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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -5.00 | -1.14% | 435.00 | 435.00 | 440.00 | 443.00 | 437.00 | 443.00 | 17,485 | 16:35:01 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Business Services, Nec | 1.29B | 26.82M | 0.2597 | 16.94 | 454.31M |
From Apr 2019 to Apr 2024
TIDMMIDW
RNS Number : 2802Y
Midwich Group PLC
08 September 2020
8 September 2020
Midwich Group plc
("Midwich" or the "Group")
Interim results for the six months ended 30 June 2020
Resilience through the pandemic, steady improvement and positioned for growth
Midwich Group (AIM: MIDW), a specialist audio visual distributor to the trade market with operations across the UK and Ireland, Continental Europe, Asia Pacific and North America, today announces its Interim Results for the six months ended 30 June 2020 ("H1 2020").
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"The coronavirus pandemic represents the biggest shock to our business sector. As the crisis unfolded, we took decisive action to protect our teams, preserve cash and support our customers and vendors. These continue to be our key priorities as the pandemic continues and will optimally position the Group as the recovery continues to gather pace.
Although significantly impacted, our market strength, combined with the diversity of our Group in terms of geographical spread, vendor breadth, technology focus and end user markets have partially mitigated the negative impact of the crisis.
In recent weeks, whilst we continue to monitor the pandemic, we have increasingly shifted our focus to the future - bringing back our teams, reopening offices and resuming some face to face customer interactions. We have launched new vendor relationships and further developed our expertise in the unified communications ("UC") sector. Our acquisition programme has also recommenced with a number of exciting opportunities in the pipeline. Group revenues have improved month on month since April.
The coronavirus pandemic has been a shock to the global economy, however we believe that the AV industry is well placed for the future. We see no overall change in long term prospects for the industry. Although some segments of the market may be slower to recover, other trends (such as the increased adoption of UC) have unsurprisingly accelerated.
I would like to thank our staff, customers and partners for their incredible support in recent months and look forward to returning to our previous financial performance as quickly as possible and continuing our long term growth trajectory."
Statutory financial highlights
Hot Features
Premium
Six months ended
30 June 2020 30 June 2019 Total growth
GBPm GBPm %
Revenue 302.0 314.8 (4%)
Gross profit 43.8 52.2 (16%)
Gross profit % 14.5% 16.6%
Operating profit/(loss) (0.7) 10.5 (106%)
Profit/(loss) before
tax (2.5) 11.3 (122%)
Profit/(loss) after
tax (2.8) 9.0 (131%)
Reported EPS - pence (3.29) 11.06 (130%)
Adjusted financial highlights
Six months ended
30 June 2020 30 June 2019 Total growth Growth at constant
GBPm GBPm % currency %
Revenue 302.0 314.8 (4%) (4%)
Gross profit 43.8 52.2 (16%) (16%)
Gross profit % 14.5% 16.6%
Adjusted operating
profit (1) 4.1 14.6 (72%) (72%)
Adjusted operating
profit % 1.4% 4.6%
Adjusted profit
before tax (1) 3.2 13.7 (77%) (76%)
Adjusted profit
after tax (1) 2.4 10.5 (77%) (77%)
Adjusted EPS - pence
(1) 2.67 12.78 (79%)
Interim dividend
per share - 4.85p
(1) Definitions of the alternative performance measures are set out in Note 2
Financial highlights
-- All financial metrics were impacted by the reduction in demand due to Covid-19 restrictions
-- Focus on cash preservation resulted in adjusted net debt as at 30 June 2020 of GBP41.2m, down 22.6% from GBP53.3m as at 31 December 2019
-- Operating cash conversion was very strong at 127% adjusted EBITDA (H1 2019: 28%)
-- Revenue declined 4.1% to GBP302.0 million (3.9% on constant currency basis) including an organic revenue reduction of 22.1%
-- Adjusted operating profit reduced by 71.9% to GBP4.1 million (71.6% lower on constant currency basis)
-- Statutory operating loss of GBP0.7 million (H1 2019: GBP10.5m profit)
-- Adjusted profit before tax decreased by 76.6% to GBP3.2 million (76.2% lower on constant currency basis)
Operational highlights
-- Decisive actions taken across the Group to mitigate the impact of Covid-19 -- Revenue recovering month on month since April -- Market share has remained stable or grown in key territories
-- Strategic acquisition of Starin in February 2020; the Group's first business in North America, funded by successful equity placing to new and existing shareholders
-- Numerous exciting new vendor relationships added in both new technology areas and geographical markets throughout the period
-- Strong acquisition pipeline across a number of regions
Post period highlights
-- Revenue continues its steady recovery -- New vendor launches, including DTEN and Poly
For further information:
Midwich Group plc Stephen Fenby, Managing Director Stephen Lamb, Finance Director +44 (0) 1379 649200 FTI Consulting Alex Beagley / Tom Hufton / Rafaella de Freitas +44 (0) 20 3727 1000 Investec Bank plc (NOMAD and Joint Broker to Midwich) James Rudd / Carlton Nelson +44 (0) 20 7597 5970 Berenberg (Joint Broker to Midwich) Ben Wright / Mark Whitmore / Alix Mecklenberg-Solodkoff +44 (0) 20 3207 7800
About Midwich Group
Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, Continental Europe, Asia Pacific and North America. The Group's long-standing relationships with over 500 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 1,000 employees across the UK and Ireland, Continental Europe, 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
Managing Director's Report
Overview
We reacted quickly to the Covid-19 pandemic and the Board's priorities changed during the period to:
-- Protection of our people; -- Protection of the business over the short term; and -- Refining the Group's strategy for the future where necessary.
Across the Group, we took decisive actions to protect our people and the business in the short term. Initially, most of our people worked from home, successfully using technology to undertake their roles. All our offices are now open, and a limited number of staff have returned to them, but only where it is considered sufficiently safe and effective for them to do so. We continue to offer flexible home working solutions to the rest of our teams.
Due to reduced customer demand during the period, our staff have shown great flexibility in their work patterns, including voluntary short-time working and reduced remuneration. We have also used the support offered by governments as necessary, such as furloughing in the UK. The Board would like to thank the team for their understanding during this period.
Protection of the business over the short term has meant a significant and ongoing focus on the management of working capital. Measures undertaken include the temporary suspension of acquisition activities and capital expenditure, together with the withdrawal of the proposed 2019 final dividend.
Whilst seeking to ensure strong short-term liquidity, management has been careful not to disrupt long term customer and supplier relationships. Cash receipts from customers have generally remained at normal levels and we have been pleased that, overall, suppliers have shown flexibility where necessary. Historically the Group has built inventory in the first half of the year, however in the second quarter this year inventory management has been a high priority, and as a result the overall value of inventory at 30 June 2020 (excluding the impact of acquisitions) has reduced by GBP8 million since 31 December 2019.
The overall impact of actions taken to manage cashflow is that adjusted net debt has reduced by GBP12.1 million since 31 December 2019 to GBP41.2 million. Approximately half the reduction is accounted for by the excess net proceeds of the equity fund raise undertaken in February to, in part, fund the acquisition of Starin in the US. The balance is a result of our strong working capital management.
