Design Group

Introduction

Introduction from
Stewart Gilliland

I am pleased to provide the overview to a strong performance during the year across a number of dimensions. This places the Group in a stronger position than twelve months ago, putting it on the road to recovering profits, margins and financial strength. The pivot to focus on near-term delivery whilst not losing sight of our longer-term strategy required a lot of hard work from everyone across the organisation. I would like to thank my colleagues throughout the Group for their hard work, and positive approach to addressing the challenges that face us.

As I pass on executive responsibility to Paul Bal, our recently appointed Group CEO, I am delighted to see a new growth-focused strategy taking form. This strategy will guide our teams to deliver more sustainable success in the coming years, built on a resilient foundation.


Stewart Gilliland

Non-Executive Chair

Design Group

Watch: 2023 Full Year Results

Design Group

Results Highlights

Return to profitability. Adjusted profit before tax. Deliver an adjusted profit before tax by FY2024. Turnaround through organic growth and acquisitions. Chart: Adjusted profit/(loss) before tax ($m). 2019: 35.8. 2020: 35.7. 2021: 32.8. 2022: (1.3). 2023: 9.2.

Adjusted EBITDA ($m). $48.8m +3%. 2023: 48.4. 2022: 38.3. 2021: 73.3. 2020: 59.8. 2019: 46.8. Reported profit/(loss) before tax ($m). $(18.9)m. 2023: (18.9). 2022: 2.2. 2021: 14.7. 2020: (0.9). 2019: 22.7.

 

Recovering margins. Adjusted operating margin. Recover to pre-pandemic levels. Rebuild a more resilient business model. Adjusted operating margin (%). 2019: 6.6. 2020: 6.6. 2021: 4.3. 2022: 0.4. 2023: 1.8.

Revenue ($m) $890.3m. -8%. 2023: 890.3. 2022: 965.1. 2021: 873.2. 2020: 624.3. 2019: 587.4. Return on capital employed (%). 2023: 5.6. 2022: 1.3. 2021: 15.8. 2020: 20.5. 2019: 22.2.

 

Generate cash. Average leverage. Sustain long-term average leverage below 2.0x. Enhance financial strength. Average leverage. 2019: 1.4x. 2020: 0.9x. 2021: 0.0x. 2022: 1.0x. 2023: 0.6x.

Cash conversion (%). 123.8%. 2023: 123.8. 2022: 15.1. 2021: 93.2. 2020: 90.7. 2019: 130.5. Average bank debt ($m). $17.1m. 2023: 17.1. 2022: 17.2. 2021: 2.2. 2020: 43.6. 2019: 63.9.

 

 

Design Group

Our Business at a Glance

We have more than 11,000 customers worldwide. Products are sold across 210,000 stores. We operate in more than 70 countries.

Revenue by customer destination. Americas: $607.5m. 2022: $665.1m. 2023: 68%. 2022: 69%. International $282.8m. 2022: $300.0m. 2023: 32%. 2022: 31%.

Revenue by season. Everyday. 2023: 49%. 2022: 53%. Christmas. 2023: 42%. 2022: 40%. Minor seasons. 2023: 9%. 2022: 7%.

Revenue by product. Celebrations. 2023: 60%. 2022: 63%. Craft and creative play. 2023: 17%. 2022: 16%. Gifting. 2023: 11%. 2022: 10%. ‘Not-for-resale’ consumables. 2023: 7%. 2022: 7%. Stationery. 2023: 5%. 2022: 4%.

Revenue by source. Sourced. 2023: 64%. 2022: 67%. Manufactured in-house. 2023: 36%. 2022: 33%.

Design Group

Executive Review

Executive Review
Paul Bal

Twelve months ago, as we looked at the coming year, it was expected to be a year where our focus would be on stabilising the Group’s falling profitability. It is therefore pleasing to report that during the year ended 31 March 2023 we have stabilised profitability, delivering a significant improvement in adjusted profit before tax ($9.2 million up from $1.3 million loss in the prior year). This highlights a good start in the journey to turnaround performance, growing profitability and margins as a result.

Whilst FY2023 was not without its challenges, as consumer demand weakened in the last quarter in some markets and paper and energy-driven costs continued to rise, the Group has delivered adjusted profit growth ahead of our earlier expectations. The adjusted operating profit more than quadrupled to $16.1 million, with the reported operating loss at $12.0 million which includes a non-cash $29.1 million impairment of goodwill. Adjusted operating profit margins similarly more than quadrupled to 1.8%. The Group remains on track to meet its aspiration to return to pre-pandemic operating profit margins by FY2025.

