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IG Design Group PLC Interim Results

24/11/2020 7:00am

UK Regulatory (RNS & others)


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TIDMIGR

RNS Number : 2479G

IG Design Group PLC

24 November 2020

EMBARGOED UNTIL 7.00 AM, 24 NOVEMBER 2020

IG Design Group PLC

(the "Company", the "Group" or "Design Group")

Results for the six months ended 30 September 2020

STRONGER THAN EXPECTED H1 PERFORMANCE- FULL YEAR OUTLOOK AHEAD OF MARKET EXPECTATIONS

IG Design Group plc, one of the world's leading designers, innovators and manufacturers of Gift Packaging, Celebrations, Craft & creative play, Stationery, Gifting and related product categories announces its results for the six months ended 30 September 2020.

As previously announced the Group's reporting currency has moved to US dollars following the acquisition of CSS Industries, Inc. ('CSS') in March 2020 which increased the US dollar revenues to over 70% of the Group.

 
  Financial Highlights              H1 2021       H1 2020 
                                 ------------ 
 Revenue                            $434.6m       $309.2m 
===============================  ============  ============ 
 Adjusted* 
 - Profit Before Tax                $30.2m        $26.1m 
                                               ============ 
 - Diluted Earnings per Share        22.0c         24.2c 
-------------------------------  ============  ============ 
 Reported 
 - Profit Before Tax                $17.1m        $20.5m 
                                               ============ 
 - Diluted Earnings per Share        11.4c         19.0c 
=============================== 
 Net debt as at the period end      $23.2m        $106.1m 
===============================                ============ 
 Average Leverage                    0.2x          1.1x 
===============================  ============  ============ 
 Interim Dividend                 3.0p (3.9c)   3.0p (3.7c) 
-------------------------------  ------------  ------------ 
 

*Adjusted results are stated before Adjusting items - for further detail see Alternative Performance Measures reconciliation within the Detailed Financial Review

   --   A stronger than expected start to the 2021 financial year (against revised Covid-19 forecasts) 
   -             First half revenue up 41% year-on-year with Adjusted profit before tax up 16% 

- Growth driven by the CSS acquisition, with Covid-19 negatively impacting trading across the Group, particularly during the first quarter

- Adjusted diluted Earnings per share at 22.0 cents is down on prior year reflecting increased shares in issue following CSS equity raise

   --   A strong first half cash management performance, underpinning interim dividend 
   -           Net debt improved $82.9 million on the prior year with Average leverage at 0.2 times 

- Interim dividend of 3.0 pence (3.9 cents) at the same level as last year, despite the uncertainty caused by Covid-19, reflecting the stronger than expected first half performance of the Group

Operational Highlights

-- Covid-19 plans successfully implemented; we have remained open, continued to serve customers and have delivered a stronger than expected financial performance

-- Orderbook is currently in excess of 80% of full year revenue forecasts; a higher level than this time in the prior year, with everyday volumes continuing to be strong across the business

-- Continue to focus on revenue growth initiatives including building on cross-selling opportunities in the US, expanding our range of sustainable products and developing an increased e-commerce offering and capability

-- Capital investment spend is lower than in previous years but we continue to benefit from prior year investments

-- CSS has delivered a strong first half performance with revenues** broadly flat year-on-year despite Covid-19 and acquisition synergies are already delivering ahead of schedule.

Outlook

Notwithstanding our caution in relation to the outlook for the balance of the year as the challenges of Covid-19 continue to impact the world, the Board are confident that the full year performance will be ahead of market expectations.

Paul Fineman, CEO, commented:

"In what has been an unprecedented period, what has shone through is the resilience and agility of our teams and our businesses. Together, we have managed to overcome numerous challenges in order to continue the delivery of quality products to our customers. Their skills and hard work have secured a strong performance and we take this opportunity to again thank them.

Though it has become more difficult for many to gather together it is pleasing to see that people's desire to celebrate life's special occasions has not waned despite the current circumstances. We've also seen countless families embracing at-home activities such as sewing or crafting. Similarly, Christmas in 2020 is being enthusiastically anticipated with customers reporting strong sell-through of decorations, gift packaging and crackers.

The outlook is encouraging, although we remain aware of continued global and regional challenges. Thanks to the strength of our performance in this half, together with our strong future pipeline, we are now tracking to deliver a full year performance ahead of market expectations."

Presentations and Overview video

IG Design Group is hosting a webinar for analysts at 0900 hrs GMT today. If you would like to register please contact designgroup@almapr.co.uk

The Company is also hosting a webinar for retail investors tomorrow, Wednesday, 25 November at 1430 hrs GMT. If you would like to attend please register here: http://bit.ly/IG_DesignGroup_H1_piworld_investor_webinar

A video overview of the results from the CEO, Paul Fineman, and CFO, Giles Willits, is available to watch here: https://www.thedesigngroup.com/half-year-results-video-2020/

** Included the this report are certain prior year figures related to CSS Industries, Inc. taken from previously published financial statements.

 
For further information: 
 
IG Design Group plc              01525 887310 
Paul Fineman, Chief Executive 
Giles Willits, Chief Financial 
 Officer 
 
Canaccord Genuity Limited        020 7523 8000 
Bobbie Hilliam, NOMAD 
 Alex Aylen, Sales 
 
Alma PR 
Rebecca Sanders-Hewett           020 3405 0205 
Susie Hudson                     designgroup@almapr.co.uk 
 Sam Modlin 
 

OVERVIEW & OUTLOOK

The first half results follow the exciting year to 31 March 2020, which included significant operational and strategic progress and great momentum. The six months to 30 September 2020 has of course been impacted by the Covid-19 pandemic, and our focus has been not only on ensuring the business successfully manages the challenges presented by the pandemic but also to continue to capitalise on the growth opportunities available to the Group while delivering the CSS integration and forecasted synergies.

It is undoubtedly times like these that demonstrate the strength of our teams, our processes and especially our ability to deliver, and our teams have done just that. The Board continues to be grateful for the attitude and determination of every individual in the Design Group teams around the world to ensure the business remains in good shape. We continue to work closely with both our suppliers and customers to maintain our high levels of service whilst working to adapt to new requirements and ensuring an efficient supply chain.

The Board is extremely pleased to be able to report that all of our businesses are performing better than initial Covid-19 forecasts and despite the additional challenges around the world as the pandemic continues to impact trading, we remain fully operational, benefitting from the swift implementation of our response plans at the outset of the crisis.

The first half can be very much split into two. The first three months were a challenging time for our teams when they were focused on working with customers and suppliers to finalise Covid-19 impacted seasonal orders all while maintaining operational effectiveness and customer service on Everyday products. Not surprisingly sales dropped significantly in the first quarter as many retailers were forced to close. However, certain categories such as Craft and creative play and Gifting performed strongly, catering well to the demand of consumers looking for family-friendly entertainment whilst under various restrictions.

The second quarter saw a return to more normal trends with the business focused on delivering seasonal orders while continuing to optimise revenues through Everyday channels. The acquisition of CSS benefitted the business throughout the period, helping the Group increase its proportion of Everyday non seasonal revenues while also introducing the new 'Craft' category to our product portfolio. Its integration continues to proceed well and is ahead of schedule in relation to the delivery of synergies, benefitting from the early and successful unification of the management leadership team in the Americas from the date of acquisition.

Thanks to the strength of our performance in this half and our strong future pipeline, notwithstanding our caution in relation to the outlook for the balance of the year as the challenges of Covid-19 continue to impact the world, the Board are confident that the full year performance will be ahead of expectations. Our trading as we approach Christmas continues to be strong and customers are reporting good sell-through to date on seasonal as well as Everyday product lines. Our cash management continues to deliver seasonal debt levels significantly below the prior year and as a result the Board expects average leverage to be below 0.5x for the year to 31 March 2021. The Group is well placed to deliver continued growth in FY22 and beyond.

COVID-19

Covid-19 continues to have a significant impact on the world, our trading partners and the Group. As announced at the previous financial year end (March 2020), we took swift action to ensure the teams were safe and the business remained financially robust and ready to benefit in the future for when trading returned to more normal levels. The business responded well to this challenge and delivered a performance ahead of our revised projections. It has maintained safe operations in all territories whilst continuing to serve our customers successfully. Furthermore, we continue to focus on developing growth initiatives and delivering synergies following the CSS acquisition in March 2020.

The impact of Covid-19 on the business in the first half of the financial year has been significant with trading down across the Group year-on-year as a result of the pandemic. It is difficult to calculate the exact extent of Covid-19 on the results, however, the following movements on revenue have been seen;

- In the first quarter of the current financial year revenues were down year-on-year across the Group (excluding CSS) by 27.8%. CSS quarter one sales** were down 11.7%. This reflected the significant reduction in orders for Everyday products as many retailers were closed and those retailers which remained open focused their activities on essential product lines.

- In the second quarter, which is financially a much more significant trading period for the Group, the business saw revenues recover strongly with CSS up 2.4% year-on-year in the quarter and Group revenues (excluding CSS) down just 2.8% on the prior period. Our orderbook remains ahead of our initial Covid-19 expectations but down like-for-like in absolute ($) terms against the prior year as our customers have taken a more cautious outlook to ensure high sell-through over the Christmas period. Everyday sales have recovered well, particularly in some key areas such as Craft and creative play.

The reduced volumes going through the business impacted on the gross margin percentage as a result of product mix and lower absorption of overheads into inventory in manufacturing. Furthermore, despite the Group taking quick action to control costs and maximise early synergies from the CSS acquisition the fixed overhead cost base, which is required to support the higher activity of the Group post the pandemic, increased as a percentage of revenues. Overall, the Group has delivered a robust adjusted operating margin at 7.5% (H1 2020: 9.3%), ahead of expectations.

Where appropriate, the Group has separately identified direct incremental costs associated with Covid-19 which total $2.0 million in the first half and have been included in Adjusting items. In addition, the business has incurred other costs resulting from Covid-19 and these, alongside Government assistance received totalling $3.6 million (the majority of which was received into our business in Australia) have not been included in Adjusting items.

SUMMARY 2021 INTERIM RESULTS

The Group's results are reported in US dollars for the first time following the CSS acquisition which increased the US dollar revenues to over 70% of the Group.

In the first half Revenue increased by 41% to $434.6 million (H1 2020: $309.2 million) including the effect of $149.1 million sales from CSS, with Adjusted profit before tax up 16.0% year-on-year at $30.2 million (H1 2020:

$26.1 million). Excluding CSS, Revenue   is down 8% reflecting the impact of Covid-19. 

Adjusted diluted earnings per share was 22.0 cents (H1 2020: 24.2 cents) which reduced, despite increased profit levels, because of the higher shares in issue following the equity raise to support the CSS acquisition in the final quarter of the 2020 financial year.

The Group ended the half year delivering a significant year-on-year reduction in net debt at $23.2 million (H1 2020: $106.1 million) with Average leverage improving to 0.2 times (H1 2020: 1.1 times). This very strong performance primarily reflects effective cash management actions, including strong management of working capital and a reduction to our capital investment programme.

Profit before tax at the half year was $17.1 million (H1 2020: $20.5 million). This reduction reflects the impact of the increase year-on-year in Adjusting items to $13.1 million (H1 2020: $5.6 million) which primarily result from the CSS integration costs and direct incremental Covid-19 associated expenditure. Diluted earnings per share therefore reduced to 11.4 cents (H1 2020: 19.0 cents).

The Board is pleased to declare an interim dividend, at the same level as last year, of 3.0 pence (3.9 cents) in respect of the period to 30 September 2020, reflecting the stronger than expected first half performance of the Group. The final dividend of 5.75 pence in relation to the year ended 31 March 2020 was paid in November 2020, later than the prior year reflecting the impact of Covid-19 and the later than usual Annual General Meeting.

REGIONAL HIGHLIGHTS

Overall, the Group has seen growth in both Revenue and Adjusted operating profit which increased to $32.4 million (H1 2020: $28.7 million) primarily as a result of the addition of CSS to the Group. Following the CSS acquisition the reporting structure of the Group has been reviewed and Group results are now presented as two reporting segments - DG Americas (DG Americas and CSS) and DG International (comprising UK and associated Asian operations, Europe, and Australia).

 
                                       Segmental Revenue            Adjusted Operating           Adjusted 
                                                                          Profit                 Operating 
                                                                                                   Margin 
 % Group                             H1      H1                   H1      H1                             H1 
  revenue                            2021    2020   % growth      2021    2020   % growth     H1 2021    2020 
                                                                                                       ====== 
 
   74%      DG Americas        $m   321.6   183.8        75%      19.5    17.7        11%        6.1%    9.6% 
                                                                                                       ====== 
   27%      DG International   $m   115.5   128.4      (10%)      15.1    13.2        15%       13.1%   10.3% 
                                           ======  =========            ======  =========              ====== 
            Elims / 
             Central 
   (1%)      costs             $m   (2.5)   (3.0)                (2.2)   (2.2) 
                                           ======                       ====== 
 
   100%     Total              $m   434.6   309.2        41%      32.4    28.7        13%        7.5%    9.3% 
=========  =================  ===  ======  ======  =========    ======  ======  =========    ========  ====== 
 

Design Group Americas

The CSS acquisition has transformed the scale of our business in the US, which now accounts for nearly three quarters of the Group's revenue. Following the acquisition in March 2020 the US team focused on the rapid integration of the two businesses under the unified senior leadership team comprising both CSS and Design Group executives. This integration is ahead of plan and is forecast to deliver synergies, identified at the time of the acquisition, ahead of expectations. These synergies include workforce rationalisation, cost savings associated with no longer running CSS as a listed business, site closure savings, scale-based purchasing upside and the early benefit from commercial opportunities resulting from combining the two businesses.

Revenue has grown significantly in the first half of this year, up 75% on the prior year at $321.6 million (H1 2020: $183.8 million) with the additional revenues from CSS of $149.1 million contributing to the scale of the business. Due to the nature of the CSS integration in the US it is not possible to accurately provide a like-for-like year-on-year profit performance split between the two US businesses. Adjusted operating profit at $19.5 million was ahead of last year (H1 2020: $17.7 million), with CSS contributing to profits for the first time. Adjusted operating margin declined to 6.1% from 9.6% as at 30 September 2020 reflecting the impact of Covid-19, which has reduced volumes.

The impact of Covid-19 on our Americas business has seen some facilities closed for periods of time at the height of the pandemic from March through to July. The US government assistance provided support to the workforce focused on payments direct to the individual rather than through the employer and as such no government assistance has been received directly by the Americas business during the period. Furthermore, an unintended impact of the US government assistance direct to the individual is that additional costs have been incurred to encourage employees to return to work rather than remain at home receiving the government assistance. This, alongside incremental cleaning and PPE expenditure has added significant cost to the running of the US manufacturing facilities in the first half of the year, of which $1.4 million has been treated as an Adjusting item.

