REG - Midwich Group PLC - Interim Results
RNS Number : 7217LMidwich Group PLC10 September 201910 September 2019
Midwich Group plc
("Midwich" or the "Group")
Interim results for the six months ended 30 June 2019
Strong revenue and profit growth together with further acquisitions in H1 2019
Midwich, a specialist audio visual ("AV") distributor to the trade market with operations across the UK and Ireland, Continental Europe and Asia Pacific, today announces its Interim Results for the six months ended 30 June 2019.
Statutory financial highlights
Six months ended
30 June 2019
£m
30 June 20181
£m
Total growth
%
Revenue
314.8
264.1
19%
Gross profit
52.2
42.9
22%
Gross profit %
16.6%
16.2%
Operating profit
10.5
11.1
(6%)
Profit before tax
11.3
11.8
(5%)
Profit after tax
9.0
9.1
(1%)
Reported EPS - pence
11.06
11.30
(2%)
Adjusted financial highlights
Six months ended
30 June 2019
£m
30 June 20181
£m
Total growth
%
Growth at constant currency %
Revenue
314.8
264.1
19%
20%
Gross profit
52.2
42.9
22%
22%
Gross profit %
16.6%
16.2%
Adjusted operating profit2
14.6
13.5
9%
9%
Adjusted operating profit %
4.6%
5.1%
Adjusted profit before tax2
13.7
12.9
6%
7%
Adjusted profit after tax2
10.5
9.7
8%
8%
Adjusted EPS - pence
12.78
12.02
6%
Interim dividend per share
4.85p
4.60p
5%
1Restated to reflect the adoption of IFRS 16. Adjusted measures are also restated to include amortisation of patents and software
2Definitions of the alternative performance measures are set out in Note 2
Financial highlights
· Revenue increased 19.2% to £314.8 million (19.7% on constant currency basis) including organic revenue growth of 5.1%
· Gross margin of 16.6%, 0.4 percentage points ahead of H1 2018
· Adjusted operating profit2 increased by 8.6% to £14.6 million (9.1% on constant currency basis)
· Adjusted profit before tax2 increased by 6.2% to £13.7 million (6.7% on constant currency basis)
· Adjusted EPS2 increased 6% to 12.78p (H1 2018: 12.02p)
· Operating cash conversion ahead of prior year at 28% of adjusted EBITDA (H1 2018: 7%)
· Interim dividend declared of 4.85 pence per share (Interim 2018: 4.60 pence per share)
Operational highlights
· Revenue growth across all territories
· Strong net operating profit growth in UK & Ireland and Continental Europe
· Lower Asia Pacific profit compared with very strong, project-driven, prior year comparatives
· Prior year acquisitions integrated and performing well
· The three businesses acquired in the first half of 2019 have increased both our geographic presence and specialist audio capabilities, with these value-added businesses positively impacting Group gross margin
· Strong acquisition pipeline across a number of regions
· Investments to enter two new markets organically:
o Broadcast in Benelux
o Core AV distribution in South East Asia
· Investments in information technology, compliance, acquisition and integration capabilities support the Group's growth strategy.
Post period highlights
· July 2019 - Complementary specialist lighting capabilities added to Earpro in Iberia through the acquisition of 100% of the share capital of Entertainment Equipment Supplies S.L. ("EES")
· July 2019 - Opened a new UK & Ireland southern showroom and demo facility in Bracknell
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"The Group has had another strong first half and I am pleased with our overall performance, particularly given political and economic uncertainties around the globe. The increase in the Group's gross margin percentage reflects strong performance from the core business and a positive contribution from the acquisitions made in 2018 and the first half of 2019. The more specialist nature of the acquired businesses ensures that our value add to customers and vendors continues to increase.
We have been busy working on opportunities to extend the Group's reach and capabilities through the period and were pleased to complete the acquisitions of MobilePro (Switzerland), Prase (Italy) and AV Partner (Norway), each of which represents the Group's entry into a new territory. In addition, the acquisitions of Prase and (post period end) EES in Spain have strengthened the Group's capabilities in the audio and lighting markets respectively. We continue to have a healthy pipeline of strategic opportunities and have invested in the Group's acquisition and integration teams in the first half. We will continue our disciplined approach to acquire businesses that add value while both strengthening and diversifying our product offering and geographical reach.
The strong performance reported in the first half and contributions from recent acquisitions, give the Board confidence in the prospects for the Group."
Enquiries:
Midwich Group plc
Stephen Fenby, Managing Director
Stephen Lamb, Finance Director+44 (0) 1379 649200
FTI Consulting
Alex Beagley / Tom Hufton / Fern Duncan+44 (0) 20 3727 1000
Investec Bank plc
James Rudd / Carlton Nelson+44 (0) 20 7597 5970
Berenberg
Ben Wright / Mark Whitmore / Laure Fine+44 (0) 20 3207 7800
Notes to editors
Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, Continental Europe and Asia Pacific. The Group's long-standing relationships with over 400 vendors, including blue-chip organisations, support a comprehensive product portfolio across major audio visual categories such as large format displays, projectors, digital signage and professional audio. The Group operates as the sole or largest in-country distributor for a number of its vendors in their respective product sets.
The Directors attribute this position to the Group's technical expertise, extensive product knowledge and strong customer service offering built up over a number of years. The Group has a large and diverse base of over 17,000 customers, most of which are professional AV integrators and IT resellers serving sectors such as corporate, education, retail, residential and hospitality. Although the Group does not sell directly to end users, it believes that the majority of its products are used by commercial and educational establishments rather than consumers.
Initially a UK only distributor, the Group now has over 900 employees across the UK and Ireland, Continental Europe and Asia Pacific. A core component of the Group's growth strategy is further expansion of its international operations and footprint into strategically targeted jurisdictions.
For further information, please visit www.midwichgroupplc.com
Managing Director's Report
Overview
The Group has performed strongly in the first six months of 2019, with double digit revenue growth and a further increase in our gross margin percentage.
Acquisitions made in the last twelve months are performing well and have contributed positively towards the Group's gross and net profits. These acquisitions have helped to grow the Group's presence in Europe and South East Asia, as well as strengthening our capabilities in the broadcast and professional audio markets.
We have also launched a start-up broadcast activity in the Benelux and opened a new office in Singapore to help drive our business across South East Asia.
The Group continues to experience growth in the displays, broadcast and audio categories.
Strategy
The Group's strategy is to focus on markets and product areas where it can leverage its value-add services, technical expertise, and sales and marketing skills. Services, skills and geographies are developed either in-house or through acquisition.
Using its focused market knowledge and skills, the Group provides its vendors with support to build and execute plans to grow market share. The Group supports its customers to win and then deliver successful projects.
The Group has successfully used acquisitions both to enter new geographical markets and to add both expertise and new product areas. Once acquired and integrated, businesses are supported to grow organically and increase profitable market share. The Group continues to pursue a strong pipeline of opportunities across a number of regions.
Acquisitions
The Group completed three acquisitions in the first half of 2019 with an additional acquisition closing shortly after the period end.
