The year saw us start the transition from our recent focus on the short-term turnaround strategy initiated in June 2022, to the growth-focused strategy that was first announced this time last year.
Two years into the Group’s three-year turnaround, we remain confident that we will restore, by 31 March 2025, the Group’s adjusted operating profit margin to at least the 4.5% that was the proforma pre-Covid-19 margin following the acquisition of CSS Industries in March 2020. Our actual aspiration is to deliver 5.0%, and this should return the Group to its historic highest level of profit delivery, which was an adjusted profit before tax of c$35.8 million delivered in FY2019. Beyond margin recovery and greater efficiency, the strategy has also delivered significant cash generation in the year through materially reduced working capital levels.
The stronger financial performance is establishing a more resilient platform from which to grow the business. It was therefore appropriate and timely to consider what follows and build on this foundation. The overall objective of our new strategy is to deliver sustained profitable growth that is primarily driven by organic efforts; and that is underpinned by a resilient and less complex business model.
This strategy is purposefully articulated as a number of attributes that we believe differentiate our services from those of our competitors. Demonstrating those attributes day-in-day-out everywhere across the Group is our strategic intent. Set out in this way, the strategy provides a checklist for our various Business Units (as well as our customers) to assess their level of service, their competitiveness and the value they bring.
Enabling us to win together
By being the partner of choice, that is:
Strategic
- Purposeful
- Providing good value
Adaptive
- Design-led
- Innovative
Dependable
• Resilient supply chain
• Responsible
Strong
- Talent-rich
- Flexible footprint
Collaborative
- Open-minded
- Learning
Informed
- Data driven
- Seasoned
How we’re developing our key capabilities
The following are the key initiatives that are being undertaken over the next three years to 31 March 2027, in line with our new strategy. Our priorities for the coming year are also highlighted.
Strategy in action: Partnering with Cardiff Metropolitan University to foster fresh creative talent
Design Group UK recently partnered with Cardiff Metropolitan University for an innovation project, inviting students to put their skills to use on a real-world design project.
Strategy in action: Turning frames into wall art to increase value to retailers and consumers
In an effort to provide more value to retailers and consumers, Anchor recently swapped all stock imagery in their photo frames for on-trend, aesthetic art prints.
Our early experience with the new strategy revealed the need to also revisit aspects of the Group’s traditional culture and internal ways of working.
Firstly, the Operating Board was re-constituted as the body to lead the Group’s operations in pursuit of this strategy. The Operating Board comprises the two Executive Directors, Group General Counsel and the leaders of the Group’s five principal businesses. This meets monthly, and at least annually holds a joint meeting with the Board.
Secondly, to facilitate cross-business collaboration and sharing with the right level of expertise, seven Forums were established. These Forums comprise senior leaders and technical experts from across the various Business Units as well as some Operating Board members. Their scope and priorities are determined by the Operating Board. The seven
Forums represent the following areas of operations:
- Commercial
- Manufacturing
- Finished Goods Sourcing
- Sustainability
- People
- Technology
- Finance
Forums convene as required, but typically with a regularity ranging from monthly to quarterly.
Thirdly, to ease the workings and progress of these teams, the Operating Board revisited the Group’s Purpose, Vision, Mission and Values.
The intention being to arrive at more up-to-date, commonly agreed articulations that will eventually better align everyone across the Group in collective endeavour, and better leverage our combined capabilities and experience.
The outcome of the Operating Board’s work in this area resulted in the following articulations:
The Group’s Purpose:
Making Moments Special
The Group’s Vision:
There when you create and celebrate your special moments
The Group’s Mission:
Providing preferred products and solutions through insight, creativity and partnership
The Group’s Values:
- A passion for creativity, excellence and innovation
- People with integrity and ethics working together
- Delivery at pace with a customer focus
- Responsibility to the planet and future generations
Successful execution and delivery of the various initiatives in the new strategy will significantly strengthen our partnership capabilities and enable our teams everywhere across the Group to deliver even more consumer-focused solutions, first to our existing and longstanding customers – helping them to continue winning at retail; and then to potential customers attracted to what we can offer and deliver.
The resulting, better presented, product solutions will enhance the value of our categories in the retail-space; and through the development of more sustainable product and packaging solutions, delivered responsibly, the win will extend beyond the shoppers and consumers of our products, to our planet itself.
The Group remains well-capitalised in terms of its installed manufacturing base. Therefore, the prime use of capital investment over this period will be in the deployment of innovation and technology to support growth, especially the pursuit of sustainable products and solutions, and support the widening of our present assortments to better serve changing trends. Selective “bolt-on” M&A opportunities will only be considered where they can accelerate entry into new product groups, new categories, new channels and customers, or new geographies where we can leverage our existing category strengths. Transformative M&A is not on the agenda. This should also mean that the Board can introduce a sustainable dividend policy once the turnaround is assured, thereby reinstating more tangible investor returns.
Initial projections of the financial impact from the successful execution of these initiatives suggest that by 31 March 2027, the Group should have delivered three consecutive years of profitable sales growth, with annual sales exceeding $900 million by that time; whilst delivering an adjusted operating profit margin of over 6%. This translates to an adjusted profit before tax exceeding $50m. We also expect strong cash conversion to continue, with average annual leverage held to no more than 1.0x under normal conditions. These projections will be further defined as we make progress with the strategy.