RNS No 2556r
INTERNATIONAL GREETINGS PLC
14th July 1998
Earnings and dividend up 30% for International Greetings
Acquisition of Copywrite for #2.1 million
International Greetings PLC (IG) today announces preliminary
results for the year ended March 31 1998 showing pre-tax
profits of #6.6 million, 29% ahead of last year's comparable
pre-exceptional #5.1 million. Earnings per share were up 30%
at 33.7p and the Board is recommending a final dividend of
6.0p payable on 1 September 1998 to shareholders on the
register on 14 August 1998.
The company also announces that it has acquired the UK
business of Copywrite Limited (in Administrative
Receivership), a children's character stationery business from
the receivers for a cash consideration, payable at completion,
equal to the net assets acquired of #2.1 million. In the year
to 31 December 1997 unaudited management accounts for that
company which consists primarily of the acquired business had
turnover of approximately #23.5m.
In order to secure the future development of this business,
International Greetings has entered into long term licence
agreements with Disney Consumer Products and representatives
of Mattel and Hasbro, the principal former product licensors
of the acquired business.
Commenting on the results for the year, Anders Hedlund, Joint
Chief Executive, said: "These are excellent results. We have
continued to improve both gross and net margins and with an
increase in sales this has brought a very strong performance
at the earnings level. We are expecting a good Christmas in
1998 and are confident that this growth and the acquisitions
of The Cracker Company and Copywrite will show significant
benefits during the next financial year".
Commenting on the acquisition Nick Fisher, Joint Chief
Executive, said: "This is a great acquisition for
International Greetings. It adds a new and exciting product
range to our activities and the synergy benefits with our
existing customers and licence partners are highly attractive.
We will refocus the business and we are confident that it will
achieve our required levels of profitability in due course."
"Both this acquisition and of The Cracker Company in May fit
our strategy of acquiring businesses closely related to our
current operations, particularly where our design and
management strengths can be best applied."
Copies of this announcement will be available to the public at
the Company's offices at Belgrave House, The Merlin Centre,
Acrewood Way, St Albans, Herts, AL4 0JY until 27 July 1998.
For further information, contact:
International Greetings PLC
Nick Fisher, Joint Chief Executive 01727-844 888
Grandfield
Michael Henman/ Christian Judge 0171-417 4170
Chairman's Statement
I am once again delighted to report another set of excellent
results for the Group, highlighted as follows:
Profit before taxation* - #6.6m up 29%
Earnings per share* - 33.7p up 30%
Dividend for the year - 8.6p up 29%
*figures exclude exceptional items
Acquisitions
In addition to the continuing strong performance of our
existing businesses, I am pleased to report to you that the
Group has recently completed two acquisitions.
Both fit in with our strategy of identifying opportunities
that are closely related to our current operations, but
particularly where the Group's design and management strengths
can be utilised to develop them to their fullest potential.
Copywrite Limited
On 13 July 1998 the UK business of Copywrite Limited (in
Administrative Receivership), a children's character
stationery business, was acquired from the receivers for a
cash consideration, payable in full at completion, equal to
net assets acquired of #2.1m. In the year to 31 December 1997
unaudited management accounts for that company which consists
primarily of the acquired business had turnover of
approximately #23.5m. It has not been possible to separately
identify the profit or loss atttributable to the net assets
acquired. However, unaudited management accounts for Copywrite
Limited, its subsidiaries and associates for the year ended 31
December 1997 show turnover of approximately #34m and an
operating loss of #1.5m.
In order to secure the future development of this business,
International Greetings has entered into long term licence
agreements with Disney Consumer Products and representatives
of Mattel and Hasbro, the principal former product licensors
of the acquired business. It is our intention to retain
certain key members of the management team of this business
and negotiations to this effect are continuing.
This acquisition adds a new range of products to the group's
activities. We believe that the application of our management
strengths to Copywrite's strong market position will, in due
course, restore the business to our required levels of
profitability.
The Cracker Company Limited
The Cracker Company, purchased in May 1998 for a maximum cash
consideration of #0.2m, is the market leader in confectionery
and games Christmas crackers. The company had turnover of
approximately #2m in the year to 31 December 1997.
Employees
Your Board continues its recognition of the importance our
employees make to the continued success of the business, and
here I pay tribute to the commitment and professionalism of
all of them. Our operating divisions based in South Wales are well into the
process of incorporating the working practices of the
"Investors in People" standards, and initial assessments have
now commenced at the St Albans location.
An Employee Share Purchase Scheme has been approved by the
Board, and all employees are being actively encouraged to
become shareholders in the Company.
Board Responsibilities
Due to the continued expansion of the business it has been
decided to clearly identify the roles and responsibilities of
the Joint Chief Executives.
