REG - Midwich Group PLC - Full Year Results
18/03/2025 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250318:nRSR0290Ba&default-theme=true
RNS Number : 0290B Midwich Group PLC 18 March 2025
18 March 2025
Midwich Group plc
("Midwich" or the "Group")
2024 Full Year Results
Record revenue and gross margins achieved in FY24, reflecting robust
performance despite a continuing challenging market
Midwich Group (AIM: MIDW), a global specialist audio visual ("AV") distributor
to the trade market, today announces its audited full year results for the
year ended 31 December 2024.
Statutory financial highlights
Year to Year to Total growth
31 December 2024 31 December 2023(1) %
£m £m
Revenue 1,317.0 1,295.1 1.7%
Gross profit 234.3 226.1 3.6%
Gross margin 17.8% 17.5%
Operating profit 24.1 41.6 (42.0%)
Profit before tax 22.3 36.5 (39.0%)
Basic EPS - pence 15.69p 27.98p (43.9%)
Total Dividend - pence per share(3) 13.0 16.5
Adjusted financial highlights(2)
Year to Year to Total growth % Growth at constant currency %
31 December 2024 31 December 2023
£m £m
Revenue 1,317.0 1295.1 1.7% 3.5%
Gross profit 234.3 226.1 3.6% 5.5%
Gross margin 17.8% 17.5%
Adjusted operating profit 48.3 59.6 (19.0%) (17.4%)
Adjusted operating profit margin % 3.7% 4.6%
Adjusted profit before tax 38.3 50.0 (23.5%) (21.6%)
Adjusted EPS - pence 26.24p 37.46p (30.0%)
Adjusted cash flow conversion 97% 114%
Adjusted net debt ratio 2.0x 1.1x
( )
(1) Restated - see note 17 for details
(2) See note 1 of the Group financial statements for definitions of non-GAAP
measures and note 16 for the reconciliations of non-GAAP measures to statutory
reported results.
(3) Total of interim and final dividends
Financial highlights
· Record revenue and gross margins, despite continued challenging macro
conditions
· Revenue increased 1.7% to £1,317.0m (2023: £1,295.1m) and up 3.5% on a
constant currency basis
· Highest ever gross profit margins of 17.8%, substantially ahead of the prior
year (2023: 17.5%)
· Adjusted operating profit of £48.3m (2023: £59.6m) reflects a resilient
performance in a tough market, with strong Adjusted cash flow conversion of
97%
· Net debt to adjusted EBITDA at the period end was 2.0x, in line with Board
expectations
· Proposed final dividend of 7.5p, bringing the 2024 full year dividend to 13.0p
(2023: 16.5p) and dividend cover to 2.0x
Operational highlights
· Strong performance in strategic product categories, reflecting the Group's
strategy to focus on higher margin product areas
· Group market share generally stable or increasing, despite the tough market
conditions
· Strong performance in North America with sales +28% and organic revenue up 7%
· Cost mitigation actions undertaken in H2 2024, resulting in c.£5m of
annualised savings achieved
· Four small bolt-on acquisitions completed during the period, with integration
progressing well
· Compound annual growth in revenue and adjusted operating profit since IPO in
2016 of 17% and 13% respectively, with a strong return on capital. Testament
to the strength of our long-term strategy and the quality of our teams
· No M&A opportunities currently in late stages, but appetite for M&A
remains in the medium term
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"After three years of strong growth, 2024 was a challenging period for the
Group. The business continued to be impacted by subdued investment in the
education and corporate end user markets, along with significant price erosion
in some mainstream product areas due to over-supply by manufacturers. Despite
these factors, our strategy of focusing on technical product areas resulted in
the business remaining robust, with revenue and gross profit growing to record
levels.
Our relative performance reflects the fundamental strength of the business,
our customer and vendor relationships, our geographic and technical solution
diversity and, most of all, the skills and dedication of our team. I believe
that the Group is very well placed to benefit from an improvement in market
conditions.
In the short term, continued price deflation in mainstream product areas is
expected to cause challenges to the growth of the business. In the meantime,
the Group continues to develop new revenue sources, and ensure we operate as
efficiently as possible.
Our expected trading performance for the 2025 full year remains unchanged,
with a higher weighting anticipated for the second half of the year."
Analyst meeting/webinar
There will be a meeting and webinar for sell-side analysts at 9.30am GMT
today, 18 March 2025, the details of which can be obtained from FTI
Consulting: midwich@fticonsulting.com (mailto:midwich@fticonsulting.com) .
For further information:
Midwich Group plc +44 (0) 1379 649200
Stephen Fenby, Managing Director
Stephen Lamb, Finance Director
Investec Bank plc (NOMAD and Joint Broker to Midwich) +44 (0) 20 7597 5970
Carlton Nelson / Ben Griffiths
Berenberg (Joint Broker to Midwich) +44 (0) 20 3207 7800
Ben Wright / Richard Andrews
FTI Consulting +44 (0) 20 3727 1000
Alex Beagley / Tom Hufton / Matthew Young
midwich@fticonsulting.com (mailto:midwich@fticonsulting.com)
About Midwich Group
Specialisation at scale
Midwich Group is a network of businesses which partner with the world's
leading technology companies to accelerate their growth. Selling into over 50
countries from 23 global locations, the Group specialises in audiovisual
technology - whether in state-of-the-art meeting rooms or on a festival main
stage, our solutions help the world connect, communicate, or experience wow
moments.
Taking technology further
With services ranging from product distribution to complex system design,
focused marketing campaigns to flexible financing solutions, and showcase
events to seed funding for startups, the Group's ever-expanding offering is
designed to add value and solve its partners' biggest challenges.
This has enabled the Group to maintain strong relationships with global
manufacturers and a diverse customer base of over 24,000, including
professional integrators, event production companies and IT resellers in
sectors such as education, corporate, retail and live events.
Enabling tomorrow
With over 1,800 employees across the UK and Ireland, EMEA, Asia Pacific and
North America, the company is committed to being a responsible employer.
The Group wants to do the right thing and actively works to limit its impact
on the environment and communities, and recognises the importance of giving
back - find out more about our sustainability activities here.
For further information, please visit www.midwichgroupplc.com
Chair's Statement
Our presence, product diversification, and specialist Pro AV focus delivered
strong gross margin improvement.
Midwich Group demonstrated resilience against a challenging market backdrop
and I am pleased to be able to report further progress in 2024, including
record revenue and gross margins, increased specialisation, further strategic
investments and continued development of our leadership team.
After an exceptional period of growth following the pandemic, which saw Group
revenue in 2022 almost double the level in 2019, growth in the last two years
has been characterised by strong demand for live events and entertainment
solutions offset by challenging corporate and education end user markets.
Our industry-leading position and diversity of geographies and technical
solutions enabled the Group to respond to this changing market backdrop.
Record revenue and gross margins in 2024 is testament to our team's
exceptional resilience, knowledge and commitment.
Whilst the Pro AV market has consistently grown above GDP, there were a number
of unprecedented challenges that continued throughout 2024. The pressures of
macroeconomic slowdowns, the impact of election cycles, higher interest rates
and labour inflation continued to moderate demand for our mainstream products.
An element of over-supply, as manufacturers struggled to accurately anticipate
demand, also resulted in unprecedented levels of discounting in the displays
market. The Group responded to this by focusing on value-added technical
solutions and, as a result, achieved both gross margin improvements and
further market share gains in many of our markets.
At constant currency, Group revenue increased by 3.5% (organic -1.4%) to
£1.32bn whilst a gross margin of 17.8% (2023: 17.5%) was a record. Overhead
growth reflected the on-boarding of the eleven acquisitions completed in the
last two years combined with the impact of inflation on the core cost base.
Despite a tight focus on cost control, and some targeted restructuring during
the year, which has delivered c.£5m in annualised savings, adjusted operating
profit reduced to £48.3m (2023: £59.6m).
In the face of extensive cost inflation in recent years, the Group has
achieved compound annual growth in revenue and adjusted operating profit over
the last five years of 14% and 8%, respectively, which is down to the strength
of our long-term strategy and the quality of our teams.
Looking to the future, the Group remains well placed to benefit from its
global scale to develop and deploy digital solutions such as e-commerce and
artificial intelligence ("AI"). These will position the Group well to deliver
positive operating leverage and net margin improvements as demand across all
markets returns to normal levels.
With the start of 2025, the wider economic backdrop continues to remain
challenging. Nevertheless, the Board believes that the structural increase in
the use of AV solutions will see robust demand in the years ahead, with
Midwich a provider of choice for our customer base. Over the longer term, the
Pro AV market is forecast to grow by an average of 5.4%(1) per annum for the
next five years and the Group is well placed to benefit from this. Despite the
Group's significant revenue, our market share represents less than 4% of our
estimated target addressable market value for the global Pro AV market. The
Group continues to have ambitious growth plans and will continue to execute
its strategy to deliver on this sizable market opportunity.
Alongside record revenue, I am pleased that the Group was also able to
complete four small strategically important acquisitions in the year.
In January 2024, the Group acquired The Farm North West LLC and The Farm
Norcal LLC ("The Farm"), which acts as an exclusive value-added sales agent to
its vendor partners, primarily in the audio and technical video segments.
Based in Silicon Valley, The Farm, which has now been integrated into the
Group's US operation, Starin Marketing, expands the Group's US footprint and
enhances its levels of customer and manufacturer support.
In the second half of the year, the Group completed three specialist
acquisitions in the UK for a total combined cash consideration of £12m. These
higher-margin technical businesses operate primarily in the live events and
fire security markets.
These acquisitions bring new capabilities, technologies, customers and vendor
relationships, further delivering on the Group's strategy to grow margins and
earnings, both organically and through selective acquisitions of strong
complementary businesses.
The integration of these businesses is largely complete, and we have
thoroughly enjoyed welcoming them to the Group.
Over the medium term, we anticipate a continuation of our expansion strategy
through both organic growth and acquisition of complementary businesses and
believe that our balance sheet and bank facilities position us well to achieve
this. The medium term acquisition pipeline remains healthy, and the management
team continues to review attractive opportunities.
Dividend
The Board understands the importance of dividends for many of our investors
and is pleased to recommend a final dividend of 7.5p per share which, if
approved, will be paid on 4 July 2025 to all shareholders on the register as
on 23 May 2025. The last day to elect for dividend reinvestment ("DRIP") is 13
June 2025. Coupled with the interim dividend of 5.5p per share, this
represents a total dividend for the year of 13.0p per share (2023: 16.5p). The
combined value of the interim and proposed final dividends is covered two
times by adjusted earnings (2023: 2.3 times).
Given the challenging market backdrop, the Board believes that the full year
dividend represents an appropriate balance between continuing to reward
shareholders and maintaining a strong balance sheet.
Over the medium term the Board continues to support a progressive dividend
policy to reflect the Group's planned growth and cash generation.
Corporate governance
Membership of the Board comprises individual directors with significant and
complementary skills and experience. Board composition is kept under review to
ensure it meets ongoing governance requirements, including independence and
diversity, and that board members collectively have appropriate skills and
experience to guide the future development and growth of the business. The
Board met ten times during the year and received regular updates from senior
leadership.
In line with the Board's succession planning, and the evolving governance
environment, I was delighted to welcome Alison Seekings to the Board in March
2024. A fourth independent Non-executive Director, Alison brings a wealth of
experience in accounting, governance and technology companies. Alison became
Audit Committee Chair in May 2024 and is a member of the other Board
sub-Committees.
Having joined the Board in May 2016, Mike Ashley is expected to retire from
his Non-executive Director role later this year and a search is currently
underway for his successor. Hilary Wright is expected to become Chair of the
Remuneration Committee when Mike retires.
I have been Chair of the Board since IPO in May 2016 and it is proposed that I
continue in the role for a limited further period. The Board considers
continuity in the Chair role important through a period of integrating new
Board members and in supporting executive management in returning the business
to profitable growth. Planning for the succession of the Chair role will
commence in 2025 with a view to my standing down in due course once a suitable
replacement is found.
In December 2024, Andrew Garnham, formerly deputy Company Secretary, was
appointed as Group Company Secretary. The Board remains satisfied that it has
a suitable balance between independence and knowledge of the business to allow
it to discharge its duties and responsibilities effectively.
In line with prior years, the Board completed a self-evaluation exercise
during 2024, reinforcing our commitment to, and success in, establishing a
strong corporate governance framework. We took the opportunity of this review
to confirm our strong and effective governance and reaffirmed the role of the
Board and its individual members in monitoring compliance with the revised QCA
code.
The Nominations Committee has reviewed the skills and experience of Board
members individually and collectively. There were no major issues or concerns
raised about the effectiveness of the Board or its individual members and
concluded that the size and composition of the Board remain appropriate at
this stage of the Group's development.
Sustainability
The Board continues to take a lead in social responsibility. Having introduced
Task Force on Climate-related Financial Disclosures ("TCFD") aligned reporting
last year, we have made further progress in 2024. In February, a new Board
Sustainability sub-Committee was established, chaired by Hilary Wright, to
further increase our focus on this area and we have included our inaugural
Sustainability Committee Report in this year's report.
The Group has a broad international footprint with the majority of its revenue
coming from outside the UK and Ireland and the Board welcomes the cultural
diversity that this brings. The Midwich culture is an open and welcoming one
and we have been recognised for this. The Board understands the importance of
diversity of gender and ethnicity and is committed to ensuring that diversity
and inclusion will be key considerations in the appointment of future
directors and senior leaders.
The Group is committed to doing the right thing for the wider society;
community engagement is embedded in our DNA. Our teams are passionate about
making a difference and once again stepped up their time commitment for our
nominated good causes. I'm delighted to report our Gift of AV programme, once
again, raised a record amount for charity in the year.
This year we have continued to enhance our work on formalising our approach to
environmental matters. Supported by a specialist third party, we have expanded
our mandatory climate-related financial disclosures, incorporating the TCFD
aligned reporting, to include broad Scope 3 data for the Group. This is in
addition to reporting on our environment-related governance, risk management,
scenario analysis, carbon reporting and net zero target setting.
The Group continues to apply the QCA code as its governance framework and has
assessed compliance with the newly revised QCA code (November 2023). The Board
welcomes the enhanced QCA code requirements and has chosen to adopt the vast
majority of additional code requirements this year.
Both our executive and independent Directors continue also to welcome feedback
from our shareholders and wider stakeholders. We engage with our largest
shareholders through invitations to discuss matters with Committee Chairs and
Directors, regular face-to-face meetings and inviting them to join us for
office/showroom tours and at our AV trade shows.
People
The success of any company is down to the quality of its leadership and its
people. In 2024, our teams demonstrated their resilience and faced up to
challenging market conditions with commitment and determination. I believe
that we have the best teams in the industry, and they have once again
delivered exceptional service to vendors, customers and end users alike.
Whilst some competitors have faltered as markets have become more challenging,
our market share and customer satisfaction levels continue to demonstrate the
core resilience of the Midwich business.
The Board has a strong belief in rewarding success and ensuring that
engagement levels are high. Share ownership by our people is a core part of
our engagement strategy and I believe that high participation in employee
share ownership and incentive plans across the Group continues to incentivise
exceptional business performance.
