TIDMIGR
RNS Number : 8257U
IG Design Group PLC
28 November 2023
EMBARGOED UNTIL 28(th) NOVEMBER 2023
IG Design Group PLC
(the "Company", the "Group" or "Design Group")
Results for the six months ended 30 September 2023
Improving operational efficiency and simplifying the business
results in profits and margin recovery
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 unaudited results for the six months ended
30 September 2023 ('the period').
Highlights for the six months ended 30 September 2023
Financial Highlights HY2024 HY2023
====================== ============= ======== ========
Revenue $444.1m $521.2m
Adjusted(a)
- Operating profit $38.2m $30.5m
- Profit before tax $34.8m $27.4m
- Diluted earnings per share 25.0c 19.6c
Reported
- Operating profit $37.5m $35.1m
- Profit before tax $34.1m $32.0m
- Diluted earnings per share 24.4c 23.1c
Net debt as at the period
end $15.1m $73.7m
------------------------------------- -------- --------
(a) Adjusted results exclude the impact of adjusting items - for
further detail see alternative performance measures reconciliation
within the detailed financial review
-- Improved profit and margin recovery across both of the
Group's divisions, ahead of the Board's expectations for the
period
-- Adjusted operating profit improved by 26% year-on-year, and
margin up 270 bps to 8.6%, driven by continued benefits from
strategic initiatives in DG Americas, strong trading in DG
International and reduced costs
-- As previously announced, revenues down nearly 15%, mainly in
DG Americas, driven by lower demand across both seasonal and
everyday categories, as well as a return to more traditional
seasonality and ordering patterns
-- Net debt significantly improved year-on-year reflecting
strong working capital management and improved underlying
profitability
-- Appointment of Rohan Cummings as Group CFO in July 2023, with
Paul Bal appointed Group CEO in April 2023
-- Senior management team strengthened with the internal
promotion of two new MDs within the DG International division
-- Continued investment in more sustainable gift packaging solutions
-- In line with the Board's previous guidance, no dividend is being declared.
Outlook
-- There remains some continued uncertainty over consumer
demand, and therefore ordering by our customers, given the current
economic climate
-- FY2024 orderbook at 86% (prior year: 92%) indicates that
although strong relationships with our customers are sustained, the
retail environment continues to be challenging
-- Full year profits and margins expected to remain in line with
the Board's expectations, with good growth year-on-year
-- Cash delivery over the year is expected to be above Board expectations
-- Remain on track for aspiration of pre-Covid-19 operating
profit margin recovery by 31 March 2025
Stewart Gilliland, Chair, commented:
"We are pleased with the progress we have continued to make on
our journey of improving operational efficiency and simplifying our
business. As a result, at the half year we have delivered
significant growth in profit and margin. In addition, net debt is
significantly lower than a year ago, reflecting strong cash flow. I
would like to thank all of our colleagues for their collaborative
efforts and hard work; their commitment has been instrumental in
our collective success thus far.
Whilst the challenging external environment, particularly in the
US, has impacted our revenue performance, we have seen increased
collaboration in navigating the uncertainty together with our
customers. Our strategy of winning together with those customers
that are succeeding has certainly been evident and we continue to
provide a product portfolio that resonates with our customers.
Looking ahead, we do detect continued overall caution in our
customers' ordering and their outlook. However, our efforts to
build a more efficient model, unlocking synergies and trapped
value, will continue and we expect to deliver full year profits and
margins in line with the Board's expectation. We are becoming
increasingly confident that a more resilient business model is
taking shape and that we will realise our stated aspiration to
return the Group to pre-Covid-19 operating profit margins by 31
March 2025."
For further information, please contact:
IG Design Group plc Tel: +44 (0)1525 887310
Paul Bal, Chief Executive
Officer
Rohan Cummings, Chief Financial
Officer
Canaccord Genuity Limited Tel: +44 (0)20 7523 8000
(Nomad and Broker)
Bobbie Hilliam, NOMAD
Alex Orr
Alma Strategic Communications Tel: +44 (0)20 3405 0205
Rebecca Sanders-Hewett designgroup@almastrategic.com
Sam Modlin
Josh Royston
Overview
We are very pleased with what has been delivered in the period,
testament to the hard work across the Group with colleagues
increasingly working together to achieve our goals. Thanks to this,
we are able to report a strong start to delivering continued margin
and profit growth this year. Cash delivery during this period has
also been beyond our original expectations. Alongside these
significant achievements, we are making good progress in realising
our stated aspiration to return the Group to pre-Covid-19 adjusted
operating profit margins by 31 March 2025. Our achievement over
this period is all the more commendable as it has been reached
during a time when consumer demand is under pressure from a number
of external forces, which is reflected in lower customer
orders.
As reported in June, we have experienced lower order quantities
since early 2023 in our Everyday categories and products. Since
then, as announced in our trading update, we have seen lower
quantities being ordered for the forthcoming seasons, especially
Christmas. Further, we have experienced some reversal in the
seasonality shifts seen last year when customers had accelerated
their ordering following the supply chain disruption of mid-2021,
meaning that some sales have returned to the second half of our
financial year. The combination of these factors, along with tender
gains and losses and favourable currency movements has resulted in
an almost net 15% reduction in revenue during the period. The
decline occurred primarily in the DG Americas division, while our
businesses in continental Europe drove the DG International
division to overall revenue growth.
Currency exchange rates have only had a small favourable impact
on these results.
The Group's adjusted operating margin rose from 5.9% to 8.6%,
delivering $38.2 million of adjusted operating profit which
represents a growth of over 25%. The half year profit and margin
exceed pre-Covid-19 levels and are the highest experienced in the
first half of any year since the CSS Industries Inc. ('CSS')
acquisition in March 2020. The seasonality of our business cycle
means that first-half profit and margin delivery is diluted in the
second half of the year. Nevertheless, our delivery in HY2024 is an
encouraging milestone in our aspiration for margin growth and
recovery on a full-year basis.
This profit and margin delivery comes from concerted efforts to
simplify our business models after the multiple acquisitions of the
past decade and improve our operational efficiency at the same
time. In addition to enhancing our sales mix following the exit
from unprofitable arrangements last year, further benefits have
come through improved sourcing of bought-in products. This progress
is supported by the easing of some of the cost headwinds
experienced in recent years, notably sea freight, though other
costs such as labour continue to rise in the present inflationary
environment.
Board changes
As previously announced, Paul Bal took on the Chief Executive
Officer position on 1 April 2023.
Rohan Cummings was appointed Chief Financial Officer (CFO),
joining the Board in July 2023. Rohan came to the Group from Devro
Limited (formerly Devro plc which was listed on the LSE), a global
leader in the supply of collagen casing and films, where he was the
group's CFO from 2020. Rohan has extensive experience of operating
in a listed environment, as well as significant commercial and
strategic capabilities having worked in complex global
operations.
Our strategy
In June 2022 our short-term strategic focus shifted to build a
stronger management team, reduce working capital and restore
margins. Good progress has been made in these areas with the
aspiration for the third being to restore the Group's adjusted
operating profit margin to pre-Covid-19 levels by 31 March 2025
(namely, at least 4.5%, being the proforma calculated margin
including the full year equivalent of CSS following its acquisition
in March 2020). We are about half-way through the journey to
deliver this, and we remain confident of achieving this outcome. We
further anticipate that achieving that overall margin should return
the Group to its highest level of profit delivery (which was an
adjusted profit before tax of c$35.8 million delivered in FY2019).
Our FY2025 aspirations are sales of $825.0 million at a 5.0%
adjusted operating margin.
In June this year we set out our new growth-focused strategy
that will guide the Group beyond this first milestone of margin
recovery. The overall aspiration of our new strategy is to deliver
sustained profitable growth that is primarily driven by organic
efforts; and that is underpinned by a resilient and less complex
business model.
This new strategy is summarised in the chart below, first shared
in our FY2023 results:
Be the partner of choice that is:
Strategic Adaptive Dependable
* Purposeful * Design-led * Resilient supply chain
* Providing good value * Innovative * Responsible
------------------------- ---------------------------------
Strong Collaborative Informed
* Talent-rich * Open-minded * Data driven
* Flexible footprint * Learning * Seasoned
------------------------- ---------------------------------
Enabling us to win together
Through excellent partnering Bringing consumer-focused
to grow our categories solutions
* Identifying and developing the required capabilities * Brand and product development
* A better shopper experience
* Sustainable products and solutions
--------------------------------------------
This new strategy is purposefully articulated as a series of
attributes that we believe should differentiate our services from
those of our competitors. Demonstrating those attributes
day-in-day-out everywhere across the entire Group should be our
strategic aspiration. Set out in this way, the strategy provides a
check-list for our various Business Units (as well as our
customers) to assess their level of service, their competitiveness
and the value they bring.
On launching this new strategy some months ago, we committed to
sharing more details of our strategic aspirations and plans at our
FY2024 interim reporting. In recent months, all of our Units have
carried out detailed strategic reviews that apply our new strategic
aspirations to their local setting. As expected, these reviews have
identified gaps and opportunities which have been translated into
initiatives to pursue by the Business Units. Some, being common
themes or issues, such as more effective sourcing, will be
addressed collectively through cross-Unit functional forums,
leveraging the best expertise and experience available in the
Group.
Essentially, the initiatives are about driving sustainable and
profitable growth, both by building the capabilities required to
further develop our various businesses, as well as further
simplifying the Group's operations, allowing more leverage of
scale.
The following are the key initiatives that are being undertaken
over the next three years to 31 March 2027, in line with our new
strategy:
-- Strategic
o Purposeful
-- Adopting clearer category architecture and product
portfolios, leveraging opportunities provided through moving into
adjacent categories and product-groups to fill gaps in our offers,
thereby ending up with fuller assortments in every market we
serve
-- Widening our customer base, especially across Europe, whilst
also further developing our business with our existing customers
through presenting a wider range of offerings
-- Developing a single-enterprise culture in our more fragmented
businesses so that they integrate and simplify further, and so
better leverage the full extent of their resources and
capabilities
o Providing good value
-- Further entry into Value, Discounter and Club channels
reflecting their increased weighting in the retail environments in
all of our markets
-- Improving segmentation of our customers, especially the "long
tail" of small accounts; and more appropriately segmenting our
service levels and route-to-market
-- Cost optimisation in manufacturing through further site
rationalisation as well as leveraging best practice followed
elsewhere in the Group, combined with seeking lower-cost
warehousing and domestic fulfilment opportunities
-- Adaptive
o Design-led
-- Continuing to invest in the design and development of
products that reflect design trends and consumer preferences,
creating unique selling propositions for our customers
-- Identifying the key brands and further licencing
opportunities that best support more premiumisation in our
offers
-- Improving the segmentation of our offers and service levels
to provide more targeted solutions at different value
propositions
o Innovative
-- Better adoption of social-media and e-commerce to engage, market and sell to a wider audience
-- Adapting our structures and processes in response to
increased centralised sourcing by some of our global customers
-- Dependable
o Resilient supply chain
-- Embarking on further near-shoring opportunities to de-risk
our current supply chains, finding solutions that offer more
sustainable options
o Responsible
-- Continue to develop and sell more sustainable products,
including full roll-out of Smartwrap(TM) , and gaining further
distribution of our Eco Nature(TM) range
-- Develop more sustainable transportation solutions for road and sea-freight
-- Strong
o Talent-rich
-- Strengthening our sales and account management skills to
better serve our customers, including the provision of insights
-- Developing our category management skills to improve the
presentation of our assortments to the consumer at retail, helping
them to better navigate our offers
o Flexible footprint
-- Re-designing our organisations to simplify operations,
improve effectiveness, and enhance efficiency to become more
competitive and more sustainable at both a local and overall Group
level
-- Collaborative
o Open-minded
-- Digitise and standardise our intellectual property management
processes across the Group to share and exploit the Group's
intellectual property more effectively
-- Establish a Group-wide approach to sourcing
o Learning
-- Improving our level of knowledge in the areas of e-commerce,
data-analysis, category management and selling skills
-- Investing in the continued development of our teams,
especially in the commercial arena, leveraging a variety of tools
and approaches
-- Informed
o Data-driven
-- Consolidating our current fragmented ERP landscapes within each business
-- Developing improved, deeper market insights to inform our focus and decision-making
o Seasoned
-- Leveraging experience, expertise and best-practice from
across the Group to fine-tune our business processes to make them
more effective and efficient
-- Strengthening our key account contact teams, and better
reflect the increasingly globalised approach of our biggest
customers
Successful execution and delivery of these initiatives will
significantly strengthen our partnership capabilities and enable
our teams everywhere across the Group to deliver even more
consumer-focused solutions, first to our existing and longstanding
customers - helping them to continue winning at retail; and then to
potential customers attracted to what we can offer and deliver. The
resulting, better presented, product solutions will enhance the
value of our categories in the retail-space; and through the
development of more sustainable product and packaging solutions,
delivered responsibly, the win will extend beyond the shoppers and
consumers of our products, to our planet itself.
