Preliminary Results
2 July, 2014
International Greetings PLC
Preliminary Results for the year ended 31 March 2014
International Greetings PLC ('International Greetings' or 'the Group'), one of the world's leading designers, innovators and manufacturers of gift packaging and greetings, social expression giftware, stationery and creative play products, announces its audited Preliminary Results for the year ended 31 March 2014.
Financial Highlights:
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· Revenue at £224.5 million after rationalisation of some non-core activities in the UK |
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· Profit before tax, exceptional items and LTIP charges up 4% to £7.6 million (2013: £7.3 million) |
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· Gross margin slightly up on prior year at 18.4% (2013: 18.3%) |
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· Fully diluted earnings per share before exceptional items increased 6.4% to 8.3 pence (2013: 7.8 pence) |
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· Cash generated from operations before exceptional items up 101% at £15.2 million (2013: £7.5 million) |
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· Net debt down 12.3% to £36.9 million (2013: £42.1 million) and leverage down 0.4 times to 2.4 times despite major capital investment programme of £8.3 million (2013: £1.9 million) |
Operational Highlights:
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· Profits in Continental Europe up over 100% reflecting progress achieved since upgrade of gift wrap production facilities in Holland in 2012 |
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· Major capital upgrade of our gift wrap manufacturing facilities in Wales remain on time and on budget |
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· Growth achieved with internet based retailers, including the introduction of new products through Ocado and Amazon |
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· Excellent year of production and service levels from relocated factory in China |
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· Withdrawal from non-core generic book activity in UK |
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· Royal Warrant granted to the Tom Smith brand of gift wrapping products |
Post period end event:
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· Acquisition of trade and certain assets of Enper Gift Wrap BV for €1.9 million, in June, 2014, providing further commercial and operational opportunities in European markets |
Paul Fineman, CEO commented:
"We are pleased to report a strong year in which all our operating regions traded profitably and delivered excellent cash generation. This was achieved whilst continuing to invest in the Group's infrastructure, to enable us to deliver enhanced future performance. In particular, the transformation of our UK based gift wrap manufacturing operation in Wales marked the completion of the second phase of upgrading our global gift wrap production facilities. This strategic initiative began in Holland in 2012 and has underpinned our strong progress in Continental Europe.
"Our recent acquisition of the trade and certain assets of Enper Gift Wrap, demonstrates our determination to identify new opportunities for profitable incremental growth. As we enter the second year of our new three year plan, we are on plan to deliver double digit cumulative average growth in earnings per share and are ahead of schedule to meet our commitment to reduce debt and leverage below two times debt/EBITDA. We look forward to the future with confidence."
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For further information, please contact: |
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International Greetings plc Paul Fineman, Chief Executive Anthony Lawrinson, Chief Financial Officer |
Tel: 01525 887310 |
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Cenkos Securities plc Bobbie Hilliam |
Tel: 0207 397 8900 |
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FTI Consulting Jonathon Brill Georgina Goodhew |
Tel: 020 7831 3113 |
Chief Executive Officer's review
Key achievements
· Focus on cash generation improves leverage by 14% from 2.8 to 2.4 times
· Net debt improved by £5.2 million (12.3%) to £36.9 million despite record capital investment (£8.3 million) in manufacturing efficiency
· On track to meet our three year plan of overall double digit EPS growth
· Profits in Continental Europe up over 100%
· Major capital expenditure project in UK on time and on budget
· Excellent year of production and service levels from recently relocated China factory
· Announced acquisition of trade and certain assets of Enper Giftwrap BV for €1.9 million on 5 June 2014
I am able to report a year in which all regions traded profitably and our objectives, both to meet short term targets and also to create the foundation for incremental profits growth for the future, were met.
Our team was focused on balancing the delivery of cash generative sales and profits, reducing leverage and doing so whilst investing in fast payback opportunities across our global manufacturing activities. This has required the careful management of working capital whilst simultaneously delivering continued excellent standards of customer service.
We are therefore delighted that a year in which sales were £224.5 million and profit before tax, exceptional items and LTIP charges was £7.6 million, net debt reduced by 12% (from £42.1 million in 2013 to £36.9 million in 2014) whilst leverage has reduced from 2.8 times in 2013 to 2.4 times in 2014. This is a particularly satisfactory result when capital expenditure increased by £6.4 million to £8.3 million in 2014 from £1.9 million in 2013. We now look forward to reaping the significant future benefits of this through manufacturing efficiencies and product quality.
In 2012, we commenced the first phase of an upgrade to our global manufacturing facilities with an environmentally friendly, high speed, high definition giftwrap printing capability at our operation in Holland. 2014 has seen the installation of a similar capability within our facility in Wales. This major project has been completed on time and on budget.
We were privileged and absolutely delighted that Her Majesty the Queen together with His Royal Highness Prince Phillip officially opened our new Welsh facilities on 30 April 2014 - an event that captured the transformation of our business, our confidence in the future and the enthusiasm and energy of our team.
Geographical highlights
UK and ASIA
The UK and Asia business accounted for 49% (2013 53%) of the Group's revenue for the year, with the cohesive efforts of our manufacturing, sourcing, operational and commercial teams once again delivering industry leading customer service. We were pleased to receive the Sainsbury's Gold Standard Award acknowledging this exemplary supplier performance.
The ever closer collaboration between our UK and Far East based operations ensures a joined up commercial and strategic approach to the market. Our competitive advantage in the UK was further enhanced by focussed investments at our existing facilities in China this included semi automated processes for cracker manufacturing together with enhanced production capability in gift bags.
Both investments were operational from Spring 2014. This provides our customers with the ability to source a broad portfolio of complementary product categories from one fully compliant and competitive source.
Towards the end of the year, reflecting our strategy to focus on product categories with scope for profitable growth, we withdrew from a small noncore product category in generic books under the Alligator brand. We will continue to grow the larger licensed product segment, consolidating under our Copywrite brand in the UK.
Our broadening customer base showed growth achieved with Internet based retailers, including the introduction of new products through Ocado and Amazon.
Mainland Europe
Our mainland European businesses accounted for 15% (2013: 13%) of the Group's sales.
Although overall market conditions have not improved we are delighted to report an outstanding outcome with strong efficiencies and record volumes.
A first full year of utilising our new state-of-the-art printing facilities based in Holland, together with the creation across all categories of innovative highly customer focused product offerings, resulted in increased market share and the creation of even greater future opportunities.
In June 2014, we were delighted to announce the acquisition of the trade and certain assets of Enper Giftwrap, strengthening our market share in the Benelux and a further demonstration of our commitment to delivering a key strategic objective to be the best and most successful supplier of gift packaging products in the European Union.
Having now established relationships with mainland Europe's ten largest retail Groups who trade in our product categories, scope now exists for our future expansion in existing and new markets, both with core and developing product categories.
USA
The US business accounted for 24% (2013: 22%) of the Group's revenue. Strong sales growth continued, building on recent years of double digit progress with 31% of Group revenues by destination in 2014 (2013: 27%). However the final quarter proved to be very challenging with extreme weather conditions impacting results in what was otherwise on track to be a record trading year. Sales developed well during the year, including to neighbouring markets in Canada, Mexico and to other South American regions, but higher margin sales in the US of Everyday product categories were largely rescheduled and therefore below expectations during the final three months of the trading year.
Nevertheless positive progress was made on several fronts during the year. We completed negotiation of banking facilities with Sun Trust on improved terms, building on improvements achieved with HSBC in April 2013.
To further enhance production efficiencies, we installed new automated case packing equipment in our Savannah operation, which was fully operational from Spring 2014.
It was with a heavy heart that in early June 2014, I announced that Rich Eckman, CEO of International Greetings, USA and our highly respected and capable Board Director, had passed away.
Rich possessed many outstanding qualities, amongst which was the ability to lead and nurture a first class team and an appetite to continually 'raise the bar'. It was our pleasure and privilege to have worked alongside a true gentleman and a very dear colleague.
Australia
Whilst the Australian economy experienced an overall slowdown during the year, our revenues, as in 2013, represented 12% of overall Group sales.
Operational performance was underpinned by the prior year's investment in our logistics facilities, enabling us to provide unprecedented levels of order fulfilment to an ever increasing range of retail customers across the nation.
Revenue by product category, brands and seasons
Our ongoing focus on two main product categories resulted in sales of gift packaging and greetings related products achieving a record 70% of Group revenues, whilst stationery and creative play products delivered 30% of revenues (following our withdrawal from a non-core category and also as a result of the last quarter's extreme weather conditions in the USA).
Sales of IG's generic brands achieved 55% of overall revenues, with customer bespoke brands achieving 45%. The continued success of our Tom Smith brand, which holds the Royal Warrant for the supply to the Her Majesty the Queen of Christmas Crackers, was further enhanced by the granting during the year of an extension of the Royal Warrant to the Tom Smith brand of gift wrapping products.
With sales of Everyday products at 44% and Christmas products at 56% of Group revenues, the Group's products are sold in over 100,000 retail stores worldwide.
Our team
I wish to express my sincere thanks and genuine admiration for our team who have embraced change throughout our Group, whilst combatting ever demanding market conditions with initiative, remarkable energy and commitment.
Our strategy
Our strategic objectives are consistently applied and the foundation for the Group's recent years of ongoing improved performance. These are:
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· nurturing the mutually valuable relationships we enjoy with our customers, suppliers and stakeholders; |
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· creating a toolbox of marketing, design, product and brand category expertise; |
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· providing best quality, value and service through optimum product development, manufacturing, sourcing and supply; |
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· giving our teams across the world the knowledge and tools needed to achieve their goals; and |
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· balancing our business, through sustainable and growing sales across geographic regions, seasons, product categories and brands |
The future
Having successfully completed the first year of a new three-year plan, we are in good shape to deliver against our target of overall double digit cumulative average growth in earnings per share.
We are also very much on course to fulfil our commitment of reduced debt and leverage below two times debt/EBITDA.
Our Group continues to identify opportunities to grow and looks forward to the future with increased confidence built on stronger foundations for improving performance.
Paul Fineman
CEO
Financial review
Key achievements
· Sales steady year on year, after rationalisation of some non core sales in the UK
· Gross margin slightly up on prior year at 18.4% (2013: 18.3%), and overheads under control
· Profit before tax, exceptional items and LTIP charges up 4% at £7.6 million (2013: £7.3 million)
· Fully diluted earnings per share before exceptional items increased 6.4% to 8.3p (2013: 7.8p)
· Cash generated from operations up over 100% at £15.2 million (2013: £7.5 million)
· Net debt down 12.3% to £36.9 million (2013: £42.1 million) and leverage down 0.4 times to 2.4 times despite major capital investment programme of £8.3 million (2013: £1.9 million)
Group performance
The financial position of the Company has improved materially in the period though we still battle with headwinds in the economy at large. The significant investment in Wales in new high-definition printing is all but complete, with the new presses already fully operational and the principle operational risks of change now behind us. Despite this substantial capital investment, which will yield margin improvements in 2014/15 and beyond, net debt actually fell substantially to £36.9 million (2013: £42.1 million), putting us ahead of plan to achieve our reductions in leverage. Our key target of earnings per share (fully diluted and stated before exceptional items) also improved by 6.4% to 8.3p, pleasingly putting us slightly ahead of our plan.
Continuing operations
Revenues for the year to 31 March 2014 were down slightly from £225.2 million in 2013 to £224.5 million in the current year. However, this masks the effect of foreign exchange rates on overseas earnings and if this is adjusted, total revenue is up slightly by 0.4%. Sales in the UK segment fell, partly due to withdrawal from a non-core product category, while sales in every other segment grew well: 5-6% in Australia and USA and 16% in Europe, where it is proving possible to cost effectively add market share despite very competitive pricing, following the investment in 2012 in a new printing technology, identical to that which we have now deployed in the UK.
Gross profit margin before exceptional items at 18.4% is very similar to the prior year (2013: 18.3%). While acceptable, margin was impacted most particularly by the adverse weather conditions in the USA in Q4, as the sales of "everyday upscale" product categories (those most impacted) typically attract a significantly higher gross margin. Margins in the UK and European segments developed well reflecting mainly efficiencies, including those linked to the economies of scale seen in Europe. The Company aims to improve margins commercially by increasing the balance of own brand products and non-Christmas business but efficiencies in sourcing and manufacturing will continue to contribute, especially following the investment in Wales which will start to show an effect in 2014/15.
An important dynamic to margin also continues to be the level of FOB business delivered directly to major customers at ports in China. This type of business continues to grow especially in the USA and Australia with the major value chains.
This typically attracts lower gross margins but it is a means of retaining or winning large volumes of business, in a manner that avoids other costs and risks associated with domestic delivery; winning this business can therefore enhance net margins and return on capital even as gross margins are diluted.
Overheads before exceptional items and LTIP charges have decreased year-on-year by a net of £0.3 million, but are broadly flat at constant exchange rates. Cost control remains tight and opportunities to remove or reduce costs are constantly sought out and new costs are only incurred where actual or prospective value can be demonstrated.
Operating profit before exceptional items and LTIP charges was flat at £10.7 million reflecting the dynamics described above.
Operating profit after exceptional items and LTIP charges was £8.8 million (2013: £9.1 million)
Exceptional items during the year amounted to £2.3 million before tax (2013: £1.6 million). This was entirely in line with plan and as previously announced these relate entirely to the investment programme in high definition printing in Wales and the associated restructuring. Of this charge, £0.2 million flowed out as cash in the year and £0.6 million will be paid out by way of redundancy payments during 2014/15. However, the balance of £1.5 million represents accelerated depreciation on assets that become redundant and superseded bank facility fees written off and there will be no cash effect at all in respect of these items.
Finance expenses before exceptional items in the year were 8.3% lower at £3.2 million (2013: £3.5 million) reflecting the improved margins negotiated with banks earlier in the year and slightly lower average indebtedness. Revised and new bank facilities were put in place to fund the investment in Wales and as noted above some historical fees relating to the superseded facility arrangements were written off as exceptional cost. New but much lower fees were incurred in arranging the revised debt facilities and these are being amortised appropriately over the term of the facilities. Notes 8 and 17 to the financial statements provide further information.
Profit before tax, exceptional items and LTIP charges was up 3.9% to £7.6 million (2013: £7.3 million).
Profit before tax was down 8.6% to £5.2 million (2013: £5.7 million) after charging exceptional items of £2.3 million (2013: £1.6 million) and LTIP charges of £0.1 million (2013: nil).
