REG - Inspecs Group PLC - Final Results
17/04/2024 07:00
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RNS Number : 9403K Inspecs Group PLC 17 April 2024
17 April 2024
INSPECS Group plc
("INSPECS", the "Company" or the "Group")
Final Results
INSPECS Group plc, a leading designer, manufacturer, and distributor of
eyewear (sunglasses, optical frames, lenses and low vision products) today
announces its final results for the year ended 31 December 2023.
Financial Highlights
· Group revenue of £203.3m (2022: £201.0m)
· Group revenue on a constant exchange rate basis(1) of £200.7m (2022:
£201.0m)
· Gross profit up 4.7% to £103.5m (2022: £98.9m)
· Adjusted Underlying EBITDA(1) up 16.1% to £18.0m (2022: £15.5m)
· Profit before tax of £0.2m (2022: loss before tax £7.7m)
· Net debt excluding leasing reduced by £3.4m to £24.2m (2022:
£27.6m)
· Cash flows from operating activities up £7.0m to £16.9m (2022:
£9.9m)
Operational Highlights and Current Trading
· New 8,000sqm manufacturing facility completed and preparing for
initial production later in the year
· Launch of leading brand into major global retailer delivered in 2023,
with a store roll out in April 2024
· O'Neill and our sustainable proprietary-brand Botaniq secured for
increased distribution into global travel retail markets
· The new team in Norville delivered significant operational
improvement in 2023 and we are now focused on increasing the customer base
· Eschenbach Optik will be launching new low vision aids in H2 2024
· Gaming eyewear launching in May 2024, with direct-to-consumer sales
· Our operational efficiency drive is delivering results, with further
work in progress on the amalgamation of our US operations and global supply
chain
· Innovative water-soluble bag designed in 2023 launching in H1 2024
· Significant new distribution into two major US chains secured for H2
2024
· New acquisition in Norway, A-Optikk AS, trading in line with
expectations
· After a disappointing end to 2023 and a slow start to 2024, the
recent trend has been more encouraging. Current momentum in the business
supports delivery of market expectations for 2024
1. Constant exchange rates and Adjusted Underlying EBITDA are non-statutory
measures. Please refer to note 4 for details.
Richard Peck, Chief Executive Officer of INSPECS Group plc, commented:
"The Group delivered record sales in 2023 with an increased number of frames
sold, despite a slower than expected end to the year. The progress that we
have made in 2023 is now delivering increased distribution of our brands to
both key accounts and our independent markets. Whilst consumer markets in
Europe remain subdued, our businesses are continuing to perform well.
"Our Frames and Optics division delivered solid growth of £5.4m in revenue
and a significant increase in operational performance despite the loss of
sales to Grand Vision following its acquisition by Essilor Luxottica. This,
and an adjustment in buying patterns by our major global retailers in 2023
caused by the effect of COVID, particularly affected our manufacturing
business in Asia. The construction of our new, state-of-the-art 8,000sqm
manufacturing facility in Vietnam has been delivered on time and on budget,
and the manufacturing division is now poised for further growth in the second
half of 2024. Norville, our lens manufacturing business, continues to show
month on month growth with significant new independent accounts and a new key
account in place for 2024.
"Our Group operates in a resilient and growing market, and we continue to
refine our business model and our strategy to deliver sustained and profitable
growth. After a disappointing end to 2023 and a slow start to 2024, the recent
trend has been more encouraging. Current momentum in the business supports
delivery of market expectations for 2024 and I am confident that the Group is
well positioned for continued success. We are excited about our future and
look forward to sharing more achievements in the coming year."
For further information please contact:
INSPECS Group plc via FTI Consulting
Richard Peck (CEO) Tel: +44 (0) 20 3727 1000
Chris Kay (CFO)
Peel Hunt (Nominated Adviser and Broker) Tel: +44 (0) 20 7418 8900
George Sellar
Andrew Clark
Lalit Bose
FTI Consulting (Financial PR) Tel: +44 (0) 20 3727 1000
Alex Beagley
Harriet Jackson
Amy Goldup
About INSPECS Group plc
INSPECS is a leading provider of eyewear solutions to the global eyewear
market. The Group produces a broad range of eyewear frames, low vision aids
and lenses, covering optical, sunglasses and safety, which are either
"Branded" (under licence or under the Group's own proprietary brands), or
"OEM" (unbranded or private label on behalf of retail customers).
INSPECS is building a global eyewear business through its vertically
integrated business model. Its continued growth is underpinned by six core
pillars: increasing the penetration of its own-brand portfolio, increasing
distribution, growing its travel retail markets, maximising group synergies,
expanding its manufacturing capacity and scaling the research and development
department as it develops new and innovative eyewear products.
The Group has operations across the globe: with offices and subsidiaries in
the UK, Germany, Portugal, Scandinavia, the US and China (including Hong Kong,
Macau and Shenzhen), and manufacturing facilities in Vietnam, China, the UK
and Italy.
INSPECS customers are global optical and non-optical retailers, global
distributors and independent opticians. Its distribution network covers over
80 countries and reaches approximately 75,000 points of sale.
More information is available at: https://INSPECS.com (https://inspecs.com)
CHAIRMAN'S STATEMENT
There is no doubt that 2023 was a challenging year for the Group, which
included a slowdown of sales in December. However, our commitment to
excellence in operations, sustainability and social responsibility has been
unwavering, driving us forward towards success.
I am pleased that the construction of our state-of-the-art factory in Vietnam
is on time and budget, which brings a significant opportunity to scale up the
Group's manufacturing capability and allows us to develop further operational
efficiencies within our supply chain, a testament to our commitment to
innovation and sustainability. This facility not only enhances our operational
efficiencies but also underscores our responsibility towards environmental
stewardship through the integration of renewable technology.
Our teams have demonstrated remarkable resilience and ingenuity through the
year, despite facing subdued retail demand in Europe, the loss of customers
due to competitor acquisitions and undergoing transitions within our business.
Whilst our revenue was only slightly ahead of 2022, I am proud that we have
achieved a commendable 16% increase in Adjusted Underlying EBITDA and a
170-basis point increase in our gross profit margin through enhanced
operational efficiencies; a testament to the collective dedication and hard
work of our employees.
Moreover, our commitment to making a positive impact extends beyond the
confines of our factory walls. Initiatives such as gifting essential PPE to
hospitals in conflict ridden zones and ensuring access to clean drinking water
for communities in which we operate highlight our dedication to global welfare
and sustainability.
Through 2024, our focus remains on continuing to enhance operational
effectiveness while driving revenue growth through synergistic collaborations.
By fostering a cohesive organisational culture and streamlining our supply
chain, we aim to unlock additional efficiencies and cost savings.
Our global presence and commitment to product excellence have been
instrumental in driving our achievements. We have successfully expanded into
new territories and launched innovative solutions, while upholding our
environmental, social and governance responsibilities.
I am confident that we are well-positioned for continued success. By remaining
focused on our strategic goals, operational efficiency, innovation, and
customer satisfaction, we will drive sustainable growth and deliver long-term
value to our shareholders.
I extend my gratitude to our employees, customers, partners, and shareholders
for their continued support. Together, we will continue to make significant
strides towards a brighter future for our Company and the communities and
stakeholders we serve.
Robin Totterman
Executive Chairman
CHIEF EXECUTIVE'S REVIEW
Having now completed my first full year as CEO I am proud to reflect on the
achievements of the past year; improved Adjusted Underlying EBITDA and reduced
costs, positive progress at Norville and a focus on innovation. While our
performance has not met expectations, due to a slow-down in sales at the end
of the year, we have continued to focus on enhancing operational performance
and group opportunities, steering our strategy in the right direction.
GLOBAL PRESENCE AND PRODUCT EXCELLENCE
We are a global company, distributing to over 80 countries and producing high
performing, award winning products to exceed our customers' expectations.
Despite challenges faced in 2023, our dedicated teams have pursued
opportunities, delivered synergies and profit optimisation initiatives to
ensure the business operates efficiently and continues to deliver high
performing products.
STRATEGY
The Board has set out its strategy for the future to ensure we maximise
opportunities and drive pace throughout the Group. With the addition of our
Vietnam manufacturing site, new products, innovative hinge solutions,
progression with digital visual aids and gaming eyewear we remain relevant, on
trend and continue to evaluate new opportunities to drive growth.
Given the external challenges across the globe such as inflationary cost
increases and subdued consumer confidence as the cost of living rose, I am
encouraged by all that we have achieved. We have continued to reduce our net
debt, despite the construction of our new Vietnam factory, and we successfully
delivered operational efficiencies, leading to an increased Adjusted
Underlying EBITDA margin of 8.9% and a reduced loss after tax of £1.0m.
GROUP PERFORMANCE
FRAMES AND OPTICS
Our Frames and Optics segment revenue grew by £5.4m in the year despite a
reduction in sales to Grand Vision retail stores around the globe, following
its acquisition by Essilor Luxottica, and subdued European retail demand.
The US market remained stable in 2023. Our strategy of introducing more Group
brands into the US market has gained momentum, particularly O'Neill and
Radley. We have moved forward with our plans to integrate Inspecs USA with
Tura to streamline operations and maximise our potential sales opportunities.
In the UK, Inspecs Ltd continues to focus on its existing chain business and
looks to deliver further growth in the travel retail sector.
At Eschenbach, TITANFLEX has been designed and manufactured since 1988 with a
focus on men's and children's collections. In 2023 the long awaited first
women's collection was launched and a new revolutionary patented hinge which
allows improved and sustained performance over the lifetime of the product.
Eschenbach has continued its success from previous years by winning two Red
Dot product design awards for Humphreys and the Mini eyewear collections which
is a fantastic accolade for all involved.
Our Low Vision business, based in Europe and the US, has had a strong
performance in 2023, delivering double digit growth of 12%. It has continued
to invest in new technological advances in the low vision field, including a
new digital magnifying aid. Our low vision aids provide poorly sighted people
with the opportunity to enhance their ability to read and work, despite
failing eyesight.
LENSES
I am pleased to report that our Lenses segment increased revenue by 18% and
reduced its operating losses by £2.0m in the year to £(2.0)m.
Norville has seen significant change over the last year. We have a new
leadership team who have successfully focused on speed and quality. Promoting
the 'Made in Britain' mark is key to the 2024 strategy and will add value
within the independent channels along with the key chain accounts. Norville
management also contributed significant engineering and technical help to the
Group in 2023, including design and development of our smart eyewear range and
specialist optical products for associated businesses, such as the dental
market. Our Group and customers can now benefit from our efficient UK
manufacturing site, and I look forward to further opportunities and growth in
2024.
MANUFACTURING
Our Manufacturing (formally Wholesale) segment had a disappointing performance
in December 2023 which led to an overall reduction in revenue of £3.7m. This
was due to lost sales following the Grand Vision/Essilor Luxottica merger and
the change in purchasing cycles following the pandemic. We expect through the
hard work of management in 2023 that the Manufacturing division will have a
stronger performance in 2024 and current indications show good progress.
I am pleased to say that the construction of our new facility in Vietnam is
completed and we are now preparing for initial production later in the year. I
would like to thank all of the team involved in the project that have
delivered a world class manufacturing facility on time and budget. We are
seeing significant interest from the optical industry as a result of the
increased capacity and efficiency of manufacturing in Vietnam.
In February 2024 the Mido show took place in Milan. With over 40,000
attendees, it is a fantastic show for the Group to be part of. I am pleased to
report that Killine received the Award for Certified Sustainable Eyewear with
their 'Natura' products in the 'Frames - Rest of the World' category.
Congratulations to the entire team for their dedication and hard work in
developing this industry leading product.
OPPORTUNITIES AND DEVELOPMENT
The Board will continue to assess acquisition targets that will complement the
Group's existing portfolio and further enhance its proposition to the market.
On 22 January 2024, the Group acquired A-Optikk AS in Norway and, combining
this with Eschenbach and Inspecs Scandinavia, will increase our operations in
the Nordic region.
Operating in a resilient market, we are confident that our business model and
strategy will enable us to capitalise on growth opportunities. The push for
proprietary brand products made in Vietnam and customers looking for new
suppliers following consolidation of competitors, all plays to our strengths.
Our global teams continue to work hard on synergising, from product design to
manufacturing and ultimately distribution.
INNOVATION
Our focus on innovative research and development across the Group continues to
evolve our business. We have focused on advancements in frames, lenses,
hinges, visual aids and developing more sustainable solutions along with
providing expertise to leading global technology firms.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Our commitment to Environmental, Social, and Governance responsibilities is
evident in our evolving ESG Roadmap. Our core vision of 'Always looking
forward' is to build a better future, focusing on sustainability, community
engagement, and employee wellbeing. Our Task Force on Climate-Related
Financial Disclosures ("TCFD") analysis guides us in understanding and
addressing our carbon footprint.
OUTLOOK
I am pleased with the performance of the business to date and, with the
opportunities that are in place for 2024, this gives me confidence in the
Group achieving market expectations for 2024. As we look to the future, our
focus remains on our six strategic pillars. I am confident that we are well
positioned for the continued success of the Group. We are excited about the
future and look forward to sharing more achievements in the coming year.
Richard Peck
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
Group sales for the year of £203.3m was an increase of 1% on previous year's
sales of £201.0m. Our continuing work to reduce non-operational costs,
without affecting the ability of the Group to drive forward in the future, has
led to a 16% increase in Adjusted Underlying EBITDA.
On a constant currency basis* our sales of £200.7m were broadly flat on
previous years' sales of £201.0m.
Reported profit before tax of £0.2m (FY22: loss before tax £7.7m) is after
incurring non-underlying costs of £0.1m (FY22: £1.5m), exchange adjustments
on borrowings of £1.3m (FY22: £(2.0)m) and net finance costs of £3.9m
(FY22: £3.0m).
Effective from 1 January 2023, the reporting currency of the Group was changed
to GBP from USD to allow for greater transparency for investors and other
stakeholders. Accordingly, comparative information is therefore also restated
in GBP.
*Constant exchange rates: figures at constant exchange rates have been
calculated using the average exchange rates in effect for the corresponding
period in the relevant comparative year.
FINANCIAL PERFORMANCE
FY23 FY22
£'000 £'000
Revenue 203,292 200,957
Gross profit 103,547 98,860
Underlying operating expenses (85,508) (83,335)
Adjusted Underlying EBITDA 18,039 15,525
Share-based payments (972) (1,398)
Depreciation and amortisation (13,039) (13,637)
Earnout on acquisitions (1,140) (1,544)
Purchase price adjustment - (132)
Operating profit/(loss) before non-underlying costs 2,888 (1,186)
Reconciliation to reported results
Operating profit/(loss) before non-underlying costs 2,888 (1,186)
Non-underlying costs (58) (1,466)
Exchange adjustments on borrowings 1,312 (2,044)
Share of (loss)/profit of associate and joint venture (12) 19
Net finance costs (3,915) (2,987)
Profit/(loss) before tax 215 (7,664)
Tax (charge)/credit (1,212) 1,345
Loss after tax (997) (6,319)
REVENUE
Total revenue for the year was £203.3m, increasing by 1% from £201.0m in
2022. On a constant currency basis, revenue remained broadly flat, from
£201.0m in 2022 to £200.7m in 2023.
GROSS MARGIN
The Group's gross profit margin overall was 50.9% compared to 49.2% in 2022,
an increase of 170 basis points. The Group has been able to achieve price
increases on both new and existing products in specific markets around the
globe and has continued to focus on supply chain efficiencies.
ADJUSTED UNDERLYING EBITDA
The Group considers Adjusted Underlying EBITDA as one of its key operating
performance indicators. Our Adjusted Underlying EBITDA increased by £2.5m,
from £15.5m to £18.0m, an increase of 16%. Adjusted Underlying EBITDA margin
rose from 7.7% to 8.9% during the year reflecting our increase in gross profit
margin and the Group's ability to controls its day-to-day operating expenses.
OPERATING EXPENSES
Operating expenses increased from £100.0m to £100.7m in 2023. The Group will
continue to seek operational cost savings in 2024.
Year Ended Year Ended Percentage change
31 December 2023 31 December 2022
£'000 £'000
Revenue 203,292 200,957 1%
Gross profit 103,547 98,860 5%
Distribution 6,020 6,292 -4%
Wages & salaries 52,690 49,760 6%
Administrative 41,949 43,994 -5%
Total operating expenses 100,659 100,046 1%
The table below sets out our operating costs as a percentage of revenue.
Year Ended Percentage Year Ended Percentage
31 December 2023 of revenue 31 December 2022 of revenue
£'000 £'000
Revenue 203,292 - 200,957 -
Gross profit 103,547 51% 98,860 49%
Distribution 6,020 3% 6,292 3%
Wages & salaries 52,690 26% 49,760 25%
Admin 41,949 21% 43,994 22%
PROFIT/(LOSS) BEFORE TAX
In 2023, the Group made a statutory profit before tax of £0.2m (FY22: loss
£7.7m), an improvement of £7.9m. The Group made an Adjusted Underlying
EBITDA of £18.0m (FY22: £15.5m).
2023 2022
£m £m
Adjusted Underlying EBITDA 18.0 15.5
Non-cash adjustments
1. Depreciation and amortisation (13.0) (13.6)
2. Purchase Price Allocation ('PPA') release on inventory - (0.1)
3. Exchange adjustments on borrowings 1.3 (2.0)
4. Share-based payments (1.0) (1.4)
5. Earnout on acquisitions (1.1) (1.5)
Sub-total 4.2 (3.1)
Non-underlying costs (0.1) (1.5)
Net finance costs (3.9) (3.1)
Profit/(loss) before tax 0.2 (7.7)
KEY ITEMS IMPACTING THE CURRENT YEAR'S RESULTS ARE AS FOLLOWS:
Depreciation and amortisation
The Group's depreciation and amortisation charge is set out below.
Amortisation costs principally arise from the capitalisation of customer
relationships and order books on acquisitions.
31 December 31 December
2023
2022
£m
£m
Depreciation 6.1 6.7
Amortisation 6.9 6.9
Total 13.0 13.6
Exchange adjustment on borrowings
The exchange adjustment on borrowings primarily relates to intragroup loans,
where the functional currency of the entities differs from the loan currency
and presentational currency. This exchange adjustment also relates to the
revolving credit facility held in Euros and USD.
Share based payment expense
The Group has an LTIP scheme in place that vests over a period of three years
from the date of the grant of the option at market value and is subject to the
continued employment of the individual over that period. The Group has
recognised a non-cash charge of £1.0m in 2023 (FY22: £1.4m). The scheme is
designed to give the equivalent of one year's salary to an individual over
that three-year period.
Earnout on acquisitions
The acquisitions of EGO Eyewear and BoDe Designs in December 2021 both contain
amounts due for contingent consideration, based on the performance of those
businesses. In 2023, the amounts payable under the agreements amounted to
£1.1m and have been charged to the profit and loss account in accordance with
IFRS 3. Further contingent consideration is expected to arise in 2024 and will
be subject to the performance of those businesses.
Net finance costs
Bank loan interest increased by £1.6m primarily due to significant global
rises in interest rates during 2023. The amortisation of loan transaction
costs relates to the refinancing charges that are amortised over the period of
the financing facilities available to the Group. In 2023, the Group exercised
its option to extend its finance facilities with HSBC until October 2025.
2023 (£m) 2022 (£m)
Bank Loan Interest 3.4 1.8
Invoice Discounting 0.1 0.1
IFRS 16 lease interest 0.5 0.5
Interest Receivable (0.2) (0.1)
Net Finance Cost 3.8 2.3
Amortisation of loan transaction costs 0.1 0.7
Total net finance costs 3.9 3.0
Non-underlying costs
The Group incurred £0.1m of non-underlying costs in 2023 (2022: £1.5m).
During the year the Group incurred restructuring costs of £0.1m which relates
to the integration of Inspecs USA and Tura.
PRIOR YEAR ADJUSTMENT
Following a review in 2023 it has been determined that deferred tax assets and
liabilities should be offset if criteria relating to their legal right and
intention to offset are met. In prior years, deferred tax balances arising on
the acquisition of subsidiaries have been presented gross and not netted
against deferred tax assets within the jurisdictions to which they relate. The
effect of this prior year adjustment as at 31 December 2022 is to reduce
deferred tax assets by £5.2m and reduce deferred tax liabilities by £5.2m.
CASH FLOWS
During the year, the Group generated £12.7m in net cash flows from operating
activities after tax and interest (2022: £4.0m). The Group has used the cash
generated to continue to invest in new property, plant and equipment, and to
enhance the Group's long-term growth strategy, resulting in an overall
decrease in cash and cash equivalents of £2.1m. An analysis of how the Group
has deployed its free cash flow in the year is set out below.
31 December 31 December 2022
2023 £'000
£'000
Cash and cash equivalents at the beginning of year 22,153 22,024
Net cash from operating activities 12,665 4,002
Net cash used in investing activities (6,183) (3,447)
Net cash used in financing activities (8,835) (3,555)
Decrease in cash and cash equivalents (2,353) (3,000)
Foreign exchange movements in the year 270 3,129
Cash and cash equivalents including overdrafts at the year end 20,070 22,153
The breakdown of net cash used in investing activities is
Purchase of intangible fixed assets (1,248) (861)
Purchase of property, plant and equipment (4,502) (2,639)
Cash paid in relation to deferred consideration (673) -
Purchase of shareholding in associate and joint venture - (55)
Interest received 240 108
Net cash used in investing activities (6,183) (3,447)
WORKING CAPITAL
The Group closely monitors its working capital position to ensure that it has
sufficient resources to meet its day-to-day requirements and to fund further
investing activities to supply its customer base.
Receivables
The Group closely monitors its receivable due days to ensure that amounts
overdue more than 30 days are kept to a minimum balance.
Year ended 31 December 2023 Year ended 31 December 2022
Total Current <30 days overdue >30 days overdue Total Current <30 days overdue >30 days overdue
Receivables (£m) 24.2 15.2 3.2 5.8 22.7 17.0 3.1 2.6
Percentage 100 63 13 24 100 75 14 11
Inventory
Our sales to inventory ratio increased from 4.2 to 5.0. The Group constantly
monitors its working capital position, with a view to increase the sales to
inventory ratio where possible.
31 December 31 December 2022
£m
2023
£m
Turnover 203.3 201.0
Inventory 40.9 48.2
Sales to inventory ratio 5.0 4.2
Loan Reclassification
During the prior year, as at 31 December 2022, it was determined that INSPECS
Limited, who holds the revolving credit facility on behalf of the Group, was
in technical breach of its cashflow cover loan covenant. This resulted in the
reclassification of the loan balance (£37.8m) to a current liability in line
with IAS 1. Subsequently, the bank waived the cashflow cover and leverage
covenants as at 31 December 2022. As at 31 December 2023, the Group was
compliant with all its covenants. The following ratios show a significant
increase as a result of this reclassification.
Current asset ratio
The current asset ratio is a liquidity ratio that measures a company's ability
to pay its short-term obligations, or those due within one year.
Year ended Year ended
31 December
31 December 2022
£m
2023
£m
Current assets 97.2 105.1
Current liabilities 65.9 107.0
Ratio 1.5 1.0
Quick ratio
The quick ratio is an indicator of a company's short-term liquidity position
and measures a company's ability to meet its short-term obligations with its
most liquid assets.
Year ended Year ended
31 December 2023
31 December 2022
£m
£m
Current assets 97.2 105.1
Less inventory (40.9) (48.2)
56.3 56.9
Current liabilities 65.9 107.0
Ratio 0.9 0.5
Net debt
The Group's opening net debt, including and excluding lease liabilities, is
shown below. During the year the Group decreased its net debt excluding leases
from £27.6m to £24.2m.
The Group has significant cash reserves, resulting in the net debt position as
set out below.
Year ended Year ended
31 December 2023
31 December 2022
£m £m
Cash at bank 20.1 22.2
Borrowings (44.3) (49.8)
Lease liabilities (17.9) (20.0)
Net debt (42.1) (47.6)
Net debt (excluding lease liabilities) (24.2) (27.6)
FINANCING
The Group finances its operation through the following facilities. During the
year the Group agreed to extend its facilities with HSBC to 24 October 2025.
These facilities have a leverage ceiling of 2.25 and debt service cover of
1.05 and an interest cover of 3.0.
Amount Expires Drawn at
£m
31 December
2023
£m
Group revolving credit facility* 29.1 October 2025 29.2
Term loans 7.8 October 2025 7.8
Revolving credit facility USA 7.9 1-year rolling 6.5
Invoice discounting 3.0 1-year rolling 0.9
Total 47.8 44.4
*This facility is denominated in USD with a revaluation performed quarterly by
the bank. Any drawdown in excess of the amount available is repaid during the
following quarter.
LEVERAGE (USING DEBT TO EQUITY RATIO)
The Group's leverage position is shown below including and excluding leasing
finance:
2023 2022
Including leasing finance 1.70 2.24
Excluding leasing finance 1.58 2.07
Required ratio 2.25 2.25
The Group's leverage is constantly updated, and a rolling projection for 12
months is reviewed to ensure compliance with the Group's covenants.
EARNINGS PER SHARE
Year ended 31 December 2023 Basic weighted average number of Ordinary Shares ('000) Total (loss)/earnings (Loss)/
£'000 earnings
per share
(pence)
Basic loss per share 101,672 (997) (0.98)
Diluted loss per share 101,672 (997) (0.98)
Basic adjusted PBT per share 101,672 8,136 8.00
Diluted adjusted PBT per share 107,246 8,136 7.59
DIVIDEND
The Group does not intend to pay a dividend for the year ended 31 December
2023. A dividend of £1.3m was paid during 2022 in respect of the year ended
31 December 2021.
GOING CONCERN
The Directors have undertaken a comprehensive assessment of the Group's
ability to trade out to 30 June 2025. Taking this into consideration, the
Directors have a reasonable expectation that the Group and the Company have
adequate resources to continue to trade throughout the review period.
Therefore, the Directors continue to adopt the going concern basis in
preparing the consolidated and Parent Company financial statements.
Chris Kay
Chief Financial Officer
Consolidated Income Statement
For the year ended 31 December 2023
Notes 2023 2022
£'000
£'000
Revenue 5 203,292 200,957
Cost of sales (99,745) (102,097)
Gross profit 103,547 98,860
Distribution costs (6,020) (6,292)
Administrative expenses (94,639) (93,754)
Operating profit/(loss) 2,888 (1,186)
Non-underlying costs 8 (58) (1,466)
Exchange adjustment on borrowings 1,312 (2,044)
Finance costs 9 (4,155) (3,095)
Finance income 9 240 108
Share of (loss)/profit of associate and joint venture (12) 19
Profit/(loss) before income tax 215 (7,664)
Income tax (charge)/credit 11 (1,212) 1,345
Loss for the year (997) (6,319)
Attributable to: (997) (6,319)
Equity holders of the Parent
Earnings per share
Basic loss for the year attributable to the equity 12 (0.98)p (6.21)p
holders of the Parent
Diluted loss for the year attributable to the equity holders of the Parent 12 (0.98)p (6.21)p
Consolidated Statement of
Other Comprehensive Income
For the year ended 31 December 2023
2023 2022
£'000
£'000
Loss for the year (997) (6,319)
Other comprehensive (loss)/income
Exchange differences on translation of foreign operations (3,999) 6,228
Other comprehensive (loss)/income for the year, net of income tax (3,999) 6,228
Total comprehensive loss for the year (4,996) (91)
Attributable to: Equity holders of the Parent (4,996) (91)
Consolidated Statement of Financial Position
as at 31 December 2023
Notes 2023 2022
£'000
£'000
Restated
ASSETS
Non-current assets
Goodwill 55,578 55,578
Intangible assets 29,813 36,170
Property, plant and equipment 19,001 17,424
Right-of-use assets 16,599 19,683
Investments in associate and joint venture 98 112
Deferred tax assets 17 2,826 1,835
123,915 130,802
Current assets
Inventories 40,848 48,158
Trade and other receivables 35,855 31,144
Tax receivables 386 3,681
Cash and cash equivalents 20,070 22,153
97,159 105,136
Assets held for sale 832 832
Total assets 221,906 236,770
EQUITY
Shareholders' equity
Called up share capital 1,017 1,017
Share premium 15 89,508 89,508
Foreign currency translation reserve 15 5,435 9,434
Share option reserve 15 3,222 2,703
Merger reserve 15 5,340 5,340
Retained earnings 15 (1,005) (461)
Total equity 103,517 107,541
Notes 2023 2022
£'000
£'000
Restated
LIABILITIES
Non-current liabilities
Financial liabilities - borrowings
Interest-bearing loans and borrowings 16 48,234 16,548
Deferred consideration 14 652 1,350
Deferred tax liabilities 17 3,647 4,376
52,533 22,274
Current liabilities
Trade and other payables 36,375 39,153
Right of return liabilities 5 11,297 10,613
Financial liabilities - borrowings
Interest-bearing loans and borrowings 24 13,000 51,746
Invoice discounting 24 887 1,490
Deferred and contingent consideration 14 2,111 2,518
Tax payable 2,186 1,435
65,856 106,955
Total liabilities 118,389 129,229
Total equity and liabilities 221,906 236,770
Consolidated Statement of
Changes in Equity
For the year ended 31 December 2023
Notes Called up share capital £'000 Share premium £'000 Foreign currency translation reserve £'000 Share option reserve £'000 Retained earnings £'000 Merger reserve £'000 Total equity £'000
Balance at 1 January 2022 1,017 89,508 3,206 1,454 6,931 5,340 107,456
Changes in equity
Loss for the year - - - - (6,319) - (6,319)
Other comprehensive income 15 - - 6,228 - - - 6,228
Total comprehensive loss - - 6,228 - (6,319) - (91)
Share-based payments 15 - - - 1,398 - - 1,398
Share options cancelled 15 - - - (149) 149 - -
Cash dividends 15 - - - - (1,222) - (1,222)
Balance at 31 December 2022 1,017 89,508 9,434 2,703 (461) 5,340 107,541
Changes in equity
Loss for the year - - - - (997) - (997)
Other comprehensive loss 15 - - (3,999) - - - (3,999)
Total comprehensive loss - - (3,999) - (997) - (4,996)
Share-based payments 15 - - - 972 - - 972
Share options forfeited 15 - - - (453) 453 - -
Balance at 31 December 2023 1,017 89,508 5,435 3,222 (1,005) 5,340 103,517
Consolidated Statement of
Cash Flows
For the year ended 31 December 2023
Notes 2023 2022
£'000
£'000
Cash flows from operating activities 13 16,914 9,888
Interest paid (3,647) (2,952)
Tax paid (602) (2,934)
Net cash from operating activities 12,665 4,002
Cash flows from investing activities
Purchase of intangible fixed assets (1,248) (861)
Purchase of property, plant and equipment (4,502) (2,639)
Cash paid in relation to deferred consideration (673) -
Purchase of shareholding in associate and joint venture - (55)
Interest received 240 108
Net cash used in investing activities (6,183) (3,447)
Cash flow from financing activities
New bank loans in the year - 10,334
Bank loan principal repayments in year (4,014) (8,392)
Transaction costs on debt refinancing (70) (80)
Movement in invoice discounting facility (603) (310)
Dividends paid to equity holders of the Parent - (1,271)
Principal payments on leases (4,148) (3,836)
Net cash used in financing activities (8,835) (3,555)
Decrease in cash and cash equivalents (2,353) (3,000)
Cash and cash equivalents at beginning of the year 22,153 22,024
Effect of foreign exchange rate changes 270 3,129
Cash and cash equivalents at end of the year 20,070 22,153
Notes
1. General information
INSPECS Group plc is a public company limited by shares and is incorporated in
England and Wales (company number 11963910). The address of the Company's
principal place of business is 7-10 Kelso Place, Upper Bristol Road, Bath BA1
3AU.
The principal activity of the Group in the year was that of design,
production, sale, marketing and distribution of high fashion eyewear, lenses
and OEM products worldwide.
2. Accounting policies
Basis of preparation
The Consolidated Financial Statements have been prepared in accordance with UK
adopted international accounting standards, and those parts of the Companies
Act 2006 applicable to companies reporting under UK adopted International
Financial Reporting Standards ('IFRS').
The Consolidated Financial Statements have been prepared on a historical cost
basis, except where fair value measurement is required under IFRS as described
below in the accounting policies.
Effective from 1 January 2023, the presentational currency for the
Consolidated and Parent Company Financial Statements was changed from USD to
GBP to allow for greater transparency for investors and other stakeholders.
Accordingly, comparative information is therefore also restated in GBP. The
Consolidated Financial Statements provide comparative information in respect
of the year ended 31 December 2022. Balances are presented to the nearest
thousand.
Going Concern
The financial statements have been prepared on the going concern basis as the
Directors have assessed that there is a reasonable expectation that the Group
will be able to continue in operation and meet its commitments as they fall
due over the going concern period to 30 June 2025.
The Board considered a base case; a downside scenario; and a reverse stress
test to assess the effect of the current economic uncertainties and political
landscape. The scenarios are as follows:
Base Case
· The Base Case is the Board approved budget which has been updated
with the Group's trading to February 2024. The budget was prepared assuming a
continuation of the current economic uncertainties and political landscape
together with inflationary pressures and higher interest rates across the
World.
· The budget includes the small acquisition of A-Optikk in Norway
completed in January 2024.
· Our markets remain resilient and are trading in line with
expectations.
· The Group expects to be able to maintain its budgeted margin
throughout 2024.
· The base case includes Capital Expenditure in 2024 for the new third
plant in Vietnam.
· In this base case scenario, no covenant breaches or liquidity
challenges are expected.
Severe but plausible downside scenario
· The Group has known forward orders for circa three months through to
the end of May 2024. Therefore, our downside scenario updates the base case
with an 8.5% reduction in revenue for each month from June 2024. The Directors
believe that an 8.5% reduction from the base case is appropriately
conservative based on the current trading position, expected falling global
inflation and increasing consumer confidence. The severe but plausible
downside assumes some controllable costs savings by a reduction in employee
bonuses and commission and a reduction in discretionary spending in
administrative costs.
· In this downside scenario, no covenant breaches or liquidity
challenges are expected.
The Group has considered the severe but plausible downside scenario. The Group
mitigates the risk of a long-term drop in revenue by having a diverse business
that trades globally so that it is not reliant on any one region.
Reverse Stress test
· The reverse stress test updated our base case with a 26% drop in
forecast revenue, whilst maintaining gross margin. This drop represents a
significant reduction against actual trading in 2023 and is a reduction in
revenue not previously experienced by the Group. This results in a breach in
interest ratio covenant in June 2025. No other covenants were forecast to be
breached in this period. The reverse stress test assumes some controllable
costs saving by a reduction in employee expenses through reducing headcount,
discretionary administration costs being limited to only those determined to
be essential, further reducing the time period in which returns can be made
allowing for a release of the right of return provision and stopping
non-committed capital expenditure from November 2024 onwards.
The Group has considered the reverse stress test and focussed on the risk of
not complying with covenants as opposed to liquidity issues. This is on the
basis that in a reverse stress test scenario the Group would breach a covenant
before cash levels were reduced such that the Group was not able to meet its
obligations as they fall due.
The reverse stress test models a breach in the interest ratio covenant in June
2025. In this case the Directors have available further levers within its
control to save costs and generate income. Whilst not wholly within
management's control, the Group also could discuss amending or waiving
covenants with the bank should an unprecedented drop in revenue occur. After a
disappointing end to 2023 and a slow start to 2024, the recent trend has been
more encouraging. This gives further confidence to the achievement of the base
case and when combined with the mitigations wholly within management's control
the directors consider that the reverse stress test scenario is a remote
possibility.
The Group's borrowings, amounting to £44.3m, contains three covenants;
Leverage, Cashflow Cover and Interest Cover ratios. Compliance on these
covenants is based on 12-month rolling periods for each Relevant Period. The
facilities are due for renewal in October 2025 and initial discussions
regarding renewal have already taken place. Formal work on the renewal is
expected to take place in Q3 2024 with a view to extending the terms for a
further 3 years from October 2025. The Directors are confident of a successful
renewal of the facilities based on the recent granting of the 12-month
extension to October 2025 combined with positive discussions with the current
lenders regarding future financing beyond the going concern period.
On this basis the Board has reasonable expectations that the Group and Company
has adequate resources to continue as a Going Concern to 30 June 2025.
Accordingly, the directors adopt the going concern basis in preparing the
financial statements.
Basis of consolidation
The consolidated financial information incorporates the Financial Statements
of the Group and all of its subsidiary undertakings. A subsidiary is defined
as an entity over which the Group has control. Control exists when the Company
has power over the investee, the company is exposed, or has rights to variable
returns from its involvement with the subsidiary and the company has the
ability to use its power of the investee to affect the amount of investor's
returns. The Financial Statements of all Group companies are adjusted, where
necessary, to ensure the use of consistent accounting policies. Acquisitions
are accounted for under the acquisition method from the date control passes to
the Group. On acquisition, the assets and liabilities of a subsidiary are
measured at their fair values. Any excess of the cost of acquisition over the
fair values of the identifiable net assets acquired is recorded as goodwill.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost
of an acquisition is measured as the aggregate of the consideration
transferred, which is measured at acquisition date fair value, and the amount
of any non-controlling interests in the acquiree. Acquisition-related costs
are expensed as incurred and classified as non-underlying costs.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
Goodwill is initially measured at cost (being the excess of the aggregate of
the consideration transferred over the net identifiable assets acquired and
liabilities assumed). If the fair value of the net assets acquired is in
excess of the aggregate consideration transferred, the Group reassesses
whether it has correctly identified all of the assets acquired and all of the
liabilities assumed and reviews the procedures used to measure the amounts to
be recognised at the acquisition date. If the reassessment still results in an
excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill is tested annually for impairment. For the purpose
of impairment testing, goodwill acquired in a business combination is, from
the acquisition date, allocated to each of the Group's cash-generating units
that are expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units.
Revenue recognition
Revenue from the sales of goods is recognised at the point in time when
control of the asset is transferred to the customer, in line with agreed
incoterms. Revenue is recognised at the fair value of the consideration
received or receivable for sale of goods to external customers in the ordinary
nature of the business. The fair value of the consideration takes into account
trade discounts, settlement discounts, volume rebates and the right of return.
Revenue in relation to royalty income is recognised over the period to which
the royalty term relates. Revenue in relation to design income is recognised
as the work is performed.
Rights of return
Under IFRS 15 a sale with right of return is recognised if the customer
receives any combination of the following:
· A full or partial refund of any consideration paid;
· A credit that can be applied against amounts owed, or that will be
owed, to the entity; and
· Another product in exchange (except for in cases of a defective
product being returned, or the exchanged item is of the same type, quality,
condition and price).
The Group recognised a liability where it has historically accepted a right of
return. The Group estimates the impact of potential returns from customers
based on historical data on returns. A refund liability is recognised for the
goods that are expected to be returned. A right of return asset (and
corresponding adjustment to cost of sales) is also recognised for the right to
recover the goods from the customer to the extent that these goods are not
considered impaired.
Inventories
Inventories are stated at the lower of cost and estimated selling price less
costs to sell after making due allowance for obsolete and slow-moving items.
Inventories are recognised as an expense in the period in which the related
revenue is generated.
Cost is determined on an average cost basis. Cost includes the purchase price
and other directly attributable costs to bring the inventory to its present
location and condition.
At the end of each period, inventories are assessed for impairment. If an item
of inventory is impaired, the identified inventory is reduced to its selling
price less costs to complete and sell and an impairment charge is recognised
in the income statement.
Royalties
Royalties payable reflect balances owed to brand owners for the right to use
the brand name. The royalty is payable based on a pre-agreed percentage of
sales volumes, with some arrangements also having minimum royalty payments for
specific periods. Royalties payable are recognised on delivery of the products
covered by such arrangements, with an additional accrual made where it is
considered that the sales level required to meet the minimum payment will not
be met.
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents comprise cash on hand and demand deposits, and short-term highly
liquid investments that are readily convertible into known amounts of cash,
that are subject to an insignificant risk of changes in value, and have a
short maturity of generally within three months when acquired, less bank
overdrafts which are repayable on demand and form an integral part of the
Group's cash management.
For the purpose of the consolidated statement of financial position, cash and
cash equivalents comprise cash on hand and at banks, including term deposits,
and assets similar in nature to cash, which are not restricted as to use.
Share-based payments
Employees (including senior executives) of the Group receive remuneration in
the form of share-based payments, whereby employees render services as
consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the
date when the grant is made using an appropriate valuation model, further
details of which are given in the detailed notes to the accounts. That cost is
recognised in employee benefits expense together with a corresponding increase
in share option reserve, over the period in which the service and, where
applicable, the performance conditions are fulfilled (the vesting period).
The cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group's best estimate of the number of equity
instruments that will ultimately vest. The expense or credit in the income
statement for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
Service performance conditions are not taken into account when determining the
grant date fair value of awards, but the likelihood of the conditions being
met is assessed as part of the Group's best estimate of the number of equity
instruments that will ultimately vest. Any other conditions attached to an
award, but without an associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are reflected in the fair value
of an award and lead to an immediate expensing of an award unless there are
also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because
service conditions have not been met. Where awards include a non-vesting
condition, the transactions are treated as vested irrespective of whether the
non-vesting condition is satisfied, provided that all other performance and/or
service conditions are satisfied. If the terms of an equity-settled award are
modified, the minimum expense recognised is the grant date fair value of the
unmodified award provided the original vesting terms of the award are met. An
additional expense, measured as at the date of modification, is recognised for
any modification that increases the total fair value of the share-based
payment transaction or is otherwise beneficial to the employee. Where an award
is cancelled by the entity or by the counterparty, any remaining element of
the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share
dilution in the computation of diluted earnings per share, to the extent that
they are dilutive.
Deferred and contingent consideration in relation to acquisitions
Deferred consideration to the previous owners arising on acquisitions are
treated as part of the consideration for the acquisition, with the liability
recognised on the statement of financial position at the date of the
acquisition. Where the consideration is contingent on continuing employment
within the Group, the charge is recognised through the Income Statement over
the period to which it relates.
Taxation
Income tax comprises current and deferred tax. Income tax relating to items
recognised outside profit or loss is recognised outside profit or loss, either
in other comprehensive income or directly in equity. Current tax assets and
liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities, based on the tax rates (and tax laws) that have
been enacted or substantively enacted by the end of the reporting period,
taking into consideration interpretations and practices prevailing in the
countries in which the Group operates. Tax liabilities are recognised when it
is considered probable that there will be a future outflow of funds to a
taxing authority. Uncertainties regarding availability of tax losses, in
respect of enquiries raised and additional tax measurements issued, may be
measured using the expected value method or single best estimate approach,
depending on the nature of the uncertainty. Tax provisions are based on
management's interpretation of country-specific tax law and the likelihood of
settlement. Management uses professional firms and previous experience when
assessing tax risks.
Deferred tax is provided, using the liability method, on all temporary
differences at the end of the reporting period between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences,
except:
· When the deferred tax liability arises from the initial recognition
of goodwill or an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
· In respect of taxable temporary differences associated with
investments in subsidiaries, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences,
the carryover of unused tax credits and unused tax losses can be utilised,
except:
· When the deferred tax asset relating to the deductible temporary
differences arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or
loss; and
· In respect of deductible temporary differences associated with
investments in subsidiaries, deferred tax assets are only recognised to the
extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the
temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the
deferred tax asset to be utilised. Unrecognised deferred tax assets are
reassessed at the end of each reporting period and are recognised to the
extent that it has become probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if and only if a
legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred taxes relate to income taxes levied by the
same taxation authority on either the same taxable entity and the same
taxation authority or different taxable entities which intend either to settle
current tax liabilities and assets on a net basis, or to realise the assets
and settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax liabilities or assets are expected to be
settled or recovered.
Foreign currencies
These Financial Statements are presented in GBP, which is the Group's
presentational currency. Each entity in the Group determines its own
functional currency and items included in the Financial Statements of each
entity are measured using that functional currency. Foreign currency
transactions recorded by the entities in the Group are initially recorded
using their respective functional currency rates prevailing at the dates of
the transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated at the functional currency rates of exchange ruling at the end of
the reporting period. Differences arising on settlement or translation of
monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
measured.
The gain or loss arising on translation of a non-monetary item measured at
fair value is treated in line with the recognition of the gain or loss on
change in fair value of the item (i.e. translation difference on the item
whose fair value gain or loss is recognised in other comprehensive income or
profit or loss is also recognised in other comprehensive income or profit or
loss, respectively).
The functional currency of INSPECS Group plc is GBP. The functional currencies
of certain overseas subsidiaries are currencies other than the GBP. At the end
of the reporting period, the assets and liabilities of these entities are
translated into GBP at the exchange rates prevailing at the end of the
reporting period and their income statements are translated into GBP at the
average exchange rates for the year.
The resulting exchange differences are recognised in other comprehensive
income and accumulated in the foreign currency translation reserve. On
disposal of a foreign operation, the component of other comprehensive income
relating to that particular foreign operation is recognised in profit or loss.
For the purpose of the consolidated statement of cash flows, the cash flows of
overseas subsidiaries are translated at the average exchange rates for the
year.
Non-underlying costs
Non-underlying costs are those that in the Directors' view should be
separately disclosed due to their nature to enable a full understanding of the
Group's financial performance. These include income and expenditure that is
considered outside of the usual course of business and therefore is separately
identified to allow the users of the Financial Statements comparability versus
prior periods. The main categories of costs disclosed as non-underlying are
acquisition costs, restructuring costs and other professional service costs
relating to the accounting integration of acquisitions.
Prior year adjustments
Material prior period errors are corrected retrospectively in the first set of
Financial Statements authorised for issue after their discovery by restating
the comparative amounts for the prior periods presented. A reconciliation
between the corrected figures and those reported for key statements is
provided in note 17. During the year, a prior year error has been identified
in relation to the jurisdictional netting of deferred tax balances.
New and amended standards and interpretations
The following standards have been published and are mandatory for accounting
periods beginning after 1 January 2023:
· New Standard IFRS 17: Insurance Contracts
· Amendments to IAS 1: Presentation of Financial Statements
· Amendments to IAS 8: Accounting Policies, Changes in Accounting
Estimates and Errors
· Amendments to IAS 12: Income Taxes
None of the above standards have given rise to a significant change in the
reported results or financial position of the Group or Company.
The following standards have been published and are mandatory for accounting
periods beginning after 1 January 2024.
· Amendments to IAS 1: Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current
· Amendments to IFRS 16: Leases
· Amendments to IAS 7: Statement of Cashflows
· Amendments to IFRS 7: Financial Instruments: Disclosures
None of the new standards not yet in issue are expected, once adopted, to give
rise to a significant change in the reported results or financial position of
the Group or Company.
Changes in accounting policies and disclosures
Effective from 1 January 2023, the presentational currency for the
Consolidated and Parent Company Financial Statements was changed from USD to
GBP to allow for greater transparency for investors and other stakeholders.
Accordingly, comparative information is therefore also restated in GBP for
this voluntary presentational change. The Consolidated Financial Statements
provide comparative information in respect of the year ended 31 December 2022.
Income and expenses were translated at the respective average exchange rates
prevailing for the relevant period. Assets, liabilities and total equity were
translated at closing exchange rates prevailing on the respective balance
sheet date. It is not considered that the change in presentational currency is
a material change to the users of these financial statements.
A statement of financial position for the periods ended 31 December 2023, 31
December 2022 and 31 December 2021 is shown below to aid comparability.
2023 2022 2021
£'000
£'000
£'000
Restated Restated
ASSETS
Non-current assets
Goodwill 55,578 55,578 56,206
Intangible assets 29,813 36,170 40,298
Property, plant and equipment 19,001 17,424 18,182
Right-of-use assets 16,599 19,683 16,482
Investment in associates 98 112 36
Deferred tax assets 2,826 1,835 2,041
123,915 130,802 133,245
Current assets
Inventories 40,848 48,158 41,199
Trade and other receivables 35,855 31,144 31,242
Tax receivables 386 3,681 2,566
Cash and cash equivalents 20,070 22,153 22,024
97,159 105,136 97,031
Assets held for sale 832 832 -
Total assets 221,906 236,770 230,276
EQUITY
Shareholders' equity
Called up share capital 1,017 1,017 1,017
Share premium 89,508 89,508 89,508
Foreign currency translation reserve 5,435 9,434 3,206
Share option reserve 3,222 2,703 1,454
Merger reserve 5,340 5,340 5,340
Retained earnings (1,005) (461) 6,931
Total equity 103,517 107,541 107,456
LIABILITIES
Non-current liabilities
Financial liabilities - borrowings
Interest-bearing loans and borrowings 48,234 16,548 51,210
Deferred consideration 652 1,350 2,300
Deferred tax liabilities 3,647 4,376 7,944
52,533 22,274 61,454
Current liabilities
Trade and other payables 36,375 39,153 39,459
Right of return liabilities 11,297 10,613 8,215
Financial liabilities - borrowings
Interest-bearing loans and borrowings 13,000 51,746 9,835
Invoice discounting 887 1,490 1,800
Deferred and contingent consideration 2,111 2,518 -
Tax payable 2,186 1,435 2,057
65,856 106,955 61,366
Total liabilities 118,389 129,229 122,820
Total equity and liabilities 221,906 236,770 230,276
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Group's Financial Statements requires management to
make judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and their accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amounts of the assets or liabilities
affected in the future.
Estimates involve the determination of the quantum of accounting balances to
be recognised. Judgements typically involve decisions such as whether to
recognise an asset or liability.
The key assumptions concerning the future and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below:
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis.
This requires an estimation of the value in use of the cash-generating units
to which the goodwill is allocated. Estimating the value in use requires the
Group to make an estimate of the expected future cash flows from the
cash-generating units and also to choose a suitable discount rate in order to
calculate the present value of those cash flows. The carrying amount of
goodwill at 31 December 2023 was £55,578,000 (2022: £55,578,000). No
provision for impairment of goodwill was made as at the end of the reporting
period.
Right of return
Management applies assumptions in determining the right of return liability
and the associated right of return asset. These assumptions are based on
analysis of historical data trends but require estimation of appropriate time
periods and expected return rates. During the period, new information was
identified providing a link between a returned item and the date of its
original sale. Management considers this new information provides a more
reliable estimate and it has therefore been used to determine the liability
and associated asset required as at 31 December 2023. In addition, a change in
commercial policy has been made in relation to the period over which returns
are accepted, with this under the control of the Group, and this applied to
the current period end position. This change in estimate arises from a
refinement in methodology and has been recognised through the current year
profit and loss in line with IAS 8.
The right of return liability at the period end is £11,297,000 (2022:
£10,613,000) with an associated right of return asset (held within inventory)
of £1,415,000 (2022: £1,596,000). If the new information and change in
policy were applied to the right of return liability as at 31 December 2022, a
liability of £10,989,000 and an associated inventory asset of £1,389,000
would have been recognised.
Uncertain tax positions
Tax authorities could challenge and investigate the Group's transfer pricing
or tax domicile arrangements. As a growing, international business, there is
an inherent risk that local tax authorities around the world could challenge
either historical transfer pricing arrangements between other entities within
the Group and subsidiaries or branches in those local jurisdictions, or the
tax domicile of subsidiaries or branches that operate in those local
jurisdictions.
As a result, the Group has identified that it is exposed to uncertain tax
positions, which it has measured using an expected value methodology. Such
methodologies require estimates to be made by management including the
relative likelihood of each of the possible outcomes occurring, the periods
over which the tax authorities may raise a challenge to the Group's transfer
pricing or tax domicile arrangements; and the quantum of interest and
penalties payable in additions to the underlying tax liability. The provision
held in relation to uncertain tax liabilities as at 31 December 2023 is
£596,000 (2022: £584,000).
Judgements made by management which are considered to have a material impact
on the Financial Statements are as follows:
Recognition of intangible assets
In recognising the intangible assets arising on acquisition of subsidiary
entities, the intangible assets must first be identified. This requires
management judgement as to the value drivers of the acquired business and its
interaction with the marketplace and stakeholders. In calculating the fair
value of the identified assets, management must use judgement to identify an
appropriate calculation technique and use estimates in deriving appropriate
forecasts and discount rates as required. Management has used external experts
to mitigate the risk of these judgements and estimates on the intangible
assets identified and valued.
Deferred tax
Deferred tax assets are recognised for unused tax losses to the extent that it
is probable that taxable profit will be available against which the losses can
be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits, together with future tax
planning strategies.
4. Non statutory measures
When reviewing performance, the Directors use alternative performance measures
in order to give meaningful year on year comparison. These alternative
performance measures are:
· EBITDA
· Adjusted Underlying EBITDA
· Adjusted Profit Before Tax
· Underlying operating expenses
· Revenue on a constant exchange rate basis
Whilst we recognise that the measures used are alternative (non-Generally
Accepted Accounting Principles) performance measures which are not defined
within IFRS, these measures are important and should be considered alongside
the IFRS measures. A reconciliation to these non-GAAP performance measures is
shown below:
2023 2022
£'000
£'000
Operating profit/(loss) 2,888 (1,186)
Add back: Amortisation 6,910 6,893
Add back: Depreciation 6,129 6,744
EBITDA 15,927 12,451
Add back: Share-based payment expense 972 1,398
Add back: Earnout on acquisition 1,140 1,544
Underlying EBITDA 18,039 15,393
Add back: Purchase Price Allocation ('PPA') release on inventory through cost - 132
of sales
Adjusted Underlying EBITDA 18,039 15,525
Less: Depreciation (6,129) (6,744)
Less: Interest (excluding amortisation of loan arrangement fees) (3,774) (2,201)
Adjusted Profit Before Tax 8,136 6,580
Less: Amortisation of loan arrangement fees (141) (786)
Less: Amortisation (6,910) (6,893)
Less: Share-based payment expense (972) (1,398)
Less: Earnout on acquisition (1,140) (1,544)
Less: Purchase Price Allocation ('PPA') release on inventory through cost of - (132)
sales
Less: Non-underlying costs (58) (1,466)
Add/(less): Exchange adjustment on borrowings 1,312 (2,044)
(Less)/add: Share of (loss)/profit of associate and joint venture (12) 19
Profit/(loss) before income tax 215 (7,664)
In addition, the Directors consider the revenue of the Group on a constant
exchange rate basis calculated using the average exchange rates in effect for
the corresponding comparative period.
5. Revenue
The revenue of the Group is attributable to the one principal activity of the
Group.
a) Geographical analysis
The Group's revenue by destination is split in the following geographic areas:
2023 2022
£'000
£'000
United Kingdom 24,132 21,238
Europe (excluding UK) 94,572 93,164
North America 69,305 69,678
South America 1,825 1,125
Asia 4,678 6,454
Africa 515 442
Australia 8,265 8,856
203,292 200,957
For the year ended 31 December 2023 the Group had one customer which accounted
for more than 10% of the Group's revenue (2022: None). The revenue generated
from this customer was £21,769,000. The revenue from this customer is
generated across both the Frames & Optics and Manufacturing (previously
Wholesale) reportable segments identified in note 6.
b) Right of return assets and liabilities
2023 2022
£'000
£'000
Right of return asset 1,415 1,596
Right of return liability (11,297) (10,613)
The right of return asset is presented as a component of inventory and the
right of return liability is presented separately on the face of the Statement
of Financial Position. The right of return liability is presented as a current
liability as the timing of its utilisation is dependent on customer returns
which varies from period to period and is outside of the Group's control.
6. Segment information
The Group operates in three operating segments, which upon application of the
aggregation criteria set out in IFRS 8 Operating Segments results in three
reporting segments:
· Frames and Optics product distribution
· Manufacturing (previously Wholesale) - being OEM and manufacturing
distribution
· Lenses - being manufacturing and distribution of lenses
The criteria applied to identify the operating segments are consistent with
the way the Group is managed. In particular, the disclosures are consistent
with the information regularly reviewed by the CEO and the CFO in their role
as Chief Operating Decision Makers, to make decisions about resources to be
allocated to the segments and to assess their performance.
The reportable segments subject to disclosure are consistent with the
organisational model adopted by the Group during the financial year ended 31
December 2023 and are as follows:
Frames Manufacturing (previously Wholesale) £'000 Lenses Total before adjustments & eliminations £'000 Adjustments & Total
and Optics
£'000
eliminations £'000
£'000
£'000
Revenue
External 178,968 20,169 4,155 203,292 - 203,292
Internal 4,681 1,848 316 6,845 (6,845) -
183,649 22,017 4,471 210,137 (6,845) 203,292
Cost of sales (92,871) (11,712) (2,509) (107,092) 7,347 (99,745)
Gross profit 90,778 10,305 1,962 103,045 502 103,547
Expenses (74,606) (5,013) (3,407) (83,026) (4,594) (87,620)
Depreciation (4,826) (698) (556) (6,080) (49) (6,129)
Amortisation (6,248) (643) (19) (6,910) - (6,910)
Operating profit/(loss) 5,098 3,951 (2,020) 7,029 (4,141) 2,888
Exchange adjustment on borrowings 1,312
Non-underlying costs (58)
Finance costs (4,155)
Finance income 240
Share of loss of associate and joint venture (12)
Taxation (1,212)
Loss for the year (997)
Frames Manufacturing (previously Wholesale) £'000 Lenses Total before adjustments & eliminations £'000 Adjustments & Total
and Optics
£'000
eliminations £'000
£'000
£'000
Total assets 320,836 64,585 9,672 395,093 (176,013) 219,080
Total liabilities (182,225) (5,543) (14,408) (202,176) 151,741 (50,435)
Deferred tax asset 2,826
Current tax liability (2,186)
Deferred tax liability (3,647)
Borrowings (62,121)
Group net assets 103,517
Other disclosures
Capital additions 1,980 3,592 178 5,750 - 5,750
The reportable segments subject to disclosure are consistent with the
organisational model adopted by the Group during the financial year ended 31
December 2022 and are as follows:
Frames Manufacturing (previously Wholesale) £'000 Lenses Total before adjustments & eliminations £'000 Adjustments & eliminations £'000 Total
and Optics
£'000
£'000
£'000
Restated
Revenue
External 173,539 23,907 3,511 200,957 - 200,957
Internal 5,180 4,080 176 9,436 (9,436) -
178,719 27,987 3,687 210,393 (9,436) 200,957
Cost of sales (92,040) (15,288) (2,830) (110,158) 8,061 (102,097)
Gross profit 86,679 12,699 857 100,235 (1,375) 98,860
Expenses (74,023) (5,035) (4,240) (83,298) (3,111) (86,409)
Depreciation (5,279) (802) (654) (6,735) (9) (6,744)
Amortisation (5,991) (882) (20) (6,893) - (6,893)
Operating profit/(loss) 1,386 5,980 (4,057) 3,309 (4,495) (1,186)
Exchange adjustment on borrowings (2,044)
Non-underlying costs (1,466)
Finance costs (3,095)
Finance income 108
Share of profit of associate and joint venture 19
Taxation 1,345
Loss for the year (6,319)
Total assets 327,596 70,197 10,470 408,263 (173,328) 234,935
Total liabilities (179,578) (12,523) (12,887) (204,988) 151,354 (53,634)
Deferred tax asset 1,835
Current tax liability (1,435)
Deferred tax liability (4,376)
Borrowings (69,784)
Group net assets 107,541
Other disclosures
Capital additions 2,286 452 762 3,500 - 3,500
Total assets are the Group's gross assets excluding deferred tax asset. Total
liabilities are the Group's gross liabilities excluding loans and borrowings,
current and deferred tax liabilities.
Non-underlying costs, as well as net finance costs and taxation are not
allocated to individual segments as they relate to Group-wide activities as
opposed to individual reporting segments.
Deferred tax and borrowings are not allocated to individual segments as they
are managed on a Group basis.
Adjusted items relate to elimination of all intra-group items including any
profit adjustments on intra-group sales that are eliminated on consolidation,
along with the profit and loss items of the Parent Company.
Adjusted items in relation to segmental assets and liabilities relate to the
elimination of all intra-group balances and investments in subsidiaries, and
assets and liabilities of the Parent Company.
Adjusted Underlying EBITDA by segment
2023 2022
£'000
£'000
Frames and Optics 17,620 14,772
Manufacturing (previously Wholesale) 5,581 8,135
Lenses (1,445) (3,382)
Adjustments and eliminations (3,717) (4,000)
18,039 15,525
Non-current operating assets
2023 2022
£'000
£'000
United Kingdom 7,376 8,117
Europe 79,302 91,211
North America 6,938 4,020
Asia 27,375 25,507
120,991 128,855
Non-current assets for this purpose consist of property, plant and equipment,
right-of-use assets, goodwill and intangible assets.
7. Employees and Directors
2023 2022
£'000
£'000
Wages and salaries 48,482 45,624
Social security costs 8,809 7,781
Pension costs 532 577
Share-based payment expense 972 1,398
58,795 55,380
The average number of employees during the year by operating segment was as
follows:
2023 2022
Frames and Optics 669 669
Manufacturing (previously Wholesale) 928 961
Lenses 76 102
1,673 1,732
Directors' remuneration during the year was as follows:
2023 2022
£'000
£'000
Directors' salaries 1,028 735
Directors' pension contributions 13 13
Share options - -
1,041 748
Information regarding the highest paid Director is as follows:
2023 2022
£'000
£'000
Salary 286 251
Pension contributions 5 6
Share options - -
Total remuneration 291 257
The number of Directors to whom employer pension contributions were made by
the Group during year is three (2022: three). This was in the form of a
defined contribution pension scheme.
8. Non-underlying costs
Non-underlying costs are those that in the Directors' view should be
separately disclosed by virtue of their size, nature or incidence to enable a
full understanding of the Group's financial performance in the year and
business trends over time. Non-underlying costs incurred during the year are
as follows:
2023 2022
£'000
£'000
Restructuring costs 58 413
Acquisition costs - 890
Other professional service costs - 163
58 1,466
Restructuring costs of £58,000 were incurred in the period in relation to the
integration of Inspecs USA with Tura. In the comparative period, £413,000
were incurred in the period in relation to the closure of International
Eyewear Limited and INSPECS Asia Limited. Acquisition costs of £890,000 were
incurred during the prior period relating to prospective acquisition targets.
Other professional service costs of £163,000 incurred in 2022 relate to
accounting transition and valuation following the acquisition of BoDe Design
GmbH and EGO Eyewear Limited in December 2021.
9. Finance costs and finance income
2023 2022
£'000
£'000
Finance costs
Bank loan interest 3,377 1,784
Invoice discounting interest and charges 136 76
Loan transaction costs 138 787
Lease interest 504 448
Total finance costs 4,155 3,095
Finance income
Interest receivable 240 108
10. Profit/(loss) before income tax
The profit/(loss) before income tax is stated after charging:
2023 2022
£'000
£'000
Cost of inventories recognised as expense 73,508 74,415
Short-term leases 434 393
Depreciation - owned assets 2,335 3,111
Depreciation - right-of-use assets 3,794 3,633
Amortisation - intangibles 6,910 6,893
2023 2022
£'000
£'000
Fees payable to the Company's auditor for audit services:
Audit of the Company and Group accounts 784 830
Audit of the subsidiaries 699 698
Total audit fees 1,483 1,528
Other assurance services 5 -
Total non-audit fees 5 -
Total auditor's remuneration 1,488 1,528
11. Income tax
Analysis of tax expense:
2023 2022
£'000
£'000
Current tax:
Current tax on profits for the year 88 -
Overseas current tax expense 2,979 1,964
Adjustment in respect of prior years (135) (820)
Total current tax 2,932 1,144
Deferred tax:
Deferred tax income relating to the origination and reversal of (1,555) (2,396)
timing differences
Effect of changes in tax rates (62) (87)
Adjustment in respect of prior years (103) (6)
Total deferred tax (1,720) (2,489)
Total tax charge/(credit) reported in the consolidated income statement 1,212 (1,345)
Factors affecting the tax charge/(credit)
The tax credit assessed for the year is lower than the standard rate of
corporation tax in the UK. The difference is explained below:
2023 2022
£'000
£'000
Profit/(loss) before income tax 215 (7,664)
Profit/(loss) multiplied by standard rate of corporation tax in the UK of 51 (1,456)
23.5% (2022: 19%)
Effects of:
Non-deductible expenses 202 946
Increase in provision for uncertain tax liabilities 12 123
Share-based payment 113 371
Different tax rate for overseas subsidiaries (208) (2,478)
Tax rate changes (58) (87)
Overseas tax charges 325 -
Amounts not recognised for deferred tax 603 2,007
Adjustments in respect of prior year 172 (771)
Tax charge/(credit) 1,212 (1,345)
Movements in other comprehensive income relating to foreign exchange on
consolidation are not taxable.
As a result of the increase in the UK corporation tax rate from 19% to 25%
from 1 April 2023, the standard rate of corporation tax in the UK for the year
ended 31 December 2023 is 23.5%
Pillar Two legislation has been enacted in certain jurisdictions in which the
Group operates. However, this legislation does not apply to the Group as its
consolidated revenue is lower than €750 million.
12. Earnings per share ('EPS')
Basic EPS is calculated by dividing the profit or loss for the year
attributable to ordinary equity holders of the Parent by the weighted average
number of Ordinary Shares outstanding during the year.
Diluted EPS is calculated by dividing the profit or loss attributable to
ordinary equity holders of the Parent by the weighted average number of
Ordinary Shares outstanding during the year plus the weighted average number
of Ordinary Shares that would be issued on conversion of all the dilutive
potential Ordinary Shares into Ordinary Shares, to the extent that the
inclusion of such shares is not anti-dilutive. A loss has been made in the
year to 31 December 2023 and the comparative period. In accordance with IAS
33, potential Ordinary Shares shall be treated as dilutive when, and only
when, their conversion to Ordinary Shares would decrease earnings per share or
increase loss per share from continuing operations. As a loss is made,
including the dilution of potential Ordinary Shares reduces the loss per share
and therefore the outstanding options should not be treated as dilutive when
calculating EPS.
Basic adjusted PBT per share figures are calculated by dividing adjusted PBT
for the year by the weighted average number of Ordinary Shares outstanding
during the year. Diluted adjusted PBT per share figures are calculated by
dividing adjusted PBT for the year by the weighted average number of Ordinary
Shares plus the weighted average number of Ordinary Shares that would be
issued on the conversion of all dilutive potential Ordinary Shares into
Ordinary Shares. A reconciliation to adjusted PBT can be found in note 4.
The following table reflects the income and share data used in the basic and
diluted EPS calculations:
Year ended 31 December 2023 Basic weighted Total (Loss)/earnings per share (pence)
average number (loss)/earnings (£'000)
of Ordinary
Shares ('000)
Basic loss per share 101,672 (997) (0.98)
Diluted loss per share 101,672 (997) (0.98)
Basic adjusted PBT per share 101,672 8,136 8.00
Diluted adjusted PBT per share 107,246 8,136 7.59
Year ended 31 December 2022 Basic Total (Loss)/
earnings per share (pence)
weighted (loss)/earnings
average number (£'000)
of Ordinary
Shares ('000)
Basic loss per share 101,672 (6,319) (6.21)
Diluted loss per share 101,672 (6,319) (6.21)
Basic adjusted PBT per share 101,672 6,580 6.47
Diluted adjusted PBT per share 107,554 6,580 6.12
13. Analysis of cash flows given in the statement of cash flows
A reconciliation of profit for the year to cash generated from operations is
shown below:
2023 2022
£'000
£'000
Profit/(loss) before income tax 215 (7,664)
Adjustments for:
Depreciation 6,129 6,744
Amortisation 6,910 6,893
Share of loss/(profit) of associate and joint venture 12 (19)
Share-based payment 972 1,398
Earnout on acquisitions - 1,544
Exchange adjustment on borrowings (1,312) 2,044
Cases valuation adjustment against goodwill - 628
Loss on disposal of non-current assets - 105
Finance costs 4,155 3,095
Finance income (240) (108)
Changes in working capital
Decrease/(increase) in inventories 7,310 (6,959)
(Increase)/decrease in trade and other receivables (4,711) 97
(Decrease)/increase in trade and other payables (2,526) 2,090
Cash flows from operating activities 16,914 9,888
14. Deferred and contingent consideration
Deferred and contingent considerations payable relate to the acquisitions of
BoDe Design GmbH and EGO Eyewear Limited. The split of the deferred and
contingent consideration between each entity is as follows:
2023 2022
£'000
£'000
EGO Eyewear Limited 652 1,350
Total non-current deferred consideration 652 1,350
2023 2022
£'000
£'000
EGO Eyewear Limited 700 675
Total current deferred consideration 700 675
BoDe Design GmbH 467 566
EGO Eyewear Limited 944 1,277
Total current contingent consideration 1,411 1,843
Total current deferred and contingent consideration 2,111 2,518
The previous owners of BoDe design and EGO eyewear are entitled to earnout
payments based on the performance of each entity to 31 December 2025. A charge
has been recognised in the Income Statement of £1,140,000 (2022: £1,544,000)
in relation to the earnout payable as a result of performance for the year to
31 December 2023.
15. Reserves
Share premium
This reserve records the amount above the nominal value of the sums received
for shares issued, less transaction costs.
2023 2022
£'000
£'000
At 1 January and 31 December 89,508 89,508
Foreign currency translation reserve
This reserve records the foreign currency translation adjustments on
consolidation. Effective from 1 January 2023, the presentational currency for
the Consolidated Financial Statements was changed from USD to GBP. This has
led to a change in the foreign currency translation reserve, which when
previously presented in USD included foreign currency translation adjustments
arising on the translation from the functional currency to the presentational
currency.
2023 2022
£'000
£'000
At 1 January 9,434 3,206
Other comprehensive income (3,999) 6,228
At 31 December 5,435 9,434
Share option reserve
The share option reserve is used to recognise the value of equity-settled
share-based payments provided to employees, including key management
personnel, as part of their remuneration.
2023 2022
£'000
£'000
At 1 January 2,703 1,454
Share-based payment charge 972 1,398
Share options forfeited (453) -
Share options cancelled - (149)
At 31 December 3,222 2,703
The share-based payment charge for the year is recognised against the reserve
as per IFRS 2 Share-Based Payments. 695,000 share options have been forfeited
during the period as a result of employees leaving before the option vesting
date. Upon forfeiture of share options, the related share option reserve is
recycled into retained earnings, resulting in the movement of £453,000 from
the share option reserve to retained earnings. During 2022, 150,000 share
options were cancelled. Upon cancellation of share options, the remaining
element of fair value of the option is expensed immediately through the income
statement. The related share option reserve is then recycled into retained
earnings, resulting in the movement of £149,000 from the share option reserve
to retained earnings in 2022.
Merger reserve
This reserve arose on the share for share exchange between INSPECS Holdings
Limited and INSPECS Group plc on 10 January 2020.
2023 2022
£'000
£'000
At 1 January and 31 December 5,340 5,340
Retained earnings
2023 2022
£'000
£'000
At 1 January (461) 6,931
Loss for the year (997) (6,319)
Share options forfeited 453 -
Share options cancelled - 149
Cash dividends - (1,222)
At 31 December (1,005) (461)
During the prior period, the final dividend in relation to the year ended 2021
was paid, amounting to 1.25 pence per share.
16. Financial liabilities - borrowings
2023 2022
£'000
£'000
Current:
Invoice discounting 887 1,490
Bank loans 9,650 48,112
Lease liabilities 3,350 3,634
13,000 51,746
2023 2022
£'000
£'000
Non-current:
Bank loans 33,733 186
Lease liabilities 14,501 16,362
48,234 16,548
At the balance sheet date, the available invoice discounting facility was
£2,113,000 (2022: £1,510,000). The invoice discounting facility bears
interest at 2.25% over base rate (2022: 2.25%). The invoice discounting
facility is secured by way of fixed and floating charges over the trade
receivables of INSPECS Limited. The facility has no fixed end date, with a
notice period of three months.
As at 31st December 2022, it was determined the Group was in technical breach
of its cashflow cover loan covenant, which resulted in the re-classification
of the loan balance (£37.8m) to a current liability in line with IAS 1.
Subsequently, HSBC waived the cashflow cover and leverage covenants at
31 December 2022. There is no such technical breach as of 31 December 2023.
On 27 October 2021, the Group entered a new multi-currency term loan with HSBC
for $18,700,000. Repayments under this loan are £750,000 per quarter plus
interest, with the liability standing at $9,491,000 as at 31 December 2023.
Interest is payable at the applicable Margin Rate plus LIBOR calculated daily
on a 360-day year basis. The Margin Rate is 1.90%, 2.15% or 2.40% dependent
upon the Group's leverage ratio. The loan matures in October 2025, having been
extended for a further 12 months during the period.
The Group also holds a multi-currency revolving credit facility loan amounting
to £29,250,000 as at 31 December 2023. Interest is payable at
LIBOR/EURIBOR/SONIA (depending on the currency in which funds are drawn down)
plus 2.4% calculated daily on a 360-day year basis. The credit facility
matures in October 2025, with this facility also having been extended for a
further 12 months during the period.
A further loan is held amounting to $8,203,000 as at 31 December 2023, on
which no capital repayments are required until maturity of the loan. This loan
holds an interest rate of LIBOR plus 2.25%.
Remaining loans in the Group are at a fixed interest rate of 2.0% and are
repayable in between one and five years. The Group's bank loans and overdrafts
are secured against the business assets of the Group. The Group's lease
liabilities are secured against the assets concerned.
17. Prior year adjustment - Deferred tax
Under IAS 12, deferred tax assets and liabilities should be offset if criteria
relating to their legal right and intention to settle net are met. In prior
years, deferred tax balances arising on the acquisition of subsidiaries have
been presented gross, and not net against deferred tax assets within the
jurisdictions to which they relate. It is considered that the criteria to
offset these assets and liabilities under IAS 12 are met, and therefore a
prior year adjustment has been made. The effect of this adjustment as at 31
December 2022 is to reduce deferred tax assets by £5,172,000 and reduce
deferred tax liabilities by £5,172,000. The effect of this adjustment as at
31 December 2021 is to reduce deferred tax assets by £7,240,000 and reduce
deferred tax liabilities by £7,240,000.
The reconciliation of the restated Statement of Financial Position as at 31
December 2022 is shown below:
31 December 2022 £'000 Prior year adjustment 31 December 2022
£'000 £'000
Restated
ASSETS
Non-current assets
Goodwill 55,578 - 55,578
Intangible assets 36,170 - 36,170
Property, plant and equipment 17,424 - 17,424
Right-of-use assets 19,683 - 19,683
Investments in associate and joint venture 112 - 112
Deferred tax assets 7,007 (5,172) 1,835
135,974 (5,172) 130,802
Current assets
Inventories 48,158 - 48,158
Trade and other receivables 31,144 - 31,144
Tax receivables 3,681 - 3,681
Cash and cash equivalents 22,153 - 22,153
105,136 - 105,136
Assets held for sale 832 - 832
Total assets 241,942 (5,172) 236,770
EQUITY
Shareholders' equity
Called up share capital 1,017 - 1,017
Share premium 89,508 - 89,508
Foreign currency translation reserve 9,434 - 9,434
Share option reserve 2,703 - 2,703
Merger reserve 5,340 - 5,340
Retained earnings (461) - (461)
Total equity 107,541 - 107,541
LIABILITIES
Non-current liabilities
Financial liabilities - borrowings
Interest-bearing loans and borrowings 16,548 - 16,548
Deferred consideration 1,350 - 1,350
Deferred tax liabilities 9,548 (5,172) 4,376
27,446 (5,172) 22,274
Current liabilities
Trade and other payables 39,153 - 39,153
Right of return liabilities 10,613 - 10,613
Financial liabilities - borrowings
Interest-bearing loans and borrowings 51,746 - 51,746
Invoice discounting 1,490 - 1,490
Deferred and contingent consideration 2,518 - 2,518
Tax payable 1,435 - 1,435
106,955 - 106,955
Total liabilities 134,401 (5,172) 129,229
Total equity and liabilities 241,942 (5,172) 236,770
The reconciliation of the restated Statement of Financial Position as at 31
December 2021 is shown below:
2021 Prior year adjustment 2021
£'000
£'000
£'000
Restated
ASSETS
Non-current assets
Goodwill 56,206 - 56,206
Intangible assets 40,298 - 40,298
Property, plant and equipment 18,182 - 18,182
Right-of-use assets 16,482 - 16,482
Investments in associate and joint venture 36 - 36
Deferred tax assets 9,281 (7,240) 2,041
140,485 (7,240) 133,245
Current assets
Inventories 41,199 - 41,199
Trade and other receivables 31,242 - 31,242
Tax receivables 2,566 - 2,566
Cash and cash equivalents 22,024 - 22,024
97,031 - 97,031
Assets held for sale - - -
Total assets 237,516 (7,240) 230,276
EQUITY
Shareholders' equity
Called up share capital 1,017 - 1,017
Share premium 89,508 - 89,508
Foreign currency translation reserve 3,206 - 3,206
Share option reserve 1,454 - 1,454
Merger reserve 5,340 - 5,340
Retained earnings 6,931 - 6,931
Total equity 107,456 - 107,456
LIABILITIES
Non-current liabilities
Financial liabilities - borrowings
Interest-bearing loans and borrowings 51,210 - 51,210
Deferred consideration 2,300 - 2,300
Deferred tax liabilities 15,184 (7,240) 7,944
68,694 (7,240) 61,454
Current liabilities
Trade and other payables 39,459 - 39,459
Right of return liabilities 8,215 - 8,215
Financial liabilities - borrowings
Interest-bearing loans and borrowings 9,835 - 9,835
Invoice discounting 1,800 - 1,800
Tax payable 2,057 - 2,057
61,366 61,366
Total liabilities 130,060 (7,240) 122,820
Total equity and liabilities 237,516 (7,240) 230,276
18. Post balance sheet events
On 22 January 2024, the Group acquired the entire share capital of A-Optikk
AS, a distributor based in Norway, for a nominal fee. The fair value of assets
and liabilities acquired, along with associated acquisition costs are not
deemed to be material to the Group as a whole.
Since the balance sheet date, but before this financial information was
approved, there were no further events that the Directors consider material to
the users of this financial information.
The financial information previously set out does not constitute the Group's
statutory financial statements for the years ended 31 December 2023 or 2022
but is derived from those financial statements. Statutory financial statements
for 2022 have been delivered to the registrar of
companies, and those for 2023 will be delivered in due course. The auditors
have reported on those accounts; their report was:
i. unqualified;
ii. did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their report; and
iii. did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
Cautionary Statement
This announcement contains forward looking statements which are made in good
faith based on the information available at the time of its approval. It is
believed that the expectations reflected in these statements are reasonable,
but they may be affected by a number of risks and uncertainties that are
inherent in any forward-looking statement which could cause actual results to
differ materially from those currently anticipated. Nothing in this document
should be regarded as a profits forecast.
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