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RNS
Midwich Group PLC  -  MIDW   

Interim Results

Released 07:00 11-Sep-2018

RNS Number : 3238A
Midwich Group PLC
11 September 2018
 

11 September 2018

Midwich Group plc

("Midwich" or the "Group")

Interim Results

Double digit revenue growth and strong profit contribution across all territories

Midwich, a specialist audio visual distributor to the trade market, today announces its interim results for the six-months ended 30 June 2018.

 

 

Six months ended

 

 

 

30 June 2018

30 June 2017

% change

 

 

 

 

 

Revenue

 

264,099

211,564

25%

 

 

 

 

 

Gross profit

 

42,879

32,433

32%

Gross profit %

 

16.2%

15.3%

 

 

 

 

 

 

Operating profit

 

11,026

8,729

26%

Adjusted operating profit

 

13,452

10,533

28%

Adjusted operating profit %

 

5.1%

5.0%

 

 

 

 

 

 

Profit before tax

 

11,854

8,033

48%

Adjusted profit before tax

 

13,030

10,253

27%

Adjusted profit before tax %

 

4.9%

4.8%

 

 

 

 

 

 

Profit after tax

 

9,118

5,812

57%

Adjusted profit after tax

 

9,783

8,032

22%

 

 

 

 

 

Reported EPS

 

11.32p

7.04p

61%

 

 

 

 

 

Adjusted EPS

 

12.09p

9.84p

23%

 

 

 

 

 

Interim dividend per share

 

4.60p

4.17p

10%

 

Financial highlights

·      Revenue increased by 24.8% to £264.1 million (24.3% on constant currency basis)

·      Gross profit margin of 16.2%, a 0.9 percentage point increase on H1 2017

·      Adjusted operating profit increased by 27.7% to £13.5 million (27.4% on constant currency basis)

·      Adjusted profit before tax improved by 27.1% to £13.0 million (26.7% on constant currency basis)

·      Operating cash flow reflects planned investment in working capital to support organic growth and seasonal trends in working capital cycle

·      Progressive dividend policy maintained with 10.3% increase in Interim dividend to 4.60 pence per share (H1 2017: 4.17 pence per share)

 

Operational highlights

·      Double digit revenue and profit growth in all territories

·      Investment in new geographies and development of specialist broadcast, lighting and audio segments enhancing both revenue growth and gross margin

·      Recent acquisitions have performed well with a positive impact on the Group gross profit margin

·      Strong acquisition pipeline across a number of regions

 

Post-period highlights

·     August 2018 - Acquisition of Bauer & Trummer GmbH (trading as New Media), a leading distributor of professional video and broadcast equipment based in Nuremberg, Germany and operating across the German, Austrian and Swiss markets;

·     September 2018 - Acquisition of Sound Directions France SAS (trading as Perfect Sound), a small specialist audio distributor based in St Etienne, France.

 

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

 

"The Group has had another strong first half and I am pleased with the performance across all of our territories. The increase in the Group's gross margin percentage reflects both growth in the core business and a significant contribution from the three acquisitions made in 2017 in our displays and technical product categories. The more specialist nature of the acquired businesses ensures that our value add to customers and vendors continues to increase. 

 

"We have been busy working on opportunities to extend the Group's reach and capabilities through the period and were pleased to complete the acquisitions of New Media and Perfect Sound after the period end. The pipeline for strategic acquisitions across the territories in which we operate remains strong and we will continue our disciplined approach to add value while both strengthening and diversifying our product offering.

"The strong performance reported in the first half, coupled with positive sales momentum and strong contributions from recent acquisitions, gives the Board confidence that the Group will report full year results in line with its revised expectations, which were upgraded at the time of the Group's trading statement on 20 July 2018."

 

Enquiries:

 

Midwich Group plc
Stephen Fenby, Managing Director
Stephen Lamb, Finance Director

+44 (0) 1379 649200

FTI Consulting
Alex Beagley / Tom Hufton / Fern Duncan

+44 (0) 20 3727 1000

Investec Bank plc
James Rudd / Carlton Nelson

+44 (0) 20 7597 5970

 

Notes to editors

Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, France, Germany, Iberia, Benelux, and Australasia. The Group's long-standing relationships with over 330 vendors, including blue-chip organisations such as Samsung, LG, Epson, and NEC, support a comprehensive product portfolio across major audio visual categories such as large format displays, projectors, digital signage and printers. The Group operates as the sole or largest in-country distributor for a number of its vendors in their respective product sets. The directors attribute this position to the Group's technical expertise, extensive product knowledge and strong customer service offering built up over a number of years. The Group has a large and diverse base of approximately 13,000 customers, most of which are professional AV integrators and IT resellers serving sectors such as corporate, education, retail, residential and hospitality. Although the Group does not sell directly to end users, it believes that the majority of its products are used by commercial and educational establishments rather than consumers.

 

Initially a UK only distributor, the Group now has over 750 employees across the UK and Ireland, Germany, France, Iberia, Benelux, and Australasia. In the six months to 30 June 2018, 42% of the Group's revenues were derived from outside the UK & Ireland. A core component of the Group's growth strategy is further expansion of its international operations and footprint into strategically targeted jurisdictions.

