REG - Inspecs Group PLC - Interim Results
07/09/2023 07:00
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RNS Number : 6193L Inspecs Group PLC 07 September 2023
7 September 2023
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 2023.
This is the first set of results in the Group's new reporting currency of
GBP.
Financial highlights:
● Revenue increased by 6.1% to £111.2m (H1 2022: £104.8m)
● On a constant exchange rates basis(1), revenue increased by 2.3% to £107.2m
(H1 2022: £104.8m)
● Operating profit increased by 25.1% to £4.6m (H1 2022: £3.6m)
● Gross profit margin 51.4% (H1 2022: 50.5%)
● Underlying EBITDA(2) increased by 5.4% to £12.1m (H1 2022: £11.4m)
● Adjusted Profit Before Tax (PBT)(2) of £6.9m (H1 2022: £7.5m)
● Adjusted PBT Basic Earnings Per Share (EPS)(2) of £0.07 (H1 2022: £0.07)
● Reported Profit Before Tax of £3.8m (H1 2022: £0.2m loss(3))
● Reported basic EPS of £0.02 (H1 2022: £(0.03) (3)), with diluted EPS of
£0.02 (H1 2022: £(0.03) (3))
● Cash generated from operations £11.5m (H1 2022: £8.7m)
● Net debt excluding leasing £22.7m (31 December 2022: £27.6m)
Operational highlights:
● 6.9m eyewear frames sold in H1 2023, compared to 6.2m in H1 2022
● Strong revenue growth in UK (+20%), North America (+9%) and LATAM (+277%)
● Substantial growth of low vision aids revenue in North America (+19%) to
£5.9m in H1 2023
● Construction of the new Vietnam manufacturing facility commenced in May 2023,
with scheduled completion in H1 2024
● Norville losses reduced substantially compared H1 2022
● Renewal completed on key licensed brands; Marco Polo and Ted Baker
● Orders received for a key licence brand by a global retailer to be delivered
in Q4 2023
● Successful launch of a women's Titanflex range in Germany
● Significant growth in commercial activity within Skunkworks, the Group's
research and development division
● Good progress against objectives outlined in our ESG framework
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 2022).
2 Refer to table "Underlying EBITDA and Adjusted PBT".
3 Comparative figures have been restated throughout to be presented in GBP
following a change in presentational currency. See note 2 for further details.
In addition, the six-month period to 30 June 2022 has been restated following
a retrospective adjustment, see note 11.
Richard Peck, CEO of INSPECS, said:
"The Group has made steady progress during the period, with an improved
trading and cash generation performance. We remain focused on achieving
operational efficiency gains and continue to identify integration
opportunities across our global trading platform.
Construction of our new manufacturing facility in Vietnam commenced in May
2023, with expected completion in H1 2024. Once fully operational, this will
increase the manufacturing capacity of the Group to circa 12 million units per
year.
Trading in the second half to date has been in line with our expectations and
our order books remain at a good level. Whilst we remain cautious in relation
to global economic and political events, we remain confident with our full
year outlook."
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
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
Rafaella de Freitas
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" (either 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 drivers, including; increasing the penetration of its own-brand
portfolio, increasing distribution in Asian Pacific markets, 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 channels.
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, with its distribution network covering
over 80 countries and reaching approximately 75,000 points of sale.
More information is available at: www.INSPECS.com (http://www.INSPECS.com)
CHIEF EXECUTIVE REVIEW
I am pleased to present our results for the six months ended 30 June 2023. The
Group has performed well during the period, achieving record first half
revenue of £111.2m (H1 2022: £104.8m) a 6.1% increase. The Group sold 6.9m
eyewear units in the period, up 11.3% compared to 6.2m eyewear units sold in
H1 2022.
The Group made an Underlying EBITDA of £12.1m compared to £11.4m for the
same period in 2022.
On a constant exchange basis, Group revenues increased 2.3% from £104.8m to
£107.2m.
