REG - Marks Electrical Grp - Annual Financial Results
08/06/2022 07:00
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RNS Number : 0754O Marks Electrical Group plc 08 June 2022
Marks Electrical Group plc
Annual financial results for the year ended 31 March 2022
Significant growth, robust profitability and positive trading momentum
Marks Electrical Group plc ("Marks Electrical" or "the Group"), a fast growing
online electrical retailer, today announces its audited results for the year
ended 31 March 2022 ("the year" or "FY22").
Financial highlights
* Record full year revenue with growth of 44% to £80.5m
* Maintained strong profitability resulting in a full year Adjusted EBITDA((1))
of £7.2m at 9.0% margin
* Underlying profitability of the operating model underpinned by a ROCE((2)) of
57%
* Free cash flow of £5.7m, representing a free cash flow margin of 7.1% and
resulting in a closing net cash position of £3.9m
* Adjusted EPS 5.01p((3)), statutory EPS 3.22p
* Proposed maiden final dividend of 0.67p per share, reflecting Group's strong
cash position and confidence in trading, to be paid (subject to shareholder
approval at the AGM) on 18 August 2022 to shareholders who are on the register
at the close of business on 15 July 2022
Operational highlights
* IPO on AIM successfully completed on 5 November 2021
* Growth in Major Domestic Appliances ("MDA") market share from 1.2% in FY21 to
1.6% in FY22, with our share in the online segment of the market (our primary
addressable market) growing from 1.5% to 2.6%((4))
* Strong performance driven across all categories but specifically in
televisions, cooking appliances and tumble dryers
* Improved inventory holding and expanded operating capacity, whilst also
expanding product range, variety and availability for customers
* Strengthened our commitment to sustainability, achieving carbon neutral
operations in FY22
* Maintained industry leading Trustpilot score of 4.8, demonstrating the
strength of our customer proposition
Current trading and outlook
* Continued positive trading momentum in the first months of FY23, with revenue
growth exceeding 20% year on year
* Disciplined approach to margin management, capital allocation and cash
conversion demonstrated in FY22, provides the Group with solid foundations to
deliver our financial targets and strategic objectives in the year ahead
Mark Smithson Chief Executive Officer, commented:
"We achieved record revenue in FY22, with growth of 44% against a strong
comparative of 78% in the prior year. This is testament to the hard work and
commitment of the entire team. I'm particularly proud to have achieved this
while maintaining our disciplined focus on margin, capital allocation and cash
generation.
While we are conscious of the challenges raised by the cost of living crisis
in the UK and its impact on consumer confidence, our low-cost and
execution-focused model leaves us well positioned to manage operationally, and
with still only 1.6% market share of the £5.4bn UK MDA market((4)), we see
significant scope and opportunity for growth.
Recognising the current impact on the consumer and thanks to our strong brand
partnerships, we have been able to expand our range of products, across price
categories, as well as introducing new credit solutions and interest free
options with our finance partners. We have continued to achieve market share
gains and strong revenue momentum in the months since the financial year end,
as our leading customer service and free next day delivery continues to
provide a compelling and unique offering that sets us apart from the
competition.
We remain well positioned moving forward to execute on our clear strategy of
growing brand awareness, delivering exceptional customer service, and
expanding our offering to new customers across the UK."
Key financial highlights: Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Revenue 80,478 55,984
Revenue growth % 44% 78%
Adjusted EBITDA((1)) 7,247 7,699
Adjusted EBITDA margin 9.0% 13.7%
Adjusted EBIT 6,386 6,824
Adjusted EBIT margin 7.9% 12.2%
Adjusted profit after tax 5,255 5,296
Adjusted earnings per share((3)) 5.01p 5.05p
Statutory profit after tax 3,288 5,696
Statutory earnings per share 3.22p 5.70p
Operating cash flow for conversion((5)) 8,616 2,593
Operating cash conversion 119% 34%
Free cash flow 5,746 2,309
Free cash flow margin 7.1% 4.1%
Net cash/(debt)((6)) 3,872 (44)
Return on Capital Employed((2)) 57% 52%
( )
(Notes)
((1) Adjusted EBITDA) (is a non-statutory measure defined as earnings
before interest, tax, depreciation, and amortisation and adjusted for
exceptional items, share-based payment charges and revaluation of
investments.)
((2) Return on Capital Employed (ROCE) is defined as Adjusted EBIT / (Total
Assets - Current liabilities))
((3) Adjusted EPS is) (a non-statutory measure of profit after tax,
adjusted for exceptional items, share-based payment charges and revaluation of
investments, over the total diluted ordinary number of shares in issue. The
number of ordinary shares as at 5 November 2021 through to 31 March 2022 have
been used as the basis for the current and prior periods adjusted earnings
per share calculation. The shares in issue since IPO represents an
indication of the future weighted average number of ordinary shares for
evaluating the performance of the Group)
((4) Based on the Group's analysis of GfK Market Intelligence sales
tracking GB data;)
((5) Operating cash flow for cash conversion) (is defined as cash generated
from operations less outflows for lease payments and exceptional items)
((6) Net cash/(debt) represents cash and cash equivalents less financial
liabilities (excluding lease liabilities).)
