14 September 2023

PORTMEIRION GROUP PLC

('the Group')

Interim results for the six months ended 30 June 2023

H1 results reflect previously stated US retailer destocking

H2 started in line with expectations with a strong Christmas order book

Portmeirion Group PLC, the owner, designer, manufacturer and omni-channel retailer of leading homeware brands in global markets, is pleased to announce its results for the six months ended 30 June 2023.

Financial summary

Financial

¹Headline profit before tax, headline EBITDA, headline operating margin and headline basic earnings per share excludes exceptional items - see note 3.

Operational summary

Current Trading & Outlook

Mike Raybould, Chief Executive, commented:

"As previously indicated, the Group has seen reduced order flow in H1 2023 across our North American market. This has been particularly noticeable amongst retail customers reducing stock levels. However we are confident that in the past few years we have made lasting market share gains in the US and have further incremental product listings agreed across key US department store chains for H2 2023.  Together with new product launches we therefore expect that sales in our US and Canadian markets will stabilise and return to growth in due course.

We are successfully controlling overheads despite the significant inflationary environment and will continue to target further global synergies in our cost base over the next 12 months. Alongside ongoing improved factory productivity in our Stoke site and as global container shipping rates return to historical levels, we remain confident of delivering our medium and long term operating margin growth targets.

We have made great strides on both operational and commercial fronts in the last few years and our brands continue to resonate well with consumers around the world."

NOTES TO EDITOR:

Portmeirion Group PLC is a leading, omni-channel British ceramics manufacturer and retailer of leading homeware brands.

Based in Stoke-on-Trent, United Kingdom, the Group owns six unrivalled heritage and contemporary brands, with 750+ years of collective heritage; Portmeirion, Spode, Royal Worcester, Pimpernel, Wax Lyrical and Nambé.

The Group serves markets across the world, with global demand driven by diversified international markets including the key geographies of the US, UK and South Korea.

Portmeirion Group has a proven capital-light, well developed and self-funded growth strategy focused on building a wider customer base and growing the sales footprint of its brands, through:

·    Building and growing international sales markets

·    Developing online sales channels in core markets

·    Designing and launching new product to widen appeal and take market share

·    Leveraging brands and extensive product ranges

Interim Review

Financial highlights

Revenue was £44.1 million for the first six months of the year, a decrease of 3% over the record prior year sales (H1 2022: £45.5 million).

Our operating performance was negatively impacted by the sales reduction; headline operating profit¹ was £0.7 million (H1 2022: £2.0 million). This left the Group's operating margin at 1.6% for the first half of the year (H1 2022: 4.3%).

Due to the reduced operating margin performance and increased interest costs, headline profit before tax¹ was £nil (H1 2022: £2.0 million).

Headline basic loss per share¹ was 0.12p (H1 2022: earnings per share of 12.00p).

¹ Headline profit before tax, headline operating profit and headline earnings per share excludes exceptional items (see note 3).

Operational overview

The Group's largest sales market, North America (the US and Canada), accounted for 33% of total Group revenue. Sales were 13% behind the first half of 2022 at £14.4 million (H1 2022: £16.7 million) as major retailers undertook aggressive destocking ahead of anticipated fears of a slowdown in consumer spending. Where we have retailer sales out data to the end consumer, this evidences that demand remains robust and we therefore believe our diversified range of products and sizeable online penetration will result in an improved trading performance once this destocking exercise is complete.  

Our second largest market is the UK, which accounted for 27% of total Group sales. Sales were slightly ahead of prior year at £11.7 million (H1 2022: £11.5 million) as we benefitted from additional sales from the AromaWorks London brand that the Group acquired in August 2022. We are closely monitoring the impact of inflationary pressures on consumer spending but currently this market is performing in line with our expectations.

In South Korea, our third largest market accounting for 32% of total Group revenue, sales grew by 7% to £14.3 million (H1 2022: £13.4 million) as we continued our strategy of increasing online exposure of our brands and diversifying our ranges. We have introduced new ranges in this market but expect both the increasing impact of inflation and currency movement to impact consumer sentiment in the short term.  

