RNS Number:7909N
International Greetings PLC
13 July 2000
Profit up 22*% at International Greetings
Strong performance from US division
Chicken Run Added to Licence Portfolio
International Greetings PLC, the leading manufacturer of
gift wrapping paper, gift accessories, cards, crackers
and licensed stationery, today reported a strong set of
results for the year ended 31 March 2000, showing pre tax
profit up 22% at #9.5*m compared with #7.8m last year.
The Board is recommending a final dividend of 2.9p,
payable on September 8 2000 to shareholders on the
register at the close of business on August 18 2000. The
total dividend for the year rose to 4p, an increase of
20% over last year.
Highlights of the year's performance include:
* *Pre-tax profits up 22% at #9.5million (1999: #7.8
million)
* *Earnings per share up 22% at 16.5p (1999: 13.5p)
* Final dividend per share up 24% at 2.9p (1999:
2.3p)
* Continued strong performance in the US
* Gearing reduced from 81% to 24%
* New company funded employee share scheme
* Figures pre net exceptional items of #97,000
Nick Fisher, Joint Chief Executive, said: "We are
delighted with these results and with the performance of
all our divisions, in particular our US operations.
Having acquired our principal competitor in the States we
are now in a position to achieve significant future
growth in this important market.
"Since acquiring Copywrite, licensed properties have
become an important part of our strategy and we are
delighted to have added Chicken Run to our portfolio.
"Our Christmas order book is well in line with
expectations and, with potential for further
acquisitions, we remain confident in the outlook for the
future."
For further information:
International Greetings 01707 630 630
Nick Fisher, Joint Chief Executive
Grandfield 020 7417 4170
Michael Henman/Nick Astaire
CHAIRMAN'S STATEMENT
These results reflect the high quality of your business
and continue the impressive growth record and performance
of previous years.
I am particularly pleased to report on the progress made
in the US where we saw a significant improvement in
turnover and operating profit more than doubling. The
acquisition in May this year of the assets and trade of
The Stephen Lawrence Company, based in New Jersey, will
represent a further boost to the US business in the
coming years. Stephen Lawrence was our principal
competitor in the US and has been the market leader in
the premium quality gift wrap and accessories market for
much of its 40 year history. The US product range was
also extended by the acquisition in January of Pepperpot,
a gift stationery business which in combination with the
Stephen Lawrence acquisition further enhances the
benefits of the Pepperpot business in the US. In the UK,
progress at Copywrite continues in line with
expectations. In our interim results announcement, I
stated our intention to close its Manchester production
facility in March. This has now been completed within our
planned timescale and budget, and the benefits of this
exercise are now beginning to be reflected in Copywrite's
trading performance.
I have always stressed that the continuing success of our
business has only been possible through the hard work,
dedication and loyalty of our employees, and this
continues to be the case. In recognition of this, the
Board wishes to introduce a new all employee share
incentive scheme under which up to 1.5% of the company's
net profit before tax is to be set aside each year to
fund the acquisition of shares in the company by the
existing employee benefit trust. It is proposed that the
trust will be authorised to distribute these shares to
all qualifying employees on an equal basis, subject to
the rules of the employee benefit trust. A resolution
will be proposed at the forthcoming Annual General
Meeting to approve this plan. Once implemented, this will
help to ensure that all employees have a stake in the
future success of the business.
OUTLOOK
With the seasonal order book for Christmas 2000 in line
with expectations, prospects for the Group's current
business are excellent. As in previous years, the
combination of organic growth supplemented by a selective
acquisition policy gives the Board confidence of
continuing success for the future.
Reflecting this confidence, the Board is recommending a
final dividend of 2.9p per share, making a total for the
year of 4p, an increase of 20% over last year. This
dividend will be paid on 8 September 2000 to shareholders
on the register at the close of business on 18 August
2000.