Results presentations
An in-person presentation for sell-side analysts hosted by Mark Smithson, CEO,
and Josh Egan, CFO, will take place at 09.00am this morning. Please contact
markselectrical@dentonsglobaladvisors.com
(mailto:markselectrical@dentonsglobaladvisors.com) for further information.
In addition, management will also provide a live online presentation for
investors at 10.30am on 10 June 2022. The online event is open to all existing
and potential shareholders and registration is free. Questions can be
submitted during the presentation and will be addressed at the end. To
register, please go to: link to sign up
(https://www.equitydevelopment.co.uk/news-and-events/marks-electrical-fyinvestorpresentation-10june?hs_preview=EEzVyhJN-72647355233)
.
A recording of the presentation will be available shortly after the event at
this link: Marks Electrical content page
(https://www.equitydevelopment.co.uk/research/tag/marks-electrical) .
Enquiries:
Marks Electrical Group plc
Via
Dentons Global Advisors:
Mark Smithson, CEO
Tel: +44 (0)20 7664 5095
Josh Egan, CFO
Dentons Global Advisors (Financial PR)
James Styles
markselectrical@dentonsglobaladvisors.com
(mailto:markselectrical@dentonsglobaladvisors.com)
Fern Duncan
Tel: +44 (0)20 7664 5095
Panmure Gordon (NOMAD and Joint Broker)
Oliver Cardigan, Ailsa Macmaster (Corporate Finance)
Tel: +44 (0) 207
886 2500
Erik Anderson (Corporate Broking)
Berenberg (Joint Broker)
Matthew Armitt / Michelle Wilson / Jack Botros (UK Investment Banking)
Tel: +44 (0) 20 3207 7800
About Marks Electrical
Marks Electrical is a fast growing, highly scalable, technology driven
e-commerce electricals retailer which sells, delivers, installs and recycles a
wide range of household electrical products. The Group was founded in
Leicester in 1987 by Mark Smithson and has scaled up into a nationwide online
retailer with a compelling growth track record, thanks to its vertically
integrated, low-cost, high-quality operating model, supported by the ongoing
structural shift of consumers to purchase online. The Group operates within
the UK Major Domestic Appliances (MDA) market, estimated to be worth
approximately £5.4 billion.
Primarily through its simple, clear and intuitive website -
markselectrical.co.uk - the Group offers over 3,500 products from over 50
leading brands across its main product categories, which include Cooking,
Refrigeration, Washers & Dryers, Dishwashers and Audio-Visual. These
products are sourced from UK distributors of the brands, with whom the Group
maintains strong and direct relationships. Marks Electrical delivers direct to
customers in its owned and branded vehicles, operated by the Group's skilled
team of delivery drivers, who are also able to offer installation and
recycling services.
For further information, visit the Marks Electrical corporate
website: https://group.markselectrical.co.uk
(https://group.markselectrical.co.uk/) and its retail
website: https://markselectrical.co.uk/ (https://markselectrical.co.uk/) .
Cautionary statement
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, and businesses of Marks Electrical
Group plc. These statements and forecasts involve risk, uncertainty and
assumptions because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those expressed or
implied by these forward-looking statements. These forward-looking statements
are made only as at the date of this announcement. Nothing in this
announcement should be construed as a profit forecast. Except as required by
law, Marks Electrical Group plc has no obligation to update the
forward-looking statements or to correct any inaccuracies therein.
Group CEO review
I am delighted with the performance we have achieved in FY22. We've navigated
challenging industry dynamics with supply chain complications, achieved a
record revenue performance with good profitability and successfully listed on
the London Stock Exchange's AIM market. All this has been achieved whilst
increasing our employee base by 49%, expanding our warehouse capacity,
enlarging our delivery fleet, appointing a plc Board and adopting a new
governance structure, and welcoming new shareholders. This however is just the
beginning!
When I reflect on the past year, I am truly proud to work with such a
hard-working, talented and committed team of colleagues across all our
operations. Without them we wouldn't be where we are today and we wouldn't
have prospered in the last 12 months, where others have struggled.
Financial performance
We continued our growth trajectory during the period with year-on-year revenue
growth of 44% from £56.0m to £80.5m, building on the 78% growth delivered in
FY21. Our Adjusted EBITDA was £7.2m at a 9.0% margin as we invested in
advertising & marketing and in driving the operational excellence of the
business.
We delivered an Adjusted EPS of 5.01p and are recommending a final dividend of
0.67p per share, representing a payout ratio of 20%, with the 0.67p being a
typical two-third share of the annualised amount.
