three year Group
facility with a club of five banks chosen to reflect and support
the geographical spread of the Group. The banks within the club are
HSBC, NatWest, Citigroup (who replaced BNP Paribas), Truist Bank
(as successor by merger to SunTrust Bank) and PNC.
On 17 January 2020 a facility increase was agreed to support the
acquisition of CSS on 3 March 2020 and to accommodate the enlarged
Group.
The facilities, which were extended in May 2021 to run to June
2023, comprise:
-- a revolving credit facility ('RCF A') of $95.0 million;
-- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to GBP130.0 million.
This RCF is flexed to meet our working capital requirements during
those months when inventory is being built within our annual
business cycle and is GBPnil when not required, minimising carry
costs; and
-- an invoice financing arrangement in Hong Kong maximum limit
$18.0 million but dependent on level of eligible receivables.
In total, the peak accessible facilities are approximately
$287.3 million (maximum $292.0 million) and are more than
sufficient to cover our peak requirements. Being partially
denominated in US dollars they also provide a hedge against
currency movements. The facilities, which do not amortise with
time, include an additional uncommitted amount to finance potential
acquisitions.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on. The RCF facilities are secured
with a fixed and floating charge over all other assets of the
Group. Amounts drawn under revolving credit facilities are
classified as current liabilities as the Group expects to settle
these amounts within 12 months.
There are financial covenants, tested quarterly, attached to the
existing facilities as follows:
-- interest cover, being the ratio of Adjusted earnings before
interest, depreciation and amortisation (EBITDA), as defined by the
banking facility, to interest on a rolling twelve--month basis;
and
-- leverage, being the ratio of debt to Adjusted EBITDA, as
defined by the banking facility, on a rolling twelve-month
basis.
Covenants are measured on pre IFRS 16 accounting
definitions.
There is a further 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.
In January 2018, the Group's Australia business obtained a
secured loan from Westpac of $6.5 million (AU$9.0 million). The
final $1.2 million was repaid during the period which results in a
nil balance at 31 March 2021. The Australia business also borrows
from Westpac for financing working capital and the current facility
level is AU$5.0 million from January to June and AU$10.0 million
July to December.
Loan arrangement fees represent the unamortised costs in
arranging the Group facilities. These fees are being amortised on a
straight line basis over the terms of the facilities.
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. This arrangement is not
considered to have had a significant impact on the Group's cashflow
in the year.
16 Deferred income
2021 2020
$000 $000
---------------------------------------- ---- ----
Included within non-current liabilities
Deferred grant income 486 561
---------------------------------------- ---- ----
Included within current liabilities
Deferred grant income 136 123
Other deferred income 288 39
---------------------------------------- ---- ----
424 162
---------------------------------------- ---- ----
The deferred grant income is in respect of government grants
relating to the development of the site in Wales. The conditions
for this grant were all fully met in January 2019. The assets for
which the grant related to are being depreciated in line with the
release of the deferred income.
17 Provisions
Property Other Total
$000 $000 $000
---------------------------------------- -------- ------- -------
Balance at 1 April 2020 (restated)(a) 6,612 1,595 8,207
Provisions made in the year 289 313 602
Provisions released during the year (27) (129) (156)
Unwinding of fair value discounts 79 - 79
Provisions utilised during the year (111) (1,423) (1,534)
Effect of movements in foreign exchange 151 10 161
---------------------------------------- -------- ------- -------
Balance at 31 March 2021 6,993 366 7,359
---------------------------------------- -------- ------- -------
Restated(a)
2021 2020
$000 $000
------------ ----- -----------
Non-current 5,742 5,161
Current 1,617 3,046
------------ ----- -----------
7,359 8,207
------------ ----- -----------
a) For more detail please refer to note 1
The property provision represents the estimated reinstatement
cost of 13 (2020:13) of the Group's leasehold properties under
fully repairing leases. A professional valuation was performed
during 2016 for one of the leasehold properties and the provision
was reassessed and is stated after discounting. Of the non-current
balance, $1.4 million (2020: $1.3 million) relates to a lease
expiring in 2036; the remainder relates to provisions unwinding
between one and five years.
Other provisions are short term and represent management's best
estimate in respect of minor amounts arising in the normal course
of business.
The timing of the utilisation of provisions assumes the business
continues to operate based on the most up -- to -- date business
plan.
18 Other financial liabilities
2021 2020
$000 $000
--------------------------------------------------------------------------------------------- ------ ------
Included within non-current liabilities
Other creditors and accruals 15,526 6,784
--------------------------------------------------------------------------------------------- ------ ------
Included within current liabilities
Other creditors and accruals 43,976 47,984
Interest rate swaps and forward foreign currency contracts carried at fair value through the
income statement - -
Interest rate swaps and forward foreign exchange contracts carried at fair value through the
hedging reserve 293 9
--------------------------------------------------------------------------------------------- ------ ------
44,269 47,993
--------------------------------------------------------------------------------------------- ------ ------
19 Trade and other payables
Restated(a)
2021 2020
$000 $000
----------------------------------------- ------- -----------
Trade payables 107,588 111,311
Other payables including social security 12,875 8,792
VAT payable 300 553
----------------------------------------- ------- -----------
120,763 120,656
----------------------------------------- ------- -----------
a) For more detail please refer to note 1
20 Share capital
Authorised share capital at 31 March 2021 and 2020 was GBP6.0
million, 121.0 million ordinary shares of 5p each.
Ordinary shares
-----------------
In thousands of shares 2021 2020
---------------------------------- -------- -------
In issue at 1 April 96,367 78,366
Options exercised during the year 491 711
Share placing - 17,290
---------------------------------- -------- -------
In issue at 31 March - fully paid 96,858 96,367
---------------------------------- -------- -------
2021 2020
$000 $000
----------------------------------- ------ -----
Allotted, called up and fully paid
Ordinary shares of GBP0.05 each 6,667 5,974
----------------------------------- ------ -----
Of the 96.9 million shares in the Company, 31,000 (2020: 31,000)
are held by the International Greetings Employee Benefit Trust.
