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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Midwich Group Plc | LSE:MIDW | London | Ordinary Share | GB00BYSXWW41 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 13.00 | 3.04% | 440.00 | 440.00 | 443.00 | 443.00 | 416.00 | 416.00 | 68,040 | 16:35:23 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Business Services, Nec | 1.29B | 26.82M | 0.2597 | 17.06 | 457.4M |
From Apr 2019 to Apr 2024
TIDMMIDW
RNS Number : 3238A
Midwich Group PLC
11 September 2018
11 September 2018
Midwich Group plc
("Midwich" or the "Group")
Interim Results
Double digit revenue growth and strong profit contribution across all territories
Midwich, a specialist audio visual distributor to the trade market, today announces its interim results for the six-months ended 30 June 2018.
Hot Features
Premium
Six months ended
30 June 30 June % change
2018 2017
Revenue 264,099 211,564 25%
Gross profit 42,879 32,433 32%
Gross profit % 16.2% 15.3%
Operating profit 11,026 8,729 26%
Adjusted operating profit 13,452 10,533 28%
Adjusted operating profit % 5.1% 5.0%
Profit before tax 11,854 8,033 48%
Adjusted profit before tax 13,030 10,253 27%
Adjusted profit before tax % 4.9% 4.8%
Profit after tax 9,118 5,812 57%
Adjusted profit after tax 9,783 8,032 22%
Reported EPS 11.32p 7.04p 61%
Adjusted EPS 12.09p 9.84p 23%
Interim dividend per share 4.60p 4.17p 10%
Financial highlights
-- Revenue increased by 24.8% to GBP264.1 million (24.3% on constant currency basis) -- Gross profit margin of 16.2%, a 0.9 percentage point increase on H1 2017
-- Adjusted operating profit increased by 27.7% to GBP13.5 million (27.4% on constant currency basis)
-- Adjusted profit before tax improved by 27.1% to GBP13.0 million (26.7% on constant currency basis)
-- Operating cash flow reflects planned investment in working capital to support organic growth and seasonal trends in working capital cycle
-- Progressive dividend policy maintained with 10.3% increase in Interim dividend to 4.60 pence per share (H1 2017: 4.17 pence per share)
Operational highlights
-- Double digit revenue and profit growth in all territories
-- Investment in new geographies and development of specialist broadcast, lighting and audio segments enhancing both revenue growth and gross margin
-- Recent acquisitions have performed well with a positive impact on the Group gross profit margin
-- Strong acquisition pipeline across a number of regions
Post-period highlights
-- August 2018 - Acquisition of Bauer & Trummer GmbH (trading as New Media), a leading distributor of professional video and broadcast equipment based in Nuremberg, Germany and operating across the German, Austrian and Swiss markets;
-- September 2018 - Acquisition of Sound Directions France SAS (trading as Perfect Sound), a small specialist audio distributor based in St Etienne, France.
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"The Group has had another strong first half and I am pleased with the performance across all of our territories. The increase in the Group's gross margin percentage reflects both growth in the core business and a significant contribution from the three acquisitions made in 2017 in our displays and technical product categories. The more specialist nature of the acquired businesses ensures that our value add to customers and vendors continues to increase.
"We have been busy working on opportunities to extend the Group's reach and capabilities through the period and were pleased to complete the acquisitions of New Media and Perfect Sound after the period end. The pipeline for strategic acquisitions across the territories in which we operate remains strong and we will continue our disciplined approach to add value while both strengthening and diversifying our product offering.
"The strong performance reported in the first half, coupled with positive sales momentum and strong contributions from recent acquisitions, gives the Board confidence that the Group will report full year results in line with its revised expectations, which were upgraded at the time of the Group's trading statement on 20 July 2018."
Enquiries:
Midwich Group plc Stephen Fenby, Managing Director Stephen Lamb, Finance Director +44 (0) 1379 649200 FTI Consulting Alex Beagley / Tom Hufton / Fern Duncan +44 (0) 20 3727 1000 Investec Bank plc James Rudd / Carlton Nelson +44 (0) 20 7597 5970
Notes to editors
Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, France, Germany, Iberia, Benelux, and Australasia. The Group's long-standing relationships with over 330 vendors, including blue-chip organisations such as Samsung, LG, Epson, and NEC, support a comprehensive product portfolio across major audio visual categories such as large format displays, projectors, digital signage and printers. 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 approximately 13,000 customers, most of which are professional AV integrators and IT resellers serving sectors such as corporate, education, retail, residential and hospitality. Although the Group does not sell directly to end users, it believes that the majority of its products are used by commercial and educational establishments rather than consumers.