The Group remains well-capitalised in terms of its installed
manufacturing base. Therefore, the prime use of capital investment
over this period will be in the deployment of innovation and
technology to support growth, especially the pursuit of sustainable
products and solutions, and support the widening of our present
assortments to better serve changing trends. Selective "bolt-on"
M&A opportunities will only be considered where they can
accelerate entry into new product groups, new categories, new
channels and customers, or new geographies where we can leverage
our existing category strengths. Transformative M&A is not on
the agenda. This should also mean that the Board can introduce a
sustainable dividend policy once the turnaround is assured, thereby
reinstating more tangible investor returns.
Initial projections of the financial impact from the successful
execution of these initiatives suggest that by 31 March 2027, the
Group should have delivered three consecutive years of profitable
sales growth, with annual sales exceeding $900 million by that
time; whilst delivering an adjusted operating profit margin of over
6%. This translates to an adjusted profit before tax exceeding
$50m. We also expect strong cash conversion to continue, with
average annual leverage held to no more than 1.0x under normal
conditions. These projections will be further defined as we make
progress with these initiatives.
In future reporting we shall highlight examples of our progress
and achievement against a selection of the initiatives and projects
set out above.
Outlook
The current economic climate continues to create an uncertain
environment for shoppers and consumers, and therefore in turn, our
customers. This has been experienced in several of our markets
since the start of 2023, and we expect it to continue to at least
the end of our current financial year. Nevertheless, we are pleased
to see our strategy of winning together with our customers
succeeding in this environment, though we do detect continued
overall caution in their ordering and their outlook. It remains a
testament to our longstanding relationships with our customers that
we see increased collaboration in navigating the uncertainty
together. Our orderbook stands at 86% at the end of October 2023,
compared to 92% at the end of October 2022, reflecting both these
strong relationships as well as the uncertainty in the
environment.
Full year profits and margins are expected to remain in line
with the Board's expectation, namely good year-on-year growth
across both measures, remaining on the path to the 31 March 2025
aspiration of margin recovery to pre-Covid-19 levels of at least
4.5%. Cash flow delivery is now expected to be stronger than in the
prior year. As announced in our trading update, revenue is now
expected to remain below prior year as a result of the continued
pressures on consumers. Offsetting the impact of this, we expect
continued contribution from our efforts to build a more efficient
model, unlocking synergies and trapped value.
Facing continued uncertainty over consumer demand, the Board
wishes to wait before it resumes paying dividends. Greater
confidence in achieving the 31 March 2025 margin aspiration,
coupled with further progress with the new growth-focused strategic
initiatives will bring that important milestone closer. As our
strategic aspirations for the years following FY2025 form, we are
becoming increasingly assured that a more resilient business model
is taking shape. This is reflected in the articulation above of our
financial aspirations in the next-stage of our new strategy.
Sustainability
Our approach to sustainability is underpinned by the intention
to minimise our impact on the environment by leveraging our global
scale, innovation, and people. As a market leader within our
industry, we aim to continually evolve and adapt our products and
practices into more environmentally sustainable solutions and
continue to believe we have a moral as well as a commercial
necessity to strive for the highest standards of ethical behaviour.
We are not only driven by the aspiration to effect positive change
and operate sustainably, to protect and preserve our planet for
future generations, but also recognise it as a catalyst for
enhancing our competitive edge.
People - Our people are key to the success of the Group, it is
therefore paramount they feel valued and supported, whether it be
through the recognition of performance, loyalty, or investment in
their development. Training opportunities continue to be a focus
around the Group to nurture both personal and professional
development. Notably, our leadership development programmes for
emerging leaders in DG UK and DG Americas have seen another cohort
of members enrolled. Internal promotions of two DG International
MDs have strengthened the Operating Board, which also improves its
gender diversity. Our development and training opportunities extend
beyond emerging leaders, with the DG Europe Academy internal
training institute striving to develop knowledge and skills of our
employees through internal and external trainers across a broad
range of subjects. Following the launch of the first Group-wide
employee engagement survey last year, areas for improvement have
been established and actions have been identified following the
feedback of results to all employees. Nonetheless, it was
encouraging to see a high participation rate, with 76% of employees
recommending the Group as a good employer, and employees on the
whole remaining positive about their roles and the company.
Product - We recognise that the nature of our products requires
us to be innovative in our design to create more sustainable
solutions and collections to promote to our customers and theirs.
This, in turn, enables us to support our customers and consumers in
minimising the use of single-use products, those containing
plastic, and products that are not recyclable. This is necessary to
prevent these products from ending up as waste in landfills and
thereby mitigating their contribution to global warming. The
development of our shrink-free wrapping paper, Smartwrap(TM) , has
fully eliminated plastic waste through the use of recyclable paper
labels. Following the successful development and launch in
continental Europe, the Group is currently investigating its
expansion and investing further in the technology to enable
Smartwrap(TM) to be manufactured and sold in other markets such as
the UK. This complements our Eco Nature(TM) range already
established in the UK which has continued to perform well, and is
gaining distribution.
Planet - The ambition to reduce our environmental impact is
underpinned by the understanding of our carbon footprint. By the
end of the year, we will endeavour to report our Group scope 1 and
2 greenhouse gas emissions which will be one of the first steps on
this journey and will not only provide more clarity, but also
support us in tracking and monitoring our emissions going forward
in our aspirational journey to net-zero. Across the Group the local
manufacture of giftwrap and bags, supported by our investment in
manufacturing and technology, helps to reduce our reliance on
freight and therefore our carbon footprint. This is evidenced by
the climate neutral status of DG Europe gift wrap and gift bag
ranges. As a testament to our efforts in DG Americas, we have
achieved Walmart's Giga-Guru status for the third year in a row,
recognising our collaboration with our biggest customer in the area
of supply chain carbon reduction.
The Group reports our performance and progress against our key
performance sustainability indicators (KPIs) which can be seen in
the Sustainability report in the Annual Report and Financial
Statements for 2023. In the year we will also continue to progress
on our journey towards Taskforce for Climate-related Financial
Disclosures (TCFD) reporting by the end of FY2024.
Regional highlights
Revenue has continued to be impacted by lower consumer demand,
both realised, and anticipated for the seasonal period ahead. More
resilience in continental European markets, coupled with foreign
currency benefits, meant that the DG International division
delivered revenue growth, though not enough to offset the decline
in the DG Americas division. Both divisions grew margins as well as
profits, whether through higher sales volume and improved mix, or
the various initiatives to improve operational efficiency.
Segmental revenue Adjusted operating Adjusted operating
profit/(loss) margin
========================== ======================== =========================== ====================
% Group
revenue HY2024 HY2023 % growth HY2024 HY2023 % growth HY2024 HY2023
======== ================ ==== ====== ====== ======== ====== ====== ======== ========= =========
64% DG Americas $m 282.4 373.4 (24.4%) 16.6 15.2 9.0% 5.9% 4.1%
36% DG International $m 161.7 149.4 8.2% 25.3 18.4 37.5% 15.7% 12.3%
Elims / Central
costs $m - (1.6) (3.7) (3.1)
100% Total $m 444.1 521.2 (14.8%) 38.2 30.5 25.6% 8.6% 5.9%
======== ================ ==== ====== ====== ======== ====== ====== ======== ========= =========
Design Group Americas
The DG Americas division represents 64% of the Group's revenue.
It experienced more than a 24% decline in revenue in the period, to
$282.4 million driven by a number of factors. The largest factor
was reduced consumer demand experienced since the start of 2023.
Initially this was experienced in the Everyday categories and
products, but since the summer it has also been felt through
reduced ordering by our customers in anticipation of reduced
consumer demand in the coming seasons, especially Christmas 2023.
The reduction therefore impacts across all categories, but
understandably the most impacted were Celebrations (in particular
"trim-a-package", décor and cards), Craft and Creative Play (mainly
creative play products, as pure craft lines proved resilient) and
Stationery. Given the driver of lower consumer demand, this
reduction occurred across almost all customers. Other drivers of
the decline were some reversion of the timing of orders to more
traditional seasonality, and net losses from competitive
tendering.
As previously reported, since early 2022 the DG Americas team
have been focused on the turnaround of their business to drive
simplification and deliver improved operational efficiency. Through
this work they are also unlocking further synergies resulting from
the acquisitions of the past decade, for example in this period six
sites have been completely vacated. The main contribution from
these initiatives comes from lower headcount, more efficient
sourcing and distribution, as well as the impact of prior year
"catch-up" pricing. The division also benefited from better
sourcing of bought-in products as well as some improvement in sea
freight in the period. The combination of these factors more than
offset the impact of the lower revenue. Therefore, despite the
lower revenues, the division delivered solid adjusted operating
profit growth, up 9.0% to $16.6 million, representing an adjusted
operating margin improvement of 180 basis points to 5.9%.
With a recently strengthened leadership team, the division sees
further opportunities for simplification and greater efficiency. It
is also reallocating resource to further develop its commercial
capabilities, to complement its design and innovation strengths, in
order to become more competitive and return the division to
profitable revenue growth.
Design Group International
The DG International division experienced an increase in revenue
of over 8% to $161.7 million. Growth centred in continental Europe
where the consumer has thus far been more resilient than in our
other markets. It is also where we are most successfully winning
alongside our key customers as we help them gain retail-share,
especially in Celebrations (mainly giftwrap) and Giftware (mainly
frames). Further benefit was derived from favourable currency
movements, which more than offset small continued decline in the UK
and, more recently in Australia, where consumer sentiment has
softened following a number of interest rate increases.
