Bumper sales and forecast thumping profits is the perfect gift for IG Design (IGR:AIM) shareholders. The gift wrap, Christmas crackers and stationery products maker delights investors with the news that annual sales will top £300m and profits and earnings will smash market expectations.

Shares in the gift bags and stickers supplier surge 13.6% higher to 300.5p. The trading update for the year ended 31 March 2017 also includes news of a better-than-expected cash performance.

SCALING NEW HEIGHTS

Paul Fineman-steered IG Design enjoyed very good second half trading and now sees annual sales surpassing £300m, a new record for the AIM-traded group.

As Shares has previously outlined, under Fineman’s stewardship, IG Design has been transformed from an indebted manufacturer exposed to commoditised markets into a design-led, trusted supplier to retailers in more than 80 countries. These include Tesco (TSCO), Walmart, Wilkinson, Boots, Amazon, Dollar Tree and drug store CVS to name but a few.

The sale of low ticket items to a broad array of retailers gives IG Design’s earnings a resilient bent, while an enviable portfolio of licences spanning emoji, Peppa Pig, Star Wars and The Secret Life of Pets only adds to its armoury.

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Paid-for research house Edison upgrades its estimates for the year to March 2017 and 2018, again. It also increased forecasts following interim results in November. Edison analysts are now expecting a jump in taxable profits to £16m versus the £11.1m in the 2016 year end, before rising to £18.1m in 2018..

IG Design’s top-line progress is being driven by the US, where organic growth and the integration of July 2016 acquisition Lang, a giftware and calendars specialist, give the business good momentum heading into the new financial year.

CASH CONVERTER

‘Not only has our performance surpassed historical revenue levels, but additionally, and in line with our strategy, we are now a significantly de-risked group with lower average debt and a much improved geographic and product diversity,’ says Fineman, whose has a philosophy that ‘it’s not profit till it’s cash’.

IG Design - MAR 2017‘Particularly notable is the comment on strong cash flow, with the group reaching its target of average leverage less than 2.5 times earnings before interest, taxation, depreciation and amortisation (EBITDA) two years ahead of plan,’ say analysts at Edison.

‘With the earnings and cash flow momentum, strong balance sheet and progressive dividend, there is good potential for further share price upside.'

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Issue Date: 24 Mar 2017