Market share - a significant growth runway
As a business we are predominantly focused on the Major Domestic Appliances
(MDA) market and have also been expanding our footprint in the Consumer
Electronics (CE) market, primarily in the television category.
During the year, the markets for both MDA and CE were turbulent, with the
first quarter (April to June) showing strong growth dynamics compared to the
prior year, followed by three further quarters of year-on-year declines.
Despite this, we grew our market share from 1.2% in FY21 to 1.6% of the
overall MDA market in FY22. Our share in the online segment of the market (our
primary addressable market) grew from 1.5% to 2.6%, and we also doubled our
market share in the television segment of the consumer electronics market,
albeit from low levels.((1))
It's these statistics that are truly exciting; we have a tiny share of an
enormous market and therefore a huge runway to grow profitably. Our
market-leading customer service, free next day delivery offering and
competitive pricing, gives us a serious customer proposition and position of
strength to take further market share across the UK.
We are enormously excited by this opportunity and that's why I took the step
to float the business in November 2021, to improve our brand awareness and
obtain access to capital markets to assist in fueling our growth. As we have
grown, we have also continued to enhance our standing and relationships with
both existing and new brand partners, which in turn has been supported by our
listed status.
Capacity expansion and operational excellence
During the year, we increased our driver-installation headcount and vehicle
fleet, materially increasing capacity. This demonstrates the strength and
scalability of our vertically integrated delivery model which is so vital to
delivering the best service for our customers.
We also expanded our warehouse footprint by making investments in additional
mezzanine flooring capacity allowing us to increase our stock holding and
future proof our site for higher revenue levels and maintain high returns. Our
focus on controlled capital allocation and profitable expansion has resulted
in a ROCE of 57%((3)).
We welcomed 66 new joiners in the year across all areas of the business, our
largest increase was in driver-installation team members where we had 38 new
recruits. In addition, I also welcomed Josh Egan to join the Board as Chief
Financial Officer, as well as a number of other senior hires to strengthen our
executive and operational teams.
Brand awareness
During the year we carried out a brand awareness study((2)) which demonstrated
that only 7% of the population in England had heard of Marks Electrical -
interestingly only 4% of people in London had heard of the brand, yet London
is our biggest delivery market on a daily basis. This demonstrates the vast
opportunity we have to scale-up and raise brand awareness.
Our marketing activities are geared towards developing our brand and we are
deploying a range of both digital and non-digital campaigns to strengthen our
proposition and capture more attention.
We truly believe that our market-leading service drives strong repeat
business, and once we have acquired the customer, they will continue to
purchase from us. This is exemplified in our strong repeat customer rate
improving further in FY22 to 25% from 24% in the prior year.
Outlook - well placed to deliver profitable market share growth
I am delighted by our performance this year, with year-on-year growth of 44%
and continued momentum throughout the year against particularly strong
comparatives due to Covid-19 acceleration of online shopping trends. When you
combine this with our 4.8 Trustpilot score and completion of a demanding IPO
process, I believe our team have done exceptionally well.
With nationwide concerns surrounding the cost of living and reduced consumer
spending, we believe that our current share of the £5.4bn((1)) UK MDA market
of 1.6%, provides significant scope and opportunity for growth. Our
market-leading customer service and free next day delivery, provides a
compelling and unique offering, that sets us apart from the competition, and
we have seen continued market share gains and strong revenue momentum in the
months since the financial year end.
At present, 80% of our revenues come from distressed purchases, providing the
Group with a defendable position during a cost-of-living crisis. Recognising
the current impact on the consumer and thanks to our strong brand
partnerships, we have been able to expand our range of products, across price
categories, as well as introducing new credit solutions and interest free
options with our finance partners. Our ancillary services, including add-ons
and warranties, make up a very small proportion of our revenue, mitigating any
impact on the Group should customers cut back on these options.
Internally, we continue to monitor our pay structures and the cost of living
to ensure all our employees are well rewarded for their hard work, offering
competitive salaries, commissions, and bonus structures across the board. The
business may have my name on it, but it really is about teamwork, and I look
forward to fostering our team spirit and family-orientated culture as we grow
the business to become a go-to destination for premium electrical appliances
in the UK.
Mark Smithson
Chief Executive Officer
(Notes)
((1) Based on the Group's analysis of GfK Market Intelligence sales
tracking GB data;)
((2) All figures, unless otherwise stated, are from YouGov Plc. Total
sample size was 1,875 adults. Fieldwork was undertaken between 4 - 5 May 2022.
The survey was carried out online. The figures have been weighted and are
representative of all England adults (aged 18+).)
((3) Return on Capital Employed (ROCE) is defined as Adjusted EBIT /
(Total Assets - Current liabilities))
( )
Financial review
It's a pleasure to share our FY22 financial results following a record year
for the business. We achieved record revenue, expanding our advertising spend
to grow brand awareness, invested in the cost base to prepare the business for
life as a public company, and delivered a strong operating cash conversion,
resulting in a closing net cash position of £3.9m and a return on capital
employed of 57%.