Initially a UK only distributor, the Group now has over 750 employees across the UK and Ireland, Germany, France, Iberia, Benelux, and Australasia. In the six months to 30 June 2018, 42% of the Group's revenues were derived from outside the UK & Ireland. A core component of the Group's growth strategy is further expansion of its international operations and footprint into strategically targeted jurisdictions.
For further information, please visit www.midwichgroupplc.com
Managing Director's Report
Overview
The Group has performed strongly in the first six months of 2018 with double digit revenue and profit growth in all geographies.
Prior year acquisitions are performing well and delivered a significant boost to the Group's gross profit margin. These acquisitions have helped to grow the Group's presence in Europe as well as strengthening our professional audio capabilities and establishing a presence in the lighting market.
The Group continues to experience growth in the displays (particularly large format and interactive displays), broadcast, audio and technical video categories.
Strategy
The Group's strategy for growth continues to be both organic and inorganic, reflecting the contributors to the successful growth track record in recent years.
The Group's organic growth strategy is focused on the provision of market leading support to its customers and vendors. As a distributor, the Group neither develops product nor does it sell to the end-users of those products. The Group's expertise is the provision of specialist and technical services which provide the greatest assistance to vendors in supplying product into the market, and to help customers provide the highest level of support to their end-users.
Underpinning the Group's growth strategy is its success in sourcing, executing and integrating acquisitions. The Group takes a disciplined approach to acquisitions, seeking to add capital value without an adverse impact on the existing business. Acquisitions remain a fundamental aspect of the Group's strategy and it continues to pursue a strong pipeline of opportunities across a number of regions.
Board
Hilary Wright was appointed as Non-Executive Director on 9 March 2018. Hilary is currently the Group HR Director of Domino Printing Sciences plc, having joined in 2016.
Anthony Bailey resigned from the position of Group Finance Director on 29 June 2018 and left the Group.
Stephen Lamb was appointed Group Finance Director on 31 July 2018. Stephen was most recently Senior Vice President and Chief Financial Officer International for Iron Mountain's international business having previously held a number of previous Chief Financial Officer positions for international businesses.
Acquisitions
Post period end, on 23 August 2018 the Group completed the acquisition of Bauer & Trummer GmbH (trading as New Media), a leading distributor of professional video and broadcast equipment based in Nuremburg, Germany and operating across the German, Austrian and Swiss markets.
On 6(th) September 2018 the Group completed the acquisition of Sound Directions France SAS (trading as Perfect Sound), a small specialist audio distributor based in St Etienne, France.
The Group's strong balance sheet means it is well placed to continue its buy and build strategy both in new and existing territories.
Simplified segmental reporting
The Board has taken the decision to amend the presentation of segmental information to more closely fit the management structure of the Group. Accordingly, our mainland European businesses have now been amalgamated for presentation purposes. The amended segmental information for the current and prior periods is set out in note 4 of the notes to the interim consolidated financial information.
Trading and financial review
Group revenue increased by 24.8% to GBP264.1 million for the period (H1 2017: GBP211.6 million).
The Group achieved a gross profit margin for the half year of 16.2%, a 0.9 percentage point increase on H1 2017 and a 0.7 percentage point increase on FY 2017. The growth in margin is attributable to both a positive mix effect from the higher gross profit margin earned in businesses acquired in 2017 and continued gross profit improvement in the UK & Ireland and Australasia.
Operating profit increased by 26.3% to GBP11.0 million (H1 2017: GBP8.7 million). Adjusting for acquisition costs, share based payments, and amortisation the Group achieved an Adjusted operating profit of GBP13.5 million, which represents growth of 27.7%. The growth in operating profit reflects the overall increase in revenue and gross profit partially offset by the impact of the prior year acquisitions which have a larger overhead cost base relative to revenue.
Based on a constant currency analysis using the current period exchange rates across both periods, the Group revenue grew by 24.3% and Group Adjusted operating profit grew by 27.4%. The Group received only a marginal benefit from movements in foreign exchange rates in the period to 30 June 2018.
UK & Ireland
Revenue in the UK & Ireland increased by 10.1%, including the benefit of the acquisition of Sound Technology Limited, which joined the Group on 30 November 2017 and performed strongly in the period. Excluding the impact of acquisitions, the UK and Ireland segment showed positive growth despite more challenging general market conditions in the period.
The UK & Ireland segment's gross profit margin increased to 17.1%, a 1.3 percentage point increase on H1 2017 and a 0.9 percentage point increase on FY 2017. The UK & Ireland has benefitted from the sales of professional audio, musical and lighting products through Sound Technology Limited and has also been aided by an increase in the proportion of technical video and display sales in the product mix.
Adjusted operating profit increased by 19.7% in the UK & Ireland.