The area where the US government's Covid-19 package provided benefit to the businesses was an extension of the time period in which operating losses could be carried back for tax purposes, generating a substantial tax refund for the group of c.$17 million. As at 30 September we have received the first of three payments with a second instalment received in October. We expect to have received the entire tax refund by the end of the financial year.

Since the end of the half year our business in the US has experienced an IT incident that has impacted operations resulting in some shipping delays. We expect that these delayed shipments will be mostly caught up, but that there could be some missed sales and additional costs of operating. As a result, there will be some costs in the second half (which will be treated as Adjusting items), against which we anticipate receiving insurance recoveries in FY22. The financial impact of the IT incident is not anticipated to be material to the overall financial performance of the Group during the period.

Despite the challenges in the period, the business continues to move forward, with the focus at half year being the execution of our Christmas product offerings and this is in full swing as we approach the Christmas season. Our new state-of-the-art printing press in Memphis which came online in March 2020 has had its first full six months of manufacturing and as a result of this capital investment, the team in Memphis are able to print higher volumes, more efficiently.

Furthermore, during the first half the Americas has seen growth through the successful development of our seasonal gifting and décor product ranges under the X&O brand. In addition, following the CSS acquisition, the business has benefitted from the increased scale of the e-tailer and online platforms of bricks and mortar retailers and is now focused on building on the CSS e-commerce experience to re-launch and develop a refreshed and expanded offering across the Americas Group.

In addition, areas of focus for the second half include cross-selling opportunities amongst the enlarged Americas Group including geographical expansion into Canada and Latin America, as well as between the Americas and International.

Design Group International

The combination of our UK, European and Australian businesses under the Design Group International umbrella allows the Group to benefit from an integrated management and operational structure as well as to position us for future growth across this segment. Our International businesses account for over a quarter of the Group's revenues, and as anticipated due to the impact of Covid-19 on our business, Revenues for the DG International business were down 10% on the prior year at $115.5 million (H1 2020: $128.4 million). However, Adjusted operating profit was up 14.5% at $15.1 million (H1 2020: $13.2 million), reflecting variations in product mix alongside a focus on overhead expenditure and in part as a result of government assistance received in certain territories.

Despite the impact of Covid-19, the UK had a robust first half revenue and margin performance, with good seasonal orders delivered on schedule. It has continued to extend its focus on sustainability with the expansion of its 'eco-nature' brand and has further built its online offering through Amazon. It also undertook a significant restructuring of the organisation, the costs of which have been treated as Adjusting items. Europe has performed well, supported by the stronger than expected performance of its major customers who have also traded robustly, after the initial lockdowns in Europe. Operationally, it has also been supported by the commissioning of the new 'Robowrap' investment which has helped drive improved productivity. Australia has performed ahead of expectations and was able to maintain good margins in the circumstances. It also took early action following the Covid-19 lockdown to reorganise some of its operations to manage costs.

The impact of Covid-19 operationally has varied across the businesses within the DG International group. Across all manufacturing sites, we have seen lower volume throughput which has reduced overhead absorption into inventory and caused efficiency levels to drop as further rigor and process is required to ensure the safety of all of our employees on the manufacturing floor. This includes shorter shifts to allow for clean down and sanitising all equipment and areas before the subsequent shift moves in. Of this expenditure incremental costs directly associated with Covid-19 of $0.5 million have been included as an Adjusting item.

Our warehouse in Australia is situated in Melbourne, Victoria which had further lockdown restrictions imposed as the number of cases rose. Although this impacted productivity as the warehouse was not able to operate at full capacity, the team in Australia has managed to mitigate the impact of this using extra shifts to ensure volume throughput was not lost.

Parts of the DG International group have received government assistance where available to mitigate as much as possible the need to reduce the workforce around the Group. In total the International division received $3.6 million of government assistance in the period, which has helped offset the additional costs incurred across the Group.

OUR PRODUCTS AND BRANDS

Pivotal to the Group's 'working with the winners' strategy is the continuous refreshing of our well-diversified, yet complementary product portfolio. This keeps us at the forefront of our customers' minds and makes us an attractive 'supplier of choice' for our retail partners. The first half split of revenue highlights how the Group has transformed its mix of revenue toward everyday based categories including Craft & creative play and Gifting.

 
 
 Revenue by product                    H1 2021             H1 2020 
  category 
===============================  ==================  ================== 
 Celebrations                       59%     $256.8m     76%     $235.2m 
===============================  ========  ========  ========  ======== 
 Craft & creative play              21%     $90.0m      5%      $14.1m 
===============================  ========  ========  ========  ======== 
 Stationery                         4%      $15.6m      7%      $20.9m 
===============================  ========  ========  ========  ======== 
 Gifting                            14%     $64.3m      9%      $29.1m 
===============================  ========  ========  ========  ======== 
 'Not-for-resale' consumables       2%       $7.9m      3%       $9.9m 
===============================  ========  ========  ========  ======== 
 Total                                      $434.6m             $309.2m 
===============================  ========  ========  ========  ======== 
 
 
 

Our product offering was further enhanced at the end of the last financial year as a result of the acquisition of CSS, and we introduced a new Craft product category throughout the Group. The benefits and the growth to the Group in this category, which includes creative play, has meant increased sales in these areas during the last six months as many households were in lockdown and turned to creative play products to entertain children whilst schools were closed as well as reigniting or taking up new hobbies in the crafting arena. 'Not-for-resale' consumables had a challenging first half with our retail customers in this category closed for much of the first quarter, resulting in lower year-on-year orders.

Revenues associated with seasonal products, whilst increasing, have reduced as a percentage of the total product portfolio helping drive forward one of our key strategic performance indicators, being diversifying seasonality within the business.

DETAILED FINANCIAL REVIEW

The Group's results are reported in US dollars for the first time following the CSS acquisition and the subsequent increased concentration of the Group revenues and earnings in US dollars. Prior year comparatives throughout this report have been presented in US dollars. Note 14 in this report contains the relevant comparatives for financial year 2020 in both US dollar and sterling denomination.

The Group has delivered ahead of our Covid-19 expectations in the first half of the year.

 
                                 H1 2021                           H1 2020 
                     Reported   Adjusting   Adjusted   Reported   Adjusting   Adjusted 
                                  Items                             Items 
                        $m         $m          $m         $m         $m          $m 
 Revenue              434.6         -        434.6      309.2         -        309.2 
 Gross profit          83.7        0.9        84.6       63.0        0.6        63.6 
 Overheads            (64.4)      12.2       (52.2)     (39.9)       5.0       (34.9) 
                    ---------  ----------  ---------  ---------  ----------  --------- 
 Operating profit      19.3       13.1        32.4       23.1        5.6        28.7 
 Finance charge       (2.2)         -        (2.2)      (2.6)         -        (2.6) 
                    ---------  ----------  ---------  ---------  ----------  --------- 
 Profit before 
  tax                  17.1       13.1        30.2       20.5        5.6        26.1 
 Tax                  (4.8)       (2.9)      (7.7)      (4.6)       (1.3)      (5.9) 
 Profit after 
  tax                  12.3       10.2        22.5       15.9        4.3        20.2 
------------------  ---------  ----------  ---------  ---------  ----------  --------- 
 

Group Revenue for the period of $434.6 million grew 41% year-on-year reflecting the contribution of CSS, acquired on 3 March 2020. Excluding CSS, organic Revenue declined by 8% as a result of the impact of Covid-19. Adjusted operating profit for the Group increased by 13.3% to $32.4 million (H1 2020: $28.7 million) with Adjusted operating margin down year-on-year at 7.5% (H1 2020: 9.3%). Gross margin fell in the half year, largely as a result of customer/product mix, and lower overhead absorption into inventory, to 19.3% (H1 2020: 20.4%). Adjusted overheads as a percentage of revenue increased to 12.0% (H1 2020: 11.3%). Overall Adjusted profit before tax increased 16.0% to $30.2 million (H1 2020: $26.1 million) largely due to increased profits from the CSS acquisition although offset by the impact of Covid-19 on the Group. Half year Profit before tax was $17.1 million (H1 2020: $20.5 million) primarily reflecting the impact of the increase year-on-year in Adjusting items to $13.1 million (H1 2020: $5.6 million).

Finance expenses

Finance costs of $2.2 million are lower compared to the prior year of $2.6 million. This primarily reflects the lower level of debt held in the year, offset by an increased impact of IFRS 16 charges associated with CSS leases.

Adjusting items

Adjusting items are material items of unusual or non-recurring nature which represent gains or losses which are separately presented by virtue of their nature, size and/or incidence. The Group has incurred Adjusting items in the period to 30 September 2020 totalling $13.1 million (H1 2020: $5.6 million). These items are as follows:

 
 
 Adjusting Items                                    H1 2021   H1 2020 
=================================================  ========  ======== 
 Losses/(gains) and transaction costs relating 
  to acquisitions and disposals of businesses        $0.9m     $0.7m 
=================================================  ========  ======== 
 Acquisition integration and restructuring costs     $5.5m     $1.2m 
=================================================  ========  ======== 
 Impairment of assets                                $0.1m       - 
=================================================  ========  ======== 
 Incremental Covid-19 costs                          $2.0m       - 
=================================================  ========  ======== 
 Amortisation of acquired intangibles                $2.2m     $1.8m 
=================================================  ========  ======== 
 LTIP charges                                        $2.4m     $1.9m 
=================================================  ========  ======== 
 Total                                              $13.1m     $5.6m 
=================================================  ========  ======== 
 

Losses/(gains) and transaction costs relating to acquisitions and disposals of businesses - $0.9 million (H1 2020: $0.7 million)

In the period, costs of $0.1 million associated with the acquisition of CSS were incurred relating to advisor fees. In addition, $0.5 million of acquisition related employee payments from the Impact Innovations Inc. transaction in 2019 which lock in and incentivise legacy talent. Finally, an additional $0.3 million of transaction costs associated with the disposal of Zhejiang Shaoxing Royal Arts and Crafts Co. Ltd were incurred.

Acquisition integration and restructuring costs - $5.5 million (H1 2020: $1.2 million)

The main costs relate to the integration of CSS into the enlarged DG Americas as new team structures have been put in place. There have also been associated temporary staff costs and recruitment costs as roles are being filled.

The CSS business includes a large portfolio of owned and leased sites, and part of the integration project includes the consolidation of these locations resulting in the impairment of lease assets and the ongoing costs associated with the closure of sites as well as the lease liability interest costs.

The UK undertook a reorganisation in light of Covid-19 for which the costs have been treated as Adjusting items. In addition, in Australia a similar reorganisation was made in the first half of the financial year.

Impairment of assets - $0.1 million (H1 2020: $nil)

In light of the impact of Covid-19 on the business, a review of inventory, trade receivables and fixed assets was undertaken at 31 March 2020. Inventories were assessed for the net realisable value and an impairment of $7.4 million was taken. Similarly trade receivables were assessed for their expected credit loss in line with IFRS 9 and an impairment of $3.8 million was taken. As at 30 September 2020, this assessment continues, and for trade receivables any impairment taken at the year end that was not required has been reversed ($3.1 million) alongside any additional debtors as at the reporting date who are now considered higher risk for which an impairment has been taken ($3.9 million). Inventories continue to be assessed for net realisable value, with sell-through of provided inventory of $1.8 million being offset against further inventory risk of $1.2 million recognised. Given the seasonality of our business and the high proportion of Christmas related sales, further assessment will be undertaken by the end of the financial year.

Incremental Covid-19 costs - $2.0 million (H1 2020: $nil)

The Covid-19 outbreak has developed rapidly in 2020, with measures taken around the world to contain the virus affecting economic activity. The Group has been affected in every territory in which we operate and the impact on the general economic environment and the reduced demand of goods from our customers as well as the closures of our businesses has had a significant impact. Certain costs relating to incremental direct labour have been identified that have impacted the financial results of the business during the year to date, equal to $2.0 million. The most significant element of these costs totalled $1.3 million relating to additional labour costs across our manufacturing facilities in the USA, Mexico and India.

Management have taken a judgement not to include government assistance received in the period as an Adjusting item, as whilst the amounts received were incremental, the underlying employee expenditure would likely not have been incurred if the government assistance was not received.

Amortisation of acquired intangibles - $2.2 million (H1 2020: $1.8 million)

Under IFRS, as part of the acquisition of a company, it is necessary to identify intangible assets such as customer relationships and brands which form part of the intangible value of the acquired business but are not part of the acquired balance sheet. These intangible assets are then amortised to the income statement over an appropriately judged period. These are not operational costs relating to the running of the acquired business and are directly related to the accounting for the acquisition. These include tradenames and brands acquired as part of the acquisition of Impact Innovations Inc. and CSS Industries Inc. in the USA and Biscay Pty Greetings Ltd in Australia. As such we include these as Adjusting items.

In addition, in accordance with IFRS 3, on acquisition, businesses need to be fair valued, which can result in an uplift to stock on hand relating to sales orders already attached to the acquired stock. This uplift will distort the margins associated with the stock, and typically unwinds quickly as stock is sold soon after acquisition. The unwind of the stock uplift ($0.6 million) associated with the CSS acquisition is included as an Adjusting item, consistent with the treatment adopted with the Impact acquisition. This has fully unwound as at 30 September 2020.

LTIP charges - $2.4 million (H1 2020: $1.9 million)

As part of our senior management remuneration, the Group operates a Long Term Incentive Plan ('LTIP') in the form of options for ordinary shares of the Group. In accordance with accounting principles, despite this plan not being a cash cost to the business, a share -- based payments charge or credit is taken to the income statement. We consider that these charges do not form part of the underlying operational costs and therefore include these as Adjusting items.

The LTIP charge for the period was $2.4 million which consists of a principal IFRS 2 charge of $2.2 million and an employer's social security charge of $0.2 million.

Taxation

The taxation charge for the half year was $4.8 million (H1 2020: $4.6 million) with the effective tax charge on Adjusted profit before tax at 25.4% (H1 2020: 22.5%). The rate is higher than the weighted blend of statutory rates in the countries in which we operate as a result of estimated permanent disallowable deductions for tax purposes. The effective rate on Profit before tax is 28.1% (H1 2020: 22.2%).

