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MIDWICH GROUP PLC Interim / Quarterly Report 2021
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Interim / Quarterly Report
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Midwich Group PLC
07 September 2021
7 September 2021
Midwich Group plc
("Midwich" or the "Group")
Interim results for the six months ended 30 June 2021
Trading momentum continues, with margins recovering
Midwich Group (AIM: MIDW), a global specialist audio visual distributor to the trade market, today announces its Interim Results for the six months ended 30 June 2021 ("H1 2021").
Statutory financial highlights
| Six months ended | ||||
| 30 June 2021 £m |
30 June 2020 £m |
Total growth % |
||
| Revenue | 390.1 | 302.0 | 29% | |
| Gross profit | 59.1 | 43.8 | 35% | |
| Gross profit % | 15.1% | 14.5% | ||
| Operating profit/(loss) | 7.6 | (0.7) | N/a | |
| Profit/(loss) before tax | 7.1 | (2.5) | 381% | |
| Profit/(loss) after tax | 4.6 | (2.8) | 263% | |
| Reported EPS - pence | 4.79 | (3.29) | 246% | |
Adjusted financial highlights
| Six months ended | ||||
| 30 June 2021 £m |
30 June 2020 £m |
Total growth % |
Growth at constant currency % | |
| Revenue | 390.1 | 302.0 | 29% | 30% |
| Gross profit | 59.1 | 43.8 | 35% | 36% |
| Gross profit % | 15.1% | 14.5% | ||
| Adjusted operating profit1 | 13.9 | 4.1 | 238% | 240% |
| Adjusted operating profit % | 3.6% | 1.4% | ||
| Adjusted profit before tax1 | 13.0 | 3.2 | 304% | 306% |
| Adjusted profit after tax1 | 9.4 | 2.4 | 289% | 290% |
| Adjusted EPS - pence1 | 10.08 | 2.67 | 278% | |
| Interim dividend per share - pence | 3.30 | - |
1Definitions of the alternative performance measures are set out in Note 2
Financial highlights
- Revenue increased 29.2% to £390.1 million (30.1% on a constant currency basis) reflecting the strength of the ongoing recovery from the impact of Covid-19
- Organic revenue growth of 25.6% despite headwinds from the exit of the low margin North American fulfilment business in December 2020
- Gross margin of 15.1%, 0.6 percentage points ahead of H1 2020
- Operating cash conversion at (31%) reflects investment in working capital to support business growth (H1 2020: 127%)
- Special dividend of 3.00 pence per share paid in July 2021 and interim dividend declared of 3.30 pence per share (Interim 2020: nil)
Operational highlights
- Trading momentum has continued despite ongoing disruption to the corporate, live events and entertainment markets
- Improvement in gross margin due to recovery in rebates and mix
- Market share has remained stable or grown in key territories
- Strategic acquisition of NMK Group at the start of the year; the Group's first business in the Middle East
- Acquisition of eLink in Germany further strengthened our unified communications offering
- Strong acquisition pipeline across a number of regions
Post period highlights
- Trading since 30 June 2021 has been in line with the Board's expectations and well ahead of the comparative period.
There will be a webinar for sell-side analysts at 9:00am today, 7 September 2021, the details of which can be obtained from FTI Consulting: [email protected].
Stephen Fenby, Managing Director of Midwich Group plc, commented:
"I am very pleased with the Group's performance in H1 2021, particularly given significant lockdowns in a number of key territories early in the period. The trading momentum seen in the second half of 2020 continued, with Group revenue in H1 2021 being 29.2% higher than in H1 2020. Organic growth was 25.6%.
Trading in EMEA showed the greatest improvement, particularly in Germany and France. After a slow start due to a severe lockdown, the UK and Ireland division improved strongly across the period, with revenues in the month of June 2021 reaching the 2019 level. Acquisitions made strong positive contributions in the period, and we have seen a significant number of new opportunities presented.
The higher margin live events and hospitality markets are starting to recover in a number of territories, although we believe there is still a considerable way to go. The recovery of the corporate market has been slightly slower than expected, as corporates have in some cases deferred their return-to-office plans. There is a more significant level of enquiries and activity in this market, and we now expect that this will start to be converted into orders and revenue in early 2022.
The Board believes that the Group's markets and business should continue to improve steadily across the remainder of 2021 and into 2022, although there remains a risk of negative impact due to further lockdowns. Shortages of product appear to be worsening and are having a dampening effect on revenues, albeit such impacts should be temporary and not affect the general growth trajectory of the business.
Trading since the end of H1 has been in line with Board expectations. Order books have continued to strengthen and, barring significant lockdowns in key territories, the Board expects trading to be comfortably ahead of its previous expectations."
For further information:
| Midwich Group plc Stephen Fenby, Managing Director Stephen Lamb, Finance Director |
+44 (0) 1379 649200 |
| Investec Bank plc (NOMAD and Joint Broker to Midwich) Carlton Nelson / Ben Griffiths |
+44 (0) 20 7597 5970 |
| Berenberg (Joint Broker to Midwich) Ben Wright / Mark Whitmore / Alix Mecklenberg-Solodkoff |
+44 (0) 20 3207 7800 |
| FTI Consulting Alex Beagley / Tom Hufton / Rafaella de Freitas |
+44 (0) 20 3727 1000 |
About Midwich Group
Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, EMEA, Asia Pacific and North America. The Group's long-standing relationships with over 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, EMEA, Asia Pacific and North America. A core component of the Group's growth strategy is further expansion of its international operations and footprint into strategically targeted jurisdictions.
For further information, please visit www.midwichgroupplc.com
Managing Director's Report
Overview
The Group continued to make good progress in H1 2021, with trading improvements in all of our key territories. I believe we have performed very well in the face of continued challenges linked to the pandemic, and would like to thank our team once again for their forbearance in these difficult circumstances. One of the core strengths of the Group is in our long-term personal relationships with customer, vendors and colleagues. We recognise that recent limitations of personal interaction can have an ongoing impact on staff wellbeing. We continue to support our team, including offering flexible working options. It is likely this will continue for some time, possibly even permanently.
A key focus for the Group continues to be seeking to maintain a high level of consistent service to our customers and vendors such that we become a long-term trusted partner. We continue to work hard to maintain service levels despite current challenges, such as ongoing product shortages and limitations in carrier capacity. Our focus on developing our offering in the AV market continues to be beneficial for our customers and vendors alike.
Working capital management is important. As expected, as the business has recovered, inventory levels have also increased. I remain comfortable that our inventories remain in line with sensible business requirements.
Trading performance
The trading momentum seen in the second half of 2020 has continued, with Group revenue increasing by 29.2% to £390.1 million, albeit this does represent a weak comparator being impacted by the onset of the pandemic in Q2 2020. Organic growth was 25.6% and on a constant currency basis revenue increased by 30.2%.
The gross margin percentage increased by 0.6% to 15.1%. This represents a significant step towards returning to the margin of 16.5% achieved in 2019. Broadly speaking, it appears that the majority of the volume related margin lost in 2020 has now been recovered, with rebates and buying discounts now approaching 2019 levels. The remaining shortfall of margin compared with 2019 is due to mix. Continued softness in the UK trade rentals market (linked primarily to live events activity) accounts for a portion of this, albeit we are beginning to see some green shoots of recovery in this market. Particularly strong sales of certain low margin broadcast technologies are also a factor (although the growth in these sales appears to be levelling off).
