REG - Midwich Group PLC - Interim Results
06/09/2022 07:17
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RNS Number : 3490Y Midwich Group PLC 06 September 2022
6 September 2022
Midwich Group plc
("Midwich" or the "Group")
Interim results for the six months ended 30 June 2022
Significant organic growth delivered, well ahead of the overall market
Midwich Group (AIM: MIDW), a global specialist audio visual distributor to
the trade market, today announces its Interim Results for the six months ended
30 June 2022 ("H1 2022").
Statutory financial highlights
Six months ended
30 June 2022 30 June 2021 Growth
£m £m %
Revenue 568.6 390.1 46%
Gross profit 84.7 59.1 43%
Gross profit % 14.9% 15.1%
Operating profit 12.7 7.6 67%
Profit/(loss) before tax 10.4 7.1 46%
Profit/(loss) after tax 7.6 4.6 65%
Reported EPS - pence 7.93 4.79 66%
Adjusted financial highlights
Six months ended
30 June 2022 30 June 2021 Growth Growth at constant currency %
£m £m %
Revenue 568.6 390.1 46% 46%
Gross profit 84.7 59.1 43% 44%
Gross profit % 14.9% 15.1%
Adjusted operating profit(1) 20.2 13.9 45% 45%
Adjusted operating profit % 3.6% 3.6%
Adjusted profit before tax(1) 19.2 13.0 47% 47%
Adjusted profit after tax(1) 14.4 9.4 53% 53%
Adjusted EPS - pence(1) 15.42 10.08 53%
Interim dividend per share - pence 4.5 3.3 36%
( )
(1)Definitions of the alternative performance measures are set out in Note 2
Financial highlights
● Revenue increased 45.8% to £568.6m (46.2% on a constant currency basis)
reflecting strong demand in all regions and the contribution from two UK&I
acquisitions completed in the period
● Adjusted profit before tax growth of 47.4% to £19.2m (H1 2021: £13.0m)
● Operating cash conversion at (32%) reflecting typical seasonal investment in
working capital to support business growth (H1 2021: (31%))
● Adjusted net debt at period end comfortably within covenants at 2.1x,
following seasonal inventory build and two acquisitions
● Interim dividend declared of 4.5 pence per share, an increase of 36% (Interim
2021: 3.3p)
Operational highlights
● Organic revenue growth of 27.9%, which is more than double the rate of the
overall market
● Strong contributions from acquisitions of Nimans and DVS in H1 2022, expanding
Group's UC offering and giving access to a new market segment - video security
products
● Gross margin slightly lower due to aged stock provisions, which are expected
to largely reverse
● Management continues to see a strong acquisition pipeline, across a number of
regions
Post period trading
● Trading since 30 June 2022 has been in line with the Board's expectations
which were recently upgraded in the Company's Pre-close Trading Statement on
19 July 2022, and remain well ahead of the comparative period.
There will be a webinar for sell-side analysts and investors at 9:30am today,
6 September 2022, the details of which can be obtained from FTI Consulting:
midwich@fticonsulting.com.
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"The Group delivered outstanding revenue growth of 45.8% to £568.6m in H1
2022. This reflected significant organic revenue growth of 27.9%, which was
supplemented by a strong contribution from the two UK businesses acquired in
early 2022. Our performance compares very favourably with AVIXA's global pro
AV market growth estimate of 10.5% for 2022.
Trading performance in the UK & Ireland, and North America was
particularly impressive, with growth on a constant currency basis of 86.3% and
81.5% respectively on H1 2021. Growth was driven by a combination of market
share gains, new vendors and technologies and partial recovery in some end
user markets.
We have also seen some recovery in the live events markets as well as for
in-person activities such as in the theatre and leisure sectors, as people
regain confidence to attend in-person events.
Although general macro-economic conditions are widely expected to remain
challenging over the coming months, the Group has not seen a fall-off in
demand. I believe that we have demonstrated the resilience of our business in
more challenging economic conditions, as seen by our strong performance
throughout prior recessions. Despite our overall scale, growth and geographic
breadth, the opportunity for the Group to grow profitable market share remains
strong. Furthermore, the evidence within our business supports the recent
AVIXA report which points to any potential negative impact to the AV industry
of a general economic downturn being balanced by increased demand from
in-person events.
The Board believes that the Group's business and the broader AV market should
continue to improve steadily across the remainder of 2022 and into 2023,
although there remains a risk of negative impact due to a decline in general
economic conditions. Shortages of product and supply chain challenges appear
to be easing in some areas, although critical component shortages continue to
cause difficulties in completing projects. Our order books remain strong.
Trading since the end of H1 has been in line with the Board's recently
upgraded expectations and well ahead of the comparative period."
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 / Alix Mecklenberg-Solodkoff
FTI Consulting +44 (0) 20 3727 1000
Alex Beagley / Tom Hufton / Rafaella de Freitas
About Midwich Group
Midwich is a specialist AV distributor to the trade market, with operations in
the UK and Ireland, EMEA, Asia Pacific and North America. The Group's
long-standing relationships with over 600 vendors, including blue-chip
organisations, support a comprehensive product portfolio across major audio
visual categories such as large format displays, projectors, digital signage
and professional audio. The Group operates as the sole or largest in-country
distributor for a number of its vendors in their respective product sets.
The Directors attribute this position to the Group's technical expertise,
extensive product knowledge and strong customer service offering built up over
a number of years. The Group has a large and diverse base of over 20,000
customers, most of which are professional AV integrators and IT resellers
serving sectors such as corporate, education, retail, residential and
hospitality. Although the Group does not sell directly to end users, it
believes that the majority of its products are used by commercial and
educational establishments rather than consumers.
Initially a UK only distributor, the Group now has around 1,500 employees
across the UK and Ireland, EMEA, Asia Pacific and North America. A core
component of the Group's growth strategy is further expansion of its
international operations and footprint into strategically targeted
jurisdictions.
For further information, please visit www.midwichgroupplc.com
(http://www.midwichgroupplc.com/)
Managing Director's Report
Overview
The Group continued to make strong progress in H1 2022, with trading improving
in all our key territories. Once again, I would like to thank our team for
its exceptional performance in the face of ongoing business and personal
challenges. Although the direct impact of the pandemic has lessened, we have
dealt effectively with continuing challenges, such as product shortages,
unpredictable supplies and inflation. However, with the return of in-person
activity and meetings, such as trade shows, we have been able to rekindle
personal relationships with colleagues, customers and vendors alike.
Maintaining a consistent high service level to our customers and vendors
remains a key focus for the Group, such that we become a long-term trusted
partner. We continue to work hard to provide exceptional service despite the
well flagged broader industry challenges such as ongoing product shortages.
Although we have seen shortages beginning to ease in a number of product areas
(such as flat panel displays), ongoing shortages of some critical system
components can cause difficulties in completing projects. Our focus on
developing our offering in the AV market continues to be beneficial for our
customers and vendors alike.