Continental Europe
Revenue in Continental Europe increased by 62.5% due to the impact of prior year acquisitions and strong performances in France and Germany. Organic growth was achieved in all major product categories, with particularly strong growth in displays. Earpro SA in Iberia and Gebroeders van Domburg BV in Benelux were acquired in Continental Europe in March 2017 and September 2017 respectively. Since acquisition the businesses have traded well and, through a different product mix, contributed to an increase in the region's gross profit margin to 14.2% compared with 13.6% in the first half of 2017.
Adjusted operating profit in Continental Europe grew by 49.7% benefitting from both acquisitions and strong organic growth from market share gains in other categories.
Australasia
The businesses in Australasia continued to grow with the recent addition of new technical vendors and achieved a 16.6% increase in revenue compared to H1 2017.
The gross profit margin in Australasia continued to improve as a result of the development of its technical vendor base. The Australasia gross profit margin was 20.0%, which is a 2.6 percentage point increase on H1 2017 and a 2.3 percentage point increase on FY 2017.
The Adjusted operating profit in Australasia grew by 81.6% aided by the development of technical vendors.
Taxation
The tax charge for the period was GBP2.7 million (H1 2017: GBP2.2 million). The Adjusted effective tax rate for the period is 24.9% (H1 2017: 21.7%) calculated based on the Adjusted tax charge for the period divided by Adjusted profit before tax.
Governance code
Upon formation at IPO, the Board resolved to establish a strong governance culture using the Quoted Companies Alliance (QCA) code as the basis for its governance framework.
In line with the London Stock Exchange's recent changes to the AIM rules, requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code, the Board has adopted the updated QCA corporate governance code for Midwich. The statement of QCA code compliance is available on the Midwich plc website.
Financial position
The Group had a net cash inflow from operations before tax of GBP0.2 million for the period (H1 2017: GBP3.5 million) which reflects the traditionally more working capital intensive first half when compared with the full year. The Board is comfortable that the Group's long term average conversion rate remains unchanged.
Net debt at 30 June 2018 was GBP41.5 million (GBP22.8 million at 30 June 2017).
Dividend
The Board is pleased to declare an interim dividend of 4.60 pence per share (H1 2017: 4.17 pence per share), which will be paid on 26 October 2018 to those shareholders on the Company's register as at 21 September 2018.
The Board continues to adopt a progressive dividend policy to reflect the Group's strong earnings and cash flow while maintaining an appropriate level of dividend cover to allow for investment in longer-term growth.
Outlook
The performance reported in the first half year coupled with indications of positive sales momentum and strong contributions from recent acquisitions gives the Board confidence that the Group will report full year results in line with its revised expectations, which were upgraded at the time of the Group's trading statement on 20 July 2018.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended 30 June 2018
Note 30 June 30 June 31 December 2017
2018 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Revenue 264,099 211,564 471,937
Cost of sales (221,220) (179,131) (398,810)
---------- ---------- -----------------
Gross profit 42,879 32,433 73,127
Distribution costs (26,803) (20,841) (45,679)
Total administrative expenses (6,495) (4,364) (9,470)
Other operating income 1,445 1,501 2,831
---------- ---------- -----------------
Operating profit 11,026 8,729 20,809
Comprising
------------------------------------------------------- ----- ---------- ---------- -----------------
Adjusted operating profit 13,452 10,533 25,044
Costs of acquisitions (43) (146) (336)
Share based payments (410) (136) (551)
Employer taxes on share based payments (145) - (118)
Amortisation (1,828) (1,522) (3,230)
------------------------------------------------------- ----- ---------- ---------- -----------------
11,026 8,729 20,809
Finance income 7 14 5
Finance costs 5 821 (710) (1,916)
---------- ---------- -----------------
Profit before taxation 11,854 8,033 18,898
Taxation (2,736) (2,221) (4,919)
---------- ---------- -----------------
Profit after taxation 9,118 5,812 13,979
========== ========== =================
Profit for the financial period/year attributable to:
The Company's equity shareholders 8,990 5,595 13,557
Non-controlling interest 128 217 422
---------- ---------- -----------------
9,118 5,812 13,979
========== ========== =================
Basic earnings per share 3 11.32p 7.04p 17.06p
Diluted earnings per share 3 11.23p 7.03p 17.00p
Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2018
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Profit for the period/financial year 9,118 5,812 13,979
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss:
Foreign exchange gains on consolidation (300) 435 974
