Record preliminary results
International Greetings PLC
29 June 2004
Embargoed until 0700, 29th June 2004
International Greetings plc
('International Greetings' or 'the Group')
Record preliminary results
Management signal confidence with 13% dividend increase
International Greetings plc (AIM: IGR), the leading designer and manufacturer of
private label greetings products and film and television character based licensed
stationery, announces today its preliminary results for the year ended 31st March 2004.
Financial highlights
•Turnover up 11% to £126.7m (2003: £113.7m) and profit before tax up 3% to £11.2m (2003: £10.9m)
•Turnover, excluding Hoomark, increased 10% to £124.6m (2003: £113.7m)
•Adjusted profit before tax*, excluding Hoomark, increased 14% to £12.7m (2003: £11.1m)
•Adjusted EPS*, excluding Hoomark, increased 15% to 21.6p (2003: 18.8p)
•Final dividend of 5p per share (2003: 4.45p) increases full year dividend 13% to 6.5p per share (2003: 5.75p)
•Hoomark trading since acquisition (loss before tax of £0.6m) in-line with expectations
•US division performed well with operating profit (in $US) rising 14% to $2m.
* figure excludes goodwill amortisation of £233,000 (2003 : £175,000) and
exceptional item of £684,000 (2003 : nil).
Operational highlights
•Strong organic growth and platforms created for further growth through acquisitions
•Acquisition of leading Dutch gift wrap business, Hoomark, strengthens the Group's position in Europe
•Licensing agreements secured for summer blockbusters including Harry Potter and the
Prisoner of Azkaban, Shrek 2 and Thunderbirds
•Increased production and sourcing from the Far East
•New licensed Christmas decorations product range launched which is already contributing sales to the Group.
Post year-end event
•Acquisition of Krakajack, a cracker manufacturer, for a consideration of approximately
£900,000, providing entry in to in the important Irish and catering markets.
Commenting, Nick Fisher, CEO of International Greetings said:
'This strong set of results demonstrates International Greetings' focus on and
ability to deliver growth, both organically and through acquisition. We are
encouraged by the performance of our US division and by progress being made in
the Far East, as well as looking forward to receiving a full year's contribution
from Hoomark. As ever, our licensed products sold well and we anticipate a
strong performance from both Shrek 2 and Thunderbirds, with further demand at
Christmas, coinciding with DVD releases. We are confident about the year ahead,
as evidenced by the improved dividend, and look forward to delivering further
shareholder value.'
For further information:
Nick Fisher, International Greetings: 01707 630630
Richard Sunderland/ Tim McCall, mj2 ltd: 020 7491 7776
Richard.sunderland@mj2.co.uk
Graeme Cull, Arden Partners: 0121 423 8960
CHAIRMAN'S STATEMENT
International Greetings is a business focused on growth. During the past year
the Group has seen impressive organic growth from its existing businesses, and
created new platforms for future growth through acquisitions.
For the year ended 31st March 2004, adjusted profit before tax* increased to
£12.1m with turnover increasing to £126.7m. Excluding the results attributable
to Hoomark, the leading Dutch gift wrap business which was acquired in November
last year, turnover increased by 10% to £124.6m with adjusted profit before
taxation* increasing by 14% to £12.7m. These are excellent results which reflect
the continuing success of the Group in meeting the challenge of satisfying both
the quality and value demands of its customers. They also demonstrate the
benefits of continued investment in product development and design, together
with ongoing cost control and improved manufacturing efficiency. This was
particularly apparent in the strong performance of the US division where, in
US$, operating profit increased by 14% on turnover up 3%.
Work continues with the integration of Hoomark, which was in its seasonally
loss-making period when it was acquired by International Greetings in November
last year. Its performance since then has been in line with expectations and it
is expected to make a positive contribution to the group's next annual results.
Since the year end, we have also further strengthened the Group's offering
through the purchase of Krakajack, one of the leading suppliers of Christmas
crackers to the Irish and catering markets.
Licensing remains an important area of the Group's core business and coinciding
with this results announcement are the release of two major film properties,
Shrek 2 and Thunderbirds. We have exclusive licences in our product categories
for these properties and have launched ranges of merchandise this summer
utilising characters from these films. We expect further sales opportunities
during the autumn period when DVD's are released for Christmas.
Once again I would like to commend all our employees for their continued
commitment in ensuring our business achieves its desired objectives. This year's
performance in all divisions illustrates their dedication to International
Greetings.
