REG - Marks Electrical Grp - HY25 Interim Results
12/11/2024 07:00
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RNS Number : 7916L Marks Electrical Group plc 12 November 2024
Results for the six months ended 30 September 2024
Marks Electrical Group plc ("Marks Electrical" or "the Group"), a fast growing
online electrical retailer, today announces its unaudited results for the six
months ended 30 September 2024 ("the Period" or "H1-25" or "first half").
Financial highlights
· Robust first half trading period with revenue growth of 9.3% to
£58.8m (H1-24: £53.9m).
· Particularly strong volume growth with Major Domestic appliances
achieving 13% volume growth during the Period and Consumer Electronics over
90% volume growth against H1-24.
· Adjusted EBITDA((1)) of £2.0m (H1-24: £2.3m) at 3.4% margin
(H1-24: 4.3%).
· Gross product margin was 24.6% (H1-24: 24.9%), with underlying
margin expansion in Major Domestic Appliances offset by a strong mix-shift
towards lower margin Consumer Electronics.
· Continued focus on working capital management and disciplined
approach to capital expenditure delivered free cash flow of £1.7m (H1-24:
£1.7m).
· Adjusted EPS of 0.72p (H1-24: 1.11p)((2)), Statutory EPS of
(0.79)p (H1-24: 0.83p).
· Robust, debt-free balance sheet with closing net cash position of
£6.7m((3)) (H1-24: £10.9m), supporting an interim dividend maintained at
0.30p per share (H1-24: 0.30p), to be be paid on 20 December 2024 to
shareholders who are on the register at the close of business on 29 November
2024, and shares will be marked ex-dividend on 28 November 2024.
Operational highlights
· Successful implementation and switchover to new business-wide,
Enterprise Resource Planning ("ERP") system, Microsoft Dynamics 365, replacing
our legacy Everest platform.
· Completed transition away from the Euronics buying group,
providing greater opportunities to develop deeper relationships with our
manufacturer brand partners and drive further growth in revenue and margin.
· Continued growth in Major Domestic Appliances and Consumer
Electronics market share.
· Maintained our Trustpilot score of 4.8, reaching over 85,000
reviews with 95% of those reviews being 4 and 5 star, demonstrating the
enduring strengths of our best-in-class customer proposition, despite
significant operational headwinds brought about by changing our supply
relationships and implementing our new ERP.
Outlook
· Outbound deliveries in September and to a lesser extent, October
were reduced to enable the successful implementation and switchover to our new
ERP system. Whilst this held back H2-25 growth, we still anticipate a recovery
in revenue growth in the second half.
· During the Period we saw a significant reduction in average order
values (-9%) as demonstrated by our volume growth outstripping the pace of our
revenue growth. Whilst this is positive from a customer acquisition and market
share perspective, it means that distribution costs represent a higher
proportion of revenue, which ultimately has a detrimental impact on profit
margin and unit economics, given the relatively fixed cost of delivery. As a
result, we now expect to achieve revenue in FY25 of circa £120.0m with EBITDA
in excess of £4.0m.
· Going forward, we will actively return to our historically
successful premium focus in order to deliver an uplift in margin performance.
We recognise this may have medium-term implications on the speed of our
revenue growth, but our objective is to drive a sustainable margin recovery
from the levels seen in H1-25.
· Looking beyond FY25, we will also harness our disciplined
approach to cost control to best manage the significant increases brought
about by the recently announced rises to employer national insurance and the
national minimum wage, following the UK Government's Autumn Budget. We
estimate the changes to cost the business in the region of £0.75m per annum.
Mark Smithson Chief Executive Officer, commented:
"The first half has included two of the largest structural changes the
business has seen, the departure from Euronics and the implementation of our
new ERP system, but despite these, we continued to remain profitable and cash
generative and grew revenue by 9.3% to £58.8m.
These investments, while involving short-term challenges, have been made to
position the business for long-term success. They will ensure that Marks
Electrical is well placed to benefit when broader market sentiment picks up
and will give us even greater vertical integration, visibility and control,
enabling us to deliver growth, returns and value for all our stakeholders.
I'm proud of the strong operational focus demonstrated throughout the Period
from our team of dedicated colleagues, which has allowed us to maintain our
4.8 Trustpilot rating during what has been a challenging period of change for
the business, and the patience of both our customers and suppliers during this
period was highly appreciated.
