17 March 2022

Portmeirion Group PLC

('the Group')

Preliminary results for the year ended 31 December 2021

Record revenue performance and profit recovery delivered

Full year dividend restored

Financial summary

Headlines:

Financial

·    Record Group revenue of £106.0 million in the year to 31 December 2021, an increase of 21% over the prior year (2020: £87.9 million) and 14% over pre Covid-19 level (2019: £92.8 million).

·  Excellent Q4 seasonal trading performance despite ongoing global supply chain inflation and disruption, demonstrating the strength of consumer demand for our brands, progress with our online strategy and resilience of our operations.

·    Sales from our own ecommerce platforms increased by 16% over 2020 and are now 81% above 2019 levels. Online sales now represent 50% of total sales in our core UK and US markets in the year to 31 December 2021 (2020: 47%, 2019: 30%).

·    Headline profit before tax¹ of £7.2 million (2020: £1.4 million, 2019: £7.4 million).

·    EBITDA of £10.7 million (2020: £5.1 million, 2019: £11.4 million).

·    Headline basic earnings per share¹ of 38.85p (2020: 4.96p, 2019: 56.32p).

·    Dividend reinstated with final dividend proposed of 13.00p per share, bringing total dividends paid and proposed to 13.00p (2020: £nil, 2019: 8.00p).

·    Strong balance sheet maintained with net cash of £0.7 million at 31 December 2021 (2020: net cash £0.7 million, 2019: net debt £12.3 million). Cash generative, which has allowed accelerated investments in our strategic capabilities.

¹Headline profit before tax and headline basic earnings per share exclude exceptional items - see notes 2 and 4.

Operational

·    Sales growth across three key markets of the US, UK and South Korea. Rest of the world sales also performed strongly and are 71% ahead of pre Covid-19 levels.

·   Substantial progress in developing online and digital capabilities, including ongoing investment in online platforms and warehouse fulfilment capabilities to support growth.

·    Strong growth across all brands, particularly in Spode up 30% over 2020.

·   Completed a number of key operational projects; hand and body line extension at Wax Lyrical, automation investment in our UK ceramic factory and mezzanine floor installed in our UK distribution centre.

·    Extended our long term energy hedging programme to Q1 2024, insulating the Group against the current volatility in energy prices.

·    Continued to deliver an improved carbon emission performance whilst undertaking a full evaluation of our ESG position in order to deliver a sustainable forward strategy.

·    Our UK businesses both achieved Investor in People (IIP) Platinum accreditation in recognition of our commitment to leading, supporting and improving our workforce.

Mike Raybould, Chief Executive commented:

"I am delighted with the significant progress we have made. Our record sales reflect the strong progress we have made on our strategy whilst successfully navigating the ongoing disruption from the pandemic. I would like to thank our employees around the world for their tireless efforts against this unprecedented backdrop.

We are focused on reaching an ever wider potential customer base - by developing online sales channels, building out new geographies and leveraging our brands and new product development more effectively. On each count, I am pleased to report we have made strong progress in 2021.

We saw a very successful seasonal holiday trading period driven by customers increasingly searching for our brands online as well as in physical retail stores. We have a roadmap for developing our brands around the world and the 30% against 2020 (and 33% against 2019) growth in our Spode brand indicates the potential opportunity ahead.

Our capital investments made in the last 12 months will enable increased production in the current year and beyond whilst driving improved operating margins through productivity gains.

We are mindful of the ongoing disruption to global supply chains and cost pressures including container freight rates. We have long term energy contracts in place until early 2024 that will protect the business in the short term from increased energy costs but are watchful that consumers around the world will require a period of adjustment to the inflationary pressures in everyday spend. We remain confident we can continue to navigate those challenges and that our brand strength and the changes we have made to the business will allow us to continue to grow in the short term with improved operating margins, and in the long term deliver significant gains in profitability.

We are also pleased that the strong trading performance and operating cash generated has allowed us to reintroduce our longstanding dividend to shareholders."

