LONDON (Thomson Financial) - International Greetings PLC
, the designer, manufacturer and distributor of greetings, stationery and licensed published products, has warned on full year profit, cancelled its final dividend and announced plans to restructure its manufacturing operations.
The group now expects a year to March 31 2008 financial performance before exceptional reorganisation costs and other items 'significantly below market expectations'.
The warning was blamed on a reduction in the final uptake of Christmas goods in the latter part of December, the slowdown in consumer spending during the first quarter of the current calendar year, and much worse than expected results from the UK greetings division.
It said elements contributing to the UK greetings division's poor performance included manufacturing inefficiencies, additional freight costs, higher than anticipated bad debts and increased stock provisions due to reduced Christmas orders.
'In light of the current trading position and anticipated full year outlook, the board has decided that it would be inappropriate for them to recommend a final dividend for the current financial year,' it said.
'Thereafter, the company would anticipate resuming paying dividends on a progressive and sustainable basis.'
Following a strategic review the group has concluded that the UK manufacturing facilities, and those in Eastern Europe and China, cannot in their current form deliver acceptable profit margins.
These manufacturing units will now be restructured, leading to a rationalisation of the business, and 'certain fixed assets' will be disposed of.
'In future, the UK greetings division will have a market-led rather than volume driven business model, and this revised approach should deliver stronger margin levels more in line with the group's other UK trading activities,' the group said.
The reduction of in-house manufacturing in the UK greetings division will lead to a significant decrease in capital requirements and expenditure from previous levels.
International Greetings also plans to exit businesses which are either 'not performing to expectations' or are considered 'not of strategic importance' for the future.
The group is now in its selling season for Christmas 2008 which will be reflected in the March 2009 year end results and early indications have been 'encouraging', it said. The forward order book in those unaffected areas of the business is 'looking strong'.
In the US the merger of Glitterwrap Inc into the existing operations is proceeding well.
Shares in International Greetings closed Friday at 47-3/4 pence, valuing the business at 22 mln stg. They are expected to fall sharply this morning.
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