As the consumer has continued to trade-down, we have evolved our business to
meet those needs, perhaps leaning too much into non-premium products, which
has led to erosion in our premium average order value. The knock-on
implications of this on our distribution costs are something that we need to
actively address moving forward by pivoting back to our historically premium
focussed operating model.
Whilst this pivot back to premium is likely to have an impact on the speed of
our revenue growth, we are focussed on continuing to execute our strategy of
driving profitable market share gains, ultimately enabling the Group to
deliver long-term value creation and become the UK's leading premium
electrical retailer."
(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) Adjusted EPS is a non-statutory measure of profit after tax, adjusted for
exceptional items, ERP replacement project, share-based payment charges and
revaluation of investments, over the total diluted ordinary number of shares
in issue.)
((3) Net cash/(debt) represents cash and cash equivalents less financial
liabilities (excluding lease liabilities))
The information contained within this announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended. Upon the publication of this announcement
via a Regulatory Information Service, this inside information is now
considered to be in the public domain.
Enquiries:
Marks Electrical Group
plc Via
DGA Group:
Mark Smithson (CEO)
Tel: +44 (0)20 7664 5095
Josh Egan (CFO)
DGA Group (Financial PR)
Jonathon Brill / James Styles / Nishad Sanzagiri
Tel: +44
(0)20 7664 5095
markselectrical@dgagroup.com (mailto:markselectrical@dgagroup.com)
Canaccord Genuity (NOMAD and Broker)
Max Hartley / George Grainger
Tel: +44 (0) 207 886 2500
About Marks Electrical
Marks Electrical is a fast growing, highly scalable, technology driven
e-commerce electrical 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 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) and Consumer Electronics (CE) market,
estimated to be worth approximately £7 billion.
Primarily through its simple, clear and intuitive website -
markselectrical.co.uk - the Group offers over 4,500 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/) .
Group Chief Executive Officer's review
The first half of FY25 has been a period of significant change for the
business:
· We successfully implemented our new business-wide, Enterprise
Resource Planning ("ERP") system, Microsoft Dynamics 365, replacing our legacy
Everest platform; and
· We exited the Euronics buying group and established new trading
relationships with over 50 brand partners.
We continued to gain market share and grew revenue 9.3% to £58.8m, whilst
generating a profit and maintaining a net cash position, despite operational
headwinds created by the above activities.
Over the past two years, consumers have been highly price-conscious, which,
given our premium focus, continues to have an impact on our average order
value, resulting in customer order volumes growing faster than revenue. This
impact has diluted our margin, when taking into account the relatively fixed
cost of delivery.
Our objective in H1-25 was to maintain stability whilst undertaking the
significant operational changes of leaving the buying group and implementing a
new ERP system, measures that will ensure the business is better positioned
for long-term success. As a result of these factors, during the Period our
average order value has drifted further which has impacted our profitability
year on year.
Our current H1-25 EBITDA margin of 3.4% is not where we want to position the
business and as we look ahead to H2-25 and beyond, our objective will be to
pivot back to premium products and enhance the unit economics of each
delivery, in order to start improving profitability from current levels,
ultimately enabling the Group to deliver long-term value creation and position
us as the UK's leading premium electrical retailer.
Market share - a small share of a big opportunity
We are predominantly focussed on the Major Domestic Appliances ("MDA") market
but have also been rapidly expanding our footprint in the Consumer Electronics
("CE") market, primarily in the television category.
During the first half, the MDA market was broadly flat, with the CE market
growing by 3.3% as a result of Euro 2024. During this period, we were able to
increase our market share to 3.0% in MDA (H1-24: 2.9%) and 0.8% in CE (H1-24:
0.5%). Furthermore, we started to add focus to Small Domestic Appliances,
where we are taking a specific and premium approach to our growth strategy,
albeit it is still early days for this part of our business.
Whilst our market share growth in MDA has not been as strong as in prior
periods, due to the lower average order values, we continued to acquire
customers and grow the brand awareness of Marks Electrical, a key pillar of
our strategy. Furthermore, the excellent growth we saw in Consumer Electronics
added additional customers that were either returning to or experiencing Marks
Electrical for the first time.
Our tiny share of such an enormous market with significant scope for market
share gains underpins our strategy for driving brand awareness in the years to
come.
Our strategy for growth
Our strategic approach is very clear - we put the customer at the heart of
everything we do and have four key elements to our strategy for growth:
Customer proposition
Our operating model continues to be unique across the MDA sector in that we
consistently offer next day delivery for in-stock items, throughout our wide
range of products, to over 90% of the UK population. In addition, our
installation service offering provides customers with the ability to add
integrated, gas, electric and television installation services to their order,
which can be carried out within a rapid time frame.
