It is growing with some of the world’s leading retailers and pays rising dividends
Thursday 19 Dec 2019 Author: James Crux

You’d be crackers to ignore this global growth winner. Investors willing to pay up for a quality long-term consolidation story with global earnings momentum should snap up IG Design (IGR:AIM).

Despite having already delivered stellar returns for shareholders, we believe there is more to come as the company leverages long-standing ties with the world’s top retailers.

IG Design makes and supplies products that help people celebrate life’s special occasions. Its hugely diverse range spans gift packaging and greetings cards, stationery, creative play products and design-led giftware.

It is growing with the likes of Walmart, the world’s largest retailer, and Target in the US. It also has agreements with names such as Tesco (TSCO), Action, Dollar Tree and Lidl.

Successful licensing deals are in place for key brands including Peppa Pig, Toy Story and Frozen and these offer additional earnings upside for IG Design, whose UK business is taking a lead in developing more environmentally-friendly products such as fully recyclable Christmas crackers.

Results for the six months to 30 September showed a double digit profit gain amid impressive showings in the UK, Europe and US, where IG Design is geared into the buoyant consumer.

Following the acquisition of Impact Innovations, the US now speaks for 60% of group revenue. Sales and profits in the country are growing like topsy and it recently inked a deal with one of the largest retailers – it isn’t allowed to disclose the name for commercial reasons – for the supply of all-year-round themed and seasonal impulse gifting products to over 1,500 stores.

IG Design is primed for long-term organic growth as it expands with new and existing retail customers.

Risks to consider include cost pressures and competition, although this company has scale and manufacturing advantages over peers. Possible disposable income declines could also reduce gifting spend in key markets.

A new printing press in Memphis will reduce costs, increase gift-wrap production capacity and help the company mitigate the impact of tariffs.

Cash-generative IG Design also offers investors a progressive dividend, one forecast to rise from 8.5p to 10.54p in the year to March 2020 ahead of 12.61p and 13.71p in the 2021 and 2022 financial years respectively.

Chief executive Paul Fineman – whose personal stake in IG Design is now worth £15.7m – is likely to pursue further acquisitions, supported by the company’s strong balance sheet, to drive incremental growth.

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