IG Design Group plc

Good morning and welcome to IG Design Group's full year 2026 results presentation. I'm Stuart Gilliland, Interim Exec Chair, and I'm joined today by our Group CFO, Rowan Cummings. Today's agenda will cover a review of the year's performance, followed by a more detailed look at the financials. We'll then provide a strategic update before concluding with an outlook, including reaffirming our guidance and our capital allocation policy. Moving on to the full year summary for 2026. It's been a transformational year for the group, following the sale of DG Americas to Hilco on 30 May 2025. We're now a more focused and less complex business, with the quality of our earnings materially improved. All the results we are presenting today relate to the continuing group on our instilling. We have delivered strong results against the backdrop of still challenging market conditions. Revenue, profit and cash were ahead of expectations, demonstrating the resilience of a more focused group. We've delivered revenue of $217.9 million and operating margins of 4.4%. We're pleased with our strong net cash position of $54.6 million, where the continuing group generated $16.2 million of cash in the year. This provides a robust platform for future growth, and Rome will take you through the financials shortly. Strategically, we've made significant progress. The disposal of DG Americas marks an important milestone in the simplifying of the group. We've continued to build momentum across our strategic growth pillars, including the bolt-on acquisition of GlenArts, Looking ahead, the outlook remains positive, which strengthened our leadership with the appointment of a new CEO, Gerald Kerr, who joined as CEO designate on the 1st of May, 2026, and will assume the role of CEO on the 1st of July, 2026, at which point I'll return to my role as non-exec chair. Gerald has been working with the group since January, so he already has a strong understanding of the strategy, operations, and our customers. Additionally, our guidance remains unchanged, reinforced by an order book with levels of 78% of budgeted revenues, and we continue to see a supportive order book, underpinning confidence in the period ahead. We're very pleased to announce both a dividend and a share buyback, reflecting our clear commitment to long-term shareholder value creation. I will cover our new discipline capital allocation policy in more detail later. Overall, IG Design Group is now a smaller, simpler, more focused business, one that is profitable, cash generative, and supported by a strong balance sheet, positioned as well for the future. This slide reflects the group as it stands today following the transformation over the last year. While we continue to have broad reach with over 550 million products sold annually across more than 50 countries, The real strength of the business is in the quality and durability of our customer relationships. We have longstanding partnerships with the winning retailers, including Aldi, Tesco, Action, and Costco. These relationships are central to our model, with our customer base increasingly weighted towards the resilient, value, and mass channel, which now represents 76% of group revenue. Our model is supported by our core capabilities, product design and innovation, responsible sustainable sourcing, and a well-established distribution network, alongside the market insight that enables us to anticipate trends and stay relevant in a fast-moving and often seasonal category. So overall, this is a more disciplined and focused group than before. one that has a strong heritage and long-established and stable relationships with our customers. We have four clear priorities for the business, addressing the challenges in the US business that were impacting the wider group, simplifying the business model, sharpening and focusing on our core markets in the UK, Europe and Australia, and improving financial stability. I'm pleased to say that we delivered against each of these. Most significantly, we completed the sale of DG Americas at the right point in time, exiting a structurally challenged and loss-making business. The timing and nature of the transaction mitigated further financial and operational drag that the group would have otherwise have experienced and protected the profitable cash-generative part of the group. That has allowed us to materially reduce complexity and establish a much clearer strategy, with more focus on our core geographies. At the same time, we've improved financial stability, strengthened the balance sheet, and have the required banking facilities in place for the year ahead. This is a business that's been fundamentally reshaped over the last 12 months, smaller and simpler, but also more stable, more focused, and better positions to generate sustainable profits and cash. I'll now hand over to Rowan to take us through a more detailed financial review.