This proposition centres around the vertical integration of our delivery
model, with our own fleet, employed drivers and installers, in-house training
academy, and our centralised single-site distribution centre, maximising
efficiency and service quality.
During the period we have made further advancements in developing our customer
proposition, including:
· Implementing our new ERP system to drive strategic improvements
in our operational and customer services activities both currently and for the
years ahead;
· Carrying out further training in our ME academy, our leading
in-house product installation facility for driver, installer and customer
service training;
· Further developing our website to continually improve the
customer journey; and
· Maintaining our excellent Trustpilot score of 4.8.
During the Period, our exit from Euronics has also strengthened our direct
brand relationships allowing us direct access to the best quality products for
customers and competitive prices and the enhanced flexibility that comes with
having a national account.
Brand awareness
A key to our success is to grow our brand awareness.
Due to the activity of leaving the buying group and implementing our new ERP
system, we carried out fewer brand awareness activities in H1-25 versus
previous years. This allowed us to focus on performance marketing as a
priority with some brand awareness in targeted locations.
The locations on which we carried out smaller scale brand awareness activities
saw elevated order growth in key geographies. Furthermore, as this was a year
of strategic change, in which we exited Euronics, we also spent significant
time developing our relationships with our brand partners' marketing teams,
in order to offer them innovative opportunities to advertise with us going
forward.
Whilst we are proud of the progress we have made, we also recognise that
there is significant opportunity for further brand awareness growth, as more
people across the UK come into contact with our brand for the first time.
Operational capacity
Across the four pillars of our strategy, operational capacity is one that was
in significant focus in FY24 as we invested materially in our warehouse
capabilities and fleet size. In FY25, this activity has been centred around
technology and saw the replacement of our legacy Everest ERP system, with
Microsoft Dynamics, a solution much more tailored to our growth aspirations.
Following our significant expenditure of £4.6m on the project, through FY24
and FY25, we successfully went live in September 2024 and whilst we faced a
number of inevitable teething issues, we are proud to report that the move
across to the new system was a success and is powering Marks Electrical across
our business operations.
We see significant scope for further technology enhancements now that
Microsoft Dynamics is in place, enabling us to improve our level of automation
and sophistication, both improving the customer journey and operational
leverage.
We continue to believe that investing across our business in people, processes
and equipment will ensure that we retain talent and provide them with the best
tools to provide customers with a market-leading experience.
Financial performance
Our profitability was impacted in the first half due to two major factors:
· Significant growth in Consumer Electronics versus Major Domestic
Appliances creating a negative margin mix effect; and
· The trade down from consumers impacting the premiumisation of our
product offering. An impact that has been market driven but has been
particularly exacerbated in our business and impacts the distribution cost of
delivery.
Additionally, the operational headwinds faced by the departure from the buying
group, as well as the ERP replacement were also contributing factors to our
performance during H1-25.
Despite this, we continued to deliver volume growth in excess of 18.0%,
revenue growth of 9.3%, remained profitable at 3.4% EBITDA margin and retained
a healthy net cash position of £6.7m, with £1.7m of underlying free cash
flow.
As we look forward, we aim to pivot the business back towards premium
products, improving the underlying unit economics. This will drive margin
improvements in the years ahead and be a contributing factor in our
strengthening net cash position.
Our ROCE remains strong at 20% in H1-25 and we believe this combination of
profitable market share growth, high return on capital and dividend income
provides a compelling proposition to drive attractive long-term shareholder
returns and despite lower profitability in the current year, we are focussed
on driving improvements in FY25 and beyond.
Outlook - focussed on delivering profitable market share growth
Whilst FY25 is a year of strategic investment and change, with multiple
significant operational developments impacting performance, we are still
growing volume and revenue, gaining market share, remain profitable and
retaining our net cash position. This is all being achieved whilst providing
market-leading customer service against a very competitive back-drop.
As momentum continues to develop and our brand awareness increases, our focus
on operational excellence and cash flow generation, combined with our healthy
net cash position, provides us with a robust platform to generate continued
profitable market share growth and become the UK's leading premium electrical
retailer.
Mark Smithson
Chief Executive Officer
Financial review
The Group made a robust start to FY25, against a broadly flat market
back-drop. Volume growth was very strong, at over 18.0%, whilst revenue growth
stood at 9.3% due to a material decline in average order value. Profitability
was impacted by both the significant mix shift towards Consumer Electronics
during the Period and in addition, the lower average order values impacting
distribution costs.