LTIP options exercised during the year resulted in 491,000
ordinary shares issued at nil cost (2020: 711,000 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 Earnings per share
2021 2020
Note $000 $000
-------------------------------------------------- ---- ------- --------
Earnings
Earnings attributable to equity holders
of the Company 8,207 16,461
Adjustments
Adjusting items (net of non-controlling
interest effect) 22,358 35,964
Tax relief on adjustments (net of non-controlling
interest effect) (5,184) (7,946)
Adjusting item - tax credit 7 - (17,336)
-------------------------------------------------- ---- ------- --------
Adjusted earnings attributable to equity
holders of the Company 25,381 27,143
-------------------------------------------------- ---- ------- --------
In thousands of shares 2021 2020
-------------------------------------------------- ---- ------- --------
Weighted average number of shares
Basic weighted average number of shares
outstanding 97,700 82,605
Dilutive effect of employee share option
plans 440 476
-------------------------------------------------- ---- ------- --------
Diluted weighted average ordinary shares 98,140 83,081
-------------------------------------------------- ---- ------- --------
2021 2020
Cents Cents
Earnings per share
Basic earnings per share 8.4 19.9
Adjustment 17.6 12.9
-------------------------------------------------- ---- ------- --------
Basic adjusted earnings per share 26.0 32.8
-------------------------------------------------- ---- ------- --------
Diluted earnings per share 8.4 19.8
Diluted adjusted earnings per share 25.9 32.7
-------------------------------------------------- ---- ------- --------
Adjusted earnings per share are provided to reflect the
underlying earnings performance of the Group.
In thousands of shares 2021 2020
---------------------------------- ------ ------
Issued ordinary shares at 1 April 96,367 78,366
Shares relating to share options 1,333 1,594
Shares issued in respect of share
placing - 2,645
Weighted average number of shares
at 31 March 97,700 82,605
----------------------------------- ------ ------
Diluted earnings per share
The diluted earnings per share is calculated taking into account
LTIP awards whose specified conditions were satisfied at the end of
the year of 440,000 (2020: 476,000) share options (including those
under the Executive share options scheme) along with 31,000 shares
held by the Employee Benefit Trust (2020: 31,000). At 31 March 2021
the diluted number of shares was 98.1 million (2020: 83.1
million).
22 Dividends paid and proposed
A final dividend for year ending 31 March 2020 was paid on 9
November 2020. An interim dividend was paid on 15 January 2021 .The
Directors are recommending a final dividend of 5.75p (7.92 cents)
in respect of the year ended 31 March 2021. If approved it will be
paid in October 2021 to shareholders on the register at the close
of business on 9 October 2021.
2021 2020
---------- ---------- ------ ---------- ---------- -----
Pence Cents Pence Cents
per share per share $000 per share per share $000
---------------------------- ---------- ---------- ------ ---------- ---------- -----
Final equity dividend for
prior year 5.75 7.13 7,329 6.00 7.44 5,868
Interim equity dividend
for current year 3.00 4.09 3,959 3.00 3.93 3,107
---------------------------- ---------- ---------- ------ ---------- ---------- -----
Dividends paid in the year 11,288 8,975
---------------------------- ---------- ---------- ------ ---------- ---------- -----
2021 2020
---------- ---------- ----- ---------- ---------- -----
Proposed for approval at Pence Cents Pence Cents
Annual General Meeting per share per share $000 per share per share $000
--------------------------- ---------- ---------- ----- ---------- ---------- -----
Final equity dividend for
the current year 5.75 7.92 7,667 5.75 7.13 7,329
--------------------------- ---------- ---------- ----- ---------- ---------- -----
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.
The last triennial valuation performed was in December 2017. A
further actuarial valuation was updated on an approximate basis at
31 March 2021, 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)
2021 2020
$000 $000
-------------------------------------------- ------- -------
Fair value plan of assets 3,615 3,028
Present value of defined benefit obligation (2,528) (2,430)
-------------------------------------------- ------- -------
Surplus in plan 1,087 598
-------------------------------------------- ------- -------
Net defined benefit asset to be recognised 676 598
-------------------------------------------- ------- -------
Reconciliation of opening and closing balances of the defined
benefit obligation
2021 2020
$000 $000
---------------------------------------------------------- ------- -------
Defined benefit obligation as at 1 April (2,430) -
Liabilities acquired in a business combination - (2,509)
Interest expense (47) -
Actuarial gains due to changes in demographic assumptions 9 -
Actuarial gains due to changes in financial assumptions 201 -
Effect of movement in foreign exchange (261) 79
---------------------------------------------------------- ------- -------
Defined benefit obligation as at 31 March (2,528) (2,430)
---------------------------------------------------------- ------- -------
Reconciliation of opening and closing balances of the fair value
of plan assets
2021 2020
$000 $000
------------------------------------------ ----- -----
Fair value of plan assets as at 1 April 3,028 -
Assets acquired in a business combination - 3,126
Interest income 59 -
Return on plan assets 121 -
Contributions by the company 71 -
Benefits paid and expenses (9) -
Effect of movement in foreign exchange 345 (98)
------------------------------------------ ----- -----
Fair value of plan assets as at 31 March 3,615 3,028
------------------------------------------ ----- -----
A total of $3,000 has been charged to Group operating profit
during the year, including $9,000 of expense netting against net
interest income of $12,000.
The principal assumptions used by the independent qualified
actuary for the purposes of IAS 19 are as follows:
2021 2020
---------------------- ----- -----
Increase in salaries - -
Increase in pensions - -
at RPI capped at 5% 3.70% 3.50%
at CPI capped at 5% 2.40% 1.95%
at CPI capped at 2.5% 2.40% 1.95%
Discount rate 2.20% 1.70%
Inflation rate - RPI 3.30% 2.80%
Inflation rate - CPI 2.40% 1.95%
---------------------- ----- -----
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:
2021 2020
-------------------------------------- ---- ----
Male retiring today at age 60 26.4 26.4
Female retiring today at age 60 28.5 28.5
Male retiring in 20 years at age 60 27.9 28.0
Female retiring in 20 years at age 60 30.1 30.1
-------------------------------------- ---- ----
In addition to the defined benefit pension scheme there is also
a small post retirement healthcare scheme operated in the USA,
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:
2021 2020
$000 $000
------------------ ---- ----
UK pension scheme 62 -
US health scheme (30) -
------------------ ---- ----
32 -
------------------ ---- ----
Long Term Incentive Plans
The Group operate two Long Term Incentive Plans ('Plans'), the
2014 Long Term Incentive Plan ('LTIP') and the Value Creation
Scheme ('VCS') launched in February 2021.
Under the LTIP, options to subscribe for ordinary shares of a
nominal value of 5p each ('ordinary shares') may be awarded
annually to Executive Board Directors of the Company, Managing
Directors and other selected senior management team members within
the Group. Ordinary shares only vest to the degree that stretching
performance conditions are met.
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 performance criteria are met is nil. In principle the
number of ordinary shares to be granted to each employee under the
LTIP will not be more than 325% in value of the relevant employee's
salary base. The maximum opportunity available under the LTIP is up
to 175% for the CEO and for other Executive Directors up to 150% of
base salary.
Under the VCS, the scheme awards will allow participants to
share, in total, up to 12.5% of the value created ('VCS Pool')
provided that the performance criteria are met. No individual award
can be greater than GBP12.5 million. The maximum opportunity
available under the VCS is up to 17.5% of the VCS Pool for the CEO
and for the other Executive Directors up to 12.5% and 7.5%. Shares
will be released to the participants either following the
calculation of the VCS Pool or, in the case of the awards for the
CEO, the other Executive Directors and three other senior
executive, following the end of a further two year holding period.
