REG - Marks Electrical Grp - Results for the six months ended 30 September 2021
18/11/2021 07:00
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RNS Number : 7479S Marks Electrical Group plc 18 November 2021
Marks Electrical Group plc
Results for the six months ended 30 September 2021
Significant growth, robust profitability and successful IPO
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 2021 ("the Period" or "H1-22" or "first half").
Financial highlights
· Strong first half revenue growth of 78% to £37.5m (H1-21
£21.1m), representing a two-year increase of 162% against the six months
ended 30 September 2019 (H1-20 £14.3m)
· Profitability on-track, Adjusted EBITDA of £3.03m (H1-21
£2.95m), delivering a margin of 8.1%
· Continued focus on working capital management with strong
operating cash conversion of 217%
· Excellent free cashflow of £5.9m, representing a Free Cash Flow
margin of 16%
· Adjusted EPS 2.14p, statutory EPS 1.55p((1))
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 1.5% in H1-22((2)), well positioned to achieve higher volumes
in H2-22
· Expanded warehouse facility by 29,000 sqft improving layout and
efficiency whilst securing future sales capacity
· Investments in the cost base to drive improvements in marketing,
brand awareness and professionalisation of the business
· Modernisation and growth of the vehicle fleet & driver base,
with an increase of 58% in delivery capacity since March-21, improving
reliability and offering customers more flexible delivery options, whilst
maintaining our cost of delivery
· Maintained inventory throughout the period, demonstrating the
strength of our relationships with our suppliers and the agility of our
business model
· Maintained our commitment to sustainability, achieving carbon
neutral operations in H1-22
Mark Smithson Chief Executive Officer, commented:
"I would like to extend a heartfelt thank you to all my colleagues who have
delivered a strong start first half performance in FY22. We achieved a record
revenue of £37.5 million, up 78% from the prior half year. In addition, we
also successfully completed our IPO and were admitted to trading on AIM on 5
November 2021, representing a major milestone in our company history.
Notwithstanding the re-opening of physical stores by a number of our
competitors, we have continued to gain market share during the first half from
1.2% in FY21 to 1.5% in the first half of FY22((2)).
We've worked closely with all our suppliers in order to ensure maintained
inventory levels during the period, and have successfully coped with the
continued surge in demand for our products. In a market with supply issues,
this demonstrates the strength of our relationships with our suppliers and the
agility of our business model in challenging times.
During the first six months, we increased our driver headcount and vehicle
fleet, materially increasing capacity, whilst maintaining our cost of
delivery. This demonstrates the strength and scalability of our vertically
integrated delivery model.
In order to improve brand awareness, we invested, for the first time ever, in
a nationwide TV campaign which led to a strong increase in website traffic and
a good return on sales, whilst further promoting the Marks Electrical brand;
this activity played a key role in delivering our 78% year-on-year sales
growth.
I am personally very proud of our first half results, which have continued
into H2-22 with a record month in October and strong continuation into
November. This performance demonstrates our high margin & strongly cash
generative earnings model, that is both flexible and scalable during what has
been, for many online retailers, a very challenging period - this demonstrates
the agility of our colleagues and business model to adapt quickly in changing
market conditions."
Key financial highlights: Six months ended Six Months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Revenue 37,470 21,066 55,984
Adjusted EBITDA 3,031 2,946 7,699
Adjusted EBITDA margin 8.1% 14.0% 13.7%
Adjusted EBIT 2,707 2,557 6,824
Adjusted EBIT margin 7.2% 12.1% 12.2%
Operating cashflow for conversion 6,578 225 2,593
Operating cash conversion 217% 8% 34%
Free cash flow 5,940 213 2,309
Free cash flow margin 16% 1% 4%
Net cash/(debt)((3)) 1,276 (68) (45)
Adjusted earnings per share((1)) 2.14p 1.89p 5.07p
( )
(Notes)
((1) Earnings per share is calculated on the number of shares in
issue post the IPO 5 November 2021 and is not representative of the number in
issue 30 September 2021. See note 4 of the financial statements for further
details;)
((2) Based on the Group's analysis of GfK Market Intelligence
sales tracking GB data; )
((3) Net cash/(debt) represents cash and cash equivalents less
financial liabilities (excluding lease liabilities))
Analyst presentation
There will be a presentation for analysts this morning at 09:30am via an
online webcast, which will be available at the following link:
https://www.lsegissuerservices.com/spark/MARKSELECTRICALGROUP/events/328424c1-2af1-4617-9c9a-409818955438
(https://www.lsegissuerservices.com/spark/MARKSELECTRICALGROUP/events/328424c1-2af1-4617-9c9a-409818955438)
.
To participate in the verbal Q&A session following the presentation, to
receive your personalised dial-in details, please register at:
https://cossprereg.btci.com/prereg/key.process?key=PWM694YDJ
(https://cossprereg.btci.com/prereg/key.process?key=PWM694YDJ)
Market abuse regulations
This announcement is released by Marks Electrical Group plc and contains
inside information for the purposes of Article 7 of the retained EU law
version of the Market Abuse Regulation (EU) 596/2014 (MAR). It is disclosed
in accordance with the Company's obligations under Article 17 of MAR. Upon
the publication of this announcement, this information is considered to be in
the public domain.
For the purposes of MAR and Article 2 of Commission Implementing Regulation
(EU) 2016/1055, this announcement is being made on behalf of Marks Electrical
Group plc by Josh Egan, Chief Financial Officer.
Enquiries:
Marks Electrical Group plc
Mark Smithson,
CEO
investors@markselectrical.co.uk (mailto:investors@markselectrical.co.uk)
Josh Egan, CFO
+44 (0) 116 2 515 515
Engine MHP (Financial PR)
Andrew Jaques
markselectrical@mhpc.com (mailto:markselectrical@mhpc.com)
Charlie
Barker
+44 (0) 203 128 8540
Rachel Mann
Panmure Gordan (NOMAD and Broker)
Oliver Cardigan, Ailsa Macmaster (Corporate Finance)
+44 (0) 207 886
2500
Erik Anderson (Corporate
Broking)
Group CEO review
We made a fast start to FY22, with a first half revenue growth of 78% and a
strong Adjusted EBITDA margin of 8.1%, setting us on-track for delivery of our
financial targets. This performance was achieved despite the headwind of
competitor stores re-opening and the resurgence of high-street activity.
We made continued progress on working capital management and delivered a
record operational cash conversion of 199%, demonstrating the highly cash
generative nature of our earnings model. This strong cash performance means we
can reinvest in the growth of the business, whilst remaining debt free, and
simultaneously provide returns for shareholders through dividends. We believe
this combination of growth alongside dividend income provides an attractive
proposition for total shareholder returns.
We expect to build on the strong revenue, profitability and cash flow we
delivered in H1-22 by continuing to leverage from investments made in our
overheads base, and benefiting from operational leverage during the busier
months of the year, with the festive season ahead.
1% share of a big opportunity
In FY21 we had a 1.2% market share of a £5.3bn major domestic appliances
market , in H1-22 we have successfully grown this to 1.5%((1)), however we
have so much more to achieve and our recent brand perception study indicated
that only 6% of adults in England were aware of the Marks Electrical
brand((2)).