Working capital management remains a key focus for the Group. As expected,
as the business has recovered, inventory levels have also increased. I remain
comfortable that our inventories are aligned with sensible business
requirements and our growth ambitions.
Trading performance
The Group has continued to build upon the recent trading momentum seen in the
second half of 2021, with revenue increasing by 45.8% to £568.6 million
(constant currency growth also 45.8%). Strong organic growth of 27.9% was
supplemented by very positive contributions from the two businesses acquired
earlier in the year.
The gross margin percentage was 0.2% lower than H1 2021. This reduction was
a combination of stronger sales of higher margin product areas being offset by
an increase in the provision for aged inventory. The Group operates a strict
provisioning policy based on the age of inventory. With unpredictable
product supplies continuing, the Group has taken advantage of buying
opportunities as they have arisen to ensure we are able to best service our
clients. This has sometimes meant holding larger inventory levels, which takes
time to reduce to normal levels. We expect that most of the aged stock
provision will reverse by the end of 2022 without the need for substantial
discounting.
The Group benefitted from operational leverage particularly in the UK&I
and North America, with the result that despite the 0.2% reduction in the
gross margin we achieved an increase in the net margin from 3.3% to 3.4%
during the period.
Products
Revenue from the two mainstream product areas (displays and projection)
increased by 21%, which is below the overall rate of growth of the Group.
These mainstream categories now account for an aggregate of just 42% of Group
revenue as we continue to diversify into specialist areas. The gross margin on
mainstream categories reduced a little due to the impact of the aged stock
provision movement.
Revenue in specialist product areas, such as technical video, audio, broadcast
and lighting grew by 86%. Technical products now account for over half of
the Group's revenue. The Group's long-term strategy is to continue
developing its presence and expertise in more specialist product categories
where there are attractive growth and margin opportunities. This includes new
categories such as security and telecoms products, in addition to the growing
unified communications and collaboration segment.
As expected, revenues in the broadcast segment fell as the strong demand for
home broadcast equipment seen through lockdowns returned to normal levels.
Overall, gross margins in technical product categories reduced by around 1.3%
- a combination of prudent aged stock provision movements and the inclusion of
lower margin telecoms products.
The Board believes that the current market conditions, highlight more than
ever, the need for manufacturers to use a high-quality specialist distributor,
such as Midwich. As such, our new vendor launch programme has continued,
with significant success.
Customers
The Group's focus has always been on seeking to provide our customers with
consistently high levels of service and support. Although our customer base
tends to be adaptable and resilient, we are aware that they continue to face
challenges with shortages of skilled staff and of products, and of
unpredictable demand. We have sought to flex our model in order to support
our customers and to accommodate the needs of the channel. A number of
markets (such as live events and hospitality) have seen a return to growth in
the first half of 2022 which we anticipate will continue to recover over the
short to medium term.
Our expansion into new product categories over the last couple of years (such
as unified communications, security and telecoms) has broadened the Group's
customer base, and also its level of engagement with major international
integrators.
End-user markets
A number of end user markets, such as education and government, have remained
strong in H1 2022. We have seen some return of the corporate market, although
this recovery is still ongoing. The live events and hospitality markets are
starting to recover, with notable growth in corporate events in the UK&I
and outdoor events in parts of southern Europe. The high street retail market
remains very subdued, and we note that AXIVA predicts that this market will
not return to pre-pandemic levels until 2025.
Strategy
The Group's strategy remains clearly focused on markets and product areas
where it can leverage its value-add services, technical expertise, and sales
and marketing skills. Services, skills and geographies are developed either
in-house or through acquisitions.
Using its market knowledge and skills, the Group provides its vendors with
support to build and execute plans to grow market share. The Group supports
its customers to win and then deliver successful projects.
During the period, the Group continued to deliver successfully on this
strategy, including building expertise and reach in the unified communications
market and continuing to launch with new vendors and technologies.
Historically, the Group has successfully used acquisitions to enter new
geographical markets and to add both expertise and new product areas. Once
acquired and integrated, businesses are supported to grow organically and
increase profitable market share. The Group continues to pursue a strong
pipeline of opportunities, either self-sourced or, increasingly, through
approaches by business owners who wish to join a strong AV focused group.
The Board continues to focus on strengthening the Group's product offering,
technical expertise and geographical reach.
Acquisitions
The Group completed two acquisitions during the first half of 2022.
In January 2022, the Group completed the acquisition of a 65% controlling
stake in Cooper Projects Limited, the parent company of DVS Limited ("DVS"), a
UK based distributor of video security products.
Based in Cardiff, DVS is a specialist distributor of CCTV and associated video
recording technologies together with complementary technologies, such as
access control, intercom, and intruder detection. DVS provides solutions for
trade customers throughout the UK, across key verticals including the
corporate, retail and residential markets.
This acquisition gives the Group access to a significant segment of the AV
market in which it had little presence, and which is expected to grow at
around 8% per annum for the next five years.
In February 2022, the Group acquired Nimans Limited and its subsidiaries
(collectively "Nimans"). Nimans is a UK based specialist distributor of
unified communications, telecoms, collaboration and audio visual technologies.
The Group continues to grow its unified communications offering and Nimans
brings further opportunities to the Group, in terms of skills in new product
and technology areas, service offerings to the trade, a large new customer
base and new vendor relationships.
These acquisitions bring new technologies, customers and vendors and further
deliver on the Group's strategy to grow earnings both organically and through
selective acquisitions of strong, complementary businesses.
In the period, the Group acquired the remaining minority shareholding in
Earpro S.A. and Entertainment Equipment Supplies SL, its Spanish audio and
lighting businesses. Following the period end, the Group also acquired the
remaining minority shareholding in Prase Engineering SpA, its Italian audio
specialist.
Today, the acquisition pipeline remains healthy and the management team
continue to review attractive opportunities in a number of markets and
regions.
Outlook
According to research published by industry trade body AVIXA in July 2022, the
global market for AV grew by 11% in 2021 and is expected to grow by a further
10.5% in 2022. The market is expected to have recovered to its 2019 size
(pre-covid pandemic) by the end of 2022, from when AVIXA predicts an
annualised growth rate of 5.9% to 2027.
The Board concurs that the wider AV industry is well positioned for long-term
growth and believes that the Group is very well positioned to take advantage
of growth opportunities.
The Board believes that the Group's markets and business should continue to
improve steadily across the remainder of 2022 and into 2023, although there
remains a risk of negative impact due to a decline in general economic
conditions. Shortages of product appear to be easing somewhat, although
ongoing shortages of some critical system components continue to cause
difficulties in competing projects. Order books remain strong and underpin
the Board's confidence in the Group's outlook for the current year and beyond.
Trading since the end of H1 has been in line with the Board's recently
upgraded expectations for the full year, and well ahead of the comparative
period.