Awards may be structured as nil-cost options which can be exercised
from release until the tenth anniversary of grant of the awards, or
as conditional awards which deliver shares for nil-cost
automatically at release.
For both plans together, the maximum dilution is 15% over a ten
year period. For the VCS specifically, within the 15% limit, there
is a dilution limit of 7.5%.
The plan rules, which have been agreed by the Remuneration
Committee, include reasonable provisions in the event of change of
control, suitable flexibility to modify performance targets in
specified situations and also a mechanism for claw-back under
certain circumstances. The Board retains the flexibility to buy
ordinary shares through an Employee Benefit Trust to mitigate
future dilution should it need to do so. Participants in the VCS
will not be granted any other long-term incentive awards during the
remaining performance period following the grant of the scheme in
February 2021 although the annual bonus and the existing in-flight
long term incentives will continue to operate.
Vested LTIP schemes - outstanding options
Exercise
Number
of price
ordinary
shares pence Exercise dates
------------------------- --------- --------- --------------------
June 2017 - August
2014-2017 LTIP scheme 36,401 nil 2024
June 2018 - January
2015-2018 LTIP scheme 331,595 nil 2028
June 2019 - January
2016-2019 LTIP scheme 295,212 nil 2028
July 2020 - August
2017-2020 LTIP scheme 210,091 nil 2027
June 2021 - November
2018-2021 LTIP scheme(b) 418,429 nil 2028
------------------------- --------- --------- --------------------
1,291,728
------------------------- --------- --------- --------------------
All performance criteria have been met for the above
schemes.
2021 2020
-------------------- -------------------
Weighted Weighted
average average
exercise Number exercise Number
price of price of
pence options pence options
----------------------------------- --------- --------- -------- ---------
Outstanding at 1 April nil 1,359,488 nil 1,575,385
Prior year adjustment(a) nil 4,650 nil 18,337
Options vesting during the year(b) nil 418,429 nil 476,449
Exercised during the year nil (490,839) nil (710,683)
----------------------------------- --------- --------- -------- ---------
Outstanding at 31 March nil 1,291,728 nil 1,359,488
----------------------------------- --------- --------- -------- ---------
Exercisable at 31 March nil 1,291,728 nil 1,359,488
----------------------------------- --------- --------- -------- ---------
a) Relates to share options not included in the prior year balance.
75% of the initial award plus dividend shares will formally vest
on 1 June 2021 following the Remuneration and Audit Committees'
approval of the results of the year ended 31 March 2021.
Scheme details for plans in vesting periods during the year
During the financial year to 31 March 2021 there were three LTIP
schemes still within their vesting periods (2020: three), as well
as the VCS (2020: nil).
Awards
2018-2021 2019-2022 2020-2022
LTIP LTIP LTIP
Grant A Grant B Grant A Grant A Grant B
-------------------------------------- -------- --------- ---------- ------- -------
Fair value per share (GBP) 5.55 5.56 6.02 4.66 6.03
Number of participants 15 5 28 1 1
Initial award 151,859 633,372 758,782 50,000 100,000
Dividend shares 3,267 11,832 18,033 917 548
Lapses and forfeitures (65,215) (316,686) (212,788) - -
-------------------------------------- -------- --------- ---------- ------- -------
Potential to vest as at 31 March 2021 89,911 328,518 564,027 50,917 100,548
-------------------------------------- -------- --------- ---------- ------- -------
Potential to vest as at 31 March 2020 134,154 636,080 - - -
-------------------------------------- -------- --------- ---------- ------- -------
The grant date fair value of the LTIP options granted in the
year assuming they are to vest in full is $1.2 million (2020: $5.7
million). The exercise price is nil.
The grant date fair value of the VCS scheme of GBP3.54 was
determined using the following factors in the binomial pricing
model:
Asset price GBP4.50
Exercise price nil
Expected volatility 31.5%
Option life 2.43
Risk free rate 0.14%
Dividend yield 2%
--------------------- -------
The expected volatility is based on the Group's historical three
year volatility. The number of participants in the VCS scheme
currently is 87.
LTIP performance targets
Awards are granted with threshold and stretch targets. 25% of
the weighted awards vests if the relevant threshold target is
achieved, with straight-line vesting of the balance up to 100% of
the weighted award if the stretch target is achieved.
Weighting Threshold Stretch
---------------- --------- ----------- -------------
2019-2022 scheme
EPS(a) 100% CAGR(b) 10% CAGR(b) 17.0%
---------------- --------- ----------- -------------
a) EPS before Board approved Adjusting items.
b) Compound annual growth rate.
In light of Covid-19, the Remuneration Committee revisited the
performance targets associated with the 2018-2021 scheme and a
revision was made in recognition of the impact of Covid-19 on the
original metrics (being CAGR of EPS). The revised metrics set a
target Adjusted profit before tax and average leverage. If this
target was met, 50% of the award would vest. If the metric was
exceeded, the award would vest on a straight line basis up to a
maximum award of 75%. The Committee also concluded during the year
that the super stretch element of the 2018-2021 scheme had fully
lapsed. The Remuneration Committee have final discretion over the
vesting of any of the schemes.
Further detailed discussion took place around the criteria for
the 2019-2022 scheme and following the same principles as the
2018-2021 scheme, it was decided to revisit the performance
criteria. It was also decided to remove the Executive Directors'
super stretch target. Revisions to metrics had not been decided
upon by 31 March 2021, however they have subsequently been amended
to an Adjusted profit before tax metric relating to the financial
year 2022.
The 2020-2022 scheme (granted to two individuals only) has a
service condition only (1 April 2020 to 30 June 2022).
VCS performance targets
The VCS is based on an achievement of a minimum 7.5% CAGR on the
opening valuation of the Company over a three year performance
period from 1 April 2020 to 31 March 2023. In addition, a
performance underpin is included such that, ordinarily, no VCS
awards will vest unless the Adjusted profit before tax for the 12
months to 31 March 2023 meets a set target.
The closing market capitalisation will be based on the volume
weighted average share price over the period of 30 days following
announcement of the audited results for the 12 months ending on 31
March 2023. Appropriate adjustments shall be made in respect of any
capital raised from or returned to shareholders during the
measurement period.
Following the calculation of the VCS Pool, each participant's
allocation will be converted into a number of ordinary shares in
the Company by reference to the share price used to determine the
size of the VCS Pool.