This creates significant opportunity to grow market share through enhanced
customer acquisition via targeted digital and non-digital marketing campaigns,
by demonstrating our premium service offering to our potential future customer
base.
We started this activity in earnest during H1-22, where we reignited our
approach to "Online" digital marketing through the establishment of new
strategic plans across both paid media and Search Engine Optimisation ("SEO")
activity. This investment and focus in H1-22 delivered immediate results and
we are now ranking on page one under google searches for multiple SKUs and
categories.
Secondly, in our "Offline" activities, we further invested in the development
of our Marks Electrical brand by commencing our first ever nationwide TV
campaign with Sky Adsmart during the month of June 2021. This activity drove a
material increase in website traffic and delivered a solid return on
advertising spend. We have further TV activity planned for later in the year.
The development of our market share and brand awareness also makes us more
attractive to our suppliers, further improving our buying power and
strengthening our deep-rooted relationships, developed over the past 35 years.
Five operating pillars
Our business has always looked deceptively simple. However, in reality
everything needs to work like a finely tuned engine to make it consistently
successful. We focus on the customer at the heart of everything we do and have
five operating pillars to assist in the deployment of our daily activities:
1. Technology driven operating model - We utilise technology
throughout our operations to facilitate the seamless distribution of
competitively priced products to customers.
2. Simple and proven distribution network - Our one site distribution
warehouse philosophy reduces complexity and maximises returns.
3. Scalable, vertically integrated delivery model - Employing our own
team of driver-installers allows us to control our distribution chain and
offer superior customer service.
4. Stocking products that meet changing market demand and trends -
Benefiting from 35 years of sector experience, we focus on premium, reliable
products that meet changing customer demands.
5. Providing an excellent online shopping experience - Our market
leading customer service offering is generated by our simple, intuitive
website and free next day delivery, facilitated through our own team of
experts.
We believe that this focus and attention to the key elements of our business
model drives superior returns in a highly competitive market.
(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 1,746 adults. Fieldwork was undertaken between 25 - 26
August 2021. The survey was carried out online. The figures have been weighted
and are representative of all England adults (aged 18+))
Next day delivery
Our operating model is unique across the Major Domestic Appliances sector in
that we consistently offer free next day delivery for in-stock items
throughout our wide range of products, across 99% of the English population.
Our ability to achieve this unique proposition centres around the vertical
integration of our delivery model, with our own fleet, employed
driver-installers, and centralised single-site distribution centre, maximising
efficiency and improving financial returns.
We have continued to provide a market leading level of customer service during
H1-22, maintaining an "Excellent" Trust Pilot score of 4.7 and in tandem have
significantly expanded our driver and delivery fleet, increasing our delivery
capacity by 58% from March 2021 and expanding our warehouse footprint by
29,000 sqft.
Our core values
I personally believe that being an employer is a huge responsibility. After 35
years of business and sector experience, I also believe it's important to stay
true to the core values that you set out with and we actively encourage
employees to adopt these across their daily activities:
1. Try your hardest.
2. Think like a customer.
3. Get the price right.
4. Be honest. Always.
During the first half, we added human resources colleagues to strengthen our
employee proposition and also invested in pay rises for drivers. Whilst we
already pay at a premium to the market, when taking into account the wider
benefits packages we offer, we thought that the timing and market dynamics
justified the increase.
Well positioned to continue our growth trajectory
The COVID-19 period undoubtedly benefited our business and ecommerce operators
more widely, as the structural shift to online shopping accelerated. However,
what has set us apart in the first half of FY22 has been our ability to
reinvest in our operating model, adding warehouse, driver and delivery
capacity, as well as investing in our marketing and brand proposition.
As we exited the COVID-19 lockdown period and re-opening of physical stores in
April 2021, we used this opportunity to reignite our growth with targeted
activities to reinvent Marks Electrical on a nationwide scale, further
cementing our position as an electrical retailer of choice for a growing
customer base.
We believe that with our 1.5% market share in H1-22 we are simply
scratching-the-surface and that we have a huge opportunity ahead of us, by
further improving our brand awareness and allowing more customers to
experience the differentiated superior customer service we offer.
Mark Smithson
Chief Executive Officer
Financial review
The Group made a strong start to the financial year. We have driven
significant sales growth, maintaining a good operating margin, despite
additional promotional activity and additional spend on marketing and
professionalisation costs, further demonstrating the strength and
profitability of our operating model.
Revenue and gross margin
Revenue has increased 78% from H1-21 to £37.5m, this is an excellent result
for the Group and provides assurance that our operating capacity development
and investments in brand awarness and marketing are paying-off.
Revene in the first half has been largely driven by our increased focus on
both Online & Offline marketing, with our increased paid media activity,
improved approach to search engine optimisation and successful TV campaigns
driving strong improvments in website traffic.
Gross margin was down 280bps from the prior year driven by three primary
factors:
· Strong product margins in H1-21 as a result of supply constraints
during the COVID-19 lockdown periods;
· The impact of a 10% site-wide discount sale in June & July,
to coincide with the TV advert; and
· An American Express promotion in April which drove incremental
volume but at a higher cost per customer.
Partially offsetting this decline was a maintained cost per delivery, despite
capacity building and an increase of 71% in the number of items delivered.
We anticipate a similar level of gross margin in H2-22 and are targeting a
normalised gross margin going forwards of between 18% and 20%.
Six months ended Six months ended Year ended Year ended
30 September 30 September 31 March 31 March
2021 2020 2021 2020
£000 £000 £000 £000
Revenue 37,470 21,066 55,984 31,500
Cost of Sales (30,270) (16,442) (44,064) (26,381)
Gross profit 7,200 4,624 11,920 5,119
Gross margin 19.2% 22.0% 21.3% 16.3%
Advertising and marketing costs
Advertising and marketing costs increased to 5.1% of revenue in H1-22 versus
3.6% H1-21 and 2.9% FY21 as a result of additional investments made in both
Online and Offline marketing activities.
In Online, we redefined our approach to both paid media and search engine
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. We will continue to make
further investments in digital marketing enhancements in H2-22.
In Offline, 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. The return
on the TV campaign was good, albeit that it represents a lower return on ad
spend versus digital activity.
We anticipate a similar level of investment in advertising & marketing in
H2-22.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Revenue 37,470 21,066 55,984
Advertising and marketing costs 1,900 749 1,641
Advertising and marketing as % of revenue 5.1% 3.6% 2.9%
Other operating expenses (excluding depreciation)
Other operating expenses increased to 6.1% of revenue in H1-22 versus 4.4%
H1-21 and 4.7% FY21 as a result of additional investments made in the
professionalisation of the business, in preparation for life as a public
company and the planned growth journey ahead.
In H1-22 the Group has made considerable investments in its operational
backbone, with several key hires, including our newly appointed CFO, Head of
Financial Reporting, Head of HR and other notable hires. 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 people in all key areas; Transport, Sales,
Customer Service, HR, IT, Procurement, Operations & 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.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Revenue 37,470 21,066 55,984
Other operating expenses 2,271 930 2,610
Other operating expenses as % of revenue 6.1% 4.4% 4.7%
With other operating expenses relatively fixed, excluding advertising spend,
the Group is now well placed to take advantage of improved operating leverage
moving forward.
