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RNS
Midwich Group PLC  -  MIDW   

Interim Results

Released 07:00 12-Sep-2017

RNS Number : 4339Q
Midwich Group PLC
12 September 2017
 

12 September 2017

Midwich Group Plc

("Midwich" or "the Group")

 

Interim Results

 

Double digit revenue growth and strong net profits across all territories

 

Midwich, a specialist audio visual and document solutions distributor to the trade market, today announces its interim results for the six-months ended 30 June 2017.

 


Note

Six Months Ended




30 June 2017

30 June 2016

% change






Revenue


211,564

158,349

34%






Gross Profit


32,433

24,641

32%

Gross profit %


15.3%

15.6%







Operating profit

 

8,729

5,575

57%

Adjusted operating profit

12

10,533

7,872

34%

Adjusted operating profit %


5.0%

5.0%







Profit before tax

 

8,033

3,825

110%

Adjusted profit before tax

12

10,253

7,563

36%

Adjusted profit before tax %


4.9%

4.8%







Profit after tax

 

5,812

2,716

114%

Adjusted profit after tax

12

8,032

6,438

25%











Basic earnings per share


7.04p

3.47p

103%

Diluted earnings per share


7.03p

3.47p

103%

Adjusted basic earnings per share

12

9.84p

8.71p

13%

Adjusted diluted earnings per share

 

9.82p

8.71p

13%






Interim Dividend per Share

13

4.2p

1.5p

36%

 

Financial Highlights

·     Revenue increased by 33.6% to £211.6 million (27.9 % on constant currency basis)

·     Gross margin of 15.3%, in line with full year 2016

·     Adjusted operating profit increased by 33.8 % to £10.5 million (27.8 % on constant currency basis)

·     Adjusted profit before tax improved by 35.6% to £10.3 million (29.5 % on constant currency basis)

·     Interim dividend declared of 4.17 pence per share (2016: 1.53 pence per share), an increase of 36.3% on a like for like basis.

 

Operational Highlights

·     Recent acquisitions have performed ahead of expectations

·     Positive full year effect of new distribution agreements

·     Continued growth in the audio visual business

 

Post-Period Highlights

·     Acquisition of Gebroeders van Domburg B.V. a Netherlands based audio visual distributor

 

Stephen Fenby, Managing Director of Midwich Group Plc, commented:

"The Group has performed strongly in the first six months of the year across all geographies with robust organic growth and contributions from recent acquisitions Holdan and Earpro.

 

"Our business in large format displays continues to grow strongly and we are pleased with progress in the developing specialist broadcast and audio segments.

 

"Profit margins have been maintained and cash generation is in line with our expectations at this stage of the year.  We are pleased to declare an interim dividend of 4.17 pence per share, 36% ahead of prior year on a like for like basis.

 

"The strong performance reported in the first half year coupled with indications of positive sales momentum and strong contributions from recent acquisitions gives the Board confidence in reporting results for the full year in line with our expectations, which were upgraded at the time of the Group's trading statement on 21 July 2017."

 

Enquiries:

 

Midwich Group Plc

Stephen Fenby, Managing Director

Anthony Bailey, Finance Director

 

+44 (0) 1379 649 200

FTI Consulting

Oliver Winters / Alex Beagley / George Robinson

+44 (0) 20 3727 1000



Investec Bank plc

James Ireland / Carlton Nelson / James Rudd

+44 (0) 20 7597 5970

 

Notes to editors

Midwich is a specialist AV and document solutions distributor to the trade market, with operations in the UK and Ireland, France, Germany, Iberia, and Australasia. The Group's long-standing relationships with over 300 vendors, including blue-chip organisations such as Samsung, LG, Epson, and NEC, support a comprehensive product portfolio across major audio visual categories such as large format displays, projectors, digital signage and printers. The Group operates as the sole or largest in-country distributor for a number of its vendors in their respective product sets. The Directors attribute this position to the Group's technical expertise, extensive product knowledge and strong customer service offering built up over a number of years. The Group has a large and diverse base of approximately 10,000 customers, most of which are professional AV integrators and IT resellers serving sectors such as corporate, education, retail, residential and hospitality. Although the Group does not sell directly to end users, it believes that the majority of its products are used by commercial and educational establishments rather than consumers.

 

Initially a UK only distributor, the Group now has over 600 employees across the UK and Ireland, Germany, France, Iberia, and Australasia. In the six months to 30 June 2017, 38 per cent of the Group's revenues were derived from outside the UK. A core component of the Group's growth strategy is further expansion of its international operations and footprint into strategically targeted jurisdictions.

 

For further information, please visit www.midwichgroupplc.com

 

MANAGING DIRECTOR'S REPORT

 

Overview

 

The Group has performed strongly in the first six months of 2017.  Our business continues to develop in all markets, with double digit revenue growth being achieved in all territories, including the UK and Ireland - our most established segment.

 

Recent acquisitions have performed ahead of expectations, and have helped to grow our presence in the specialist broadcast and audio markets.

