TIDMPMP
RNS Number : 9318T
Portmeirion Group PLC
23 March 2023
23 March 2023
Portmeirion Group PLC
(the "Group")
Preliminary results for the year ended 31 December 2022
Another record sales year shows continued resilience of our
brands and strong global demand
Portmeirion Group PLC, the owner, designer, manufacturer and
omni-channel retailer of leading homeware brands in global markets,
is pleased to announce its preliminary results for the year ended
31 December 2022.
Financial summary
2022 2021 2019
GBPm GBPm GBPm
Revenue 110.8 106.0 92.8
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Headline profit before tax(1) 8.0 7.2 7.4
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Profit before tax 7.0 6.0 7.1
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EBITDA 12.1 10.7 11.4
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Headline basic earnings per share(1) 46.59p 38.85p 56.32p
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Basic earnings per share 40.39p 23.58p 54.66p
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Dividends paid and proposed per share
in respect of the year 15.50p 13.00p 8.00p
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Headlines:
Financial
-- Record Group revenue of GBP110.8 million in the year to 31
December 2022, an increase of 5% over the prior year (2021:
GBP106.0 million) and 19% over pre Covid-19 level (2019: GBP92.8
million).
-- Headline operating margin(1) increased from 7.2% to 7.8% and
we reiterate our long-term ambition to improve the operating
margin to 12.5%.
-- Excellent Christmas and Thanksgiving trading period with strong
demand across our portfolio of consumer goods brands.
-- Sales from online platforms continue to grow despite physical
retail stores reopening, and now represent 51% of total sales
in our core UK and US markets in the year to 31 December 2022
(2021: 50%, 2019: 30%).
-- Headline profit before tax(1) of GBP8.0 million now ahead
of pre-Covid levels (2021: GBP7.2 million, 2019: GBP7.4 million).
-- Total dividends paid and proposed of 15.50p per share, a 19%
increase over the prior year (2021: 13.00p, 2019: 8.00p),
reflecting improved trading performance during the year. Final
dividend proposed of 12.00p per share.
-- Inventory levels remain elevated at year end to avoid supply
chain disruption and this is expected to normalise in 2023.
-- Strong balance sheet and significant headroom within current
borrowing facilities.
(1) Headline profit before tax, headline operating margin and
headline basic earnings per share exclude exceptional items - see
notes 2 and 4.
Operational
-- Improved productivity in Stoke-on-Trent ceramic factory as
we start to obtain the benefits from automation capex.
-- Encouraging growth from South Korea, Canada and China, following
strategic focus on international markets.
-- AromaWorks London brand and intellectual property acquisition
in August 2022 adding scale and synergies to home fragrance
operations.
-- Collaboration between Spode and Kit Kemp Design Studio for
an initial period of five years, with launch date set for
April 2023.
-- New product launches continue to represent more than 10%
of Group sales, including new collections to celebrate the
50(th) anniversary of Portmeirion Botanic Garden.
Current Trading & Outlook
Trading in the first few months of 2023 is in line with our
-- expectations and our forward order books remain healthy.
Seeing an encouraging customer outlook although remain cautious
-- due to the ongoing macroeconomic uncertainty.
Remain focused on long-term growth and margin improvement
-- opportunity and confident in continued progress against our
strategy.
Mike Raybould, Chief Executive commented:
"I am delighted that our brands continue to resonate so well
with customers around the world despite the tougher economic
backdrop. We have benefited from our diversified, global sales
geography with 75% of sales now outside of the UK. We saw strong
sell through during our seasonal / Christmas trading with increased
online penetration and successful new product extensions. Ongoing
productivity improvements in our UK ceramic factory with the
continued investment in automation, together with our long-term
energy price hedge in place until Q1 FY24, helped us to mitigate
higher input cost inflation and still grow operating margins.
We have a strong new product pipeline and look forward to
launching our new product ranges over the next 18 months. Our
ambition is to support and extend our key heritage ranges including
Portmeirion Botanic Garden and Spode Christmas Tree as well as
taking further share in contemporary product categories. We will
launch our Spode tableware and giftware collaboration with leading
British interior designer Kit Kemp in New York and London in April
2023.
Trading for the first few months of 2023 remains in line with
our expectations and we enter the new year with a healthy forward
order book. We continue to focus on delivering on our significant
long-term growth and margin improvement opportunity. The
macroeconomic uncertainty looks to continue however our global
diversification, strong balance sheet and encouraging customer
outlook means we are well positioned for the year ahead."
ENQUIRIES:
Portmeirion Group PLC:
Mike Raybould, Chief Executive +44 (0) 1782 mraybould@portmeiriongroup.com
743 443
David Sproston, Group Finance +44 (0) 1782 dsproston@portmeiriongroup.com
Director 743 443
Hudson Sandler:
Dan de Belder +44 (0) 207 796 portmeirion@hudsonsandler.com
4133
Nick Moore
Emily Brooker
Shore Capital:
(Nominated Adviser and Joint +44 (0) 207 408
Broker): 4090
Patrick Castle Corporate Advisory
Lucy Bowden Corporate Broking
Malachy McEntyre
Singer Capital Markets +44 (0) 207
(Joint Broker): 496 3000
Peter Steel Investment Banking
Asha Chotai
NOTES TO EDITOR:
Portmeirion Group PLC is a leading, omni-channel British
ceramics manufacturer and retailer of leading homeware brands.
Based in Stoke-on-Trent, United Kingdom, the Group owns six
unrivalled heritage and contemporary brands, with 750+ years of
collective heritage; Portmeirion, Spode, Royal Worcester,
Pimpernel, Wax Lyrical and Nambé .
The Group serves markets across the world, with global demand
driven by diversified international markets including the key
geographies of the US, UK and South Korea.