On 17 January 2019, the Group acquired 100% of the share capital of MobilePro AG ("MobilePro"), a Swiss value-added distributor of audio visual products. Based in Zurich, MobilePro is a market leading AV distributor to the Swiss trade market. The business provides a comprehensive product offering across projection, display and interactive technologies.
On 31 January 2019, the Group acquired 80% of the share capital of Prase Engineering S.p.A ("Prase"), an Italian value-added distributor of AV products. Based near Venice, Prase is a specialist AV distributor, with a strong heritage in the solution driven professional audio market, where the business operates with high-end specialist brands. More recently, the Company has successfully added key video brands, such as LG and Epson, to its portfolio.
On 3 May 2019, the Group acquired 100% of the share capital of AV Partner AS ("AV Partner"), a Norwegian value-added distributor of AV products. Based in Oslo, AV Partner is a specialist distributor, with a market leading position in the Norwegian projection market. In recent months, it has built a displays business and has also moved into new enlarged premises with dedicated warehousing and demo facilities.
Post period end, on 1 July 2019, the Group completed the acquisition of 100% of EES, a Spanish value-added distributor of lighting and lighting infrastructure products. Based near San Sebastian, EES distributes products from key vendors including Robe, Verlinde and Prolyte on an exclusive basis to the Spanish trade market, with a particular focus on customers servicing the live events and rental sectors.
On 29 April 2019, the Group also acquired the remaining 10.5% of the issued share capital of Holdan, a value-added distributor of technology solutions focused on the broadcast, professional video and traditional audio-visual markets. The consideration for this was satisfied by the issue of 300,212 new ordinary shares of 1p each in the Group.
A strong acquisition pipeline, together with the Group's strong balance sheet, means it is well placed to continue its buy and build strategy both in new and existing territories.
New showroom facility
In July 2019, Midwich UK & Ireland opened a new 50,000 sqft+ southern showroom and demo facility (Innovation House) located in Bracknell, Berkshire.
This state-of-the-art showroom will be one of the largest multi-vendor experience centres in the UK and will showcase the Group's wide-ranging technologies.
Trading and financial review
Group revenue increased by 19.2% to £314.8 million for the six months to 30 June 2019 (H1 2018: £264.1 million).
The Group achieved a gross profit margin for the period of 16.6%, a 0.4 percentage point increase on H1 2018 and a 0.1 percentage point increase on FY 2018. Growth in margin resulted from both a positive mix effect from the higher gross profit margin businesses acquired in the last twelve months and continued gross profit improvement in the core business. Reported operating profit was impacted by growth in acquisition related expenses and amortisation of acquired intangibles, reflecting the increase in acquisition activity across the Group; together with an increase in share based payment charges.
Adjusted operating profit was £14.6 million (H1 2018: £13.5 million), which represents growth of 8.6%. The growth in adjusted operating profit reflects the overall increase in revenue and gross profit partially offset by investment in the infrastructure required to support the anticipated continued growth of the Group, in particular the central acquisition & integration teams, as well as its start-up businesses in South East Asia and Benelux.
Based on a constant currency analysis, using the current period exchange rates across both periods, Group revenue grew by 19.7% and Group Adjusted operating profit grew by 9.1%. The Group received only a marginal negative impact from movements in foreign exchange rates in the period to 30 June 2019.
Regional highlights
Six months ended
30 June
2019
£m
30 June
20181
£m
Total growth
%
Growth at constant currency
%
Organic growth %
Revenue
UK & Ireland
154.0
153.6
0.3%
0.4%
0.4%
Continental Europe
138.0
93.5
47.5%
48.4%
14.0%
Asia Pacific
22.8
17.0
33.9%
36.6%
(2.1%)
Total Global
314.8
264.1
19.2%
19.7%
5.1%
Gross profit margin
UK & Ireland
17.8%
17.1%
+0.7 ppts
Continental Europe
15.0%
14.2%
+0.8 ppts
Asia Pacific
18.1%
20.0%
(1.9) ppts
Total Global
16.6%
16.2%
+0.4 ppts
Adjusted operating profit2
UK & Ireland
9.8
9.1
7.2%
7.2%
Continental Europe
5.0
3.7
37.8%
38.6%
Asia Pacific
1.2
1.8
(31.8%)
(30.0%)
Group costs
(1.4)
(1.1)
Total Global
14.6
13.5
8.6%
9.1%
Adjusted finance costs
(0.9)
(0.6)
Adjusted profit before tax2
13.7
12.9
6.2%
6.7%
1Restated to reflect the adoption of IFRS 16. Adjusted measures are also restated to include amortisation of patents and software
2Definitions of the alternative performance measures are set out in Note 2
UK & Ireland
Revenue in the UK & Ireland increased by 0.4% in the period on a constant currency basis. There was good growth in the core AV business, driven by demand for large format displays, LED and broadcast technologies. As expected, this was partially offset by managed decline in document solutions, and tougher trading conditions for the small part of the business that addresses the consumer market.
The UK & Ireland segment's gross profit margin increased to 17.8%, a 0.7 percentage point increase on H1 2018 and a 0.4 percentage point increase on FY 2018. The UK & Ireland has benefitted from a favourable product mix attributable to an increase the proportion of display sales.
Adjusted operating profit increased by 7.2% in the UK & Ireland.
Continental Europe
Revenue in Continental Europe increased by 47.5% due to the impact of recent acquisitions and particularly strong performances in France, Germany and the Netherlands. Organic growth of 14.0% reflected strong performance in all major product categories, with particularly strong growth in displays, audio and broadcast. We entered three new geographies in the first half though the acquisitions of Prase in Italy, MobilePro in Switzerland and AV Partners in Norway. These recent acquisitions, together with the two prior year acquisitions in France and Germany, have traded well and are contributing to an increase in the region's gross profit margin to 15.0% compared with 14.2% in the first half of 2018.
Adjusted operating profit in Continental Europe grew by 38.6%, at constant currency, benefitting from the impact of recent acquisitions.
Asia Pacific
Growth in Asia Pacific revenues of 33.9% (36.6% at constant currency) benefitted from the Blonde Robot acquisition completed in December 2018. On an organic basis, Asia Pacific was marginally down on the same period in 2018, which included an exceptional level of project activity.
The Asia Pacific gross profit margin of 18.1%, was 1.9 percentage points below H1 2018, due to the high margin project activity in the prior year.
Adjusted operating profit in Asia Pacific at £1.2 million (H1 2018: £1.8 million) was impacted by the reduction in gross profit together with the investment in opening a new South East Asia AV business in H1 2019.
The Board notes that, according to trade body AVIXA, Asia Pacific is the largest AV region in the world. The market appears to be fragmented but represents an interesting opportunity for the Group over the long term.
Group costs
Group costs for the half year were £1.4 million (H1 2018: £1.1 million). The increase reflects additional investment in legal, compliance, information technology and acquisition & business integration capabilities to support the Group's growth strategy.