 

We saw strong growth in the displays (particularly large format and interactive displays), broadcast, audio and technical product categories.

 

Strategy

 

The Group's strategy for growth continues to be both organic and inorganic, reflecting the contributors to the successful growth track record in recent years.

 

The Group's organic growth strategy is focused on the provision of market leading support to its customers and vendors.  As a distributor, the Group neither develops product nor does it sell to the end-users of those products.  It is aware that both its vendors and customers generally have a choice of distribution partner.  The Group's expertise is the provision of services which provide the greatest assistance to vendors in pushing product out into the market, and to help customers provide the highest level of support to their end-users.

 

Underpinning the Group's growth strategy is its success in sourcing, executing and integrating its chosen acquisitions.  The Group takes a disciplined approach to acquisitions, seeking to add capital value without an adverse impact on the existing business.  Acquisitions remain a fundamental aspect of the Group's strategy and it continues to pursue a strong pipeline of opportunities.

 

Acquisitions

 

On 27 March 2017, the Group completed the acquisition of EarPro S.A. ("Earpro"), a value-added distributor of audio, video and lighting solutions in Spain and Portugal. Integration of the business is progressing well and we are pleased with its performance since acquisition.

 

Post period end, on 6 September 2017 the Group completed the acquisition of Gebroeders van Domburg , a market leading specialist audio visual and lighting distributor in the Netherlands. The Group's robust balance sheet means it is well placed to continue its buy and build strategy both in new and existing territories.

 

Trading and Financial Review

 

Group turnover increased by 33.6% to £211.6 million for the period (H1 2016: £158.3 million).  Significant double digit growth was achieved in all territories with Germany and Australasia growing at the fastest rates of 47% and 44% respectively. Our business in Germany has continued to gain share in the projection category and to develop its business in the large format and technical categories. Our businesses in Australasia benefited from the introduction of new technical vendors and growth in existing vendors. The UK and Ireland business grew at 27% with Holdan, which was acquired in September 2016, performing strongly. Our business in France grew by 18% driven particularly by the projection category.  Earpro had a strong first quarter, contributing nearly £5 million in sales, which was above the Board's original expectations.

 

The Group's gross margin for the half year fell by 0.3% to 15.3%, in line with the full year result for 2016. The gross margin in the UK business was 0.6% lower than in the first half of last year, partly as a result of one-off high margin document solutions sold in the prior period and partly due to the impact of product mix. The gross margins in Germany and France were also slightly below prior year as a result of product mix effects. Australasia grew its gross margin strongly as it extended its technical vendor base. The gross margin of the Earpro business in Iberia contributed positively to the overall Group result.

 

Operating profit increased by 56.6% to £8.7 million (H1 2016: £5.6 million). Adjusting for acquisition costs and amortisation, operating profit of £10.5 million represented growth of 33.8%. Adjusted operating profit increased by 28% in the UK & Ireland with particularly strong contributions from Holdan and the PSCo rental business. Operating profit in Australasia grew by nearly 70% and in Germany by nearly 20%. The only territory which experienced a fall in operating profit was France where we have invested in additional resources to support future growth.

 

Group turnover and adjusted operating profit both grew by 28% on a constant currency basis in the first half.  The Group benefited from movements in currency in the first half and the positive impact on adjusted operating profit was approximately £0.4 million.  

 

Taxation

 

The tax charge for the period was £2.2 million (H1 2016: £1.1 million) which represents an effective current tax rate of 22% (H1 2016: 21%) based on adjusted operating profits less net interest costs.  The charge in H1 2017 includes a prior year debit of £0.1 million.  The charge in 2016 included prior year credits amounting to £0.3 million.

 

Financial Position

 

The Group had a net cash inflow from operations before tax of £3.5 million for the period (H1 2016: outflow £1.2 million).  The first half year is traditionally a more working capital intensive period than the full year and this performance was in line with management expectations. 

Net debt at 30 June 2017 was £22.8 million (£15.0 million at 31 December 2016).

 

Dividend

 

The Board is pleased to declare an interim dividend of 4.17 pence per share (H1 2016: 1.53 pence per share for the shortened interim period after the IPO), which will be paid on 27 October 2017 to those shareholders on the Company's register as at 22 September 2017.

 

Outlook

 

The strong performance reported in the first half year coupled with indications of positive sales momentum and strong contributions from recent acquisitions  gives the Board confidence in reporting results for the full year in line with our expectations, which were upgraded at the time of the Group's trading statement on 21 July 2017 .

