Design Group Regulatory News (IGR)

23 June 2015

International Greetings PLC

Preliminary Results for the year ended 31 March 2015

International Greetings PLC ("International Greetings" or the "Group"), one of the world's leading designers, innovators and manufacturers of gift packaging and greetings, social expression giftware, stationery and creative play products, announces its audited Preliminary Results for the year ended 31 March 2015.

Financial Highlights:

· Revenue at £229.0 million up by £4.6 million (2%) or £9.9 million (4.5%) at like for like exchange rates.

· Profit before tax, exceptional items and LTIP charges up 21% to £9.2 million (2014: £7.6 million).

· Fully diluted earnings per share before exceptional items increased 29% to 10.7 pence (2014: 8.3 pence).

· Cash generated from operations before exceptional items up 18% to £17.9 million (2014: £15.2 million).

· Net debt down 20% to £29.4 million (2014: £36.9 million) and leverage down 0.6 times to 1.8 times, comfortably below our key target of 2 times and a year ahead of schedule.

· Return to the dividend list with proposed full year dividend of 1 pence.

Operational Highlights:

· Completion of major capital investment in production facilities in Wales on time and on budget.

· Record volumes of gift packaging and greetings related products sold worldwide.

· Installation of new gift bag manufacturing facilities in China to be fully deployed throughout 2015/16.

· Underlying operating profits in Europe up by 32% following the successful acquisition and integration of Enper BV Giftwrap in Holland, announced on 5 June, building upon our capital investment there in 2012.

· Major licensing wins throughout the Group including new franchises with Disney and Universal Studios.

· A full strength Management Team, together with a considerably strengthened balance sheet underpins opportunities for on-going growth both organically and through well considered acquisitions.

Paul Fineman, CEO commented:

"I am very pleased to report an excellent set of results during a year in which we have exceeded our goals in profit generation, debt reduction and earnings per share growth. We have continued to strengthen the balance sheet and simultaneously identified and invested in fast payback opportunities within our business. We are delighted that we can therefore confidently return to the dividend list a year ahead of schedule.

"The investments we have made during the period mean we are very much on plan to deliver double digit cumulative average growth in earnings per share and we remain determined to continue to drive performance and reduce leverage. We believe we can achieve these objectives while simultaneously providing a dividend return for shareholders and investing carefully for further future growth."

A full version of the financial statements are available on the investors section on our website and can be accessed from: www.internationalgreetings.co.uk.

International Greetings PLC

Results for the year ended 31 March 2015

Our mission

To succeed by design in all that we do. To drive profitable growth through exceptional customer service, industry leading innovation and great value.

Financial highlights

Operational highlights

· Completion on time and on budget of major capital investment in production facilities in Wales

· Underlying operating profits in Europe up by 32% following the successful acquisition and integration of Enper Giftwrap Business in Holland, Summer 2014

· A full strength management team, together with a considerably strengthened balance sheet underpins opportunities for ongoing growth both organically and through further well-considered acquisitions

· Installation of new gift bag manufacturing facilities within our plant in China to be fully deployed in 2015/16

· Major licensing wins throughout the Group include new franchises with Disney and Universal Studios

Chief Executive Officer's Review

Delivering strong results today and set for continued future improvement

Paul Fineman

CEO

Substantial cash generation and debt reduction has triggered the payment of a dividend.

Key achievements

· Profit before tax, exceptional items and LTIP increased by 21% to £9.2 million

· Focus on cash generation improved leverage by 25% from 2.4 to 1.8 times

· On track to meet our three-year plan of overall double digit earnings per share growth

· Non-UK revenues by customer destination now 67% of total Group revenues

· Major capital expenditure project in UK completed on time and on budget

· Excellent year of production and service levels from our recently relocated China factory

· Acquisition of trade and certain assets of Enper Giftwrap BV now fully integrated, building upon our capital investment there in 2012

I am very pleased to report an excellent set of results for the year in which we have exceeded our goals in profit generation, debt reduction and earnings per share.

This strong performance has been achieved whilst simultaneously meeting key operational goals that, together with other initiatives, provide us with further opportunities for future growth in all areas of Group activity.

We are therefore delighted that during a year in which sales were up 2% to £229.0 million, profit before tax, exceptional items and LTIP charges increased by 21% to £9.2 million, whilst net debt reduced by 20% from £36.9 million in 2014 to £29.4 million in 2015, a year ahead of schedule.

Of particular note, is the substantial reduction of leverage from 2.4 times in 2014 to 1.8 times in 2015, triggering the re-commencement of dividend payments. This has been achieved through our continued focus on balancing the delivery of cash generative sales and profits, reducing leverage and doing so whilst investing in fast payback opportunities across our business and our global manufacturing activities in particular.

With fully diluted earnings per share (before exceptional items) up 29% on the prior year at 10.7p (2014: 8.3p) we are certainly on track with our three-year plan to deliver overall double digit earnings per share growth.

Following the completion of the first phase of an upgrade to our global manufacturing facilities in 2012, with an environmentally-friendly, high-speed, high-definition gift wrap printing capability at our operation in Holland, 2014 has seen the installation of a similar capability within our facility in Wales, officially opened on 30 April 2014 by Her Majesty the Queen together with His Royal Highness Prince Phillip. Our management teams at both facilities have driven efficiencies beyond expectations and enhanced our competitive position whilst continuing to deliver excellent quality and service.

We are now carefully evaluating the prospects for the next phase of similar fast payback investment in the USA, having successfully executed these comparable projects in Europe.

Geographical highlights

UK and Asia

Our UK and Asia business accounted for 47% (2014: 49%) of the Group's revenue for the year, and continues to deliver a portfolio of innovative and highly-competitive products with great efficiency and industry‑leading customer service. This, together with a compelling offering of our generic, licensed and bespoke customer brands, has driven margins higher in this region.

Our UK and Far East operations continue to work collaboratively ensuring we leverage a joined‑up commercial and strategic approach to the market. We continued to strengthen an important competitive advantage by broadening and upgrading compliance standards within our existing facilities in China, which led to the record sales of 74 million Christmas crackers produced during the year. We are now geared for even greater performance levels having invested in semi‑automated processes for cracker manufacturing, which, together with enhanced production capability in gift bags and greetings cards, became operational in Spring 2014.

These facilities have enabled us to secure a three-year trading contract for sole supply of single greeting cards to the UK's largest £1 retail chain, whilst record levels of gift bag orders have been achieved for shipment during 2015.

We have achieved our objective to provide our customers with the ability to source a broad portfolio of complementary product categories from one fully compliant and competitive source.

We will continue to grow sales of licensed products with stationery and creative play categories being consolidated under our Copywrite brand in the UK. Sales of the highly popular Frozen and Despicable Me ranges were noteworthy and continue to thrive into the new year, alongside a continually refreshed and updated selection of licensed product ranges.

Mainland Europe

Our businesses in mainland Europe accounted for 16% (2014: 15%) of the Group's sales.

Although overall market conditions remain challenging, we are extremely pleased to report a strong performance with excellent levels of manufacturing efficiency and record sales volumes.

Our second full year of utilising our state‑of‑the‑art printing facilities based in Holland, together with the delivery across all categories of innovative highly competitive product offerings, resulted in a continued growth of market share and the creation of even greater future opportunities.

The acquisition of the trade and certain assets of Enper Giftwrap BV, in June 2014, has been fully integrated and has strengthened our market share in the Benelux. This demonstrates our commitment to our key strategic objective to be the best and most successful supplier of gift packaging products in the European Union and we shall continue to seek similar fast payback investment opportunities.

We are now actively trading with mainland Europe's ten largest retail groups and scope exists for our future expansion in existing and new markets, both with core and developing product categories.

USA

The USA business accounted for 25% (2014: 24%) of Group's revenue.

Having achieved double digit sales growth in the recent years, the strong sales growth continued with USA representing 32% of Group revenues by destination in 2015 (2014: 31%).

In early June 2014, I announced that Rich Eckman, CEO of International Greetings, USA had tragically passed away. Rich had tirelessly lead our USA business during a period of significant transformation and created a strong platform for future growth. Considerable scope now exists for enhanced levels of profitability as well as continued growth in sales revenue under the leadership of Gideon Schlessinger, who joined us as CEO in April 2015.

Our USA-based gift wrap manufacturing facilities near Savannah were enhanced by the installation of new automated case packing equipment, which was fully operational from Spring 2014. We shall now progress to a further phase of fast payback investment during the current financial year through the installation of new high speed, state of the art paper conversion facilities.