Adjusted operating profit rose over 37% to $25.3 million. This
represents an adjusted operating margin of 15.7%, up an outstanding
340 basis points. Whilst raising our prices has proved extremely
challenging in the present environment, and some costs such as
labour continue to rise, we have benefited from reduction in other
costs such as sea freight, as well as better sourcing of bought-in
products. Our product mix also improved.
The DG UK team is making good progress to address the more
challenging consumer sentiment in the UK market and its
reorganisation is also progressing well. In the period, we have
seen a small reduction in revenue, but a rise in absolute profit
driven by a focus on increasing both efficiency and effectiveness,
to thereby become more competitive in the tough retail environment.
A notable achievement in the period is the successful collaboration
with a key customer, Tesco, in the development of its Paperchase
range of products since its acquisition of the brand earlier this
year.
In continental Europe our innovative Smartwrap(TM) shrink-free
giftwrap solution is fast gaining traction, with over half of our
customers now stocking it. Besides its obvious sustainability
credentials, it offers a more appealing product in-store to
consumers. The teams in these markets are also broadening their
categories, especially in the areas of home décor and stationery,
and expanding warehousing facilities.
Our products, brands and channels
The Group continues to offer a diverse, yet complementary,
product portfolio, providing our customers with a one-stop- shop
product and service solution. This underpins the Group's strategy
to be a partner of choice for our customers.
Revenue by product HY2024 HY2023
category
==================== ============== ==============
Celebrations 63% $278.5m 64% $333.4m
Craft & creative
play 15% $67.9m 15% $80.0m
Gifting 11% $49.2m 9% $45.4m
Not-for-resale
consumables 7% $30.3m 6% $33.5m
Stationery 4% $18.2m 6% $28.9m
Total $444.1m $521.2m
==================== ==== ======== ==== ========
Celebrations continue to be the leading category for the Group,
consisting mostly of gift packaging and seasonal décor. This
category has been affected by the fall in seasonal demand this year
in DG Americas, yet still makes up 63% of sales in the period.
Craft sales have stabilised this year following the normalisation
from Covid-19 pandemic lockdown highs, however creative play sales
have decreased due to lower order volumes from our customers in the
period. Despite the fall in Group sales, our Gifting category
remained resilient in the current environment with strong frame
sales, which are 30% up in the period, mostly in continental
Europe.
Revenue by season HY2024 HY2023
=================== ============== ==============
Christmas 50% $223.3m 50% $258.8m
Minor seasons 4% $19.2m 5% $26.6m
Everyday 46% $201.6m 45% $235.8m
Total $444.1m $521.2m
=================== ==== ======== ==== ========
Given that the decline in revenue in some of our markets has
been in both Everyday products and the seasonal ranges, our mix of
revenue by season has broadly stayed in line with the prior
period.
Revenue by customer HY2024 HY2023
channel
===================== ============== ==============
Value & Mass 72% $317.6m 71% $369.3m
Independents 16% $71.4m 16% $84.2m
Specialists 10% $46.6m 12% $60.8m
Online 2% $8.5m 1% $6.9m
Total $444.1m $521.2m
===================== ==== ======== ==== ========
Our distribution of revenue by channel has remained consistent
with the prior period, with no specific channel experiencing a
disproportionately significant impact compared to the others, with
all channels apart from Online facing a 15-25% decline in line with
the overall pressure on revenue.
Revenue by brand HY2024 HY2023
==================== =============== ==============
Licensed 10% $45.2m 9% $47.6m
Customer own brand
/ bespoke 55% $243.1m 60% $312.1m
DG brand 35% $155.8m 31% $161.5m
Total $444.1m $521.2m
==================== ===== ======== ==== ========
The reduction in customer own branded sales reflects the adverse
DG Americas seasonal revenue dynamics mainly in the Celebrations
category.
Detailed financial review
The Group's financial results for the first six months of the
year are summarised below.
HY2024 HY2023
================================ ================================
Reported Adjusting Adjusted Reported Adjusting Adjusted
items items
$m $m $m $m $m $m
============================= ========= ========== ========= ========= ========== =========
Revenue 444.1 - 444.1 521.2 - 521.2
Gross profit 93.0 0.4 93.4 86.6 - 86.6
Overheads (55.5) 0.3 (55.2) (51.5) (4.6) (56.1)
--------- ---------- --------- --------- ---------- ---------
Operating profit 37.5 0.7 38.2 35.1 (4.6) 30.5
Finance charge (3.4) - (3.4) (3.1) - (3.1)
--------- ---------- --------- --------- ---------- ---------
Profit before tax 34.1 0.7 34.8 32.0 (4.6) 27.4
Tax (9.5) (0.2) (9.7) (8.5) 1.2 (7.3)
--------- ---------- ---------
Profit after tax 24.6 0.5 25.1 23.5 (3.4) 20.1
----------------------------- --------- ---------- --------- --------- ---------- ---------
Operating profit 37.5 0.7 38.2 35.1 (4.6) 30.5
Depreciation and impairment
of PPE and software 6.9 - 6.9 7.5 - 7.5
Depreciation and impairment
of right of use assets 7.6 0.6 8.2 8.8 - 8.8
Acquisition amortisation 0.9 (0.9) - 1.4 (1.4) -
--------- ---------- --------- --------- ---------- ---------
EBITDA 52.9 0.4 53.3 52.8 (6.0) 46.8
----------------------------- --------- ---------- --------- --------- ---------- ---------
Diluted EPS 24.4c 0.6c 25.0c 23.1c (3.5c) 19.6c
Basic EPS 24.6c 0.6c 25.2c 23.1c (3.5c) 19.6c
Revenue for the period decreased by 15% to $444.1 million
(HY2023: $521.2 million) driven by reduced order quantities guided
by lower customer expectations, especially of the forthcoming
Christmas season, as well as lower consumer demand for Everyday
products in some markets, the normalisation of seasonal ordering,
and net losses from competitive tendering . The Group revenues,
when assessed in constant currency terms, decreased 16%
year-on-year with foreign exchange having a small positive impact
on the year-on-year perspective .
Adjusted operating profit has improved year-on-year to $38.2
million (HY2023: $30.5 million) with adjusted gross margin at 21.0%
(HY2023: 16.6%). This improvement reflects the benefits of efforts
to simplify our business models and improving operational
efficiency. The improvement is also helped by the better sourcing
of bought-in products, the easing of some cost headwinds
experienced in recent years, notably sea freight. Adjusted
overheads as a percentage of revenue increased to 12.4% (HY2023:
10.8%) reflecting the increased cost of labour offset only in part
by the ongoing efforts to manage costs across the Group.
Overall, the Group finished the half year with adjusted profit
before tax of $34.8 million (HY2023: $27.4 million), and a reported
profit before tax of $34.1 million (HY2023: $32.0 million). Profit
before tax is marginally lower than the adjusted profit before tax,
reflecting the adjusting items net charge. Further details of the
adjusting items are detailed below. Profit after tax is $24.6
million (HY2023: $23.5 million) for the six months to 30 September
2023.
Finance expenses
Finance costs in the year of $3.4 million are higher than prior
year (HY2023: $3.1 million) driven by significantly higher interest
rates in this half year when compared to the same period last year.
The higher finance costs have been largely mitigated by lower
average net debt levels.
Adjusting items
Adjusting items are material items of an unusual or
non-recurring nature which represent gains or losses which are
separately presented by virtue of their nature, size and/or
incidence. The Group's adjusting items in the period to 30
September 2023 total a net debit of $0.7 million compared to a net
credit of $4.6 million in the prior year. Details of these items
can be seen below.
HY2024 HY2023
Adjusting $m $m
items
======================= ======= ======= ======= ======= ======== ========
Acquisition integration and restructuring
income (0.2) (4.4)
Amortisation of acquired intangibles 0.9 1.4
(Gains)/losses and transaction costs relating
to acquisitions and disposals of businesses - (1.5)
IT security incident - (0.1)
Total 0.7 (4.6)
=========================================================== ======== ========
Acquisition integration and restructuring income - $0.2
million
In order to realise synergies, from acquisitions or existing
businesses, integration and restructuring projects are respectively
undertaken that aim to deliver future savings and efficiencies for
the Group. These are projects outside of the normal operations of
the business and typically incur one-time costs to ensure
successful implementation. As such it is appropriate that costs
associated with projects of this nature be included as adjusting
items. The costs incurred in HY2024 relate to the reorganisation
and business simplification in DG Americas as follows:
Reversal of impairment: Following the integration of some of DG
America's sites in FY2021, a portion of a leased site in Budd Lake,
New Jersey was exited, and the right-of-use asset was impaired. In
the period ended 30 September 2023, the landlord re-acquired a
portion of the impaired site resulting in a reversal of impairment
of $0.6 million.
DG Americas business reorganisation: In the period ended 30
September 2023 further restructuring costs, relating to staff, of
$0.4 million have been recognised in DG Americas. This follows the
announcement in March 2023 of further business reorganisation.
Amortisation of acquired intangibles - $0.9 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 which are not part of the acquired balance sheet.
These intangible assets are then amortised to the income statement
over their useful economic lives. These are not considered
operational costs relating to the running of the acquired business
and are directly related to the accounting for the acquisition, as
such these are included in adjusting items. These include
tradenames and brands acquired as part of the acquisitions of
Impact, with the tradenames and brands related to CSS fully
amortised in the prior year.
Taxation
The taxation charge for the half year on profit before tax is
$9.5 million (HY2023: $8.5 million) with the effective tax rate at
27.9% (HY2023: 26.3%). The taxation charge on adjusted profit
before tax is $9.7 million (HY2023: $7.3 million) with the
effective tax rate at 27.8% (HY2023: 26.5%).
There is a higher effective tax rate in each jurisdiction than
the relevant statutory rate due to permanently disallowable items.
The effective tax rate in the UK is 0% as deferred tax is not
recognised. The changes in profit mix across the various
territories, together with the impact of unrecognised deferred tax
on assessed losses in the UK territory, are the main drivers that
impact the effective tax rate.
Earnings per share
Adjusted diluted earnings per share of 25.0 cents (HY2023: 19.6
cents) is 28% higher year-on-year driven by the increased profits.
Diluted earnings per share is 24.4 cents (HY2023: 23.1 cents) which
is lower than adjusted diluted earnings per share reflecting the
small adjusting items charge in the period. The reconciliation
between reported and adjusted diluted earnings per share is shown
in the table above.
Dividend
The Board are not recommending an interim dividend.
Cash flow and net debt
The Group ended the period with a net debt balance of $15.1
million (HY2023: $73.7 million), $58.6 million lower than the same
period in the prior year. This is particularly significant given
the prior year benefited from proceeds from the sale of properties.
The year-on-year progress is mainly reflective of both the higher
opening net cash position of $50.5 million (HY2023: $30.2 million)
as well as improvements in working capital outflows.