In our rest of world markets, sales were down 4% over the same period in 2022 at £3.7 million (H1 2022: £3.8 million). The prior year included some Q1 sales to Russia/Eastern Europe and some loss-making home fragrance contracts which we have since discontinued; excluding these, underlying ceramic sales were 10% ahead of the prior year as part of our long-term strategy.

We continue to invest in new products for our customers around the world, and are pleased with the initial performance of a number of new ranges including the new Spode collaboration with the Kit Kemp Design Studio.

Balance sheet

The Group ended the first half of 2023 with net debt of £15.0 million at 30 June 2023; this compares to net debt of £6.8 million at 30 June 2022 and net debt of £10.1 million at 31 December 2022. In addition to the cash balance of £1.5 million and bank borrowings of £16.4 million, the Group also has unutilised bank facilities of £10.1 million. The increase in net debt since 30 June 2022 is largely driven by working capital movements, with higher receivables due to customer mix and lower payables due to reduced inventory purchasing. We expect both of these movements to unwind in H2.

Our stock balance at 30 June 2023 was £42.1 million compared to £42.6 million at 30 June 2022 and £41.1 million at 31 December 2022. Excluding the impact of AromaWorks London inventory (brand acquired in August 2022) and seasonal shipping timing, we have reduced inventory from both June 2022 and December 2022 on a like-for-like basis by 5%. We have a number of initiatives in the second half of 2023 which should see further reductions in inventory and an improved net debt position by 31 December 2023 compared to the prior year end.

Dividend

The Board is committed to a dividend policy which ensures we retain and invest enough capital in our business to drive long-term growth in our brands and maintain a prudent and sustainable level of dividend cover.

Despite the short term challenges in the Group's trading performance, we expect to generate cash in the current financial year and with our medium term expectations for profit and cash generation, the Board is declaring an interim dividend of 3.50p per share (2022: 3.50p). The interim dividend will be paid on 15 December 2023. The ex-dividend date will be 16 November 2023 with a record date of 17 November 2023.

The cover for dividends paid and proposed for 2022 was 3.0 times. We remain of a view that a dividend cover level of approximately 3.0 times is in the long-term interest of the Group and shareholders.

Environmental, Social and Governance (ESG)

In May 2023, the Group launched a new sustainability strategy and roadmap entitled 'Crafting a Better Future' which outlines the Group's commitment to becoming a more sustainable business. The launch represents the next level of ambition for the Group - to ensure that we continue to reduce our impact on the environment and support our colleagues and communities.

We continue to drive our progress on reducing our energy consumption and in H1 reduced gas and electricity usage by 6% compared to the prior year.

Further details on our ESG commitments and integration within the Group can be found on our website, www.portmeiriongroup.com, and in the Section 172(1) statement - Engaging with key stakeholders, Our commitment to ESG and the Corporate Governance Statements in our Annual Report and Accounts.

Corporate governance

The Group is a committed member of the Quoted Companies Alliance ("QCA") and has chosen to apply the QCA Corporate Governance Code, complying with its principles throughout the period. Further details can be found on our website at www.portmeiriongroup.com/investors.

The Board keeps its composition and performance under review to ensure that we have the appropriate skills and experience in place to deliver our strategy. In June 2023, the Group announced that Jeremy Wilson had been appointed as a Non-executive Director.

Group Strategy

Our homeware brands have a combined history of more than 750 years and are much loved around the world.

We remain focused on our strategic goal of growing the sales footprint of the business over the next 3-5 years. We plan to do that by continuing to develop our key heritage ranges through product extensions and developing new sales channels to reach new customers, whilst at the same time increasing our market share in contemporary and giftware homewares through launching beautifully designed new products and leveraging these new ranges across our existing global sales infrastructure.

Our strategy remains to return operating margins back to historical levels with a medium-term target of reaching 10%.