The Group benefitted from operational leverage, with improving levels of business in the first half of the year. The increase in gross margin of £15.3m resulted in an increase in adjusted profit before tax of £9.8 million, with growth in overheads attributable to our ceasing to use government employment support, the normalisation of salary and bonuses and the impact of acquisitions.
Territories
The Group trades in twenty different countries organised into four geographical regions.
Trading in EMEA showed the greatest improvement, with revenues up 65% year on year, and net profit substantially higher. The acquisitions of eLink and NMK made strong positive contributions to the results, but nonetheless organic revenue and profit improved in almost all businesses, particularly those in Germany and France. Organic revenue growth was 58%. The overall gross margin percentage was consistent with the two previous years.
Performance in the UK & Ireland improved significantly after the easing of the severe lockdowns earlier in the period. Revenues increased 25%, helped particularly by the contribution from new vendors launched in late 2020 and H1 2021, such as Barco Clickshare and BirdDog. The gross margin percentage was flat compared with H1 2020, although this represented a continued improvement on the post-Covid period. The live events, entertainment and hospitality markets have remained subdued, but it is anticipated that further easing of restrictions should enable these markets to return towards normality, thus improving sales and margins in the UK & Ireland business.
Revenue in North America was 41.8% lower than the same period in 2020. However, at the end of 2020 the Group exited a low margin fulfilment arrangement in North America, therefore on a like-for-like basis revenue was around 30% higher than in H1 2020. Trading in North America improved steadily in H1 2021, with strong margins being helped particularly by the release of provisions in respect of aged stock sold in the period.
As expected, trading in the Asia Pacific (APAC) region was relatively flat compared with the prior year. Economic activity in the two principal APAC markets in which we operate (Australia and New Zealand) does not appear to have achieved a sustained improvement since the initial impact of the Covid-19 crisis and recent severe lockdowns have further slowed improvement in these territories.
The Board continues to monitor its share of vendor business in each of its key markets and remains confident that, overall, the Group has at least maintained and in many cases grown its market share.
Products
Revenue from the two mainstream product areas (displays and projection) increased by 33% and exceeded 2019 levels. Gross margins have improved in these mainstream product areas and are more than halfway back to pre-pandemic levels.
Revenue in specialist product areas, such as technical video, audio, broadcast and lighting grew by 26%. Technical products account for half of the Group's revenue. The Group's planned long-term strategy is to continue to develop its presence and expertise in more specialist product categories.
Strong revenue growth was achieved in the broadcast category, particularly with the New Media business in Germany, although gross margins in this business remain a little below group averages.
Margins in other technical product areas have generally returned to 2019 levels. A number of newer brands carry slightly lower margins than the Group average, and we are working hard to improve these. The UK trade rental business (which is focused on live events and trades at particularly high gross margins) has started to improve but is still well below 2019 levels.
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. As such our new vendor launch programme has continued, with significant success across much of the Group.
Customers
The Group's focus has always been on seeking to provide our customers with consistently high service and support. Although our customer base tends to be adaptable and resilient, the past eighteen months have given them additional challenges. For example, the small number of customers focused only on the live events market have found significant challenges, with many businesses downscaling. Most other customers tend to have broad, flexible offerings which can be adapted to address stronger pockets of demand (for example in the education market). Project delays, the unpredictability of site access for installs, and product shortages have created operational and logistical issues for customers, which we seek to support through our flexible approach.
Our expansion into new geographical markets and product categories (such as unified communications (UC)) has enhanced the Group's customer base, and also its level of engagement with major international integrators.
End-user markets
There have been no major changes in end user demand in the first half of 2021. Markets which are largely government funded (such as education, healthcare and defence) have remained relatively strong. The corporate market continues to be relatively muted as many end users are still developing their return-to-work strategies. The Group has seen a significant increase in enquiries in respect of this market, and believes that many of these are most likely to convert into orders in 2022. The live events and hospitality markets have started to recover in geographies where lockdown restrictions have been eased.
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 UC 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 continues to pursue a strong pipeline of opportunities, either self-sourced or, increasingly, through approaches by business owners who wish to join a strong AV focused group.
The Board continues to focus on strengthening the Group's product offering, technical expertise and geographical reach. The acquisition pipeline remains healthy.
Acquisitions
The Group completed two acquisitions during the first half of 2021.
During the period, the Group completed the acquisition of an 80% controlling stake in Nicolas M. Kyvernitis Electronics Ent., NMK Middle East FZE and Edge Electronics Trading LLC ("Edge") (collectively "the NMK Group" or "NMK"). Based in the UAE and Qatar, the NMK Group is a value-added distributor of AV products and represents Midwich's entry into the Middle Eastern market.
Based in Sharjah, UAE, NMK supplies specialist AV products to customers in the UAE and wider Gulf region, with Edge, based in Doha, supporting customers in Qatar. The NMK Group continues to be led by the existing management team and integration is progressing well.
The Middle Eastern market is one of the fastest growing AV markets in the world according to trade body AVIXA. The deal further expands Midwich's geographical footprint, enabling the Group to extend the support it can provide to customers and vendors internationally.
On 19 April 2021, the Group acquired the UC division of eLink Distribution AG. The acquisition of eLink enhances the Midwich Group's UC offering in the DACH region and underlines its investment in this strategically important and fast-growing technology category.
These acquisitions further deliver on the Group's strategy to grow earnings both organically and through the selective acquisition of strong, complementary businesses.
Audit tender
During the period the Group conducted an audit tender led by the Audit Committee Chair. Whilst there is no formal requirement for an audit tender in AIM companies, the Audit Committee noted that that the Group's auditors were approaching their tenth anniversary in post and, therefore, determined that a process should take place. The tender process followed the guidelines issued by the Financial Reporting Council (FRC) and six firms were invited to tender; all participated. After shortlisting three firms and following a comprehensive review of their proposals the outcome of the process was that Grant Thornton was reappointed as the Group's auditors.
Outlook
According to research published by industry trade body AVIXA in June 2021, the global market for AV contracted by 17% in 2020, with the fall in EMEA (the Group's largest territory) just under 20%. The global reduction was much higher than the 8% reduction it forecast in July 2020. The market is expected to grow by 8.4% in 2021 and then at a compound annual rate of 7.2% for the next five years. Retail, cinema, events and hospitality were the hardest hit end user markets in 2020, and are expected to see very significant growth given the increase in household finances. The Board concurs that the wider AV industry is well positioned for long-term growth, and believes that the Group is very well positioned to take advantage of this.
The Board believes that the Group's markets and business should continue to improve steadily across the remainder of 2021 and into 2022, although there remains a risk of negative impact due to further lockdowns. Shortages of product appear to be worsening and are having a dampening effect on revenues, albeit such impacts should be temporary and, at present, not affect the general growth trajectory of the business.
Trading since the end of H1 has been in line with Board expectations. Order books have continued to strengthen and, barring significant lockdowns in key territories, the Board expects trading to be comfortably ahead of its previous expectations.
