REG - Midwich Group PLC - Interim Results
05/09/2023 07:00
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RNS Number : 3450L Midwich Group PLC 05 September 2023
5 September 2023
Midwich Group plc
("Midwich", the "Company" or the "Group")
Interim results for the six months ended 30 June 2023
Strong performance despite market challenges; full year expectations
unchanged
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 2023 ("H1 2023").
Statutory financial highlights
Six months ended
30 June 2023 30 June 2022 Growth
£m £m %
Revenue 610.4 568.6 7.4%
Gross profit 99.6 84.7 17.5%
Gross profit % 16.3% 14.9%
Operating profit 18.6 12.7 46.5%
Profit/(loss) before tax 15.6 10.4 50.5%
Profit/(loss) after tax 11.6 7.6 52.9%
Reported EPS - pence 12.14 7.93 53.1%
Adjusted financial highlights
Six months ended
30 June 2023 30 June 2022 Growth Growth at constant currency %
£m £m %
Revenue 610.4 568.6 7.4% 5.1%
Gross profit 99.6 84.7 17.5% 15.2%
Gross profit % 16.3% 14.9%
Adjusted operating profit(1) 26.4 20.2 30.9% 27.9%
Adjusted operating profit % 4.3% 3.6%
Adjusted profit before tax(1) 21.8 19.2 13.4% 10.5%
Adjusted profit after tax(1) 16.1 14.4 11.6%
Adjusted EPS - pence(1) 16.93 15.42 9.8%
Interim dividend per share - pence 5.5 4.5 22.2%
( )
(1)Definitions of the alternative performance measures are set out in Note 2
Financial highlights
● Revenue increased 7.4% (5.1% at constant currency) to £610.4m with organic
growth of 2.3%.
● Significant improvement in gross margins to 16.3% from 14.9% in the prior
year.
● Adjusted operating profit growth of 30.9% to £26.4m (H1 2022: £20.2m).
● Operating cash conversion at 27% inflow; ahead of Board expectations and
reflecting typical seasonal investments in working capital (H1 2022: 32%
outflow).
● Successful equity placing in June 2023 raised over £50m to support the
Group's M&A strategy.
● Adjusted net debt of £102.1m at period end with leverage(^) at 1.5x following
the fundraise and the acquisition of S.F. Marketing, Inc. ("SFM") in Canada.
● Interim dividend declared of 5.5 pence per share, an increase of 22% (Interim
2022: 4.5p).
Operational highlights
● Against a backdrop of continued challenging market conditions in a number of
key markets, the Group's diverse product and geographic portfolio resulted in
revenue growth of 7.4% and further market share gains with many of the Group's
key vendors.
● Favourable product mix resulted in significant improvements in gross margins.
● In June 2023, the Group acquired SFM, a specialist value-add AV distributor in
Canada, adding 1,500 new customers and strengthening relationships with key
tier-1 vendors in the audio and visual markets.
● Management continues to see a strong acquisition pipeline, across a number of
regions.
Post period trading and outlook
● Post the period end, and in line with the stated use of proceeds of the equity
issue in June 2023, the Group has completed five acquisitions: Toolfarm.com,
Inc and Digital Media Promos, Inc (trading as 76 Media) in the US, HHB
Communications Holdings Limited and Pulse Cinemas Holdings Limited in the UK,
and Video Digital Soluciones S.L. in Spain. The aggregate cash spent (net of
cash acquired) on these transactions was £18m.
● With order books remaining healthy despite the broader challenging market
conditions, the Board expects the momentum seen in H1 2023 to continue
throughout the remainder of the year. As a result, the Board continues to
expect trading performance for the full year to be in line with its previous
expectations.
(^)RCF covenant is 3x Adjusted net debt/adjusted EBITDA. For these purposes
Adjusted EBITDA includes proforma EBITDA for acquisitions acquired in the last
12 months.
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"Our performance in H1 2023 was strong, with the Group delivering revenue
growth of 7.4% and adjusted operating profit improving by 30.9% compared with
H1 2022, despite continued challenging market conditions in a number of key
markets. Particularly notable was the significant improvement in our gross
profit percentage, moving from 14.9% in H1 2022 to 16.3% in H1 2023 and our
adjusted operating profit percentage which increased from 3.6% to 4.3%. Higher
interest charges impacted our adjusted profit before tax, which nonetheless
still increased by 13.4% to £21.8 million in the period.
Slower than expected corporate and education markets were more than
compensated for by strength in the live event and entertainment sectors. The
change in mix attributable to the significant growth of technical video and
audio products resulted in a favourable product margin mix.
The EMEA region performed particularly well, with strong improvements in
organic revenue, gross margin and adjusted operating profit. Although general
macro-economic conditions are widely expected to remain challenging over the
coming months, the Group continues to be well placed to identify and benefit
from organic and inorganic business development opportunities. I believe our
demonstrable track record of performing well despite challenging broader
economic conditions is a testament to the quality of our business and our
ability to grow market share profitably. Furthermore, our order books remain
strong and as a result the Board's expectations for the full year remain
unchanged."
There will be a meeting and webinar for sell-side analysts and investors at
9:30am today, 5 September 2023, the details of which can be obtained from FTI
Consulting: 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 / Rafaella de Freitas
About Midwich Group
Midwich is a specialist AV distributor to the trade market, with operations
in EMEA, the UK and Ireland, 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 1,800 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 progress in H1 2023, despite continued challenging
market and macro-economic conditions in a number of key markets leading to
some softness in mainstream product demand. In line with our long-term
strategy, we achieved strong sales growth in higher margin technical products,
with the result that both gross and operating margins increased significantly
and adjusted operating profit increased by 30.9% in the period compared with
H1 2022.