 

Stephen Fenby

Managing Director

 

Unaudited Consolidated Income Statement for the 6 months ended 30 June 2017


Note


30 June

2017


30 June

2016


31 December 2016


 

 

Unaudited


Unaudited


Audited


 

 

£'000


£'000


£'000


 

 

 

 

 

 

 

Revenue


 

211,564


158,349


370,142

Cost of sales


 

(179,131)


(133,708)


(313,681)

Gross profit


 

32,433


24,641


56,461


 

 


 

 

 

 

Distribution costs


 

(20,841)


(16,001)


(35,520)

Total administrative expenses


 

(4,364)


(4,398)


(9,234)

Other operating income


 

1,501


1,333


2,780

Operating profit


 

8,729


5,575


14,487

Comprising

 

 


 

 

Adjusted operating profit

 

 

10,533

 

7,872

 

18,542

Costs of flotation

 

 

-

 

(1,018)

 

(1,041)

Share based payments

 

 

(136)

 

-

 

(75)

Costs of acquisitions

 

 

(146)

 

-

 

(259)

Amortisation

 

 

(1,522)

(1,279)

(2,680)


 

 

8,729

 

5,575

 

14,487


 

 


 


 


Finance income


 

14


-


1

Finance costs

5

 

(710)


(1,750)


(2,386)

Profit before taxation


 

8,033


3,825


12,102


 

 


 

 

 

 

Taxation


 

(2,221)


(1,109)


(3,542)

Profit after taxation

 

 

5,812

 

2,716

 

8,560


 

 


 

 

 

 

Profit for the period/financial year attributable to:


 


 

 

 

 

The company's equity shareholders


 

5,595


2,461


8,216

Non-controlling interest


 

217

 

255

 

344


 

 

5,812


2,716


8,560

Basic earnings per share

3

 

7.04p


3.47p


10.92p

Diluted earnings per share

3

 

7.03p


3.47p


10.91p

 

Unaudited Consolidated Statement of Comprehensive Income for 6 months ended 30 June 2017

 

 

 

30 June


30 June


31 December




2017


2016


2016




Unaudited


Unaudited


Audited


 

 

£'000

 

£'000


£'000


 

 

 

 

 

 

 

Profit for the period/financial year


 

5,595

 

2,461

 

8,216

 

 

 

 

 

 

 

 

Other comprehensive income - items that may subsequently be reclassified to profit / loss


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange gains on consolidation


 

435


1,261


1,707


 

 

 

 

 

 

 

Other comprehensive income for the period/financial year, net of tax


 

435


1,261


1,707


 

 

 

 

 

 

 

Total comprehensive income for the period/financial year attributable to the Company's equity shareholders


 

6,030


3,722


9,923


 

 

 

 

 

 

 

Total comprehensive income for the period/financial year attributable to non-controlling interests


 

217


255


344


 

 

 

 

 

 

 

Total comprehensive income for the period/financial year


 

6,247

 

3,977

 

10,267

 

 

 






 

 

Unaudited Consolidated Balance Sheet as at 30 June 2017

 

 

 

30 June


30 June


31 December




2017


2016


2016


 

 

Unaudited


Unaudited


Audited


 

 

£'000


£'000


£'000

Assets


 

 

 

 

 

 

Non-current assets


 

 

 

 

 

 

Goodwill


 

5,568


3,303


4,557

Intangible assets


 

19,725


18,370


18,820

Property, plant and equipment


 

5,978


3,424


5,035


 

 

31,271


25,097


28,412

Current assets


 

 

 

 

 

 

Inventories


 

56,514


40,351


48,142

Trade and other receivables


 

61,862


48,015


52,545

Cash and cash equivalents


 

20,597


14,880


20,164


 

 

138,973

 

103,246


120,851

Current liabilities


 

 

 

 

 

 

Trade and other payables


 

(64,786)


(51,870)


(58,299)

Financial instruments


 

(734)

 

-

 

(698)

Deferred consideration


 

(4,939)


-


(1,554)

Borrowings


 

(43,426)


(28,737)


(35,131)

Current tax


 

(2,260)


(1,995)


(2,062)


 

 

(116,145)


(82,602)


(97,744)

Net current assets


 

22,828


20,644


23,107









Non-current liabilities:


 

 

 

 

 

 

Financial instruments


 

(2,853)

 

-

 

(1,441)

Deferred consideration


 

-

 

-

 

(72)

Finance lease payables


 

-

 

(26)

 

-

Deferred tax


 

(3,817)

 

(3,378)

 

(3,414)

 

 

 

(6,670)


(3,404)


(4,927)

Net assets


 

47,429


42,337


46,592









Capital and reserves


 

 

 

 

 

 

Share capital


 

794


794


794

Share premium


 

25,855


25,857


25,855

Share based payment reserve


 

233


-


84

Investment in own shares


 

(5)

 

(5)

 

(5)

Retained earnings


 

19,753


15,220


19,765

Translation reserve


 

1,152

 

271

 

717

Put option reserve


 

(2,803)


-


(1,770)

Capital redemption reserve


 

50

 

50

 

50

Other reserve


 

150

 

150

 

150

Equity attributable to owners of parent


 

45,179

 

42,337


45,640

Non-controlling interests


 

2,250

 

-

 

952

Total equity


 

47,429


42,337


46,592

 

Unaudited Consolidated Statement of Changes in Equity for 6 months ended 30 June 2017

