In a trading update today (30 April) the gifting and stationery specialist revealed further issues at its already problematic DG Americas business.
Around 60% of group revenues come from the US market with the division posting sales of $500.3m (£374.5m) last year. More than half of purchases via DG Americas are currently sourced from China, which was handed a 145% baseline tariff by Trump.
IG Design Group said the situation was both “complex and dynamic” given the evolving nature of the tariff regime, and its DG Americas team has been working with customers and suppliers to mitigate the potential impact.
“Notwithstanding this, tariffs have the potential to have a significant adverse effect on the DG Americas performance going forward,” the group stated.
It is conducting an accelerated strategic review, which “includes considering an exit of the division”.
An update is expected before it publishes results for the year ended 31 March in June.
Group revenue is expected to be down by 9%, with sales in the US down 12%. The adjusted profit before tax is likely to be around $1m, compared to $25.9m last year.
IG Design Group started reporting in dollars after two big acquisitions there made the US the biggest part of its business. In 2018 it acquired Impact Innovations which required a total funding requirement of £84.4m, and in January 2020 raised £120m to buy CSS Industries for £90m, in a move that doubled the size of its US business.
However, the subsequent Covid-19 supply chain crisis resulted in multiple profit warnings.
More recently, challenging retail conditions in the US were compounded by a number of retail customers going bust, including its fourth largest.
The group expects to recognise a “very material write-down” of its impaired investment in the US business.
Although IG's share price has recently been trading at a ten-year low, news of the potential exit from the struggling US business seemed to find favour with investors. Its shares were up 13.7% this morning at 56.40p (52-week high: 240.00p, low: 45.92p).
Chair Stewart Gilliland also noted that the group's businesses beyond the US “remain robust”.
IG Design Group trades as Design Group. Its UK head office is in Newport Pagnell, with its main manufacturing site in Ystrad Mynach, Mid Glamorgan.
President Trump marked a dizzying 100 days in office this week with a celebratory rally in Michigan, where he described his actions as a “revolution of common sense”. Uncertainty over Trump’s tariffs policy since his so-called ‘Liberation Day’ announcements on 2 April has been blamed for economic turbulence around the world.
