Investors in IG Design (IGR) have gotten used to impressive sales growth in recent years, but an acquisition-led suge in FY2019 was accompanied by double-digit declines in statutory profits and earnings per share (EPS). The unvarnished figures were weighed down by £8.4m in exceptional costs from restructuring the US business and the acquisition of Impact, a gift packaging group based in the US.
The deal added more than £100m to the group’s US revenues, making it by far the largest geographical segment of the business. The scale of the acquisition was reflected in expanded inventory and intangibles, although it also resulted in a £24.8m capital inflow as inventory was despatched and receivables collected from customers "over and above" the funding of creditor payments. Exclude these factors and the group logged a net working capital outflow of £13m.
The integration process is on track to deliver $5m (£3.8m) in annual operational savings by 2021. The business will also take delivery of a new high-tech printing press in the final quarter of 2019, which will drive further efficiency improvements. That's to be welcomed, because even though profitability growth can suffer due to the integration of new assets, a 116 basis point contraction in the gross margin is still fairly steep.
Berenberg increased adjusted cash profit forecasts for March 2020 to £53m, although EPS forecasts were trimmed slightly to 31.7p due to IFRS 16 accounting changes, up from £39m and 29.3p in FY2019.
| IG DESIGN (IGR) | ||||
| ORD PRICE: | 600p | MARKET VALUE: | £470m | |
| TOUCH: | 596-604p | 12-MONTH HIGH: | 621p | LOW: 434p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 37 | |
| NET ASSET VALUE: | 219p* | NET CASH: | £16.2m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 229 | 7.3 | 9.7 | 1.0 |
| 2016 | 237 | 9.9 | 12.3 | 2.5 |
| 2017 | 311 | 13.0 | 15.7 | 4.5 |
| 2018 | 328 | 19.7 | 21.1 | 6.0 |
| 2019 | 448 | 17.3 | 16.2 | 8.5 |
| % change | +37 | -12 | -23 | +42 |
| Ex-div: | 1 Aug | |||
| Payment: | Sep** | |||
| *Includes intangible assets of £83.7m, or 107p a share **Payment date not announced | ||||