---------- ---------- ------------
Other comprehensive income for the financial
period/year, net of tax (300) 435 974
Total comprehensive income for the period/financial
year 8,818 6,247 14,953
========== ========== ============
Attributable to:
Owners of the Parent Company 8,697 6,030 14,531
Non-controlling interests 121 217 422
8,818 6,247 14,953
========== ========== ============
Unaudited consolidated statement of financial position as at 30 June 2018
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 9,068 5,568 9,094
Intangible assets 20,720 19,725 22,310
Property, plant and equipment 7,990 5,978 7,692
Deferred tax assets 930 - 387
---------- ---------- ------------
38,708 31,271 39,483
Current assets
Inventories 74,015 56,514 62,984
Trade and other receivables 84,704 61,862 76,361
Cash and cash equivalents 24,806 20,597 28,203
---------- ---------- ------------
183,525 138,973 167,548
Current liabilities
Trade and other payables (89,529) (64,786) (84,617)
Derivative financial instruments - - (93)
Put option liabilities - (734) -
Deferred consideration (384) (4,939) (4,841)
Borrowings and financial liabilities (66,015) (43,426) (50,176)
Current tax (2,785) (2,260) (2,873)
---------- ---------- ------------
(158,713) (116,145) (142,600)
Net current assets 24,812 22,828 24,948
---------- ---------- ------------
Total assets less current liabilities 63,520 54,099 64,431
Non-current liabilities:
Trade and other payables (156) - (181)
Put option liabilities (4,092) (2,853) (5,195)
Deferred consideration - - (1,197)
Borrowings and financial liabilities (324) - (321)
Deferred tax liabilities (4,091) (3,817) (4,445)
---------- ---------- ------------
(8,663) (6,670) (11,339)
Net assets 54,857 47,429 53,092
========== ========== ============
Equity
Share capital 794 794 794
Share premium 25,855 25,855 25,855
Share based payment reserve 1,338 233 751
Investment in own shares (5) (5) (5)
Retained earnings 25,681 19,753 24,331
Translation reserve 1,398 1,152 1,691
Put option reserve (3,638) (2,803) (3,638)
Capital redemption reserve 50 50 50
Other reserve 150 150 150
---------- ---------- ------------
Equity attributable to owners of
Parent Company 51,623 45,179 49,979
Non-controlling interests 3,234 2,250 3,113
Total equity 54,857 47,429 53,092
========== ========== ============
Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2018
For the period ended 30 June 2018
Equity
Share attributable
Investment based Put Capital to owners
Share Share in own payment Retained Translation option redemption Other of the Non-controlling
capital premium shares reserve earnings reserve reserve reserve reserve Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January
2018 794 25,855 (5) 751 24,331 1,691 (3,638) 50 150 49,979 3,113 53,092
Profit for
the period - - - - 8,990 - - - - 8,990 128 9,118
Other
comprehensive
income - - - - - (293) - - - (293) (7) (300)
---------------- --------
Total
comprehensive
income for
the period - - - - 8,990 (293) - - - 8,697 121 8,818
Share based
payments - - - 409 - - - - - 409 - 409
Deferred
tax on share
based
payments - - - 178 - - - - - 178 - 178
Dividends
paid - - - - (7,640) - - - - (7,640) - (7,640)
Balance at
30 June 2018
(Unaudited) 794 25,855 (5) 1,338 25,681 1,398 (3,638) 50 150 51,623 3,234 54,857
======== ======== =========== ======== ========= ============ ======== =========== ========= ============= ================ ========
For the period ended 30 June 2017
Equity
Share attributable
Investment based Put Capital to owners
Share Share in own payment Retained Translation option redemption Other of the Non-controlling
capital premium shares reserve earnings reserve reserve reserve reserve Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January
2017 794 25,855 (5) 84 19,765 717 (1,770) 50 150 45,640 952 46,592
Profit for
the period - - - - 5,595 - - - - 5,595 217 5,812
Other
comprehensive
income - - - - - 435 - - - 435 - 435
---------------- --------
Total
comprehensive
income for
the period - - - - 5,595 435 - - - 6,030 217 6,247
Share based
payments - - - 136 - - - - - 136 - 136
Deferred tax
on share
based
payments - - - 13 - - - - - 13 - 13
Acquisition
of Earpro
SA (note 7) - - - - - - (1,033) - - (1,033) 1,081 48
Dividends
paid - - - - (5,607) - - - - (5,607) - (5,607)
Balance at
30 June 2017
(Unaudited) 794 25,855 (5) 233 19,753 1,152 (2,803) 50 150 45,179 2,250 47,429
======== ======== =========== ======== ========= ============ ======== =========== ========= ============= ================ ========
For the year ended 30 December 2017
Equity
Share attributable
Share Investment based Put Capital to owners
Share in own payment Retained Translation option redemption Other of the Non-controlling
capital premium shares reserve earnings reserve reserve reserve reserve Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January
2017 794 25,855 (5) 84 19,765 717 (1,770) 50 150 45,640 952 46,592
Profit for
the year - - - - 13,557 - - - - 13,557 422 13,979
Other
comprehensive
income - - - - - 974 - - - 974 - 974
---------------- --------
Total
comprehensive
income for
the year - - - - 13,557 974 - - - 14,531 422 14,953
Acquisition
of