Share-based payments charges
The total expense recognised for the year arising from equity --
settled share -- based payments are as follows:
2021 2020
$000 $000
---------------------------------------------------------- ----- -----
Charge in relation to the 2017-2020 LTIP scheme - 477
Charge/(credit) in relation to the 2018-2021 LTIP
scheme 2,951 (764)
Charge in relation to the 2019-2022 LTIP scheme - -
Charge in relation to the 2020-2022 LTIP scheme 229 -
Charge in relation to the VCS scheme 488 -
---------------------------------------------------------- ----- -----
Equity-settled share-based payments charge/(credit) 3,668 (287)
Social security charge 524 35
---------------------------------------------------------- ----- -----
Total equity-settled share-based payments charge/(credit) 4,192 (252)
---------------------------------------------------------- ----- -----
Deferred tax assets are recognised on share-based payment
schemes (see note 11).
Social security charges 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 $1.3 million (2020:
$1.0 million).
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, which are given below,
are not considered to be materially different to their fair
values.
As at 31 March 2021, the Group had derivative contracts, which
were measured at Level 2 fair value subsequent to initial
recognition, to the value of an asset of $207,000 (2020: $412,000)
and a liability of $293,000 (2020: $9,000).
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 $254.5 million (2020: $186.2 million)
being the total of the carrying amount of financial assets,
excluding equity investments above.
The maximum exposure to credit risk for trade receivables at the
balance sheet date by reporting segment was:
2021 2020
$000 $000
-------------- ------- ------
Americas 94,484 75,183
International 21,374 21,185
-------------- ------- ------
115,858 96,368
-------------- ------- ------
Credit quality of financial assets and impairment losses
There was no change to the level of provision for doubtful debts
upon the adoption of IFRS 9.
The ageing of trade receivables at the balance sheet date
was:
2021 2020
------------------------------ ------------------------------
Provisions Provisions
Expected for Expected for
doubtful doubtful
loss rate Gross debts loss rate Gross debts
% $000 $000% $000 $000
------------------- --------- ------- ---------- -------- ------- ----------
Not past due 0.1 76,709 (105) 8.0 77,757 (6,234)
Past due 0-60 days 7.4 26,057 (1,930) 11.1 22,305 (2,478)
61-90 days 15.7 6,657 (1,045) 33.6 2,449 (823)
More than 90 days 42.0 16,413 (6,898) 64.4 9,532 (6,140)
------------------- --------- ------- ---------- --------- ------- ----------
7.9 125,836 (9,978) 14.0 112,043 (15,675)
------------------- --------- ------- ---------- --------- ------- ----------
There were no unimpaired balances outstanding at 31 March 2021
(2020: $nil) where the Group had renegotiated the terms of the
trade receivable. The movement year-on-year relates to assets
impaired as at 31 March 2020 due to Covid-19 that have been
utilised or released as no longer required during the year to 31
March 2021.
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:
2021 2020
$000 $000
---------------------------------------- ------- -------
Balance at 1 April 15,675 7,891
Charge for the year 2,295 8,261
Unused amounts reversed (4,103) (1,313)
Acquisition of businesses - 2,231
Amounts utilised (4,000) (1,210)
Effects of movement in foreign exchange 111 (185)
---------------------------------------- ------- -------
Balance at 31 March 9,978 15,675
---------------------------------------- ------- -------
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 2021 are set out in note 15.
The following are the contractual maturities of financial
liabilities, including estimated interest payments:
One to Two to
Carrying Contractual One year two five More than
amount cash flows or less years years five years
31 March 2021 Note $000 $000 $000 $000 $000 $000
------------------------------- ---- -------- ----------- --------- -------- -------- ----------
Non-derivative financial
liabilities
Other financial liabilities(a) 18 59,502 (59,502) (43,976) (15,279) (122) (125)
Lease liabilities(a) 10 113,922 (129,399) (22,729) (20,125) (44,212) (42,333)
Trade payables(a) 19 107,588 (107,588) (107,588) - - -
Other payables(a) 19 13,175 (13,175) (13,175) - - -
Derivative financial
liabilities
Forward foreign exchange
contracts carried
at fair value
through the hedging
reserve(a) 293 (2,100) (2,100) - - -
------------------------------- ---- -------- ----------- --------- -------- -------- ----------
294,480 (311,764) (189,568) (35,404) (44,334) (42,458)
------------------------------- ---- -------- ----------- --------- -------- -------- ----------
a) Measured at Level 2.
One to Two to
Carrying Contractual One year two five More than
amount cash flows or less years years five years
31 March 2020 Note $000 $000 $000 $000 $000 $000
------------------------------- ---- -------- ----------- --------- -------- -------- ----------
Non-derivative financial
liabilities
Secured bank loans
- Australian dollar(a) 15 987 (1,018) (571) (447) - -
Other financial liabilities(b) 18 54,768 (54,768) (47,984) (6,753) (28) (3)
Lease liabilities(b) 10 95,413 (109,542) (20,145) (18,294) (40,050) (31,053)
Trade payables(b)
(restated)(c) 19 111,311 (111,311) (111,311) - - -
Other payables(b) 19 9,345 (9,345) (9,345) - - -
Derivative financial
liabilities
Forward foreign exchange
contracts carried
at fair value through
the hedging reserve(b) 9 (4,500) (4,500) - - -
------------------------------- ---- -------- ----------- --------- -------- -------- ----------
271,833 (290,484) (193,856) (25,494) (40,078) (31,056)
------------------------------- ---- -------- ----------- --------- -------- -------- ----------
a) Nominal interest rate 4.49%.
b) Measured at Level 2.
c) For more detail please refer to note 1
The following table shows the facilities for bank loans,
overdrafts, asset -- backed loans and revolving credit
facilities:
31 March 2021 31 March 2020
------------------------------------------- -------------------------------------------
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
------------------- -------- ----------- --------- --------- -------- ----------- --------- ---------
Secured bank
loans - - - - 987 (1,018) - (1,018)
Corporate
revolving
credit facilities - - (97,136) (97,136) - - (97,025) (97,025)
Bank overdraft - - (5,002) (5,002) - - (4,441) (4,441)
------------------- -------- ----------- --------- --------- -------- ----------- --------- ---------
- - (102,138) (102,138) 987 (1,018) (101,466) (102,484)
------------------- -------- ----------- --------- --------- -------- ----------- --------- ---------
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
$292.0 million (2020: $281.4 million).
At 31 March 2021 the facility amounted to $97.1 million (2020:
$97.0 million).
Additional facilities were available at other banks of $5.0
million (2020: $4.4 million).