Trading performance
Group trading in much of the period was impacted significantly by Covid-19. As a result, Group revenue at GBP302.0 million for H1 2020 was 4.1% per cent below the same period last year (H1 2019: GBP314.8 million), with a decline in underlying revenue of 22.1%. On a constant currency basis, Group revenue reduced by 3.9%.
Mainly due to product mix, gross margins were 2.1 percentage points lower than the same period last year at 14.5% (H1 2019: 16.6%). Actions taken to reduce operating expenditure meant that the Group was profitable in the first half, but at a level significantly below the same period last year. H1 2020 adjusted operating profit was GBP4.1 million (H1 2019: GBP14.6 million), down 71.6% on a constant currency basis. The reported operating loss for the period was GBP0.7 million (H1 2019: GBP10.5 million profit).
As a specialist audio visual ("AV") distributor, a significant proportion of the products sold by the Group are installed into buildings. As countries entered lockdown, the ability of the Group's customers, primarily system integrators, to access sites became significantly curtailed, and many projects were delayed. While some of these projects have since been undertaken, and certain others are anticipated in the short to medium term, a number are now considered unlikely to be carried out or be revised to accommodate post-Covid-19 requirements.
This led to a reduction in revenue, which was felt in the first quarter and more significantly in the month of April, when revenue was less than 50% of budgeted levels. Revenue improved relative to the prior year in May and June and has continued as such in July and August, when Group revenue (including Starin) was ahead of the equivalent months in 2019.
The Board is encouraged by the speed of recovery but is cognisant that further improvement will be, in part, linked to the development of the pandemic across its various territories.
Revenue performance has varied by territory, product set, customer type and end user market.
Territories
The Group operates in eighteen different territories across the world. This geographical diversity has been an advantage as the impact of the crisis has varied by territory, however every country has been significantly impacted. In general, countries that experienced the most comprehensive initial lockdowns (such as France, Spain, Italy, Ireland and New Zealand) saw the most dramatic reduction in revenue initially, but the sharpest subsequent recovery as the lockdowns eased.
The Group's businesses in Germany has been so far a little less impacted than in other territories. Although initially impacted less than in other regions recent lockdowns have had a greater impact on the Asia Pacific region.
The impact on the US business has been similar to the rest of the Group overall.
The UK is the Group's single largest territory by revenue, profit and headcount, and addresses multiple markets with many different product sets. As such, general economic conditions tend to have a more significant impact on the UK business than in other countries where the Group has a relatively smaller market share. Like other regions, the impact on the UK business was initially significant but has continued to improve month on month since April. Importantly, the Board is confident that overall, the Group has not lost share to its competition in the UK or other territories.
Products
Certain product sets have been impacted in different ways depending on their use. A strong performance was achieved from technologies used to facilitate working from home. Such products include desktop monitors, printers and various associated accessories. Certain broadcast products have also performed well throughout the period, as organisations have had to invest in technologies which enable better remote communication. Unified communications solutions have performed well, and the Group has sought to maximise the skills and relationships it acquired through the acquisition of Starin in the US in February of this year. The integration of this business has gone well, which is particularly pleasing in the circumstances, and the Board remains encouraged by the significant opportunity that Starin and the Group's entry into the large North American market represents.
The Board believes that current market conditions highlight more than ever the need for manufacturers to use a high-quality specialist distributor such as Midwich. So far in 2020, the Group has launched an encouraging number of new vendor relationships, such as with Sonos, Netgear, Poly and Huddly and rolled out existing relationships with Barco, Biamp, Shure, DTEN and Absen into new technology areas (such as the Barco Clickshare range in the UK & Ireland and France) or geographical markets (such as launching Shure in France). The launch of new vendors has continued during the lockdown period as the Group continues to position its portfolio in exciting growth markets.
Customers
While the Group's system integrator customers initially struggled to undertake typically complex projects due to limited ability to access sites, sales to customers selling on-line were comparatively strong during the second quarter in particular, albeit that the margins on such sales tend to be lower than the Group's average.
End-user markets
The Board has noted the impact of the crisis on different end user markets. Markets which are largely government funded (such as education, healthcare and defence) have remained relatively strong, impacted mostly by the ability of customers to access sites. The corporate market has been more muted with end users mostly working from home and investment plans largely placed on hold.
Strategy
Whilst the impact of Covid-19 continues to create short term uncertainty, the Group's strategy remains focused on markets and product areas where it can leverage its value-add services, technical expertise, and sales and marketing skills. Services, skills and geographies are developed either in-house or through acquisition.
Using its market knowledge and skills, the Group provides its vendors with support to build and execute plans to grow market share. The Group supports its customers to win and then deliver successful projects.
During the period, the Group has continued to pursue its goals including building expertise and reach in the unified communications market and continuing to launch with new vendors and technologies (as noted above).
Historically, the Group has successfully used acquisitions both to enter new geographical markets and to add both expertise and new product areas. Once acquired and integrated, businesses are supported to grow organically and increase profitable market share. The Group put acquisition activity on hold since the start of the Covid-19 pandemic, however, we continue to pursue a strong pipeline of opportunities and in the last few months we have resumed conversations with certain strategic targets.
The Board is supporting actions to prepare for the post-Covid-19 recovery. During the second half of 2020 these include resuming the roll out of the Group's new Enterprise Resource Planning system and ensuring that the profile of inventory is appropriate at 31 December 2020.
Acquisitions
The Group completed two acquisitions at the beginning of 2020.
On 6 February 2020, the Group acquired 100% of the share capital of Starin Marketing Inc ("Starin"), a specialist value-add AV distributor in the US . Based in Chesterton, Indiana, the acquisition of Starin represents the Group's entry into the US market, the largest in the world. Starin has a particular strength in technical video and unified communications technologies. Whilst Starin's market and financial performance have also been affected by the global pandemic, we have been pleased with its robust response to Covid-19. We have also made substantial progress on post-acquisition integration and have been able to leverage Starin's historical vendor relationships to strengthen the wider Group's product offering, especially in unified communications. Our work with the Starin team has reinforced the Board's view that significant growth opportunities exist for the Group in the North American market.
On 13 March 2020, the Group acquired the trade and assets of Vantage Systems Pty Limited ("Vantage"). Vantage specialises in unified communications and is based in Melbourne, Australia. The Vantage acquisition strengthens our service and support solutions, and integration is progressing well.
Issue of equity
On 7 February 2020, the Group raised net proceeds of GBP38.9m through a placing of 7,944,800 shares with existing and new shareholders. The net proceeds of the placing were used to repay short term debt facilities drawn down in relation to the acquisition of Starin and provide additional headroom to fund further targeted strategic acquisitions in the future.
Outlook
Market conditions for the Group's products and services are likely to remain significantly impacted by the development of the pandemic for the remainder of 2020. In the short term, changes in government restrictions and the associated business impact are expected to result in volatility in demand and product mix. This uncertainty makes forecasting the Group's profitability in the coming months challenging.
According to recent research by industry trade body AVIXA, the global market for AV is expected to contract by around 8% in 2020, grow in 2021 and exceed its 2019 level in 2022. Over the five years to 2025 the global market is expected to grow at a compound annual rate of 5.8%. The Board expects short term uncertainty to continue into 2021, but it continues to believe that both the Group and the wider AV industry are well positioned for long term growth.
