IG Design Group has delivered another year of strong revenue growth (+10%), together with the transformational acquisition of the US company CSS. Adjusted profit before tax and diluted EPS were slightly down year-onyear but would have been ahead and in line with market expectations, adding back the adverse impact of Covid-19. A final dividend of 5.75p sees the full year figure up 3%. While the group has made a commendably strong start against its Covid-19 adjusted forecasts, the full year outturn for FY21E (and our view of a bounce back in FY22E) will nonetheless be adversely impacted by the ongoing changes brought about by Covid-19.
FY20 results: Revenues rose 10%, aided by a one-month contribution from CSS, but were also adversely impacted by Covid-19 factors. These held back reported sales and profits by an estimated £6.9m and £3.8m respectively. Adding this back to reported adjusted PBT (£29.1m) and diluted EPS (26.9p) would have seen both advance year-on-year – and in line with market expectations. Year-end net cash stood at £42.3m, with shareholders receiving a full-year dividend of 8.75p, up 3% from last year.
Q1 trading – a strong start: Management has rapidly implemented its operational response plan to the Covid-19 challenges. It has also adjusted its internal forecasts, against which Q1 has surpassed expectations on sales, adjusted PBT and cash. LFL revenues (excluding CSS) were down 27.7% year-on-year, with CSS revenues down 11.7%. Adjusted PBT was in line with last year, benefitting from proactive cost management, a favourable sales margin mix, and CSS’s results, with net cash $63m higher.
The shape of things to come and forecasts: While Q1 has exceeded expectations, the reduced ability to absorb overhead costs into inventory across the peak production period will adversely impact profitability across the rest of the year. The group is however resilient and well positioned - with good access to bank facilities, a strong order pipeline (>$500m and ahead of last year) and a strong management team - to weather the challenges ahead. We have revised our forecasts for FY21E and FY22E, with turnover down c. 18% and 11% respectively against preCovid market expectations, with fully diluted EPS of 14.6p and 29.7p. We stress these reflect our best view in uncertain times, but with many moving parts and therefore considerably reduced forecasting confidence.