Operating exceptional charges
During the year the Group incurred exceptional one-off expenditure in relation
to the Initial Public Offering of the business on the Alternative Investment
Market ("AIM") of the London Stock Exchange. The nature of the costs incurred
primarily relate to legal and professional fees, linked to the various
workstreams involved in the IPO process.
The Group was successfully admitted to trading on AIM on 5 November 2021. The
Group expects to incur some remaining IPO related costs in H2-22 which it also
expects to disclose as exceptional charges and will not include in Adjusted
EBITDA.
Adjusted earnings before Interest, Tax, Depreciation and Amortisation
("EBITDA")
The Group achieved Adjusted EBITDA for the period of £3.03m representing a
margin of 8.1%, down 590bps against H1-21.
This decrease in margin year on year is a direct result of events
aforementioned, namely:
· 280bps reduction in gross margin due to strong product margins in
H1-21 as a result of supply constraints during the COVID-19 lockdown periods,
and increased promotional activity in H1-22;
· 150bps increase in advertising & marketing costs as we
improve our approach to digital marketing activity and increase our focus on
brand awareness; and
· 160bps investment in professionalisation of the business.
We anticipate an improvement in Adjusted EBITDA margin in H2-22 as we benefit
from operating leverage over the investments made in overheads.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Profit after tax 1,626 2,088 5,696
Addback:
Tax 443 551 1,458
Finance costs 30 33 70
IPO related costs 727 - -
Less:
Revaluation of investments (119) (115) (400)
Adjusted EBIT 2,707 2,557 6,824
Depreciation and amortisation 317 389 827
Loss on disposal of fixed assets 7 - 48
Adjusted EBITDA 3,031 2,946 7,699
Adjusted EBITDA margin 8.1% 14.0% 13.7%
Cashflow and statement of financial position
During H1-22 the Group achieved excellent cash flow from operations of £6.0m
with an operating cashflow for conversion of £6.6m at 217% and free cash flow
of £5.9m. This strong performance demonstrates the highly cash generative
nature of our earnings model.
The Group spent £300k on a new mezzanine floor in the warehouse during H1-22,
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 16 new vans on finance lease
with a capital value of £599k, including a cash outflow for deposits of
£179k. This enables the Group to meet higher sales demand along with reducing
our carbon footprint with more efficient vehicles.
The Group finished the period in a net cash position of £1.3m as at 30
September 2021. On 5 November 2021, the Group successfully listed on the
Alternative Investment Market of the London Stock Exchange and in doing so
raised additional primary proceeds of £5m, further increasing its net cash
position.
Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Profit before tax 2,069 2,639 7,154
Addback:
Finance costs 30 33 70
Loss on disposal of fixed assets 7 - 48
Depreciation and amortisation 317 389 827
Revaluation of investments (119) (115) (400)
(Increase)/decrease in inventories (112) (2,179) (7,110)
(Increase)/decrease in receivables 917 (2,133) (1,197)
Increase/(decrease) in payables 2,936 1,724 3,513
Cash flow from operating activities 6,045 358 2,905
Addback:
Outflows relating to IPO costs 727 - -
Less:
Outflows for lease payments (194) (133) (312)
Operating cash flow for conversion 6,578 225 2,593
Operating cash conversion 217% 8% 34%
Investing activities (447) - (190)
Tax paid (171) - (66)
Interest paid (20) (12) (28)
Free cash flow 5,940 213 2,309
Current trading and outlook
The strong result delivered in the first half provides us with solid
foundations to deliver our strategic objectives in H2-22.
The business has continued to prosper during the start of the second half,
with a record sales month in October and a strong continuation into November.
We have further investments planned in marketing, brand awareness and capacity
building all of which should keep us on-track to deliver our ambitious revenue
targets.
We expect to build on the strong profitability we delivered in H1-22 by
continuing to leverage from investments made in the first half and benefiting
from operational leverage over the overheads base during the busier months of
the year, keeping us on track to deliver our full year Adjusted EBITDA margin
target of 9%.
Consolidated Statement of comprehensive income
Six months ended 30 September 2021
Notes Six months ended Six months ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Revenue 37,470 21,066 55,984
Cost of Sales (30,270) (16,442) (44,064)
Gross profit 7,200 4,624 11,920
Administrative expenses (4,493) (2,067) (5,261)
Operating exceptional charges (727) - -
Operating profit 1,980 2,557 6,659
Other operating income - - 165
Fair value gains through the profit and loss 119 115 400
Finance expenses (30) (33) (70)
Profit before income tax 2,069 2,639 7,154
Tax on profit 5 (443) (551) (1,458)
Profit for the financial period 1,626 2,088 5,696
Other comprehensive income - - 662
Total comprehensive income for the period 1,626 2,088 6,358
Consolidated Balance sheet
At 30 September 2021
Notes At At
30 September 31 March
2021 2021
£000 £000
Non-current assets
Property, plant and equipment 7 5,844 5,623
Right-of-use asset 8 1,406 779
Investments 1,216 1,146
8,466 7,548
Current assets
Inventories 11,544 11,432
Trade and other receivables 1,936 2,839
Cash and cash equivalents 1,276 1,493
14,756 15,764
Total assets 23,222 23,312
Current liabilities
Trade and other payables 11,127 8,303
Lease liabilities 9 512 330
Current tax liabilities 5 1,829 1,557
Financial liabilities - 233
13,468 10,423
Non-current liabilities
Trade and other payables - 17
Financial liabilities - 1,304
Lease liabilities 9 871 422
Deferred tax 618 618
Provisions 155 155
Total liabilities 15,112 12,939
Net assets 8,110 10,373
Shareholders' equity
Called up share capital - 6
Revaluation reserve 1,235 1,235
Retained earnings 6,875 9,132
Total equity shareholders' funds 8,110 10,373
The interim financial statements of Marks Electrical Group plc were approved
by the Board on 17 November 2021 and signed on its behalf by:
Josh Egan
Chief Financial Officer
Consolidated Statement of changes in equity
Six months ended 30 September 2021
Note Revaluation reserve Share capital Retained Total
£000 £000 earnings Shareholders'
£000 funds
£000
At 31 March 2020 573 6 3,436 4,015
Total comprehensive income for the period - - 5,696 5,696
Gain on revaluation of freehold property 817 - - 817
Income tax relating to revaluation (155) - - (155)
of freehold property
Equity dividends paid - - - - -
At 31 March 2021 1,235 6 9,132 10,373
Total comprehensive income for the period - - 1,626 1,626
Disposal of shares - (6) - (6)
Equity dividends paid 6 - - (3,883) (3,883)
At 30 September 2021 1,235 - 6,875 8,110
All the results arise from continuing operations
Consolidated Cashflow
Six months ended 30 September 2021
Notes At At
30 September 31 March
2021 2021
£000 £000
Cash flows from operating activities
Profit for the period 1,626 5,696
Adjustments for non-cash items:
Depreciation of property, plant and equipment 99 428
Depreciation of right-of-use assets 218 399
Loss/(profit) on disposal of property, plant and equipment 7 48
Fair value gains (119) (400)
Interest expense 30 70
Taxation charged 443 1,458
Movements in working capital:
Decrease/(increase) in inventories (112) (7,110)
Decrease/(increase) in receivables 917 (1,197)
Increase/(decrease) in payables 2,936 3,513
Cash flow generated from operations 6,045 2,905
Corporation tax paid (171) (66)
Net cashflow generated from operations 5,874 2,839
Cash flows from investing activities
Purchase of property, plant and equipment (321) (216)
Deposits on right-of-use assets (179) -
Proceeds from sale of property, plant and equipment 4 26
Income from investments 49 -
Net cash used by investing activities (447) (190)
Cash flows from financing activities
Interest paid (10) (42)
Repayment of borrowings (1,538) (227)
Interest paid on lease liabilities (20) (28)
Principle repayment of lease liabilities (195) (312)
Equity Dividends paid (3,883) -
Net cash used by financing activities (5,646) (609)
Net (decrease)/increase in cash and cash equivalents (217) 2,040
Cash and cash equivalents at the beginning of the period 1,493 (547)
Cash and cash equivalents at end of the period 1,276 1,493
Notes to the unaudited financial statements
Six months ended 30 September 2021
1 General Information
On 5 November 2021 Mark's Electrical Group plc (formerly Marks Electrical
Holdings) became a publicly listed Group, listed on the Alternative investment
Market ("AIM"), a market operated by 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 unaudited interim financial statements of Marks Electrical Group plc for
the six months ended 30 September 2021 were authorised for issue by the Board
of Directors on 17 November 2021 and signed on its behalf by Joshua Egan.