For the period ended 30 June 2017


Share
capital

Share premium

Investment in own shares

Share based payment reserve

Retained
earnings

Translation reserve

Put option reserve

Capital redemption reserve

 

Other reserve

Equity attributable to owners of the parent

Non-controlling interests

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000














Balance at 1 January 2017

794

25,855

(5)

84

19,765

717

(1,770)

50

150

45,640

952

46,592

Profit for the period

-

-

-

-

5,595

-

-

-

-

5,595

217

5,812

Other comprehensive income

-

-

-

-

-

435

-

-

-

435

-

435

Total comprehensive income for the period

-

-

-

-

5,595

435

-

-

-

6,030

217

6,247

Share based payments

-

-

-

136

-

-

-

-

-

136

-

136

Deferred tax on share based payments

-

-

-

13

-

-

-

-

-

13

-

13

Acquisition of Earpro SA (note 7)

-

-

-

-

-

-

(1,033)

-

-

(1,033)

1,081

48

Dividends paid

-

-

-

-

(5,607)

-

-

-

-

(5,607)

-

(5,607)

Balance at 30 June 2017 (Unaudited)

794

25,855

(5)

233

19,753

1,152

(2,803)

50

150

45,179

2,250

47,429

 

 

For the period ended 30 June 2016


Share capital

Share premium

Investment in own shares

Retained earnings

Translation reserve

Put option reserve

Capital redemption reserve

Other reserve

Equity attributable to owners of the parent

Non-controlling interests

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000













Balance at 1 January 2016

1,398

-

(1,000)

8,652

(990)

(1,735)

50

1,145

7,520

4,858

12,378

Profit for the period

-

-

-

2,461

-

-

-

-

2,461

255

2,716

Other comprehensive Income

-

-

-

-

1,261

-

-

-

1,261

-

1,261

Total comprehensive income for the period

-

-

-

2,461

1,261

-

-

-

3,722

255

3,977

Bonus share issue*

663

-

(5)

(663)

-

-

-

5

-

-

-

Share capital reduction*

(1,392)

-

1,000

1,392

-

-

-

(1,000)

-

-

-

Issue of shares*

125

26,647

-

-

-

-

-

-

26,772

-

26,772

Costs of share issue*

-

(790)

-

-

-

-

-

-

(790)

-

(790)

Acquisition of non-controlling interest (note 8)

-

-

-

3,378

-

1,735

-

-

5,113

(5,113)

-

Transactions with owners

(604)

25,857

995

4,107

-

1,735

-

(995)

31,095

(5,113)

25,982

Balance at 30 June 2016 (Unaudited)

794

25,857

(5)

15,220

271

-

50

150

42,337

             -

42,337

*See note 6

 

For the year ended 31 December 2016


Share
capital

Share premium

Investment in own shares

Share based payment reserve

Retained
earnings

Translation reserve

Put option reserve

Capital redemption reserve

 

Other reserve

Equity attributable to owners of the parent

Non-controlling interests

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000














Balance at 1 January 2016

1,398

-

(1,000)

-

8,652

(990)

(1,735)

50

1,145

7,520

4,858

12,378

Profit for the year

-

-

-

-

8,216

-

-

-

-

8,216

344

8,560

Other comprehensive income

-

-

-

-

-

1,707

-

-

-

1,707

-

1,707

Total comprehensive income for the year

-

-

-

-

8,216

1,707

-

-

-

9,923

344

10,267

Bonus share issue*

663

-

(5)

-

(663)

-

-

-

5

-

-

-

Share capital reduction*

(1,392)

-

1,000

-

1,392

-

-

-

(1,000)

-

-

-

Issue of shares*

125

26,647

-

-

-

-

-

-

-

26,772

-

26,772

Costs of share issue*

-

(792)

-

-

-

-

-

-

-

(792)

-

(792)

Acquisition of non-controlling interest (note 8)

-

-

-

-

3,378

-

1,735

-

-

5,113

(5,113)

-

Share based payments

-

-

-

75

-

-

-

-

-

75

-

75

Deferred tax on share based payments

-

-

-

9

-

-

-

-

-

9

-

9

Acquisition of subsidiary

-

-

-

-

-

-

(1,770)

-

-

(1,770)

863

(907)

Dividends paid

-

-

-

-

(1,210)

-

-

-

-

(1,210)

-

(1,210)

Balance at 31 December 2016 (Audited)

794

25,855

(5)

84

19,765

717

(1,770)

50

150

45,640

952

46,592

 

*See note 6

 

 

Unaudited Consolidated Cashflow Statement for 6 months ended 30 June 2017

 

 

30 June


30 June


31 December

 



2017


2016


2016

 


 

Unaudited


Unaudited


Audited

 


 

£'000


£'000


£'000

 

Cash inflow from operating activities


 

 

 

 

 

 

Profit before tax


8,033


3,825


12,102

 

Depreciation


733

 

604

 

1,229

 

Amortisation


1,522

 