Earnings per share

Adjusted earnings per share at 22.0 cents were down 9% on the prior year (H1 2020: 24.2 cents) primarily as a result of a higher diluted share number following the share raise in early 2020. Diluted earnings per share are 11.4 cents (H1 2020: 19.0 cents). The reconciliation between Reported and Adjusted earnings per share can be seen below:

 
 
 Earnings per share                                         H1 2021   H1 2020 
=========================================================  ========  ======== 
 Earnings attributable to equity holders of 
  the Company                                               $11.2m    $15.3m 
=========================================================  ========  ======== 
 Adjustments 
=========================================================  ========  ======== 
     Adjusting items (net of non-controlling interest 
      effect)                                               $13.2m     $5.5m 
=========================================================  ========  ======== 
     Tax charge/(relief) on adjustments (net of 
      non-controlling interest effect)                      ($2.9m)   ($1.3m) 
=========================================================  ========  ======== 
 Adjusted earnings                                          $21.5m    $19.5m 
=========================================================  ========  ======== 
 Weighted average number of shares 
========================================================= 
     Basic weighted average number of shares outstanding     97.7m     80.0m 
=========================================================            ======== 
     Dilutive effect of employee share option 
      plans                                                  0.3m      0.4m 
=========================================================  ========  ======== 
 Diluted weighted average ordinary shares                    98.0m     80.4m 
=========================================================  ========  ======== 
 
 Basic earnings per share                                    11.5c     19.1c 
=========================================================            ======== 
 Impact of Adjusting items                                   10.5c     5.3c 
=========================================================  ========  ======== 
 Basic adjusted earnings per share                           22.0c     24.4c 
=========================================================  ========  ======== 
 Diluted earnings per share                                  11.4c     19.0c 
=========================================================  ========  ======== 
 Diluted adjusted earnings per share                         22.0c     24.2c 
=========================================================  ========  ======== 
 

Cash flow and net debt

As at 30 September 2020 net debt (excluding IFRS 16 lease liabilities) was $23.2 million, significantly better than the prior year of $106.1 million. Average leverage as at the half year was 0.2 times from 1.1 times for the comparative prior period reflecting an improved Adjusted EBITDA alongside the year-on-year reduction in average debt.

 
 Cashflow                                    H1 2021     H1 2020 
=========================================  ==========  ========== 
 Adjusted EBITDA                             $49.7m      $37.2m 
=========================================  ==========  ========== 
 Movements in working capital               ($104.9m)   ($139.8m) 
=========================================  ==========  ========== 
 Adjusted cash used by operations           ($55.2m)    ($102.6m) 
=========================================  ==========  ========== 
 Adjusting items                            ($10.4m)     ($1.9m) 
=========================================  ==========  ========== 
 Cash used by operations                    ($65.6m)    ($104.5m) 
=========================================  ==========  ========== 
 Capital expenditure (net of disposals 
  of property, plant and equipment)          ($3.4m)     ($5.1m) 
=========================================  ==========  ========== 
 Tax received/(paid)                          $2.9m      ($3.0m) 
=========================================  ==========  ========== 
 Interest paid                               ($1.9m)     ($2.1m) 
=========================================  ==========  ========== 
 Payments of lease liabilities               ($7.2m)     ($3.9m) 
=========================================  ==========  ========== 
 Dividends paid (including those paid to 
  non-controlling interests)                    -        ($5.9m) 
=========================================  ==========  ========== 
 FX and other                                ($0.4m)     ($3.8m) 
========================================= 
 Movement in net debt                       ($75.6m)    ($128.3m) 
=========================================  ==========  ========== 
 Opening net cash                            $52.4m      $22.2m 
=========================================  ==========  ========== 
 Closing net debt                           ($23.2m)    ($106.1m) 
=========================================  ==========  ========== 
 

Working capital

The Group's working capital movement this half year was impacted by the acquisition of CSS. The net working capital outflow in the half year was $104.9 million (H1 2020: $139.8 million). Stripping out the effect of CSS on working capital movements there was an underlying outflow of $74.4 million in the first half of 2021. This lower working capital movement reflects the reduced year-on-year seasonal working capital build as a result of the impact of Covid-19 alongside the stronger cash management disciplines across the Group.

In the current Covid-19 environment the Group continues to actively track debtors and credit risk profiles of all of our customers to ensure we try to mitigate as far as possible any additional exposure to credit risk.

Adjusting items

During the first half of the year there was $10.4 million (H1 2020: $1.9 million) net cash outflow in relation to Adjusting items of which $4.5 million related to cash outflow for costs accrued at the year end. The significant majority of the total outflow related to the restructuring and synergy realisation costs associated with the CSS acquisition.

Capital expenditure

During the first half of the year the Group invested $3.4 million (H1 2020: $5.1 million). The majority of this spend was in DG Americas on the fit out of the newly leased site in Mississippi, Tennessee.

Cash tax

During the first half of the year the Group benefited from a net cash inflow of tax as a result of US tax repayments following claims made by CSS under the CARES Act. The total cash amounts received at 30 September 2020 was $3.2 million. The Group made tax payments of $0.3 million which compares to a tax payment of $3.0 million in the prior year. The reduced cash tax payments are directly as a result of lower earnings driven by Covid-19.

Dividend payments

As part of the Covid-19 cash actions taken by the Group the timing of the final dividend payment in relation to the year ended 31 March 2020 was moved from September 2020 to November 2020. As such no payment was made in the first half of the financial year compared to a $5.9 million outflow in the prior year.

Financial position and going concern basis

The Group has a banking facility (refinanced in January 2020) which runs to May 2022 and includes a revolving credit facility ('RCF') of $95 million, a further flexible RCF of up to GBP130 million, flexible to meet working capital requirements during peak manufacturing, and a maximum limit of $18 million invoice financing arrangement in Hong Kong. The Group also has access to supplier financing arrangements which we utilise at certain times of the year.

The Group has been fully compliant with all banking covenants associated with these facilities and has not required, nor requested, any covenant waivers associated with the impact of Covid-19 on the Group results.

In light of the ongoing Covid-19 pandemic, as with the financial statements for 31 March 2020, the Directors have paid particularly close attention to their assessment of going concern in preparation of these financial statements.

The Group is currently trading ahead of forecasts used to consider the going concern assessment. These forecasts which have been reviewed in detail by the Board, and take into account the significant seasonal working capital cycle of the business, have been sensitised to reflect potential adverse downturns in the current assumptions including the second wave of the pandemic. Management has also produced a maximum stress forecast which has been deliberately engineered to challenge the Group's liquidity position and covenant performance during the forecast period. These forecasts and additional analysis demonstrated that there is sufficient excess headroom for the Group to meet its obligations as they fall due for a forecast period of more than twelve months beyond the date of these accounts. As such, the Directors do not see any practical, regulatory or legal restrictions which would limit their ability to fund the different regions of the business as required.

Accordingly, the Directors have continued to adopt the going concern basis of accounting in preparing the financial statements.

Principal risks and uncertainties

Risk is an inherent part of business, especially as Design Group aim to continue to deliver growth around the world. The Group actively monitors the risk related to its business and the environment in which it operates, as our continued success is influenced by how well we manage our risks. As at 30 September 2020, the Group's principal risks and uncertainties, as detailed in the Group's financial statements for the year ended 31 March 2020 are still active risks and there have been no material movements in these risks during the first half of this financial year. These will be reviewed again at year end, however, the Group do not expect there to be any significant change in the principal risks and uncertainties by the end of the year.

Statement of Directors' responsibilities

The Directors confirm to the best of their knowledge that:

-- The condensed interim set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;

-- The interim report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

-- The interim report includes a fair review of the information required by DTR 4.2.8R (disclosures of related parties transactions and any changes therein).

Alternative performance measures

This review includes alternative performance measures ('APMs') that are presented in addition to the standard IFRS metrics. The Directors believe that these APMs provide important additional information regarding the adjusted performance of the business including trends, performance and position of the Group. APMs are used to enhance the comparability of information between reporting periods and segmental business units by adjusting for exceptional or uncontrollable factors which affect IFRS measures, to aid the understanding of the Group's performance. Consequently, APMs are used by the Directors and management for strategic and performance analysis, planning, reporting and reward setting. APMs reflect the results of the business excluding Adjusting items, which are items that are material and of an unusual or non-recurring nature.

The APMs and the definitions used are listed below:

   --    Adjusted EBITDA - EBITDA before Adjusting items 
   --    Adjusted operating profit - Profit before finance charges, tax and Adjusting items 
   --    Adjusted profit before tax   - Profit before tax and Adjusting items 

-- Adjusted profit after tax - Profit after tax before Adjusting items and associated tax effect

-- Adjusted earnings per share - Fully diluted earnings per share before Adjusting items and associated tax effect

In addition, the Group uses APMs in order to calculate other key performance metrics including:

-- Average leverage - Rolling twelve month average bank debt (being average debt measured before lease liabilities) divided by rolling twelve month Adjusted EBITDA reduced for lease payments

   --   Adjusted operating margin - Adjusted operating profit divided by revenue 

Adjusting items

Further details of the items categorised as Adjusting items are disclosed in more detail in note 3.

A full reconciliation between our adjusted and reported results is provided below:

 
 APM Reconciliation                     H1 2021    H1 2020 
=====================================  =========  ======== 
 Adjusted EBITDA                         $49.7m    $37.2m 
 Adjusting items                        ($10.0m)   ($3.8m) 
 EBITDA                                  $39.7m    $33.4m 
-------------------------------------  ---------  -------- 
 
 Adjusted operating profit               $32.4m    $28.7m 
 Adjusting items                        ($13.1m)   ($5.6m) 
 Reported operating profit               $19.3m    $23.2m 
-------------------------------------  ---------  -------- 
 
 Adjusted profit before tax              $30.2m    $26.1m 
 Adjusting items                        ($13.1m)   ($5.6m) 
 Reported profit before tax              $17.1m    $20.5m 
-------------------------------------  ---------  -------- 
 
 Adjusted profit after tax               $22.2m    $20.2m 
 Adjusting items                        ($10.2m)   ($4.3m) 
 Reported profit after tax               $12.3m    $15.9m 
-------------------------------------  ---------  -------- 
 
 Adjusted earnings per share             22.0c      24.2c 
 Adjusting items                        (10.6c)    (5.2c) 
 Reported diluted earnings per share     11.4c      19.0c 
=====================================  =========  ======== 
 

** Included in this report are certain prior year figures related to CSS Industries, Inc. taken from previously published financial statements.

CONDENSED CONSOLIDATED INCOME STATEMENT

SIX MONTHSED 30 SEPTEMBER 2020

 
 
                                    Unaudited six months ended   Unaudited restated(a) six   Twelve months restated(a) 
                                                   30 Sep 2020    months ended 30 Sep 2019           ended 31 Mar 2020 
                             Note                         $000                        $000                        $000 
---------------------------  ----  ---------------------------  --------------------------  -------------------------- 
Revenue                         2                      434,635                     309,220                     624,340 
Cost of sales                                        (350,937)                   (246,186)                   (530,109) 
---------------------------  ----  ---------------------------  --------------------------  -------------------------- 
Gross profit                                            83,698                      63,034                      94,231 
Selling expenses                                      (21,584)                    (13,374)                    (33,766) 
Administration expenses                               (46,480)                    (27,089)                    (58,868) 
Other operating income          4                        3,909                         503                         927 
Profit on disposal of 
 property, plant and 
 equipment                                                  10                           -                         246 
(Loss)/profit on disposal 
 of subsidiary                                           (208)                           -                       1,836 
Operating profit                3                       19,345                      23,074                       4,606 
Finance expenses                                       (2,265)                     (2,616)                     (5,479) 
---------------------------  ----  ---------------------------  --------------------------  -------------------------- 
Profit/(loss) before tax                                17,080                      20,458                       (873) 
Income tax (charge)/credit      5                      (4,801)                     (4,535)                      18,276 
---------------------------  ----  ---------------------------  --------------------------  -------------------------- 
Profit for the period                                   12,279                      15,923                      17,403 
---------------------------  ----  ---------------------------  --------------------------  -------------------------- 
Attributable to: 
Owners of the Parent 
 Company                                                11,222                      15,297                      16,461 
Non-controlling interests                                1,057                         626                         942 
---------------------------  ----  ---------------------------  --------------------------  -------------------------- 
 

Earnings per ordinary share

 
 
          Note      Unaudited six months ended 30  Unaudited restated(a) six months    Twelve months restated(a) ended 
                                        Sept 2020                 ended 30 Sep 2019                        31 Mar 2020 
--------  ----  ---------------------------------  --------------------------------  --------------------------------- 
Basic        8                              11.5c                             19.1c                              19.9c 
--------  ----  ---------------------------------  --------------------------------  --------------------------------- 
Diluted      8                              11.4c                             19.0c                              19.8c 
--------  ----  ---------------------------------  --------------------------------  --------------------------------- 
 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

SIX MONTHSED 30 SEPTEMBER 2020

 
 
                                                Unaudited     Unaudited        Twelve 
                                               six months   restated(a)        months 
                                                    ended    six months   restated(a) 
                                                   30 Sep         ended         ended 
                                                     2020        30 Sep            31 
                                                                   2019      Mar 2020 
                                                     $000          $000          $000 
 -------------------------------------------  -----------  ------------  ------------ 
Profit for the period                              12,279        15,923        17,403 
Other comprehensive income: 
Exchange difference on translation of 
 foreign operations (net of tax)                  (4,144)       (4,031)         3,112 
Recycling translation reserves on disposal 
 of subsidiary                                          -             -            42 
Transfer to profit and loss on maturing 
 cash flow hedges (net of tax)                        127         (490)         (490) 
Net unrealised (loss)/gain on cash flow 
 hedges (net of tax)                                (391)          (64)           657 
--------------------------------------------  -----------  ------------  ------------ 
Other comprehensive (expense)/income for 
 the period, net of tax items which may 
 be reclassified to profit and loss in 
 subsequent periods                               (4,408)       (4,585)         3,321 
--------------------------------------------  -----------  ------------  ------------ 
Total comprehensive income for the period, 
 net of tax                                         7,871        11,338        20,724 
Attributable to: 
Owners of the Parent Company                        6,143        10,860        20,372 
Non-controlling interests                           1,728           478           352 
--------------------------------------------  -----------  ------------  ------------ 
                                                    7,871        11,338        20,724 
 -------------------------------------------  -----------  ------------  ------------ 
 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SIX MONTHSED 30 SEPTEMBER 2020

 
 