Maintaining a consistent high service level to our customers and vendors
remains a key focus for the Group, so we remain a long-term trusted partner.
We continue to work hard to provide exceptional service and have also
increased our market share with many of the Group's key vendors in the period.
Our focus on developing our offering in the AV market continues to be
beneficial for our customers and vendors alike.
Working capital management continues to be a key focus for the Group with a
positive operating cash flow in the period despite the normal seasonal
investment in working capital. We expect operating cash generation for the
full year to be in line with our long-term trend of 70-80% of adjusted EBITDA.
Trading performance
Revenue in H1 2023 grew by 7.4% (5.1% on a constant currency basis) to reach
£610.4 million. Organic growth was 2.3%. Compared with H1 2022, revenue
growth was strong in EMEA (+13.5%) and North America (+23.9%), but declined by
2.2% in the UK & Ireland. Based on independent market data, we believe
that the decline in our UK & Ireland revenue is significantly less than
the overall market decline in that territory.
The gross margin percentage was 1.4 percentage points higher than in H1 2022,
with improvements seen in all territories except North America. The increase
was a combination of stronger sales of higher margin product areas -
particularly in pro audio where improved availability of product led to
increased sales. With product being more readily available, inventory levels
have been more stable, and we saw a relatively small change in the aged
inventory provision in the period.
Investments in headcount, made primarily in 2022, led to an increase in
overheads, although this was more than covered by the improvement in gross
profit. As a result, the adjusted operating profit margin improved from 3.6%
in H1 2022 to 4.3% in H1 2023.
Products
Overall revenue from the two mainstream product areas (displays and
projection) declined by around 4%, with a decrease in display sales being
partially offset by an increase in projection revenue. These mainstream
categories now account for an aggregate of 38% of Group revenue as we continue
to diversify into specialist areas. The gross margin on mainstream categories
increased slightly.
Revenue in the specialist product areas of technical video, audio and lighting
grew strongly, with pro audio recording the largest at 52% growth on the prior
year. The overall margin on these categories also improved strongly.
As expected, revenues in the broadcast segment fell as the strong demand for
home broadcast equipment seen through lockdowns returned to normal levels.
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. We continue to have significant success with the roll out of
brand relationships acquired over the last few years, together with the
expansion of existing relationships into new territories in EMEA.
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 softer demand in some
areas, combined with higher interest rates, have caused some challenges. We
continue to use our distribution expertise and value add advice to support our
customers through these challenges and to accommodate the needs of the
channel.
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, expertise 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.
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 Group has continued to deliver successfully on this strategy, completing
six strategically aligned acquisitions to date in 2023 with a strong pipeline
of further opportunities.
The Board continues to focus on strengthening the Group's product offering,
technical expertise and geographical reach.
Acquisitions
The Group completed one acquisition during H1 2023.
In June 2023, the Group completed the acquisition of S.F. Marketing, Inc.
("SFM"), a specialist value-add AV distributor based in Canada.
Founded in 1978 and based in Montreal, SFM is a leading value-add distributor
of professional AV, with heritage in the professional audio market. It has 146
employees and over 1,500 customers. The business has grown through long
standing relationships with tier-1 brands and developing a reputation for
offering exceptional levels of service, which remains a key focus of the
business's strategy.
SFM is the Group's second investment in the strategically important North
American region, following the acquisition of Starin in 2020. SFM also
represents Midwich's first physical presence in Canada, which represents 2.6%
of the global AV market, with the Canadian market expected to grow at a CAGR
of 5.4% over the next 5 years to $11.9bn in 2027. The initial consideration,
plus acquired net debt, for SFM was £24.1m.
In July 2023, post the period-end, the Group made five further acquisitions,
each of which add expertise and new product areas to existing territories.
Starin, the US arm of the Group, expanded its broadcast technology offering
with the acquisitions of Toolfarm.com, Inc and Digital Media Promos, Inc
(trading as 76 Media).
Toolfarm.com, distributes video software products and plugins, with a
particular focus on 3D and motion graphics, whilst 76 Media is a value-add
distributor of high-end video storage and media asset management hardware to
the US market.
In the UK&I, the Group completed the acquisition of HHB Communications
Holdings Limited ("HHB"), a leading supplier of specialist professional audio
equipment, content creation products, and music technology. Founded in 1976
and with 55 employees, HHB has built a name for itself in the broadcasting,
media and entertainment market and has supported many notable postproduction
facilities, film, gaming, recording studios, and broadcasters with its
products used by the likes of Warner Brothers, BBC, Sky and Pinewood Studios.
Representing manufacturers such as RØDE, Genelec, and AVID from its three
London locations, HHB joining the Group further develops Midwich's offering in
these strategically important markets.
Also in the UK&I, the Group acquired Pulse Cinemas Holdings Limited
trading as Pulse Cinemas. Founded in 2003, Pulse Cinemas is a home cinema
distributor with an established reputation for delivering beautiful cinema
spaces with class-leading luxury brands. Pulse Cinemas enhances the UK&I
business' custom installation offering and also brings state-of-the-art home
cinema demonstration facilities.
In Spain, Midwich Iberia acquired Video Digital Soluciones S.L. trading as
Video Digital. Video Digital is a Barcelona-based distributor of pro AV
equipment in Spain and Portugal with a strong position in the broadcast
market, working with a range of leading manufacturers, including Blackmagic
Design.
These acquisitions bring new technologies, customers and vendor relationships,
further delivering on the Group's strategy to grow earnings both organically
and through selective acquisitions of strong, complementary businesses.
The acquisition pipeline remains healthy, and the management team continue to
review attractive opportunities in a number of markets and regions.