For further information, please visit www.midwichgroupplc.com

 

Managing Director's Report

Overview

 

The Group has performed strongly in the first six months of 2018 with double digit revenue and profit growth in all geographies.

 

Prior year acquisitions are performing well and delivered a significant boost to the Group's gross profit margin. These acquisitions have helped to grow the Group's presence in Europe as well as strengthening our professional audio capabilities and establishing a presence in the lighting market.

 

The Group continues to experience growth in the displays (particularly large format and interactive displays), broadcast, audio and technical video categories.

 

Strategy

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

 

The Group's organic growth strategy is focused on the provision of market leading support to its customers and vendors. As a distributor, the Group neither develops product nor does it sell to the end-users of those products.  The Group's expertise is the provision of specialist and technical services which provide the greatest assistance to vendors in supplying product into the market, and to help customers provide the highest level of support to their end-users.

 

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

 

Board

Hilary Wright was appointed as Non-Executive Director on 9 March 2018. Hilary is currently the Group HR Director of Domino Printing Sciences plc, having joined in 2016.

 

Anthony Bailey resigned from the position of Group Finance Director on 29 June 2018 and left the Group.

Stephen Lamb was appointed Group Finance Director on 31 July 2018. Stephen was most recently Senior Vice President and Chief Financial Officer International for Iron Mountain's international business having previously held a number of previous Chief Financial Officer positions for international businesses.

 

Acquisitions

Post period end, on 23 August 2018 the Group completed the acquisition of Bauer & Trummer GmbH (trading as New Media), a leading distributor of professional video and broadcast equipment based in Nuremburg, Germany and operating across the German, Austrian and Swiss markets.

 

On 6th September 2018 the Group completed the acquisition of Sound Directions France SAS (trading as Perfect Sound), a small specialist audio distributor based in St Etienne, France.

 

The Group's strong balance sheet means it is well placed to continue its buy and build strategy both in new and existing territories.

 

Simplified segmental reporting

The Board has taken the decision to amend the presentation of segmental information to more closely fit the management structure of the Group. Accordingly, our mainland European businesses have now been amalgamated for presentation purposes. The amended segmental information for the current and prior periods is set out in note 4 of the notes to the interim consolidated financial information.

 

Trading and financial review

Group revenue increased by 24.8% to £264.1 million for the period (H1 2017: £211.6 million).

 

The Group achieved a gross profit margin for the half year of 16.2%, a 0.9 percentage point increase on H1 2017 and a 0.7 percentage point increase on FY 2017. The growth in margin is attributable to both a positive mix effect from the higher gross profit margin earned in businesses acquired in 2017 and continued gross profit improvement in the UK & Ireland and Australasia.

 

Operating profit increased by 26.3% to £11.0 million (H1 2017: £8.7 million). Adjusting for acquisition costs, share based payments, and amortisation the Group achieved an Adjusted operating profit of £13.5 million, which represents growth of 27.7%. The growth in operating profit reflects the overall increase in revenue and gross profit partially offset by the impact of the prior year acquisitions which have a larger overhead cost base relative to revenue.

Based on a constant currency analysis using the current period exchange rates across both periods, the Group revenue grew by 24.3% and Group Adjusted operating profit grew by 27.4%. The Group received only a marginal benefit from movements in foreign exchange rates in the period to 30 June 2018.

 

UK & Ireland

Revenue in the UK & Ireland increased by 10.1%, including the benefit of the acquisition of Sound Technology Limited, which joined the Group on 30 November 2017 and performed strongly in the period. Excluding the impact of acquisitions, the UK and Ireland segment showed positive growth despite more challenging general market conditions in the period.

 

The UK & Ireland segment's gross profit margin increased to 17.1%, a 1.3 percentage point increase on H1 2017 and a 0.9 percentage point increase on FY 2017. The UK & Ireland has benefitted from the sales of professional audio, musical and lighting products through Sound Technology Limited and has also been aided by an increase in the proportion of technical video and display sales in the product mix.

 

Adjusted operating profit increased by 19.7% in the UK & Ireland.

 

Continental Europe

Revenue in Continental Europe increased by 62.5% due to the impact of prior year acquisitions and strong performances in France and Germany.  Organic growth was achieved in all major product categories, with particularly strong growth in displays. Earpro SA in Iberia and Gebroeders van Domburg BV in Benelux were acquired in Continental Europe in March 2017 and September 2017 respectively. Since acquisition the businesses have traded well and, through a different product mix, contributed to an increase in the region's gross profit margin to 14.2% compared with 13.6% in the first half of 2017.

 

Adjusted operating profit in Continental Europe grew by 49.7% benefitting from both acquisitions and strong organic growth from market share gains in other categories.

 

Australasia

The businesses in Australasia continued to grow with the recent addition of new technical vendors and achieved a 16.6% increase in revenue compared to H1 2017.

