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Midwich Group PLC   -  MIDW   

Interim Results

Released 07:00 10-Sep-2019

RNS Number : 7217L
Midwich Group PLC
10 September 2019
 

10 September 2019

Midwich Group plc

("Midwich" or the "Group")

Interim results for the six months ended 30 June 2019

Strong revenue and profit growth together with further acquisitions in H1 2019

Midwich, a specialist audio visual ("AV") distributor to the trade market with operations across the UK and Ireland, Continental Europe and Asia Pacific, today announces its Interim Results for the six months ended 30 June 2019.

Statutory financial highlights

 

Six months ended

 

 

 

30 June 2019

 £m

30 June 20181

£m

Total growth

%

 

Revenue

314.8

264.1

19%

 

 

 

 

 

 

Gross profit

52.2

42.9

22%

 

Gross profit %

16.6%

16.2%

 

 

 

 

 

 

 

Operating profit

10.5

11.1

(6%)

 

 

 

 

 

 

Profit before tax

11.3

11.8

(5%)

 

Profit after tax

9.0

9.1

(1%)

 

 

 

 

 

 

Reported EPS - pence

11.06

11.30

(2%)

 

 

 

 

 

 

Adjusted financial highlights

 

Six months ended

 

 

 

30 June 2019

 £m

30 June 20181

£m

Total growth

%

Growth at constant currency %

Revenue

314.8

264.1

19%

20%

 

 

 

 

 

Gross profit

52.2

42.9

22%

22%

Gross profit %

16.6%

16.2%

 

 

 

 

 

 

 

Adjusted operating profit2

14.6

13.5

9%

9%

Adjusted operating profit %

4.6%

5.1%

 

 

 

 

 

 

 

Adjusted profit before tax2

13.7

12.9

6%

7%

 

 

 

 

 

Adjusted profit after tax2

10.5

9.7

8%

8%

 

 

 

 

 

Adjusted EPS - pence

12.78

12.02

6%

 

 

 

 

 

 

Interim dividend per share

4.85p

4.60p

5%

 

 

1Restated to reflect the adoption of IFRS 16. Adjusted measures are also restated to include amortisation of patents and software

2Definitions of the alternative performance measures are set out in Note 2

Financial highlights

·     Revenue increased 19.2% to £314.8 million (19.7% on constant currency basis) including organic revenue growth of 5.1%

·     Gross margin of 16.6%, 0.4 percentage points ahead of H1 2018

·     Adjusted operating profit2 increased by 8.6% to £14.6 million (9.1% on constant currency basis)

·     Adjusted profit before tax2 increased by 6.2% to £13.7 million (6.7% on constant currency basis)

·     Adjusted EPS2 increased 6% to 12.78p (H1 2018: 12.02p)

·     Operating cash conversion ahead of prior year at 28% of adjusted EBITDA (H1 2018: 7%)

·     Interim dividend declared of 4.85 pence per share (Interim 2018: 4.60 pence per share)

 

Operational highlights

·     Revenue growth across all territories

·     Strong net operating profit growth in UK & Ireland and Continental Europe

·     Lower Asia Pacific profit compared with very strong, project-driven, prior year comparatives

·     Prior year acquisitions integrated and performing well

·     The three businesses acquired in the first half of 2019 have increased both our geographic presence and specialist audio capabilities, with these value-added businesses positively impacting Group gross margin

·     Strong acquisition pipeline across a number of regions

·     Investments to enter two new markets organically:

Broadcast in Benelux

Core AV distribution in South East Asia

·     Investments in information technology, compliance, acquisition and integration capabilities support the Group's growth strategy.

 

Post period highlights

·     July 2019 - Complementary specialist lighting capabilities added to Earpro in Iberia through the acquisition of 100% of the share capital of Entertainment Equipment Supplies S.L. ("EES")

·     July 2019 - Opened a new UK & Ireland southern showroom and demo facility in Bracknell

 

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

"The Group has had another strong first half and I am pleased with our overall performance, particularly given political and economic uncertainties around the globe. The increase in the Group's gross margin percentage reflects strong performance from the core business and a positive contribution from the acquisitions made in 2018 and the first half of 2019. 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 MobilePro (Switzerland), Prase (Italy) and AV Partner (Norway), each of which represents the Group's entry into a new territory. In addition, the acquisitions of Prase and (post period end) EES in Spain have strengthened the Group's capabilities in the audio and lighting markets respectively. We continue to have a healthy pipeline of strategic opportunities and have invested in the Group's acquisition and integration teams in the first half. We will continue our disciplined approach to acquire businesses that add value while both strengthening and diversifying our product offering and geographical reach.