The sales growth during the year included expansion within neighbouring markets in Canada, Mexico and to other South American regions. In the USA itself, notable growth was achieved within the major supermarket and discount channels.

We were especially successful in managing working capital, and, in particular, a 36% reduction in inventory levels was achieved without any detrimental impact to service levels.

Australia

Whilst the Australian economy experienced an overall slowdown during the year, our Australian revenues represented 12% of overall Group sales (2014: 12%).

Our ability to provide our customers with fast turnaround service levels was underpinned by our relatively recent investment in our logistics facilities, enabling us to provide unprecedented levels of order fulfilment to an ever increasing base of retail customers across the nation.

Having successfully achieved sales growth, our focus is on executing plans to improve profitability and we are pleased to now have in place the skillsets and experience required to optimise future returns.

Revenue by product category, brand and season

We continued to focus on our two core product categories, with sales of gift packaging and greetings related products accounting for 73% of Group revenues, whilst stationery and creative play products delivered 27% of revenues.

Sales of IG's generic brands achieved 39% of overall revenues, underpinned by the continued success of our Tom Smith brand, which holds the Royal Warrant for the supply of Christmas crackers and gift wrapping products to Her Majesty the Queen.

With sales of Everyday products at 44% and Christmas products at 56% of Group revenues, the Group's products are sold to over 5,000 customers in over 100,000 retail stores across more than 80 countries.

Our team

The dedication, enthusiasm and appetite of our team throughout the Group for ongoing improvement continues to be inspirational and provides the momentum for future growth across all regions. I am pleased to have the opportunity to thank all of my colleagues for another year of excellent progress and all other stakeholders, including our customers, shareholders, suppliers, advisers and bankers for their continued and much appreciated support.

Our strategy

Our strategic objectives are well documented and detailed in the of the financial statements. They have been consistently applied and provide the foundation for the Group's recent years of ongoing improved performance.

The future

We are very pleased to have successfully completed the second year of a three‑year plan, with outcomes effectively a year ahead of schedule. We are in good shape to deliver against our target of overall double digit cumulative average growth in earnings per share and have significantly reduced debt well beyond original plan levels with leverage now below two times debt/EBITDA. We are delighted to be able to resume dividend payments with a final dividend of 1p per share recommended for the year ended 31 March 2015.

Having considerably strengthened our financial position and management team, opportunities exist to grow in all regions, both organically and through well considered acquisitions.

We are determined to continue to drive performance and our Group is now positioned to deliver ongoing improvements, leveraging our achievement and investments made in recent years.

Paul Fineman

Chief Executive Officer

22 June 2015

Financial Review

Delivering our financial promises - ahead of schedule

Anthony Lawrinson

Chief Financial Officer

This year, we have achieved our goal to reduce year-end leverage below two times, grown underlying earnings per share by 29% and reintroduced a dividend - all ahead of schedule.

Key achievements

· Sales up 2% on prior year (4.5% at constant exchange rates)

· Profit before tax, exceptional items and LTIP charges up 21% at £9.2 million (2014: £7.6 million)

· Fully diluted earnings per share before exceptional items increased 29% to 10.7p (2014: 8.3p)

· Cash generated from operations up over 18% at £17.9 million (2014: £15.2 million)

· Net debt down 20% to £29.4 million (2014: £36.9 million) with leverage at 1.8 times (2014: 2.4 times) comfortably below our key target of two times

· Return to the dividend list with proposed full year dividend of 1 pence

Group performance

Building on a sound performance and an important investment in Wales last year, the Group has again delivered strong results, not only in terms of profit and our key earnings per share growth target, but pivotally reducing leverage below our key target of two times.

Our businesses in the UK (including Asia) and Europe have delivered excellent performances, built on foundations of well-considered investment and faultless execution of both organic investment and the integration of our acquisition made early in the financial year. Our businesses in the USA and Australia are still not achieving their full potential, providing further opportunity to improve. We have already begun the initial process of further investment in the USA to support that improvement now that the leadership there has been bolstered with a new CEO. We now have sufficient confidence in the financial strength of the business to return to the dividend list - a year ahead of schedule. The Group's ability to generate cash should now be strong enough to support continued deleveraging, ongoing investment in growth and a sustainable dividend.

Continuing operations

Revenues for the year to 31 March 2015 were slightly up from £224 million in 2014 to £229 million. At constant exchange rates on overseas earnings this increase was greater at £10 million or 4.5%. Revenue in the UK segment again fell as we seek to focus on the preferred mix of sales and optimise profitability in our most mature markets. In underlying currencies sales in every other segment again grew well between 10% and 12% though with differing impacts to profitability. In Europe, our market leading printing platform continues to provide competitive advantage enhanced further by the integration of the trade and certain assets of Enper Giftwrap BV (a small local competitor that was acquired during the year) and good growth in other non-manufactured categories through deep customer relationships. Our Australian JV and USA business both grew revenue well, but both can do more to achieve our expected level of net margin on this additional business.

Gross profit margin before exceptional items at 17.5% is down on the prior year (2014: 18.4%) much as we saw at the half-year point. Although net pre‑tax profit margins have improved to 3.7% (2014: 3.3%) the Group margin effect reflects the mix of lower margin sales growth in Australia and USA and in both geographies we believe there is opportunity to do more to improve this, particularly in the USA now that we have a new CEO in place. Meanwhile margins in the UK and European segments developed well reflecting mainly efficiencies, economies of scale and careful mix management. The Group aims to improve margins commercially by increasing the balance of own brand products and non‑Christmas business but efficiencies in sourcing and manufacturing will continue to contribute, especially following the investment in Wales where we will see the full effect of the investment in 2015/16.

An important dynamic to margin also continues to be the level of FOB business delivered directly to major customers at ports in China. This type of business continues to grow in all territories especially in the USA with the major value chains.

This typically attracts lower gross margins but it is a means of retaining or winning large volumes of business, in a manner that avoids other costs and risks associated with domestic delivery; winning this business can therefore enhance net margins and return on capital even as gross margins are diluted.

Overheads (before exceptional items and LTIP charges) have decreased year‑on‑year by a pleasing 7.6% or £2.4 million reflecting in particular continuing initiatives in the mature UK market. Tight cost control is a feature of our business and opportunities to remove or reduce costs are constantly sought out, with new costs only incurred where actual or prospective value can be demonstrated.

As a result of the above, underlying operating profit before exceptional items and LTIP charges increased by nearly 11% to £11.9 million. Operating profit after exceptional items and LTIP charges increased even more markedly by 14% to £10.0 million (2014: £8.8 million).

Exceptional items during the year amounted to £1.2 million before tax (2014: £2.3 million) and this charge was lower than planned as a result of our strong execution. The majority of the charge related to the investment programme in high-definition printing in Wales and the associated restructuring, with smaller amounts relating to the restructuring of the leadership team in the USA following the death of the previous CEO, and the acquisition of the Enper Giftwrap business in the Netherlands. Of this charge, a significant element represents accelerated depreciation and thus the actual cash element was lower at £1.1 million even after including outflows deferred from last year.

Finance expenses (before exceptional charges) in the year were 14% lower at £2.7 million (2014: £3.2 million) reflecting the full year effect of improved margins negotiated with banks last year but importantly also lower average indebtedness and more effective use of lower cost facilities. Notes 8 and 17 to the financial statements provide further information.

Underlying profit before tax, exceptional items and LTIP charges was up 21% to £9.2 million (2014: £7.6 million) while profit before tax was up 41% to £7.3 million (2014: £5.2 million) after charging exceptional items of £1.2 million (2014: £2.3 million) and LTIP charges of £0.6 million (2014: £0.1 million).

Taxation

The headline taxation charge is slightly down at £1.3 million (2014: £1.5 million) though of course on a higher profit base so the overall tax charge has dropped significantly to 18.4% reflecting the ability to access tax losses through improved profitability and also fuller tax relief on exceptional items. The effective underlying tax charge on profits before exceptional items is also lower than the prior year at 20.0% (2014: 24.6%), again because greater profitability means more tax losses are now accessible.

The current geographical profile of Group profits before exceptional items at current local rates of tax would result in an underlying blended tax rate of just under 25.9%. However, there are still tax losses in the USA with a current tax value of £1.7 million and in the UK and Asian segment with a current tax value of £0.3 million, not yet recognised in the balance sheet. The opportunity to recognise and utilise these as profitability is sustained and improves, will continue to suppress the actual tax rate for some time to come.