The Group's performance at the Underlying EBITDA level in H1 2023 exceeded our
previous record performance of H1 2022 by 5.4%. The Group saw good growth in
our UK and North American businesses, and a significant reduction in the
operational losses at Norville, as a result of our cost saving programme. Our
European markets (excluding the UK) remained relatively flat. Our gross profit
margin, despite cost inflationary pressures, increased to 51.4% from 50.5%.
Administrative expenses in the period of £49.3m (H1 2022: £46.6m) were well
controlled, decreasing from 44.4% to 44.3% of revenue.
The Group has made key licence renewals, including Marco Polo and Ted Baker,
as well as receiving a significant order from a global retailer for a key
licence brand which will be delivered in Q4 2023.
UK
Within the UK market, revenue has increased by 19.5% to £13.6m, driven by
increased distribution to major retail chains.
Europe
Revenue in Europe at £52.2m was flat year on year with a strong performance
in our key German market offset by a softer performance in other European
markets. During the period TitanFlex, a brand designed for comfort,
successfully launched a new range for women.
North America
Revenue within North America has increased by £3.0m (8.6%) to £37.4m, with
good growth in our frame and low vision operating entities.
Frames and Optics
Our Frames and Optics distribution business increased its external revenue
from £93.2m in H1 2022 to £100.2m in H1 2023, an increase of 7.6%. This was
driven mainly by a good performance in the UK and North American markets.
Wholesale
In line with our expectations for the first six months, external revenue from
the Wholesale business for H1 2023 was £9.0m, compared to £9.9m in H1 2022.
We expect to see increased activity in the second half.
Lenses
Our lens manufacturing business has reported external revenue growth of 13.9%,
with losses from the division decreasing by £0.9m to £1.2m. We continue to
make steady progress, with increased revenue and operational activity, and a
drive towards profitability in the future.
Manufacturing
Construction of our new manufacturing facility in Vietnam commenced in May
2023, with expected completion in H1 2024. Once fully operational, this will
increase the manufacturing capacity of the Group to circa 12 million units per
year.
We continue to evaluate our Portugal manufacturing facility, which would
mainly supply our European markets.
Research and development
The research and development division of the business, Skunkworks, has
continued to work on the development of innovative eyewear channels, resulting
in significant growth in commercial activity during H1 2023.
ESG
Following the establishment of our ESG Committee in 2022, we have been
progressing against our ESG goals. During the period the Group donated two
water filtration units for local schools in Vietnam and offset over 4,500
TCO(2)e through renewable energy projects. We continue to assess ways in which
we can further integrate ESG into our corporate strategy.
Eyewear market
The eyewear market is projected to grow at a rate of 4.4% per year between
2023 and 2027 (data from Statista.com) providing a resilient base to support
our long-term growth strategy.
Outlook
Trading in the second half to date has been in line with our expectations and
our order books remain at a good level. Whilst we remain cautious in relation
to global economic and political events, we remain confident with our full
year outlook.
I would like to thank all our teams across the globe who have contributed to
this good performance in H1 2023, and their continuing hard work and
dedication in achieving our long-term goal of developing INSPECS Group into
one of the world's leading eyewear companies.
Richard Peck
7 September 2023
FINANCIAL REVIEW
Revenue
Revenue increased to £111.2m from £104.8m in H1 2022, an increase of 6.1%.
This was driven by strong growth in our UK and North American markets. On a
constant exchange rate(1) revenues increased 2.3% from £104.8m (H1 2022) to
£107.2m.
Gross Profit Margin
The Group's gross profit margin increased from 50.5% in H1 2022 to 51.4% in H1
2023. The Group continues to actively manage its gross profit margin despite
cost inflation.
Operating Profit
The Group's operating profit increased 25.1% to £4.6m (H1 2022: £3.6m).
Underlying EBITDA
The Group's Underlying EBITDA (as calculated in the 'Underlying EBITDA and
Adjusted PBT' table below) increased from £11.4m in H1 2022 to £12.1m in H1
2023.
Finance Expenses
Our reported net finance costs increased from £1.3m in H1 2022 to £2.0m
reflecting the rise in interest rates around the globe. Net finance costs
include £0.1m (H1 2022: £0.3m) relating to the amortisation of capitalised
loan arrangement fees.