Outlook
Despite some softness in the AV market so far in 2023, according to research
published by industry trade body AVIXA in July 2023, the global AV market is
expected to grow at an annualised rate of 5.8% in the five years to 2028.
The Board concurs that the wider AV industry is well positioned for long-term
growth and believes that the Group is very well placed to take advantage of
growth opportunities. In particular, the Group's ongoing focus on more
specialist areas of the market should help to sustain higher gross margins and
drive incremental profit opportunities.
The Board believes that the Group's major markets will remain challenging
across the remainder of 2023. However, order books remain steady 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 expectations for
the full year.
Regional highlights
Six months ended
30 June 30 June Total growth Growth at constant currency Organic growth
%
2023 2022 % %
£m £m
Revenue
UK & Ireland 234.0 239.3 (2.2%) (2.3%) (6.0%)
EMEA 281.3 247.9 13.5% 9.5% 9.5%
Asia Pacific 25.2 25.0 0.9% 2.3% 2.3%
North America 69.9 56.4 23.9% 18.7% 5.4%
Total Global 610.4 568.6 7.4% 5.1% 2.3%
Gross profit margin
UK & Ireland 17.7% 15.7% 2.0 ppts
EMEA 15.5% 14.1% 1.4 ppts
Asia Pacific 17.5% 15.7% 1.8 ppts
North America 14.5% 14.7% (0.2) ppts
Total Global 16.3% 14.9% 1.4 ppts
Adjusted operating profit(1)
UK & Ireland 13.9 10.8 29.0% 28.6%
EMEA 12.5 8.7 44.3% 39.0%
Asia Pacific 0.1 0.2 (33.1%) (21.9%)
North America 3.0 3.1 (4.9%) (8.7%)
Group costs (3.1) (2.6)
Total Global 26.4 20.2 30.9% 27.9%
Adjusted finance costs (4.6) (1.0)
Adjusted profit before tax(1) 21.8 19.2 13.4% 10.5%
(1)Definitions of the alternative performance measures are set out in Note 2
All percentages referenced in this section below are at constant currency
unless otherwise stated.
UK & Ireland
After an exceptionally strong H1 2022, which saw some post Covid-19
expenditure catch up and associated revenue growth of 86.3%, revenue in the UK
& Ireland (UK&I) was marginally below the prior year. This reflected a
slower market for mainstream products, which is attributed to delayed
expenditure by corporate and education end users. Both have been affected by
additional cost pressures, whilst the education sector has also been impacted
by labour disputes and uncertainty over future wage bills. There was small
contribution from the full year effect of acquisitions completed at the start
of 2022.
Based on industry data, combined with our own analysis of customer and vendor
activity, we believe that we have increased or maintained market share in the
UK&I and we remain confident that the pro AV market will continue to grow
faster than GDP in the medium term.
The UK&I achieved an exceptional increase in gross profit margin
percentage to 17.7% (H1 2022: 15.7%) reflecting positive product mix with
further growth in technical products and the continued recovery in higher
margin markets such as live events, entertainment and hospitality.
Adjusted operating profit increased by 28.6% (H1 2022: 119.7%) in the UK&I
to £13.9m (H1 2022: £10.8m).
EMEA
EMEA achieved further market share gains in the period with growth of 9.5% (H1
2022: 20.4%) to £281.3m (H1 2022: £247.9m). Whilst Germany, EMEA's largest
market, experienced similar market softness to that seen in the UK, there was
good growth in all other territories with very strong demand for technical
solutions, including pro audio and live event solutions, resulting in
exceptional growth in Southern Europe and the Middle East.
Gross profit margins improved to 15.5% (H1 2022: 14.1%) as a result of
favourable product mix and the benefit of product supply issues now being
largely overcome.
Adjusted operating profit in EMEA at £12.5m (H1 2022: £8.7m) was up 39.0% on
the prior year due to the combined benefit of revenue growth, the increase in
gross margin and operating leverage in our technical businesses.
Asia Pacific
Revenue in Asia Pacific was up 2.3% on the prior year (H1 2022: 12.2%). There
was good growth in mainstream product demand, whilst broadcast sales returned
to normal after a period of strong demand during the pandemic. Whilst we
continue to see a higher level of enquiries for larger projects, this part of
the market has yet to return to pre-pandemic levels.
The Asia Pacific gross profit margin of 17.5% was 1.8 percentage points above
H1 2022, reflecting increased technical product mix.
Adjusted operating profit in Asia Pacific was £0.1m (H1 2022: £0.2m).
North America
Organic revenue at Starin increased by 5.4% reflecting continue demand for
unified communications solutions. Starin continues to deliver gross margins
which we understand are ahead of the wider North American market at 14.5% (H1
2022: 14.7%).
Total revenue growth in US dollars was 18.7% (H1 2022: 81.5%) reflecting the
initial contribution from the SFM acquisition at the beginning of June 2023,
whilst exchange rate benefits increased reported growth to 23.9% (H1 2022:
94.0%). This currency trend is expected to reverse in the second half of the
year.
Adjusted operating profit in North America was slighly below the prior year at
£3.0m (H1 2022: £3.1m) reflecting further investment in sales and business
management staff in order to support future growth.
Group costs
Group costs for the half year were £3.1m (H1 2022: £2.6m). The increase
reflects investment in Group support staff and inflation.
Operating profit
Adjusted operating profit for the period at £26.4m (H1 2022 £20.2m) is
stated before the impact of acquisition related expenses of £0.3m (H1 2022:
£0.4m), share based payments and associated employer taxes of £2.8m (H1
2022: £2.8m) and amortisation of acquired intangibles of £4.8m (H1 2022:
£4.3m). The reported operating profit for the period was £18.6m (H1 2022:
£12.7m).