On 28 May 2021 the Group banking facilities were extended to run
to June 2023, see note 15 for more information.
d) Cash flow hedges
The following derivative financial instruments were designated
as cash flow hedges:
2021 2020
Forward exchange contracts carrying amount $000 $000
------------------------------------------- ----- ----
Derivative financial assets 207 412
Derivative financial liabilities (293) (9)
------------------------------------------- ----- ----
The Group has forward currency hedging contracts outstanding at
31 March 2021 designated as hedges of expected future purchases in
US dollars and Chinese renminbi and sales in euros 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 twelve months of the
balance sheet date at average prices of 1.23 for US dollar
contracts (2020: 1.11), 6.56 for Chinese renminbi contracts (2020:
7.09) and not applicable for euro contracts (2020: 1.14). At the
year end the Group held $13.2 million (2020: $9.6 million), RMB
42.0 million (2020: RMB 31.9 million) and EURnil million (2020:
EUR0.9 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 2021
were assessed to be highly effective and as at 31 March 2021 a net
unrealised loss of $1.3 million (2020: $657,000 gain) with related
deferred tax credit of $nil (2020: $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 was $nil (2020: $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 2021 Note $000 $000 $000 $000 $000
-------------------------- ---- --------- -------- ------- ------- ---------
Long term assets 13 5,721 - - - 5,721
Cash and cash equivalents 14 101,602 10,227 4,556 16,375 132,760
Trade receivables 13 95,336 9,947 6,233 4,342 115,858
Derivative financial
assets - 206 - 1 207
Bank overdrafts 14 (41,582) (11,594) (3,857) - (57,033)
Loan arrangement
fees 15 - 723 - - 723
Trade payables 19 (83,908) (11,769) (7,898) (4,013) (107,588)
Other payables 19 (11,650) (703) (611) (211) (13,175)
-------------------------- ---- --------- -------- ------- ------- ---------
Balance sheet exposure 65,519 (2,963) (1,577) 16,494 77,473
-------------------------- ---- --------- -------- ------- ------- ---------
US dollar Sterling Euro Other Total
31 March 2020 Note $000 $000 $000 $000 $000
----------------------------- ---- --------- -------- -------- ------- ---------
Long term assets 13 6,223 - - - 6,223
Cash and cash equivalents 14 62,293 9,905 3,325 7,677 83,200
Trade receivables 13 76,895 9,700 6,312 3,461 96,368
Derivative financial assets - 246 - 166 412
Secured bank loans 15 - - - (987) (987)
Bank overdrafts 14 (18,053) - (12,906) (44) (31,003)
Loan arrangement fees 15 - 1,209 - - 1,209
Trade payables (restated)(a) 19 (89,687) (10,984) (7,856) (2,784) (111,311)
Other payables 19 (7,429) (936) (784) (196) (9,345)
----------------------------- ---- --------- -------- -------- ------- ---------
Balance sheet exposure 30,242 9,140 (11,909) 7,293 34,766
----------------------------- ---- --------- -------- -------- ------- ---------
a) For more detail please refer to note 1
The following significant exchange rates applied to US dollar
during the year:
Average rate 31 March spot rate
-------------- --------------------
2021 2020 2021 2020
--------------- ------ ------ --------- ---------
Euro 0.85 0.90 0.85 0.90
Pound sterling 0.76 0.79 0.73 0.81
--------------- ------ ------ --------- ---------
Sensitivity analysis
A 10% weakening of the following currencies against US dollar at
31 March 2021 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 2020.
Equity (Loss)/profit
-------------- ---------------
2021 2020 2021 2021
$000 $000 $000 $000
--------------- ----- ------- ------- ------
Euro (143) (1,083) (14) 28
Pound sterling (269) 831 - 94
--------------- ----- ------- ------- ------
On the basis of the same assumptions, a 10% strengthening of the
above currencies against US dollar at 31 March 2021 would have
affected equity and profit or loss by the following amounts:
Equity Profit/(loss)
------------- ---------------
2021 2020 2021 2020
$000 $000 $000 $000
--------------- ---- ------- ------ -------
Euro 175 1,323 17 (34)
Pound sterling 329 (1,016) - (115)
--------------- ---- ------- ------ -------
Profile
At the balance sheet date the interest rate profile of the
Group's interest-bearing financial instruments was:
2021 2020
Variable rate instruments Note $000 $000
-------------------------- ---- -------- --------
Financial assets 132,760 83,200
Financial liabilities (57,033) (31,990)
Net cash 14 75,727 51,210
-------------------------- ---- -------- --------
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 2020.
Sensitivity analysis
2021 2020
$000 $000
--------------- ---- ----
Equity
Increase 379 256
Decrease - -
Profit or loss
Increase 379 256
Decrease - -
--------------- ---- ----
f) Capital management
The Board's policy is to maintain 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 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
------------------
2021 2020
Note $000 $000
-------------------------------------------------------- ---- -------- --------
Net equity attributable to owners of the Parent Company 383,522 371,200
Net cash 14 (76,450) (52,419)
-------------------------------------------------------- ---- -------- --------
Trading capital 307,072 318,781
-------------------------------------------------------- ---- -------- --------
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 and
Chief Executive Officer 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
leverage, measured as the ratio of average monthly net debt to
EBITDA before Adjusting items.
25 Capital commitments
At 31 March 2021, the Group had outstanding authorised capital
commitments to purchase plant and equipment for $2.7 million (2020:
$2.4 million).
26 Related parties
2021 2020
$000 $000
----------------------------- ---- -----
Sale of goods:
Hedlunds Pappers Industri AB 278 266
Festive Productions Ltd 14 9
Hedlund Import AB - 2,825
SA Greetings (Pty) Ltd 45 215
----------------------------- ---- -----
337 3,315
----------------------------- ---- -----
Purchase of goods:
Mattr Media Ltd - 90
----------------------------- ---- -----
- 90
----------------------------- ---- -----
Receivables:
Hedlunds Pappers Industri AB 7 -
----------------------------- ---- -----
7 -
----------------------------- ---- -----
Payables:
Mattr Media Ltd - 31
----------------------------- ---- -----
- 31
----------------------------- ---- -----
Identity of related parties and trading
Hedlund Import AB and AB Alrick-Hedlund are 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.
Festive Productions Ltd is a subsidiary undertaking of Malios
Holding AG, a company under the ultimate control of the Hedlund
family.
John Charlton is Chairman of SA Greetings (Pty) Ltd (South
African Greetings).
During the prior year the Company paid for marketing services to
Mattr Media Ltd, a company controlled by Joshua Fineman, who is the
son of the Group CEO.
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% (2020: 27%) of the voting shares of the Company.
The shareholdings of Directors and changes during the year are
shown in the Directors' report in the Group's Annual Report.
Directors' remuneration
2021 2020
$000 $000
------------------------------------- ----- -----
Short term employee benefits 1,874 1,793
Post-employment benefits - 10
Share-based payments charge/(credit) 2,266 (22)
------------------------------------- ----- -----
4,140 1,781
------------------------------------- ----- -----
See the Directors' remuneration report in the Group's Annual
Report for more detail.