Regional highlights
| Six months ended | ||||||||||
| 30 June 2021 £m |
30 June 2020 £m |
Total growth % |
Growth at constant currency % |
Organic growth % |
||||||
| Revenue | ||||||||||
| UK & Ireland | 128.6 | 103.1 | 24.7% | 24.8% | 24.8% | |||||
| EMEA | 210.2 | 127.2 | 65.3% | 66.2% | 58.2% | |||||
| Asia Pacific | 22.2 | 21.7 | 2.0% | (2.4%) | (2.5%) | |||||
| North America | 29.1 | 50.0 | (41.8%) | (36.3%) | (43.5%)2 | |||||
| Total Global | 390.1 | 302.0 | 29.2% | 30.1% | 25.6% | |||||
| Gross profit margin | ||||||||||
| UK & Ireland | 15.4% | 15.5% | (0.1) ppts | |||||||
| EMEA | 14.5% | 14.5% | - ppts | |||||||
| Asia Pacific | 17.7% | 15.7% | 2.0 ppts | |||||||
| North America | 17.2% | 11.9% | 5.3 ppts | |||||||
| Total Global | 15.1% | 14.5% | 0.6 ppts | |||||||
| Adjusted operating profit1 | ||||||||||
| UK & Ireland | 4.9 | 2.1 | 135.9% | 136.0% | ||||||
| Continental Europe | 9.1 | 2.0 | 341.3% | 342.3% | ||||||
| Asia Pacific | 0.5 | 0.4 | 32.6% | 21.0% | ||||||
| North America | 1.1 | 0.7 | 73.0% | 89.3% | ||||||
| Group costs | (1.7) | (1.1) | ||||||||
| Total Global | 13.9 | 4.1 | 238.0% | 240.2% | ||||||
| Adjusted finance costs | (0.9) | (0.9) | ||||||||
| Adjusted profit before tax1 | 13.0 | 3.2 | 304.1% | 305.8% | ||||||
1Definitions of the alternative performance measures are set out in Note 2
2North American revenue was impacted by the exit of low margin fulfilment activity in December 2020. Excluding this from the prior year North American organic growth was 30.3%
All percentages referenced in this section are at constant currency unless otherwise stated.
UK & Ireland
Revenue in the UK & Ireland (UK&I) increased by 24.8% in the period. Trading improved significantly after the easing of the severe lockdowns earlier in the period. The growth in revenue was helped particularly by the contribution from new vendors launched in late 2020 and H1 2021, such as Barco Clickshare and BirdDog.
The gross margin percentage was broadly flat compared with H1 2020, although this represented a continued improvement on the Covid-19 lockdown period. The live events, entertainment and hospitality markets have remained subdued, but it is anticipated that further easing of restrictions should enable these markets to return towards normality, thus improving sales and margins in the UK&I business. The UK&I business ceased its use of government furlough support during the period.
Adjusted operating profit increased by 136% in the UK&I.
EMEA
Trading in EMEA showed the greatest improvement, with revenues up 66.2% year on year. The strongest performances were seen in Germany, which benefited from both strong sales into the education sector and high demand for broadcast solutions, and France, which benefitted from the new brands added and market share gains. Whilst the region has continued to be impacted by Covid-19 restrictions there has been a progressive improvement in demand in all territories during the period and order books are substantially ahead of the prior year.
Gross margin at 14.5% was in line with the prior year with a positive improvement in many businesses offset by a negative mix effect due to the scale of the growth in Germany and France.
Adjusted operating profit in EMEA increased by 342.3% reflecting the positive operating leverage from the revenue growth.
Asia Pacific
Revenue in Asia Pacific was broadly in line with the prior year. The region was the least affected by Covid-19 restrictions in the prior year and traded well in the period with strong demand for camera and broadcast solutions. During the period we saw an increased level of enquiries for larger projects, although recent lockdowns in Australia make the timing of delivery uncertain.
The Asia Pacific gross profit margin of 17.7%, was 2.0 percentage points above H1 2020, reflecting favourable product mix.
Adjusted operating profit in Asia Pacific increased by 21.0% to £0.5 million (H1 2020: £0.4 million).
North America
Trading in North America imporved steadily during the period reflecting the focus on its specialist AV business and the benefit of investment in sales capabilities. Revenue in North America declined by 36.3% as a result of the previously announced exit of low margin fulfiment activity in the second half of 2020. Excluding this activity North American revenue increased by 30.3%.
Gross margins improved substantially to 17.2% (H1 2020: 11.9%) with the business benefitting from both an improvement in product mix and the release of provisions in respect of aged stock sold in the period.
Adjusted operating profit in North America increased by 89.3% to £1.1m (H1 2020: £0.7 million).
Group costs
Group costs for the half year were £1.7 million (H1 2020: £1.1 million). The increase reflects the return to full salary and bonus costs following the voluntary reductions to partially mitigate the impact of Covid-19 in 2020.
Operating profit
Adjusted operating profit for the period at £13.9 million (H1 2020 £4.1 million) is stated before the impact of acquisition related expenses of £0.3 million (H1 2020: £0.4 million), share based payments and associated employer taxes of £2.4 million (H1 2020: £1.3 million) and amortisation of acquired intangibles of £3.6 million (H1 2020: £3.1 million). The reported operating profit for the period was £7.6 million (H1 2020: £0.7 million loss).
Movement in foreign exchange
In recent months Sterling has appreciated against both the USD and the Euro. In the period this reduced the reported group rates by 0.9 percentage points. Should current exchange rates prevail for the rest of 2021 the full year impact of currency translation will be to reduce revenue growth by approximately 3%. Note, the Group makes most of its sales and purchases in local currency; this provides a natural hedge for transactional activity.
Finance costs
Adjusted finance costs for the period were an expense of £0.9 million (H1 2020: £0.9 million).
Reported finance costs for the period were £0.6 million (H1 2020: £1.9 million). The adjustments to finance costs include foreign exchange income on borrowings for acquisitions of £1.4 million (H1 2020: £(0.5) million), movements in deferred and contingent considerations of £0.1 million (H1 2020: £0.1 million), and movements in put option liabilities over non-controlling interests of £1.0 million (H1 2020: £0.4 million).
Taxation
The reported tax charge for the period was £2.5 million (H1 2020: £0.3 million). The adjusted effective tax rate for the period was 27.8% (H1 2019: 24.9%) calculated based on the adjusted tax charge for the period divided by adjusted profit before tax. The increase in effective tax rate is attributable to a shift in geographic mix towards higher tax jurisdictions.
Cash flows and net debt
The Group had an adjusted net cash outflow from operations before tax of £5.1 million for the period (H1 2020: £9.0 million inflow). Whilst the focus in the prior year was on liquidity and cash preservation, 2021 saw a return to more usual working capital patterns. The first half is traditionally more working capital intensive, when compared with the full year, due to the seasonality of demand, especially in the education sector. Given the stronger than expected trading in the period, and the chip related risk of product shortages, the Group decided to invest in additional inventory to ensure continuity of supply. The Board is comfortable that the Group's long-term average cash conversion rate (70-80%) remains unchanged.
Adjusted net debt (excluding leases liabilities), was £56.0 million at 30 June 2021 (£41.2 million at 30 June 2020).