Depreciation and amortisation
The increase in depreciation is driven by the renewal of key leases across the
Group.
Period ended 30 June 2023 £m Period ended 30 June 2022
£m
Depreciation 3.4 3.0
Amortisation 3.3 3.4
Total 6.7 6.4
Profit/(Loss) Before Tax
Profit before tax for the period was £3.8m (H1 2022: £0.2m loss). The
increase of £4.0m is after an increase in finance costs of £0.7m, an
increase in amortisation and depreciation of £0.3m and an improvement in
exchange adjustments on borrowings of £2.8m.
Adjusted Profit Before Tax
The Group's Adjusted Profit Before Tax (PBT) decreased from £7.5m in H1 2022
to £6.9m in H1 2023 as a result of increased net interest costs (excluding
amortisation of loan arrangement fees) of £0.9m and an increase in
depreciation of £0.4m.
Cash Generation
Cash management was a key focus in the period and the Group generated a net
cash inflow from operating activities of £8.4m in H1 2023 compared to £4.7m
in H1 2022.
Cash Position
The Group's cash as of 30 June 2023 was £25.9m compared to £22.2m as at 31
December 2022.
Net Debt
The Group has delivered strong cash generation in the first half and as a
result, net debt (excluding leases) decreased by £4.9m to £22.7m (31
December 2022: £27.6m). During the period, the Group invested £0.9m on
construction of our new manufacturing facility in Vietnam and paid a further
£2.2m of deferred and contingent consideration relating to the EGO and BoDe
acquisitions.
Financing
The Group finances its operation through the following borrowings and
facilities.
Expires Drawn at Drawn at
30 June 2023
31 December 2022
£m
£m
Group revolving credit facility October 2024 29.5 30.0
Term loans October 2024 9.7 10.5
Revolving credit facility USA 1-year rolling 6.7 7.2
Invoice discounting 1-year rolling 2.1 1.5
Other 0.5 0.6
Total 48.5 49.8
Leverage (using debt to equity ratio)
The Group's leverage position is shown below:
30 June
2023
Actual ratio 1.99
Required ratio 3.00
The Group's leverage is calculated using a twelve-month rolling EBITDA. The
Group's performance in the second half of 2022 was weak and resulted in lower
reported EBITDA. As a result of the improved trading performance in the first
half and our current expectations for the full year, it is expected that,
subject to market conditions, the Group's leverage will continue to improve in
the second half of 2023.
Inventory
Our revenue to inventory ratio has improved compared to 30 June 2022 with
increased revenue being delivered from a similar inventory base.
Period ended 30 June 2023 Period ended 30 June 2022
£m £m
Revenue 111.2 104.8
Inventory 42.3 42.4
Revenue to inventory ratio 2.6 2.5
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.
Period ended 30 June 2023 Period ended 30 June 2022
£m £m
Current Assets 106.7 103.3
Current Liabilities 69.7 66.4
Ratio 1.5 1.6
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.
Period ended 30 June 2023 Period ended 30 June 2022
£m £m
Current Assets 106.7 103.3
Less Inventory (42.3) (42.4)
64.4 60.9
Current Liabilities 69.7 66.4
Ratio 0.9 0.9
Earnings per Share
The Group's Basic Adjusted PBT Earnings per Share for the 6 months to 30 June
2023 was £0.07 compared to £0.07 for the 6 months to 30 June 2022.
Dividend
As previously announced the Group does not intend to pay a dividend in 2023
and accordingly is not proposing a dividend for the period ended 30 June 2023.