This interim announcement and consolidated interim financial information have
been prepared in accordance with the recognition and measurement requirements
of International Financial Reporting Standards issued by the International
Accounting Standards Board, as adopted by the United Kingdom.
The principal accounting policies used in preparing the interim results are
those the Group expects to apply in its financial statements for the year
ending 31 March 2022. A full description of accounting policies is contained
within the historical financial information included in the AIM admission
document which is available on our website.
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 does not contain all the information that is
required to be disclosed in a full set of IFRS financial statements. The
financial information for the period ended 30 September 2021 is unaudited and
does not constitute the Group's statutory financial statements for the period.
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.
The interim 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 of pounds sterling ('£'000'), the
functional and presentation currency of the Group, except where otherwise
indicated.
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. The Group have applied the
requirements of IFRS 16 Leases from 1 April 2018, in advance of its effective
date of 1 January 2019, to facilitate consistent presentation across the
periods shown within the financial statements. The effects of adoption have
been recognised directly in opening retained earnings.
2.2 Going concern
The Group has traded positively during the COVID-19 period and has continued
to invest for growth throughout the period.
The board of Directors have completed a rigorous going concern assessment and
taken the following actions to test or enhance the robustness of the Companies
liquidity levels for a period of at least twelve-months from the date of
approval of the document. As part of their assessment, the Mark's Electrical
board has considered:
· The cash flow forecasts and the revenue projections for the Group
· Reasonably possible changes in trading performance, including
severe yet plausible downside scenarios.
· An assessment of historical forecasting accuracy by comparing
forecast cash flows to those actually achieved by the Group
· The Group's robust policy towards liquidity and cash flow
management.
· The Group's ability to successfully manage the principal risks
outlined in this report.
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.
2.3 New standards, amendments and interpretations
The Group has adopted the following new standards and interpretations in these
financial statements
throughout the track record period, with a transition date of 1 April 2018.
▪ IFRS 9 - Financial instruments (effective 1 January 2018 and early
adopted);
▪ IFRS 15 - Revenue from Contracts with Customers (effective 1 January
2018);
▪ IFRS 16 - Leases (effective 1 January 2019 and early adopted); and
▪ IFRIC 23 - Uncertainty over Income Tax Positions (effective 1 January 2019
and early adopted).
IFRS 9 Financial instruments
IFRS 9 'Financial Instruments' replaced IAS 39 'Financial Instruments:
Recognition and Measurement'. It makes major changes to the previous guidance
on the classification and measurement of financial assets and introduces an
'expected credit loss' model for the impairment of financial assets. Given
there have been no changes in the classification or measurement of financial
assets and liabilities a detailed table has not been provided.
(i) Recognition, classification, and measurement of
financial instruments
The Group has assessed which business models apply to its financial
instruments at the date of initial application and has designated the
financial assets and financial liabilities into the appropriate IFRS 9
measurement categories based on the facts and circumstances at that date. As
at 1 April 2017, there were no significant classification and measurement
adjustments. The financial assets and liabilities for the Group are classified
and measured at amortised cost.
(ii) Impairment of financial assets
The impact of the new accounting methodology for determining the impairment
provision for trade receivables resulted in no material change in the
provision. Under the new policy a loss allowance for expected credit losses is
recognised based upon the lifetime expected credit losses in cases where the
credit risk on trade and other receivables has increased significantly since
initial recognition.
In cases where the credit risk has not increased significantly the Group
measures the loss allowance at an amount equal to the 12-month expected credit
loss. This assessment is performed on a collective basis considering
forward-looking information.
Trade receivables longer than one year overdue and specific risk trade
receivables with no reasonable expectation of recovery are impaired and hence
provided for in full unless reliable supporting information to determine
otherwise is available. No recognition, measurement, or classification changes
have been recorded on adoption of IFRS 9.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 became effective on 1 January 2018 and superseded the revenue
recognition included in IAS 18 Revenue, IAS 11 Construction Contracts, and the
related interpretations.
Under IFRS 15, revenue is now recognised to depict the transfer of promised
goods or services to a customer in an amount that reflects the consideration
to which the Group expects to be entitled in exchange for those goods and
services. The underlying principle is a five-step approach to determine
performance obligations, the consideration and the allocation thereof, and
timing of revenue recognition. IFRS 15 also includes guidance on the
presentation of assets and liabilities arising from contracts with customers,
which depends on the relationship between Mark's Electricals performance and
the customers' payment.
The Group is in the business of providing online retail and supply of domestic
electrical appliances and consumer electronics. Income is recognised when the
products have been dispatched. No recognition, measurement, or classification
changes have been recorded on adoption of IFRS 15.
IFRS 16 Leases
IFRS 16 became effective on 1 January 2019 and superseded IAS 17 Leases and
the related interpretations. IFRS 16 has been early adopted throughout the
financial statements. IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases and has been applied using
the fully retrospective approach. Under IFRS 16 the main difference for the
Group is that certain leases that the Group holds as a lessee are recognised
on the balance sheet, as both a right-of-use ('ROU') asset and a largely
offsetting lease liability. Low value and short-term leases were excluded from
these calculations under the practical expedients allowed in the standard. The
ROU asset is depreciated in accordance with IAS 16 'Property, Plant and
Equipment' and the liability is increased for the accumulation of interest and
reduced by cash lease payments. There is no impact on cashflow. In the
statement of comprehensive income, the Group recognises a depreciation charge
and an interest charge instead of a straight-line operating cost. This changes
the timing of cost recognition on the lease, resulting in extra cost in early
years of the lease, and reduced cost towards the end of the lease. Judgements
made by the Directors in the application of these accounting policies that
have a significant effect on these financial statements together with
estimates with a significant risk of material adjustment in the next year are
discussed in note 2.11 to the financial statements.
