Gift packaging and greetings cards maker International Greetings (IGR:AIM) has shrugged off tough consumer markets to deliver double-digit earnings per share growth. Benefiting from its geographical diversity and broad customer base, progress across the pond in the USA also helped the company offset quieter UK and European markets.
International Greetings designs, makes and sources gift packaging, greetings, stationery and creative play products. It has operations spanning the UK, Europe, the US, Asia and Australia.
Despite its lowly £17.9 million cap, the company is the world's fourth largest player in a greetings and consumer gift packaging market worth £3 billion.
With gift packaging, greetings cards, stationery and creative play products at its core, the company punches above its weight in the market, offering one-stop-shop 'solutions' to retail titans ranging from Tesco (TSCO) and ASDA-owner Wal-Mart (WMT:NYSE) to Target (TGT:NYSE) and France's Carrefour (CA:PA) [ENDS].
Shares edged up 3.2% to 32.5p this morning as International Greetings unveiled creditable 3% growth in profits before exceptional items and tax to £7.3 million for the year to March and a 16% hike in earnings to 7.8p per share.
Sales were up 2% to a record £225.2 million, with challenging trading in the UK and Europe more than offset by progress in North America, where sales skipped 11% higher to £50 million and profits rose 22% to £4.2 million.
During the year, International Greetings once again enjoyed double-digit sales and profits growth in the USA, where customers include Target and discount store chain Dollar Tree (DLTR:NASDAQ).
Encouragingly, the company is seeing growth in the $1 specialist retail sector as well as with new 'upscale' customers such as department store Bloomingdales.
Chief executive officer (CEO) Paul Fineman, who has overseen extensive restructuring of the company in recent years, highlighted the production of record volumes of product from International Greetings' manufacturing businesses last year.
A busy period saw the company complete the relocation of its gift bags, greetings cards and Christmas cracker manufacturing plant in China, strengthening its competitive position, as well as a first season of production in Holland using its new state-of-the-art printing press.
Highlights within the revenue mix included gift packaging and greetings sales of £155 million and 25% growth in global sales of 'everyday' single cards in a trend showcasing the group's reduced seasonality.
While growth is being targeted at everyday product, Christmas orders for the UK and North America are going well. Fineman is upbeat about organic growth prospects, underpinned by International Greetings existing customers, many of whom are internationally-expanding retailers, products and brands.
With year-end net debt of £42.1 million, International Greetings is spending £6 million on upgrading its manufacturing of gift wrap in Wales, a project that delays the paying down of debt to a a leverage ratio of below two times debt/EBITDA and a return to the dividend trail.
However, analysts at paid-for research house Edison argue recent share price weakness related to the deferment of debt reduction and additional exceptional costs has been overdone.
In a note this morning, Edison writes: 'On all appropriate valuation methodologies (peer appraisal, DCF and value of underlying assets), we derive a considerably higher valuation than the current share price, calculating a range of 73p-95p.'