Regional highlights
Six months ended
30 June 2022 £m 30 Total growth Growth at constant currency Organic growth
%
June % %
2021
£m
Revenue
UK & Ireland 239.3 128.6 86.1% 86.3% 30.6%
EMEA 247.9 210.2 17.9% 20.4% 20.4%
Asia Pacific 25.0 22.2 12.7% 12.2% 12.2%
North America 56.4 29.1 94.0% 81.5% 81.5%
Total Global 568.6 390.1 45.8% 46.2% 27.9%
Gross profit margin
UK & Ireland 15.7% 15.4% 0.3 ppts
EMEA 14.1% 14.5% (0.4) ppts
Asia Pacific 15.7% 17.7% (2.0) ppts
North America 14.7% 17.2% (2.5) ppts
Total Global 14.9% 15.1% (0.2) ppts
Adjusted operating profit(1)
UK & Ireland 10.8 4.9 119.0% 119.7%
EMEA 8.7 9.1 (4.0)% (3.0%)
Asia Pacific 0.2 0.5 (67.7)% (68.2%)
North America 3.1 1.1 174.0% 156.4%
Group costs (2.6) (1.7)
Total Global 20.2 13.9 45.0% 44.5%
Adjusted finance costs (1.0) (0.9)
Adjusted profit before tax(1) 19.2 13.0 47.4% 47.1%
(1)Definitions of the alternative performance measures are set out in Note 2
All percentages referenced in this section are at constant currency unless
otherwise stated.
UK & Ireland
Revenue in the UK & Ireland (UK&I) increased by 86.3% in the period,
including the impact of the acquisitions of DVS and Nimans at the beginning of
the year. Acquisition integration is proceeding well, reflecting the strong
cultural fit. Both businesses are performing strongly and have delivered
revenue synergies earlier than expected.
Organic revenue growth was exceptionally strong at 30.6% with the business
benefitting from the return to normal working practices following the
cessation of pandemic restrictions and further significant market share gains.
The market share gains are attributed particularly to the contribution from
new vendors launched in the last two years, combined with strong long-term
value added partnerships with our customers.
The gross margin percentage improved by 0.3 ppts compared with H1 2021,
reflecting a partial recovery in higher margin markets such as live events,
entertainment and hospitality.
Adjusted operating profit increased by 119.7% in the UK&I to £10.8m.
EMEA
After an exceptionally strong performance in 2021, EMEA achieved further
market share gains with growth of 20.4% to £247.9m in the period. There was
good growth across the region with notable performances in the Middle East, as
a result of project demand and the benefit of new vendors added in prior
periods; in Southern Europe, due to a rebound in demand from corporates and
live events; and in Germany, where the education market demand remains high.
After two years of unprecedented demand, broadcast solutions revenue returned
to normal levels.
Gross margin at 14.1% was below the prior year reflecting both the impact of
an increase in the aged inventory provision, due to holding some additional
volumes to ensure continuity of supply, and product mix. There were signs of
product supply issues beginning to ease during the period, although this
continues to have an impact especially with respect to complex/higher margin
projects.
Adjusted operating profit in EMEA at £8.7m was broadly in line with the same
period in 2021.
Asia Pacific
Revenue in Asia Pacific was up 12.2% on the prior year. The region continued
to be impacted by COVID-19 restrictions, although these have eased in recent
months. Revenue growth was driven by increased sales of displays into the
education and corporate markets. We continue to see a higher level of
enquiries for larger projects, although ongoing product supply challenges and
the delayed market recovery mean that the timing of delivery is uncertain.
The Asia Pacific gross profit margin of 15.7% was 2.0 percentage points below
H1 2021, reflecting the less technical product mix.
Adjusted operating profit in Asia Pacific was £0.2m (H1 2021: £0.5m).
North America
Trading in North America was very strong, reflecting the strategic focus on
its specialist AV business and the benefit of investment in sales
capabilities. The Starin business is performing well and has added new brands
over the last two years and increased both its customer base and its share of
wallet with existing customers. Revenue in North America increased by 81.5% to
£56.4m.
The increased scale and focus on core AV activity resulted in gross margins of
14.7% which we understand is ahead of the wider North American market. Gross
margins in the prior period benefitted from the release of provisions in
respect of aged stock sold in the period.
Adjusted operating profit in North America increased by 156.4% to £3.1m (H1
2021: £1.1m).
Group costs
Group costs for the half year were £2.6m (H1 2021: £1.7m). The increase
reflects investment in Group IT and security and increased travel expenses.
Operating profit
Adjusted operating profit for the period at £20.2m (H1 2021 £13.9m) is
stated before the impact of acquisition related expenses of £0.4m (H1 2021:
£0.3m), share based payments and associated employer taxes of £2.8m (H1
2021: £2.4m) and amortisation of acquired intangibles of £4.3m (H1 2021:
£3.6m). The reported operating profit for the period was £12.7m (H1 2021:
£7.6m).
Movement in foreign exchange
Compared to the prior period Sterling has appreciated against the Euro but
depreciated against the US Dollar. These movements have largely offset each
other with reported growth at the Group level broadly in line with constant
currency growth. Note, the Group makes most of its sales and purchases in
local currency; this provides a natural hedge for transactional activity.
Finance costs
Adjusted finance costs for the period were an expense of £1.0m (H1 2021:
£0.9m) and included the benefit of £0.6m of fair value movements on foreign
exchange derivatives.
Reported finance costs were £2.3m (H1 2021: £0.5m). The adjustments to
finance costs include fair value movements in derivatives and foreign exchange
movement on borrowings for acquisitions of (£0.2m) (H1 2021: £1.4m),
valuation changes in deferred and contingent considerations of £0.4m (H1
2021: £0.1m), and movements in put option liabilities over non-controlling
interests of £1.1m (H1 2021: £1.0m).
Taxation
The reported tax charge for the period was £2.8m (H1 2021: £2.5m). The
adjusted effective tax rate was 24.9% (H1 2021: 27.8%) calculated based on the
adjusted tax charge divided by adjusted profit before tax. The decrease in
effective tax rate is attributable to a shift in geographic mix towards lower
tax jurisdictions.
Cash flows and net debt
The Group had an adjusted net cash outflow from operations before tax of
£7.6m for the period (H1 2021: £5.1m). The first half is traditionally more
working capital intensive when compared with the full year due to the
seasonality of demand, especially in the education sector. Overall working
capital levels, as a percentage of annualised revenue, were in line with H1
2021, whilst absolute working capital increased due to the growth in revenue,
the impact of acquisitions and some additional inventory holdings to manage
product shortage risk and maintain our service levels. The Board is
comfortable that the Group's long-term average annual cash conversion rate
(70-80%) remains sustainable.
Adjusted net debt (excluding leases liabilities), was £112.5m at 30 June 2022
(£56.0m at 30 June 2021), equivalent to 2.1x adjusted EBITDA.
The adoption of IFRS 16 in 2019 resulted in an increase in recognised lease
liabilities (predominantly for office, showroom and warehouse facilities).