Underlying EBITDA and Adjusted PBT
The below table shows how Underlying EBITDA and Adjusted PBT are calculated:
6 months ended 30 June 2023 6 months ended 30 June 2022 12 months ended 31 December 2022
Restated (1) Restated (1)
£'000 £'000 £'000
Revenue 111,199 104,809 200,957
Gross Profit 57,147 52,893 98,860
Operating expenses (52,592) (49,253) (100,046)
Operating profit/(loss) 4,555 3,640 (1,186)
Add back: Amortisation 3,252 3,445 6,893
Add back: Depreciation 3,361 2,950 6,744
EBITDA 11,168 10,035 12,451
Add back: Share based payment expense 526 638 1,398
Add back: Earn out on acquisition 366 770 1,544
Underlying EBITDA 12,060 11,443 15,393
Add back: Purchase Price Allocation ('PPA') release on inventory through cost 132
of sales
- 27
Adjusted Underlying EBITDA 12,060 11,470 15,525
Less: Depreciation (3,361) (2,950) (6,744)
Less: Net interest (excluding amortisation of loan arrangement fees) (1,979)
(1,846) (990)
Adjusted Profit Before Tax (PBT) 6,853 7,530 6,802
Adjusted PBT earnings per share
£ £ £
Basic Adjusted PBT Earnings per Share for the period attributable to the
equity holders of the parent
0.07 0.07 0.07
Diluted Adjusted PBT Earnings per Share for the period attributable to the
equity holders of the parent
0.06 0.07 0.06
1 Comparative figures have been restated throughout to be
presented in GBP following a change in presentational currency. See note 2 for
further details. In addition, the six-month period to 30 June 2022 has been
restated following a retrospective adjustment, see note 11.
Underlying EBITDA segmental information
Underlying EBITDA by reportable segment (as defined in note 4) for the six
months ended 30 June 2023 is as follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 102,876 9,922 2,069 114,867 (3,668) 111,199
Operating profit/(loss) 7,272 887 (1,248) 6,911 (2,356) 4,555
Add back:
Amortisation 2,809 433 10 3,252 - 3,252
Depreciation 2,663 347 336 3,346 15 3,361
Share based payments 198 161 - 359 167 526
Earn out on acquisitions 366 - - 366 - 366
Underlying EBITDA 13,308 1,828 (902) 14,234 (2,174) 12,060
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2023
Notes Unaudited Unaudited
6 months ended
30 June 2023 6 months ended
30 June 2022
Restated
£'000 £'000
REVENUE 4 111,199 104,809
Cost of sales (54,052) (51,916)
GROSS PROFIT 57,147 52,893
Distribution costs (3,328) (2,703)
Administrative expenses (49,264) (46,550)
OPERATING PROFIT 4,555 3,640
Non-underlying costs 9 - (911)
Exchange adjustments on borrowings 1,210 (1,585)
Share of loss of associates (4) (1)
Finance costs (2,103) (1,371)
Finance income 145 39
PROFIT/(LOSS) BEFORE INCOME TAX 3,803 (189)
Income tax (1,720) (2,685)
PROFIT/(LOSS) FOR THE PERIOD 2,083 (2,874)
OTHER COMPREHENSIVE INCOME:
Exchange adjustment on consolidation (3,973) 4,272
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD (1,890) 1,398
Earnings per share £ £
Basic EPS for the period attributable 5 0.02 (0.03)
to the equity holders of the parent
5 0.02 (0.03)
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 2023
Notes
Unaudited
6 months ended
30 June 2023
Unaudited
6 months ended
30 June 2022
Restated
£'000
£'000
REVENUE
4
111,199
104,809
Cost of sales
(54,052)
(51,916)
GROSS PROFIT
57,147
52,893
Distribution costs
(3,328)
(2,703)
Administrative expenses
(49,264)
(46,550)
OPERATING PROFIT
4,555
3,640
Non-underlying costs
9
-
(911)
Exchange adjustments on borrowings
1,210
(1,585)
Share of loss of associates
(4)
(1)
Finance costs
(2,103)
(1,371)
Finance income
145
39
PROFIT/(LOSS) BEFORE INCOME TAX
3,803
(189)
Income tax
(1,720)
(2,685)
PROFIT/(LOSS) FOR THE PERIOD
2,083
(2,874)
OTHER COMPREHENSIVE INCOME:
Exchange adjustment on consolidation
(3,973)
4,272
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD
(1,890)
1,398
Earnings per share
£
£
Basic EPS for the period attributable
to the equity holders of the parent
5
0.02
(0.03)
Diluted EPS for the period attributable
to the equity holders of the parent
5
0.02
(0.03)
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Note Unaudited Unaudited As at
31 December 2022
As at As at
30 June 2023
30 June 2022 Restated
£'000 Restated £'000