Anders Hedlund will have sole responsibility for all day to
day operational activities, and for the strategic development
of each product area.
Nick Fisher will concentrate on corporate affair matters -
particularly the identification and integration of
acquisitions and investor relations.
Achievements
We all felt a great sense of pride when International
Greetings was awarded the AIM Company of the Year accolade
last October. We received further professional recognition
when our Joint Chief Executive, Anders Hedlund, was voted
Welsh Business Achiever of the Year at the Welsh Business
Awards in May. Although this was a personal award, Anders
accepted it on behalf of all International Greetings
employees, particularly those with whom he has worked during
his 20 years in South Wales. He commented that, "The success
of our business activities in Wales has been as a direct
result of the commitment and dedication our workforce has
demonstrated.".
Outlook
The trading year to date, together with the seasonal order
book, is in line with our expectations and I am confident that
this year's organic growth, together with the acquisitions
made, will show significant benefits during the next financial
year. This confidence is reflected in your Board's
recommendation of a final dividend of 6p, making a total for
the year of 8.6p, a 29% increase over last year. The final
dividend will be paid on 1 September 1998 to shareholders on
the register at the close of business on 14 August 1998.
John Elfed Jones CBE DL
Chairman
Finance review
The Group's strategy of focusing on margin improvements,
combined with controlled turnover growth has again been
responsible for another excellent set of figures, and
continues the trend of recent years.
Turnover for the year to 31 March 1998 showed an increase of
10% to #53.5m (1997: #48.4m) with operating profit up by 31%
to #7.6m (1997: #5.8m). The giftwrap division performed
particularly well, with operating profit up by 33% in the UK
and 71% in the US.
The gross profit margin improved to 33.5% from 29.9%, and
reflected productivity improvements resulting from a
combination of organisational changes and increased capital
investment programmes. Interest payable increased from #0.7m
to #1m due to a combination of higher interest rates and the
redemption of preference shares in February 1997.
Profit before taxation rose to #6.6m, an increase of 29% over
the previous year's underlying figure of #5.1m*.
This year's overall tax charge of #2.149m represents an
effective rate of 32.5% compared with last year's rate of
33.2%*.
Earnings per Share and Dividends
Earnings per share for the year to 31 March 1998 were 33.7p.
This represents an increase of 30% in underlying earnings per
share from 26p*.
* (excluding exceptional items)
The final dividend of 6p makes a total dividend for the year
of 8.6p, which is covered 3.9 times by earnings per share.
Cash flow
As a result of a combination of the anticipated increase in
Christmas 1998 volumes, and the objective of continuously
improving customer service levels by reducing seasonal
production peaks, manufacturing volumes were greatly increased
in the January to March 1998 quarter over the comparable
period in the previous year. Working capital movements, in
particular the increase in stock, reflected this.
Nevertheless, the Group's cash inflow from operating
activities amounted to #4.9m.
Net capital investments during the year amounted to #3.8m,
compared with #2.5m in the previous year. The increase is
largely due to several one-off projects, the largest of which
was an investment of #0.8m in a Thermal Regenerative Unit for
the gravure print facility. Other significant projects
included the installation of fire protection systems
throughout all the Group's main premises and new business
computer systems for our US division.
Financing
We maintain excellent relations with our principal bankers,
HSBC Midland who, in addition to providing increased
facilities for organic growth, have provided the financial
support required for the recent acquisitions referred to in
the Chairman's Statement.
The Group's borrowings amounted to #6.6m at 31 March 1998 and
gearing was a modest 49%. However, due to the seasonality of
the Group's business, interest cover is considered a more
meaningful determinant in assessing the Group's debt capacity.
With operating profits covering the interest expense 7.5
times, the Group's financial position remains strong. This
financial strength will enable us to continue to follow our
strategic objective of maximising earnings and hence
shareholder value and returns.
Mark Collini
Finance Director
Review of operations
UK
Giftwrap
Technological advances in the printing industry mean that we
continually evaluate new opportunities to improve facilities.
In addition to the commissioning of a new printing press, we
invested in a state-of-the-art Thermal Regenerative Unit for
the gravure print facility. This equipment significantly
increases the efficiency of waste handling and reflects our
commitment as an environmentally conscious business.
Further investments were made in the print plant to achieve
specialist finishes. Design is of paramount importance to our
products, not only in terms of the surface pattern, but also
in texture and feel, and we believe these investments will
give us a distinct competitive advantage.
A new 135,000 sq ft group distribution warehouse was
officially opened on 1 June 1998 by the Right Honourable Ron
Davies, MP, Secretary of State for Wales. The extra space
allows for continued growth in seasonal sales and is shared
with the cracker division.
The investment in ribbon extrusion machinery during 1996 has
paid off handsomely with significant increases in both
turnover and UK market share in this product area.
