Portmeirion : 5,698KB

Financial

• Group revenue of £102.7 million in the year to 31 December 2023 (2022: £110.8 million), in line with market expectations and a resilient performance against tough trading conditions in the US and South Korea.
• Headline EBITDA1 of £9.2 million (2022: £13.2 million) and headline operating margin1 of 4.7% (2022: 7.8%) reflecting reduced revenue and operational gearing.
• Headline profit before tax1 of £3.0 million (2022: £8.0 million) in line with market expectations.
• Good Christmas trading period with robust demand across our portfolio of consumer goods brands.
• Return to sales growth in Wax Lyrical division and further 16% growth in ROW sales markets, in line with our diversification strategy.
• Much improved free cash flow generation of £4.4 million (2022: free cash outflow of £8.7 million).

• Inventory levels successfully reduced by 13% to £36.0 million (2022: £41.1 million) as part of medium-term plan to return to 2021 volume level.
• Balance sheet remains robust with net debt improved to £7.9 million (2022: £10.1 million) and significant headroom within current borrowing facilities.
• Final dividend proposed of 2.00p per share reflects prudence given the ongoing macro-economic uncertainty and continued prioritisation of further reduction to net debt. Total dividends paid and proposed of 5.50p per share (2022: 15.50p).
• Non-cashimpairment of £10.9 million in home fragrance division driven by higher cost of capital at 17.5% (2022: 8.6%) and trading performance failing to return to pre-Covid levels, although underlying performance of the division has improved.

1. Headline EBITDA, headline profit before tax, headline operating margin and headline basic earnings per share exclude exceptional items - see notes 6 and 13.

1. 87,854

1. 92,816

Headline profit before tax (£'000)

£3,033

23 3,033

228,004

Operational

• Improved gross margin performance of 130 bps in US market - a key part of our long term goal for improving operating margins.
• Improving productivity in Stoke-on- Trent ceramic factory driven by ongoing automation programme.
• Spode brand continues to grow, led by Spode Christmas Tree range and benefit from new collaboration with Kit Kemp Design Studio.
• Home fragrance sales grew by 24% due to new listing wins in the UK grocery channel in Asda and Tesco and full year impact

from the acquisition of the AromaWorks London brand.

• Positive reaction to 2024 product launches at trade fairs with strong opening customer orders.
• Launch of new sustainability strategy 'Crafting a Better Future' demonstrates the Group's commitment to becoming a more sustainable business. Energy usage reduced by 8% compared to the prior year.

Headline basic EPS (p)

21.36p

23 21.36

2246.59

21 38.85

20 4.96

Current Trading & Outlook

• We are on track to achieve the Board's profit expectations for the year, supported by the reorganisation and restructuring of our cost base in the last few months to provide a significantly leaner operating model going forward. As a result of these measures, we anticipate overhead costs will be approximately 10% lower (£4 million) in 2024 than the prior year.
• As set out in January trading update, we expect 2024 to be a challenging year due to ongoing macro uncertainty with customers remaining cautious in relation to H1 order flow. This is particularly noticeable in the South Korean market which we expect to remain subdued as Asian markets continue to suffer from difficult economic conditions. Accordingly, we expect in H1, our traditionally quieter half, Group sales to be

down on the previous year, before returning to growth in H2 although sales performance remains difficult to predict.

• In the US and UK, we expect a modestly improved performance during the year and anticipate further progress in ROW markets and continued sales growth in our home fragrance division, Wax Lyrical. Encouragingly, our current US Christmas advance orders are significantly ahead as at the same point last year.

1956.32

Dividends paid and proposed per share (p)

5.50p

23 5.50

2215.50

1. 13.00

1. Nil

1. 8.00

Pictured: Spode Blue Italian

Who we are

Our vision is to be a leading force in the global homeware sector focused on growing our great brands. To achieve this, we aim for consistent sales growth by developing new channels including online, new geographies and through new product launches. In conjunction with sales growth, we are focused on continuous improvement of our operating efficiency and capabilities across the Group.

We have 802 valued employees and sell around the world where our brands and products are enjoyed by millions of consumers. Our diversified channels and offering bring considerable opportunity for growth and development for the future.

Our Brands

Business Model pages 14 and 15

Our Commitment to ESG pages 20 to 26

What we do

Established sales channels

The Group sells into over 80 countries worldwide and has sales offices in the UK, US, Canada, Europe, The Middle East and the Far East.

We sell our product increasingly via online channels including our own UK and US websites and through a network of distributors, agents and own-retail stores.

The increase in consumer demand for online has been further impacted by our focus to grow this channel, and 44% of total sales in our core UK and US markets are made via an online platform, whether our own ecommerce store, pureplay web stores or omnichannel retailer websites.

We serve our customers from our warehouses in the UK, the US and Canada. We also direct ship from sourced suppliers to maximise efficiency and lead times where appropriate to do so.