Portmeirion Group has a proven capital-light, well developed and
self-funded growth strategy focused on building a wider customer
base and growing the sales footprint of its brands, through:
-- Building and growing international sales markets
-- Developing online sales channels in core markets
-- Designing and launching new product to widen appeal and take market share
-- Leveraging brands and extensive product ranges
Portmeirion Group PLC
Chairman and Chief Executive Statements
Trading
2022 was another record sales year for the Group as our strategy
of developing geographic sales markets and increasing online sales
penetration continues to yield benefits.
Sales grew by 5% over 2021 and are now 19% above 2019 pre-Covid
levels as our portfolio of brands showed their resilience and
continued to resonate globally with consumers.
We experienced another strong seasonal Christmas and
Thanksgiving trading period - particularly in the US, now our
largest sales market and representing 40% of the Group's turnover.
Our Spode Christmas Tree range, first launched in 1938, remains a
US market favourite and continues to grow driven by new product
launches and increased online exposure through retailer websites
and our own ecommerce channels. It is noticeable that whilst being
seasonally weighted, the festive period is also our most reliable
in terms of forecasting sales with a large number of repeat
customers returning each year to place orders to add to their
collections.
Our South Korean sales market grew strongly and is now back to
historical levels of trading as we continue to innovate and
introduce new product ranges and increase online exposure.
In our core UK and US markets we have continued to see the
benefits of growth in online channel exposure despite physical
retail reopening in 2022 - with 51% of all sales going through
online channels (2021: 50%, 2019: 30%).
Our ability to pass on price rises and achieve factory
productivity gains from capital investments, together with the
strength and depth of our supply chain experience in managing high
input cost inflation, has allowed us to grow headline profits by
11% over 2021 and increase operating margins by 8%.
Full year headline profit before tax(1) was GBP8.0 million
(2021: GBP7.2 million).
We are confident that we can continue to grow our sales
footprint over the next 3-5 years driven by new geographic markets,
further online channel penetration and product innovation within
our core markets. Simultaneously, we are focused on our long-term
objective of growing our operating margins back to historical highs
of around 12.5% (2022: 7.8%, 2021: 7.2%).
Financial Headlines
Revenue for the year ended 31 December 2022 was up by 5% from
2021 and 19% from pre Covid-19 levels at GBP110.8 million, in line
with market consensus. This has been achieved by a strong Christmas
trading period, as well as continued growth of our online sales
platforms, especially in our core UK and US markets (51% of total
sales in 2022). Our long-term ambition is to improve operating
margins to 12.5% and this has moved in the right direction with
headline operating margins(1) increasing to 7.8% (2021: 7.2%).
Additionally, headline basic earnings per share(1) was 46.59p per
share (2021: 38.85p, 2019: 56.32p).
(1) Headline profit before tax, headline operating margin and
headline basic earnings per share exclude exceptional items - see
notes 2 and 4.
Dividend
The Board remains committed to a sustainable dividend policy
with an appropriate level of cover. Our policy will ensure that we
retain and invest sufficient capital in our business to drive
long-term growth in our brands. We currently consider that a level
of cover at or close to three times the dividends paid and proposed
for the year is the appropriate rate for the medium-term to allow
increased investment whilst providing a return for
shareholders.
Due to the improved trading performance in the year, the Board
is recommending a final dividend of 12.00p (2021: 13.00p). Total
dividends paid and proposed for the year would therefore be 15.50p
per share, an increase of 19% over the prior year (2021:
13.00p).
The Board
On 22 March 2023, in the interest of our continued commitment to
good practice, the Board appointed Angela Luger as the Senior
Non-executive Director. Angela has been a Non-executive Director
since 2019. During 2022, we strengthened our Global commercial
leadership with the appointment of Bill Robedee as Global Sales
Director in addition to his role as President of Portmeirion North
America.
The Board keeps its composition and performance under constant
review so as to ensure that we have the appropriate skills,
experience and resources to deliver on our four main board
requirements of: setting strategy, reviewing progress against
strategy, monitoring the resources required to deliver the strategy
and complying with relevant regulatory or governance requirements
be they legal or otherwise. We undertake a formal board
effectiveness review each year.
Environmental, Social and Governance (ESG)
We are focused on being an ethical and sustainable business and
recognise our responsibility to our shareholders, employees,
customers, communities and the people that bring our products into
their homes. We believe that operating in a sustainable way across
the environment, all people and communities is critical to the
long-term health of our business and the world we operate in.
Following analysis work over the last two years, we are now at a
pivotal stage in developing and delivering a sustainability plan
for our global business. In Q2 2023, we will be announcing our
Crafting a Better Future sustainable business strategy and
roadmap.
The Group has a long history of innovation and a strong track
record of continual improvements in ESG. Focusing on our operation
with the highest energy usage, being the Stoke-on-Trent tableware
manufacturing facility, we were pleased to see a further reduction
in carbon emission per tonne of saleable product by 10% in 2022
over 2021. We are dedicated to delivering further significant
improvements in energy consumption and carbon emissions in the
coming years.
Our commitment to our people, ethics and governance is
unfaltering, supported by our policies and processes. Further
details about our corporate culture and its integration within the
Group can be found on our website, www.portmeiriongroup.com, and in
our annual report and accounts in the Section 172(1) statement -
Engaging with key stakeholders to deliver long term success, in the
Our commitment to ESG section and the Corporate Governance
Statement.
The commitment of our employees to making beautiful products
ethically is valued by the Board and we thank them for their
efforts in delivering record results. Our culture and staff
well-being initiatives support our ethos to be an employer of
choice. This is demonstrated by both our UK businesses being
Investor in People Platinum level accredited.