Portmeirion Group PLC

Chairman and Chief Executive Statements

Trading

2021 was a record sales year for the Group driven by our strategy of reaching a wider potential customer base through developing our online sales channels, building new geographical markets and new product launches within our strong family of brands.

We were pleased to see growth over 2020 and 2019 pre Covid-19 levels in our UK and US core markets. We experienced a strong seasonal Christmas trading period, particularly in the US market where new product launches and our ability to handle drop ship order fulfilment enabled good levels of growth.

The work we did in 2019 and 2020 to safeguard our brands, long term, in South Korea enabled a robust and sustainable sales performance in 2021 with sales rising by 43% over the prior year.

We have continued our transformation to a more online and digital based business and were delighted to see 16% sales growth in our own branded websites despite high street retail stores reopening. 50% of total sales in our core UK and US markets now go through all online channels (2020: 47%, 2019: 30%). Developing a deeper direct relationship with the end consumer represents a huge opportunity for the Group and we will continue to invest in our capabilities in this area. Our website customer lists grew by 25% in 2021 and by over 220,000 (110%) on a two year basis versus 2019. With the opportunity of repeat purchases this is a key KPI for the Group and a positive indicator of future sales growth potential.

The benefit of our diversified sales channels and increasing the number of routes to market enabled a strong rebound in profitability in 2021 despite the well-publicised disruption and significant cost increases in global supply chains, particularly in container sea freight. The strength and depth of experience of our supply chain teams around the world really shone through and enabled our Q4 sales to beat our forecasts.

Full year headline profit before tax¹ was £7.2 million (2020: £1.4 million).

We are confident in our long-term strategy for growth and have a strong balance sheet to support our ambitions. The Group continues to be cash generative and we maintained a net cash positive position after net capital expenditure of £4.6 million during the year.

Financial Headlines

·    Revenue was £106.0 million, an increase of 21% on 2020 and 14% on 2019 pre Covid-19 levels.

·    Like-for-like sales increased by 19% over the prior year.   

·    Own platform website sales increased by 16% to £11.4 million (2020: £9.8 million) and by 81% on a YO2Y basis.

·    Headline basic earnings per share¹ was 38.85p per share (2020: 4.96p).

·    Final dividend proposed of 13.00p per share, bringing total dividends paid and proposed to 13.00p (2020: £nil, 2019: 8.00p).

¹Headline profit before tax and headline basic earnings per share exclude exceptional items - see notes 2 and 4.

Dividend

The Board remains committed to a sustainable dividend policy with an appropriate level of cover. Our policy will ensure that we retain and invest enough capital in our business to drive long-term growth in our brands. We currently consider that a level of cover at or close to three times the dividends paid and proposed for the year is the appropriate rate for the medium term to allow increased investment whilst providing a return for shareholders. 

During the Covid-19 pandemic we determined not to pay a dividend due to the impact and disruption on our business.

Due to the strong trading performance and cash generation, the Board are recommending a final dividend of 13.00p (2020: £nil). Total dividends paid and proposed for the year would therefore be 13.00p (2020: £nil).

The Board

The Board keeps its composition and performance under constant review so as to ensure that we have the appropriate skills, experience and resources to deliver on our four main board requirements of: setting strategy, reviewing progress against strategy, monitoring the resources required to deliver the strategy and complying with relevant requirements be they legal or otherwise. We undertake a formal board effectiveness review each year.

In order to promote best practice, each of the relevant committee meetings are now chaired by one of the Non-executive directors; Andrew Andrea chairs the Audit Committee, Angela Luger the Nomination Committee and Clare Askem the Remuneration Committee. 

Environmental, Social and Governance (ESG)

We are focused on doing business ethically and sustainably - for our shareholders, the environment, our people, our customers, our suppliers and the communities we operate in. The Group has a long history of innovation and a strong track record of continual improvements in ESG.