1,279

 

2,680

 

(Gain) / loss on disposal of assets


(153)

 

(85)

 

183

 

Share based payments


136

 

-

 

75

 

Foreign exchange (gains)/losses


154


(15)


216

 

Finance income


(14)


-


(1)

 

Finance costs


710


1,750


2,386

 

Adjusted profit from operations before changes in working capital


11,121


7,358


18,870

 

Increase in inventories


(6,319)


(2,502)


(8,447)

 

Increase in trade and other receivables


(5,114)


(5,308)


(5,887)

 

(Decrease) / increase in trade and other payables


3,830


(755)


3,367

 

Cash flow from operations


3,518


(1,207)


7,903

 

Income tax paid


(2,186)


(1,664)


(4,281)

 

Net cash inflow / (outflow) from operating activities


1,332


(2,871)


3,622

 








 

Cash flow from investing activities


 

 

 

 

 

 

Acquisition of businesses


(4,986)

 

-

 

(3,276)

 

Cash acquired within business combination


2,972

 

-

 

367

 

Purchase of intangible assets


(43)

 

(126)

 

(186)

 

Purchase of plant and equipment


(1,820)

 

(606)

 

(2,278)

 

Proceeds on disposal of plant and equipment


368

 

371

 

546

 

Interest received


14


-


1

 

Net cash outflow from investing activities


(3,495)


(361)


(4,826)

 








 

Net cash from financing activities


 

 

 

 

 

 

Acquisition of non-controlling interest


-

 

(7,454)

 

(7,454)

 

Deferred consideration paid


(11)

 

-

 

(11)

 

Issue of shares net of issue costs


-


25,982

 

25,980

 

Dividends paid


(5,607)


-

 

(1,210)

 

Invoice financing inflows / (outflows)


7,380


(3,688)


256

 

Issue of loan to related party


-


-

 

(212)

 

Repayment received of related party loan


-


-

 

212

 

Repayment of loans


(14)


(13,424)


(13,696)

 

Interest paid


(295)


(390)


(657)

 

Interest paid on finance leases


-


(10)

 

(16)

 

Capital element of finance lease payments


(65)

 

(219)

 

(527)

 

Net cash inflow from financing activities


1,388


797


2,665

 








 

Net (decrease) / increase in cash and cash equivalents

 

(775)

 

(2,435)

 

1,461

 

 








 

Cash and cash equivalents at beginning of period/year


17,201


14,351


14,351

 

Effects of exchange rate changes


280


1,222


1,389

 

Cash and cash equivalents at end of period/year


16,706


13,138


17,201

 

Comprising:

 

 

 

 

 

 

 

 

Cash at bank

 

 

 

20,597

 

14,880

 

20,164

Bank overdrafts

 

 

 

(3,891)

 

(1,742)

 

(2,963)

 

 

 

 

16,706

 

13,138

 

 

Notes to the Interim Consolidated Financial Information

1.    GENERAL

 

The interim financial information for the period to 30 June 2017 is unaudited and does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

They do not include all the information required in annual financial statements in accordance with IFRS, and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2016.

               

2.    ACCOUNTING POLICIES

 

The interim financial information in this report has been prepared on the basis of the accounting policies set out in the audited financial statements for the year ended 31 December 2016, which complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").

The financial information has been prepared on the basis of IFRS that the Directors expect to be applicable as at 31 December 2017.

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 2016, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.

 

3.    EARNINGS PER SHARE

 

Basic earnings per share is based on the profit after tax for the period/year and the weighted average number of shares in issue during the period/year. Preference shares are non-participating and therefore excluded.

Diluted earnings per share is calculated by adjusting the average number of shares in issue during the period to assume conversion of all dilutive potential ordinary shares. Since July 2016, the Group has issued potentially dilutive shares relating to the long term incentive plan available to senior management and key members of staff.

 

June

2017

 

June

2016

 

December

2016

Profit attributable to equity holders of the parent Company (£'000)

5,595


2,461


8,216

Weighted average number of shares in issue*

79,448,200


71,000,398


75,247,380

Basic earnings per share

7.04p


3.47p


10.92p

 

*The weighted average number of shares for the purpose of earnings per share has been based on the assumed number of shares as if the bonus issue on 6 May 2016 had occurred at the beginning of the earliest period presented.