We have complied with the principles of the Quoted Companies
Alliance ("QCA") Corporate Governance Code throughout 2022 and
continue to do so. Further details of our approach to governance
can be found on our website and in our annual report and accounts.
The Board considers our governance procedures to be appropriate for
a company of our size, however we are always open to improvement
and welcome feedback and engagement with all shareholders.
Shareholders are encouraged to contact us via the email address
shareholderenquiries@portmeiriongroup.com .
Operational Overview
Revenue for the Group increased by 5% to GBP110.8 million (2021:
GBP106.0 million).
The US is our largest geographical market representing 40% of
Group sales. In translated figures, sales in the US increased by 3%
to GBP43.8 million (2021: GBP42.5 million) with the continued
benefit of online channel penetration and new product launches.
Sales of our ever popular Spode Christmas Tree range, loved for
generations as part of the ritual of family seasonal celebrations,
grew strongly as we reached ever more customers through online
sales channels and new SKU extensions to the range.
Our UK market is our second largest market and in 2022 accounted
for 25% of Group sales at GBP28.3 million (2021: GBP32.9 million),
a decrease of 14% over the prior year as UK consumers reacted to
cost of living pressures.
Sales into South Korea increased to GBP26.7 million (2021:
GBP18.7 million) and have recovered back to historical levels
following the steps we took in 2019/20 to stabilise and maintain
sales at a sustainable level in this important market. Sales
benefited from our strategy of increasing online channel exposure
and the sale of new and different ranges outside of our core
Portmeirion Botanic Garden tableware ranges including home
fragrance and more contemporary ranges. Portmeirion Botanic Garden
remains a hugely popular range in South Korea and ranks as one of
the very top 'online search terms' in the tableware category.
Products and brands
Our brands and product ranges are a major economic asset for the
Group. Our six major brands -
Portmeirion, Spode, Wax Lyrical, Nambé, Royal Worcester and
Pimpernel together have over 750 years of combined history. Their
designs are well recognised and loved by consumers around the
world.
We have a number of product ranges that have huge longevity and
long running customer repeat purchase. Portmeirion Botanic Garden
was launched 50 years ago and continues to sell well around the
world today. Spode Christmas Tree launched in 1938 is a top US
Christmas tableware range. We continue to design new extensions to
ensure these ranges remain relevant for consumers and to extend
their appeal around the world. Together the two ranges account for
approximately 40% of sales and are two of the most successful
global tableware ranges, providing the Group with a very reliable
base of sales each year.
Additionally, we have a growing portfolio of contemporary
product ranges, including Sophie Conran for Portmeirion, and an
exciting roadmap of new product planned for launch over the next 18
months.
We are focused on growing both our heritage range sales
footprint and increasing our contemporary market share through new
product development, increasing online sales channel penetration
and developing new geographical markets.
Our Spode brand, which is 252 years old, grew by 4% in 2022 and
is now 39% up on 2019 pre Covid levels. We expect Spode to continue
to grow in the next 3-5 years.
Our Nambé brand, acquired during 2019, grew by 13% as we
continue to execute on sales synergies and is now 17% above its
pre-acquisition sales base at constant currency.
Sales from our home fragrance division, Wax Lyrical, fell by 7%
as its UK customer base continued to be impacted by Covid and the
impact of the cost of living crisis hit consumer spending in the
home fragrances category. In the second half of 2022, we acquired
the brand of AromaWorks London, which operates in the adjacent
health and wellbeing category with customers including Waitrose,
Holland and Barrett and Champneys. The acquisition is expected to
drive sales and operational synergies from 2023. Further commentary
on our plans to improve the performance of our home fragrance
division is set out below.
A list of our current ranges can be found at
www.portmeirion.co.uk and www.spode.co.uk. Customers in the United
States should go to www.portmeirion.com and www.nambe.com.
Customers in Canada should go to www.haustopia.com.
Current Trading & Outlook
We remain cautious against the backdrop of ongoing economic
uncertainty and the impact of world events on consumer spending.
However, we have been encouraged by our customer outlook at trade
shows around the world in recent weeks including their feedback on
our new product pipeline. In addition there are signs that global
supply chain disruption and general overstocking in retailers are
subsiding. Similarly global shipping costs are trending back to
historical levels.
Our sales in the first few months of 2023 are in line with our
expectations and forward order books remain healthy.
We are pleased with the strategic progress we have made and
remain confident in our long term strategy.
Group Strategy
We believe we have a significant opportunity to grow the sales
footprint of our business over the next 3-5 years. We will do that
by continuing to develop our key heritage ranges through product
extensions and developing new sales channels to reach more
customers.
Secondly, we are focused on increasing our market share in
contemporary and giftware homewares through developing and
launching beautifully designed new products and leveraging these
new ranges across our existing global sales infrastructure.
Further detail on executing our growth strategy
1. Geography - building and growing sales markets outside of our
three core markets of US, UK and South Korea
Rest of World sales markets (excluding Russia and Eastern
Europe) grew by 6% in 2022 and are 81% up on 2019. Our products are
sold in more than 80 countries around the world. Our three core
markets of UK, US and South Korea account for 89% of Group
sales.
We see a significant opportunity to grow the contribution from
'rest of world' sales markets over the next 3-5 years. In the last
two years, we have appointed new distributor partners in China and
Malaysia and are excited about the prospects of reaching more
customers in these regions.
Sales in our Canadian market grew by 23% in 2022 as we continue
to benefit from the acquisition in 2020 of a long-standing joint
venture, with the ability to leverage synergies from our North
American team.
2. Online - further developing online sales channels in our core
markets reaching more potential customers on more occasions
In our core UK and US markets, sales through online channels now
represent 51% (2021: 50%, 2019: 30%). In South Korea we have
increased online channel presence in 2022 driving sales growth in
this market.