John Elfed Jones CBE DL
Chairman
REVIEW OF OPERATIONS
Throughout the Group's operating divisions, our strategy
is focused on the retailer and their customer, the
consumer. By tailoring product ranges to the
specifications of individual retailers, we help to
establish consumer loyalty, thereby contributing to
growth in the retailer's market share. Consistent growth
in the Group's turnover and profits demonstrate the
effectiveness of this continuing strategy.
UNITED KINGDOM
OVERVIEW
The programme of upgrading and enhancing manufacturing
facilities continues across all divisions. Improved
production processes, sourcing of new materials and the
creation of innovative design concepts ensure we
consistently provide fresh and unique products within our
sectors. The investment made last year in printing and
finishing equipment in the card division has proved
particularly successful, with this division's sales and
profitability significantly improved over previous years.
Investments in production and design have been
complemented by similar investment in information
technology. During the year we have successfully
implemented new management and financial systems in the
greetings card and cracker divisions. These upgraded
systems will improve efficiency and enhance supply chain
management leading to increased customer service levels
and therefore profitability.
For the first time, this year's results include a full 12
months contribution from Copywrite which shows
profitability moving towards the levels prevailing in the
rest of the Group (see Finance Review). We have
successfully achieved the shift from in-house production
at Manchester to sourcing from outside suppliers without
affecting customer service, and we look forward to seeing
the benefits flowing from this change in future years'
performance.
The acquisition of Pepperpot, a gift stationery business,
has been absorbed into the day to day operations of
Copywrite. We have appointed a product manager
responsible for creating new ranges for both the UK and
US markets, and are pleased to report that the potential
in both markets for Pepperpot products has exceeded our
original expectations. Due to our strong relationship
with Disney Consumer Products, we have been licensed to
market additional gift and stationery categories which
now firmly establishes Copywrite as a one stop supplier
of licensed stationery and gift items for the children's,
adult and collectable markets.
DESIGN
In order to maintain our position as market leader within
the sector, our creative teams actively research consumer
preferences in terms of colour, product and packaging. We
work within a global market and therefore attend trade
shows in the United Kingdom, Continental Europe, the
United States and the Far East in order to keep abreast
of market developments and trends in design. With the
benefit of employing creative teams on both sides of the
Atlantic, we are in a position to be the true world
leader in design in our marketplace. Winning the "Best
Christmas Card Box" at the annual Greetings Industry
Awards in November last year is one example of our
acknowledged design capability.
LICENSING
Our licensing strategy is to develop a portfolio of the
most popular mass market licensed properties, and to
maximise licence opportunities by working in close
partnership with both licensors and our key retail
customers. This approach ensures that we are in a better
position to match production levels with consumer demand.
In addition to existing licence agreements for all Disney
characters, Barbie, Action Man and a number of other well
known characters we have recently signed an exclusive
agreement for our product categories in Europe for the
new Aardman animation film "Chicken Run". This is the
first animated feature film by the creator of Wallace and
Gromit and we are confident that this will be a long term
merchandising success.
OVERSEAS
The profile of our overseas operations has been steadily
increasing in significance over recent years. To reflect
this, we appointed Martin Hornung to the Board of
directors in March 2000 as Executive Director responsible
for the development of the Group's international
activities. During the past nine years as a senior
executive, Martin has built up an extensive knowledge of
all aspects of International Greetings which will be
invaluable in the support of our US and Far East
operations.
The excellent performance of the US division was
highlighted in the Chairman's statement, with both
turnover and profit considerably improved during the past
year. The confidence expressed in last year's annual
report has been well justified by these results and we
remain confident of our continuing success in this
market.
The recent purchase of Stephen Lawrence firmly
establishes our position as the leading premium gift wrap
company in the US market. We intend to retain a sales and
design presence at Stephen Lawrence's previous base in
New Jersey, but to transfer production to our
manufacturing facility in Georgia to take advantage of
economies of scale and overhead reduction.
In response to the growth in materials being sourced from
the Far East, we have established a new company,
International Greetings Asia Ltd. in Hong Kong. One of
our existing executives (with ten years experience in
purchasing and manufacturing) has relocated to Hong Kong
in order to manage the day to day aspects of the
operation. We see this as a strategic development of long
term importance for the Group.
