IG Design Group plc

Welcome to the 2026 interim results presentation for IG Design Group PLC. I'm Stuart Gilliland, interim executive chair, and I'm pleased to be joined today by our group CFO, Rowan Cummings. The first half of full year 2026 marked a transitional period following the sale of DG Americas on the 30th of May 2025, which resulted in us becoming a less complex group From a leadership perspective, Paul Bell stepped down as CEO in June 25, with myself serving as interim executive chair during the ongoing recruitment process. In terms of today's presentation, we'll begin with a review of the half year performance, delving into the financials in more detail. We'll then move on to what the group looks like today, including more insight into each of the divisions. We'll then wrap up by looking at the future, reconfirming guidance for the next three years and the future strategy to deliver this guidance. Moving on to the summary, before we do, I want to clarify that everything we are going to present for the interim results offer the continuing group. As we communicated previously, the results delivered are against the backdrop of challenging markets. Revenue is down 13%, with adjusted operating margins down to 4.3%, driven by the headwinds highlighted in our full-year guidance. Rowan will cover off the reasons behind these movements in more detail in the financial review. Importantly, we end the period with a strong net cash position, as well as a robust order book which gives confidence for the second half, and we are confident that we're still on track to deliver in line with full-year guidance. The CEO recruitment process remains ongoing and I am committed to continuing as Interim Exec Chair until the appointment is finalised. Finally, following the successful sale of DG Americas to Hilco on 30 May 2025, the sale and liquidation process is still ongoing with only FutureNet proceeds to the Group contingent on the outcome of this process. However, they are currently assumed to be nil. I'll now pass over to Rowan who will cover the financials in more detail.

Thanks Stuart. Revenue from continuing operations decreased by 13% to $131.4 million compared to $151.3 million last year. This decline reflects previously communicated market headwinds including softer UK demand the impact of US tariffs on UK sales and competitive pricing pressures in Europe. Additionally, $7.4 million of shipments shifted into the second half of the year, primarily in Europe. On a constant currency basis, revenue fell by approximately 16%, with a modest positive impact from foreign exchange translation on reported US dollar result. The shipment timing into H2 provides further visibility for recovery, which coupled with an order book of 96% reinforces confidence in full year guidance. Moving on to operating profit. Operating profit decreased from $12.9 million to $5.7 million for the half year, reflecting the impact of lower sales volume, tariff and pricing pressures highlighted earlier. On the positive side, cost-saving initiatives delivered meaningful offsets. Freight savings contributed $2.6 million following the normalization of elevated rates seen last year. This is supported by $0.8 million of strategic efficiencies from the closure of the China site last year and $1.9 million in net overhead reductions. Additional gains of $0.4 million, including FX, help mitigate the overall impact. Despite these improvements, margin pressures from tariffs and pricing, which were highlighted previously as headwinds in the year-end guidance, outweighed the operational savings which were achieved. These moving parts highlight the challenging environment we are operating in. Note that while the timing of shipments does negatively impact the period we are reporting, we expect these to have a positive impact in the second half. Now looking into our segmental performance. Starting with DG Europe, they delivered revenue of $58.8 million, broadly flat year-on-year, despite a $2.7 million pricing decline driven by the competitive European market and a $5 million timing shift of orders into H2. These offset progress and growth from existing customers in new product categories. Adjusted operating profit was $7.5 million versus $8.7 million last year, with margins at 12.7% compared to 14.7%, reflecting pricing investments to maintain competitiveness. Looking ahead, visibility is strong, with an order book of 99% of full-year forecasted sales. Now looking to DG UK, revenue declined 30% to $50.3 million, impacted by softer demand the impact of US tariffs and the timing shift of seasonal shipments into H2. The tariff and timing impacts accounted for half of the UK revenue decline in the period. The impact of the tariffs on revenue was material at $8.4 million because DGUK's largest customer is predominantly US-based. An introduction of the US tariffs resulted in the customer reducing volumes in anticipation of lower consumer demand amid macroeconomic uncertainty. Further to this, to mitigate the decline in trading, in the period, pricing support was agreed with this customer to help offset the tariff impact. Adjusted operating profit fell to $0.7 million, with margins at 1.5%, reflecting lower volumes and the timing shift of shipments into H2, partially offset by cost savings from the China site closure and continued progress in overhead reductions. The second half will benefit from higher sales and margin than the prior year's second half, as well as a more efficient cost base. Orderbook at 87% is in line with prior year, giving confidence around full year delivery. Finally, DG Australia grew 8% to $22.8 million, driven by strong performance across all channels, and in particular party products. Adjusted operating profit rose to $1.7 million with margins improving to 7.6%, supported by higher volumes and higher margin product mix. The DG Australian team has successfully completed the warehouse relocation. As a management team, we would like to thank the Australian team for their commitment and effective execution. Turning to central costs, we've taken decisive action to reduce the central costs by streamlining the PLC team and rationalizing headcount. lower audit and consulting fees and renegotiating bank facilities for improved financing terms. While transitional restructuring costs impacted this period, these actions will deliver long-term savings. Let's now move to the detailed financial review and start by looking at the key P&L lines and at the areas I've not highlighted already. Gross margin decreased 390 basis points to 20%, mainly due to the performance already covered, particularly in DGUK. This led to a 25% reduction in gross profit year-on-year. Overheads decreased 8%, driven by efforts to reduce net overhead costs in DGUK, such as the closure of the China site, in the prior year. The group recorded an adjusted net financing charge of $0.4 million. compared to $0.6 million in the prior period. The improvement reflects reduced borrowing costs and better working capital management. The group recorded an adjusted tax charge of $0.1 million versus $2.2 million charge last year, driven by a one-off provision release as a result of the China entity closure. resulting in exceptionally low effective tax rate for the period. When looking at the reported numbers, the biggest impact are the adjusted items, primarily relating to the relocation of the DG Australia warehouse, including transitional expenses and temporary dual site operational costs. As we previously highlighted, Hilco is in the process of realising the DGA group entities through asset sales and liquidation, and any future proceeds that we receive are contingent on the completion and outcome of this process. More detail of this can be seen in the appendix to the presentation on the website. As at 30 September 2025, the fair value of expected future proceeds was assumed to be nil. A loss on sale of $140.3 million was recognized, which, when combined with $10.1 million of trading losses, gives a total loss from discontinued operations of $150.4 million. If we now turn to the cash flow, the group closed the half year with net cash balance of $1.9 million, down $5.5 million year-on-year, mainly due to the lower opening cash position. Despite the revenue shift into the second half, cash outflow improved by 16% to $47.9 million, reflecting stronger discipline in cash and working capital management. Adjusted EBITDA was $10.3 million versus $17.9 million last year. Working capital absorption reduced to $51.2 million from $65 million, driven by improvements in Europe despite the delay in shipments. Capital expenditure rose to $2.4 million, which coupled with the adjusting item outflow largely relates to the new DG Australia warehouse. We had an interest income versus payment in the prior year due to lower borrowing costs and our new banking facility, which is a £40 million receivables financing facility with HSBC and NatWest, providing flexible funding without financial ratio covenants and a favourable cost to the group. Finally, DG Americas had a cash outflow of $33.3 million, plus there were $1.7 million of disposal costs. I'll now pass back to Stuart as we spend more time looking at the group today and our future in more detail.