We continue to build long-term direct to consumer relationships
through our own ecommerce sites in the UK and US. In the UK we
launched new websites in 2022 that will improve customer journey,
conversion and our ability to retarget customers for future
purchases. In 2022, our own ecommerce sales represented 14.2% of
total sales in the UK and US (2021: 14.6%, 2019: 9.7%), which was
an 8% reduction on 2021 sales as physical retail reopened, but
still up a very healthy 63% on 2019 pre-Covid levels.
Our key Christmas ranges are now more widely available on
retailer websites - a key component of our excellent sell through
across the recent 2022 seasonal holidays. This in turn provides
strong momentum and encouragement for increased retailer buys for
2023.
3. Designing and launching new product - widening the appeal
with our existing customer base and taking market share
Sales from new product launches and extensions to existing
ranges account for over 10% of the Group's sales and we have a
strong roadmap of new launches for the next 18 months.
Product launch extensions to our core heritage ranges
(Portmeirion Botanic Garden and Spode Christmas Tree) sold well
during 2022 and both ranges benefit from significant repeat
purchasing as consumers seek to add to their collection. We have
already finalised further new product extensions for launch during
2023.
We have an exciting portfolio of contemporary tableware,
giftware and home fragrance to launch over the next 12-18 months
that we believe will help us take market share in core markets.
This includes our Spode Kit Kemp collaboration which launches in
April 2023, new stoneware tableware ranges for Portmeirion and new
lines for each of our well established Sophie Conran for
Portmeirion, Royal Worcester Wrendale Designs and Sara Miller
London for Portmeirion ranges.
We were excited to launch home fragrance and hand and body
products under our Portmeirion Botanic Garden brand in 2022 and
expect these to grow in 2023, particularly in our South Korean
market.
4. Leveraging our brands
We are working on establishing our Nambé brand outside of its
core US market, growing our key Spode Christmas Tree range outside
of the US market, leveraging our high organic brand awareness in
South Korea over new ranges and on cross sell opportunities to grow
basket size for our own ecommerce platforms.
Our Nambé brand grew, again, by 13% on 2021 and is now 17% above
2019 pre-acquisition sales levels at constant currency despite
disruption to sales markets from Covid. We continue to expand
product ranges and sales distribution channels.
Further detail on returning our operating margins to 12.5% in
the long term
There is a significant opportunity for us to improve operating
margins back to historical highs of 12.5% over the long-term (2022:
7.8%) with a medium-term target of reaching 10%. We will do this
by:
1. Improving productivity in our UK factories through investment
in automation to reduce manual handling
We have accelerated capital investment in our Stoke-on-Trent
tableware factory over the past 2 years, investing in automation
and projects that reduce manual handling and increase our pieces
output per labour hour with a roadmap of further projects for the
next 2 years. Average project pay back is 3 years or less and
together with our ability to leverage our factory's capacity as we
grow sales this will drive up operating margins for the Group.
Productivity in our Stoke-on-Trent factory increased by 2% in
2022 and by 13% versus pre-Covid levels.
2. Leveraging our fixed cost base as we grow top line sales
We see a significant opportunity to further grow our sales
footprint over the next 3-5 years which will enable us to leverage
spare capacity in our factories and our existing sales and
distribution infrastructure around the world.
3. Improving the profitability of our home fragrance division back to pre-Covid levels
Wax Lyrical, our home fragrance division, that manufactures
fragranced candles, diffusers and hand and body products in our
factory in Cumbria was significantly impacted by the closure of
much of its customer base due to Covid. Concentrated in physical
retail, the nature of the product meant there was a much lower
transition to online sales channels than with our core tableware
business. Sales decreased by 8% in 2022 and are still 23% below
pre-Covid levels. Due to cost reduction initiatives, profit
contribution was GBP0.5 million better than in 2021, albeit a small
loss before tax was incurred and some way short of pre-Covid levels
of profitability.
In order to improve factory utilisation we purchased the brand
and certain assets of AromaWorks London out of administration in
August 2022. By the end of 2022, we had successfully closed the
AromaWorks factory and migrated its product lines to be made and
absorbed within existing capacity at our Wax Lyrical factory. We
expect this will drive better recovery of fixed overheads and,
together with commercial product initiatives underway, will return
Wax Lyrical to profitability in 2023. We are excited by our new
Portmeirion Botanic Garden home fragrance and hand and body ranges
that launched during 2022 and expect these new ranges to make a
more significant contribution over the coming years.
We expect the home fragrance category to recover over the next
few years as the cost of living pressures ease which together with
the initiatives above will have a positive impact on the Group's
operating margins.
Dick Steele Mike Raybould
Non-executive Chairman Chief Executive
Financial Review
In 2022, the Group continued to progress against our strategic
targets, demonstrating a resilient performance against significant
macro-economic challenges following the Covid-19 pandemic and the
cost of living crisis. Unsurprisingly, all of our major sales
markets were impacted to some extent by large increases in energy
costs and other inflationary pressures.
Set against this, we continued to invest in our strategy in
order to deliver both sales growth and operating margin
improvement.
Revenue
Revenue for the year ended 31 December 2022 totalled GBP110.8
million, an increase of 5% over the prior year (2021: GBP106.0
million) and 19% above pre-pandemic levels (2019: GBP92.8
million).
The Group benefited from a small amount of sales from the
acquisition of the AromaWorks London brand and intellectual
property in August 2022 and the impact of weaker sterling compared
to the US dollar, which increased our revenue but not
profitability.
Geographical sales performance reflected the benefit of our
diversified sales markets, with growth in South Korea and Rest of
World markets more than offsetting weaker performance in the
UK.