Our culture and values are at the heart of how we do everything in the Group,
and we have continued to invest resources in maintaining the spirit of
Midwich. This includes a step up in both our environmental and community
engagement in the year. Our teams address every challenge with commitment and
determination, and it is this positive approach that is the main driver of our
market share gains and long-term growth.
The Board has regular interaction with the Executive Directors and senior
leadership, together with the Managing Directors of our key operating units.
The Board is confident that our senior teams are working well and show the
strength and depth of the Group's leadership to support future growth.
On behalf of the Board, I would like to thank all employees and our partners
for their commitment and hard work and congratulate them on achieving an
impressive performance in a challenging year.
Andrew Herbert
Non-executive Chair
(1) Source: AVIXA.
Managing Director's Review
Robust performance in a challenging market.
Overview
In 2023, I reported that challenging macroeconomic factors had started to have
an impact on the business, particularly with respect to demand for our more
mainstream products. These challenging conditions continued throughout 2024 -
the longest period of suppressed demand that I can recall. The impact of lower
demand on our business has been exacerbated by certain manufacturers
continuing to over-supply product into the market, which in turn has led to
significant falls in average selling prices in categories such as large format
and interactive displays.
For many years, our focus has been to increase our strength in higher-margin,
more technical products such as audio, lighting and technical video. We have
had considerable success with this strategy, and indeed aggregate revenue from
these three categories increased by 8% in the year.
However, revenue from some of our mainstream product categories declined
during the year, albeit by less than the decline in these markets overall.
Displays and projection continue to be important product categories for the
business, and the tough conditions in these markets still have an impact on
the business.
Amid the difficult market conditions which continued throughout 2024, we
delivered record revenue of £1.3bn. The impact of mix improvements pushed our
gross margin from 17.5% to 17.8%. However, overheads increased by more than
gross profit (driven mostly by acquisitions made in 2023 and 2024, investment
in growth markets, inflation and higher interest charges), with the result
that our adjusted operating profit declined by 17.4%^ and adjusted profit
before tax fell by 21.6%^ to £38.3m.
The business has experienced and weathered occasional periods of significant
demand reduction - such as in the financial crisis and COVID-19. I would liken
2024 to one of these periods.
With a tough market backdrop, the business has responded well by focusing on
the needs of our customers and vendors. This has been a very challenging year
for our team, and I congratulate everyone for their efforts and performance.
The Group remains in a strong strategic and financial position, and we
continue to maintain and take market share in our core regions, which is a
testament to the work of our team.
Business performance
Group revenue increased by 1.7% to £1.3bn in 2024 (constant currency 3.5%),
with gross margins reaching 17.8% (2023: 17.5%).
Both were records for the Group and reflect organic growth in the North
American businesses with small organic declines in the rest of the world.
The increase in gross margin reflects the favourable product mix benefit from
our strategic focus on value-added technical products, driven particularly by
our acquisition programme in 2023 and, to a lesser extent, 2024. We take a
measured approach to investment, investing in our teams and operational
capabilities whilst targeting improvements in operating profit margins.
Despite undertaking a cost reduction programme in H2 2024, adjusted operating
profit decreased by 17.4%^ to £48.6m, which represents an adjusted operating
profit margin of 3.7%, down from 4.6% in the prior year. Disciplined working
capital management contributed to strong operating cash generation, with
operating cash at 97% of adjusted EBITDA ahead of our long-term average of
c80%. This helped mitigate some of the headwinds from higher interest rates.
Adjusted profit before tax of £38.3m (2023: £50.0m) was 21.6%^ below 2023.
We ended the year with leverage (adjusted net debt to adjusted EBITDA) of 2.0
times (2023: 1.1 times) which was in line with Board and market expectations.
This, combined with our long-term bank facilities, provides capacity for the
Group to continue to pursue both organic and inorganic opportunities.
Market share gains in end user markets
Third party data* for 2024 shows double digit declines in a number of the
mainstream Pro AV product categories and an overall mid-single digit decline
in the Pro AV distribution market. The Group's overall growth of 1.7%, with an
organic decline of 1.4%, demonstrates further market share gains for Midwich
in 2024. The Group adapted to the evolving market conditions, working closely
with our customers and vendors to meet the changes in market demand. In broad
terms, we categorise our products into mainstream and specialist technical
categories.
Mainstream products cover displays and projectors. These categories comprised
an aggregate of 31.3% of Group revenue in 2024 (2023: 34.9%). Specialist
categories cover technologies which require greater pre and post-sales support
and hence tend to carry higher margins. This group covers categories such as
audio, technical video and broadcast and represented 64.2% of total sales
compared with 61.2% in 2023.
A core part of the Group's long-term strategic focus is to become more
specialist. Displays and projection are at the core of the majority of Pro AV
projects, and we are the leading distributor of high-end displays and
projection in many of our businesses. Despite a challenging large format
display market, which third party data* indicates declined at double digit
rates in 2024, our display and projection business reduced by only 8.9% in the
year, indicating a continued growth in market share in these categories. LED
solutions, which continue to gain share from displays and projection in the
larger format categories, continued to experience strong growth, up 8% in the
year, and we believe we have established a strong market position in this
category. These products require a higher level of expertise to distribute
effectively, and hence tend to carry a higher overall gross margin than
mainstream products.
Growing our technical product categories has been a particular focus of the
business for many years, and in 2024 revenues increased by 5%. This was driven
by increased demand from entertainment and live events and also the full year
impact of acquisitions undertaken in 2023. There was strong growth in both
professional audio and lighting, particularly in the UK&I and North
America.
Investing in the future
The global Pro AV market is in excess of $300bn^^, of which our assessment of
the Group's Target Addressable Market ("TAM") is c$45bn. Whilst I believe that
we are the leading global specialist Pro AV distributor, our £1.3bn revenue
in 2024 represents less than 1% of the global market and 3-4% of our TAM. The
opportunity for the future remains enormous and we will continue to target
growth both organically and through acquisition.
In the last two years we have undertaken significant M&A activity,
completing eleven acquisitions. This was a significant step up from our
post-IPO average of two to three deals per annum. We acquire businesses to
enter new geographies or add to our product set and technical capabilities.
The four transactions in 2024 brought us further technical expertise and sales
presence on the west coast of the US, as well as additional lighting and
security expertise and a cable assembly business in the UK.
Our values and culture
Midwich Group is our people, their skills, experience, relationships and
attitude. We promote trust, honesty, hard work, integrity, humility and
creativity and value everyone's ideas and contribution. Team engagement is of
critical importance, and we saw improvements in our engagement survey in 2024.
Our approach is to reward success, and we continue to adapt to the changing
work environment. In the last twelve months, we have increased our global
collaboration, stepped up employee benefits and increased our engagement with
our nominated charities, our communities and our environment.
Outlook
The Group has a proven capability to grow ahead of its markets both
organically and through acquisition. Whilst the challenging market conditions
seen in 2024 have continued into 2025, and we do not expect a near-term
improvement in market growth, I believe the Group is well positioned to take
advantage of an upturn in demand.
Rather than just waiting for market conditions to improve, the team has sought
to improve the business through a combination of new technology and vendor
launches, and improving productivity.
We have further enhanced the strength of our relationships with customers and
vendors alike over the last twelve months. However, our team is not
complacent; we recognise that we operate in a competitive market where both
vendors and customers have a choice of which partners to work with. Of our top
40 vendors in 2024, we were either exclusive or the number one distributor for
the vast majority. Our focus is to ensure that we provide the best service
possible and continue to develop our offering.
Having made eleven acquisitions in a short space of time, we took a decision
to not pursue other transactions in the short term. We do, however, continue
to engage with potential acquisitions and have an extensive opportunity
pipeline and several interesting conversations in early stages.
In the short term, continued price deflation in mainstream product areas is
expected to cause challenges to the growth of the business. In the meantime,
the Group continues to develop new revenue sources, and ensure we operate as
efficiently as possible.
With the global AV market expected to continue growing over the medium to long
term, our Group is very well positioned for the future.
Stephen Fenby
Group Managing Director
^ Constant currency.
* Futuresource Consulting.
^^ Source: AVIXA.
Financial review
A resilient performance underpinned by strong operating cash generation.
Against a challenging market backdrop the Group achieved record revenue and
gross margins in 2024. Group revenue increased to £1.32bn (2023: £1.30bn).
Macroeconomic headwinds continued to impact demand for our mainstream
products, but the Group's focus on technical product categories, which
represent 64% of the Group's revenues, resulted in a record gross margin of
17.8% (2023: 17.5%).
Statutory operating profit was £24.1m (2023: £41.6m). Adjusted operating
profit of £48.3m (2023: £59.6m) reflected the impact of price discounting of
mainstream products due to excess product supply.
Distribution and administrative overheads increased as anticipated during the
year, primarily due to the acquisitions completed in the last two years,
labour cost inflation, which eased during the year, and further investment in
the Middle East.
Given the continuing tough market conditions, the Group took actions to reduce
costs during the year including both lower discretionary expenditure and
targeted restructuring activity. This resulted in lower overheads in the
second half of the year and positions the Group well for the year ahead.
Exceptional cost in the year included restructuring costs, the disposal of the
Group's ERP prototype, following "go live" of the base system and the impact
of a fire in the UAE. The damage from the fire is insured and expected to be
recovered in full in 2025.
Statutory financial highlights
Year to 31 Year to 31 Total growth
December 2024 December 2023 %
£m (Restated(2))
£m
Revenue 1,317.0 1,295.1 1.7%
Gross profit 234.3 226.1 3.6%
Operating profit 24.1 41.6 (42.0%)
Profit before tax 22.3 36.5 (39.0%)
Profit after tax 17.0 28.9 (41.4%)
Basic EPS - pence 15.69p 27.98p (43.9%)
Adjusted financial highlights(1)
Year to 31 December 2024 Year to 31 Total growth Growth at
£m December 2023 % constant
(Restated(2)) currency
£m %
Revenue 1,317.0 £1,295.1 1.7% 3.5%
Gross profit 234.3 226.1 3.6% 5.5%
Gross profit margin % 17.8% 17.5%
Adjusted operating profit 48.3 59.6 (19.0%) (17.4%)
Adjusted operating profit margin % 3.7% 4.6%
Adjusted profit before tax 38.3 50.0 (23.5%) (21.6%)
Adjusted profit after tax 28.2 38.5 (26.6%)
Adjusted EPS - pence 26.24p 37.46p (30.0%)
1 Definitions of the alternative performance measures are set out in note
1 to the consolidated financial statements.
Strong operating cash generation underpinned the resilient trading
performance, with adjusted cash flow conversion at 97% (2023: 114%). Adjusted
net debt increased to £130.6m at 31 December 2024 (2023: £82.6m) due to
further expenditure on acquisitions and deferred consideration.
Currency headwinds reduced both Group revenue and adjusted operating profit in
the year by 1.8% and 1.6% respectively. The currency movements in the prior
year had a negligible impact on these metrics.
Organic revenue declined by 1.4% (2023: +0.8%) as a result of weaker
mainstream product demand which was partially offset by growth in technical
product sales.
Adjusted EPS at 26.24p in 2024 (2023: 37.46p) was impacted by both the change
in adjusted operating profit and the equity issue in June 2023.
The Group's operating segments are the UK and Ireland, EMEA, Asia Pacific and
North America. The Group is supported by a central team.
Regional highlights
Year to 31 Year to 31 Total Growth at Organic
December 2024 December 2023 growth constant growth
£m (Restated(2)) % currency %
£m %
Revenue
UK & Ireland 476.4 478.3 (0.4%) (0.3%) (3.1%)
EMEA 569.9 588.1 (3.1%) (0.6%) (2.7%)
Asia Pacific 45.9 48.0 (4.3%) (1.3%) (1.3%)
North America 224.8 180.7 24.4% 28.1% 7.0%
Total global 1,317.0 1,295.1 1.7% 3.5% (1.4%)
Gross profit margin
UK & Ireland 18.0% 18.7% (0.7)ppts
EMEA 16.8% 16.1% 0.7ppts
Asia Pacific 16.4% 17.4% (1.0)ppts
North America 20.1% 18.6% 1.5ppts
Total global 17.8% 17.5% 0.3ppts
Adjusted operating profit(1)
UK & Ireland 19.7 27.1 (27.2%) (27.0%)
EMEA 24.8 28.1 (11.8%) (9.6%)
Asia Pacific (0.8) (0.3) (237%) (249%)
North America 9.3 9.5 (1.0%) 1.8%
Group costs (4.7) (4.8)
Total global 48.3 59.6 (19.0%) (17.4%)
Share of profit from associate 0.1 -
Adjusted net finance costs (10.1) (9.6) (4.8%) (4.2%)
Adjusted profit before tax1 38.3 50.0 (23.5%) (21.6%)
1 Definitions of the alternative performance measures are set out in
note 1 to the consolidated financial statements.
2 Restated, see note 17 for further details
The financial performance of each segment (at constant currency growth rates)
during the year was:
North America
This segment, which includes the United States and Canada (acquired in June
2023) grew by 28.1% (2023: 45.5%) with organic growth of 7.0% (2023: 8.1%).
After an exceptional first half, growth slowed towards the end of the year
reflecting the impact of expected vendor changes in Canada. Higher-margin
acquisition mix impact and projects led to an exceptional gross margin of
20.1% (2023: 18.6%). Adjusted operating profit was broadly in line with the
prior year reflecting the impact of integration costs for The Farm and
investment at SFM.
UK & Ireland
UK&I market demand continued to be subdued in the period with revenue
largely flat year on year. Technical product categories remained strong whilst
demand for mainstream products was impacted by an unusual level of discounting
attributable to product over-supply. Gross margin held up well at 18.0% (2023:
18.7%). Both acquisitions and inflation impacted overheads and, despite cost
reduction activity during the year, adjusted operating profit reduced to
£19.7m (2023: £27.1m).
EMEA
The EMEA segment revenue was marginally down on the prior year. There was
strong growth in Southern Europe and the Middle East due to demand for live
events and entertainment solutions. This was offset by softer demand in
Northern Europe by corporate and education customers. The stronger,
higher-margin, technical sales improved gross margin to 16.8% (2023: 16.1%).
The region produced an adjusted operating profit of £24.8m (2023: £28.1m).
Asia Pacific
The Asia Pacific segment, which is mainly Australia, continues to see a high
level of competition in a subdued market. Revenue reduced by 1.3% to £45.9m
(2023: -7.3% to £48.0m), generating gross profit of £7.5m (2023: £8.3m) at
a gross profit margin of 16.4% (2023: 17.4%).
Adjusted operating losses were £0.8m (2023: £0.3m profit). The Board
believes that the actions underway in APAC will see the region return to
profitability in time.
Group costs
Group costs for the year were £4.7m (2023: £4.8m). Group costs include
central support for sales, finance, compliance, human resources, information
technology and executive management.
Exceptional costs and adjusting items
Adjusted operating profit is stated before £12.0m of exceptional items
comprising:
· Restructuring costs of £7.7m (2023: £nil), of which £3m related to
Group-wide cost reduction activities undertaken during the year, which are
expected to lead to savings of approximately £5m annually from 2025 onwards.