Adoption of IFRS 16 and update to alternative performance measures
The Group adopted IFRS 16 Leases for H1 2019 and prior period comparatives have been restated. The IFRS 16 adoption has not materially affected the results and a reconciliation to amounts previously reported is included in Note 10.
As a result of the adoption of IFRS 16 the Group has revised its definitions of adjusted profit measures. The revised adjusted operating profit includes depreciation and amortisation of right to use assets, patents and software. Adjusted profit before tax also includes these charges and the interest cost of leases recognised under IFRS 16.
IFRS 16 adoption and inclusion of amortisation of patents and software in adjusted metrics reduce adjusted operating profit in H1 2019 by £0.1 million (H1 2018: £Nil) and adjusted profit before tax by £0.2 million (H1 2018: £0.1 million).
Finance costs
Finance costs for the period were an income of £0.8 million (H1 2018: £0.7 million). Adjusted finance costs for the period were an expense of £0.9 million (H1 2018: £0.5 million). The increase in adjusted finance costs reflects the additional finance costs associated with financing the Group's acquisitions. The adjustments to finance costs include foreign exchange losses on borrowings for acquisitions of £0.1 million (H1 2018: Nil), an income from movements in deferred and contingent considerations of £0.9 million (H1 2018: £0.1 million), and an income from movements in put option liabilities over non-controlling interests of £0.9 million (H1 2018: £1.1 million).
Taxation
The reported tax charge for the period was £2.3 million (H1 2018: £2.7 million). The adjusted effective tax rate for the period was 23.8% (H1 2018: 24.8%) calculated based on the adjusted tax charge for the period divided by adjusted profit before tax.
Cash flows and financing
The Group had an adjusted net cash inflow from operations before tax of £4.9 million for the period (H1 2018: £1.1 million) which benefitted from strong working capital management and was ahead of the Board's expectations given the traditionally more working capital intensive first half when compared with the full year. The Board is comfortable that the Group's long term average cash conversion rate remains unchanged.
In February, the Group increased its revolving credit facility to £20 million (£15 million at 31 December 2018) and added a small term facility in Spain to support its acquisition strategy.
The Group has acted to hedge certain exchange rate and interest rate exposures in H1. This includes borrowing in Euros to finance European acquisitions and using financial instruments to fix part of the Group's interest charges. These instruments are marked to market at the end of each reporting period, with the change in valuation recognised in the income statement. Given any amounts recognised generally arise from market movements and accordingly bear no direct relation to the Group's underlying performance any gains or losses have been excluded from adjusted profit measures.
Net debt
Net debt, excluding IFRS 16 Leases liabilities, was £53.8 million at 30 June 2019 (£41.2 million at 30 June 2018) and net debt at 30 June 2019 including IFRS 16 was £71.3 million (£51.1 million at 30 June 2018). The adoption of IFRS 16 resulted in an increase in net debt of £17.1 million at 30 June 2019 (£9.6 million at 30 June 2018).
Dividend
The Board is pleased to declare an interim dividend of 4.85 pence per share (H1 2018: 4.60 pence per share), which will be paid on 25 October 2019 to those shareholders on the Company's register as at 20 September 2019. The last day to elect for dividend reinvestment ("DRIP") is 4 October 2019.
The Board continues to adopt a progressive dividend policy to reflect the Group's strong earnings and cash flow while maintaining an appropriate level of dividend cover to allow for investment in longer-term growth. The Board intends to pay future dividends within a cover range of 2 to 2.5 times adjusted earnings.
Outlook
The Board recognises that there is negative sentiment in the global economy, impacted by matters such as the US/China tariff dispute, Brexit and political change in certain territories. Historically, the AV industry has proven to be relatively robust in challenging economic periods. Performance in the year to date has been in line with the Board's expectations and we remain confident in the prospects for the Group.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended 30 June 2019
Note
30 June
2019
30 June
2018
31 December 2018
Unaudited
Unaudited
Audited
(Restated)1
(Restated)1
£'000
£'000
£'000
Revenue
314,842
264,099
573,682
Cost of sales
(262,600)
(221,220)
(479,120)
Gross profit
52,242
42,879
94,562
Distribution costs
(32,804)
(26,803)
(56,329)
Administrative expenses
(10,834)
(6,396)
(16,317)
Other operating income
1,862
1,445
3,025
Operating profit
10,466
11,125
24,941
Adjusted operating profit
14,630
13,470
30,267
Costs of acquisitions
(306)
(43)
(365)
Share based payments
(1,275)
(410)
(1,120)
Employer taxes on share based payments
(280)
(145)
(221)
Amortisation of brands, customer and supplier relationships
(2,303)
(1,747)
(3,620)
10,466
11,125
24,941
Finance income
19
7
81
Finance costs
5
797
703
(3,991)
Profit before taxation
11,282
11,835
21,031
Taxation
(2,249)
(2,726)
(5,774)
Profit after taxation
9,033
9,109
15,257
Profit for the financial period/year attributable to:
The Company's equity shareholders
8,753
8,981
14,696
Non-controlling interests
280
128
561
9,033
9,109
15,257
Basic earnings per share
3
11.06p
11.30p
18.50p
Diluted earnings per share
3
10.90p
11.22p
18.33p
1 Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.
Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2019
30 June
30 June
31 December
2019
2018
2018
Unaudited
Unaudited
Audited
(Restated)1
(Restated)1
£'000
£'000
£'000
Profit for the period/financial year
9,033
9,109
15,257
Other comprehensive income
Items that will be reclassified subsequently to profit or loss:
Foreign exchange gains/(losses) on consolidation
299
(296)
162
Other comprehensive income for the financial period/year, net of tax
299
(296)
162
Total comprehensive income for the period/financial year
9,332
8,813
15,419
Attributable to:
Owners of the Parent Company
8,983
8,692
14,870
Non-controlling interests
349
121
549
9,332
8,813
15,419
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
Unaudited consolidated statement of financial position as at 30 June 2019
30 June
30 June
31 December
2019
2018
2018
Unaudited
Unaudited
Audited
(Restated)1
(Restated)1
£'000
£'000
£'000
Assets
Non-current assets
Goodwill
13,655
9,416
11,568
Intangible assets
33,256
20,720
24,766
Right of use assets
16,615
9,190
10,141
Property, plant and equipment
10,982
7,594
7,028
Deferred tax assets
2,147
1,105
1,421
76,655
48,025
54,924
Current assets
Inventories
90,599
74,015
74,379
Trade and other receivables
107,258
84,704
83,139
Derivative financial instruments
116
-
25
Cash and cash equivalents
16,201
24,806
16,685
214,174
183,525
174,228
Current liabilities
Trade and other payables
(112,667)
(89,529)
(97,729)
Put option liabilities over non-controlling interests
(2,302)
-
(1,746)
Deferred and contingent considerations
(5,806)
(384)
(4,005)
Borrowings and financial liabilities
(46,638)
(67,244)
(36,838)
Current tax
(3,685)
(2,785)
(2,892)
(171,098)
(159,942)
(143,210)
Net current assets
43,076
23,583
31,018
Total assets less current liabilities
119,731
71,608
85,942
Non-current liabilities
Trade and other payables
(641)
(156)
(736)
Put option liabilities over non-controlling interests
(4,271)
(4,092)
(4,654)
Deferred and contingent considerations
(2,869)
-
(757)
Borrowings and financial liabilities
(40,846)
(8,620)
(16,108)
Deferred tax liabilities
(7,324)
(4,091)
(5,512)
Other provisions
(1,607)
-
(56)
(57,558)
(16,959)
(27,823)
Net assets
62,173
54,649
58,119
Equity
Share capital
799
794
794
Share premium
27,752
25,855
25,855
Share based payment reserve
3,100
1,338
1,837
Investment in own shares
(7)
(5)
(5)
Retained earnings
27,604
25,469
27,535
Translation reserve
2,095
1,402
1,865
Put option reserve
(6,329)
(3,638)
(4,532)
Capital redemption reserve
50
50
50
Other reserve
150
150
150
Equity attributable to owners of Parent Company
55,214
51,415
53,549
Non-controlling interests
6,959
3,234
4,570
Total equity
62,173
54,649
58,119
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2019
For the period ended 30 June 2019
Share
capitalShare premium
Investment in own shares
Share based payment reserve
Retained
earningsTranslation reserve
Put option reserve
Capital redemption reserve
Other reserve
Equity attributable to owners of the Parent
Non-controlling interests
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 1 January 2019 previously reported
794
25,855
(5)
1,837
27,766
1,861
(4,532)
50
150
53,776
4,570
58,346
Change of accounting policies (note 10)
-
-
-
-
(231)
4
-
-
-
(227)
-
(227)
Restated 1 January 2019
794
25,855
(5)
1,837
27,535
1,865
(4,532)
50
150
53,549
4,570
58,119
Profit for the period
-
-
-
-
8,753
-
-
-
-
8,753
280
9,033
Other comprehensive income
-
-
-
-
-
230
-
-
-
230
69
299
Total comprehensive income for the period
-
-
-
-
8,753
230
-
-
-
8,983
349
9,332
Shares issued
2
-
(2)
-
-
-
-
-
-
-
-
-
Share based payments
-
-
-
1,275
-
-
-
-
-
1,275
-
1,275
Deferred tax on share based payments
-
-
-
16
-
-
-
-
-
16
-
16
Share options exercised
-
24
-
(28)
4
-
-
-
-
-
-
-
Acquisition of subsidiaries (note 7)
-
-
-
-
-
-
(2,886)
-
-
(2,886)
2,883
(3)
Acquisition of non-controlling interests (note 8)
3
1,873
-
-
(246)
-
1,089
-
-
2,719
(843)
1,876
Dividends paid
-
-
-
-
(8,442)
-
-
-
-
(8,442)
-
(8,442)
Balance at 30 June 2019 (Unaudited)
799
27,752
(7)
3,100
27,604
2,095
(6,329)
50
150
55,214
6,959
62,173
For the period ended 30 June 2018 (restated)1
Share
capitalShare premium
Investment in own shares
Share based payment reserve
Retained
earningsTranslation reserve
Put option reserve
Capital redemption reserve
Other reserve
Equity attributable to owners of the Parent
Non-controlling interests
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 1 January 2018 previously reported
794
25,855
(5)
751
24,331
1,691
(3,638)
50
150
49,979
3,113
53,092
Change of accounting policies (note 10)
-
-
-
-
(203)
-
-
-
-
(203)
-
(203)
Restated 1 January 2018
794
25,855
(5)
751
24,128
1,691
(3,638)
50
150
49,776
3,113
52,889
Profit for the period
-
-
-
-
8,981
-
-
-
-
8,981
128
9,109
Other comprehensive income
-
-
-
-
-
(289)
-
-
-
(289)
(7)
(296)
Total comprehensive income for the period
-
-
-
-
8,981
(289)
-
-
-
8,692
121
8,813
Share based payments
-
-
-
410
-
-
-
-
-
410
-
410
Deferred tax on share based payments
-
-
-
177
-
-
-
-
-
177
-
177
Dividends paid
-
-
-
-
(7,640)
-
-
-
-
(7,640)
-
(7,640)
Balance at 30 June 2018 (Unaudited)
794
25,855
(5)
1,338
25,469
1,402
(3,638)
50
150
51,415
3,234
54,649
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
For the year ended 30 December 2018 (Restated)1
Share
capitalShare premium
Investment in own shares
Share based payment reserve
Retained
earningsTranslation reserve
Put option reserve
Capital redemption reserve
Other reserve
Equity attributable to owners of the Parent
Non-controlling interests
Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 1 January 2018 previously reported
794
25,855
(5)
751
24,331
1,691
(3,638)
50
150
49,979
3,113
53,092
Change of accounting policies (note 10)
-
-
-
-
(203)
-
-
-
-
(203)
-
(203)
Restated 1 January 2018
794
25,855
(5)
751
24,128
1,691
(3,638)
50
150
49,776
3,113
52,889
Profit for the year
-
-
-
-
14,696
-
-
-
-
14,696
561
15,257
Other comprehensive income
-
-
-
-
-
174
-
-
-
174
(12)
162
Total comprehensive income for the year
-
-
-
-
14,696
174
-
-
-
14,870
549
15,419
Share based payments
-
-
-
1,120
-
-
-
-
-
1,120
-
1,120
Deferred tax on share based payments
-
-
-
(34)
-
-
-
-
-
(34)
-
(34)
Acquisition of subsidiaries (note 7)
-
-
-
-
-
-
(894)
-
-
(894)
908
14
Dividends paid
-
-
-
-
(11,289)
-
-
-
-
(11,289)
-
(11,289)
Balance at 31 December 2018
794
25,855
(5)
1,837
27,535
1,865
(4,532)
50
150
53,549
4,570
58,119
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
Unaudited consolidated cashflow statement for 6 months ended 30 June 2019
30 June
30 June
31 December
2019
2018
2018
Unaudited
Unaudited
Audited
(Restated)1
(Restated)1
£'000
£'000
£'000
Cash flows from operating activities
Profit before tax
11,282
11,835
21,031
Depreciation
2,444
2,015
4,176
Amortisation
2,385
1,828
3,792
Gain/(loss) on disposal of assets
11
(5)
27
Share based payments
1,275
410
1,120
Foreign exchange (gains)/losses
(193)
195
4
Finance income
(19)
(7)
(81)
Finance costs
(797)
(703)
3,991
Profit from operations before changes in working capital
16,388
15,568
34,060
Increase in inventories
(7,588)
(11,031)
(9,468)
Increase in trade and other receivables
(12,145)
(8,343)
(3,221)
Increase in trade and other payables
7,706
4,888
10,246
Cash inflow from operations
4,361
1,082
31,617
Income tax paid
(3,016)
(3,543)
(7,377)
Net cash inflow/(outflow) from operating activities
1,345
(2,461)
24,240
Cash flows from investing activities
Acquisition of businesses, net of cash and debt acquired
(15,869)
-
(6,724)
Deferred and contingent considerations paid
(2,955)
(5,507)
(5,507)
Purchase of intangible assets
(979)
(357)
(778)
Purchase of plant and equipment
(3,010)
(1,734)
(2,360)
Proceeds on disposal of plant and equipment
326
219
382
Interest received
19
7
81
Net cash outflow from investing activities
(22,468)
(7,372)
(14,906)
Cash from financing activities
Dividends paid
(8,442)
(7,640)
(11,289)
Invoice financing inflows/(outflows)
3,052
9,678
(8,704)
Proceeds from borrowings
24,976
159
12,240
Repayment of loans
(1,293)
(9)
(2,107)
Interest paid
(962)
(522)
(1,362)
Interest on leases
(173)
(125)
(268)
Capital element of lease payments
(969)
(867)
(1,725)
Net cash inflow/(outflow) from financing activities
16,189
674
(13,215)
Net decrease in cash and cash equivalents
(4,934)
(9,159)
(3,881)
Cash and cash equivalents at beginning of period/year
16,357
20,010
20,010
Effects of exchange rate changes
267
(331)
228
Cash and cash equivalents at end of period/year
11,690
10,520
16,357
Comprising:
Cash at bank
16,201
24,806
16,685
Bank overdrafts
(4,511)
(14,286)
(328)
11,690
10,520
16,357
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2019 is unaudited and does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006.