The US, our largest sales market, grew again by 3% to GBP43.8
million (2021: GBP42.5 million) which is another record sales
performance, albeit benefitting from a favourable retranslation in
sterling from US dollars.
UK sales declined by 14% against a challenging retail
environment as inflation soared and consumers battled against the
rising cost of living.
In South Korea, sales increased by 43% to GBP26.7 million (2021:
GBP18.7 million) as we expanded our number of ranges and opened new
online distribution routes. We continue to monitor sales out data
from our distributors and remain confident of further progress
going forward in this important market.
Rest of World markets increased to GBP12.1 million (2021:
GBP12.0 million). Following the outbreak of war in Ukraine, our
sales in Eastern Europe were negatively impacted; excluding these
markets rest of world sales increased by 6%. Against this, we again
performed strongly in Canada and saw growth in China and Malaysia
as we began to work with new distribution partners.
Profit
Headline profit before taxation(1) was GBP8.0 million, an 11%
improvement over the 2021 level of GBP7.2 million and now ahead of
the pre-pandemic level in 2019 of GBP7.4 million. Statutory profit
before taxation was GBP7.0 million (2021: GBP6.0 million, 2019:
GBP7.1 million).
This improved profit performance was driven by sales growth and
operating margin improvement. The major markets in which the Group
operates were all impacted by macro-economic factors, with supply
chain costs at an all-time high combined with significant labour,
material and energy cost inflation. The Group was able to drive
efficiency and cost savings in order to balance these challenges,
which led to an operating margin improvement from 7.2% to 7.8%.
(1) Headline profit before taxation excludes exceptional items -
see note 4.
Interest and financing costs
Finance costs for the Group increased b y GBP0.4 million to
GBP1.0 million (2021: GBP0.6 million) as borrowings increased and
interest rates rose significantly, which both increased the cost of
borrowing and the interest on lease liabilities.
With UK interest rates continuing to rise we expect a higher
charge in 2023 before falling back to historical levels going
forward as long term loans mature.
Taxation
The charge for taxation for the year was GBP1.4 million (2021:
GBP2.7 million), an effective tax rate of 20% (2021: 46%). The
reduced tax charge is mainly due to the one-off impact of the
change in UK corporation tax rate from 19% to 25% in the prior year
which caused an additional deferred tax charge of GBP1.1
million.
Dividends
The Board proposes a final dividend of 12.00p per share (2021:
13.00p) giving a total dividend for the year of 15.50p per share
(2021: 13.00p). The final dividend is expected to be paid on 30 May
2023 to shareholders on the register on 21 April 2023 with an
ex-dividend date of 20 April 2023.
We continue to consider that a dividend at a cover of three
times is appropriate in order to balance our ongoing investment
behind our growth strategy with providing a positive return to
shareholders.
Cash generation and net debt
At 31 December 2022, the Group had net debt of GBP10.1 million
(comprising cash and cash equivalents of GBP1.7 million less
borrowings of GBP11.8 million). This compares to a net cash balance
of GBP0.7 million at the prior year end.
Operating cash flow was negatively impacted by working capital
during the year; operating cash generated was GBP1.7 million (2021:
GBP8.7 million), the reduction primarily due to a net increase of
GBP9.9 million in inventory over the year (to match our sales
demand amongst other factors as explained below) .
We continued to invest in our strategic goals and spent a net
GBP6.0 million on capital expenditure as well as acquiring the
brand and intellectual property of AromaWorks London in order to
drive more scale through our home fragrance factory . The capital
expenditure included the installation of automation equipment in
our Stoke-on-Trent factory and the development costs of our new UK
websites.
Bank facilities
The Group has agreed debt facilities with Lloyds Bank which
totaled GBP27.5 million at the balance sheet date, having extended
our facilities during the year in order to provide additional
headroom given inflationary supply chain pressures. These
facilities consist of a GBP10.0 million revolving credit facility
available until February 2025, a GBP6.25 million overdraft and a
GBP6.25 million trade finance facility on an annual renewal cycle,
and a GBP10 million term loan repayable by January 2025 of which
GBP5.0 million was outstanding at the year end. The revolving
credit facility remained undrawn at 31 December 2022.
Our business remains seasonal due to the second half weighting
of our sales. Consistent with previous years, we experienced a
working capital swing of around GBP10.0 million during the year as
we built inventory to match our sales demand. At the year end we
had available cash and borrowing headroom of GBP17.4 million. We
believe our committed funding lines more than adequately addresses
this seasonal dynamic and are prudent.
Assets and liabilities
We had a net working capital outflow of GBP10.3 million driven
by increased inventory over the prior year. About two thirds of
this increase was caused by foreign currency retranslation and
supply chain cost increases, mainly container freight rates and
material increases.
The remainder was early purchasing for additional stock depth of
key lines, which meant we exited the year with a higher stock
balance. With improving supply chains, we expect stock balances to
reduce during 2023 and end the year broadly in line with 2021
volumes.
We continue to make contributions to our closed defined benefit
pension scheme and paid GBP0.9 million during the year.
There has been a significant level of volatility in the pension
scheme valuation during 2022, particularly as a result of the UK
'mini-budget' in September which brought particular disruption to
bond yields.
At the year end we had an accounting surplus of GBP0.3 million,
which was a reduction from the surplus of GBP0.9 million reported
in 2021. At a gross level, both assets and liabilities fell
materially as equities reduced in value and the discount rate used
to calculate scheme liabilities, which is based on corporate bond
yields, increased significantly. We continue to evaluate ways to
de-risk the volatility in the scheme, with a medium-term aim to
reach low-dependency.