Consequently, to handle future growth, the ribbon
manufacturing operation has been reorganised within the main
giftwrap plant to be an autonomous manufacturing division.
Additional new products are being developed to be sold at the
luxury end of the market in both the UK and US.
Crackers
We have developed specialist machines to automate some of the
processes previously performed manually. This will enable the
production of a superior product in terms of quality and at
the same time reduce manufacturing costs.
The additional storage space created by the new Group
distribution warehouse provides the opportunity to manufacture
many orders earlier than previous years. This has the effect
of easing capacity constraints during the peak summer season
and allows production space for late repeat orders to be made.
A hygienic packing area was established in January to
facilitate the production of confectionery crackers and will
be instrumental in the manufacture of the additional volumes
created by the acquisition of "The Cracker Company". This
purchase gives the cracker division the opportunity to not
only broaden its ranges, but by utilising existing facilities
mentioned above, we expect an immediate positive effect to the
bottom line.
Cards
The card division continues to focus on private label fixed
orders for boxed Christmas cards. Increased investment in
design and new licenced properties resulted in turnover
increasing by 25%. The division has recently been reorganised
in order to implement a strategy of reducing production costs
by worldwide sourcing for both the printing and finishing of
cards and will facilitate further growth in our market share.
USA
The extension to the Georgia factory was completed on time and
was fully operational by 1 May this year. The total area now
exceeds 200,000 sq ft, encompassing printing, manufacturing,
warehouse and distribution activities.
To complement the enlarged plant further operational
investments have been made. Investment in new computer
business systems and additional conversion equipment will
improve efficiency in all areas of the business, and provide
the necessary capacity to fulfill our rapid expansion plans
over the next few years.
A key element in our strategic plan in the US has been the
continual improvement in the quality of designs and product
ranges. By benefitting from the UK's design expenditure and
resources, our US division, trading as "The Gift Wrap Company"
now offers the best range of giftwrap products in the US
market. This success is reflected in the willingness of
leading independent sales organisations to enter into
exclusive agreements to promote and sell our ranges of
products, at the expense of our competitors. Over the last 12
months five such agreements have been signed, covering a total
of 15 states.
Group Design and Marketing
The importance of offering the best designs in our chosen
markets is of primary importance to International Greetings.
To this end, we maintain an on-going investment programme in
this area.Our creative design team has increased in number by over 50%
during the past two years. This reflects the growing design
demands in our markets, which we recognise and support fully
as our main catalyst for growth. Our designers not only create
looks from within the International Greetings design "stable",
but are continually expanding our design horizons with
worldwide research, thereby keeping our customers' ranges at
the forefront of the market place.
We continue with our strategy of offering ranges to include
the most commercial licensed properties and many agreements
are now in place including The Walt Disney Company, Warner
Brothers and BBC Enterprises.
With the widening of product ranges the primary sales drive is
to increase sales to our existing customer base by making
International Greetings a one-stop supplier for as many design
led disposable paper products as possible. We believe this
strategy will create further new account opportunities in the
UK and also in Continental Europe.
New Product Areas
Concentrating on our strengths, we embarked on two new product
trials with a number of our major customers. During the year
our design and product development teams successfully launched
ranges of calendars and packaged everyday cards which have
performed well. We believe both these categories can be
further developed to provide future growth opportunities.
Summary
This past year was an important one for the Group. Apart from
adding the exciting new product category of children's
character stationery to our portfolio, we have also
consolidated and focused our existing operations to create a
solid foundation to achieve our corporate goals.
Anders Hedlund Nick Fisher
Joint Chief Executive Joint Chief Executive
Consolidated profit and loss account
for the year ended 31 March 1998
1998 1997
Notes #000 #000
Turnover 2 53,496 48,431
Cost of sales (35,597) (33,945)
_____ _____
Gross profit 17,899 14,486
Distribution expenses (3,784) (2,924)
Administrative expenses (6,479) (5,742)
_____ _____
Operating Profit 7,636 5,820
Exceptional surplus on disposal
of fixed assets - 742
Interest payable and similar
charges (1,014) (686)
_____ _____
Profit on ordinary activities
before taxation 2 6,622 5,876
Tax on profit on ordinary
activities 3 (2,149) (1,726)
_____ _____
Profit on ordinary activities
a fter taxation 4,473 4,150
Minority interests (27) (17)
_____ _____
Profit for the financial year 4,446 4,133
Dividends
Equity (1,135) (866)
Non-equity - (135)
_____ _____
Retained profit for the
financial year 3,311 3,132
===== =====
Earnings per share 4
Basic 33.7p 31.7p
Excluding exceptional items 33.7p 26.0p
Fully diluted 31.8p
===== =====
The above results relate to continuing activities.