Thanks, Stuart. Before we dive into the financials, let me step back and look at what we promised at the beginning of the year and how we've delivered against that. As a reminder, at the start of FY26, we were reporting in US dollars, and at the end of the year, we transitioned into sterling. On this slide, we're showing both our delivery in dollars directly against our original guidance, and equally in pounds to bridge that commitment to our current reporting currency. And as GF has already said, all of the results we are presenting today relate to the continuing group. Looking first at revenue, we guided to $270 to $280 million and delivered $291.8 million, which translates to £217.9 million. For adjusted operating margin, we guided to 3% to 4% and delivered 4.4%, slightly above the top end of the range, reflecting strong operational discipline. And finally on cash, we guided to $40 to $45 million and delivered a very strong $72.2 million, or £54.6 million, driven by improved profitability and significant working capital release as inventory levels normalised. Building on that, this slide tracks in more detail how we've delivered against the commitments we set out a year ago. On the left, we said we would improve profitability, strengthen cash generation and balance sheet discipline, reduce central costs, and simplify the business. Starting with profitability, we delivered an adjusted operating profit margin of 4.4%, ahead of market expectations, reflecting both revenue outperformance and continued cost discipline. On cash generation and balance sheet, we've made particularly strong progress. We generated £26.4 million of adjusted operating cash, up from £15.7 million last year, driven primarily by a significant working capital release as inventory normalised. We also refinanced the group, entering into a new receivable finance facility with HSBC and NatWest in July, which lowered our financing costs and provides flexible funding. Importantly, the stronger cash performance coupled with capital reduction project has enabled us to return capital to shareholders through dividends and share buybacks. In terms of central costs, we delivered on targeted cost reduction actions, generating 1.3 million pounds of savings. And on simplification, we've taken tangible steps, including a change in reporting currency and segmentation. Turning to group revenue. For the full year, revenue declined 3% to £217.9 million, reflecting the market headwinds we outlined previously. Looking at the drivers in more detail, performance has been shaped by a combination of volume, tariffs, pricing and effects. Starting with volume, we saw good progress from our strategic initiatives, delivering £7.9 million of growth across the group. particularly through expansion into adjacent and higher price point categories, such as decor and license ranges, leveraging the strong customer relationships we have in place. This largely offsets softer underlying demand of roughly £7 million, particularly in the UK, where the retail environment and the independence channel remains challenging. As communicated previously, the impact of US tariffs reduced revenue by £5.9 million. As well as the tariff itself, one of our largest customers also reduced ordering in anticipation of the weaker consumer demand as a result of the uncertainty created in the US market. In addition, we saw pricing pressure across Europe, resulting in a £4.7 million headwind, reflecting the competitive environment in which we invested in price to maintain our market position with key retail partners. Offsetting some of these factors, foreign exchange provided a modest tailwind of £2.2 million. From a divisional perspective, Europe and Australia delivered growth of 2% and 6% respectively, while the UK was down 12%, reflecting the more challenging trading conditions in that market. Moving on to adjusted operating profit. For the full year, adjusted operating profit was £9.6 million, compared to £16 million in FY25, with margins of 4.4%. The largest driver remains the revenue-related headwinds we have discussed, which reduced operating profit by £11 million. This includes the combined impact of lower volumes, tariffs and pricing pressure across the group. Breaking that down, softer sales volumes and mix account for £3.7 million, tariffs for £2.6 million, and pricing pressure a further £4.7 million, reflecting the competitive environment, particularly in Europe. Offsetting some of this, freight costs reduced by £4.8 million, as rates normalised following the elevated levels seen in the prior year. Restructuring initiatives contributed £0.8 million, which reflect the benefits from the closure of the China site in the prior year, offset by an impairment of machinery in DG Europe. Overheads increased by more 0.5 million pounds, with reductions across the cost base, offset by reinstatement of performance-related initiatives. So overall, while margins remain under pressure, the group is demonstrating increasing cost discipline, and