Lease liabilities excluded from adjusted net debt totalled £23.0m at 30 June
2022 (£17.2m 30 June 2021). Total net debt was £135.5m at 30 June 2022
(£73.3m at 30 June 2021).
Adjusted net debt was impacted by the net payments totalling £23.5m in
respect of the acquisitions and purchase of minority shareholdings in the
period.
The Group has access to an £80m revolving credit facility (RCF) which it uses
to finance acquisition investments. Other borrowing facilities are to provide
working capital financing. There were no significant changes to facilities
during the period and as at 30 June 2022, the Group has access to total
facilities of over £200m.
The Group has various instruments to hedge certain exchange rate and interest
rate exposures. These include borrowings in Euros to finance European
acquisitions and financial instruments to fix part of the Group's interest
charges. These instruments are marked to market at the end of each reporting
period, with the change in valuation recognised in the income statement. Given
any amounts recognised generally arise from market movements and accordingly
bear no direct relation to the Group's underlying performance, any gains or
losses have been excluded from adjusted profit measures.
Dividend
The Board is pleased to declare an interim dividend of 4.5 pence per share (H1
2021: 3.3p), an increase of 36%. This will be paid on 26 October 2022 to those
shareholders on the Company's register as at 16 September 2022. The last day
to elect for dividend reinvestment ("DRIP") is 3 October 2022.
The Board believes in a progressive dividend policy to reflect the Group's
strong earnings and cash flow while maintaining an appropriate level of
dividend cover to allow for investment in longer-term growth. The Board
anticipates that future dividends will continue to be covered in the range of
2-2.5 times by adjusted earnings per share.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended 30 June 2022
Note 30 30 31 December 2021
June June
2022 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 568,566 390,072 855,973
Cost of sales (483,829) (331,005) (724,712)
Gross profit 84,737 59,067 131,261
Distribution costs (52,327) (37,165) (80,585)
Administrative expenses (22,535) (15,887) (34,871)
Other operating income 2,784 1,600 5,175
Operating profit 12,659 7,615 20,980
Adjusted operating profit 20,187 13,921 34,012
Costs of acquisitions (377) (286) (486)
Share based payments (2,548) (2,024) (4,416)
Employer taxes on share based payments (252) (426) (904)
Amortisation of brands, customer and supplier relationships (4,351) (3,570) (7,226)
12,659 7,615 20,980
Finance income 91 48 108
Finance costs 5 (2,386) (571) (2,193)
Profit before taxation 10,364 7,092 18,895
Taxation (2,802) (2,516) (5,422)
Profit after taxation 7,562 4,576 13,473
Profit for the financial period/year attributable to:
The Company's equity shareholders 6,996 4,220 12,429
Non-controlling interests 566 356 1,044
7,562 4,576 13,473
Basic earnings per share 3 7.93p 4.79p 14.11p
Diluted earnings per share 3 7.69p 4.70p 13.76p
Unaudited consolidated statement of comprehensive income for 6 months ended 30
June 2022
30 30 31 December
June June
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period/financial year 7,562 4,576 13,473
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains and (losses) on retirement benefit obligations - - 254
Items that will be reclassified subsequently to profit or loss:
Foreign exchange gains/(losses) on consolidation 5,895 (3,835) (4,710)
Other comprehensive income for the financial period/year, net of tax 5,895 (3,835) (4,456)
Total comprehensive income for the period/financial year 13,457 741 9,017
Attributable to:
Owners of the Parent Company 12,259 748 8,384
Non-controlling interests 1,198 (7) 633
13,457 741 9,017
Unaudited consolidated statement of financial position as at 30 June 2022
Note 30 30 31 December
June June
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 35,430 22,329 21,163
Intangible assets 76,877 53,518 51,972
Right of use assets 20,993 16,239 19,826
Property, plant and equipment 14,636 10,574 11,792
Deferred tax assets 3,571 2,779 2,725
151,507 105,439 107,478
Current assets
Inventories 171,446 117,838 125,825
Trade and other receivables 216,792 127,252 124,256
Derivative financial instruments 2,956 7 492
Cash and cash equivalents 17,380 19,884 15,476
408,574 264,981 266,049
Current liabilities
Trade and other payables (231,718) (137,571) (142,546)
Derivative financial instruments - (391) -
Put option liabilities over non-controlling interests (3,042) (5,518) (3,863)
Deferred and contingent considerations (527) (6,135) (466)
Borrowings and financial liabilities (61,145) (43,267) (34,053)
Current tax (3,651) (2,130) (2,869)
(300,083) (195,012) (183,797)
Net current assets 108,491 69,969 82,252
Total assets less current liabilities 259,998 175,408 189,730
Non-current liabilities
Trade and other payables (1,694) (1,385) (1,418)
Put option liabilities over non-controlling interests (12,113) (4,034) (4,287)
Deferred and contingent considerations (16,922) (1,796) (1,468)
Borrowings and financial liabilities (91,731) (49,875) (60,399)
Deferred tax liabilities (10,510) (6,298) (5,066)
Other provisions (3,770) (2,786) (2,696)
(136,740) (66,174) (75,334)
Net assets 123,258 109,234 114,396
Equity
Share capital 6 889 887 887
Share premium 67,047 67,047 67,047
Share based payment reserve 10,118 6,340 7,879
Investment in own shares 6 (7) (7) (5)
Retained earnings 39,516 34,794 39,078
Translation reserve 3,081 (1,355) (2,182)
Put option reserve (13,684) (8,679) (7,784)
Capital redemption reserve 50 50 50
Other reserve 150 150 150
Equity attributable to owners of Parent Company 107,160 99,227 105,120
Non-controlling interests 16,098 10,007 9,276
Total equity 123,258 109,234 114,396
Unaudited consolidated statement of changes in equity for 6 months ended 30
June 2022
For the period ended 30 June 2022
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 6) (note 7)
Balance at 1 January 2022 887 67,047 (5) 39,078 (1,887) 105,120 9,276 114,396
Profit for the period - - - 6,996 - 6,996 566 7,562
Other comprehensive income - - - - 5,263 5,263 632 5,895
Total comprehensive income for the year - - - 6,996 5,263 12,259 1,198 13,457
Shares issued (note 6) 2 - (2) - - - - -
Share based payments - - - - 2,535 2,535 - 2,535
Deferred tax on share based payments - - - - (220) (220) - (220)
Share options exercised - - - 76 (76) - - -
Acquisition of subsidiaries (note 8) - - - - (6,933) (6,933) 6,933 -
Dividends paid (note 13) - - - (6,910) - (6,910) - (6,910)
Acquisition of non-controlling interest (note 9) - - - 276 1,033 1,309 (1,309) -
Balance at 30 June 2022 (unaudited) 889 67,047 (7) 39,516 (285) 107,160 16,098 123,258
For the period ended 30 June 2021
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 6) (note 7)
Balance at 1 January 2021 886 67,047 (6) 30,436 1,976 100,339 6,148 106,487
Profit for the period - - - 4,220 - 4,220 356 4,576
Other comprehensive income - - - - (3,472) (3,472) (363) (3,835)
Total comprehensive income for the year - - - 4,220 (3,472) 748 (7) 741
Shares issued (note 6) 1 - (1) - - - - -
Share based payments - - - - 2,024 2,024 - 2,024