 

The gross profit margin in Australasia continued to improve as a result of the development of its technical vendor base. The Australasia gross profit margin was 20.0%, which is a 2.6 percentage point increase on H1 2017 and a 2.3 percentage point increase on FY 2017.

 

The Adjusted operating profit in Australasia grew by 81.6% aided by the development of technical vendors.

 

Taxation

The tax charge for the period was £2.7 million (H1 2017: £2.2 million). The Adjusted effective tax rate for the period is 24.9% (H1 2017: 21.7%) calculated based on the Adjusted tax charge for the period divided by Adjusted profit before tax.

 

Governance code

Upon formation at IPO, the Board resolved to establish a strong governance culture using the Quoted Companies Alliance (QCA) code as the basis for its governance framework.

 

In line with the London Stock Exchange's recent changes to the AIM rules, requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code, the Board has adopted the updated QCA corporate governance code for Midwich. The statement of QCA code compliance is available on the Midwich plc website.

 

Financial position

The Group had a net cash inflow from operations before tax of £0.2 million for the period (H1 2017: £3.5 million) which reflects the traditionally more working capital intensive first half when compared with the full year. The Board is comfortable that the Group's long term average conversion rate remains unchanged.

Net debt at 30 June 2018 was £41.5 million (£22.8 million at 30 June 2017).

 

Dividend

The Board is pleased to declare an interim dividend of 4.60 pence per share (H1 2017: 4.17 pence per share), which will be paid on 26 October 2018 to those shareholders on the Company's register as at 21 September 2018.

 

The Board continues to adopt a progressive dividend policy to reflect the Group's strong earnings and cash flow while maintaining an appropriate level of dividend cover to allow for investment in longer-term growth.

 

Outlook

The performance reported in the first half year coupled with indications of positive sales momentum and strong contributions from recent acquisitions gives the Board confidence that the Group will report full year results in line with its revised expectations, which were upgraded at the time of the Group's trading statement on 20 July 2018.

 

Stephen Fenby

Managing Director

 

Unaudited consolidated income statement for the 6 months ended 30 June 2018

 

Note

 

30 June

2018

 

30 June

2017

 

31 December 2017

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Revenue

 

 

264,099

 

211,564

 

471,937

Cost of sales

 

 

(221,220)

 

(179,131)

 

(398,810)

Gross profit

 

 

42,879

 

32,433

 

73,127

 

 

 

 

 

 

 

 

Distribution costs

 

 

(26,803)

 

(20,841)

 

(45,679)

Total administrative expenses

 

 

(6,495)

 

(4,364)

 

(9,470)

Other operating income

 

 

1,445

 

1,501

 

2,831

Operating profit

 

 

11,026

 

8,729

 

20,809

Comprising

 

 

 

 

 

 

 

Adjusted operating profit

 

 

13,452

 

10,533

 

25,044

Costs of acquisitions

 

 

(43)

 

(146)

 

(336)

Share based payments

 

 

(410)

 

(136)

 

(551)

Employer taxes on share based payments

 

 

(145)

 

-

 

(118)

Amortisation

 

 

(1,828)

 

(1,522)

 

(3,230)

 

 

 

11,026

 

8,729

 

20,809

 

 

 

 

 

 

 

 

Finance income

 

 

7

 

14

 

5

Finance costs

5

 

821

 

(710)

 

(1,916)

Profit before taxation

 

 

11,854

 

8,033

 

18,898

Taxation

 

 

(2,736)

 

(2,221)

 

(4,919)

Profit after taxation

 

 

9,118

 

5,812

 

13,979

 

 

 

 

 

 

 

 

Profit for the financial period/year attributable to:

 

 

 

 

 

 

 

The Company's equity shareholders

 

 

8,990

 

5,595

 

13,557

Non-controlling interest

 

 

128

 

217

 

422

 

 

 

9,118

 

5,812

 

13,979

Basic earnings per share

3

 

11.32p

 

7.04p

 

17.06p

Diluted earnings per share

3

 

11.23p

 

7.03p

 

17.00p

 

Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2018

 

 

30 June

 

30 June

 

31 December

 

 

2018

 

2017

 

2017

 

 

Unaudited

 

Unaudited

 

Audited

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Profit for the period/financial year

 

9,118

 

5,812

 

13,979

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

Items that will be reclassified subsequently to profit or loss:

 

 

 

 

 

 

Foreign exchange gains on consolidation

 

(300)

 

435

 

974

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

 

(300)

 

435

 

974

 

 

 

 

 

 

 

Total comprehensive income for the period/financial year

 

8,818

 

6,247

 

14,953

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Owners of the Parent Company

 

8,697

 

6,030

 

14,531

Non-controlling interests

 

121

 

217

 

422

 

 

8,818

 

6,247

 

14,953

 

Unaudited consolidated statement of financial position as at 30 June 2018

 

 

 

30 June

 

30 June

 

31 December

 

 

 

2018

 

2017

 

2017

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

 

 

9,068

 

5,568

 

9,094

Intangible assets

 

 

20,720

 

19,725

 

22,310

Property, plant and equipment

 

 

7,990

 

