Foreign exchange movements were doubly positive for IG Design (IGR) shareholders last year. As the third-largest player in the global gift packaging and greeting card market, most sales are in currencies other than sterling. This brought a very useful translational effect - £23.7m to the top line and £2.2m to adjusted pre-tax profits - for a company that reports in pounds.
The second benefit was indirect. In the period, the relative strength of the US dollar against other currencies squeezed the profit margins of goods produced in China and later sold to non-US markets. The solution: focus on higher-margin product lines, a move that helped boost the adjusted gross margin by 230 basis points.
That's no mean feat in the world of gift packaging, but if anything the scope for earnings growth has increased. Save for a serious further decline in the value of the pound, the clearance of IG's borrowings now means management has the financial strength as well as the time to focus on acquisition opportunities, which according to chief executive Paul Fineman arrive on a weekly basis.
Analysts at Cenkos Securities expect adjusted pre-tax profits of £19.1m and diluted EPS of 20p in the year to March 2018, up from £16.3m and 18.2p in 2017.
IG DESIGN (IGR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 350p | MARKET VALUE: | £219m | |
| TOUCH: | 347-353p | 12-MONTH HIGH: | 367p | LOW: 141p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 138p* | NET CASH: | £3m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 225 | 5.7 | 6.0 | nil |
| 2014 | 224 | 5.2 | 5.2 | nil |
| 2015 | 229 | 7.3 | 9.7 | 1.0 |
| 2016 | 237 | 9.9 | 12.3 | 2.5 |
| 2017 | 311 | 13.0 | 15.7 | 4.5 |
| % change | +31 | +32 | +28 | +80 |
Ex-div: 6 Jul Payment: 7 Sep *Includes intangible assets of £33.7m, or 54p a share. | ||||