Movement in foreign exchange
Compared to the prior year, Sterling weakened against the Euro and the US
Dollar. These movements increased our reported revenue and adjusted operating
profit in H1 by 2.3% and 3.1% respectively. Following a significant
devaluation in Sterling in H2 2022 market expectations are for GBP to be
stronger in the second half, when compared to the prior year. Based on these
expectations the reported current gains in the first half are expected to
fully reverse in H2 2023. 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 £4.6m (H1 2022:
£1.0m) with the increase reflecting the higher interest rate environment
whilst the prior year benefitted from a credit of £0.6m for fair value
movements on foreign exchange derivatives.
Reported finance costs were £3.0m (H1 2022: £2.3m). The adjustments to
finance costs include fair value movements in derivatives and foreign exchange
movement on borrowings for acquisitions of (£1.5m) (H1 2022: (£0.2m)),
valuation changes in deferred and contingent considerations of £0.3m (H1
2022: £0.4m), and movements in put option liabilities over non-controlling
interests of (£0.4m) (H1 2022: £1.1m).
Taxation
The reported tax charge for the period was £4.0m (H1 2022: £2.8m). The
adjusted effective tax rate was 26.1%; (H1 2022: 24.9%) calculated based on
the adjusted tax charge divided by adjusted profit before tax. The increase in
effective tax rate is attributable to higher tax rates in the UK and the
change in geographic mix.
Cash flows and net debt
The Group had an adjusted net cash inflow from operations before tax of £8.2m
for the period (H1 2022: £7.6m outflow). 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 consistent with
the same period in the prior year. The Board is comfortable that the Group's
long-term average annual cash conversion rate (70-80%) remains sustainable.
Gross capital spend on tangible assets was £2.4m (H1 2022: £3.4m) and
included investment in rental assets in UK&I. An investment of £5.9m in
intangible fixed assets (H1 2022: £2.0m) was predominantly in relation to the
Group's new ERP solution.
Adjusted net debt (excluding leases liabilities), was £102.1m at 30 June 2023
(£112.5m at 30 June 2022), equivalent to 1.5x 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 £22.8m at 30 June
2023 (£23.0m 30 June 2022). Total net debt was £124.9m at 30 June 2023
(£135.5m at 30 June 2022).
On the 8(th) June 2023 the Group successfully completed an equity placing of
11,764,705 shares, together with the completion of a retail offer of 294,233
shares, at a price per share of 425p. The total net proceeds of £50m were
used to finance the acquisition of SF Marketing and to repay Group borrowings
to provide further headroom to fund other pipeline acquisitions. In the first
half, adjusted net debt was impacted by net payments totalling £29.5m (H1
2022: £23.5m) in respect of acquisitions, deferred consideration and the
purchase of minority shareholdings in the period.
In January 2023, the Group increased its revolving credit facility to £175m
(£80m at 31 December 2022) to finance future acquisitions. This facility is
supported by six banks, is for a 4½ year term, and has an adjusted net debt
to adjusted EBITDA covenant ratio of 3 times and an adjusted interest cover
covenant of 4 times adjusted EBITDA. The EBITDA covenant is calculated on a
historical twelve-month basis and includes the full benefit of the prior
year's earnings of any businesses acquired. Other borrowing facilities are to
provide working capital financing. The Group has access to total facilities of
c.£300m.
The Group has various instruments to hedge certain exchange rate and interest
rate exposures. These include borrowing in local currency to finance
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 5.5 pence per share (H1
2022: 4.5p), an increase of 22%. This will be paid on 27(th) October 2023 to
those shareholders on the Company's register as at 22(nd) September 2023. The
last day to elect for dividend reinvestment ("DRIP") is 6(th) October 2023.
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.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended 30 June 2023
Note 30 June 30 June 31 December 2022
2023 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 610,442 568,566 1,204,049
Cost of sales (510,868) (483,829) (1,020,335)
Gross profit 99,574 84,737 183,714
Distribution costs (61,126) (52,327) (109,042)
Administrative expenses (23,411) (22,535) (45,592)
Other operating income 3,514 2,784 5,973
Operating profit 18,551 12,659 35,053
Adjusted operating profit 26,424 20,187 51,108
Costs of acquisitions (306) (377) (435)
Share based payments (2,385) (2,548) (6,031)
Employer taxes on share based payments (370) (252) (176)
Amortisation of brands, customer and supplier relationships (4,812) (4,351) (9,413)
18,551 12,659 35,053
Finance income 63 91 95
Finance costs 5 (3,018) (2,386) (10,232)
Profit before taxation 15,596 10,364 24,916
Taxation (4,037) (2,802) (8,061)
Profit after taxation 11,559 7,562 16,855
Profit for the financial period/year attributable to:
The Company's equity shareholders 10,959 6,996 15,293
Non-controlling interests 600 566 1,562
11,559 7,562 16,855
Basic earnings per share 3 12.14p 7.93p 17.32p
Diluted earnings per share 3 11.76p 7.69p 16.74p
Unaudited consolidated statement of comprehensive income for 6 months ended 30
June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period/financial year 11,559 7,562 16,855
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains and (losses) on retirement benefit obligations - - 588
Items that will be reclassified subsequently to profit or loss:
Foreign exchange gains/(losses) on consolidation (6,307) 5,895 8,282
Other comprehensive income for the financial period/year, net of tax (6,307) 5,895 8,870
Total comprehensive income for the period/financial year 5,252 13,457 25,725
Attributable to:
Owners of the Parent Company 5,015 12,259 23,419
Non-controlling interests 237 1,198 2,306
5,252 13,457 25,725
Unaudited consolidated statement of financial position as at 30 June 2023