non-controlling
interest (note
8) - - - - (79) - 681 - - 602 (602) -
Share based
payments - - - 551 - - - - - 551 - 551
Deferred tax
on share based
payments - - - 116 - - - - - 116 - 116
Acquisition
of subsidiary
(note 7) - - - - - - (2,549) - - (2,549) 2,341 (208)
Dividends
paid - - - - (8,912) - - - - (8,912) - (8,912)
Balance at
31 December
2017 794 25,855 (5) 751 24,331 1,691 (3,638) 50 150 49,979 3,113 53,092
======== ======== =========== ======== ========= ============ ======== =========== ========= ============= ================ ========
Unaudited consolidated cashflow statement for 6 months ended 30 June 2018
30 June 30 June 31 December
2018 2017 2017
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 11,854 8,033 18,898
Depreciation 1,201 733 1,793
Amortisation 1,828 1,522 3,230
Gain on disposal of assets (4) (153) (21)
Share based payments 409 136 551
Foreign exchange losses 195 154 156
Finance income (7) (14) (5)
Finance costs (821) 710 1,916
---------- ---------- ------------
Adjusted profit from operations before
changes in working capital 14,655 11,121 26,518
Increase in inventories (11,031) (6,319) (7,217)
Increase in trade and other receivables (8,343) (5,114) (11,954)
Increase in trade and other payables 4,888 3,830 14,724
---------- ---------- ------------
Cash inflow from operations 169 3,518 22,071
Income tax paid (3,543) (2,186) (4,784)
---------- ---------- ------------
Net cash (outflow)/inflow from operating
activities (3,374) 1,332 17,287
Cash flows from investing activities
Acquisition of businesses - (4,986) (9,108)
Deferred consideration paid (5,507) (11) (1,511)
Cash acquired within business combinations - 2,972 2,854
Purchase of intangible assets (357) (43) (48)
Purchase of plant and equipment (1,734) (1,820) (3,064)
Proceeds on disposal of plant and equipment 219 368 528
Interest received 7 14 5
---------- ---------- ------------
Net cash outflow from investing activities (7,372) (3,506) (10,344)
Cash from financing activities
Acquisition of non-controlling interest - - (751)
Dividends paid (7,640) (5,607) (8,912)
Invoice financing inflows 9,678 7,380 5,673
Proceeds from borrowings 159 - -
Repayment of loans (9) (14) (26)
Interest paid (522) (295) (647)
Interest on finance leases (7) - (4)
Capital element of finance lease payments (72) (65) (121)
---------- ---------- ------------
Net cash inflow/(outflow) from financing
activities 1,587 1,399 (4,788)
Net (decrease)/increase in cash and
cash equivalents (9,159) (775) 2,155
Cash and cash equivalents at beginning
of period/year 20,010 17,201 17,201
Effects of exchange rate changes (331) 280 654
Cash and cash equivalents at end of
period/year 10,520 16,706 20,010
========== ========== ============
Comprising:
Cash at bank 24,806 20,597 28,203
Bank overdrafts (14,286) (3,891) (8,193)
10,520 16,706 20,010
========= ======== ========
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2018 is unaudited and does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006.
The interim consolidated financial information does not include all the information required for statutory financial statements in accordance with IFRS, and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2017.
2. Accounting policies
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 2017, except as amended for the implementation of IFRS 9 'Financial instruments' and IFRS 15 'Revenue from contracts with customers', which were adopted on 1 January 2018. The audited financial statements for the year ended 31 December 2017 complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").
The Group has elected to apply the modified retrospective approach to the transition to both IFRS 9 and IFRS 15. The modified retrospective approach requires the transition to be implemented without restatement of the prior year results. The new standards have not had a material impact on the reported results and there is no adjustment to equity at 1 January 2018 as a result of the implementation of the new standards.
The Group is required to adopt IFRS 16 'Leases', which replaces IAS 17 'Leases' for accounting periods beginning on or after 1 January 2019. IFRS 16 requires the Group to recognise a 'Right of use' asset and a lease liability in respect of material leases. Implementation of the new standard will result in a significant increase in both assets and liabilities in the statement of financial position, with a corresponding increase in depreciation charges and finance costs offset by a reduction in operating lease costs in the income statement.
The directors have adopted the going concern basis in preparing the financial information. In assessing whether the going concern assumption is appropriate, the directors have taken into account all relevant available information about the foreseeable future.
The statutory accounts for the year ended 31 December 2017, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.
3. Earnings per share
Basic earnings per share is calculated by dividing the profit after tax for the period/year attributable to equity shareholders of the Company by the weighted average number of shares in issue during the period/year.