The business continues to perform well, and the Board is confident in the future
prospects for the Group. As a result, and reflecting the strong financial
position, with net funds at the year end of £10.3m, we are recommending a final
dividend of 5p per share. This makes a total for the year of 6.5p, and
represents an increase of 13% over last year.
John Elfed Jones CBE DL
Chairman
*figure excludes goodwill amortisation of £233,000 (2003: £175,000) and
exceptional item of £684,000 (2003: nil).
REVIEW OF OPERATIONS
The last 12 months have been an active and successful period for International
Greetings. We have seen impressive growth in both turnover and profits from our
core businesses, and in addition to establishing a new licensed Christmas
decorations product category, the Group's range of activities have been
broadened with the acquisitions of Hoomark and Krakajack.
UK and European Market
The core business has performed extremely well during the last year, with
turnover of the UK business increasing by 14% to £108m. This includes a turnover
contribution from the newly established licensed Christmas decorations product
category of £2.4m. We are encouraged by the favourable response this new area of
business has received from customers, and are confident in its future growth
potential.
The acquisition of Hoomark represents a major step forward in the Group's
development into mainland Europe. In addition to the sales opportunities it
gives to supply the Group's products into this important market place, there are
also many synergy benefits. Manufacturing facilities in the UK will benefit from
the extra capacity now available and efficiency gains and economies of scale
arising in areas such as printing and sourcing of raw materials are expected.
On 1st June 2004, the Group completed the purchase of the assets and trade of
Krakajack, a cracker manufacturing business based in Ireland, for a total
consideration of approximately £900,000. This acquisition has enabled
International Greetings to acquire, for a relatively low cost, a unique high
speed automated cracker production line, complementing its existing hand-made
manufacturing facilities in South Wales and the Far East. The production
equipment will be relocated to South Wales, and the acquisition provides the
Group with an entry into the catering side of the cracker market as well as a
significant market share in Ireland.
US Market
The US division has also performed well during the year. The results of this
division, translated into sterling, have been negatively affected by movements
in exchange rates during the year. However, in US$, although turnover only
increased by 3%, efficiency improvements resulted in operating profit increasing
by 14%. These improvements in productivity have primarily arisen from increasing
in-house printing and conversion, following recent investments in new equipment.
The Group continues with its strategy of developing further into the US mass
market sector, and has now set up a dedicated sales and marketing division to
maximise this opportunity. Additional sales from this division are expected to
start coming through in the current year.
Far East Production
Production and sourcing from Hong Kong and China continues to be of increasing
importance to the Group. In April last year we opened a cracker production
facility in China. All production targets for last year's Christmas orders were
met and as a result, an increase in production from this facility is expected
during the next 12 months. The Group continues to develop new products and
source new materials and finishes from the region, in order to maintain our
competitive market position.
Design and Licensing
The trend by consumers to constantly demand new and fresh ideas is very apparent
in greetings and stationery products. The Group's design teams have once again
demonstrated their ability to create new ranges and designs, which can be
manufactured economically to meet consumers' demands. An important measure of
the Group's success is the sell-through of its products by its retail customers,
and we are pleased to report excellent retail sales during the past year, not
only for Christmas products, but also for everyday ranges.
Sales targets for new licensed properties launched during the past 12 months
were met, and coinciding with this results announcement are the release of two
major film properties, Shrek 2 and Thunderbirds. Sales of merchandise from these
two films will be generated during the current financial year, together with
those from the Group's perennial Disney, Barbie, Simpsons and other licences.
The Group's policy of maintaining a strong core licence portfolio together with
new film signings complements its customers' range requirements for licensed
merchandise, and new licensed properties will continue to be sourced.
Conclusion
Following another successful year for the Group, the focus will remain on what
International Greetings does best - innovation and excellence in design,
efficient manufacturing and exemplary service to customers. The Group will also
continue to pursue its strategy of organic growth, supplemented by selective
acquisitions of complementary businesses that create additional value. We are
confident that all these initiatives will ensure that International Greetings
continues to be a successful, thriving growth business.
Nick Fisher Joint Chief Executive
Anders Hedlund Joint Chief Executive
FINANCIAL REVIEW
Group Performance
Turnover for the year to 31st March 2004 increased to £126.7m. Excluding the
sales of £2.1m attributable to Hoomark since its acquisition, turnover increased
by 10% to £124.6m.
Adjusted operating profit* for the year to 31st March 2004 increased to £12.3m.