IFRIC 23 Uncertainty over Income Tax Positions
IFRIC 23 clarifies how to recognise and measure current and deferred income
tax assets and liabilities when there is uncertainty over income tax
treatments. The standard is effective for financial years commencing on or
after 1 January 2019 and has been early adopted throughout these financial
statements. The application of IFRIC 23 did not have any financial impact as
the directors do not consider there to be any uncertainty over income tax
treatments for the Group
New standards, amendments and interpretations not yet adopted
The following standards, amendments and interpretations are not yet effective
and have not been early adopted by the Group:
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRIC 22 clarifies which exchange rate to use in transactions that involve
advance consideration paid or received in a foreign currency. There is not
considered to be an impact of this standard on the Group.
2.4 Revenue recognition
Revenue from contracts with customers is recognised when or as the Group
satisfies a performance obligation by transferring a promised good or service
to a customer. A good or service is transferred when the customer obtains
control of that good or service. The transfer of electrical appliances and
consumer electronics sold by the Group usually coincides with the delivery of
the item to the customer and the customer taking physical possession. The
Group principally satisfies its performance obligations at a point in time and
recognises revenue on dispatch.
Revenue is measured at the fair value of the consideration received, excluding
discounts, rebates and sales taxes or duty. Production based taxes are not
included in revenue, they are paid on production and recorded within cost of
sales.
Amounts received in advance for electrical appliances sales are recorded as
contract liabilities and revenue is recognised as the performance obligations
are met.
2.5 Net finance costs
Finance expense
Finance expense comprises of interest payable and finance leases interest
which are expensed in the period in which they are incurred and reported in
finance costs. Finance income
Finance income relates to deposit income
2.6 Current and deferred taxation
The tax expense for the period comprises current and deferred tax. Tax is
recognised in the consolidated statement of comprehensive income, except that
a charge attributable to an item of income or expense recognised as other
comprehensive income or to an item recognised directly in equity is also
recognised in other comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws
that have been enacted or substantively enacted by the reporting date in the
UK where the Group operates and generate taxable income.
Deferred tax balances are recognised in respect of all timing differences that
have originated but not reversed by the balance sheet date, except:
- The recognition of deferred tax assets is limited to the extent
that it is probable that they will be recovered against the reversal of
deferred tax liabilities or other future taxable profits;
- Any deferred tax balances are reversed if and when all
conditions for retaining associated tax allowances have been met; and
- Where timing differences relate to interests in subsidiaries,
associates, branches and joint ventures and the Group can control their
reversal and such reversal is not considered probable in the foreseeable
future.
Deferred tax balances are not recognised in respect of permanent differences
except in respect of business combinations, when deferred tax is recognised on
the differences between the fair values of assets acquired and the future tax
deductions available for them and the differences between the fair values of
liabilities acquired and the amount that will be assessed for tax. Deferred
income tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
2.7 Property plant and equipment
Property, plant and equipment is stated at historical cost less accumulated
depreciation and any accumulated impairment losses. Historical cost includes
expenditure that is directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the
manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their
residual value over their estimated useful lives, over the shorter of the
lease term and the estimated useful life, using the straight-line method.
Depreciation is provided on the following straight line basis:
- Plant and machinery between five and 10 years
- Fixtures and fittings and equipment three to five years
- Motor vehicles three years
- Leasehold improvements 10 years
- Freehold buildings 50 years
The assets' residual values, useful lives and depreciation methods are
reviewed, and adjusted prospectively if appropriate, or if there is an
indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised in the statement of comprehensive
income.
Freehold property and improvements are recorded at fair value less accumulated
depreciation. Depreciation is measured between ten and fifty years, effective
from the date of each valuation. Valuations are undertaken with sufficient
regularity to ensure the carrying amount is not materially misstated.
Revaluation movements, and associated deferred tax, are recorded through other
comprehensive income to the extent they do not reverse a previous decrease
recognised through profit and loss.
2.8 Leased assets
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
To assess whether a contract conveys the right to control the use of an
identified asset, the Group assesses whether: an identified physically
distinct asset can be identified; and the Group has the right to obtain
substantially all of the economic benefits from the asset throughout the
period of use and has the ability to direct the use of the asset over the
lease term being able to restrict the usage of third parties as applicable.
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
- Leases of low value assets; and
- Leases with a duration of 12 months or less.
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the Group
incremental borrowing rate on commencement of the lease is used.
On initial recognition, the carrying value of the lease liability also
includes:
- amounts expected to be payable under any residual value
guarantee;
- the exercise price of any purchase option granted in favour of
the Group if it is reasonably certain to assess that option;
- any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of the termination option being
exercised.
- Right of use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and increased for:
- lease payments made at or before commencement of the lease;
- initial direct costs incurred; and
- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for
example, it re-assesses the probability of a lessee extension or termination
option being exercised), it adjusts the carrying amount of the lease liability
to reflect the payments to make over the revised term, which are discounted at
the same discount rate that applied on lease commencement. An equivalent
adjustment is made to the carrying value of the right-of-use asset, with the
revised carrying amount being amortised over the remaining (revised) lease
term.
2.9 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short term
highly liquid deposits which are subject to an insignificant risk of changes
in value.
2.10 Inventory
Stocks are valued at the lower of cost and net realisable value, after making
due allowance for obsolete and slow moving items, as well as provisioning for
rebates receivable. Cost is determined using the first in first out method.
The carrying amount of stock sold is recognised as an expense in the period in
which the related revenue is recognised.
2.11 Financial assets
The Group classifies its financial assets at amortised cost. Financial
assets do not comprise prepayments. Management determines the classification
of its financial assets at initial recognition.
Financial Assets recognised at amortised cost
The Group's financial assets held at amortised cost comprise trade and other
receivables and cash and cash equivalents in the consolidated statement of
financial position.
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through the provision of goods and services to customers (e.g. trade
receivables), but also incorporate other types of financial assets where the
objective is to hold their assets in order to collect contractual cash flows
and the contractual cash flows are solely payments of the principal and
interest. They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue and are
subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the
simplified approach within IFRS 9 using the lifetime expected credit losses.
During this process the probability of the non-payment of the trade
receivables is assessed. This probability is then multiplied by the amount of
the expected loss arising from default to determine the lifetime expected
credit loss for the trade receivables. For trade receivables, which are
reported net; such provisions are recorded in a separate provision account
with the loss being recognised within administrative expenses in the
consolidated statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
Impairment provisions for other receivables are recognised based on the
general impairment model within IFRS 9. In doing so, the Group follows the
3-stage approach to expected credit losses. Step 1 is to estimate the
probability that the debtor will default over the next 12 months. Step 2
considers if the credit risk has increased significantly since initial
recognition of the debtor. Finally, Step 3 considers if the debtor is credit
impaired, following the criteria under IFRS 9.