There was an additional one-off charge of £4.7m related to the disposal of
the Group's ERP prototype system (see note 3 for more details);
· A £4.3m loss of assets following a warehouse fire in Dubai in December 2024.
This amount is insured and expected to be recovered in full in 2025.
Other adjusting items were:
· Acquisition-related expenses, which reduced to £1.1m (2023: £1.5m) due to
fewer acquisitions (four) in the year (2023: seven);
· A credit of £1.3m (2023: £5.3m charge) in respect of share-based payments
and associated taxes which arose as a result of a reduced likelihood of
certain long-term incentive scheme targets being achieved; and
· Amortisation of acquired intangibles of £12.4m (2023: £11.2m).
Profit before tax
The Group reported a profit before taxation of £22.3m (2023: £36.5m). Profit
before tax is stated after the net interest costs on borrowings for historical
acquisition investments and working capital of £10.5m (2023: £9.6m). Finance
costs increased during the year mainly because of the increase in net debt
during the period.
Profit before tax was impacted by a total gain of £7.4m (2023: £4.5m) in
relation to the change in valuation of both deferred consideration and put and
call options, and the revaluation of loans and financial instruments. In 2024,
there was also a one-off gain of £1.2m arising when the Group purchased the
remaining 70% of an associate undertaking which resulted in a one-off gain on
the initial investment (note 4).
Adjusted profit before tax of £38.3m (2023: £50.0m) decreased by 21.6%
(constant currency) (2023: +11.1%). A reconciliation of the adjustments to
statutory measures is set out on note 16.
Tax
The adjusted effective tax rate was 26.3% in 2024 (2023: 23.1%), which
reflects the mix of tax rates in the geographies where the Group operates.
Earnings per share
Basic earnings per share is calculated on the total profit of the Group
attributable to shareholders. Basic EPS for the year was 15.69p (2023:
27.98p). Adjusted EPS decreased by 30% (2023: +4%) to 26.24p (2023: 37.46p).
The EPS growth metrics were impacted by the equity issued in 2023.
Year to Year to
31 December 31 December
2024 2023
£m £m
Adjusted operating profit 48.3 59.6
Add back depreciation and unadjusted amortisation 10.9 9.9
Adjusted EBITDA 59.2 69.5
(Increase)/Decrease in stocks (8.1) 10.5
Decrease in debtors 13.8 9.6
(Decrease) in creditors1 (7.3) (10.0)
Adjusted cash flow from operations 57.6 79.6
Adjusted cash flow conversion 97% 114%
1 Excluding the movements on cash settled share based payments and
employer taxes on share based payments.
The Group's adjusted cash flow conversion, calculated comparing adjusted cash
flow from operations with adjusted EBITDA, was 97% (2023: 114%). Strong
working capital management, together with 3.5% (constant currency) revenue
growth in 2024, resulted in cash conversion ahead of the long-term average for
the Group. Our expectation of long-term adjusted cash flow conversion remains
between 70% and 80%.
Gross capital spend on tangible assets was £5.4m (2023: £5.6m) and included
investment in facilities together with rental asset purchases in the UK and
Ireland. An investment of £9.5m (2023: £10.4m) in intangible fixed assets
included £9.3m (2023: £10.1m) in relation to the Group's new ERP solution
which went live in its first country in the year.
Dividend
The Board has recommended a final dividend of 7.5p per share, which, together
with the interim dividend of 5.5p per share, gives a total dividend for 2024
of 13.0p per share (2023: 16.5p). If approved by shareholders at the AGM, the
final dividend will be paid on 4 July 2025 to shareholders on the register on
23 May 2025. The last day to elect for dividend reinvestment ("DRIP") is 13
June 2025.
Net debt
Net debt at 31 December 2024 increased to £153.4m from £106.2m at 31
December 2023. The Group's reported net debt continues to be impacted by the
adoption of IFRS 16, which results in £22.8m of lease liabilities (2023:
£23.6m) being added to net debt. As noted in the prior year, the Group's
focus is net debt excluding leases ("adjusted net debt"). The impact of leases
on net debt is excluded from the Group's main banking covenants.
Adjusted net debt at 31 December 2024 was £130.6m (2023: £82.6m). This
increase can be largely attributed to payments totalling £38.2m (2023:
£52.0m) for acquisition and deferred consideration payments in the year.
The Group utilises a £175m revolving credit facility which matures in
mid-2028. This facility is supported by six banks and has an adjusted net debt
to adjusted EBITDA covenant of 3x and an adjusted interest cover covenant
ratio of 4x adjusted EBITDA. The EBITDA for covenants is calculated on a
historical twelvemonth basis and includes the full benefit of the prior year's
earnings from any business acquired.
Most of the Group's other borrowing facilities are to provide working capital
financing. Whilst the use of such facilities is typically linked to trading
activity in the borrowing company, these facilities provide liquidity,
flexibility and headroom to support the Group's organic growth. As at 31
December 2024, the Group has access to total facilities of over £300m (2023:
over £300m).
Goodwill and intangible assets
The Group's goodwill and intangible assets of £184.0m (2023: £168.2m) mainly
arise from the various acquisitions undertaken. Each year, the Board reviews
goodwill for impairment and, as at 31 December 2024, the Board believes there
are no material impairments. The intangible assets arising from business
combinations, for exclusive supplier contracts, customer relationships and
brands, are amortised over an appropriate period.
Working capital
Working capital management is a core part of the Group's performance. Growth
in working capital in the year was aligned with the overall growth in Group
revenue. As at 31 December 2024, the Group had working capital (trade and
other receivables plus inventories less trade and other payables) of £155.8m
(2023: £154.6m). This represented 11.8% of current year revenue (2023:
11.9%).
The Group uses a range of different techniques to write down inventory to the
lower of cost and net realisable value, including a formulaic methodology
based on the age of inventory. The aged inventory methodology writes down
inventory by a specific percentage based on time elapsed from the purchase
date. There was no change in this methodology in the year. As at 31 December
2024, the Group's inventory provision was £16.2m (8.5% of cost) (2023:
£18.5m, 10.0% of cost).
Statutory measures
The Group reports alternative performance measures, which are defined in note
1 to the consolidated financial statements. These measures reflect the key
metrics used in the day-to-day management of the Group.
The alternative profit-related performance measures exclude
acquisition-related costs, impairments, certain share based payments and a
number of non-cash-related finance charges related to the revaluation of
financial instruments. Users should exercise caution in relying on alternative
performance measures which should be seen as supplementary information in
addition to the statutory disclosures.
Adjusted return on capital employed
Adjusted return on capital employed is an alternative performance measure (see
note 1 to the consolidated financial statements for the definition).
The Directors believe that this is an important measure of the investment
returns of the Group.
Calculation Reference to the financial statements 2024 2023
£'000 £'000
Total equity Group balance sheet 189,154 196,144
Total net debt Group balance sheet 153,429 106,191
Accumulated amortisation of acquired intangibles Intangible assets note 64,495 52,969
Right of use leased assets Group balance sheet (19,038) (21,051)
Acquisition-related liabilities Group balance sheet 17,275 38,080
Closing capital employed 405,315 372,333
Average capital employed 388,824 340,169
Adjusted operating profit 48,299 59,593
Adjusted return on capital employed 12.4% 17.5%
Average capital employed increased in the year, largely as a result of the
full year impact of prior year acquisitions combined with four further
acquisition completed in 2024.
Average return on capital was impacted by challenging market conditions in
2024, which reduced adjusted operating profit performance.
Adjustments to reported results
2024 2023
£'000 £'000
Operating profit 24,133 41,583
Acquisition costs 1,124 1,489
Exceptional costs (note 3) 11,962 -
Share based payments (888) 4,738
Employer taxes on share based payments (419) 603
Amortisation of brands, customer and supplier relationships 12,387 11,180
Adjusted operating profit 48,299 59,593
Profit before tax 22,311 36,547
Acquisition costs 1,124 1,489
Exceptional costs (note 3) 11,962 -
Share based payments (888) 4,738
Employer taxes on share based payments (419) 603
Amortisation of brands, customer and supplier relationships 12,387 11,180
Derivative fair value movements and foreign exchange gains and losses on (1,208) 659
borrowings for acquisitions
Gains and losses on deferred and contingent consideration (6,645) (4,150)
Gains and losses on put option liabilities 834 (1,063)
Gain on remeasurement of previously held equity interest (1,205) -
Adjusted profit before tax 38,253 50,003
Net finance costs (10,527) (9,554)
Foreign exchange derivative gains/(losses) 396 (60)
Investment derivative gains 1 -
Adjusted net finance costs (10,130) (9,614)
Adjusted operating profit 48,299 59,593
Share of profit from associate 84 24
Adjusted net finance costs (10,130) (9,614)
Adjusted profit before tax 38,253 50,003
Profit after tax 16,962 28,926
Total adjusted profit before tax adjustments (above) 15,942 13,456
Tax impact of adjustments (4,696) (3,930)
Adjusted profit after tax 28,208 38,452
Profit after tax 16,962 28,926
Non-controlling interest (932) (2,109)
Profit after tax attributable to owners of the Parent Company 16,030 26,817
Adjusted profit after tax 28,208 38,452
Non-controlling interest (932) (2,109)
Adjustments to profit after tax due to NCI (470) (439)
Adjusted profit after tax attributable to owners of the Parent Company 26,806 35,904
Number of shares for EPS 102,164,466 95,852,306
Reported EPS - pence 15.69 27.98
Adjusted EPS - pence 26.24 37.46
The Directors present adjusted operating profit, adjusted profit before tax,
and adjusted profit after tax as alternative performance measures in order to
provide relevant information relating to the performance of the Group.
Adjusted profits are a reflection of the underlying trading profit and are
important measures used by Directors for assessing Group performance. The
definitions of the alternative performance measures are set out on note 1 to
the consolidated financial statements.
Consolidated statement of comprehensive income for the year ended 31 December
2024
Notes 2024 2023
£'000 £'000
(Restated)(1)
Revenue 1,317,013 1,295,079
Cost of sales (1,082,683) (1,068,940)
Gross profit 234,330 226,139
Selling and distribution costs (155,690) (140,543)
Administrative expenses (63,007) (51,029)
Other operating income 8,500 7,016
Operating profit 24,133 41,583
Comprising
Adjusted operating profit 48,299 59,593
Acquisition costs 13 (1,124) (1,489)
Exceptional items 3 (11,962) -
Share based payments 11 888 (4,738)
Employer taxes on share based payments 11 419 (603)
Amortisation of brands, customer relationships, and supplier relationships (12,387) (11,180)
24,133 41,583
Share of profit after tax from associate 84 24
Other gains and losses 4 8,621 4,494
Finance income 812 293
Finance costs 5 (11,339) (9,847)
Profit before taxation 22,311 36,547
Taxation (5,349) (7,621)
Profit after taxation 16,962 28,926
Profit for the financial year attributable to:
The Company's equity shareholders 16,030 26,817
Non-controlling interest 932 2,109
16,962 28,926
Basic earnings per share 6 15.69p 27.98p
Diluted earnings per share 6 15.18p 27.06p
(1) Comparative information has been restated as detailed in note 17.
2024 2023
£'000 £'000
Profit for the financial year 16,962 28,926
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Actuarial losses on retirement benefit obligations (286) (172)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange losses on consolidation (5,483) (5,432)
Other comprehensive income for the financial year, net of tax (5,769) (5,604)
Total comprehensive income for the year 11,193 23,322
Attributable to:
Owners of the Parent Company 10,696 21,681
Non-controlling interests 497 1,641
11,193 23,322
Consolidated statement of financial position as at 31 December 2024
Notes 2024 2023
Assets £'000 £'000
Non-current assets (Restated)(1)
Investments 393 299
Goodwill 60,418 51,216
Intangible assets 123,547 117,009
Right of use assets 19,038 21,051
Property, plant and equipment 19,709 16,640
Derivative financial instruments 1,608 2,031
Deferred tax assets 151 617
224,864 208,863
Current assets
Inventories 174,448 165,588
Derivative financial instruments 572 53
Current tax asset 4,057 -
Trade and other receivables 197,562 209,140
Cash and cash equivalents 49,160 56,135
425,799 430,916
Current liabilities
Trade and other payables (213,567) (216,229)
Derivative financial instruments - (26)
Put option liabilities over non-controlling interests (11,682) (21,958)
Deferred and contingent considerations (3,835) (11,694)
Borrowings and financial liabilities 7 (45,048) (49,146)
Current tax liabilities (1,339) (179)
(275,471) (299,232)
Net current assets 150,328 131,684
Total assets less current liabilities 375,192 340,547
Non-current liabilities
Trade and other payables (2,645) (3,915)
Put option liabilities over non-controlling interests - (743)
Deferred and contingent considerations (1,758) (3,685)
Borrowings and financial liabilities 7 (157,541) (113,180)
Deferred tax liabilities (20,574) (18,920)
Retirement benefit obligation (2,005) (1,562)
Provisions (1,515) (2,398)
(186,038) (144,403)
Net assets 189,154 196,144
Equity
Share capital 9 1,042 1,033
Share premium 116,959 116,959
Share based payment reserve 5,489 10,843
Investment in own shares (616) (616)
Retained earnings 69,739 63,093
Translation reserve (4,656) 392
Put option reserve (6,933) (18,649)
Capital redemption reserve 50 50
Other reserve 150 150
Equity attributable to owners of the Parent Company 181,224 173,255
Non-controlling interests 7,930 22,889
Total equity 189,154 196,144
The financial statements were approved by the Board of Directors and
authorised for issue on 17 March 2025 and were signed on its behalf by:
Mr S B Fenby
Director
Company registration number: 08793266
(1) Comparative information has been restated as detailed in note 17.
