IGR Ig Design Group Plc

Transformation of the Group continues to plan, with business simplification, efficiency and cost-saving initiatives particularly focused on the turnaround of the DG Americas division

Challenging market conditions and retail trends experienced in H1 across a number of our markets have continued into H2, and they have more than offset the benefits resulting from such initiatives

Trading across both divisions since H1 has been impacted negatively over the important Christmas season, with DG Americas particularly affected, due to challenging retail conditions affecting customers

As we previously communicated, a number of our retail customers in the very competitive US retail market have experienced considerable distress, and have in recent weeks entered protective arrangements or bankruptcy procedures. This week, a major (4th largest) customer of our DG Americas division has re-entered Chapter 11 protection. These events have required DG Americas to establish significant provisions, circa $15m, to offset its exposure to the amounts receivable from such customers as well as the inventory associated with them

Furthermore, the sales performance of our categories at the retail level during the Christmas season versus customer expectations is also leading a number of retail customers to reduce or delay their forward ordering, impacting our future revenue projections, production scheduling and cost absorption

As recently announced, Sue Buchta, the new CEO for DG Americas, has now joined the organisation. Sue brings an exceptional breadth of leadership experience and commercial acumen from a career in the consumer products industry. With her onboarding well underway, Sue will build on the turnaround plan, with a particular focus on how our strategy returns DG Americas to profitable growth.

Given the aforementioned events, as well as the continuation of challenging retail conditions across both divisions, overall Group revenue for the year ending 31 March 2025 is now expected to be c10% below last year, and therefore below expectations, with both divisions expected to experience decline, with DG Americas estimated to decline c13%, and DG International decline c1%

Correspondingly, FY25 adjusted profit is now expected to be significantly impacted, with profit delivery for the full year around break-even, and well below last year, as well as being significantly below current market expectations (believed to be $32.0m)

Whilst the Group was on track to deliver its strategic expectations of returning margins to above proforma pre-pandemic levels of at least 4.5% in FY25, this will now not be realised and our aspirations will have to be re-planned and re-set

A strong net cash position is still expected to remain at the year-end, albeit being lower than previous expectations given the reduced profit delivery and expected lower receivables recovery due to customer in protective arrangements or bankruptcy procedures. The Company also continues to expect cash proceeds from property disposals.

As communicated at results, it remains too early to comment on what impact, positive or negative, any future changes in international trade tariffs resulting from the incoming US administration will have on the Group

Under these challenging circumstances, at this stage, and until the recent events are more fully assessed, the Board is no longer able to provide guidance for the years beyond FY25. Pending any other material developments, the Group will provide a further update on its results for the year ending 31 March 2025 in late April 2025, with fuller reporting on 17 June 2025 ("FY25") which will include revised management expectations for FY26. Following the recent trading performance of DG America, the Group would now expect to write down the carrying value of its DG Americas division as part of its FY25.