Taxation
The headline taxation charge has dropped to £1.5 million (2013: £1.6 million) or 28.1%. The effective underlying tax charge on profits before exceptional items is lower at 24.6% (2013: 26.0%) because the exceptional items arising in the UK attract relief at a lower level than the blended rate for the Group as a whole.
Actual taxation paid in cash during the year was minimal at £60k (2013: £0.9 million) as our business in Australia took tax relief against the write off of a material bad debt in the prior year, and profits in other geographies continue to be shielded by tax losses and similar tax assets brought forward.
The current geographical profile of Group profits before exceptional items at current local rates of tax would result in an underlying blended tax rate of just under 29%. However, there are still tax losses in the USA with a current tax value of £2.2 million and in the UK with a current tax value of £0.3 million, not yet recognised in the balance sheet. The opportunity to recognise and utilise these as profitability is sustained and improves, will suppress the actual tax rate for some time to come.
Profit for the year
Net profit for the year was down 8.5% to £3.7 million (2013: £4.1 million). However, this was after charging £1.9 million (2013: £1.3 million) in respect of exceptional items, with the current year element all relating to the investment and consequent restructuring in our manufacturing facilities in Wales and £0.1 million in respect of the new LTIP scheme (2013: nil).
Earnings per share and dividends
Basic earnings per share were 5.2p (2013: 6.0p). After removing the effect of exceptional items, the adjusted earnings per share increased to 8.5p (2013: 8.1p) representing an increase of 4.9%.
Employee share options of 1.8 million had vested but not yet been exercised as at 31 March 2014. As these are exercised, earnings per share will trend towards the fully diluted level and the Company targets growth in this fully diluted metric (before exceptional items) as a primary goal. In addition the Company introduced a new long term incentive plan during the year and this approach of targeting fully diluted earnings per share (before exceptional items) will accommodate that scheme as and when any of the new "performance shares" vest. Details of share plans can be found in note 25 to the financial statements. Fully diluted earnings per share (stated before exceptional items) were 8.3p, up 6.4% on the prior year (2013: 7.8p), and ahead of plan.
No dividend was paid during the year (2013: £nil) and the Board does not propose a final dividend for the year. The other primary focus remains the reduction of leverage from the current level of 2.4 times EBITDA (2013: 2.8 times) to below 2.0 times EBITDA. At this point, the Board will consider whether it is appropriate to resume dividends.
Balance sheet and cash flow
Net debt at 31 March 2014 was much improved at £36.9 million (2013: £42.1 million) and leverage fell accordingly to 2.4 times from 2.8 times in the prior year. Weaker exchange rates helped in this regard and net debt at like for like rates would have been £1.4 million higher. Nonetheless this is a very strong performance and well ahead of our plan in a year in which capital expenditure of £8.3 million (2013: £1.9 million) exceeded depreciation by £3.3 million. Notes 17 and 26 to the financial statements provide further information.
Year-end net debt included amounts denominated in US Dollars of $25.5 million (2013: $22.6 million) and in Euros of €5.8 million (2013: €12.4 million). The year-end exchange rates were $1.67 (2013: $1.52) and €1.21 (2012: €1.19). Allowing for this, debt stated at constant exchange rates would have been £1.4 million higher.
Working capital management continues to be a priority. Outstanding debtors are monitored closely, both to maximise cash but also to reduce our credit risk. Trade debtors reduced to £16.1 million (2013: £18.8 million) at the year end, more than reversing last year's increase, which related to specific customer circumstances but in the 2013/14 year also reflecting lower Q4 sales in the USA following the extraordinarily adverse weather conditions.
The charge for bad and doubtful debts in the year was £0.1 million or less than 0.1% of turnover.
Net stock levels after provisioning for older stock reduced by 3.3% from £50.1 million to £48.5 million. Stock levels only increased in the USA, again related to lower sales as a result of the poor weather conditions in Q4.
Older stock (measured as over 15 months since last purchase) increased slightly from £5.1 million to £5.8 million (at March 2014 exchange rates) but provisioning remains adequate and our businesses consistently achieve in excess of 100% recovery against written down values of old stock.
Group cash generated from operations was more than double that of the prior year at £15.2 million (2013: £7.5 million), reflecting full conversion of operating profits into cash flow and assisted by a small net reduction in working capital of £0.7 million (2013: increase of £5.7 million).
As noted above, investment in capital expenditure was very substantial at £8.3 million (2013: £1.9 million), well above depreciation and the prior year. This reflects the investment in two new state-of-the-art printing presses and associated facilities at our gift wrap manufacturing operation in Wales, matching the equivalent capability installed in Europe in 2012 that is now yielding such strong results. During the year we also invested in further automation at our manufacturing facilities in China and the USA, which mitigates against the twin challenges of availability and cost of labour.
The investment in Wales is consolidating our operations, and we anticipate one of our three current sites will then become available for sale later in the 2014/15 year. The net book value of this site is £1.25 million. In addition the Company is in the second of a five-year period by which a company has the option to purchase part of another under utilised site (net book value £0.8 million) for a price of £2.4 million. This is also generating premium income of £0.1 million p.a. over the option period, recognised within other operating income.
Equity attributable to shareholders has increased to £53.5 million from £51.9 million predominantly reflecting profits generated in the year.
Risks and key performance indicators
Our areas of primary focus are:
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· improved earnings attributable to shareholders, which we aim to achieve through top line growth and mix management in selected markets and channels together with strong cost and gross margin management; and |
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· lower leverage measured as the ratio of net debt to pre-exceptional EBITDA, which we aim to achieve through improved profitability together with close management of our working capital.
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Operationally this means a focus on:
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· nurturing valuable relationships: monitoring the profitability, product mix and service delivered in respect of our customer base; growing those relationships in existing and new territories and product categories; |
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· creating a toolbox of expertise: ensuring that we have market leading design and product capability in our categories, sharing knowledge through common platforms; |
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· providing best quality, value and service: monitoring and benchmarking the key elements of our cost bases, buying or manufacturing as efficiently and effectively as possible from a total cost perspective across the whole season so that we can deliver great value to customers and strong returns to shareholders; |
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· balancing our business: we monitor the mix and profitability in each of our businesses across season, brand and product categories, seeking out those opportunities that yield the best returns on our scarce capital while rooting out those activities that consume resources for little or no gain; and |
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· providing differentiated product offerings: across the value, mass and upscale markets. |
Foreign Exchange Impact to Profit and Earnings
Our diverse geographical revenue and profit streams continue to provide us with market resilience but naturally this carries with it the volatility of currency. As noted above in the context of net debt, foreign exchange rates impacted significantly in the year on the translation of our overseas figures relative to prior years with the US dollar rate moving 10% from 1.52 to 1.67 during the year and the Australian dollar rate moving 23% from 1.46 to 1.80. The movement in the Euro rate was more muted at 1.19 to 1.21. This change in rates placed some pressure on profit against planned outcomes although this was manageable within 2013/14. However, if we assume that the significantly weaker rates at the end of the year continue through calendar 2014, the impact will be more material in next year's results through the translation of overseas earnings.
Treasury operations
The Group operates with four supportive bankers, each addressing one of our geographic segments. The Group's principal bank has recently extended additional facilities to support the capital programme in Wales, now almost complete. Current global facilities comprise:
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· term facilities at Group level in Sterling and USD, repayable in tranches with bullets in May 2016; |
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· leasing facilities for seven and five years respectively in the UK and Netherlands for key plant and machinery; |
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· asset backed facilities secured on the stock and debtors of the relevant operating businesses in each segment, all of which have at least one more year to run and are usually renewed for two to three years at a time; and |
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· a revolving multi-currency credit facility and overdraft to manage peak working capital requirements; these are renewed in May annually. |
These facilities provide the Group with the operational flexibility it requires in a highly seasonal business on a cost effective basis. As noted above, interest margins have been falling as leverage has improved and the Group has been able to renegotiate favourable terms on the two largest facilities during the year.
There are financial covenants attached to our facilities and the Group comfortably complied with these throughout the year. These covenants include:
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· debt service, being the ratio of cash flow available to finance costs on a rolling twelve-month basis; |
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· interest cover, being the ratio of earnings before interest, depreciation and amortisation to interest on a rolling twelve month basis; |
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· leverage being the ratio of debt to pre-exceptional EBITDA on a rolling twelve month basis; and |
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· appropriate local covenants in the individual businesses, which have asset backed facilities. |
The Group has various interest rate swaps denominated in US Dollars, Sterling and Euros to improve certainty over interest charges. The Group adopts hedge accounting for these instruments. No new interest rate contracts were entered into during the year. The Group also actively manages FX transaction exposure in each of its businesses, with advice and support from the central treasury team.
Note 26 to the financial statements provides further information in respect of treasury matters.
Post balance sheet event
On 5 June 2014 the Group announced the acquisition of the trade and certain of the assets of Enper Giftwrap BV, a Dutch company with sales of €5 million, for €1.9 million. This transaction is expected to complete on 30 June 2014. While modest in scale, this acquisition is an ideal step towards consolidation of the very competitive European gift wrap marketplace. The Group's Dutch management team plan to integrate Enper's customer base and selected fixed assets into its own facilities within three months of completion. We have allowed for the loss of some less profitable customers but the synergies that should arise post integration (2015/16 season) from such an integration into our modern printing presses, installed in Hoogeveen in 2012, will more than offset this and the cash payback after all costs of acquisition and integration should be no more than four years.
This is the Group's first acquisition for some years and it is a reflection of the our improving balance sheet and trading position that we are now able to evaluate and execute on such opportunities - albeit highly selectively. We do not anticipate that this investment will impact materially on our debt reduction plans.
Conclusion
In conclusion, delivery has been ahead of plan in the year now completed. Net debt and earnings per share performance was especially pleasing and outperformance in the arena of cash management is providing the Group with additional flexibility and options to create value for shareholders in the future.
Anthony Lawrinson
Director
19 June 2014
Consolidated income statement
year ended 31 March 2014
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|
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Year ended 31 March 2014 |
Year ended 31 March 2013 |
||||||
|
|
|
||||||||
|
|
|
Before |
|
Exceptional |
|
Before |
|
Exceptional |
|
|
|
|
exceptional |
|
items |
|
exceptional |
|
items |
|
|
|
|
items |
|
(note 10) |
Total |
items |
|
(note 10) |
Total |
|
|
Notes |
£000 |
|
£000 |
£000 |
£000 |
|
£000 |
£000 |
|
Revenue |
4 |
224,462 |
|
- |
224,462 |
225,211 |
|
- |
225,211 |
|
Cost of sales |
|
(183,238) |
|
(2,006) |
(185,244) |
(183,941) |
|
(953) |
(184,894) |
|
Gross profit |
|
41,224 |
|
(2,006) |
39,218 |
41,270 |
|
(953) |
40,317 |
|
|
|
18.4% |
|
|
17.5% |
18.3% |
|
|
17.9% |
|
Selling expenses |
|
(12,108) |
|
- |
(12,108) |
(12,790) |
|
(455) |
(13,245) |
|
Administration expenses |
|
(19,191) |
|
- |
(19,191) |
(18,789) |
|
(195) |
(18,984) |
|
Other operating income |
7 |
737 |
|
147 |
884 |
803 |
|
- |
803 |
|
Profit on disposal of property, plant and equipment |
|
- |
|
- |
- |
252 |
|
- |
252 |
|
Operating profit/(loss) |
5 |
10,662 |
|
(1,859) |
8,803 |
10,746 |
|
(1,603) |
9,143 |
|
Finance expenses |
8 |
(3,177) |
|
(439) |
(3,616) |
(3,466) |
|
- |
(3,466) |
|
Profit/(loss) before tax |
|
7,485 |
|
(2,298) |
5,187 |
7,280 |
|
(1,603) |
5,677 |
|
Income tax (charge)/credit |
9 |
(1,840) |
|
381 |
(1,459) |
(1,890) |
|
289 |
(1,601) |
|
Profit/(loss) for the period |
|
5,645 |
|
(1,917) |
3,728 |
5,390 |
|
(1,314) |
4,076 |
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
Owners of the Parent Company |
|
|
|
|
3,010 |
|
|
|
3,401 |
|
Non-controlling interests |
|
|
|
|
718 |
|
|
|
675 |
|
|
|
2014 |
|
2013 |
|
|
|
Notes |
Diluted |
Basic |
Diluted |
Basic |
|
Adjusted earnings per share excluding exceptional items and LTIP charges |
23 |
8.4p |
8.6p |
7.8p |
7.8p |
|
Loss per share on LTIP charges |
23 |
(0.1p) |
(0.1p) |
- |
- |
|
Adjusted earnings per share excluding exceptional items |
23 |
8.3p |
8.5p |
7.8p |
8.1p |
|
Loss per share on exceptional items |
23 |
(3.2p) |
(3.3p) |
(2.0p) |
(2.1p) |
|
Earnings per share |
|
5.1p |
5.2p |
5.8p |
6.0p |
Consolidated statement of comprehensive income
year ended 31 March 2014
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Profit for the year |
3,728 |
4,076 |
|
Other comprehensive income: |
|
|
|
Exchange difference on translation of foreign operations |
(2,257) |
633 |
|
Transfer to profit and loss of maturing cash flow hedges (net of tax) |
451 |
446 |
|
Net loss on cash flow hedges (net of tax) |
(577) |
(451) |
|
Other comprehensive income for period, net of tax items |
|
|
|
which may be reclassified in to profit and loss in subsequent periods |
(2,383) |
628 |
|
Total comprehensive income for the period, net of tax |
1,345 |
4,704 |
|
Attributable to: |
|
|
|
Owners of the Parent Company |
1,366 |
3,796 |
|
Non-controlling interests |
(21) |
908 |
|
|
1,345 |
4,704 |
Consolidated statement of changes in equity
year ended 31 March 2014
|
|
|
Share |
|
|
|
|
|
|
|
|
|
|
premium |
|
|
|
|
|
|
|
|
|
|
and capital |
|
|
|
|
|
Non‑ |
|
|
|
Share |
redemption |
Merger |
Hedging |
Translation |
Retained |
Shareholder |
controlling |
|
|
|
capital |
reserve |
reserves |
reserves |
reserve |
earnings |
equity |
interest |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
At 1 April 2012 |
2,750 |
4,480 |
17,164 |
(446) |
446 |
23,410 |
47,804 |
4,744 |
52,548 |
|
Profit for the year |
- |
- |
- |
- |
- |
3,401 |
3,401 |
675 |
4,076 |
|
Other comprehensive income |
- |
- |
- |
(5) |
400 |
- |
395 |
233 |
628 |
|
Total comprehensive income for the year |
- |
- |
- |
(5) |
400 |
3,401 |
3,796 |
908 |
4,704 |
|
Equity-settled share-based payment (note 25) |
- |
- |
- |
- |
- |
22 |
22 |
- |
22 |
|
Options exercised (note 22) |
88 |
178 |
- |
- |
- |
- |
266 |
- |
266 |
|
Equity dividends paid |
- |
- |
- |
- |
- |
- |
- |
(968) |
(968) |
|
At 31 March 2013 |
2,838 |
4,658 |
17,164 |
(451) |
846 |
26,833 |
51,888 |
4,684 |
56,572 |
|
Profit for the year |
- |
- |
- |
- |
- |
3,010 |
3,010 |
718 |
3,728 |
|
Other comprehensive income |
- |
- |
- |
(126) |
(1,518) |
- |
(1,644) |
(739) |
(2,383) |
|
Total comprehensive income for the year |
- |
- |
- |
(126) |
(1,518) |
3,010 |
1,366 |
(21) |
1,345 |
|
Equity-settled share-based payment (note 25) |
- |
- |
- |
- |
- |
82 |
82 |
- |
82 |
|
Options exercised (note 22) |
58 |
118 |
- |
- |
- |
- |
176 |
- |
176 |
|
Equity dividends paid |
- |
- |
- |
- |
- |
- |
- |
(1,014) |
(1,014) |
|
At 31 March 2014 |
2,896 |
4,776 |
17,164 |
(577) |
(672) |
29,925 |
53,512 |
3,649 |
57,161 |
Merger reserve
The merger reserve comprises premium on shares issued in relation to business combinations.