Consolidated statement of changes in equity for the year ended 31 December
2024
Share Share premium Investment in own shares Retained Equity attributable to owners of the Parent Non-controlling interests Total
capital
earnings
Other reserves
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(note 9) (note 9) (note 10)
Balance at 1 January 2024 1,033 116,959 (616) 63,093 (7,214) 173,255 22,889 196,144
Profit for the year - - - 16,030 - 16,030 932 16,962
Other comprehensive income - - - (286) (5,048) (5,334) (435) (5,769)
Total comprehensive income for the year - - - 15,744 (5,048) 10,696 497 11,193
Shares issued (note 9) 9 - (9) - - - - -
Share based payments - - - - (957) (957) - (957)
Deferred tax on share based payments - - - - (115) (115) - (115)
Share options exercised - - 9 4,280 (4,282) 7 - 7
Acquisition of non-controlling interest (note 12) - - - 3,740 11,716 15,456 (15,456) -
Dividends paid (note 14) - - - (17,118) - (17,118) - (17,118)
Transactions with owners 9 - - (9,098) 6,362 (2,727) (15,456) (18,183)
Balance at 31 December 2024 1,042 116,959 (616) 69,739 (5,900) 181,224 7,930 189,154
For the year ended 31 December 2023
Share Share premium Investment in own shares Retained Equity attributable to owners of the Parent Non-controlling interests Total
capital
earnings
Other reserves
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(note 9) (note 9) (note 10)
Balance at 1 January 2023 889 67,047 (5) 46,023 6,782 120,736 13,398 134,134
Profit for the year - - - 26,817 - 26,817 2,109 28,926
Other comprehensive income - - - (172) (4,964) (5,136) (468) (5,604)
Total comprehensive income for the year - - - 26,645 (4,964) 21,681 1,641 23,322
Shares issued (note 9) 144 49,912 (23) - - 50,033 - 50,033
Shares purchases (note 9) - - (600) - - (600) - (600)
Share based payments - - - - 4,661 4,661 - 4,661
Deferred tax on share based payments - - - - (434) (434) - (434)
Share options exercised - - 12 5,407 (5,409) 10 - 10
Acquisition of subsidiaries (note 13) - - - - (7,850) (7,850) 7,850 -
Dividends paid (note 14) - - - (14,982) - (14,982) - (14,982)
Transactions with owners 144 49,912 (611) (9,575) (9,032) 30,838 7,850 38,688
Balance at 31 December 2023 1,033 116,959 (616) 63,093 (7,214) 173,255 22,889 196,144
Consolidated statement of cash flows for the year ended 31 December 2024
Notes 2024 2023
£'000 £'000
Cash flows from operating activities
Profit before tax 22,311 36,547
Depreciation 10,568 9,286
Amortisation 12,675 11,818
Loss on disposal of assets 4,637 763
Share based payments (957) 4,661
Foreign exchange gains (3,108) (2,467)
Gain on remeasurement of previously held equity (1,205) -
Share of profit after tax from associate (84) (24)
Finance income (812) (293)
Finance costs and other gains and losses 3,923 5,353
Profit from operations before changes in working capital 47,948 65,644
(Increase)/decrease in inventories (8,112) 10,524
Decrease in trade and other receivables 13,778 9,637
Decrease in trade and other payables (7,566) (9,429)
Cash inflow from operations 46,048 76,376
Income tax paid (10,764) (12,586)
Net cash inflow from operating activities 35,284 63,790
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired 13 (12,937) (42,359)
Deferred and contingent consideration paid (12,993) (9,300)
Investment in associate and other entities (393) (275)
Purchase of intangible assets (9,487) (10,364)
Purchase of plant and equipment (5,414) (5,605)
Proceeds on disposal of plant and equipment 401 198
Interest received 812 293
Net cash used in investing activities (40,011) (67,412)
Net cash flows from financing activities
Proceeds on issue of shares 9 - 51,250
Costs associated with shares issued 9 - (1,217)
Purchase of own shares 9 - (600)
Proceeds on exercise of share options 11 7 10
Acquisition of non-controlling interest 12 (11,853) (61)
Dividends paid 14 (17,118) (14,982)
Invoice financing outflows (4,671) (3,009)
Proceeds from borrowings 49,333 39,228
Repayment of loans (884) (19,690)
Interest paid (10,712) (9,360)
Interest on leases (779) (651)
Capital element of lease payments (4,628) (5,235)
Net cash (outflow)/inflow from financing activities (1,305) 35,683
Net (decrease)/increase in cash and cash equivalents (6,032) 32,061
Cash and cash equivalents at beginning of financial year 52,053 20,938
Effects of exchange rate changes (618) (946)
Cash and cash equivalents at end of financial year 45,403 52,053
Comprising:
Cash at bank 49,160 56,135
Bank overdrafts (3,757) (4,082)
45,403 52,053
Notes to the consolidated financial statements
1. Accounting policies
General information and nature of operations
Midwich Group plc ("the Company") is a public limited company incorporated in
England and Wales and listed on the London Stock Exchange's Alternative
Investment Market (AIM). The principal activity of Midwich Group plc and its
subsidiary companies ("the Group") is the distribution of Audio Visual
Solutions to trade customers.
Basis of preparation
The consolidated financial statements of Midwich Group plc have been prepared
in accordance with UK adopted International Accounting Standards ("IAS") and
in conformity with the requirements of the Companies Act 2006.
The financial statements have been prepared under the historical cost
convention as modified for financial instruments at fair value and in
accordance with applicable accounting standards.
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.
Going concern
In considering the going concern basis for preparing the financial statements,
the Board considers the Group's objectives and strategy, its principal risks
and uncertainties in achieving its goals and objectives which are set out in
the Strategic Report. The Board has undertaken a review of going concern under
three scenarios: 1) our base plan, 2) a downside scenario and 3) a reverse
stress test for the period to 31 December 2026. The sensitivity and reverse
stress tests are based on a model that allows the Group to assess its
liquidity, solvency and compliance with banking covenants based on inputs for
future trading performance. Varying the inputs into the model allows the Group
to assess the impact of potential adverse trading conditions. The sensitivity
analysis is based on revenue being broadly flat on 2024. The RST model is
based on a decrease in revenue of revenue of approx. £150m in comparison to
2024. Both scenarios also include the impact of changes in gross profit margin
and other mitigations in respect of overheads and capital expenditure. The
level of revenue deterioration is not considered plausible based on current
trading performance and expected market growth.
The directors consider the working capital and finance facilities of the
business to be adequate to fund its operations and growth strategy. The Group
has a variety of finance facilities available to it including a revolving
credit facility ("RCF") which expires in 2028 and secured invoice discounting
facilities which require renewal in the forecast period.
The Group is subject to covenant testing on a biannual basis at its half year
and full year reporting dates under the RCF agreement. The two RCF covenants
are Group Leverage and Interest Cover and are specifically defined in the RCF
agreement. The definition of the Group Leverage covenant is the adjusted net
debt to adjusted EBITDA ratio included in the alternative performance
measures. The definition of the Interest Cover covenant is the adjusted EBITDA
to adjusted net finance costs ratio included in the alternative performance
measures. The adjusted net debt in the Group Leverage covenant can be no
higher than 3 times the adjusted EBITDA. The adjusted EBITDA in the Interest
Cover covenant must be at least 4 times adjusted net finance costs. Under the
base case scenario, neither of the Group Leverage or Interest Cover covenants
are breached in 2025 or 2026.
The directors are confident that they will be able to renew the secured
invoice discounting facilities given the secured nature of the facility and
state of the business. Notwithstanding, this represents an uncertainty and
further models (base plan and reverse stress test) have been prepared to
assess going concern without the use of on demand facilities. The base case
continues to demonstrate the Group's ability to continue as a going concern.
The reverse stress test demonstrates that the Group can withstand severe
adverse trading conditions and would breach covenants in 2026, which would
provide sufficient time to implement the necessary actions to avoid this. In
assessing the ability to withstand severe adverse trading conditions, the
directors have also considered mitigating actions available to them.
There are no material uncertainties that cast significant doubt on the Group's
ability to continue as a going concern and the Group continues to adopt the
going concern basis in preparing consolidated financial statements. The
Group's strategy remains unchanged, and we will continue to focus on
profitable organic growth complemented by targeted acquisitions.
Revenue
Revenue arises from the sale of goods, provision of ancillary services, and
the rental of products.
Revenue from the sale of goods is recognised on despatch when control of the
products is transferred to the customer. All performance obligations are met
when the customer obtains control to direct the goods within the sales channel
and incurs the risk of obsolescence. This includes revenue recognised for bill
and hold arrangements where the goods are despatched to a warehouse and held
on behalf of the customer.
Ancillary services include support services, transport, installations,
removals, warranties, and repairs. Where contracts for ancillary services
include multiple performance obligations the transaction price is allocated to
each separate performance obligation within the contact based on estimated
cost-plus margin. Revenues from support services, transport, and warranties
are recognised over time as the services are performed. Revenues from all
other ancillary services including installations, removals, and repairs are
recognised at a point in time upon delivery of the service.
Revenue from the rental of products via an operating lease is recognised on a
straight-line basis over the lease term. Proceeds from the sale of rental
assets are recognised as sales of goods. Revenue for the sale of rental assets
is recognised at the point in time when the control is transferred, at which
point the customer obtains the ability to direct the goods in the channel and
incurs the risk of obsolescence.
The Group recognises revenue as a principal or agent depending on whether it
controls the goods provided to the customer. The Group recognises revenue on a
gross principal basis when it controls the goods. The Group recognises revenue
on a net agent basis by offsetting the cost of goods it does not control
within revenue. The Group assesses whether it controls the goods based on when
it has the responsibility for the performance obligations of the goods,
inventory risk, and discretion over pricing of the goods. Direct shipment
sales are recognised on a principal basis as the Group has the responsibility
for the performance obligations for the goods, discretion over pricing, and
limited inventory risks while the goods are in transit. Sales of licences and
software are recognised on a principal basis when the sale is related to the
sales of hardware or acquired in advance for a customer under arrangements
where the Group bears the responsibility for the acceptability of the software
and whether it meets the customer's needs. Sales of licences and software are
recognised on an agent basis when acquired as needed by the customer or under
arrangements where the Group does not bear the responsibility for the
acceptability of the software and whether it meets the customer's needs.
Exceptional items
Exceptional items are amounts that are disclosed separately to provide
transparency and comparability to enable a better understanding of the Group's
financial performance. Exceptional items include restructuring costs, loss on
disposal of development costs, and a loss of inventory due to a fire. Further
details of exceptional items are disclosed in note 3.
Other gains and losses
Other gains and losses include gains and losses on the Group's derivative
financial instruments, borrowings for acquisitions, deferred and contingent
considerations, put option liabilities, and equity interests. Gains and losses
on the Group's derivative financial instruments arise from changes in the fair
value of the instruments. Gains and losses on the Group's borrowings for
acquisitions occur due to movements in foreign exchange rates. Gains and
losses on the Group's deferred and contingent considerations include amortised
interest, foreign exchange gains and losses, and changes in fair value of the
instruments. Gains and losses on the Group's put option liabilities include
amortised interest, foreign exchange gains and losses, and subsequent
remeasurements to present value of the instruments. Gains and losses on equity
interests arise on remeasurement of previously held equity interests when a
controlling interest is acquired.
Goodwill
Goodwill represents the future economic benefits arising from business
combinations which are not individually identified and separately recognised.
Goodwill is carried at cost as established at the date of acquisition of the
business less any accumulated impairment losses.
Intangible assets other than goodwill
Intangible assets acquired separately are measured at cost on initial
recognition. The cost of intangible assets acquired in a business combination
are initially measured at their fair value as at the date of acquisition.
Intangible assets arising from development are recognised only when:
· the development is proven to be technically feasible,
· the Group will have the ability to use the asset,
· it is probable that the asset will generate future economic benefits,
· the Group has adequate resources to complete the development,
· the Group intends to complete development, and
· the Group can reliably measure expenditure on the attributable to the
development.
The costs of research and development activities that do not meet the
recognition criteria for an intangible asset arising from development are
recognised in the income statement. Development activities that have advanced
sufficiently and meet all the recognition criteria are capitalised as
intangible assets arising from development and are initially measured at the
directly attributable costs incurred that are necessary to develop the asset
to be capable of operating in the manner intended by management. Directly
attributable costs include borrowing costs.
Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and accumulated impairment losses. Intangible assets
arising from development begin being depreciated when the asset is available
for use as intended by management. Subsequent expenditure on intangible assets
arising from development is only recognised when it meets the initial
recognition criteria, is directly attributable to the initial asset
recognised, and increases future economic benefits that can be obtained from
the asset.
The useful lives of all intangible assets other than goodwill are assessed as
finite. Intangible assets with finite lives are amortised over the useful
economic life and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are
reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for by changing the amortisation period or
method, as appropriate, and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with finite lives is recognised
in profit or loss in administrative expenses. Intangible assets arising from
development that have not started to depreciate because they are not available
for use as intended by management are tested for impairment annually.
Gains or losses arising from derecognition of an intangible asset are measured
as the difference between the net disposal proceeds and the carrying amount of
the asset and are recognised in profit or loss when the asset is derecognised.
Amortisation is calculated using a units of production or straight-line method
to recognise the cost in a pattern that reflects the consumption of economic
benefits over the estimated useful life of the assets as follows:
· Patents and licences 3-10 years
· Software 3-15 years
· Brands 3-15 years
· Customer relationships 5-15 years
· Supplier relationships 5-15 years
Impairment of non-financial assets including goodwill
For the purposes of impairment testing, goodwill is allocated to each of the
Group's cash generating units that are expected to benefit from the synergies
of the combination. Each unit to which goodwill is allocated represents the
lowest level within the Group that independent cash flows are monitored. A
cash generating unit to which goodwill has been allocated is tested for
impairment annually, or more frequently when there is indication that the unit
may be impaired.
At each reporting date the Group reviews the carrying amounts of non-current
assets excluding goodwill to determine whether there is any indication that
they have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the extent of any
impairment loss. Where the asset does not generate cash flows that are
independent from other assets, the estimate is the recoverable amount of the
cash generating unit to which the asset belongs. Recoverable amount is the
higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted. If the recoverable
amount of an asset or cash generating unit is estimated to be less than the
carrying amount, then the carrying amount of the asset or cash generating unit
is reduced to the recoverable amount. The impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to the unit and then
to the other assets of the unit pro rata based on the carrying amount of each
asset in the unit. An impairment loss is recognised as an expense immediately.
An impairment loss recognised for goodwill is not reversed in subsequent
periods. Where an impairment loss on other non-financial assets subsequently
reverses, the carrying amount of the asset or cash generating unit is
increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset or cash
generating unit in prior periods. A reversal of an impairment loss is
recognised in the income statement immediately.
Inventory
Inventory is valued at the lower of cost and net realisable value, after
making due allowance for obsolete and slow-moving items. The cost of inventory
comprises the purchase price including directly attributable supplier rebates
and directly attributable costs incurred in bringing products to their present
location and condition. Some goods are held on behalf of customers and are not
included within the Group's inventory.
Financial liabilities
Financial liabilities include trade and other payables; deferred
considerations; put option liabilities; borrowings; and derivative financial
instruments with a negative market value.
The Group classifies financial liabilities into three categories:
· financial liabilities measured at amortised cost;
· financial liabilities measured at fair value through profit or loss; and
· contingent consideration recognised in a business combination.
Financial liabilities measured at amortised cost are initially measured at
fair value minus directly attributable transaction costs and subsequently
measured using the effective interest method. The effects of discounting
within the effective interest method are omitted if immaterial. Where the
contractual cash flows of the financial liability are renegotiated or
otherwise modified the financial liability is recalculated at the present
value of the modified contractual cash flows discounted at the financial
liability's original effective interest rate.
Financial liabilities measured at fair value through profit or loss are
initially and subsequently measured at fair value. Transaction costs directly
attributable to the issue of the financial liability are recognised in the
profit and loss.
Contingent consideration recognised in a business combination is initially and
subsequently measured at fair value.
Financial liabilities are derecognised when they are extinguished, discharged,
cancelled, or expire.
Cash flows in respect of deferred considerations, including contingent
considerations, are reported as an investing cash flows because they are cash
flows that arise from obtaining control of subsidiaries. Movements in the fair
value of contingent consideration are classified as charges or credits to
finance costs in the income statement.
Put option liabilities
Put options to acquire non-controlling interests of subsidiaries are initially
recognised at present value and subsequently measured at amortised cost, being
the present value of future payments discounted at the original effective
interest rate. Where the contractual cash flows of the put option liability
are renegotiated or otherwise modified the financial liability is recalculated
at the present value of the modified contractual cash flows discounted at the
financial liability's original effective interest rate. Further details of the
measurement of put options are given in the accounting judgements and key
sources of estimation uncertainty accounting policy.