Financial assets recognised at fair value through profit or loss
Financial instruments such as forwards, swaps and forward exchange contracts
are classified as derivative financial assets and liabilities at fair value
through profit or loss. Derivative financial assets and liabilities are
initially measured at fair value at the date the derivative contract is
entered into and are subsequently remeasured to fair value at each financial
period end date. The resulting gain or loss is recognised in fair value
gains/(losses) through profit or loss immediately. The Group does not apply
hedge accounting.
A derivative with a positive fair value is recognised as a financial asset,
whereas derivative with a negative fair value is recognised as a financial
liability, unless a bilateral netting agreement exists between the Group and
the counterparty, in which case derivative financial asst and liability
positions with the counterparty are aggregated to produce a single netted
asset or liability.
The fair value of the derivative contracts us based on their observable prices
in the exchange marketplace requiring no significant adjustment.
2.12 Financial liabilities
The Group measures its financial liabilities at amortised cost. All financial
liabilities are recognised in the statement of financial position when the
Group becomes a party to the contractual provision of the instrument.
Financial liabilities measured at amortised cost
The Group's financial liabilities held at amortised cost comprise trade
payables and other short-dated monetary liabilities, and bank and other
borrowings in the consolidated statement of financial position.
Trade payables and other short-dated monetary liabilities are initially
recognised at fair value and subsequently carried at amortised cost using the
effective interest rate method.
Bank and other borrowings are initially recognised at fair value net of any
transaction costs directly attributable to the issue of the instrument. Such
interest-bearing liabilities are subsequently measured at amortised cost using
the effective interest rate method, which ensures that any interest expense
over the period to repayment is at a constant rate on the balance of the
liability carried in the consolidated statement of financial position.
For the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as well as
any interest or coupon payable while the liability is outstanding.
Unless otherwise indicated, the carrying values of the Group's financial
liabilities measured at amortised cost represents a reasonable approximation
of their fair values.
2.13 Impairment of assets
Assets that are subject to depreciation or amortisation are assessed at each
reporting date to determine whether there is any indication that the assets
are impaired. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows
(cash-generating units or CGUs).
Where there is any indication that an asset may be impaired, the carrying
value of the asset (or CGUs to which the asset has been allocated) is tested
for impairment. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's (or CGU's) fair value less costs to sell and value
in use. Non-financial assets that have been previously impaired are reviewed
at each reporting date to assess whether there is any indication that the
impairment losses recognised in prior periods may no longer exist or may have
decreased. Goodwill is reviewed for impairment on an annual basis, with any
impairment to goodwill not reversed at a later period.
2.14 Government grants
Other operating income represents includes Government grants for the Job
Retention Scheme.
Government grants are recognised at their fair value where there is a
reasonable assurance that the grant will be received, and the Group will
comply with all attached conditions. Government grants relating to costs are
deferred and recognised in profit or loss over the period necessary to match
them with the costs that they are intended to compensate.
In the year ended 31 March 2020 and 2021, the Group utilised the Government's
Coronavirus Job Retention Scheme ('CJRS'), which allows for businesses to
submit claims for repayment of furlough or flexible furlough employee wages as
a result of COVID-19. The grant income received has been accounted for in
accordance with IAS 20 'Accounting for Government Grants and Disclosure of
Government Assistance' and shown in other operating income in the income
statement and personnel costs have been shown gross of grant income.
3. 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.
Judgements
The following are the areas requiring the use of judgement that may
significantly impact the financial statements.
Useful economic lives of property, plant and equipment and intangible assets
Property, plant and equipment are depreciated, and intangible assets are
amortised over their useful lives. Useful lives are based on management's
estimates, which are periodically reviewed for continued appropriateness.
Changes to estimates can result in variations in the carrying values and
amounts charged to the statement of comprehensive income in specific periods.
Estimates and assumptions
The following are areas require significant estimates and assumptions that may
significantly impact the financial statements:
Freehold property valuation
In the comparative number for financial year ended 31 March 2021, one of the
key areas of estimation uncertainty was the valuation of the freehold property
held by the Group. The Group uses external Chartered Surveyors to carry out
the valuation to minimise the judgement required when valuing the property.
The valuation was carried out on a market value basis and was in accordance
with RICS Valuation - Global Standards (incorporating the IVSC International
Valuation Standards) effective from 31 January 2020. The directors considers
that the valuation prepared represents the fair value of freehold land and
buildings at 31 March 2021, as such the valuation was incorporated into the
financial statements. During the period the property was disposed of.
Fixed asset investments
Estimates and assumptions are used to determine the carrying value of unlisted
investments at fair value through profit and loss. The fixed asset investment
is a buying group ("Euronics") which the Group is part and is entitled to a
share of profit from based on purchases made during any given period. The
fixed asset investment is made up of an initial buy-in cost plus share of
profits accrued since entering Euronics. Due to the lack of visibility of
Euronics profit year to date the Group estimates the current periods profit
share based on a percentage of total purchases from Euronics. The profits from
Euronics are seldom distributed, however if the Group were to leave Euronics,
the total accrued profits including the initial buy-in cost would become
payable in full.
Historical tax schemes
At the period end, and year ended 31 March 2021, the Group held provision on
the Balance Sheet for potential liabilities in relation to historical tax
schemes that Mark Smithson, the majority shareholder of the Group, entered
into through the Group. The Group took advice on the potential liabilities of
the schemes and at the year ended 31 March 2021 accrued a reliable estimate to
cover liabilities that may arise. Mark Smithson has indemnified the Group for
any unaccrued liabilities that may arise.
3. Earnings per share
(a) Earnings
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2021 2020 2021
£000 £000 £000
Earnings 1,626 2,088 6,358
Add:
Costs related to IPO 727 - -
Less:
Property revaluation - - (662)
Revaluation of investments (119) (115) (400)
Adjusted earnings* 2,234 1,973 5,296
*Adjusted earnings form the underlying trading result after tax of the Group.
(b) Number of shares
Note Six months Six months
ended ended Year ended
30 September 30 September 31 March
2021 2020* 2021*
Basic weighted average number of shares 1 - -
Adjustment for shares issued for IPO 99,999,999 100,000,000 100,000,000
Adjustment for capital raised at IPO* 4,545,454 4,545,454 4,545,454
Adjustment for all-employee share incentive 403,596 403,596 403,596
plan*
10
Adjusted basic weighted average number of shares 104,949,050 104,949,050 104,949,050
*The adjustment for shares issued at IPO (5 November 2021) relates to the
capital raised by the Group and the all-employee share incentive plan. This
gives a true reflection of earnings per share for the users of the financial
statements, however, does not reflect the share position on 30 September 2021
pre-float. Prior years have also been adjusted to make earnings per share more
comparable. Note, the adjustment for the all-employee share incentive plan
does not include the potentially dilutive effect of management incentive plans
that will be put in place during H2-22.
(c) Earnings per share
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2021 2020 2021
Statutory earnings
Basic statutory earnings per share* 1.55p 2.00p 6.08p
Adjusted earnings
Basic adjusted earnings per share* 2.14p 1.89p 5.07p
*Based on adjusted basic weighted average number of shares as disclosed in 4
(b) above.