the actions we have taken are now clearly offsetting a significant portion of the external headwinds. Turning to DG Europe, which accounts for 47% of revenue, DG Europe delivered revenue of 102.9 million pounds, up 2% year-on-year. This reflects good underlying progress in the business, with volume in adjacent and higher value categories offsetting the pricing pressure we have previously highlighted, and demonstrates the benefit of product diversification within our established value and mass market customer base. As flagged at the half-year, the European market has remained competitive, with pricing investment required to maintain our position with key retail partners. Adjusted operating profit was £11.5 million versus £14.4 million last year, with margins at 11.2% down from 14.3%. This reduction is primarily driven by pricing investment and lower gift wrap manufacturing volumes, which reduce production efficiency and operational leverage. It also includes a non-cash impairment charge of £1.5 million against certain manufacturing assets, following a reassessment of demand of European-produced but higher-cost product in that market. However, it is important to highlight that lower margins were partially offset by a tailwind from freight cost normalisation. Strategically, we continue to make good progress. On premiumization, we are seeing increased traction through licensed and higher value ranges. Product diversification remains a key driver, particularly in categories such as FSDUs and homeware, where early progress is encouraging. We have also strengthened commercial capability with key hires during the year, while continuing to expand with the leading value and mass market retailers who are performing well. Looking ahead, we will remain focused on premiumization and product diversification, while also focusing on customer expansion, now that we have strengthened our commercial capability. Europe has a strong market position and clear strategic leaders to support both growth and margin recovery over time. Now turning to DG UK, which accounts for 38% of revenue. For the full year, revenue declined by 12% to £82 million. While this remains a challenging performance, it does reflect a significant improvement from the first half, as we flagged at the time, where we saw much deeper declines. As we highlighted previously, the key driver was the impact of US tariffs on our largest customer, who reduced volumes as they adjusted ordering in anticipation of weaker consumer demand. We also provided pricing support to help mitigate the tariff impact, which further weighed on revenue. Working closely with our customer, we leveraged the strong commercial relationship to take on a wider range of new products, which partially offset the declining core volumes. Beyond this, performance was also affected by softer UK consumer environment, particularly within the independence channel. Adjusted operating profit was £3.1 million versus £5.6 million last year, with margins of 3.8%. This reflects the operational impact of lower volumes and unfavourable mix, particularly in our core gift packaging category, partially mitigated by actions taken last year, including the closure of the China manufacturing facility alongside continued overhead discipline. Strategically, we continue to focus on product differentiation and premiumization, expanding into higher margin categories such as decor and create products to reduce reliance on core gift packaging. We are strengthening commercial capability through insight and execution, including our commercial academy and the new B2B ordering platform, and progressing channel diversification to reduce concentration risk, increasing the proportion of manufactured product also remains a key lever, giving the operational leverage it brings. While profitability remains under pressure, looking ahead, DGUK is committed to building a leaner, more commercially effective operating model, simplifying core processes, sharpening the cost base, and enabling reinvestment to accelerate sustainable, profitable growth. DG Australia delivered a strong performance in the year, with revenue increasing by 6% to £33.5 million, reflecting good momentum across all channels and product categories, with particular strength in party wear, gift packaging and craft. Adjusted operating profit increased to £1.8 million from £1.6 million, with margins holding at 5.2%. The increase reflects the benefit of higher sales volumes and improved mix, which more than offset the increase in cost base associated with the warehouse relocation. As flagged at the half-year, the warehouse relocation, prompted by the expiry of the previous lease, has now been successfully completed. It has resulted in higher fixed costs, reflecting current market means. But it is also largely absorbed through strong trading. I would like to recognize the team for the effective execution of the warehouse transition. Importantly, this now provides a much stronger platform for future growth with additional