The PLC announced H1 results today that confirmed its previous guidance.
Sales were down 11% at $393.1m on the back of subdued customer demand, “predominantly in the US, and somewhat in the UK and Australia”.
Its key products include gift wrap, gift bags, cards, Christmas crackers, partyware, stationery, and branded bags.
Statutory operating profit – including one-off costs – fell 81% to $7.1m after taking into account a $7.6m charge related to the closure of its manufacturing site in China, and restructuring at the DG America business.
Rising raw material, manufacturing and freight costs put further pressure on profitability as the increases “could not be fully recovered through pricing given the market environment”.
The group is broadening its supplier base, including from Mexico for the Americas market, and is also establishing a sourcing team in India.
Design Group has also made a strategic investment in bag making in Europe, “supporting customer demand for near-shoring solutions”. It has invested €1.7m (£1.4m) in a new line at its Hoogeveen site in the Netherlands. The line can handle a range of sizes, substrates and bag handle types; as well as multi-packs.
It also noted that the roll-out of its Smartwrap solution that does away with shrink film on gift wrap packaging has cut plastic use by more than 29 tonnes.
Chair Stewart Gilliland commented: “We have made good progress throughout our turnaround, particularly as we remain on track to return margins to pre-pandemic levels, and although the broader conditions have perhaps become more difficult, our ambition has not abated.
“The challenging macroeconomic backdrop has undoubtably impacted the confidence of retailers, but we are focused on navigating this landscape by prioritising the essentials of improved delivery, increased collaboration and price competitiveness, to a strong customer base with who we have longstanding relationships.”
Regarding incoming US president Donald Trump’s plans to immediately bring in new tariffs on goods made in China, Mexico and Canada, Design Group noted: “It is not yet clear how the tariff regime in the US will change, nor how other countries will respond to any changes.”
The group’s board said it could not yet comment on how this will affect future trading.
“As a domestic manufacturer of a number of categories there may be some positive impact that offsets any potential inflationary consequences.
“As the incoming new US government's plans are communicated, we will then be in a position to evaluate the opportunities and risks that any changing tariffs will present.”
The DG Americas division accounts for 62% of sales.
Regarding the National Insurance increases announced by chancellor Rachel Reeves in her recent budget, Design Group commented: “The reduction in the National Insurance threshold was not anticipated, and when combined with the rise in the employers' National Insurance rate to 15% the effect is to add c.$0.7m to the group's annual operating costs from next year.”
The group is headquartered in Newport Pagnell and has a UK manufacturing facility in Hengoed, Mid Glamorgan.
IG Design Group’s share price fell to a new 52-week low of 106.00p on the news and was down 12.68% at 109.15p at the time of writing (52-week high: 240.00p).