Capital redemption reserve
The capital redemption reserve comprises amounts transferred from retained earnings in relation to the redemption of preference shares. For ease of presentation, the amount of £1.34 million relating to the capital redemption reserve has been included within the column of share premium and capital redemption reserve in the balances at both the beginning and end of each year, with no movements.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.
Shareholders' equity
Shareholders' equity represents total equity attributable to owners of the Parent Company.
Consolidated balance sheet
as at 31 March 2014
|
|
|
As at |
As at |
|
|
|
31 March |
31 March |
|
|
|
2014 |
2013 |
|
|
Notes |
£000 |
£000 |
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
11 |
32,049 |
29,993 |
|
Intangible assets |
12 |
31,950 |
32,795 |
|
Deferred tax assets |
13 |
3,665 |
4,250 |
|
Total non‑current assets |
|
67,664 |
67,038 |
|
Current assets |
|
|
|
|
Inventory |
14 |
48,460 |
50,114 |
|
Trade and other receivables |
15 |
19,690 |
23,285 |
|
Cash and cash equivalents |
16 |
8,111 |
2,301 |
|
Total current assets |
|
76,261 |
75,700 |
|
Total assets |
|
143,925 |
142,738 |
|
Equity |
|
|
|
|
Share capital |
22 |
2,896 |
2,838 |
|
Share premium |
|
3,436 |
3,318 |
|
Reserves |
|
17,255 |
18,899 |
|
Retained earnings |
|
29,925 |
26,833 |
|
Equity attributable to owners of the Parent Company |
|
53,512 |
51,888 |
|
Non-controlling interests |
|
3,649 |
4,684 |
|
Total equity |
|
57,161 |
56,572 |
|
Non-current liabilities |
|
|
|
|
Loans and borrowings |
17 |
28,145 |
29,479 |
|
Deferred income |
18 |
1,592 |
1,329 |
|
Provisions |
19 |
860 |
862 |
|
Other financial liabilities |
20 |
4,202 |
1,803 |
|
Total non-current liabilities |
|
34,799 |
33,473 |
|
Current liabilities |
|
|
|
|
Bank overdraft |
16 |
2,529 |
336 |
|
Loans and borrowings |
17 |
9,695 |
12,847 |
|
Deferred income |
18 |
1,202 |
550 |
|
Provisions |
19 |
165 |
107 |
|
Income tax payable |
|
2,052 |
904 |
|
Trade and other payables |
21 |
25,818 |
28,995 |
|
Other financial liabilities |
20 |
10,504 |
8,954 |
|
Total current liabilities |
|
51,965 |
52,693 |
|
Total liabilities |
|
86,764 |
86,166 |
|
Total equity and liabilities |
|
143,925 |
142,738 |
These financial statements were approved by the Board of Directors on 19 June 2014 and were signed on its behalf by:
|
Paul Fineman |
Director |
|
Anthony Lawrinson |
Director |
|
Company number |
1401155 |
Consolidated cash flow statement
year ended 31 March 2014
|
|
|
2014 |
2013 |
|
|
Notes |
£000 |
£000 |
|
Cash flows from operating activities |
|
|
|
|
Profit for the year |
|
3,728 |
4,076 |
|
Adjustments for: |
|
|
|
|
Depreciation |
11 |
5,032 |
3,807 |
|
Amortisation of intangible assets |
12 |
576 |
494 |
|
Finance expenses |
8,10 |
3,616 |
3,466 |
|
Income tax charge |
9 |
1,459 |
1,601 |
|
Loss/profit on sales of property, plant and equipment and intangible assets |
5 |
4 |
(252) |
|
Equity-settled share-based payment |
25 |
82 |
22 |
|
Operating profit after adjustments for non-cash items |
|
14,497 |
13,214 |
|
Change in trade and other receivables |
|
1,520 |
(1,965) |
|
Change in inventory |
|
(722) |
(7,171) |
|
Change in trade and other payables |
|
(48) |
4,356 |
|
Change in provisions and deferred income |
|
(84) |
(901) |
|
Cash generated from operations |
|
15,163 |
7,533 |
|
Tax paid |
|
(60) |
(937) |
|
Interest and similar charges paid |
|
(3,221) |
(3,285) |
|
Net cash inflow from operating activities |
|
11,882 |
3,311 |
|
Cash flow from investing activities |
|
|
|
|
Proceeds from sale of property, plant and equipment |
|
140 |
421 |
|
Acquisition of intangible assets |
|
(206) |
(242) |
|
Acquisition of property, plant and equipment (a) |
|
(5,085) |
(1,884) |
|
Receipt of government grants |
|
1,049 |
- |
|
Net cash outflow from investing activities |
|
(4,102) |
(1,705) |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of share capital |
|
176 |
266 |
|
Repayment of secured borrowings |
|
(5,646) |
(4,060) |
|
Net movement in credit facilities |
|
(2,671) |
2,748 |
|
Payment of finance lease liabilities |
|
(296) |
(115) |
|
New bank loans raised |
|
5,000 |
- |
|
New finance leases (a) |
|
- |
1,764 |
|
Loan arrangement fees |
|
(180) |
(444) |
|
Dividends paid to non‑controlling interests |
|
(1,014) |
(968) |
|
Net cash outflow from financing activities |
|
(4,631) |
(809) |
|
Net increase in cash and cash equivalents |
|
3,149 |
797 |
|
Cash and cash equivalents at beginning of period |
|
1,965 |
1,223 |
|
Effect of exchange rate fluctuations on cash held |
|
468 |
(55) |
|
Cash and cash equivalents at 31 March |
16 |
5,582 |
1,965 |
(a) In the current year £3,239,000 of new finance leases have been shown netted off against acquisitions of property, plant and equipment. In the prior year, new finance leases represent proceeds received in respect of £1,764,000 assets purchased in 2011/12 shown in acquisition of property, plant and equipment in that year.
Notes to the financial statements
year ended 31 March 2014
1 Accounting policies
International Greetings plc is a public limited company, incorporated and domiciled in England and Wales. The Company's ordinary shares are listed on AIM.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Company financial statements present information about the Company as a separate entity and not about its Group.
The Group financial statements have been prepared and approved by the Directors in accordance with EU adopted International Financial Reporting Standards. The Company has elected to prepare its Company financial statements in accordance with UK GAAP;
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Group financial statements.
Judgements made by the Directors in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the policies below.
Going concern basis
The financial statements have been prepared on the going concern basis.
The borrowing requirement of the Group increases steadily over the period from July and peaks in October, due to the seasonality of the business, as the sales of wrap and crackers are mainly for the Christmas market, before then reducing.
As with any company placing reliance on external entities for financial support, the Directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of this report, they have no reason to believe that it will not do so.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.
Measurement convention
The financial statements are prepared on the historical cost basis except that financial instruments used for hedging are stated at their fair value.
Changes in accounting policies
The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2014, except for the adoption of new standards and interpretations as of 1 April 2014.
Basis of consolidation
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Foreign currency translation
The consolidated financial statements are presented in pounds Sterling, which is the Company's functional currency and the Group's presentational currency.
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations, and of related qualifying hedges, are taken directly to the translation reserve. They are released into the income statement upon disposal.
Exchange differences arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income in the translation reserve. The cumulative translation differences previously recognised in other comprehensive income (or where the foreign operation is part of a subsidiary, the parent's interest in the cumulative translation differences) are released into the income statement upon disposal of the foreign operation or on loss of control of the subsidiary that includes the foreign operation.
Classification of financial instruments issued by the Group
Financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders' funds) only to the extent that they meet the following two conditions:
(a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
(b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium exclude amounts in relation to those shares.
Trade and other receivables
Where it is likely to be materially different from the nominal value, trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.
Trade and other payables
Where it is likely to be materially different from the nominal value, trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method.
Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised as other comprehensive income in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement.
Amounts previously recognised in other comprehensive income are transferred to the income statement in the periods when the hedged item affects profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contract hedging export sales is recognised in the income statement within "sales". However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory), the gains or losses previously recognised in other comprehensive income are transferred from other comprehensive income and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold (in case of inventory).
When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in other comprehensive income and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in other comprehensive income is recognised in the income statement immediately.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.
Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Where land and buildings are held under finance leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of a finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as described below.
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:
|
· freehold buildings |
25-30 years |
|
· leasehold land and buildings |
life of lease |
|
· plant and equipment |
four-25 years |
|
· fixtures and fittings |
three-five years |
|
· motor vehicles |
four years |
No depreciation is provided on freehold land.
Included within plant and machinery are assets with a range of depreciation rates. These rates are tailored to the
nature of the assets to reflect their estimated useful lives.
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Intangible assets and goodwill
Subject to the transitional relief in IFRS 1, all business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries. In respect of business acquisitions that have occurred since 1 April 2006, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested every half year for impairment.
In respect of acquisitions prior to 1 April 2006, goodwill is included on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated.
If the cost of an acquisition is less than the fair value of the Group's share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.
The main classes of intangible assets are computer software and publishing imprints.
Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. The estimated useful life of computer software ranges between three and five years. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are three to five years.
Amortisation charges are included under "administrative expenses" in the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on a combination of weighted average and the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Impairment
The carrying amounts of the Group's assets other than inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
For goodwill, the recoverable amount is estimated at each half-year.
An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The recoverable amount of the Group's assets is the greater of their fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time, value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment in respect of goodwill is not reversed. In respect of other assets, an impairment is reversed when there is an indication that the impairment may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised.
Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan and announced its main provisions. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as borrowing costs.
Deferred consideration
Where considered material, the Group calculates deferred consideration by discounting it to its fair value.
This fair value is used to calculate the total purchase consideration and hence the goodwill figure. As the discount unwinds it is charged as a finance expense within the income statement and added to the deferred consideration creditor.
Revenue recognition
Revenue represents the amounts, net of discounts, allowances for volume and promotional rebates and other payments to customers (excluding value added tax) derived from the provision of goods and services to customers during the year. Sales of goods are recognised when a Group entity has despatched products to the customer, legal title has passed and the collectability of the related receivable is reasonably assured.
Exceptional items
Exceptional items are those items of financial performance which, because of size or incidence, require separate disclosure to enable underlying performance to be assessed.
Discontinued operations
A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier.
When an operation is classified as a discontinued operation, the comparative income statement is represented as if the operation had been discontinued from the start of the comparative period.
Government grants
Capital-based government grants are included within other financial liabilities in the balance sheet and credited to operating profit over the estimated useful economic lives of the assets to which they relate.
Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.
Finance lease payments
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Finance income and expenses
Finance expenses comprise interest payable, finance charges on finance leases and unwinding of the discount on provisions and deferred consideration. Finance income comprises interest receivable on funds invested and dividend income.
Net movements in the fair value of derivatives are also included within finance income or expense.
Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payments is established. Foreign currency gains and losses are reported on a net basis.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or equity respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
Dividend distribution
Final dividends to shareholders of International Greetings plc are recognised as a liability in the period that they are approved by shareholders.
Employee benefits
Pensions
The Group operates a defined contribution personal pension scheme. The assets of this scheme are held separately from those of the Group in an independently administered fund. The pension charge represents contributions payable by the Group to the fund.
The Netherlands subsidiary operates an industrial defined benefit fund, based on average wages, that has an agreed maximum contribution. The pension fund is a multi-employer fund and there is no contractual or constructive obligation for charging the net defined benefit cost of the plan to participating entities other than an agreed maximum contribution for the period, that is shared between employer (4/7) and employees (3/7). The Dutch Government is not planning to make employers fund any deficits in industrial pension funds; accordingly the Group treats the scheme as a defined contribution scheme for disclosure purposes. The Group recognises a cost equal to its contributions payable for the period.
Share-based payment transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined by using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any service and performance (vesting conditions), other than performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non-vesting conditions. Like market performance conditions, non-vesting conditions are taken into account in determining the grant date fair value.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market vesting condition or a non-vesting condition, which are treated as vesting irrespective of whether or not the market vesting condition or non-vesting condition is satisfied, provided that all other non-market vesting conditions are satisfied.
At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market vesting conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition or a non-vesting condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
New standards adopted early
The Group has elected to adopt early the amendments to IAS 36 Recoverable Amounts Disclosure for Non-Financial Assets.
New standards and interpretations not applied
Management continually reviews the impact of newly published standards and amendments and considers, where applicable, disclosure of their impact on the Group.