The interim consolidated financial information does not include all the information required for statutory financial statements in accordance with IFRS, and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2018.
2. Accounting policies
Basis of preparation
The interim financial information in this report has been prepared on the basis of the accounting policies set out in the audited financial statements for the year ended 31 December 2018, except as amended for the implementation of IFRS 16 'Leases', which was adopted on 1 January 2019. The audited financial statements for the year ended 31 December 2018 complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").
The Group has elected to apply the full retrospective approach to the transition to IFRS 16. The full retrospective approach requires the transition to be implemented with restatement of the prior year results as if IFRS 16 had always been applied. Adoption of the IFRS 16 has resulted in the recognition of Right of use assets and lease liabilities with a corresponding increase in depreciation charges and finance costs offset by a reduction in operating lease costs in the income statement.
The directors have adopted the going concern basis in preparing the financial information. In assessing whether the going concern assumption is appropriate, the directors have taken into account all relevant available information about the foreseeable future.
The statutory accounts for the year ended 31 December 2018, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.
Use of alternative performance measures
The Group has defined certain measures that it uses to understand and manage performance. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. These non-GAAP measures are not intended to be a substitute for any IFRS measures of performance, but management has included them as they consider them to be key measures used within the business for assessing the underlying performance.
Growth at constant currency: This measure shows the year on year change in performance after eliminating the impact of foreign exchange movement, which is outside of management's control.
Organic growth: This is defined as growth at constant currency growth excluding acquisitions until the first anniversary of their consolidation.
Adjusted operating profit: Adjusted operating profit is disclosed to indicate the Group's underlying profitability. It is defined as profit before acquisition related expenses, share based payments and associated employer taxes and amortisation of brand, customer and supplier relationship intangible assets.
Adjusted EBITDA: This represents operating profit before acquisition related expenses, share based payments and associated employer taxes, depreciation and amortisation.
Adjusted profit before tax: This is profit before tax adjusted for acquisition related expenses, share based payments and associated employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements.
Adjusted profit after tax: This is profit after tax adjusted for acquisition related expenses, share based payments and associated employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements and the tax thereon.
Adjusted EPS: This is adjusted profit after tax less profit, amortisation of brand, customer and supplier relationship intangible assets and tax thereon due to non-controlling interests divided by the weighted number of shares outstanding.
3. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax for the period/year attributable to equity shareholders of the Company by the weighted average number of shares outstanding during the period/year.
Diluted earnings per share is calculated by adjusting the profit after tax for the period/year attributable to equity shareholders of the Company for the fair value (measured in accordance with IFRS 2) of any goods or services to be supplied to the Group in the future under the share options granted by the financial reporting date and dividing it by the weighted average number of shares outstanding during the period/year adjusted for the effects of all dilutive potential ordinary shares.
The Group's earnings per share and diluted earnings per share, are as follows:
June
2019
June
2018
(Restated)1
December
2018
(Restated)1
Profit attributable to equity holders of the Parent Company (£'000)
8,753
8,981
14,696
Weighted average number of shares outstanding2
79,078,793
79,448,200
79,448,200
Dilutive (potential dilutive) effect of share options
1,175,685
605,798
725,002
Weighted average number of ordinary shares for the purposes of diluted earnings per share
80,254,478
80,053,998
80,173,202
Basic earnings per share
11.06p
11.30p
18.50p
Diluted earnings per share
10.90p
11.22p
18.33p
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
2 Comparative earnings per share calculations were based on the number of shares issued rather than the number of shares outstanding and therefore excluded the weighted average number of own shares held. Comparative earnings per share calculations have not been restated for the weighted average number of own shares held as the effect is not material.
4. Segmental reporting
June 2019
UK & Ireland
£'000
Continental Europe
£'000
Asia
Pacific
£'000
Other
£'000
Total
£'000
Revenue
154,078
137,975
22,789
-
314,842
Gross profit
27,406
20,714
4,122
-
52,242
Gross profit %
17.8%
15.0%
18.1%
-
16.6%
Adjusted operating profit
9,760
5,057
1,195
(1,382)
14,630
Cost of acquisitions
-
-
-
(306)
(306)
Share based payments
(535)
(399)
(98)
(243)
(1,275)
Employer taxes on share based payments
(83)
(145)
(9)
(43)
(280)
Amortisation of brand, customer and supplier relationships
(1,277)
(888)
(138)
-
(2,303)
Operating profit
7,865
3,625
950
(1,974)
10,466
Net interest received
816
Profit before tax
11,282
Other segmental information
June 2019
UK & Ireland
£'000
Continental Europe
£'000
Asia
Pacific
£'000
Other
£'000
Total
£'000
Segment assets
127,048
143,751
19,655
375
290,829
Segment liabilities
(98,282)
(114,017)
(16,007)
(350)
(228,656)
Segment net assets
28,766
29,734
3,648
25
62,173
Depreciation
1,198
1,057
189
-
2,444
Amortisation
1,323
916
146
-
2,385
Other segmental information
UK
£'000
International
£'000
Total
£'000
Non-current assets
28,624
48,031
76,655
June 2018 (Restated)1
UK & Ireland
£'000
Continental Europe
£'000
Asia
Pacific
£'000
Other
£'000
Total
£'000
Revenue
153,555
93,526
17,018
-
264,099
Gross profit
26,230
13,250
3,399
-
42,879
Gross profit %
17.1%
14.2%
20.0%
-
16.2%
Adjusted operating profit
9,107
3,670
1,751
(1,058)
13,470
Cost of acquisitions
-
-
-
(43)
(43)
Share based payments
(231)
(116)
(42)
(21)
(410)
Employer taxes on share based payments
(57)
(62)
(11)
(15)
(145)
Amortisation of brands, customer and supplier relationships
(1,278)
(450)
(19)
-
(1,747)
Operating profit
7,541
3,042
1,679
(1,137)
11,125
Net interest received
710
Profit before tax
11,835
Other segmental information
June 2018 (Restated)1
UK & Ireland
£'000
Continental Europe
£'000
Asia
Pacific
£'000
Other
£'000
Total
£'000
Segment assets
140,187
77,574
13,006
783
231,550
Segment liabilities
(123,470)
(45,201)
(8,113)
(117)
(176,901)
Segment net assets
16,717
32,373
4,893
666
54,649
Depreciation
1,097
786
132
-
2,015
Amortisation
1,337
467
24
-
1,828
Other segmental information
UK
£'000
International
£'000
Total
£'000
Non-current assets
25,114
22,911
48,025
1 Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.