 

Read the full Executive Review using the download button below or from page 16 of the Annual Report.

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Executive Review

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Design Group

Our Strategy

As we experience some momentum on our journey to restoring our margins and financial strength, it has been our focus to establish a plan for the next stage of our development. A growth-focused strategic review was completed recently, and we are pleased to be in a position to share our early thoughts.

 

Last year’s strategic focus

In recent years the Group had focused on a 3 pillar strategy of:

• Working with the winners
• Design & innovation
• Efficiency & scale

The speed and the scale of the challenges experienced in FY2022 caused the Board to revisit this, favouring more immediate plans and aspirations with the objective of quickly making the Group’s operations more resilient, and stopping further deterioration in profitability.

This resulted in a 5-point focus on:

• Reducing complexity, better leveraging expertise and scale and improving mix
• Improving margins
• Making the supply chain more resilient
• Lowering working capital
• Strengthening leadership and teams

Notwithstanding the tough economic backdrop that we have faced, including significant inflationary pressure, this focus on strengthening our business model has enabled us to deliver a stronger than anticipated improvement in profitability, margins and balance sheet strength over FY2023.

The new emerging growth-focused Group strategy

Our experience from delivering the FY2023 results under continued tough retail conditions, coupled with the significant leadership and organisational changes taking place across the Group, means that having the right strategy is more important than ever to put the Group back onto a sustainable organic growth trajectory. And with this intent, during the last quarter of FY2023, in conjunction with the Operating Board, a professional firm of external consultants was commissioned to work with our local leadership teams and carry out a diagnostic of the strategic challenges faced by our businesses as they seek to grow. The findings were reported to the Board in March, and the Board and Operating Board have since distilled the report into strategic priorities.

These have now been articulated as a high-level Group strategy which we see as an evolution based upon where the business is today, rather than a complete change in strategy. In parallel, our Business Units started compiling their own 3-year strategic plans taking the diagnostic work as input. These plans should be completed and aligned over the coming months. At our half-year reporting in November 2023, we anticipate being able to set out further details of our aspirations, plans and key initiatives. Further down the line we will also share some case studies to illustrate the activities being undertaken.

 

The new Group strategy

The strategy concentrates on further developing and sustaining the critical attributes our customers require of us. This will enable us to continue to be the partner of choice that working together with our customers, wins in the retail environment.

 

Read the full Strategy section using the download button below or from page 10 of the Annual Report.

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2023 Full Strategy Section

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Design Group

Sustainability

As a market leader in our industry, we aim to minimise our impact on the environment by constantly challenging ourselves to find ways in which we can use our scale and people to influence and drive positive, proactive change. We understand that our impact and responsibilities extend beyond our immediate surroundings, into the lives of our employees and stakeholders, the environment, and our local and global communities.

It is a moral and commercial necessity that we strive for the highest standards of ethical behaviour and innovate and improve to reduce the environmental impact of our operations to protect and preserve our planet, for this and future generations.

Our sustainability framework ‘helping design a better future’, aims to shape the Group’s approach to sustainability and enable us to demonstrate, monitor and improve our environmental, social and governance (ESG) performance and to drive our business forward sustainably. The framework is underpinned by the United Nations Sustainable Development Goals (SDGs) which were reviewed to identify the areas which are most relevant to Design Group.

Not only has the Group made progress in striving towards TCFD reporting in the past year, we have continued to leverage our innovation and customer relationships to develop, produce and supply sustainable ranges. Our performance, KPIs and progress in each of the three pillars are reported over the next few pages.

We are pleased with our progress in recent years, however we recognise that we are still early on in our sustainability journey and there is further work required. We will continue to develop our sustainability framework, in particular to further refi ne our KPIs, targets and goals in order to drive positive change and strive to be the most sustainable we can be.

 

Read the full Sustainability section using the download button below or from page 30 of the Annual Report.

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2023 Full Sustainability Section

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Design Group

Risks

Our risk management framework Governance

Risk is an inherent part of business, especially as Design Group seeks to become more resilient in its performance going forward.

Design Group operates a well-established structure for the management of risk, where responsibilities and ownership are clearly defined.

 

Risk strategy and appetite

As part of the risk management process each principal risk, as identified in the next few pages, is considered in the context of achieving the Group’s strategy.

Risk appetite is an expression of the types and amount of risk that the Group is willing to take or accept to achieve its objectives. Our risk appetite has been set for each risk category at a Board level and ranges from minimal to open.

 

Read the full Risk section using the download button below or from page 50 of the Annual Report.

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2023 Full Risk Section

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2023 Full Year Results Announcement

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