Deferred tax on share based payments - - - - (18) (18) - (18)
Share options exercised - - - 138 (138) - - -
Acquisition of subsidiaries - - - - (3,866) (3,866) 3,866 -
Balance at 30 June 2021 (unaudited) 887 67,047 (7) 34,794 (3,494) 99,227 10,007 109,234
For the year ended 31 December 2021 (audited)
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 6) (note 7)
Balance at 1 January 2021 886 67,047 (6) 30,436 1,976 100,339 6,148 106,487
Profit for the year - - - 12,429 - 12,429 1,044 13,473
Other comprehensive income - - - 254 (4,299) (4,045) (411) (4,456)
Total comprehensive income for the year - - - 12,683 (4,299) 8,384 633 9,017
Shares issued (note 6) 1 - (1) - - - - -
Share based payments - - - - 4,398 4,398 - 4,398
Deferred tax on share based payments - - - - 61 61 - 61
Share options exercised - - 2 1,051 (1,052) 1 - 1
Acquisition of subsidiaries (note 8) - - - - (3,866) (3,866) 3,866 -
Dividends paid (note 13) - - - (5,568) - (5,568) - (5,568)
Acquisition of non-controlling interest (note 9) - - - 476 895 1,371 (1,371) -
Balance at 31 December 2021 887 67,047 (5) 39,078 (1,887) 105,120 9,276 114,396
( )
Unaudited consolidated cashflow statement for 6 months ended 30 June 2022
30 30 31 December
June June
2022 2021 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Profit before tax 10,364 7,092 18,895
Depreciation 3,429 2,653 5,793
Amortisation 4,530 3,697 7,502
Gain on disposal of assets 3 356 25
Share based payments 2,535 2,024 4,398
Foreign exchange losses/(gains) 1,405 (331) (1,026)
Finance income (91) (48) (108)
Finance costs 2,386 571 2,193
Profit from operations before changes in working capital 24,561 16,014 37,672
Increase in inventories (27,293) (28,718) (36,496)
Increase in trade and other receivables (68,834) (15,497) (12,473)
Increase in trade and other payables 65,019 22,794 27,943
Cash (outflow)/inflow from operations (6,547) (5,407) 16,646
Income tax paid (3,714) (3,307) (5,151)
Net cash (outflow)/inflow from operating activities (10,261) (8,714) 11,495
Cash flows from investing activities
Acquisition of businesses net of cash acquired (22,372) (16,134) (16,836)
Purchase of intangible assets (2,018) (845) (2,401)
Purchase of plant and equipment (3,434) (975) (3,558)
Proceeds on disposal of plant and equipment 27 170 253
Interest received 91 48 108
Net cash outflow from investing activities (27,706) (17,736) (22,435)
Cash from financing activities
Proceeds on exercise of share options - - 1
Deferred and contingent considerations paid - (4,999) (11,265)
Acquisition of non-controlling interest (1,063) - (2,055)
Dividends paid (6,910) - (5,568)
Invoice financing inflows 11,714 14,385 6,261
Proceeds from borrowings 32,685 15,977 23,222
Repayment of loans (2,866) (1,000) (4,660)
Interest paid (1,713) (902) (2,087)
Interest on leases (230) (152) (439)
Capital element of lease payments (3,848) (2,201) (3,072)
Net cash inflow from financing activities 27,769 21,108 338
Net decrease in cash and cash equivalents (10,198) (5,342) (10,601)
Cash and cash equivalents at beginning of period/year 11,639 23,795 23,795
Effects of exchange rate changes 491 (308) (1,555)
Cash and cash equivalents at end of period/year 1,932 18,145 11,639
Comprising:
Cash at bank 17,380 19,884 15,476
Bank overdrafts (15,448) (1,739) (3,837)
1,932 18,145 11,639
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2022 is unaudited
and does not constitute statutory financial statements within the meaning of
Section 434 of the Companies Act 2006.
The interim consolidated financial information does not include all the
information required for statutory financial statements in accordance with UK
adopted International Accounting Standards ("IAS"), and should therefore be
read in conjunction with the consolidated financial statements for the year
ended 31 December 2021.
2. Accounting policies
Basis of preparation
The interim financial information in this report has been prepared on the
basis of the accounting policies set out in the audited financial statements
for the year ended 31 December 2021. The audited financial statements for the
year ended 31 December 2021 were prepared in accordance with UK adopted
International Accounting Standards ("IAS") in conformity with the requirements
of the Companies Act 2006.
The directors have adopted the going concern basis in preparing the financial
information. In assessing whether the going concern assumption is appropriate,
the directors have taken into account all relevant available information about
the foreseeable future.
The statutory accounts for the year ended 31 December 2021, have been
delivered to the Registrar of Companies. The auditors reported on these
accounts; their report was unqualified; did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006, and did not include
reference to any matters to which the auditor drew attention by way of
emphasis.
Use of alternative performance measures
The Group has defined certain measures that it uses to understand and manage
performance. These measures are not defined under IAS and they may not be
directly comparable with other companies' adjusted measures. These non-GAAP
measures are not intended to be a substitute for any IAS measures of
performance, but management has included them as they consider them to be key
measures used within the business for assessing the underlying performance.
Growth at constant currency: This measure shows the year on year change in
performance after eliminating the impact of foreign exchange movement, which
is outside of management's control.
Organic growth: This is defined as growth at constant currency growth
excluding acquisitions until the first anniversary of their consolidation.
Adjusted operating profit: Adjusted operating profit is disclosed to indicate
the Group's underlying profitability. It is defined as profit before
acquisition related expenses, share based payments and associated employer
taxes and amortisation of brand, customer and supplier relationship intangible
assets. Share based payments are adjusted to the provide transparency over the
costs.
Adjusted EBITDA: This represents operating profit before acquisition related
expenses, share based payments and associated employer taxes, depreciation and
amortisation.
Adjusted profit before tax: This is profit before tax adjusted for acquisition
related expenses, share based payments and associated employer taxes,
amortisation of brand, customer and supplier relationship intangible assets,
changes in deferred or contingent considerations and put option liabilities
over non-controlling interests, foreign exchange gains or losses on borrowings
for acquisitions, fair value movements on derivatives for borrowings, and
financing fair value remeasurements.
Adjusted profit after tax: This is profit after tax adjusted for acquisition
related expenses, share based payments and associated employer taxes,
amortisation of brand, customer and supplier relationship intangible assets,
changes in deferred or contingent considerations and put option liabilities
over non-controlling interests, foreign exchange gains or losses on borrowings
for acquisitions, fair value movements on derivatives for borrowings, and
financing fair value remeasurements and the tax thereon.