December 2018 (Restated)1
UK & Ireland
£'000
Continental Europe
£'000
Asia
Pacific
£'000
Other
£'000
Total
£'000
Revenue
315,808
222,017
35,857
-
573,682
Gross profit
54,890
33,086
6,586
-
94,562
Gross profit %
17.4%
14.9%
18.4%
-
16.5%
Adjusted operating profit
19,541
10,276
2,935
(2,485)
30,267
Costs of acquisitions
-
-
-
(365)
(365)
Share based payments
(557)
(382)
(106)
(75)
(1,120)
Employer taxes on share based payments
(72)
(109)
(14)
(26)
(221)
Amortisation of brands, customer and supplier relationships
(2,557)
(1,005)
(58)
-
(3,620)
Operating profit
16,355
8,780
2,757
(2,951)
24,941
Net interest paid
(3,910)
Profit before tax
21,031
1 Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.
Other segmental information
December 2018 (Restated)1
UK & Ireland
£'000
Continental Europe
£'000
Asia
Pacific
£'000
Other
£'000
Total
£'000
Segment assets
117,144
91,977
19,689
342
229,152
Segment liabilities
(103,076)
(52,891)
(14,710)
(356)
(171,033)
Segment net assets/(liabilities)
14,068
39,086
4,979
(14)
58,119
Depreciation
2,222
1,670
284
-
4,176
Amortisation
2,672
1,050
70
-
3,792
Other segmental information
UK
£'000
International
£'000
Total
£'000
Non-current assets
23,222
31,702
54,924
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
5. Finance costs
June 2019
June 2018
December 2018
(Restated)1
(Restated)1
£'000
£'000
£'000
Interest on overdrafts and invoice discounting facilities
535
418
1,042
Interest on leases
172
125
268
Interest on other loans and fair value movements on derivatives relating to foreign exchange
208
4
151
Foreign exchange gains or losses on borrowings for acquisitions and fair value movements on derivatives for borrowings
129
-
-
Interest, foreign exchange and other finance costs of deferred and contingent considerations
(924)
(147)
2,219
Interest, foreign exchange and other finance costs of put option liabilities over non-controlling interests
(917)
(1,103)
311
(797)
(703)
3,991
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
June 2019
June 2018
December 2018
Classed as equity:
Number
£'000
Number
£'000
Number
£'000
Issued and fully paid ordinary shares of £0.01 each
Opening balance
79,448,200
794
79,448,200
794
79,448,200
794
Shares issued
525,212
5
-
-
-
-
Closing balance
79,973,412
799
79,448,200
794
79,448,200
794
During the period Midwich Group plc issued 300,212 shares in order to settle the put option liability and acquire the remaining shares in Holdan Limited, and issued 225,000 shares into an employee benefit trust. There were no share transactions effected during the comparative period or the year to 31 December 2018.
Employee benefit trusts
In 2016 Midwich Group plc allocated 480,700 shares into Midwich Group plc 2016 Share Incentive Plan, an employee benefit trust. As at 30 June 2019 392,800 of these shares were transferred to Midwich Employees' Share Trust, a separate employee benefit trust for the SIP. During the period 7,700 shares were transferred to employees from the Midwich Employees' Share Trust, as share options were exercised. During the period Midwich Group plc set up Midwich Group plc 2019 Jersey Employee Benefit Trust, a new employee benefit trust and issued 225,000 to shares to the trust.
A reconciliation of LTIP option movements during the current and comparative period, and the year to 31 December 2018 is as follows:
Six months to June 2019
Six months to June 2018
Twelve months to December 2018
Outstanding at 1 January
1,460,900
788,000
788,000
Granted
-
75,000
684,400
Lapsed
(9,400)
(1,000)
(11,500)
Outstanding at period end
1,451,500
862,000
1,460,900
A reconciliation of SIP option movements during the current and comparative period, and the year to 31 December 2018 is as follows:
Six months to June 2019
Six months to June 2018
Twelve months to December 2018
Outstanding at 1 January
284,300
227,000
227,000
Granted
-
91,500
91,500
Lapsed
(6,100)
(12,500)
(34,200)
Exercised
(7,700)
-
-
Outstanding at period end
270,500
306,000
284,300
7. Business combinations
Acquisitions were completed by the Group during the comparative periods to increase scale, broaden its addressable market and widen the product offering.
Subsidiaries acquired
Acquisition
Principal activity
Date of acquisition
Proportion acquired (%)
Fair value of consideration
£'000
MobilePro AG
Distribution of audio visual products to trade customers
17 January 2019
100%
882
Prase Engineering SpA
Distribution of professional audio products to trade customers
31 January 2019
80%
11,534
AV Partner AS
Distribution of audio visual products to trade customers
3 May 2019
100%
5,467
Bauer & Trummer GmbH
Distribution of professional broadcast equipment to trade customers
23 August 2018
100%
3,311
Sound Directions France SAS
Distribution of professional audio products to trade customers
5 September 2018
100%
682
Blonde Robot Pty Limited
Distribution of audio visual products to trade customers
4 December 2018
65%
1,687
2019 acquisitions
Fair value of consideration transferred:
2019
MobilePro AG
Prase Engineering SpA
AV Partner AS
£'000
£'000
£'000
Cash
882
6,108
3,225
Deferred and contingent considerations
-
5,426
2,242
Total
882
11,534
5,467
During the period the Group recognised acquisition costs of £17k in relation to the acquisition of the remaining shares of Holdan Limited, £44k in relation to the acquisition of MobilePro AG, £109k in relation to the acquisition of Prase Engineering SpA, £70k in relation to the acquisition of AV Partner AS, £42k in relation to other acquisitions not completed before the end of the period, £9k in relation to the incorporation of Midwich Asia Pte Limited, and £15k on other potential future acquisitions.
On acquisition of Prase Engineering SpA the Group recognised £2,886k in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest.