Revenue and gross margin
During the year revenue increased 44% to £80.5m (2021:£56.0m), which was an
excellent result for the Group and provides assurance that our operating
capacity development and investments in marketing, brand awareness and
operational excellence are working.
Revenue growth was strong throughout the year, with 78% revenue growth in the
first half, followed by 23% growth in the second half. The momentum continued
throughout the period due to our increased focus on both online and offline
marketing, with our increased paid media activity, improved approach to search
engine optimisation and successful TV campaigns driving strong improvements in
website traffic and brand awareness.
Gross profit margin was down 150bps from the prior year driven by strong
product margins in FY21 as a result of supply constraints during the COVID-19
lockdown periods. As supply improved and competition increased, we saw an
overall contraction of the gross product margin, but this was more in line
with gross product margin levels seen in FY19 and FY20.
During the year, there has been significant market commentary around driver
constraints and inflationary supply chain pressure; despite this, we were able
to expand deliveries on our own fleet by 47%, add 38 additional drivers and
minimise the impact on our cost of delivery per item to only a 5.2% increase
year-on-year. This is despite fuel costs also increasing during the period by
15.8%.
We anticipate strong pricing competition in the market in FY23, however we
continue to work closely with our suppliers throughout our categories and
ranges, and are targeting a gross margin going forwards of between 19% and
20%.
Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Revenue 80,478 55,984
Cost of Sales (64,583) (44,064)
Gross profit 15,895 11,920
Gross margin 19.8% 21.3%
Advertising and marketing costs
Advertising costs increased to 5.0% of revenue in FY22 versus 2.9% in FY21 as
a result of additional investments made in both online and offline marketing
activities.
In online advertising, we redefined our approach to both paid media and search
engine optimisation, as well as adding conversion rate optimisation
activities. The strategic direction we took and the investments made have
resulted in materially improved search result rankings and improved online
presence for multiple SKUs across our range.
In offline advertising, in order to improve our brand awareness, we carried
out our first ever national TV campaign, whilst also carrying out both radio
and print based activities. The national TV campaign was highly successful and
drove a material uplift in website traffic whilst adding incremental sales. We
carried out additional TV campaigns through other channels during the year and
also started both YouTube and programmatic display activity.
We believe that the activities carried out in advertising during the year have
significantly contributed to our revenue growth.
We anticipate a similar level of investment as a percentage of revenue in
advertising & marketing in FY23.
Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Revenue 80,478 55,984
Advertising and marketing costs (4,004) (1,641)
Advertising and marketing as % of revenue 5.0% 2.9%
Other operating expenses (excluding depreciation)
Other operating expenses were 5.8% of revenue in FY22 versus 4.6% in FY21 as a
result of additional investments made to enhance the operational excellence of
the business, in preparation for life as a public company and the planned
growth journey ahead.
During the year the Group has made considerable investments in its operational
base, with several key hires, including appointing a Group CFO, Head of
Financial Reporting, Head of HR, Head of Operations and Head of Supplier
Management, all of these roles being leadership positions within the business.
These hires were necessary to ensure we have the capability to implement and
maintain appropriate processes and controls, and deliver continued operational
excellence whilst managing increased sales growth.
During the period we have added colleagues in all key areas; Sales, Customer
Service, HR, IT, Procurement, Operations and Finance, and believe these
additions will significantly strengthen our employee base. In addition, we
have also now introduced a salary for the Group CEO which is also in the
overhead base.
We have continued to control costs well during the period and have ensured
that despite the changes implemented, we have minimised the increase in the
cost base to 120bps.
Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Revenue 80,478 55,984
Other operating expenses (excluding depreciation) (4,644) (2,580)
Other operating expenses as % of revenue 5.8% 4.6%
With other operating expenses relatively fixed, excluding advertising spend,
the Group expects to maintain an overhead base in the range of 5.5 - 6.5% of
sales.
Adjusted earnings before Interest, Tax, Depreciation and Amortisation
("EBITDA")
The Group achieved Adjusted EBITDA for the period of £7.2m representing a
margin of 9.0% (2021: £7.7m, 13.7%).
This decrease in Adjusted EBITDA margin year on year is a direct result of the
following aforementioned points:
- 150bps reduction in gross margin due to strong product margins in FY21 as
a result of supply constraints during the COVID-19 lockdown periods;
- 210bps reduction as a result of increased promotional activity and a
differentiated approach to online and offline advertising activities to
improve brand awareness; and
- 120bps cost increase as a result of investment in professionalisation
of the business.
Despite the current market challenges, we anticipate maintaining a strong
Adjusted EBITDA margin in FY23.
Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Statutory profit after tax 3,288 5,696
Addback:
Tax charge 477 1,458
Finance costs 65 70
Non-underlying costs 2,676 -
Share based payment expense 75 -
Less:
Fair value gains net of tax (195) (400)
Adjusted EBIT 6,386 6,824
Depreciation and amortisation 861 875
Adjusted EBITDA 7,247 7,699
Adjusted EBITDA margin 9.0% 13.7%
Statutory Profit after tax
During the year, Statutory profit after tax fell from £5.7m to £3.3m
primarily due to exceptional costs.
Non-underlying (exceptional) items.
During the year the Group incurred exceptional one-off expenditure in
administrative expenses in relation to historical tax arrangements (as
disclosed in the Admission Document) and its admission to trading on the
London Stock Exchange's AIM market. The nature of the costs incurred primarily
relate to tax, legal and professional fees, linked to the various workstreams
involved in the admission. This amounted to £2.7m and is non-recurring in
nature and hence has been removed from Adjusted EBITDA to better represent
ongoing trading performance, with costs directly related to the IPO
reclassified to equity.
The Group also has an investment in its buying group, Combined Independents
(Holdings) Limited. This investment is revalued annually, with its value
increasing based on purchases made, and its value decreasing based on cash
paid out to members in relation to their investments. We choose to exclude
this fair value gain from Adjusted EBITDA as its nature is partially but not
strictly related to the trading activities of the business.
Cashflow and statement of financial position
During the year the Group achieved cash flow from operations of £9.3m with an
operating cashflow for conversion of £8.6m at 119% and free cash flow of
£5.7m which after exceptional items results in a closing net cash position of
£3.9m.
The Group spent £0.2m on a new mezzanine floor in the warehouse, adding an
additional 29,000 sq.ft of warehousing space. This enables the Group to
benefit from an improved layout as well as increased future revenue capacity.
During the period, the Group has also acquired 25 new vans on finance lease
with a capital value of £0.9m, including a cash outflow for deposits of
£0.3m. This enables the Group to meet higher sales demand.
On 5 November 2021, the Group successfully listed on London Stock Exchange's
AIM market and in doing so raised primary proceeds of £4.7m after costs.
Primarily in the second half, the Group also made strategic investments in
inventory in order to improve its SKU range and depth of product availability,
increasing stock holding to £14.4m from £11.4m in 2021. Inventory days
improved to 90 from 102 in the prior year, and working capital improvements
were also made in trade payables, improving our overall days payable position
to 52 days from 44 days in the prior year. The Group finished the period in a
net cash position of £3.9m as at 31 March 2022 and has no long-term lending
facilities outside of its finance leases.
Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Underlying profit before tax 6,441 7,154
Addback:
Finance costs 65 70
Loss on disposal of fixed assets (17) 48
Depreciation and amortisation 878 827
Revaluation of investments (195) (400)
Share based payment expense 75 -
Provision release (155) -
(Increase)/decrease in inventories (2,957) (7,110)
(Increase)/decrease in receivables 212 (1,197)
Increase/(decrease) in payables 4,926 3,513
Cash flow from underlying operating activities 9,273 2,905
Less:
Outflows for lease payments (657) (312)
Underlying operating cash flow for conversion 8,616 2,593
Operating cash conversion 119% 34%
Investing activities (774) (190)
Tax paid (2,042) (66)
Interest paid (54) (28)
Underlying free cash flow 5,746 2,309
Current trading and outlook
Competitor pressure has increased in FY23, coupled with a challenging market
backdrop, but despite this, the business has continued its momentum, gaining
market share and focusing on leveraging its cost base to maintain a strong
Adjusted EBITDA margin.
Our disciplined approach to margin management, capital allocation and cash
conversion demonstrated in FY22, provides us with solid foundations to deliver
our strategic objectives in FY23.
Consolidated Statement of comprehensive income
Year ended 31 March 2022
Notes Year ended Year ended Year ended Year ended
31 March 31 March 31 March 31 March
2022 2022 2022 2021
Underlying Non-underlying Statutory Statutory
£000 £000 £000 £000
Revenue 80,478 - 80,478 55,984
Cost of Sales (64,583) - (64,583) (44,064)
Gross profit 15,895 - 15,895 11,920
Administrative expenses (9,509) - (9,509) (5,261)
Share based payment expense (75) - (75) -
Operating exceptional charges 5 - (2,676) (2,676) -
Total Administrative expenses (9,584) (2,676) (12,260) (5,261)
Operating profit 6,311 (2,676) 3,635 6,659
Other income - - - 165
Fair value gains 195 - 195 400
Finance expenses (65) - (65) (70)
Profit before income tax 6,441 (2,676) 3,765 7,154
Tax on profit (1,028) 551 (477) (1,458)
Profit for the financial year 5,413 (2,125) 3,288 5,696
Items that will not be reclassified to profit or loss:
Other comprehensive income - - - 817
Tax relating to OCI - - - (155)
Total comprehensive income for the period 5,413 (2,125) 3,288 6,358
Earnings per share
Statutory basic and diluted earnings per share 3 3.22p 5.70p
All the results arise from continuing operations.