Actual taxation paid in cash during the year was greater than the prior year at £1.3 million (2014: £0.1 million) as our businesses in Australia, the Netherlands and China do not have sufficient losses to shield all of their profits - plus our Australian business took tax relief against the write off of a material bad debt in the prior year, reducing cash tax payable in that year only. With improving and sustained profitability, all of our businesses are likely to pay some cash tax in future periods, though this will continue to be mitigated in the UK and Asia and especially the USA by losses brought forward.

Profit for the year

Net profit for the year increased by a very material 60% to £6.0 million (2014: £3.7 million), even after removing the effect of exceptional items and LTIP charges the underlying profitability still improved by 30% to £7.5 million (2014: £5.7 million).

Earnings per share and dividends

Basic earnings per share were 9.7p (2014: 5.2p). After removing the effect of exceptional items, the adjusted earnings per share were 11.2p (2014: 8.5p) representing an increase of 32%.

Employee share options from the 2008 incentive scheme of 1,589,285 have vested but not yet been exercised as at 31 March 2015. Additionally 1,107,652 shares now vest in respect of the 2012‑15 long term incentive plan and more shares may vest in future periods in respect of the 2014‑17 and any subsequent schemes. As these are exercised, earnings per share will trend towards the fully diluted level and the Company targets growth in this fully diluted metric (before exceptional items) as a primary goal which ensures that incentive plan outcomes and shareholder interests remain aligned. Details of share plans can be found in note 25 to the financial statements.

Fully diluted earnings per share (stated before exceptional items) were 10.7p, up 29% on the prior year (2014: 8.3p), and well ahead of schedule.

The ratio of year end net debt to EBITDA (leverage) was 1.8 times, below our key target of two times, a year ahead of schedule. Accordingly the Board is pleased to propose a final dividend of 1p per share for the year (2014: nil) which will be paid during September, subject to shareholder approval. Clearly this dividend is comfortably covered by underlying earnings and there should be scope to increase this in future periods while still investing in growth and managing average leverage still lower. The Board has determined that any dividend will always be covered not less than three times by underlying earnings per share and the Company currently intends to trend towards this level of pay‑out over time. However, dividend policy will be balanced against the attractive opportunities to invest in efficiency and growth that continue to present themselves and the desire to further reduce average net leverage, which is still regarded as higher than is optimal.

Balance sheet and cash flow

Net debt at 31 March 2015 was again much improved at £29.4 million (2014: £36.9 million) and this improvement would have been even stronger at like‑for‑like exchange rates. As referenced above leverage fell accordingly to 1.8 times from 2.4 times in the prior year. This is a very strong performance and well ahead of our plan despite investment in a small acquisition during the year.

US dollar exchange rate movement in the year effectively increased US dollar debt reported in sterling, partly offset by movement in euro exchange rates on euro denominated debt. Notes 17 and 26 to the financial statements provide further information. Year‑end net debt included amounts denominated in US dollar of $7.9 million (2014: $25.5 million) and in euros of €7.2 million (2014: €5.8 million). The year‑end exchange rates were $1.48 (2014: $1.67) and €1.38 (2014: €1.21). Therefore at like-for-like exchange rates debt would have improved by a further £1.5 million.

Working capital management continues to be a priority. Outstanding debtors are monitored closely, both to maximise cash but also to reduce our credit risk. Trade debtors increased to £18.3 million (2014: £16.1 million) at the year end. Sales towards the end of the year were stronger in the USA in contrast to the prior year when we experienced extraordinarily adverse weather conditions.

The charge for bad and doubtful debts in the year was £0.1 million or less than 0.1% of turnover.

Net stock levels after provisioning for older stock reduced significantly by 4.7% from £48.5 million to £46.2 million. Stock levels fell particularly in the USA, more than reversing an increase we experienced in the prior year related to lower sales as a result of the poor weather conditions in Q4.

Older stock (measured as over 15 months since last purchase) fell slightly to £5.6 million (2014: £5.8 million). Provisioning remains adequate and similar to prior periods. Our businesses consistently achieve 100% recovery against written down values of old stock.

Group cash generated from operations was again very strong at £17.9 million (2014: £15.2 million), reflecting the strength of operating profitability and assisted by a net reduction in working capital of £2.1 million (2014: reduction of £0.7 million).

Investment in capital expenditure was lower than depreciation during the year at £2.3 million and much lower than the prior year (2014: £8.3 million), in which year we incurred the bulk of the investment in two new state‑of‑the‑art printing presses and associated facilities at our gift wrap manufacturing operation in Wales. The Group continues to invest wherever we see strong returns and improved efficiencies. The manufacturing platforms across all our sites in China, UK and Europe are up to date underpinning our competitive position and yet we still see further opportunities for bolt on capital investment in these locations to add further capability. However, the greatest opportunity remains the USA where we have recently approved the next phase of an investment programme and are currently considering plans to do more.

With the investment in Wales complete, our site at Aberbargoed may shortly become available for sale, offering the opportunity to release cash in the near future. In addition the Group is in the third year of a five‑year period by which a company has the option to purchase part of another under utilised site (net book value £0.8 million) for a price of £2.4 million. This is also generating premium income of £0.1 million p.a. over the option period, recognised within other operating income.

Equity attributable to shareholders has increased to £59.7 million from £53.5 million predominantly reflecting profits generated in the year.

Risks and key performance indicators

Our areas of primary focus are:

· improved earnings attributable to shareholders, which we aim to achieve through top-line growth and mix management in selected markets and channels together with strong cost and gross margin management; and

· lower average leverage measured as the ratio of average net debt to pre‑exceptional EBITDA, which we aim to achieve through improved profitability together with close management of our working capital and focussed investment.

Operationally this means a focus on:

· nurturing valuable relationships: monitoring the profitability, product mix and service delivered in respect of our customer base; growing those relationships in existing and new territories and product categories;

· creating a toolbox of expertise: ensuring that we have market leading design and product capability in our categories, sharing knowledge through common platforms;

· providing best quality, value and service: monitoring and benchmarking the key elements of our cost bases, buying or manufacturing as efficiently and effectively as possible from a total cost perspective across the whole season so that we can deliver great value to customers and strong returns to shareholders;

· balancing our business: we monitor the mix and profitability in each of our businesses across season, brand and product categories, seeking out those opportunities that yield the best returns on our scarce capital while rooting out those activities that consume resources for little or no gain; and

· providing differentiated product offerings: across the value, mass and upscale markets.

Foreign exchange impact to profit and earnings

Our diverse geographical revenue and profit streams continue to provide us with market resilience but naturally this carries with it the volatility of currency.

As noted above in the context of net debt, foreign exchange rates can impact significantly in the year on the translation of our overseas figures relative to prior years with the US dollar rate moving from 1.67 to 1.48 during the year, the euro from 1.21 to 1.38 and the Australian dollar rate moving from 1.80 to 1.95. As noted above this change in rates had a material impact on the sterling value of sales although the impact to net profit during the year was modest at only £0.2 million because the Group matches the currency of costs and funding where possible. However, the significantly weaker euro rates at the end of the year are likely to impact more materially in next year's results through the translation of overseas earnings.

Additionally, the relative strength of the US dollar against other currencies can materially impact purchase prices out of China. This is most noticeable in the weakness of the euro and Australian dollar and our European and Australian businesses are finding their margins are squeezed through substantial FX headwinds on bought in product from the Far East. It is a feature of our business that we innovate, invest and commercially redesign product to combat this effect but this can take more than one season.

Treasury operations

The Group operates with four supportive bankers, each addressing one of our geographic segments. Current global facilities comprise:

· term facilities at Group level in sterling and US dollar, repayable in tranches with bullets in May 2018;

· leasing facilities for seven and five years respectively in the UK and Netherlands for key plant and machinery;

· asset-backed facilities secured on the stock and debtors of the relevant operating businesses in each segment, all of which have at least one more year to run and are usually renewed for two to three years at a time; and

· a revolving multi‑currency credit facility and overdraft to manage peak working capital requirements; these are renewed in May annually.

These facilities provide the Group with the operational flexibility it requires in a highly-seasonal business on a cost-effective basis. As noted above, interest margins have been falling as leverage has improved and the Group works with its lenders to find the most cost-effective solutions to its working capital needs. Accessing the lowest cost facilities more effectively had a material benefit in the current year.