27 Subsidiary with significant non-controlling interest
The Company has two subsidiary companies which have a material
non-controlling interest: IG Design Group Australia Pty Ltd
('Australia') and Anker Play Products LLC ('APP'). Summary
financial information in relation to Australia and APP is shown
below.
2021 2020
---------------------------- ---------------------------
Non-controlling interest
- Australia APP Total Australia APP Total
balance sheet as at 31
March $000 $000 $000 $000 $000 $000
------------------------- --------- ------- -------- --------- ------- -------
Non-current assets 11,146 177 11,323 10,591 238 10,829
Current assets 19,525 8,328 27,853 11,492 3,117 14,609
Current liabilities (8,757) (6,462) (15,219) (6,197) (3,414) (9,611)
Non-current liabilities (6,066) - (6,066) (6,603) (76) (6,679)
------------------------- --------- ------- -------- --------- ------- -------
2021 2020
------------------------- -------------------------
Non-controlling interest Australia APP Total Australia APP Total
- comprehensive
income for the year ended
31 March $000 $000 $000 $000 $000 $000
------------------------------------- --------- ------ ------ --------- ------ ------
Revenue 43,995 21,084 65,079 41,071 18,937 60,008
Profit/(loss) after tax 4,399 1,307 5,706 1,885 (953) 932
Total comprehensive income/(expense) 6,564 1,307 7,871 2,027 (953) 1,074
------------------------------------- --------- ------ ------ --------- ------ ------
2021 2020
----------------------- ----------------------
Non-controlling interest
- Australia APP Total Australia APP Total
cash flow for the year
ended 31 March $000 $000 $000 $000 $000 $000
------------------------- --------- ----- ----- --------- ---- -----
Net increase in cash and
cash equivalents 4,990 1,184 6,174 403 10 413
------------------------- --------- ----- ----- --------- ---- -----
2021 2020
Australia APP Total Australia APP Total
Non-controlling interest $000 $000 $000 $000 $000 $000
------------------------------------- --------- ---- ----- --------- ----- -----
Balance as at 1 April 4,643 - 4,643 4,863 403 5,266
Share of profits for the
year 2,200 34 2,234 942 - 942
Other comprehensive (expense)/income (94) - (94) 71 - 71
Recognition/(derecognition)
of non-controlling interest - 539 539 - (403) (403)
IFRS 16 retained earnings
adjustment - - - (572) - (572)
Currency translation 1,175 - 1,175 (661) - (661)
------------------------------------- --------- ---- ----- --------- ----- -----
Balance as at 31 March 7,924 573 8,497 4,643 - 4,643
------------------------------------- --------- ---- ----- --------- ----- -----
28 Acquisitions and disposals of subsidiaries
Acquisitions in the prior year
On 3 March 2020, the Group acquired 100% of the equity of CSS
Industries, Inc. ('CSS').
Effect of acquisition of CSS - adjustment to provisional
accounting
Provisional Adjustments Final
fair values within the fair values
recognised measurement recognised
on acquisition period on acquisition
$000 $000 $000
---------------------------------------- -------------- ----------- --------------
Property, plant and equipment 40,570 (878) 39,692
Right-of-use assets 40,650 - 40,650
Intangible assets 5,960 - 5,960
Inventories 56,630 27,503 84,133
Trade and other receivables 65,296 - 65,296
Expected credit loss (2,231) - (2,231)
Cash and cash equivalents 10,538 - 10,538
Trade and other payables (75,186) 1,306 (73,880)
Provisions (5,167) (329) (5,496)
Income taxes (3,828) - (3,828)
Deferred tax 8,797 (3,312) 5,485
Lease liabilities (47,344) - (47,344)
---------------------------------------- -------------- ----------- --------------
Net identifiable assets and liabilities 94,685 24,290 118,975
---------------------------------------- -------------- ----------- --------------
Consideration paid in cash 122,789 - 122,789
---------------------------------------- -------------- ----------- --------------
Total consideration 122,789 - 122,789
---------------------------------------- -------------- ----------- --------------
Goodwill 28,104 (24,290) 3,814
---------------------------------------- -------------- ----------- --------------
Fair values adjustments were made to property, plant and
equipment, inventories, provisions and deferred tax assets
acquired. The provisional accounting was undertaken for the year
ended 31 March 2020 and given the proximity of the acquisition on 3
March to the reporting date, the accounting was therefore by its
very nature provisional and based on limited knowledge of the
business at the time. In addition, Covid-19 was prevalent and
created significant uncertainty. As such, this uncertainty was
built into the provisional accounting and a very cautious view was
taken, in particular around inventory.
The adjustments made during the measurement period to inventory
reflect an alignment of accounting policies between the two
businesses, along with an adjustment to cautious inventory
provisions based on sell-through of provided products during the
measurement period. The other adjustments included a revisit of the
fair values of plant and machinery and the release of contingent
liabilities in relation to potential environmental claims. Deferred
tax was adjusted as a result of the overall adjustment to
provisional opening balances.
Disposals in the previous year
On 24 February 2020, the Group divested of its operations in
Shaoxing.
In the year to 31 March 2021 additional costs associated with
the disposal were incurred of $208,000.
The disposal proceeds, net liabilities disposed of and gains
arising from the movement in foreign currency exchange from the
divestment of the Shaoxing business were as follows:
$000
--------------------------------------------------------------------- -------
Property, plant and equipment 133
Right-of-use assets 572
Inventories 788
Trade and other receivables 696
Corporation tax (3,187)
Trade and other payables (548)
Provisions (198)
Lease liabilities (623)
--------------------------------------------------------------------- -------
(2,367)
--------------------------------------------------------------------- -------
Gain on disposal calculated as:
Disposal proceeds 122
Net liabilities disposed 2,367
--------------------------------------------------------------------- -------
2,489
Transaction costs (246)
Tax on sale of business (including Chinese withholding tax) (365)
Reclassification of gains from movement in foreign currency exchange (42)
--------------------------------------------------------------------- -------
1,836
--------------------------------------------------------------------- -------
Disposal proceeds
Satisfied by:
Cash consideration 122
Deferred consideration (122)
--------------------------------------------------------------------- -------
Net cash inflow from disposals of businesses -
--------------------------------------------------------------------- -------
29 Non-adjusting post balance sheet events
There were no known material non-adjusting events which occurred
between the end of the reporting period and prior to the
authorisation of these financial statements on 14 June 2021.
30 Presentation currency
The Company has changed the presentation currency of the Group
from pound sterling to US dollars effective 1 April 2020. Following
the acquisition of CSS, a significant majority of the Group
earnings is now denominated in US dollars. Management believes that
the presentation currency change will give investors and other
stakeholders a clearer understanding of the Design Group's
financial performance over time. In addition, the change will
reduce the volatility of the Group's earnings due to foreign
exchange movements, in relation to the translation of foreign
currency balances.