Consolidated Statement of financial position
At 31 March 2022
Notes At At
31 March 31 March
2022 2021
£000 £000
Assets
Non-current assets
Property, plant and equipment 841 5,623
Right-of-use assets 2,328 779
Investments 1,293 1,146
4,462 7,548
Current assets
Inventories 14,389 11,432
Trade and other receivables 2,627 2,839
Cash and cash equivalents 3,872 1,493
20,888 15,764
Total assets 25,350 23,312
Liabilities
Current liabilities
Trade and other payables 13,067 8,303
Lease liabilities 938 330
Current tax liabilities 145 1,557
Loans and borrowings - 233
14,150 10,423
Non-current liabilities
Trade and other payables - 17
Loans and borrowings - 1,304
Lease liabilities 1,324 422
Deferred tax 466 618
Provisions - 155
Total liabilities 15,940 12,939
Net assets 9,410 10,373
Shareholders' equity
Called up share capital 7 1,049 100,000
Share premium 7 4,694 -
Treasury shares 7 (4) -
Merger reserve 7 (100,000) (99,994)
Revaluation reserve - 1,235
Retained earnings 103,671 9,132
Total equity shareholders' funds 9,410 10,373
Consolidated Statement of changes in equity
Year ended 31 March 2022
Notes Called up share capital Share premium Merger reserve Treasury shares Revaluation reserve Retained earnings Total shareholders' equity
£000 £000 £000 £000 £000 £000 £000
At 31 March 2020 100,000 - (99,994) - 573 3,436 4,015
Profit for the year - - - - - 5,696 5,696
Other comprehensive income:
Revaluation of freehold property - - - - 817 - 817
Income tax relating to other comprehensive income - - - - (155) - (155)
Total comprehensive income 662 5,696 6,358
At 31 March 2021 100,000 - (99,994) - 1,235 9,132 10,373
Total comprehensive income for the period - - - - - 3,288 3,288
Contributions by and distributions to owners:
-Dividends paid 6 - - - - - (3,884) (3,884)
-Dividends in specie 6 - - - - - (5,175) (5,175)
-Issue of shares 7 49 4,954 - (4) - - 4,999
-Costs of share issue 7 (260) (260)
-Capital reduction 7 (99,000) - - - - 99,000 -
-Cancellation of E shares - - (6) - - - (6)
-Share based payment charge - - - - - 75 75
Sale of property - - - - (1,235) 1,235 -
At 31 March 2022 1,049 4,694 (100,000) (4) - 103,671 9,410
All the results arise from continuing operations.
Consolidated Cashflow
Year ended 31 March 2022
Notes Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Cash flows from operating activities
Profit for the period 3,288 5,696
Adjustments for non-cash items:
Depreciation of property, plant and equipment 189 428
Depreciation of right-of-use assets 689 399
(Profit)/loss on disposal of property, plant and equipment (17) 48
Fair value gains (195) (400)
Share based payment expense 75 -
Interest expense 65 70
Taxation charged 477 1,458
Release of provisions (155) -
Movements in working capital:
(Increase) in inventories (2,957) (7,110)
Decrease/(increase) in receivables 212 (1,197)
Increase in payables 4,926 3,513
Cash flow generated from operations 6,598 2,905
Corporation tax paid (2,042) (66)
Net cashflow generated from operations 4,556 2,839
Cash flows from investing activities
Purchase of property, plant and equipment (583) (216)
Deposits on right-of-use assets (304) -
Proceeds from sale of property, plant and equipment 65 26
Income from investments 48 -
Net cash used by investing activities (774) (190)
Cash flows from financing activities
Interest paid (11) (42)
Issue of ordinary share capital 7 4,740 -
Repayment of borrowings (1,537) (227)
Interest paid on lease liabilities (54) (28)
Principal repayment of lease liabilities (657) (312)
Equity dividends paid 6 (3,884) -
Net cash used by financing activities (1,403) (609)
Net increase in cash and cash equivalents 2,379 2,040
Cash and cash equivalents at the beginning of the period 1,493 (547)
Cash and cash equivalents at end of the period 3,872 1,493
Notes to the financial statements
Year ended 31 March 2022
1 General Information
On 5 November 2021 Marks Electrical Group plc (formerly Marks Electrical
Holdings) became a publicly listed Group, on the Alternative Investment Market
("AIM"), of the London Stock Exchange. The Group is domiciled in the UK and
its registered office is 4 Boston Road, Leicester, LE4 1AU.
The principal activity of the Group throughout the period is the supply of
domestic electrical appliances and consumer electronics in the United Kingdom.
2 Accounting policies
2.1 Basis of preparation
The financial statements of Marks Electrical Group plc for the year ended 31
March 2022 were authorised for issue by the Board of Directors on 7 June 2022
and signed on its behalf by Josh Egan.