Should the recent positive trading momentum continue for the rest of this year, trading performance in the second half of the year should be better than in the first half, with H2 2020 revenue expected to be similar to that reported in H2 2019, albeit including the benefit of the Starin acquisition in the current year. It is likely that product mix will continue to adversely affect margins for the rest of the year and that the growth in profitability will reflect the impact of certain government support measures for employment, particularly in the UK, being scaled back later in 2020. Accordingly, the Board currently expects H2 2020 adjusted operating profit to be moderately ahead of the first half.
Whilst continuing to ensure the ongoing financial strength of the business, the Board is now putting increasing focus on ensuring the Group is best able to capitalise on trading conditions in 2021 and thereby continue the long-term momentum generated up to 2019.
Regional highlights
Six months ended
30 June 2020 30 June Total growth Growth Organic
2019 (1) at constant growth (1)
currency %
(1)
GBPm GBPm % %
Revenue
UK & Ireland 103.1 154.0 (33.1%) (33.1%) (33.1%)
Continental
Europe 127.2 138.0 (7.8%) (8.0%) (13.1%)
Asia Pacific 21.7 22.8 (4.5%) (0.7%) (1.8%)
North America 50.0 - - - -
Total Global 302.0 314.8 (4.1%) (3.9%) (22.1%)
Gross profit
margin
UK & Ireland 15.5% 17.8% (2.3) ppts
Continental
Europe 14.5% 15.0% (0.5) ppts
Asia Pacific 15.7% 18.1% (2.4) ppts
North America 11.9% - -
Total Global 14.5% 16.6% (2.1) ppts
Adjusted operating
profit(2)
UK & Ireland 2.1 9.8 (78.6%) (78.6%)
Continental
Europe 2.0 5.0 (59.3%) (58.9%)
Asia Pacific 0.4 1.2 (70.5%) (68.8%)
North America 0.7 - - -
Group costs (1.1) (1.4)
Total Global 4.1 14.6 (71.9%) (71.6%)
Adjusted finance
costs (0.9) (0.9)
Adjusted profit
before tax(2) 3.2 13.7 (76.6%) (76.2%)
(1) For the avoidance of doubt percentages shown in brackets represent a decline on the prior period
(2) Definitions of the alternative performance measures are set out in Note 2
All percentages referenced in this section are at constant currency unless otherwise stated
UK & Ireland
Revenue in the UK & Ireland decreased by 33.1% in the period. Trading was impacted by the Covid-19 pandemic as the majority of customers had projects suspended and access to end user sites restricted. The UK & Ireland business acted quickly to refocus on vertical markets that were performing better (such as education and healthcare) and products for streaming and home working use. However, this change in mix, away from complex value added solutions, had a negative impact on gross margins.
The UK & Ireland segment's gross profit margin fell to 15.5%, a 2.3 percentage point decrease on H1 2019.
During the period the UK & Ireland was able to limit the impact of Covid-19 on both its liquidity and operating costs from significant flexibility shown by both its vendors and employees including reductions and delays in stock purchasing and voluntary salary reductions. The business appreciated the government furlough scheme which has allowed the preservation of many jobs. Overall, approximately GBP1.3 million of furlough benefit was received towards staff costs in H1 2020.
Adjusted operating profit decreased by 78.6% in the UK & Ireland.
Continental Europe
Revenue in Continental Europe decreased by 8.0% in the period. Each country in the region has been impacted by the pandemic to different extents, largely based on the local product focus and the varying degrees of lockdown. The strongest performance was seen in Germany which benefited from both strong sales into the education sector and high demand for streaming solutions. Following a strict lockdown in France, Sidev has seen trading recover quickly, although not yet to pre-Covid-19 levels. There has been a slower recovery in Spain and Italy as these businesses have a relatively high mix of complex installations that require site access.
Organic revenue declined by 13.1% with the difference between reported and organic growth being the impact of acquisitions (Prase and AV Partners) completed part way through H1 2019. The region's gross profit margin was 0.5% lower than H1 2019 mainly due to changes in both country and product mix.
Adjusted operating profit in Continental Europe fell by 58.9%. Whilst our teams in the region displayed great flexibility and there was some benefit from part time working, there was generally less benefit from direct government support in the region.
Asia Pacific
Asia Pacific trading was the least affected across the Group, with revenues largely in line with the prior year at (0.7% lower). The business benefited from lighter lockdown restrictions in Australia during the period, although it was also impacted by the product mix changes seen in other regions. The much smaller New Zealand business was closed for a period but is now fully reopened.
The Asia Pacific gross profit margin of 15.7%, was 2.4 percentage points below H1 2019, mainly due to a greater relative impact from Covid-19 on value added projects.
Adjusted operating profit in Asia Pacific at GBP0.4 million (H1 2019: GBP1.2 million) was impacted by the reduction in gross profit. The region did not take material advantage of any government support.
North America
The Group's US business, Starin Marketing, was acquired on 6 February 2020. The integration of this business has progressed well, particularly considering the practical limitations imposed by the Covid-19 crisis. Overall, the US market has been impacted similarly to the rest of the Group. Starin's business may be broadly split into two. Firstly, an audio fulfilment business which operates at a lower than Group average margin, and secondly a core technical AV business which includes a strong specialisation in unified communictions technologies.
Group costs
Group costs for the half year were GBP1.1 million (H1 2019: GBP1.4 million). The decrease reflects salary reductions taken by the Board and other central staff and a small amount of furlough benefit.
Operating profit
Adjusted operating profit for the period at GBP4.1 million (H1 2019 GBP14.6 million) is stated before the impact of acquisition related expenses of GBP0.4 million (H1 2019: GBP0.3 million), share based payments and associated employer taxes of GBP1.3 million (H1 2019: GBP1.5 million) and amortisation of acquired intangibles of GBP3.1 million (H1 2019: GBP2.3 million). The reported operating loss for the period was GBP0.7 million (H1 2019: GBP10.5 million profit).
Finance costs
Adjusted finance costs for the period were an expense of GBP0.9 million (H1 2019: GBP0.9 million).
Reported finance costs for the period were GBP1.8 million (H1 2019: GBP0.8 million income). The adjustments to finance costs include foreign exchange differences on borrowings for acquisitions of GBP0.4 million (H1 2019: GBP0.1 million), movements in deferred and contingent considerations of GBP0.1 million (H1 2019: GBP0.9 million), and movements in put option liabilities over non-controlling interests of GBP0.3 million (H1 2019: GBP0.9 million).
Taxation
The reported tax charge for the period was GBP0.3 million (H1 2019: GBP2.3 million). The adjusted effective tax rate for the period was 24.9% (H1 2019: 23.8%) calculated based on the adjusted tax charge for the period divided by adjusted profit before tax.