HY2024 HY2023
Cash flow $m $m
============================ ===== ==== ==== ==== ==== ==== ==== ==== ======== ========
Adjusted EBITDA 53.3 46.8
Add back for share-based payment
charge 0.6 0.3
Movements in working
capital (99.5) (136.3)
Adjusted cash used by operations (45.6) (89.2)
Adjusting items within cash utilised
by operations (1.8) (1.0)
Cash used by operations (47.4) (90.2)
Adjusting items within investing
and financing activities - 8.2
Capital expenditure (net of disposals
of property, plant and equipment) (5.2) (3.2)
Acquisition of non-controlling
interest - (3.0)
Tax paid (1.3) (3.1)
Interest paid (2.3) (2.3)
Lease liabilities principal
repayments (9.7) (10.8)
Dividends paid (including those paid
to non-controlling interests) - (2.6)
Purchase of own shares - (0.9)
FX and other 0.3 4.0
Movement in net debt (65.6) (103.9)
Opening net cash 50.5 30.2
=================================== ================================== ======== ========
Closing net
debt (15.1) (73.7)
============================================================================= ======== ========
Working capital
Working capital levels of the Group increase steadily in the
first half of the year as manufacturing of seasonal product builds
ahead of distribution. The second half of the year then sees the
borrowing levels of the Group decline and typically move to a net
cash position as Christmas-related receivables are collected. The
working capital outflow in the period was $99.5 million (HY2023:
$136.3 million), a $36.8 million improvement on the prior year.
This is largely due to better working capital management across the
Group as well as the impacts of the lower volumes in DG
Americas.
Adjusting items
During the period there was a $1.8 million net cash outflow
(HY2023: $7.2 million inflow) in relation to adjusting items, of
which $1.4 million outflow related to costs incurred in previous
years. Further detail on adjusting items can be seen above.
Capital expenditure
Capital expenditure in the period was higher than the prior year
at $5.2 million (HY2023: $3.2 million) reflecting strategic
investment in sustainable Smartwrap(TM) technology, as well as
nearshoring and consolidation of our sites.
Foreign exchange exposure management
Our foreign exchange ('FX') exposure is split into two
areas:
Translational FX exposure - This exposure is the result of the
requirement for the Group to report its results in one currency.
This necessitates the translation of our regional business units'
local currency financial results into the Group's adopted reported
currency. The Group's reporting currency is US dollars in light of
the fact that a significant proportion of the Group's revenues and
profits are in US dollars. There remains a smaller part of the
Group whose functional currency is something other than US dollars.
The constant currency results recalculate the prior year based on
the exchange rates of the current period to enhance the
comparability of information between reporting periods. The revenue
decrease would have been $6.3 million more than prior year if a
consistent currency was applied. and the increase in adjusted
profit before tax would have been $0.6 million lower.
Transactional FX exposure - This FX exposure is managed
carefully by the Group as it can result in additional cash outflows
if not managed appropriately. In response to this risk the Group
adopts an active hedging policy to ensure foreign exchange
movements remain mitigated as far as possible. In addition, a
reasonable proportion of this hedging is achieved through natural
hedges whereby our purchases and sales in US dollars are offset.
The balance of our hedging is achieved through forward exchange
contracts and similar derivatives.
Financial position and going concern basis
The Group's net assets at 30 September 2023 were $355.6 million
which is $15.9 million lower than last year (HY2023: $371.5
million).
As at the 30 September 2023 balance sheet date, the Directors
have assessed going concern in preparation of these financial
statements and the outlook for FY2024 and beyond. The Directors are
of the opinion the Group has adequate liquidity at the half year
with a net debt position of $15.1 million ($7.3 million of cash and
$24.0 million of asset backed lending reduced by $1.6 million of
facility arrangement fees).
The Directors of the Group have performed an assessment of the
overall position and future forecasts for the purposes of going
concern. Going concern forecasts have been produced using the
Group's FY2024 and FY2025 forecasts and plans. These forecasts have
been produced and reviewed in detail by the Board and take into
account the seasonal working capital cycle of the business. They
have been sensitised to reflect severe but plausible adverse
downturns in the current assumptions including the potential impact
of a significant disruption in one of our major customer's
business, as well as continued pressures on demand in the US
market, beyond those risks already factored into the budgets and
plans. The base forecasts and additional sensitivity analysis have
been tested against the facility limits and covenants. The analysis
demonstrated to the Directors that the Group has sufficient
headroom for the Group to meet its obligations as they fall due for
a forecast period of more than twelve months beyond the date of
signing these accounts and will also be compliant with all
covenants within this time frame. 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.
Risk
The Group operates a decentralised model where risk management
is embedded within strategic and operational decision making, with
an overarching role played by the Group team and the Board to
ensure oversight in the risk management process.
The following risks are no longer recognised as principal risks
for the Group: Financing capacity due to the strong cash flows and
profit and margin recovery, coupled with the secured financing
arrangement; Manufacturing operations as the essence of this risk
is now covered in the strategy and supply chain and sourcing risks;
Acquisition investment given the reduced M&A agenda. The risk
management framework, along with the remaining principal risks and
uncertainties faced by the Group, remain in line with those set out
on pages 50 to 55 of our annual report and financial statements
2023.
The key risks for the Group at present continue to be: Strategy,
macroeconomic uncertainty, and consumers. Given the journey we are
on to address the Group strategy, this risk remains more important
than ever to ensure sustainable profit growth is achieved.
Macroeconomic uncertainty continues to be high following the
succession of geopolitical events impacting our business across our
suppliers, customers, consumers and workforce. Similarly, the high
inflationary environment and cost-of-living crisis is creating a
heightened Consumer risk given the risk of depressed consumer
sentiment across our markets, despite the Group focus on working
together with the winning retailers.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that these
condensed interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and that the interim management
report includes a fair review of the information, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
Approved on behalf of the Group Board by Rohan Cummings.
Alternative performance measures
This review includes alternative performance measures (APMs)
that are presented in addition to the standard UK IFRS metrics. The
Directors believe that these APMs provide important additional
information regarding the underlying performance of the business
including trends, performance and position of the Group. APMs are
used to enhance the comparability of information between reporting
periods and segmental business units by adjusting for exceptional
or uncontrollable factors which affect UK IFRS measures, to aid the
understanding of the Group's performance. Consequently, APMs are
used by the Directors and management for strategic and performance
analysis, planning, reporting and reward setting. APMs reflect the
results of the business excluding adjusting items, which are items
that are material or of an unusual or non-recurring nature.
The APMs and the definitions used are listed below:
-- Adjusted EBITDA - Profit/(loss) before finance charges, tax,
depreciation, amortisation, impairment (EBITDA) and adjusting
items
-- Adjusted gross profit - Gross profit before adjusting items
-- Adjusted operating profit/(loss) - Profit/(loss) before
finance charges, tax and adjusting items
-- Adjusted profit/(loss) before tax - Profit/(loss) before tax and adjusting items
-- Adjusted profit/(loss) after tax - Profit/(loss) after tax
before adjusting items and associated tax effect
-- Adjusted tax - Tax before adjusting items
-- Adjusted diluted earnings/(loss) per share - Diluted
earnings/(loss) per share before adjusting items and associated tax
effect
-- Adjusted overheads - Selling costs, administration expenses,
other operating income, profit/(loss) on disposal of property,
plant and equipment (overheads) before adjusting items
-- Adjusted cash generated from operations - Cash generated from
operations before the associated cash impact of those adjusting
items
-- Net cash - Cash and cash equivalents, bank overdraft and loan arrangement fees
In terms of these APMs, a full reconciliation between our
adjusted and reported results is provided in the detailed financial
review above, from which the following key performance metrics have
been derived:
-- Adjusted gross margin - Adjusted gross profit divided by revenue
-- Adjusted operating margin - Adjusted operating profit divided by revenue
-- Adjusted EBITDA margin - Adjusted EBITDA divided by revenue
-- Cash conversion - Adjusted cash generated from operations divided by adjusted EBITDA
Further details of the items categorised as adjusting items are
disclosed in more detail in note 3.
CONDENSED CONSOLIDATED INCOME STATEMENT
SIX MONTHSED 30 SEPTEMBER 2023
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 2022 31 Mar
2023 2023
Note $000 $000 $000
---------------------------------------------------- ---- ---------- ----------- ---------
Revenue 2 444,050 521,184 890,309
Cost of sales (351,069) (434,575) (758,569)
---------------------------------------------------- ---- ---------- ----------- ---------
Gross profit 92,981 86,609 131,740
Selling expenses (22,168) (23,216) (47,097)
Administration expenses - costs (33,885) (35,098) (75,112)
Administration expenses - impairment of goodwill - - (29,100)
Other operating income 5 522 2,107 2,951
Profit on disposal of property, plant and equipment 2 24 4,721 4,595
Profit/(loss) on disposal of leases 27 (73) -
---------------------------------------------------- ---- ---------- ----------- ---------
Operating profit/(loss) 3 37,501 35,050 (12,023)
Finance expenses (3,448) (3,125) (6,873)
---------------------------------------------------- ---- ---------- ----------- ---------
Profit/(loss) before tax 34,053 31,925 (18,896)
Income tax charge 6 (9,485) (8,399) (7,563)
---------------------------------------------------- ---- ---------- ----------- ---------
Profit/(loss) for the period 24,568 23,526 (26,459)
---------------------------------------------------- ---- ---------- ----------- ---------
Attributable to:
Owners of the Parent Company 23,911 22,754 (27,987)
Non-controlling interests 657 772 1,528
---------------------------------------------------- ---- ---------- ----------- ---------
Earnings/(loss) per ordinary share
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
Note
-------- ---- ---------- ---------- -------
Basic 9 24.6c 23.1c (28.6c)
-------- ---- ---------- ---------- -------
Diluted 9 24.4c 23.1c (28.6c)
-------- ---- ---------- ---------- -------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2023
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
----------------------------------------------- ---------- ---------- --------
Profit/(loss) for the period 24,568 23,526 (26,459)
Other comprehensive income/(expense):
Items that will not be reclassified to profit
or loss
Re-measurement of defined benefit pension
and health benefit schemes - - (37)
Items that may be reclassified subsequently
to profit or loss
----------------------------------------------- ---------- ---------- --------
Exchange difference on translation of foreign
operations (186) 24,790 10,621
Transfer to profit and loss on maturing cash
flow hedges 139 (753) (683)
Net unrealised (loss)/gain on cash flow hedges (407) (513) 419
Income tax relating to these items - - -
----------------------------------------------- ---------- ---------- --------
(454) 23,524 10,357
----------------------------------------------- ---------- ---------- --------
Other comprehensive (expense)/income for
the period, net of tax (454) 23,524 10,320
----------------------------------------------- ---------- ---------- --------
Total comprehensive income/(expense) for
the period, net of tax 24,114 47,050 (16,139)
Attributable to:
Owners of the Parent Company 23,713 47,136 (17,024)
Non-controlling interests 401 (86) 885
----------------------------------------------- ---------- ---------- --------
24,114 47,050 (16,139)
----------------------------------------------- ---------- ---------- --------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2023
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