We have made a very conscious decision to go beyond minimum compliance with our ESG requirements and push our progress to a more targeted, deliverable strategy. Throughout 2021, we worked to better understand the materiality of our impacts and to make well-informed choices in focusing our resources and efforts to deliver tangible strides towards a more sustainable world. We have made significant progress in recent years in reducing our energy usage, reducing carbon emission per tonne of sales product by 12% over 2020, and are committed and look forward to publishing our ambitions in key areas later this year. We are dedicated to delivering further significant improvements in energy consumption and carbon emissions in the coming years.

Our commitment to our people, ethics and governance are unfaltering, supported by our policies and processes. Further details on our corporate culture and its integration within the Group can be found on our website, www.portmeiriongroup.com, and in our annual report and accounts in the Section 172(1) statement - Engaging with key stakeholders to deliver long term success, in the Our commitment to ESG section and the Corporate Governance Statement.

We are again immensely proud of and thankful to all our people and teams for their commitment and hard work throughout 2021. Our results, safety records and staff well-being are testimony to all their efforts.

The Group is a committed member of the Quoted Companies Alliance ("QCA") and has chosen to apply the QCA Corporate Governance Code as the most appropriate for our size and structure. We have complied with the principles of the QCA code throughout 2021 and continue to do so. Further details of our approach to governance can be found on our website and in our annual report and accounts. The Board consider our governance procedures to be appropriate for a company of our size, however we are always open to improvement and welcome feedback from shareholders.

Operational Overview

Revenue for the Group increased by 21% to £106.0 million (2020: £87.9 million).

The US is our largest geographical market representing 40% of Group sales. In translated figures, sales in the US increased by 27% to £42.5 million (2020: £33.5 million) due to the benefit of increased online channel sales and successful product range extensions. Sales of our ever popular Spode Christmas Tree range, loved for generations as part of the ritual of family seasonal celebrations, grew strongly as we reached ever more customers through online sales and new extensions to the range.

Our UK market is our second largest market and in 2021 accounted for 31% of Group sales at £32.9 million (2020: £31.8 million), an increase of 3% over the prior year. Excluding the sales of hand sanitiser in 2020 in response to the Covid-19 pandemic, UK market sales increased by 14%.

As previously reported, we took action in 2019 and 2020 to reduce levels of parallel shipping into our South Korean market, enabling overstocks to subside. This allowed for a much more robust and sustainable level of sales in 2021, with good sell through to the end consumer. Sales into South Korea were £18.7 million (2020 £13.1 million, 2019: £20.8 million). We are pleased that the steps we took to stabilise this important market have been successful and we expect to see growth from a much more solid base in the coming years.

Products and brands

Our brands and product ranges are key assets and a major economic driver for the Group. Our six major brands - Portmeirion, Spode, Wax Lyrical, Nambé, Royal Worcester and Pimpernel - have over 750 years of combined history and are sold across the world. Their design and appeal are timeless and are much loved in homes around the world.

We see significant potential to grow the sales footprints of our brands in the future and have developed more structured roadmaps in the past 18 months to help deliver on this potential. Our roadmaps include developing our heritage ranges such as Portmeirion Botanic Garden and Spode Christmas Tree as well as more contemporary ranges and licensed collaboration ranges. We are fortunate, in Spode Christmas Tree and Portmeirion Botanic Garden, to have two of the most successful and long selling ranges in the global tableware category.

Portmeirion Botanic Garden was first launched in 1972 and remains our largest selling range. We estimate there are over 50 million pieces of Botanic Garden in use worldwide today and there is a strong repeating sales element. To mark its 50th year in 2022 we will be launching new range extensions to further support and grow the appeal and longevity of this historic range.

The brand work we have done should allow us to accelerate and leverage our brand portfolio across our diversified sales channels and markets. We are pleased to see the early benefits of our work in 2021. Our Spode brand, which celebrated its 250th anniversary in 2020, grew strongly in 2021, with sales up 30% on 2020 (up 33% on 2019). Key drivers included new product development and line extensions within the ever popular Spode Christmas Tree range, new contemporary range launches and the benefit of increased availability on online channels. Similarly sales in our Pimpernel brand were up 28% and 26% on a two year basis.