The following standards, interpretations and amendments issued by the IASB have an effective date after the date of these financial statements:
|
|
|
To be |
|
|
Effective |
adopted by |
|
New pronouncement |
date |
the Group |
|
IFRS 10 Consolidated Financial Statements |
1 Jan 2014 |
1 Apr 2014 |
|
IFRS 11 Joint Arrangements |
1 Jan 2014 |
1 Apr 2014 |
|
IFRS 12 Disclosure of Interests in Other Entities |
1 Jan 2014 |
1 Apr 2014 |
|
IFRS 10, IFRS 12 and IAS 27 Investment Entities (Amendments) |
1 Jan 2014 |
1 Apr 2014 |
|
IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 |
1 Jan 2014 |
1 Apr 2014 |
|
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting |
|
|
|
- Amendments to IAS 39 |
1 Jan 2014 |
1 Apr 2014 |
|
IFRIC 21 Levies* |
1 Jan 2014 |
1 Apr 2014 |
|
IAS 19 Defined Benefits Plans - Employee Contributions - Amendments to IAS 19* |
1 Jan 2014 |
1 Apr 2014 |
|
Annual Improvements 2010-2012 Cycle* |
1 Jul 2014 |
1 Apr 2015 |
|
Annual Improvements 2011-2013 Cycle* |
1 Jul 2014 |
1 Apr 2015 |
|
IFRS 14 Regulatory Deferral Accounts* |
1 Jan 2016 |
1 Apr 2016 |
|
Amendments to IAS 16 and IAS 38: Clarification of acceptable methods |
|
|
|
of depreciation and amortisation* |
1 Jan 2016 |
1 Apr 2016 |
|
Amendments to IFRS 11 Accounting for Acquisitions of Interest in Joint Operations* |
1 Jan 2016 |
1 Apr 2016 |
|
IFRS 15 Revenue from Contracts with Customers* |
1 Jan 2017 |
1 Apr 2017 |
|
IFRS 9 Financial Instruments*† |
1 Jan 2018 |
1 Apr 2018 |
* Not yet endorsed by EFRAG.
† IFRS 9 does not yet have a mandatory effective date. The IASB have tentatively agreed an effective date of 1 January 2018.
None of the above standards are anticipated to significantly impact the Group's results or assets and liabilities and are not expected to require significant disclosure.
The new standards, interpretations and amendments which are considered most relevant to the Group are as follows:
IFRS 9: the first phase of IFRS 9, which addressed classification and measurement of financial assets was published in November 2009, and was subsequently amended in October 2010 and November 2013, to include classification and measurement requirements for financial liabilities and hedge accounting requirements. IFRS 9 does not currently have a mandatory effective date. A mandatory effective date will be set when the IASB completes the impairment phase of the project. However, the IASB has tentatively decided that the mandatory effective date of IFRS 9 will be for annual periods beginning on or after 1 January 2018. The Group will quantify the impact of IFRS 9 when the final standard, including all phases, is issued.
IFRS 10: IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidated financial statements. IFRS 10 does not change consolidation procedures (i.e. how to consolidate an entity). Rather, IFRS 10 changes whether an entity is consolidated by revising the definition of control. IFRS 10 also provides a number of clarifications on applying the new definition of control.
IFRS 12: IFRS 12 includes all the disclosure requirements for subsidiaries, joint ventures, associates and "structured entities".
IFRS 15: IFRS 15 replaces existing IFRS revenue recognition requirements in IAS 18 Revenue. The standard applies to all revenue contracts and provides a model for the recognition and measurement of sales of some non-financial assets (e.g. disposals of property, plant and equipment). The core principle of IFRS 15 is that revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Application is required for annual periods beginning on or after 1 January 2017. The Group are currently assessing the impact of IFRS 15.
2 Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies, which are described in note 1, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these 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 if the revision only affects that period or in the period of revision and future periods if the revision affects both current and future periods.
In addition to the forward operating profit and cash flow projections, the estimates and assumptions that have had a significant bearing on the financial statements in the current year or could have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Critical judgements in applying the Group's accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
Exceptional items
The Directors have chosen to separate certain items of financial performance which they believe, because of size or incidence, require separate disclosure to enable underlying performance to be assessed. These items are fully described in note 10.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are discussed in the strategic report and below.
Impairment of goodwill and property, plant and equipment
Determining whether goodwill and property, plant and equipment are impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated or to which property, plant and equipment belong. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £31.2 million (2013: £31.5 million). No impairment (2013: £nil) was required. The carrying amount of property, plant and equipment was £32.0 million (2013: £30.0 million). No impairment loss (2013: £nil) was required.
Provision for slow moving inventory
The Group has guidelines for providing for inventory which may be sold below cost due to its age or condition. Directors assess the inventory at each location and in some cases decide that there are specific reasons to provide more than the guideline levels, or less if there are specific action plans in place which mean the guideline provision level is not required. Determining the level of inventory provision requires an estimation of likely future realisable value of the inventory in various time frames and comparing with the cost of holding stock for those time frames. Regular monitoring of stock levels, the ageing of stock and the level of the provision is carried out by the Directors. Details of inventory carrying values are provided in note 14. At the year end, stock purchased more than 15 months previously had increased from £5.1 million to £5.8 million (at March 2014 exchange rates) and the Group has provisions of £3.3 million (2013: £3.7 million) over the total inventory value.
Share-based payments
The Directors are required to estimate the fair value of services received in return for share options granted to employees that are measured by reference to the fair value of share options granted. For the share options scheme the estimate of the fair value of the services received is based on a Black Scholes model (with the contractual life of the option and expectations of early exercise incorporated into the model). For the long term incentive plan the estimate of the fair value is based on the share price on the date the scheme was approved and the proportion of shares expected to vest. Details of the key assumptions made in the measurement of share-based payments are provided in note 25.
Taxation
There are many transactions and calculations for which the ultimate tax determination is uncertain. Significant judgement is required in determining the Group's tax assets and liabilities. Deferred tax assets have been recognised to the extent they are recoverable based on profit projections for future years. Income tax liabilities for anticipated issues have been recognised based on estimates of whether additional tax will be due. Notwithstanding the above, the Group believes that it will recover tax assets and has adequate provision to cover all risks across all business operations. See note 13 for more details.
3 Financial risk management
Risk management is discussed in the strategic report and a discussion of risks and uncertainties can be found further on in the report, along with the Group's key risks. See note 26 for additional information about the Group's exposure to each of these risks and the ways in which they are managed. Below are key financial risk management areas:
|
· currency risk is mitigated by a mixture of forward contracts, spot currency purchases and natural hedges; |
|
· liquidity risk is managed by monitoring daily cash balances, weekly cash flow forecasts, regular reforecasting of monthly working capital and regular dialogue with the Group's banks; and |
|
· credit risk is managed by constant review of key debtors and banking with reputable banks. |
4 Segmental information
The Group has one material business activity being the design, manufacture and distribution of gift packaging and greetings, stationery and creative play products.
For management purposes the Group is organised into four geographic business units.
The results below are allocated based on the region in which the businesses are located; this reflects the Group's management and internal reporting structure. The decision was made during 2011 to focus Asia as a service provider of manufacturing and procurement operations, whose main customers are our UK businesses. Both the China factory and the majority of the Hong Kong procurement operations are now overseen by our UK operational management team and we therefore continue to include Asia within the internal reporting of the UK operations, such that UK and Asia comprise an operating segment. The Chief Operating Decision Maker is the Board.
Intra-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 operating profit. Interest expense or revenue and tax are managed on a Group basis and not split between reportable segments.
Segment assets are all non-current and current assets, excluding deferred tax and income tax receivable. Where cash is shown in one segment, which nets under the Group's banking facilities, against overdrafts in other segments, the elimination is shown in the eliminations column. Similarly inter-segment receivables and payables are eliminated.
|
|
UK and Asia |
Europe |
USA |
Australia |
Eliminations |
Group |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Year ended 31 March 2014 |
|
|
|
|
|
|
|
Revenue - external |
110,516 |
34,396 |
53,153 |
26,397 |
- |
224,462 |
|
- inter segment |
1,583 |
292 |
- |
- |
(1,875) |
- |
|
Total segment revenue |
112,099 |
34,688 |
53,153 |
26,397 |
(1,875) |
224,462 |
|
Segment result before exceptional items |
3,533 |
2,556 |
3,026 |
2,107 |
- |
11,222 |
|
Exceptional items |
(1,859) |
- |
- |
- |
- |
(1,859) |
|
Segment result |
1,674 |
2,556 |
3,026 |
2,107 |
- |
9,363 |
|
Central administration costs |
|
|
|
|
|
(560) |
|
Net finance expenses |
|
|
|
|
|
(3,616) |
|
Income tax |
|
|
|
|
|
(1,459) |
|
Profit for the year ended 31 March 2014 |
|
|
|
|
|
3,728 |
|
Balances at 31 March 2014 |
|
|
|
|
|
|
|
Segment assets |
105,987 |
15,983 |
10,395 |
8,230 |
3,330 |
143,925 |
|
Segment liabilities |
(47,428) |
(10,390) |
(24,730) |
(2,499) |
(1,717) |
(86,764) |
|
Capital expenditure |
|
|
|
|
|
|
|
- property, plant and equipment |
6,923 |
296 |
952 |
153 |
- |
8,324 |
|
- intangible |
225 |
20 |
111 |
- |
- |
356 |
|
Depreciation |
3,403 |
750 |
653 |
226 |
- |
5,032 |
|
Amortisation |
386 |
59 |
47 |
84 |
- |
576 |
|
|
UK and Asia |
Europe |
USA |
Australia |
Eliminations |
Group |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Year ended 31 March 2013 |
|
|
|
|
|
|
|
Revenue - external |
118,765 |
28,499 |
50,104 |
27,843 |
- |
225,211 |
|
- inter segment |
1,433 |
143 |
- |
- |
(1,576) |
- |
|
Total segment revenue |
120,198 |
28,642 |
50,104 |
27,843 |
(1,576) |
225,211 |
|
Segment result before exceptional items |
3,974 |
1,151 |
3,796 |
2,431 |
- |
11,352 |
|
Exceptional items |
(1,084) |
- |
(64) |
(455) |
- |
(1,603) |
|
Segment result |
2,890 |
1,151 |
3,732 |
1,976 |
- |
9,749 |
|
Central administration costs |
|
|
|
|
|
(606) |
|
Net finance expenses |
|
|
|
|
|
(3,466) |
|
Income tax |
|
|
|
|
|
(1,601) |
|
Profit for the year ended 31 March 2013 |
|
|
|
|
|
4,076 |
|
Balances at 31 March 2013 |
|
|
|
|
|
|
|
Segment assets |
100,336 |
17,605 |
11,170 |
9,852 |
3,775 |
142,738 |
|
Segment liabilities |
(41,297) |
(14,025) |
(27,286) |
(3,129) |
(429) |
(86,166) |
|
Capital expenditure |
|
|
|
|
|
|
|
- property, plant and equipment |
795 |
153 |
230 |
706 |
- |
1,884 |
|
- intangible |
159 |
11 |
40 |
32 |
- |
242 |
|
Depreciation |
2,237 |
716 |
644 |
210 |
- |
3,807 |
|
Amortisation |
310 |
57 |
39 |
88 |
- |
494 |
(a) Capital expenditure consists of additions of property, plant and equipment, intangible assets and goodwill.
(b) No single customer accounts for over 10% of total sales.
(c) The assets and liabilities that have not been allocated to segments consist of deferred tax assets £3,665,000 (2013: £4,250,000) and income tax payable of £2,052,000 (2013: £904,000). In addition, the assets and liabilities have been grossed up for VAT of £335,000 (2013: £475,000) to reflect the net position of the Group.
(d) No operating segment has been aggregated in determining reportable segments.
(e) Central recharges are included within the result of the segment that takes the recharge. The balance of the central costs are not allocated to segments.
Geographical information
The Group's information about its segmental assets (non-current assets excluding deferred tax assets and other financial assets) and turnover by customer destination and product are detailed below:
|
|
Non-current assets |
|
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
UK and Asia |
42,087 |
39,276 |
|
USA |
6,245 |
6,492 |
|
Europe |
13,756 |
14,483 |
|
Australia |
1,911 |
2,537 |
|
|
63,999 |
62,788 |
Turnover by customer destination
|
|
Turnover |
|
|
|
|
|
2014 |
2013 |
2014 |
2013 |
|
|
£000 |
£000 |
% |
% |
|
UK |
75,488 |
87,050 |
33 |
39 |
|
USA |
69,849 |
58,976 |
31 |
27 |
|
Europe |
46,996 |
39,362 |
21 |
17 |
|
Australia and New Zealand |
26,397 |
27,843 |
12 |
12 |
|
Rest of the world |
5,732 |
11,980 |
3 |
5 |
|
|
224,462 |
225,211 |
100 |
100 |
Turnover by product
|
|
2014 |
2013 |
2014 |
2013 |
|
|
£000 |
£000 |
% |
% |
|
Gift packaging and greetings |
157,503 |
154,947 |
70 |
69 |
|
Stationery and creative play products |
66,959 |
70,264 |
30 |
31 |
|
|
224,462 |
225,211 |
100 |
100 |
5 Expenses and auditor's remuneration
Included in profit are the following charges/(credits):
|
|
|
2014 |
2013 |
|
|
Notes |
£000 |
£000 |
|
Depreciation |
11 |
5,032 |
3,807 |
|
Loss/(profit) on sales of property, plant and equipment and intangible assets |
|
4 |
(252) |
|
Release of deferred grant income |
7 |
(570) |
(550) |
|
Amortisation of intangible assets |
12 |
576 |
494 |
|
Operating lease payment - minimum lease payment |
27 |
4,307 |
3,887 |
|
Sub-lease rental income |
7 |
(304) |
(191) |
|
Write down of inventories to net realisable value |
14 |
2,963 |
2,931 |
|
Reversal of previous write downs on inventory |
14 |
(226) |
(1,116) |
|
Loss on foreign exchange |
|
411 |
34 |
Auditor's remuneration:
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Amounts receivable by auditor and its associates in respect of: |
|
|
|
Audit of these financial statements |
42 |
44 |
|
Audit of financial statements of subsidiaries pursuant to legislation |
|
|
|
- Overseas subsidiaries |
138 |
135 |
|
- UK subsidiaries |
58 |
66 |
|
Other services relating to taxation |
- |
2 |
6 Staff numbers and costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
|
|
Number of employees |
|
|
|
2014 |
2013 |
|
Selling and administration |
401 |
397 |
|
Production and distribution |
1,400 |
1,411 |
|
|
1,801 |
1,808 |
The aggregate payroll costs of these persons were as follows
|
|
|
2014 |
2013 |
|
|
Note |
£000 |
£000 |
|
Wages and salaries |
|
37,165 |
36,512 |
|
Share‑based payments - Long term incentive plan |
25 |
82 |
- |
|
Share‑based payments - Share option scheme |
25 |
- |
22 |
|
Social security costs |
|
3,050 |
2,911 |
|
Other pension costs |
|
2,498 |
2,057 |
|
|
|
42,795 |
41,502 |
For information on Directors' remuneration please refer to the sections titled "Executive share options" and "Directors' remuneration" within the Directors' remuneration report.