At the year end we held treasury shares with a book value of
GBP0.4 million in order to satisfy employee share option schemes,
which had been bought at an average price of GBP1.87 per share,
equating to 210,282 shares, having used 8,363 during the year. In
addition, we also hold 234,523 shares in The Portmeirion Employees'
Share Trust. These shares have a book value of GBP2.7 million,
having been bought at an average cost of GBP11.58 each. The balance
of these shares did not move during the year.
Goodwill and intangible assets on our balance sheet largely
represent the value of the acquired brands of Spode, Royal
Worcester, Wax Lyrical and Nambé, as well as computer software
investment including our online webstore and associated
infrastructure. The balance of intangible assets increased during
the year as we continued to invest in our UK and US websites and
systems and acquired the brand and intellectual property of
AromaWorks London.
Treasury and risk management
The impact of transactional currency flows on the Group's profit
is not material due to the natural matching of revenue and costs
across our global businesses. In the year sterling weakened against
both the US dollar and euro, which increases our sterling revenue
upon retranslation but this had no material impact on Group
profit.
When any anticipated exposure arises, our policy is to use
appropriate hedging instruments to mitigate that risk. We have a
robust approach to managing risk to deliver our strategy as
explained in our annual report and accounts.
David Sproston
Group Finance Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2022
2022 2021
Notes GBP'000 GBP'000
Revenue 3 110,820 106,018
Operating costs before exceptionals (102,154) (98,375)
--------------------------------------- ------ ---------- ----------
Headline operating profit(1) 8,666 7,643
Exceptional items 4
- restructuring costs (958) (1,036)
- acquisition costs (76) -
- GMP equalisation - (197)
Operating profit 7,632 6,410
Interest income 29 12
Finance costs 5 (956) (580)
Profit on sale of fixed assets - 120
Other income 265 -
Headline profit before tax(1) 8,004 7,195
Exceptional items 4
- restructuring costs (958) (1,036)
- acquisition costs (76) -
- GMP equalisation - (197)
Profit before tax 6,970 5,962
Tax (1,415) (2,721)
--------------------------------------- ------ ---------- ----------
Profit for the year attributable to
equity holders 5,555 3,241
--------------------------------------- ------ ---------- ----------
Earnings per share 2
Basic 40.39p 23.58p
Diluted 40.35p 23.49p
--------------------------------------- ------- -------
Headline earnings per share 2
Basic 46.59p 38.85p
Diluted 46.54p 38.71p
--------------------------------------- ------- -------
Dividends proposed and paid per share 6 15.50p 13.00p
--------------------------------------- ------- -------
All the above figures relate to continuing operations.
(1) Headline operating profit is statutory operating profit of
GBP7,632,000 (2021: GBP6,410,000) add exceptional items of
GBP1,034,000 (2021: GBP1,233,000). Headline profit before tax is
statutory profit before tax of GBP6,970,000 (2021: GBP5,962,000)
add exceptional items of GBP1,034,000 (2021: GBP1,233,000).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
Profit for the year 5,555 3,241
---------------------------------------------- --------- ---------
Items that will not be reclassified
subsequently to profit or loss:
Remeasurement of net defined benefit
pension scheme liability (1,517) 2,505
Deferred tax relating to items that will
not be reclassified subsequently to profit
or loss 380 267
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of
foreign operations 2,466 64
Deferred tax relating to items that may
be reclassified subsequently to profit
or loss - 45
---------------------------------------------- --------- ---------
Other comprehensive income for the year 1,329 2,881
---------------------------------------------- --------- ---------
Total comprehensive income for the year
attributable to equity holders 6,884 6,122
---------------------------------------------- --------- ---------
CONSOLIDATED BALANCE SHEET
31 December 2022
2022 2021
GBP'000 GBP'000
Non-current assets
Goodwill 9,416 8,978
Intangible assets 8,581 7,126
Property, plant and equipment 16,842 14,398
Right-of-use assets 5,869 6,409
Pension scheme surplus 317 910
Total non-current assets 41,025 37,821
-------------------------------- --------- ---------
Current assets
Inventories 41,117 29,224
Trade and other receivables 19,887 19,243
Current income tax asset 792 662
Cash and cash equivalents 1,681 7,616
Total current assets 63,477 56,745
-------------------------------- --------- ---------
Total assets 104,502 94,566
-------------------------------- --------- ---------
Current liabilities
Trade and other payables (16,469) (16,245)
Lease liabilities (1,696) (1,695)
Borrowings (8,789) (1,986)
Total current liabilities (26,954) (19,926)
-------------------------------- --------- ---------
Non-current liabilities
Deferred tax liability (3,230) (2,609)
Lease liabilities (4,654) (5,119)
Borrowings (2,981) (4,965)
Total non-current liabilities (10,865) (12,693)
-------------------------------- --------- ---------
Total liabilities (37,819) (32,619)
-------------------------------- --------- ---------
Net assets 66,683 61,947
-------------------------------- --------- ---------
Equity
Called up share capital 710 710
Share premium account 18,344 18,344
Investment in own shares (3,108) (3,124)
Share-based payment reserve 148 128
Translation reserve 3,652 1,186
Retained earnings 46,937 44,703
-------------------------------- --------- ---------
Total equity 66,683 61,947
-------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2022
Share-based
Share Investment payment
Share premium in own reserve Translation Retained
capital account shares GBP'000 reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2021 710 18,344 (3,140) 152 1,077 38,566 55,709
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
Profit for the
year - - - - - 3,241 3,241
Other comprehensive
income for the
year - - - - 109 2,772 2,881
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
Total comprehensive
income for the
year - - - - 109 6,013 6,122
Increase in share-based