Further detail on executing our growth strategy

1.    Geography - building and growing sales markets outside of our three core markets of North America, UK and South Korea

Rest of World ceramic sales markets (excluding Russia/Eastern Europe) grew by 10% in H1 2023. Our products are sold in more than 80 countries around the world. Our three core markets of North America, UK and South Korea accounted for 92% of Group sales in H1 2023.

We continue to see a significant opportunity to grow the contribution from sales outside of core markets over the next 3-5 years.

2.    Online - further developing online sales channels in our core markets reaching more potential customers on more occasions

In our core UK and US markets, sales through all online channels accounted for 48% of sales (H1 2022: 52%, FY 2022: 51%). In addition, we continued to build our online presence in international markets including South Korea.

For our own websites, our customer lists continue to grow and are now 10% larger than twelve months ago. This has allowed us to reduce investment in traffic acquisition spend and drive an improved operating margin performance for our online sales.

3.    Designing and launching new products - widening the appeal with our existing customer base and taking market share

Sales from new product launches in H1 2023 accounted for in excess of 10% of the Group's total sales, with a strong roadmap of new launches for the next 18 months.

We expect to see further strengthening of this KPI due to our investment in this area. 

4.    Leveraging our brands

We continue to invest in our six global brands and work on leveraging the strength of our brands outside of their current core markets.

Our Spode brand has grown again in H1 2023 and we expect further benefits in H2 2023 from the new collaboration with Kit Kemp Design Studio.

Returning our operating margin to 12.5% in the long term

1.    Improving productivity in our UK factories through investment in automation to reduce manual handling

We continue to invest in our UK factories and have a number of new automation investments being installed over the remainder of 2023 which will reduce manual handling and increase our pieces output per labour hour.

Productivity in our UK ceramic factory was maintained in H1 2023 despite a small reduction in output as we balance inventory levels.

2.    Leveraging our fixed cost base as we grow top line sales

We still see a significant opportunity to grow our sales footprint over the next 3-5 years which will enable us to leverage our spare factory capacity and improve capabilities in our UK factories and our existing sales and distribution infrastructure around the world.

3.    Improving the profitability of our home fragrance division back to pre-Covid levels

Wax Lyrical, our home fragrance division, had a positive H1 2023 with both an improved sales and profit performance.

In 2022 we purchased the AromaWorks London brand and have now absorbed the manufacturing of all of its product ranges within the existing capacity at our Wax Lyrical factory in Cumbria, UK. This has driven better recovery of fixed overheads and we expect the home fragrance division to return to profitability for the full year.

Outlook

We are cognisant of the ongoing challenges facing consumers around the world with significant inflationary cost pressures and rising interest rates. Whilst in the short term this will continue to impact consumer spending decisions, we expect demand for our brands to remain robust. We expect retailer customer stock levels to stabilise after a period of destocking during the first half.

The second half of the year has started in line with our expectations and we have strong advance order books for our key Christmas ranges which are ahead of last year and provide us with good visibility of H2 sales. We will also continue to mitigate economic pressures by bringing new products to the market. We expect FY sales and profit to be in line with consensus market expectations which were revised in July as a result of North American retailer destocking.

Despite short term pressures, we remain confident in our medium and long term ambitions to grow our sales and operating margins. We have taken market share in key markets in recent years, particularly in the US - and together, with the ongoing work to increase productivity through investments in our factories, will drive much improved levels of profitability in the medium term.

Dick Steele                                    Mike Raybould

Non-executive Chairman             Chief Executive

Consolidated Income Statement

Unaudited

All the above figures relate to continuing operations.

¹Headline operating profit is statutory operating profit of £590,000 (H1 2022: £951,000) add exceptional items of £124,000 (H1 2022: £1,006,000). Headline profit before tax is statutory loss before tax of £113,000 (H1 2022: profit before tax of £1,004,000), add exceptional items of £124,000 (H1 2022: £1,006,000).

Consolidated Statement of Comprehensive Income

Unaudited

Consolidated Balance Sheet

Unaudited