Adjusted EPS: Adjusted EPS is EPS calculated using the basis of adjusted
profit after tax instead of profit after tax after deducting adjustments to
profit after tax due to non-controlling interests.
Adjusted net debt: Net debt is borrowings less cash and cash equivalents.
Adjusted net debt excludes leases.
Adjusted net debt:Adjusted EBITDA: This is calculated as per the Group's RCF
debt facility covenant and includes the benefit of proforma annualised
earnings for acquisitions completed in the last 12 months.
3. 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.
The Group's earnings per share and diluted earnings per share, are as follows:
June June December
2022 2021 2021
Profit attributable to equity holders of the Parent Company (£'000) 6,996 4,220 12,429
Weighted average number of shares outstanding 88,224,914 88,032,819 88,101,300
Dilutive (potential dilutive) effect of share options 2,701,745 1,665,248 2,204,110
Weighted average number of ordinary shares for the purposes of diluted 90,926,659 89,698,067 90,305,410
earnings per share
Basic earnings per share 7.93p 4.79p 14.11p
Diluted earnings per share 7.69p 4.70p 13.76p
4. Segmental reporting
30 June 2022 UK & Ireland EMEA Asia North America £'000 Other Total
Pacific
£'000 £'000
( )
£'000
£'000 £'000
Revenue 239,270 247,882 25,017 56,396 - 568,565
Gross profit 37,635 34,864 3,932 8,307 - 84,738
Gross profit % 15.7% 14.1% 15.7% 14.7% - 14.9%
Adjusted operating profit 10,781 8,723 151 3,109 (2,578) 20,186
Cost of acquisitions - - - - (377) (377)
Share based payments (993) (811) (201) (34) (508) (2,548)
Employer taxes on share based payments (83) (91) (5) (2) (72) (252)
Amortisation of brand, customer and supplier relationships (1,899) (1,664) (139) (650) - (4,351)
Operating profit 7,806 6,158 (193) 2,423 (3,534) 12,658
Net interest expense (2,295)
Profit before tax 10,363
Other segmental information
June 2022 UK & Ireland EMEA Asia North America £'000 Other Total
Pacific
£'000 £'000
( )
£'000
£'000 £'000
Segment assets 244,504 234,593 23,714 55,930 1,340 560,081
Segment liabilities (211,363) (177,710) (19,351) (27,561) (838) (436,823)
Segment net assets 33,141 56,883 4,363 28,369 502 123,528
Depreciation 1,313 1,625 256 235 - 3,429
Amortisation 1,941 1,695 146 747 - 4,530
Other segmental information UK International Total
£'000 £'000 £'000
Non-current assets 67,310 84,197 151,507
Deferred tax assets 2,244 1,327 3,571
Non-current assets excluding deferred tax 65,066 82,870 147,936
30 June 2021 UK & Ireland EMEA Asia North America £'000 Other Total
Pacific
£'000 £'000
( )
£'000
£'000 £'000
Revenue 128,581 210,223 22,194 29,074 - 390,072
Gross profit 19,747 30,388 3,918 5,014 - 59,067
Gross profit % 15.4% 14.5% 17.7% 17.2% - 15.1%
Adjusted operating profit 4,923 9,092 468 1,134 (1,696) 13,921
Cost of acquisitions - - - - (286) (286)
Share based payments (750) (603) (171) (17) (483) (2,024)
Employer taxes on share based payments (114) (185) (17) (2) (107) (425)
Amortisation of brand, customer and supplier relationships (1,187) (1,637) (139) (608) - (3,571)
Operating profit 2,872 6,667 141 507 (2,572) 7,615
Net interest expense (523)
Profit before tax 7,092
Other segmental information
June 2021 UK & Ireland EMEA Asia North America £'000 Other Total
Pacific
£'000 £'000
( )
£'000
£'000 £'000
Segment assets 115,838 195,412 20,345 38,070 755 370,420
Segment liabilities (85,421) (142,512) (16,624) (16,039) (590) (261,186)
Segment net assets 30,417 52,900 3,721 22,031 165 109,234
Depreciation 1,035 1,165 295 158 - 2,653
Amortisation 1,195 1,680 147 675 - 3,697
Other segmental information UK International Total
£'000 £'000 £'000
Non-current assets 25,142 80,297 105,439
Deferred tax assets 1,319 1,460 2,779
Non-current assets excluding deferred tax 23,823 78,837 102,660
31 December 2021 UK & Ireland EMEA Asia North America Other Total
£'000 £'000 Pacific £'000
£'000 £'000 £'000
Revenue 286,060 455,434 45,384 69,094 - 855,972
Gross profit 45,333 67,000 7,958 10,969 - 131,260
Gross profit % 15.8% 14.7% 17.5% 15.9% - 15.3%
Adjusted operating profit 12,720 21,356 926 4,556 (5,546) 34,012
Costs of acquisitions - - - - (486) (486)
Share based payments (1,599) (1,384) (366) (45) (1,022) (4,416)
Employer taxes on share based payments (249) (401) (33) (5) (216) (904)
Amortisation of brands, customer and supplier relationships (2,371) (3,356) (273) (1,226) - (7,226)
Operating profit 8,501 16,215 254 3,280 (7,270) 20,980
Interest (2,085)
Profit before tax 18,895
December 2021 UK & Ireland EMEA Asia North America Total
£'000 £'000 Pacific £'000 Other
£'000 £'000
£'000
Segment assets 106,426 203,066 21,489 41,987 559 373,527
Segment liabilities (74,564) (148,943) (17,357) (17,454) (813) (259,131)
Segment net assets 31,862 54,123 4,132 24,533 (254) 114,396
Depreciation 2,064 2,761 563 405 - 5,793
Amortisation 2,391 3,446 288 1,377 - 7,502
Other segmental information UK International Total
£'000 £'000 £'000
Non-current assets 25,575 81,903 107,478
Deferred tax asset 1,268 1,457 2,725
Non-current assets excluding deferred tax 24,307 80,446 104,753
5. Finance costs
June 2022 June 2021 December 2021
£'000 £'000 £'000
Interest on overdraft and invoice discounting 765 414 867
Interest on leases 230 152 439
Interest on loans 740 383 810
Fair value movements on foreign exchange derivatives (644) 5 77
Other interest costs 2 2 15
Fair value movements on derivatives for borrowings (1,613) (589) (1,244)
Foreign exchange (gains)/losses on borrowings for acquisitions 1,390 (892) (814)
Interest, foreign exchange and other finance costs of deferred and contingent 382 52 347
considerations
Interest, foreign exchange and other finance costs of put option liabilities 1,134 1,044 1,696
2,386 571 2,193
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
June 2022 June 2021 December 2021
Classed as equity: Number £'000 Number £'000 Number £'000
Issued and fully paid ordinary shares of £0.01 each
Opening balance 88,735,612 887 88,604,712 886 88,604,712 886
Shares issued 144,300 2 130,900 1 130,900 1
Closing balance 88,879,912 889 88,735,612 887 88,735,612 887
During the period Midwich Group plc issued 144,300 shares (2021: 130,900) into
an employee benefit trust.