Taking the Group's LTIP's into consideration in respect of the Group's weighted average number of ordinary shares for the purposes of diluted earnings per share, is as follows:

 

 

June

2017

 

June

2016

 

December

2016

Number of shares

 

 

 

 

 

Dilutive (potential dilutive) effect of share options

134,338

 

-

 

93,852

Weighted average number of ordinary shares for the purposes of diluted earnings per share

79,582,538

 

71,000,398


75,341,232

 

 

 

 

 

 

Diluted earnings per share

7.03p

 

3.47p

 

10.91p

 

4.    SEGMENTAL REPORTING

 

June 2017







£'000

UK & Ireland

France

Iberia1

Germany

Australasia

Total








Revenue

139,420

17,123

4,927

35,495

14,599

211,564








Gross profit

22,090

2,165

1,316

4,327

2,535

32,433

Gross profit %

15.8%

12.6%

26.7%

12.2%

17.4%

15.3%


 

 

 

 

 

 

Adjusted operating profit

 7,138

 260

 588

 1,586

 961

 10,533


 

 

 

 

 

 

Costs of acquisitions

(146)

-

-

-

-

(146)

Share based payments

(136)

-

-

-

-

(136)

Amortisation

(1,215)

(15)

(71)

(196)

(25)

(1,522)


 

 

 

 

 

 

Operating profit

 5,641

 245

 517

 1,390

 936

 8,729


 

 

 

 

 

 

Net interest


 

 

 

 

(696)


 

 

 

 

 

 

Profit before tax


 

 

 

 

 8,033


 

 

 

 

 

 

Segment assets

115,353

11,965

12,909

 20,621

 9,396

 170,244


 

 

 

 

 


Segment liabilities

(95,931)

(10,312)

(4,288)

(6,303)

(5,981)

(122,815)


 

 

 

 

 


Depreciation and amortisation

 1,788

 94

 75

 212

 86

 2,255


 

 

 

 

 

 

 

 

 


UK

ROW

Total

Non-current assets


 


 23,173

 8,098

 31,271

1Iberian subsidiary acquired 27 March 2017

June 2016






£'000

UK & Ireland

France

Germany

Australasia

Total







Revenue

109,532

14,536

24,157

10,124

158,349







Gross profit

17,961

1,915

3,220

1,545

24,641

Gross profit %

16.4%

13.2%

13.3%

15.3%

15.6%


 

 

 

 

 

Adjusted operating profit

5,595

357

1,349

571

7,872


 

 

 

 

 

Costs of flotation

(1,018)

-

-

-

(1,018)

Amortisation

(1,069)

(15)

(190)

(5)

(1,279)


 

 

 

 

 

Operating profit

3,508

342

1,159

566

5,575


 

 

 

 

 

Net interest


 

 

 

(1,750)


 

 

 

 

 

Profit before tax


 

 

 

3,825


 

 

 

 

 

Segment assets

93,520

10,561

17,799

6,463

128,343


 

 

 

 


Segment liabilities

(65,557)

(9,701)

(5,899)

(4,849)

(86,006)


 

 

 

 


Depreciation and amortisation

1,539

63

207

74

1,883


 

 

 

 

 

 

 

 

UK

ROW

Total

Non-current assets


 

20,615

4,482

25,097

 

 

December 2016






£'000

UK & Ireland

France

Germany

Australasia

Total







Revenue

246,972

33,414

64,258

25,498

370,142







Gross profit

39,319

4,526

8,495

4,121

56,461

Gross profit %

15.9%

13.5%

13.2%

16.2%

15.3%


 

 

 

 

 

Adjusted operating profit

12,001

1,059

3,881

1,601

18,542


 

 

 

 

 

Costs of flotation

(1,041)

-

-

-

(1,041)

Costs of acquisitions

(247)

-

-

(12)

(259)

Share based payments

(75)

-

-

-

(75)

Amortisation

(2,230)

(33)

(390)

(27)

(2,680)


 

 

 

 

 

Operating profit

8,408

1,026

3,491

1,562

14,487


 

 

 

 

 

Net interest


 

 

 

(2,385)


 

 

 

 

 

Profit before tax


 

 

 

12,102


 

 

 

 

 

Segment assets

109,614

11,303

19,634

8,712

149,263


 

 

 

 


Segment liabilities

(80,498)

(9,878)

(6,548)

(5,747)

(102,671)


 

 

 

 


Depreciation and amortisation

3,197

139

425

 148

3,909


 

 

 

 

 

 

 

 

UK

ROW

Total

Non-current assets


 

22,129

    6,283

28,412

 

 

 

5.    FINANCE COSTS

 

 

June 2017

 

June 2016

 

December 2016

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Interest on overdraft and invoice discounting

282


305


604

Interest on finance leases

-


20


27

Dividend on preference shares treated as borrowings

-


(14)


(14)

Interest on other loans

12


79


40

Interest & fair value movement on put option liability

416


1,360


1,729

 


 

 

 


 

710

 

1,750

 

2,386

 

6.    SHARE CAPITAL

 

The total allotted share capital of the company is:

Allotted, issued and fully paid


June 2017



June 2016



December 2016

Classed as equity:

Number

£'000


Number

£'000


Number

£'000










Ordinary shares of £0.01 each

79,448,200

794


79,448,200

794


79,448,200

794



















Total equity

79,448,200

794


79,448,200

794


79,448,200

794

 

Share transactions effected during the 2017 interim period:

No shares have been issued during the 6 months ended 30 June 2017.