7 Other operating income
|
|
|
2014 |
2013 |
|
|
Note |
£000 |
£000 |
|
Grant income received |
|
570 |
550 |
|
Sub-lease rentals credited to the income statement |
|
304 |
191 |
|
Other |
|
(137) |
62 |
|
|
|
737 |
803 |
|
Exceptional item |
10 |
147 |
- |
|
|
|
884 |
803 |
8 Finance expenses
|
|
|
2014 |
2013 |
|
|
Note |
£000 |
£000 |
|
Interest payable on bank loans and overdrafts |
|
2,463 |
2,676 |
|
Other similar charges |
|
536 |
719 |
|
Finance charges in respect of finance leases |
|
110 |
57 |
|
Unwinding of fair value discounts |
|
7 |
57 |
|
Interest payable under the effective interest method |
|
3,116 |
3,509 |
|
Derivative financial instruments at fair value through income statement |
|
61 |
(43) |
|
|
|
3,177 |
3,466 |
|
Exceptional item |
10 |
439 |
- |
|
|
|
3,616 |
3,466 |
9 Taxation
Recognised in the income statement
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Current tax expenses |
|
|
|
Current year - UK corporation tax |
173 |
- |
|
Current year - foreign tax |
1,372 |
516 |
|
Adjustments for prior years |
(324) |
482 |
|
|
1,221 |
998 |
|
Deferred tax expense |
|
|
|
Original and reversal of temporary differences |
390 |
887 |
|
Adjustments in respect of previous periods |
(152) |
(284) |
|
|
238 |
603 |
|
Total tax in income statement |
1,459 |
1,601 |
Reconciliation of effective tax rate
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Profit before tax |
5,187 |
5,677 |
|
Profit before tax multiplied by the standard rate of |
|
|
|
corporation tax rate of 23% in the UK (2013: 24%) |
1,193 |
1,362 |
|
Effects of: |
|
|
|
Expenses not deductible for tax purposes |
219 |
38 |
|
Unrecognised tax losses |
- |
684 |
|
Movement in unprovided deferred tax |
(295) |
(1,220) |
|
Deferred tax effect on tax rate changes |
213 |
35 |
|
Differences between UK and overseas tax rates |
200 |
396 |
|
Other items |
405 |
108 |
|
Adjustments in respect of prior years |
(476) |
198 |
|
Total tax in income statement |
1,459 |
1,601 |
10 Exceptional items
|
|
|
Other |
|
|
|
|
Cost of |
operating |
Finance |
|
|
|
sales |
income |
expenses |
Total |
|
2014 |
£000 |
£000 |
£000 |
£000 |
|
Restructuring of operational activities |
|
|
|
|
|
Efficiency programmes in the UK (a) |
2,006 |
(147) |
- |
1,859 |
|
Accelerated amortisation of bank fees (b) |
- |
- |
439 |
439 |
|
Total restructuring costs |
2,006 |
(147) |
439 |
2,298 |
|
Income tax credit |
|
|
|
(381) |
|
|
|
|
|
1,917 |
|
|
Cost of |
Selling |
Admin |
|
|
|
sales |
expenses |
expenses |
Total |
|
2013 |
£000 |
£000 |
£000 |
£000 |
|
Restructuring of operational activities |
|
|
|
|
|
- bad debt (c) |
- |
455 |
- |
455 |
|
- China factory disruptions (d) |
953 |
- |
- |
953 |
|
- management restructuring (e) |
- |
- |
195 |
195 |
|
Total restructuring costs |
953 |
455 |
195 |
1,603 |
|
Income tax credit |
|
|
|
(289) |
|
|
|
|
|
1,314 |
(a) Costs associated with major upgrade to manufacturing facilities in Wales and restructuring of UK operations. Other operating income relates to accelerated release of a grant.
(b) Accelerated amortisation of bank arrangement fees as a result of renegotiating banking facilities to fund the investment in Wales.
(c) Bad debt arising from major customer entering administration.
(d) Costs associated with disruption caused by a strike in the China factory.
(e) Redundancy costs arising from restructuring of management at a UK subsidiary.
Impact of exceptional items on cash flow
|
|
Included in |
Deferred |
Non‑cash |
|
|
|
cash flow |
cash |
items |
Total |
|
2014 |
£000 |
£000 |
£000 |
£000 |
|
Restructuring of operational activities |
|
|
|
|
|
Efficiency programmes in the UK |
165 |
552 |
1,142 |
1,859 |
|
Accelerated amortisations of bank fees |
36 |
- |
403 |
439 |
|
|
201 |
552 |
1,545 |
2,298 |
In 2013 the total exceptional items of £1,603,000 was included in that year's cash flow.
11 Property, plant and equipment
|
|
Land and buildings |
Plant and |
Fixtures and |
Motor |
|
|
|
|
Freehold |
Leasehold |
equipment |
fittings |
Vehicles |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
|
|
|
Balance at 1 April 2012 |
21,973 |
7,199 |
48,346 |
1,322 |
722 |
79,562 |
|
Additions |
47 |
220 |
1,288 |
257 |
72 |
1,884 |
|
Disposals |
(302) |
(66) |
(559) |
(437) |
(134) |
(1,498) |
|
Transfers between categories |
- |
- |
(103) |
103 |
- |
- |
|
Effect of movements in foreign exchange |
85 |
396 |
831 |
94 |
23 |
1,429 |
|
Balance at 1 April 2013 |
21,803 |
7,749 |
49,803 |
1,339 |
683 |
81,377 |
|
Additions |
1,839 |
107 |
6,011 |
270 |
97 |
8,324 |
|
Disposals |
- |
(24) |
(67) |
(563) |
(79) |
(733) |
|
Reclassification to computer software |
- |
- |
- |
(389) |
- |
(389) |
|
Effect of movements in foreign exchange |
(166) |
(690) |
(1,563) |
(210) |
(59) |
(2,688) |
|
Balance at 31 March 2014 |
23,476 |
7,142 |
54,184 |
447 |
642 |
85,891 |
|
Depreciation and impairment |
|
|
|
|
|
|
|
Balance as at 1 April 2012 |
(8,964) |
(1,824) |
(36,221) |
(546) |
(474) |
(48,029) |
|
Depreciation charge for the year |
(921) |
(415) |
(1,893) |
(499) |
(79) |
(3,807) |
|
Disposals |
149 |
66 |
546 |
435 |
133 |
1,329 |
|
Transfers between categories |
- |
- |
91 |
(91) |
- |
- |
|
Effect of movements in foreign exchange |
(34) |
(128) |
(617) |
(86) |
(12) |
(877) |
|
Balance at 1 April 2013 |
(9,770) |
(2,301) |
(38,094) |
(787) |
(432) |
(51,384) |
|
Depreciation charge for the year |
(1,307) |
(482) |
(2,762) |
(416) |
(65) |
(5,032) |
|
Disposals |
- |
8 |
65 |
548 |
25 |
646 |
|
Reclassification to computer software |
- |
- |
- |
359 |
- |
359 |
|
Effect of movements in foreign exchange |
46 |
225 |
1,090 |
177 |
31 |
1,569 |
|
Balance at 31 March 2014 |
(11,031) |
(2,550) |
(39,701) |
(119) |
(441) |
(53,842) |
|
Net book value |
|
|
|
|
|
|
|
Balance at 31 March 2014 |
12,445 |
4,592 |
14,483 |
328 |
201 |
32,049 |
|
At 31 March 2013 |
12,033 |
5,448 |
11,709 |
552 |
251 |
29,993 |
Depreciation is charged to either cost of sales, selling costs or administration costs within the income statement depending on the department to which the assets relate.
Leased plant and machinery
The net book value of property, plant and equipment included an amount of £4,894,000 (2013: £1,850,000) in respect of assets held under finance leases.
Security
All freehold properties are subject to a fixed charge.
12 Intangible assets
|
|
|
Computer |
Other |
|
|
|
Goodwill |
software |
intangibles |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
|
Cost |
|
|
|
|
|
Balance at 1 April 2012 |
40,295 |
2,963 |
495 |
43,753 |
|
Additions |
- |
242 |
- |
242 |
|
Disposals |
- |
(48) |
- |
(48) |
|
Effect of movements in foreign exchange |
405 |
68 |
3 |
476 |
|
Balance at 1 April 2013 |
40,700 |
3,225 |
498 |
44,423 |
|
Additions |
- |
356 |
- |
356 |
|
Reclassification from property, plant and equipment |
- |
389 |
- |
389 |
|
Disposals |
- |
(197) |
(467) |
(664) |
|
Effect of movements in foreign exchange |
(874) |
(132) |
(7) |
(1,013) |
|
Balance at 31 March 2014 |
39,826 |
3,641 |
24 |
43,491 |
|
Amortisation and impairment |
|
|
|
|
|
Balance at 1 April 2012 |
(8,861) |
(1,735) |
(241) |
(10,837) |
|
Amortisation for the year |
- |
(447) |
(47) |
(494) |
|
Disposals |
- |
48 |
- |
48 |
|
Effect of movements in foreign exchange |
(296) |
(48) |
(1) |
(345) |
|
Balance at 1 April 2013 |
(9,157) |
(2,182) |
(289) |
(11,628) |
|
Amortisation for the year |
- |
(536) |
(40) |
(576) |
|
Reclassification from property, plant and equipment |
- |
(359) |
- |
(359) |
|
Disposals |
- |
76 |
323 |
399 |
|
Effect of movements in foreign exchange |
529 |
92 |
2 |
623 |
|
Balance at 31 March 2014 |
(8,628) |
(2,909) |
(4) |
(11,541) |
|
Net book value |
|
|
|
|
|
Balance at 31 March 2014 |
31,198 |
732 |
20 |
31,950 |
|
At 31 March 2013 |
31,543 |
1,043 |
209 |
32,795 |
The aggregate carrying amounts of goodwill allocated to each geographical segment are as follows:
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
UK and Asia |
25,600 |
25,600 |
|
Europe |
4,461 |
4,541 |
|
Australia |
1,137 |
1,402 |
|
Total |
31,198 |
31,543 |
Impairment
The Group tests goodwill each half year for impairment, or more frequently if there are indications that goodwill might be impaired.
For the purposes of impairment testing, goodwill considered significant in comparison to the Group's total carrying amount of such assets has been allocated to the business unit, or group of business units, that are expected to benefit from the synergies of the combination, which represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is referred to below as a cash generating unit. During the last few years the businesses have begun to work more closely with each other, exploiting the synergies that arise. The recoverable amounts of cash generating units are determined from the higher of value in use and fair value less costs to sell.
The Group prepares cash flow forecasts for each cash generating unit derived from the most recent financial budgets for the following three years which are approved by the Board. The key assumptions in those budgets are sales, margins achievable and overhead costs, which are based on past experience and future expectations. The Group then extrapolates cash flows for the following seven years based on a conservative estimate of market growth of 2% (2013: 2%).
The cash-generating units used the following pre-tax discount rate which are derived from an estimate of the Group's future average weighted cost of capital adjusted to reflect the market assessment of the risks specific to the current estimated cash flows over the same period.
Pre-tax discount rates used were:
|
|
2014 |
2013 |
|
UK and Asia |
12.7% |
12.7% |
|
Europe |
14.3% |
15.3% |
|
Australia |
14.3% |
14.3% |
All of the cash-generating units' values in use were determined to be higher than fair value less costs to sell, thus this was used as the recoverable amount. In all businesses the carrying value of the goodwill was supported by the recoverable amount and there are currently no reasonably foreseeable changes to assumptions that would give rise to an impairment of the carrying value.
The Directors do not believe a reasonably possible change to the assumptions would give rise to an impairment.
The Directors have considered a 3% movement in the discount rate and a flat budget growth rate assumption in their assessment.
13 Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
|
|
Assets |
Liabilities |
Net |
|||
|
|
2014 |
2013 |
2014 |
2013 |
2014 |
2013 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Property, plant and equipment |
1,317 |
1,204 |
(1,304) |
(884) |
13 |
320 |
|
Capital gains deferred |
- |
- |
(294) |
(472) |
(294) |
(472) |
|
Tax loss carried forward |
2,488 |
3,278 |
- |
(1) |
2,488 |
3,277 |
|
Other temporary differences |
1,458 |
1,125 |
- |
- |
1,458 |
1,125 |
|
Net tax assets/(liabilities) |
5,263 |
5,607 |
(1,598) |
(1,357) |
3,665 |
4,250 |
The deferred tax asset in respect of tax losses carried forward at 31 March 2014 of £2,219,000 (2013: £2,819,000) is comprised of UK tax losses of £530,000 (2013: £29,000) and US losses of £1,689,000 (2013: £2,790,000). US tax losses carried forward will become irrecoverable in March 2027. UK tax losses may be carried forward indefinitely. The deferred tax assets have been recognised where the Board considers there is sufficient evidence that taxable profits will be available against which the tax losses can be utilised. The Board expects that the tax losses will be recoverable against future profits but given the level of tax losses brought forward, recoverability has been assessed on the basis of expected profits currently forecast. Deferred tax assets in respect of taxable losses that are expected to be recovered outside this forecast period have not been recognised. This includes unrecognised deferred tax assets in respect of brought forward UK losses of £310,000 (2013: £858,000) and £2,194,000 (2013: £2,153,000) in respect of brought forward US tax losses.
No deferred tax is recognised on unremitted earnings of overseas subsidiaries. Overseas reserves can now be repatriated to the UK with no tax cost. If all overseas earnings were repatriated with immediate effect, no tax charge (2013: £nil) would be payable.
The Finance Act 2013, which provides for reductions in the main rate of corporation tax from 23% to 21% effective from 1 April 2014 and to 20% effective from 1 April 2015, was substantively enacted on 2 July 2013. These rate reductions have been reflected in the calculation of deferred tax at the balance sheet date.
There are no deferred tax balances with respect to cash flow hedges.