Diluted earnings per share is calculated by adjusting the profit after tax for the period/year attributable to equity shareholders of the Company for the fair value (measured in accordance with IFRS 2) of any goods or services to be supplied to the Group in the future under the share options granted by the balance sheet date and dividing it by the weighted average number of shares in issue during the period/year adjusted for the effects of all dilutive potential ordinary shares.
The Group's earnings per share and diluted earnings per share, are as follows:
June June December
2018 2017 2017
Profit attributable to equity holders
of the Parent Company (GBP'000) 8,990 5,595 13,557
Weighted average number of shares in
issue 79,448,200 79,448,200 79,448,200
Dilutive (potential dilutive) effect
of share options 605,798 134,338 305,464
----------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of diluted earnings
per share 80,053,998 79,582,538 79,753,664
=========== =========== ===========
Basic earnings per share 11.32p 7.04p 17.06p
=========== =========== ===========
Diluted earnings per share 11.23p 7.03p 17.00p
=========== =========== ===========
4. Segmental reporting
UK & Continental Australasia Other(1) Total
Ireland Europe
June 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------ ------------ -------------- ------------- ----------
Revenue 153,555 93,526 17,018 - 264,099
Gross profit 26,230 13,250 3,399 - 42,879
Gross profit % 17.1% 14.2% 20.0% - 16.2%
Adjusted operating
profit 9,122 3,643 1,745 (1,058) 13,452
Cost of
acquisitions - - - (43) (43)
Share based
payments (231) (116) (42) (21) (410)
Employer taxes on
share based
payments (57) (62) (11) (15) (145)
Amortisation (1,337) (467) (24) - (1,828)
Operating profit 7,497 2,998 1,668 (1,137) 11,026
------------------- ------------ ------------ -------------- ------------- ----------
Interest 828
----------
Profit before tax 11,854
==========
Other segmental information
UK & Continental Australasia Other(1) Total
Ireland Europe
June 2018 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 138,314 71,413 11,723 783 222,233
Segment
liabilities (121,562) (38,981) (6,716) (117) (167,376)
------------------- ------------ ------------ -------------- ------------- ----------
Segment net assets 16,752 32,432 5,007 666 54,857
Depreciation 799 362 40 - 1,201
UK International Total
Other segmental information GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ----------------------------- ----------
Non-current assets 23,494 15,214 38,708
UK & Continental Australasia Other(1) Total
Ireland(1) Europe(1)
June 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------ ------------ -------------- ------------- ----------
Revenue 139,420 57,545 14,599 - 211,564
Gross profit 22,090 7,808 2,535 - 32,433
Gross profit % 15.8% 13.6% 17.4% - 15.3%
Adjusted operating
profit 7,619 2,434 961 (481) 10,533
Costs of
acquisitions - - - (146) (146)
Share based
payments (136) - - - (136)
Amortisation (1,215) (282) (25) - (1,522)
Operating profit 6,268 2,152 936 (627) 8,729
------------------- ------------ ------------ -------------- ------------- ----------
Interest (696)
----------
Profit before tax 8,033
==========
Other segmental information
UK & Continental Australasia Other(1) Total
Ireland(1) Europe(1)
June 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 115,291 45,495 9,396 62 170,244
Segment
liabilities (95,843) (20,903) (5,981) (88) (122,815)
------------------- ------------ ------------ -------------- ------------- ----------
Segment net assets 19,448 24,592 3,415 (26) 47,429
Depreciation 573 99 61 - 733
UK International Total
Other segmental information GBP'000 GBP'000 GBP'000
----------------------------- --------- -------------- ---------
Non-current assets 23,173 8,098 31,271
(1) Restated to combine France, Germany and the Rest of Europe into one segment and show Group office functions within the Other segment due to internal restructuring undertaken on 1 January 2018.
UK & Continental Australasia Other(1) Total
Ireland(1) Europe(1)
December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------ -------------- ------------ --------- ----------
Revenue 283,712 156,163 32,062 - 471,937
Gross profit 45,830 21,637 5,660 - 73,127
Gross profit % 16.2% 13.9% 17.7% - 15.5%
Adjusted operating profit 16,131 7,470 2,576 (1,133) 25,044
Costs of acquisitions - - - (336) (336)
Share based payments (351) (142) (50) (8) (551)
Employer taxes on share based
payments (65) (51) - (2) (118)
Amortisation (2,450) (730) (50) - (3,230)
Operating profit 13,265 6,547 2,476 (1,479) 20,809
-------------------------------- ------------ -------------- ------------ --------- ----------
Interest (1,911)
----------
Profit before tax 18,898
==========
Other segmental information
UK & Continental Australasia Other(1) Total
Ireland(1) Europe(1)
December 2017 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 122,213 73,242 11,162 26 206,643
Segment liabilities (107,955) (38,847) (6,632) (117) (153,551)
-------------------------------- ------------ -------------- ------------ --------- ----------
Segment net assets 14,258 34,395 4,530 (91) 53,092
Depreciation 1,281 385 127 - 1,793
UK International Total
Other segmental information GBP'000 GBP'000 GBP'000
----------------------------- --------- -------------- ---------
Non-current assets 24,808 14,287 39,095
(1) Restated to combine France, Germany and the Rest of Europe into one segment and show Group office functions within the Other segments due to internal restructuring undertaken on 1 January 2018.