£'000
ASSETS
NON-CURRENT ASSETS
Goodwill 55,578 56,206 55,578
Intangible assets 32,248 38,523 36,170
Property Plant and equipment 33,840 38,598 37,107
Investment in associates 105 91 112
Net investment - sublease 675 - -
Deferred tax 6,337 8,180 7,007
128,783 141,598 135,974
CURRENT ASSETS
Inventories 42,349 42,402 48,158
Trade and other receivables 6 36,647 34,532 31,144
Net investment - sublease 110 - -
Tax receivable 1,719 1,233 3,681
Cash and cash equivalents 25,862 25,179 22,153
106,687 103,346 105,136
Assets held for sale 832 - 832
TOTAL ASSETS 236,302 244,944 241,942
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 5,461 7,478 9,434
Share option reserve 3,153 2,092 2,703
Merger reserve 5,340 5,340 5,340
Retained earnings 1,698 4,057 (461)
TOTAL EQUITY 106,177 109,492 107,541
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings 51,525 53,109 16,548
Deferred consideration 652 1,776 1,350
Deferred tax 8,203 14,215 9,548
60,380 69,100 27,446
CURRENT LIABILITIES
Trade and other payables 7 38,921 40,175 39,153
Right of return liability 11,862 8,885 10,613
Financial liabilities - borrowings
Interest bearing loans and borrowings 13,140 13,144 51,746
Invoice discounting 2,089 708 1,490
Deferred consideration 1,333 1,304 2,518
Tax payable 2,400 2,136 1,435
69,745 66,352 106,955
TOTAL LIABILITIES 130,125 135,452 134,401
TOTAL EQUITY AND LIABILITIES 236,302 244,944 241,942
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2023
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 2023
Balance at 1 January 2023 1,017 89,508 9,434 2,703 (461) 5,340 107,541
Profit for the period - - - - 2,083 - 2,083
Other comprehensive loss - - (3,973) - - - (3,973)
Total comprehensive loss - - (3,973) - 2,083 - (1,890)
Share-based payments - - - 526 - - 526
Share options forfeited - - - (76) 76 - -
Balance at 30 June 2023 (unaudited) 1,017 89,508 5,461 3,153 1,698 5,340 106,177
SIX MONTHS ENDED 30 JUNE 2022
Balance at 1 January 2022 restated 1,017 89,508 3,206 1,454 6,931 5,340 107,456
Loss for the period - - - - (2,874) - (2,874)
Other comprehensive income - - 4,272 - - - 4,272
Total comprehensive profit/(loss) - - 4,272 - (2,874) - 1,398
Share-based payments - - - 638 - - 638
Balance at 30 June 2022 1,017 89,508 7,478 2,092 4,057 5,340 109,492
restated (unaudited)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW
For the period ended 30 June 2023
Unaudited Unaudited
6 months ended 6 months ended
30 June 2023 30 June 2022
Restated
£000 £000
Cash flows from operating activities
Profit/(loss) before income tax 3,803 (189)
Depreciation charges 3,361 2,950
Amortisation charges 3,252 3,445
Share based payments 526 638
Earn out on acquisitions 366 770
Exchange adjustments on borrowings (1,210) 1,585
Share of loss from associate 4 1
Finance costs 2,103 1,371
Finance income (145) (39)
12,060 10,532
Decrease/(increase) in inventories 5,809 (1,203)
Increase in trade and other receivables (5,503) (3,290)
(Decrease)/increase in trade and other payables (866) 2,688
Cash generated from operations 11,500 8,727
Interest paid (1,831) (1,353)
Tax paid (1,248) (2,646)
Net cash flow from operating activities 8,421 4,728
Cash flows used in investing activities
Purchase of intangible fixed assets (124) (59)
Purchase of property plant and equipment (1,361) (1,007)
Interest received 145 39
Net cash flows used in investing
activities (1,340) (1,027)
Cash flow from financing activities
Bank loan principal repayments in period (1,010) (1,112)
New loans in the period - 1,612
Movement in invoice discounting facility 599 1,092
Loan transaction costs (70) (105)
Principal payments on leases (1,999) (1,548)
Net cash flows used in financing
activities (2,480) (61)
Net increase in cash and cash
equivalents 4,601 3,640
Cash and cash equivalents at 22,153 22,024
beginning of the period
Net foreign currency movements (892) (485)
Cash and cash equivalents 25,862 25,179
at end of period
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS
For the period ended 30 June 2023
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, the interim 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 September 2024.