                          Attributable to the owners of the Parent Company 
                    ------------------------------------------------------------- 
                                   Share 
                                 premium 
                             and capital                                                                 Non- 
                                                                                   ------------- 
                      Share   redemption   Merger  Hedging  Translation  Retained  Shareholders'  controlling 
                                                                                                               ------- 
                    capital      reserve  reserve  reserve      reserve  earnings         equity    interests    Total 
                       $000         $000     $000     $000         $000      $000           $000         $000     $000 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
At 1 April 2020 
 (restated(a) )       5,974      215,417   40,175      320      (4,389)   113,703        371,200        4,643  375,843 
Profit for the 
 period                   -            -        -        -            -    11,222         11,222        1,057   12,279 
Other 
 comprehensive 
 (expense)/ income        -            -        -    (264)      (4,815)         -        (5,079)          671  (4,408) 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
Total 
 comprehensive 
 income for the 
 period                   -            -        -    (264)      (4,815)    11,222          6,143        1,728    7,871 
Transactions with 
owners in their 
capacity as owners 
Equity-settled 
 share-based 
 payments                 -            -        -        -            -     2,309          2,309            -    2,309 
Tax on 
 equity-settled 
 share-based 
 payments                 -            -        -        -            -     (266)          (266)            -    (266) 
Recognition of 
 non-controlling 
 interests                -            -        -        -            -         -              -          276      276 
Options exercised        14            -        -        -            -      (14)              -            -        - 
Exchange 
 differences on 
 opening balances       268        9,647    1,799        -            -         -         11,714            -   11,714 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
At 30 September 
 2020                 6,256      225,064   41,974       56      (9,204)   126,954        391,100        6,647  397,747 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
 

SIX MONTHSED 30 SEPTEMBER 2019

 
 
                          Attributable to the owners of the Parent Company 
                    ------------------------------------------------------------- 
                                   Share 
                                 premium 
                             and capital                                                                 Non- 
                                                                                   ------------- 
                      Share   redemption   Merger  Hedging  Translation  Retained  Shareholders'  controlling 
                                                                                                               ------- 
                    capital      reserve  reserve  reserve      reserve  earnings         equity    interests    Total 
                       $000         $000     $000     $000         $000      $000           $000         $000     $000 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
At 31 March 2019 
 (restated(a) )       5,093       74,962   42,119      153      (8,133)   108,763        222,957        5,266  228,223 
Impact of adopting 
 IFRS 16                  -            -        -        -            -   (2,427)        (2,427)        (572)  (2,999) 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
Restated equity at 
 1 April 2019         5,093       74,962   42,119      153      (8,133)   106,336        220,530        4,694  225,224 
Profit for the 
 period                   -            -        -        -            -    15,297         15,297          626   15,923 
Other 
 comprehensive 
 expense                  -            -        -    (554)      (3,883)         -        (4,437)        (148)  (4,585) 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
Total 
 comprehensive 
 income for the 
 period                   -            -        -    (554)      (3,883)    15,297         10,860          478   11,338 
Transactions with 
owners in their 
capacity as owners 
Equity-settled 
 share-based 
 payments                 -            -        -        -            -     1,491          1,491            -    1,491 
Tax on 
 equity-settled 
 share-based 
 payments                 -            -        -        -            -       314            314            -      314 
Recognition of 
 non-controlling 
 interests                -            -        -        -            -         -              -          121      121 
Options exercised        44            -        -        -            -      (44)              -            -        - 
Equity dividends 
 paid                     -            -        -        -            -   (5,868)        (5,868)            -  (5,868) 
Exchange 
 differences on 
 opening balances     (274)      (4,037)  (2,268)        -            -         -        (6,579)            -  (6,579) 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
At 30 September 
 2019 (restated(a) 
 )                    4,863       70,925   39,851    (401)     (12,016)   117,526        220,748        5,293  226,041 
------------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  ------- 
 

YEARED 31 MARCH 2020

 
 
                         Attributable to the owners of the Parent Company 
                   ------------------------------------------------------------- 
                                  Share 
                                premium 
                            and capital                                                                 Non- 
                                                                                  ------------- 
                     Share   redemption   Merger  Hedging  Translation  Retained  Shareholders'  controlling 
                                                                                                              -------- 
                   capital      reserve  reserve  reserve      reserve  earnings         equity    interests     Total 
                      $000         $000     $000     $000         $000      $000           $000         $000      $000 
-----------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  -------- 
At 31 March 2019 
 (restated(a) )      5,093       74,962   42,119      153      (8,133)   108,763        222,957        5,266   228,223 
Impact of 
 adopting IFRS 16        -            -        -        -            -   (2,427)        (2,427)        (572)   (2,999) 
-----------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  -------- 
Restated equity 
 at 1 April 2019     5,093       74,962   42,119      153      (8,133)   106,336        220,530        4,694   225,224 
Profit for the 
 year                    -            -        -        -            -    16,461         16,461          942    17,403 
Other 
 comprehensive 
 income/(expense)        -            -        -      167        3,744         -          3,911        (590)     3,321 
-----------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  -------- 
Total 
 comprehensive 
 income for the 
 year                    -            -        -      167        3,744    16,461         20,372          352    20,724 
Transactions with 
owners in their 
capacity as 
owners 
Equity-settled 
 share-based 
 payments                -            -        -        -            -     (287)          (287)            -     (287) 
Tax on 
 equity-settled 
 share-based 
 payments                -            -        -        -            -       213            213            -       213 
Derecognition of 
 non-controlling 
 interests               -            -        -        -            -         -              -        (403)     (403) 
Shares issued        1,117      150,145        -        -            -         -        151,262            -   151,262 
Options exercised       45            -        -        -            -      (45)              -            -         - 
Equity dividends 
 paid                    -            -        -        -            -   (8,975)        (8,975)            -   (8,975) 
Exchange 
 differences on 
 opening balances    (281)      (9,690)  (1,944)        -            -         -       (11,915)            -  (11,915) 
                                                                                  -------------               -------- 
At 31 March 2020 
 (restated(a) )      5,974      215,417   40,175      320      (4,389)   113,703        371,200        4,643   375,843 
-----------------  -------  -----------  -------  -------  -----------  --------  -------------  -----------  -------- 
 

CONDENSED CONSOLIDATED BALANCE SHEET

AS AT 30 SEPTEMBER 2020

 
 
                                                        Unaudited  Unaudited restated(a)  Restated(a)  Restated(a) 
                                                         as at 30               as at 30     as at 31     as at 31 
                                                         Sep 2020               Sep 2019     Mar 2020     Mar 2019 
                                                  Note       $000                   $000         $000         $000 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Non-current assets 
Property, plant and equipment                              90,383                 50,769       92,622       51,786 
Intangible assets                                         140,315                106,482      140,504      110,503 
Right-of-use assets                                       105,882                 43,771       82,742            - 
Long-term assets                                            6,308                      -        6,223            - 
Deferred tax assets                                        22,351                  5,126       18,135        4,693 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total non-current assets                                  365,239                206,148      340,226      166,982 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Current assets 
Inventory                                                 187,717                157,703      141,911       90,442 
Trade and other receivables                               281,556                200,664      110,047       64,641 
Income tax receivable                                      15,138                      -       18,377            - 
Derivative financial assets                          9        556                    511          412          168 
Cash and cash equivalents                            6     76,770                145,117       83,200      110,910 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total current assets                                      561,737                503,995      353,947      266,161 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total assets                                         2    926,976                710,143      694,173      433,143 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Equity 
Share capital                                               6,256                  4,863        5,974        5,093 
Share premium                                             223,327                 69,277      213,755       73,220 
Capital redemption reserve                                  1,737                  1,648        1,662        1,742 
Merger reserve                                             41,974                 39,851       40,175       42,119 
Hedging reserve                                                56                  (401)          320          153 
Translation reserve                                       (9,204)               (12,016)      (4,389)      (8,133) 
Retained earnings                                         126,954                117,526      113,703      108,763 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Equity attributable to owners of the Parent 
 Company                                                  391,100                220,748      371,200      222,957 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Non-controlling interests                                   6,647                  5,293        4,643        5,266 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total equity                                              397,747                226,041      375,843      228,223 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Non-current liabilities 
Loans and borrowings                                 7      (389)                    899        (219)        1,847 
Lease liabilities                                          99,946                 42,097       78,418            - 
Deferred income                                               586                    678          561          976 
Provisions                                                  5,422                  3,094        5,161        3,472 
Other financial liabilities                                 9,354                    868        6,784        2,362 
Deferred tax liabilities                                    1,572                    906        1,314          900 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total non-current liabilities                             116,491                 48,542       92,019        9,557 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Current liabilities 
Bank overdraft                                       6     45,180                125,522       31,003       85,614 
Loans and borrowings                                 7     55,219                124,755          (3)        1,239 
Lease liabilities                                          19,799                  7,531       16,995            - 
Deferred income                                               496                    437          162          129 
Provisions                                                  1,150                  1,149        2,717        1,417 
Income tax payable                                         13,522                  7,417        5,482        6,202 
Trade and other payables                                  230,494                147,732      121,962       76,135 
Other financial liabilities                                46,878                 21,017       47,993       24,627 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total current liabilities                                 412,738                435,560      226,311      195,363 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total liabilities                                    2    529,229                484,102      318,330      204,920 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
Total equity and liabilities                              926,976                710,143      694,173      433,143 
------------------------------------------------  ----  ---------  ---------------------  -----------  ----------- 
 
 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

SIX MONTHSED 30 SEPTEMBER 2020

 
 
                                     Unaudited six months ended 30          Unaudited restated(a)               Twelve 
                                                          Sep 2020   six months ended 30 Sep 2019   months restated(a) 
                                                                                                              ended 31 
                                                                                                              Mar 2020 
                               Note                           $000                           $000                 $000 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Cash flows from operating 
activities 
Profit for the period                                       12,279                         15,923               17,403 
Adjustments for: 
Depreciation and impairment 
 of property, plant and 
 equipment                                                   6,678                          3,845                8,880 
Depreciation of right-of-use 
 assets                                                      9,370                          4,043                8,911 
Amortisation of intangible 
 assets                                                      4,258                          2,444                4,816 
Finance expenses                                             2,265                          2,616                5,479 
Income tax charge/(credit)                                   4,801                          4,535             (18,276) 
Loss/(profit) on disposal of 
 a business                                                    208                              -              (1,836) 
(Profit)/loss on sales of 
 property, plant and 
 equipment                                                    (10)                              9                (246) 
Loss on disposal of 
 intangible fixed assets                                         1                              -                    1 
Equity-settled share-based 
 payments                                                    2,477                          1,908                (252) 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Operating profit after 
 adjustments for non-cash 
 items                                                      42,327                         35,323               24,880 
Change in trade and other 
 receivables                                             (169,524)                      (143,430)                9,841 
Change in inventory                                       (42,133)                       (71,244)                1,532 
Change in trade and other 
 payables, provisions and 
 deferred income                                           105,217                         74,861                1,592 
Cash (used by)/generated from 
 operations                                               (64,113)                      (104,490)               37,845 
Tax received/(paid)                                          2,857                        (2,984)              (5,993) 
Interest and similar charges 
 paid                                                      (1,927)                        (2,092)              (5,090) 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Net cash (outflow)/inflow 
 from operating activities                                (63,183)                      (109,566)               26,762 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Cash flow from investing 
activities 
Proceeds from sale of 
 property, plant and 
 equipment                                                      30                             25                  767 
Acquisition of businesses 
 (net of cash acquired)                                          -                              -            (112,251) 
Acquisition of intangible 
 assets                                                      (737)                        (1,126)              (3,738) 
Acquisition of property, 
 plant and equipment                                       (2,729)                        (4,041)             (10,463) 
Net cash outflow from 
 investing activities                                      (3,436)                        (5,142)            (125,685) 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Cash flows from financing 
activities 
Proceeds from issue of share 
 capital                                                         -                              -              152,535 
Repayment of secured 
 borrowings                                                (1,025)                          (627)              (1,917) 
Net movement in previous 
 credit facilities                                               -                         48,230               48,230 
Repayment of previous credit 
 facilities                                                      -                       (48,230)             (48,230) 
Net movement in new credit 
 facilities                                                 55,730                        123,903                    - 
Payment of lease liabilities                               (8,772)                        (3,868)              (8,430) 
Loan arrangement fees                                            -                          (737)              (1,571) 
Equity dividends paid                                            -                        (5,868)              (8,975) 
Net cash inflow from 
 financing activities                                       45,933                        112,803              131,642 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Net (decrease)/increase in 
 cash and cash equivalents                                (20,686)                        (1,905)               32,719 
Cash and cash equivalents at 
 beginning of the period                                    52,197                         25,296               25,296 
Effect of exchange rate 
 fluctuations on cash held                                      79                        (3,796)              (5,818) 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
Cash and cash equivalents at 
 end of the period                6                         31,590                         19,595               52,197 
-----------------------------  ----  -----------------------------  -----------------------------  ------------------- 
 

(a) the Group's reporting currency has moved to US Dollars following the acquisition of CSS in March 2020 which increased the US dollar revenues to over 70% of the Group and therefore primary statements have been restated from sterling to US dollar. See note 14 to this interim report for the comparative primary statements from the prior year as previously presented in sterling. In addition, all prior year comparative notes to the accounts have been restated throughout this report.

NOTES TO THE INTERIM FINANCIAL STATEMENTS

SIX MONTHSED 30 SEPTEMBER 2020

   1    Accounting policies 

Basis of Preparation

The financial information contained in this interim report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006 and is unaudited.

The Group interim report has been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRS'). The financial information for the year ended 31 March 2020 is extracted from the statutory accounts of the Group for that financial year and has been restated into US dollar. See the Presentation Currency section below for further detail. The auditor's report was (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under Section 498 (2) of the Companies Act 2006. The interim report does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 31 March 2020. The audited annual accounts have been delivered to the Registrar of Companies.

The preparation of financial statements that conform with adopted IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods if relevant.

For the purposes of these financial statements 'Design Group' or 'the Group' means IG Design Group plc ('the Company') and its subsidiaries. The Company's ordinary shares are listed on the Alternative Investment Market ('AIM').

Seasonality of the Business

The business of the Group is seasonal and although revenues accrue relatively evenly in both halves of the year, working capital requirements including inventory levels increase steadily in the first half from July and peaks in October as manufacturing and distribution of Christmas products builds ahead of shipping. The second half of the year sees the borrowing of the Group decline and move to typically a cash positive position as we collect our debtors through January to March.

Presentation Currency

The Company has changed the presentation currency of the Group from pound sterling to US dollar effective 1 April 2020. Following the acquisition of CSS Industries Inc., a significant majority of the Group earnings is now denominated in US dollars. Management believes that the presentation currency change will give investors and other stakeholders a clearer understanding of the Group's financial performance over time. In addition, the change will reduce the volatility of the Group's earnings due to foreign exchange movements, in relation to the translation of foreign currency balances.

The currency translation reserve was set to zero at 1 April 2006 on transition to IFRS and has been restated as if the Group had reported in US dollars since that date. Share capital, share premium, capital redemptions reserve, merger reserve and hedging reserve are translated into US dollars at the rates of exchange at the balance sheet date and the resulting exchange differences are included in other reserves.

The functional currency of the parent company remains as sterling as it is located in the United Kingdom and substantially all of its cash flows, assets and liabilities are denominated in sterling, as well as its share capital. As such, the Parent Company's functional currency differs to that of the Group's reporting currency.