capacity, improving distribution capability and operational efficiency. We also secured a new distribution agreement with Hinkler Books during the year, a complementary category that broadens our offering across the independence and national channels. The contribution in FY26 was limited, but as volumes scale, Hinkler is expected to be a meaningful contributor to growth and help us utilize the increased warehouse capacity. From a strategic standpoint, the focus now shifts to leveraging that platform. driving revenue growth through existing and new channels, optimizing the cost base as we annualize the warehouse benefits, and continuing to premiumize the mix and support margin progression over time. While DG Australia is a smaller part of the group, it is an important one and continues to demonstrate growth, good market position, and key opportunities to enhance returns. Let's now move to the detailed financial review, focusing on areas we haven't already covered. Growth profit decreased by 15% to £41.9 million, with adjusted gross margin reducing by 280 basis points to 19.2%. Encouragingly, adjusted overheads reduced to £32.3 million, down from £33.5 million year-on-year, reflecting prior year restructuring benefits and continued cost discipline, partially offset by higher people-related costs, including performance-related remuneration. As a percentage of sales, overheads were broadly stable at 14.8%. Below the operating line, net finance costs reduced slightly to £1 million, reflecting lower finance costs following the refinancing and the group's strong cash position, partially offset by higher lease interest of £1.3 million following the Australian warehouse relocation. The adjusted tax charge for the year was £1.3 million, an effective tax rate of 15.1%, which is lower than the prior year primarily due to a £1.6 million tax credit following the release of uncertain tax provisions no longer applicable after the closure of the China site. This results in adjusted profit after tax of £7.3 million and diluted adjusted earnings per share of 7.2 pence. Turning briefly to reported numbers, reported operating profit was £7.5 million. The difference to adjusted profit is a net adjusting item charge of £2.1 million, made up of £1.3 million of restructuring and integration costs, largely the Far East reorganisation and Australian relocation. Provision for guarantees following the sale of DG Americas of £3.8 million was partially offset by a £3 million profit on disposal of the surplus UK property. Finally, the reported results include the final impact of discontinued operations following the sale of DG Americas, comprising both trading losses prior to disposal and loss under sale. As before, any potential future proceeds remain uncertain and are currently expected to be null. Turning now to cash flow, for the full year the group delivered a strong improvement in cash generation with a net cash inflow from continuing operations of £16.2 million compared to an outflow last year. This improvement has been driven primarily by working capital which contributed £7.2 million inflow against £8.3 million outflow last year. This reflects a significant unwind in the elevated inventory levels we carried in the prior year, particularly in Europe. As a reminder, that inventory had built up following supply chain disruption at a key retail partner, and it reversed during FY26 as stock levels normalised, releasing cash. Adjusted EBITDA at £18.4 million, down from £23.4 million last year, affected lower profitability we have discussed. Importantly, this converted more effectively into cash, with adjusted cash generated from operations of £26.4 million, up from £15.7 million. Capital expenditure was £2.9 million, broadly in line, albeit lower than the prior year. Predominantly maintenance capex, alongside investment in electric forklifts following the DG Australia warehouse relocation. Tax paid reduced to £3.8 million. around £3 million lower than the prior year, reflecting prior year overpayments and lower profits in tax-paying territories, and lease payments reduced as we normalised the cost base. We also benefited from £3 million of proceeds from the disposal of the surplus UK warehouse, and interest remained well controlled, reflecting the benefit of a receivables financing facility. Finally, as expected, there was a cash outflow relating to DG Americas of £25.8 million, alongside £1.4 million of disposal costs, reflecting the final phase of separation, with no change in our assumption that the future proceeds remain uncertain and currently valued at nil. Bringing this together, the group ended the year with a strong net cash position of £54.6 million. The group has delivered a significant improvement in cash generation, driven by disciplined working capital management and a simplified business model, leaving us with a strong balance sheet to support future growth and capital returns. I'll now pass back to Stuart, who will talk through the strategic progress we have made.