------------- -------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
At 1 April
2023 6,059 214,845 40,069 38 (1,198) 68,033 327,846 6,530 334,376
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
Profit for the
period - - - - - 23,911 23,911 657 24,568
Other
comprehensive
(expense)/income - - - (271) 73 - (198) (256) (454)
Total
comprehensive
income/(expense)
for the period - - - (271) 73 23,911 23,713 401 24,114
------- ----------- ------- ------- -----------
Transactions
with owners
in their capacity
as owners
Equity-settled
share-based
payments - - - - - 599 599 - 599
Tax on
equity-settled
share-based
payments - - - - - (5) (5) - (5)
Options exercised 16 - - - - (16) - - -
Exchange
differences
on opening
balances (79) (2,878) (537) - - - (3,494) - (3,494)
At 30 September
2023 5,996 211,967 39,532 (233) (1,125) 92,522 348,659 6,931 355,590
------------------ ------- ----------- ------- ------- ----------- -------- ------------- ----------- -------
SIX MONTHSED 30 SEPTEMBER 2022
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
------------- --------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 1 April
2022 6,373 228,143 42,549 299 (12,459) 96,806 361,711 7,999 369,710
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Profit for the
period - - - - - 22,754 22,754 772 23,526
Other
comprehensive
income/(expense) - - - (1,295) 25,677 - 24,382 (858) 23,524
Total
comprehensive
income/(expense)
for the period - - - (1,295) 25,677 22,754 47,136 (86) 47,050
------- ----------- ------- ------- -----------
Change in
ownership
interest
Options over
non-controlling
interest - - - - - 3,069 3,069 - 3,069
Acquisition
of
non-controlling
interest - - - - - (3,558) (3,558) 607 (2,951)
Transactions
with owners
in their capacity
as owners
Equity-settled
share-based
payments - - - - - 283 283 - 283
Purchase of
own shares - - - - - (865) (865) - (865)
Options exercised 51 - - - - (51) - - -
Equity dividends
paid - - - - - - - (2,616) (2,616)
Exchange
differences
on opening
balances (969) (34,738) (6,479) - - - (42,186) - (42,186)
At 30 September
2022 5,455 193,405 36,070 (996) 13,218 118,438 365,590 5,904 371,494
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
YEARED 31 MARCH 2023
Attributable to the owners of the
Parent Company
-------------------------------------------------------------
Share
premium
and capital Non-
------------- --------
Share redemption Merger Hedging Translation Retained Shareholders' controlling
capital reserve reserve reserve reserve earnings equity interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 1 April
2022 6,373 228,143 42,549 299 (12,459) 96,806 361,711 7,999 369,710
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Loss for the
year - - - - - (27,987) (27,987) 1,528 (26,459)
Other
comprehensive
income/(expense) - - - (261) 11,261 (37) 10,963 (643) 10,320
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Total
comprehensive
(expense)/income
for the year - - - (261) 11,261 (28,024) (17,024) 885 (16,139)
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
Change in
ownership
interest
Options over
non-controlling
interest - - - - - 3,069 3,069 - 3,069
Acquisition
of
non-controlling
interest - - - - - (3,558) (3,558) 607 (2,951)
Transactions
with owners
in their capacity
as owners
Equity-settled
share-based
payments - - - - - 656 656 - 656
Purchase of
own shares - - - - - (865) (865) - (865)
Options exercised 51 - - - - (51) - - -
Equity dividends
paid - - - - - - - (2,961) (2,961)
Exchange
differences
on opening
balances (365) (13,298) (2,480) - - - (16,143) - (16,143)
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
At 31 March
2023 6,059 214,845 40,069 38 (1,198) 68,033 327,846 6,530 334,376
----------------- ------- ----------- ------- ------- ----------- -------- ------------- ----------- --------
In line with the Group's accounting policy, share capital, share
premium, capital redemption reserve, merger reserve and hedging
reserve are translated into US dollars at the rates of exchange at
each balance sheet date and the resulting cumulative exchange
differences are included in translation reserves.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2023
Unaudited Unaudited
as at as at As at
30 Sep 30 Sep 31 Mar
2023 2022 2023
Note $000 $000 $000
--------------------------------- ---- --------- --------- -------
Non-current assets
Property, plant and equipment 66,961 71,803 70,306
Intangible assets 69,469 98,460 71,325
Right-of-use assets 62,106 74,025 69,332
Long-term assets 5,236 5,839 5,647
Deferred tax assets 12,164 8,159 15,401
--------------------------------- ---- --------- --------- -------
Total non-current assets 215,936 258,286 232,011
--------------------------------- ---- --------- --------- -------
Current assets
Asset held for sale 1,612 - -
Inventory 218,794 264,769 206,426
Trade and other receivables 252,343 265,998 92,402
Income tax receivable 1,964 1,223 2,428
Derivative financial assets 10 664 502 340
Cash and cash equivalents 7 71,566 83,396 85,213
--------------------------------- ---- --------- --------- -------
Total current assets 546,943 615,888 386,809
--------------------------------- ---- --------- --------- -------
Total assets 2 762,879 874,174 618,820
--------------------------------- ---- --------- --------- -------
Non-current liabilities
Loans and borrowings 8 (1,005) (317) -
Lease liabilities 54,836 66,322 62,717
Deferred income 1,930 463 2,038
Provisions 2,985 4,803 5,474
Other financial liabilities 14,082 17,827 19,071
Deferred tax liabilities 163 194 221
--------------------------------- ---- --------- --------- -------
Total non-current liabilities 72,991 89,292 89,521
--------------------------------- ---- --------- --------- -------
Current liabilities
Bank overdraft 7 64,261 69,122 34,979
Loans and borrowings 8 23,397 88,274 (250)
Lease liabilities 15,988 18,234 17,470
Deferred income 437 1,681 263
Provisions 3,626 1,205 1,339
Income tax payable 11,531 4,660 6,918
Trade and other payables 177,463 188,690 92,977
Other financial liabilities 37,595 41,522 41,227
--------------------------------- ---- --------- --------- -------
Total current liabilities 334,298 413,388 194,923
--------------------------------- ---- --------- --------- -------
Total liabilities 2 407,289 502,680 284,444
--------------------------------- ---- --------- --------- -------
Net Assets 355,590 371,494 334,376
Equity
Share capital 5,996 5,455 6,059
Share premium 210,331 191,912 213,187
Capital redemption reserve 1,636 1,493 1,658
Merger reserve 39,532 36,070 40,069
Hedging reserve (233) (996) 38
Translation reserve (1,125) 13,218 (1,198)
Retained earnings 92,522 118,438 68,033
--------------------------------- ---- --------- --------- -------
Equity attributable to owners of
the Parent Company 348,659 365,590 327,846
Non-controlling interests 6,931 5,904 6,530
--------------------------------- ---- --------- --------- -------
Total equity 355,590 371,494 334,376
--------------------------------- ---- --------- --------- -------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
SIX MONTHSED 30 SEPTEMBER 2023
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
Note $000 $000 $000
------------------------------------------ ---- ---------- ---------- --------
Cash flows from operating activities
Profit/(loss) for the period 24,568 23,526 (26,459)
Adjustments for:
Depreciation and impairment/(reversal
of impairment) of property, plant
and equipment 6,159 6,384 12,532
Depreciation and impairment/(reversal
of impairment) of right-of-use assets 7,626 8,862 18,471
Amortisation of intangible assets 1,603 2,477 4,817
Goodwill impairment - - 29,100
Finance expenses 3,448 3,125 6,873
Income tax charge 9,485 8,399 7,563
Profit on disposal of property, plant
and equipment (24) (4,721) (4,595)
(Profit)/loss on disposal of leases (27) 73 -
Equity-settled share-based payments
- expense/(income) 630 312 805
Add back income from insurance settlement - - (1,500)
------------------------------------------ ---- ---------- ---------- --------
Operating profit after adjustments
for non-cash items 53,468 48,437 47,607
Change in trade and other receivables (163,254) (146,837) 36,929
Change in inventory (14,596) (48,061) 17,790
Change in trade and other payables,
provisions and deferred income 76,974 57,779 (43,352)
------------------------------------------ ---- ---------- ---------- --------
Cash (used by)/generated from operations (47,408) (88,682) 58,974
Tax paid (1,272) (3,092) (7,307)
Interest and similar charges paid (2,267) (2,326) (5,270)
------------------------------------------ ---- ---------- ---------- --------
Net cash (outflow)/inflow from operating
activities (50,947) (94,100) 46,397
------------------------------------------ ---- ---------- ---------- --------
Cash flow from investing activities
Proceeds from sale of property, plant
and equipment 42 6,839 6,809
Acquisition of intangible assets (93) (16) (368)
Acquisition of property, plant and
equipment (5,123) (3,286) (5,459)
Proceeds from insurance settlement - - 1,500
------------------------------------------ ---- ---------- ---------- --------
Net cash (outflow)/inflow from investing
activities (5,174) 3,537 2,482
------------------------------------------ ---- ---------- ---------- --------
Cash flows from financing activities
Acquisition of non-controlling interest - (2,951) (2,951)
Purchase of own shares - (865) (865)
Net movement in credit facilities 24,000 88,908 -
Lease liabilities principal repayments (9,666) (10,848) (20,428)
Loan arrangement fees (1,873) (1,079) (1,079)
Dividends paid to non-controlling
interest - (2,616) (2,961)
------------------------------------------ ---- ---------- ---------- --------
Net cash inflow/(outflow) from financing
activities 12,461 70,549 (28,284)
------------------------------------------ ---- ---------- ---------- --------
Net (decrease)/increase in cash and
cash equivalents (43,660) (20,014) 20,595
Cash and cash equivalents and bank
overdrafts at beginning of the period 50,234 29,799 29,799
Effect of exchange rate fluctuations
on cash held 731 4,489 (160)
------------------------------------------ ---- ---------- ---------- --------
Cash and cash equivalents and bank
overdrafts at end of the period 7 7,305 14,274 50,234
------------------------------------------ ---- ---------- ---------- --------
NOTES TO THE INTERIM FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2023
1. Accounting policies
Basis of preparation
The financial information contained in this interim report does
not constitute statutory accounts as defined in Section 435 of the
Companies Act 2006 and is unaudited. Statutory accounts for the
year ended 31 March 2023 were approved by the board of directors on
19 June 2023 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain any
statement under section 498 of the Companies Act 2006. These
interim financial statements have been reviewed, not audited.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards (UK IFRS), with future changes
being subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK IFRS in its consolidated financial statements on
1 April 2021. This condensed consolidated interim financial report
for the half-year reporting period ended 30 September 2023 has been
prepared in accordance with the UK-adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. The interim report does not include
all of the notes of the type normally included in an annual
financial report. Accordingly, this report is to be read in
conjunction with the annual report for the year ended 31 March
2023, which has been prepared in accordance with UK-adopted
international accounting standards and the requirements of the
Companies Act 2006, and any public announcements made by IG Design
Group plc during the interim reporting period.
The preparation of financial statements that conform with
adopted UK IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of income and
expense during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results may ultimately differ from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and future periods if
relevant.
For the purposes of these financial statements, 'Design Group'
or 'the Group' means IG Design Group plc ('the Company') and its
subsidiaries. IG Design plc is a company limited by shares,
incorporated and domiciled in the UK. Its registered office is
Howard House, Howard Way, Interchange Park, Newport Pagnell, MK16
9PX. Its shares are listed on the Alternative Investment Market
(AIM).
Seasonality of the business
The business of the Group is seasonal and although revenues
generally accrue relatively evenly in both halves of the year,
working capital requirements, including inventory levels, increase
steadily in the first half from July and peak in October as
manufacturing of Christmas products builds ahead of distribution.
The second half of the year sees the borrowing of the Group decline
and move to typically a cash positive position as the Group
collects its receivables through January to March.
Presentation currency
The presentation and functional currency of the Group is US
dollars. The functional currency of the Parent Company remains as
pound sterling as it is located in the United Kingdom and
substantially all of its cash flows, assets and liabilities are
denominated in pound sterling, as well as its share capital.
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. Cash balances and
borrowings are detailed in notes 7 and 8.