Since the change in reporting currency has been applied retrospectively all comparative numbers in these consolidated interim accounts have been restated into US dollar. Note 14 sets out the key primary statements with both sterling and US dollar comparatives for the six months ended 30 September 2019 and year ended 31 March 2020.

Going Concern

Cash balances and borrowings are detailed in notes 6 and 7.

On 5 June 2019, to meet the funding requirements of the Group, the business refinanced with a banking group comprising HSBC, NatWest, BNP Paribas, Sun Trust and PNC Bank as part of a three year deal. This facility was then subsequently amended and extended on 17 January 2020 with the same banking group to accommodate the acquisition of CSS Industries Inc. The facilities run to May 2022 and comprise of a revolving credit facility ('RCF') of $95.0 million, a further flexible RCF of up to GBP130.0 million flexible to meet the Group's working capital requirements during peak manufacturing, and a maximum limit of $18.0 million invoice financing arrangement in Hong Kong. We also have access to supplier financing arrangements from certain customers which we utilise at certain times of the year. These arrangements are subject to the continuing support of the customers banking partners and therefore could be withdrawn at short notice.

The Directors have prepared detailed plans and forecasts for a period of at least twelve months from the date of signing these financial statements. The plans reflect the seasonal operating cycle of the business and assume continuity of supply chain. They also benefit from the diverse geographic spread of the Group and the high proportion of revenues generated from retailers who have remained open during the Covid-19 crisis. The base case forecasts broadly assume a recovery over the remainder of this financial year but to a generally recessionary environment. The Group is currently trading ahead of forecasts used to consider the going concern assessment. The forecasts show the Group has more than sufficient liquidity. In light of the ongoing Covid-19 pandemic, these forecasts have been sensitised to reflect severe but plausible adverse downturns in the current assumptions including the impact of the second wave of the pandemic and associated lockdown in the UK and Europe as well as the cyber incident in the US. Management has also produced a maximum stress forecast which has been deliberately engineered to challenge the Group's liquidity and leverage covenant positions during the forecast period. Further analysis has been prepared in relation to the mitigating actions open to the Group in the event of a scenario which is worse than the sensitivities already modelled. These mitigating actions include short term sales action, cutting discretionary spend further, headcount reductions and reduction in investment such as capex.

These forecasts and additional analysis including mitigating actions demonstrated that the Group has sufficient excess headroom for the Group to meet its obligations as they fall due for a forecast period of more than twelve months beyond the date of signing these accounts.

Based on these models, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, and accordingly have adopted the going concern basis in preparing the consolidated financial statements. This disclosure has been prepared in accordance with the Financial Reporting Council's UK Corporate Governance Code.

Significant accounting policies

The accounting policies adopted in the preparation of the interim report are consistent with those followed in preparation of the Group's annual financial statements for the year ended 31 March 2020.

2 Segmental information

The Group has one material business activity being the design, manufacture and distribution of Celebration, Craft & creative play, Stationery, Gifting and 'Not-for-resale' consumable products.

Following the acquisition of CSS, the business has been restructured with the consolidation of the UK, European and Australian businesses under one operating segment: International. As such the Board has re-evaluated the reporting segments for the Group and for management purposes the Group is now organised into two geographic reporting segments. These are the segments as reported to, and evaluated by, the Chief Operating Decision Makers for the Group.

The acquisition of CSS Industries Inc. has seen additional entities in various locations around the world including Asia, Australia, UK, India and Mexico. Management review the results for CSS as one consolidated unit and this forms part of the Americas segment for the purpose of segmental reporting.

Inter -- segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Financial performance of each segment is measured on adjusted operating profit before management recharges. Interest and tax are managed on a Group basis and not split between reportable segments. However, the related financial liability and cash has been allocated out into the reportable segments as this is how they are managed by the Group.

Segment assets are all non - current and current assets, excluding deferred tax and income tax, which are shown in the eliminations column. Inter - segment receivables and payables are not included within segmental assets and liabilities as they eliminate on consolidation.

 
 
                                                                                        Central 
                                                                                              & 
                                                       Americas(a)  International  eliminations      Group 
                                                              $000           $000          $000       $000 
-----------------------------------  ----------------  -----------  -------------  ------------  --------- 
Six months ended 30 September 
 2020 
Revenue                             - external             321,572        113,063             -    434,635 
                                    - inter segment              -          2,443       (2,443)          - 
----------------------------------  -----------------  -----------  -------------  ------------  --------- 
Total segment revenue                                      321,572        115,506       (2,443)    434,635 
-----------------------------------  ----------------  -----------  -------------  ------------  --------- 
Segment result before adjusting 
 items and management recharges                             19,550         15,140       (2,224)     32,466 
Adjusting items (note 3)                                                                          (13,121) 
Operating profit                                                                                    19,345 
Finance expenses                                                                                   (2,265) 
Income tax                                                                                         (4,801) 
-----------------------------------  ----------------  -----------  -------------  ------------  --------- 
Profit for six months ended 
 30 September 2020                                                                                  12,279 
-----------------------------------  ----------------  -----------  -------------  ------------  --------- 
Balances at 30 September 2020 
Segment assets                                             563,866        282,583        80,527    926,976 
-----------------------------------  ----------------  -----------  -------------  ------------  --------- 
Segment liabilities                                      (316,758)      (148,970)      (63,501)  (529,229) 
-----------------------------------  ----------------  -----------  -------------  ------------  --------- 
Capital expenditure additions 
 - property, plant and equipment                             1,519          1,210             -      2,729 
 - intangible assets                                           700             37             -        737 
 - right-of-use assets                                      29,639            679             -     30,318 
Depreciation - property, plant 
 and equipment                                               3,917          2,760             1      6,678 
Amortisation - intangible assets                             3,988            270             -      4,258 
Depreciation - right-of-use 
 assets                                                      6,756          2,579            35      9,370 
 
 
 
 
 
                                                                                     Central 
                                                                                           & 
                                                       Americas  International  eliminations      Group 
                                                            (a) 
                                                           $000           $000          $000       $000 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
Six months ended 30 September 
 2019 
Revenue                            - external           183,837        125,383             -    309,220 
                                   - inter segment            -          2,999       (2,999)          - 
---------------------------------  -----------------  ---------  -------------  ------------  --------- 
Total segment revenue                                   183,837        128,382       (2,999)    309,220 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
Segment result before adjusting 
 items and management recharges                          17,600         13,222       (2,167)     28,655 
Adjusting items (note 3)                                                                        (5,581) 
Operating profit                                                                                 23,074 
Finance expenses                                                                                (2,616) 
Income tax                                                                                      (4,535) 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
Profit for the six months 
 ended 30 September 2019                                                                         15,923 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
Balances at 30 September 2019 
Segment assets                                          293,067        282,311       134,765    710,143 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
Segment liabilities                                   (195,082)      (164,295)     (124,725)  (484,102) 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
Capital expenditure additions 
 - property, plant and equipment                          1,021          3,016             4      4,041 
 - intangible assets                                        894            146            86      1,126 
 - right-of-use assets                                      640          2,663            33      3,336 
Depreciation - property, plant 
 and equipment                                            1,243          2,599             3      3,845 
Amortisation - intangible 
 assets                                                   2,120            324             -      2,444 
Depreciation - right-of-use 
 assets                                                   1,787          2,223            33      4,043 
----------------------------------  ----------------  ---------  -------------  ------------  --------- 
 
 
 
 
                                                                                    Central 
                                                                                          & 
                                                   Americas(a)  International  eliminations      Group 
                                                          $000           $000          $000       $000 
-------------------------------  ----------------  -----------  -------------  ------------  --------- 
Year ended 31 March 
 2020 
Revenue                       - external               355,917        268,423             -    624,340 
                              - inter segment                -          7,071       (7,071)          - 
----------------------------  -------------------  -----------  -------------  ------------  --------- 
Total segment revenue                                  355,917        275,494       (7,071)    624,340 
-------------------------------  ----------------  -----------  -------------  ------------  --------- 
Segment result before adjusting 
 items and management recharge                          20,064         24,877       (4,017)     40,924 
Adjusting items (note 
 3)                                                                                           (36,318) 
Operating profit                                                                                 4,606 
Finance expenses                                                                               (5,479) 
Income tax                                                                                      18,276 
-------------------------------  ----------------  -----------  -------------  ------------  --------- 
Profit for the year 
 ended 31 March 2020                                                                            17,403 
-------------------------------  ----------------  -----------  -------------  ------------  --------- 
Balances at 31 March 
 2020 
Segment assets                                         423,642        210,380        60,151    694,173 
-----------------------------  ------------------  -----------  -------------  ------------  --------- 
Segment liabilities                                  (199,584)       (95,410)      (23,336)  (318,330) 
-----------------------------  ------------------  -----------  -------------  ------------  --------- 
Capital expenditure additions 
 - property, plant and equipment                         3,372          7,087             4     10,463 
 - property, plant and equipment 
  on acquisition of business                            40,570              -             -     40,570 
 - intangible assets                                     3,419            236            83      3,738 
 - intangible assets on acquisition 
  of business                                            5,960              -             -      5,960 
 - right-of-use assets                                     790          6,515            33      7,338 
 - right-of-use assets on acquisition 
  of business                                           40,650              -             -     40,650 
Depreciation - property, plant 
 and equipment                                           3,034          5,411             3      8,448 
Impairment                                                   -            432             -        432 
 
Amortisation - intangible 
 assets                                                  4,341            475             -      4,816 
Depreciation - right-of-use 
 assets                                                  4,222          4,619            70      8,911 
------------------------------  -----------------  -----------  -------------  ------------  --------- 
 
 
   (a)     Including overseas entities for the Americas operating segment 

3 Operating profit and adjusting items

 
 
                                   Unaudited    Unaudited    Twelve 
                                  six months   six months    months 
                                       ended        ended     ended 
                                      30 Sep       30 Sep    31 Mar 
                                        2020         2019      2020 
                                        $000         $000      $000 
 ------------------------------  -----------  -----------  -------- 
Operating profit analysed as: 
Adjusted operating profit             32,466       28,655    40,924 
Adjusting items                     (13,121)      (5,581)  (36,318) 
-------------------------------  -----------  -----------  -------- 
Operating profit                      19,345       23,074     4,606 
-------------------------------  -----------  -----------  -------- 
 

Adjusting items

 
 
Six months ended 30                                                       Loss on sale of        Other finance   Total 
September 2020       Cost of sales  Selling expenses  Admin expenses           subsidiary             expenses 
                              $000              $000            $000                 $000                 $000    $000 
Losses/(gains) and 
 transaction costs 
 relating to 
 acquisitions and 
 disposals of 
 businesses(1)                   -                 -             674                  208                    -     882 
Acquisition 
 integration and 
 restructuring 
 costs(2)                       33                 -           5,478                    -                    -   5,511 
Impairment of 
 assets(3)                       -                52               -                    -                    -      52 
Incremental 
 Covid-19 costs(4)             926                 -           1,048                    -                    -   1,974 
Amortisation of 
 acquired 
 intangibles(5)                  -                 -           2,225                    -                    -   2,225 
LTIP charge(6)                   -                 -           2,477                    -                    -   2,477 
Adjusting items                959                52          11,902                  208                    -  13,121 
-------------------  -------------  ----------------  --------------  -------------------  -------------------  ------ 
 
 
Six months ended 30                                                                     Loss              Other  Total 
September 2019              Cost    Selling expenses    Admin expenses            on sale of   finance expenses 
                        of sales                                                  subsidiary 
                            $000                $000              $000                  $000               $000   $000 
Losses/(gains) and 
 transaction costs 
 relating to 
 acquisitions and 
 disposals of 
 businesses(1)                 -                   -               685                     -                  -    685 
Acquisition 
 integration and 
 restructuring 
 costs(2)                    563                   -               642                     -                  -  1,205 
Amortisation of 
 acquired 
 intangibles (5)               -                   -             1,783                     -                  -  1,783 
LTIP charge(6)                 -                   -             1,908                     -                  -  1,908 
Adjusting items              563                   -             5,018                     -                  -  5,581 
--------------------  ----------  ------------------  ----------------  --------------------  -----------------  ----- 
 
 
 
Year ended 31 March                                                                  Profit              Other   Total 
2020                        Cost    Selling expenses    Admin expenses           on sale of   finance expenses 
                        of sales                                                 subsidiary 
                            $000                $000              $000                 $000               $000    $000 
Losses/(gains) and 
 transaction costs 
 relating to 
 acquisitions and 
 disposals of 
 businesses(1)                32                   -             5,918              (1,836)                  -   4,114 
Acquisition 
 integration and 
 restructuring 
 costs(2)                  7,066                   -             4,960                    -                  -  12,026 
Impairment of 
 assets(3)                 8,021               3,789                 -                    -                  -  11,810 
Incremental Covid-19 
 costs(4)                    327                   -               292                    -                  -     619 
Amortisation of 
 acquired 
 intangibles (5)               -                   -             3,573                    -                  -   3,573 
LTIP credits(6)                -                   -             (252)                    -                  -   (252) 
US tariffs(7)              4,428                   -                 -                    -                  -   4,428 
--------------------  ----------  ------------------  ----------------  -------------------  -----------------  ------ 
Adjusting items           19,874               3,789            14,491              (1,836)                  -  36,318 
--------------------  ----------  ------------------  ----------------  -------------------  -----------------  ------ 
 

Adjusting items are separately presented by virtue of their nature, size and/or incidence (per each operating segment). These items are material items of an unusual or non-recurring nature which represent gains or losses and are presented to allow for the review of the performance of the business in a consistent manner and in line with how the business is managed and measured on a day-to-day basis and allow the reader to obtain a clearer understanding of the underlying results of the ongoing Group's operations. They are typically gains or costs associated with events that are not considered to form part of the core operations, or are considered to be a 'non-recurring' event (although they may span several accounting periods).

These costs/(gains) relating to the period ended 30 September 2020 are broken down as follows;

(1) Losses/(gains) and transaction costs relating to acquisitions and disposals of businesses

Costs directly associated with acquisitions, including legal and advisory fees on deals, form part of our reported results on an IFRS basis. These costs however, in the Board's view, form part of the capital transaction, and as they are not attributed to investment value under IFRS 3, they are included as an adjusting item. Similarly, where acquisitions have employee related payments (exclusive of LTIPs) which lock in and incentivise legacy talent, we also include these costs as Adjusting items. Furthermore, gains or losses on the disposal of businesses, including any transaction costs associated with the disposal are treated as Adjusting items.

In the period, costs of $133,000 associated with the acquisition of CSS were incurred relating to advisor fees. In addition, $542,000 of acquisition related employee payments from the Impact Innovations Inc. transaction in 2019 which lock in and incentivise legacy talent. Finally, an additional $207,000 of transaction costs associated with the disposal of Zhejiang Shaoxing Royal Arts and Crafts Co. Ltd ('Shaoxing') were incurred.