The adoption of IFRS 16 in 2019 resulted in an increase in recognised lease liabilities. Lease liabilities excluded from adjusted net debt totalled £17.2m at 30 June 2021 (£17.9m 30 June 2020). Total net debt was £73.3m at 30 June 2021 (£59.1m at 30 June 2020).
Adjusted net debt was impacted by payments totalling £18.8m less cash acquired of £2.7m in respect of the acquisitions of NMK and eLink together with deferred consideration of £5.0m for Prase and Bauer und Trummer.
The Group has access to a £50m RCF facility which it uses to finance acquisition investments. Other borrowing facilities are to provide working capital financing. There were no significant changes to facilities during the period. As at 30 June 2021, the Group has access to total facilities of approximately £180 million.
The Group has various instruments to hedge certain exchange rate and interest rate exposures. These include borrowings in Euros to finance European acquisitions and financial instruments to fix part of the Group's interest charges. These instruments are marked to market at the end of each reporting period, with the change in valuation recognised in the income statement. Given any amounts recognised generally arise from market movements and accordingly bear no direct relation to the Group's underlying performance any gains or losses have been excluded from adjusted profit measures.
Dividend
Following the special dividend of 3.00 pence per share, paid on 2 July 2021, the Board is pleased to declare an interim dividend of 3.30 pence per share (H1 2020: nil). This will be paid on 25 October 2021 to those shareholders on the Company's register as at 17 September 2021. The last day to elect for dividend reinvestment ("DRIP") is 4 October 2021.
The Board believes in a progressive dividend policy to reflect the Group's strong earnings and cash flow while maintaining an appropriate level of dividend cover to allow for investment in longer-term growth. The Board intends to pay future dividends within a cover range of 2 to 2.5 times adjusted earnings.
Stephen Fenby
Managing Director
Unaudited consolidated income statement for the 6 months ended 30 June 2021
| Note | 30 June 2021 |
30 June 2020 |
31 December 2020 | ||||
| Unaudited | Unaudited | Audited | |||||
| £'000 | £'000 | £'000 | |||||
| Revenue | 390,072 | 302,017 | 711,754 | ||||
| Cost of sales | (331,005) | (258,211) | (609,961) | ||||
| Gross profit | 59,067 | 43,806 | 101,793 | ||||
| Distribution costs | (37,165) | (32,039) | (68,488) | ||||
| Administrative expenses | (15,887) | (13,343) | (28,225) | ||||
| Other operating income | 1,600 | 905 | 2,010 | ||||
| Operating profit/(loss) | 7,615 | (671) | 7,090 | ||||
| Adjusted operating profit | 13,921 | 4,118 | 16,532 | ||||
| Costs of acquisitions | (286) | (359) | (526) | ||||
| Share based payments | (2,024) | (1,378) | (2,562) | ||||
| Employer taxes on share based payments | (426) | 56 | (130) | ||||
| Amortisation of brands, customer and supplier relationships | (3,570) | (3,108) | (6,224) | ||||
| 7,615 | (671) | 7,090 | |||||
| Finance income | 48 | 2 | 172 | ||||
| Finance costs | 5 | (571) | (1,855) | (8,257) | |||
| Profit/(loss) before taxation | 7,092 | (2,524) | (995) | ||||
| Taxation | (2,516) | (278) | (2,392) | ||||
| Profit/(loss) after taxation | 4,576 | (2,802) | (3,387) | ||||
| Profit/(loss) for the financial period/year attributable to: | |||||||
| The Company's equity shareholders | 4,220 | (2,824) | (3,751) | ||||
| Non-controlling interests | 356 | 22 | 364 | ||||
| 4,576 | (2,802) | (3,387) | |||||
| Basic earnings per share | 3 | 4.79p | (3.29)p | (4.32)p | |||
| Diluted earnings per share | 3 | 4.70p | (3.29)p | (4.32)p |
Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2021
| 30 June |
30 June |
31 December | ||||
| 2021 | 2020 | 2020 | ||||
| Unaudited | Unaudited | Audited | ||||
| £'000 | £'000 | £'000 | ||||
| Profit/(loss) for the period/financial year | 4,576 | (2,802) | (3,387) | |||
| Other comprehensive income | ||||||
| Items that will not be reclassified subsequently to profit or loss: | ||||||
| Actuarial gains and (losses) on retirement benefit obligations | - | - | (4) | |||
| 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 | (3,835) | 4,819 | 3,542 | |||
| Other comprehensive income for the financial period/year, net of tax | (3,835) | 3,866 | 3,344 | |||
| Total comprehensive income for the period/financial year | 741 | 1,064 | (43) | |||
| Attributable to: | ||||||
| Owners of the Parent Company | 748 | 552 | (878) | |||
| Non-controlling interests | (7) | 512 | 835 | |||
| 741 | 1,064 | (43) |
Unaudited consolidated statement of financial position as at 30 June 2021
| Note | 30 June |
30 June |
31 December | ||||
| 2021 | 2020 | 2020 | |||||
| Unaudited | Unaudited | Audited | |||||
| £'000 | £'000 | £'000 | |||||
| Assets | |||||||
| Non-current assets | |||||||
| Goodwill | 22,329 | 15,417 | 15,350 | ||||
| Intangible assets | 53,518 | 47,443 | 43,631 | ||||
| Right of use assets | 16,239 | 16,450 | 17,102 | ||||
| Property, plant and equipment | 10,574 | 12,049 | 11,206 | ||||
| Deferred tax assets | 2,779 | 2,452 | 2,386 | ||||
| 105,439 | 93,811 | 89,675 | |||||
| Current assets | |||||||
| Inventories | 117,838 | 110,633 | 83,995 | ||||
| Trade and other receivables | 127,252 | 92,465 | 107,082 | ||||
| Derivative financial instruments | 7 | - | 24 | ||||
| Cash and cash equivalents | 19,884 | 20,328 | 25,485 | ||||
| 264,981 | 223,426 | 216,586 | |||||
| Current liabilities | |||||||
| Trade and other payables | (137,571) | (103,160) | (110,136) | ||||
| Derivative financial instruments | (391) | (1,014) | (1,094) | ||||
| Put option liabilities over non-controlling interests | (5,518) | (3,806) | (1,306) | ||||
| Deferred and contingent considerations | (6,135) | (6,423) | (7,012) | ||||
| Borrowings and financial liabilities | (43,267) | (37,968) | (30,045) | ||||
| Current tax | (2,130) | (2,441) | (638) | ||||
| (195,012) | (154,812) | (150,231) | |||||
| Net current assets | 69,969 | 68,614 | 66,355 | ||||
| Total assets less current liabilities | 175,408 | 162,425 | 156,030 | ||||
| Non-current liabilities | |||||||
| Trade and other payables | (1,385) | (664) | (1,708) | ||||
| Put option liabilities over non-controlling interests | (4,034) | (4,041) | (3,337) | ||||
| Deferred and contingent considerations | (1,796) | (490) | (465) | ||||
| Borrowings and financial liabilities | (49,875) | (41,445) | (34,719) | ||||
| Deferred tax liabilities | (6,298) | (6,736) | (7,011) | ||||
| Other provisions | (2,786) | (2,615) | (2,303) | ||||
| (66,174) | (55,991) | (49,543) | |||||