5,978

 

7,692

Deferred tax assets

 

 

930

 

-

 

387

 

 

 

38,708

 

31,271

 

39,483

Current assets

 

 

 

 

 

 

 

Inventories

 

 

74,015

 

56,514

 

62,984

Trade and other receivables

 

 

84,704

 

61,862

 

76,361

Cash and cash equivalents

 

 

24,806

 

20,597

 

28,203

 

 

 

183,525

 

138,973

 

167,548

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(89,529)

 

(64,786)

 

(84,617)

Derivative financial instruments

 

 

-

 

-

 

(93)

Put option liabilities

 

 

-

 

(734)

 

-

Deferred consideration

 

 

(384)

 

(4,939)

 

(4,841)

Borrowings and financial liabilities

 

 

(66,015)

 

(43,426)

 

(50,176)

Current tax

 

 

(2,785)

 

(2,260)

 

(2,873)

 

 

 

(158,713)

 

(116,145)

 

(142,600)

 

 

 

 

 

 

 

 

Net current assets

 

 

24,812

 

22,828

 

24,948

Total assets less current liabilities

 

 

63,520

 

54,099

 

64,431

 

 

 

 

 

 

 

 

Non-current liabilities:

 

 

 

 

 

 

 

Trade and other payables

 

 

(156)

 

-

 

(181)

Put option liabilities

 

 

(4,092)

 

(2,853)

 

(5,195)

Deferred consideration

 

 

-

 

-

 

(1,197)

Borrowings and financial liabilities

 

 

(324)

 

-

 

(321)

Deferred tax liabilities

 

 

(4,091)

 

(3,817)

 

(4,445)

 

 

 

(8,663)

 

(6,670)

 

(11,339)

 

 

 

 

 

 

 

 

Net assets

 

 

54,857

 

47,429

 

53,092

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Share capital

 

 

794

 

794

 

794

Share premium

 

 

25,855

 

25,855

 

25,855

Share based payment reserve

 

 

1,338

 

233

 

751

Investment in own shares

 

 

(5)

 

(5)

 

(5)

Retained earnings

 

 

25,681

 

19,753

 

24,331

Translation reserve

 

 

1,398

 

1,152

 

1,691

Put option reserve

 

 

(3,638)

 

(2,803)

 

(3,638)

Capital redemption reserve

 

 

50

 

50

 

50

Other reserve

 

 

150

 

150

 

150

Equity attributable to owners of Parent Company

 

 

51,623

 

45,179

 

49,979

Non-controlling interests

 

 

3,234

 

2,250

 

3,113

Total equity

 

 

54,857

 

47,429

 

53,092

 

Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2018

For the period ended 30 June 2018

 

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 2018

794

25,855

(5)

751

24,331

1,691

(3,638)

50

150

49,979

3,113

53,092

Profit for the period

-

-

-

-

8,990

-

-

-

-

8,990

128

9,118

Other comprehensive income

-

-

-

-

-

(293)

-

-

-

(293)

(7)

(300)

Total comprehensive income for the period

-

-

-

-

8,990

(293)

-

-

-

8,697

121

8,818

Share based payments

-

-

-

409

-

-

-

-

-

409

-

409

Deferred tax on share based payments

-

-

-

178

-

-

-

-

-

178

-

178

Dividends paid

-

-

-

-

(7,640)

-

-

-

-

(7,640)

-

(7,640)

Balance at 30 June 2018 (Unaudited)

794

25,855

(5)

1,338

25,681

1,398

(3,638)

50

150

51,623

3,234

54,857

 

For the period ended 30 June 2017

 

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 year ended 30 December 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 year

-

-

-

-

13,557

-

-

-

-

13,557

422

13,979

Other comprehensive income

-

-

-

-

-

974

-

-

-

974

-

974

Total comprehensive income for the year

-

-

-

-

13,557

974

-

-

-

14,531

422

14,953

Acquisition of non-controlling interest (note 8)

-

-

-

-

(79)

-

681

-

-

602

(602)

-

Share based payments

-

-

-

551

-

-

-

-

-

551

-

551

Deferred tax on share based payments

-

-

-

116

-

-

-

-

-

116

-

116

Acquisition of subsidiary (note 7)

-

-

-

-

-

-

(2,549)

-

-

(2,549)

2,341

(208)

Dividends paid

-

-

-

-

(8,912)

-

-

-

-

(8,912)

-

(8,912)

Balance at 31 December 2017

794

25,855

(5)

751

24,331

1,691

(3,638)

50

150

49,979

3,113

53,092

 

Unaudited consolidated cashflow statement for 6 months ended 30 June 2018

 

 

 

30 June

 

30 June

 

31 December

 

 

 

2018

 

2017

 

2017

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

£'000

 

£'000

 

£'000

 

Cash flows from operating activities

 

 

 

 

 

 

 

Profit before tax

 

11,854

 

8,033

 

18,898

 

Depreciation

 

1,201

 

733

 

1,793

 

Amortisation

 

1,828

 

1,522

 

3,230

 

Gain on disposal of assets

 