As at 30 September 2019, the Group incurred $685,000 of transaction costs primarily relating to acquisition related employee payments from the Impact Innovations Inc. transaction in 2019 which lock in and incentivise legacy talent as well as other M&A related costs. As at 31 March 2020 the total net cost incurred by the Group was $4.1 million, including costs associated with the acquisition of CSS Industries Inc. along with the profit on disposal of Shaoxing.

(2) Acquisition integration and restructuring costs

In order to realise synergies from acquisitions, integration projects are undertaken that aim to deliver future savings and efficiencies for the Group. These are projects outside of the normal operations of the business and typically incur one-time costs to ensure successful implementation. As such the Board considers it is appropriate that costs associated with projects of this nature be included as Adjusting items.

The main costs relate to the integration of CSS into the enlarged DG Americas as new team structures have been put in place. There have also been associated temporary staff costs and recruitment costs as roles are being filled. These costs amounted to $3.4 million in the period.

The CSS business includes a large portfolio of owned and leased sites, and part of the integration project includes the consolidation of these locations resulting in the impairment of lease assets and the ongoing costs associated with the closure of sites as well as the lease liability interest costs. In the period, the site in Nashville, Tennessee was closed and the associated impairment of the lease asset and ongoing costs associated with the mothballing of the site as well as the lease liability interest costs have been treated as Adjusting items amounting to $1.4 million in the period. This is consistent with the treatment adopted when other sites have been closed.

The UK undertook a reorganisation in light of Covid-19 for which the costs have been treated as Adjusting items. In addition, in Australia a similar reorganisation was made in the first half of the financial year. The total costs associated with the reorganisations in the period was $798,000.

As at 30 September 2019, the Group had incurred $1.2 million of acquisition integration costs, and by 31 March 2020 $12.0 million of costs relating to the integration of manufacturing facilities in Memphis, transition and retention costs as well as costs relating to the CSS integration.

(3) Impairment of assets

In light of the impact of Covid-19 on the business, a review of inventory, trade receivables and fixed assets was undertaken at the year end. Inventories were assessed at 31 March 2020 for the net realisable value and an impairment of $7.4 million was taken in relation to aged and obsolete inventory. Similarly trade receivables were assessed for their expected credit loss in line with IFRS 9 and an impairment of $3.8 million was taken. In addition, an impairment of $667,000 was taken as at 31 March 2020 in relation to inventory related assets and certain fixed assets.

As at 30 September 2020, this assessment continues, and for trade receivables any impairment taken at the year end that was not required has been reversed ($3.1 million) alongside any additional debtors as at the reporting date who are now considered higher risk for which an impairment has been taken ($3.9 million). Inventories continue to be assessed for net realisable value, with sell- through of provided inventory of $1.8 million being netted against further inventory risk of $1.2 million recognised. Given the seasonality of our business and the high proportion of Christmas related sales, further assessment will be undertaken by the end of the financial year.

(4) Incremental Covid-19 costs

The Covid-19 outbreak has developed rapidly in 2020, with measures taken around the world to contain the virus affecting economic activity. The Group has been affected in every territory in which we operate and the impact on the general economic environment and the reduced demand of goods from our customers as well as the closures of our businesses has had a significant impact. Certain costs relating to incremental direct labour have been identified that have impacted the financial results of the business during the year to date, equal to $2.0 million. The most significant element of these costs totalled $1.3 million relating to additional labour costs across our manufacturing facilities in the USA, Mexico and India. The US government assistance provided support to the workforce focused on payments direct to the individual rather than through the employer and as such no government assistance has been received directly by the Americas business during the period. Furthermore, an unintended impact of the US government assistance direct to the individual is that additional costs have been incurred to encourage employees to return to work rather than remain at home receiving the government assistance. Similarly in Mexico and India, government mandates has meant that no workforce reductions have been allowed by law and labour costs, that otherwise would not have been, have been incurred as a result. Other incremental costs include $432,000 of costs associated with direct labour inefficiencies and shorter shifts in our manufacturing sites to allow for clean down and sanitising all equipment and areas before the subsequent shift move in as well as $228,000 of additional cleaning and PPE costs.

Management have taken a judgement not to include government assistance received in the period as an Adjusting item, as whilst the amounts received were incremental, the underlying employee expenditure would likely not have been incurred if the government assistance was not received.

In the year ended 31 March 2020, $619,000 of direct incremental costs associated with Covid-19 had been incurred by the Group.

(5) Amortisation of acquired intangibles

Under IFRS, as part of the acquisition of a company, it is necessary to identify intangible assets such as customer relationships and brands which form part of the intangible value of the acquired business but are not part of the acquired balance sheet. These intangible assets are then amortised to the income statement over an appropriately judged period. These are not operational costs relating to the running of the acquired business and are directly related to the accounting for the acquisition. These include tradenames and brands acquired as part of the acquisition of Impact Innovations Inc. and CSS Industries Inc. in the USA and Biscay Pty Greetings Ltd in Australia. As such we include these as Adjusting items. Note that the trade names acquired as part of the acquisition of The Lang Companies Inc. were fully amortised in the prior year.

In addition, in accordance with IFRS 3, on acquisition, businesses need to be fair valued, which can result in an uplift to stock on hand relating to sales orders already attached to the acquired stock. This uplift will distort the margins associated with the stock, and typically unwinds quickly as stock is sold soon after acquisition. The unwind of the stock uplift ($0.6 million) associated with the CSS acquisition is included as an Adjusting item, consistent with the treatment adopted with the Impact acquisition. This has fully unwound as at 30 September 2020.

(6) LTIP charges

As part of our senior management remuneration, the Group operate a Long Term Incentive Plan ('LTIP') in the form of options for ordinary shares of the Group. In accordance with accounting principles, despite this plan not being a cash cost to the business a share -- based payments charge or credit is taken to the income statement. We consider that these charges and the associated social security charges do not form part of the underlying operational costs and therefore include these as Adjusting items.

The LTIP charge for the period to 30 September 2020 is $2.4 million which consists of a principal IFRS 2 charge of $2.2 million and an employer's social security charge of $0.2 million.

As at 30 September 2019, $1.9 million of LTIP charges had been incurred and by the 31 March 2020, these charges had been reversed and instead a credit of ($0.3) million had been taken.

The cash flow effect on adjusting items

There was $10.4 million net outflow on the current period's cash flow (H1 2020: $1.9 million) which included $4.5 million (H1 2020: $591,000) of outflow deferred from last year.

4 Other operating income

 
 
                                                       Unaudited    Unaudited   Twelve 
                                                      six months   six months   months 
                                                           ended        ended    ended 
                                                          30 Sep       30 Sep   31 Mar 
                                                            2020         2019     2020 
                                                            $000         $000     $000 
---------------------------------------------------  -----------  -----------  ------- 
Grant income received                                         64          317      380 
Sub-lease rentals credited to the income statement           178          177      358 
Government assistance                                      3,578            -        - 
Other                                                         89            9      189 
Total other operating income                               3,909          503      927 
---------------------------------------------------  -----------  -----------  ------- 
 

5 Taxation

Recognised in the income statement

 
 
                                                        Unaudited    Unaudited   Twelve 
                                                       six months   six months   months 
                                                            ended        ended    ended 
                                                           30 Sep       30 Sep   31 Mar 
                                                             2020         2019     2020 
                                                             $000         $000     $000 
----------------------------------------------------  -----------  -----------  ------- 
Current tax (charge)/credit 
Current income tax (charge)/credit                        (8,625)      (4,533)   14,458 
Deferred tax credit/(charge) 
Relating to origination and reversal of temporary 
 differences                                                3,824          (2)    3,818 
----------------------------------------------------  -----------  -----------  ------- 
Total tax in the income statement                         (4,801)      (4,535)   18,276 
----------------------------------------------------  -----------  -----------  ------- 
Total tax (charge)/credit on adjusting items 
Total tax on profit before adjusting items                (7,677)      (5,860)  (7,113) 
Total tax on adjusting items                                2,876        1,325    8,053 
Adjusting item - tax credit (US tax loss carryback)             -            -   17,336 
Total tax in income statement                             (4,801)      (4,535)   18,276 
----------------------------------------------------  -----------  -----------  ------- 
 

6 Cash and cash equivalents/bank overdrafts

 
 
                                                      Unaudited    Unaudited     Twelve 
                                                     six months   six months     months 
                                                          ended        ended      ended 
                                                         30 Sep       30 Sep   31 March 
                                                           2020         2019       2020 
                                                           $000         $000       $000 
--------------------------------------------------  -----------  -----------  --------- 
Cash and cash equivalents                                76,770      145,117     83,200 
Bank overdrafts                                        (45,180)    (125,522)   (31,003) 
--------------------------------------------------  -----------  -----------  --------- 
Cash and cash equivalents per cash flow statement        31,590       19,595     52,197 
--------------------------------------------------  -----------  -----------  --------- 
 

Net cash

 
 
                                                    Unaudited    Unaudited   Twelve 
                                                   six months   six months   months 
                                                        ended        ended    ended 
                                                       30 Sep       30 Sep   31 Mar 
                                                         2020         2019     2020 
                                                         $000         $000     $000 
------------------------------------------------  -----------  -----------  ------- 
Cash and cash equivalents                              31,590       19,595   52,197 
Bank loans and overdrafts                            (55,802)    (126,268)    (987) 
Loan arrangement fees                                     972          614    1,209 
------------------------------------------------  -----------  -----------  ------- 
Net (debt)/cash as used in the financial review      (23,240)    (106,059)   52,419 
------------------------------------------------  -----------  -----------  ------- 
 

The bank loans and overdrafts are secured by a fixed charge on certain of the Group's land and buildings, a fixed charge on certain of the Group's book debts and a floating charge on certain of the Group's other assets. See note 7 for further details of the Group's loans and borrowings.

7 Loans and borrowings

This note provides information about the contractual terms of the Group's interest - bearing loans and borrowings.

 
 
                                          Unaudited    Unaudited   Twelve 
                                         six months   six months   months 
                                              ended        ended    ended 
                                             30 Sep       30 Sep   31 Mar 
                                               2020         2019     2020 
                                               $000         $000     $000 
--------------------------------------  -----------  -----------  ------- 
Non-current liabilities 
Secured bank loans                                -        1,149      432 
Loan arrangement fees                         (389)        (250)    (651) 
--------------------------------------  -----------  -----------  ------- 
                                              (389)          899    (219) 
--------------------------------------  -----------  -----------  ------- 
Current liabilities 
Asset backed loan                            10,451       11,248        - 
Revolving credit facilities                  45,279      112,655        - 
Current portion of secured bank loans            72        1,216      555 
--------------------------------------  -----------  -----------  ------- 
Bank loans and borrowings                    55,802      125,119      555 
Loan arrangement fees                         (583)        (364)    (558) 
--------------------------------------  -----------  -----------  ------- 
                                             55,219      124,755      (3) 
--------------------------------------  -----------  -----------  ------- 
 

Secured bank loans

On 5 June 2019, the Group entered into a new three year Group facility with a club of five banks chosen to reflect and support the geographical spread of the Group. The banks within the club are HSBC, NatWest, BNP Paribas, Sun Trust and PNC.

On 17 January 2020 a facility increase was agreed to support the acquisition of CSS Industries Inc. on 3 March 2020 and to accommodate the enlarged Group.

The facilities, which run to May 2022, comprises of:

   --     a revolving credit facility ('RCF A') of $95.0 million; 

-- a further flexible revolving credit facility ('RCF B') with availability varying from month to month of up to GBP130.0 million. This RCF is flexed to meet our working capital requirements during those months when inventory is being built within our annual business cycle and is $nil when not required, minimising carry costs; and

-- an invoice financing arrangement in Hong Kong maximum limit $18.0 million but dependent on level of eligible receivables

In total, the accessible facilities are approximately $276.7 million (maximum $281.4 million) and are more than sufficient to cover our peak requirements. Being partially denominated in US dollar they also provide a hedge against currency movements. The facilities, which do not amortise with time, include an additional uncommitted amount to finance potential acquisitions.

Invoice financing arrangements are secured over the trade receivables that they are drawn on. The RCF facilities are secured with a fixed and floating charge over all other assets of the Group. Revolving credit facilities are classified as current liabilities as the Group expects to settle these amounts within 12 months.

There are financial covenants, tested quarterly, attached to the existing facilities as follows:

-- interest cover, being the ratio of adjusted earnings before interest, depreciation and amortisation (EBITDA), as defined by the banking facility, to interest on a rolling twelve--month basis; and

-- leverage, being the ratio of debt to adjusted EBITDA, as defined by the banking facility, on a rolling twelve-month basis.

Covenants are measured on pre IFRS16 accounting definitions.

There is a further covenant tested monthly in respect of the working capital RCF by which available asset cover must not fall below agreed levels relative to amounts drawn.

In January 2018, the Group's Australia business obtained a secured loan from Westpac of $6.5 million (AU$9.0 million). This is repayable monthly over a five year period. It is subject to a variable interest rate linked to the Australian base rate. $1.0 million was repaid during the period which, along with $110,000 exchange movement results in a balance at 30 September 2020 of $72,000 (AU$100,000). The Australia business also borrows from Westpac for financing working capital and the current facility level is AU$5.0 million from January to June and AU$10.0 million July to December.

Loan arrangement fees represent the unamortised costs in arranging the Group facilities. These fees are being amortised on a straight line basis over the terms of the facilities.

8 Earnings per share

 
 
 
                                              Unaudited     Unaudited          Twelve 
                                             six months    six months    months ended 
                                               ended 30      ended 30     31 Mar 2020 
                                               Sep 2020      Sep 2019 
                                                   $000          $000            $000 
-----------------------------------------  ------------  ------------  -------------- 
 Earnings 
 Earnings attributable to equity 
  holders of the Company                         11,222        15,297          16,461 
 Adjustments 
 Adjusting items (net of non-controlling 
  interest effect)                               13,199         5,485          35,964 
 Tax charge/(relief) on adjustments 
  (net of non-controlling interest 
  effect)                                       (2,899)       (1,296)         (7,946) 
 Adjusting item - tax credit (US 
  tax loss carryback)                                 -             -        (17,336) 
-----------------------------------------  ------------  ------------  -------------- 
 Adjusted earnings                               21,522        19,486          27,143 
-----------------------------------------  ------------  ------------  -------------- 
 Weighted average number of shares 
 Basic weighted average number of 
  shares outstanding                             97,700        79,960          82,605 
 Dilutive effect of employee share 
  option plans                                      327           441             476 
 Diluted weighted average ordinary 
  shares                                         98,027        80,401          83,081 
-----------------------------------------  ------------  ------------  -------------- 
 Earnings per share (cents) 
 Basic earnings per share                          11.5          19.1            19.9 
 Adjustment                                        10.5           5.3            12.9 
-----------------------------------------  ------------  ------------  -------------- 
 Basic adjusted earnings per share                 22.0          24.4            32.8 
-----------------------------------------  ------------  ------------  -------------- 
 Diluted earnings per share                        11.4          19.0            19.8 
-----------------------------------------  ------------  ------------  -------------- 
 Diluted adjusted earnings per share               22.0          24.2            32.7 
-----------------------------------------  ------------  ------------  -------------- 
 

Adjusted earnings per share is provided to reflect the underlying earnings performance of the Group.