Excluding the operating loss attributable to Hoomark since acquisition, adjusted
operating profit* increased by 8% to £12.7m, and represents an adjusted
operating margin* of 10.2%. Hoomark made an operating loss of £0.4m for the
period it was part of the Group. However, in common with the rest of the Group,
Hoomark's business has a considerable degree of seasonality, and the results for
this period are not representative of the full year's performance. Based on
unaudited management accounts figures, Hoomark had turnover for the 12 months to
31st March 2004 of £9.2m and made an operating profit of £0.5m.
The exceptional item of £0.7m represents the one-off start up costs associated
with setting up the new licensed Christmas decorations product category, which
is already contributing sales to the Group.
Lower borrowing levels throughout the year have been primarily responsible for
the interest charge for the year to 31st March 2004 of £0.1m being significantly
lower than last year's £0.7m.
Adjusted profit before tax* increased to £12.1m. Excluding the loss before tax
attributable to Hoomark since acquisition, adjusted profit before tax* increased
by 14% to £12.7m.
Earnings Per Share and Dividend
Adjusted basic earnings per share* for the year ended 31st March 2004 were
20.7p, an increase of 10%. Excluding the loss per share attributable to Hoomark
since acquisition, adjusted basic earnings per share* for the year ended 31st
March 2004 increased by 15% to 21.6p. Basic earnings per share were 19.2p, an
increase of 3%.
The final dividend for the year of 5p (2003: 4.45p) makes a total dividend for
the year of 6.5p, an increase of 13% and is covered three times by basic
earnings per share.
Balance Sheet and Cash Flow
The Group has once again produced a strong cash flow performance and
strengthened its financial position. Shareholders' funds increased by £6.2m to
£44.1m, and net funds have increased by £6.8m to £10.3m, notwithstanding the
additional net debt of £8.2m arising as a result of the acquisition of Hoomark.
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
focus, resulting in large variations in working capital, with net funds for
certain periods of the year and net borrowings in other periods. As a result,
the Board considers that long term reduction of exposure to fluctuations in
interest rates on working capital is unlikely to be economically viable.
A significant proportion of the Group's purchases are denominated in US$. The
effect of exchange rate fluctuations is reduced through a combination of
measures including hedging and forward exchange contracts.
Mark Collini
Finance Director
*figure excludes goodwill amortisation of £233,000 (2003: £175,000) and
exceptional item of £684,000 (2003: nil).
Consolidated profit and loss account
for the year ended 31 March 2004
Note Continuing operations
Pre-exceptional Exceptional Acquisition Total Total
item item
2004 2004 2004 2004 2003
£000 £000 £000 £000 £000
Turnover 2 124,639 - 2,050 126,689 113,732
Cost of sales (86,917) - (1,756) (88,673) (78,239)
--- --- --- --- ---
Gross profit 37,722 - 294 38,016 35,493
Distribution expenses (11,529) - (325) (11,854) (11,357)
Administrative expenses (13,714) (684) (427) (14,825) (12,515)
--- --- --- --- ---
Operating profit 2 12,479 (684) (458) 11,337 11,621
Net interest payable (40) - (97) (137) (690)
--- --- --- --- ---
Profit on ordinary
activities
before taxation 2-3 12,439 (684) (555) 11,200 10,931
--- --- --- --- ---
Tax on profit on
ordinary
activities 4 (3,142) (3,299)
--- --- --- --- ---
Profit for the
financial year 8,058 7,632
Dividends -
equity 5 (2,774) (2,385)
--- --- --- --- ---
Retained
profit for the
financial year 5,284 5,247
=== === === === ===
Earnings per
share 6
Basic 19.2p 18.5p
Adjusted basic
excluding
goodwill and
exceptional
item 20.7p 18.8p
Diluted 19.1p 18.3p
=== === === === ===
Consolidated statement of total recognised gains and losses
for the year ended 31 March 2004
2004 2003
£000 £000
Profit for the financial year 8,058 7,632
Currency translation differences arising on
foreign currency net investments (835) (602)
--- ---
Total recognised gains and losses relating to the financial
year 7,223 7,030
=== ===
Consolidated balance sheet
at 31 March 2004
