Cracker firm warns of restructuring

Gift wrap and Christmas cracker firm International Greetings today said it planned to restructure its UK operation and ditch failing businesses.

The move by Hatfield-based International Greetings came as it said results for the year to March 31 were likely to be "significantly below" market hopes.

It said its UK manufacturing facilities - including a site in Glamorgan - were unable to deliver acceptable profit margins in their current form.

The company pledged to pursue a market-led rather than volume driven business model and said it would exit those businesses that are either not performing to expectations or not of strategic importance.

IG generates around a third of its sales from gift wrap, with another 11% achieved through cracker sales.

In 2005, it brought the Tom Smith cracker business, together with the Royal warrants which have been held by the brand since 1906.

The group, which made pre-tax profits of £18.1 million in its last financial year, has made a number of acquisitions in an effort to secure new product ranges and distribution channels.

The company recently reorganised its UK seasonal trading divisions into one business unit based in Glamorgan. It also looked to diversify with the 2006 acquisition of Alligator Books and its more recent purchase of Pinwheel Children's Books.

International said the latest revision to its results guidance reflected weak Christmas trading and a slowdown in consumer spending at the start of this year. It added that manufacturing inefficiencies, additional freight costs and higher than anticipated bad debts added to its problems in the UK.

In light of the current trading position and full-year outlook, International said it would be "inappropriate" to recommend a final dividend for the current financial year.

Despite the recent problems, International said early indications for Christmas 2008 were encouraging.

It added: "With the reduction of the cost base and refocus of the UK manufacturing division, a significantly improved performance is expected from this area of the business."