IG Design Group plc (IGR) Earnings Call Transcript & Summary

I'm here today with IG Design Group's CEO, Paul Fineman; and CFO, Giles Willits, to discuss their full year 2020 results.

Paul, can you give us an overview of the period?

Certainly. Results for the year to the 31st of March 2020 showed good revenue growth, with sales of just under GBP 0.5 billion, despite a sizable impact of COVID-19. And in relation to COVID-19, the lockdown period prevented shipments, GBP 6.9 million, of high-margin sales from being made. And this, together with manufacturing lockdown and its consequent loss of overhead inventory absorption, resulted in a GBP 3.8 million reduction in profit in the month of March. However, revenues grew overall by 10%, and for the first time, we sold over 1 billion units of products worldwide. We also made really good progress against all strategic goals, notwithstanding external influences such as COVID-19, especially in March, and the evolving impact of significant tariffs in our U.S. business. We are especially pleased with progress made in terms of our capital investments throughout the year and, of course, to have completed our largest ever acquisition of CSS Industries in the United States in early March. So in summary, a year that was very satisfactory under the circumstances.

And how did you respond to the outbreak of COVID-19? And what impact has it had on the group?

So our response to COVID-19 has been rapid. We have leveraged the strength and adaptability of our global business to deliver a strong first quarter in FY '21. In terms of people, we had to immediately ensure our facilities were compliant with required protocols, including reorganizing manufacturing and distribution, in order to maintain operations. We've been recognized as a best practice facility and used by local authorities as an example to other local businesses. In terms of customers, we accelerated preparation for the forthcoming Christmas season in order to underpin on-time delivery. We restored manufacturing and distribution to full capacity, establishing ourselves as an essential business in the United States. And we've met all customer requirements. We have also ensured the integrity of our overall global supply chain. And in terms of financial strength, whilst disciplines were already very much in place, we adopted robust cash management, including prudent review of expenditure, inventory and debtors. Overall, especially against our quarter 1 COVID-19 plans, we've seen a strong performance, with actual PBIT in line with the same period in FY '20, whilst we remained cash positive for the whole of quarter 1 FY '21.

Giles, can you give us an overview of the financial performance during the period?

Sure. Our financial position is strong, and we have ended the year with our lowest ever average leverage and a highest ever net cash position. These facts, together with our resilient 2020 financial results, give us confidence to maintain our year-end dividend in line with our progressive dividend policy. In terms of our headline 2020 commitments to shareholders, we have seen another year of good progress, with our adjusted earnings per share after adjusting for the impact of COVID-19 up and in line with market expectations. Our dividend cover improved to 3.1x, and our average leverage is now below 1x adjusted EBITDA. Revenue in FY '20 was up 10%, with strong organic growth, and helped deliver adjusted profit after taking into account the impact of COVID-19 up to GBP 32.9 million. We ended the financial year with GBP 42.3 million of net cash, up GBP 25.2 million on the prior year. And with our banking facilities of over GBP 200 million, we have very comfortable headroom.