Final Results
International Greetings PLC
9 July 2002
Immediate release 9 July 2002
Excellent progress made in US Division
Licence for second Harry Potter film agreed with Warner Bros.
Financial position remains strong, Final dividend maintained
International Greetings PLC, one of the world's leading designers and
manufacturers of greeting products and licensed stationery, today reported
results for the year ended 31 March 2002, showing an encouraging 16% increase in
turnover.
Highlights:
• Turnover up 16% at £111m (2001: £95m)
• Profit before tax, exceptional item and goodwill amortisation £9.1m (2001:
£10.7m)
• Profit before tax and exceptional item £8.9m (2001: £10.5m)
• Final dividend per share held at 3.3p, making a dividend for the full year
of 4.5p (2001: 4.5p)
• Acquisition of new distribution centre
• Problems highlighted at interims in UK giftwrap business are under control
and the changes implemented have led to encouraging progress
• US business performing well and now accounts for 26% of group revenue
• Terms agreed with Warner Bros for second Harry Potter film, 'The Chamber
of Secrets' due for release in November
Nick Fisher, Joint Chief Executive, said:
'We announced at the interim stage that we had experienced problems in our UK
giftwrap business. We have undertaken a thorough review and have implemented
changes to the operation. Anders Hedlund has resumed day to day responsibility
and we are encouraged by the progress made.'
'We are pleased by the performance of the remaining divisions, all of which have
reported increases in profitability. In particular, our US division has made
excellent progress this year.
'We continue to invest in design and licensing to ensure our continued
competitive advantage and have been awarded European Best Design Licensee of the
Year for our ranges of Barbie stationery. We are also delighted to be working
once again with Warner Bros. to design ranges of our products to support the new
Harry Potter film release for the coming Christmas season.
'Although this year has been challenging, our business model remains robust for
future growth and we are totally committed to ensuring our businesses deliver to
their maximum potential.'
For further information, please contact:
International Greetings 01707 630 630
Nick Fisher, Joint Chief Executive
Grandfield 020 7417 4170
Clare Abbot 07715 169 326
Victoria Morris 07976 285 955
CHAIRMAN'S STATEMENT
Excluding exceptional item:
Profit before tax £8.9m
Earnings per share 15.3p
Dividend for the year 4.5p
The results for the full year to 31 March 2002 reflect the varying performance
of divisions within the Group. Turnover for the year was £111m, showing a 16%
increase over last year's figure and profit before exceptional items and
taxation was £8.9m, a decrease of 15%. With the notable exception of our UK gift
wrap business, all divisions recorded a good increase in profitability compared
with prior years, and I am particularly pleased with the excellent progress that
we have made in our US business.
As highlighted in our interim statement, the management and production problems
experienced in our UK gift-wrap business have had a significant adverse impact
on the Group's results. We have introduced improvements to our processes and
procedures in this division, and have made a number of key management changes
with Anders Hedlund having resumed day to day control of the division. We will
be looking for a real improvement in its operating performance, and although it
is still early days, we are encouraged by progress made in resolving the
problems that have been identified. The division has a good level of forward
orders and has traded satisfactorily to date, but the full impact of the
management and operational changes we have made can only be assessed when we
have completed orders for Christmas 2002. In the meantime, the Board is
carefully monitoring the operating performance of this division.
A major factor in ensuring the long-term success of our business is our
relationships with our customers. In this respect, I am pleased to report that
delivery performance and customer service levels were all maintained at a high
level.
This has been a challenging year for our people and I would once again like to
take this opportunity to thank our workforce for their hard work and support
which is so important in ensuring the future success of the business.
The level and quality of our 2002 seasonal order book is encouraging, and your
Board is therefore recommending that the final dividend is held at last year's
level of 3.3p per share. The dividend will be paid on 20 September 2002 to
shareholders on the register at close of business on 6 September 2002.
John Elfed Jones CBE DL
Chairman
Copies of the Annual Report will be posted to shareholders on 15 July 2002, when
copies will also be available from the Group's registered office, Belgrave
House, Hatfield Business Park, Frobisher Way, Hatfield, Herts AL10 9TQ
REVIEW OF OPERATIONS
Whilst the Group achieved a 16% increase in turnover in the year to 31 March
2002, the loss of manufacturing and operational controls in our gift-wrap
division resulted in significant and unacceptable margin erosion in that
business. All other divisions traded in line with our expectations and continued
to make good progress during the year. A particular feature of the year was the
strength of our US operation, which albeit from a relatively small base, is now
making significant inroads into the world's largest market for our products.