Note 30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 38,443 35,430 35,765
Intangible assets 86,095 76,877 76,002
Right of use assets 20,955 20,993 21,559
Property, plant and equipment 15,890 14,636 14,961
Deferred tax assets 3,092 3,571 2,567
164,475 151,507 150,854
Current assets
Inventories 168,262 171,446 159,823
Trade and other receivables 236,967 216,792 218,612
Derivative financial instruments 4,033 2,956 4,630
Cash and cash equivalents 20,095 17,380 25,855
429,357 408,574 408,920
Current liabilities
Trade and other payables (220,621) (231,718) (225,899)
Derivative financial instruments (176) - (1,483)
Put option liabilities over non-controlling interests (9,301) (3,042) -
Deferred and contingent considerations (9,642) (527) (9,275)
Borrowings and financial liabilities (65,531) (61,145) (44,955)
Current tax (2,685) (3,651) (3,541)
(307,956) (300,083) (285,153)
Net current assets 121,401 108,491 123,767
Total assets less current liabilities 285,876 259,998 274,621
Non-current liabilities
Trade and other payables (1,694) (1,694) (1,872)
Put option liabilities over non-controlling interests (6,231) (12,113) (15,975)
Deferred and contingent considerations - (16,922) (8,157)
Borrowings and financial liabilities (79,481) (91,731) (100,324)
Deferred tax liabilities (12,563) (10,510) (10,576)
Other provisions (3,635) (3,770) (3,583)
(103,604) (136,740) (140,487)
Net assets 182,272 123,258 134,134
Equity
Share capital 6 1,033 889 889
Share premium 116,959 67,047 67,047
Share based payment reserve 10,404 10,118 12,025
Investment in own shares 6 (20) (7) (5)
Retained earnings 51,448 39,516 46,023
Translation reserve (588) 3,081 5,356
Put option reserve (10,799) (13,684) (10,799)
Capital redemption reserve 50 50 50
Other reserve 150 150 150
Equity attributable to owners of Parent Company 168,637 107,160 120,736
Non-controlling interests 13,635 16,098 13,398
Total equity 182,272 123,258 134,134
Unaudited consolidated statement of changes in equity for 6 months ended 30
June 2023
For the period ended 30 June 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 6) (note 7)
Balance at 1 January 2023 889 67,047 (5) 46,023 6,782 120,736 13,398 134,134
Profit for the period - - - 10,959 - 10,959 600 11,559
Other comprehensive income - - - - (5,944) (5,944) (363) (6,307)
Total comprehensive income for the year - - - 10,959 (5,944) 5,015 237 5,252
Shares issued (note 6) 144 49,912 (23) - - 50,033 - 50,033
Share based payments - - - - 2,357 2,357 - 2,357
Deferred tax on share based payments - - - - (124) (124) - (124)
Share options exercised - - 8 3,854 (3,854) 8 - 8
Dividends paid (note 14) - - - (9,388) - (9,388) - (9,388)
Balance at 30 June 2023 (unaudited) 1,033 116,959 (20) 51,448 (783) 168,637 13,635 182,272
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 14) - - - (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 year ended 31 December 2022 (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 2022 887 67,047 (5) 39,078 (1,887) 105,120 9,276 114,396
Profit for the year - - - 15,293 - 15,293 1,562 16,855
Other comprehensive income - - - 588 7,538 8,126 744 8,870
Total comprehensive income for the year - - - 15,881 7,538 23,419 2,306 25,725
Shares issued (note 6) 2 - (2) - - - - -
Share based payments - - - - 6,006 6,006 - 6,006
Deferred tax on share based payments - - - - (1,093) (1,093) - (1,093)
Share options exercised - - 2 766 (767) 1 - 1
Acquisition of subsidiaries (note 8) - - - - (6,933) (6,933) 6,933 -
Dividends paid (note 14) - - - (10,901) - (10,901) - (10,901)
Acquisition of non-controlling interest (note 9) - - - 1,199 3,918 5,117 (5,117) -
Balance at 31 December 2022 889 67,047 (5) 46,023 6,782 120,736 13,398 134,134
( )
Unaudited consolidated cashflow statement for 6 months ended 30 June 2023
30 June 30 June 31 December
2023 2022 2022
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Profit before tax 15,596 10,364 24,916
Depreciation 3,817 3,429 7,039
Amortisation 5,067 4,530 9,807
(Gain)/loss on disposal of assets (65) 3 141
Share based payments 2,357 2,535 6,006
Foreign exchange (gains)/losses (3,529) 1,405 3,827
Finance income (63) (91) (95)
Finance costs 3,018 2,386 10,232
Profit from operations before changes in working capital 26,198 24,561 61,873
(Increase)/decrease in inventories 2,353 (27,293) (15,670)
Increase in trade and other receivables (9,138) (68,834) (70,654)
Increase/(decrease) in trade and other payables (15,094) 65,019 59,779
Cash inflow/(outflow) from operations 4,319 (6,547) 35,328
Income tax paid (6,134) (3,714) (9,142)
Net cash inflow/(outflow) from operating activities (1,814) (10,261) 26,186
Cash flows from investing activities
Acquisition of businesses net of cash acquired (20,215) (22,372) (22,372)
Purchase of intangible assets (5,945) (2,018) (5,760)
Purchase of plant and equipment (2,442) (3,434) (5,328)
Proceeds on disposal of plant and equipment 226 27 140
Interest received 63 91 95
Net cash outflow from investing activities (28,313) (27,706) (33,225)
Cash from financing activities
Gross proceeds on issue of shares 51,250 - -
Costs associated with shares issued (1,217) - -
Proceeds on exercise of share options 8 - 1
Deferred and contingent considerations paid (9,300) - (198)
Acquisition of non-controlling interest - (1,063) (3,974)
Dividends paid (9,388) (6,910) (10,901)
Invoice financing inflows 2,948 11,714 14,282
Proceeds from borrowings 1,525 32,685 31,304
Repayment of loans (16,436) (2,866) (4,947)
Interest paid (4,240) (1,713) (5,217)
Interest on leases (419) (230) (602)
Capital element of lease payments (2,235) (3,848) (4,126)
Net cash inflow from financing activities 12,496 27,769 15,622
Net decrease in cash and cash equivalents (17,632) (10,198) 8,583
Cash and cash equivalents at beginning of period/year 20,938 11,639 11,639
Effects of exchange rate changes (409) 491 716
Cash and cash equivalents at end of period/year 2,897 1,932 20,938
Comprising:
Cash at bank 20,095 17,380 25,855
Bank overdrafts (17,198) (15,448) (4,917)
2,897 1,932 20,938
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2023 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 2022.