5. Finance costs
December
June 2018 June 2017 2017
GBP'000 GBP'000 GBP'000
Interest on overdraft and invoice discounting 418 282 666
Interest on finance leases 7 - 4
Interest on other loans 4 12 70
Interest, foreign exchange and other finance
costs of deferred and contingent considerations (147) - (81)
Interest, foreign exchange and other finance
costs of put option liabilities (1,103) 416 1,257
(821) 710 1,916
=========== ============ =========
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
June 2018 June 2017 December 2017
Classed as equity: Number GBP'000 Number GBP'000 Number GBP'000
Issued and fully paid
ordinary shares of
GBP0.01 each
Opening balance 79,448,200 794 79,448,200 794 79,448,200 794
Closing balance 79,448,200 794 79,448,200 794 79,448,200 794
=========== ======== =========== ======== =========== ========
There were no share transactions effected during the current or comparative period or the year to 31 December 2017.
Employee benefit trust
The Group's employee benefit trust was allocated 480,700 ordinary shares in 2016.
A reconciliation of the shares allocated to employees within the SIP is as follows:
Six months Six months Twelve
to June to June months
2018 2017 to December
2017
Outstanding at 1 January 227,000 119,000 119,000
Granted - 128,500 128,500
Lapsed (16,500) (8,000) (20,500)
Outstanding at period end 210,500 239,500 227,000
=========== =========== =============
7. Business combinations
Acquisitions were completed by the Group during the comparative periods to increase scale, broaden its addressable market and widen the product offering.
Subsidiaries acquired
Acquisition Principal activity Date of Proportion Fair value
acquisition acquired of consideration
(%) GBP'000
------------------ ------------------------------- -------------- ----------- ------------------
Distribution of audio
visual and lighting products 27 March
Earpro SA to trade customers 2017 88.5% 8,311
------------------ ------------------------------- -------------- ----------- ------------------
Gebroeders Distribution of audio
van Domburg visual and lighting products 6 September
BV to trade customers 2017 70% 2,942
------------------ ------------------------------- -------------- ----------- ------------------
Distribution of professional
Sound Technology audio, musical and lighting 30 November
Limited products to trade customers 2017 100% 3,858
------------------ ------------------------------- -------------- ----------- ------------------
Fair value of consideration transferred
Earpro SA Gebroeders Sound Technology
van Domburg Limited
BV
GBP'000 GBP'000 GBP'000
Cash 4,987 1,522 2,600
Deferred consideration 3,324 - 1,258
Deferred contingent consideration - 1,420 -
Total 8,311 2,942 3,858
========== ============= =================
Acquisition costs of GBP43k were expensed to the income statement in relation to the future potential acquisitions during the six-month period ended 30 June 2018.
Acquisition costs of GBP81k in relation to the acquisition of Earpro SA, GBP58k in relation to the acquisition of Gebroeders van Domburg BV and GBP7k in relation to the 2016 acquisition of Holdan Limited were expensed to the income statement during the six-month period ended 30 June 2017.
In addition to the acquisition costs for the six-month period ended 30 June 2017 a further GBP106k of acquisition costs relating to the acquisition of Gebroeders van Domburg BV and GBP84k in relation to the acquisition of Sound Technology Limited were incurred during the year ended 31 December 2017.
On acquisition of Earpro SA and Gebroeders van Domburg BV the Group recognised GBP1,033k and GBP1,516k respectively in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest in each acquisition.