UK
The gift wrap division accounted for approximately 37% of revenue for the year
ended 31 March 2002. However, weaknesses in manufacturing efficiency and process
have resulted in a significant shortfall against budgeted profitability in this
business. A detailed action plan has been established to resolve areas of
operating under-performance and this has resulted in a number of management
changes in this division.
We made a number of investments during the year to improve this division's
operating efficiencies and would expect the benefits of these to begin to flow
through to an improvement in operating margins in the current year. In
particular the division has acquired a new 500,000 sq. ft distribution facility
in South Wales. This will enable us to consolidate a number of facilities and as
a result we expect to reduce storage and distribution costs. We have also
expended significant sums on acquiring new and more efficient printing and
converting capacity in order to provide the basis for further reductions in
operating costs.
The card division has increased its portfolio of customers by utilising some of
the specialist equipment purchased last year to manufacture a wider range of
Christmas cards. Selective expansion into the everyday and birthday market
sectors has shown some promise.
We continued to make good progress in our Christmas cracker division where we
have increased capacity and secured scope for ongoing margin improvement by
reducing our reliance on UK production facilities. In particular, by building on
our increasingly close relationships with Far East sources we see opportunities
to develop this business further.
Copywrite has maintained its leading market position in the children's
stationery market, and enjoyed the benefit of two successful film launches during
the year, Harry Potter and the Philosopher's Stone and Disney's Monsters Inc. The
Pepperpot gift area also grew significantly with launches of many new adult
ranges by leading contemporary UK artists and designers such as Jack Vettriano
and Toby Mott.
US
The Group's sales to the US have increased significantly during the year, with
US sales now accounting for 26% of revenue. Despite the uncertain economic
climate, we expect to continue to grow strongly following positive customer
reaction to our 2002 product launches. In order to enable profitable
exploitation of the opportunities offered by the US market, we have commissioned
a new six-colour printing press and additional finishing equipment. This $1m
investment will reduce reliance on external suppliers and provide the business
with additional flexibility to respond more rapidly to customer requirements.
We have also introduced new Pepperpot stationery ranges to the US market, and a
concerted marketing effort is being made to increase sales of Pepperpot products
to our existing customer base.
Far East
We seek to balance the benefits of an efficient Far East sourcing operation for
certain product segments with the need for highly efficient manufacturing and
processing capabilities which allow us to provide the highest levels of
flexibility and service to our customers. Indeed, in response to changing market
conditions we have increased purchases from the Far East to 22% of the Group's
total. We continue to see further balanced developments in this area of the
Group's sourcing of goods and services as being of considerable importance in
ensuring that we continue to satisfy our customers' requirements.
Design and Licensing
We firmly believe that the creativity of our design and licensing teams remain
an essential competitive advantage. About 75% of our intellectual property is
created and developed in-house with 80 creative staff employed in design studios
in the UK and the US. We are a trusted partner in our product segments for a
number of premium licensed brands. As a result, around 25% of designs relating
to licensed properties are developed in conjunction with licensors such as
Disney, Warner Brothers and Mattel.
We will maintain our focus on these strong brands together with selective annual
film releases to maximise these revenue opportunities, although we will continue
to take our conservative approach to the risks associated with licensed
merchandise.
We are delighted to have been awarded European Best Design Licensee of the Year
for a range of Barbie stationery, and we are also pleased to announce that we
have agreed terms with Warner Brothers for the second Harry Potter film, 'The
Chamber of Secrets', due for release in November 2002.
Conclusion
This last year has been a difficult one in the Group's history, but we remain
totally committed to ensuring that all our businesses deliver to their maximum
potential. As always, our focus is on delivering our customers' needs, therefore
retaining their goodwill. We will, as in previous years, continue to develop our
business both organically and by selective acquisitions.
Anders Hedlund Nick Fisher
Joint Chief Executive Joint Chief Executive
FINANCE REVIEW
Turnover for the year to 31 March 2002 increased by 16% to £110.6m (2001:
£95.3m). However, the under performance in the UK gift wrap division resulted in
a Group operating profit* of £10.6m, down 11%. After interest payable of £1.7m,
net profit before taxation* was £8.9m, down by 15% from last year's £10.5m.
Earnings per share* for the year ended 31 March 2002 also showed a decrease of
15% at 15.3p (2001: 17.9p).
Balance Sheet and Cash Flow
Shareholders funds increased by £4.3m to £33m, an increase of 15%, with gearing
decreasing from last year's 56% to 45%. Net debt was £14.9m, down from last
year's £16m, and interest expense is well covered at 6.4 times operating profit
*. We completed a number of significant capital projects in the current year
which should begin to generate efficiency improvements, and resulted in net
capital expenditure for the year of £8.2m.
