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IG Design profits rise

By BFN News | 07:29 AM | Wednesday 29 June, 2016

IG Design Group - formerly International Greetings - reports operating profit of £12.7m for the year to the end of Msrch - up 26^ - with underlying operating profit up 14% at £13.5m. The group said 2015/16 was a strong year, with growth in profitability and especially operating cash flow exceeding its expectations, enabling it to increase the dividend to shareholders faster than previously anticipated. Revenues for the year to 31 March 2016 were up from £229 million in 2015 to £237 million, a solid 3.5%, though 4.4% at constant exchange rates. Underlying revenue in local currency grew in every marketplace, exceeding the group's expectations and despite some further modification of mix in the UK where its Celebrations activity grew strongly while Stationery and Creative Play sales fell back. Sales growth in Australia was particularly pleasing with new product categories and customer wins in the Celebrations space through a re‑energised sales capability. After a drop in gross profit margin last year, the group recovered ground this year to 18.3% (2015: 17.5% pre‑exceptional items) reflecting the continued and full year effects of its investments and constant search for efficiency. Net pre‑tax and exceptional profit margins improved to 4.2% (2015: 3.7%). Operating margins have held steady or improved in every geographical area in the group. In Europe the already strong 10% net operating margin was sustained (against the group's expectations given exchange rate headwinds) with progress in the USA and Australia the most meaningful as anticipated, up 1.3 and 1.6 percentage points respectively to 6.3% and 5.4% respectively. The full year effect of the group's investment in Wales contributed, lifting margins in the UK segment 0.6 percentage points to 6.7%. The Group aims to improve margins commercially by increasing the balance of own brand products and non‑Christmas business but efficiencies in sourcing and manufacturing are also continuing to contribute materially. Thegroup says another important dynamic to margin continues to be the level of FOB business delivered directly to major customers at ports in China. This type of business continues to grow in all territories especially in the USA 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 increased slightly, reflecting mainly investment in the US business and other capability to allow it to grow, but these costs remained largely steady year‑on‑year as a percentage of sales. Chief executive Paul Fineman said: "I am delighted to report that the Group has delivered another year of strong growth with all metrics again exceeding our financial, commercial and operational goals. We have, once again, demonstrated our ability to turn profit into cash and successfully deliver fast payback on investments made, allowing us to increase dividends from 1p to 2.5p. "We have a defined vision for the future, focused on profit growth alongside a unique blend of creativity and reliability. As such, our new brand will provide the platform for this next phase of Group development, accelerating our ability to leverage our global scale, simplifying our structure and illustrating the extent of our offering to our existing and future customers. "The evolution of our Group into a multi-category, design-focused and global business signals a new phase of growth opportunities both through exciting organic opportunities and through well considered acquisitions." The group says that while it is too early to know the full long-term impacts of the UK's exit from the EU, the board feels that Design Group's diversified global portfolio of activity, together with our new global funding arrangements, means we are well positioned to manage the effects, and this outcome of itself results in no material change in outlook for the Group's near term financial results or future growth prospects. Story provided by

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