 

Share transactions effected during the 2016 interim period (see notes):

Number of shares


Opening 1 January 2016

Issue of B1 Ordinary shares*

Buy back of B5 Ordinary shares

4 February

Redemption of Preference shares

22 April

Write down of Preference, B3 and B5 shares

29 April

Re-designation to Ordinary shares

29 April

Bonus share issue

29 April

Issue of Ordinary shares

3 May

Closing 30 June 2016

Ordinary shares of £0.01

-

-

-

-

-

669,482

66,278,718

12,500,000

79,448,200

Ordinary shares of £1

396,000

-

-

-

-

(396,000)

-

-

-

Preference shares of £1

4,123,746

-

-

(3,123,746)

(995,193)

(4,807)

-

-

-

A Ordinary shares of £0.01

52,500

-

-

-

-

(52,500)

-

-

-

B1 Ordinary shares of £0.01

174,474

36,450

-

-

-

(210,924)

-

-

-

B3 Ordinary shares of £0.01

7,179

-

-

-

(4,331)

(2,848)

-

-

-

B5 Ordinary shares of £0.01

14,358


(7,179)

-

(4,776)

(2,403)

-

-

-












4,768,257

36,450

(7,179)

(3,123,746)

(1,004,300)

-

66,278,718

12,500,000

79,448,200

 

Value of shares


£'000










Opening 1 January 2016

Issue of B1 Ordinary shares*

Share capital reduction 13 April

Redemption of Preference shares

22 April

Write down of Preference, B3 and B5 shares

29 April

Re-designation to Ordinary shares

29 April

Bonus share issue

29 April

Issue of Ordinary shares

3 May

Closing 30 June 2016

Ordinary shares of £0.01

-

-

-

-

-

6

663

125

794

Ordinary shares of £1

396

-

(392)

-

-

(4)

-

-

-

Preference shares of £1

4,124

-

(990)

(3,124)

(10)

(0)

-

-

-

A Ordinary shares of £0.01

-

-

-

-

-

-

-

-

-

B1 Ordinary shares of £0.01

2

-

-

-

-

(2)

-

-

-












4,522

-

(1,382)

(3,124)

(10)

-

663

125

794

 

* Issue of B1 Ordinary shares took place on the following dates at a price of £21.20 per share:

13 January

10,000

18 January

20,000

4 February

3,700

10 March

2,750

 

36,450

 

Notes on share capital movements during 2016

As explained further in the admission document, the following share capital changes (as illustrated in the above tables) took place during the period:

1.    Issue of B1 Ordinary shares at £21.20 per share as noted above, creating share premium of £772,000

2.    Buy back of 7,179 B5 Ordinary shares on 4 February 2016 for cancellation at par value

3.    Share capital reduction on 13 April 2016, reducing the equity Preference share capital and Ordinary share capital from £1.00 per share nominal value to £0.01 per share nominal value

4.    Redemption of Preference shares classified as a financial liability on 22 April 2016, settling the financial liability in full

5.    Re-designation of the Preference shares', B3 shares' and B5 shares' percentages on 29 April 2016, and subsequently re-designation of these as Deferred shares, pursuant to which these Deferred shares were transferred in favour of the Company for nil consideration and then cancelled.

6.    Re-designation of all remaining categories of shares as £0.01 Ordinary shares on 29 April 2016

7.    Bonus share issue on 29 April 2016 in the proportion of 99 Ordinary shares for each existing Ordinary share

8.    Placing of new shares on 3 May 2016 (date of admission to the AIM Market) at £2.08 per share, creating share premium of £25,875,000 less issue costs of £790,000

 

All reductions in value of existing share capital have created additional distributable reserves which have been recorded in retained earnings. The bonus issue of ordinary shares has used some of the additional distributable reserves created by the preceding share capital reductions.

Rights and obligations

Ordinary shares have attached to them full voting, dividend and capital distribution (including on winding up) rights.  They do not confer any rights of redemption.

Employee benefit trust

As a result of the share changes described in the share capital movements notes 3,5,6 and 7 above, the employee benefit trust was allocated 480,700 ordinary shares.  On 30 June 2016, 136,000 of these shares were distributed to the SIP trust, leaving 344,700 ordinary shares in the employee benefit trust as at 31 December 2016.

In May 2017 a further 105,000 were distributed to the SIP trust, leaving 239,700 £0.01 Ordinary shares in the employee benefit trust at 30 June 2017.

 

7.    BUSINESS COMBINATIONS

 

Acquisitions have been completed by the Group during the period to increase scale, broaden its addressable market and widen the product offering.

 

Subsidiaries acquired:

 

Principal activity

Date of acquisition

Proportion of voting equity interest acquired (%)

Fair value of consideration transferred

£'000

 

 

 

 

 

Earpro SA

Distribution of audio visual products to trade customers

27 March 2017

88.50%

8,311

 

 

Fair value of consideration transferred

2017

Acquisition of Earpro SA

 

 

£'000

 

 



Cash

4,986


Deferred contingent consideration

3,325


Total

8,311


 

Acquisition costs of £146,000 were expensed to the income statement in relation to the acquisition of Earpro SA.