Treasury Operations
The Board continues to assess and manage the risks associated with the treasury
function as the business develops. The Group's business has a strong seasonal
element resulting in large variations in working capital requirements. As a
result, the Board has considered that long-term restriction of the exposure to
interest rate fluctuations on working capital is unlikely to be economically
viable. Where opportunities exist, however, for the short term fixing of
elements of this funding at attractive rates, for example, through the use of
acceptance credits, these options are considered.
The Group also sources an increasing proportion of its purchases denominated in
US$. The Group reduces the effect of exchange rate fluctuations, where
practicable, through a combination of measures including hedging and forward
exchange contracts.
Dividends
The strength of the balance sheet and our confidence in our future prospects
means that your Board has decided to recommend maintaining the final dividend at
last years level of 3.3p (2001: 3.3p) a share. This makes a total dividend for
the year of 4.5p, which has also been held at last year's level. The total
dividend is covered 3.4 times by earnings per share.*
Conclusion
Notwithstanding the year's results, the Group's financial position remains
strong, as reflected by the maintained dividend, and we remain well placed to be
able to take advantage of future opportunities.
Mark Collini
Finance Director
* Figures exclude exceptional item
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2002
Notes Pre-exceptional Exceptional 2002 2001
item item Total
£000 £000 £000 £000
Turnover 1 110,653 - 110,653 95,344
Cost of sales (78,008) - ( 78,008) (62,755)
Gross profit 32,645 - 32,645 32,589
Distribution expenses (10,097) - (10,097) (8,920)
Administrative expenses (11,986) (420) (12,406) (11,750)
Operating profit 1 10,562 (420) 10,142 11,919
Interest payable and similar charges 2 (1,657) (1,399)
Profit on ordinary activities before 3
taxation 8,485 10,520
Tax on profit on ordinary activities 4 (2,516) (3,248)
Profit for the financial year 5,969 7,272
Dividends - equity 5 (1,849) (1,836)
Retained profit for the financial year 4,120 5,436
Earnings per share 6
Basic 14.6p 17.9p
Excluding exceptional item 15.3p 17.9p
Diluted 14.2p 17.3p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 March 2002
2002 2001
£000 £000
Profit for the financial year 5,969 7,272
Currency translation differences arising on foreign currency net investments - 312
Total recognised gains and losses relating to the financial year 5,969 7,584
CONSOLIDATED BALANCE SHEET
at 31 March 2002
2002 2001
£000 £000 £000 £000
Fixed assets
Intangible assets - goodwill 1,262 1,438
Tangible assets 23,437 18,762
24,699 20,200
Current assets
Stocks 25,061 26,641
Debtors 16,355 19,020
Cash at bank and in hand 2 4
41,418 45,665
Creditors: amounts falling due within
one year (28,299) (33,672)
Net current assets 13,119 11,993
Total assets less current liabilities 37,818 32,193
Creditors: amounts falling due after
more than one year (3,477) (2,012)
Provisions for liabilities and charges (800) (763)
Deferred income (581) (750)
Net assets 32,960 28,668
Capital and reserves
Called up share capital 2,054 2,036
Share premium account 780 626
Other reserves 1,618 1,618
Profit and loss account 28,508 24,388
Equity shareholders' funds 32,960 28,668
These financial statements were approved by the Board of directors on 9 July
2002 and were signed on its behalf by:
N Fisher M Collini
DIRECTOR DIRECTOR
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2002
2002 2001
£000 £000
Net cash inflow from operating activities 15,716 3,385
Returns on investments and servicing of finance (1,649) (1,523)
Taxation (2,826) (3,353)
Capital expenditure (8,242) (5,411)
Acquisitions and disposals - (1,918)
Equity dividends paid (1,837) (1,670)
Cash inflow/(outflow) before financing 1,162 (10,490)
Financing 1,480 841
Increase/(decrease) in cash in the year 2,642 (9,649)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
in net debt for the year ended 31 March 2002
2002 2001
£000 £000
Increase/(decrease) in cash in the year 2,642 (9,649)
Cash inflow from financing (1,308) (598)
Change in net debt resulting from cash flows 1,334 (10,247)
Inception of finance leases (258) (10)
Translation differences - (223)
Movement in net debt in the year 1,076 (10,480)
Net debt at beginning of year (15,983) (5,503)
Net debt at end of year (14,907) (15,983)
NOTES
1. Segmental Analysis
Turnover and profit on ordinary activities before taxation are derived from one
class of business.
a). Geographical area of operation
UK USA Group
2002 2001 2002 2001 2002 2001
£000 £000 £000 £000 £000 £000
Turnover 90,100 77,692 20,553 17,652 110,653 95,344
Operating profit before
exceptional item 8,265 10,044 2,297 1,875 10,562 11,919
Exceptional item (420) - - - (420) -
Operating profit after 7,845 10,044 2,297 1,875 10,142 11,919
Exceptional item
Net Interest (1,657) (1,399)
Profit on ordinary activities
before taxation 8,485 10,520
Net assets 26,733 23,676 6,227 4,992 32,960 28,668
The above results relate entirely to continuing operations.