As a result of these impacts, we expect lower profitability in the current
year but are focussed on pivoting back to a more premium product mix in order
to recover the unit economics and ultimately the margin.
Revenue and gross product profit
In H1-25, the Group delivered revenue growth of 9.3% to £58.8 million. Gross
product profit margin was 24.6%, down 30bps from H1-24, driven by product mix
as a result of our significant growth in Consumer Electronics, which typically
attracts a lower margin than Major Domestic Appliances. This was partially
offset by underlying margin growth in our Major Domestic Appliances business.
We expect gross margin to improve marginally in H2-25.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Revenue 58,844 53,858 114,262
Cost of Sales* (44,346) (40,471) (85,230)
Gross product profit 14,498 13,387 29,032
Gross product profit margin 24.6% 24.9% 25.4%
Distribution and installation costs
During the Period, we saw a significant reduction in average order values
(-9%) as demonstrated by our volume growth outstripping the pace of our
revenue growth. Whilst this is positive from a customer acquisition
perspective, the knock-on implication of this is that distribution costs
represent a higher proportion of revenue, which ultimately has a detrimental
impact on profit margin and unit economics.
We expect distribution and installation costs to remain broadly flat as a
percentage of sales during H2-25.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Revenue 58,844 53,858 114,262
Distribution & installation costs (5,825) (4,907) (11,089)
Distribution & installation costs as % of revenue 9.9% 9.1% 9.7%
Advertising and marketing costs
Advertising and marketing cost were tightly controlled at 5.3% of revenue,
versus 5.6% in the prior year. The Group has continued to invest in brand
awareness across various channels, including digital marketing, social, radio
and out-of-home campaigns.
Full year marketing costs are expected to be 5.0% of revenue, reflecting lower
spend in H2-25.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Revenue 58,844 53,858 114,262
Advertising and marketing costs (3,097) (2,995) (5,754)
Advertising and marketing as % of revenue 5.3% 5.6% 5.0%
Other operating expenses (excluding depreciation)
Other operating expenses are in line with FY24 at 6.0% of revenue, as we
retained a tight control on our operating cost base.
Due to increased technology costs as a result of the new ERP system
implementation, we anticipate overheads in H2-25 to be within the range of 6.5
- 7.0% of revenue but are actively working on activities to mitigate this
increase.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Revenue 58,844 53,858 114,262
Other operating expenses (3,553) (3,173) (6,827)
Other operating expenses as % of revenue 6.0% 5.9% 6.0%
Adjusted earnings before Interest, Tax, Depreciation and Amortisation
("EBITDA")
Six months ended Six months ended
30 September 30 September
2024 2023
£000 £000
Statutory profit after tax (827) 873
Addback:
Exceptional items net of tax 1,411 439
Underlying profit after tax 584 1,312
Addback:
Underlying tax charge 236 291
Underlying profit before tax 820 1,603
Addback:
Net finance (income)/costs (122) (55)
Share based payment costs 233 149
Less:
Buying group rebates - (195)
Adjusted EBIT 931 1,502
Depreciation and amortisation 1,090 772
(Profit)/Loss on disposal of fixed assets 1 38
Adjusted EBITDA 2,022 2,312
Adjusted EBITDA margin 3.4% 4.3%
The Group achieved Adjusted EBITDA for the period of £2.0m representing a
margin of 3.4%, down 90bps against H1-24. This decrease in margin year on year
is primarily due to category mix and distribution costs, as previously
detailed.
Statutory Profit after tax
During the Period, the statutory loss after tax was £0.8m, down £1.7m versus
H1-24. This decrease is primarily driven by exceptional costs incurred in
relation to our ERP implementation project of £1.9m incurred in the Period.
ERP implementation project
Costs of £1.9m (H1-24: £0.4m) were incurred in the Period in relation to our
ERP implementation project, which was successfully implemented during
September 2024. For the purposes of aiding comparability, these costs are
removed from adjusted financial performance measures.
Share-based payments
The Group issued new awards under its long-term incentive plan during the year
to senior and junior management. This,
combined with previously issued awards resulted in an expense of £0.2m in the
income statement (H1-24: £0.1m).
This charge and related professional fees are removed from adjusted financial
performance measures.