(4)

 

(153)

 

(21)

 

Share based payments

 

409

 

136

 

551

 

Foreign exchange losses

 

195

 

154

 

156

 

Finance income

 

(7)

 

(14)

 

(5)

 

Finance costs

 

(821)

 

710

 

1,916

 

Adjusted profit from operations before changes in working capital

 

14,655

 

11,121

 

26,518

 

 

 

 

 

 

 

 

 

Increase in inventories

 

(11,031)

 

(6,319)

 

(7,217)

 

Increase in trade and other receivables

 

(8,343)

 

(5,114)

 

(11,954)

 

Increase in trade and other payables

 

4,888

 

3,830

 

14,724

 

Cash inflow from operations

 

169

 

3,518

 

22,071

 

Income tax paid

 

(3,543)

 

(2,186)

 

(4,784)

 

Net cash (outflow)/inflow from operating activities

 

(3,374)

 

1,332

 

17,287

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Acquisition of businesses

 

-

 

(4,986)

 

(9,108)

 

Deferred consideration paid

 

(5,507)

 

(11)

 

(1,511)

 

Cash acquired within business combinations

 

-

 

2,972

 

2,854

 

Purchase of intangible assets

 

(357)

 

(43)

 

(48)

 

Purchase of plant and equipment

 

(1,734)

 

(1,820)

 

(3,064)

 

Proceeds on disposal of plant and equipment

 

219

 

368

 

528

 

Interest received

 

7

 

14

 

5

 

Net cash outflow from investing activities

 

(7,372)

 

(3,506)

 

(10,344)

 

 

 

 

 

 

 

 

 

Cash from financing activities

 

 

 

 

 

 

 

Acquisition of non-controlling interest

 

-

 

-

 

(751)

 

Dividends paid

 

(7,640)

 

(5,607)

 

(8,912)

 

Invoice financing inflows

 

9,678

 

7,380

 

5,673

 

Proceeds from borrowings

 

159

 

-

 

-

 

Repayment of loans

 

(9)

 

(14)

 

(26)

 

Interest paid

 

(522)

 

(295)

 

(647)

 

Interest on finance leases

 

(7)

 

-

 

(4)

 

Capital element of finance lease payments

 

(72)

 

(65)

 

(121)

 

Net cash inflow/(outflow) from financing activities

 

1,587

 

1,399

 

(4,788)

 

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(9,159)

 

(775)

 

2,155

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period/year

 

20,010

 

17,201

 

17,201

Effects of exchange rate changes

 

(331)

 

280

 

654

Cash and cash equivalents at end of period/year

 

10,520

 

16,706

 

20,010

               

 

Comprising:

 

 

 

 

 

 

 

 

Cash at bank

 

 

 

24,806

 

20,597

 

28,203

Bank overdrafts

 

 

 

(14,286)

 

(3,891)

 

(8,193)

 

 

 

 

10,520

 

16,706

 

20,010

 

 

Notes to the interim consolidated financial information

 

1.    General information

The interim financial information for the period to 30 June 2018 is unaudited and does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006.

 

The interim consolidated financial information does not include all the information required for statutory financial statements in accordance with IFRS, and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2017.

 

2.    Accounting policies

The interim financial information in this report has been prepared on the basis of the accounting policies set out in the audited financial statements for the year ended 31 December 2017, except as amended for the implementation of IFRS 9 'Financial instruments' and IFRS 15 'Revenue from contracts with customers', which were adopted on 1 January 2018. The audited financial statements for the year ended 31 December 2017 complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").

 

The Group has elected to apply the modified retrospective approach to the transition to both IFRS 9 and IFRS 15. The modified retrospective approach requires the transition to be implemented without restatement of the prior year results. The new standards have not had a material impact on the reported results and there is no adjustment to equity at 1 January 2018 as a result of the implementation of the new standards.

 

The Group is required to adopt IFRS 16 'Leases', which replaces IAS 17 'Leases' for accounting periods beginning on or after 1 January 2019. IFRS 16 requires the Group to recognise a 'Right of use' asset and a lease liability in respect of material leases. Implementation of the new standard will result in a significant increase in both assets and liabilities in the statement of financial position, with a corresponding increase in depreciation charges and finance costs offset by a reduction in operating lease costs in the income statement.

 

The directors have adopted the going concern basis in preparing the financial information. In assessing whether the going concern assumption is appropriate, the directors have taken into account all relevant available information about the foreseeable future. 

 

The statutory accounts for the year ended 31 December 2017, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.

 

3.    Earnings per share

Basic earnings per share is calculated by dividing the profit after tax for the period/year attributable to equity shareholders of the Company by the weighted average number of shares in issue during the period/year.

 

Diluted earnings per share is calculated by adjusting the profit after tax for the period/year attributable to equity shareholders of the Company for the fair value (measured in accordance with IFRS 2) of any goods or services to be supplied to the Group in the future under the share options granted by the balance sheet date and dividing it by the weighted average number of shares in issue during the period/year adjusted for the effects of all dilutive potential ordinary shares.