Own shares held in employee benefit trusts
June 2022 June 2021 December 2021
Number £'000 Number £'000 Number £'000
Issued and fully paid ordinary shares of £0.01 each
Opening balance 518,300 5 593,600 6 593,600 6
Shares issued 144,300 2 130,900 1 130,900 1
Exercise of share options (18,140) - (40,500) - (206,200) (2)
Closing balance 644,460 7 684,000 7 518,300 5
A reconciliation of LTIP option movements during the current and comparative
period, and the year to 31 December 2021 is as follows:
Six months to June 2022 Six months to June 2021 Twelve months to December 2021
Outstanding at 1 January 3,284,374 2,691,676 2,691,676
Granted 1,004,141 89,700 794,700
Lapsed (43,058) (13,300) (61,202)
Exercised (14,240) (39,000) (140,800)
Outstanding at period end 4,231,217 2,729,076 3,284,374
A reconciliation of SIP option movements during the current and comparative
period, and the year to 31 December 2021 is as follows:
Six months to June 2022 Six months to June 2021 Twelve months to December 2021
Outstanding at 1 January 267,900 254,700 254,700
Granted 106,800 111,900 111,900
Lapsed (8,700) (11,400) (33,300)
Exercised (3,900) (1,500) (65,400)
Outstanding at period end 362,100 353,700 267,900
7. Other reserves
Movement in other reserves for the year ended 30 June 2022 (Unaudited)
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 2022 7,879 (2,182) (7,784) 50 150 (1,887)
Other comprehensive income - 5,263 - - - 5,263
Total comprehensive income for the period - 5,263 - - - 5,263
Share based payments 2,535 - - - - 2,535
Deferred tax on share based payments (220) - - - - (220)
Share options exercised (76) - - - - (76)
Acquisition of subsidiaries (note 8) - - (6,933) - - (6,933)
Acquisition of non-controlling interest (note 9) - - 1,033 - - 1,033
Balance at 30 June 2022 10,118 3,081 (13,684) 50 150 (285)
Movement in other reserves for the year ended 30 June 2021 (Unaudited)
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 2021 4,472 2,117 (4,813) 50 150 1,976
Other comprehensive income - (3,472) - - - (3,472)
Total comprehensive income for the period - (3,472) - - - (3,472)
Share based payments 2,024 - - - - 2,024
Deferred tax on share based payments (18) - - - - (18)
Share options exercised (138) - - - - (138)
Acquisition of subsidiaries (note 8) - - (3,866) - - (3,866)
Balance at 30 June 2021 6,340 (1,355) (8,679) 50 150 (3,494)
Movement in other reserves for the year ended 31 December 2021 (Audited)
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 2021 4,472 2,117 (4,813) 50 150 1,976
Other comprehensive income - (4,299) - - - (4,299)
Total comprehensive income for the year - (4,299) - - - (4,299)
Share based payments 4,398 - - - - 4,398
Deferred tax on share based payments 61 - - - - 61
Share options exercised (1,052) - - - - (1,052)
Acquisition of subsidiary (note 8) - - (3,866) - - (3,866)
Acquisition of non-controlling interest (note 9) - - 895 - - 895
Balance at 31 December 2021 7,879 (2,182) (7,784) 50 150 (1,887)
8. Business combinations
Acquisitions were completed by the Group during the current and comparative
periods to increase scale, broaden its addressable market and widen the
product offering.
Subsidiaries acquired
Acquisition Principal activity Date of acquisition Proportion acquired (%) Fair value of consideration
£'000
Cooper Projects Limited (DVS) Distribution of audio visual products to trade customers 7 January 2022 65% 12,877
Nimans Limited (Nimans) Distribution of audio visual products to trade customers 7 February 2022 100% 27,271
Nicolas M. Kyvernitis Electronics Ent (NMK) Distribution of audio visual products to trade customers 1 January 2021 80% 15,463
In addition to the above on the 19 April 2021 the Group exchanged a fair value
consideration of £8,775k to acquire certain trade and assets of eLink
Distribution AG (eLink) a Company registered in Germany.
2022 acquisitions
Fair value of consideration transferred 2022
DVS Nimans
£'000 £'000
Cash 8,580 16,500
Deferred consideration 4,297 10,771
Total 12,877 27,271
Acquisition costs of £377k in relation to the acquisitions of DVS and Niman
were expensed to the income statement during the period ended 30 June 2022.
Fair value of acquisitions 2022
DVS Nimans
£'000 £'000
Non-current assets
Goodwill 5,055 8,388
Intangible assets - brands 1,288 2,950
Intangible assets - customer relationships 799 4,809
Intangible assets - supplier relationships 5,948 8,591
Intangible assets - patents and software 103 -
Plant and equipment 556 2,120
13,749 26,858
Current assets
Inventories 6,513 11,815
Trade and other receivables 7,842 15,861
Current tax - 18
Cash and cash equivalents 643 2,065
14,998 29,759
Current liabilities
Trade and other payables (2,298) (22,308)
Borrowings and financial liabilities (4,147) (255)
Current tax (142) -
(6,587) (22,563)
Non-current liabilities
Borrowings and financial liabilities (228) (2,059)
Provisions (65) (832)
Deferred tax (2,057) (3,892)
(2,350) (6,783)
Non-controlling interests (6,933) -
Fair value of net assets acquired attributable to equity shareholders of the 12,877 27,271
Parent Company
Goodwill acquired in 2022 relates to the workforce, synergies and sales know
how. Goodwill arising on both acquisitions has been allocated to the United
Kingdom and Ireland segment.
Net cash outflow on acquisition of subsidiaries 2022
DVS Nimans
£'000 £'000
Consideration paid in cash 8,580 16,500
Less: cash and cash equivalent balances acquired (643) (2,065)
Net cash outflow 7,937 14,435
Plus: borrowings acquired 4,375 2,314
Net debt outflow 12,312 16,749
2021 acquisitions
Fair value of consideration transferred 2021
NMK eLink
£'000 £'000
Cash 11,350 7,441
Deferred consideration 4,113 -
Contingent consideration - 1,334
Total 15,463 8,775
Acquisition costs of £199k in relation to the acquisition of NMK and £87k in
relation to the eLink acquisition of trade and assets were expensed to the
income statement during the period ended 30 June 2021.