Depreciation
Depreciation increased to £1.1m (H1-24: £0.8m), driven by:
· Fleet modernisation and growth to accommodate the increase in
sales volumes;
· A renewal of the main property lease at 4 Boston Road, Leicester;
and
· Leasehold improvements added during FY24 and H1-25 including;
office refurbishment to increase capacity, dock levellers, the ME Academy
training facility and new racking to improve warehouse efficiency.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Right of use assets: vans 327 203 393
Right of use assets: property 300 282 565
Property, plant and equipment 464 287 758
Total depreciation 1,091 772 1,716
Taxation
Tax credits and charges are recognised based on management's best estimate
given the information available at the interim period. The credit for the six
months ended 30 September 2024 was £234,000 (H1-23: £291,000 charge). The
key driver of the tax credit is in relation to the ERP expenditure. The
Group's adjusted consolidated effective tax rate for the six months ended 30
September 2024 was 25.0% (H1-24: 25.0%). The deferred tax liability is
expected to reverse within 36 months.
Earnings per share
Basic earnings per share ("EPS"), which is calculated for both the current and
comparative period based upon the weighted average number of shares in the
year, was a loss of (0.79)p per share (H1-24: earnings 0.83p).
Adjusted EPS was 0.72p per share (H1-24: 1.11p per share), the table below
shows the reconciliation between statutory and adjusted earnings. See Note 3
to the financial statements for further details.
Six months ended Six months ended
30 September 30 September
2024 2023
£000 £000
Statutory profit after tax (827) 873
Addback:
Exceptional items 1,881 439
Tax effect of exceptional items (470) (110)
Underlying profit for the period 584 1,202
Charges relating to share-based payments net of tax 175 111
Buying group rebates - (146)
Adjusted profit for earnings per share 759 1,167
Fully diluted number of ordinary shares 104,949,050 105,248,083
Adjusted earnings per share 0.72p 1.11p
Cashflow and statement of financial position
During H1-25 the Group achieved an underlying cash flow from operations of
£2.6m and free cash flow of £1.7m. This operational cashflow generation is
primarily due to working capital improvements, and cashflow from trading.
The Group has invested in several areas of the business during H1-25 to
continue the long-term objective of accommodating growth and maximising the
potential of the current site. Key additions include a new office space,
increased fleet capacity through the addition of 12 vehicles, warehouse
improvements to increase efficiency and stock capacity, and yard improvements
to optimise daily procedures. In H1-25 the total capital expenditure amounted
to £0.5m, which was significantly lower than the high level of expenditure in
the prior year (H1-24: £1.4m).
Heading into the 2024 peak trading period, we significantly increased the
inventory levels with a particular focus on Consumer Electronics. This
resulted in working capital outflow of £7.15m but was partly offset by an
increase in payables to suppliers of £6.87m.
The Group closed the period in a comfortable net cash position of £6.7m
versus £7.8m at FY24 and £10.9m at H1-24.
Six months ended Six months ended
30 September 30 September
2024 2023
£000 £000
Underlying profit before tax 820 1,603
Addback:
Finance (income)/costs (122) (55)
(Profit)/Loss on disposal of fixed assets 1 38
Depreciation and amortisation 1,091 772
Share based payment cost 233 148
(Increase)/decrease in inventories (7,151) 227
(Increase)/decrease in receivables 860 (1,188)
Increase/(decrease) in payables 6,870 2,533
Payables movement in relation to ERP - (236)
Underlying cash flow from operating activities 2,602 3,842
Less:
Outflows for lease payments (612) (484)
Underlying operating cash flow for conversion 1,990 3,358
Operating cash conversion 98% 145%
Investing activities (508) (1,350)
Tax received/(paid) 76 (350)
Interest received/(paid) 120 45
Underlying free cash flow 1,678 1,703
RCF
During the Period we successfully established a Revolving Credit Facility
("RCF") with Lloyds Bank, the Group's primary banking partner. This was
structured as a £4.0m committed undrawn facility and a £1.0m overdraft
facility. The purpose of the facility is to provide flexibility for working
capital during peak trading periods, especially in light of new trading
relationships now we are outside of the Euronics buying group. Whilst we
intend on strategically maintaining a net cash position, this facility will
provide the Group with additional comfort during periods of inventory build.
Events after the reporting period
There have been no material events to report after the end of the reporting
period.