Movement in deferred tax during the year
|
|
1 April |
Recognised |
Recognised |
31 March |
|
|
2013 |
in income |
in equity |
2014 |
|
|
£000 |
£000 |
£000 |
£000 |
|
Property, plant and equipment |
320 |
(635) |
328 |
13 |
|
Capital gains deferred |
(472) |
322 |
(144) |
(294) |
|
Tax loss carried forward |
3,277 |
(504) |
(285) |
2,488 |
|
Other temporary differences |
1,125 |
579 |
(246) |
1,458 |
|
Net tax assets |
4,250 |
(238) |
(347) |
3,665 |
Movement in deferred tax during the prior year
|
|
1 April |
Recognised |
Recognised |
31 March |
|
|
2012 |
in income |
in equity |
2013 |
|
|
£000 |
£000 |
£000 |
£000 |
|
Property, plant and equipment |
(1,466) |
1,778 |
8 |
320 |
|
Capital gains deferred |
(494) |
22 |
- |
(472) |
|
Tax loss carried forward |
3,817 |
(671) |
131 |
3,277 |
|
Other temporary differences |
2,783 |
(1,732) |
74 |
1,125 |
|
Net tax assets |
4,640 |
(603) |
213 |
4,250 |
14 Inventory
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Raw materials and consumables |
4,531 |
5,488 |
|
Work in progress |
9,435 |
9,100 |
|
Finished goods |
34,494 |
35,526 |
|
|
48,460 |
50,114 |
Of the £48,460,000 (2013: £50,114,000) stock value £43,870,000 (2013: £44,074,000) is held at cost and £4,590,000 (2013: £6,040,000) is held at net realisable value. The write down of inventories to net realisable value amounted to £2,963,000 (2013: £2,931,000). The reversal of previous write downs amounted to £226,000 (2013: £1,116,000). The reversal is due to the inventory being either used or sold.
Materials, consumables, changes in finished goods and work in progress recognised as a cost of sale amounted to £158,590,000 (2013: £159,525,000).
Part of the Group's funding is via asset backed loans from our bankers. These loans are secured on part of the inventory and trade receivables of the UK, European and American businesses. The amount of the inventory that is used to secure an asset backed loan is £42,298,000 (2013: £31,544,000). In addition bank loans to Hoomark and International Greetings USA are secured on a freehold property and contents, including inventory, therein.
Refer to note 17 for outstanding balance on asset backed loans and details of the secured bank loans.
15 Trade and other receivables
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Trade receivables |
16,078 |
18,799 |
|
Prepayments and accrued income |
1,770 |
1,486 |
|
Other receivables |
1,699 |
2,012 |
|
VAT receivable |
143 |
988 |
|
|
19,690 |
23,285 |
Part of the Group's funding is via asset backed loans from our bankers. These loans are secured on part of the inventory and trade receivables of the UK, European and American businesses. The amount of the trade receivables that is used to secure the asset backed loans is £12,469,000 (2013: £9,684,000).
Refer to note 17 for outstanding balance on asset backed loans.
There are no trade receivables in the current year (2013: £nil) expected to be recovered in more than twelve months.
The Group's exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in note 26.
16 Cash and cash equivalents/bank overdrafts
|
|
|
2014 |
2013 |
|
|
Note |
£000 |
£000 |
|
Cash and cash equivalents |
|
8,111 |
2,301 |
|
Bank overdrafts |
|
(2,529) |
(336) |
|
Cash and cash equivalents per cash flow statement |
|
5,582 |
1,965 |
Net debt
|
|
|
2014 |
2013 |
|
|
|
£000 |
£000 |
|
Cash and cash equivalents |
|
8,111 |
2,301 |
|
Bank loans and overdrafts |
17 |
(40,622) |
(43,215) |
|
Loan arrangement fees |
|
253 |
553 |
|
Finance leases |
|
(4,689) |
(1,777) |
|
Net debt as used in the financial review |
|
(36,947) |
(42,138) |
The Group's exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 26.
The bank 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.
17 Loans and borrowings
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 26.
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Non-current liabilities |
|
|
|
Secured bank loans |
28,222 |
29,775 |
|
Loan arrangement fees |
(77) |
(296) |
|
|
28,145 |
29,479 |
|
Current liabilities |
|
|
|
Asset backed loan |
5,336 |
7,683 |
|
Revolving credit facilities |
- |
658 |
|
Current portion of secured bank loans |
4,535 |
4,763 |
|
Bank loans and borrowings |
9,871 |
13,104 |
|
Loan arrangement fees |
(176) |
(257) |
|
|
9,695 |
12,847 |
The asset backed loans are secured on the inventory and receivables of the larger business units within the UK, USA and European business segments.
The revolving credit facilities are secured on the assets of the Group, in the same way as the bank overdraft above. The interest rate is 3.2% over LIBOR. The facilities are drawn for periods from one day up to six months.
Following the negotiations of new banking facilities in April 2013, the Group accrued arrangement fees which are being spread over the life of the facility.
Terms and debt repayment schedule
|
|
|
2014 |
2013 |
|
Repayment analysis of bank loans and overdrafts |
Note |
£000 |
£000 |
|
Due within one year: |
|
|
|
|
Bank loans and borrowings (see below) |
|
9,871 |
13,104 |
|
Bank overdrafts |
16 |
2,529 |
336 |
|
Due between one and two years: |
|
|
|
|
Secured bank loans (see below) |
|
6,071 |
4,725 |
|
Due between two and five years: |
|
|
|
|
Secured bank loans (see below) |
|
18,525 |
20,984 |
|
Due after more than five years: |
|
|
|
|
Secured bank loans (see below) |
|
3,626 |
4,066 |
|
|
|
40,622 |
43,215 |
During the year the facility with the Group's major bank was amended to include a new £5,000,000 facility to fund the new investment in Wales.
Secured bank loans
Loan 1
The principal of £303,000 (2013: £487,000) is repayable monthly on a reducing balance basis over a 15 year period, ending in March 2016. The loan is secured over the freehold land and buildings and the contents therein of International Greetings USA, Inc. and is subject to a variable rate of interest linked to the US Federal Funds Rate (US FFR). The currency of denomination of the loan is US Dollars.
Loan 2
The principal of £275,000 (2013: £470,000) is repayable monthly on a reducing balance basis over a nine year period ending in March 2016. The loan is secured over the freehold land and buildings and the content therein of International Greetings USA, Inc. and is subject to a variable rate of interest linked to the US FFR. The currency of denomination of the loan is US Dollars.
Loan 3
The principal of £5,486,000 (2013: £5,956,000) is repayable quarterly over a 20 year period ending in July 2028. The loan is secured over the freehold land and buildings and the content therein of Hoomark BV and is subject to a variable rate of interest linked to EURIBOR, that has been swapped to a fixed rate for a notional amount of £5,785,000 (2013: £5,882,000) over a period of five years ending in January 2017. The currency of denomination of the loan is Euros.
Loan 4
The principal of £Nil (2013: £218,000) was repayable monthly over a five year period ending November 2013. The loan was secured over the plant and machinery of International Greetings UK Ltd and was subject to a variable rate interest linked to the UK base rate. The currency of denomination of the loan was Sterling.
Loan 5
The principal of £14,659,000 (2013: £15,208,000) is repayable over a five year period with a bullet repayment in May 2016. £9,100,000 is denominated in Sterling and £5,559,000 is denominated in US Dollars. They are subject to a variable interest rate linked to LIBOR except for the element that has been swapped. At 31 March 2014 the Group had an interest rate cap on a notional amount of £8 million, and a notional amount of $8 million, whereby interest payable has been capped at 1.5% on both notional amounts. The terms of the hedge have been negotiated to match the terms of the commitments.
Loan 6
The principal of £8,035,000 (2013: £12,199,000) is repayable and amortised over a four year period to May 2015. £4,800,000 is denominated in Sterling and £3,235,000 is denominated in US Dollars. They are subject to a variable interest rate linked to LIBOR except for the elements that have been swapped. At 31 March 2014, the Group had an interest rate swap in place with a notional amount of £2.9 million whereby it receives a floating rate of interest based on LIBOR and pays a fixed rate of interest at 0.92% on the notional amount. The terms of the hedge have been negotiated to match the terms of the commitments. At 31 March 2014, the Group had an interest rate swap in place with a notional amount of $5.4 million whereby it receives a floating rate of interest based on LIBOR and pays a fixed rate of interest at 0.77% on the notional amount. The terms of the hedge have been negotiated to match the terms of commitment.
Loan 7
The principal of £4,000,000 (2013: £Nil) is repayable over a three year period to May 2016. It is subject to a variable interest rate linked to LIBOR. The currency of denomination of the loan is Sterling.
18 Deferred income
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Included within non‑current liabilities |
|
|
|
Deferred grant income |
1,592 |
1,329 |
|
Included within current liabilities |
|
|
|
Deferred grant income |
620 |
550 |
|
Other deferred income |
582 |
- |
|
|
1,202 |
550 |
The deferred grant income is in respect of government grants relating to the development of the site in Wales.
During the year £1,049,000 new grant was received in relation to the new investment in Wales. This is being amortised in line with depreciation on the new investment. All conditions on the old grant have been met and there is no requirement to repay. It is being amortised in line with the depreciation on the site development.
19 Provisions
|
|
|
Property |
|
|
|
£000 |
|
Balance at 1 April 2013 |
|
969 |
|
New provisions made during the year |
|
120 |
|
Unwinding of fair value discounts |
|
7 |
|
Provisions utilised during the year |
|
(71) |
|
Balance at 31 March 2014 |
|
1,025 |
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Non‑current |
860 |
862 |
|
Current |
165 |
107 |
|
|
1,025 |
969 |
The provision represents the estimated reinstatement cost of two of the Group's leasehold properties under fully repairing leases and provision for an onerous lease for one of those properties. A professional valuation was performed during 2012 for one of the leasehold properties and the provision was reassessed and is stated after discounting. £664,000 of the non-current balance relates to a lease expiring in 2025, the balance relates to items between two and five years.
20 Other financial liabilities
|
|
|
|
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Included within non-current liabilities |
|
|
|
Finance lease |
4,087 |
1,540 |
|
Other creditors and accruals |
115 |
263 |
|
|
4,202 |
1,803 |
|
Included within current liabilities |
|
|
|
Finance lease |
602 |
237 |
|
Other creditors and accruals |
9,210 |
8,212 |
|
Interest rate swaps and forward foreign currency contracts carried at fair value through the income statement |
115 |
54 |
|
Interest rate swaps and forward foreign exchange contracts carried at fair value through the hedging reserve |
577 |
451 |
|
|
10,504 |
8,954 |
Finance lease liabilities
Finance lease liabilities are payable as follows:
|
|
Minimum |
|
|
Minimum |
|
|
|
|
lease |
|
|
lease |
|
|
|
|
payments |
Interest |
Principal |
payments |
Interest |
Principal |
|
|
2014 |
2014 |
2014 |
2013 |
2013 |
2013 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Less than one year |
795 |
(193) |
602 |
314 |
(77) |
237 |
|
Between one and five years |
3,538 |
(400) |
3,138 |
1,717 |
(177) |
1,540 |
|
More than five years |
968 |
(19) |
949 |
- |
- |
- |
|
|
5,301 |
(612) |
4,689 |
2,031 |
(254) |
1,777 |
During the year two new finance leases were entered into for £3,239,000 to fund new printing machines in the Group's facilities in Wales. The interest rate on these leases is 3.88%.
21 Trade and other payables
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Trade payables |
25,031 |
28,291 |
|
Other payables including income taxes and social security |
787 |
704 |
|
|
25,818 |
28,995 |
22 Share capital
Authorised share capital at 31 March 2014 and 2013 was £6,047,443 divided into 120,948,860 ordinary shares of 5p each.
|
|
Ordinary shares |
|
|
In thousands of shares |
2014 |
2013 |
|
In issue at 1 April |
56,768 |
55,007 |
|
Options exercised during the year |
1,158 |
1,761 |
|
In issue at 31 March - fully paid |
57,926 |
56,768 |
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Allotted, called up and fully paid |
|
|
|
Ordinary shares of £0.05 each |
2,896 |
2,838 |
Share options exercised during the year amounted to 1,158,000 (2013: 1,761,000) which generated cash proceeds of £176,000 (2013: £266,000).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
23 Earnings per share
|
|
2014 |
2013 |
||
|
|
Diluted |
Basic |
Diluted |
Basic |
|
Adjusted earnings per share excluding |
|
|
|
|
|
exceptional items and LTIP charges |
8.4p |
8.6p |
7.8p |
7.8p |
|
Loss per share on LTIP charges |
(0.1p) |
(0.1p) |
- |
- |
|
Adjusted earnings per share excluding |
|
|
|
|
|
exceptional items |
8.3p |
8.5p |
7.8p |
8.1p |
|
Loss per share on exceptional items |
(3.2p) |
(3.3p) |
(2.0p) |
(2.1p) |
|
Earnings per share |
5.1p |
5.2p |
5.8p |
6.0p |
The basic earnings per share is based on the profit attributable to equity holders of the Company of £3,010,000 (2013: £3,401,000) and the weighted average number of ordinary shares in issue of 57,519,000 (2013: 56,245,000) calculated as follows:
|
Weighted average number of shares in thousands of shares |
2014 |
2013 |
|
Issued ordinary shares at 1 April |
56,768 |
55,007 |
|
Shares issued in respect of exercising of share options |
751 |
1,238 |
|
Weighted average number of shares at 31 March |
57,519 |
56,245 |
Adjusted basic earnings per share excludes exceptional items charged of £2,298,000 (2013: £1,376,000) and the tax relief attributable to those items of £381,000 (2013: £221,000), to give adjusted profit of £4,927,000 (2013: £4,556,000).
Diluted earnings per share
The average number of share options outstanding in the year is 2,281,351 (2013: 3,664,232), at an average exercise price of 19.6p (2013: 19.6p). The diluted earnings per share is calculated assuming all these options were exercised. At 31 March the diluted number of shares was 59,098,460 (2013: 58,794,617).
24 Dividends
No dividends were paid in the year (2013: nil). The Directors do not propose a final dividend for 2014.
25 Share-based payments
Options
Options to subscribe for ordinary shares have been granted, pursuant to the Company's approved and unapproved Employee Share Option Schemes, which are exercisable at dates ranging up to January 2021. At 31 March 2014, outstanding options were as follows:
|
|
Number of |
Exercise |
Exercise |
|
|
ordinary shares |
price (p) |
dates |
|
Approved: |
1,667,140 |
14 |
December 2011 - December 2018 |
|
|
38,000 |
31.25 |
July 2012 - July 2019 |
|
|
12,000 |
50 |
September 2012 - September 2019 |
|
|
48,387 |
62 |
January 2014 - January 2021 |
|
Unapproved: |
107,145 |
14 |
December 2011 - December 2018 |
|
|
1,613 |
62 |
January 2014 - January 2021 |
|
|
1,874,285 |
|
|
All share-based payments are equity-settled.