Note 2004 2003
£000 £000 £000 £000
Fixed assets
Intangible assets - goodwill 2,737 1,071
Tangible assets 23,271 21,721
--- ---
26,008 22,792
Current assets
Stocks 22,069 21,860
Debtors 11,492 9,856
Cash at bank and in hand 16,233 10,547
--- ---
49,794 42,263
Creditors: amounts falling due
within one year (25,583) (21,438)
--- ---
Net current assets 24,211 20,825
--- ---
Total assets less current 50,219 43,617
liabilities
Creditors: amounts falling due
after more than one year (3,059) (2,278)
Provisions for liabilities and charges (243) (394)
Deferred income (2,802) (3,016)
--- ---
Net assets 44,115 37,929
=== ===
Capital and reserves
Called up share capital 2,112 2,077
Share premium account 1,703 1,081
Potential issue of shares 8 1,080 -
Other reserves 181 1,016
Profit and loss account 39,039 33,755
--- ---
Equity shareholders' funds 7 44,115 37,929
=== ===
Consolidated cash flow statement
for the year ended 31 March 2004
2004 2003
£000 £000
Net cash inflow from operating activities 23,695 22,510
Returns on investments and servicing of (191) (707)
finance
Taxation (3,175) (2,980)
Capital expenditure (4,842) 752
Acquisitions and disposals (7,777) -
Equity dividends paid (2,511) (1,892)
---------------- ----------------
Cash inflow before financing 5,199 17,683
Financing 1,440 (1,553)
---------------- ----------------
Increase in cash 6,639 16,130
================ ================
Reconciliation of net cash flow to movement in net funds
for the year ended 31 March 2004
2004 2003
£000 £000
Increase in cash in the year 6,639 16,130
Cash (inflow)/outflow from debt and lease (783) 1,877
financing
---------------- ----------------
Change in net funds resulting from cash flows 5,856 18,007
New finance leases (180) (695)
Finance leases acquired with subsidiary (393) -
Translation differences 1,552 1,028
---------------- ----------------
Movement in net funds in the year 6,835 18,340
Net funds/(debt) at beginning of year 3,433 (14,907)
---------------- ----------------
Net funds at end of year 10,268 3,433
================ ================
Notes
1 Basis of preparation
The financial information set out above does not constitute the Company's statutory
financial statements for the years ended 31 March 2004 or 2003. Statutory financial
statements for 2003 have been delivered to the registrar of companies, and
those for 2004 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.
2 Segmental analysis
(a) Geographical area of operation
UK & Europe USA Group
2004 2003 2004 2003 2004 2003
£000 £000 £000 £000 £000 £000
Turnover 110,338 95,260 16,351 18,472 126,689 113,732
=== === === === === ===
Operating profit
before exceptional
item 10,944 10,524 1,077 1,097 12,021 11,621
Exceptional item (see
below) (684) - - - (684) -
--- --- --- --- --- ---
Operating profit
after exceptional
item 10,260 10,524 1,077 1,097 11,337 11,621
--- --- --- ---
Net interest (137) (690)
--- ---
Profit on ordinary
activities before
taxation 11,200 10,931
=== ===
Net assets 38,408 31,961 5,707 5,968 44,115 37,929
=== === === === === ===
The above results relate entirely to continuing operations.
Exceptional item
During the year ended 31 March 2004 the group established a new product category
involved in the design and selling of licensed decorations. The exceptional item
of £684,000 (2003: £Nil) represents the one-off start-up costs associated with
this category.
(b) Geographical analysis of turnover by destination
2004 2003
£000 £000
UK 90,986 79,101
USA 23,287 27,180
Europe 10,427 6,977
Rest of world 1,989 474
------------- ---------------
126,689 113,732
============= ===============
3 Profit on ordinary activities before taxation
2004 2003
£000 £000
Profit on ordinary activities before taxation is stated after
charging/(crediting)
Auditors' remuneration- audit fees paid to the company's
auditor and its associates 73 68
- non audit fees paid to the company's
auditor and its associates 52 68
Hire of plant and machinery - rentals payable under operating
leases 309 341
Hire of other assets - operating leases 741 307
Release of deferred grant income (299) (293)
Depreciation - owned 4,327 3,821
- leased 139 101
Amortisation of goodwill 233 175
=== ===
Audit fees payable by the company for the year were £14,000 (2003: £6,000).