Cash flows and net debt
In response to the uncertainty created by the Covid-19 pandemic, the Group took a number of actions to preserve cash, including:
-- the withdrawal of the 2019 proposed final dividend; -- the suspension of M&A activity and the deferral of certain put and call options; -- stopping capital expenditure; -- deferral of certain tax payments; -- tighter control over inventory purchases; -- use of government support measures; and -- tighter management of operating expenses
These actions helped the Group achieve an adjusted cash inflow from operations of GBP9.0 million (H1 2019: GBP4.8 million). The first half of the year is typically a period of working capital investment for the Group and the above actions reversed a net investment in the first few months of the period with a significant cash inflow later in the half.
Adjusted net debt (Excluding leases liabilities), was GBP41.2 million at 30 June 2020 (GBP53.9 million at 30 June 2019).
The adoption of IFRS 16 in 2019 resulted in an increase in recognised lease liabilities. Lease liabilities excluded from adjusted net debt totalled GBP17.9m at 30 June 2020 (GBP17.4m 30 June 2019). Total net debt was GBP59.1m at 30 June 2020 (GBP71.3m at 30 June 2019).
Adjusted net debt was favourably impacted by the excess net proceeds of the equity placing undertaken in February 2020 to, in part, fund the acquisition of Starin in the US. This resulted in a net debt reduction of GBP5.3 million being the net placing proceeds of GBP38.9 million less Starin purchase price of GBP21.0 million, associated transaction costs GBP0.3 million and net debt acquired of GBP12.3 million.
In January 2020, the Group increased its revolving credit facility to GBP50 million (GBP20 million at 31 December 2019) to support its acquisition strategy. This facility has an adjusted net debt to adjusted EBITDA covenant ratio of 2.75 times calculated on a historic 12 month basis. The strong cash performance in H1 2020 resulted in a ratio of less than 1.4 times at 30 June 2020. The Group's principal lender has been very supportive during the Covid-19 crisis and has offered to relax this covenant for an appropriate period if necessary, details of any such changes will be disclosed once finalised.
Most of the Group's other borrowing facilities are to provide working capital financing. During the period, the Group arranged further flexibility in working capital financing including the addition of flexible term loans, inventory backed facilities and extended overdrafts in several countries. Whilst the use of such facilities has been limited, the additional headroom has enhanced the Group's access to liquidity. As at 30 June 2020, the Group has access to total facilities of over GBP185 million.
The Group has various instruments to hedge certain exchange rate and interest rate exposures. These include borrowing in Euros to finance European acquisitions and using financial instruments to fix part of the Group's interest charges. These instruments are marked to market at the end of each reporting period, with the change in valuation recognised in the income statement. Given any amounts recognised generally arise from market movements and accordingly bear no direct relation to the Group's underlying performance any gains or losses have been excluded from adjusted profit measures.
Dividend
After much consideration, as a result of the clear necessity to preserve cashflows at the start of the Covid-19 pandemic, the Board took the difficult decision to withdraw the proposed 2019 final dividend and continues to believe it is not appropriate to declare an interim dividend for the period (H1 2019: 4.85 pence per share).
The Board is fully cognisant of the importance of dividends to its shareholders. As such, the Board will continue to monitor the Group's performance and outlook with a view to reinstating dividend payments as soon as practicable.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended 30 June 2020
Note 30 June 30 June 31 December 2019
2020 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Revenue 302,017 314,842 686,240
Cost of sales (258,211) (262,600) (573,133)
---------- ---------- -----------------
Gross profit 43,806 52,242 113,107
Distribution costs (32,039) (32,804) (68,624)
Administrative expenses (13,343) (10,834) (23,132)
Other operating income 905 1,862 3,583
---------- ---------- -----------------
Operating (loss)/profit (671) 10,466 24,934
Adjusted operating profit 4,118 14,630 33,462
Costs of acquisitions (359) (306) (356)
Share based payments (1,378) (1,275) (2,874)
Employer taxes on share based payments 56 (280) (427)
Amortisation of brands, customer and supplier relationships (3,108) (2,303) (4,871)
-------------------------------------------------------------- ----- ---------- ---------- -----------------
(671) 10,466 24,934
Finance income 2 19 66
Finance costs 5 (1,855) 797 (1,219)
---------- ---------- -----------------
(Loss)/profit before taxation (2,524) 11,282 23,781
Taxation (278) (2,249) (5,581)
---------- ---------- -----------------
(Loss)/profit after taxation (2,802) 9,033 18,200
========== ========== =================
(Loss)/profit for the financial period/year attributable to:
The Company's equity shareholders (2,824) 8,753 17,182
Non-controlling interests 22 280 1,018
---------- ---------- -----------------
(2,802) 9,033 18,200
========== ========== =================
Basic earnings per share 3 (3.29)p 11.06p 21.67p
Diluted earnings per share 3 (3.24)p 10.90p 21.31p
Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2020
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
(Loss)/profit for the period/financial
year (2,802) 9,033 18,200
Other comprehensive income
Items that will not be reclassified subsequently
to profit or loss:
Actuarial gains and (losses) on retirement
benefit obligations - - (386)
Items that will be reclassified subsequently
to profit or loss:
Net (loss)/gain on net investment hedge (953) - 194
Foreign exchange gains/(losses) on consolidation 4,819 299 (3,115)
---------- ---------- ------------
Other comprehensive income for the financial
period/year, net of tax 3,866 299 (3,307)
Total comprehensive income for the period/financial
year 1,064 9,332 14,893
========== ========== ============
Attributable to:
Owners of the Parent Company 552 8,983 14,171
Non-controlling interests 512 349 722
1,064 9,332 14,893
========== ========== ============
Unaudited consolidated statement of financial position as at 30 June 2020
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 15,417 13,655 13,326
Intangible assets 47,443 33,256 31,974
Right of use assets 16,450 16,615 15,949
Property, plant and equipment 12,049 10,982 12,086
Deferred tax assets 2,452 2,147 2,169
---------- ---------- ------------
93,811 76,655 75,504
Current assets
Inventories 110,633 90,599 88,691
Trade and other receivables 92,465 107,258 104,100
Derivative financial instruments - 116 -
Cash and cash equivalents 20,328 16,201 13,015
---------- ---------- ------------
223,426 214,174 205,806
Current liabilities
Trade and other payables (103,160) (112,667) (106,342)
Derivative financial instruments (1,014) - (132)
Put option liabilities over non-controlling
interests (3,806) (2,302) (3,490)
Deferred and contingent considerations (6,423) (5,806) (4,133)
Borrowings and financial liabilities (37,968) (46,638) (46,529)
Current tax (2,441) (3,685) (2,331)
---------- ---------- ------------
(154,812) (171,098) (162,957)