New and amended International Accounting Standards adopted by the Group
The Group adopted the following standards, amendments to standards and
interpretations, which are effective for the first time this year:
Amendments to IAS 1 Presentation of financial statements - clarification on
the presentation of current and non current liabilities,
Amendments to IFRS 16 Leases - clarification in respect of the subsequent
measurement of sale and leaseback transactions that satisfy the requirements
in IFRS 15 to be accounted for as a sale,
Amendments to IAS 1 Presentation of financial statements - clarification over
the classification of non current borrowings with covenants, and
Amendments to IAS 7 Statement of cash flows and IFRS 7 Financial instruments:
disclosures - additional disclosure requirements in respect of supplier
finance arrangements.
The new standards have not had a material impact on the reported net financial
performance or net financial position of the Group.
International Accounting Standards in issue but not yet effective
The Group intends to adopt new and amended standards and interpretations, if
applicable, when they become effective. The new and amended standards and
interpretations that are issued, but not yet effective, up to the date of
issuance of the Group's financial statements are not expected to have an
impact on the Group's reported financial position or performance.
Use of alternative performance measures
The Group has defined certain measures used within the business for assessing
and managing performance. These measures are not defined under IAS and they
may not be directly comparable with other companies' adjusted measures. The
Group discloses the adjustments to IAS measures to provide transparency over
the costs that are excluded from the alternative performance measures. The
alternative performance measures provide a materially different presentation
of the Group's performance compared to IAS measures. The alternative
performance measures are not a substitute for IAS measures and are presented
with the adjustments to IAS measures to provide supplementary information for
assessing performance in accordance with IAS measures.
· Constant currency: This adjusted measure applies the current year's exchange
rates to the prior year's results to eliminate the impact of foreign exchange
movements, which are outside of management's control.
· Growth at constant currency: This measure shows the year on year change in
performance at constant currency.
· Organic growth: This is defined as growth at constant currency 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 operating profit before
acquisition costs, exceptional items, share based payments and associated
employer taxes, and amortisation of brand, customer and supplier relationship
intangible assets and impairments.
· Adjusted EBITDA: This represents operating profit before acquisition costs,
exceptional items, share based payments and associated employer taxes,
depreciation, amortisation, and impairments.
· Adjusted net finance costs: This represents finance income, finance costs,
gains and losses on foreign exchange derivatives, and gains and losses on
investment derivatives.
· Adjusted profit before tax: This is adjusted operating profit plus share of
profit after tax from associate less adjusted net finance costs.
· Adjusted taxation: This represents taxation less the tax impact of the
adjusting items included within adjusted profit before tax.
· Adjusted profit after tax: This is adjusted profit before tax less adjusted
taxation.
· Adjusted non-controlling interest share of profit after tax: This represents
non-controlling interest less the impact of adjusting items included within
adjusted profit after tax.
· Adjusted EPS: This is EPS calculated based on adjusted profit after tax minus
adjusted non-controlling interest share of profit after tax instead of profit
after tax minus non-controlling interest share of profit after tax.
· Adjusted net debt: This is net debt excluding lease liabilities. Net debt is
borrowings less cash and cash equivalents.
· Adjusted return on capital employed: Adjusted operating profit divided by
adjusted capital employed.
· Adjusted capital employed: Total equity, plus net debt, plus accumulated
amortisation on acquired intangible assets, minus right of use assets, and
minus acquisition liabilities. Acquisition liabilities comprise deferred and
contingent considerations, and put option liabilities over non-controlling
interests.
· Adjusted increase/(decrease) in trade and other payables: This is the
increase/(decrease) in trade and other payables adjusted to exclude the
movement on trade and other payables for cash settled share based payments and
employer taxes on share based payments.
· Adjusted operating cash flow: This is the net cash inflow from operating
activities calculated using adjusted increase/(decrease) in trade and other
payables instead of increase/(decrease) in trade and other payables.
· Adjusted cash flow conversion: This is the percentage of adjusted operating
cash flow to adjusted EBITDA.
· Adjusted net debt to adjusted EBITDA ratio: This is calculated as per the
Group's RCF debt facility covenant and is described as the Group Leverage
covenant. The calculation of Adjusted EBITDA for the covenant differs from the
calculation of the Group's Adjusted EBITDA alternative performance measure as
it includes the benefit of proforma annualised earnings for acquisitions
completed in the last 12 months.
· Adjusted EBITDA to adjusted net finance costs ratio: This is calculated as per
the Group's RCF agreement and is described as the Interest Cover covenant. The
calculation of Adjusted EBITDA for the covenant differs from the calculation
of the Group's Adjusted EBITDA alternative performance measure as it includes
the benefit of proforma annualised earnings for acquisitions completed in the
last 12 months.
A reconciliation of statutory measures to adjusted performance measures is
provided in note 16.
Accounting judgements and sources of estimation uncertainty
The preparation of financial statements in accordance with the principles of
the IASs requires the directors to make judgements and use estimation
techniques to provide a fair presentation of the Group's financial position
and performance. Accounting judgements represent the accounting decisions made
by the directors that have the most significant effect on amounts recognised
in the financial statements. Sources of estimation uncertainty represent the
assumptions made by management that carry significant risks of a material
adjustment to the value of assets and liabilities within the next financial
year. Judgements and estimates are evaluated based on historical experience,
continuing developments within the Group, and reasonable expectations of
future events. Judgements and estimates are subject to regular review by the
directors.
Significant accounting judgements made by the Group in preparing the financial
statements
Put options over non-controlling interests
For all acquisitions of subsidiaries where the Group has acquired less than
100% of the legal form of ownership it has entered into put and call options
over the remaining interest in the subsidiary. The options allow the Group to
exercise a call option to acquire the remaining interest from the owners and
for the owners to exercise a put option to sell the remaining interest to the
Group on the symmetrical terms. Theoretically the option will be exercised
irrespective of whether it has an intrinsic positive or negative value because
logically either the Group will exercise the option if it has an intrinsic
positive value, or the owners of the remaining interest will exercise the
option if it has an intrinsic negative value.
The significant accounting judgement is whether to recognise the
non-controlling interest and the put option liability or to derecognise the
non-controlling interest and put option liability and recognise the future
payment of the option as deferred or contingent consideration. The latter
approach is based on the economic substance of the anticipated acquisition of
the remaining interest. The Group could adopt this approach if it made a
judgement that the Group had access to returns from the remaining interest.
The Group's judgement is that while it is almost certain that put and call
options will exercise the former approach is more prudent. Therefore, the
Group has always recognised the non-controlling interest and put option
liability when it has acquired less than 100% of the legal form of ownership.
Where the Group has recognised put option liabilities over non-controlling
interests it is required to make a judgement over the subsequent measurement
of the instrument. The amounts payable for all the put option liabilities the
Group has entered vary based on the performance of the underlying entities
over which the put option liabilities have been granted. The judgement the
Group must make is over whether any changes in performance of the underlying
entity constitute a modification of the contractual cash flows of the
instrument.
If the Group judges that changes in performance of the underlying entity that
result in a variation of the amount payable for the put option constitute a
modification of the contractual cash flows, then the Group is required to be
remeasure the put option liability to present value with a corresponding gain
or loss recognised in the income statement. If the Group judges that changes
in performance do not constitute a modification of the contractual cash flows,
then the put option would be held at amortised cost without a subsequent
remeasurement. Where the Group's put option liabilities are held at amortised
cost without subsequent remeasurement there would be a difference between the
amortised cost and the final settlement. The difference between the amortised
cost of the instrument and the settlement would be transacted in equity as per
the acquisition of a non-controlling interest.
The Group has judged that changes in performance of the underlying entities
that result in variations in the amount payable to settle the put option
liabilities are modifications of the contractual cash flows and should result
in the remeasurement of the put option liability to present value. The Group
has made this judgement because the variable nature of the settlement of the
options means they are always subject to potential negotiation. This
accounting judgement significantly reduces the measurement inconsistency
between the Group's put option liabilities and contingent considerations.
Capitalisation of development costs
The Group has exercised judgement over whether development of the Group's
Enterprise Resource Planning system meets recognition criteria as an
intangible asset arising from development. The judgement includes whether the
development activities that have advanced sufficiently and meet all the
recognition criteria. The recognition criteria are whether development is
proven to be technically feasible, the Group will have the ability to use the
asset, it is probable that the asset will generate future economic benefits,
the Group has adequate resources to complete the development, the Group
intends to complete development, and the Group can reliably measure
expenditure on the attributable to the development.
Revenue vs agent revenue recognition
To determine the revenue recognition accounting policy, management of the
Group has exercised judgement over whether it controls goods provided to
customers for all the sources of revenue. These judgements determine whether
revenue should be recognised on a gross principal or net agent basis. The
Group assessed the indicators of control over goods. The indicators of control
include whether it has responsibility for the performance obligation of the
goods, inventory risk, and discretion over pricing of the goods. Where the
Group determined that it has control over the goods provided it has set an
accounting policy to recognise revenue on a gross principal basis. Where the
Group determined that it does not have control over the goods provided it has
set an accounting policy to recognise revenue on a net agent basis.
The Group incurs inventory risk for the sales of most goods. The Group incurs
the price volatility risk due to changes in the price of the goods or
transportation costs for the sale of most goods. The Group has responsibility
for customer satisfaction over the performance obligations for the sales of
most goods and services. Only in rare circumstances relating to the sales of
some licences and software did the Group identify that it acts as an agent.
The Group judged that it acted as an agent in respect of the sale of some
licences and software when the licences were sold independently of the sales
of hardware. The Group judged it acted as agent for licences and software
sales when it obtained the licences and software as needed by the customer and
was not responsible for the acceptability of the software and whether it meets
the customer's needs.
Exceptional items
Exceptional items are amounts that are disclosed separately to provide
transparency and comparability. The management of the Group has exercised
judgement over which items to present as exceptional items.
Cash generating units
The Group is required to perform annual impairment tests for goodwill. To
perform the impairment test for goodwill the Group is required to allocate
goodwill to its cash generating units from the date of acquisition. The Group
has exercised judgement in determining its cash generating units. Cash
generating units are the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from other
assets or groups of assets. The Group has judged that its smallest cash
generating units are not smaller than its reportable segments.
Significant sources of estimation uncertainty facing the Group in preparing
the financial statements
Inventory write down
The Group is required to write inventory down to the lower of cost and net
realisable value. To determine the write down of inventory the Group estimates
the future sales volumes, sales prices, costs to sell inventory, and
shrinkage.
The Group uses a range of different techniques to write down inventory to the
lower of cost and net realisable value including a formulaic methodology based
on the age of inventory. The aged inventory methodology writes down inventory
by a specific percentage based on time elapsed from purchase date and these
specific percentages are based on historical data.
The uncertainty associated with estimating the write down of inventory is
whether the realisable value on sale or disposal of inventory approximates the
value of inventory after write downs have been applied. The ultimate sale or
disposal of inventory results in a reversal of the write down against the cost
of inventory disposed with a potential gain or loss depending upon the
accuracy of the estimation.
If each write down percentage applied to inventory were increased by ten
percentage points the total write down against inventory held at the reporting
date would increase by £6,494k. This increase excludes inventory on which no
write down has been applied and is subject to an increase up to a maximum
write down of 100%.
If each write down percentage applied to inventory were decreased by ten
percentage points the total write down against inventory held at the reporting
date would decrease by £6,062k. This decrease is subject to a minimum write
down of 0%.
Fair value of separately identifiable intangible assets in business
combinations
The Group is required to calculate the fair value of identifiable assets and
liabilities acquired in business combinations. To estimate the fair value of
separately identifiable assets in business combinations certain assumptions
must be made about future trading performance, royalty rates, customer
attrition rates, and supplier contract renewal rates. The fair values of
assets and liabilities acquired in business combinations are disclosed in note
13.
Contingent considerations and put option liabilities
The Group is required to record contingent considerations at fair value. The
Group initially measures put option liabilities at present value and
subsequently measures put option liabilities at amortised cost using the
effective interest rate method. When there are modifications in the
contractual cash flows during the year the put option liabilities are
subsequently remeasured to present value.
The Group use a range of present valuation techniques including both the
discount rate adjustment technique and the expected present value technique to
determine the fair values of contingent considerations and the present values
of put option liabilities. Subsequent measurements to fair value and
remeasurement to present value can result in significant increases or
decreases in the value of the liability.
Impairment assessments of goodwill and intangible fixed assets
The Group has goodwill of £60,418k (2023: £51,216k) and assets arising from
development that are not available for use of £632k (2023: £20,507k) that
are required to be tested for impairment annually. The Group's impairment
assessments are based on present value techniques that calculate the
recoverable amounts for assets being tested for impairment. The present value
techniques used for impairment tests require management judgement and
estimation over forecast profitability and cash flows of cash generating
units, and selection appropriate discount rates.
The Group has used reasonable and prudent assumptions over forecast
profitability and cash flows to calculate recoverable amount. Changes to the
calculation of recoverable amount that reflect reasonable and possible
alternative key assumptions would lead to an increase or decrease in the
amount by which recoverable amount exceeds carrying amount or could result in
an impairment.
Inherent within development projects is a degree of risk that the project will
not be delivered on time, will not achieve the planned functionality, or will
not deliver the planned benefits. In the event of such risks crystallising
there is a risk that the carrying value of the asset could be impaired or
could be nil.
2. Segmental reporting
Operating segments
For the purposes of segmental reporting, the Group's Chief Operating Decision
Maker ("CODM") is the Managing Director. The Group is a distributor of audio
visual solutions to trade customers. The Board reviews attributable revenue,
expenses, assets and liabilities by geographic region and makes decisions
about resources and assesses performance based on this information. Therefore,
the Group's operating segments are geographic in nature.
