Executive Review

Executive Review by Group CEO Paul Fineman and Group CFO Giles Willits.

We are pleased to report that the Group has achieved another excellent year of adjusted profit and adjusted earnings per share growth as a result of strong performances from all regions. It is particularly pleasing to have delivered significant organic growth whilst also benefiting from the acquisition of Impact Innovations Inc. and other capital investments across the Group. The diversified nature of our business, alongside excellent customer relationships, the strength of our design and innovation capabilities and our focus on service have all added up to making this another record year for IG Design Group plc.

Furthermore our focus on cash generation has resulted in a significant increase in our year end cash, and delivered a further reduction in average leverage, despite increased capital and acquisition investment. During the year, Group sales increased by 37% to £448.2 million (2018: £327.5 million) with adjusted profit before tax increasing by 39% to £30.3 million (2018: £21.8 million). Adjusted earnings per share increased 33% to 29.3 pence (2018: 22.1 pence). Average leverage improved from 1.5 times to 1.3 times, whilst the year-end positive net cash balance increased from £4.4 million in 2018 to £17.1 million in 2019, reflecting the effectiveness of our focus on converting profit into cash and the highly cash generative dynamics within our business.

Design Group Goals

We are Design Group. We transform paper and a whole lot more into products that help the world celebrate life’s special occasions. We are proud to serve the best retailers around the globe with a complete end-to-end service from design to distribution. Our Goals Are:

Customers

to be the ‘partner of choice’ across an increasing range of products and categories where our customers value our fast pace, innovation, market focus and flexibility.

Team

to have a creative and winning culture focused on developing a team that looks to accomplish great things.

Suppliers

to build relationships with suppliers who provide capacity and enable us to compete profitably and share our passion for design and innovation.

Investors

continue to grow our Group and deliver returns well above market performance.

Our Commitment to Shareholders

Delivering Growth

Adjusted EPS

Continue to deliver double digit three-year compound annual growth
Through organic growth and acquisitions
Revenue
£448.4m
2018: £327.5m +37%
Adjusted profit before tax
£30.3m
2018: £21.8m
Reported profit before tax: £17.3m (2018: £19.7m)

Generating Cash

Average leverage

Sustain long term average leverage between 1.0x and 2.0x
Provides capacity for future investment
Adjusted EBITDA
£38.7m
2018: £28.0m +38%
Average debt
£48.8m
2018: £41.9m +16%

Improving Returns

Dividend

Trend upwards until 2.5x covered (40% pay out)
Growth supported increased shareholder distributions
Cash conversion
130.5%
2018: 80.5%
Return on capital employed
24.3%
2018: 22.5%

Design Group at a Glance

We’re truly international, with 11,000 customers selling our products through over 210,000 stores across more than 80 countries, we enjoy considerable market presence around the world.

Focused on our four major product categories of Celebrations, Stationery and creative play, Gifting and ‘Not-for-resale’ consumables, we leverage our Group size and expertise whilst retaining local market knowledge and relationships through our local businesses.

This blend of global scale and local knowledge allows us to offer our customers a high quality ‘one-stop-shop’ solution from small independents to large multinational retailers and e-tailers. In addition to our own generic brands, our design-led product offerings include an excellent portfolio of licensed and customer bespoke products.

(a) Stationery and Creative Play.

(b) “Not-for-resale” consumables.

Social Responsibility

At Design Group we aim to lead the way in social responsibility through respecting our people and our environment and ensuring our supply chains are sourcing responsibly.

Environmental

Environmental Taskforce

Environmental issues are taken very seriously given the nature of our business. As a Group we ensure that we are fully compliant with all legal environmental requirements. We encourage all parts of the business to look to reduce our impact on the environment and look to continually improve each year through the development of new environmentally friendly products and better processes that reduce our carbon footprint.

This year saw the launch of our Environmental Taskforce across the Group who will be working with third party specialist organisations, with the aim to be regarded by our customers as leaders in bringing improved sustainable product solutions to all product categories in the Group’s portfolio. The taskforce is comprised of a select group of senior management who are charged with enabling the people in our offices, warehouses and supply chains to bring the Group’s environmental agenda to life and into the core of their business practice.

Key environmental initiatives

As a key part of the agenda we have identified initiatives that focus on ensuring that the Group is doing all it can to transform the effect of our business on the environment. These include using more sustainable materials in our production to move towards fully recyclable packaging, a focus on reducing our carbon footprint, reducing waste in the manufacturing process, and a continued focus on responsible sourcing.

Starting with crackers

A recent developments is a completely recyclable cracker range for customers in the UK. Other initiatives include removing plastic from a selection of product packaging, removing non-recyclable glitter from a number of wrap ranges and reducing the size of wrap cores to reduce the volumes and cost of our transport. We still have a long way to go, but we will continue to improve year-on-year as increasing our attention on the environmental impact of the Group is moving us forward in the right direction.

People

A truly global workforce

The average number of employees during the year was 2,364 within Design Group. Our people are based across the globe, with offices in Australia, Hong Kong, China, the Netherlands, Poland, the USA and the UK. Not to mention our global sales team across many locations around the world.

Our people make us who we are

Design Group wouldn’t be who we are without the passion, drive and determination of our talented teams across the globe in all disciplines. They are the key to our success and we continue to work towards ensuring that our people are committed, loyal and engaged by investing in their capabilities and desire to learn and develop.

In the Annual Report, our corporate governance review highlights our focus on training, talent identification and personal development mechanisms as well as employee engagement.

A charitable bunch

One key desire of all our teams across the Group is to ensure that Design Group is making a positive difference in its surrounding communities. Teams across the globe have been involved in many charitable initiatives this year, including; raising money for Breast Cancer, donations to support Ronald McDonald House, provider of free ‘home away from home’ accommodation; donations of toys to Family Promise as well as reading to students within the Liberty County School System; and donating blankets for the winter months to Senior Citizens Inc. in Savannah.

Design Group UK has teamed up with the Trussell Trust (UK national food bank coordinator) and for every case of catering crackers sold we donate £2 to the Trussell Trust. The Group team also spent an afternoon sorting donations for Willen Hospice who are providers of specialist palliative care in Milton Keynes.

Investors

Our supply chain

It’s our responsibility to make sure every worker in our supply chain is protected and respected. In our facilities, we ensure that all employees receive the relevant living wage, and we promote equality amongst our workforce across all diversities.

Employee safety is paramount throughout the Group and we ensure that we operate within all safety laws and regulations within the territories where we are based. Our code of business conduct sets out our position on all of these key principles and is being rolled out across the globe to all Design Group employees.

Working closely with our suppliers

Design Group is committed to engage with our suppliers fairly and lawfully and source responsibly. We are SEDEX members and work closely with ‘Stronger Together’, a multi-stakeholder initiative aiming to reduce modern slavery, and our suppliers to ensure they respect human rights, promote decent working conditions and improve sustainability across our supply base.

Responsible sourcing

Through regular audits (ethical, quality and technical) we work to ensure the factories with which we produce goods meet relevant requirements, which comply with standards set by Business Social Compliance Initiative (‘BSCI’), Ethical Trading Initiative (‘ETI’), Workplace Conditions Assessment (‘WCA’), and Consumer Trade Partnership Against Terrorism (‘CTPAT’).

IG Design Group plc
Full Year Results 2019