Net current assets 68,614 43,076 42,849
---------- ---------- ------------
Total assets less current liabilities 162,425 119,731 118,353
Non-current liabilities
Trade and other payables (664) (641) (665)
Put option liabilities over non-controlling
interests (4,041) (4,271) (3,799)
Deferred and contingent considerations (490) (2,869) (2,796)
Borrowings and financial liabilities (41,445) (40,846) (36,466)
Deferred tax liabilities (6,736) (7,324) (6,850)
Other provisions (2,615) (1,607) (2,484)
---------- ---------- ------------
(55,991) (57,558) (53,060)
Net assets 106,434 62,173 65,293
========== ========== ============
Equity
Share capital 886 799 799
Share premium 68,193 27,752 28,225
Share based payment reserve 4,024 3,100 3,998
Investment in own shares (8) (7) (5)
Retained earnings 29,042 27,604 31,867
Translation reserve 3,375 2,095 (954)
Hedging reserve (759) - 194
Put option reserve (6,329) (6,329) (6,329)
Capital redemption reserve 50 50 50
Other reserve 150 150 150
---------- ---------- ------------
Equity attributable to owners of
Parent Company 98,624 55,214 57,995
Non-controlling interests 7,810 6,959 7,298
Total equity 106,434 62,173 65,293
========== ========== ============
Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2020
For the period ended 30 June 2020
Equity
Investment attributable
Share Share in own Retained Other to owners of Non-controlling
capital premium shares earnings reserves the Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(note 6 ) (note 7 )
Balance at 1
January 2020 799 28,225 (5) 31,867 (2,891) 57,995 7,298 65,293
Loss for the
period - - - (2,824) - (2,824) 22 (2,802)
Other
comprehensive
income - - - - 3,376 3,376 490 3,866
---------------- --------
Total
comprehensive
income for
the year - - - (2,824) 3,376 552 512 1,064
Shares issued
(note 6 ) 87 38,822 (7) - - 38,902 - 38,902
Share based
payments - - - - 1,378 1,378 - 1,378
Deferred tax
on share
based
payments - - - - (203) (203) - (203)
Share options
exercised - 1,146 4 (1) (1,149) - - -
---------- --------- ----------- ---------- ---------- ------------- ---------------- --------
Balance at 30
June 2020
(unaudited) 886 68,193 (8) 29,042 511 98,624 7,810 106,434
========== ========= =========== ========== ========== ============= ================ ========
For the period ended 30 June 2019
Equity
Investment attributable
Share Share in own Retained Other to owners of Non-controlling
capital premium shares earnings reserves the Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(note 6 ) (note 7 )
Balance at 1
January 2019 794 25,855 (5) 27,535 (630) 53,549 4,570 58,119
Profit for the
period - - - 8,753 - 8,753 280 9,033
Other
comprehensive
income - - - - 230 230 69 299
---------------- --------
Total
comprehensive
income for the
year - - - 8,753 230 8,983 349 9,332
Shares issued
(note 6 ) 2 - (2) - - - - -
Share based
payments - - - - 1,275 1,275 - 1,275
Deferred tax on
share based
payments - - - - 16 16 - 16
Share options
exercised - 24 - 4 (28) - - -
Acquisition of
subsidiary
(note 8 ) - - - - (2,886) (2,886) 2,883 (3)
Acquisition of
non-controlling
interest (note
9 ) 3 1,873 - (246) 1,089 2,719 (843) 1,876
Dividends paid - - - (8,442) - (8,442) - (8,442)
---------- -------- ----------- --------- ---------- ------------- ---------------- --------
Balance at 30
June 2019
(unaudited) 799 27,752 (7) 27,604 (934) 55,214 6,959 62,173
========== ======== =========== ========= ========== ============= ================ ========
For the year ended 31 December 2019
Equity
Investment attributable
Share Share in own Retained Other to owners of Non-controlling
capital premium shares earnings reserves the Parent interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(note 6 ) (note 7 )
Balance at 1
January 2019 794 25,855 (5) 27,535 (630) 53,549 4,570 58,119
Profit for the
year - - - 17,182 - 17,182 1,018 18,200
Other
comprehensive
income - - - (386) (2,625) (3,011) (296) (3,307)
---------------- ---------
Total
comprehensive
income for the
year - - - 16,796 (2,625) 14,171 722 14,893
Shares issued
(note 6 ) 2 - (2) - - - - -
Share based
payments - - - - 2,874 2,874 - 2,874
Deferred tax on
share based
payments - - - - (128) (128) - (128)
Share options
exercised - 497 2 86 (585) - - -
Acquisition of
subsidiary
(note 8 ) - - - - (2,886) (2,886) 2,884 (2)
Acquisition of
non-controlling
interest (note
9 ) 3 1,873 - (245) 1,089 2,720 (843) 1,877
Dividends paid - - - (12,305) - (12,305) (35) (12,340)
---------- -------- ----------- --------- ---------- ------------- ---------------- ---------
Balance at 31
December 2019 799 28,225 (5) 31,867 (2,891) 57,995 7,298 65,293
========== ======== =========== ========= ========== ============= ================ =========
Unaudited consolidated cashflow statement for 6 months ended 30 June 2020
30 June 30 June 31 December
2020 2019 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit before tax (2,524) 11,282 23,781
Depreciation 2,898 2,444 5,425
Amortisation 3,158 2,385 5,023
Gain on disposal of assets 3 11 50
Share based payments 1,378 1,275 2,874
Foreign exchange gains (171) (193) (583)
Finance income (2) (19) (66)
Finance costs 1,855 (797) 1,219
---------- ---------- ------------
Profit from operations before changes
in working capital 6,595 16,388 37,723
Decrease/(increase) in inventories 8,301 (7,588) (5,110)
Decrease/(increase) in trade and other
receivables 32,714 (12,145) (7,686)
(Decrease)/increase in trade and other
payables (39,146) 7,706 1,293
---------- ---------- ------------
Cash inflow from operations 8,464 4,361 26,220
Income tax paid (767) (3,016) (8,844)
---------- ---------- ------------
Net cash inflow from operating activities 7,697 1,345 17,376
Cash flows from investing activities
Acquisition of businesses net of cash
acquired (18,393) (8,722) (10,091)
Deferred and contingent considerations
paid (2,951) (2,955) (5,517)
Purchase of intangible assets (640) (979) (1,977)
Purchase of plant and equipment (981) (3,010) (5,793)
Proceeds on disposal of plant and equipment 137 326 417
Interest received 2 19 66
---------- ---------- ------------
Net cash outflow from investing activities (22,826) (15,321) (22,895)
Cash from financing activities
Issue of shares net of issue costs 38,907 - -
Dividends paid - (8,442) (12,340)
Invoice financing (outflows)/inflows (25,950) (4,095) 6,785
Proceeds from borrowings 11,946 24,976 13,099
Repayment of loans (1,078) (1,293) (1,053)
Interest paid (1,005) (962) (1,679)
Interest on leases (167) (173) (379)
Capital element of lease payments (1,225) (969) (2,627)
---------- ---------- ------------
Net cash inflow/(outflow) from financing
activities 21,428 9,042 1,806
Net increase/(decrease) in cash and
cash equivalents 6,299 (4,934) (3,713)
Cash and cash equivalents at beginning
of period/year 11,497 16,357 16,357
Effects of exchange rate changes 2,532 267 (1,147)
Cash and cash equivalents at end of
period/year 20,328 11,690 11,497
========== ========== ============
Comprising:
Cash at bank 20,328 16,201 16,357
Bank overdrafts - (4,511) (1,147)
20,328 11,690 11,497
======= ======== ========
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2020 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 2019.
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 2019. The audited financial statements for the year ended 31 December 2019 complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").
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 2019, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.