2024 UK & Ireland EMEA Asia Pacific North America Other Total
£'000 £'000 £'000 £'000
£'000 £'000
Revenue 476,370 569,912 45,925 224,806 - 1,317,013
Gross profit 85,775 95,860 7,511 45,184 - 234,330
Gross profit % 18.0% 16.8% 16.4% 20.1% - 17.8%
Adjusted operating profit 19,728 24,792 (826) 9,332 (4,727) 48,299
Costs of acquisitions - - - - (1,124) (1,124)
Restructuring costs (874) (1,500) (92) (498) (56) (3,020)
Disposal of development costs (4,651) - - - - (4,651)
Loss of inventory due to fire - (4,291) - - - (4,291)
Share based payments 140 364 (7) 9 382 888
Employer taxes on share based payments 129 180 12 2 96 419
Amortisation of brands, customer and supplier relationships (4,552) (4,121) (249) (3,465) - (12,387)
Operating profit 9,920 15,424 (1,162) 5,380 (5,429) 24,133
Share of profit after tax from associate 84
Other gains and losses and interest (1,906)
Profit before tax 22,311
2024 UK & Ireland EMEA Asia Pacific North America Total
£'000 £'000 £'000 £'000 Other
£'000
£'000
Segment assets 272,925 255,350 21,839 100,487 62 650,663
Segment liabilities (216,188) (166,086) (20,621) (58,461) (153) (461,509)
Segment net assets 56,737 89,264 1,218 42,026 (91) 189,154
Depreciation 4,544 3,683 870 1,471 - 10,568
Amortisation 4,640 4,161 258 3,616 - 12,675
Segment country information UK Germany USA Other Total
£'000 £'000 £'000 £'000 £'000
Non-current assets 96,381 25,685 27,127 75,671 224,864
Deferred tax assets - - - 151 151
Non-current assets excluding deferred tax 96,381 25,685 27,127 75,520 224,713
2023 (Restated)(1) UK & Ireland EMEA Asia Pacific North America Other Total
£'000 £'000 £'000 £'000
£'000 £'000
Revenue 478,269 588,142 47,966 180,702 - 1,295,079
Gross profit 89,246 94,894 8,348 33,651 - 226,139
Gross profit % 18.7% 16.1% 17.4% 18.6% - 17.5%
Adjusted operating profit 27,110 28,122 (245) 9,425 (4,819) 59,593
Costs of acquisitions - - - - (1,489) (1,489)
Share based payments (1,905) (1,389) (274) (102) (1,068) (4,738)
Employer taxes on share based payments (180) (258) (13) (9) (143) (603)
Amortisation of brands, customer and supplier relationships (5,247) (3,614) (267) (2,052) - (11,180)
Operating profit 19,778 22,861 (799) 7,262 (7,519) 41,583
Share of profit after tax from associate 24
Other gains and losses and interest (5,060)
Profit before tax 36,547
2023 (Restated)(1) UK & Ireland EMEA Asia Pacific North America Total
£'000 £'000 £'000 £'000 Other
£'000
£'000
Segment assets 251,191 276,219 22,471 89,838 60 639,779
Segment liabilities (182,790) (181,601) (18,575) (59,936) (733) (443,635)
Segment net assets 68,401 94,618 3,896 29,902 (673) 196,144
Depreciation 3,570 3,640 642 1,434 - 9,286
Amortisation 5,623 3,684 284 2,227 - 11,818
Segment country information UK Germany USA Other Total
£'000 £'000 £'000 £'000 £'000
Non-current assets 94,540 29,404 20,942 63,977 208,863
Deferred tax assets - 310 135 172 617
Non-current assets excluding deferred tax 94,540 29,094 20,807 63,805 208,246
(1) Comparative information has been restated as detailed in note 17.
Other than those presented in the tables above, there were no other
non-current assets excluding deferred tax in any country that amounted to more
than 10%. Revenue from the UK, being the domicile of the Company, amounted to
£455,935k (2023: £458,504k). Revenue from Germany amounted to £225,376k
(2023: £236,731k) and revenue from the USA amounted to £152,987k (2023:
£135,873k). There was no other revenue from a country that amounted to more
than 10% of total revenue.
Segment revenues above are generated from external customers. The accounting
policies of the reportable segments have been consistently applied. In
addition to the external revenue reported by segment the UK & Ireland
segment made £16,632k (2023: £22,103k) of intercompany sales. The EMEA
segment made £40,788k (2023: £42,012k) of intercompany sales. The Asia
Pacific segment made £640k (2023: £653k) of intercompany sales. The North
America segment made £148k (2023: £3k) of intercompany sales.
Sales to the largest customer
Included in revenue is £29.0m (2023: £13.7m) that arose from sales to the
Group's largest customer based in USA (2023: Germany). No single customer
contributed 10% or more to the Group's revenue in any period presented.
3. Exceptional items
2024 2023
Operating profit is stated after charging: £'000 £'000
Restructuring costs 3,020 -
Loss on disposal of development costs 4,651 -
Loss of inventory due to fire 4,291 -
11,962 -
During the year the Group incurred exceptional items that included
restructuring costs, loss on disposal of development costs, and the loss of
inventory due to a fire. All exceptional items have all been recognised in
administrative expenses.
The Group's restructuring costs were incurred for reorganising its operations
in all geographies. Further analysis of the costs is available in note 2.
The loss on disposal of development costs occurred on the successful launch of
the Group's ERP system. The costs represent the pilot prototype of the ERP
system that was developed and deployed as part of the development of the main
ERP platform. The Group did not depreciate these costs in prior years as the
asset was not available for use as management intended. The costs were
disposed when the main platform became available for use because of a
reassessment of the technology that determined that the pilot prototype was
obsolete as it was no longer compatible with the main platform as originally
intended.
The loss of inventory due to fire occurred due to a warehouse fire in the UAE.
There was no loss of life due to the fire and the Group has adequate insurance
to recover the loss of inventory and any resulting disruption to trade.
Further details are available in 15.
4. Other gains and losses
Analysis of the Group's other gains/(losses)
2024 2023
£'000 £'000
(Restated)(1)
Foreign exchange derivative gains/(losses) 396 (60)
Investment derivative gains 1 -
Borrowings derivative losses (423) (1,219)
Foreign exchange gains on borrowings for acquisitions 1,631 560
Gains on deferred and contingent considerations 7,499 4,976
Losses on deferred and contingent considerations (854) (826)
Gains on put option liabilities 865 1,472
Losses on put option liabilities (1,699) (409)
Gain on remeasurement of previously held equity interest 1,205 -
8,621 4,494
(1) Comparative information has been restated as detailed in note 17.
Included within other gains and losses are amounts that are presented on a net
basis to reflect the substance of a group of similar transactions. However,
gains and losses have been presented separately if they are material. Gains
and losses on deferred and contingent consideration include amortised
interest, foreign exchange gains and losses, and changes in fair value. Gains
and losses on put option liabilities include amortised interest, foreign
exchange gains and losses, and changes due to subsequent remeasurement to
present value.
5. Finance costs
2024 2023
£'000 £'000
(Restated)(1)
Interest on overdraft and invoice discounting 2,780 3,894
Interest on leases 779 651
Interest on loans 7,698 5,214
Other interest costs 82 88
11,339 9,847
(1) Comparative information has been restated as detailed in note 17.
Interest costs of £1,547k (2023: nil) have been capitalised as part of the
intangible asset arising from development using an interest rate of 1.6% plus
the Bank of England base rate.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax
attributable to equity shareholders of the Company by the weighted average
number of shares outstanding during the year. Shares outstanding is the total
shares issued less the own shares held in employee benefit trusts. Diluted
earnings per share is calculated by dividing the profit after tax attributable
to equity shareholders of the Company by the weighted average number of shares
in issue during the year adjusted for the effects of all dilutive potential
Ordinary Shares.
Profit attributable to equity holders of the Group (£'000) 16,030 26,817
Weighted average number of shares in outstanding 102,164,466 95,852,306
Potentially dilutive effect of the Group's share option schemes 3,436,080 3,233,327
Weighted average number of diluted Ordinary Shares 105,600,546 99,085,633
Basic earnings per share 15.69p 27.98p
Diluted earnings per share 15.18p 27.06p
7. Borrowings
2024 2023
£'000 £'000
Secured borrowings
- Bank overdrafts and invoice discounting 36,850 42,518
- Bank loans 142,903 96,198
- Leases 22,836 23,610
202,589 162,326
Current 45,048 49,146
Non-current 157,541 113,180
202,589 162,326
Summary of borrowing arrangements:
The Group has overdraft borrowings which comprised £3,757k at the end of 2024
(2023: £4,082k). The facilities are uncommitted and secured with fixed and
floating charges over the assets of the Group.
At the reporting date the Group had drawn down £33,093k (2023: £38,436k) on
invoice discounting and short-term borrowing facilities. The total amount
drawn down on invoice discounting facilities was £26,943k (2023: £33,571k).
The short-term borrowing facilities are secured with floating charges over the
assets of the Group. The invoice discounting facilities comprise fully
revolving receivables financing agreements which are secured on the underlying
receivables. The facilities have no fixed repayment dates and receivables are
automatically offset against the outstanding amounts of the facility on
settlement of the receivable. The invoice discounting and short-term borrowing
facilities are subject to interest at variable rates of between 2 - 10% (2023:
2 - 10%) which are calculated using the respective base rate of the country in
which the facility is located and a margin that has been agreed with the
respective lender. The invoice discounting and short-term borrowing facilities
are repayable on demand.
At the reporting date the Group had drawn down £142,903k (2023: £96,198k) of
its long-term loan facilities. The loans are secured with fixed and floating
charges over the assets of the Group. The Group is subject to covenants under
its Revolving Credit Facility and if the Group defaults under these covenants,
it may not be able to meet its payment obligations. The two RCF covenants are
Group Leverage and Interest Cover and are specifically defined in the RCF
agreement which are test biannually. The definition of the Group Leverage
covenant is the adjusted net debt to adjusted EBITDA ratio included in the
alternative performance measures. The definition of the Interest Cover
covenant is the adjusted EBITDA to adjusted net finance costs ratio included
in the alternative performance measures. The adjusted net debt in the Group
Leverage covenant can be no higher than 3 times the adjusted EBITDA. The
adjusted EBITDA in the Interest Cover covenant must be at least 4 times
adjusted net finance costs. As at 31 December 2024, Group Leverage was 2.0x
and Interest Cover was 6.6x. Under the base case scenario calculated for the
Group's assessment of going concern (see note 1), neither of the Group
Leverage or Interest Cover covenants are breached in 2025 or 2026.
The Revolving Credit Facility expires in June 2028 and is subject to interest
at variable rates. The applicable interest rate is based on SONIA, SOFR,
EURIBOR, BBSW and CORRA for Sterling, US Dollar, Euro, Australian Dollar, and
Canadian Dollar borrowings, and an additional margin which has been
respectively agreed with the lenders.
The Group has lease liabilities of £22,836k at the end of 2024 (2023:
£23,610k). Lease obligations included within acquisitions completed during
the year totalled £2,184k (2023: £1,927k).
Borrowings
2024 2023
£'000 £'000
Borrowings due within 1 year 38,896 44,534
Borrowings due after 1 year 140,857 94,182
Leases 22,836 23,610
202,589 162,326
Reconciliation of liabilities arising from financing activities
2024 2023
£'000 £'000
At 1 January 162,326 145,279
Cash flows:
Invoice financing inflows/(outflows) (4,671) (3,009)
Proceeds from borrowings 49,333 39,228
Repayment of loans and overdrafts (1,209) (20,525)
Capital element of leases (4,628) (5,235)
Non-cash:
Acquisitions 2,188 4,459
New liabilities arising on leases 2,227 4,939
Disposals on modification or termination of leases (14) (955)
Foreign exchange gain (2,963) (1,855)
At 31 December 202,589 162,326
8. Financial instrument risk exposure and management
The Group's operations expose it to degrees of financial risk that include
liquidity risk, credit risk, interest rate risk, and foreign currency risk.
This note describes the Group's objectives, policies and process for managing
those risks and the methods used to measure them.
Credit risk
The Group's credit risk is primarily attributable to its cash balances and
trade receivables. The Group does not have a significant concentration of
risk, with exposure diversified over a substantial number of third parties.
The risk is further mitigated by insurance of the trade receivables. Some
specifically identified receivables have been provided for at 100%.
The credit risk on liquid funds is limited because the third parties are large
international banks with a credit rating of at least A. The Group's total
credit risk amounts to the total of the sum of the trade and other receivables
and cash and cash equivalents. At 31 December 2024 total credit risk amounted
to £230,461k (2023: £246,539k).
Interest rate risk
The interest on the Group's overdrafts, invoice discounting facilities and
Revolving Credit Facility borrowings are variable. The Group has interest rate
swap contracts in respect of the Group's variable interest rates to achieve a
fixed rate of interest. Rising interest rates present an increased cash flow
risk associated with the high cost of servicing debt. Rising interest rates
also increase the finance costs of working capital. The Group manages the
increased cost of working capital by focusing on profitability margins and
working capital arrangements of the business.
Foreign exchange risk
The Group is largely able to manage the exchange rate risk arising from
operations through the natural matching of payments and receipts denominated
in the same currencies. Any exposure tends to be on the payment side and is
mainly in relation to the Sterling strength relative to the Euro or US
Dollar. This transactional risk is considered manageable as the proportion of
Group procurement that is not sourced in local currency is small. However, on
occasions the Group does buy foreign currency call options and forward
contracts to mitigate this risk.
The Group holds certain borrowings in the currencies of foreign acquired
operations to reduce the Group's exposure to fluctuations in the value of
foreign currencies that have a negative effect on the value of foreign
operations. The Group does not adopt hedge accounting and recognises gains and
losses on foreign exchange in both the income statement and translation
reserve.
The total value of borrowings held in foreign currencies by companies whose
functional currency is GBP relating to overseas acquired operations is as
follows:
2024 2023
£'000 £'000
EUR 35,049 27,378
AUD 5,163 3,585
USD 15,883 17,063
CAD 10,242 10,441
A 10% increase or decrease in the strength of sterling against all borrowings
held in foreign currencies by companies whose functional currency is GBP would
increase or decrease profit before tax by £6,634k (2023: £5,847k).
The Group reports in Pounds Sterling (GBP) but has significant revenues and
costs as well as assets and liabilities that are denominated in other
currencies. The table below sets out the exchange rates used in the periods
reported.
Annual average Year end
2024 2023 2024 2023
EUR/GBP 1.184 1.152 1.210 1.154
AUD/GBP 1.943 1.880 2.023 1.868
NZD/GBP 2.120 2.032 2.236 2.013
USD/GBP 1.278 1.248 1.253 1.275
CHF/GBP 1.127 1.118 1.136 1.073
NOK/GBP 13.806 13.189 14.230 12.947
AED/GBP 4.692 4.582 4.598 4.678
QAR/GBP 4.651 4.541 4.558 4.637
SAR/GBP 4.797 4.638 4.708 4.769
CAD/GBP 1.754 1.666 1.802 1.682
The following tables illustrate the effect of changes in foreign exchange
rates relative to the GBP on the profit before tax and net assets. The amounts
are calculated retrospectively by applying the current year exchange rates to
the prior year results so that the current year exchange rates are applied
consistently across both periods. Changing the comparative result illustrates
the effect of changes in foreign exchange rates relative to the current year
result.
Applying the current year exchange rates to the results of the prior year has
the following effect on profit before tax and net assets:
Profit/(loss) before tax
2023 Revised 2023 Impact Impact
£'000 £'000 £'000 %
EUR 36,547 36,095 (452) (1.2)%
AUD 36,547 36,570 23 0.1%
NZD 36,547 36,549 2 0.0%
USD 36,547 36,463 (84) (0.2)%
CHF 36,547 36,551 4 0.0%
NOK 36,547 36,530 (17) 0.0%
AED 36,547 36,311 (236) (0.6)%
QAR 36,547 36,530 (17) 0.0%
SAR 36,547 36,539 (8) 0.0%
CAD 36,547 36,438 (109) (0.3)%
All currencies 36,547 35,653 (894) (2.4)%
Net assets
2023 Revised 2023 Impact Impact
£'000 £'000 £'000 %
EUR 196,144 193,139 (3,005) (1.5)%
AUD 196,144 195,961 (183) (0.1)%
NZD 196,144 196,123 (21) 0.0%
USD 196,144 196,332 188 0.1%
CHF 196,144 196,176 32 0.0%
NOK 196,144 195,908 (236) (0.1)%
AED 196,144 196,456 312 0.2%
QAR 196,144 196,204 60 0.0%
SAR 196,144 196,234 90 0.0%
CAD 196,144 194,615 (1,529) (0.8)%
All currencies 196,144 191,852 (4,292) (2.2)%
Liquidity risk
The main objective of the Group's liquidity risk management strategy is to
ensure that the Group has sufficient liquidity to pay all liabilities as they
fall due. The Group manages liquidity by monitoring working capital and
maintaining sufficient cash balances to meet liabilities as they fall due
using bank borrowing arrangements.