The Group financial statements have been prepared on a going
concern basis as the Directors have a reasonable expectation that
the Group has adequate resources to continue trading for a period
of at least twelve months from the date of this report, based on an
assessment of the overall position and future forecasts for the
going concern period. This assessment has also considered the
overall level of Group borrowings and covenant requirements, the
flexibility of the Group to react to changing market conditions and
ability to appropriately manage any business risks.
On 5 June 2023, the business entered into a new banking facility
with HSBC and NatWest bank as part of a three-year deal to meet the
funding requirements of the Group. This facility comprises an Asset
Backed Lending (ABL) arrangement with a maximum facility amount of
$125.0 million. On 3 November 2023 the Group made an operational
amendment to the ABL arrangement and signed a supplemental
agreement with an option to access a GBP17.0 million RCF facility
over a two month period. This amendment offers flexibility during
the months where the Group has a requirement for funding while
having limited access into the ABL. Cash balances, borrowing and
the financial covenants applicable to the facility are detailed in
notes 7 and 8.
In addition to the above facility, the Group also increased its
unsecured overdraft facility provided by HSBC to GBP16.5 million,
which reduced to GBP8.5 million from August 2023. As such, after
making appropriate enquires, the Directors do not see any
practical, regulatory or legal restrictions which would limit their
ability to fund the different regions of the business as required
as the Group has sufficient resources.
The Group also have access to supplier financing arrangements
from certain customers which we utilise at certain times of the
year. The largest of these supplier financing arrangements are
subject to the continuing support of the customers' banking
partners and therefore could be withdrawn at short notice. As the
new ABL arrangement is linked to trade debtors, any withdrawal of
these facilities would be largely offset as the borrowing base
under the facility would increase.
The Directors have assessed detailed plans and forecasts up to
31 March 2025. These forecasts reflect the fact that the Group has
now returned to profitability and continues the journey to more
robust performance, growing profitability and margins as a result.
They also reflect the seasonal operating cycle of the business and
further recovery associated with the DG Americas plan.
These forecasts have been sensitised to reflect severe but
plausible adverse downturns in the current assumptions.
Specifically, the severe but plausible downside scenario has taken
account of the following risks:
-- the potential impact of a significant disruption in one of
our major customer's business, reflected in a c$20-$25 million
reduction in sales performance and related cash and working capital
impacts; and
-- the potential impact of further effects of inflation on
disposable incomes and therefore demand for products in the DG
Americas business segments, reflected in a c$65-$75 million
reduction of sales.
In the severe but plausible scenario modelled there remains
adequate headroom in our forecast liquidity, and under all the
covenant requirements.
Based on this assessment, the Directors have formed a judgement
that there is a reasonable expectation the Group will have adequate
resources to continue in operational existence for the foreseeable
future.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim report are consistent with those of the previous financial
year and corresponding interim reporting period and the adoption of
new and amended standards. A number of new or amended standards
became applicable for the current reporting period. The Group did
not have to change its accounting policies or make retrospective
adjustments as a result of adopting these standards.
New and amended standards
On 23 May 2023, the IASB issued narrow-scope amendments to IAS
12. The amendments provide a temporary exception from the
requirement to recognise and disclose deferred taxes arising from
enacted or substantively enacted tax law that implements the Pillar
two model rules published by the OECD, including tax law that
implements qualified domestic minimum top-up taxes described in
those rules. The amendments to IAS 12 are required to be applied
immediately (subject to any local endorsement processes) and
retrospectively in accordance with IAS 8, 'Accounting Policies,
Changes in Accounting Estimates and Errors', including the
requirement to disclose the fact that the exception has been
applied if the entity's income taxes will be affected by enacted or
substantively enacted tax law that implements the OECD's Pillar two
model rules. This amendment has not yet been endorsed by the UK
endorsement Board. However, the group has developed an accounting
policy on the recognition of deferred taxes arising from the Pillar
two model rules where no deferred taxes are provided.
2. Segmental information
The Group has one material business activity, being the design,
manufacture and distribution of Celebrations, Craft & creative
play, Stationery, Gifting and 'Not-for-resale' consumable
products.
The business operates under two reporting segments which are
reported to, and evaluated by, the Chief Operating Decision Makers
for the Group. The DG Americas segment includes overseas operations
in Asia, Australia, the UK, India and Mexico, being the overseas
entities of US companies. The DG International segment comprises
the consolidation of the separately owned business in the UK, Asia,
Europe and Australia.
Inter -- segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Financial performance of each segment is measured on adjusted
operating profit before management recharges. Interest and tax are
managed on a Group basis and not split between reportable segments.
However, the related financial liabilities and cash have been
allocated out into the reportable segments as this is how they are
managed by the Group.
Segment assets are all non-current and current assets, excluding
deferred tax and income tax, which are shown in the eliminations
column. Inter -- segment receivables and payables are not included
within segmental assets and liabilities as they eliminate on
consolidation.
DG Central
&
DG Americas(a) International eliminations Group
$000 $000 $000 $000
--------------------------------------- -------------- ------------- ------------ ---------
Six months ended 30 September 2023
Revenue - external 282,392 161,658 - 444,050
- inter-segment - 33 (33) -
--------------------------------------- -------------- ------------- ------------ ---------
Total segment revenue 282,392 161,691 (33) 444,050
--------------------------------------- -------------- ------------- ------------ ---------
Segment profit/(loss) before adjusting
items 16,568 25,315 (3,640) 38,243
Adjusting items (note 3) (742) - - (742)
--------------------------------------- -------------- ------------- ------------ ---------
Operating profit/(loss) 15,826 25,315 (3,640) 37,501
Finance expenses (3,448)
Income tax (9,485)
--------------------------------------- -------------- ------------- ------------ ---------
Profit for the six months ended 30
September 2023 24,568
--------------------------------------- -------------- ------------- ------------ ---------
Balances at 30 September 2023
Segment assets 468,822 249,221 44,836 762,879
--------------------------------------- -------------- ------------- ------------ ---------
Segment liabilities (241,203) (137,278) (28,808) (407,289)
--------------------------------------- -------------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 3,659 1,418 46 5,123
- intangible assets 59 34 - 93
- right-of-use assets 1,207 144 - 1,351
Depreciation - property, plant and
equipment 3,483 2,664 12 6,159
Amortisation - intangible assets 1,533 70 - 1,603
Depreciation - right-of-use assets 5,691 2,484 4 8,179
Reversal of impairment - right-of-use
assets (553) - - (553)
Profit on disposal of property, plant
and equipment - 24 - 24
--------------------------------------- -------------- ------------- ------------ ---------
(a) Including overseas entities for the DG Americas operating
segment.
DG Central
&
DG Americas(a) International eliminations Group
$000 $000 $000 $000
--------------------------------------- -------------- ------------- ------------ ---------
Six months ended 30 September 2022
Revenue - external 373,417 147,767 - 521,184
- inter-segment - 1,671 (1,671) -
--------------------------------------- -------------- ------------- ------------ ---------
Total segment revenue 373,417 149,438 (1,671) 521,184
--------------------------------------- -------------- ------------- ------------ ---------
Segment profit/(loss) before adjusting
items 15,199 18,408 (3,154) 30,453
Adjusting items (note 3) 4,597 - - 4,597
--------------------------------------- -------------- ------------- ------------ ---------
Operating profit/(loss) 19,796 18,408 (3,154) 35,050
Finance expenses (3,125)
Income tax (8,399)
--------------------------------------- -------------- ------------- ------------ ---------
Profit for the six months ended 30
September 2022 23,526
--------------------------------------- -------------- ------------- ------------ ---------
Balances at 30 September 2022
Segment assets 513,678 286,517 73,979 874,174
--------------------------------------- -------------- ------------- ------------ ---------
Segment liabilities (260,029) (158,811) (83,840) (502,680)
--------------------------------------- -------------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 1,558 1,705 23 3,286
- intangible assets 2 14 - 16
- right-of-use assets 431 46 24 501
Depreciation - property, plant and
equipment 3,689 2,688 7 6,384
Amortisation - intangible assets 2,402 75 - 2,477
Depreciation - right-of-use assets 6,335 2,521 6 8,862
Profit on disposal of property, plant
and equipment(b) 4,641 80 - 4,721
--------------------------------------- -------------- ------------- ------------ ---------
(a) Including overseas entities for the DG Americas operating
segment.
(b) Includes $4.6 million relating to the profit on sale of a
property owned by the Group in Manhattan, Kansas; see note 3.
DG Central
&
DG Americas(a) International eliminations Group
$000 $000 $000 $000
--------------------------------------- -------------- ------------- ------------ ---------
Year ended 31 March 2023
Revenue - external 592,954 297,355 - 890,309
- inter-segment - 2,283 (2,283) -
--------------------------------------- -------------- ------------- ------------ ---------
Total segment revenue 592,954 299,638 (2,283) 890,309
--------------------------------------- -------------- ------------- ------------ ---------
Segment profit/(loss) before adjusting
items 2,918 19,827 (6,696) 16,049
Adjusting items (note 3) 1,701 (29,773) - (28,072)
--------------------------------------- -------------- ------------- ------------ ---------
Operating (loss)/profit 4,619 (9,946) (6,696) (12,023)
Finance expenses (6,873)
Income tax (7,563)
--------------------------------------- -------------- ------------- ------------ ---------
Loss for the year ended 31 March
2023 (26,459)
--------------------------------------- -------------- ------------- ------------ ---------
Balances at 31 March 2023
Segment assets 370,276 201,650 46,894 618,820
--------------------------------------- -------------- ------------- ------------ ---------
Segment liabilities (156,053) (96,588) (31,803) (284,444)
--------------------------------------- -------------- ------------- ------------ ---------
Capital expenditure additions
- property, plant and equipment 2,452 2,941 66 5,459
- intangible assets 331 37 - 368
- right-of-use assets 727 4,094 24 4,845
Depreciation - property, plant and
equipment 7,291 5,226 15 12,532
Amortisation - intangible assets 4,673 144 - 4,817
Impairment - intangible assets - 29,100 - 29,100
Depreciation - right-of-use assets 12,615 5,090 9 17,714
Impairment - right-of-use assets 757 - - 757
Profit on disposal of property, plant
and equipment(b) 4,493 102 - 4,595
--------------------------------------- -------------- ------------- ------------ ---------
(a) Including overseas entities for the DG Americas operating
segment.
(b) Includes $4.6 million relating to the profit on sale of a
property owned by the Group in Manhattan, Kansas; see note 3.
Total administration expenses are $33.9 million (HY2023: $35.1
million; FY2023: $104.2 million which included $29.1 million
goodwill impairment). The release of previous slow moving and
obsolete inventory is $3.4 million (HY2023: $2.6 million; FY2023:
$6.3 million).
