(Alliance News) - IG Design Group PLC's share price was cut in half on Wednesday, with a disappointing trading update and "unprecedented" challenges set to continue.
The Bedfordshire, England-based craft, gifting and stationery manufacturer and distributor expects its adjusted operating profit to fall to a breakeven level for the year ending March 31, significantly lower than market expectations. Adjusted operating for profit for financial 2021 was USD42.0 million. Earnings for the full year will also fall significantly short of previous expectations.
The company's share price fell 56% to 112.60 pence in London on Wednesday.
It said in the nine months to December 31, supply chain delays and headwinds caused orders to be processed and shipped in a shorter time window than expected, which incurred fulfilment costs.
Craft sales in the US fell from the year before, and the company says this will last into its final quarter. The reduction in revenue, as well as high supply chain costs, specifically in freight, labour and raw materials, reduced operating margins to 4%, down 460 basis points on the previous year.
The craft company said it will not pay a final dividend for the financial year, but plans to continue paying dividends beyond financial 2022.
On a more positive note, IT Design's international business performed in line with expectations, and its overall revenue growth for the nine-month period was USD828 million, up 12% like-for-like on the previous year.
The company also said it was making "good progress" in the search for a new chief financial officer. The current CFO Giles Willits will extend his notice period, given the severe challenges faced by the business.
Looking ahead, IG Design did not give guidance for financial 2023 owing to the "heightened uncertainty" of the external challenges that are set to continue.
Chief Executive Officer Paul Fineman commented: "Without any end to the supply and cost challenges in sight we cannot simply wait for these external challenges to improve. We have therefore instigated a review of our US operations, analysing our cost base and identifying improvements that can be made quickly. We remain confident in our long term strategy but with the current challenges unlikely to ease in the short term we plan to undertake this review to ensure it remains appropriate."
By Elizabeth Winter; elizabethwinter@alliancenews.com
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Design Group (IGR)