See note 7 for details of borrowing arrangements.
The tables below show the undiscounted cash flows on the Group's financial
instrument liabilities as at 31 December 2024 and 2023 based on their
contractual maturity:
At 31 December 2024
Total Within 2 Within Between 6 - 12 Between 1-2 After
months
months
years
than
2 -6
months 2 years
£'000 £'000 £'000 £'000 £'000 £'000
Trade payables 165,315 147,176 18,020 12 18 89
Other payables 362 68 294 - - -
Deferred consideration 6,707 1,115 - 2,800 442 2,350
Put option liabilities 11,800 6,798 5,002 - - -
Leases 27,731 1,205 2,513 4,218 5,703 14,092
Accruals 29,491 24,561 1,442 950 1,432 1,106
Bank overdrafts, loans and invoice discounting 179,753 37,765 962 169 137 140,720
421,159 218,688 28,233 8,149 7,732 158,357
At 31 December 2023 (Restated)(1)
Total Within 2 Within Between 6 - 12 Between 1-2 After
months
months
years
than
2 -6
months 2 years
£'000 £'000 £'000 £'000 £'000 £'000
Trade payables 162,803 151,199 11,582 5 6 11
Other payables 312 310 2 - - -
Deferred consideration 16,802 1,053 10,611 200 2,402 2,536
Put option liabilities 23,535 - 9,833 12,607 - 1,095
Leases 26,070 807 1,914 2,605 4,742 16,002
Accruals 36,993 29,150 2,822 1,123 1,989 1,909
Bank overdrafts, loans and invoice discounting 138,716 43,260 1,076 198 168 94,014
405,231 225,779 37,840 16,738 9,307 115,567
(1) Comparative information has been restated as detailed in note
17.
9. Share capital
The total allotted share capital of the Company is:
Allotted, issued and fully paid
2024 2023
Number £'000 Number £'000
Issued and fully paid Ordinary Shares of £0.01 each
At 1 January 103,251,326 1,033 88,879,912 889
Shares issued 993,800 9 14,371,414 144
At 31 December 104,245,126 1,042 103,251,326 1,033
During the year the Company issued 993,800 shares to the Group's employee
benefit trusts (2023: 2,312,476). During the prior year the Company also
issued 12,058,938 shares for total proceeds less issue cost of £50,033k.
Employee benefit trust
The Group's employee benefit trusts were allocated the following shares to be
issued on exercise of share options:
2024 2023
Number £'000 Number £'000
At 1 January 1,770,282 616 501,460 5
Share issued 993,800 9 2,312,476 23
Shares purchased - - 149,838 600
Shares issued on exercise of options (985,269) (9) (1,193,492) (12)
At 31 December 1,778,813 616 1,770,282 616
During the prior year the Company purchased 149,838 shares for £600k.
10. Other reserves
Movement in other reserves for the year ended 31 December 2024
Share based payment reserve Translation reserve Put option reserve Capital redemption reserve Other reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2024 10,843 392 (18,649) 50 150 (7,214)
Other comprehensive income - (5,048) - - - (5,048)
Total comprehensive income for the year - (5,048) - - - (5,048)
Share based payments (957) - - - - (957)
Deferred tax on share based payments (115) - - - - (115)
Share options exercised (4,282) - - - - (4,282)
Acquisition of non-controlling interest (note 12) - - 11,716 - - 11,716
Transactions with owners (5,354) - 11,716 - - 6,362
Balance at 31 December 2024 5,489 (4,656) (6,933) 50 150 (5,900)
Movement in other reserves for the year ended 31 December 2023
Share based payment reserve Translation reserve Put option reserve Capital redemption reserve Other reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 12,025 5,356 (10,799) 50 150 6,782
Other comprehensive income - (4,964) - - - (4,964)
Total comprehensive income for the year - (4,964) - - - (4,964)
Share based payments 4,661 - - - - 4,661
Deferred tax on share based payments (434) - - - - (434)
Share options exercised (5,409) - - - - (5,409)
Acquisition of subsidiary (note 13) - - (7,850) - - (7,850)
Transactions with owners (1,182) - (7,850) - - (9,032)
Balance at 31 December 2023 10,843 392 (18,649) 50 150 (7,214)
11. Share based payments
The Group operates two share option plans, the Long Term Incentive Plan
("LTIP") and the Share Incentive Plan ("SIP"). The Group has made a grant
under the LTIP and SIP during both the current and prior year.
Share Incentive Plan:
The Group operates a SIP to which the employees of the Group may be invited to
participate by the Remuneration Committee. Under the SIP, free shares granted
to employees are issued and held in trust in during a conditional vesting
period. The SIP shares vest 3 years after the date of grant. The SIP share are
settled in equity once exercised.
Long Term Incentive Plan:
The Group also operates an LTIP to which the employees of the Group may be
invited to participate by the Remuneration Committee. Options issued under the
LTIP are exercisable at £0.01 per share but the Group has the option to
provide an exemption for this payment. The options vest 3 years after the date
of grant, subject to certain service and non-market performance conditions.
The Group has the option to require an extended holding period in relation to
specific options. The options are settled in equity once exercised except for
options issued to employees in certain jurisdictions where settlement in
equity is prohibited. For options issued to employees in jurisdictions in
which settlement in equity is prohibited the options are issued on the same
basis except they are settled in cash.
If the options remain unexercised after a period of 10 years from the date of
grant, the options expire. Options are forfeited if the employee leaves the
Group before the options vest.
LTIP options and SIP shares were valued using the Black-Scholes option-pricing
model. The fair value of the 2024 Options granted and the assumptions used in
the calculation are as follows:
LTIP SIP
Date of grant 29 Nov 2024 8 Apr 2024
Number granted 1,737,431 186,600
Share price at date of grant (£) £2.87 £4.04
Exercise price (£) £0.01 -
Expected volatility 12.3% 12.3%
Expected life (years) 2.33 3
Risk free rate 4.22% 4.54%
Expected dividend yield excluded from option 3.56% 0.0%
Percentage of options expected to vest 92.0% 70.5%
Fair value at date of grant £3,829,048 £531,438
Earliest vesting date 31 Mar 2027 8 Apr 2027
Expiry date 29 Nov 2034 8 Apr 2034
Included within the LTIP issue in 2024 are 159,213 options issued to employees
that will be settled in cash.
LTIP options and SIP shares were valued using the Black-Scholes option-pricing
model. The fair value of the 2023 Options granted and the assumptions used in
the calculation are as follows:
LTIP SIP
Date of grant 16 Aug 2023 11 Apr 2023
Number granted 1,190,811 111,300
Share price at date of grant (£) £4.17 £5.12
Exercise price (£) £0.01 -
Expected volatility 13.9% 13.9%
Expected life (years) 2.67 3
Risk free rate 5.06% 3.93%
Expected dividend yield excluded from option 2.91% 0.0%
Percentage of options expected to vest 91.0% 70.5%
Fair value at date of grant £3,557,234 £401,756
Earliest vesting date 31 Mar 2026 11 Apr 2026
Expiry date 16 Aug 2033 11 Apr 2033
Included within the LTIP issue in 2023 are 143,100 options issued to employees
that will be settled in cash.
The expected volatility is based on the volatility of similar companies in the
industry. The expected life is the average expected period to exercise. The
risk-free rate of return is the yield on zero-coupon UK government bonds of a
term consistent with the assumed option life.
The Group recognised total credits of £957k (2023: expenses of £4,661k)
related to equity-settled share based payment transactions. There is a
significant variation between the expense in the prior year and the credit
this year. The difference has arisen because the LTIP options issued in 2022
and 2023 are subject to performance targets, which have become unlikely to be
met during the year resulting in a significant decrease in the number of
options expected to vest.
In addition to equity settled share based payment transactions the Group
recognised expenses of £69k (2023: £77k) related to cash settled share based
payment transactions and credits of £419k (2023: expenses of £603k) related
to employer taxes on share options for the above schemes during the year. The
total carrying amount of liabilities arising from share based payment
transactions at the end of the year was £618k (2023: £1,525k).
A reconciliation of LTIP option movements over the current and prior year
excluding any options to be settled in cash is shown below:
As at 31 December 2024 As at 31 December 2023
Number of LTIP options Weighted average exercise price Number of LTIP options Weighted average exercise price
£ £
Outstanding at start of year 3,885,946 0.01 4,115,317 0.01
Granted 1,578,218 0.01 1,047,711 0.01
Lapsed (15,337) 0.01 (177,490) 0.01
Exercised (888,669) 0.01 (1,099,592) 0.01
Outstanding at end of year 4,560,158 0.01 3,885,946 0.01
Weighted average remaining contractual life 1.2 years 1.1 years
A reconciliation of SIP movements over the current and prior year is shown
below:
As at 31 December 2024 As at 31 December 2023
Number of SIP shares Weighted average exercise price Number of SIP shares Weighted average exercise price
£ £
Outstanding at 1 January 276,300 - 280,800 -
Granted 186,600 - 111,300 -
Lapsed (32,700) - (21,900) -
Exercised (96,600) - (93,900) -
Outstanding at 31 December 333,600 - 276,300 -
Weighted average remaining contractual life 1.5 years 1.4 years
Share options were regularly exercised throughout the year. The average share
price throughout the year was £3.50 (2023: £4.39). As at the year end there
were 727,041 (2023: 1,048,911) equity settled share options that had vested
and had yet to be exercised.
12. Acquisition of non-controlling interest
During the year the Group acquired the remaining 20% non-controlling interest
in Midwich International Limited and the remaining 49% non-controlling
interest in ProdyTel Distribution GmbH.
The non-controlling interest in Midwich International Limited had a value of
£7,572k and was acquired for a consideration of £5,036k paid during the year
with a further consideration with a value of £4,591k that was retained and is
due to be settled in 2025. The non-controlling interest in ProdyTel
Distribution GmbH had a value of £7,884k and was acquired for a consideration
of £6,817k.
£3,866k of the put option reserve was transferred to retained earnings when
the Midwich International Limited element of the put option was extinguished
and £7,850k of the put option reserve was transferred to retained earnings
when the ProdyTel Distribution GmbH element of the put option was
extinguished.
During the prior year the Group settled the remaining consideration of £61k
that was retained on the acquisition of the non-controlling interest in Prase
Engineering SpA.
13. Business combinations
Acquisitions have been completed by the Group to increase scale, broaden its
addressable market and widen the product offering.
Subsidiaries acquired:
Acquisition(1) Principal activity Acquisition date Proportion acquired (%) Fair value of consideration
£'000
DCS Distribution of cable products to trade customers 2 October 2024 100% 12,295
UK Fire Distribution of fire safety products to trade customers 1 October 2024 100% 1,501
Dry Hire Lighting Distribution of lighting products to trade customers 31 July 2024 70% 3,705
The Farm Distribution of audio visual software to trade customers 19 January 2024 100% 7,614
ProdyTel Distribution of professional audio products to trade customers 10 November 2023 51% 8,170
Pulse Cinemas Distribution of specialist home cinema products to trade customers 31 July 2023 100% 1,715
Video Digital Distribution of broadcast products to trade customers 21 July 2023 100% 1,364
HHB Distribution of professional audio products to trade customers 12 July 2023 100% 21,078
76 Media Distribution of broadcast products to trade customers 5 July 2023 100% 1,123
Toolfarm Distribution of video editing software to trade customers 5 July 2023 100% 5,057
SF Marketing Distribution of audio visual products to trade customers 31 May 2023 100% 21,369
Fair value of considerations 2024 The Farm Dry Hire Lighting UK Fire DCS
£'000 £'000 £'000 £'000
Cash 2,948 3,210 1,146 7,819
Deferred consideration 292 495 - 3,495
Contingent consideration 4,374 - 355 981
Total 7,614 3,705 1,501 12,295
Costs of £1,124k were expensed to the income statement during the year in
relation to acquisitions.
Fair value of acquisitions 2024 The Farm Dry Hire Lighting UK Fire DCS
£'000 £'000 £'000 £'000
Non-current assets
Goodwill 3,512 1,745 272 4,691
Intangible assets - brands 1,135 60 108 197
Intangible assets - customer relationships 352 417 505 3,145
Intangible assets - supplier relationships 3,895 1,181 880 4,067
Right of use assets 232 173 - 945
Property, plant and equipment 8 3,864 - 54
9,134 7,440 1,765 13,099
Current assets
Inventories - - 51 697
Gross contractual trade and other receivables 403 754 303 783
Contractual cash flows not expected to be collected - (29) (10) (4)
Cash and cash equivalents 145 229 205 1,607
548 954 549 3,083
Current liabilities
Trade and other payables (215) (1,431) (376) (886)
Borrowings and financial liabilities - - - (4)
Current tax (3) - (53) (169)
(218) (1,431) (429) (1,059)
Non-current liabilities
Borrowings and financial liabilities (237) (972) - (975)
Deferred tax (1,613) (699) (384) (1,853)
(1,850) (1,671) (384) (2,828)
Equity interest held prior to acquisition - (1,587) - -
Fair value of net assets acquired attributable to equity shareholders of the 7,614 3,705 1,501 12,295
Parent Company
Goodwill acquired in 2024 relates to the workforce, synergies, sales and
purchasing knowledge and experience. Goodwill arising on the acquisition of
The Farm has been allocated to the North America segment. Goodwill arising on
the Dry Hire Lighting, UK Fire, and DCS acquisitions has been allocated to the
United Kingdom and Republic of Ireland segment. No goodwill acquired is
deductible for tax purposes.
Net cash outflows of acquisitions 2024
The Farm Dry Hire Lighting UK Fire DCS
£'000 £'000 £'000 £'000
Consideration paid in cash 2,948 3,210 1,146 7,819
Less: cash and cash equivalent balances acquired (145) (229) (205) (1,607)
Net cash outflow 2,803 2,981 941 6,212
Plus: borrowings acquired 237 972 - 979
Net debt outflow 3,040 3,953 941 7,191
Post-acquisition contribution 2024
Acquired subsidiaries made the following contributions to the Group's results
for the year in which they were acquired:
The Farm Dry Hire Lighting UK Fire DCS
£'000 £'000 £'000 £'000
Revenue 4,034 963 345 829
Profit/(loss) after tax (539) 287 (119) 98
These amounts are stated net of the depreciation of acquired intangibles.
