Portmeirion Group PLC ('the Group')
14 November 2019
Trading Update
Portmeirion Group, the designer, manufacturer and worldwide distributor of high quality homewares under the Portmeirion, Spode, Royal Worcester, Pimpernel, Wax Lyrical and Nambé brands, is updating the market on current trading.
We have previously reported that the Group experienced lower export sales, particularly for South Korea, in the early part of the current financial year.
Sales into the South Korean market, specifically for the Portmeirion Botanic Garden ranges, continue to be weaker than expected. It is clear that the significant historic demand in South Korea for our classic Botanic Garden ranges has led to other geographical markets re-shipping into South Korea, resulting in overstocking in this market.
Since May we have invested considerable resource to address these issues including:
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developing and manufacturing nearly 1,000 new premium product SKUs for our South Korean distributor to create a fresh differentiated product in the market. These ranges have started to sell positively and we expect further growth from these new ranges in 2020;
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increasing due diligence of our distributors to ensure greater visibility of sales tracking, therefore reducing risk of re-shipping product into South Korea;
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diversifying our brands and distribution channels including signing a new distribution contract with a major South Korean retailer to drive growth from other premium brands in our portfolio. First shipments are expected to commence in late 2019 with significant growth expected in 2020; and
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continuing to develop other export markets outside South Korea. |
The clearing of the overstocking in South Korea combined with a more disciplined focus on exports has resulted, however, in a larger than anticipated short term reduction in our Botanic Garden range sales. This, combined with the impact on our development cost and manufacturing processes for new products, will have an impact on the Group's financial performance in the current financial year.
Whilst we are confident that the strategic investments outlined above will result in improved manufacturing efficiencies and sales growth in 2020, these will inevitably impact 2019. As such, we now expect that the profit for 2019 will be materially behind current market expectations.
Notwithstanding the challenges in South Korea, we are encouraged by the progress in other strategic areas of focus in the business, including the continued transition to online, expansion of our home fragrance division, and new product development to celebrate our Spode brand's 250th year in style in 2020. In addition, the integration of the recently acquired Nambé business is progressing well, with positive initial feedback as the Group looks to roll out the Nambé brand across our international markets.
With a strong balance sheet and expectation of ongoing healthy levels of cash generation in the business, there is no anticipated change to our dividend policy
Mike Raybould, CEO, said:
“Since being appointed in September, I have reviewed all of our markets, and our teams have invested a huge amount of resource to resolve the issues we have faced in South Korea which were more challenging than we had anticipated earlier in the year.
The Group has a long and consistent track record of growth, leveraging our heritage portfolio of homeware brands around the world. We believe that the recent actions we have taken will be successful in protecting our brands and export markets in the long term.
The Group continues to invest in its long term strategy. In the last three months there have been key senior level hires in marketing, digital and online and product development to accelerate our progress in these areas.
With the actions we have now taken, I am confident that we will be able to turnaround our South Korean business and grow strongly in a greater number of markets in the coming years.”