payment reserve - - - 64 - - 64
Transfer on exercise
or lapse of options - - - (88) - 88 -
Shares issued
under employee
share schemes - - 16 - - (16) -
Deferred tax on
share- based payment - - - - - 52 52
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
At 1 January
2022 710 18,344 (3,124) 128 1,186 44,703 61,947
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
Profit for the
year - - - - - 5,555 5,555
Other comprehensive
income for the
year - - - - 2,466 (1,137) 1,329
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
Total comprehensive
income for the
year - - - - 2,466 4,418 6,884
Dividends paid - - - - - (2,269) (2,269)
Increase in share-based
payment reserve - - - 91 - - 91
Transfer on exercise
or lapse of options - - - (71) - 71 -
Shares issued
under employee
share schemes - - 16 - - (16) -
Deferred tax on
share- based payment - - - - - 30 30
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
At 31 December
2022 710 18,344 (3,108) 148 3,652 46,937 66,683
------------------------ ---------- ---------- ------------- ------------ -------------- ----------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
Operating profit 7,632 6,410
Adjustments for:
Depreciation of property, plant and equipment 1,810 1,652
Depreciation of right-of-use assets 1,881 1,933
Amortisation of intangible assets 813 698
Charge for share-based payments 91 64
Charge for GMP equalisation - 197
Exchange (loss)/gain (559) 36
Loss on sale of tangible fixed assets 251 17
Operating cash flows before movements in working
capital 11,919 11,007
Increase in inventories (9,869) (2,071)
Decrease/(increase) in receivables 239 (3,960)
(Decrease)/increase in payables (643) 3,707
Cash generated from operations 1,646 8,683
Contributions to defined benefit pension scheme (900) (1,350)
Interest paid (686) (368)
Income taxes paid (300) (461)
----------------------------------------------------- --------- ---------
Net cash (outflow)/inflow from operating activities (240) 6,504
----------------------------------------------------- --------- ---------
Investing activities
Interest received 5 12
Purchase of property, plant and equipment (4,093) (4,511)
Proceeds from disposal of property, plant and
equipment - 786
Purchase of intangible assets (1,933) (843)
Other income 265 -
Acquisition of subsidiary (821) -
Net cash outflow from investing activities (6,577) (4,556)
----------------------------------------------------- --------- ---------
Financing activities
Equity dividends paid (2,269) -
Principal elements of lease payments (1,864) (1,927)
Drawdown of short term borrowings 6,803 -
Repayments of borrowings (2,000) (4,000)
Net cash inflow/(outflow) from financing activities 670 (5,927)
----------------------------------------------------- --------- ---------
Net decrease in cash and cash equivalents (6,147) (3,979)
Cash and cash equivalents at beginning of year 7,616 11,590
Effect of foreign exchange rate changes 212 5
----------------------------------------------------- --------- ---------
Cash and cash equivalents at end of year 1,681 7,616
----------------------------------------------------- --------- ---------
NOTES TO THE PRELIMINARY RESULTS
1. This announcement was approved by the Board of Directors on 22 March 2023.
1.1 The financial information set out above does not constitute
the Company's statutory accounts for the years ended 31 December
2022 or 2021, but is derived from those accounts. Statutory
accounts for 2021 have been delivered to the Registrar of Companies
and those for 2022 will be delivered following the Company's Annual
General Meeting. The auditors have reported on those accounts:
their reports were unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under
Sections 498(2) or (3) of the Companies Act 2006.
1.2 For the year ended 31 December 2022 the Group has prepared
its annual report and accounts in accordance with accounting
standards in conformity with the requirements of the Companies Act
2006 (International Financial Reporting Standards).
This financial information has been prepared in accordance with
the accounting policies stated in the Group's financial statements
for the year ended 31 December 2022.
The financial statements have been prepared on the historical
cost basis, with the exception of derivative financial instruments
which are stated at their fair value.
1.3 At the year end the Group had net debt of GBP10.1 million
(comprising cash and cash equivalents of GBP1.7 million less
borrowings of GBP11.8 million) and had unutilised bank facilities
with available funding of GBP15.7 million. Operating cash
generation was impacted during the year by an adverse working
capital movement and was therefore GBP1.6 million (2021: GBP8.7
million), although we expect this movement to largely reverse in
2023.
The Group sells into over 80 countries worldwide and has a
spread of customers and sales channels within its major UK and US
markets with adequate credit insurance cover in export markets
where required. The Group manufactures approximately 38% of its
products and sources the remainder from a range of third-party
suppliers.
There remains ongoing challenges in our sales markets around the
world caused by the negative impact of the cost of living crisis,
but the Group's performance continues to remain resilient and we
are well diversified with significant funding headroom
available.
The Group has also produced a sensitivity analysis to its cash
flow forecast based upon possible downside scenarios. We have
modelled a 10% sales reduction to assess the potential impact of a
significant downturn in trading performance similar to the
reduction experienced in 2020 during the Covid-19 pandemic and is
therefore considered a very prudent case. This demonstrated the
Group still has sufficient headroom within borrowing facilities and
loan covenants.
We have also considered a reverse stress-tested scenario to try
and assess the amount of sales reduction required before the Group
begins to approach maximum facility and covenant headroom. This
demonstrated sales could reduce by more than 20% before we breached
facility limits or any covenants.
After making enquiries and reviewing budgets and forecasts for
the Group, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the annual
report and accounts.