 

The Group's earnings per share and diluted earnings per share, are as follows:

 

 

June

2018

 

June

2017

 

December

2017

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

8,990

 

5,595

 

13,557

Weighted average number of shares in issue

79,448,200

 

79,448,200

 

79,448,200

Dilutive (potential dilutive) effect of share options

605,798

 

134,338

 

305,464

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

80,053,998

 

79,582,538

 

79,753,664

 

 

 

 

 

 

Basic earnings per share

11.32p

 

7.04p

 

17.06p

Diluted earnings per share

11.23p

 

7.03p

 

17.00p

 

4.    Segmental reporting

June 2018

 

 

UK & Ireland

£'000

Continental Europe

£'000

Australasia

 

£'000

Other1

 

£'000

Total

 

£'000

 

 

 

 

 

 

 

 

Revenue

153,555

93,526

17,018

-

264,099

 

 

 

 

 

 

 

 

Gross profit

26,230

13,250

3,399

-

42,879

 

Gross profit %

17.1%

14.2%

20.0%

-

16.2%

 

 

 

 

 

 

 

 

Adjusted operating profit

9,122

3,643

1,745

(1,058)

13,452

 

 

 

 

 

 

 

 

Cost of acquisitions

-

-

-

(43)

(43)

 

Share based payments

(231)

(116)

(42)

(21)

(410)

 

Employer taxes on share based payments

(57)

(62)

(11)

(15)

(145)

 

Amortisation

(1,337)

(467)

(24)

-

(1,828)

 

 

 

 

 

 

 

 

Operating profit

7,497

2,998

1,668

(1,137)

11,026

 

Interest

 

 

 

 

828

 

Profit before tax

 

 

 

 

11,854

 

 

Other segmental information

 

 

June 2018

 

 

UK & Ireland

£'000

Continental Europe

£'000

Australasia

 

£'000

Other1

 

£'000

Total

 

£'000

 

Segment assets

138,314

71,413

11,723

783

222,233

 

Segment liabilities

(121,562)

(38,981)

(6,716)

(117)

(167,376)

 

Segment net assets

16,752

32,432

5,007

666

54,857

 

Depreciation

799

362

40

-

1,201

 

 

 

 

 

 

 

 

 

Other segmental information

 

UK

£'000

International

£'000

Total

£'000

 

Non-current assets

23,494

15,214

38,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2017

 

 

UK & Ireland1

£'000

Continental Europe1

£'000

Australasia

 

£'000

Other1

 

£'000

Total

 

£'000

 

 

 

 

 

 

 

 

Revenue

139,420

57,545

14,599

-

211,564

 

 

 

 

 

 

 

 

Gross profit

22,090

7,808

2,535

-

32,433

 

Gross profit %

15.8%

13.6%

17.4%

-

15.3%

 

 

 

 

 

 

 

 

Adjusted operating profit

7,619

2,434

961

(481)

10,533

 

 

 

 

 

 

 

 

Costs of acquisitions

-

-

-

(146)

(146)

 

Share based payments

(136)

-

-

-

(136)

 

Amortisation

(1,215)

(282)

(25)

-

(1,522)

 

 

 

 

 

 

 

 

Operating profit

6,268

2,152

936

(627)

8,729

 

Interest

 

 

 

 

(696)

 

Profit before tax

 

 

 

 

8,033

 

 

Other segmental information

 

 

June 2017

 

 

UK & Ireland1

£'000

Continental Europe1

£'000

Australasia

 

£'000

Other1

 

£'000

Total

 

£'000

 

Segment assets

115,291

45,495

9,396

62

170,244

 

Segment liabilities

(95,843)

(20,903)

(5,981)

(88)

(122,815)

 

Segment net assets

19,448

24,592

3,415

(26)

47,429

 

Depreciation

573

99

61

-

733

 

 

 

 

 

 

 

 

 

                                           

 

Other segmental information

 

UK

£'000

International

£'000

Total

£'000

Non-current assets

23,173

8,098

31,271

1   Restated to combine France, Germany and the Rest of Europe into one segment and show Group office functions within the Other segment due to internal restructuring undertaken on 1 January 2018.

December 2017

 

 

UK & Ireland1

£'000

Continental Europe1

£'000

Australasia

 

£'000

Other1

 

£'000

Total

 

£'000

 

 

 

 

 

 

 

 

Revenue

283,712

156,163

32,062

-

471,937

 

 

 

 

 

 

 

 

Gross profit

45,830

21,637

5,660

-

73,127

 

Gross profit %

16.2%

13.9%

17.7%

-

15.5%

 

 

 

 

 

 

 

 

Adjusted operating profit

16,131

7,470

2,576

(1,133)

25,044

 

 

 

 

 

 

 

 

Costs of acquisitions

-

-

-

(336)

(336)

 

Share based payments

(351)

(142)

(50)

(8)

(551)

 

Employer taxes on share based payments

(65)

(51)

-

(2)

(118)

 

Amortisation

(2,450)

(730)

(50)

-

(3,230)

 

 

 

 

 

 

 

 