Consolidated Statement of comprehensive income
Six months ended 30 September 2024
Notes Six months ended Six months ended Six months ended Six months ended Year ended
30 September 30 September 30 September 30 September 31 March
2024 2024 2024 2023 2024
Underlying Non-underlying Statutory Statutory Statutory
£000 £000 £000 £000 £000
Revenue 58,844 58,444 53,858 114,262
Cost of Sales (44,346) (44,346) (40,276) (85,230)
Gross profit 14,498 14,498 13,582 29,032
Distribution costs (5,825) (5,825) (4,907) (11,089)
Administrative expenses (7,975) (1,881) (9,856) (7,566) (17,455)
Operating profit 698 (1,881) (1,183) 1,109 488
Finance income 168 168 79 167
Finance expenses (46) (46) (24) (39)
Profit before income tax 820 (1,061) 1,164 616
Tax on profit 4 (236) 470 234 (291) (189)
Profit for the financial period 584 (1,411) (827) 873 427
Total comprehensive income for the period 584 (1,411) (827) 873 427
Earnings per share
Statutory basic and diluted earnings per share (0.79p) 0.83p 0.41p
Consolidated Balance sheet
At 30 September 2024
Notes At At
30 September 31 March
2024 2024
£000 £000
Non-current assets
Property, plant and equipment 2,545 2,671
Right-of-use asset 2,947 1,152
Trade and other receivables 129 71
5,621 3,894
Current assets
Inventories 20,165 13,015
Trade and other receivables 8,566 9,172
Current tax assets 619 461
Cash and cash equivalents 6,679 7,817
36,029 30,465
Total assets 41,650 34,359
Current liabilities
Trade and other payables (25,552) (18,501)
Lease liabilities (1,005) (621)
(26,557) (19,122)
Non-current liabilities
Lease liabilities (1,938) (534)
Deferred tax liabilities 4 (991) (991)
Total liabilities (29,486) (20,647)
Net assets 12,164 13,712
Shareholders' equity
Called up share capital 1,049 1,049
Share premium 4,575 4,815
Treasury shares (6) (3)
Merger reserve (100,000) (100,000)
Retained earnings 106,546 107,851
Total shareholders' equity 12,164 13,712
The interim financial statements of Marks Electrical Group plc were approved
by the Board on 11 November 2024 and signed on its behalf by:
Josh Egan
Chief Financial Officer
Marks Electrical Group plc
Consolidated Statement of changes in equity
Six months ended 30 September 2024
Notes Called up share capital Share premium Merger reserve Treasury shares Retained earnings Total shareholders' equity
£000 £000 £000 £000 £000 £000
At 31 March 2023 1,049 4,694 (100,000) (4) 108,085 13,824
Profit for the financial year - - - - 427 427
Contributions by and distributions to owners:
-Dividends paid - - - - (1,007) (1,007)
-Share options and LTIP charge - - - - 346 346
Sale of treasury shares - 121 - 1 - 122
At 31 March 2024 1,049 4,815 (100,000) (3) 107,851 13,712
Loss for the period - - - - (827) (827)
Contributions by and distributions to owners:
-Dividends paid - - - - (690) (690)
-Share based payment charge - - - - 212 212
-Purchase of treasury shares - (240) - (3) - (243)
At 30 September 2024 1,049 4,575 (100,000) (6) 106,546 12,164
All the results arise from continuing operations.
Marks Electrical Group plc
Consolidated Cash flow
Six months ended 30 September 2024
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Cash flows from operating activities
(Loss)/profit for the period (827) 873 427
Adjustments for non-cash items:
Depreciation of property, plant and equipment 464 287 758
Depreciation of right-of-use assets 627 485 958
(Profit)/loss on disposal of property, plant and equipment 1 38 71
Share based payment expense 233 148 362
(Interest income) (168) (79) (167)
Interest expense 46 24 39
Taxation charged (234) 291 189
Movements in working capital:
(Increase)/decrease in inventories (7,151) 227 1,185
Decrease/(increase) in receivables 860 (1,188) (3,535)
Increase in payables 6,870 2,533 2,101
Cash flow generated from operations 721 3,639 2,388
Corporation tax paid 76 (350) (743)
Net cash flow generated from operations 797 3,289 1,645
Cash flows from investing activities
Purchase of property, plant and equipment (355) (1,367) (2,023)
Deposits on right-of-use assets (154) - (144)
Proceeds from sale of property, plant and equipment - 17 52
Proceeds from sale of right-of-use assets - - 33
Interest received 168 69 157
Net cash used by investing activities (341) (1,281) (1,925)
Cash flows from financing activities
Sale/(purchase) of shares (244) 122 122
Interest paid on lease liabilities (48) (24) (42)
Principal repayment of lease liabilities (612) (484) (948)
Equity dividends paid (690) (693) (1,007)
Net cash used by financing activities (1,594) (1,079) (1,875)
Net increase in cash and cash equivalents (1,138) 929 (2,155)
Cash and cash equivalents at the beginning of the period 7,817 9,972 9,972
Cash and cash equivalents at end of the period 6,679 10,901 7,817
Marks Electrical Group plc
Notes to the unaudited financial statements
Six months ended 30 September 2024
1 General Information
Marks Electrical Group plc (the "Company") is a public limited company
incorporated in the United Kingdom under the Companies Act 2006 (registration
number 13509635). The Company is domiciled in the United Kingdom and its
registered address is 4 Boston Road, Leicester, LE4 1AU. The Company's
ordinary shares are listed on the AIM market, of the London Stock Exchange.