This consolidated financial information has been prepared in accordance with
UK adopted international accounting standards.
There are no new standards, interpretations and amendments which are not yet
effective in these financial statements, expected to have a material effect on
the Group's future financial statements.
The financial information has been prepared on a going concern basis under the
historical cost convention. The financial information and the notes to the
financial information are presented in thousands of pounds sterling
('£'000'), the functional and presentation currency of the Group, except
where otherwise indicated.
The financial information set out in this document does not constitute the
statutory accounts of the Group for the financial years ended 31 March 2022 or
30 March 2021 but is derived from the 2022 Annual Report and Financial
Statements. The Annual Report and Financial Statements for 2022 will be
delivered to the Registrar of Companies in due course. The auditors have
reported on those accounts and have given an unqualified report, which does
not contain a statement under Section 498 of the Companies Act 2006.
2.2 Prior period comparatives
The comparative financial information for the full year ended 31 March 2021
has been derived from the financial information for that period included in
the Group's AIM admission document. The statutory financial statements for the
year ended 31 March 2021 were prepared under UK GAAP and have been filed at
Companies House. The auditor's report on those financial statements was
unqualified, did not include references to any matters to which the auditor
drew attention by way of emphasis without qualifying its report and did not
contain a statement under section 498(2)-(3) of the Companies Act 2006.
As part of the process of Admission to listing on the Official List and to
trading on the London Stock Exchange, an accountant's report, undertaken by
BDO LLP, in accordance with the Standards for Investment Reporting 2000 ("SIR
2000") issued by the Auditing Practices Board in the United Kingdom, was
issued on the historical information included in the Prospectus. The
accountant's report, dated 2 November 2021, included an unqualified opinion on
the historical information presented.
2.3 Going concern
The Group has traded positively during the year, delivering sales growth of
44%, whilst maintaining a 7.8% operating margin and net cashflow of £2.4m.
Management have prepared detailed financial projections for a period of 12
months from the date of signing the financial statements ('Review Period').
These projections are based on the Group's detailed annual business plan.
Sensitivity analysis has been performed to model the impact of more adverse
trends compared to those included in the financial projections in order to
estimate the impact of severe but plausible downside risks.
After reviewing the forecasts and risk assessments and making other enquiries,
the board has formed the judgement at the time of approving the financial
statements that there is a reasonable expectation that Group has adequate
resources to continue in operational existence for at least twelve months from
the date of approval of these financial statements.
2.4 Consolidation
The Group financial statements include those of the parent company and its
subsidiaries, drawn up to 31 March 2022. Subsidiaries are entities over which
the Group obtains and exercises control through voting rights. Income,
expenditure, unrealised gains and intra-Group balances arising from
transactions within the Group are eliminated.
At the time of the IPO, the acquisition of the trading subsidiaries was
achieved by way of share for share exchange and the difference between the par
value of the shares issued and the fair value of the cost of investment was
recorded as an addition to the merger reserve. The parent company statement of
financial position shows a merger reserve of £59,999,999 and an investment of
£159,999,998.
On a Group basis, an accounting policy was adopted based on the predecessor
method as is not a business combination but rather a group re-organisation and
thus falls outside the scope of IFRS 3. IFRS does not specifically state how
group re-organisations are accounted for. Therefore, in accordance with IAS 8,
the Directors have considered the accounting for group re-organisations using
merger accounting principles, as set out in FRS 102, The Financial Reporting
Standard applicable in the UK and Republic of Ireland. Under this method, the
financial statements of the parties to the combination are aggregated and
presented as though the combining entities had always been part of the same
group. The investment by Marks Electrical Group plc in Marks Electrical
Limited was eliminated and the difference between the fair value and nominal
value of the shares was adjusted through the merger reserve in the Group
statement of financial position.
3. Earnings per share
3.1 Statutory earning per share
(a) Earnings
Year ended
31 March Year ended
2022 31 March
£000 2021
£000
Statutory earnings 3,288 5,696
(b) Number of shares
Year ended
31 March Year ended
2022 31 March
2021
Basic weighted average number of shares 101,979,620 100,000,000
(c) Earnings per share
Year ended
31 March Year ended
2022 31 March
2021
Statutory earnings
Basic statutory earnings per share* 3.22p 5.70p
3.2 Non-Statutory earning per share
(a) Earnings
Year ended
31 March Year ended
2022 31 March
£000 2021
£000
Statutory earnings 3,288 5,696
Add:
Exceptional costs 2,125 -
Less:
Fair value gains net of tax (158) (400)
Adjusted earnings 5,255 5,296
(b) Number of shares
Year ended
31 March Year ended
2022 31 March
2021
Shares in issue following IPO 104,949,050 104,949,050
(c) Earnings per share
Year ended
31 March Year ended
2022 31 March
2021
Adjusted earnings
Basic adjusted earnings per share* 5.01p 5.05p
Adjusted earnings per share is a non-statutory measure the Group is using to
provide comparability and ease of understanding to the users of the financial
statements. This includes adjustments to the earnings and the number of
shares.