Fair value of acquisitions
2019
MobilePro AG
Prase Engineering SpA
AV Partner AS
£'000
£'000
£'000
Non-current assets
Goodwill
451
370
1,195
Intangible assets - customer relationships
165
1,504
1,193
Intangible assets - supplier contracts
327
3,110
2,241
Intangible assets - brands
534
382
142
Right of use assets
1,548
69
1,370
Plant and equipment
59
2,497
8
3,084
7,932
6,149
Current assets
Inventories
3,742
3,604
1,285
Trade and other receivables
2,162
8,830
983
Current tax
-
-
33
Cash and cash equivalents
42
1,439
13
5,946
13,873
2,314
Current liabilities
Trade and other payables
(3,747)
(4,370)
(839)
Borrowings and financial liabilities
(1,749)
(90)
-
Current tax
(1)
(403)
-
(5,497)
(4,863)
(839)
Non-current liabilities
Borrowings and financial liabilities
(2,093)
(69)
(1,370)
Deferred tax liabilities
(218)
(1,286)
(787)
Other provisions
(340)
(1,169)
-
(2,651)
(2,524)
(2,157)
Non-controlling interests
-
(2,884)
-
Fair value of net assets acquired attributable to equity shareholders of the Parent Company
882
11,534
5,467
Goodwill acquired in 2019 relates to the workforce, synergies and sales know how. Goodwill arising on all the acquisitions has been allocated to the Continental Europe segment.
Gross contractual amounts of trade and other receivables acquired in 2018 were £12,110k, with bad debt provisions of £135k.
Net cash outflow on acquisition of subsidiaries
MobilePro AG
Prase Engineering SpA
AV Partner AS
£'000
£'000
£'000
Consideration paid in cash
882
6,108
3,225
Less: cash and cash equivalent balances acquired
(42)
(1,439)
(13)
Plus: borrowings acquired
3,842
159
1,370
Net cash outflow
4,682
4,828
4,582
2018 acquisitions
Fair value of consideration transferred:
2018
Bauer & Trummer GmbH
Sound Directions France SAS
Blonde Robot Pty Limited
£'000
£'000
£'000
Cash
1,354
628
1,687
Deferred and contingent considerations
1,957
54
-
Total
3,311
682
1,687
Acquisition costs of £119k in relation to the acquisition of Bauer & Trummer GmbH, £47k in relation to the acquisition of Sound Directions France SAS, £83k in relation to the acquisition of Blonde Robot Pty Limited, and £116k in relation to other acquisitions not completed before the end of the year were expensed to the income statement during the year ended 31 December 2018.
On acquisition of Blonde Robot Pty Limited the Group recognised £894k in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest.
Fair value of acquisitions
2018 (Restated)1
Bauer & Trummer GmbH
Sound Directions France SAS
Blonde Robot Pty Limited
£'000
£'000
£'000
Non-current assets
Goodwill
1,022
174
935
Intangible assets - customer relationships
1,051
105
1,808
Intangible assets - supplier contracts
1,349
159
427
Intangible assets - brands
337
18
270
Right of use assets
1,153
179
210
Plant and equipment
140
23
86
5,052
658
3,736
Current assets
Inventories
702
61
1,164
Trade and other receivables
550
698
2,309
Cash and cash equivalents
327
211
-
1,579
970
3,473
Current liabilities
Trade and other payables
(1,045)
(628)
(1,746)
Current tax
-
-
(53)
Derivative financial instruments
-
-
(23)
Borrowings and financial liabilities
(265)
(52)
(1,776)
(1,310)
(680)
(3,598)
Non-current liabilities
Borrowings and financial liabilities
(1,116)
(173)
(211)
Deferred tax
(894)
(93)
(747)
Other provisions
-
-
(58)
(2,010)
(266)
(1,016)
Non-controlling interests
-
-
(908)
Fair value of net assets acquired attributable to equity shareholders of the Parent Company
3,311
682
1,687
1 Comparative information is restated for the adoption of IFRS 16 (note 10).
Goodwill acquired in 2018 relates to the workforce, synergies and sales know how. Goodwill arising on the Bauer & Trummer GmbH and Sound Directions France SAS acquisitions has been allocated to the Continental Europe segment. Goodwill arising on the Blonde Robot Pty Limited acquisition has been allocated to the APAC segment.
Gross contractual amounts of trade and other receivables acquired in 2018 were £3,589k, with bad debt provisions of £32k.
Net cash outflow on acquisition of subsidiaries
Bauer & Trummer GmbH
Sound Directions France SAS
Blonde Robot Pty Limited
£'000
£'000
£'000
Consideration paid in cash
1,354
628
1,687
Less: cash and cash equivalent balances acquired
(327)
(211)
-
Plus: borrowings acquired
1,381
225
1,987
Net cash outflow
2,408
642
3,674
8. Acquisition of non-controlling interest
On 29 April 2019, the Group the acquired the remaining 10.5% non-controlling interest in Holdan Limited of £843k, for a consideration of £1,875k. £1,089k of the put option reserve was transferred to retained earnings when the put option liability was extinguished.
9. Currency impact
The Group reports in Pounds Sterling (GBP) but has significant revenues and costs as well as assets and liabilities denominated in Euros (EUR) and Australian Dollars (AUD). The table below sets out the prevailing exchange rates in the periods reported.
Six months to 30 June 2019
Six months to 30 June 2018
At 30 June 2019
At 30 June 2018
At 31 December 2018
Average
Average
EUR/GBP
1.143
1.136
1.118
1.131
1.115
AUD/GBP
1.824
1.777
1.814
1.788
1.809
NZD/GBP
1.917
1.921
1.895
1.950
1.902
USD/GBP
1.292
-
1.273
-
1.277
CHF/GBP
1.297
-
1.241
-
-
NOK/GBP
11.176
-
10.851
-
-
Applying the current period foreign exchange rates across the first half of 2018 had the following impact on reported results:
EUR
AUD
NZD
£000
£000
£000
Increase/(decrease) in revenue due to change in foreign exchange rate:
(653)
(401)
3
Decrease in profit before tax due to change in foreign exchange rate:
(29)
(40)
-
Increase/(decrease) in net debt due to change in foreign exchange rate:
175
(17)
(2)
10. Changes in accounting standards
The Group has adopted IFRS 16 from 1 January 2019 using the full retrospective approach. Comparative financial results have been restated as if IFRS 16 had always been adopted. Adoption of IFRS 16 requires that leases longer than 12 months are recognised as liabilities and initially measured at the present value of the future lease payments. The present value of future lease payments is discounted at the implicit interest rate of the lease if it can be readily determined and at the lessee's incremental borrowing rate if the implicit interest rate can't be easily determined. Leases are subsequently measured at amortised cost.
The adoption of IFRS 16 also requires the recognition of right of use assets, which are initially measured at the same value as the lease liability but are subsequently measured at the original value of the lease liability cost less accumulated depreciation and impairment losses.
As a result of the adoption of IFRS 16 the Group reports an increase in depreciation and interest costs with a corresponding decrease in rental costs in the statement of financial performance.