The principal activity of the Company and its subsidiaries (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
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 unless otherwise specified within these accounting
policies. The financial information and the notes to the financial information
are presented in thousands ('£'000') except where otherwise indicated. The
functional and presentation currency of the Group is pound sterling.
The figures for the period to 30 September 2024 and the comparative period to
30 September 2023 have not been audited or reviewed. The figures for 31 March
2024 have been extracted from the financial statements for the year to 31
March 2024, which have been delivered to the Registrar of Companies. The
interim financial statements do not constitute statutory accounts within the
meaning of the Companies Act 2006.
The policies have been consistently applied to all periods presented, unless
otherwise stated. The principal accounting policies adopted in the preparation
of the financial statements are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
2.2 Going concern
The Group has traded positively during the period, delivering sales growth of
9.3%, whilst achieving a net operating cashflow of £0.8m.
Management have prepared detailed financial projections for the period to 30
November 2025. 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.
The key sensitivity assumptions applied include:
• A material slow-down in e-commerce sales;
• A significant increase in goods sold.
Mitigating actions available to the Group were applied and the Board
challenged the assumptions used.
Marks Electrical Group plc
Notes to the unaudited financial statements (continued)
The Board of Directors has completed a rigorous going concern assessment and
taken the following actions to test or enhance the robustness of the Company's
liquidity levels for the period to 30 November 2025. As part of its
assessment, the Board has considered:
• The cash flow forecasts and the revenue projections for the Company;
• Reasonably possible changes in trading performance, including a severe yet
plausible downside scenario and other
extreme scenarios which are not plausible;
• The Company's robust policy towards liquidity and cash flow management;
• The Company's ability to successfully manage the principal risks outlined
in this report;
• The current cost of living crisis;
• Inflation pressures facing the Company and its employees; and
• The impacts of leaving Euronics.
In total, six stress tests were performed on the base case with varying
severities and multiple combinations, under the severe yet plausible scenario
the Company remains in a cash positive position, with no mitigating actions
required. Only in the extreme, not plausible, scenario referenced above, is
where mitigating action would be required. The mitigating response that would
be necessary is short-term inventory level management, which would not be
considered to have any long-term impacts on the Company's performance.
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 the Company has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of these financial statements.
2.3 Consolidation
The Group financial statements include those of the parent Company and its
subsidiaries, drawn up to 31 March 2024. Subsidiaries are entities over which
the Company 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 £nil and an investment of
£60,656,676.
On a Group basis, an accounting policy was adopted based on the predecessor
method as this 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.
2.4 Operating exceptional charges
The Group presents exceptional items on the face of the statement of
comprehensive income these are material items of income and expense which the
Directors consider, because of their size or nature and expected
non-recurrence, merit separate presentation to facilitate financial comparison
with prior periods and to assess trends in financial performance. Exceptional
items are included in Administration expenses in the consolidated statement of
comprehensive income but not considered to be part of the underlying trading
performance of the business.
Marks Electrical Group plc
Notes to the unaudited financial statements (continued)
2.5 Significant accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
2.6 Long term equity incentive plans
Employees and directors receive remuneration from the Company in the form of
share-based payment transactions, whereby they meet performance criteria
required by the Company and in consideration receive equity instruments. The
cost of the equity settled transactions is measured by a reference to the fair
value at the date of grant and is recognised as an expense in the statement of
comprehensive income over the vesting period of the schemes.
Market Value Options and Free Shares (issued on IPO)
A Black-Scholes pricing model is used to measure the fair value of the
employee share options using six variables, the volatility, type of option,
share price on issue, time, strike price and the risk-free rate. Other
conditions which are required to be met in order for an employee to become
fully entitled are taken into consideration, such as employee attrition rates.