4. Taxation
Income tax 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 expense for the six
months ended 30 September 2021 is £442,630 (HY21: £551,305). The Group's
adjusted consolidated effective tax rate for the six months ended 30 September
2021 is 19.0% (HY21: 19.0%).
5. Dividends paid
Six months Year ended
ended 31 March
30 September 2021
2021 £000
£000
Dividends declared and paid during the period: 3,883 -
Dividends paid during the period totalled £3,883,000 (FY21: £nil).
6. Tangible assets
Freehold Property Plant and Machinery Total
£000 £000 £000
Cost
At 31 March 2020 4,650 641 5,291
Additions - 216 216
Disposals - (81) (81)
Revaluations 558 - 558
At 31 March 2021 5,208 776 5,984
Additions 5 316 321
At 30 September 2021 5,213 1,092 6,305
Accumulated depreciation and impairment
At 31 March 2020 - 200 200
Charged in the year 259 169 428
Depreciation on disposals - (8) (8)
Revaluations (259) - (259)
At 31 March 2021 - 361 361
Charged in the period 37 62 99
At 30 September 2021 37 423 460
Net book value at 30 September 2021 5,176 669 5,845
Net book value at 31 March 2021 5,208 415 5,623
7. Right of use assets
Property Motor Total
£000 Vehicles £000
£000
Cost
At 31 March 2020 616 697 1,313
Additions 616 144 760
Disposals (616) - (616)
At 31 March 2021 616 841 1,457
Additions 277 599 876
Disposals - (56) (56)
At 30 September 2021 893 1,384 2,277
Accumulated depreciation and impairment
At 31 March 2020 582 313 895
Charged in the year 205 194 399
Depreciation on disposals (616) - (616)
At 31 March 2021 171 507 678
Charged in the period 103 115 218
Depreciation on disposals - (25) (25)
At 30 September 2021 274 597 871
Net book value at 30 September 2021 619 787 1,406
Net book value at 31 March 2021 445 334 779
8. Lease liabilities
At 30 At 31
September March
2021 2021
£000 £000
Year 1 548 351
Year 2 517 343
Year 3 381 85
Year 4 - -
Year 5 - -
Impact of discounting (63) (28)
Total liability 1,383 751
Presented as:
Current 512 329
Non-current 871 422
Finance costs recognised in the income statement in relation to lease
liabilities:
At 30 At 31
September March
2021 2021
£000 £000
Interest expense on leases 20 28
20 28
9. Post balance sheet events
On 5 November 2021, Marks Electrical Group plc successfully listed on the
Alternative Investment Market of the London Stock Exchange. In doing so,
27,272,727 shares were placed on the market, 22,727,273 from existing shares
and 4,545,454 new shares, from which the Group raised capital of £5,000,000.
On 1 October 2021, Marks Electrical Limited disposed of the freehold property
to Mavrek Properties Limited (a company controlled by Mark Smithson - CEO) for
it's carrying value of £5,176,000. The property was immediately leased back
to MEL.
10. Operating exceptional charges
The Group presents as exceptional items on the face of the Statement of
Comprehensive Income those 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 excluded from Adjusted EBITDA as management believe
they should be considered separately to gain an understanding of the
underlying profitability of the business.
11. Transition to IFRS
The Group's effective IFRS transition date for the purposes of this financial
information was 1 April 2018. The effects of transition to IFRS on the balance
sheets at 1 April 2018, 31 March 2019, 31 March 2020 and 31 March 2021 and the
income statements for the years ended 1 April 2018, 31 March 2019, 31 March
2020 and 31 March 2021, are shown below. In preparing the consolidated
historical financial information the Group has applied IFRS for the first time
from 1 April 2018. The principles and requirements for first time adoption of
IFRS are set out in IFRS 1. The Group did not take advantage of any exemptions
under IFRS 1.
The transition adjustments required on applying IFRS, as numbered in the
tables below, were:
IFRS 16 standard was effective from 1 January 2019, with early adoption
applicable. The Group has applied the modified retrospective approach, the
first day of the first period included in the financial statements under IFRS.
Adjustments have been made to leases under IFRS 16, to recognise leases
previously recognised as operating leases as right-of-use assets and to
recognise finance leases previously recognised as property, plant and
equipment (PPE) as right-of use assets.
The impact of the standard as of 1 April 2018 has resulted in an initial
recognition of right-of-use assets with a net book value of £818,910 and
total lease liabilities of £738,789. As part of this recognition, a
reclassification of finance leases from PPE to right-of-use asset of £373,918
has been made along with the associated hire purchase creditor amounting to
£286,460. £7,337 has been recognised as an adjustment to retained earnings.
In the year end March 2019, reclassification adjustments between PPE and the
right of use asset amounting to £204,845 were made. The total impact on right
of use assets was a net decrease of £536, after amortisation of £205,381
charged on these assets. Hire purchase creditors have been reclassified to
lease liabilities. The total impact on the profit and loss resulted in a net
decrease to administration expenses of £12,911 and increased finance expense
of £14,382.
In the year end March 2020, reclassification adjustments between PPE and the
right of use asset amounting to £284,022 were made and an additional lease
was entered into resulting in an addition to the right of use asset of
£117,167. The total impact on right of use assets was a net increase of
£178,721 after amortisation of £222,468 charged on these assets. Hire
purchase creditors have been reclassified to lease liabilities. The total
impact on the profit and loss resulted in a net decrease to administration
expenses of £13,978 and increased finance expense of £8,003.
In the year end March 2021, reclassification adjustments between PPE and the
right of use asset amounting to £263,187 were made.. During the year a new
lease was entered into for the freehold property which resulted in an addition
of £616,143 to the right of use asset amount. The total impact on right of
use assets was a net increase of £644,657 after amortisation of £234,673
charged on the assets Hire purchase creditors have been reclassified to lease
liabilities. The total impact on the profit and loss resulted in a net
decrease to administration expenses of £14,740 and increased finance expense
of £20,916
The transition adjustments have no impact on the net cash flow for the years
presented. However, the cash flow statement has been adjusted for the revised
IFRS result for the year and the changes in balances and classification
resulting from the transition to IFRS. The amounts are explained above and
impact cash flow classification as follows:
On transition to IFRS, an adjustment has been made to reclassify a balance of
£432,636 from the revaluation reserve to retained earnings on 1 April 2018.
The balance related to revaluations of investments that are treated as fair
value through the income statement under IFRS.
In the year end March 2020, £81,195 has been re-classified from other
comprehensive income to administrative expenses as it was incorrectly
classified as an increase to the revaluation reserve.