There are financial covenants attached to our facilities and the Group comfortably complied with these throughout the year. These covenants include:

· debt service, being the ratio of cash flow available to finance costs on a rolling twelve-month basis;

· interest cover, being the ratio of earnings before interest, depreciation and amortisation to interest on a rolling twelve-month basis;

· leverage, being the ratio of debt to pre‑exceptional EBITDA on a rolling twelve-month basis; and

· appropriate local covenants in the individual businesses, which have asset-backed facilities.

The Group has various interest rate swaps denominated in US dollar, sterling and euros to improve certainty over interest charges. The Group adopts hedge accounting for some of these instruments. No new interest rate contracts were entered into during the year. The Group also actively manages FX transaction exposure in each of its businesses, with advice and support from the central treasury team.

Note 26 to the financial statements provides further information in respect of treasury matters.

Conclusion

The Group delivered another very strong year, building on past achievements, placing us a full year ahead of schedule and thus able to declare a dividend for the first time in many years. Net debt and earnings per share performance were especially pleasing and continued outperformance in the arena of cash management is providing the Group with additional flexibility and options to create value for shareholders in the future.

Anthony Lawrinson

Chief Financial Officer

22 June 2015

Chairman's Corporate Governance Review

Continuing to promote a culture of respect, integrity, openness and honesty

John Charlton

Chairman

Dear shareholder,

As already stated, we are very pleased with the performance of our Group during the year ended 31 March 2015. It was particularly pleasing that we achieved our profit and earnings per share goals and at the same time reduced our debt and improved our leverage ratio. Our capital expenditure projects within our manufacturing facilities in Holland and the UK have been well implemented, thereby improving our operating efficiencies and we believe that we have strengthened our position as being one of the world's leading designers, manufacturers, importers and distributors of each of the core product categories on which we focus.

As Chairman, one of my important roles is to lead the Board and help promote a culture within each of the businesses in our Group of respect, integrity, openness, honesty and enjoyment, in the way that we communicate with our customers, suppliers, shareholders, advisers and of course all our associates. The Board continues to operate under a governance structure, which is designed to be flexible and efficient in creating sustainable long-term growth in shareholder value.

Corporate governance

The UK Corporate Governance Code (formerly the Combined Code) sets out standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders.

Whilst there is no obligation for AIM‑listed companies to comply with this Code, your Board endorses the principles of effective corporate governance and is committed to maintaining the highest standards of ethics, and professional competence. That said, your Directors do not consider that full compliance with all aspects of the Code is appropriate for our Group at this stage of its development, but we shall keep the matter under review and continue to develop procedures and policies as the Group grows.

Board of Directors

The principal duty of the Board is to represent and protect the interests of the Company's shareholders. The Board plays an important role in working with management to ensure that our businesses are well governed, financially strong, that we mitigate any risks that our managers identify and that we strike a balance between achieving our short-term objectives and longer-term growth and development. As a consequence, the Board works closely with management in developing proposals on strategy for each of our businesses and for our Group, as a whole.

Division of responsibilities

There is a distinct and defined division of responsibilities between the Chairman and the Chief Executive Officer ("CEO"). The Chairman is primarily responsible for the effective working of the Board and the CEO for the operational management of the business and for the implementation of the agreed strategy.

Composition of the Board

As advised within last year's annual report, it was with immense sadness that I had to report that our Board colleague Rich Eckman passed away on 1 June 2014. There were no other changes to the composition of our Board. We operate with three Executive Directors balanced by three Non‑Executive Directors, with myself then as Chairman. Our Non‑Executive Directors have an important role in constructively challenging and helping to develop proposals on strategy; on scrutinising management's performance in meeting agreed goals and objectives and the monitoring of performance reports.

I also need to advise that Phil Dutton, one of our Non‑Executive Directors will not be seeking re-election at our forthcoming Annual General Meeting. Phil is currently residing in the USA and has now informed us that he will continue to live in the USA, thus making attendance at Board Meetings and involvement in International Greetings PLC matters impractical. Phil was appointed to our Board in May 2012.

Phil currently chairs our Audit Committee and is also a member of our Remuneration Committee. Whilst Phil will not be stepping down from our Board until 16 September, I should like to place on record the valuable contribution he has made to our Board and committees these past three years and the support that he has given to our Group. We wish Phil and his family every success.

The Board has two committees - Remuneration and Audit. Our Remuneration and Compensation Committee is now chaired by Elaine Bond, one of our Non‑Executive Directors and the Committee comprises Phil Dutton, another of our Non‑Executive Directors and myself. Our Audit Committee comprises Elaine Bond and myself and is chaired by Phil Dutton.

The Audit Committee satisfies itself on the integrity of financial information and that controls and risk management systems are robust and defensible. The Committee meets as required during the year and at least twice with the Group's external auditor. Its role is to review the interim and final financial statements for approval by the Board, to ensure that operational and financial controls are functioning properly, and to provide the forum through which the Group's external auditor reports to the Board.

The Remuneration Committee ("RemCom") determines appropriate levels of remuneration and compensation for Executive Directors. The Committee meets as required during the year and this year was heavily involved in agreeing the positions within our senior management team that should participate in our Long Term Incentive Plan ("LTIP"), together with the level of awards. RemCom is also responsible for agreeing the performance criteria for the annual bonuses and LTIP for Executive Directors and senior management.

Anders Hedlund also holds the position of Non‑Executive Director on the Board. Anders Hedlund is presumed not independent because, as founder, he has served on the Board since the Company's inception, he holds significant interests in the shareholding of the Company and he also fulfils a consultancy role within one of the Group's businesses.

As at the date of this report, all of the other Non‑Executive Directors are considered independent under the UK Corporate Governance Code.

Board process and information

The Board met six times during the year, including an in depth review of FY16 budgets with senior management over three days. The Board aims to meet at least six times a year for formal Board meetings and up to five further times in between for informal business reviews, to review budgets and to focus on strategy. Where possible and cost effective, the Board tries to meet on the premises of various of its subsidiaries during the year, which provides an opportunity for the Directors to visit our businesses and meet with the senior management.

Dialogue occurs regularly between Directors outside of scheduled meetings. Meeting agendae include review and approval of minutes recorded, matters arising, a review of material operational matters relating to our businesses and other special items for discussion or consideration. Board papers are usually circulated at least three business days in advance to allow Directors adequate time to prepare.

The Board receives operational and financial information and reports from the CEO/Chief Financial Officer to assist in monitoring and assessing the ongoing performance of the business on a monthly basis.

Accountability and audit

All Directors have accepted a duty of care and accountability to act in the interests of the Company. As stated, the Audit Committee oversees how the Board monitors risk and reviews the adequacy of the risk management framework.

Risk management

The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Group's risk management systems, policies and procedures are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits. Such a system is designed to manage, rather than eliminate the risk of failure to achieve business objectives and, can only provide a reasonable and not absolute assurance against material misstatement or loss.

Risk management processes are reviewed regularly by the Audit Committee to reflect changes in market conditions and the Group's activities. The Board's oversight covers all controls, including financial, operational and compliance controls and general risk management. It is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate the need for more extensive monitoring.

Finally, whilst providing an overview of the policies and procedures that we adopt in following good corporate governance, I wish to thank my fellow Directors for their hard work, commitment, loyalty and support that they give to our Group. I also wish to place on record once again our thanks and appreciation to all our employees throughout the Group. It is through their efforts and support that we continue to make the progress that we have. We value greatly their commitment and loyalty. I should also take this opportunity to thank our shareholders, bankers, customers, suppliers and advisers for their input and contributions to all our businesses throughout the world. We never take their support for granted and we are grateful for the excellent working relationship and partnership that we enjoy with them.

John Charlton

Chairman

22 June 2015

Director's report

The Directors present their annual report and the audited financial statements for the year ended 31 March 2015.

Likely future developments

See strategic report in the financial statements.

Financial risk

See strategic report in the financial statements.

Dividends

No interim dividend was paid (2014: nil). The Directors are recommending a final dividend of 1p per share (2014: nil). If approved it will be paid in September 2015 to shareholders on the register at the close of business on 10 July 2015.

Capital structure

Details of the issued share capital, together with details of movements in the Company's issued share capital during the year are shown in note 22. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company.

There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation.