 

The strong performance reported in the first half and contributions from recent acquisitions, give the Board confidence in the prospects for the Group."

 

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

Berenberg
Ben Wright / Mark Whitmore / Laure Fine

+44 (0) 20 3207 7800

 

Notes to editors

Midwich is a specialist AV distributor to the trade market, with operations in the UK and Ireland, Continental Europe and Asia Pacific. The Group's long-standing relationships with over 400 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 17,000 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 900 employees across the UK and Ireland, Continental Europe and Asia Pacific. 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 2019, with double digit revenue growth and a further increase in our gross margin percentage.

Acquisitions made in the last twelve months are performing well and have contributed positively towards the Group's gross and net profits. These acquisitions have helped to grow the Group's presence in Europe and South East Asia, as well as strengthening our capabilities in the broadcast and professional audio markets.

We have also launched a start-up broadcast activity in the Benelux and opened a new office in Singapore to help drive our business across South East Asia.

The Group continues to experience growth in the displays, broadcast and audio categories.

Strategy

The Group's strategy is to focus 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 focused 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. 

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 across a number of regions.

Acquisitions

The Group completed three acquisitions in the first half of 2019 with an additional acquisition closing shortly after the period end.

On 17 January 2019, the Group acquired 100% of the share capital of MobilePro AG ("MobilePro"), a Swiss value-added distributor of audio visual products. Based in Zurich, MobilePro is a market leading AV distributor to the Swiss trade market.  The business provides a comprehensive product offering across projection, display and interactive technologies.

On 31 January 2019, the Group acquired 80% of the share capital of Prase Engineering S.p.A ("Prase"), an Italian value-added distributor of AV products. Based near Venice, Prase is a specialist AV distributor, with a strong heritage in the solution driven professional audio market, where the business operates with high-end specialist brands.  More recently, the Company has successfully added key video brands, such as LG and Epson, to its portfolio.

On 3 May 2019, the Group acquired 100% of the share capital of AV Partner AS ("AV Partner"), a Norwegian value-added distributor of AV products. Based in Oslo, AV Partner is a specialist distributor, with a market leading position in the Norwegian projection market. In recent months, it has built a displays business and has also moved into new enlarged premises with dedicated warehousing and demo facilities.

Post period end, on 1 July 2019, the Group completed the acquisition of 100% of EES, a Spanish value-added distributor of lighting and lighting infrastructure products. Based near San Sebastian, EES distributes products from key vendors including Robe, Verlinde and Prolyte on an exclusive basis to the Spanish trade market, with a particular focus on customers servicing the live events and rental sectors.

On 29 April 2019, the Group also acquired the remaining 10.5% of the issued share capital of Holdan, a value-added distributor of technology solutions focused on the broadcast, professional video and traditional audio-visual markets. The consideration for this was satisfied by the issue of 300,212 new ordinary shares of 1p each in the Group.

A strong acquisition pipeline, together with the Group's strong balance sheet, means it is well placed to continue its buy and build strategy both in new and existing territories.

New showroom facility

In July 2019, Midwich UK & Ireland opened a new 50,000 sqft+ southern showroom and demo facility (Innovation House) located in Bracknell, Berkshire. 

This state-of-the-art showroom will be one of the largest multi-vendor experience centres in the UK and will showcase the Group's wide-ranging technologies.

Trading and financial review

Group revenue increased by 19.2% to £314.8 million for the six months to 30 June 2019 (H1 2018: £264.1 million).

The Group achieved a gross profit margin for the period of 16.6%, a 0.4 percentage point increase on H1 2018 and a 0.1 percentage point increase on FY  2018. Growth in margin resulted from both a positive mix effect from the higher gross profit margin businesses acquired in the last twelve months and continued gross profit improvement in the core business. Reported operating profit was impacted by growth in acquisition related expenses and amortisation of acquired intangibles, reflecting the increase in acquisition activity across the Group; together with an increase in share based payment charges.