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 £27.6m at 31 December 2022 to £22.7m at
30 June 2023.
• Cash generated from operations in the period amounted to £11.5m
(2022 H1: £8.7m).
• The Group balance sheet has net assets of £106.2m and net
current assets of £36.9m.
• The Group's net debt excluding leasing improved by £4.9m in the
six months to 30 June 2023.
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, building 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 recent periods.
• Retaining cash for investment into the Group by not paying a
dividend to shareholders.
Basis of preparation
The interim consolidated financial statements for the six months ended 30 June
2023 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 2022.
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.
The comparative financial information for the period ended 30 June 2022 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 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.
Right of return liability
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. The right of return liability at the period
end is £11,862,000 (31 December 2022: £10,613,000) in line with the
accounting methodology used as at 31 December 2022.
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 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
2023 are as below:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 100,220 9,016 1,963 111,199 - 111,199
Internal 2,656 906 106 3,668 (3,668) -
102,876 9,922 2,069 114,867 (3,668) 111,199
Cost of sales (51,174) (5,731) (1,240) (58,145) 4,093 (54,052)
Gross profit 51,702 4,191 829 56,722 425 57,147
Expenses (44,430) (3,304) (2,077) (49,811) (2,781) (52,592)
Operating profit/(loss) 7,272 887 (1,248) 6,911 (2,356) 4,555
Exchange adjustment
on borrowings 1,210
Finance costs (2,103)
Finance income 145
Share of loss of associates (4)
Taxation (1,720)
Profit for the period 2,083
Reported segments relating to the balance sheet as at 30 June 2023 are as
follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000
£'000 £'000
Total assets 325,541 62,385 9,955 397,881 (167,916) 229,965
Total liabilities (177,949) (6,040) (13,836) (197,825) 145,057 (52,768)
147,592 56,345 (3,881) 200,056 (22,859) 177,197
Deferred tax asset 6,337
Deferred tax liability (8,203)
Current tax liability (2,400)
Borrowings (66,754)
Group net assets 106,177
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
2022 (restated) are as below:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 93,166 9,919 1,724 104,809 - 104,809
Internal 2,892 2,352 113 5,357 (5,357) -
96,058 12,271 1,837 110,166 (5,357) 104,809
Cost of sales (48,166) (6,712) (1,491) (56,369) 4,453 (51,916)
Gross profit 47,892 5,559 346 53,797 (904) 52,893
Expenses (42,133) (3,275) (2,500) (47,908) (1,345) (49,253)
Operating profit/(loss) 5,759 2,284 (2,154) 5,889 (2,249) 3,640
Exchange adjustment
on borrowings (1,585)
Non-underlying
costs (911)
Finance costs (1,371)
Finance income 39
Share of loss of associates (1)
Taxation (2,685)
Loss for the period (2,874)
Reported segments relating to the balance sheet as at 31 December 2022
(restated) are as follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000
£'000 £'000
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)
148,018 57,674 (2,417) 203,275 (21,974) 181,301
Deferred tax asset 7,007
Deferred tax liability (9,548)
Current tax liability (1,435)
Borrowings (69,784)
Group net assets 107,541
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 revenues 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 2023 30 June 2022
Restated
£'000 £'000
United Kingdom 13,621 11,396
Europe (excluding UK) 52,161 52,278