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 2022. The audited financial statements for the
year ended 31 December 2022 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 2022, 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
2023 2022 2022
Profit attributable to equity holders of the Parent Company (£'000) 10,959 6,996 15,293
Weighted average number of shares outstanding 90,242,805 88,224,914 88,299,098
Dilutive (potential dilutive) effect of share options 2,974,694 2,701,810 3,064,305
Weighted average number of ordinary shares for the purposes of diluted 93,217,499 90,926,724 91,363,403
earnings per share
Basic earnings per share 12.14p 7.93p 17.32p
Diluted earnings per share 11.76p 7.69p 16.74p
4. Segmental reporting
30 June 2023 UK & Ireland EMEA Asia North America £'000 Other Total
Pacific
£'000 £'000
( )
£'000
£'000 £'000
Revenue 234,022 281,284 25,252 69,884 - 610,442
Gross profit 41,450 43,580 4,427 10,117 - 99,574
Gross profit % 17.7% 15.5% 17.5% 14.5% - 16.3%
Adjusted operating profit 13,909 12,583 101 2,957 (3,126) 26,424
Cost of acquisitions - - - - (306) (306)
Share based payments (947) (733) (158) (48) (499) (2,385)
Employer taxes on share based payments (112) (168) (12) (5) (74) (371)
Amortisation of brand, customer and supplier relationships (2,142) (1,780) (136) (753) - (4,812)
Operating profit 10,708 9,902 (205) 2,151 (4,005) 18,550
Net interest expense (2,955)
Profit before tax 15,595
Other segmental information
June 2023 UK & Ireland EMEA Asia North America £'000 Other Total
Pacific
£'000 £'000
( )
£'000
£'000 £'000
Segment assets 246,154 241,682 23,532 81,069 1,395 593,832
Segment liabilities (187,844) (170,034) (19,600) (32,691) (1,391) (411,560)
Segment net assets 58,310 71,648 3,932 48,378 4 182,272
Depreciation 1,501 1,665 275 375 - 3,817
Amortisation 2,248 1,812 144 863 - 5,067
Other segmental information UK International Total
£'000 £'000 £'000
Non-current assets 73,239 91,236 164,475
Deferred tax assets 1,806 1,286 3,092
Non-current assets excluding deferred tax 71,433 89,950 161,383
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
31 December 2022 UK & Ireland EMEA Asia North America Other Total
£'000 £'000 Pacific £'000
£'000 £'000 £'000
Revenue 492,203 534,962 53,763 123,121 - 1,204,049
Gross profit 79,104 78,014 9,312 17,284 - 183,714
Gross profit % 16.1% 14.6% 17.3% 14.0% - 15.3%
Adjusted operating profit 26,500 22,718 1,378 6,437 (5,925) 51,108
Costs of acquisitions - - - - (435) (435)
Share based payments (2,260) (1,911) (469) (96) (1,295) (6,031)
Employer taxes on share based payments (56) (57) 3 (4) (62) (176)
Amortisation of brands, customer and supplier relationships (4,201) (3,566) (282) (1,364) - (9,413)
Operating profit 19,983 17,184 630 4,973 (7,717) 35,053
Interest (10,137)
Profit before tax 24,916
December 2022 UK & Ireland EMEA Asia North America Total
£'000 £'000 Pacific £'000 Other
£'000 £'000
£'000
Segment assets 235,716 245,321 27,024 51,002 711 559,774
Segment liabilities (196,934) (187,802) (19,013) (20,985) (906) (425,640)
Segment net assets 38,782 57,519 8,011 30,017 (195) 134,134
Depreciation 2,731 3,294 443 571 - 7,039
Amortisation 4,290 3,652 297 1,568 - 9,807
Other segmental information UK International Total
£'000 £'000 £'000
Non-current assets 68,547 82,307 150,854
Deferred tax asset 1,051 1,516 2,567
Non-current assets excluding deferred tax 67,496 80,791 148,287
5. Finance costs
June 2023 June 2022 December 2022
£'000 £'000 £'000
Interest on overdraft and invoice discounting 1,413 765 2,221
Interest on leases 419 230 602
Interest on loans 2,756 740 2,470
Fair value movements on foreign exchange derivatives 141 (644) 733
Other interest costs 2 2 26
Fair value movements on derivatives for borrowings (763) (1,613) (2,888)
Foreign exchange (gains)/losses on borrowings for acquisitions (751) 1,390 1,694
Interest, foreign exchange and other finance costs of deferred and contingent 243 382 508
considerations
Interest, foreign exchange and other finance costs of put option liabilities (442) 1,134 4,866
3,018 2,386 10,232
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
June 2023 June 2022 December 2022
Classed as equity: Number £'000 Number £'000 Number £'000
Issued and fully paid ordinary shares of £0.01 each
Opening balance 88,879,912 889 88,735,612 887 88,735,612 887
Shares issued 14,371,414 144 144,300 2 144,300 2
Closing balance 103,251,326 1,033 88,879,912 889 88,879,912 889
During the period Midwich Group plc issued 2,312,476 shares (2022: 144,300)
into an employee benefit trust and 12,058,938 shares for total proceeds less
issue cost of £50,033k.