3. Operating profit and adjusting items
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
------------------------------ ---------- ---------- --------
Operating profit analysed as:
Adjusted operating profit 38,243 30,453 16,049
Adjusting items (742) 4,597 (28,072)
------------------------------ ---------- ---------- --------
Operating profit 37,501 35,050 (12,023)
------------------------------ ---------- ---------- --------
Adjusting items
Profit
on
Admin Other disposal Admin
of
Cost of expenses operating property, expenses
plant
Six months ended sales - costs income & equipment - other Total
30 September 2023 $000 $000 $000 $000 $000 $000
------------------------- ------- -------- --------- ----------- -------- -----
Acquisition integration
and restructuring
costs/(income)(1) 394 (554) - - - (160)
Amortisation of acquired
intangibles(2) - 902 - - - 902
------------------------- ------- -------- --------- ----------- -------- -----
Adjusting items 394 348 - - - 742
------------------------- ------- -------- --------- ----------- -------- -----
Profit Admin
on
Admin Other disposal expenses
of
Cost of expenses operating property, - impairment
plant of
Six months ended sales - costs income and equipment goodwill Total
30 September 2022 $000 $000 $000 $000 $000 $000
-------------------------- ------- -------- --------- ------------- ------------ -------
Acquisition integration
and restructuring
costs/(income)(1) - 235 - (4,608) - (4,373)
Amortisation of acquired
intangibles(2) - 1,418 - - - 1,418
Losses/(gains) and
transaction costs
relating to acquisitions
and disposals of
businesses(3) - - (1,500) - - (1,500)
IT security incident
income (4) - (142) - - - (142)
Adjusting items - 1,511 (1,500) (4,608) - (4,597)
-------------------------- ------- -------- --------- ------------- ------------ -------
Profit Admin
on
Admin Other disposal expenses
of
Cost of expenses operating property, - impairment
plant of
Year ended sales - costs income and equipment goodwill Total
31 March 2023 $000 $000 $000 $000 $000 $000
-------------------------- ------- -------- --------- ------------- ------------ -------
Acquisition integration
and restructuring
costs/(income)(1) 1,479 1,031 - (4,493) - (1,983)
Amortisation of acquired
intangibles(2) - 2,751 - - - 2,751
Losses/(gains) and
transaction costs
relating to acquisitions
and disposals of
businesses(3) - - (1,500) - - (1,500)
IT security incident
income(4) - (142) - - - (142)
Goodwill impairment(5) - - - - 29,100 29,100
Reversal of impairment
of assets(6) (154) - - - - (154)
Adjusting items 1,325 3,640 (1,500) (4,493) 29,100 28,072
-------------------------- ------- -------- --------- ------------- ------------ -------
Adjusting items are separately presented by virtue of their
nature, size and/or 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 (gains)/losses are broken down as follows:
(1) Acquisition integration and restructuring costs/(income)
In order to realise synergies from acquisitions, or existing
businesses, integration and restructuring projects are respectively
undertaken that aim to deliver future savings and efficiencies for
the Group. These are projects outside of the normal operations of
the business and typically incur one-time costs to ensure
successful implementation. As such it is appropriate that costs
associated with projects of this nature be included as adjusting
items. The income/costs incurred relate to the reorganisation,
business simplification and impairment expenses in DG Americas and
the reorganisation of the DG UK businesses as follows:
Reversal of impairment: Following the integration of DG
Americas' sites in FY2021, a portion of a leased site in Budd Lake,
New Jersey was exited, and the right-of-use asset was impaired. In
the period ended 30 September 2023, the landlord reacquired a
portion of the impaired site resulting in a reversal of impairment
of $0.6 million.
DG Americas business reorganisation: In the period ended 30
September 2023 further restructuring costs, relating to staff, of
$0.4 million (FY2023: $0.8 million) have been recognised in DG
Americas. This follows the announcement in March 2023 of further
business reorganisation. Similarly, in March 2023 the UK business
internally announced a business simplification in light of the
downturn of the UK market outlook, resulting in the recognition of
one-off restructuring costs of $0.7 million in FY2023.
Site closures: In FY2023, a property in Manhattan, Kansas was
sold for proceeds of $6.7 million resulting in a profit on disposal
of $4.6 million recognised as an adjusting item. Additionally, in
FY2023 costs of $0.3 million (HY2023: $0.2 million) were incurred
in relation to the relocation and closure of these sites, as well
as the consolidation of other US sites.
(2) Amortisation of acquired intangibles
Under IFRS, as part of the acquisition of a company, it is
necessary to identify intangible assets such as customer lists and
trade names which form part of the intangible value of the acquired
business but are not part of the acquired balance sheet. These
intangible assets are then amortised to the income statement over
their useful economic lives. These are not operational costs
relating to the running of the acquired business and are directly
related to the accounting for the acquisition. These include
tradenames and brands acquired as part of the acquisition of
Impact, with the tradenames and brands related to CSS fully
amortised in the prior year. As such, we include these as adjusting
items.
(3) Losses/(gains) and transaction costs relating to
acquisitions and disposals of businesses
Costs directly associated with acquisitions, including legal and
advisory fees on deals, form part of our reported results on an
IFRS basis. These costs, however, in the Board's view, form part of
the capital transaction, and as they are not attributed to
investment value under IFRS 3, they are included as an adjusting
item. Similarly, where acquisitions have employee related payments
(exclusive of Long Term Incentive Plans) which lock in and
incentivise legacy talent, we also include these costs as adjusting
items. Furthermore, gains or losses on the disposal of businesses,
including any transaction costs associated with the disposal, are
treated as adjusting items.
In FY2023 $1.5 million (HY2023: $1.5 million) of insurance
income was received in relation to the Impact Innovations, Inc
(Impact) Representations and Warranties insurance settlement in
connection with accounting and tax issues present at acquisition in
August 2018.
(4) IT security incident income
The IT security incident which occurred in DG Americas in
October/November 2020 resulted in one-off costs of $2.2 million
being incurred during the year ended 31 March 2021. This did not
include the lost profits incurred as a result of downtime in the
business for which an insurance claim was made. In FY2023 further
insurance income was received of $142,000 (HY2023: $142,000) in
relation to this incident. The treatment of this income as
adjusting, follows the previous treatment of the one-off costs as
adjusting.
(5) Goodwill impairment
In FY2023 an impairment of $29.1 million was recorded to write
down the goodwill from historical acquisitions in the UK and Asia
Cash-Generating Unit (CGU).
This was following the deterioration of the result experienced
in UK and Asia CGU, especially in the second half of FY2023, the
longer-term impacts on the forecasts for future cash flows have
resulted in an impairment. The calculation was further exacerbated
by the significant increase in the discount rate, mainly as a
result of higher interest rates.
(6) Reversal of impairment of assets
At the onset of the Covid-19 pandemic a review of inventory,
trade receivables and fixed assets was undertaken. Inventories were
assessed at 31 March 2020 for the net realisable value and an
impairment of $7.4 million was recognised. Trade receivables were
assessed for their expected credit loss in line with IFRS 9 and an
impairment of $3.8 million was recognised. The UK's bag line
machines were impaired by $348,000 based on expected future cash
flows associated with the 'Not-for-resale' consumables
business.
In FY2023 a credit of $154,000 was recognised relating to
reversal of impairments no longer required. There are no remaining
provisions relating to these costs.
The cash flow effect of adjusting items
There was a $1.8 million net outflow in the current period's
cash flow (HY2023: $7.2 million net inflow, FY2023: $6.9 million
net inflow) relating to adjusting items which included $1.4 million
outflow (HY2023: $919,000, FY2023: $1.1 million) deferred from
prior years.
4. Share based payments charges
The total expense recognised for the period arising from
equity-settled share-based payments is as follows:
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2023 30 Sep 31 Mar
2022 2023
$000 $000 $000
------------------------------------------- ----------- ---------- ------
Charge in relation to the 2020-2022 LTIP
scheme - 166 166
Charge in relation to the 2022-2025 LTIP
scheme 452 117 490
Charge in relation to the 2023-2026 LTIP
scheme 147 - -
------------------------------------------- ----------- ---------- ------
Equity-settled share-based payments charge 599 283 656
Social security charge 31 29 149
------------------------------------------- ----------- ---------- ------
Total equity-settled share-based payments
charge 630 312 805
------------------------------------------- ----------- ---------- ------
In August 2023, the 2023-2026 LTIP was granted. The 2023-2026
LTIP is subject to certain performance criteria being achieved
during a three-year period: relative Total Shareholder Return
versus FTSE SmallCap (excluding Investment Trusts) constituents;
and EPS growth, with an 'underpin' condition to reduce vesting
levels if unwarranted 'windfall gains' from share price movements
arise. There is a two-year holding period for certain
individuals.
5. Other operating income
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
---------------------------------------------- ---------- ---------- ------
Grant income received 105 40 111
Sub-lease rental income 352 567 1,253
Other 65 - 87
---------------------------------------------- ---------- ---------- ------
Other operating income before adjusting items 522 607 1,451
Adjusting items (note 3) - 1,500 1,500
---------------------------------------------- ---------- ---------- ------
Total other operating income 522 2,107 2,951
---------------------------------------------- ---------- ---------- ------
6. Taxation
Recognised in the income statement
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
-------------------------------------------------- ---------- ---------- ------
Current tax charge
Current income tax charge 6,351 648 6,975
Deferred tax charge
Origination and reversal of temporary differences 3,134 7,751 588
-------------------------------------------------- ---------- ---------- ------
Total tax in the income statement 9,485 8,399 7,563
-------------------------------------------------- ---------- ---------- ------
Total tax charge/(credit) on adjusting items
Total tax on profit before adjusting items 9,670 7,250 7,806
Total tax on adjusting items (185) 1,149 (243)
-------------------------------------------------- ---------- ---------- ------
Total tax in the income statement 9,485 8,399 7,563
-------------------------------------------------- ---------- ---------- ------
The tax expense has been calculated by applying the effective
rate of tax which is expected to apply for the year ended 31 March
2024 by jurisdiction, using rates substantively enacted by 30
September 2023. The tax effect of adjusting items are recognised in
the same period as the relevant adjusting item.
The deferred tax assets in the UK continue not to be recognised
based on the assessment of future taxable profits against which the
asset could unwind.
On 20 June 2023, legislation in respect of Pillar Two was
substantively enacted in the UK, Finance (No.2) Act 2023, to apply
for financial years beginning on or after 31 December 2023. The
Group is in the process of undertaking an impact assessment. The
IAS 12 exception to recognise and disclose information about
deferred tax assets and liabilities related to Pillar Two income
taxes has been applied.
7. Cash and cash equivalents/bank overdrafts
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
---------------------------------------------------------------------- ---------- ---------- --------
Cash and cash equivalents 71,566 83,396 85,213
Bank overdrafts (64,261) (69,122) (34,979)
---------------------------------------------------------------------- ---------- ---------- --------
Cash and cash equivalents and bank overdrafts per cash flow statement 7,305 14,274 50,234
---------------------------------------------------------------------- ---------- ---------- --------
(Net debt)/net cash
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
-------------------------------------------------------------------- ---------- ---------- ------
Cash and cash equivalents 7,305 14,274 50,234
Bank loans (24,000) (88,908) -
Loan arrangement fees 1,608 951 250
-------------------------------------------------------------------- ---------- ---------- ------
Net (debt)/cash as used in the financial review cash flow statement (15,087) (73,683) 50,484
-------------------------------------------------------------------- ---------- ---------- ------
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 8 for further details of the
Group's loans and borrowings.