Strategic areas of focus

Our commercial strategy is focused on reaching more customers on more occasions through:

·    developing online sales channels;

·    building new markets and geography;

·    new product launches/new categories; and

·    leveraging our brands more effectively.

Our operating strategy supports our commercial strategy and is to build additional capabilities and increased efficiency/productivity in everything we do.

As a result, our twin financial goals are:

1.   consistent and sustainable sales growth; and

2.   improved operating margins, thereby converting sales more effectively into profit.

We have continued increased investment in these strategic areas despite the short-term challenges of Covid-19, as we believe this will enable the Group to prosper in the long-term.

As a result, the strategic capabilities of the business have taken a huge step forward in the past eighteen months. We have significantly expanded our online sales and digital marketing teams and re-organised our core market and export sales teams to more effectively leverage our brands. 

As we increasingly reach more end customers directly, we are able to build an ever stronger emotional affinity for our brands and products and get much improved feedback that helps us curate our ranges and design tomorrow's products more effectively.        

We are heavily investing in automation in our factories and warehouses, building further capacity and efficiencies in production and increasing our drop ship online warehouse fulfilment capabilities.

DRIVING SALES GROWTH THROUGH REACHING MORE CUSTOMERS ON MORE OCCASIONS

1.   Developing online sales channels

Our brands are known and loved around the world. There is a huge opportunity to reach more potential customers through online channels including our own branded websites. The benefit of building an increasingly direct relationship with the end consumer allows us to continue to communicate after the first purchase, building a long term relationship with the customer. Increasingly we see potential customers searching for 'our brand names' when searching online for products within the categories we operate in. This affinity for our brands and what they stand for is an important point of difference that we can leverage further as we develop our web systems, data and analytics.

We have continued to invest through 2021 in improving our website sales platforms and digital marketing assets. In the UK and US we have established web sales platforms for all our core brands. Website sales increased by 16% in 2021, building on the significant growth we achieved in 2020 when retail stores were shut for much of the year. On a two year basis, our own website sales are up 81%. For our two core markets in the UK and US, sales through all online channels (including third party retailer websites) increased to 50% for the first time (2020: 47%, 2019: 30%).

In addition, we have built extra warehouse capacity for online/drop ship order fulfilment that, for the UK, will allow us to ship approximately double the number of direct to consumer parcels per day in the second half of 2022.

We have an ongoing roadmap of development to further boost our online sales and digital marketing for all our brands. In 2022, we expect to launch new websites in the UK, building on the website re-platforming project we executed in the US in 2020. We are also working on improved CRM and launching Customer VIP club programmes in 2022.

2.   Building new markets and geography

Our products are sold in more than 70 countries around the world, however, our three largest markets of the UK, US and South Korea account for 89% of all Group sales.

We restructured our international sales teams in 2020 with a focus on developing more sizeable rest of world markets over the next three to five years.

We are pleased to report early positive results with our rest of world sales growing by 27% in 2021 and we expect to see further strong growth in the next three years. In 2021, we appointed a new distributor for all our brands in China and we are excited to work with them on developing new customers in this region. We have also seen good growth in 2021 in a number of other markets including Australia and Scandinavia.

3.   New product launches

Developing and launching new products and extending existing ranges is a key strategic driver for sales growth. We have implemented new global processes for product development and launch and have a future pipeline of development going out two years.

In 2021 we managed to keep our product launch programmes on track despite ongoing disruption to supply chains and sales markets from Covid-19. This included a new Sophie Conran for Portmeirion tableware range, extensions to our ever popular Spode Christmas Tree range, a new Spode range: Creatures of Curiosity and new ranges for our Wax Lyrical and Nambé brands.

Part of our strategic focus in this area is to see an improved sales contribution from new product launches. In 2021, new products launched (within the last 12 months) generated over 10% of total Group sales. In 2022 we celebrate the 50th anniversary of Portmeirion Botanic Garden and will be launching new products under this range as well as substantial new launches across our other brands.

We continue to focus on changing and improving packaging formats for our products to enhance our customer proposition for online channels.

