Final Results
International Greetings PLC
12 July 2001
For immediate release 12 July 2001
Profit up 11% at International Greetings
Significant growth from US division
Successful launch of Harry Potter merchandise
International Greetings PLC, one of the world's leading designers and
manufacturers of greeting products and licensed stationery, today reported a
strong set of results for the year ended 31 March 2001, showing pre-tax profit
up 11% at £10.5m.
Highlights for the period include:
* Pre-tax profit up 11% at £10.52m (2000: £9.44m)
* EPS up 10% at 17.9p (2000: 16.3p)
* Final dividend per share up 14% at 3.3p (2000: 2.9p)
* Stephen Lawrence fully integrated, enhancing US market position
Nick Fisher, Joint Chief Executive, said:
'We are delighted to deliver another set of strong results. It has been a
particularly successful year for the Group's US division, with the existing
business continuing to perform well and the acquisition of Stephen Lawrence
now fully integrated and profitable.
'We have continued to expand our licensed portfolio with the best characters
and initial sales of Harry Potter ranges have been very encouraging.
'Our ongoing commitment to new product development, technological innovation
and efficiency improvement ensures we will remain at the forefront of our
industry.
'Once again, our seasonal order levels are well in line with expectations,
which gives us confidence for the future.'
For further information, please contact:
International Greetings 01707 630 630
Nick Fisher, Joint Chief Executive
Grandfield 020 7417 4170
Clare Abbot / Laura Foster
Chairman's Statement
I am once again pleased to report that your company has continued to perform
impressively during the year ended 31 March 2001. Highlights for the year are:
Profit before tax £10.5m up 11%
Earnings per share 17.9p up 10%
Dividend for the year 4.5p up 13%
In addition to the continuing success of our core businesses, the Group has
made significant progress in the development of its international operations.
The acquisition of The Stephen Lawrence Company has significantly enhanced our
market position in the US. The final phase of its integration, the extension
to our manufacturing and distribution facility, was completed on time, within
budget and has already contributed to operational efficiencies.
Our Hong Kong subsidiary, IG Asia, continues to expand in its role as a major
sourcing operation for the Group, and is expected to account for an increasing
proportion of the Group's purchasing requirements in future years.
I cannot praise the commitment and loyalty of our workforce enough, and I
stress that the motivation of, and commitment to our employees is of primary
importance to your Board. I am delighted to report that two further
subsidiaries have been accredited with Investors in People status. The All
Employee Share Ownership Plan has now been introduced, and we are confident
that the extension of share ownership to employees will help to ensure the
continuing future success of the business.
Your Board has been actively looking for a non-executive director who can make
a real contribution to the day to day activities of the Group. A number of
individuals have been shortlisted, and we expect to announce an appointment in
due course.
Outlook
The trading year to date, together with the 2001 seasonal order book levels
achieved, gives your Board confidence of continuing future success.
This confidence is reflected in your Board's recommendation of a final
dividend of 3.3p per share, making a total for the year of 4.5p, a 13%
increase over last year. The final dividend will be paid on 20th September
2001 to shareholders on the register at close of business on the 31st August
2001.
John Elfed Jones CBE DL
Chairman
Copies of the Annual Report will be posted to shareholders on 13 July 2001,
when copies will also be available from the Group's registered office,
Belgrave House, Hatfield Business Park, Frobisher Way, Hatfield, Herts AL10
9TQ
Review of Operations
The strength of the core businesses reflects our continuing strategy of
anticipating and responding to the demands of our customers and a constantly
evolving market.
As our major retail customers invest in their operations and infrastructure,
these are mirrored in our organisation. They are kept continually under review
so as to provide the levels of information and service demanded in today's
trading climate.
UK
We are constantly looking for opportunities to develop new products, increase
efficiency and reduce costs by ensuring that the Group is at the forefront of
technological developments in our industry.
New Developments
New product development (NPD) remains a key priority in International
Greetings' marketing strategy. The NPD team is constantly reviewing our
markets, to keep ahead of changes in design and trends. The Halloween range,
which launched successfully last year, experienced a good sell through to
consumers and continues to grow. A new development this year has been the
launch of ranges of multipack everyday cards to a number of our major retail
customers. This new product category has moved the Group into the everyday
card sector without the normal infrastructure constraints of individual store
deliveries and merchandising back-up borne by traditional card suppliers.