| Net assets | 109,234 | 106,434 | 106,487 | ||||
| Equity | |||||||
| Share capital | 6 | 887 | 886 | 886 | |||
| Share premium | 67,047 | 68,193 | 67,047 | ||||
| Share based payment reserve | 6,340 | 4,024 | 4,472 | ||||
| Investment in own shares | 6 | (7) | (8) | (6) | |||
| Retained earnings | 34,794 | 29,042 | 30,436 | ||||
| Translation reserve | (1,355) | 3,375 | 2,117 | ||||
| Hedging reserve | - | (759) | - | ||||
| Put option reserve | (8,679) | (6,329) | (4,813) | ||||
| Capital redemption reserve | 50 | 50 | 50 | ||||
| Other reserve | 150 | 150 | 150 | ||||
| Equity attributable to owners of Parent Company | 99,227 | 98,624 | 100,339 | ||||
| Non-controlling interests | 10,007 | 7,810 | 6,148 | ||||
| Total equity | 109,234 | 106,434 | 106,487 | ||||
Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2021
For the period ended 30 June 2021
| Share capital |
Share premium | Investment in own shares | Retained earnings |
Other reserves | Equity attributable to owners of the Parent | Non-controlling interests | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| (note 6) | (note 7) | |||||||
| Balance at 1 January 2021 | 886 | 67,047 | (6) | 30,436 | 1,976 | 100,339 | 6,148 | 106,487 |
| Profit for the period | - | - | - | 4,220 | - | 4,220 | 356 | 4,576 |
| Other comprehensive income | - | - | - | - | (3,472) | (3,472) | (363) | (3,835) |
| Total comprehensive income for the year | - | - | - | 4,220 | (3,472) | 748 | (7) | 741 |
| Shares issued (note 6) | 1 | - | (1) | - | - | - | - | - |
| Share based payments | - | - | - | - | 2,024 | 2,024 | - | 2,024 |
| Deferred tax on share based payments | - | - | - | - | (18) | (18) | - | (18) |
| Share options exercised | - | - | - | 138 | (138) | - | - | - |
| Acquisition of subsidiaries | - | - | - | - | (3,866) | (3,866) | 3,866 | - |
| Balance at 30 June 2021 (unaudited) | 887 | 67,047 | (7) | 34,794 | (3,494) | 99,227 | 10,007 | 109,234 |
For the period ended 30 June 2020
| Share capital |
Share premium | Investment in own shares | Retained earnings |
Other reserves | Equity attributable to owners of the Parent | Non-controlling interests | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'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 year ended 31 December 2020 (audited)
| Share capital |
Share premium | Investment in own shares | Retained earnings |
Other reserves | Equity attributable to owners of the Parent | Non-controlling interests | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'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)/profit for the year | - | - | - | (3,751) | - | (3,751) | 364 | (3,387) |
| Other comprehensive income | - | - | - | (4) | 2,877 | 2,873 | 471 | 3,344 |
| Total comprehensive income for the year | - | - | - | (3,755) | 2,877 | (878) | 835 | (43) |
| Shares issued (note 6) | 87 | 38,822 | (7) | - | - | 38,902 | - | 38,902 |
| Share based payments | - | - | - | - | 2,562 | 2,562 | - | 2,562 |
| Deferred tax on share based payments | - | - | - | - | (232) | (232) | - | (232) |
| Share options exercised | - | - | 6 | 1,855 | (1,856) | - | - | 5 |
| Acquisition of non-controlling interest (note 9) | - | - | - | 469 | 1,516 | 1,985 | (1,985) | - |
| Balance at 31 December 2020 | 886 | 67,047 | (6) | 30,436 | 1,976 | 100,339 | 6,148 | 106,487 |
Unaudited consolidated cashflow statement for 6 months ended 30 June 2021
| 30 June |
30 June |
31 December | |||||
| 2021 | 2020 | 2020 | |||||
| Unaudited | Unaudited | Audited | |||||
| £'000 | £'000 | £'000 | |||||
| Cash flows from operating activities | |||||||
| Profit/(loss) before tax | 7,092 | (2,524) | (995) | ||||
| Depreciation | 2,653 | 2,898 | 5,991 | ||||
| Amortisation | 3,697 | 3,158 | 6,429 | ||||
| Gain on disposal of assets | 356 | 3 | 1,122 | ||||
| Share based payments | 2,024 | 1,378 | 2,562 | ||||
| Foreign exchange gains | (331) | (171) | (295) | ||||
| Finance income | (48) | (2) | (172) | ||||
| Finance costs | 571 | 1,855 | 8,257 | ||||
| Profit from operations before changes in working capital | 16,014 | 6,595 | 22,899 | ||||
| (Increase)/decrease in inventories | (28,718) | 8,301 | 34,939 | ||||
| (Increase)/decrease in trade and other receivables | (15,497) | 32,714 | 18,097 | ||||
| Increase/(decrease) in trade and other payables | 22,794 | (39,146) | (31,442) | ||||
| Cash (outflow)/inflow from operations | (5,407) | 8,464 | 44,493 | ||||
| Income tax paid | (3,307) | (767) | (4,372) | ||||
| Net cash (outflow)/inflow from operating activities | (8,714) | 7,697 | 40,121 | ||||
| Cash flows from investing activities | |||||||
| Acquisition of businesses net of cash acquired | (16,134) | (18,393) | (18,393) | ||||
| Purchase of intangible assets | (845) | (640) | (1,730) | ||||
| Purchase of plant and equipment | (975) | (981) | (1,860) | ||||
| Proceeds on disposal of plant and equipment | 170 | 137 | 306 | ||||
| Interest received | 48 | 2 | 172 | ||||
| Net cash outflow from investing activities | (17,736) | (19,875) | (21,505) | ||||
| Cash from financing activities | |||||||
| Gross proceeds on issue of shares | - | 39,724 | 39,724 | ||||
| Costs associated with shares issued | - | (822) | (822) | ||||
| Proceeds on exercise of share options | - | 5 | 5 | ||||
| Deferred and contingent considerations paid | (4,999) | (2,951) | (5,238) | ||||
| Acquisition of non-controlling interest | - | - | (2,875) | ||||
| Invoice financing inflows/(outflows) | 14,385 | (25,950) | (32,191) | ||||
| Proceeds from borrowings | 15,977 | 11,946 | 4,796 | ||||
| Repayment of loans | (1,000) | (1,078) | (4,445) | ||||
| Interest paid | (902) | (1,005) | (2,438) | ||||
| Interest on leases | (152) | (167) | (362) | ||||
| Capital element of lease payments | (2,201) | (1,225) | (4,226) | ||||
| Net cash inflow/(outflow) from financing activities | 21,108 | 18,477 | (8,072) | ||||
| Net (decrease)/increase in cash and cash equivalents | (5,342) | 6,299 | 10,544 | ||||
| Cash and cash equivalents at beginning of period/year | 23,795 | 11,497 | 11,497 | ||||
| Effects of exchange rate changes | (308) | 2,532 | 1,754 | ||||
| Cash and cash equivalents at end of period/year | 18,145 | 20,328 | 23,795 | ||||
| Comprising: | ||||||
| Cash at bank | 19,884 | 20,328 | 25,485 | |||
| Bank overdrafts | (1,739) | - | (1,690) | |||
| 18,145 | 20,328 | 23,795 |
Notes to the interim consolidated financial information
1. General information
The interim financial information for the period to 30 June 2021 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 International Accounting Standards ("IAS"), and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2020.