Product design and development

The Group's key economic driver is its six global brands and the designs which underpin them. Collectively these brands have over 750 years of history, and some of our major homeware ranges are also brand names in their own right. Portmeirion Botanic Garden, which was first launched in 1972, still sells in significant volume around the world today and Spode Christmas Tree, first introduced in 1938, continues to sell strongly particularly in our key US market.

Design and quality are key to our business model. We continue to develop, extend, refresh and refine our existing collections, as well as launching new ranges and products in order to retain and improve our customer appeal. Our design studios are the creative hub for new product development.

Production and sourcing

We manufacture earthenware from our factory in Stoke-on-Trent and home fragrance at our factory in the Lake District. We also source a range of product from around the world to the same exacting quality standards; this includes bone china and porcelain tableware, wood, glass and metal alloy giftware and other associated homeware products. In 2023, our mix of sales was 45% manufactured product and 55% sourced product. With this diversified supply model, we are less exposed to the current supply chain issues faced by many of our competitors.

The Group continues to invest in our manufacturing sites and have completed a number of capital expenditure projects during 2023 in order to improve our cost efficiency and output capacity. This included the latest stage of automation investment in our Stoke- on-Trent factory.

Where we operate

Geographical revenue split

Strategic Repor t

1

Global brands loved around the world

The Group owns six major brands which are sold into over 80 countries around the world and have a combined history of more than 750 years.

We are committed to developing and expanding the reach of our brands, with particular focus on growing our digital marketing strengths.

Portmeirion Botanic Garden celebrated its 50th year in 2022 and Spode Christmas Tree, first launched in 1938, remains a perennial US market favourite.

2

Online sales and capability to grow this channel

Our online channels remain a key part of our growth strategy. Reflecting the change in consumer behaviour to digital, we continue to invest in our online platforms, fulfilment and capabilities.

We place strong focus on the growth of our own ecommerce, D2C for retail customers and building partnerships with distributors/retailers who have

1. like-mindedapproach to digital growth.

3

Strong operational capabilities

The Group maintains two factories in the UK, these factories made up 45% of the revenue generated in 2023, with the remaining 55% coming from sourced product sales. Product from our six global brands is shipped mainly via our distribution centres in the UK, US and Canada.

We continue to build capabilities and capacity in our operations including the finalisation of our mezzanine floor project at our main UK distribution centre to enhance D2C order fulfilment.

We have further investment planned for our D2C capabilities at our UK, US and Canada distribution centres.

4

Robust balance sheet and facility headroom to support growth

The Group maintains a robust strong balance sheet in light of external inflationary pressures and at 31 December 2023 had £17.6 million of headroom via cash and bank facilities available.

We have continued to focus on working capital efficiency and have seen a £5.2 million (13%) reduction in inventory, and expect further benefits in 2024.

Summary

• Third consecutive year of sales above £100 million.
• Profit before tax impacted by 7% sales reduction and higher finance costs.
• Ongoing initiatives in ESG result in 8% reduction
  in energy consumption during the year.

Introduction

The long term success of Portmeirion depends on doing things better today than we did yesterday, and in maintaining the same attitude tomorrow.

In 2023, we reported a third consecutive year of revenue in excess of £100 million, albeit a 7% reduction over the record sales performance delivered in 2022. Revenue remains 11% ahead of pre Covid-19 levels. This reduced revenue performance, combined with an increase in finance costs due to interest rates rises, means we have reported a reduction in profit before taxation.

Our business and strategy

We design, manufacture, source and sell consumer products worldwide. Our business is built around six international homeware brands: Portmeirion, Spode, Wax Lyrical, Royal Worcester, Pimpernel and Nambé, which collectively have more than 750 years of heritage. As such we have a huge amount of expertise in design and manufacturing within our categories and we are fortunate to own brands and product ranges that have timeless appeal and that are much loved in homes around the world.

We will continue to develop our brands, reaching an ever wider customer base across the world. Intellectual property and design are at the heart of our business, manifesting in the sustainable nature of our revenue.

We trade in over 80 countries worldwide and have manufacturing and warehousing facilities in the UK and warehouses in the US and Canada. Our Group headquarters are in Stoke-on-Trent in the UK, with additional offices in the Lake District, Canada and the US. Our revenue is increasingly being earned from digital channels, through our own web sites and those of third parties, some of which we fulfil directly to the consumer. We continue to sell through third party retailers, wholesalers, agents and distributors. We have 12 of our own retail outlets in the UK and the US.

The Group's strategy is set out in more detail on pages 16 and 17.

The Principal Risks and Uncertainties which face the Group are set out on page 35. It is an integral part of our management approach that we continually identify, evaluate and mitigate risks where appropriate and reasonable.

The Group continues to monitor ongoing risks to supply chains and inflationary impact on consumer spending. Whilst we cannot fully remove all external risk factors, we remain a diversified and well-funded business.

Pictured: Portmeirion Botanic Garden

Governance

The Group is a committed member of the Quoted Companies Alliance ("QCA") and has chosen to apply the QCA Corporate Governance Code as the most appropriate for our size and structure. We have complied with the principles of the QCA code throughout 2023 and continue to do so. Further details of our approach to governance can be found on our website and on pages

40 to 45 of this report. The Board considers our governance procedures to be appropriate for a company of our size, however we continually look to further improve and welcome feedback and engagement from shareholders. Shareholders are encouraged to contact us via the email address shareholderenquiries@portmeiriongroup.com.