Consumer demand has been strong and we expect this trend of more pre-packaged
greetings ranges to accelerate.
Copywrite has traditionally been a licensed merchandise specialist. We are now
looking to expand into non-licensed merchandise, utilising designs created
in-house linking the latest fashion trends to stationery. The Pepperpot
division has also extended its product offering by the introduction of gift
and home decor ranges.
Cost Reductions and Efficiency Improvements
We have brought in-house the lithographic digital proofing and reprographic
functions in order to obtain additional control over these previously
out-sourced processes. As a result significant amounts of time are saved
between the design approval and printing stages, direct cost savings can be
made using digital reprographic methods and artwork costs are reduced by the
reuse of existing digital data to generate new designs.
We continue to invest in our production plants and have acquired new
specialist machinery in the printing operations. This is part of our on-going
programme to reduce costs and remain competitive. These benefits can be passed
on to our customers, who in turn are able to offer better value to consumers,
ensuring the continuing development of the marketplace.
The Group's gift wrap printing capacity in the UK has also been significantly
increased by the purchase of two additional gravure printing presses. The
first has recently been commissioned and the second is expected to be
commissioned by the end of the year. These investments will provide the means
to meet the anticipated increase in volume as the business continues to grow,
and enable more flexible and efficient production at our main print facility
in South Wales.
The Copywrite stationery division has completed its change management
programme, with all functions now under one roof, and a direct link to the Far
East sourcing operation. These infrastructure changes ensure that Copywrite
has a solid platform to deliver its growth targets of turnover and margin
enhancement.
US
The growth of the existing US division, together with the acquisition of
Stephen Lawrence has resulted in an overall increase in the Group's US
turnover of 58% and this division now accounts for 19% of Group turnover.
The manufacturing and distribution operations of Stephen Lawrence have now
been fully integrated with those of The Gift Wrap Company. The factory
extension in Georgia was opened in May 2001, increasing manufacturing and
distribution space to approximately 300,000 sq ft. This investment, coupled
with plans to acquire a new six colour printing press and additional finishing
equipment, will ensure the division has sufficient production capacity to meet
targets set for the foreseeable future.
The 'Gift Wrap Company' and 'Stephen Lawrence' gift wrap ranges are marketed
and distributed as two distinctive brands. With the benefit of our marketing
and design expertise, a new Stephen Lawrence Christmas collection has been
successfully relaunched. The bow and ribbon ranges of both companies have been
consolidated into one collection, resulting in improvements in stock
management and margins.
Sales of other Group products have been very encouraging in the US with cards
and tags achieving large increases year on year. The Pepperpot stationery
targeted at the US market has performed well and new ranges will be launched
during the coming year. These are being developed with the UK division and
sourced jointly from the Far East, resulting in improved margins in both
markets.
Licensing and Design
Recognising the importance that design plays in the Group's continued growth,
the Group's design and licensing responsibilities have been split into two
separate roles.
Reporting directly into the Board, the Group's design and licensing directors
will between them spearhead the strategic development of these activities.
This will ensure that we continue to set new industry standards for designs
created by our in-house teams, and that we are seen as the industry leader
holding the best licensed properties in our market sector. New licenses
successfully launched this year were 'Harry Potter'
and 'The Simpsons', and we look forward to the coming year with launches of
the 'Harry Potter' film licence and new film releases by the Walt Disney
Company and Mattel's 'Barbie'. The focus on quality of design meets with
increasing consumer demands, who are constantly looking for new trends and
innovation in our design-led marketplace.
Conclusion
The past year's activities have highlighted the success of our continuing
commitment to meeting our customers' needs, whilst always endeavouring to
streamline our business practices with good communication and increased
efficiency. We will continue to operate a balanced policy of organic growth,
coupled with selective acquisitions, taking advantage of our industry
leadership position.