2022, 2023 and 2024 Long-Term Incentive Plan ("LTIP")
The 2022, 2023 and 2024 LTIP is split into three tranches, earnings per share
("EPS"), cash flow and total shareholder return ("TSR"). In estimating the EPS
and cash flow, management have considered the likelihood of conditions being
met based on current forecasts and performance. This has been applied to the
share price at the valuation date after stripping out expected future
dividends. For the TSR metric, a Monte Carlo simulation model has been used
for the valuation, the model is appropriate given the share-based payments are
subject to market conditions.
At each statement of financial position date before the vesting date, the
cumulative expense is calculated, representing the expired vesting period and
the best estimate of the number of equity instruments that will ultimately
vest. The movement in the cumulative balance is recognised in the statement of
comprehensive income.
3. Earnings per share
(a) Earnings
Six months ended Six months ended
30 September 30 September Year ended
2024 2023 31 March
£000 £000 2024
£000
Statutory earnings (827) 873 427
(b) Number of shares
Six months ended Six months ended
30 September 30 September Year ended
2024 2023 31 March
2024
Basic weighted average number of shares 104,949,050 104,949,050 104,949,050
Dilutive effect of share options and awards - 299,033 -
Diluted weighted average number of shares 104,949,050 105,248,083 104,949,050
Marks Electrical Group plc
Notes to the unaudited financial statements (continued)
(c) Earnings per share
Six months ended Six months ended
30 September 30 September Year ended
2024 2023 31 March
2024
Statutory earnings
Basic statutory earnings per share (0.79)p 0.83p 0.41p
Diluted statutory earnings per share (0.79)p 0.83p 0.41p
3.1 Non-Statutory earning per share
(a) Earnings
Six months ended Six months ended Year ended
30 September 30 September 31 March
2024 2023 2024
£000 £000 £000
Statutory earnings (827) 873 427
Add:
Non underlying costs net of tax 1,411 329 2,045
Share-based payments net of tax 175 111 365
Less:
Buying group rebate - (146) (268)
Adjusted earnings 759 1,167 2,569
(b) Number of shares
Six months ended Six months ended
30 September 30 September Year ended
2024 2023 31 March
2024
Basic weighted average number of shares 104,949,050 104,949,050 104,949,050
Dilutive effect of share options and awards - 299,033 -
Diluted weighted average number of shares 104,949,050 105,248,083 104,949,050
(c) Earnings per share
Six months ended Six months ended
30 September 30 September Year ended
2024 2023 31 March
2024
Adjusted earnings
Basic adjusted earnings per share* 0.72p 1.12p 2.45p
Diluted adjusted earnings per share 0.72p 1.11p 2.45p
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 as disclosed above.
The number of ordinary shares as at 31 March 2024 through to 30 September 2024
has been used as the basis for the current and prior periods adjusted earnings
per share calculation.
Marks Electrical Group plc
Notes to the unaudited financial statements (continued)
4. Taxation
Income tax credit/(expense) is recognised based on management's best estimate
of the average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period. The income tax credit for
the six months ended 30 September 2024 is £234,000 (H1-24: £291,000). The
Group's adjusted consolidated effective tax rate for the six months ended 30
September 2024 is 25.0% (H1-24: 25.0%).
5. Dividends paid
Six months ended Year ended
30 September 31 March
2024 2024
£000 £000
Dividends paid during the period:
Final dividend for 2024: 0.66p (2023: 0.66p) 690 692
Interim dividend for 2025: Nil (2024:0.30p) - 315
Dividends paid 690 1,007
Final dividend for 2025: Nil (2024: 0.66p) - 693
Dividends paid and issued during the period totalled £690,060 (2024:
£692,586).
An interim dividend has been proposed to be paid on 20 December 2024 for 0.30p
per share (HY-24: 0.30p).
6. Operating exceptional charges
During the period the Group incurred exceptional one-off expenditure in
administrative expenses in relation to the implementation of a new ERP system.
The ERP implementation was completed in September 2024 with all the costs
expensed through the statement of comprehensive income and in order to aid
comparability, it has been disclosed separately as a non-underlying items.
During H1-25 £1,881,000 was incurred as an expense with an associated tax
credit of £470,000. The Group anticipates further minor costs in H2-25 in
relation to the implementation, with all exceptional costs expected to be
completed within the FY25 financial year.
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