Adjusted operating profit was £14.6 million (H1 2018: £13.5 million), which represents growth of 8.6%. The growth in adjusted operating profit reflects the overall increase in revenue and gross profit partially offset by investment in the infrastructure required to support the anticipated continued growth of the Group, in particular the central acquisition & integration teams, as well as its start-up businesses in South East Asia and Benelux.

Based on a constant currency analysis, using the current period exchange rates across both periods, Group revenue grew by 19.7% and Group Adjusted operating profit grew by 9.1%. The Group received only a marginal negative impact from movements in foreign exchange rates in the period to 30 June 2019.

 

Regional highlights

 

 

Six months ended

 

 

 

 

 

30 June

2019

 £m

30 June

20181

£m

Total growth

%

Growth at constant currency

%

Organic growth %

 

Revenue

 

 

 

 

 

 

UK & Ireland

154.0

153.6

0.3%

0.4%

0.4%

 

Continental Europe

138.0

93.5

47.5%

48.4%

14.0%

 

Asia Pacific

22.8

17.0

33.9%

36.6%

(2.1%)

 

Total Global

314.8

264.1

19.2%

19.7%

5.1%

 

 

 

 

 

 

 

 

Gross profit margin

 

 

 

 

 

 

UK & Ireland

17.8%

17.1%

+0.7 ppts

 

 

 

Continental Europe

15.0%

14.2%

+0.8 ppts

 

 

 

Asia Pacific

18.1%

20.0%

(1.9) ppts

 

 

 

Total Global

16.6%

16.2%

+0.4 ppts

 

 

 

 

 

 

 

 

 

 

Adjusted operating profit2

 

 

 

 

 

 

UK & Ireland

9.8

9.1

7.2%

7.2%

 

 

Continental Europe

5.0

3.7

37.8%

38.6%

 

 

Asia Pacific

1.2

1.8

(31.8%)

(30.0%)

 

 

Group costs

(1.4)

(1.1)

 

 

 

 

Total Global

14.6

13.5

8.6%

9.1%

 

 

 

 

 

 

 

 

 

Adjusted finance costs

(0.9)

(0.6)

 

 

 

 

Adjusted profit before tax2

13.7

12.9

6.2%

6.7%

 

 

 

 

 

 

 

 

 

                     

1Restated to reflect the adoption of IFRS 16. Adjusted measures are also restated to include amortisation of patents and software

2Definitions of the alternative performance measures are set out in Note 2

UK & Ireland

Revenue in the UK & Ireland increased by 0.4% in the period on a constant currency basis. There was good growth in the core AV business, driven by demand for large format displays, LED and broadcast technologies. As expected, this was partially offset by managed decline in document solutions, and tougher trading conditions for the small part of the business that addresses the consumer market.

The UK & Ireland segment's gross profit margin increased to 17.8%, a 0.7 percentage point increase on H1 2018 and a 0.4 percentage point increase on FY 2018. The UK & Ireland has benefitted from a favourable product mix attributable to an increase the proportion of display sales.

Adjusted operating profit increased by 7.2% in the UK & Ireland.

Continental Europe

Revenue in Continental Europe increased by 47.5% due to the impact of recent acquisitions and particularly strong performances in France, Germany and the Netherlands.  Organic growth of 14.0% reflected strong performance in all major product categories, with particularly strong growth in displays, audio and broadcast. We entered three new geographies in the first half though the acquisitions of Prase in Italy, MobilePro in Switzerland and AV Partners in Norway. These recent acquisitions, together with the two prior year acquisitions in France and Germany, have traded well and are contributing to an increase in the region's gross profit margin to 15.0% compared with 14.2% in the first half of 2018.

Adjusted operating profit in Continental Europe grew by 38.6%, at constant currency, benefitting from the impact of recent acquisitions.

Asia Pacific

Growth in Asia Pacific revenues of 33.9% (36.6% at constant currency) benefitted from the Blonde Robot acquisition completed in December 2018. On an organic basis, Asia Pacific was marginally down on the same period in 2018, which included an exceptional level of project activity.

The Asia Pacific gross profit margin of 18.1%, was 1.9 percentage points below H1 2018, due to the high margin project activity in the prior year.