4.   Leveraging our brands more effectively

Telling the story to the end consumer of what our brands and product ranges stand for, increasingly in online channels, represents a significant opportunity for the Group. We have increased resource, brand marketing and digital marketing spend over the past two years and this will continue to support our growth ambitions - and allow us to reach more potential end customers on more occasions than ever before.

We are looking to leverage the Group's infrastructure more effectively across all our consumer brands including the more recent acquisitions: Wax Lyrical and Nambé.

In 2021, we combined UK sales teams across our tableware brands and home fragrance division to allow more effective sales synergies.

Nambé brand sales increased by 23% to record a five year high despite ongoing disruption from Covid-19 to sales markets through increased distribution, including online and better stock availability.

Home fragrance sales, excluding hand sanitiser ranges (production started in 2020 in reaction to the pandemic), grew by 5% in 2021. Our Wax Lyrical brand has been impacted by Covid-19 enforced retail closures for much of 2020 and 2021, however, we expect to see a return to growth in 2022 as restrictions are lifted.

In addition, we now produce home fragrance products under our Sophie Conran for Portmeirion and Royal Worcester Wrendale Designs tableware ranges. In 2022, we also expect to launch home fragrance products as an extension to our hugely successful Portmeirion Botanic Garden range as part of our celebrations of Botanic Garden's 50th year.

All of our brands grew in 2021 and we are pleased to see the early and positive signs from our efforts to leverage our brands more effectively, with Spode and Pimpernel sales up 33% and 26% respectively on a two year basis.

BUILDING OUR OPERATIONAL CAPABILITIES AND EFFICIENCIES

In order to support our growth and to deliver higher operating margins, the Group has a clear plan to deliver increased production capacity, improved productivity, lower costs per unit and increased capabilities.

We have increased capital investment in our operations in the past 24 months. In our Stoke-on-Trent manufacturing facility we have designed new automation that will add capacity and lower costs and reliance on manual labour. Despite delays in final assembly of robotics due to the global shortage in silicon chips, a number of these projects went live in late 2021 and early 2022. Further investments are in progress for 2022 and 2023. As well as delivering much increased levels of production output these investments will also support our goal of reducing our cost per unit by at least 10%.

In our home fragrance manufacturing site, in Cumbria, we completed the build of a new hand and body liquid production facility in the second half of 2021. This facility will add capacity for production of core existing ranges of reed diffusers and also allow the production and sales of hand and body liquid soaps for the first time.

The experience and skills of our operations and supply chain teams shone through 2021 as the business successfully coped with the immense disruption to global supply chains and container freight shipping. The fact that the business had a very strong Christmas trading period, resulting in a record sales year for the Group, is a testament to the immense efforts and experience of our teams.

We have a roadmap for increasing warehouse capacity for drop ship/online order fulfilment in both our key UK and US markets. The first phase of this - building a large mezzanine floor extension in our UK warehouse - was completed in Q4 2021 and will support expected online sales growth in 2022.

In 2021, we continued to focus on improved procurement to drive efficiencies in spending. In the first half of the year we also extended our long term energy hedging programme to Q1 2024, insulating the Group against the current volatility in energy prices.  

Outlook

We are pleased with the progress we have made in 2021 - not only navigating the ongoing challenges of Covid-19 as evidenced by our record sales performance but also our continued track record on execution of our long term strategy.

We remain cognisant of ongoing economic uncertainty, in particular the challenges to the consumer of the rising costs of living including energy and fuel costs, and the ongoing impact of the war in Ukraine. Likewise that it will take time for global supply chains and container freight costs to stabilise following Covid-19 and return to some sort of normality. We have long term energy contracts in place until early 2024 that will protect the business in the short term from increased energy costs but are watchful that consumers around the world will require a period of adjustment to the inflationary pressures in everyday spend.  

However, we believe our investments in our brands, digital and online presence and increasingly diversified sales channels and geography will enable us to more than offset the afore-mentioned challenges and continue to grow in 2022 and over the coming years. Our operational investments in 2021 will enable growth in production output and productivity in 2022 which, together with our proven supply chain, should provide a solid foundation for future progress, including further opportunities to improve margin.