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 2020. The audited financial statements for the year ended 31 December 2020 complied with International Accounting Standards in conformity with the requirements of the Companies Act 2006.
The directors have adopted the going concern basis in preparing the financial information. In assessing whether the going concern assumption is appropriate, the directors have taken into account all relevant available information about the foreseeable future.
The statutory accounts for the year ended 31 December 2020, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.
Use of alternative performance measures
The Group has defined certain measures that it uses to understand and manage performance. These measures are not defined under IAS and they may not be directly comparable with other companies' adjusted measures. These non-GAAP measures are not intended to be a substitute for any IAS measures of performance, but management has included them as they consider them to be key measures used within the business for assessing the underlying performance.
Growth at constant currency: This measure shows the year on year change in performance after eliminating the impact of foreign exchange movement, which is outside of management's control.
Organic growth: This is defined as growth at constant currency growth excluding acquisitions until the first anniversary of their consolidation.
Adjusted operating profit: Adjusted operating profit is disclosed to indicate the Group's underlying profitability. It is defined as profit before acquisition related expenses, share based payments and associated employer taxes and amortisation of brand, customer and supplier relationship intangible assets.
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 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 2021 |
June 2020 |
December 2020 |
|
| Profit/(Loss) attributable to equity holders of the Parent Company (£'000) | 4,220 | (2,824) | (3,751) |
| Weighted average number of shares outstanding | 88,032,819 | 85,882,336 | 86,893,508 |
| Dilutive (potential dilutive) effect of share options | 1,665,248 | 1,361,945 | 1,242,399 |
| Weighted average number of ordinary shares for the purposes of diluted earnings per share | 89,698,067 | 87,244,281 | 88,135,907 |
| Basic earnings per share | 4.79p | (3.29)p | (4.32)p |
| Diluted earnings per share | 4.70p | (3.29)p | (4.32)p |
4. Segmental reporting
| 30 June 2021 | UK & Ireland £'000 |
EMEA £'000 |
APAC £'000 |
North America £'000 | Other £'000 |
Total £'000 |
||||||||||||||||
| Revenue | 128,581 | 210,223 | 22,194 | 29,074 | - | 390,072 | ||||||||||||||||
| Gross profit | 19,747 | 30,388 | 3,918 | 5,014 | - | 59,067 | ||||||||||||||||
| Gross profit % | 15.4% | 14.5% | 17.7% | 17.2% | - | 15.1% | ||||||||||||||||
| Adjusted operating profit/(loss) | 4,923 | 9,092 | 468 | 1,134 | (1,696) | 13,921 | ||||||||||||||||
| Cost of acquisitions | - | - | - | - | (286) | (286) | ||||||||||||||||
| Share based payments | (750) | (603) | (171) | (17) | (483) | (2,024) | ||||||||||||||||
| Employer taxes on share based payments | (114) | (185) | (17) | (2) | (107) | (425) | ||||||||||||||||
| Amortisation of brand, customer and supplier relationships | (1,187) | (1,637) | (139) | (608) | - | (3,571) | ||||||||||||||||
| Operating profit/(loss) | 2,872 | 6,667 | 141 | 507 | (2,572) | 7,615 | ||||||||||||||||
| Net interest expense | (523) | |||||||||||||||||||||
| Profit before tax | 7,092 | |||||||||||||||||||||
| Other segmental information | ||||||||||||||||||||||
| June 2021 | UK & Ireland £'000 |
EMEA £'000 |
APAC £'000 |
North America £'000 | Other £'000 |
Total £'000 |
||||||||||||||||
| Segment assets | 115,838 | 195,412 | 20,345 | 38,070 | 755 | 370,420 | ||||||||||||||||
| Segment liabilities | (85,421) | (142,512) | (16,624) | (16,039) | (590) | (261,186) | ||||||||||||||||
| Segment net assets | 30,417 | 52,900 | 3,721 | 22,031 | 165 | 109,234 | ||||||||||||||||
| Depreciation | 1,035 | 1,165 | 295 | 158 | - | 2,653 | ||||||||||||||||
| Amortisation | 1,195 | 1,680 | 147 | 675 | - | 3,697 | ||||||||||||||||
| Other segmental information | UK £'000 |
Rest of world £'000 |
Total £'000 |
|||||||||||||||||||
| Non-current assets | 25,142 | 80,297 | 105,439 | |||||||||||||||||||
| 30 June 2020 | UK & Ireland £'000 |
EMEA £'000 |
APAC £'000 |
North America £'000 | Other £'000 |
Total £'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/(loss) | 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 before tax | (2,524) | |||||||||||||||||
| Other segmental information | ||||||||||||||||||
| June 2020 | UK & Ireland £'000 |
EMEA £'000 |
APAC £'000 |
North America £'000 | Other £'000 |
Total £'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 | ||||||||||||
| Other segmental information | UK £'000 |
Rest of world £'000 |
Total £'000 |
|||||||||||||||
| Non-current assets | 27,888 | 65,923 | 93,811 | |||||||||||||||
| 31 December 2020 | UK & Ireland£'000 | EMEA £'000 |
APAC £'000 |
North America £'000 |
Other £'000 |
Total £'000 |
|||||||||
| Revenue | 224,386 | 331,115 | 44,476 | 111,777 | - | 711,754 | |||||||||
| Gross profit | 31,321 | 45,635 | 6,821 | 18,016 | - | 101,793 | |||||||||
| Gross profit % | 14.0% | 13.8% | 15.3% | 16.1% | - | 14.3% | |||||||||
| Adjusted operating profit/(loss) | 3,916 | 9,393 | 820 | 4,909 | (2,506) | 16,532 | |||||||||
| Costs of acquisitions | - | - | - | - | (526) | (526) | |||||||||
| Share based payments | (1,141) | (799) | (218) | (3) | (401) | (2,562) | |||||||||
| Employer taxes on share based payments | (46) | (31) | (7) | - | (46) | (130) | |||||||||
| Amortisation of brands, customer and supplier relationships | (2,490) | (2,285) | (270) | (1,179) | - | (6,224) | |||||||||
| Operating profit/(loss) | 239 | 6,278 | 325 | 3,727 | (3,479) | 7,090 | |||||||||
| Interest | (8,085) | ||||||||||||||
| Loss before tax | (995) | ||||||||||||||
| December 2020 | UK & Ireland £'000 |
EMEA £'000 |
Asia Pacific £'000 |
North America £'000 |
Other £'000 |
Total £'000 |
|||||||||
| Segment assets | 94,627 | 150,167 | 21,039 | 40,130 | 298 | 306,261 | |||||||||
| Segment liabilities | (60,545) | (103,078) | (17,614) | (17,851) | (686) | (199,774) | |||||||||
| Segment net assets | 34,082 | 47,089 | 3,425 | 22,279 | (388) | 106,487 | |||||||||
| Depreciation | 2,540 | 2,603 | 480 | 368 | - | 5,991 | |||||||||
| Amortisation | 2,519 | 2,356 | 286 | 1,268 | - | 6,429 | |||||||||
| Other segmental information | UK £'000 |
International £'000 |
Total £'000 |
||||||||||||
| Non-current assets | 25,959 | 63,716 | 89,675 | ||||||||||||
5. Finance costs
| June 2021 | June 2020 | December 2020 | |||
| £'000 | £'000 | £'000 | |||
| Interest on overdraft and invoice discounting | 414 | 574 | 1,194 | ||
| Interest on leases | 152 | 167 | 362 | ||
| Interest on loans | 383 | 351 | 830 | ||
| Fair value movements on foreign exchange derivatives | 5 | (194) | 156 | ||
| Other interest costs | 2 | 2 | 4 | ||
| Fair value movements on derivatives for borrowings | (589) | 1,154 | 1,194 | ||
| Foreign exchange (gains)/losses on borrowings for acquisitions | (892) | (681) | 1,088 | ||
| Interest, foreign exchange and other finance costs of deferred and contingent considerations | 52 | 107 | 3,275 | ||
| Interest, foreign exchange and other finance costs of put option liabilities | 1,044 | 375 | 154 | ||
| 571 | 1,855 | 8,257 |
6. Share capital
The total allotted share capital of the Parent Company is:
Allotted, issued and fully paid
| June 2021 | June 2020 | December 2020 | ||||||
| Classed as equity: | Number | £'000 | Number | £'000 | Number | £'000 | ||
| Issued and fully paid ordinary shares of £0.01 each | ||||||||
| Opening balance | 88,604,712 | 886 | 79,973,412 | 799 | 79,973,412 | 799 | ||
| Shares issued | 130,900 | 1 | 8,631,300 | 87 | 8,631,300 | 87 | ||
| Closing balance | 88,735,612 | 887 | 88,604,712 | 886 | 88,604,712 | 886 |
During the period Midwich Group plc issued 130,900 shares (2020: 686,500) into an employee benefit trust. During the prior year, in addition to the shares issued to the employee benefit trust Midwich Group plc issued 7,944,800 shares in order to repay short term debts and fund the Starin acquisition.
