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IG Design parties on, defying revenue drop to deliver strong results


IG Design Group LON:IGR, the AIM-listed, Newport Pagnell-based designer and manufacturer of party products and gifts is due to publish its results for the year ended 31st March 2024 next Tuesday (25th June).

Although it seems there hasn’t been much to celebrate in the last year, this has not discouraged IG, as it is expecting a strong set of results driven by an efficiency push from management to turn around what is the largest consumer gift packaging business in the world.

The strategy led to a significant growth in profit and increased cashflow with management announcing that its is expecting to deliver adjusted profit before tax of USD25.9m (GBP20.4m), up 181.5% on the profit of USD9.2m announced for 2022/23. This would put them well ahead of market expectations – so something for the party good company to celebrate!

Improving operational efficiency

Paul Bal, IG’s CEO said in a trading update: “I am delighted with our progress in improving operational efficiency and simplifying our business.  Through our work, we have delivered another year with significant improvement in profit and margin. I thank all of my colleagues for their hard work as we continue on our journey.”

And it has been quite a year for the Buckinghamshire company, with expected revenues of around USD800m. Although that was down 10% year-on-year, IG Design managed to increase its profit margin to 3.8%. up 200 basis points year-on-year.

Although trade was a bit behind (down 16%) the previous year in the Americas, and Australian and the home market of the UK showed structural softness, the Europeans continues to party and the reverses were more than made up through European performance.

IG closed out the financial year with USD95m in the bank, almost double its USD50m position the year before, which again beat the market expectations and was a result of more disciplined capital management in the group. More incoming cash was expected as the company sold a number of its freehold sites in America and consolidated its logistical footprint.

Heading back to pre-Covid levels

The company had a tough Covid, but three years down the line has more-or less recovered to pre-pandemic levels, and Bal is aiming to return to a profit margin of 4.5% by the end on the next financial year – the level it was at before the Coronavirus pandemic.

He said: “Looking ahead, whilst the external environment remains uncertain, we remain confident that our strategy is the right one, and that we will achieve our aspiration to return the group to pre-Covid-19 adjusted operating profit margins by 31 March 2025.”

The wholesaler expects to build on the head of steam it generated last year and Bal was encouraged by the company’s Americas division growing 132% with the international business growing 61%. He is expecting the Americas to throw off last year’s sluggishness and generate more profit for the group in the coming year.

The company has around 11,000 customers spread over 80 countries, with its principal markets being the US, UK, Australia and Europe and sells its products in brick-and-mortar establishments like Walmart, Costco, Lidl and Aldi, as well as through online retailers like Amazon. Its five major product categories are: Celebrations, Craft, Stationery and Creative Play, Gifting, and Not-for-resale consumables.

IG Group recently completed a share buyback of GBP2.8m of its shares for its Employee Benefits Trust, funded by a loan. The company refinanced for a further three-years a USD125m revolving credit facility with NatWest and HSBC banks structured as an Asset Backed Lending arrangement with a rate of 1.75% to 2.25% over US SOFR about a year ago.

IG opened trading on 18th June at 216.9p. IG Group’s shares were up 60.7% over one-year and have improved 47% year-to-date. IG’s share have ranged between 105p and 229.8p over a 52-week period. The company has a market cap of GBP213.8m.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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