Statement of Financial Position
at 1 April 2018
FRS 102 IFRS IFRS
£000 adjustments £000
£000
Non-current assets
Property, plant and equipment 4,862 (374) 4,488
Investments 558 - 558
Right-of-use assets - 819 819
Total non-current assets 5,420 445 5,865
Current assets
Inventories 4,391 - 4,391
Trade and other receivables 1,890 - 1,890
Cash and cash equivalents 418 - 418
Total current assets 6,699 - 6,699
Total assets 12,119 445 12,564
Current liabilities
Trade and other payables 5,596 (152) 5,444
Corporation tax payable 84 - 84
Borrowings 1,465 - 1,465
Lease liabilities - 356 356
7,145 204 7,349
Non-current liabilities
Other payables 135 (135) -
Borrowings 2,210 - 2,210
Lease liabilities - 383 383
Deferred tax - - -
Provisions 413 - 413
Total non-current liabilities 2,758 248 3,006
Total liabilities 9,903 452 10,355
Net assets 2,216 (7) 2,209
Shareholders' equity
Called up share capital 6 - 6
Revaluation reserve 433 (433) -
Retained earnings 1,777 426 2,203
Total equity shareholders' funds 2,216 (7) 2,209
Statement of Financial Position
FRS 102 IFRS IFRS IFRS
£000 adj b/f adjustments £000
£000 £000
Non-current assets
Property, plant and equipment 5,473 - (205) 5,268
Investments 665 - - 665
Right-of-use assets - 445 - 445
Total non-current assets 6,138 445 (205) 6,378
Current assets
Inventories 4,772 - - 4,772
Trade and other receivables 1,968 - - 1,968
Cash and cash equivalents 670 - - 670
Total current assets 7,410 - - 7,410
Total assets 13,548 445 (205) 13,788
Current liabilities
Trade and other payables 5,275 - (120) 5,155
Corporation tax payable 265 - - 265
Borrowings 1,592 - - 1,592
Lease liabilities - 204 128 332
7,132 204 8 7,344
Non-current liabilities
Other payables 530 - (18) 512
Borrowings 1,743 - - 1,743
Lease liabilities - 248 (194) 54
Deferred tax 368 - - 368
Provisions 155 - - 155
Total non-current liabilities 2,796 248 (212) 2,832
Total liabilities 9,928 452 (204) 10,176
Net assets 3,620 (7) (1) 3,612
Shareholders' equity
Called up share capital 6 - - 6
Revaluation reserve 1,006 (433) - 573
Retained earnings 2,608 426 (1) 3,033
Total equity shareholders' funds 3,620 (7) (1) 3,612
At 31 March 2019
Statement of profit or loss and other comprehensive income
at 31 March 2019
FRS 102
£000 IFRS IFRS
adjustments £000
£000
Revenue 31,247 - 31,247
Cost of sales (25,411) - (25,411)
Gross profit 5,836 - 5,836
Other operating income 26 - 26
Administrative expenses (4,442) 13 (4,429)
Operating profit 1,420 13 1,433
Finance expense (82) (14) (96)
Revaluation gain 107 - 107
Profit before income tax 1,445 (1) 1,444
Tax on profit (262) - (262)
Profit for the financial period 1,183 (1) 1,182
Other comprehensive income
Fair value of freehold property 686 - 686
Income tax relating to OCI (113) - (113)
Total comprehensive income for the period 1,756 (1) 1,755
Statement of Financial Position
at 31 March 2020
FRS 102 IFRS IFRS IFRS
£000 adj b/f adjustments £000
£000 £000
Non-current assets
Property, plant and equipment 5,375 - (284) 5,091
Investments 746 - - 746
Right-of-use assets - 240 178 418
Total non-current assets 6,121 240 (106) 6,255
Current assets
Inventories 4,322 - - 4,322
Trade and other receivables 1,642 - - 1,642
Cash and cash equivalents 179 - - 179
Total current assets 6,143 - - 6,143
Total assets 12,264 240 (106) 12,398
Current liabilities
Trade and other payables 4,665 - (73) 4,592
Corporation tax payable 244 - - 244
Borrowings 961 - - 961
Lease liabilities - 212 (75) 137
5,870 212 (148) 5,934
Non-current liabilities
Other payables 309 - (112) 197
Borrowings 1,529 - - 1,529
Lease liabilities - 36 149 185
Deferred tax 383 - - 383
Provisions 155 - - 155
Total non-current liabilities 2,376 36 37 2,449
Total liabilities 8,246 248 (111) 8,383
Net assets 4,018 (8) 5 4,015
Shareholders' equity
Called up share capital 6 - - 6
Revaluation reserve 1,087 (433) (81) 573
Retained earnings 2,925 425 86 3,436
Total equity shareholders' funds 4,018 (8) 5 4,015
Statement of profit or loss and other comprehensive income
at 31 March 2020
FRS 102
£000 IFRS IFRS
adjustments £000
£000
Revenue 31,500 - 31,500
Cost of sales (26,381) - (26,381)
Gross profit 5,119 - 5,119
Other operating income 159 - 159
Administrative expenses (4,504) 95 (4,409)
Operating profit 774 95 869
Finance expense (107) (9) (116)
Revaluation gain 123 - 123
Profit before income tax 790 86 876
Tax on profit (158) - (158)
Profit for the financial period 632 86 718
Other comprehensive income
Fair value of freehold property 80 (80) -
Income tax relating to OCI 1 (1) -
Total comprehensive income for the period 713 5 718
Statement of Financial Position
at 31 March 2021
FRS 102 IFRS IFRS IFRS
£000 adj b/f adjustments £000
£000 £000
Non-current assets
Property, plant and equipment 5,886 - (263) 5,623
Investments 1,146 - - 1,146
Right-of-use assets - 134 645 779
Total non-current assets 7,032 134 382 7,548
Current assets
Inventories 11,432 - - 11,432
Trade and other receivables 2,839 - - 2,839
Cash and cash equivalents 1,493 - - 1,493
Total current assets 15,764 - - 15,764
Total assets 22,796 134 382 23,312
Current liabilities
Trade and other payables 8,400 - (97) 8,303
Corporation tax payable 1,557 - - 1,557
Borrowings 233 - - 233
Lease liabilities - 65 265 330
10,190 65 168 10,423
Non-current liabilities
Other payables 147 - (130) 17
Borrowings 1,304 - - 1,304
Lease liabilities - 72 350 422
Deferred tax 618 - - 618
Provisions 155 - - 155
Total non-current liabilities 2,224 72 220 2,516
Total liabilities 12,414 137 388 12,939
Net assets 10,382 (3) (6) 10,373
Shareholders' equity
Called up share capital 6 - - 6
Revaluation reserve 1,749 (514) - 1,235
Retained earnings 8,627 511 (6) 9,132
Total equity shareholders' funds 10,382 (3) (6) 10,373
Statement of profit or loss and other comprehensive income
at 31 March 2021
FRS 102
£000 IFRS IFRS
adjustments £000
£000
Revenue 55,984 - 55,984
Cost of sales (44,064) - (44,064)
Gross profit 11,920 - 11,920
Other operating income 165 - 165
Administrative expenses (5,276) 15 (5,261)
Operating profit 6,809 15 6,824
Finance expense (49) (21) (70)
Revaluation gain 400 - 400
Profit before income tax 7,160 (6) 7,154
Tax on profit (1,458) - (1,458)
Profit for the financial period 5,702 (6) 5,696
Other comprehensive income
Fair value of freehold property 817 - 817
Income tax relating to OCI (155) - (155)
Total comprehensive income for the period 6,364 (6) 6,358
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