Details on share‑based payments are set out in note 25 to the financial statements and the Directors' remuneration report. No person has any special rights or control over the Company's share capital and all issued shares are fully paid.

Directors and Directors' interests

The Directors who held office during the year were as follows:

Elaine Bond Rich Eckman*

Lance Burn Paul Fineman

John Charlton Anders Hedlund

Phil Dutton Anthony Lawrinson

*Rich Eckman passed away on 1 June 2014.

In accordance with the Company's Articles of Association, Elaine Bond will stand for re-election at the forthcoming Annual General Meeting.

Phil Dutton will not stand for re-election and will stand down on 16 September 2015.

The Directors who held office during the year had the following direct interests in the ordinary shares of the Company:

In addition to the above holdings:

(a) 57,500 (2014: 57,500) shares are held by the wife of John Charlton.

(b) Rich Eckman passed away on 1 June 2014. Rich Eckman's 200,000 options were exercised by his estate on 24 September 2014 in accordance with the scheme rules.

(c) Paul Fineman owns a non‑beneficial interest in 174,608 (2014: 174,608) ordinary shares of 5p each.

(d) 17,142,640 (2014: 17,142,640) and 5,275,116 (2014: 5,275,116) ordinary shares of 5p each are respectively registered in the names of AC Artistic Limited ("Artistic") and Malios Limited, companies incorporated in the British Virgin Islands, and under the ultimate control of the Hedlund family. In addition to the Hedlund family's beneficial interest set out above, the Hedlund family is also interested in a further 1,150,790 ordinary shares, representing a further 1.98% of the current issued share capital of the Company. These ordinary shares are held by West Coast Trust, a trust for the benefit of Anders Hedlund's adult children, which holds 900,790 ordinary shares and Claes Hedlund, Anders Hedlund's brother, who owns 250,000 ordinary shares. In total the Hedlund family is interested in 23,568,994 ordinary shares, representing 40.49% of the current issued share capital of Company.

(e) For details of the Executive Share Option and LTIP Schemes see page 27 to 31 of the financial statements

No shares were purchased by Directors between 31 March 2015 and the date of this annual report.

Employees

The Group recognises the benefits of keeping employees informed on matters affecting them as employees and on the various factors affecting the performance of the Group. This is achieved through employee briefings that are held in most businesses at least twice a year and regular team briefings.

The Group conforms to current employment laws on the employment of disabled persons and, where we are informed of any employee disability, management makes all reasonable efforts to accommodate that employee's requirements.

Health and safety

The Group is committed to maintaining high standards of health and safety in every area of the business.

It is the aim of the Group to exceed the requirements of health and safety legislation and we have established a Group Board level health and safety co‑ordinator to ensure continuous improvement of health and safety across the Group.

Going concern

The Group's business activities, together with the factors likely to affect its future development, its performance and position are set out in the Chief Executive Officer's review. The financial position of the Group, its cash flows, liquidity position and its management of both working capital and capital expenditure are set out in the financial review. Details of bank loans and borrowings are given in note 17 to the financial statements and liquidity risks are given in note 26 to the financial statements.

The Group relies on its banks for financial support and is confident that the facilities in place are sufficient to meet its needs for the foreseeable future (see note 1 to the financial statements). Accordingly the Directors continue to adopt the going concern basis in preparing the financial statements.

Purchase of own shares

The Directors are authorised to make market purchases of the Company's own shares under an authority granted at the last Annual General Meeting. The Directors will seek renewal of this authority at the forthcoming Annual General Meeting. During the year the Company did not buy back any of its shares. If passed, the resolution would give the Company authority to purchase in the market up to 5,820,490 ordinary shares (representing approximately 10% of the Company's issued share capital).

Any shares purchased under this authority would either be treated as cancelled (and the number of shares in issue reduced accordingly) or held in treasury, available for re‑sale by the Company or transferred to an employees' share scheme. This general authority, if approved, would expire on the date of the Company's 2016 Annual General Meeting or, if earlier, 15 months from the date the resolution is passed. The Directors presently intend that a resolution to renew this authority will be proposed at next year's Annual General Meeting and at each succeeding Annual General Meeting.

Auditor

The Directors who held office at the date of approval of this annual report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware and, each Director has taken all the steps that ought to have been taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

By order of the Board

Anthony Lawrinson

Director

22 June 2015

Consolidated income statement

year ended 31 March 2015

Consolidated statement of comprehensive income

year ended 31 March 2015

Consolidated statement of changes in equity

year ended 31 March 2015

Merger reserve

The merger reserve comprises premium on shares issued in relation to business combinations.

Capital redemption reserve

The capital redemption reserve comprises amounts transferred from retained earnings in relation to the redemption of preference shares. For ease of presentation, the amount of £1.34 million relating to the capital redemption reserve has been included within the column of share premium and capital redemption reserve in the balances at both the beginning and end of each year, with no movements.

Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Shareholders' equity

Shareholders' equity represents total equity attributable to owners of the Parent Company.

Consolidated balance sheet

as at 31 March 2015

These financial statements were approved by the Board of Directors on 22 June 2015 and were signed on its behalf by:

Paul Fineman Anthony Lawrinson

Director Director

Consolidated cash flow statement

year ended 31 March 2015

Notes to the financial statements

year ended 31 March 2015

1 Accounting policies

The financial information included in this preliminary statement of results does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006 (the "Act"). The financial information for the year ended 31 March 2015 has been extracted from the financial statements on which an unqualified audit opinion has been issued.

International Greetings PLC is a public limited company, incorporated and domiciled in England and Wales. The Company's ordinary shares are listed on AIM.

The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Company financial statements present information about the Company as a separate entity and not about its Group.

The Group financial statements have been prepared and approved by the Directors in accordance with EU adopted International Financial Reporting Standards. The Company has elected to prepare its Company financial statements in accordance with UK GAAP; these are presented in the financial statements.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Group financial statements.

Judgements made by the Directors in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the policies below.

Going concern basis

The financial statements have been prepared on the going concern basis.

The borrowing requirement of the Group increases steadily over the period from July and peaks in October, due to the seasonality of the business, as the sales of wrap and crackers are mainly for the Christmas market, before then reducing.

As with any company placing reliance on external entities for financial support, the Directors acknowledge that there can be no certainty that this support will continue although, at the date of approval of this report, they have no reason to believe that it will not do so.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

Measurement convention

The financial statements are prepared on the historical cost basis except that derivative financial instruments are stated at their fair value.

Changes in accounting policies

The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 March 2015, except for the adoption of new standards and interpretations as of 1 April 2015.

Basis of consolidation

Subsidiaries are entities controlled by the Group. Generally there is a presumption that a majority of voting rights result in control. To support this presumption, and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all facts and circumstances in assessing whether it has the power to control an investee, including rights arising from shareholder agreements, contractual arrangements and potential voting rights held by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Foreign currency translation

The consolidated financial statements are presented in pounds sterling, which is the Company's functional currency and the Group's presentational currency.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations, and of related qualifying hedges, are taken directly to the translation reserve. They are released into the income statement upon disposal.

Exchange differences arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income in the translation reserve. The cumulative translation differences previously recognised in other comprehensive income (or where the foreign operation is part of a subsidiary, the parent's interest in the cumulative translation differences) are released into the income statement upon disposal of the foreign operation or on loss of control of the subsidiary that includes the foreign operation.

Classification of financial instruments issued by the Group

Financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders' funds) only to the extent that they meet the following two conditions:

(a) they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and

(b) where the instrument will or may be settled in the Company's own equity instruments, it is either a non‑derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company's exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company's own shares, the amounts presented in these financial statements for called up share capital and share premium exclude amounts in relation to those shares.

Trade and other receivables

Where it is likely to be materially different from the nominal value, trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment losses.

Trade and other payables

Where it is likely to be materially different from the nominal value, trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purposes of the cash flow statement.

Interest‑bearing borrowings

Interest‑bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest‑bearing borrowings are stated at amortised cost using the effective interest method.

Derivative financial instruments and hedging

Derivative financial instruments

Derivative financial instruments are recognised at fair value. The gain or loss on re‑measurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised as other comprehensive income in the hedging reserve. Any ineffective portion of the hedge is recognised immediately in the income statement.