Detailed below are the key primary statements with both pound
sterling and US dollar comparatives for the year ended 31 March
2020 and as at 31 March 2020.
CONSOLIDATED INCOME STATEMENT
Year ended Year
31 Mar 2020 ended
31 Mar 2020
$000 GBP000
-------------------------------------- ----------------------------- -----------------------------
Revenue 624,340 494,234
Cost of sales (530,109) (419,131)
----------------------------------------- ----------------------------- -----------------------------
Gross profit 94,231 75,103
Selling expenses (33,766) (26,523)
Administration expenses (58,868) (46,409)
Other operating income 927 735
Profit on disposal of property, plant
and equipment 246 188
Profit on disposal of subsidiary 1,836 1,486
Operating profit 4,606 4,580
Finance expenses (5,479) (4,317)
----------------------------------------- ----------------------------- -----------------------------
(Loss)/profit before tax (873) 263
Income tax credit 18,276 14,547
----------------------------------------- ----------------------------- -----------------------------
Profit for the period 17,403 14,810
----------------------------------------- ----------------------------- -----------------------------
Attributable to:
Owners of the Parent Company 16,461 14,060
Non-controlling interests 942 750
----------------------------------------- ----------------------------- -----------------------------
Earnings per ordinary share
Year ended Year ended
31 Mar 2020 31 Mar 2020
-------- ------------------------------ -----------------------------
Basic 19.9c 17.0p
----------- ------------------------------ -----------------------------
Diluted 19.8c 16.9p
----------- ------------------------------ -----------------------------
Adjusted Earnings per ordinary share
Year ended Year ended
31 Mar 2020 31 Mar 2020
-------- ------------------------------ -----------------------------
Basic 32.8c 27.0p
----------- ------------------------------ -----------------------------
Diluted 32.7c 26.9p
----------- ------------------------------ -----------------------------
EXECUTIVE REVIEW INCOME STATEMENT
Year ended Year ended
31 Mar 2020 31 Mar 2020
$m GBPm
--------------------------- ------------------------------ -----------------------------
Revenue 624.3 494.2
Gross profit 114.1 90.9
Overheads (73.2) (57.5)
Adjusted operating profit 40.9 33.4
Finance expenses (5.5) (4.3)
------------------------------ ------------------------------ -----------------------------
Adjusted profit before tax 35.4 29.1
Adjusting items (36.3) (28.8)
------------------------------ ------------------------------ -----------------------------
(Loss/)profit before tax (0.9) 0.3
------------------------------ ------------------------------ -----------------------------
Income tax credit 18.3 14.5
------------------------------ ------------------------------ -----------------------------
Profit for the period 17.4 14.8
------------------------------ ------------------------------ -----------------------------
CONSOLIDATED BALANCE SHEET
Restated(a)
As at Restated(a)
31 Mar As at
2020 31 Mar 2020
$000 GBP000
--------------------------------- --- --- ------------------------ -----------------------
Non-current assets
Property, plant and equipment 91,744 73,987
Intangible assets 116,214 93,720
Right-of-use assets 82,742 66,728
Long-term assets 6,223 5,019
Deferred tax assets 18,135 14,624
-------------------------------------------- ------------------------ -----------------------
Total non-current assets 315,058 254,078
-------------------------------------------- ------------------------ -----------------------
Current assets
Inventory 169,414 136,625
Trade and other receivables 110,047 88,748
Income tax receivable 18,377 14,820
Derivative financial assets 412 332
Cash and cash equivalents 83,200 67,098
-------------------------------------------- ------------------------ -----------------------
Total current assets 381,450 307,623
-------------------------------------------- ------------------------ -----------------------
Total assets 696,508 561,701
-------------------------------------------- ------------------------ -----------------------
Equity
Share capital 5,974 4,818
Share premium 213,755 172,383
Capital redemption reserve 1,662 1,340
Merger reserve 40,175 32,399
Hedging reserve 320 258
Translation reserve (4,389) 7,383
Retained earnings 113,703 80,794
-------------------------------------------- ------------------------ -----------------------
Equity attributable to owners of
the Parent Company 371,200 299,375
-------------------------------------------- ------------------------ -----------------------
Non-controlling interests 4,643 3,744
-------------------------------------------- ------------------------ -----------------------
Total equity 375,843 303,119
-------------------------------------------- ------------------------ -----------------------
Non-current liabilities
Loans and borrowings (219) (177)
Lease liabilities 78,418 63,241
Deferred income 561 452
Provisions 5,161 4,163
Other financial liabilities 6,784 5,471
Deferred tax liabilities 4,626 3,730
-------------------------------------------- ------------------------ -----------------------
Total non-current liabilities 95,331 76,880
-------------------------------------------- ------------------------ -----------------------
Current liabilities
Bank overdraft 31,003 25,004
Loans and borrowings (3) (2)
Lease liabilities 16,995 13,705
Deferred income 162 131
Provisions 3,046 2,456
Income tax payable 5,482 4,399
Trade and other payables 120,656 97,304
Other financial liabilities 47,993 38,705
-------------------------------------------- ------------------------ -----------------------
Total current liabilities 225,334 181,702
-------------------------------------------- ------------------------ -----------------------
Total liabilities 320,665 258,582
-------------------------------------------- ------------------------ -----------------------
Total equity and liabilities 696,508 561,701
-------------------------------------------- ------------------------ -----------------------
a) For more detail please refer to note 1
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 Mar 2020 31 Mar 2020
$000 GBP000
-------------------------------------------- --- ----------------------------- -----------------------------
Cash flows from operating activities
Profit for the year 17,403 14,810
Adjustments for:
Depreciation and impairment 8,880 6,994
Depreciation of right-of-use assets 8,911 7,014
Amortisation of intangible assets 4,816 3,796
Finance expenses 5,479 4,317
Income tax credit (18,276) (14,547)
Profit on disposal of subsidiary (1,836) (1,486)
Profit on disposal of property, plant and equipment (246) (188)
Loss on disposal of intangible fixed assets 1 1
Equity-settled share-based payments (252) (202)
--------------------------------------------------- ----------------------------- -----------------------------
Operating profit after adjustments for non-cash
items 24,880 20,509
Change in trade and other receivables 9,841 629
Change in inventory 1,532 705
Change in trade and other payables, provisions and
deferred income 1,592 5,913
Cash generated from operations 37,845 27,756
Tax paid (5,993) (4,749)
Interest and similar charges paid (5,090) (3,996)
--------------------------------------------------- ----------------------------- -----------------------------
Net cash inflow from operating activities 26,762 19,011