North America 37,428 34,457
South America 1,315 349
Asia 2,993 3,228
Australia 3,515 3,033
Other 166 68
111,199 104,809
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 period to 30 June 2022 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 £0.02 (30 June 2022: £(0.03)), with diluted
earnings per share of £0.02 (30 June 2022: £(0.03)). The following table
reflects the income and share data used in the basic and diluted EPS
calculations:
6 months ended 30 June 2023 Basic weighted Total Earnings per share (£)
average number earnings (£'000)
of Ordinary
Shares ('000)
Basic EPS 101,672 2,083 0.02
Diluted EPS 107,492 2,083 0.02
Adjusted PBT basic EPS 101,672 6,878 0.07
Adjusted PBT diluted EPS 107,492 6,878 0.06
6months ended 30 June 2022 (restated) Basic weighted Total Earnings per share (£)
average number earnings (£'000)
of Ordinary
Shares ('000)
Basic EPS 101,672 (2,874) (0.03)
Diluted EPS 107,028 (2,874) (0.03)
Adjusted PBT basic EPS 101,672 7,530 0.07
Adjusted PBT diluted EPS 107,028 7,530 0.07
Within INSPECS Group plc, each Ordinary share carries the right to participate
in distributions, as respects dividends and as respects capital on winding
up.
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 2023 30 June 2022 2022
Restated Restated
£'000 £'000 £'000
Trade receivables 26,298 25,038 22,670
Prepayments 3,381 3,237 2,267
Other receivables 6,968 6,257 6,207
36,647 34,532 31,144
7. TRADE AND OTHER PAYABLES
Unaudited Unaudited As at
31 December
2022
Restated
As at As at
30 June 2023 30 June 2022
Restated
£'000 £'000 £'000
Trade payables 23,530 22,460 22,140
Amounts owed to related parties 185 185 198
Other payables 798 483 464
Social security and other taxes 4,723 4,593 4,232
Royalties & provisions 3,216 5,656 4,073
Accruals 6,469 6,798 8,046
38,921 40,175 39,153
8. NET DEBT
Unaudited Unaudited As at
31 December
2022
As at As at
30 June 2023 30 June 2022
£'000 £'000 £'000
Restated Restated
Cash and cash equivalents 25,862 25,179 22,153
Interest bearing borrowings excl. leasing
(46,449) (46,081) (48,300)
Invoice discounting (2,089) (708) (1,490)
Net debt excluding leasing (22,676) (21,610) (27,637)
Lease liability (18,216) (20,172) (19,994)
Net debt including leasing (40,892) (41,782) (47,631)
9. NON-UNDERLYING COSTS
Non-underlying costs during the six months to 30 June 2022 related to
accounting alignment of acquisitions which occurred in 2021 as well as work on
ongoing acquisitions 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 1.01 412,102
27 February 2020 3-5 years 1.95 1,923,110
22 December 2020 3-5 years 2.10 1,290,000
26 February 2021 3-5 years 3.25 641,036
21 June 2021 3-5 years 3.51 90,000
31 August 2021 3-5 years 3.70 275,000
23 December 2021 3-5 years 3.70 414,999
28 February 2022 3-5 years 3.75 641,036
11. RESTATED PROFIT/(LOSS) BEFORE TAX
The 2022 Annual Report and Accounts included restated primary statements for
the year to 31 December 2021 relating to a prior year adjustment concerning
the treatment of contingent consideration payable on business combinations.
The 30 June 2022 comparative primary statements have therefore also been
restated within these interims, with the impact on profit before tax for the
six months to 30 June 2022 being as follows:
£'000
Profit before tax 30 June 2022 (converted to GBP) 581
Adjustments relating to earn-out on contingent consideration (770)
Restated loss before tax 30 June 2022 (189)
12. POST BALANCE SHEET EVENTS
Since the end of the interim period on 30 June 2023 there were no material
events that the directors consider material to the users of these interim
statements.
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