We have a strong balance sheet, positive cash flow and a clear and focused strategy which we believe will enable us to grow profitably over the short and medium term.

Dick Steele                                                      Mike Raybould

Non-executive Chairman                               Chief Executive

This announcement contains inside information for the purposes of the retained UK version of the EU Market Abuse Regulation No 596/2014 (UK MAR).

ENQUIRIES:

Financial Review

Following the challenging backdrop of disruption and lockdowns of 2020, the year started with the UK back in lockdown and significant inflation and disruption to both supply chains and labour markets.

Set against this, the Group continued to invest in our strategy, confident in our ability to generate growth and make progress against our strategic targets.

We saw ongoing demand for our brands, growing well across all key geographical markets and further increases in online channel sales.

Revenue

Revenue for the year ended 31 December 2021 totalled £106.0 million, an increase of 21% over the prior year (2020: £87.9 million) and is now 14% above pre-pandemic levels (2019: £92.8 million).

The Group has benefited from additional sales from recent acquisitions; Nambé was acquired in July 2019 and Portmeirion Canada was fully acquired in August 2020. On a like-for-like basis revenue was 19% ahead of 2020.

Sales in our US market are translated from US dollars into sterling at the average daily exchange rate.  In 2021, sterling was stronger against the US dollar than in 2020, therefore at a constant currency rate the Group's like-for-like sales would have been 22% higher.

Geographical sales performance was strong overall and we saw growth across our three key markets of the US, UK and South Korea.

The UK and US markets both achieved record sales levels, driven by online where 50% of sales in these markets were via online channels (2020: 47%, 2019: 30%).

In South Korea, sales increased by 43% to £18.7 million (2020: £13.1 million) as consumer demand recovered from the prior year. We remain confident that this is a sustainable base from which we can grow sales going forward.

Rest of the world markets increased by 27% to £12.0 million (2020: £9.4 million). This was driven by strong sales in Canada following the acquisition of the remaining 50% of our distribution partner in 2020.

Profit

Headline profit before taxation¹ was £7.2 million, a significant improvement over the 2020 level of £1.4 million and broadly in line with the pre-pandemic level in 2019 of £7.4 million. Statutory profit before taxation was £6.0 million (2020: loss before taxation £0.2 million, 2019: profit before taxation £7.1 million).

This strong profit performance was despite ongoing disruption within a number of our key sales markets.

In the UK, retail stores were closed for the first quarter of the year, and in Canada for much of the first half of the year. This restricted sales channels, although we were able to compensate for these shortfalls due to strong trading performance elsewhere, including online sales in the UK and US.

The well-publicised supply chain inflation and delays impacted our markets around the world, with container freight rates at five times 2019 levels.

Covid-19 restrictions and isolation periods also impacted absence rates in our factories and warehouses, which in turn disrupted sales fulfilment and production efficiency.

Set against these significant challenges, the Group managed this disruption incredibly well and delivered a record sales performance, with profit before taxation in line with 2019 levels.

¹Headline profit before taxation excludes exceptional items - see note 4.

Interest and financing costs

Finance costs for the Group decreased by £0.1 million to £0.6 million (2020: £0.7 million) due to reduced borrowing facilities as long term loans were repaid.

We expect to see finance costs continue to reduce as long term loans are repaid.

Taxation

The charge for taxation for the year was £2.7 million (2020: £0.5 million). The increased charge is due to the improved profit performance over the prior year and the one-off impact of the change in UK corporation tax rate from 19% to 25% which caused a deferred tax charge of £1.1 million.  

Dividends

The Board proposes a final dividend of 13.00p per share (2020: £nil) giving a total dividend for the year of 13.00p (2020: £nil). The final dividend is expected to be paid on 26 May 2022 to shareholders on the register on 22 April 2022 with an ex-dividend date of 21 April 2022.