There were no performance or profitability conditions attached to the approved options (other than continued employment), except for 48,387 shares issued at 62p, which relate to specific performance targets related to sales of new product areas in the US. Conditions related to profitability for the two years to March 2011 are attached to the unapproved options awarded to Executive Directors and these conditions have now been fully met.
For the share options outstanding at 31 March 2014, the weighted average remaining contract life was 4.7 years (2013: 5.8 years).
The numbers and weighted average exercise prices of share options are as follows:
|
|
2014 |
|
2013 |
|
|
|
Weighted |
|
Weighted |
|
|
|
average |
Number of |
average |
Number of |
|
|
exercise price |
options |
Exercise price |
options |
|
Outstanding at the beginning of the period |
17p |
3,141,956 |
18p |
5,002,556 |
|
Approved options granted during the period |
0p |
- |
0p |
- |
|
Unapproved options granted in the period |
0p |
- |
0p |
- |
|
Lapsed during the year |
58p |
(110,000) |
0p |
(100,000) |
|
Exercised during the period |
15p |
(1,157,671) |
15p |
(1,760,600) |
|
Outstanding at the end of the period |
16p |
1,874,285 |
17p |
3,141,956 |
|
Exercisable at the end of the period |
16p |
1,874,285 |
14p |
2,991,956 |
The weighted average share price at the date of exercise of share options exercised during the period was 47.4p (2013: 54.9p).
No share options were granted during the year or the previous year.
Long Term incentive Plan (LTIP)
During the year the Group introduced a new Long Term Incentive Plan.
The Company will issue up to 1,400,000 ordinary shares under the LTIP to Anthony Lawrinson, a Director of the Company. The ordinary shares are being issued as part of Anthony Lawrinson's remuneration package agreed at the time of his appointment to the Board in October 2011. Vesting is conditional upon and proportionate to the cumulative average growth (CAGR) in fully diluted earnings per share before exceptional items over a defined period from 1 April 2012 to 31 March 2015 with CAGR of 20% required for the whole amount to vest. The cost to Anthony Lawrinson of the ordinary shares to be issued under the LTIP if the performance criterion is met, will be nil. Anthony Lawrinson has no other options over ordinary shares.
The fair value of the LTIP granted during the year was based on the share price on the date the scheme was approved and the expected number of shares to vest.
The total expenses recognised for the period arising from equity-settled share-based payments are as follows:
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
LTIP |
82 |
- |
|
Share option scheme |
- |
22 |
|
|
82 |
22 |
26 Financial instruments
a) Fair values of financial instruments
The carrying values for each class of financial assets and financial liabilities in the balance sheet, which are given below, are not considered to be materially different to their fair values.
As at 31 March 2014, the Group had derivative contracts, which were measured at Level 2 fair value subsequent to initial recognition, to the value of a liability of £692,000 (2013: liability of £505,000).
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. Doubtful receivable provisions are established based upon the difference between the receivable value and the estimated net collectible amount.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.
Interest-bearing borrowings
Fair value, which after initial recognition is determined for disclosure purposes only, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date. For finance leases the market rate of interest is determined by reference to similar lease agreements.
Derivative financial instruments
The fair value of forward exchange contracts is based on their market price.
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.
|
|
|
2014 |
2013 |
||
|
|
|
Carrying |
Fair |
Carrying |
Fair |
|
|
|
amount |
value |
amount |
value |
|
|
Notes |
£000 |
£000 |
£000 |
£000 |
|
Cash and cash equivalents |
16 |
8,111 |
8,111 |
2,301 |
2,301 |
|
Trade receivables |
15 |
16,078 |
16,078 |
18,799 |
18,799 |
|
Other receivables |
15 |
1,699 |
1,699 |
2,012 |
2,012 |
|
Total financial assets |
|
25,888 |
25,888 |
23,112 |
23,112 |
|
Bank loans and overdrafts |
16 |
40,622 |
40,622 |
43,215 |
43,215 |
|
Finance lease liability |
20 |
4,689 |
4,689 |
1,777 |
1,777 |
|
Other financial liabilities |
20 |
9,325 |
9,325 |
8,475 |
8,475 |
|
Trade payables |
21 |
25,031 |
25,031 |
28,291 |
28,291 |
|
Other payables |
21 |
787 |
787 |
704 |
704 |
|
Total financial liabilities measured at amortised cost |
|
80,454 |
80,454 |
82,462 |
82,462 |
|
Financial liabilities at fair value through profit or loss |
20 |
115 |
115 |
54 |
54 |
|
Financial liabilities at fair value through hedging reserve |
20 |
577 |
577 |
451 |
451 |
|
Total financial liabilities at fair value |
|
692 |
692 |
505 |
505 |
|
Total financial liabilities |
|
81,146 |
81,146 |
82,967 |
82,967 |
|
Net financial liabilities |
|
55,258 |
55,258 |
59,855 |
59,855 |
b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from customers and investment securities.
The Group's exposure to credit risk is managed by dealing only with banks and financial institutions with strong credit ratings. The Group's financial credit risk is primarily attributable to its trade receivables.
The Group has no significant concentration of credit risk exposure as revenues are split across a large number of customers in different geographical areas. The main customers of the Group are large and mid-sized retailers, other manufacturers and wholesalers of greetings products, service merchandisers and trading companies. The Group has established procedures to minimise the risk of default of trade receivables including detailed credit checks undertaken before new customers are accepted and rigorous credit control procedures after sale. These processes have proved effective in minimising the level of impairments required.
The amounts presented in the balance sheet are net of allowances for doubtful receivables estimated by the Group's management, based on prior experience and their assessment of the current economic environment.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was £25,888,000 (2013: £23,122,000) being the total of the carrying amount of financial assets, excluding equity investments, shown in the table above.
The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was:
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
UK and Asia |
6,850 |
7,357 |
|
USA |
4,237 |
4,796 |
|
Europe |
2,306 |
2,709 |
|
Australia |
2,685 |
3,937 |
|
|
16,078 |
18,799 |
Credit quality of financial assets and impairment losses
The ageing of trade receivables at the balance sheet date was:
|
|
2014 |
|
2013 |
||
|
|
Gross |
Impairment |
|
Gross |
Impairment |
|
|
£000 |
£000 |
|
£000 |
£000 |
|
Not past due |
11,408 |
(5) |
|
12,616 |
(43) |
|
Past due 0-90 days |
4,025 |
(46) |
|
5,790 |
(94) |
|
More than 90 days |
926 |
(230) |
|
857 |
(327) |
|
|
16,359 |
(281) |
|
19,263 |
(464) |
There were no unimpaired balances outstanding at 31 March 2014 (2013: £nil) where the Group had renegotiated the terms of the trade receivable.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Balance at 1 April |
464 |
565 |
|
Charge for the year |
310 |
964 |
|
Unused amounts reversed |
(211) |
(262) |
|
Amounts written off |
(270) |
(813) |
|
Effects of movement in foreign exchange |
(12) |
10 |
|
Balance at 31 March |
281 |
464 |
The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly.
c) Liquidity risk
Financial risk management
The Group's policy with regard to liquidity ensures adequate access to funds by maintaining an appropriate mix of short-term and longer-term facilities, which are reviewed on a regular basis. The maturity profile and details of debt outstanding at 31 March 2014 is set out in note 17.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
|
|
|
Nominal |
|
|
One year |
One to |
Two to |
More than |
|
|
|
interest rate |
Carrying amount |
Contractual Cash flows |
or less |
two years |
five years |
five years |
|
31 March 2014 |
Notes |
% |
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
Non-derivative financial liabilities |
|
|
|
|
|
|
|
|
|
Secured bank loans |
|
|
|
|
|
|
|
|
|
- Sterling |
|
3.4 - 3.8 |
17,900 |
(18,833) |
(2,359) |
(3,898) |
(12,576) |
- |
|
Secured bank loans |
|
|
|
|
|
|
|
|
|
- US Dollar |
|
3.1 - 3.6 |
9,372 |
(9,936) |
(1,908) |
(2,053) |
(5,975) |
- |
|
Secured bank loans |
|
|
|
|
|
|
|
|
|
- Euros |
|
4.3 |
5,485 |
(7,023) |
(574) |
(574) |
(1,649) |
(4,226) |
|
Total secured bank loans |
17 |
|
32,757 |
(35,792) |
(4,841) |
(6,525) |
(20,200) |
(4,226) |
|
Finance leases |
20 |
|
|
|
|
|
|
|
|
- Sterling leases |
|
3.9 |
3,176 |
(3,616) |
(531) |
(529) |
(1,588) |
(968) |
|
- Euro leases |
|
4.8 |
1,505 |
(1,679) |
(258) |
(258) |
(1,163) |
- |
|
- other leases |
|
6.0 |
8 |
(8) |
(8) |
- |
- |
- |
|
Other financial liabilities |
|
|
9,325 |
(9,325) |
(9,210) |
(115) |
- |
- |
|
Trade payables |
21 |
|
25,031 |
(25,031) |
(25,031) |
- |
- |
- |
|
Other payables |
21 |
|
787 |
(787) |
(787) |
- |
- |
- |
|
Asset backed loans |
|
1.7 - 3.5 |
5,336 |
(5,336) |
(5,336) |
- |
- |
- |
|
Revolving credit facilities |
|
3.2 - 3.7 |
- |
- |
- |
- |
- |
- |
|
Bank overdraft |
|
1.5 - 5.1 |
2,529 |
(2,529) |
(2,529) |
- |
- |
- |
|
Derivative financial liabilities |
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through the income statement |
|
|
|
|
|
|
|
|
|
- Interest rate swaps (a) |
|
|
49 |
- |
- |
- |
- |
- |
|
Financial liabilities carried at |
|
|
|
|
|
|
|
|
|
fair value through the hedging reserve - Interest rate swaps (a) |
|
|
399 |
- |
- |
- |
- |
- |
|
Forward foreign exchange contracts carried at fair value through the income statement |
|
|
|
|
|
|
|
|
|
|
|
66 |
(150) |
(150) |
- |
- |
- |
|
|
Forward foreign exchange contracts carried at fair value through the hedging reserve |
|
|
|
|
|
|
|
|
|
|
|
178 |
(21,374) |
(21,374) |
- |
- |
- |
|
|
|
|
|
81,146 |
(105,627) |
(70,055) |
(7,427) |
(22,951) |
(5,194) |
(a) The interest rate swaps with fair values of £49,000 and £399,000 mature over a period ending January 2017.
|
|
|
Nominal |
|
|
|
One to |
|
|
|
|
|
interest rate |
Carrying amount |
Contractual Cash flows |
One year or less |
two years |
Two to five years |
More than five years |
|
31 March 2013 |
Notes |
% |
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
Non-derivative financial liabilities |
|
|
|
|
|
|
|
|
|
Secured bank loans |
|
|
|
|
|
|
|
|
|
- Sterling |
|
3.5 - 3.9 |
16,318 |
(17,709) |
(2,448) |
(2,396) |
(12,865) |
- |
|
Secured bank loans |
|
|
|
|
|
|
|
|
|
- US Dollar |
|
3.2 - 3.6 |
12,264 |
(13,203) |
(2,001) |
(2,133) |
(9,069) |
- |
|
Secured bank loans - Euros |
|
3.8 |
5,956 |
(7,739) |
(597) |
(583) |
(1,662) |
(4,897) |
|
Total secured bank loans |
17 |
|
34,538 |
(38,651) |
(5,046) |
(5,112) |
(23,596) |
(4,897) |
|
Finance leases |
20 |
|
|
|
|
|
|
|
|
- Sterling leases |
|
5.5 |
34 |
(35) |
(33) |
(2) |
- |
- |
|
- Euro leases |
|
4.8 |
1,719 |
(1,969) |
(262) |
(262) |
(1,445) |
- |
|
- other leases |
|
6.0 |
24 |
(27) |
(19) |
(7) |
(1) |
- |
|
Other financial liabilities |
|
8,475 |
(8,475) |
(8,212) |
(263) |
- |
- |
|
|
Trade payables |
21 |
|
28,291 |
(28,291) |
(28,291) |
- |
- |
- |
|
Other payables |
21 |
|
704 |
(704) |
(704) |
- |
- |
- |
|
Asset backed loans |
|
2.3 - 3.5 |
7,683 |
(7,683) |
(7,683) |
- |
- |
- |
|
Revolving credit facilities |
|
3.5 - 3.7 |
658 |
(658) |
(658) |
- |
- |
- |
|
Bank overdraft |
|
1.5 - 4.5 |
336 |
(336) |
(336) |
- |
- |
- |
|
Derivative financial liabilities |
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through the income statement |
|
|
|
|
|
|
|
|
|
- interest rate swaps (b) |
|
|
54 |
- |
- |
- |
- |
- |
|
Financial liabilities carried at fair value through the hedging |
|
|
|
|
|
|
|
|
|
reserve - interest rate swaps (b) |
|
|
546 |
- |
- |
- |
- |
- |
|
Forward foreign exchange |
|
|
|
|
|
|
|
|
|
contracts carried at fair value |
|
|
|
|
|
|
|
|
|
through the hedging reserve |
|
|
(95) |
(12,925) |
(12,925) |
- |
- |
- |
|
|
|
|
82,967 |
(99,754) |
(64,169) |
(5,646) |
(25,042) |
(4,897) |
(b) The interest rate swaps with fair values of £54,000 and £546,000 mature over a period ending January 2017.
The following shows the facilities for bank loans, overdrafts, asset backed loans and revolving credit facilities:
|
|
31 March 2014 |
31 March 2013 |
||||||
|
|
|
Facility used |
|
|
|
Facility used |
|
|
|
|
Carrying |
contractual |
Facility |
Total |
Carrying |
contractual |
Facility |
Total |
|
|
amount |
cash flows |
unused |
facility |
amount |
cash flows |
unused |
facility |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Secured bank loans (see above) |
32,757 |
(35,792) |
- |
(35,792) |
34,538 |
(38,651) |
- |
(38,651) |
|
Asset backed loans |
5,336 |
(5,336) |
(9,283) |
(14,619) |
7,683 |
(7,683) |
(4,900) |
(12,583) |
|
Revolving credit facilities |
- |
- |
(500) |
(500) |
658 |
(658) |
(2,242) |
(2,900) |
|
Bank overdraft |
2,529 |
(2,529) |
(4,537) |
(7,066) |
336 |
(336) |
(4,137) |
(4,473) |
|
|
40,622 |
(43,657) |
(14,320) |
(57,977) |
43,215 |
(47,328) |
(11,279) |
(58,607) |
The asset backed loan facilities are dependent upon the levels of the relevant inventory and receivables.
