Outperformance in the bag
IG Design Group (LON:INGR) has had a very good second half trading and has issued a year-end update indicating that numbers will exceed market estimates. We have lifted our FY17 and FY18 numbers by 8-10% at the pre-tax and EPS levels, following an 11% uplift to earnings with the interims. Particularly notable is the comment on strong cash flow, with the group reaching its target of average leverage less than 2.5x EBITDA two years ahead of plan. With the earnings and cash flow momentum, strong balance sheet and progressive dividend, there is good potential for further share price upside.
Progress driven by US and Continental Europe
US progress, both organic and with the integration of Lang, is very encouraging and gives good momentum into the new financial year. Market opportunities are substantial as the group addresses new segments, such as the drug stores, and widens product categories. A shift in the Australian client base, disclosed earlier, will have restrained short-term profits but should boost margins in future periods. The UK, despite currency headwinds, is also broadening its market offer and internal reorganisation will help drive efficiency. The continental European business’s top line is growing well helped by customer expansion, with consequent efficiency gains boosted further by internal initiatives.
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