Proforma full year contribution 2024
Acquired subsidiaries would have made the following contributions to the
Group's results for the year in which they were acquired if they were acquired
on 1 January 2024:
The Farm Dry Hire Lighting UK Fire DCS
£'000 £'000 £'000 £'000
Revenue 4,050 2,467 1,989 5,557
Profit after tax(1) (660) 621 94 637
(1)These amounts have been calculated using the results of subsidiaries and
adjusting them for differences between the accounting policies and Generally
Accepted Accounting Principles applicable to the subsidiaries and the
accounting policies and IAS reporting requirements of the Group. The
translation adjustments to modify the reported results of the subsidiaries
have been applied as if the Group's accounting policies and IAS reporting
requirements had always been applied. The translation adjustments include the
additional depreciation and amortisation charges relating to the fair value
adjustments to property, plant and equipment and intangible assets assuming
the fair values recognised on acquisition were valid on 1 January 2024,
together with the consequential tax effects.
Fair value of considerations 2023 SF Marketing HHB ProdyTel Others
£'000 £'000 £'000 £'000
Cash 20,215 13,087 7,406 7,706
Deferred consideration 1,154 - - 689
Contingent consideration - 7,991 764 864
Total 21,369 21,078 8,170 9,259
Costs of £1,489k were expensed to the income statement during the year in
relation to acquisitions.
Fair value of acquisitions 2023 SF Marketing HHB ProdyTel Others
£'000 £'000 £'000 £'000
Non-current assets
Goodwill 3,792 4,259 4,744 3,391
Intangible assets - patents and software 284 - - 2
Intangible assets - brands 1,702 702 487 680
Intangible assets - customer relationships 2,485 5,082 3,751 1,722
Intangible assets - supplier relationships 6,924 7,095 9,052 4,493
Right of use assets 972 140 297 55
Property, plant and equipment 686 36 162 239
16,845 17,314 18,493 10,582
Current assets
Inventories 10,792 3,836 959 702
Gross contractual trade and other receivables 9,603 2,674 1,793 1,231
Contractual cash flows not expected to be collected (386) - (9) (55)
Derivative financial instruments 21 - - -
Cash and cash equivalents 118 3,794 634 1,510
20,148 10,304 3,377 3,388
Current liabilities
Trade and other payables (9,690) (3,092) (1,093) (2,672)
Borrowings and financial liabilities (700) - - (3)
Current tax - - (129) (146)
(10,390) (3,092) (1,222) (2,821)
Non-current liabilities
Borrowings and financial liabilities (2,781) (501) (357) (117)
Deferred tax (2,453) (2,947) (4,271) (1,773)
(5,234) (3,448) (4,628) (1,890)
Non-controlling interests - - (7,850) -
Fair value of net assets acquired attributable to equity shareholders of the 21,369 21,078 8,170 9,259
Parent Company
Goodwill acquired in 2023 relates to the workforce, synergies, sales and
purchasing knowledge and experience. Goodwill arising on the SF Marketing,
Toolfarm and 76 Media acquisitions has been allocated to the North America
segment. Goodwill arising on the Video Digital and ProdyTel acquisitions has
been allocated to the Europe Middle East and Africa segment. Goodwill arising
on the HHB and Pulse Cinemas acquisitions has been allocated to the United
Kingdom and Republic of Ireland segment. No goodwill acquired is deductible
for tax purposes.
Net cash outflows of acquisitions 2023
SF Marketing HHB ProdyTel Others
£'000 £'000 £'000 £'000
Consideration paid in cash 20,215 13,087 7,406 7,706
Less: cash and cash equivalent balances acquired (118) (3,794) (634) (1,509)
Net cash outflow 20,097 9,293 6,772 6,197
Plus: borrowings acquired 3,481 501 357 120
Net debt outflow 23,578 9,794 7,129 6,317
Post-acquisition contribution 2023
Acquired subsidiaries made the following contributions to the Group's results
for the year in which they were acquired:
SF Marketing Toolfarm 76 Media HHB Video Digital Pulse Cinemas ProdyTel
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 44,575 1,048 1,250 11,760 1,835 1,892 2,646
Profit/(loss) after tax 1,662 205 67 (180) (63) 96 283
Proforma full year contribution 2023
Acquired subsidiaries would have made the following contributions to the
Group's results for the year in which they were acquired if they were acquired
on 1 January 2023:
SF Marketing Toolfarm 76 Media HHB Video Digital Pulse Cinemas ProdyTel
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 72,159 2,199 2,551 28,084 5,452 4,893 16,569
Profit after tax(1) 2,653 313 165 494 1 149 1,731
(1)These amounts have been calculated using the results of subsidiaries and
adjusting them for differences between the accounting policies and Generally
Accepted Accounting Principles applicable to the subsidiaries and the
accounting policies and IAS reporting requirements of the Group. The
translation adjustments to modify the reported results of the subsidiaries
have been applied as if the Group's accounting policies and IAS reporting
requirements had always been applied. The translation adjustments include the
additional depreciation and amortisation charges relating to the fair value
adjustments to property, plant and equipment and intangible assets assuming
the fair values recognised on acquisition were valid on 1 January 2023,
together with the consequential tax effects.
14. Dividends
On the 14 June 2024 the Company paid a final dividend of £11,467k. Excluding
the effects of waived dividends this equated to 11.0 pence per share. On 18
October 2024 the Company paid an interim dividend of £5,651k. Excluding the
effects of waived dividends this equated to 5.50 pence per share. During the
prior year the Company paid a final dividend of £9,388k and an interim
dividend of £5,594k. Excluding the effects of waived dividends these equated
to 10.50 and 5.50 pence per share respectively.
The Board is recommending a final dividend of 7.5 pence per share which, if
approved, will be paid on 4 July 2025 to shareholders on the register on 23
May 2025.
15. Contingent asset
On 21 December 2024 a fire broke out at a neighbouring warehouse to the
Group's warehouse facility in the United Arab Emirates. The fire spread to
other warehouses in the vicinity and resulted in the total loss of the Group's
inventory at that location. Thankfully there was no loss of life due to the
fire. The carrying value of inventory lost was £4,291k. The Group has acted
rapidly to source temporary warehousing and to ensure that immediate customer
orders could be fulfilled. The Group has adequate insurance to cover the loss
of inventory and any resulting business interruption. Due to the proximity of
the fire to the year end and the lag in the standards and sophistication of
the insurance market in the United Arab Emirates the Group has been unable to
process the claim to the point where the receipt of funds is virtually
certain. Therefore, the Group has not recognised the insurance claim as a
reimbursement asset.
The Group is confident in the insurance cover that has been placed and that
the claim will be settled in due course. The Group's best estimate of the
probable future economic benefits resulting from past events in respect of the
claim is £4,523k.
16. Alternative performance measures
2024 2023
£'000 £'000
Operating profit 24,133 41,583
Acquisition costs 1,124 1,489
Exceptional items 11,962 -
Share based payments (888) 4,738
Employer taxes on share based payments (419) 603
Amortisation of brands, customer and supplier relationships 12,387 11,180
Adjusted operating profit 48,299 59,593
Depreciation 10,568 9,286
Amortisation of patents and software 288 638
Adjusted EBITDA 59,155 69,517
(Increase)/decrease in inventories (8,112) 10,524
(Increase) in trade and other receivables 13,778 9,637
Adjusted increase/(decrease) in trade and other payables(1) (7,216) (10,109)
Adjusted cash flow from operations 57,605 79,569
Adjusted cash flow conversion 97.4% 114.5%
Profit before tax 22,311 36,547
Acquisition costs 1,124 1,489
Exceptional items 11,962 -
Share based payments (888) 4,738
Employer taxes on share based payments (419) 603
Amortisation of brands, customer and supplier relationships 12,387 11,180
Borrowings derivative losses 423 1,219
Foreign exchange gains on acquisition borrowings (1,631) (560)
Gain on remeasurement of previously held equity interest (1,205) -
Other gains and losses on deferred and contingent considerations (6,645) (4,150)
Other gains and losses on put option liabilities over non-controlling 834 (1,063)
interests
Adjusted profit before tax 38,253 50,003
Finance costs (11,339) (9,847)
Finance income 812 293
Foreign exchange derivative gains/(losses) 396 (60)
Investment derivative gains 1 -
Adjusted net finance cost (10,130) (9,614)
Adjusted operating profit 48,299 59,593
Share of profit after tax from associate 84 24
Adjusted net finance cost (10,130) (9,614)
Adjusted profit before tax 38,253 50,003
Profit after tax 16,962 28,926
Acquisition costs 1,124 1,489
Exceptional items 11,962 -
Share based payments (888) 4,738
Employer taxes on share based payments (419) 603
Amortisation of brands, customer and supplier relationships 12,387 11,180
Borrowings derivative losses 423 1,219
Foreign exchange gains on acquisition borrowings (1,631) (560)
Gain on remeasurement of previously held equity interest (1,205) -
Other gains and losses on deferred and contingent considerations (6,645) (4,150)
Other gains and losses on put option liabilities over non-controlling 834 (1,063)
interests
Tax impact of exceptional costs (2,625) -
Tax impact of share based payments 223 (1,171)
Tax impact of employer taxes on share based payments 112 (156)
Tax impact of amortisation of brands, customer and supplier relationships (2,849) (2,714)
Tax impact of foreign exchange gains on acquisition borrowings 443 111
Adjusted profit after tax 28,208 38,452
Profit after tax 16,962 28,926
Non-controlling interest (NCI) (932) (2,109)
Profit after tax attributable to equity holders of the Parent Company 16,030 26,817
Adjusted profit after tax 28,208 38,452
Non-controlling interest (932) (2,109)
Share based payments attributable to NCI (1) (17)
Employer taxes on share based payments attributable to NCI 3 -
Amortisation of brands, customer and supplier relationships attributable to (630) (524)
NCI
Tax impact attributable to NCI 158 102
Adjusted non controlling interest profit after tax (1,402) (2,548)
Adjusted profit after tax attributable to equity holders of the Parent Company 26,806 35,904
Weighted average number of ordinary shares 102,164,466 95,852,306
Diluted weighted average number of ordinary shares 105,600,546 99,085,633
Adjusted basic earnings per share 26.24 37.46
Adjusted diluted earnings per share 25.38 36.24
(1) Excludes the movement in cash settled share based payments and employer
taxes on share based payments.
17. Restatements to prior year results
The Group adopted new standards, amendments to standards, and interpretations,
which are effective from 1 January 2024. These include amendments to IAS 1
presentation of financial statements, IFRS 16 leases, IAS 7 statement of cash
flows, and IFRS 7 financial instruments: disclosures. The new accounting
standards did not have a direct impact on reported results. However, in
consideration of the new accounting standards and recent guidance of the
Financial Reporting Council the Group made presentational changes to the
financial statements.
Comparative financial results have been restated as if changes in had always
been adopted. The changes are reclassifications that do not alter the net
financial performance or position previously reported.
The changes in presentation include reclassifying a derivative financial
instrument from a current asset to a non current asset, presenting gains and
losses separately from finance costs, presenting the retirement benefit
obligations separately in the statement of financial position, and the
restatement of trade receivables and trade payables.
The restatement of the derivative financial instrument is because the maturity
of the derivative is greater than 12 months.
The restatement of other gains and losses is to present separately the gains
and losses on the Group's derivative financial instruments, borrowings for
acquisitions, deferred and contingent considerations, and put option
liabilities that were previously reported in finance costs.
The restatement of trade receivables and trade payables relates to purchase
invoices dated before the reporting date for goods that had not been received
and for which the Group does not have the risks and rewards of control as at
the reporting date. Previously the purchase invoices were recognised as trade
payables with a separate trade receivable recognised representing a right to a
refund as the goods had not been delivered as at the reporting date. The
amounts payable for the purchase invoices have been derecognised on the basis
that the Group did not have a liability until the related inventory comes
under the control of the Group.
The changes in presentation for revenue recognition relate to management's
reassessments over principal vs agent. As a result of a detailed reassessment
of the Group's principal vs agent revenue recognition the Group reassessed the
presentation for carriage and software revenue. Carriage revenue had
previously been recognised on a net agent basis and has been changed to a
gross principal basis. The change resulted in an increase in revenue and
distribution costs of £9,670k. The Group recognises software revenue on both
a net agent and gross principal basis depending on the circumstances of the
sales. The Group has extended the amount of software sales that have been
recognised on a net agent basis with a corresponding decrease in the revenue
recognised on a gross principal basis. The change resulted in a decrease in
revenue and cost of sales of £3,735k. There was no impact on the reported
profit after tax or earnings per share reported for 31 December 2023.
The impact of adopting these changes on the financial performance and position
of the Group for the comparative period is as follows:
2023 2023 2023
Previously presented Impact of changes Restated
£'000 £'000 £'000
Revenue 1,289,144 5,935 1,295,079
Cost of sales (1,072,675) 3,735 (1,068,940)
Gross profit 216,469 9,670 226,139
Selling and distribution costs (130,873) (9,670) (140,543)
Administrative expenses (51,029) - (51,029)
Other operating income 7,016 - 7,016
Operating profit 41,583 - 41,583
Share of profit after tax from associate 24 - 24
Other gains and losses - 4,494 4,494
Finance income 293 - 293
Finance costs (5,353) (4,494) (9,847)
Profit before taxation 36,547 - 36,547
Taxation (7,621) - (7,621)
Profit after taxation 28,926 - 28,926
2023 2023 2023
Previously presented Impact of changes Restated
£'000 £'000 £'000
Assets
Non-current assets
Investments 299 - 299
Goodwill 51,216 - 51,216
Intangible assets 117,009 - 117,009
Right of use assets 21,051 - 21,051
Property, plant and equipment 16,640 - 16,640
Derivative financial instruments - 2,031 2,031
Deferred tax assets 617 - 617
206,832 2,031 208,863
Current assets
Inventories 165,588 - 165,588
Derivative financial instruments 2,084 (2,031) 53
Trade and other receivables 223,826 (14,686) 209,140
Cash and cash equivalents 56,135 - 56,135
447,633 (16,717) 430,916
Current liabilities
Trade and other payables (230,915) 14,686 (216,229)
Derivative financial instruments (26) (26)
Put option liabilities over non-controlling interests (21,958) - (21,958)
Deferred and contingent considerations (11,694) - (11,694)
Borrowings and financial liabilities (49,146) - (49,146)
Current tax (179) - (179)
(313,918) 14,686 (299,232)
Net current assets 133,715 (2,031) 131,684
Total assets less current liabilities 340,547 - 340,547
Non-current liabilities
Trade and other payables (3,915) - (3,915)
Put option liabilities over non-controlling interests (743) - (743)
Deferred and contingent considerations (3,685) - (3,685)
Borrowings and financial liabilities (113,180) - (113,180)
Deferred tax liabilities (18,920) - (18,920)
Retirement benefit obligation - (1,562) (1,562)
Other provisions (3,960) 1,562 (2,398)
(144,403) - (144,403)
Net assets 196,144 - 196,144
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FFFFFVEIDLIERecent news on Midwich
See all newsREG - Midwich Group PLC - Holding(s) in Company
AnnouncementREG - Midwich Group PLC - Posting of Annual Report and Notice of AGM
AnnouncementREG - Midwich Group PLC - Holding(s) in Company
AnnouncementREG - Midwich Group PLC - Issue of Equity & Total Voting Rights
AnnouncementREG - Midwich Group PLC - Full Year Results
Announcement