Operating profit

13,265

6,547

2,476

(1,479)

20,809

 

Interest

 

 

 

 

(1,911)

 

Profit before tax

 

 

 

 

18,898

 

 

Other segmental information

 

 

December 2017

 

 

UK & Ireland1

£'000

 

Continental Europe1

£'000

Australasia

 

£'000

Other1

 

£'000

Total

 

£'000

 

Segment assets

122,213

73,242

11,162

26

206,643

 

Segment liabilities

(107,955)

(38,847)

(6,632)

(117)

(153,551)

 

Segment net assets

14,258

34,395

4,530

(91)

53,092

 

Depreciation

1,281

385

127

-

1,793

 

 

 

 

 

 

 

 

                         

 

Other segmental information

 

UK

£'000

International

£'000

Total

£'000

Non-current assets

24,808

14,287

39,095

 

1   Restated to combine France, Germany and the Rest of Europe into one segment and show Group office functions within the Other segments due to internal restructuring undertaken on 1 January 2018.

5.    Finance costs

 

 

June 2018

 

June 2017

 

December 2017

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Interest on overdraft and invoice discounting

418

 

282

 

666

Interest on finance leases

7

 

-

 

4

Interest on other loans

4

 

12

 

70

Interest, foreign exchange and other finance costs of deferred and contingent considerations

(147)

 

-

 

(81)

Interest, foreign exchange and other finance costs of put option liabilities

(1,103)

 

416

 

1,257

 

(821)

 

710

 

1,916

 

6.    Share capital

 

The total allotted share capital of the Parent Company is:

Allotted, issued and fully paid

 

June 2018

 

June 2017

 

December 2017

Classed as equity:

Number

£'000

 

Number

£'000

 

Number

£'000

Issued and fully paid ordinary shares of £0.01 each

 

 

 

 

 

 

 

 

Opening balance

79,448,200

794

 

79,448,200

794

 

79,448,200

794

Closing balance

79,448,200

794

 

79,448,200

794

 

79,448,200

794

 

There were no share transactions effected during the current or comparative period or the year to 31 December 2017.

 

Employee benefit trust

The Group's employee benefit trust was allocated 480,700 ordinary shares in 2016.

 

A reconciliation of the shares allocated to employees within the SIP is as follows:

 

 

Six months to June 2018

 

Six months to June 2017

 

Twelve months to December 2017

 

 

 

 

 

 

Outstanding at 1 January

227,000

 

119,000

 

119,000

Granted

-

 

128,500

 

128,500

Lapsed

(16,500)

 

(8,000)

 

(20,500)

Outstanding at period end

210,500

 

239,500

 

227,000

 

7.    Business combinations

 

Acquisitions were completed by the Group during the comparative periods to increase scale, broaden its addressable market and widen the product offering.

 

Subsidiaries acquired

 

Acquisition

Principal activity

Date of acquisition

Proportion acquired (%)

Fair value of consideration

£'000

Earpro SA

Distribution of audio visual and lighting products to trade customers

27 March 2017

88.5%

8,311

Gebroeders van Domburg BV

Distribution of audio visual and lighting products to trade customers

6 September 2017

70%

2,942

Sound Technology Limited

Distribution of professional audio, musical and lighting products to trade customers

30 November 2017

100%

3,858

 

Fair value of consideration transferred

 

Earpro SA

Gebroeders van Domburg BV

Sound Technology Limited

 

£'000

£'000

£'000

 

 

 

 

Cash

4,987

1,522

2,600

Deferred consideration

3,324

-

1,258

Deferred contingent consideration

-

1,420

-

Total

8,311

2,942

3,858

 

Acquisition costs of £43k were expensed to the income statement in relation to the future potential acquisitions during the six-month period ended 30 June 2018.

 

Acquisition costs of £81k in relation to the acquisition of Earpro SA, £58k in relation to the acquisition of Gebroeders van Domburg BV and £7k in relation to the 2016 acquisition of Holdan Limited were expensed to the income statement during the six-month period ended 30 June 2017.

 

In addition to the acquisition costs for the six-month period ended 30 June 2017 a further £106k of acquisition costs relating to the acquisition of Gebroeders van Domburg BV and £84k in relation to the acquisition of Sound Technology Limited were incurred during the year ended 31 December 2017.

 

On acquisition of Earpro SA and Gebroeders van Domburg BV the Group recognised £1,033k and £1,516k respectively in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest in each acquisition.