Own shares held in employee benefit trusts
June 2023 June 2022 December 2022
Number £'000 Number £'000 Number £'000
Issued and fully paid ordinary shares of £0.01 each
Opening balance 501,460 5 518,300 5 518,300 5
Shares issued 2,312,476 23 144,300 2 144,300 2
Exercise of share options (833,092) (8) (18,140) - (161,140) (2)
Closing balance 1,980,844 20 644,460 7 501,460 5
A reconciliation of LTIP option movements during the current and comparative
period, and the year to 31 December 2022 is as follows:
Six months to June 2023 Six months to June 2022 Twelve months to December 2022
Outstanding at 1 January 4,115,317 3,284,374 3,284,374
Granted - 1,004,141 1,004,141
Lapsed (10,200) (43,058) (89,458)
Exercised (827,992) (14,240) (83,740)
Outstanding at period end 3,277,125 4,231,217 4,115,317
A reconciliation of SIP option movements during the current and comparative
period, and the year to 31 December 2022 is as follows:
Six months to June 2023 Six months to June 2022 Twelve months to December 2022
Outstanding at 1 January 280,800 267,900 267,900
Granted 111,300 106,800 106,800
Lapsed (3,300) (8,700) (16,500)
Exercised (5,100) (3,900) (77,400)
Outstanding at period end 383,700 362,100 280,800
7. Other reserves
Movement in other reserves for the year ended 30 June 2023 (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 2023 12,025 5,356 (10,799) 50 150 6,782
Other comprehensive income - (5,944) - - - (5,944)
Total comprehensive income for the period - (5,944) - - - (5,944)
Share based payments 2,357 - - - - 2,357
Deferred tax on share based payments (124) - - - - (124)
Share options exercised (3,854) - - - - (3,854)
Balance at 30 June 2023 10,404 (588) (10,799) 50 150 (783)
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 31 December 2022 (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 2022 7,879 (2,182) (7,784) 50 150 (1,887)
Other comprehensive income - 7,538 - - - 7,538
Total comprehensive income for the year - 7,538 - - - 7,538
Share based payments 6,006 - - - - 6,006
Deferred tax on share based payments (1,093) - - - - (1,093)
Share options exercised (767) - - - - (767)
Acquisition of subsidiary (note 8) - - (6,933) - - (6,933)
Acquisition of non-controlling interest (note 9) - - 3,918 - - 3,918
Balance at 31 December 2022 12,025 5,356 (10,799) 50 150 6,782
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
SF Marketing Inc (SFM) Distribution of audio visual products to trade customers 7 June 2023 100% 20,983
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
2023 acquisitions
Fair value of consideration transferred 2023
SFM
£'000
Cash 19,633
Deferred consideration 1,350
Total 20,983
Acquisition costs of £306k in relation to the acquisitions of SFM and other
acquisitions not completed by the period end were expensed to the income
statement during the period ended 30 June 2023.
Fair value of acquisitions 2023
SFM
£'000
Non-current assets
Goodwill 3,569
Intangible assets - brands 1,686
Intangible assets - customer relationships 2,486
Intangible assets - supplier relationships 6,901
Intangible assets - patents and software 284
Right of use assets 972
Plant and equipment 686
Deferred tax 411
16,995
Current assets
Inventories 10,792
Trade and other receivables 9,217
Derivative financial instruments 21
Cash and cash equivalents 118
20,148
Current liabilities
Trade and other payables (9,690)
Borrowings and financial liabilities (700)
(10,390)
Non-current liabilities
Borrowings and financial liabilities (2,781)
Deferred tax (2,989)
(5,770)
Non-controlling interests -
Fair value of net assets acquired attributable to equity shareholders of the 20,983
Parent Company
Goodwill acquired in 2023 relates to the workforce, synergies and sales know
how. Goodwill arising on the SFM acquisition has been allocated to the North
America segment.
Net cash outflow on acquisition of subsidiaries 2023
SFM
£'000
Consideration paid in cash 19,633
Plus: cash and cash equivalent overdraft balances acquired 582
Net cash outflow 20,215
Plus: borrowings acquired 3,841
Net debt outflow 24,056
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 -
Right of use assets 314 1,610
Property, plant and equipment 242 510
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
9. Acquisition of non-controlling interest
During the period to 30 June 2022 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 the remainder of 2022 the Group acquired the remaining 20.0%
non-controlling interest in Prase Engineering SpA, which had a value of
£3,808k, for a consideration of £2,912k. £2,885k 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 2023 Six months to 30 June 2022 At 30 June 2023 At 30 June 2022 At 31 December 2022
Average Average
EUR/GBP 1.144 1.185 1.165 1.162 1.128
AUD/GBP 1.841 1.808 1.910 1.766 1.771
NZD/GBP 1.987 1.959 2.075 1.953 1.897
USD/GBP 1.236 1.297 1.271 1.214 1.204
CHF/GBP 1.128 1.216 1.137 1.163 1.111
NOK/GBP 12.925 11.815 13.619 12.000 11.846
AED/GBP 4.540 4.769 4.667 4.466 4.435
QAR/GBP 4.500 4.726 4.626 4.426 4.396
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 2022 2022 Impact Impact
£'000 £'000 £'000 %
EUR 10,628 10,364 264 2.5%
AUD 10,366 10,364 2 -%
NZD 10,366 10,364 2 -%
USD 10,463 10,364 99 1.0%
CHF 10,353 10,364 (11) (0.1%)
NOK 10,356 10,364 (8) (0.1%)
AED 10,464 10,364 100 1.0%
QAR 10,358 10,364 (6) (0.1%)
All currencies 10,806 10,364 442 4.3%
Net assets
Revised 2022 2022 Impact Impact
£'000 £'000 £'000 %
EUR 123,061 123,258 (197) (0.2%)
AUD 123,066 123,258 (192) (0.2%)
NZD 123,249 123,258 (9) -%
USD 122,684 123,258 (574) (0.5%)
CHF 123,249 123,258 (9) -
NOK 122,989 123,258 (269) (0.2%)
AED 122,825 123,258 (433) (0.4%)
QAR 123,170 123,258 (88) (0.1%)
All currencies 121,487 123,258 (1,771) (1.4%)
11. Events after the reporting date
On 5 July 2023 the Group acquired 100% of Toolfarm.com Inc based in the United
States of America. The business specialises in the distribution of video
editing software. The consideration is comprised of an initial payment of
$6,430k.