INVESTORS IN PEOPLE
We were delighted that during the year we achieved
Investors in People accreditation for our gift wrap and
cracker divisions in South Wales - more than 50% of our
900 employees are now working under Investors in People
standards and it is our intention that all other
divisions will be accredited in due course.
CONCLUSION
We will continue with our customer and consumer focused
strategy, enhancing our existing businesses organically
and by pursuing acquisitions that meet our predetermined
criteria. This year's results are a testament to success
in delivering this strategy and we are confident of even
greater success in future years.
Anders Hedlund Nick Fisher
Joint Chief Executive Joint Chief Executive
FINANCE REVIEW
* Turnover - #85.5m up 18%
* Operating profit* - #10.8m up 15%
* Shareholders' funds - #22.8m up 28%
Turnover for the year to 31 March 2000 increased by 18%
to #85.5m (1999: #72.2), with operating profit* up by 15%
to #10.8m (1999: #9.4m). Exceptional gains on the sale of
our head office in Hatfield and land and buildings in
Boston, USA of #0.4m were offset by the exceptional cost
of closure of Copywrite's Manchester facility amounting
to #0.5m, to give net exceptional costs of #0.1m.
The overall operating profit margin* showed a small
decrease from 13.1% to 12.6%, but this was almost
entirely due to the inclusion of a full twelve month
period for Copywrite for the first time this year,
compared with an eight month trading period included in
last year's figures. Nonetheless, the operating margin*
at Copywrite improved from 3.5% to 5.1% and with the
closure of the uneconomic production facility at
Manchester, we expect a continuing improvement in
operating margins.
Interest payable decreased from #1.6m to #1.3m, as a
consequence of a combination of improved working capital
management and fixed asset disposals.
Profit before taxation* rose to #9.5m, an increase of 22%
and represents a pre-tax margin of 11.2%, up from 10.9%
last year.
EARNINGS PER SHARE AND DIVIDEND
Basic earnings per share for the year ended 31 March 2000
were 16.3p. Excluding exceptional items, earnings per
share were 16.5p, an increase of 22%. The final dividend
of 2.9p (1999: 2.3p) makes a total dividend for the year
of 4p (1999: 3.3p). The total dividend is covered four
times by the earnings per share, and represents an
increase of 20% over last year.
BALANCE SHEET AND CASHFLOW
The Group's financial position improved considerably
during the year. Shareholders' funds increased by #5m to
#22.8m and debt at 31 March 2000 was #5.5m, down from
#14.5m last year. Tight working capital management and in
particular reduced levels of inventory, together with
fixed assets disposals resulted in this major improvement
which saw gearing reduced from 81% last year to 24% at 31
March 2000.
Interest cover also strengthened significantly during the
year, with operating profits excluding exceptional items
covering the interest expense 8.5 times, up from 6.0
times last year.
* figures before exceptional items
TREASURY OPERATIONS
The Board continues to assess and manage the risks
associated with the treasury functions as the business
develops. Whilst the Copywrite business is less seasonal
than the rest of the Group, overall the Group's business
still retains a strong seasonal element which results in
large variations in working capital requirement. Long
term restriction of the exposure to interest rate
fluctuations on working capital funding is not considered
economically viable. However, where opportunities exist
for the short term, fixing at attractive rates primarily
through the use of acceptance credits, these are
considered.