8. Loans and borrowings
This note provides information about the contractual terms of
the Group's interest-bearing loans and borrowings.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
$000 $000 $000
---------------------------- ---------- ---------- ------
Non-current liabilities
Loan arrangement fees (1,005) (317) -
---------------------------- ---------- ---------- ------
(1,005) (317) -
---------------------------- ---------- ---------- ------
Current liabilities
Asset backed loan 24,000 10,579 -
Revolving credit facilities - 78,329 -
Bank loans and borrowings 24,000 88,908 -
Loan arrangement fees (603) (634) (250)
---------------------------- ---------- ---------- ------
23,397 88,274 (250)
---------------------------- ---------- ---------- ------
Secured bank loans
Facilities utilised in current period
The Group entered into a new banking facility on 5 June 2023,
this facility comprises an Asset Backed Lending ("ABL") arrangement
with a maximum facility amount of $125.0 million. The facility with
HSBC and NatWest banks has an original term of three years, with
the option of submitting two extension notices to extend the
facility twice, each by a period of one year. On 3 November 2023
the Group made an operational amendment to the ABL arrangement and
signed a supplemental agreement with an option to access a GBP17.0
million RCF facility over a two month period. This amendment does
not increase the maximum facility amount and offers flexibility
during the months where the Group has a requirement for funding
while having limited access into the ABL.
The Group also increased its unsecured overdraft facility
provided by HSBC to GBP16.5 million, which reduced to GBP8.5
million from August 2023. If the option to access the RCF facility
is exercised, the amounts drawn on the overdraft facility and RCF
facility may not exceed GBP17 million.
Interest charged on the Asset Backed lending facility is based,
on one of two methods dependant on the timing of the Group's
borrowing request submission:
-- A margin of between 1.75% and 2.25%, based on average excess
availability, plus a 0.1% credit spread adjustment, plus the US
Secured Overnight Financing Rate ("SOFR"); or
-- A margin of between 0.75% and 1.25% based on average excess
availability, plus a rate based on the higher of: the HSBC prime
rate, the Federal Funds rate plus 0.5%, or SOFR plus 1%.
A further commitment/non-utilisation fee is charged at 0.25%
where facility usage is greater than 50% of the maximum credit
line, and 0.375% where facility usage is less than 50% of the
maximum credit line.
Interest on the RCF is charged at a margin of 2.5% plus Sterling
Overnight Index Average ("SONIA").
The financial covenant within the ABL agreement, which is a
minimum fixed charge coverage ratio of 1.0 times, is only triggered
if the remaining availability of the facility is less than the
higher of $12.5 million or 12.5% of the borrowing base. The
amendment to the facility on 3 November 2023, reduced the remaining
availability trigger point to $6.5 million over a two month
period.
The financial covenants within the RCF agreement are as
follows:
-- A minimum fixed charge coverage ratio of 1.0 times,
calculated for the 12 month period to the most recent quarterly
reporting period
-- An asset cover ratio of no less than 200% calculated as at
the date of the last monthly reporting period
The ABL and RCF are secured with an all-assets lien on all
existing and future assets of the loan parties. The loan parties
are Anker Play Products, LLC, Berwick Offray, LLC, BOC
Distribution, Inc., C. R. Gibson, LLC, CSS Industries, Inc., IG
Design Group (Lang), Inc., IG Design Group Americas, Inc., IG
Design Group plc, IG Design Group UK Limited, Impact Innovations,
Inc., Lion Ribbon Company, LLC, Paper Magic Group, Inc.,
Philadelphia Industries, Inc., Simplicity Creative Corp., The Lang
Companies, Inc., The McCall Pattern Company, Inc.
Invoice financing arrangements are secured over the trade
receivables that they are drawn on. The Group also has an invoice
financing arrangement in Hong Kong with a maximum limit of $18.0
million, dependent on level of eligible receivables. This facility
was cancelled on 13 October 2023 in line with the terms of the new
financing arrangement.
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 a
number 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.
Facilities utilised in prior periods
On 1 June 2022, the Company had extended and amended the terms
of its existing banking agreement to 31 March 2024. These
facilities were cancelled on 5 June 2023. These facilities were
maintained through a club of five banks: HSBC, NatWest, Citigroup
(who replaced BNP Paribas), Truist Bank (as successor by merger to
SunTrust Bank) and PNC. The amended facilities comprised:
-- a revolving credit facility ('RCF A') reduced from $95.0 million to $90.0 million; and
-- a further flexible revolving credit facility ('RCF B') with
availability varying from month to month of up to a maximum level
of GBP92.0 million (reduced from a maximum level of GBP130
million). This RCF was flexed to meet our working capital
requirements during those months when inventory was being built
within our annual business cycle and was GBPnil when not required,
minimising carrying costs.
The RCFs were secured with a fixed and floating charge over the
assets of the Group. Amounts drawn under RCFs were classified as
current liabilities as the Group expected to settle these amounts
within twelve months.
From April 2023 covenants were tested quarterly and were as
follows:
-- interest cover, being the ratio of adjusted earnings before
interest, depreciation and amortisation (adjusted 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.
There was 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. These covenants were
measured on pre-IFRS 16 accounting definitions.
Given the cancellation of the RCF on 5 June 2023, these
covenants are no longer applicable. The Group has remained
comfortably in compliance with all of these covenants up its
cancellation.
9. Earnings/(loss) per share
Unaudited Unaudited Twelve
six months six months months
ended ended(a) ended
30 Sep 2023 30 Sep 31 Mar
2022 2023
$000 $000 $000
---------------------------------------------------------------------------- ----------- ---------- --------
Earnings/(loss)
Earnings/(loss) attributable to equity holders of the Company 23,911 22,754 (27,987)
Adjustments
Adjusting items (net of non-controlling interest effect) 742 (4,597) 28,072
Tax (relief)/charge on adjustments (net of non-controlling interest effect) (185) 1,149 (243)
---------------------------------------------------------------------------- ----------- ---------- --------
Adjusted earnings/(loss) attributable to equity holders of the Company 24,468 19,306 (158)
---------------------------------------------------------------------------- ----------- ---------- --------
Unaudited Unaudited Twelve
six months six months months
ended ended ended
In thousands of shares 30 Sep 30 Sep 31 Mar
2023 2022 2023
-------------------------------------------- ---------- ---------- ------
Issued ordinary shares at 1 April 97,993 97,062 97,062
Shares relating to share options 315 1,242 1,242
Less: shares held by Employee Benefit Trust (1,031) (12) (536)
Weighted average number of shares for the
purposes of calculating basic EPS 97,277 98,292 97,768
Effect of dilutive potential shares - share
awards 658 10 -
-------------------------------------------- ---------- ---------- ------
Weighted average number of shares for the
purposes of calculating diluted EPS 97,935 98,302 97,768
-------------------------------------------- ---------- ---------- ------
In the twelve months to 31 March 2023 there were 209,000 share
options which were not included in the calculation of diluted
earnings per share because they were antidilutive.
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 2023 30 Sep 31 Mar
2022 2023
Cents Cents Cents
------------------------------------------- ----------- ---------- ------
Earnings/(loss) per share
Basic earnings/(loss) per share 24.6 23.1 (28.6)
Impact of adjusting items (net of tax) 0.6 (3.5) 28.4
------------------------------------------- ----------- ---------- ------
Basic adjusted earnings/(loss) per share 25.2 19.6 (0.2)
------------------------------------------- ----------- ---------- ------
Diluted earnings/(loss) per share 24.4 23.1 (28.6)
------------------------------------------- ----------- ---------- ------
Diluted adjusted earnings/(loss) per share 25.0 19.6 (0.2)
------------------------------------------- ----------- ---------- ------
Adjusted earnings/(loss) per share is provided to reflect the
underlying earnings performance of the Group.
Basic earnings/(loss) per share
Basic EPS is calculated by dividing the profit for the period
attributable to ordinary shareholders by the weighted average
number of shares outstanding during the period, excluding own
shares held by the Employee Benefit Trust.
Diluted earnings/(loss) per share
Diluted EPS is calculated by dividing the profits for the period
attributable to ordinary shareholdings by the weighted average
number of shares outstanding during the period, excluding own
shares held by the Employee Benefit Trust, plus the weighted
average number of ordinary shares that would be issued on the
conversion of the potentially dilutive shares.
10. Financial instruments
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.
All other financial assets and liabilities are measured at
amortised cost.
The Group held the following financial instruments at 30
September 2023, which were measured at Level 2 fair value
subsequent to initial recognition:
Unaudited Unaudited Twelve
six months six months months
ended ended ended
30 Sep 30 Sep 31 Mar
2023 2022 2023
Forward exchange contracts carrying amount $000 $000 $000
------------------------------------------- ---------- ---------- ------
Derivative financial assets 664 502 340
Derivative financial liabilities (876) (1,467) (315)
------------------------------------------- ---------- ---------- ------
The Group has forward currency hedging contracts outstanding at
30 September 2023 designated as hedges of expected future purchases
in US dollars, Chinese renminbi and Japanese yen 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.
11. Capital commitments
At 30 September 2023, the Group had outstanding authorised
capital commitments to purchase plant and equipment for $4.0
million (HY2023: $2.3 million). At 30 September 2023, the Group has
estimated lease commitments for leases not yet commenced of
$16.7m.
12. Related parties
As at 30 September 2023, there are no changes to the related
parties or types of transactions as disclosed at 31 March 2023.
13. 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 this interim report except for the amendment to
the financing agreement as detailed in note 8.
Independent review report to IG Design Group plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed IG Design Group plc's condensed consolidated
interim financial statements (the "interim financial statements")
for the 6 month period ended 30 September 2023 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the AIM Rules for Companies.
The interim financial statements comprise:
-- the Condensed Consolidated Balance Sheet as at 30 September 2023;
-- the Condensed Consolidated Income Statement and Condensed
Consolidated Statement of Comprehensive Income for the period then
ended;
-- the Condensed Consolidated Cash Flow Statement for the period then ended;
-- the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements have been prepared in
accordance with UK adopted International Accounting Standard 34,
'Interim Financial Reporting' and the AIM Rules for Companies.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council for use in the
United Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with ISRE (UK) 2410.
However, future events or conditions may cause the group to cease
to continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim financial statements are the responsibility of, and
have been approved by the directors. The directors are responsible
for preparing the interim financial statements in accordance with
the AIM Rules for Companies which require that the financial
information must be presented and prepared in a form consistent
with that which will be adopted in the company's annual financial
statements. In preparing the interim financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements based on our review. Our conclusion, including
our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the
Basis for conclusion paragraph of this report. This report,
including the conclusion, has been prepared for and only for the
company for the purpose of complying with the AIM Rules for
Companies and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent
in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Milton Keynes
27 November 2023
REGISTERED OFFICE
Howard House
Howard Way
Interchange Park
Newport Pagnell MK16 9PX
IG Design Group plc
is registered in
England and Wales,
number 1401155
Visit us online at
thedesigngroup.com
ADVISERS
Financial and nominated
adviser and broker
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR
Independent auditor
PricewaterhouseCoopers LLP
Exchange House
Central Business Exchange
Midsummer Boulevard
Central Milton Keynes
MK9 2DF
Public relations
Alma Strategic Communications
71-73 Carter Lane
London EC4V 5EQ
Share registrar
Link Group
Central Square
29 Wellington Street
Leeds LS1 4DL
By phone:
UK - 0371 664 0300
Calls are charged at the standard geographic rate and will vary
by provider. Calls made outside the United Kingdom will be charged
at the applicable international rate. Lines are open between 9.00 -
17.30, Monday to Friday excluding public holidays in England and
Wales.
By email: enquiries@linkgroup.co.uk
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END
IR FLFIALLLDFIV
(END) Dow Jones Newswires
November 28, 2023 02:00 ET (07:00 GMT)
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