Fair value of acquisitions
Earpro SA Gebroeders van Domburg BV Sound Technology Limited
GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 1,009 2,667 851
Intangible assets - customer
relationships 740 2,178 -
Intangible assets - supplier exclusivity 1,488 - 1,553
Intangible assets - trade name 104 158 153
Intangible assets - other 58 - 52
Plant and equipment 66 1,765 28
----------- --------------------------- --------------------------
3,465 6,768 2,637
Current assets
Inventories 2,053 2,878 2,694
Trade and other receivables 4,003 3,526 4,132
Current tax - - 6
Cash and cash equivalents 3,172 - 65
----------- --------------------------- --------------------------
9,228 6,404 6,897
Current liabilities
Trade and other payables (2,723) (5,334) (3,655)
Derivative financial instruments - - (128)
Borrowings and financial liabilities - (2,877) (1,617)
Current tax - (4) -
----------- --------------------------- --------------------------
(2,723) (8,215) (5,400)
Non-current liabilities
Borrowings - (170) -
Deferred tax (579) (584) (276)
----------- --------------------------- --------------------------
(579) (754) (276)
Non-controlling interests (1,080) (1,261) -
----------- --------------------------- --------------------------
Fair value of net assets acquired
attributable to equity shareholders of
the Parent Company 8,311 2,942 3,858
=========== =========================== ==========================
Goodwill acquired in 2017 relates to workforce, synergies and sales know how. Goodwill arising on the acquisition of Earpro SA and Gebroeders van Domburg BV has been allocated to the Rest of Europe operating segment. Goodwill arising on the acquisition of Sound Technology Limited has been allocated to the UK and Ireland operating segment.
Net cash outflow on acquisition of subsidiaries
Earpro SA Gebroeders van Domburg BV Sound Technology Limited
GBP'000 GBP'000 GBP'000
Consideration paid in cash 4,987 1,522 2,600
Plus: overdraft borrowings - 200 -
Less: cash and cash equivalent balances
acquired (2,989) - (65)
Net cash outflow 1,998 1,722 2,535
=========== =========================== ==========================
8. Acquisition of non-controlling interest
On 3 October 2017, the Group acquired 10.5% of the 21% non-controlling interest in Holdan Limited, which had a value of GBP602k, for a consideration of GBP750k. GBP681k of the put option reserve was transferred to retained earnings when this element of the put option was extinguished.
9. Currency impact
The Group reports in Pounds Sterling (GBP) but has significant revenues and costs as well as assets and liabilities denominated in Euros (EUR) and Australian Dollars (AUD). The table below sets out the prevailing exchange rates in the periods reported.
Six months Six months At 30 June At 30 June At 31 December
to 30 June to 30 June 2018 2017 2017
2018 2017
Average Average
EUR/GBP 1.136 1.166 1.131 1.146 1.126
AUD/GBP 1.777 1.678 1.788 1.732 1.725
Applying the current period foreign exchange rates across the first half of 2016 had the following impact on reported results:
EUR AUD
GBP000 GBP000
Increase/(decrease) in revenue due to movement in
foreign exchange rate: 1,784 (748)
Increase/(decrease) in profit before tax due to
movement in foreign exchange rate: 83 (45)
Increase in net debt due to movement in foreign
exchange rate: 13 37
10. 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.
11. Events after the reporting period
On 23 August 2018 the Group acquired 100% of Bauer und Trummer GmbH, a specialist broadcast and pro video distributor based in Nuremberg, Germany.
On 6th September 2018 the Group completed the acquisition of Sound Directions France SAS (trading as Perfect Sound), a small specialist audio distributor based in St Etienne, France.
12. Adjustments to reported results
Six months ended
30 June 30 June
2018 2017
GBP000 GBP000
Operating profit 11,026 8,729
Exceptional administrative costs 43 146
Share based payments 410 136
Employer taxes on share based payments 145 -
Amortisation 1,828 1,522
----------- -----------
Adjusted operating profit 13,452 10,533
Profit before tax 11,854 8,033
Exceptional administrative costs 43 146
Share based payments 410 136
Employer taxes on share based payments 145 -
Amortisation 1,828 1,522
Finance costs - deferred consideration (147) -
Finance costs - put option liabilities (1,103) 416
----------- -----------
Adjusted profit before tax 13,030 10,253
Profit after tax 9,118 5,812
Exceptional administrative costs 43 146
Share based payments 410 136
Employer taxes on share based payments 145 -
Amortisation 1,828 1,522
Finance costs - deferred consideration (147) -
Finance costs - put option liabilities (1,103) 416
Tax impact (511) -
----------- -----------
Adjusted profit after tax 9,783 8,032
Profit after tax 9,118 5,812
Non-controlling interest (128) (217)
----------- -----------
Profit after tax attributable to equity holders of
the Parent Company 8,990 5,595
Adjusted profit after tax 9,783 8,032
Non-controlling interest (128) (217)
Amortisation attributable to NCI (64) -
Deferred tax on amortisation attributable to NCI 15 -
----------- -----------
Adjusted profit after tax attributable to equity
holders of the Parent Company 9,606 7,815
Number of shares 79,448,200 79,448,200
Diluted number of shares 80,053,998 79,582,538
Basic adjusted earnings per share 12.09p 9.84p
Diluted adjusted earnings per share 12.00p 9.82p
13. Interim dividend
The interim dividend proposed for the six months to 30 June 2018 of 4.60 pence (30 June 2017: 4.17 pence) relates to profits earned over the period.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR LLFVEAIIILIT
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