Mark Collini
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 March 2000
Note Pre- Exceptional 2000 1999
exceptional items Total #000
Items #000 #000
#000
Turnover 2 85,542 - 85,542 72,151
Cost of sales (58,458) - (58,458) (48,877)
Gross profit 27,084 - 27,084 23,274
Distribution (6,040) - (6,040) (5,055)
expenses
Administrative (10,228) (528) (10,756) (8,803)
expenses
Operating profit 10,816 (528) 10,288 9,416
Profit on
disposal of - 431 431 -
fixed assets
Interest payable
and similar (1,278) - (1,278) (1,581)
charges
Profit on ordinary
activities before 2 9,538 (97) 9,441 7,835
taxation
Tax on profit on 3 (2,833) (2,414)
ordinary
activities
Profit for the
financial year 6,608 5,421
Dividends - equity 4 (1,625) (1,372)
Retained profit
for the financial 4,983 4,049
year
Earnings per 5
share
Basic 16.3 13.5*
Diluted 15.8 13.3*
* Figures adjusted to reflect bonus issue made in
September 1999.
CONSOLIDATED BALANCE SHEET
at 31 March 2000
2000 2000 1999 1999
#000 #000 #000 #000
Fixed assets
Intangible assets -
goodwill 1,417 1,574
Tangible assets 16,233 19,343
17,650 20,917
Current assets
Stocks 14,458 15,687
Debtors 15,205 14,265
Cash at bank and in hand - -
29,663 29,952
Creditors: amounts
falling due within one
year (21,181) (29,910)
Net current assets 8,482 42
Total assets less current 26,132 20,959
liabilities
Creditors: amounts falling
due after more than one
year (1,709) (1,878)
Provisions for liabilities
and charges (687) (685)
Deferred income (889) (552)
Net assets 22,847 17,844
Capital and reserves
Called up share capital 2,032 677
Share premium account 557 1,909
Other reserves 1,306 1,289
Profit and loss account 18,952 13,969
Equity shareholders' funds 22,847 17,844
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2000
2000 1999
#000 #000
Net cash inflow from operating
activities 14,627 8,071
Returns on investments and servicing (1,364) (1,522)
of finance
Taxation (3,237) (2,157)
Capital expenditure 273 (7,275)
Acquisitions and disposals (375) (4,111)
Equity dividends paid (1,395) (1,216)
Cash inflow/(outflow) before 8,529 (8,210)
financing
Financing 160 158
Increase/(decrease) in cash 8,689 (8,052)
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 2000 or 1999. Statutory accounts for 1999
have been delivered to the registrar of companies, and
those for 2000 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 1999.
2 SEGMENTAL ANALYSIS
UK and Europe USA Group
2000 1999 2000 1999 2000 1999
#000 #000 #000 #000 #000 #000
Turnover 73,939 63,347 11,603 8,804 85,542 72,151
Operating profit 9,412 8,826 1,404 590 10,816 9,416
before
exceptional items
Exceptional items (157) - 60 - (97) -
Operating profit 9,255 8,826 1,464 590 10,719 9,416
after exceptional
items
Net interest (1,278) (1,581)
Profit on
ordinary 9,441 7,835
activities before
taxation
Net assets 19,404 15,566 3,443 2,278 22,847 17,844
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
2000 1999
#000 #000
UK Corporation Tax 2,129 2,312
Deferred Taxation 80 32
Overseas Taxation - current 630 113
- deferred (78) (28)
Adjustments relating to an
earlier year: 43 (2)
UK Corporation Tax
Overseas taxation 29 (13)
2,833 2,414
4. DIVIDENDS
2000 1999
#000 #000
Interim paid - 1.1 per share 447 424
(1999: 1.0p*)
Final proposed - 2.9p per share 1,178 948
(1999: 2.3p*)
1,625 1,372
5. EARNINGS PER SHARE
2000 1999
Earnings per share 16.3p 13.5p*
Diluted earnings per share 15.8p 13.3p*
The basic earnings per share is based on earnings of
#6,608,000 (1999: #5,421, 000) and the weighted average
number of ordinary shares in issue of 40,631,341 (1999:
40,255,335*). The calculation of diluted earnings is based
on 41,766,923 (1999: 40,872,465*) ordinary shares. The
difference of 1,135,582 (1999: 617,130*) represents the
dilutive effect of outstanding employee share options which
has been calculated in accordance with FRS 14.
* Figures adjusted to reflect bonus share issue made in
September 1999.
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