Adjusted earnings exclude all exceptional costs, plus the add back of the
revaluation in the investment of the Group's buying group, as disclosed above.
The number of ordinary shares as at 5 November 2021 through to 31 March 2022
have been used as the basis for the current and prior periods adjusted
earnings per share calculation. The shares in issue since IPO represents an
indication of the future weighted average number of ordinary shares for
evaluating the performance of the Group.
4. Operating segments
IFRS 8 'Operating Segments' requires the Group to determine its operating
segments based on information which is provided internally. Based on the
internal reporting information and management structures within the group, it
has been determined that there is only one operating segment, being the Group,
as the information reported includes operating results at a consolidated Group
level only (the 'Operating group'). There is also considered to be only one
reporting segment, which is the Group, the results of which are shown in the
consolidated statement of comprehensive income.
Management has determined that there is one operating and reporting segment
based on the reports reviewed by senior management which is the chief
operating decision-maker. Senior management is made up of Executive Directors
and heads of departments. Senior management is responsible for the strategic
decision-making of the Group.
5. Non-underlying items (exceptional costs)
During the year the Group incurred exceptional one-off expenditure in
administrative expenses in relation to the Initial Public Offering of the
business on the Alternative Investment Market ("AIM") of the London Stock
Exchange and historical tax arrangements (as disclosed in the Admission
document). The nature of the costs incurred primarily relate to tax, legal and
professional fees, linked to the various workstreams involved in the IPO
process. This amounted to £2,676,000 and is non- recurring in nature and
hence has been removed from the underlying result, to better represent ongoing
trading performance.
The Group has benefited from £551,000 of tax relief in relation to the
non-underlying items. This tax relief has also been classed as non-underlying
for purpose of the financial statements.
6. Dividends
Year ended Year ended
31 March 31 March
2022 2021
£000 £000
Dividends declared during the period:
Dividends paid during the period* (3.88p per share) 3,884 -
Dividend in specie* (5.18p per share) 5,175 -
9,059 -
The Board is recommending a final dividend of 0.67p per share (£703,000) that
will be subject to final approval by the Board at the 2022 AGM. A dividend
payout of 0.67p represents a payout ratio of 20%, with the 0.67p being a
typical two-third share of the annualised amount. The dividend has not been
accrued into the consolidated statement of financial position
*All dividends paid and issued in the year, were done so by Marks Electrical
Limited not Marks Electrical Group plc and are disclosed due to this being the
first year reporting under merger accounting, refer to the accounting policies
for further details. Dividends paid and issued during the period totalled
£9,059,471 (FY21: £nil), and were issued prior to Admission. The dividend in
specie related to a group restructure prior to Admission, the consideration
for the dividend in specie was the transfer of 100% of the share capital of
Mavrek Properties (previously an indirect subsidiary of the Group).
7. Share capital and reserves
At 31 At 31
March March
Allotted, called up and fully paid 2022 2022
Number £
Incorporation 14 July 2021 £1.00 shares 1 1
Issue of share capital 8 October 2021 £1.00 shares 99,999,999 99,999,999
Capital reduction 11 October 2021 (see below) - (99,000,000)
Issue of share capital 5 November 2021 £0.01 shares 4,949,050 49,491
104,949,050 1,049,491
Share Capital
Share capital compromises the nominal value of the Company's shares of £0.01
each.
On 11 October 2021 the Company issued a statement of capital reduction was
issued to reduce the nominal value of the 100,000,000 shares in issue at that
date from £1.00 per share to £0.01. This resulted in a reduction of share
capital of £99,000,000 and an increase in retained earnings of £99,000,000.
Share premium
The share premium reserve is the premium paid on the Company's £0.01 Ordinary
shares. During the year 4,545,454 shares
were issued for £1.10 each, resulting in a net premium of £4,694,000,
consisting of £4,954,000 premium paid less £260,000 placing costs.
Merger reserve
The merger reserve relates to the merger relief under section 612 of the
Company's Act, on the acquisition of Marks Electrical Limited, a 100% owned
subsidiary of the Group.
On 8 October 2021, Marks Electrical Group plc acquired the 100 ordinary shares
(100% of the share capital) in Marks Electrical Limited, in return for the
issue of 99,999,999 ordinary shares with a nominal value of £1.00 each, at a
price of £1.60 each, bringing the total consideration to £160,000,000.
This transaction falls under section 612 of the Companies Act and merger
relief was applied. On consolidation under the predecessor method a merger
reserve of £100,000,000 is recognised.
Treasury shares
Treasury reserve relates to shares acquired by the Group's employee benefit
trust. At the year end the Group held 403,596 treasury shares. Total
consideration paid for the treasury shares was £4,036.
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