Use of alternative performance measures
The Group has defined certain measures that it uses to understand and manage performance. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. These non-GAAP measures are not intended to be a substitute for any IFRS measures of performance, but management has included them as they consider them to be key measures used within the business for assessing the underlying performance.
Growth at constant currency: This measure shows the year on year change in performance after eliminating the impact of foreign exchange movement, which is outside of management's control.
Organic growth: This is defined as growth at constant currency growth excluding acquisitions until the first anniversary of their consolidation.
Adjusted operating profit: Adjusted operating profit is disclosed to indicate the Group's underlying profitability. It is defined as profit before acquisition related expenses, share based payments and associated employer taxes and amortisation of brand, customer and supplier relationship intangible assets.
Adjusted EBITDA: This represents operating profit before acquisition related expenses, share based payments and associated employer taxes, depreciation and amortisation.
Adjusted profit before tax: This is profit before tax adjusted for acquisition related expenses, share based payments and associated employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements.
Adjusted profit after tax: This is profit after tax adjusted for acquisition related expenses, share based payments and associated employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements and the tax thereon.
Adjusted EPS: This is adjusted profit after tax less profit, amortisation of brand, customer and supplier relationship intangible assets and tax thereon due to non-controlling interests divided by the weighted number of shares outstanding.
Adjusted net debt: This is net debt excluding leases.
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 period/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
2020 2019 2019
(Loss)/profit attributable to equity holders
of the Parent Company (GBP'000) (2,824) 8,753 17,182
Weighted average number of shares outstanding 85,882,336 79,078,793 79,275,480
Dilutive (potential dilutive) effect of
share options 1,361,945 1,175,685 1,334,953
----------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 87,244,281 80,254,478 80,610,433
=========== =========== ===========
Basic earnings per share (3.29)p 11.06p 21.67p
=========== =========== ===========
Diluted earnings per share (3.24)p 10.90p 21.31p
=========== =========== ===========
4. Segmental reporting
UK & Continental Asia North Other Total
Ireland Europe Pacific America
30 June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ------------ ------------ --------- ------------- ----------
Revenue 103,089 127,180 21,754 49,994 - 302,017
Gross profit 15,998 18,452 3,419 5,937 - 43,806
Gross profit % 15.5% 14.5% 15.7% 11.9% - 14.5%
Adjusted
operating
profit 2,087 2,060 353 656 (1,038) 4,118
Cost of
acquisitions - - - (359) (359)
Share based
payments (606) (465) (121) - (186) (1,378)
Employer taxes
on share
based payments 15 34 3 - 4 56
Amortisation of
brand,
customer and
supplier
relationships (1,279) (1,135) (133) (561) - (3,108)
Operating
profit/(loss) 217 494 102 95 (1,579) (671)
---------------- ----------- ------------ ------------ --------- ------------- ----------
Net interest
expense (1,853)
----------
(Loss)/profit
before tax (2,524)
==========
Other segmental information
UK & Continental Asia North Other Total
Ireland Europe Pacific America
June 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 94,565 143,447 20,093 58,769 363 317,237
Segment
liabilities (59,291) (99,411) (14,848) (36,927) (326) (210,803)
---------------- ----------- ------------ ------------ --------- ------------- ----------
Segment net
assets 35,274 44,036 5,245 21,842 37 106,434
Depreciation 1,342 1,236 131 189 - 2,898
Amortisation 1,292 1,164 141 561 - 3,158
Rest of
UK world Total
Other segmental information GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------ ------------------------ ----------
Non-current assets 27,888 65,923 93,811
UK & Continental Asia Other Total
Ireland Europe Pacific
June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ------------ ------------ --------- ------------- ----------
Revenue 154,078 137,975 22,789 - 314,842
Gross profit 27,406 20,714 4,122 - 52,242
Gross profit % 17.8% 15.0% 18.1% - 16.6%
Adjusted
operating
profit 9,760 5,057 1,195 (1,382) 14,630
Cost of
acquisitions - - - (306) (306)
Share based
payments (535) (399) (98) (243) (1,275)
Employer taxes
on share
based payments (83) (145) (9) (43) (280)
Amortisation of
brand,
customer and
supplier
relationships (1,277) (888) (138) - (2,303)
Operating
profit 7,865 3,625 950 (1,974) 10,466
---------------- ----------- ------------ ------------ --------- ------------- ----------
Net interest
received 816
----------
Profit before
tax 11,282
==========
Other segmental information
UK & Continental Asia Other Total
Ireland Europe Pacific
June 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 127,048 143,751 19,655 375 290,829
Segment
liabilities (98,282) (114,017) (16,007) (350) (228,656)
---------------- ----------- ------------ ------------ --------- ------------- ----------
Segment net
assets 28,766 29,734 3,648 25 62,173
Depreciation 1,198 1,057 189 - 2,444
Amortisation 1,323 916 146 - 2,385
Rest of
UK world Total
Other segmental information GBP'000 GBP'000 GBP'000
----------------------------- ------------ ------------ ------------------------ ----------
Non-current assets 28,624 48,031 76,655
31 December 2019 UK Continental Asia Other Total
& Ireland Europe Pacific
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- ------------ --------- --------- ------------
Revenue 314,627 320,990 50,623 - 686,240
Gross profit 55,328 48,805 8,974 - 113,107
Gross profit % 17.6% 15.2% 17.7% - 16.5%
Adjusted operating profit 19,850 14,108 2,716 (3,212) 33,462
Costs of acquisitions - - - (356) (356)
Share based payments (1,230) (948) (235) (461) (2,874)
Employer taxes on share based payments (136) (201) (17) (73) (427)
Amortisation of brands, customer
and supplier relationships (2,558) (2,039) (274) - (4,871)
Operating profit 15,926 10,920 2,190 (4,102) 24,934
------------------------------------------- ----------- ------------ --------- --------- ------------
Interest (1,153)
------------
Profit before tax 23,781
============
UK & Continental Asia Other Total
Ireland Europe Pacific
31 December 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment assets 113,690 143,859 23,633 128 281,310
Segment liabilities (86,535) (109,427) (19,644) (411) (216,017)
------------------------------------------- ----------- ------------ --------- --------- ------------
Segment net assets 27,155 34,432 3,989 (283) 65,293
Depreciation 2,562 2,412 451 - 5,425
Amortisation 2,637 2,095 291 - 5,023
Rest of
UK world Total
Other segmental information GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ----------------------- --------- ----------
Non-current assets 29,112 46,392 75,504
5. Finance costs
December
June 2020 June 2019 2019
GBP'000 GBP'000 GBP'000
Interest on overdraft and invoice discounting 574 535 1,176
Interest on leases 167 172 379
Interest on loans 351 216 517
Fair value movements on foreign exchange derivatives (194) (8) 246
Other interest costs 2 - 2
Fair value movements on derivatives for borrowings 1,154 129 42
Foreign exchange gains on borrowings for acquisitions (681) - (146)
Interest, foreign exchange and other finance
costs of deferred and contingent considerations 107 (924) (949)
Interest, foreign exchange and other finance
costs of put option liabilities 375 (917) (48)
1,855 (797) 1,219
=========== ============ =========
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
June 2020 June 2019 December 2019
Classed as equity: Number GBP'000 Number GBP'000 Number GBP'000
Issued and fully paid
ordinary shares of
GBP0.01 each
Opening balance 79,973,412 799 79,448,200 794 79,448,200 794
Shares issued 8,631,300 87 525,212 5 525,212 5
Closing balance 88,604,712 886 79,973,412 799 79,973,412 799
=========== ======== =========== ======== =========== ========
During the period Midwich Group plc issued 7,944,800 shares in order to repay short term debts and fund the Starin acquisition as well as 686,500 shares (2019: 225,000) into an employee benefit trust. During the prior period Midwich Group plc also issued 300,212 shares in order to settle the put option liability and acquire the remaining shares in Holdan Limited.