The major bank facilities vary in the year depending on forecast debt requirements. The maximum limit across all facilities with the major bank was £74 million (2013: £75 million). At 31 March 2014 the facility amounted to £42.9 million (2013: £35.8 million).
Additional facilities were available at other banks of £17.0 million (2013: £18.7 million), including asset backed loans according to the level of receivables and inventory.
The short term overdraft, RCF and the asset backed loan elements of those facilities was renewed on improved terms in May 2014, which will slightly lower the blended rate in the forthcoming year.
The asset backed loan facilities are to be renewed on:
· UK - May 2016;
· USA - August 2017; and
· Europe - July 2017.
d) Cash flow hedges
The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected to occur:
|
|
Carrying |
Contractual |
One year |
|
|
amount |
cash flows |
or less |
|
31 March 2014 |
£000 |
£000 |
£000 |
|
Interest rate swaps: |
|
|
|
|
Liabilities |
399 |
- |
- |
|
Forward exchange contracts: |
|
|
|
|
Liabilities |
178 |
(21,374) |
(21,374) |
|
|
Carrying |
Contractual |
One year |
|
|
amount |
cash flows |
or less |
|
31 March 2013 |
£000 |
£000 |
£000 |
|
Interest rate swaps: |
|
|
|
|
Liabilities |
546 |
- |
- |
|
Forward exchange contracts: |
|
|
|
|
Liabilities |
(95) |
(12,925) |
(12,925) |
At 31 March 2014, the Group had an interest rate swap in place with a notional amount of £2.9 million, whereby it receives a floating rate of interest based on LIBOR and pays a fixed rate of interest at 0.92% on the notional amount. The swap is to hedge the exposure to changes in the interest rate. The terms of the hedge have been negotiated to match the terms and commitments. The fair value of the swap at the balance sheet date was a liability of £4,000.
At 31 March 2014, the Group had an interest rate swap in place with a notional amount of $5.4 million (£3.2 million), whereby it receives a floating rate of interest based on LIBOR and pays a fixed rate of interest at 0.77% on the notional amount. The swap is to hedge the exposure to changes in the interest rate. The terms of the hedge have been negotiated to match the terms of the commitments. The fair value of the swap at the balance sheet date was a liability of £12,000.
At 31 March 2014 the Group had an interest rate swap in place with a notional amount of €7 million (£5.8 million), whereby it receives a floating rate of interest based on EURIBOR and pays a fixed rate of interest at 2.29% on the notional amount. This swap is to hedge the exposure to changes in the interest rate. The terms of the hedge have been negotiated to match the terms of the commitments. The fair value of the swap at the balance sheet date was a liability of £278,000.
At 31 March 2014, the Group had an interest rate cap on a notional amount of £8 million, and a notional amount of $8 million (£4.8 million), whereby interest payable has been capped at 1.5% on both notional amounts. The terms of the hedge have been negotiated to match the terms of the commitments. The fair value of the caps at the balance sheet date were liabilities of £105,000.
The Group has forward currency hedging contracts outstanding at 31 March 2014 designated as hedges of expected future purchases in US Dollars and Chinese Renminbi for which the Group has firm commitments. The forward currency contracts are being used to hedge the foreign currency risk of the firm commitments.
The terms of the forward currency hedging contracts have been negotiated to match the terms of the commitments.
The cash flow hedges of the expected future purchases in 2014/15 were assessed to be highly effective and as at 31 March 2014 a net unrealised loss of £178,000 with related deferred tax credit of £nil was included in other comprehensive income in respect of these hedging contracts.
e) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group's income or the value of its holdings of financial instruments.
The Group hedges a proportion, as deemed appropriate by management, of its UK subsidiaries' sales and purchases of inventory denominated in foreign currency by entering into foreign exchange contracts. Such foreign exchange contracts typically have maturities of less than one year.
The Group rarely hedges profit translation exposure, since such hedges provide only a temporary deferral of the effects of movement in foreign exchange rates. Similarly, the Group does not hedge its long-term investments in overseas assets.
However, the Group holds loans that are denominated in the functional currency of certain overseas entities.
The Group's exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments except derivatives when it is based on notional amounts.
|
|
|
Sterling |
Euro |
US Dollar |
Other |
Total |
|
31 March 2014 |
Notes |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cash and cash equivalents |
16 |
1,010 |
5,006 |
674 |
1,421 |
8,111 |
|
Trade receivables |
15 |
4,939 |
2,284 |
5,896 |
2,959 |
16,078 |
|
Other receivables |
|
1,296 |
51 |
21 |
70 |
1,438 |
|
Secured bank loans |
17 |
(17,900) |
(5,485) |
(9,372) |
- |
(32,757) |
|
Loan arrangement fees |
17 |
155 |
- |
98 |
- |
253 |
|
Finance leases |
20 |
(3,176) |
(1,505) |
(6) |
(2) |
(4,689) |
|
Asset backed loans |
17 |
1,007 |
(3,572) |
(2,771) |
- |
(5,336) |
|
Bank overdrafts |
16 |
1,657 |
801 |
(3,918) |
(1,069) |
(2,529) |
|
Trade payables |
21 |
(11,834) |
(3,262) |
(7,433) |
(2,502) |
(25,031) |
|
Other payables |
21 |
(549) |
(238) |
- |
- |
(787) |
|
Financial liabilities at fair value through hedging reserve |
20 |
(577) |
- |
- |
- |
(577) |
|
Balance sheet exposure |
|
(23,972) |
(5,920) |
(16,811) |
877 |
(45,826) |
|
|
|
Sterling |
Euro |
US Dollar |
Other |
Total |
|
31 March 2013 |
Notes |
£000 |
£000 |
£000 |
£000 |
£000 |
|
Cash and cash equivalents |
16 |
(158) |
423 |
1,604 |
432 |
2,301 |
|
Trade receivables |
15 |
5,989 |
2,736 |
6,068 |
4,006 |
18,799 |
|
Other receivables |
|
1,484 |
35 |
174 |
202 |
1,895 |
|
Secured bank loans |
17 |
(16,318) |
(5,956) |
(12,264) |
- |
(34,538) |
|
Loan arrangement fees |
17 |
403 |
- |
150 |
- |
553 |
|
Finance leases |
20 |
(34) |
(1,719) |
(24) |
- |
(1,777) |
|
Asset backed loans |
17 |
(3,125) |
(3,219) |
(1,339) |
- |
(7,683) |
|
Revolving credit facilities |
17 |
- |
- |
(658) |
- |
(658) |
|
Bank overdrafts |
16 |
1,416 |
18 |
(2,193) |
423 |
(336) |
|
Trade payables |
21 |
(10,809) |
(3,352) |
(10,578) |
(3,552) |
(28,291) |
|
Other payables |
21 |
(584) |
(120) |
- |
- |
(704) |
|
Financial liabilities at fair value through hedging reserve |
20 |
(451) |
- |
- |
- |
(451) |
|
Balance sheet exposure |
|
(22,187) |
(11,154) |
(19,060) |
1,511 |
(50,890) |
The following significant exchange rates applied during the year:
|
|
Average rate |
|
Reporting date spot rate |
||
|
|
2014 |
2013 |
|
2014 |
2013 |
|
Euro |
1.19 |
1.23 |
|
1.21 |
1.19 |
|
US Dollar |
1.59 |
1.58 |
|
1.67 |
1.52 |
Sensitivity analysis
A 10% weakening of the following currencies against Sterling at 31 March 2014 would have increased equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date. This is translational exposure.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant. The analysis is performed on the same basis for 31 March 2013.
|
|
Equity |
|
Profit/(loss) |
||
|
|
2014 |
2013 |
|
2014 |
2013 |
|
|
£000 |
£000 |
|
£000 |
£000 |
|
Euro |
(285) |
180 |
|
(148) |
29 |
|
US Dollar |
1,528 |
1,733 |
|
(247) |
(238) |
On the basis of the same assumptions, a 10% strengthening of the above currencies against Sterling at 31 March 2014 would have decreased equity and profit or loss by the following amounts:
|
|
Equity |
|
Profit/(loss) |
||
|
|
2014 |
2013 |
|
2014 |
2013 |
|
|
£000 |
£000 |
|
£000 |
£000 |
|
Euro |
349 |
(220) |
|
181 |
(35) |
|
US Dollar |
(1,868) |
(2,118) |
|
302 |
291 |
Interest rate risk
Profile
At the balance sheet date the interest rate profile of the Group's interest‑bearing financial instruments was:
|
|
|
2014 |
2013 |
|
|
Notes |
£000 |
£000 |
|
Fixed rate instruments |
|
|
|
|
Financial liabilities |
|
(24,757) |
(29,442) |
|
Variable rate instruments |
|
|
|
|
Financial assets |
|
8,111 |
2,301 |
|
Financial liabilities |
|
(15,865) |
(13,773) |
|
Loan arrangement fees |
|
253 |
553 |
|
Finance leases |
|
(4,689) |
(1,777) |
|
Net debt |
16 |
(36,947) |
(42,138) |
The fixed rate borrowings above are shown after taking account of an interest rate swap (see note 17 for details).
A change of 50 basis points (0.5%) in interest rates at the balance sheet date would have decreased equity and profit or loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing at that date.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect on financial instruments with variable interest rates, financial instruments at fair value through profit or loss. The analysis is performed on the same basis for 31 March 2013.
|
|
2014 |
2013 |
|
Sensitivity analysis |
£000 |
£000 |
|
Equity |
|
|
|
Increase |
- |
- |
|
Decrease |
68 |
38 |
|
Profit or loss |
|
|
|
Increase |
- |
- |
|
Decrease |
68 |
38 |
f) Capital management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Group is dependent on the continuing support of its bankers for working capital facilities and so the Board's major objective is to keep borrowings within these facilities.
The Board manages as capital its trading capital, which it defines as its net assets plus net debt. Net debt is calculated as total debt (bank overdrafts, loans and borrowing as shown in the balance sheet), less cash and cash equivalents. The banking facilities with our principal bank have covenants relating to interest cover, cash flow cover and leverage, and our articles currently permit borrowings (including letter of credit facilities) to a maximum of four times equity.
|
|
|
Equity |
|
|
|
|
2014 |
2013 |
|
|
Notes |
£000 |
£000 |
|
Net assets attributable to owners of the Parent Company |
|
53,512 |
51,888 |
|
Net debt |
16 |
36,947 |
42,138 |
|
Trading capital |
|
90,459 |
94,026 |
The main areas of capital management revolve around the management of the components of working capital including monitoring inventory turn, and months' production or cost of sales outstanding, age of inventory, age of trade receivables, balance sheet reforecasting, monthly profit and loss, weekly cash flow forecasts and daily cash balances. Major investment decisions are based on reviewing the expected future cash flows and all major capital expenditure requires sign off by the Group Chief Executive Officer and Group Chief Financial Officer. There were no major changes in the Group's approach to capital management during the year. A particular focus of the Group is leverage measured as the ratio of net debt to pre-exceptional EBITDA which is measured on a monthly basis.
27 Operating leases
Non-cancellable operating lease rentals are payable as follows:
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Less than one year |
3,921 |
4,340 |
|
Between one and five years |
8,737 |
9,844 |
|
More than five years |
9,178 |
10,163 |
|
|
21,836 |
24,347 |
The Group leases a number of warehouse and factory facilities as well as vehicles and office equipment under operating leases. The leases of warehouse and factory facilities typically have an option to renew at the end of the lease term and lease payments are subject to five-yearly rent reviews.
One of the leased properties has been sublet by the Group. The sub-lease has a period to run of more than five years. Sub-lease payments of £303,000 (2013: £303,000) are expected to be received during the financial year.
During the year £4,307,000 was recognised as an expense in the income statement in respect of operating leases (2013: £3,887,000).
28 Capital commitments
At 31 March 2014, the Group had outstanding authorised capital commitments to purchase plant and equipment for £1,076,000 (2013: £94,000).
29 Related parties
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Sale of goods |
|
|
|
AB Alrick - Hedlund |
413 |
394 |
|
Hedlunds Pappers Industri AB |
62 |
35 |
|
Festive Productions Ltd |
57 |
56 |
|
Hedlund Import AB |
8,186 |
7,915 |
|
|
8,718 |
8,400 |
|
Purchase of goods |
|
|
|
AB Alrick - Hedlund |
706 |
- |
|
Hedlund Import AB |
173 |
2,455 |
|
Festive Productions Ltd |
- |
31 |
|
|
879 |
2,486 |
|
Receivables: |
|
|
|
AB Alrick - Hedlund |
11 |
- |
|
Hedlunds Pappers Industri AB |
1 |
17 |
|
Festive Productions Ltd |
- |
36 |
|
Balance at 31 March |
12 |
53 |
|
Payables: |
|
|
|
Hedlund Import AB |
(436) |
(475) |
|
Balance at 31 March |
(436) |
(475) |
Identity of related parties and trading
Hedlund Import AB and AB Alrick - Hedlund are under the ultimate control of the Hedlund family. Anders Hedlund is a Director of Hedlunds Pappers Industri AB which is under the ultimate control of the Hedlund family. Festive Productions Ltd is a subsidiary undertaking of Malios AG, a company under the ultimate control of the Hedlund family.
Phil Dutton, Non-Executive Director, is married to Judith McKenna who was Executive Vice President of Strategy and International Development at Walmart International and is now Executive Vice President, Chief Development Officer of Walmart US. Walmart are significant customers of the Group.
The above trading takes place in the ordinary course of business and on normal commercial terms.
Other related party transactions
Directors of the Company and their immediate relatives have an interest in 50% (2013: 50%) of the voting shares of the Company. The shareholdings of Directors are shown in the Directors' report. No other shares were issued to Directors during the year (2013: nil).
Directors' remuneration
|
|
2014 |
2013 |
|
|
£000 |
£000 |
|
Remuneration |
1,941 |
946 |
|
Pension contributions |
71 |
59 |
|
Share-based payments relating to Directors - LTIP |
82 |
- |
|
Employer national insurance contributions on the above remuneration |
242 |
130 |
|
|
2,336 |
1,135 |
30 Post balance sheet events
On 5 June 2014 the Company announced that through its business in Europe ("IG Europe"), it has signed a contract to acquire the trade and certain of the assets of Enper Giftwrap BV for approximately €1.9 million with the majority of the purchase price representing usable fixed assets and stock. Enper is a gift-wrap manufacturer in the Netherlands servicing northern Europe with sales of €5 million and this acquisition will allow IG Europe to widen its customer base and further strengthen its market position in a core product category.
Completion is expected to take place at the end of June 2014.
This information is provided by RNS
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