Amounts previously recognised in other comprehensive income are transferred to the income statement in the periods when the hedged item affects profit or loss (for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of forward foreign exchange contract hedging export sales is recognised in the income statement within "sales". However, when the forecast transaction that is hedged results in the recognition of a non‑financial asset (for example, inventory), the gains or losses previously recognised in other comprehensive income are transferred from other comprehensive income and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in cost of goods sold (in case of inventory).

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in other comprehensive income and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in other comprehensive income is recognised in the income statement immediately.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance leases. Where land and buildings are held under finance leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of a finance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as described below.

Depreciation is charged to the income statement on a straight‑line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives are as follows:

· freehold buildings 25-30 years

· leasehold land and buildings life of lease

· plant and equipment four-25 years

· fixtures and fittings three-five years

· motor vehicles four years

No depreciation is provided on freehold land.

Included within plant and machinery are assets with a range of depreciation rates. These rates are tailored to the nature of the assets to reflect their estimated useful lives.

Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.

Intangible assets and goodwill

Subject to the transitional relief in IFRS 1, all business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries. In respect of business acquisitions that have occurred since 1 April 2006, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Identifiable intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable.

Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash‑generating units and is not amortised but is tested every half year for impairment.

In respect of acquisitions prior to 1 April 2006, goodwill is included on the basis of its deemed cost, which represents the amount recorded under UK GAAP which was broadly comparable save that only separable intangibles were recognised and goodwill was amortised. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated.

If the cost of an acquisition is less than the fair value of the Group's share of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.

Other intangible assets

Expenditure on internally generated goodwill and brands is recognised in the income statement as an expense as incurred.

Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses.

The main classes of intangible assets are computer software and publishing imprints.

Amortisation

Amortisation is charged to the income statement on a straight‑line basis over the estimated useful lives of intangible assets unless such lives are indefinite. The estimated useful life of computer software ranges between three and five years. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are three to five years.

Amortisation charges are included under "administrative expenses" in the income statement.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is based on a combination of weighted average and the first‑in first‑out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

Impairment

The carrying amounts of the Group's assets other than inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

For goodwill, the recoverable amount is estimated at each half‑year.

An impairment loss is recognised whenever the carrying amount of an asset or its cash‑generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

Impairment losses recognised in respect of cash‑generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash‑generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash‑generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

The recoverable amount of the Group's assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time, value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash‑generating unit to which the asset belongs.

An impairment in respect of goodwill is not reversed. In respect of other assets, an impairment is reversed when there is an indication that the impairment may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan and announced its main provisions. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre‑tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as borrowing costs.

Deferred consideration

Where considered material, the Group calculates deferred consideration by discounting it to its fair value. This fair value is used to calculate the total purchase consideration and hence the goodwill figure. As the discount unwinds it is charged as a finance expense within the income statement and added to the deferred consideration creditor.

Revenue recognition

Revenue represents the amounts, net of discounts, allowances for volume and promotional rebates and other payments to customers (excluding value added tax) derived from the provision of goods and services to customers during the year. Sales of goods are recognised when a Group entity has despatched products to the customer, legal title has passed and the collectability of the related receivable is reasonably assured. Provisions are made for volume and promotional rebates where they have been agreed or are reasonably likely to arise, based upon actual and forecast sales.

Exceptional items

Exceptional items are those items of financial performance which, because of size or incidence, require separate disclosure to enable underlying performance to be assessed.

Discontinued operations

A discontinued operation is a component of the Group's business that represents a separate major line of business or geographical area that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier.

When an operation is classified as a discontinued operation, the comparative income statement is represented as if the operation had been discontinued from the start of the comparative period.

Government grants

Capital‑based government grants are included within other financial liabilities in the balance sheet and credited to operating profit over the estimated useful economic lives of the assets to which they relate.

Supplier income

The Group does not have material retrospective supplier incentive arrangements but where these do arise, they are recognised within cost of sales on an accruals basis as earned for each relevant supplier rebate.

Expenses

Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight‑line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

Finance lease payments

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Finance income and expenses

Finance expenses comprise interest payable, finance charges on finance leases and unwinding of the discount on provisions and deferred consideration. Finance income comprises interest receivable on funds invested and dividend income.

Net movements in the fair value of derivatives which have not been designated as an effective hedge, and any ineffective portion of fair value movement on derivatives designated as a hedge are also included within finance income or expense.

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Dividend income is recognised in the income statement on the date the entity's right to receive payments is established. Foreign currency gains and losses are reported on a net basis.

Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or equity respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

Dividend distribution

Final dividends to shareholders of International Greetings PLC are recognised as a liability in the period that they are approved by shareholders.

Employee benefits

Pensions

The Group operates a defined contribution personal pension scheme. The assets of this scheme are held separately from those of the Group in an independently administered fund. The pension charge represents contributions payable by the Group to the fund.

The Netherlands subsidiary operates an industrial defined benefit fund, based on average wages, that has an agreed maximum contribution. The pension fund is a multi‑employer fund and there is no contractual or constructive obligation for charging the net defined benefit cost of the plan to participating entities other than an agreed maximum contribution for the period, that is shared between employer (4/7) and employees (3/7). The Dutch Government is not planning to make employers fund any deficits in industrial pension funds; accordingly the Group treats the scheme as a defined contribution scheme for disclosure purposes. The Group recognises a cost equal to its contributions payable for the period.

Share‑based payment transactions

The cost of equity‑settled transactions with employees is measured by reference to the fair value at the date on which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined by using an appropriate pricing model. In valuing equity‑settled transactions, no account is taken of any service and performance (vesting conditions), other than performance conditions linked to the price of the shares of the Company (market conditions). Any other conditions which are required to be met in order for an employee to become fully entitled to an award are considered to be non‑vesting conditions. Like market performance conditions, non‑vesting conditions are taken into account in determining the grant date fair value.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market vesting condition or a non‑vesting condition, which are treated as vesting irrespective of whether or not the market vesting condition or non‑vesting condition is satisfied, provided that all other non‑market vesting conditions are satisfied.

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non‑market vesting conditions and of the number of equity instruments that will ultimately vest or, in the case of an instrument subject to a market condition or a non‑vesting condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

New standards

There are no IFRS or IFRIC interpretations or amendments effective for the first time this financial year that have any material impact on the Group.

New standards and interpretations not applied

Management continually reviews the impact of newly published standards and amendments and considers, where applicable, disclosure of their impact on the Group.

The following standards, interpretations and amendments issued by the IASB have an effective date after the date of these financial statements and are considered by management to be relevant to the Group:

* Not yet endorsed by EFRAG.

· IFRS 9 'Financial Instruments' replaces the existing requirements in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including the new expected credit loss model for calculating impairment of financial assets, and the new general hedge accounting requirements. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. The Group are currently assessing the impact of IFRS 9.

· IFRS 15: IFRS 15 replaces existing IFRS revenue recognition requirements in IAS 18 Revenue. The standard applies to all revenue contracts and provides a model for the recognition and measurement of sales of some non‑financial assets (e.g. disposals of property, plant and equipment). The core principle of IFRS 15 is that revenue is recognised to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Application is required for annual periods beginning on or after 1 January 2017. The Group are currently assessing the impact of IFRS 15.

No other standards, interpretations or amendments which have been issued but are not yet effective are expected to significantly impact the Group's results or assets and liabilities and are not expected to require significant disclosure.

2 Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 1, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of revision and future periods if the revision affects both current and future periods.

The estimates and assumptions that have had a significant bearing on the financial statements in the current year or could have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Critical judgements in applying the Group's accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Exceptional items

The Directors have chosen to separate certain items of financial performance which they believe, because of size or incidence, require separate disclosure to enable underlying performance to be assessed. These items are fully described in note 10.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are discussed in the strategic report and below.

Impairment of goodwill and property, plant and equipment

Determining whether goodwill and property, plant and equipment are impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated or to which property, plant and equipment belong. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash‑generating unit and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £31.1 million (2014: £31.2 million). No impairment (2014: nil) was required. The carrying amount of property, plant and equipment was £29.9 million (2014: £32.0 million). No impairment loss (2014: nil) was required, (see note 12).

Provision for slow moving inventory

The Group has guidelines for providing for inventory which may be sold below cost due to its age or condition. Directors assess the inventory at each location and in some cases decide that there are specific reasons to provide more than the guideline levels, or less if there are specific action plans in place which mean the guideline provision level is not required. Determining the level of inventory provision requires an estimation of likely future realisable value of the inventory in various time frames and comparing with the cost of holding stock for those time frames. Regular monitoring of stock levels, the ageing of stock and the level of the provision is carried out by the Directors. Details of inventory carrying values are provided in note 14. At the year end, stock purchased more than 15 months previously had decreased from £5.8 million to £5.6 million and the Group has provisions of £3.8 million (2014: £3.3 million) over the total inventory value.