Adjusted operating profit in Asia Pacific at £1.2 million (H1 2018: £1.8 million) was impacted by the reduction in gross profit together with the investment in opening a new South East Asia AV business in H1 2019.

The Board notes that, according to trade body AVIXA, Asia Pacific is the largest AV region in the world.  The market appears to be fragmented but represents an interesting opportunity for the Group over the long term.

Group costs

Group costs for the half year were £1.4 million (H1 2018: £1.1 million). The increase reflects additional investment in legal, compliance, information technology and acquisition & business integration capabilities to support the Group's growth strategy.

Adoption of IFRS 16 and update to alternative performance measures

The Group adopted IFRS 16 Leases for H1 2019 and prior period comparatives have been restated. The IFRS 16 adoption has not materially affected the results and a reconciliation to amounts previously reported is included in Note 10.

As a result of the adoption of IFRS 16 the Group has revised its definitions of adjusted profit measures. The revised adjusted operating profit includes depreciation and amortisation of right to use assets, patents and software. Adjusted profit before tax also includes these charges and the interest cost of leases recognised under IFRS 16.

IFRS 16 adoption and inclusion of amortisation of patents and software in adjusted metrics reduce adjusted operating profit in H1 2019 by £0.1 million (H1 2018: £Nil) and adjusted profit before tax by £0.2 million (H1 2018: £0.1 million).

Finance costs

Finance costs for the period were an income of £0.8 million (H1 2018: £0.7 million). Adjusted finance costs for the period were an expense of £0.9 million (H1 2018: £0.5 million). The increase in adjusted finance costs reflects the additional finance costs associated with financing the Group's acquisitions. The adjustments to finance costs include foreign exchange losses on borrowings for acquisitions of £0.1 million (H1 2018: Nil), an income from movements in deferred and contingent considerations of £0.9 million (H1 2018: £0.1 million), and an income from movements in put option liabilities over non-controlling interests of £0.9 million (H1 2018: £1.1 million).

Taxation

The reported tax charge for the period was £2.3 million (H1 2018: £2.7 million). The adjusted effective tax rate for the period was 23.8% (H1 2018: 24.8%) calculated based on the adjusted tax charge for the period divided by adjusted profit before tax.

Cash flows and financing

The Group had an adjusted net cash inflow from operations before tax of £4.9 million for the period (H1 2018: £1.1 million) which benefitted from strong working capital management and was ahead of the Board's expectations given 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 cash conversion rate remains unchanged.

In February, the Group increased its revolving credit facility to £20 million (£15 million at 31 December 2018) and added a small term facility in Spain to support its acquisition strategy.

The Group has acted to hedge certain exchange rate and interest rate exposures in H1. This includes borrowing in Euros to finance European acquisitions and using financial instruments to fix part of the Group's interest charges. These instruments are marked to market at the end of each reporting period, with the change in valuation recognised in the income statement. Given any amounts recognised generally arise from market movements and accordingly bear no direct relation to the Group's underlying performance any gains or losses have been excluded from adjusted profit measures.

Net debt

Net debt, excluding IFRS 16 Leases liabilities, was £53.8 million at 30 June 2019 (£41.2 million at 30 June 2018) and net debt at 30 June 2019 including IFRS 16 was £71.3 million (£51.1 million at 30 June 2018). The adoption of IFRS 16 resulted in an increase in net debt of £17.1 million at 30 June 2019 (£9.6 million at 30 June 2018).

Dividend

The Board is pleased to declare an interim dividend of 4.85 pence per share (H1 2018: 4.60 pence per share), which will be paid on 25 October 2019 to those shareholders on the Company's register as at 20 September 2019. The last day to elect for dividend reinvestment ("DRIP") is 4 October 2019.

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. The Board intends to pay future dividends within a cover range of 2 to 2.5 times adjusted earnings.

Outlook

The Board recognises that there is negative sentiment in the global economy, impacted by matters such as the US/China tariff dispute, Brexit and political change in certain territories. Historically, the AV industry has proven to be relatively robust in challenging economic periods. Performance in the year to date has been in line with the Board's expectations and we remain confident in the prospects for the Group.