 
 
In thousands of shares                           Unaudited    Unaudited   Twelve 
                                                six months   six months   months 
                                                     ended        ended    ended 
                                                    30 Sep       30 Sep   31 Mar 
                                                      2020         2019     2020 
---------------------------------------------  -----------  -----------  ------- 
Issued ordinary shares at 1 April                   96,367       78,366   78,366 
Shares held by Employee Benefit Trust                    -            -        - 
Shares relating to share options                     1,333        1,594    1,594 
Shares issued in respect of share placing                -            -    2,645 
---------------------------------------------  -----------  -----------  ------- 
Weighted average number of shares at the end 
 of the period                                      97,700       79,960   82,605 
---------------------------------------------  -----------  -----------  ------- 
 

Diluted earnings per share

The diluted earnings per share is calculated taking into account LTIP awards whose specified conditions were satisfied at the end of the reporting period of 327,000 (H1 2020: 441,000) share options. At 30 September 2020 the diluted number of shares was 98.0 million (H1 2020: 80.4 million).

9 Financial instruments

Derivative financial instruments

The fair value of forward exchange contracts is assessed using valuation models taking into account market inputs such as foreign exchange spot and forward rates, yield curves and forward interest rates.

Fair value hierarchy

Financial instruments which are recognised at fair value subsequent to initial recognition are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. The three levels are defined as follows:

   --     Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; 

-- Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

-- Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

All other financial assets and liabilities are measured at amortised cost.

The Group held the following financial instruments at fair value at 30 September 2020:

 
 
                                               Unaudited    Unaudited   Twelve 
                                              six months   six months   months 
                                                   ended        ended    ended 
                                                  30 Sep       30 Sep   31 Mar 
                                                    2020         2019     2020 
Forward exchange contracts carrying amount          $000         $000     $000 
-------------------------------------------  -----------  -----------  ------- 
 
Derivative financial assets                          556          511      412 
Derivative financial liabilities                   (538)        (814)      (9) 
-------------------------------------------  -----------  -----------  ------- 
 

10 Capital commitments

At 30 September 2020, the Group had outstanding authorised capital commitments to purchase plant and equipment for $1.1 million (H1 2020: $4.6 million).

11 Related parties

As at 30 September 2020, there are no changes to the related parties or types of transactions as disclosed at 31 March 2020.

12 Acquisitions and disposals of subsidiaries

Acquisitions in the prior year

On 3 March 2020, the Group acquired 100% of the equity of CSS Industries, Inc. ("CSS"), a creative consumer products company, focused on the craft, gift and seasonal categories predominately within the US.

As disclosed in the financial statements as at 31 March 2020, the provisional effect of acquisition of CSS is as follows:

 
                                             Provisional 
                                             fair values 
                                              recognised 
                                          on acquisition 
                                                    $000 
----------------------------------------  -------------- 
Property, plant and equipment                     40,570 
Right-of-use assets                               40,650 
Intangible assets                                  5,960 
Inventories                                       56,630 
Trade and other receivables                       65,296 
Doubtful debt provision                          (2,231) 
Cash                                              10,538 
Trade and payables                              (75,186) 
Provisions                                       (5,167) 
Income taxes                                     (3,828) 
Deferred tax                                       8,797 
Lease liabilities                               (47,344) 
----------------------------------------  -------------- 
Net identifiable assets and liabilities           94,685 
----------------------------------------  -------------- 
Consideration paid in shares                           - 
Consideration paid in cash                       122,789 
----------------------------------------  -------------- 
Total consideration                              122,789 
----------------------------------------  -------------- 
Goodwill                                          28,104 
----------------------------------------  -------------- 
 

Contingent liabilities of GBP3.6 million were recognised as part of the business combination relating to reinstatement costs of

leased buildings, potential change of control penalties, potential environmental claims and potential litigation. The liabilities

have the potential to unwind over one to five years and contain estimates. There has been no material movement in these liabilities as at 30 September 2020.

In addition, as at 30 September 2020, no measurement period adjustment has been made. A review of the provisional acquisition accounting as stated in the financial statements to 31 March 2020 is ongoing, with particular focus on inventory as the business sells through any acquired inventory. As this assessment needs to be ongoing throughout the year, if appropriate, any measurement period adjustments will be made in the second half of the year.

13 Non-adjusting post balance sheet events

After the end of the reporting period, and prior to the authorisation of this interim report on 24 November 2020, the Group has declared an interim dividend of 3.0 pence (3.9 cents) per share (H1 2020: 3.0 pence (3.7 cents)).

14 Presentation currency

The Company has changed the presentation currency of the Group from pound sterling to US dollars effective 1 April 2020. Following the acquisition of CSS Industries Inc., a significant majority of the Group earnings is now denominated in US dollars. Management believes that the presentation currency change will give investors and other stakeholders a clearer understanding of the Design Group's financial performance over time. In addition, the change will reduce the volatility of the Group's earnings due to foreign exchange movements, in relation to the translation of foreign currency balances.

Detailed below are the key primary statements with both pound sterling and US dollar comparatives for both six months ended 30 September 2019 and the year ended 31 March 2020.

CONSOLIDATED INCOME STATEMENT

 
 
                             Unaudited               Unaudited                     Twelve                 Twelve 
                              six months              six months                   months                 months 
                              ended                   ended                        ended                  ended 
                              30 Sep 2019             30 Sep 2019                  31 Mar                 31 Mar 
                                                                                   2020                   2020 
                                       $000                   GBP000                   $000                   GBP000 
--------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
Revenue                           309,220                248,371                  624,340                494,234 
Cost of sales                  (246,186)               (197,597)               (530,109)               (419,131) 
--------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
Gross profit                        63,034                 50,774                   94,231                 75,103 
Selling expenses                 (13,374)                (10,658)                (33,766)                (26,523) 
Administration 
 expenses                        (27,089)                (21,336)                (58,868)                (46,409) 
Other operating 
 income                                  503                    398                      927                    735 
Profit on disposal 
 of property, 
 plant and equipment                      -                       -                      246                    188 
Profit on disposal 
 of subsidiary                            -                       -                   1,836                  1,486 
Operating profit                    23,074                 19,178                     4,606                  4,580 
Finance expenses                   (2,616)                 (2,083)                 (5,479)                 (4,317) 
--------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
Profit /(loss) 
 before tax                         20,458                 17,095                     (873)                     263 
Income tax 
 (charge)/credit                   (4,535)                 (3,792)                  18,276                 14,547 
--------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
Profit for the 
 period                             15,923                 13,303                   17,403                 14,810 
--------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
Attributable to: 
Owners of the Parent 
 Company                            15,297                 12,799                   16,461                 14,060 
Non-controlling 
 interests                               626                    504                      942                    750 
--------------------  ----------------------  ----------------------  ----------------------  ---------------------- 
 

Earnings per ordinary share

 
 
                 Unaudited             Unaudited                    Twelve months              Twelve months 
                  six months            six months                   ended                      ended 
                  ended                 ended                        31 Mar 2020                31 Mar 2020 
                  30 Sep 2019           30 Sep 
                                        2019 
--------  ---------------------  --------------------  --------------------------  ------------------------- 
Basic                     19.1c                 16.0p                  19.9c                      17.0p 
--------  ---------------------  --------------------  --------------------------  ------------------------- 
Diluted                   19.0c                 16.0p                  19.8c                      16.9p 
--------  ---------------------  --------------------  --------------------------  ------------------------- 
 

Adjusted Earnings per ordinary share

 
 
                  Unaudited                Unaudited 
                   six months               six months                 Twelve months              Twelve months 
                   ended                    ended                       ended                      ended 
                   30 Sep 2019              30 Sep 2019                 31 Mar 2020                31 Mar 2020 
--------  ----------------------  ----------------------  --------------------------  ------------------------- 
Basic                      24.4c                   20.2p                  32.8c                      27.0p 
--------  ----------------------  ----------------------  --------------------------  ------------------------- 
Diluted                    24.2c                   20.1p                  32.7c                      26.9p 
--------  ----------------------  ----------------------  --------------------------  ------------------------- 
 

EXECUTIVE REVIEW INCOME STATEMENT

 
 
                                                                                   Twelve 
                          Unaudited                 Unaudited                      months                 Twelve 
                           six months                six months                    ended                  months 
                           ended                     ended                         31 Mar                 ended 
                           30 Sep 2019               30 Sep 2019                   2020                   31 Mar 2020 
                                      $m                        GBPm                      $m                     GBPm 
----------------  -----------------------  -------------------------  ----------------------  ----------------------- 
Revenue                           309.2                     248.4                     624.3                  494.2 
Gross profit                        63.6                      51.3                    114.1                    90.9 
Overheads                         (34.9)                   (27.7)                    (73.2)                  (57.5) 
Adjusted 
 operating 
 profit                             28.7                      23.6                      40.9                   33.4 
Finance expenses                    (2.6)                    (2.1)                     (5.5)                   (4.3) 
----------------  -----------------------  -------------------------  ----------------------  ----------------------- 
Adjusted profit 
 /(loss) before 
 tax                                26.1                      21.5                      35.4                   29.1 
Adjusting items                     (5.6)                    (4.4)                   (36.3)                  (28.8) 
----------------  -----------------------  -------------------------  ----------------------  ----------------------- 
Profit /(loss) 
 before tax                         20.5                      17.1                     (0.9)                     0.3 
----------------  -----------------------  -------------------------  ----------------------  ----------------------- 
Income tax 
 credit/(charge)                    (4.6)                    (3.8)                      18.3                   14.5 
----------------  -----------------------  -------------------------  ----------------------  ----------------------- 
Profit for the 
 period                             15.9                      13.3                      17.4                   14.8 
----------------  -----------------------  -------------------------  ----------------------  ----------------------- 
 

CONSOLIDATED BALANCE SHEET

 
 
                            Unaudited                 Unaudited                     Twelve                     Twelve 
                             six months                six months                   months ended               months 
                             ended                     ended                        31 Mar                     ended 
                             30 Sep 2019               30 Sep 2019                  2020                       31 Mar 2020 
                                     $000                      GBP000                   $000                       GBP000 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Non-current 
assets 
Property, plant 
 and equipment                    50,769                    41,276                   92,622                     74,695 
Intangible 
 assets                         106,482                     86,570                 140,504                    113,309 
Right-of-use 
 assets                           43,771                    35,586                   82,742                     66,728 
Long-term assets                         -                         -                   6,223                      5,019 
Deferred tax 
 assets                             5,126                     4,167                  18,135                     14,624 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total 
 non-current 
 assets                         206,148                   167,599                  340,226                    274,375 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Current assets 
Inventory                       157,703                   128,213                  141,911                    114,445 
Trade and other 
 receivables                    200,664                   163,143                  110,047                      88,748 
Income tax 
 receivable                              -                         -                 18,377                     14,820 
Derivative 
 financial 
 assets                                511                       415                      412                        332 
Cash and cash 
 equivalents                    145,117                   117,982                    83,200                     67,098 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total current 
 assets                         503,995                   409,753                  353,947                    285,443 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total assets                    710,143                   577,352                  694,173                    559,818 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Equity 
Share capital                       4,863                     3,954                    5,974                      4,818 
Share premium                     69,277                    56,323                 213,755                    172,383 
Capital 
 redemption 
 reserve                            1,648                     1,340                    1,662                      1,340 
Merger reserve                    39,851                    32,399                   40,175                     32,399 
Hedging reserve                      (401)                     (326)                      320                        258 
Translation 
 reserve                        (12,016)                      2,375                  (4,389)                      7,383 
Retained 
 earnings                       117,526                     83,400                 113,703                      80,794 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Equity 
 attributable to 
 owners 
 of the Parent 
 Company                        220,748                   179,465                  371,200                    299,375 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Non-controlling 
 interests                          5,293                     4,305                    4,643                      3,744 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total equity                    226,041                   183,770                  375,843                    303,119 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Non-current 
liabilities 
Loans and 
 borrowings                            899                       731                    (219)                      (177) 
Lease 
 liabilities                      42,097                    34,225                   78,418                     63,241 
Deferred income                        678                       552                      561                        452 
Provisions                          3,094                     2,516                    5,161                      4,163 
Other financial 
 liabilities                           868                       706                   6,784                      5,471 
Deferred tax 
 liabilities                           906                       736                   1,314                      1,059 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total 
 non-current 
 liabilities                      48,542                    39,466                   92,019                     74,209 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Current 
liabilities 
Bank overdraft                  125,522                   102,051                    31,003                     25,004 
Loans and 
 borrowings                     124,755                   101,427                           (3)                        (2) 
Lease 
 liabilities                        7,531                     6,123                  16,995                     13,705 
Deferred income                        437                       355                      162                        131 
Provisions                          1,149                        934                   2,717                      2,191 
Income tax 
 payable                            7,417                     6,030                    5,482                      4,399 
Trade and other 
 payables                       147,732                   120,109                  121,962                      98,357 
Other financial 
 liabilities                      21,017                    17,087                   47,993                     38,705 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total current 
 liabilities                    435,560                   354,116                  226,311                    182,490 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total 
 liabilities                    484,102                   393,582                  318,330                    256,699 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
Total equity and 
 liabilities                    710,143                   577,352                  694,173                    559,818 
----------------  ------------------------  -------------------------   -------------------------  ----------------------- 
 
 

CONSOLIDATED CASH FLOW STATEMENT

 
 
                                   Unaudited                   Unaudited                     Twelve                   Twelve 
                                    six months                  six months                   months                   months 
                                    ended                       ended                        ended                    ended 
                                    30 Sep 2019                 30 Sep 2019                  31 Mar 2020              31 Mar 2020 
                                            $000                        GBP000                   $000                     GBP000 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Cash flows from 
operating activities 
Profit for the year                      15,923                      13,303                   17,403                   14,810 
Adjustments for: 
Depreciation and 
 impairment                                3,845                       3,041                    8,880                    6,994 
Depreciation of 
 right-of-use assets                       4,043                       3,208                    8,911                    7,014 
Amortisation of 
 intangible assets                         2,444                       1,944                    4,816                    3,796 
Finance expenses                           2,616                       2,083                    5,479                    4,317 
Income tax 
 charge/(credit)                           4,535                       3,792                (18,276)                 (14,547) 
Profit on disposal of 
 subsidiary                                      -                           -                (1,836)                  (1,486) 
Loss/(profit) on 
 disposal of property, 
 plant and equipment                              9                           7                  (246)                    (188) 
Loss on disposal of 
 intangible fixed 
 assets                                          -                           -                         1                        1 
Equity-settled 
 share-based payments                      1,908                       1,513                     (252)                    (202) 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Operating profit after 
 adjustments for 
 non-cash items                          35,323                      28,891                   24,880                   20,509 
Change in trade and 
 other receivables                   (143,430)                   (116,210)                      9,841                       629 
Change in inventory                    (71,244)                    (56,065)                     1,532                       705 
Change in trade and 
 other payables, 
 provisions and 
 deferred income                         74,861                      61,502                     1,592                    5,913 
Cash (used 
 by)/generated from 
 operations                          (104,490)                     (81,882)                   37,845                   27,756 
Tax paid                                 (2,984)                     (2,297)                  (5,993)                  (4,749) 
Interest and similar 
 charges paid                            (2,092)                     (1,672)                  (5,090)                  (3,996) 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Net cash 
 (outflow)/inflow from 
 operating activities                (109,566)                     (85,851)                   26,762                   19,011 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Cash flow from 
investing activities 
Proceeds from sale of 
 property, plant and 
 equipment                                      25                          21                     767                      595 
Acquisition of 
 businesses (net of 
 cash acquired)                                  -                           -            (112,251)                  (87,696) 
Acquisition of 
 intangible assets                       (1,126)                        (908)                 (3,738)                  (2,997) 
Acquisition of 
 property, plant and 
 equipment                               (4,041)                     (3,171)                (10,463)                   (8,133) 
Net cash outflow from 
 investing activities                    (5,142)                     (4,058)              (125,685)                  (98,231) 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Cash flows from 
financing activities 
Proceeds from issue of 
 share capital                                   -                           -              152,535                  116,924 
Repayment of secured 
 borrowings                                 (627)                       (497)                 (1,917)                  (1,505) 
Net movement in 
 previous credit 
 facilities                              48,230                      37,976                   48,230                   37,976 
Repayment of previous 
 credit facilities                     (48,230)                    (37,976)                 (48,230)                 (37,976) 
Net movement in new 
 credit facilities                     123,903                     100,734                            -                      -- 
Payment of lease 
 liabilities                             (3,868)                     (3,055)                  (8,430)                  (6,622) 
Loan arrangement fees                       (737)                       (598)                 (1,571)                  (1,234) 
Equity dividends paid                    (5,868)                     (4,732)                  (8,975)                  (7,104) 
Net cash inflow from 
 financing activities                  112,803                       91,852                 131,642                  100,459 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Net (decrease)/increase 
 in cash and cash 
 equivalents                             (1,905)                       1,943                  32,719                   21,239 
Cash and cash 
 equivalents at 
 beginning of the 
 period                                  25,296                      19,458                   25,296                   19,458 
Effect of exchange rate 
 fluctuations on cash 
 held                                    (3,796)                     (5,470)                  (5,818)                    1,397 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
Cash and cash 
 equivalents at end of 
 the period                              19,595                      15,931                   52,197                   42,094 
-----------------------  --------------------------  --------------------------  -----------------------  ----------------------- 
 
 

ADJUSTED CONSOLIDATED CASH FLOW STATEMENT

 
 
                                          Unaudited     Unaudited    Twelve    Twelve 
                                         six months    six months    months    months 
                                              ended         ended     ended     ended 
                                             30 Sep        30 Sep    31 Mar    31 Mar 
                                               2019          2019      2020      2020 
                                                 $m          GBPm        $m      GBPm 
 Adjusted EBITDA                               37.2          30.4      59.5      48.1 
 Movements in working capital               (139.8)       (110.7)     (5.3)     (7.5) 
-------------------------------------  ------------  ------------  --------  -------- 
 Adjusted cash (used by)/generated 
  from operations                           (102.6)        (80.3)      54.2      40.6 
 Adjusting items                              (1.9)        (1.6 )    (16.6)    (13.1) 
-------------------------------------  ------------  ------------  --------  -------- 
 Cash (used by)/generated from 
  operations                                (104.5)        (81.9)      37.6      27.5 
 Capital expenditure (net of 
  disposals of property, plant 
  and equipment)                              (5.1)         (4.1)    (13.7)    (10.7) 
 Business acquired (including 
  cash on acquisition)                            -             -   (112.3)    (87.7) 
 Tax paid                                     (3.0)         (2.3)     (6.0)     (4.7) 
 Interest paid                                (2.1)         (1.7)     (5.1)     (4.0) 
 Payments of lease liabilities                (3.9)         (3.1)     (8.4)     (6.6) 
 Dividends paid (including those 
  paid to non controlling interests)          (5.9)         (4.7)     (9.0)     (7.1) 
 Proceeds from issue of share 
  capital                                         -             -     152.5     116.9 
 FX and other                                 (3.8)         (5.5)     (5.4)       1.6 
-------------------------------------  ------------  ------------  --------  -------- 
 Movement in net (debt)/cash                (128.3)       (103.3)      30.2      25.2 
 Opening net cash                              22.2          17.1      22.2      17.1 
-------------------------------------  ------------  ------------  --------  -------- 
 Closing net (debt)/cash                    (106.1)        (86.2)      52.4      42.3 
-------------------------------------  ------------  ------------  --------  -------- 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
 
                                            Unaudited    Unaudited    Twelve  Twelve 
                                           six months   six months    months   months 
                                                ended        ended     ended   ended 
                                               30 Sep       30 Sep    31 Mar   31 Mar 
                                                 2019         2019      2020    2020 
                                                 $000       GBP000      $000   GBP000 
Profit for the period                          15,923       13,303    17,403   14,810 
Other comprehensive income: 
Exchange difference on translation 
 of foreign operations (net of tax)           (4,031)          860     3,112    5,450 
Recycling translation reserves on 
 disposal of subsidiary                             -            -        42       34 
Transfer to profit and loss on maturing 
 cash flow hedges (net of tax)                  (490)        (377)     (490)    (377) 
Net unrealised (loss)/gain on cash 
 flow hedges (net of tax)                        (64)         (67)       657      517 
Other comprehensive income for the 
 period, net of tax items which may 
 be reclassified to profit and loss 
 in subsequent periods                        (4,585)          416     3,321    5,624 
Total comprehensive income for the 
 year, net of tax                              11,338       13,719    20,724   20,434 
Attributable to: 
Owners of the Parent Company                   10,860       13,123    20,372   19,976 
Non-controlling interests                         478          596       352      458 
                                               11,338       13,719    20,724   20,434 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SIX MONTHSED 30 SEPTEMBER 2019 - US dollar

 
 
                        Attributable to the owners of the Parent Company 
                                Share 
                              premium 
                                  and                                                                 Non- 
                              capital 
                    Share  redemption   Merger  Hedging  Translation  Retained  Shareholders'  controlling 
                  capital     reserve  reserve  reserve      reserve  earnings         equity    interests    Total 
                     $000        $000     $000     $000         $000      $000           $000         $000     $000 
At 31 March 2019    5,093      74,962   42,119      153      (8,133)   108,763        222,957        5,266  228,223 
Impact of 
 adopting IFRS 
 16                     -           -        -        -            -   (2,427)        (2,427)        (572)  (2,999) 
Restated equity 
 at 31 March 
 2019               5,093      74,962   42,119      153      (8,133)   106,336        220,530        4,694  225,224 
Profit for the 
 year                   -           -        -        -            -    15,297         15,297          626   15,923 
Other 
 comprehensive 
 income                 -           -        -    (554)      (3,883)         -        (4,437)        (148)  (4,585) 
Total 
 comprehensive 
 income for the 
 year                   -           -        -    (554)      (3,883)    15,297         10,860          478   11,338 
Transactions 
with owners in 
their capacity 
as owners 
Equity-settled 
 share-based 
 payments               -           -        -        -            -     1,491          1,491            -    1,491 
Tax on 
 equity-settled 
 share-based 
 payments               -           -        -        -            -       314            314            -      314 
Recognition of 
 non-controlling 
 interests              -           -        -        -            -         -              -          121      121 
Options 
 exercised             44           -        -        -            -      (44)              -            -        - 
Equity dividends 
 paid                   -           -        -        -            -   (5,868)        (5,868)            -  (5,868) 
Exchange 
 differences on 
 opening 
 balances           (274)     (4,037)  (2,268)        -            -         -        (6,579)            -  (6,579) 
At 30 September 
 2019               4,863      70,925   39,851    (401)     (12,016)   117,526        220,748        5,293  226,041 
 
 

SIX MONTHSED 30 SEPTEMBER 2019 - Sterling

 
 
                         Attributable to the owners of the Parent Company 
                                Share 
                              premium 
                                  and                                                                    Non- 
                              capital 
                    Share  redemption    Merger   Hedging  Translation  Retained.  Shareholders'  controlling 
                                                                                                               ------- 
                  capital     reserve   reserve   reserve      reserve   earnings         equity    interests    Total 
                   GBP000      GBP000    GBP000    GBP000       GBP000     GBP000         GBP000       GBP000   GBP000 
----------------  -------  ----------  -------- 
At 31 March 2019    3,918      57,663    32,399       118        1,607     75,801        171,506        4,051  175,557 
Impact of 
 adopting IFRS 
 16                     -           -         -         -            -    (1,867)        (1,867)        (440)  (2,307) 
----------------  -------  ----------  -------- 
Restated equity 
 at 31 March 
 2019               3,918      57,663    32,399       118        1,607     73,934        169,639        3,611  173,250 
Profit for the 
 year                   -           -         -         -            -     12,799         12,799          504   13,303 
Other 
 comprehensive 
 income                 -           -         -     (444)          768          -            324           92      416 
----------------  -------  ----------  -------- 
Total 
 comprehensive 
 income for the 
 year                   -           -         -     (444)          768     12,799         13,123          596   13,719 
Transactions 
with owners in 
their capacity 
as owners 
Equity-settled 
 share-based 
 payments               -           -         -         -            -      1,180          1,180            -    1,180 
Tax on 
 equity-settled 
 share-based 
 payments               -           -         -         -            -        255            255            -      255 
Recognition of 
 non-controlling 
 interests              -           -         -         -            -          -              -           98       98 
Options 
 exercised             36           -         -         -            -       (36)              -            -        - 
Equity dividends 
 paid                   -           -         -         -            -    (4,732)        (4,732)            -  (4,732) 
At 30 September 
 2019               3,954      57,663    32,399     (326)        2,375     83,400        179,465        4,305  183,770 
----------------  -------  ----------  -------- 
 
 

YEARED 31 MARCH 2020 - US dollar

 
 
                         Attributable to the owners of the Parent Company 
                                Share 
                              premium 
                                  and                                                                   Non- 
                              capital 
                    Share  redemption    Merger   Hedging  Translation  Retained  Shareholders'  controlling 
                  capital     reserve   reserve   reserve      reserve  earnings         equity    interests     Total 
                     $000        $000      $000      $000         $000      $000           $000         $000      $000 
---------------- 
At 31 March 2019    5,093      74,962    42,119       153      (8,133)   108,763        222,957        5,266   228,223 
Impact of 
 adopting IFRS 
 16                     -           -         -         -            -   (2,427)        (2,427)        (572)   (2,999) 
---------------- 
Restated equity 
 at 1 April 2019    5,093      74,962    42,119       153      (8,133)   106,336        220,530        4,694   225,224 
Profit for the 
 year                   -           -         -         -            -    16,461         16,461          942    17,403 
Other 
 comprehensive 
 income                 -           -         -       167        3,744         -          3,911        (590)     3,321 
----------------  -------  ----------  -------- 
Total 
 comprehensive 
 income for the 
 year                   -           -         -       167        3,744    16,461         20,372          352    20,724 
Transactions 
with owners in 
their capacity 
as owners 
Equity-settled 
 share-based 
 payments               -           -         -         -            -     (287)          (287)            -     (287) 
Tax on 
 equity-settled 
 share-based 
 payments               -           -         -         -            -       213            213            -       213 
Derecognition of 
 non-controlling 
 interests              -           -         -         -            -         -              -        (403)     (403) 
Shares issued       1,117     150,145         -         -            -         -        151,262            -   151,262 
Options 
 exercised             45           -         -         -            -      (45)              -            -         - 
Equity dividends 
 paid                   -           -         -         -            -   (8,975)        (8,975)            -   (8,975) 
Exchange 
 differences on 
 opening 
 balances           (281)     (9,690)   (1,944)         -            -         -       (11,915)            -  (11,915) 
At 31 March 2020    5,974     215,417    40,175       320      (4,389)   113,703        371,200        4,643   375,843 
 
 

YEARED 31 MARCH 2020 - Sterling

 
 
                          Attributable to the owners of the Parent Company 
                                 Share 
                               premium 
                                   and                                                                    Non- 
                               capital 
                     Share  redemption    Merger    Hedging  Translation  Retained  Shareholders'  controlling 
                   capital     reserve   reserve    reserve      reserve  earnings         equity    interests    Total 
                    GBP000      GBP000    GBP000     GBP000       GBP000    GBP000         GBP000       GBP000   GBP000 
----------------  --------  ----------  -------- 
At 31 March 2019     3,918      57,663    32,399        118        1,607    75,801        171,506        4,051  175,557 
Impact of 
 adopting IFRS 
 16                      -           -         -          -            -   (1,867)        (1,867)        (440)  (2,307) 
----------------  --------  ----------  -------- 
Restated equity 
 at 1 April 2019     3,918      57,663    32,399        118        1,607    73,934        169,639        3,611  173,250 
Profit for the 
 year                    -           -         -          -            -    14,060         14,060          750   14,810 
Other 
 comprehensive 
 income                  -           -         -        140        5,776         -          5,916        (292)    5,624 
----------------  --------  ----------  -------- 
Total 
 comprehensive 
 income for the 
 year                    -           -         -        140        5,776    14,060         19,976          458   20,434 
Transactions 
with owners in 
their capacity 
as owners 
Equity-settled 
 share-based 
 payments                -           -         -          -            -     (231)          (231)            -    (231) 
Tax on 
 equity-settled 
 share-based 
 payments                -           -         -          -            -       171            171            -      171 
Derecognition of 
 non-controlling 
 interests               -           -         -          -            -         -              -        (325)    (325) 
Shares issued          864     116,060         -          -            -         -        116,924            -  116,924 
Options 
 exercised              36           -         -          -            -      (36)              -            -        - 
Equity dividends 
 paid                    -           -         -          -            -   (7,104)        (7,104)            -  (7,104) 
At 31 March 2020     4,818     173,723    32,399        258        7,383    80,794        299,375        3,744  303,119 
----------------  --------  ----------  -------- 
 
 
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