Anders Hedlund Nick Fisher
Joint Chief Executive Joint Chief Executive
Finance review
Turnover £95.3m up 11%
Operating Profit £11.9m up 16%
Shareholders Funds £28.7m up 25%
Turnover for the year to 31st March 2001 increased by 11% to £95.3m (2000 : £
85.5m), with operating profit up by 16% to £11.9m. Turnover and operating
profit attributable to the acquisition of The Stephen Lawrence Co Inc was £
3.3m and £0.1m respectively.
Operating profit margins were up in the Group's core businesses, and Stephen
Lawrence's financial performance since acquisition has been encouraging. Gross
margins are higher than those of our existing US division, and now that its
operations have been fully integrated with our facility in Georgia, we
confidently expect this acquisition to make a significant contribution to the
future growth and profitability of the Group's US operations.
Profit before tax was £10.5m, an increase of 11% over last year.
Earnings per Share and Dividends
Earnings per share for the year ended 31st March 2001 were 17.9p, an increase
of 10% over last year's 16.3p. The final dividend of 3.3p (2000: 2.9p) a share
makes a total dividend for the year of 4.5p (2000: 4.0p).
The total dividend is covered four times by earnings per share and represents
an increase of 13% over last year.
Balance Sheet and Cash Flow
Shareholders' funds increased by £5.8m to £28.7m, an increase of 25%.
Following the early receipt of several large orders from customers, the Group
took the opportunity to increase manufacturing volumes in the January to March
2001 period over the comparable period in the previous year. This early
build-up of seasonal stock will generate future benefits by reducing the
seasonal production peak later in the period and, together with the
acquisition of Stephen Lawrence, was primarily responsible for the increase in
net debt which increased by £10.5m to £16m.
Gearing at 31st March 2001 was 56%. However, due to the seasonality of the
Group's business, interest cover is considered a more meaningful indicator of
the Group's financial strength. Interest expense is 8.5 times covered by
operating profit and the Group's financial position remains strong.
Treasury Operations
The Board continues to assess and manage the risks associated with the
treasury function as the business develops.
The Group's business has a strong seasonal element resulting in large
variations in working capital requirements. As a result, the Board has
considered that long term restriction of the exposure to interest rate
fluctuations on working capital is unlikely to be economically viable. Where
opportunities exist, however, for short term fixing of elements of this
funding at attractive rates, for example, through the use of acceptance
credits, these options are considered.
The Group also sources an increasing proportion of its purchases denominated
in US$. The Group reduces the effect of exchange rate fluctuations, where
practicable, through a combination of measures including hedging and forward
exchange contracts.
Conclusion
The continuing growth of the business demonstrates the success in achieving
our strategic objectives. We will continue seeking to maximise earnings, and
hence shareholder value and returns.
Mark Collini
Finance Director
Consolidated profit and loss account
for the year ended 31 March 2001
Continuing operations 2001 2000
Acquisition Total
Note £000 £000 £000 £000
Turnover 2 92,028 3,316 95,344 85,542
Cost of sales (60,780) (1,975) (62,755) (58,458)
Gross profit 31,248 1,341 32,589 27,084
Distribution (7,894) (1,026) (8,920) (6,040)
expenses
Administrative (11,497) (253) (11,750) (10,756)
expenses
Operating profit 2 11,857 62 11,919 10,288
Profit on disposal of - 431
fixed assets
Interest payable (1,399) (1,278)
and similar
charges
Profit on 2 10,520 9,441
ordinary
activities before
taxation
Tax on profit on 3 (3,248) (2,833)
ordinary
activities
Profit for the 7,272 6,608
financial year
Dividends - equity 4 (1,836) (1,625)
Retained profit 5,436 4,983
for the financial
year
Earnings per share 5
Basic 17.9p 16.3p
Diluted 17.3p 15.8p
Consolidated statement of total recognised gains and losses
for the year ended 31 March 2001
2001 2000
£000 £000
Profit for the financial year 7,272 6,608
Currency translation differences arising on foreign 312 17