The exceptional item of £420,000 (2001: £Nil) represents full provision against
an unpaid insurance claim and additional costs arising from the liquidation of
the company's insurers, Independent Insurance Company, in June 2001.
b). Geographical analysis of turnover by destination
2002 2001
£000 £000
UK 71,828 66,360
USA 28,533 18,402
Rest of world 10,292 10,582
110,653 95,344
2. Interest Payable and Similar Charges
2002 2001
£000 £000
On bank loans and overdrafts 1,472 1,268
Other loans 103 93
Finance charges payable in respect of finance leases 82 38
1,657 1,399
3. Profit on Ordinary Activities before Taxation
2002 2001
£000 £000
Profit on ordinary activities before taxation is stated
after charging / (crediting)
Auditors' • audit fees paid to the company's auditor and its associates 70 59
remuneration • non audit fees paid to the company's 60 38
auditor and its associates
Hire of plant and
machinery • rentals payable under operating leases 325 250
Hire of other assets • operating leases 516 807
Release of deferred grant income (169) (313)
Audit fees payable by the company for the year were £6,000 (2001: £6,000)
4a). Taxation
2002 2001
£000 £000 £000 £000
Current tax
UK corporation tax on profits of the 1,668 2,514
year
Adjustments in respect of previous 3 33
periods
1,671 2,547
Foreign tax on profits of the year 870 622
Adjustments in respect of previous
periods (62) 3
808 625
Total current tax 2,479 3,172
Deferred taxation
Origination and reversal of timing
differences 121 113
Adjustments in respect of previous
periods
(following the adoption of FRS 19: (84) (37)
Deferred tax)
Total deferred tax 37 76
Tax on profits on ordinary activities 2,516 3,248
4b). Factors Affecting the Tax Charge for the Period
The tax assessed for the year is lower than the standard rate of corporation tax
in the UK (30%).
The differences are explained below:
2002 2001
£000 £000
Profit on ordinary activities before tax 8,485 10,520
Profit on ordinary activities multiplied by standard rate 2,546 3,156
of corporation tax in the UK of 30%
Effects of:
Expenses not deductible for corporation tax purposes 35 33
Release of grant (51) (71)
Capital allowances for the period in excess of depreciation (96) 51
Provisions not deductible until paid 3 (126)
Other timing differences 35 12
Difference between UK and overseas tax rates 66 81
Adjustments in respect of previous periods (59) 36
Current tax charge for the year 2,479 3,172
4c). Factors that may affect Future Tax Charges
No provision has been made for deferred tax on gains recognised on previous
capital disposals where potentially taxable gains have been rolled over into
replacement assets. Such tax would become payable only if the replacement assets
were sold without it being possible to claim roll-over relief. The total amount
unprovided is £411,000. At present it is not envisaged that any tax will become
payable in the future.
No deferred tax is recognised on the unremitted earnings of overseas
subsidiaries. As the earnings are continually reinvested by the Group, no tax is
expected to be payable on them for the forseeable future.
5. Dividends
2002 2001
£000 £000
Interim paid - 1.2p per share (2001: 1.2p) 493 492
Final proposed - 3.3p per share (2001: 3.3p) 1,356 1,344
1,849 1,836
6. Earnings per Share
2002 2001
Earnings per share excluding exceptional item 15.3p 17.9p
Loss per share on exceptional item (0.7p) -
Basic earnings per share 14.6p 17.9p
Diluted earnings per share 14.2p 17.3p
The basic earnings per share is based on the earnings of £5,969,000 (2001:
£7,272,000) and the weighted average number of ordinary shares in issue of
40,864,758 (2001: 40,697,466). The calculation of diluted earnings per share is
based on 41,907,777 (2001: 42,081,299) ordinary shares. The difference of
1,043,019 (2001: 1,383,833) represents the dilutive effect of outstanding
employee share options which has been calculated in accordance with FRS 14.
Earnings per share excluding exceptional item is based upon the earnings as
above after adjusting for the exceptional item of £420,000 (2001: £Nil) and the
tax relief thereon.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 12 hours ago Schroder Income Growth Fund
- 12 hours ago Schroder Income Growth Fund
- 12 hours ago Personal Assets Trust
- 12 hours ago Direct Line Insurance Group
- 12 hours ago Tesco