Own shares held in employee benefit trusts
| June 2021 | June 2020 | December 2020 | ||||||
| Number | £'000 | Number | £'000 | Number | £'000 | |||
| Issued and fully paid ordinary shares of £0.01 each | ||||||||
| Opening balance | 593,600 | 6 | 476,700 | 5 | 476,700 | 5 | ||
| Shares issued | 130,900 | 1 | 686,500 | 7 | 686,500 | 7 | ||
| Exercise of share options | (40,500) | - | (342,200) | (4) | (569,600) | (6) | ||
| Closing balance | 684,000 | 7 | 821,000 | 8 | 593,600 | 6 |
A reconciliation of LTIP option movements during the current and comparative period, and the year to 31 December 2020 is as follows:
| Six months to June 2021 | Six months to June 2020 | Twelve months to December 2020 | |||
| Outstanding at 1 January | 2,691,676 | 1,976,250 | 1,976,250 | ||
| Granted | 89,700 | - | 1,222,676 | ||
| Lapsed | (13,300) | (10,250) | (39,750) | ||
| Exercised | (39,000) | (253,000) | (467,500) | ||
| Outstanding at period end | 2,729,076 | 1,713,000 | 2,691,676 |
A reconciliation of SIP option movements during the current and comparative period, and the year to 31 December 2020 is as follows:
| Six months to June 2021 | Six months to June 2020 | Twelve months to December 2020 | |||
| Outstanding at 1 January | 254,700 | 265,100 | 265,100 | ||
| Granted | 111,900 | - | 105,900 | ||
| Lapsed | (11,400) | (7,900) | (14,200) | ||
| Exercised | (1,500) | (89,200) | (102,100) | ||
| Outstanding at period end | 353,700 | 168,000 | 254,700 |
7. Other reserves
Movement in other reserves for the year ended 30 June 2021 (Unaudited)
| Share based payment reserve | Translation reserve | Put option reserve | Capital redemption reserve | Other reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2021 | 4,472 | 2,117 | (4,813) | 50 | 150 | 1,976 |
| Other comprehensive income | - | (3,472) | - | - | - | (3,472) |
| Total comprehensive income for the period | - | (3,472) | - | - | - | (3,472) |
| Share based payments | 2,024 | - | - | - | - | 2,024 |
| Deferred tax on share based payments | (18) | - | - | - | - | (18) |
| Share options exercised | (138) | - | - | - | - | (138) |
| Acquisition of subsidiaries | - | - | (3,866) | - | - | (3,866) |
| Balance at 30 June 2021 | 6,340 | (1,355) | (8,679) | 50 | 150 | (3,494) |
Movement in other reserves for the year ended 30 June 2020 (Unaudited)
| Share based payment reserve | Translation reserve | Hedging reserve | Put option reserve | Capital redemption reserve | Other reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'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 | 4,024 | 3,375 | (759) | (6,329) | 50 | 150 | 511 |
Movement in other reserves for the year ended 31 December 2020 (Audited)
| Share based payment reserve | Translation reserve | Hedging reserve | Put option reserve | Capital redemption reserve | Other reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2020 | 3,998 | (954) | 194 | (6,329) | 50 | 150 | (2,891) |
| Other comprehensive income | - | 3,071 | (194) | - | - | - | 2,877 |
| Total comprehensive income for the year | - | 3,071 | (194) | - | - | - | 2,877 |
| Share based payments | 2,562 | - | - | - | - | - | 2,562 |
| Deferred tax on share based payments | (232) | - | - | - | - | - | (232) |
| Share options exercised | (1,856) | - | - | - | - | - | (1,856) |
| Acquisition of non-controlling interest (note 9) | - | - | - | 1,516 | - | - | 1,516 |
| Balance at 31 December 2020 | 4,472 | 2,117 | - | (4,813) | 50 | 150 | 1,976 |
8. Business combinations
Acquisitions were completed by the Group during the current and comparative periods to increase scale, broaden its addressable market and widen the product offering.
Subsidiaries acquired
| Acquisition | Principal activity | Date of acquisition | Proportion acquired (%) | Fair value of consideration £'000 |
| Nicolas M. Kyvernitis Electronics Ent | Distribution of audio visual products to trade customers | 1 January 2021 | 80% | 15,463 |
| Starin Marking Inc | Distribution of audio visual products to trade customers | 6 February 2020 | 100% | 20,961 |
In addition to the above on the 19 April 2021 and 28 February 2020 the Group exchanged a fair value consideration of £8,775k and £885k to acquire certain trade and assets of eLink Distribution AG and Vantage Systems Pty Limited, Companies registered in Germany and Australia.