Thanks Rowan. As presented to you last time, we have four drivers of long-term growth that underpin both revenue expansion and margin improvement. First, premiumization. We're upgrading and offering through improved design, higher quality materials, and more disciplined pricing. And we're already seeing the benefits of this through the increase in sales of licensed products, which now represent 8% of group sales versus 5% last year. Second, product diversification, which is to expand into higher margin categories to reduce concentration risk and improve resilience of earnings. Third, customer and channel expansion, increasing our reach across existing and new channels, including investigation into online platforms to drive volumes and enhance operating leverage over time. Finally, commercial capability, investing through training, commercial excellence programs, and better use of market insights. We've included some case studies of product ranges that deliver on our strategy initiatives in the appendix. And importantly, all of these are underpinned by our continued focus on low-cost, efficient manufacturing and sourcing, which remains a core competitive advantage. Turning to capital allocation. First, our priorities grow. We will continue to invest organically across product, commercial capability, and channel expansion, as well as pursuing selective strategically aligned bolt-on M&A, where it strengthens our portfolio or accelerates entry into higher margin categories. The bar for returns remains high. Second is a progressive dividend policy targeting three times earnings cover over time. We're committed to this policy being a sustainable dividend policy, so we'll not be impacted by any selective strategic bolts on M&A. Against that backdrop, we're pleased to announce today a one pence per share dividend for 2026, an important step in returning cash to shareholders whilst maintaining flexibility to invest for growth. Third, where we have surplus capital beyond the needs of the business, we will return this through share buybacks, subject to maintaining a prudent balance sheet. In line with this, we're also announcing a 10% share buyback program for fall year 2026 and the efficient use of capital at current valuation levels that also enhances earnings per share and overall shareholder returns. Stepping back, this framework is deliberately balanced prioritizing investment in growth, delivering a sustainable and growing dividend, and returning excess capital in a disciplined way. All underpinned by a strong balance sheet and robust cash generation that gives us confidence in executing all of these pillars in parallel. Post-year end, we completed a bolt-on acquisition with the purchase of Glenart in South Africa in April 2026. Glenart is a design-led manufacturer and distributor within the Celebrate category, with a strong position in crackers and a well-established local presence. And the business is highly complementary to our existing operations in both product offering and sales channel. Strategically, this acquisition is compelling across the three dimensions. First, its earnings accreted, and we expect it to be immediately earnings enhancing, in line with our disciplined approach to capital allocation. Second, it strengthens our cost competitiveness, providing access to a lower-cost manufacturing base that supports group margins and adds flexibility and resilience to our supply chain. Third, it represents a fourth step in geographical expansion, giving us a direct entry point into the South African market whilst leveraging Glenart's established customer relationships and distribution channels with the key market players. The consideration is based on multiple of Glenart's EBITDA, with initial cash payments of around 3.4 million on completion. His third fixed consideration over the following three years and the performance-related elements linked to Iridar, which keeps our interests well aligned. This is a clear example of the selective bolt-on M&A strategy we've outlined earlier, where we can add capability, improve margins, and expand geographically, while maintaining a disciplined return profile. We see this as the first step in building a broader international platform and will continue to evaluate similar opportunities that align with our strategic and financial criteria. The business today is more streamlined, focused and cash generative following strategic progress we've made over the last 12 months. We're better positioned to benefit from our long-standing strong customer relationships, have a resilient operating model and a robust balance sheet, which gives us flexibility to invest and return capital. That said, we remain cognizant of the macro environment, with ongoing cost pressures, inflation, and softer consumer confidence across a number of our markets. In terms of current trading, we remain encouraged by the order book, which is 78% of budgeted revenues, compared to 75% secured at this time last year. Looking ahead, our guidance remains unchanged. For 27-28, we're guiding to revenue growth of 0-5%, reflects our ongoing demand on certainty, and a disciplined approach to pricing and mix. Adjusted operating margins of 4-5%, supported by premiumisation, operating leverage, and continued cost control, and free cash generation of at least £5 million per annum. underpinned by improved profitability and tight working capital management. We have a business well positioned to deliver steady, high-quality growth with improving margins and a strong cash conversion, while maintaining flexibility to navigate the external environment. In the short term, our strategy will be focused on evolution rather than revolution, with continued emphasis on the four long-term growth pillars and accelerated momentum of future value creation where possible. With that in mind, I'd now like to pass over to Gerald, who will briefly talk you through why he joined the group. Following this, Rohan and I will take any questions that you may have.