Share‑based payments

The Directors are required to estimate the fair value of services received in return for share options granted to employees that are measured by reference to the fair value of share options granted. For the long term incentive plan the estimate of the fair value is based on the share price on the date the scheme was approved and the proportion of shares expected to vest. Details of the key assumptions made in the measurement of share‑based payments are provided in note 25.

Taxation

There are many transactions and calculations for which the ultimate tax determination is uncertain. Significant judgement is required in determining the Group's tax assets and liabilities. Deferred tax assets have been recognised to the extent they are recoverable based on profit projections for future years. Income tax liabilities for anticipated issues have been recognised based on estimates of whether additional tax will be due. Notwithstanding the above, the Group believes that it will recover tax assets and has adequate provision to cover all risks across all business operations. See note 13 for more details.

3 Financial risk management

Risk management is discussed in the strategic report and a discussion of risks and uncertainties can be found in the financial statements, along with the Group's key risks. See note 26 for additional information about the Group's exposure to each of these risks and the ways in which they are managed. Below are key financial risk management areas:

· currency risk is mitigated by a mixture of forward contracts, spot currency purchases and natural hedges;

· liquidity risk is managed by monitoring daily cash balances, weekly cash flow forecasts, regular reforecasting of monthly working capital and regular dialogue with the Group's banks; and

· credit risk is managed by constant review of key debtors and banking with reputable banks.

4 Segmental information

The Group has one material business activity being the design, manufacture and distribution of gift packaging and greetings, stationery and creative play products.

For management purposes the Group is organised into four geographic business units.

The results below are allocated based on the region in which the businesses are located; this reflects the Group's management and internal reporting structure. The decision was made during 2011 to focus Asia as a service provider of manufacturing and procurement operations, whose main customers are our UK businesses. Both the China factory and the majority of the Hong Kong procurement operations are now overseen by our UK operational management team and we therefore continue to include Asia within the internal reporting of the UK operations, such that UK and Asia comprise an operating segment. The Chief Operating Decision Maker is the Board.

Intra‑segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Financial performance of each segment is measured on operating profit. Interest expense or revenue and tax are managed on a Group basis and not split between reportable segments. However the related financial liability and cash has been allocated out into the reportable segments as this is how they are managed by the Group.

Segment assets are all non‑current and current assets, excluding deferred tax and income tax receivable. These are shown in the eliminations column. Where cash is shown in one segment, which nets under the Group's banking facilities, against overdrafts in other segments, the elimination is shown in the eliminations column. Similarly inter‑segment receivables and payables are eliminated.

(a) Capital expenditure consists of additions of property, plant and equipment, intangible assets and goodwill.

(b) No single customer accounts for over 10% of total sales.

(c) The assets and liabilities that have not been allocated to segments consist of deferred tax assets £4,121,000 (2014: £3,665,000) and income tax payable of £2,192,000 (2014: £2,052,000). In addition, the assets and liabilities include the VAT debtor of £126,000 (2014: £335,000) (creditor) to reflect the net position of the Group.

(d) No operating segment has been aggregated in determining reportable segments.

(e) Central recharges are included within the result of the segment that takes the recharge. The balance of the central costs are not allocated to segments.

Geographical information

The Group's information about its segmental assets (non‑current assets excluding deferred tax assets and other financial assets) and turnover by customer destination and product are detailed below:

Turnover by customer destination

Turnover by product

5 Expenses and auditor's remuneration

Included in profit are the following charges/(credits):

Auditor's remuneration:

6 Staff numbers and costs

The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:

The aggregate payroll costs of these persons were as follows:

For information on Directors' remuneration please refer to the sections titled "Executive share options" and "Directors' remuneration" within the Directors' remuneration report.

7 Other operating income

8 Finance expenses

9 Taxation

Recognised in the income statement

Reconciliation of effective tax rate

10 Exceptional items

(a) Costs associated with major upgrade to manufacturing facilities in Wales they include accelerated depreciation of £571,000 (2014: £1,174,00). Other operating income relates to accelerated release of a grant.

(b) Costs associated with restructuring the leadership team in the USA.

(c) Costs relating to acquisition of trade and certain assets of Enper Giftwrap BV.

(d) Accelerated amortisation of bank arrangement fees as a result of renegotiating banking facilities to fund the investment in Wales.

Impact of exceptional items on cash flow

There was a £1,114,000 impact on the current years cash flow (2014: £201,000) which included £812,000 of outflow deferred from last year. £200,000 of the current year's exceptional item remains to be paid in 2015/16. In 2014 exceptional items of £201,000 were included in that year's cash flow.

11 Property, plant and equipment

Depreciation is charged to either cost of sales, selling costs or administration costs within the income statement depending on the department to which the assets relate.

Leased plant and machinery

The net book value of property, plant and equipment included an amount of £5,328,000 (2014: £4,894,000) in respect of assets held under finance leases.

Security

All freehold properties are subject to a fixed charge.

12 Intangible assets

The aggregate carrying amounts of goodwill allocated to each geographical segment are as follows:

Impairment

The Group tests goodwill each half year for impairment, or more frequently if there are indications that goodwill might be impaired.

For the purposes of impairment testing, goodwill considered significant in comparison to the Group's total carrying amount of such assets has been allocated to the business unit, or group of business units, that are expected to benefit from the synergies of the combination (see table on page 56 of the financial statements), which represents the lowest level within the Group at which the goodwill is monitored for internal management purposes, and is referred to below as a cash-generating unit. During the last few years the businesses have begun to work more closely with each other, exploiting the synergies that arise. The recoverable amounts of cash-generating units are determined from the higher of value in use and fair value less costs to sell.

The Group prepares cash flow forecasts for each cash‑generating unit derived from the most recent financial budgets for the following three years which are approved by the Board. The key assumptions in those budgets are sales, margins achievable and overhead costs, which are based on past experience and future expectations. The Group then extrapolates cash flows for the following seven years based on a conservative estimate of market growth of 2% (2014: 2%).

The cash‑generating units used the following pre‑tax discount rate which are derived from an estimate of the Group's future average weighted cost of capital adjusted to reflect the market assessment of the risks specific to the current estimated cash flows over the same period.

Pre‑tax discount rates used were:

All of the cash‑generating units' values in use were determined to be higher than fair value less costs to sell, thus this was used as the recoverable amount. In all businesses the carrying value of the goodwill was supported by the recoverable amount and there are currently no reasonably foreseeable changes to assumptions that would give rise to an impairment of the carrying value.

The Directors do not believe a reasonably possible change to the assumptions would give rise to an impairment. The Directors have considered a 3% movement in the discount rate and a flat budget growth rate assumption in their assessment.

13 Deferred tax assets and liabilities

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

The deferred tax asset in respect of tax losses carried forward at 31 March 2015 of £3,334,000 (2014: £2,219,000) is comprised of UK tax losses of £773,000 (2014: £530,000) and US losses of £2,561,000 (2014: £1,689,000). US tax losses carried forward will become irrecoverable in March 2027. UK tax losses may be carried forward indefinitely. The deferred tax assets have been recognised where the Board considers there is sufficient evidence that taxable profits will be available against which the tax losses can be utilised. The Board expects that the tax losses will be recoverable against future profits but given the level of tax losses brought forward, recoverability has been assessed on the basis of expected profits currently forecast. Deferred tax assets in respect of taxable losses that are expected to be recovered outside this forecast period have not been recognised. This includes unrecognised deferred tax assets in respect of brought forward UK losses of £272,000 (2014: £310,000) and £1,719,000 (2014: £2,194,000) in respect of brought forward US tax losses.

No deferred tax is recognised on unremitted earnings of overseas subsidiaries. Overseas reserves can now be repatriated to the UK with no tax cost. If all overseas earnings were repatriated with immediate effect, no tax charge (2014: nil) would be payable.

The Finance Act 2013, which provides for reductions in the main rate of corporation tax from 23% to 21% effective from 1 April 2014 and to 20% effective from 1 April 2015, was substantively enacted on 2 July 2013. These rate reductions have been reflected in the calculation of deferred tax at the balance sheet date.

