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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ig Design Group Plc | LSE:IGR | London | Ordinary Share | GB0004526900 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.50 | -2.06% | 119.00 | 118.00 | 125.00 | 121.50 | 121.50 | 121.50 | 261,193 | 16:35:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Convrt Paper,paperbd Pds,nec | 890.31M | -27.99M | -0.2829 | -4.29 | 120.2M |
From Apr 2019 to Apr 2024
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.
Hot Features
Premium
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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