Employee benefit trusts
The Group's employee benefit trusts were allocated 480,700 Ordinary Shares in 2016 and a further 225,000 shares in 2019 and a further 686,500 shares in the period. As at 30 June 2020, 571,200 (2019: 7,700) shares had been distributed employees on the exercise of share options leaving 821,000 Ordinary Shares held in the Group's employee benefit trusts as at 30 June 2020 (2019: 698,000).
A reconciliation of LTIP option movements during the current and comparative period, and the year to 31 December 2019 is as follows:
Six months Six months Twelve
to June to June months
2020 2019 to December
2019
Outstanding at 1 January 1,976,250 1,410,900 1,410,900
Granted - 50,000 705,050
Lapsed (10,250) (9,400) (16,200)
Exercised (253,000) - (123,500)
Outstanding at period end 1,713,000 1,451,500 1,976,250
=========== =========== =============
A reconciliation of SIP option movements during the current and comparative period, and the year to 31 December 2019 is as follows:
Six months Six months Twelve
to June to June months
2020 2019 to December
2019
Outstanding at 1 January 265,100 284,300 284,300
Granted - - 107,400
Lapsed (7,900) (6,100) (21,100)
Exercised (89,200) (7,700) (105,500)
Outstanding at period end 168,000 270,500 265,100
=========== =========== =============
7. Other reserves
Movement in other reserves for the year ended 30 June 2020
Share based Translation Hedging Put option Capital Other Total
payment reserve reserve reserve redemption reserve
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2020 3,998 (954) 194 (6,329) 50 150 (2,891)
Other
comprehensive
income - 4,329 (953) - - - 3,376
------------ ------------ ------------- ------------- ------------ ------------- --------
Total
comprehensive
income for
the period - 4,329 (953) - - - 3,376
Share based
payments 1,378 - - - - - 1,378
Deferred tax
on share
based
payments (203) - - - - - (203)
Share options
exercised (1,149) - - - - - (1,149)
------------ ------------ ------------- ------------- ------------ ------------- --------
Balance at 30
June 2020
unaudited 4,024 3,375 (759) (6,329) 50 150 511
============ ============ ============= ============= ============ ============= ========
Movement in other reserves for the year ended 30 June 2019
Share based Translation Put option Capital Other reserve Total
payment reserve reserve redemption
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2019 1,837 1,865 (4,532) 50 150 (630)
Other
comprehensive
income - 230 - - - 230
--------------- --------------- ---------------- --------------- -------------- --------
Total
comprehensive
income for the
period - 230 - - - 230
Share based
payments 1,275 - - - - 1,275
Deferred tax on
share based
payments 16 - - - - 16
Share options
exercised (28) - - - - (28)
Acquisition of
subsidiary
(note 8 ) - - (2,886) - - (2,886)
Acquisition of
non-controlling
interest (note
9 ) - - 1,089 - - 1,089
--------------- --------------- ---------------- --------------- -------------- --------
Balance at 30
June 2019
unaudited 3,100 2,095 (6,329) 50 150 (934)
=============== =============== ================ =============== ============== ========
Movement in other reserves for the year ended 31 December 2019
Share based Translation Hedging Put option Capital Other Total
payment reserve reserve reserve redemption reserve
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2019 1,837 1,865 - (4,532) 50 150 (630)
Other
comprehensive
income - (2,819) 194 - - - (2,625)
------------ ------------ ------------ ------------ ------------ ------------- --------
Total
comprehensive
income for the
year - (2,819) 194 - - - (2,625)
Share based
payments 2,874 - - - - - 2,874
Deferred tax on
share based
payments (128) - - - - - (128)
Share options
exercised (585) - - - - - (585)
Acquisition of
subsidiary
Error!
Reference
source not
found. ) - - - (2,886) - - (2,886)
Acquisition of
non-controlling
interest - - - 1,089 - - 1,089
------------ ------------ ------------ ------------ ------------ ------------- --------
Balance at 31
December 2019 3,998 (954) 194 (6,329) 50 150 (2,891)
============ ============ ============ ============ ============ ============= ========
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 Proportion Fair value
acquisition acquired of consideration
(%) GBP'000
Distribution of audio
Starin Marking visual products to trade 6 February
Inc customers 2020 100% 20,961
Distribution of audio
visual products to trade 17 January
MobilePro AG customers 2019 100% 882
Distribution of professional
Prase Engineering audio products to trade 31 January
SpA customers 2019 80% 11,534
Distribution of audio
visual products to trade
AV Partner AS customers 3 May 2019 100% 5,467
Entertainment
Equipment Supplies Distribution of lighting
SL products to trade customers 1 July 2019 100% 3,245
In addition to the above on the 28 February 2020 the Group exchanged a fair value consideration of GBP885k to acquire certain trade and assets of Vantage Systems Pty Limited, a Company registered in Australia.
2020 acquisitions
Fair value of consideration transferred 2020 Starin Vantage
GBP'000 GBP'000
Cash 18,872 506
Deferred consideration 2,089 379
------- -------
Total 20,961 885
======= =======
Acquisition costs of GBP327k in relation to the acquisition of Starin and GBP32k in relation to the Vantage acquisition of trade and assets were expensed to the income statement during the period ended 30 June 2020.
Fair value of acquisitions 2020 Starin Vantage
GBP'000 GBP'000
Non-current assets
Goodwill 520 960
Intangible assets - brands 4,065 -
Intangible assets - customer relationships 2,884 -
Intangible assets - supplier relationships 9,189 -
Intangible assets - software 82 -
Right of use assets 743 -
Plant and equipment 515 5
Deferred tax 3 -
-------- -------
18,001 965
Current assets
Inventories 30,243 -
Trade and other receivables 20,951 129
Cash and cash equivalents 985 -
-------- -------
52,179 129
Current liabilities
Trade and other payables (35,885) (209)
Borrowings and financial liabilities (12,728) -
-------- -------
(48,613) (209)
Non-current liabilities
Borrowings and financial liabilities (606) -
-------- -------
(606) -
Fair value of net assets acquired attributable to equity shareholders of the Parent Company 20,961 885
======== =======
Goodwill acquired in 2020 relates to the workforce, synergies and sales know how. Goodwill arising on the Starin acquisition has been allocated to the North America segment, goodwill arising on the Vantage trade and assets acquisition has been allocated to the Asia Pacific segment.
Gross contractual amounts of trade and other receivables acquired in 2020 were GBP21,977k, with bad debt provisions of GBP897k.