currency net investments
Total recognised gains and losses relating to the financial 7,584 6,625
year
Consolidated balance sheet
at 31 March 2001
2001 2001 2000 2000
£000 £000 £000 £000
Fixed assets
Intangible assets - goodwill 1,438 1,417
Tangible assets 18,762 16,233
20,200 17,650
Current assets
Stocks 26,641 14,458
Debtors 19,020 15,205
Cash at bank and in hand 4 -
45,665 29,663
Creditors: amounts falling due (33,672) (21,181)
within one year
Net current assets 11,993 8,482
Total assets less current 32,193 26,132
liabilities
Creditors: amounts falling due after more (2,012) (1,709)
than one year
Provisions for liabilities and (763) (687)
charges
Deferred income (750) (889)
Net assets 28,668 22,847
Capital and reserves
Called up share capital 2,036 2,032
Share premium account 626 557
Other reserves 1,618 1,306
Profit and loss account 24,388 18,952
Equity shareholders' funds 28,668 22,847
These financial statements were approved by the board of directors on 12 July
2001 and were signed on its behalf by:
N Fisher MCollini
Director Director
Consolidated cash flow statement
for the year ended 31 March 2001
2001 2000
£000 £000
Net cash inflow from operating activities 3,385 14,627
Returns on investments and servicing of finance (1,523) (1,364)
Taxation (3,353) (3,237)
Capital expenditure (5,411) 273
Acquisitions and disposals (1,918) (375)
Equity dividends paid (1,670) (1,395)
Cash (outflow)/inflow before financing (10,490) 8,529
Financing 841 160
(Decrease)/increase in cash (9,649) 8,689
Reconciliation of net cash flow to movement in net debt
for the year ended 31 March 2001
2001 2000
£000 £000
(Decrease)/increase in cash in the year (9,649) 8,689
Cash (inflow)/outflow from financing (598) 459
Change in net debt resulting from cash flows (10,247) 9,148
Inception of finance leases (10) (125)
Translation differences (223) (36)
Movement in net debt in the year (10,480) 8,987
Net debt at beginning of year (5,503) (14,490)
Net debt at end of year (15,983) (5,503)
NOTES
1. BASIS OF INFORMATION
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 March 2001 or 2000. Statutory
accounts for 2000 have been delivered to the registrar of companies, and
those for 2001 will be delivered following the company's annual general
meeting. The auditors have reported on those accounts; their reports were
unqualified and did not contain statements under section 237 (2) or 3 of
the Companies Act 1985.
This statement has been prepared on the basis of the accounting policies
as set out in the Group's Annual Report for the year ended 31 March 2000.
2. SEGMENTAL ANALYSIS
UK and Europe USA Group
2001 2000 2001 2000 2001 2000
£000 £000 £000 £000 £000 £000
Turnover 76,942 73,939 18,402 11,603 95,344 85,542
Operating 10,044 9,412 1,875 1,404 11,919 10,816
profit before
exceptional
items
Exceptional - (157) - 60 - (97)
items
Operating 10,044 9,255 1,875 1,464 11,919 10,719
profit after
exceptional
items
Net interest (1,399) (1,278)
Profit on ordinary
activities before 10,520 9,441
taxation
Net assets 23,676 19,404 4,992 3,443 28,668 22,847
There is no material difference between turnover by origin, as shown
above, and turnover by destination. The above results relate entirely to
continuing operations.
3. TAXATION
2001 2000
£000 £000
UK Corporation tax 2,514 2,129
Deferred taxation 90 80
Overseas taxation - current 622 630
- deferred 23 (78)
Adjustments relating to an earlier year:
UK Corporation tax 33 43
Deferred tax (44) -
Overseas taxation
Current 3 29
Deferred 7 -
3,248 2,833
4. DIVIDENDS
2001 2000
£000 £000
Interim paid - 1.2p per share (2000: 1.1p) 492 447
Final proposed - 3.3p per share (2000: 2.9p) 1,344 1,178
1,836 1,625
5. EARNINGS PER SHARE
2001 2000
Earnings per share 17.9p 16.3p
Diluted earnings per share 17.3p 15.8p
The basic earnings per share is based on the earnings of £7,272,000 (2000: £
6,608,000) and the weighted average number of ordinary shares in issue of
40,697,466 (2000: 40,631,341). The calculation of diluted earnings per share
is based on 42,081,299 (2000: 41,766,923) ordinary shares. The difference of
1,383,833 (2000: 1,135,582) represents the dilutive effect of outstanding
employee share options which has been calculated in accordance with FRS 14.
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