Greetings cards, gift wrap and Christmas cracker manufacturer IG Design’s (IGR:AIM) forecast-beating full year results confirm the company continues to capture market share and send the shares 10.5p higher to 446.5p at the opening bell, now flat at 436p as the initial excitement fades.
Working with an array of retail industry winners, IG Design flags a positive start to the new financial year and also delights shareholders by declaring a one third increase in the shareholder reward.
Results for the year ended 31 March show sales up 5% to £327.5m, a 32% surge in underlying profit before tax to £21.4m and a better-than-expected 33% increase in the total dividend to 6p, supported by strong cash generation and reduced leverage.
Despite paper price inflation, gross and net margins also moved higher, reflecting IG Design’s growing scale and its focus on innovation, efficiencies and a shift to higher margin products.
STRENGTH THROUGH DIVERSITY
Encouragingly, all regions delivered top line and profits growth last year, as IG Design, which also makes everything from stationery and partyware products to ‘not-for-resale’ branded bags, continued to work with many of the globe’s most successful mass and discount retailers.
Customers range from Walmart, Tesco (TSCO) and Costco, to CVS Pharmacy, Aldi and Lidl and US discounters Dollar Tree and Dollar General. Geographically, the standout performances were generated in the USA, Europe and Australia, while IG Design’s UK business returned to growth.
Last year, IG Design traded with more than 10,000 customers, its products sold in over 200,000 stores in 80-plus countries and with over 70% of sales generated outside of the UK.
POSITIVE OUTLOOK
CEO Paul Fineman says ‘2017/18 has seen our well-diversified business deliver a very successful overall performance, but more importantly, on-going momentum and opportunity for 2018/19 and beyond.
'Whilst we have achieved record levels of sales and profits, we have also invested for the future with fast payback capital investment of just over £9.4m, demonstrating our confidence in the future and our determination to retain a distinct competitive advantage and to be the preferred choice for our customers and all stakeholders.'
IG Design finished the year with £4.4m net cash on the balance sheet, despite spending on growth projects and the acquisition of Aussie greetings card-to-paper products business Biscay.
Fineman says his charge remains ‘very well placed to continue to grow organically, across all regions and channels. This, together with carefully considered M&A opportunities supported by an ever strengthening balance sheet, provides a very bright future.’ He also insists that ‘with a strong order book in place and a positive start to the new financial year, we are excited about the opportunities to deliver further growth in 2018/19.’
THE ANALYSTS’ TAKE
‘We are increasingly confident that IG Design can continue to invest, improve efficiency and optimise procurement to consequently deliver earnings growth in the medium term,’ enthuses Berenberg this morning. ‘We therefore upgrade our earnings per share (EPS) numbers by 7.6%/8.5%/13.4% for full year 2019/2020/2021 respectively,’ says the investment bank, sticking with its ‘buy’ rating but upgrading its price target from 500p to 520p.
Meanwhile, Cenkos maintain its ‘buy’ recommendation ‘to reflect IG Design’s next phase of double-digit growth underpinned by high cash generation’. The brokerage raises its full year 2019 EPS forecast by 5.3% to 24.9p, ups its dividend estimate 11.5% to 7.25p and increases its net cash estimate by the best part of 16% to £9.5m.