Net cash outflow on acquisition of subsidiaries 2020
Starin Vantage
GBP'000 GBP'000
Consideration paid in cash 18,872 506
Less: cash and cash equivalent balances acquired (985) -
Net cash outflow 17,887 506
======= =======
Plus: borrowings acquired 13,334 -
------- -------
Net debt outflow 31,221 506
======= =======
2019 acquisitions
Fair value of consideration transferred MobilePro Prase AV Partner EES
2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash 882 6,108 3,225 2,189
Deferred contingent consideration - 5,426 2,242 1,056
--------- ------- ---------- -------
Total 882 11,534 5,467 3,245
========= ======= ========== =======
Acquisition costs of GBP116k in relation to the acquisition of Prase, GBP115k in relation to the acquisition of AV Partner, GBP78k in relation to the acquisition of EES and GBP47k in relation to other acquisitions not completed during the year were expensed to the income statement during the year ended 31 December 2019.
On acquisition of Prase the Group recognised GBP2,886k in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest.
Fair value of acquisitions 2019 MobilePro Prase AV Partner EES
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 451 371 1,195 131
Intangible assets - brands 535 382 142 81
Intangible assets - customer relationships 165 1,504 1,193 567
Intangible assets - supplier relationships 326 3,110 2,241 810
Right of use assets 1,548 69 1,370 209
Plant and equipment 59 2,497 8 71
Deferred tax 3 143 - 1
--------- ------- ---------- -------
3,087 8,076 6,149 1,870
Current assets
Inventories 3,742 3,604 1,285 569
Trade and other receivables 2,162 8,830 983 1,301
Current tax - - 33 -
Cash and cash equivalents 42 1,439 12 820
--------- ------- ---------- -------
5,946 13,873 2,313 2,690
Current liabilities
Trade and other payables (1,970) (4,370) (838) (601)
Borrowings and financial liabilities (3,526) (90) (132) (34)
Current tax (1) (404) - (137)
--------- ------- ---------- -------
(5,497) (4,864) (970) (772)
Non-current liabilities
Borrowings and financial liabilities (2,094) (69) (1,238) (179)
Deferred tax (220) (1,429) (787) (364)
Other provisions (340) (1,169) - -
--------- ------- ---------- -------
(2,654) (2,667) (2,025) (543)
Non-controlling interests - (2,884) - -
--------- ------- ---------- -------
Fair value of net assets acquired attributable to equity shareholders
of the Parent Company 882 11,534 5,467 3,245
========= ======= ========== =======
In addition to the above the Group paid GBP45k to secure an exclusive supplier arrangement in a trade and assets acquisition.
Goodwill acquired in 2019 relates to the workforce, synergies and sales know how. Goodwill arising on all acquisitions in the period have been allocated to the Continental Europe segment.
Gross contractual amounts of trade and other receivables acquired in 2018 were GBP13,335k, with bad debt provisions of GBP59k.
Net cash outflow on acquisition of subsidiaries 2019
MobilePro Prase AV Partner EES
GBP'000 GBP'000 GBP'000 GBP'000
Consideration paid in cash 882 6,108 3,225 2,189
Less: cash and cash equivalent balances acquired (42) (1,439) (12) (820)
Net cash outflow 840 4,669 3,213 1,369
========= ======= ========== =======
Plus: borrowings acquired 5,620 159 1,370 213
--------- ------- ---------- -------
Net debt outflow 6,460 4,828 4,583 1,582
========= ======= ========== =======
9. Acquisition of non-controlling interest
On 29 April 2019, the Group the acquired the remaining 10.5% non-controlling interest in Holdan Limited of GBP843k, for a consideration of GBP1,875k. GBP1,089k of the put option reserve was transferred to retained earnings when the put option liability was extinguished.
10. 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 2020 2019 2019
2020 2019
Average Average
EUR/GBP 1.144 1.143 1.100 1.118 1.177
AUD/GBP 1.907 1.824 1.795 1.814 1.883
NZD/GBP 2.001 1.917 1.920 1.895 1.960
USD/GBP 1.265 1.292 1.236 1.273 1.321
CHF/GBP 1.221 1.297 1.171 1.241 1.277
NOK/GBP 12.241 11.176 11.924 10.851 11.607
Applying the following current period foreign exchange rates respectively to the results of the period first half of 2019 had the following impact on the previously reported results:
EUR AUD USD
GBP000 GBP000 GBP000
Revenue (95) (863) 25
Profit before tax (3) (37) -
Equity 671 24 (2)
11. Copies of interim report
Copies of the interim report are available to the public free of charge from the Company at Vinces Road, Diss, IP22 4YT.
12. Adjustments to reported results
Six months ended
30 June 30 June
2020 2019
GBP000 GBP000
Operating (loss)/profit (671) 10,466
Cost of acquisitions 359 306
Share based payments 1,378 1,275
Employer taxes on share based payments (56) 280
Amortisation of brands, customer and supplier relationships 3,108 2,303
---------- ----------
Adjusted operating profit 4,118 14,630
Depreciation 2,898 2,444
Amortisation of patents and software 50 82
---------- ----------
Adjusted EBITDA 7,066 17,156
Decrease/(increase) in adjusted inventories 8,301 (7,588)
Decrease/(increase) in adjusted trade and other receivables 32,714 (12,145)
(Decrease)/increase in adjusted trade and other payables (39,090) 7,426
Adjusted cash flow from operations 8,991 4,849
Adjusted EBITDA cash flow conversion 127.2% 28.3%
(Loss)/profit before tax (2,524) 11,282
Cost of acquisitions 359 306
Share based payments 1,378 1,275
Employer taxes on share based payments (56) 280
Amortisation of brands, customer and supplier relationships 3,108 2,303
Foreign exchange losses on borrowings for acquisitions 473 129
Finance costs - deferred and contingent considerations 107 (924)
Finance costs - put option liabilities over non-controlling
interests 375 (917)
---------- ----------
Adjusted profit before tax 3,220 13,734
(Loss)/profit after tax (2,802) 9,033
Cost of acquisitions 359 306
Share based payments 1,378 1,275
Employer taxes on share based payments (56) 280
Amortisation of brands, customer and supplier relationships 3,108 2,303
Foreign exchange losses on borrowings for acquisitions 473 129
Finance costs - deferred and contingent considerations 107 (924)
Finance costs - put option liabilities over non-controlling
interests 375 (917)
Tax impact (525) (1,020)
---------- ----------
Adjusted profit after tax 2,417 10,465
(Loss)/profit after tax (2,802) 9,033
Non-controlling interest (22) (280)
---------- ----------
(Loss)/profit after tax attributable to equity holders
of the Parent Company (2,824) 8,753
Adjusted profit after tax 2,417 10,465
Non-controlling interest (22) (280)
Amortisation attributable to NCI (143) (144)
Deferred tax on amortisation attributable to NCI 38 70
---------- ----------
Adjusted profit after tax attributable to equity
holders of the Parent Company 2,290 10,111
Weighted average number of ordinary shares 85,882,336 79,078,793
Diluted weighted average number of ordinary shares 87,244,281 80,254,478
Basic adjusted earnings per share 2.67p 12.78p
Diluted adjusted earnings per share 2.63p 12.59p
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