We are reintroducing the dividend at a cover of three times in order to balance our ongoing investment behind our growth strategy with providing a positive return to shareholders.

Cash generation and net debt

At 31 December 2021, the Group had a net cash balance of £0.7 million (comprising cash and cash equivalents of £7.6 million less borrowings of £6.9 million). This compares to a net cash balance of £0.7 million at the prior year end.

The Group continues to be cash generative; operating cash generated was £8.7 million (2020: £8.7 million) despite the increased cost of inventory due to container freight prices.

The positive operating cash flows allowed the Group to continue to invest behind our strategic goals; net capital expenditure was £4.6 million in the year (2020: £2.8 million). This included the new hand and body line extension at our home fragrance factory in the Lake District, factory automation investments in our Stoke-on-Trent ceramic factory and a new mezzanine floor at our main UK distribution site.

Bank facilities

The Group has agreed debt facilities with Lloyds Bank which totalled £22 million at the balance sheet date. This consists of a £10 million revolving credit facility available until February 2025, a £5 million overdraft on an annual renewal cycle and a £10 million term loan repayable by January 2025 of which £7 million was outstanding at the year end. The overdraft and revolving credit facilities were not being utilised at 31 December 2021.  

Our business remains seasonal due to the second half weighting of our sales. We therefore experienced, in common with previous years, a working capital swing of around £8 million during the year as we built inventory to match our sales demand. At the year end we had available cash and borrowing headroom of £22.6 million. We believe our committed funding lines more than adequately addresses this seasonal dynamic and is prudent.

Assets and liabilities

We had a net working capital outflow of £2.3 million which was driven by increased inventory over the prior year. Increased receivable balances were largely offset by increased payable balances due to an increase in year on year trading activity.

Our inventory balance increased to £29.2 million (2020: £27.3 million) which was predominantly caused by supply chain inflation due to increased raw material and finished goods prices inflating the cost of goods. We continue to monitor supply chain disruption and the impact it may have on our inventory costs and lead times.

We continue to make contributions to our closed defined benefit pension scheme and paid £1.35 million during the year, with agreed contributions of £0.9 million for 2022.

At the 2020 year end we had an accounting deficit of £2.7 million which had increased due to a fall in the discount rate used to calculate scheme liabilities, which is based on corporate bond yields.

As yields have recovered following the pandemic, we now have a £0.9 million pension surplus under IAS 19. We continue to evaluate ways to de-risk the volatility in the scheme, with a medium term aim to reach low-dependency.

At the year end we held treasury shares with a book value of £0.4 million in order to satisfy employee share option schemes, which had been bought at an average price of £1.87 per share, equating to 218,645 shares, having used 8,330 during the year. In addition, we also hold 234,523 shares in The Portmeirion Employees' Share Trust. These shares have a book value of £2.7 million, having been bought at an average cost of £11.58 each. The balance of these shares did not move during the year.

Goodwill and intangible assets on our balance sheet largely represent the value of the acquired brands of Spode, Royal Worcester, Wax Lyrical and Nambé, as well as computer software investment including our online webstore and associated infrastructure. The balance of intangible assets increased during the year as we continued to invest in our UK and US websites and systems.

Treasury and risk management

The impact of transactional currency flows on the Group's profit is not material due to the natural matching of revenue and costs across our global businesses. In the year sterling strengthened against both the US dollar and euro, but this had no material impact on Group profit.

When any anticipated exposure arises, our policy is to use appropriate hedging instruments to mitigate that risk. We have a robust approach to managing risk to deliver our strategy as explained in our annual report and accounts.

David Sproston

Group Finance Director        

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2021

All the above figures relate to continuing operations.

¹ Headline operating profit is statutory operating profit of £6,410,000 (2020: £570,000) add exceptional items of £1,233,000 (2020: £1,623,000). Headline profit before tax is statutory profit before tax of £5,962,000 (2020: £232,000 loss before tax) add exceptional items of £1,233,000 (2020: £1,623,000).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2021

CONSOLIDATED BALANCE SHEET

31 December 2021

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2021