Earnings Call: H2 2021

Jun 15, 2021

I'm here today with IG Design Group's CEO, Paul Feynman and CFO, Giles Willett. Please could you provide us with a summary of the year? Well, we're very pleased with our performance. Ultimately, 2021 really demonstrated the resilience and the strength of our business and of our teams around the world. In summary, clearly, the health and safety of our employees was and remains very much a priority. Despite a backdrop of COVID related operational challenges, we continue to deliver for our customers and further strengthened our relationships with the world's major retailers. And for the first time, sales to our top 20 customers were over $500,000,000 We successfully adapted to COVID-nineteen, mitigated as much of the impact as was possible and continued to focus on growth initiatives, especially new product development and sustainability. CSS, the business we acquired in March 2020, has performed very well and already delivered great value to the group. And I'm delighted to say that we achieved financial results in line with expectations, which Giles will give you more detail on now. In terms of our financial results, we have delivered a robust performance. Group revenue was up 40% to $873,200,000 primarily reflecting the 1st full year of CSS ownership. However, we were not able to avoid the negative impact of COVID-nineteen in the year with our like for like Design Group revenue down overall by 5%. Encouragingly, CSS performed better than expected year on year, down just 1% like for like. Despite operating margins being down, reflecting the impact of COVID-nineteen on customer and product revenue mix, manufacturing overhead absorption rates and operational deleverage, our adjusted profit before tax was up 4.4% year on year to $37,000,000 ahead of our expectations. Our financial position has strengthened during the year despite the pandemic. We finished the year with net cash of $76,500,000 up $24,100,000 on the year. And more importantly, saw the business deliver 0 average leverage in the 12 month period to the 31st March 2021, reflecting the focus on cash management during the year, especially during our businesses' peak working capital period. Furthermore, in May 2021, we extended the existing banking facilities for a further 12 months to June 2023. As a result, we are pleased to announce that we will be paying a full year dividend in line with the prior year, reflecting our strong cash performance. Paul, you've announced some new growth targets today. What are they and how will you get there? We have for many years delivered on our commitments to shareholders across adjusted EBITDA, dividends and average leverage. Today, we announce our intention to go beyond this in the long term. Our updated plan is to drive revenues beyond $1,500,000,000 approximately 30% to be achieved through organic growth and the balance from M and A. We will also plan to more than double EBITDA and to drive up EBITDA margins. We'll achieve these goals through a continued focus on our existing 3 strategic pillars, working with the winners, design and innovation and efficiency and scale. What have been some of the operational highlights over the year? We've ensured that we are able to provide a portfolio of products and service that reflect our omnichannel presence and the demands of our major customers. To give a sense of the scale of our activities, for the first time, we've delivered over 100,000 different SKUs. Our new product initiatives include the launch of our NIKKA D branded range of beautiful and innovative greeting cards in the United States, as well as the very successful expansion of our EcoNature brand range of sustainable products that were launched in the UK. One highlight has been our craft and creative play categories, which were in great demand during the year, generating over $150,000,000 of sales. From a channel perspective, we've seen the continued growth of e commerce based activities across key markets, working with the world's largest e tailers as well as the online platforms of our established customer base. And finally, another important development worthy of mention is the launch of the group's sustainability framework, the next step in our ESG journey. And can you provide an overview of the CSS acquisition and the general performance in your Americas business? The scale of our U. S. Business is being transformed. The U. S. Now accounts for over 70% of the As for highlights during the year in the U. S, firstly, As for highlights during the year in the U. S, firstly, despite COVID related challenges, we successfully retained an excellent level of service to customers. This is demonstrated by our 2nd award as Walmart Supplier of the Year. Secondly, the integration of CSS. This has so far unlocked $10,000,000 in synergies and cost savings. Not only are there further savings due to be delivered in 2022 and 'twenty three, we shall also start to see cross selling opportunities as a result of the integration that has taken place during FY 2021. And thirdly, the year also saw particularly successful product launches in the USA, including across everyday product categories. Our X and O branded ranges of impulse gift products and the development of exciting creative play ranges have subsequently been adapted for other markets. The current year will see further initiatives, including a focus on e commerce and a refreshed and vibrant craft product offering. And how the international business performed in the period? The combined international business performance was certainly resilient, although prolonged COVID related lockdowns impacted revenue in the UK and Europe. Overall, revenue outside of the Americas dropped by only 4%, but the bottom line benefited from favorable product mix and a focus on managing overhead costs down alongside government assistance received in certain territories. In the UK, we delivered strong service to customers with excellent sell through of our products over the Christmas period. In Europe, a solid year saw the benefits of working with the winning retailers and of the investment in Robo Wrap, our increased automation in our wrap making process. And in Australia, which was the region least impacted by COVID, we delivered a very robust performance supported by new product development and a strong independent retail sector. And what are your expectations for the next year and beyond? Assuming reopening progress is maintained, we expect to deliver significant year on year growth in both revenues and earnings during FY 'twenty two. We feel it's appropriate to remain cautious about the ongoing effect of COVID-nineteen and especially its associated impact on raw material and freight pricing. However, we're extremely encouraged by the resilience of our diverse customer base and of our broad product portfolio. Our order book for FY 'twenty two is already at almost $600,000,000 over 60% of projected revenues. Assuming the current progress is maintained in the reopening of regional economies where we operate, as I say, we expect to deliver significant year on year growth in both revenues and earnings in FY 'twenty two and to maintain momentum towards achieving the growth goals we plan to deliver.