The Board

In June 2023, the Board appointed Jeremy Wilson as a Non-executive Director. Jeremy is a qualified chartered accountant with

30 years' experience in senior finance roles in a wide range of industries including consumer products.

At the conclusion of the AGM on 21 May 2024 Andrew Andrea will retire from the Board and hand over the Chair of the Audit Committee to Jeremy. Andrew has been a Non-executive Director since June 2017 and has made an invaluable contribution to the Board; we wish him well for the future.

The Board keeps its composition and performance under constant review so as to ensure that we have the appropriate skills,

experience and resources to deliver on our four main board requirements of: setting strategy, reviewing progress against strategy, monitoring the resources required to deliver the strategy and complying with relevant regulatory or governance requirements be they legal or otherwise. We undertake a formal board effectiveness review each year.

Our people continue to show outstanding commitment to the Group in their ability to adapt and deliver in difficult market conditions whilst developing readiness for future growth. The Board is proud to be part of a team that drives us forward and thanks all of our colleagues for their efforts.

Our people, culture and environmental impact

We promote an open culture in the business which is achieved from effective employee engagement, people development and diligent resource management. We are a caring employer with an excellent health and safety record, fair and balanced equality policies, a wide diversity in our workforce and management structures and a consultative approach with our people.

In order to safeguard our future profitability we have undertaken headcount reductions across the Group, this process has been handled carefully and sensitively.

We continue to advance our ESG agenda, and in 2023 published our new sustainable business strategy and roadmap 'Crafting a Better Future'. This remains a key focus of the Board going forward.

Further details can be found in the Our commitment to ESG section on pages 20 to 26 and the Corporate Governance Statement on pages 40 to 45 of this report.

Dividend

The Board remains committed to a sustainable dividend policy with an appropriate level of cover. Our policy will ensure that we retain and invest sufficient capital in our business to drive long-term growth in our brands. We currently consider that a level of cover at or close to three times the dividends paid and proposed for the year is the appropriate rate for the medium- term to allow increased investment whilst providing a return for shareholders.

Prudently, given the ongoing macro-economic uncertainty and the continued prioritisation of further reduction to net debt, the Board

is recommending a final dividend of 2.00p (2022: 12.00p). Total dividends paid and proposed for the year would therefore be 5.50p per share (2022: 15.50p). The Board continues to monitor its dividend outlook and looks forward to increasing shareholder returns as the trading environment improves.

Dick Steele

Chairman

25 March 2024

Summary

• Sales fall 7% against a tough comp of record 2022 sales levels and a much tougher consumer market backdrop but remain 11% above pre-Covid levels.
• Rest of world sales grew 16% representing key part of long term growth plan and home fragrance division returns to growth with sales up by 24%.
• Ongoing investments in factory automation and productivity gains have helped offset input cost inflation.
• Opportunity to both grow sales and improve operating margins back to historic levels over next 3-5 years.
• Energy usage down 8% although Carbon/ tonne saleable product increases by 9% as we reduce output and stock levels.

Financial Highlights

2023 was the third consecutive year the Group had exceeded £100 million of sales, albeit North America and South Korea sales were slightly down year-on-year due to the impact of weaker consumer sentiment and de-stocking by our major retail customers.

Group sales reduced by 7% compared to the record figures reported for 2022.

We experienced another strong Q4 trading period particularly for our key Christmas ranges. Sales from our Spode brand continued to grow, with Spode Christmas Tree sales again increasing, driven by both additional store space and extensions to the range.

We also saw growth in our rest of world markets which were up 16% over the prior year.

In Wax Lyrical, our home fragrance division, sales were up 24% driven by new listing wins in the UK grocery channel and the full year impact from the acquisition of the AromaWorks London brand in August 2022 which has delivered cost synergies and cross-selling opportunities.

Operational Overview

Revenue for the Group decreased by 7% to £102.7 million (2022: £110.8 million).

The Group's largest geographical market, North America (the US and Canada), accounted for 41% of total Group revenue. In translated figures, sales in this market decreased by 13% to £42.4 million (2022: £48.9 million) due to previously highlighted customer destocking and tougher macro-economic conditions. However, we are pleased to have seen an improved gross margin performance of 130 bps in the US market - a key part of our long term goal for improving operating margins.

Our second largest market is the UK which accounted for 30% of Group sales at

£30.8 million (2022: £28.3 million), an increase of 9% over the prior year. UK ceramic sales were broadly flat, with the growth coming from a rebound in home fragrance sales.

Sales into South Korea slowed down in the second half resulting in a 19% full year reduction to £21.5 million (2022: £26.7 million) as consumers reacted to inflationary pressures and the resulting impact of retailers reducing stock holding.

Rest of World sales have grown strongly to £8.1 million (2022: £7.0 million), an increase of 16%, and remain a key area of focus in our