4 Taxation
2004 2003
£000 £000 £000 £000
Current tax
UK corporation tax on profits of the year 3,414 3,278
Adjustments in respect of previous periods (63) 55
-------- --------
3,351 3,333
Foreign tax
On profits of the year 166 264
Adjustments in respect of previous periods (205) 92
-------- --------
(39) 356
-------- --------
Total current tax 3,312 3,689
Deferred taxation
Origination and reversal of timing
differences (190) (316)
Adjustments in respectof previous periods 20 (74)
-------- --------
Total deferred tax (170) (390)
-------- --------
Tax on profits onordinary activities 3,142 3,299
-------- --------
5 Dividends
2004 2003
£000 £000
Interim paid - 1.5p per share (2003: 1.3p) 662 536
Final proposed - 5.0p per share (2003: 4.45p) 2,112 1,849
---------------- ----------------
2,774 2,385
---------------- ----------------
6 Earnings per share
2004 2003
Adjusted basic earnings per share excluding
goodwill and exceptional item 20.7p 18.8p
Loss per share on goodwill (0.4p) (0.3p)
Loss per share on exceptional item (1.1p) -
---------------- ----------------
Basic earnings per share 19.2p 18.5p
================ ================
Diluted earnings per share 19.1p 18.3p
================ ================
The basic earnings per share is based on the earnings of £8,058,000 (2003:
£7,632,000) and the weighted average number of ordinary shares in issue of
41,995,174 (2003: 41,229,758). The calculation of diluted earnings per share is
based on 42,180,513 (2003: 41,760,588) ordinary shares. The difference of
185,339 (2003: 530,830) represents the dilutive effect of outstanding employee
share options which has been calculated in accordance with FRS 14.
Adjusted basic earnings per share excluding goodwill and exceptional item is
calculated after adjusting for amortisation of goodwill of £233,000 (2003:
£175,000), the exceptional item of £684,000 (2003: £Nil), and the tax relief
attributable to these items.
7 Reconciliations of movements in shareholders' funds
Group
2004 2003
£000 £000
Profit for the financial year 8,058 7,632
Dividends (2,774) (2,385)
--- ---
5,284 5,247
Other recognised gains and losses relating to
the year (net) (835) (602)
New share capital subscribed 657 324
Potential issue of shares (see below) 1,080 -
--- ---
Net addition to shareholders' funds 6,186 4,969
Opening shareholders' funds 37,929 32,960
--- ---
Closing shareholders' funds 44,115 37,929
=== ===
8 Acquisition
On 19 November 2003 the company acquired 100% of the issued share capital of
Hoomark Gift-wrap Partners BV, a manufacturer of gift wrapping paper based in
The Netherlands. The provisional fair value of total assets acquired was as
follows:
Book value of Provisional fair value Provisional fair value
acquired adjustments (note (a) at date of acquisition
business below)
£000 £000 £000
Fixed assets 1,352 393 1,745
Stock 2,860 (158) 2,702
Debtors 4,681 (133) 4,548
Creditors (1,525) (393) (1,918)
Bank loans
and (6,551) - (6,551)
overdraft
---------------- ---------------- ----------------
Net assets
acquired 817 (291) 526
================ ================ ===============
Satisfied by:
£000
Cash paid 1,226
Estimated future deferred consideration (see note (b) below) 1,217
----------------
Total consideration 2,443
----------------
Goodwill 1,917
================
The goodwill relating to the acquisition is written off over 10 years, being its
estimated useful economic life.
(a) The adjustments made to the net book values of the assets and liabilities of
Hoomark represent the capitalisation of fixed assets held under finance leases
and adjustments to bring stock and debtor provisioning into line with group
policies.
(b) The estimated future deferred consideration, of which £1,080,000 may be paid
by the issuance of new ordinary shares at the company's option, consists of:
i) an amount of €1,000,000 due in June 2004, payable in either cash or by the
issuance of new ordinary shares, at the company's option.
ii) an amount equivalent to 50% of the estimated profit after tax of Hoomark
Gift-wrap Partners BV for the 3 years ended 31 March 2007. This is payable in 3
annual instalments commencing 31 July 2005. Up to 75% of this element of the
deferred consideration may be payable by the issuance of new ordinary shares, at
the company's option.
(c) In January 2003, Hoomark Gift-wrap Partners BV bought certain assets and the
business previously carried out by Hoomark BV from the trustee in bankruptcy of
Hoomark BV, and commenced trading. As a result no accounts are available for the
year ended 31 March 2003. For the period 1 April 2003 to 18 November 2003,
unaudited management accounts figures (translated at the 31 March 2004 exchange
rate) reflect turnover of £7.14m, operating profit of £0.95m and interest
payable of £0.34m, resulting in a profit before tax of £0.61m.
This information is provided by RNS
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