 

 

2017

Acquisition of Earpro SA

 

 

£'000

 

Non-current assets

 

 

Goodwill

1,009


Intangible assets  - key supplier exclusivity

1,488


Intangible assets - customer relationships

740


Intangible assets - brand name

104


Intangible assets - other

58


Plant and equipment

66


Deferred tax asset

4


 



Current assets



Inventories

2,053


Trade and other receivables

4,004


Cash and cash equivalents

2,972


Financial Investments

201


 



Current liabilities



Trade and other payables

(2,724)


 



Non-current liabilities



Deferred tax

(583)


 



Non-controlling interests

(1,081)


 



 

8,311


 

Goodwill acquired in 2017 relates to workforce, synergies and sales know how.

 

Goodwill arising on the acquisition of Earpro SA has been allocated to the Iberian operating segment and is not expected to be deductible for tax purposes.

 

 

Acquisition of Earpro

 

 

£'000

 

Net cash outflow on acquisition of subsidiaries

 

 

 



Consideration paid in cash

(4,986)


Less: cash and cash equivalent balances acquired

2,972


 



Net cash outflow

(2,014)


 

 

8.    ACQUISITION OF NON-CONTROLLING INTEREST

 

On 9 May 2016, the Group exercised a call option to acquire the remaining 49% non-controlling interest in their subsidiary, Kern & Stelly Medientechnik GmbH for €9,237,000.

As a result of this acquisition, the put option liability and put option reserve have been derecognised and the non-controlling interests in equity have been extinguished.

As this company was previously consolidated as a subsidiary, no other changes in the net assets of the subsidiary included in the consolidated financial statements arise because no change in control has occurred.

 

9.    CURRENCY IMPACT

The Group report in Pounds Sterling (GBP) but has significant revenues and costs as well as assets and liabilities that are denominated in  Euros (EUR) and Australia Dollars (AUD).  The table below sets out the prevailing exchange rates in the periods reported.


Six months to 30 June

At 30 June

At 31 December


2017

2016

2017

2016

2016


Average

Average










EUR/GBP

1.166

1.300

1.146

1.208

1.180







AUD/GBP

1.678

1.966

1.732

1.802

1.690

 

The impact of changes in the key exchange rates from the first half of 2016 to the first half of 2017 are summarised as follows:

£000

EUR

AUD




Impact on revenues

5,327

1,670




Impact on profit before tax

264

87




Impact on net debt

61

(44)

 

 

10.  COPIES OF INTERIM REPORT

 

Copies of the interim report are available to the public free of charge from the Company at Vinces Road, Diss, IP22 4YT.

 

11.  POST BALANCE SHEET EVENTS

 

On 6 September the Group acquired 70% of Gebroeders van Domburg B.V, a specialist audio visual and lighting distributor in the Netherlands.

The initial consideration payable was €2.1m. The transaction also included an earn-out structure for the initial 70% stake which will be based on the business's performance in the period to 31 December 2018. The Group has options to acquire their remaining 30% stake over the next three years on a pre-determined methodology linked primarily to earnings growth. 

 

12.  ADJUSTMENTS TO REPORTED RESULTS

 


Six months ended


30 June

30 June


2017

2016


£000

£000




Operating profit

8,729

5,575

Exceptional administrative costs

146

1,018

Share based payments

136

-

Amortisation

1,522

1,279

Adjusted operating profit

10,533

7,872







Profit before tax

8,033

3,825

Exceptional administrative costs

146

1,018

Share based payments

136

-

Amortisation

1,522

1,279

Finance costs - put and call option

416

1,360

Finance costs - interest on loan notes and preference shares

-

81

Adjusted profit before tax

10,253

7,563




Profit after tax

5,812

2,716

Exceptional administrative costs

146

1,018

Share based payments

136

-

Amortisation

1,522

1,279

Finance costs - put and call option

416

1,360

Finance costs - interest on loan notes and preference shares

-

81

Tax impact - at 20%

-

(16)

Adjusted profit after tax

8,032

6,438




Profit after tax

5,812

2,716

Non-controlling interest

(217)

(255)

Profit after tax attributable

5,595

2,461




Adjusted profit after tax

8,032

6,438

Non-controlling interest

(217)

(255)

Adjusted profit after tax attributable

7,815

6,183




Number of shares

79,448,200

71,000,398

Reported EPS - pence

7.04p

3.47p

Adjusted EPS - pence

9.84p

8.71p

 

13.  INTERIM DIVIDEND

 

The 2016 interim dividend of 1.5 pence was related to profits earned in the period from completion of the Group's listing on AIM to 30 June 2016, a period of 55 days.  As a result the 2016 interim dividend was reduced by 50%.  The interim dividend proposed for the six months to 30 June 2017 of 4.17 pence is related to profits earned over that whole period.  Reported like for like growth of 36% is after adjustment to gross up the 2016 number to a full six months on a pro rata basis.   

 


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