--------------------------------------------------- ----------------------------- -----------------------------
Cash flow from investing activities
Proceeds from sale of property, plant and equipment 767 595
Acquisition of businesses (net of cash acquired) (112,251) (87,696)
Acquisition of intangible assets (3,738) (2,997)
Acquisition of property, plant and equipment (10,463) (8,133)
Net cash outflow from investing activities (125,685) (98,231)
--------------------------------------------------- ----------------------------- -----------------------------
Cash flows from financing activities
Proceeds from issue of share capital 152,535 116,924
Repayment of secured borrowings (1,917) (1,505)
Net movement in previous credit facilities 48,230 37,976
Repayment of previous credit facilities (48,230) (37,976)
Payment of lease liabilities (8,430) (6,622)
Loan arrangement fees (1,571) (1,234)
Equity dividends paid (8,975) (7,104)
Net cash inflow from financing activities 131,642 100,459
--------------------------------------------------- ----------------------------- -----------------------------
Net increase in cash and cash equivalents 32,719 21,239
Cash and cash equivalents at beginning of the
period 25,296 19,458
Effect of exchange rate fluctuations on cash held (5,818) 1,397
--------------------------------------------------- ----------------------------- -----------------------------
Cash and cash equivalents at end of the period 52,197 42,094
--------------------------------------------------- ----------------------------- -----------------------------
ADJUSTED CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 Mar 31 Mar 2020
2020
$m GBPm
Adjusted EBITDA 59.5 48.1
Movements in working capital (5.3) (7.5)
------------------------------------------ ------- ---- ----------- -------------
Adjusted cash generated from operations 54.2 40.6
Adjusting items (16.6) (13.1)
------------------------------------------ ------- ---- ----------- -------------
Cash generated from operations 37.6 27.5
Capital expenditure (net of disposals
of property, plant and equipment) (13.7) (10.7)
Business acquired (including cash
on acquisition) (112.3) (87.7)
Tax paid (6.0) (4.7)
Interest paid (5.1) (4.0)
Payments of lease liabilities (8.4) (6.6)
Dividends paid (including those paid
to non controlling interests) (9.0) (7.1)
Proceeds from issue of share capital 152.5 116.9
FX and other (5.4) 1.6
--------------------------------------------- ---- ---- ----------- -------------
Movement in net cash 30.2 25.2
Opening net cash 22.2 17.1
--------------------------------------------- ---- ---- ----------- -------------
Closing net cash 52.4 42.3
--------------------------------------------- ---- ---- ----------- -------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year Year ended
ended 31 Mar
31 Mar 2020
2020
$000 GBP000
-------------------------------------------------- --- -------- ----------
Profit for the period 17,403 14,810
Other comprehensive income:
Exchange difference on translation of foreign
operations (net of tax) 3,112 5,450
Recycling translation reserves on disposal of
subsidiary 42 34
Transfer to profit and loss on maturing cash
flow hedges (net of tax) (490) (377)
Net unrealised gain on cash flow hedges (net
of tax) 657 517
--------------------------------------------------------- -------- ----------
Other comprehensive income for the period, net
of tax items which may be reclassified to profit
and loss in subsequent periods 3,321 5,624
--------------------------------------------------------- -------- ----------
Total comprehensive income for the year, net
of tax 20,724 20,434
Attributable to:
Owners of the Parent Company 20,372 19,976
Non-controlling interests 352 458
--------------------------------------------------------- -------- ----------
20,724 20,434
--- -------------------------------------------------- -------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MARCH 2020 - US dollar
Attributable to the owners of the Parent Company
-------------------------------------------------------------
Share
premium
and Non-
capital
-------------
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 31 March 2019 5,093 74,962 42,119 153 (8,133) 108,763 222,957 5,266 228,223
Impact of
adopting IFRS 16 - - - - - (2,427) (2,427) (572) (2,999)
----------------- ------- ---------- ------- -------- ----------- -------- ------------- ----------- --------
Restated equity
at 1 April 2019 5,093 74,962 42,119 153 (8,133) 106,336 220,530 4,694 225,224
Profit for the
year - - - - - 16,461 16,461 942 17,403
Other
comprehensive
income/(expense) - - - 167 3,744 - 3,911 (590) 3,321
----------------- ------- ---------- ------- -------- ----------- -------- ------------- ----------- --------
Total
comprehensive
income for the
year - - - 167 3,744 16,461 20,372 352 20,724
Transactions with
owners in their
capacity as
owners
Equity-settled
share-based
payments - - - - - (287) (287) - (287)
Tax on
equity-settled
share-based
payments - - - - - 213 213 - 213
Derecognition of
non-controlling
interests - - - - - - - (403) (403)
Shares issued 1,117 150,145 - - - - 151,262 - 151,262
Options exercised 45 - - - - (45) - - -
Equity dividends
paid - - - - - (8,975) (8,975) - (8,975)
Exchange
differences on
opening balances (281) (9,690) (1,944) - - - (11,915) - (11,915)
------------- --------
At 31 March 2020 5,974 215,417 40,175 320 (4,389) 113,703 371,200 4,643 375,843
----------------- ------- ---------- ------- -------- ----------- -------- ------------- ----------- --------
YEAR ENDED 31 MARCH 2020 - Pound Sterling
Attributable to the owners of the Parent Company
---------------------------------------------------------------
Share
premium
and Non-
capital
-------------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
-------
capital reserve reserve reserve reserve earnings equity interests Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------- -------- ---------- -------- -------- ----------- -------- ------------- ----------- -------
At 31 March 2019 3,918 57,663 32,399 118 1,607 75,801 171,506 4,051 175,557
Impact of
adopting IFRS 16 - - - - - (1,867) (1,867) (440) (2,307)
----------------- -------- ---------- -------- -------- ----------- -------- ------------- ----------- -------
Restated equity
at 1 April 2019 3,918 57,663 32,399 118 1,607 73,934 169,639 3,611 173,250
Profit for the
year - - - - - 14,060 14,060 750 14,810
Other
comprehensive
income/(expense) - - - 140 5,776 - 5,916 (292) 5,624
----------------- -------- ---------- -------- -------- ----------- -------- -------------
Total
comprehensive
income for the
year - - - 140 5,776 14,060 19,976 458 20,434
Transactions with
owners in their
capacity as
owners
Equity-settled
share-based
payments - - - - - (231) (231) - (231)
Tax on
equity-settled
share-based
payments - - - - - 171 171 - 171
Derecognition of
non-controlling
interests - - - - - - - (325) (325)
Shares issued 864 116,060 - - - - 116,924 - 116,924
Options exercised 36 - - - - (36) - - -
Equity dividends
paid - - - - - (7,104) (7,104) - (7,104)
At 31 March 2020 4,818 173,723 32,399 258 7,383 80,794 299,375 3,744 303,119
----------------- -------- ---------- -------- -------- ----------- -----------
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END
FR GSGDLSUBDGBU
(END) Dow Jones Newswires
June 15, 2021 02:00 ET (06:00 GMT)
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