Stephen Fenby

Managing Director

 

Unaudited consolidated income statement for the 6 months ended 30 June 2019

 

Note

 

30 June

2019

 

30 June

2018

 

31 December 2018

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

(Restated)1

 

(Restated)1

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Revenue

 

 

314,842

 

264,099

 

573,682

Cost of sales

 

 

(262,600)

 

(221,220)

 

(479,120)

Gross profit

 

 

52,242

 

42,879

 

94,562

 

 

 

 

 

 

 

 

Distribution costs

 

 

(32,804)

 

(26,803)

 

(56,329)

Administrative expenses

 

 

(10,834)

 

(6,396)

 

(16,317)

Other operating income

 

 

1,862

 

1,445

 

3,025

Operating profit

 

 

10,466

 

11,125

 

24,941

 

 

 

 

 

 

 

 

Adjusted operating profit

 

 

14,630

 

13,470

 

30,267

Costs of acquisitions

 

 

(306)

 

(43)

 

(365)

Share based payments

 

 

(1,275)

 

(410)

 

(1,120)

Employer taxes on share based payments

 

 

(280)

 

(145)

 

(221)

Amortisation of brands, customer and supplier relationships

 

 

(2,303)

 

(1,747)

 

(3,620)

 

 

 

10,466

 

11,125

 

24,941

 

 

 

 

 

 

 

 

Finance income

 

 

19

 

7

 

81

Finance costs

5

 

797

 

703

 

(3,991)

Profit before taxation

 

 

11,282

 

11,835

 

21,031

Taxation

 

 

(2,249)

 

(2,726)

 

(5,774)

Profit after taxation

 

 

9,033

 

9,109

 

15,257

 

 

 

 

 

 

 

 

Profit for the financial period/year attributable to:

 

 

 

 

 

 

 

The Company's equity shareholders

 

 

8,753

 

8,981

 

14,696

Non-controlling interests

 

 

280

 

128

 

561

 

 

 

9,033

 

9,109

 

15,257

Basic earnings per share

3

 

11.06p

 

11.30p

 

18.50p

Diluted earnings per share

3

 

10.90p

 

11.22p

 

18.33p

1   Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.

Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2019

 

 

30 June

 

30 June

 

31 December

 

 

2019

 

2018

 

2018

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

(Restated)1

 

(Restated)1

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Profit for the period/financial year

 

9,033

 

9,109

 

15,257

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

Items that will be reclassified subsequently to profit or loss:

 

 

 

 

 

 

Foreign exchange gains/(losses) on consolidation

 

299

 

(296)

 

162

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

 

299

 

(296)

 

162

 

 

 

 

 

 

 

Total comprehensive income for the period/financial year

 

9,332

 

8,813

 

15,419

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

Owners of the Parent Company

 

8,983

 

8,692

 

14,870

Non-controlling interests

 

349

 

121

 

549

 

 

9,332

 

8,813

 

15,419

1   Comparative information is restated for the adoption of IFRS 16 (note 10).

Unaudited consolidated statement of financial position as at 30 June 2019

 

 

 

30 June

 

30 June

 

31 December

 

 

 

2019

 

2018

 

2018

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

(Restated)1

 

(Restated)1

 

 

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

 

 

13,655

 

9,416

 

11,568

Intangible assets

 

 

33,256

 

20,720

 

24,766

Right of use assets

 

 

16,615

 

9,190

 

10,141

Property, plant and equipment

 

 

10,982

 

7,594

 

7,028

Deferred tax assets

 

 

2,147

 

1,105

 

1,421

 

 

 

76,655

 

48,025

 

54,924

Current assets

 

 

 

 

 

 

 

Inventories

 

 

90,599

 

74,015

 

74,379

Trade and other receivables

 

 

107,258

 

84,704

 

83,139

Derivative financial instruments

 

 

116

 

-

 

25

Cash and cash equivalents

 

 

16,201

 

24,806

 

16,685

 

 

 

214,174

 

183,525

 

174,228

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(112,667)

 

(89,529)

 

(97,729)

Put option liabilities over non-controlling interests

 

 

(2,302)

 

-

 

(1,746)

Deferred and contingent considerations

 

 

(5,806)

 

(384)

 

(4,005)

Borrowings and financial liabilities

 

 

(46,638)

 

(67,244)

 

(36,838)

Current tax

 

 

(3,685)