This slide highlights the robust foundation and operational excellence that the business has built over the years. The Group's strength lies in its strong heritage, which has fostered long-established and stable relationships with key stakeholders, both suppliers and customers alike. This history not only provides a sense of reliability, but also a clear pathway to continued success in the market. Made up of three operating segments in the UK, Europe and Australia, we have over 730 employees and offer an extensive product range of over 22,000 SKUs. This breadth of offerings is a testament to the group's capacity to meet diverse customer needs and adapt to evolving market demands. This extensive reach is underpinned by three manufacturing facilities, ensuring a well coordinated and efficient production process. Innovation remains at the heart of the business, with a strong focus on product design and development. Our ability to innovate while maintaining responsible sourcing and manufacturing practices ensures that products not only meet market needs, but also align with sustainability goals. This is increasingly important in today's market, where consumers and customers alike are prioritising ethical and responsible business practices. In addition to manufacturing excellence, the company maintains a strong distribution and fulfilment network, which guarantees timely delivery and customer satisfaction across multiple regions. Finally, the commitment to market insight allows the business to anticipate trends and stay ahead of competitors, offering a competitive edge in a rapidly changing landscape. DG Europe is 45% of group revenue and designs, sources and manufactures across celebration and creative products. The portfolio is diversified across gift packaging, party stationery and homeware with manufactured gift packaging and bought-in homeware, the two dominant categories. This mix supports seasonal and everyday demand, with a hybrid manufactured source model allowing flexibility and cost competitors, as well as control over quality and lead times. The business is strongly aligned with value and mass market retailers, who are the winners in today's market. which provides scale and volume, but also requires competitive pricing and operational efficiency. Our strategic focus in GG-Yord is firstly product differentiation to diversify revenue streams and reduce concentration risk, as well as expand into higher margin categories. Secondly, premiumization with optimizing pricing to reflect product value and support margin expansion. Thirdly, customer expansion, building on strong relationships with major retailers. Lastly, commercial capability, ensuring operational excellence and margin resilience. Design Group UK contributes 38% of group revenue. The UK business offers a broad range of categories with gift packaging as the core product. Supported by party stationery, craft, homeware and goods not for resale. Seasonal ranges remain a key driver, underpinning the volume and margin behind the strong partnerships with major value and must-market retailers, complemented by independents and other channels. This diversified customer mix provides scale and resilience, while enabling opportunities for premiumisation. The segment has a combination of manufactured and sourced products, and with the sourced products predominantly coming from the Far East to maintain cost competitiveness and product breadth. Recent efficiencies from the China site closure and establishment of a new Far East office are expected to deliver further cost savings and operational improvements. Our strategic focus in DG UK is firstly product differentiation. Elevating average selling price and margin for expansion into higher margin categories, leveraging our strengths in product design, quality and reliability. Secondly, commercial capability, strengthening commercial and marketing excellence to support growth and margin resilience. Then channel diversification, expanding beyond traditional into new channels to mitigate market concentration risk. Manufactured revenue growth will have a compounding positive impact on margin due to operational leverage. Design Group Australia represents 17% of group revenue and is a warehouse facility that sources all its products with no in-country manufacturing. The business is focused predominantly on the celebrate category, designs, sources and distributes a wide range of products such as party wear, cards and gift wrap within the Australian market. The business is strong in independent channels and offers a higher margin, supported by national retail change, which brings scale to the business. Our strategic focus in Fiji, Australia will shift from the warehouse relocation improving the operational environment which provides a platform for future growth to revenue growth opportunity which allows us to optimize efficiency following the relocation leveraging scale and improved distribution the incredibly varied product mix across both seasonal and everyday demand provides opportunities for premiumization which is another focus area which will lead to higher average selling prices and enhanced margin performance.