There are no deferred tax balances with respect to cash flow hedges.

Movement in deferred tax during the year

Movement in deferred tax during the prior year

*SOCI - statement of comprehensive income

14 Inventory

Of the £46,162,000 (2014: £48,460,000) stock value £41,896,000 (2014: £43,870,000) is held at cost and £4,266,000 (2014: £4,590,000) is held at net realisable value. The write down of inventories to net realisable value amounted to £2,565,000 (2014: £2,963,000). The reversal of previous write downs amounted to £224,000 (2014: £226,000). The reversal is due to the inventory being either used or sold.

Materials, consumables, changes in finished goods and work in progress recognised as a cost of sale amounted to £162,340,000 (2014: £158,590,000).

Part of the Group's funding is via asset‑backed loans from our bankers. These loans are secured on part of the inventory and trade receivables of the UK, European and American businesses. The amount of the inventory that is used to secure an asset‑backed loan is £38,043,000 (2014: £42,298,000). In addition bank loans to Hoomark and International Greetings USA are secured on a freehold property and contents, including inventory, therein.

Refer to note 17 for outstanding balance on asset‑backed loans and details of the secured bank loans.

15 Trade and other receivables

Part of the Group's funding is via asset‑backed loans from our bankers. These loans are secured on part of the inventory and trade receivables of the UK, European and American businesses. The amount of the trade receivables that is used to secure the asset‑backed loans is £15,223,000 (2014: £12,469,000).

Refer to note 17 for outstanding balance on asset‑backed loans.

There are no trade receivables in the current year (2014: nil) expected to be recovered in more than twelve months.

The Group's exposure to credit and currency risks and impairment losses related to trade and other receivables is disclosed in note 26.

16 Cash and cash equivalents/bank overdrafts

Net debt

The Group's exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 26.

The bank overdrafts are secured by a fixed charge on certain of the Group's land and buildings, a fixed charge on certain of the Group's book debts and a floating charge on certain of the Group's other assets.

17 Loans and borrowings

This note provides information about the contractual terms of the Group's interest‑bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, see note 26.

The asset‑backed loans are secured on the inventory and receivables of the larger business units within the UK, USA and European business segments.

Following the negotiations of modified banking facilities in August 2014, the Group accrued additional arrangement fees which are being spread over the life of the facility.

Terms and debt repayment schedule

In August 2014 the Group extended the maturity profile of its core borrowings as reflected in loans 5 and 6 shown below:

Secured bank loans

Bank overdraft and ABL

Included in the above table are bank overdrafts and ABL balances of £1,568,000 (2014: £2,529,000) and £544,000 (2014: £5,336,000). Overdrafts are secured on the assets of the Group, ABL balances are secured over inventory and trade receivable balances (see notes 14 and 15 for further details).

Loan 1

The principal of £176,000 (2014: £303,000) is repayable monthly on a reducing balance basis over a 15‑year period, ending in March 2016. The loan is secured over the freehold land and buildings and the contents therein of International Greetings USA, Inc. and is subject to a variable rate of interest linked to the US Federal Funds Rate (US FFR). The currency of denomination of the loan is US dollars.

Loan 2

The principal of £132,000 (2014: £275,000) is repayable monthly on a reducing balance basis over a nine‑year period ending in March 2016. The loan is secured over the freehold land and buildings and the content therein of International Greetings USA, Inc. and is subject to a variable rate of interest linked to the US FFR. The currency of denomination of the loan is US dollars.

Loan 3

A new loan of £365,000 was taken out during the year and is secured over part of the plant and machinery of International Greetings USA. The principle of £328,000 (2014: nil) was outstanding at 31 March 2015 and is repayable over a five‑year period ending September 2019. It is subject to a variable rate of interest linked to the US FRR. The currency of denomination of the loan is US dollars.

Loan 4

The principal of £4,483,000 (2014: £5,486,000) is repayable quarterly over a 20‑year period ending in July 2028. The loan is secured over the freehold land and buildings and the content therein of Hoomark BV and is subject to a variable rate of interest linked to EURIBOR, that has been swapped to a fixed rate for a notional amount of £5,072,000 (2014: £5,785,000) over a period of five years ending in January 2017. The currency of denomination of the loan is euros.

Loan 5

The principal of £9,010,000 is repayable in May 2018. £6,925,000 is denominated in sterling and £2,085,000 is denominated in US dollars. They are subject to a variable interest rate linked to LIBOR except for the element that has been swapped. At 31 March 2015 the Group had an interest rate cap on a notional amount of £8 million, and a notional amount of $8 million, whereby interest payable has been capped at 1.5% on both notional amounts.

Loan 6

The principal of £12,297,000 is repayable and amortised to May 2017. £7,229,000 is denominated in sterling and £5,068,000 is denominated in US dollars. They are subject to a variable interest rate linked to LIBOR except for the elements that have been swapped. At 31 March 2015, the Group had an interest rate swap in place with a notional amount of £0.6 million whereby it receives a floating rate of interest based on LIBOR and pays a fixed rate of interest at 0.92% on the notional amount. The terms of the hedge have been negotiated to match the terms of the commitments. At 31 March 2015, the Group had an interest rate swap in place with a notional amount of $2.8 million whereby it receives a floating rate of interest based on LIBOR and pays a fixed rate of interest at 0.77% on the notional amount.

Previous amounts outstanding at 31 March 2014 were £14,859,000 repayable in May 2016, £8,035,000 repayable over two years to May 2015 and £4,000,000 repayable over three years to May 2016.

18 Deferred income

The deferred grant income is in respect of government grants relating to the development of the site in Wales. This is being amortised in line with depreciation on the new investment. All conditions on the old grant have been met and there is no requirement to repay. It is being amortised in line with the depreciation on the site development.

19 Provisions

The provision represents the estimated reinstatement cost of two of the Group's leasehold properties under fully repairing leases and provision for an onerous lease for one of those properties. A professional valuation was performed during 2012 for one of the leasehold properties and the provision was reassessed and is stated after discounting. £664,000 of the non‑current balance relates to a lease expiring in 2025, the balance relates to items between two and five years.

20 Other financial liabilities

Finance lease liabilities

Finance lease liabilities are payable as follows:

During the prior year two new finance leases were entered into for £3,239,000 to fund new printing machines in the Group's facilities in Wales. The interest rate on these leases is 3.88%.

21 Trade and other payables

22 Share capital

Authorised share capital at 31 March 2015 and 2014 was £6,047,443 divided into 120,948,860 ordinary shares of 5p each.

Share options exercised during the year amounted to 280,000 (2014: 1,158,000) which generated cash proceeds of £39,000 (2014: £176,000).

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

23 Earnings per share

The basic earnings per share is based on the profit attributable to equity holders of the Company of £5,605,000 (2014: £3,010,000) and the weighted average number of ordinary shares in issue of 58,071,000 (2014: 57,519,000) calculated as follows:

Adjusted basic earnings per share excludes exceptional items charged of £1,235,000 (2014: £2,298,000) and the tax relief attributable to those items of £362,000 (2014: £381,000), to give adjusted profit of £6,478,000 (2014: £4,927,000).

Diluted earnings per share

The average number of share options outstanding in the year is 1,723,833 (2014: 2,281,351), at an average exercise price of 17.4p (2014: 19.6p). The diluted earnings per share is calculated assuming all these options were exercised, and taking into account LTIP awards whose specified performance conditions were satisfied at the end of the reporting period. At 31 March the diluted number of shares was 60,531,000 (2014: 59,098,460).

24 Dividends paid and proposed

No dividends were paid in the year (2014: nil). The Directors are recommending a final dividend of 1p (2014: nil). If approved, the dividend will be paid in September 2015 to shareholders on the register at the close of business on 10 July 2015.

25 Share‑based payments

Executive Share Options 2008

Options to subscribe for ordinary shares have been granted, pursuant to the Company's approved and unapproved Employee Share Option Schemes, which are exercisable at dates ranging up to January 2021. At 31 March 2015, outstanding options were as follows:

All share‑based payments are equity‑settled.

There were no performance conditions attached to the approved options (other than continued employment). Conditions related to profitability for the two years to March 2011 were attached to the unapproved options awarded to Executive Directors and these conditions have now been fully met.

For the share options outstanding at 31 March 2015, the weighted average remaining contract life was 3.8 years (2014: 4.7 years).

The numbers and weighted average exercise prices of share options are as follows: