REG - Inspecs Group PLC - Interim Results
18/08/2022 07:00
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RNS Number : 3939W Inspecs Group PLC 18 August 2022
18 August 2022
INSPECS Group plc
("INSPECS", "the Company" or "the Group")
Interim Results
INSPECS Group plc, a global eyewear and lens design house and manufacturer,
presents its unaudited interim results for the six months ended 30 June
2022.
Financial highlights:
· Revenue increased to $138.4m (H1 2021: $125.7m)
· Revenue increased to $145.5m (H1 2021: $125.7m), an increase of
15.8% at constant exchange rates (1)
· Operating profit increased to $5.8m (H1 2021: $2.5m (2))
· Gross profit margin 50.5% (H1 2021: 44.2% (2), underlying 49.1%
(3))
· Underlying EBITDA $15.1m (H1 2021: $16.8m (2))
· Underlying basic Earnings Per Share (EPS) of $0.15 (H1 2021:
$0.17), with underlying diluted EPS of $0.14 (H1 2020: $0.16)
· Reported profit before tax of $0.8m (H1 2021: $3.5m loss (2))
· Reported loss after tax of $2.8m (H1 2021: $3.8m (2))
· Reported basic EPS of $(0.03) (H1 2021: $(0.04)), with diluted
EPS of $(0.03) (H1 2021: $(0.04))
· Strong balance sheet with cash at 30 June 2022 of $30.6m (30 June
2021: $33.8m)
· Cash generated from operations $10.1m (H1 2021: $18.8m)
· Net debt excluding leasing $26.2m (31 December 2021: $32.8m)
Operational highlights:
· Norville new factory now fully operational and 'Labpack'
distribution of complete frame and lens packages underway
· Planning permission and building design complete and approved on
new factory in Vietnam
· Location for new Portugal factory sourced and building designed
· O'Neill, Superdry and Botaniq ranges now distributed by Group
entities in the USA and Europe
· First delivery of lenses for Amazon's own eyewear division in Q2
of 2022
· Group companies working together to ensure enhanced distribution
rates for our products
· Rationalisation of Hong Kong offices now complete
· The Group has completed the registration of its products as
medical devices with the Medicines and Healthcare Regulatory Agency (MHRA),
the European Database on Medical Devices (EUDAMED) and the Food and Drug
Administration (FDA) in the USA
1 Constant currency exchange rates: figures at constant
currency exchange rates have been calculated using the average exchange rates
in effect for the corresponding period in the relevant comparative period (H1
2021).
2 The six-month period to 30 June 2021 has been restated
following retrospective adjustments (note 11).
3 Underlying gross profit margin for H1 2021 excludes $6.1m
purchase price allocation adjustment relating to inventory valuation following
the acquisition of Eschenbach on 16 December 2020.
Robin Totterman, CEO of INSPECS, said:
"I am pleased to report an underlying EBITDA of $15.1m for the six months to
30 June 2022 (H1 2021: $16.8m). The Group EBITDA increased by $4.3m from
$10.0m in H1 2021 to $14.3m in H1 2022. Our operating profit increased by
$3.4m from $2.5m in H1 2021 to $5.8m in H1 2022.
The Group has made good progress against our strategic objectives during the
period, specifically with the ongoing integration of the Group's businesses
and increasing our distribution reach around the globe.
Our European business performed ahead of internal budget for the first half,
however, our reported results were affected by a rapid decline in the Euro
against the US Dollar in Q2, which is the current reporting currency of the
Group. Given the evolution in Group global earnings since our IPO, the Board
will review the reporting currency with our advisors in 2023. Our Norville
factory relocation incurred additional downtime and costs but is now fully
operational and increasing production.
Later this year we expect to start construction of our new factory in Portugal
and increase our Vietnam production capacity through expansion, which will
satisfy the increased demand from key accounts. Production is expected to
begin towards the end of 2023, with distribution in Q1 of 2024.
Our Group order books are ahead as of 30 June 2022 compared to 30 June 2021,
and we enter the second half of the year in a good position. Whilst we remain
cautious of the overall economic outlook for the UK and European market, we
remain focused on executing a number of strategic priorities that will
increase production, enabling us to bring innovative new products to market
and continue to deliver shareholder value."
For further information please contact:
INSPECS Group plc via FTI Consulting
Robin Totterman (CEO) Tel: +44 (0) 20 3727 1000
Chris Kay (CFO)
Peel Hunt (Nominated Adviser and Broker) Tel: +44 (0) 20 7418 8900
Adrian Trimmings
Andrew Clark
Lalit Bose
FTI Consulting (Financial PR) Tel: +44 (0) 20 3727 1000
Alex Beagley INSPECS@fticonsulting.com (mailto:inspecs@fticonsulting.com)
Harriet Jackson
Alice Newlyn
This announcement contains inside information for the purposes of the Market
Abuse Regulation (Regulation (EU) No 596/2014) including as it forms part of
domestic law in the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018. The person responsible for arranging release of this
announcement on behalf of Inspecs is Chris Kay, Chief Financial Officer.
About INSPECS Group plc
INSPECS is a Bath-based designer, manufacturer and distributor of eyewear
frames and optically advanced spectacle lenses. The Group produces a broad
range of frames and lenses, covering optical, sunglasses and safety, which are
either "Branded" (either under licence or under the Group's own proprietary
brands), or "OEM" (including private label on behalf of retail customers as
well as unbranded).
INSPECS aims to be the leader in eyewear solutions through its
vertically-integrated business model and has adopted a three-pillar growth
strategy to achieve this: (i) continue to grow organically; (ii) undertake
further acquisitions (and drive value through leveraging the Group's internal
capabilities); and (iii) extend the Group's manufacturing capacity.
The Group has completed several significant acquisitions since its IPO in
February 2020. In December 2020, INSPECS acquired Eschenbach, a leading global
eyewear supplier, headquartered in Nuremberg, Germany, which includes the
American company Tura. This followed the acquisition of lens maker Norville in
July 2020, whereby INSPECS combined two British heritage brands, Savile Row
frame maker, and Norville lens maker, further enhancing its
vertically-integrated business model. In December 2021 the Group acquired Ego
Eyewear, a design and licensing company which uses third party eyewear
manufacturers to produce premium fashion brands, and BoDe, a distributor of
optical frames and sunglasses principally to the German and neighbouring
markets.
INSPECS customers include global optical and non-optical retailers, global
distributors and independent opticians, with its distribution network covering
over 80 countries and reaching approximately 75,000 points of sale.
INSPECS 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. With the acquisition of Eschenbach, the Group's international reach
further extends across Europe and the American markets.
More information is available at: https://inspecs.com (https://inspecs.com)
CHIEF EXECUTIVE REVIEW
I am pleased to present our results for the six months ended 30 June 2022. The
Group has performed well during the period, achieving sales of $138.4m (H1
2021: $125.7m) an increase of $12.7m or 10.1%. The Group made an underlying
EBITDA of $15.1m compared to an adjusted $16.8m for the same period in 2021.
On a constant exchange basis(1), the Group revenues rose from $125.7m to
$145.5m, an increase of $19.8m or 15.8%.
Two factors led to the Group not exceeding H1 2021 performance at the
underlying EBITDA level. Firstly, our lens manufacturing site took longer than
expected to reach optimal production following the move and as a result, we
were not able to engage fully with our optical customers as delays were caused
by infrastructure issues and the recalibration of machinery following the
move. We are now starting to see steady progress at Norville and expect it to
contribute to the Group profits in 2023.
Secondly, whilst our European business performed ahead of internal budget for
the first half, our reported results were affected by a rapid decline in the
Euro against the US Dollar. The Euro: US Dollar rate was 1.14 at the start of
the year with a relatively small movement in Q1 closing at 1.11 to the Dollar.
In Q2 the US Dollar sharply appreciated against the Euro, moving to parity in
the quarter and closing in June 2022 at rate of 1.04. Our reporting currency
at present is US Dollar and as such our European business and profits reflect
this movement in currency. Given the evolution in Group global earnings since
our IPO, the Board will review the reporting currency with its advisors and
will assess the effect on our reporting in 2023.
In Vietnam, I am pleased to report that plans for our new factory have been
submitted and we expect construction to commence later this year, with
production expected to begin towards the end of 2023, with distribution in Q1
of 2024.
We have also reached agreement on the new production facility in Portugal
based in Setubal near our Lisbon office. Construction is expected to start
later this year and I expect the factory will go into production at the end of
2023.
Our Italian small scale rolled gold eyewear facility will commence shipments
of the premium product in Q4 of this year.
In Europe we have seen a solid market in Q2 rather than the rapid growth we
saw in Q1 of 2021. I remain cautious of the overall economic outlook for the
European market with continual issues arising from the Ukrainian situation and
the global inflation currently prevalent in the marketplace.
We are seeing a similar picture in the USA but Tura continues to win market
share.
In the UK, the business environment is similar to those we are experiencing in
Europe but again our team is continuing to win market share and our design
teams are working hard to ensure our products are on message.
Our team at Skunk Works has been expanded in H1 with two additional employees.
We are now starting to see the first commercial benefits of our investment
with orders starting to flow from Amazon and we continue to work with Bosch
Sensonics on the further development of smart eyewear.
We also continue our work on the development of biodegradable eyewear and
packaging to reduce the environmental effect of eyewear. Our recyclable and
sustainable products are now in the marketplace, and there has been a good
reaction from the market for these products.
We are complementing our finance team with the recruitment of key additional
employees to provide greater bandwidth across the Group.
Overall, this was a good H1 despite adverse foreign exchange movements and a
delay in achieving optimal production levels following the Norville factory
move. Our order books continue to grow and are ahead at 30 June 2022 compared
to 30 June 2021, and the Group is working hard on delivering sustained,
profitable growth for all our stakeholders.
I would like to thank all our employees on what has been a busy six months and
look forward to the second half of 2022 and the medium term with confidence.
Robin Totterman
18 August 2022
FINANCIAL REVIEW
Revenue
Revenue increased to $138.4m from $125.7m in H1 FY21, an increase of 10.1%.
This was driven by the continuing integration of Eschenbach and volume growth
across the diversity of markets that we now operate in. On a constant exchange
rate(1) revenues rose from $125.7m (H1 2021) to $145.5m, an increase of $19.8m
or 15.8%.
Underlying Gross Margin
The Group's underlying gross margin increased from 49.1% to 50.5%. The Group
continues to actively manage its gross profit margin despite cost inflation.
Operating Profit
The Group operating profit increased 132% to $5.8m (H1 2021: $2.5m).
Underlying EBITDA
The Group underlying EBITDA decreased from $16.8m in H1 2021 to $15.1m in H1
2022.
Finance Expenses
Our net finance costs increased from $1.1m to $1.8m reflecting the rise in
interest rates and drawdown in late 2021 of the RCF facility to fund the
acquisitions of EGO Eyewear and BoDe Design. Net finance costs include $0.5m
(H1 2021: $0.2m) relating to the amortisation of capitalised loan arrangement
fees.
Depreciation and amortisation
The increase in depreciation and amortisation is driven by the expansion and
the assets owned by the Group.
Period ended 30 June 2022 Period ended 30 June 2021
Depreciation 3.9m 4.1m
Amortisation 4.5m 3.5m
Total 8.4m 7.6m
Profit/(Loss) Before Tax
Profit before tax for the period of $0.8m is after charging $1.2m of
non-underlying costs and a foreign exchange loss on borrowings of $2.1m, being
a non-cash item.
Cash Generation
The Group generated a net cash inflow from operating activities of $10.1m in
H1 2022 compared to S18.8m (H1 2021).
Cash Position
The Group's cash at 30 June 2022 was $30.6m compared to $33.8m at 30 June
2021.
Net Debt
The Group's net debt excluding leasing has decreased from $32.8m at 31
December 2021 to $26.2m as at 30 June 2022.
Leverage
The Group's leverage including leasing reduced by 5% from 1.9 at 31 December
2021 to 1.8 at 30 June 2022.
The Group's leasing increased in the first half due to a new lease on the
offices in New York and the renewal of new leases for motor vehicles for the
Group's sales staff. This increased our leasing liability under IFRS 16 from
$22.4m as at 31 December 2021 to $24.5m as at 30 June 2022. Despite this, net
debt including leasing reduced by $4.4m over the last 6 months.
Inventory
Our sales to inventory ratio has remained flat compared to 30 June 2021.
Period ended 30 June 2022 Period ended 30 June 2021
Turnover 138.4m 125.7m
Inventory 51.5m 46.1m
Sales to inventory ratio 2.7 2.7
Current asset ratio
The current ratio is a liquidity ratio that measures a company's ability to
pay short-term obligations, or those due within one year.
The Groups current asset ratio has decreased from 1.8 to 1.6 which reflects
the additional borrowing taken out to acquire EGO Eyewear and BoDe Designs in
late 2021.
Period ended 30 June 2022 Period ended 30 June 2021
Current Assets 125.6m 117.8m
Current Liabilities 79.0m 66.0m
Ratio 1.6 1.8
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.
The quick ratio has decreased in line with the current asset ratio, as they
are driven by the same factor of additional borrowing to fund the acquisitions
at the end of 2021.
Period ended 30 June 2022 Period ended 30 June 2021
Current Assets 125.6m 117.8m
Less Inventory (51.5)m (46.1)m
74.1 71.7
Current Liabilities 79.0m 66.0m
Ratio 0.9 1.1
Earnings per Share
The Group's underlying basic earnings per share of the 6 months to 30 June
2022 was $0.15 compared to $0.17 for the 6 months to 30 June 2021.
Underlying EBITDA
The below table shows how Underlying EBITDA is calculated:
6 months ended 30 June 2022 6 months ended 30 June 2021 restated 12 months ended 31 December 2021
$'000 $'000 $'000
Revenue 138,359 125,746 246,471
Gross Profit 69,825 55,615 115,771
Operating expenses (64,002) (53,157) (114,230)
Operating profit 5,823 2,458 1,541
Add back: Amortisation and impairment on intangible assets 11,020
4,548 3,451
Add back: Depreciation 3,895 4,131 7,430
EBITDA 14,266 10,040 19,991
Add back: Share based payment expense 1,484
842 680
Add back: Purchase price allocation (PPA) adjustment on Eschenbach inventory 5,991
- 6,104
Add back: Underlying EBITDA (loss) for acquisitions in the period 90
- -
Underlying EBITDA 15,108 16,824 27,556
Underlying Earnings per Share
$ $ $
Basic underlying Earnings per Share for the period attributable to the equity
holders of the parent
0.15 0.17 0.27
0.26
Diluted underlying Earnings per Share for the period attributable to the
equity holders of the parent
0.14 0.16
Underlying EBITDA segmental information
Underlying EBITDA by reportable segment (as defined in note 4) for the six
months ended 30 June 2022 is as follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
$'000 $'000 $'000 $'000 $'000 $'000
Revenue 126,806 16,200 2,424 145,430 (7,071) 138,359
Operating profit/(loss) 6,496 3,017 (2,845) 6,668 (845) 5,823
Add back:
Amortisation 3,978 570 - 4,548 - 4,548
Depreciation 2,895 561 439 3,895 - 3,895
Share based payments 584 258 - 842 - 842
Underlying EBITDA 13,953 4,406 (2,406) 15,953 (845) 15,108
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2022
Notes Unaudited Unaudited restated
6 months ended 6 months ended
30 June 2022
30 June 2021
$'000 $'000
REVENUE 4 138,359 125,746
Cost of sales (68,534) (70,131)
GROSS PROFIT 69,825 55,615
Distribution costs (3,568) (1,774)
Administrative expenses (60,434) (51,383)
OPERATING PROFIT 5,823 2,458
Non-underlying costs 9 (1,202) (1,248)
Exchange adjustments on borrowings (2,093) (3,619)
Share of profits of associates (1) -
Finance costs (1,809) (1,123)
Finance income 51 19
PROFIT/(LOSS) BEFORE INCOME TAX 769 (3,513)
Income tax (3,547) (324)
LOSS FOR THE PERIOD (2,778) (3,837)
OTHER COMPREHENSIVE INCOME:
Exchange adjustment on consolidation (9,312) 3,963
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD (12,090) 126
Earnings per share
Basic EPS for the period attributable 5 (0.03) (0.04)
to the equity holders of the parent
5 (0.03) (0.04)
Diluted EPS for the period attributable
to the equity holders of the parent
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2022
Notes
Unaudited
6 months ended
30 June 2022
Unaudited restated
6 months ended
30 June 2021
$'000
$'000
REVENUE
4
138,359
125,746
Cost of sales
(68,534)
(70,131)
GROSS PROFIT
69,825
55,615
Distribution costs
(3,568)
(1,774)
Administrative expenses
(60,434)
(51,383)
OPERATING PROFIT
5,823
2,458
Non-underlying costs
9
(1,202)
(1,248)
Exchange adjustments on borrowings
(2,093)
(3,619)
Share of profits of associates
(1)
-
Finance costs
(1,809)
(1,123)
Finance income
51
19
PROFIT/(LOSS) BEFORE INCOME TAX
769
(3,513)
Income tax
(3,547)
(324)
LOSS FOR THE PERIOD
(2,778)
(3,837)
OTHER COMPREHENSIVE INCOME:
Exchange adjustment on consolidation
(9,312)
3,963
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD
(12,090)
126
Earnings per share
Basic EPS for the period attributable
to the equity holders of the parent
5
(0.03)
(0.04)
Diluted EPS for the period attributable
to the equity holders of the parent
5
(0.03)
(0.04)
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
Note Unaudited Unaudited restated Audited
As at As at As at
30 June 2022
30 June 2021 31 December 2021
$'000 $'000 $'000
ASSETS
NON-CURRENT ASSETS
Goodwill 73,139 73,631 81,359
Intangible assets 46,793 50,738 54,454
Property Plant and equipment 46,885 42,620 46,838
Investment in associates 111 57 48
Deferred tax 9,936 12,352 12,540
176,864 179,398 195,239
CURRENT ASSETS
Inventories 51,534 46,058 55,664
Trade and other receivables 6 41,946 37,689 42,229
Tax receivable 1,497 246 3,468
Cash and cash equivalents 30,585 33,834 29,759
125,562 117,827 131,120
TOTAL ASSETS 302,426 297,225 326,359
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 1,389 1,384 1,389
Share premium 122,291 121,940 122,291
Foreign currency translation reserve (6,494) 3,874 2,818
Share option reserve 2,843 1,547 2,001
Merger reserve 7,296 7,296 7,296
Retained earnings 6,651 10,592 9,429
133,976 146,633 145,224
TOTAL EQUITY
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings 8 64,511 63,191 69,194
Contingent and deferred consideration 7,680 - 8,505
Deferred tax 17,267 21,406 20,517
89,458 84,597 98,216
CURRENT LIABILITIES
Trade and other payables 7 48,798 38,549 53,317
Right of return liability 10,793 12,331 11,100
Financial liabilities - borrowings
Interest bearing loans and borrowings 8 15,966 10,191 13,289
Invoice discounting 8 860 - 2,433
Tax payable 2,575 4,924 2,780
78,992 65,995 82,919
TOTAL LIABILITIES 168,450 150,592 181,135
TOTAL EQUITY AND LIABILITIES 302,426 297,225 326,359
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2022
Called up share capital Share premium Foreign currency translation reserve Share option reserve Retained earnings Merger reserve Total equity
$000 $000 $000 $000 $000 $000 $000
SIX MONTHS ENDED 30 JUNE 2022
Balance at 1 January 2022 1,389 122,291 2,818 2,001 9,429 7,296 145,224
Loss for the period - - - - (2,778) - (2,778)
Other comprehensive loss - - (9,312) - - - (9,312)
Total comprehensive loss - - (9,312) - (2,778) - (12,090)
Share-based payments - - - 842 - - 842
Balance at 30 June 2022 (unaudited) 1,389 122,291 (6,494) 2,843 6,651 7,296 133,976
SIX MONTHS ENDED 30 JUNE 2021
Balance at 1 January 2021 (restated) 1,384 121,940 (89) 867 14,429 7,296 145,827
Loss for the period - - - - (3,837) - (3,837)
Other comprehensive income - - 3,963 - - - 3,963
Total comprehensive loss - - 3,963 - (3,837) - 126
Share-based payments - - - 680 - - 680
Balance at 30 June 2021 (unaudited) 1,384 121,940 3,874 1,547 10,592 7,296 146,633
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW
For the period ended 30 June 2022
Unaudited Unaudited restated
6 months ended 6 months ended
30 June 2022 30 June 2021
$000 $000
Cash flows from operating activities
Profit/(loss) before income tax 769 (3,513)
Depreciation charges 3,895 4,131
Amortisation charges 4,548 3,451
Share based payments 842 680
Exchange adjustments on borrowings 2,093 3,619
Loss from associate 1 -
Finance costs 1,809 1,123
Finance income (51) (19)
13,906 9,472
(Increase)/decrease in inventories (1,462) 10,128
(Increase)/decrease in trade and other receivables (3,997) 4,017
Increase/(decrease) in trade and other payables 1,682 (4,862)
Cash generated from operations 10,129 18,755
Interest paid (1,786) (1,115)
Tax paid (3,492) -
Net cash flow from operating activities 4,851 17,640
Cash flows (used in)/from investing activities
Purchase of intangible fixed assets (77) (86)
Purchase of property plant and equipment (1,330) (2,697)
Interest received 51 19
Net cash flows (used in)/from investing
activities (1,356) (2,764)
Cash flow from financing activities
Bank loan principal repayments in period (2,909) (3,102)
Principal payments on leases (2,043) (1,920)
New loans in the period 2,127 -
Net cash flows used in financing
activities (2,825) (5,022)
Net increase in cash and cash
equivalents 670 9,854
Cash and cash equivalents at 29,759 23,776
beginning of the period
Net foreign currency movements 156 204
Cash and cash equivalents 30,585 33,834
at end of period
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS
For the period ended 30 June 2022
1. GENERAL INFORMATION
INSPECS Group plc is a public company limited by shares and is incorporated in
England and Wales. The address of the Company's principal place of business is
Kelso Place, Upper Bristol Road, Bath BA1 3AU.
The principal activity of the Group in the period was that of design,
production, sale, marketing and distribution of high fashion eyewear and OEM
products worldwide.
2. ACCOUNTING POLICIES
Going concern
Based on the Group's forecasts considered in the light of the COVID-19
situation and current economic climate the Directors have adopted the going
concern basis in preparing the interim financial statements.
The assessment has considered the Group's current financial position as
follows:
• The Group improved its cash position during the period with net
debt including leasing dropping from $(55.2)m at 31 December 2021 to $(50.8)m
at 30 June 2022.
• Cash generated from operations in the period amounted to $10.1m
(2021 H1: $18.8m).
• The Group has a strong balance sheet, with net assets of $134.0m
and net current assets of $46.6m.
The assessment has considered the current measures being put in place by the
Group to preserve cash and ensure continuity of operations through:
• Ensuring continuation of its supply chain buildings on the
benefit of having its own manufacturing sites and by securing alternative
third-party supply lines.
• Maintaining geographical sales diversification, focusing sales
to online customers and seeking new revenue streams around the globe.
• Ability to service both the major global retail chains and
significant distribution to the independent eyewear market following the
acquisitions completed over the last two years.
Basis of preparation
The interim consolidated financial statements for the six months ended 30 June
2022 have been prepared in accordance with IAS 34 Interim Financial Reporting
and with accounting policies that are consistent with the Group's Annual
Report and Financial Statements for the period ended 31 December 2021.
The comparative financial information for the period ended 30 June 2021 in
this interim report does not constitute statutory accounts for that period
under 434 of the Companies Act 2006 and is unaudited.
Accounting policies are included in detail within the latest Annual Report.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
The preparation of the Group's historical information 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 in
the future.
Estimation uncertainty
In addition to the impact of COVID-19 discussed within the going concern
section of note 2, 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 period, are
described below.
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 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 addition to the underlying tax liability. As a result,
the Group has made a provision of $672,000 as at 30 June 2022 ($3,067,000 as
at 30 June 2021), in line with the accounting methodology used as at 31
December 2021.
4. 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 (previously Branded) product distribution.
• 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
organisation model adopted by the Group during the six months ended 30 June
2022 are as below:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
$'000 $'000 $'000 $'000 $'000 $'000
Revenue
External 122,988 13,095 2,276 138,359 - 138,359
Internal 3,818 3,105 148 7,071 (7,071) -
126,806 16,200 2,424 145,430 (7,071) 138,359
Cost of sales (63,583) (8,860) (1,970) (74,413) 5,879 (68,534)
Gross profit 63,223 7,340 454 71,017 (1,192) 69,825
Expenses (56,727) (4,323) (3,299) (64,349) 347 (64,002)
Operating profit/(loss) 6,496 3,017 (2,845) 6,668 (845) 5,823
Exchange adjustment
on borrowings (2,093)
Non-underlying
costs (1,202)
Finance costs (1,809)
Finance income 51
Loss of associate (1)
Taxation (3,547)
Loss for the period (2,778)
Reported segments relating to the balance sheet as at 30 June 2022 are as
follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
$'000 $'000 $'000 $'000
$'000 $'000
Total assets 406,690 75,084 12,489 494,263 (201,773) 292,490
Total liabilities (302,238) (7,914) (12,626) (322,778) 254,647 (68,131)
104,452 67,170 (137) 171,485 52,874 224,359
Deferred tax asset 9,936
Deferred tax liability (17,267)
Current tax liability (2,575)
Borrowings (80,477)
Group net assets 133,976
Total assets are the Group's gross assets excluding deferred tax asset. Total
liabilities are the Group's gross liabilities excluding loans and borrowings,
and deferred tax liability.
The reportable segments subject to disclosure are consistent with the
organisation model adopted by the Group during the six months ended 30 June
2021 are as below:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
$'000 $'000 $'000 $'000 $'000 $'000
Revenue
External 109,233 12,261 4,252 125,746 - 125,746
Internal 1,216 1,382 26 2,624 (2,624) -
110,449 13,643 4,278 128,370 (2,624) 125,746
Cost of sales (60,471) (9,442) (2,473) (72,386) 2,255 (70,131)
Gross profit 49,978 4,201 1,805 55,984 (369) 55,616
Expenses (48,865) (1,988) (2,598) (53,451) 294 (53,157)
Operating profit/(loss) 1,113 2,213 (793) 2,533 (75) 2,458
Exchange adjustment
on borrowings (3,619)
Non-underlying
costs - acquisitions (1,248)
Finance costs (1,123)
Finance income 19
Taxation (324)
Loss for the period (3,837)
Reported segments relating to the balance sheet as at 31 December 2021 are as
follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
$'000 $'000 $'000 $'000
$'000 $'000
Total assets 436,102 75,568 13,986 525,656 (211,837) 313,819
Total liabilities (327,303) (7,444) (10,813) (345,560) 270,205 (75,355)
108,799 68,124 3,173 180,096 58,368 238,464
Deferred tax asset 12,540
Deferred tax liability (20,517)
Current tax liability (2,780)
Borrowings (82,483)
Group net assets 145,224
Total assets are the Group's gross assets excluding deferred tax asset. Total
liabilities are the Group's gross liabilities excluding loans and borrowings,
and deferred tax liability.
Acquisition costs, finance costs and income, and taxation are not allocated to
individual segments as the underlying instruments are managed on a Group
basis.
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.
The revenue of the Group is attributable to the one principal activity of the
Group.
Geographical analysis
The Group's revenue by destination is split in the following geographic areas:
Unaudited Unaudited
6 months ended 6 months ended
30 June 2022 30 June 2021
$'000s $'000s
United Kingdom 12,995 12,339
Europe (excluding UK) 71,061 68,721
North America 45,487 40,968
South America 461 169
Asia 6,701 2,369
Australia 1,654 1,180
138,359 125,746
5. EARNINGS PER SHARE
Basic Earnings per Share ("EPS") is calculated by dividing the profit for the
period attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by dividing the profit attributable to ordinary
equity holders of the parent by the weighted average number of ordinary shares
outstanding during the period 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. During the periods ended 30 June 2022 and 30 June
2021 the Group made a loss; therefore, diluted EPS is not applicable as the
impact of potential ordinary shares is anti-dilutive. Basic earnings per share
is therefore $(0.03) (30 June 2021 restated: $(0.04)), with diluted earnings
per share $(0.03) (30 June 2021 restated: $(0.04)). The following table
reflects the income and share data used in the basic and diluted EPS
calculations:
30 June 30 June
2022 2021
Restated
SHARES
$'000 $'000
Loss attributable to the
equity holders of the parent for basic earnings (2,778) (3,837)
Number Number
of shares of shares
Weighted average number of
shares for basic EPS 101,671,525 101,290,898
Effect of dilution from:
Share options 5,356,247 4,211,782
Weighted average number of shares
adjusted for the effect of dilution 107,027,772 105,502,680
Within INSPECS Group plc, each Ordinary share carries the right to participate
in distributions, as respects dividends and as respects capital on winding up.
6. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited As at
As at As at 31 December
30 June 2022 30 June 2021 2021
$'000 $'000 $'000
Trade receivables 30,413 27,000 29,362
Prepayments 3,971 2,859 3,396
Other receivables 7,562 7,830 9,471
41,946 37,689 42,229
7. TRADE AND OTHER PAYABLES
Unaudited Unaudited As at
31 December
2021
As at As at
30 June 2021 30 June 2021
$'000 $'000 $'000
Trade payables 27,282 19,678 32,801
Amounts owed to related parties 224 147 196
Other payables 587 614 934
Social security and other taxes 5,579 6,380 5,776
Royalties & provisions 6,870 2,453 4,435
Accruals 8,256 9,277 9,175
48,798 38,549 53,317
8. NET DEBT
Unaudited Unaudited As at
31 December
2021
As at As at
30 June 2022 30 June 2021
$'000 $'000 $'000
Cash and cash equivalents 30,585 33,834 29,759
Interest bearing borrowings excl. leasing
(55,974) (54,630) (60,092)
Invoice discounting (860) - (2,433)
Net debt excluding leasing (26,249) (20,796) (32,766)
Lease liability (24,503) (18,752) (22,391)
Net debt including leasing (50,752) (39,548) (55,157)
9. NON-UNDERLYING COSTS
Non-underlying costs in the period relate to accounting alignment of
acquisitions which occurred in 2021 as well as work on ongoing acquisition and
restructuring.
10. SHARE-BASED PAYMENTS
Certain employees of the Group are granted options over the shares in INSPECS
Group. The options are granted with a fixed exercise price and have vesting
dates of between one and three years after date of grant.
The Group recognises a share-based payment expense based on the fair value of
the awards granted, and an equivalent credit directly in equity to share
option reserve. On exercise of the shares by the employees, the Group is
charged the intrinsic value of the shares by INSPECS Group plc and this amount
is treated as a reduction of the capital contribution, and it is recognised
directly in equity.
Share options outstanding at the end of the period have the following expiry
date and exercise prices:
Grant date Expected life of Exercise price per option $ Number of share options
options
11 October 2019 3-5 years 1.27 412,102
27 February 2020 3-5 years 2.52 1,923,110
22 December 2020 3-5 years 2.87 1,460,000
26 February 2021 3-5 years 2.93 100,000
26 February 2021 3-5 years 4.53 641,036
21 June 2021 3-5 years 4.87 90,000
31 August 2021 3-5 years 5.09 275,000
23 December 2021 3-5 years 4.95 454,999
The exercise price under each option agreement is denominated in GBP, with the
USD balance shown above converted at the rate the option was issued.
11. RESTATED UNDERLYING EBITDA
The 2021 Annual Report and Accounts included restated primary statements for
the year to 31 December 2020 relating to prior year adjustments in Tura Inc.
The 30 June 2021 comparative primary statements have also been restated within
these interims, with the impact on Underlying EBITDA for the six months to 30
June 2021 being as follows:
$'000
Underlying EBITDA 30 June 2021 interims as released 17,708
Adjustments relating to freight and scrappage (884)
Restated underlying EBITDA 30 June 2021 16,824
12. POST BALANCE SHEET EVENTS
Since the end of the interim period on 30 June 2022 there were no material
events that the directors consider material to the users of these interim
statements.
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