In addition to the acquisition of Toolfarm Inc the Group also acquired 100% of
Digital Media Promos Inc on 5 July 2023. The Company is also based in the
United States of America. The business specialises in the distribution of
broadcast products. The initial consideration is $968k with a contingent
consideration of up to a maximum of $1,500k based on performance payable in
2026.
On 12 July 2023 the Group acquired 100% of the HHB Communications Holdings
Limited group of companies based in the United Kingdom. The business
specialises in the distribution of professional audio products. The initial
consideration is £13.1m with a contingent consideration based on performance
of up to £10.5m payable in instalments due in 2024 and 2025.
On 21 July 2023 the Group acquired 100% of Video Soluciones SL and Video
Digital Import SL, companies based in Spain. The business specialises in the
distribution of broadcast products. The initial consideration is €700k with
deferred consideration of €500k payable in 2024 and contingent
considerations of up to a maximum of €600k based on performance payable in
2026.
On 21 July 2023 the Group made an investment of £275k to acquire 30% of Dry
Hire Lighting Limited. The Group holds a put option to sell the investment to
other private investors of Dry Hire Lighting Limited and the investors hold a
call option to purchase the investment from the Group.
On 31 July 2023 the Group acquired 100% of the Pulse Cinemas Holdings Limited
group of companies based in the United Kingdom. The business specialises in
the distribution of home cinema products. The initial consideration is
£1,282k with deferred consideration of £200k payable in 2024 and contingent
considerations of up to a maximum of £1,000k based on performance payable in
2026.
12. 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.
13. Adjustments to reported results
Six months ended
30 June 2023 30 June 2022
£000 £000
Operating profit 18,551 12,659
Cost of acquisitions 306 377
Share based payments 2,385 2,548
Employer taxes on share based payments 370 252
Amortisation of brands, customer and supplier relationships 4,812 4,351
Adjusted operating profit 26,424 20,187
Depreciation 3,817 3,429
Amortisation of patents and software 255 179
Adjusted EBITDA 30,496 23,795
(Increase)/decrease in adjusted inventories 2,353 (27,293)
(Increase)/decrease in adjusted trade and other receivables (9,138) (68,834)
Increase/(decrease) in adjusted trade and other payables (15,492) 64,754
Adjusted cash flow from operations 8,219 (7,577)
Adjusted EBITDA cash flow conversion 27.0% (31.8%)
Profit before tax 15,596 10,364
Cost of acquisitions 306 377
Share based payments 2,385 2,548
Employer taxes on share based payments 370 252
Amortisation of brands, customer and supplier relationships 4,812 4,351
Derivative fair value and foreign exchange gains and losses on acquisition (1,514) (223)
borrowings
Finance costs - deferred and contingent considerations 243 382
Finance costs - put option liabilities over non-controlling interests (443) 1,134
Adjusted profit before tax 21,755 19,185
Profit after tax 11,559 7,562
Cost of acquisitions 306 377
Share based payments 2,385 2,548
Employer taxes on share based payments 370 252
Amortisation of brands, customer and supplier relationships 4,812 4,351
Derivative fair value and foreign exchange gains and losses on acquisition (1,514) (223)
borrowings
Finance costs - deferred and contingent considerations 243 382
Finance costs - put option liabilities over non-controlling interests (443) 1,134
Tax impact (1,636) (1,979)
Adjusted profit after tax 16,082 14,404
Profit after tax 11,559 7,562
Non-controlling interest (NCI) (600) (566)
Profit after tax attributable to equity holders of the Parent Company 10,959 6,996
Adjusted profit after tax 16,082 14,404
Non-controlling interest (600) (566)
Share based payments attributable to NCI (7) (7)
Employer taxes on share based payments attributable to NCI - (1)
Amortisation of brands, customer and supplier relationships attributable to (243) (278)
NCI
Tax impact attributable to NCI 45 48
Adjusted profit after tax attributable to equity holders of the Parent Company 15,277 13,600
Weighted average number of ordinary shares 90,242,805 88,224,914
Diluted weighted average number of ordinary shares 93,217,499 90,926,724
Adjusted basic earnings per share 16.93p 15.42p
Adjusted diluted earnings per share 16.39p 14.96p
14. Dividends
During the period the Group declared a final dividend of 10.50 pence per
share. (30 June 2022: 7.80 pence per share). After the period end the Group
declared an interim dividend for the six months to 30 June 2023 of 5.50 pence
(30 June 2022: 4.50 pence per share) that relates to profits earned over the
period.
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