Fair value of acquisitions 2021
NMK eLink
£'000 £'000
Non-current assets
Goodwill 3,768 3,713
Intangible assets - brands 721 172
Intangible assets - customer relationships 1,700 972
Intangible assets - supplier relationships 8,289 2,197
Plant and equipment 77 -
14,555 7,054
Current assets
Inventories 2,325 2,799
Trade and other receivables 4,673 -
Cash and cash equivalents 2,657 -
9,655 2,799
Current liabilities
Trade and other payables (4,432) -
Non-current liabilities
Provisions (368) -
Deferred tax (81) (1,078)
(449) (1,078)
Non-controlling interests (3,866) -
Fair value of net assets acquired attributable to equity shareholders of the 15,463 8,775
Parent Company
Goodwill acquired in 2021 relates to the workforce, synergies and sales know
how. Goodwill arising on both acquisitions has been allocated to the EMEA
segment.
Net cash outflow on acquisition of subsidiaries 2021
NMK eLink
£'000 £'000
Consideration paid in cash 11,350 7,441
Less: cash and cash equivalent balances acquired (2,657) -
Net cash outflow 8,693 7,441
Plus: borrowings acquired - -
Net debt outflow 8,693 7,441
9. Acquisition of non-controlling interest
During the period the Group acquired the remaining 11.5% non-controlling
interest in Earpro SA, which had a value of £1,309k, for a consideration of
£1,063k. £1,033k of the put option reserve was transferred to retained
earnings when this element of the put option was extinguished.
During 2021 the Group acquired the remaining 35.0% non-controlling interest in
Blonde Robot Pty limited, which had a value of £1,371k, for a consideration
of £2,055k. £895k of the put option reserve was transferred to retained
earnings when this element of the put option was extinguished.
10. Currency impact
The Group reports in Pounds Sterling (GBP) but has significant revenues and
costs as well as assets and liabilities that are denominated in Euros (EUR),
Dollars (USD) and Australian Dollars (AUD). The table below sets out the
exchange rates in the current and prior periods.
Six months to 30 June 2022 Six months to 30 June 2021 At 30 June 2022 At 30 June 2021 At 31 December 2021
Average Average
EUR/GBP 1.185 1.149 1.162 1.165 1.191
AUD/GBP 1.808 1.806 1.766 1.840 1.859
NZD/GBP 1.959 1.935 1.953 1.978 1.973
USD/GBP 1.297 1.386 1.214 1.382 1.348
CHF/GBP 1.216 1.258 1.163 1.277 1.231
NOK/GBP 11.815 11.772 12.000 11.888 11.893
AED/GBP 4.769 5.089 4.466 5.070 4.971
QAR/GBP 4.726 5.044 4.426 5.025 4.927
The following tables illustrate the effect of changes in foreign exchange
rates in the EUR, AUD, NZD, USD, CHF, NOK, AED, and QAR relative to the GBP on
the profit before tax and net assets. The amounts are calculated
retrospectively by applying the current period exchange rates to the prior
period results so that the current period 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 period
result.
Applying the current period exchange rates to the results of the prior period
has the following effect on the translation of profit before tax and net
assets of foreign entities:
Profit before tax
Revised 2021 2021 Impact Impact
£'000 £'000 £'000 %
EUR 6,850 7,092 (242) (3.5%)
AUD 7,092 7,092 - -%
NZD 7,092 7,092 - -%
USD 7,091 7,092 (1) -%
CHF 7,072 7,092 (20) (0.3%)
NOK 7,092 7,092 - -%
AED 7,152 7,092 60 0.8%
QAR 7,129 7,092 37 0.5%
All currencies 6,926 7,092 (166) (2.3%)
Net assets
Revised 2021 2021 Impact Impact
£'000 £'000 £'000 %
EUR 109,378 109,234 144 0.1%
AUD 109,415 109,234 181 0.2%
NZD 109,236 109,234 2 -%
USD 110,281 109,234 1,047 1.0%
CHF 109,178 109,234 (56) (0.1%)
NOK 109,216 109,234 (18) -
AED 109,897 109,234 663 0.6%
QAR 109,413 109,234 179 0.2%
All currencies 111,376 109,234 2,142 2.0%
11. Copies of interim report
Copies of the interim report are available to the public free of charge from
the Company at Vinces Road, Diss, IP22 4YT.
12. Adjustments to reported results
Six months ended
30 June 2022 30 June 2021
£000 £000
Operating profit 12,659 7,615
Cost of acquisitions 377 286
Share based payments 2,548 2,024
Employer taxes on share based payments 252 426
Amortisation of brands, customer and supplier relationships 4,351 3,570
Adjusted operating profit 20,187 13,921
Depreciation 3,429 2,653
Amortisation of patents and software 179 127
Adjusted EBITDA 23,795 16,701
(Increase)/decrease in adjusted inventories (27,293) (28,718)
(Increase)/decrease in adjusted trade and other receivables (68,834) (15,497)
Increase/(decrease) in adjusted trade and other payables 64,754 22,368
Adjusted cash flow from operations (7,577) (5,146)
Adjusted EBITDA cash flow conversion (31.8%) (30.8%)
Profit before tax 10,364 7,092
Cost of acquisitions 377 286
Share based payments 2,548 2,024
Employer taxes on share based payments 252 426
Amortisation of brands, customer and supplier relationships 4,351 3,570
Derivative fair value and foreign exchange gains and losses on acquisition (223) (1,481)
borrowings
Finance costs - deferred and contingent considerations 382 52
Finance costs - put option liabilities over non-controlling interests 1,134 1,044
Adjusted profit before tax 19,185 13,013
Profit after tax 7,562 4,576
Cost of acquisitions 377 286
Share based payments 2,548 2,024
Employer taxes on share based payments 252 426
Amortisation of brands, customer and supplier relationships 4,351 3,570
Derivative fair value and foreign exchange gains and losses on acquisition (223) (1,481)
borrowings
Finance costs - deferred and contingent considerations 382 52
Finance costs - put option liabilities over non-controlling interests 1,134 1,044
Tax impact (1,979) (1,105)
Adjusted profit after tax 14,404 9,392
Profit after tax 7,562 4,576
Non-controlling interest (NCI) (566) (356)
Profit after tax attributable to equity holders of the Parent Company 6,996 4,220
Adjusted profit after tax 14,404 9,392
Non-controlling interest (566) (356)
Share based payments attributable to NCI (7) -
Employer taxes on share based payments attributable to NCI (1) -
Amortisation of brands, customer and supplier relationships attributable to (278) (211)
NCI
Tax impact attributable to NCI 48 49
Adjusted profit after tax attributable to equity holders of the Parent Company 13,600 8,874
Weighted average number of ordinary shares 88,224,914 88,032,819
Diluted weighted average number of ordinary shares 90,926,659 89,698,067
Adjusted basic earnings per share 15.42p 10.08p
Adjusted diluted earnings per share 14.96p 9.89p
13. Dividends
During the period the Group declared a final dividend of 7.80 pence per share.
(30 June 2021 special dividend: 3.00 pence paid after the period end). After
the period end the Group declared an interim dividend for the six months to 30
June 2022 of 4.50 pence (30 June 2021: 3.30 pence) that relates to profits
earned over the period.
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