NOTES TO THE PRELIMINARY RESULTS
Continued
2. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
2022 2021
Weighted Weighted
average average
number Earnings number Earnings
Earnings of per share Earnings of per share
GBP'000 shares (pence) GBP'000 shares (pence)
Basic earnings
per share 5,555 13,753,233 40.39 3,241 13,747,450 23.58
Effect of dilutive
securities:
employee share
options - 14,773 - - 49,235 -
-------------------- --------- ----------- ----------- --------- ----------- -----------
Diluted earnings
per share 5,555 13,768,006 40.35 3,241 13,796,685 23.49
-------------------- --------- ----------- ----------- --------- ----------- -----------
2022 2021
Weighted Weighted
average average
number Earnings number Earnings
Earnings of per share Earnings of per share
GBP'000 shares (pence) GBP'000 shares (pence)
Headline basic
earnings per
share 6,407 13,753,233 46.59 5,341 13,747,450 38.85
Effect of dilutive
securities:
employee share
options - 14,773 - - 49,235 -
-------------------- --------- ----------- ----------- --------- ----------- -----------
Headline diluted
earnings per
share 6,407 13,768,006 46.54 5,341 13,796,685 38.71
-------------------- --------- ----------- ----------- --------- ----------- -----------
The calculation of basic and diluted headline earnings per share
is based on the following data:
2022 2021
GBP'000 GBP'000
Profit for the year attributable to equity
holders 5,555 3,241
Add back/(deduct):
Exceptional items 1,034 1,233
Tax effect of exceptional items (182) (223)
Exceptional impact of remeasuring deferred
tax balances from 19% to 25% - 1,090
Headline earnings 6,407 5,341
------------------------------------------------ --------- ---------
NOTES TO THE PRELIMINARY RESULTS
Continued
3. Segmental analysis
The following tables provide an analysis of the Group's revenue
by operating segment and geographical market, irrespective of the
origin of the products:
2022 2021
Operating segment GBP'000 GBP'000
UK 59,753 59,686
North America 51,067 46,332
110,820 106,018
------------------- --------- ---------
2022 2021
Geographical market GBP'000 GBP'000
United Kingdom 28,255 32,871
United States 43,783 42,492
South Korea 26,656 18,680
Rest of the World 12,126 11,975
--------------------- --------- ---------
110,820 106,018
--------------------- --------- ---------
4. Exceptional items
Exceptional items by type are as follows:
2022 2021
GBP'000 GBP'000
Restructuring costs 958 1,036
Acquisition costs 76 -
GMP equalisation costs - 197
1,034 1,233
------------------------ --------- ---------
5. Finance costs
2022 2021
GBP'000 GBP'000
Interest paid 686 361
Interest on lease liabilities 270 192
Net interest expense on pension scheme
asset - 27
956 580
---------------------------------------- --------- ---------
NOTES TO THE PRELIMINARY RESULTS
Continued
6. Dividends
The Directors recommend that a final dividend for 2022 of 12.00p
(2021: 13.00p) per ordinary share be paid. The final dividend will
be paid, subject to shareholders' approval, on 30 May 2023, to
shareholders on the register at the close of business on 21 April
2023. This dividend has not been included as a liability in these
financial statements. The total dividend paid and proposed for the
year is 15.50p per share (2021: 13.00p).
7. Reconciliation of earnings before interest, tax, depreciation
and amortisation (EBITDA)
2022 2021
GBP'000 GBP'000
Operating profit 7,632 6,410
Add back:
Depreciation 3,691 3,585
Amortisation 813 698
Earnings before interest, tax, depreciation
and amortisation 12,136 10,693
--------------------------------------------- --------- ---------
8. Government grants
Government grants were receivable as part of Government
initiatives to provide financial support as a result of Covid-19
lockdowns. There are no future related costs in respect of these
grants which are receivable solely as compensation for past
expenses.
In the prior year, the Group received funding from the UK
Government's 'Coronavirus Job Retention Scheme' and retail support
grants, the US Government's 'Paycheck Protection Programme' and the
Canadian Government's 'Emergency Wage Subsidy'. In total this
support amounted to GBP316,000 and was included as a credit within
operating costs. There were no related credits in 2022.
NOTES TO THE PRELIMINARY RESULTS
Continued
9. Acquisition of AromaWorks trade and assets
On 12 August 2022, the Group acquired 100% of the trade and
assets of AromaWorks for a net consideration of GBP821,000.
The acquisition provides the Group with additional scale in the
home fragrance market and strategically complements its existing
home fragrance operation.
The acquisition terms do not include any contingent
consideration or deferred consideration arrangements. Details of
the total consideration and the provisional fair values of the
assets and liabilities acquired are as follows:
Initial
fair value
Net assets Fair value of assets
acquired adjustment acquired
GBP'000 GBP'000 GBP'000
Inventory 268 (117) 151
Identifiable intangible
assets 309 - 309
Deferred tax on intangible
assets (77) - (77)
Total identifiable assets 500 (117) 383
Goodwill 438 438
--------------------------------------- ------------- -------------- ------------
Total consideration 821
======================================= ============= ============== ============
GBP'000
Satisfied by:
Cash and cash equivalents 821
Total consideration transferred 821
============================================= =============== ====== ============
Consideration consists of GBP438,000 paid to the administrators
for the trade and assets of AromaWorks. The remaining consideration
includes contributions made to suppliers and customers to ensure
ongoing trade.
The goodwill of GBP438,000 arising from the acquisition consists
of the anticipated synergies of combining the existing Group
operations with those of AromaWorks. This will include shared
product development, distribution channels, access to new customers
and other operational synergies.
Acquisition related costs (included in exceptional costs)
amounted to GBP76,000.
AromaWorks contributed GBP731,000 revenue and GBP49,000 profit
before tax for the period between the date of acquisition and the
balance sheet date.
NOTES TO THE PRELIMINARY RESULTS
Continued
10. Post balance sheet events
There are no post balance sheet events.
11. Availability of annual report and accounts
The accounts for the year ended 31 December 2022 will be posted
to shareholders on or before 14 April 2023 and laid before the
Company at the Annual General Meeting on 23 May 2023. Copies will
be available from the Company Secretary at Portmeirion Group PLC,
London Road, Stoke-on-Trent, Staffordshire, ST4 7QQ, or from the
website www.portmeiriongroup.com.
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