 

Fair value of acquisitions

 

 Earpro SA

 Gebroeders van Domburg BV

 Sound Technology Limited

 

 

£'000

£'000

£'000

 

Non-current assets

 

 

 

 

Goodwill

1,009

2,667

851

 

Intangible assets - customer relationships

740

2,178

-

 

Intangible assets - supplier exclusivity

1,488

-

1,553

 

Intangible assets - trade name

104

158

153

 

Intangible assets - other

58

-

52

 

Plant and equipment

66

1,765

28

 

 

3,465

6,768

2,637

 

 

 

 

 

 

Current assets

 

 

 

 

Inventories

2,053

2,878

2,694

 

Trade and other receivables

4,003

3,526

4,132

 

Current tax

-

-

6

 

Cash and cash equivalents

3,172

-

65

 

 

9,228

6,404

6,897

 

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

(2,723)

(5,334)

(3,655)

 

Derivative financial instruments

-

-

(128)

 

Borrowings and financial liabilities

-

(2,877)

(1,617)

 

Current tax

-

(4)

-

 

 

(2,723)

(8,215)

(5,400)

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

-

(170)

-

 

Deferred tax

(579)

(584)

(276)

 

 

(579)

(754)

(276)

 

 

 

 

 

 

Non-controlling interests

(1,080)

(1,261)

-

 

Fair value of net assets acquired attributable to equity shareholders of the Parent Company

8,311

2,942

3,858

 

 

Goodwill acquired in 2017 relates to workforce, synergies and sales know how. Goodwill arising on the acquisition of Earpro SA and Gebroeders van Domburg BV has been allocated to the Rest of Europe operating segment. Goodwill arising on the acquisition of Sound Technology Limited has been allocated to the UK and Ireland operating segment.

 

Net cash outflow on acquisition of subsidiaries

 

 

 Earpro SA

 Gebroeders van Domburg BV

 Sound Technology Limited

 

 

£'000

£'000

£'000

 

 

 

 

 

 

Consideration paid in cash

4,987

1,522

2,600

 

Plus: overdraft borrowings

-

200

-

 

Less: cash and cash equivalent balances acquired

(2,989)

-

(65)

 

Net cash outflow

1,998

1,722

2,535

 

 

8. Acquisition of non-controlling interest

 

On 3 October 2017, the Group acquired 10.5% of the 21% non-controlling interest in Holdan Limited, which had a value of £602k, for a consideration of £750k. £681k of the put option reserve was transferred to retained earnings when this element of the put option was extinguished.

9.    Currency impact

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

 

Six months to 30 June 2018

Six months to 30 June 2017

At 30 June 2018

At 30 June 2017

At 31 December 2017

 

 

Average

Average

 

 

 

 

 

 

 

 

 

EUR/GBP

1.136

1.166

1.131

1.146

1.126

 

 

 

 

 

 

AUD/GBP

1.777

1.678

1.788

1.732

1.725

                   

 

Applying the current period foreign exchange rates across the first half of 2016 had the following impact on reported results:

 

EUR

AUD

 

£000

£000

 

 

 

Increase/(decrease) in revenue due to movement in foreign exchange rate:

1,784

(748)

 

 

 

Increase/(decrease) in profit before tax due to movement in foreign exchange rate:

83

(45)

 

 

 

Increase in net debt due to movement in foreign exchange rate:

13

37

 

10.  Copies of interim report

 

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

 

11.  Events after the reporting period

 

On 23 August 2018 the Group acquired 100% of Bauer und Trummer GmbH, a specialist broadcast and pro video distributor based in Nuremberg, Germany.

On 6th September 2018 the Group completed the acquisition of Sound Directions France SAS (trading as Perfect Sound), a small specialist audio distributor based in St Etienne, France.

12.  Adjustments to reported results

 

 

Six months ended

 

30 June

30 June

 

2018

2017

 

£000

£000

 

 

 

Operating profit

11,026

8,729

Exceptional administrative costs

43

146

Share based payments

410

136

Employer taxes on share based payments

145

-

Amortisation

1,828

1,522

Adjusted operating profit

13,452

10,533

 

 

 

Profit before tax

11,854

8,033

Exceptional administrative costs

43

146

Share based payments

410

136

Employer taxes on share based payments

145

-

Amortisation

1,828

1,522

Finance costs - deferred consideration

(147)

-

Finance costs - put option liabilities

(1,103)

416

Adjusted profit before tax

13,030

10,253

 

 

 

Profit after tax

9,118

5,812

Exceptional administrative costs

43

146

Share based payments

410

136

Employer taxes on share based payments

145

-

Amortisation

1,828

1,522

Finance costs - deferred consideration

(147)

-

Finance costs - put option liabilities

(1,103)

416

Tax impact

(511)

-

Adjusted profit after tax

9,783

8,032

 

 

 

Profit after tax

9,118

5,812

Non-controlling interest

(128)

(217)

Profit after tax attributable to  equity holders of the Parent Company

8,990

5,595

 

 

 

Adjusted profit after tax

9,783

8,032

Non-controlling interest

(128)

(217)

Amortisation attributable to NCI

(64)

-

Deferred tax on amortisation attributable to NCI

15

-

Adjusted profit after tax attributable to equity holders of the Parent Company

9,606

7,815

 

 

 

Number of shares

79,448,200

79,448,200

Diluted number of shares

80,053,998

79,582,538

Basic adjusted earnings per share

12.09p

9.84p

Diluted adjusted earnings per share

12.00p

9.82p

 

13.  Interim dividend

 

The interim dividend proposed for the six months to 30 June 2018 of 4.60 pence (30 June 2017: 4.17 pence) relates to profits earned over the period.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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