Consolidated balance sheet
at 31 March 1998
1998 1997
#000 #000 #000 #000
Fixed assets
Intangible assets 214 -
Tangible assets 12,291 9,614
_____ _____
12,505 9,614
Current assets
Stocks 14,135 9,846
Debtors 9,747 7,161
Cash at bank and in hand - 1
______ ______
23,882 17,008
Creditors: amounts
falling due within
one year (19,712) (14,637)
______ ______
Net current assets 4,170 2,371
______ ______
Total assets less current
liabilities 16,675 11,985
Creditors: amounts falling
due after more than one year (2,128) (721)
Provisions for liabilities
and charges (479) (355)
Deferred income (624) (745)
______ ______
Net assets 13,444 10,164
Capital and reserves
Called up share capital 661 660
Share premium account 1,631 1,582
Other reserves 1,232 1,254
Profit and loss account 9,920 6,609
______ ______
Equity shareholders' funds 13,444 10,105
Minority interests - 59
______ ______
13,444 10,164
====== ======
These financial statements were approved by the board of
directors on 13 July 1998 and were signed on its behalf by:
N Fisher, Director
M Collini, Director
Consolidated cash flow statement
for the year ended 31 March 1998
1998 1997
#000 #000
Net cash inflow from operating
activities 4,867 6,719
Returns on investments and
servicing of finance (900) (885)
Taxation (1,447) (1,229)
Capital expenditure (3,770) (2,537)
Acquisitions and disposals (250) -
Equity dividends paid (937) (691)
_____ _____
Cash (outflow)/inflow
before financing (2,437) 1,377
Financing 1,065 (2,723)
_____ _____
Decrease in cash (1,372) (1,346)
====== ======
Reconciliation of net cash flow to movement in net debt
for the year ended 31 March 1998
1998 1997
#000 #000
Decrease in cash in the year (1,372) (1,346)
Cash (inflow)/outflow
from financing (852) 948
_____ _____
Change in net debt resulting
from cash flows (2,224) (398)
Inception of finance leases (650) (62)
Translation differences 46 82
_____ _____
Movement in net debt in the year (2,828) (378)
Net debt at beginning of year (3,809) (3,431)
_____ _____
Net debt at end of year (6,637) (3,809)
====== ======
The results for the year ended 31 March 1997 shown above are
not the Group's financial statements for that financial year.
These results have been extracted from the financial
statements which contain unqualified audit reports with no
adverse statements under Section 237(2) or (3) of the
Company's Act 1985. The financial statements for the year
ended 31 March 1997 have been filed with the Registrar of
Companies. Copies of this announcement are available to the
public at the Company's offices at Belgrave House, The Merlin
Centre, Acrewood Way, St Albans, Herts, AL4 0JY until 27 July
1998.
Notes
1. Accounting policies
This statement has been prepared on the basis of the
accounting policies as set out in the Group's 1997/8 Annual
Report.
2 Segmental analysis
UK and Europe USA Group
1998 1997 1998 1997 1998 1997
#000 #000 #000 #000 #000 #000
Turnover 45,713 41,202 7,783 7,229 53,496 48,431
====== ====== ===== ===== ===== ======
Operating
profit 6,969 5,422 667 398 7,636 5,820
===== ===== ===== ===== ===== =====
Exceptional
surplus on
disposal of
fixed assets - 742
Net interest (1,014) (686)
_____ _____
Profit on ordinary
activities
before taxation 6,622 5,876
===== =====
Net assets 11,349 8,371 2,095 1,793 13,444 10,164
===== ===== ===== ===== ===== =====
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
1998 1997
#000 #000
UK Corporation tax 1,844 1,656
Deferred taxation 137 45
Overseas taxation - current 62 8
- deferred 38 72
Adjustments relating to an earlier year:
Corporation tax 70 (33)
Deferred taxation (2) (22)
____ _____
2,149 1,726
===== =====
In 1997 profits of #680,000 included within the exceptional
surplus on disposal of fixed assets were not taxable as relief
was available.
4 Earnings per share
1998 1997
#000 #000
Earnings per share excluding
exceptional items 33.7p 26.0p
Earnings per share on
exceptional items - 5.7p
____ _____
Basic earnings per share 33.7p 31.7p
==== ====
The basic earnings per share is based on the earnings of
#4,446,000 (1997: #3,998,000) and the weighted average number
of ordinary shares in issue of 13,198,969 (1997: 12,622,375).
Fully diluted earnings per share are 31.8p based on earnings
of #4,505,000 and a weighted average number of ordinary shares
in issue of 14,163,969 which assumes that all outstanding
options are exercised.
Earnings per share excluding exceptional items is based upon
the earnings, as above, after adjusting for the exceptional
surplus on disposal of fixed assets of #Nil (1997: #742,000).
END
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