The impact of adopting IFRS 16 on the financial performance and position of the Group for the comparative periods is as follows:
30 June 2018
30 June 2018
30 June 2018
Previously presented
Impact of IFRS 16
Restated
£'000
£'000
£'000
Revenue
264,099
-
264,099
Cost of sales
(221,220)
-
(221,220)
Gross profit
42,879
-
42,879
Distribution costs
(26,803)
-
(26,803)
Administrative expenses
(6,495)
99
(6,396)
Other operating income
1,445
-
1,445
Operating profit
11,026
99
11,125
Finance income
7
-
7
Finance costs
821
(118)
703
Profit before taxation
11,854
(19)
11,835
Taxation
(2,736)
10
(2,726)
Profit after taxation
9,118
(9)
9,109
30 June 2018
30 June 2018
30 June 2018
Previously presented
Impact of IFRS 16
Restated
£'000
£'000
£'000
Assets
Non-current assets
Goodwill
9,068
348
9,416
Intangible assets
20,720
-
20,720
Right of use assets
-
9,190
9,190
Property, plant and equipment
7,990
(396)
7,594
Deferred tax assets
930
175
1,105
38,708
9,317
48,025
Current assets
Inventories
74,015
-
74,015
Trade and other receivables
84,704
-
84,704
Cash and cash equivalents
24,806
-
24,806
183,525
-
183,525
Current liabilities
Trade and other payables
(89,529)
-
(89,529)
Deferred and contingent considerations
(384)
-
(384)
Borrowings and financial liabilities
(66,015)
(1,229)
(67,244)
Current tax
(2,785)
-
(2,785)
(158,713)
(1,229)
(159,942)
Net current assets
24,812
(1,229)
23,583
Total assets less current liabilities
63,520
8,088
71,608
Non-current liabilities
Trade and other payables
(156)
-
(156)
Put option liabilities over non-controlling interests
(4,092)
-
(4,092)
Borrowings and financial liabilities
(324)
(8,296)
(8,620)
Deferred tax liabilities
(4,091)
-
(4,091)
(8,663)
(8,296)
(16,959)
Net assets
54,857
(208)
54,649
31 December 2018
31 December 2018
31 December 2018
Previously presented
Impact of IFRS 16
Restated
£'000
£'000
£'000
Revenue
573,682
-
573,682
Cost of sales
(479,120)
-
(479,120)
Gross profit
94,562
-
94,562
Distribution costs
(56,329)
-
(56,329)
Administrative expenses
(16,511)
194
(16,317)
Other operating income
3,025
-
3,025
Operating profit
24,747
194
24,941
Finance income
81
-
81
Finance costs
(3,751)
(240)
(3,991)
Profit before taxation
21,077
(46)
21,031
Taxation
(5,792)
18
(5,774)
Profit after taxation
15,285
(28)
15,257
31 December 2018
31 December 2018
31 December 2018
Previously presented
Impact of IFRS 16
Restated
£'000
£'000
£'000
Assets
Non-current assets
Goodwill
11,188
380
11,568
Intangible assets
24,766
-
24,766
Right of use assets
-
10,141
10,141
Property, plant and equipment
7,391
(363)
7,028
Deferred tax assets
1,222
199
1,421
44,567
10,357
54,924
Current assets
Inventories
74,379
-
74,379
Trade and other receivables
83,139
-
83,139
Derivative financial instruments
25
-
25
Cash and cash equivalents
16,685
-
16,685
174,228
-
174,228
Current liabilities
Trade and other payables
(97,729)
-
(97,729)
Put option liabilities over non-controlling interests
(1,746)
-
(1,746)
Deferred and contingent considerations
(4,005)
-
(4,005)
Borrowings and financial liabilities
(35,151)
(1,687)
(36,838)
Current tax
(2,892)
-
(2,892)
(141,523)
(1,687)
(143,210)
Net current assets
32,705
(1,687)
31,018
Total assets less current liabilities
77,272
8,670
85,942
Non-current liabilities
Trade and other payables
(736)
-
(736)
Put option liabilities over non-controlling interests
(4,654)
-
(4,654)
Deferred and contingent considerations
(757)
-
(757)
Borrowings and financial liabilities
(7,211)
(8,897)
(16,108)
Deferred tax liabilities
(5,512)
-
(5,512)
Other provisions
(56)
-
(56)
(18,926)
(8,897)
(27,823)
Net assets
58,346
(227)
58,119
11. Copies of interim report
Copies of the interim report are available to the public free of charge from the Company at Vinces Road, Diss, IP22 4YT.
12. Events after the reporting period
On 1 July 2019 the Group acquired 100% of Entertainment Equipment Supplies SL, a specialist distributor of lighting and lighting infrastructure products based in San Sebastian, Spain.
13. Adjustments to reported results
Six months ended
30 June
30 June
2019
2018
(Restated)1
£000
£000
Operating profit
10,466
11,125
Cost of acquisitions
306
43
Share based payments
1,275
410
Employer taxes on share based payments
280
145
Amortisation of brands, customer and supplier relationships
2,303
1,747
Adjusted operating profit
14,630
13,470
Depreciation
2,444
2,015
Amortisation of patents and software
82
81
Adjusted EBITDA
17,156
15,566
Increase in adjusted inventories
(7,588)
(11,031)
Increase in adjusted trade and other receivables
(12,145)
(8,343)
Increase in adjusted trade and other payables
7,426
4,888
Adjusted cash flow from operations
4,849
1,080
Adjusted EBITDA cash flow conversion
28.3%
6.9%
Profit before tax
11,282
11,835
Cost of acquisitions
306
43
Share based payments
1,275
410
Employer taxes on share based payments
280
145
Amortisation of brands, customer and supplier relationships
2,303
1,747
Foreign exchange losses on borrowings for acquisitions
129
-
Finance costs - deferred and contingent considerations
(924)
(147)
Finance costs - put option liabilities over non-controlling interests
(917)
(1,103)
Adjusted profit before tax
13,734
12,930
Profit after tax
9,033
9,109
Cost of acquisitions
306
43
Share based payments
1,270
410
Employer taxes on share based payments
280
145
Amortisation of brands, customer and supplier relationships
2,303
1,747
Foreign exchange losses on borrowings for acquisitions
129
-
Finance costs - deferred and contingent considerations
(924)
(147)
Finance costs - put option liabilities over non-controlling interests
(917)
(1,103)
Tax impact
(1,026)
(481)
Adjusted profit after tax
10,459
9,723
Profit after tax
9,033
9,109
Non-controlling interest
(280)
(128)
Profit after tax attributable to equity holders of the Parent Company
8,753
8,981
Adjusted profit after tax
10,459
9,723
Non-controlling interest
(280)
(128)
Amortisation attributable to NCI
(144)
(63)
Deferred tax on amortisation attributable to NCI
70
15
Adjusted profit after tax attributable to equity holders of the Parent Company
10,105
9,547
Weighted average number of ordinary shares
79,078,793
79,448,200
Diluted weighted average number of ordinary shares
80,254,478
80,053,998
Basic adjusted earnings per share
12.78p
12.02p
Diluted adjusted earnings per share
12.59p
11.93p
1 Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.
14. Interim dividend
The interim dividend proposed for the six months to 30 June 2019 of 4.85 pence (30 June 2018: 4.60 pence) relates to profits earned over the period.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR SSAFMUFUSESU
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