2021 acquisitions
| Fair value of consideration transferred 2021 | NMK | eLink |
| £'000 | £'000 | |
| Cash | 11,350 | 7,441 |
| Deferred consideration | 4,113 | - |
| Contingent consideration | - | 1,334 |
| Total | 15,463 | 8,775 |
Acquisition costs of £199k in relation to the acquisition of NMK and £87k in relation to the eLink acquisition of trade and assets were expensed to the income statement during the period ended 30 June 2021.
| Fair value of acquisitions 2021 | NMK | eLink |
| £'000 | £'000 | |
| Non-current assets | ||
| Goodwill | 3,768 | 3,713 |
| Intangible assets - brands | 721 | 172 |
| Intangible assets - customer relationships | 1,700 | 972 |
| Intangible assets - supplier relationships | 8,289 | 2,197 |
| Plant and equipment | 77 | - |
| 14,555 | 7,054 | |
| Current assets | ||
| Inventories | 2,325 | 2,799 |
| Trade and other receivables | 4,673 | - |
| Cash and cash equivalents | 2,657 | - |
| 9,655 | 2,799 | |
| Current liabilities | ||
| Trade and other payables | (4,432) | - |
| Non-current liabilities | ||
| Provisions | (368) | - |
| Deferred tax | (81) | (1,078) |
| (449) | (1,078) | |
| Non-controlling interests | (3,866) | - |
| Fair value of net assets acquired attributable to equity shareholders of the Parent Company | 15,463 | 8,775 |
Goodwill acquired in 2021 relates to the workforce, synergies and sales know how. Goodwill arising on both acquisitions has been allocated to the Europe, Middle East, and Africa segment.
Gross contractual amounts of trade and other receivables acquired in 2021 were £4,810k, with bad debt provisions of £137k.
Net cash outflow on acquisition of subsidiaries 2021
| NMK | eLink | |
| £'000 | £'000 | |
| Consideration paid in cash | 11,350 | 7,441 |
| Less: cash and cash equivalent balances acquired | (2,657) | - |
| Net cash outflow | 8,693 | 7,441 |
| Plus: borrowings acquired | - | - |
| Net debt outflow | 8,693 | 7,441 |
2020 acquisitions
| Fair value of consideration transferred 2020 | Starin | Vantage |
| £'000 | £'000 | |
| Cash | 18,872 | 506 |
| Deferred consideration | 2,089 | 379 |
| Total | 20,961 | 885 |
Acquisition costs of £327k in relation to the acquisition of Starin and £32k 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 |
| £'000 | £'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 £21,977k, with bad debt provisions of £897k.
Net cash outflow on acquisition of subsidiaries 2020
| Starin | Vantage | |
| £'000 | £'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 |
9. Acquisition of non-controlling interest
During 2020, the Group acquired the remaining 30.0% non-controlling interest in Gebroeders van Domburg BV, which had a value of £1,985k, for a consideration of £2,874k. £1,516k of the put option reserve was transferred to retained earnings when this element of the put option was extinguished.
10. Currency impact
The Group reports in Pounds Sterling (GBP) but has significant revenues and costs as well as assets and liabilities that are denominated in Euros (EUR), Dollars (USD) and Australian Dollars (AUD). The table below sets out the exchange rates for currencies reported in both the current and prior periods.
| Six months to 30 June 2021 | Six months to 30 June 2020 | At 30 June 2021 | At 30 June 2020 | At 31 December 2020 | |||||
| Average | Average | ||||||||
| EUR/GBP | 1.149 | 1.144 | 1.165 | 1.100 | 1.112 | ||||
| AUD/GBP | 1.806 | 1.907 | 1.840 | 1.795 | 1.763 | ||||
| NZD/GBP | 1.935 | 2.001 | 1.978 | 1.920 | 1.885 | ||||
| USD/GBP | 1.386 | 1.265 | 1.382 | 1.236 | 1.365 | ||||
| CHF/GBP | 1.258 | 1.221 | 1.277 | 1.171 | 1.220 | ||||
| NOK/GBP | 11.772 | 12.241 | 11.888 | 11.924 | 11.627 | ||||
Applying the current period exchange rates to the results of the prior period has the following effect on loss before tax and net assets:
| Revised 2020 | 2020 | Impact | Impact | ||
| £'000 | £'000 | £'000 | % | ||
| Loss before tax | (2,466) | (2,524) | 58 | 2.3% | |
| Net assets | 101,821 | 106,434 | (4,613) | (4.3%) |
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 | |
| 2021 | 2020 | |
| £000 | £000 | |
| Operating profit/(loss) | 7,615 | (671) |
| Cost of acquisitions | 286 | 359 |
| Share based payments | 2,024 | 1,378 |
| Employer taxes on share based payments | 426 | (56) |
| Amortisation of brands, customer and supplier relationships | 3,570 | 3,108 |
| Adjusted operating profit | 13,921 | 4,118 |
| Depreciation | 2,653 | 2,898 |
| Amortisation of patents and software | 127 | 50 |
| Adjusted EBITDA | 16,701 | 7,066 |
| (Increase)/decrease in adjusted inventories | (28,718) | 8,301 |
| (Increase)/decrease in adjusted trade and other receivables | (15,497) | 32,714 |
| Increase/(decrease) in adjusted trade and other payables | 22,368 | (39,090) |
| Adjusted cash flow from operations | (5,146) | 8,991 |
| Adjusted EBITDA cash flow conversion | (30.8%) | 127.2% |
| Profit/(loss) before tax | 7,092 | (2,524) |
| Cost of acquisitions | 286 | 359 |
| Share based payments | 2,024 | 1,378 |
| Employer taxes on share based payments | 426 | (56) |
| Amortisation of brands, customer and supplier relationships | 3,570 | 3,108 |
| Derivative fair value movements and foreign exchange gains and losses on borrowings for acquisitions | (1,481) | 473 |
| Finance costs - deferred and contingent considerations | 52 | 107 |
| Finance costs - put option liabilities over non-controlling interests | 1,044 | 375 |
| Adjusted profit before tax | 13,013 | 3,220 |
| Profit/(loss) after tax | 4,576 | (2,802) |
| Cost of acquisitions | 286 | 359 |
| Share based payments | 2,024 | 1,378 |
| Employer taxes on share based payments | 426 | (56) |
| Amortisation of brands, customer and supplier relationships | 3,570 | 3,108 |
| Derivative fair value movements and foreign exchange gains and losses on borrowings for acquisitions | (1,481) | 473 |
| Finance costs - deferred and contingent considerations | 52 | 107 |
| Finance costs - put option liabilities over non-controlling interests | 1,044 | 375 |
| Tax impact | (1,105) | (525) |
| Adjusted profit after tax | 9,392 | 2,417 |
| Profit/(loss) after tax | 4,576 | (2,802) |
| Non-controlling interest | (356) | (22) |
| (Loss)/profit after tax attributable to equity holders of the Parent Company | 4,220 | (2,824) |
| Adjusted profit after tax | 9,392 | 2,417 |
| Non-controlling interest | (356) | (22) |
| Amortisation attributable to NCI | (211) | (143) |
| Deferred tax on amortisation attributable to NCI | 49 | 38 |
| Adjusted profit after tax attributable to equity holders of the Parent Company | 8,874 | 2,290 |
| Weighted average number of ordinary shares | 88,032,819 | 85,882,336 |
| Diluted weighted average number of ordinary shares | 89,698,067 | 87,244,281 |
| Basic adjusted earnings per share | 10.08p | 2.67p |
| Diluted adjusted earnings per share | 9.89p | 2.63p |
13. Dividends
During the period the Group declared a special dividend of 3.00 pence per share to be paid after the period end. After the period end the Group declared an interim dividend for the six months to 30 June 2021 of 3.30 pence that relates to profits earned over the period.
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