 

(2,785)

 

(2,892)

 

 

 

(171,098)

 

(159,942)

 

(143,210)

Net current assets

 

 

43,076

 

23,583

 

31,018

Total assets less current liabilities

 

 

119,731

 

71,608

 

85,942

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(641)

 

(156)

 

(736)

Put option liabilities over non-controlling interests

 

 

(4,271)

 

(4,092)

 

(4,654)

Deferred and contingent considerations

 

 

(2,869)

 

-

 

(757)

Borrowings and financial liabilities

 

 

(40,846)

 

(8,620)

 

(16,108)

Deferred tax liabilities

 

 

(7,324)

 

(4,091)

 

(5,512)

Other provisions

 

 

(1,607)

 

-

 

(56)

 

 

 

(57,558)

 

(16,959)

 

(27,823)

 

 

 

 

 

 

 

 

Net assets

 

 

62,173

 

54,649

 

58,119

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Share capital

 

 

799

 

794

 

794

Share premium

 

 

27,752

 

25,855

 

25,855

Share based payment reserve

 

 

3,100

 

1,338

 

1,837

Investment in own shares

 

 

(7)

 

(5)

 

(5)

Retained earnings

 

 

27,604

 

25,469

 

27,535

Translation reserve

 

 

2,095

 

1,402

 

1,865

Put option reserve

 

 

(6,329)

 

(3,638)

 

(4,532)

Capital redemption reserve

 

 

50

 

50

 

50

Other reserve

 

 

150

 

150

 

150

Equity attributable to owners of Parent Company

 

 

55,214

 

51,415

 

53,549

Non-controlling interests

 

 

6,959

 

3,234

 

4,570

Total equity

 

 

62,173

 

54,649

 

58,119

1 Comparative information is restated for the adoption of IFRS 16 (note 10).

 

 

 

 

 

 

 

 

 

Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2019

For the period ended 30 June 2019

 

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 2019 previously reported

794

25,855

(5)

1,837

27,766

1,861

(4,532)

50

150

53,776

4,570

58,346

Change of accounting policies (note 10)

-

-

-

-

(231)

4

-

-

-

(227)

-

(227)

Restated 1 January 2019

794

25,855

(5)

1,837

27,535

1,865

(4,532)

50

150

53,549

4,570

58,119

Profit for the period

-

-

-

-

8,753

-

-

-

-

8,753

280

9,033

Other comprehensive income

-

-

-

-

-

230

-

-

-

230

69

299

Total comprehensive income for the period

-

-

-

-

8,753

230

-

-

-

8,983

349

9,332

Shares issued

2

-

(2)

-

-

-

-

-

-

-

-

-

Share based payments

-

-

-

1,275

-

-

-

-

-

1,275

-

1,275

Deferred tax on share based payments

-

-

-

16

-

-

-

-

-

16

-

16

Share options exercised

-

24

-

(28)

4

-

-

-

-

-

-

-

Acquisition of subsidiaries (note 7)

-

-

-

-

-

-

(2,886)

-

-

(2,886)

2,883

(3)

Acquisition of non-controlling interests (note 8)

3

1,873

-

-

(246)

-

1,089

-

-

2,719

(843)

1,876

Dividends paid

-

-

-

-

(8,442)

-

-

-

-

(8,442)

-

(8,442)

Balance at 30 June 2019 (Unaudited)

799

27,752

(7)

3,100

27,604

2,095

(6,329)

50

150

55,214

6,959

62,173

 

For the period ended 30 June 2018 (restated)1

 

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 previously reported

794

25,855

(5)

751

24,331

1,691

(3,638)

50

150

49,979

3,113

53,092

Change of accounting policies (note 10)

-

-

-

-

(203)

-

-

-

-

(203)

-

(203)

Restated 1 January 2018

794

25,855

(5)

751

24,128

1,691

(3,638)

50

150

49,776

3,113

52,889

Profit for the period

-

-

-

-

8,981

-

-

-

-

8,981

128

9,109

Other comprehensive income

-

-

-

-

-

(289)

-

-

-

(289)

(7)

(296)

Total comprehensive income for the period

-

-

-

-

8,981

(289)

-

-

-

8,692

121

8,813

Share based payments

-

-

-

410

-

-

-

-

-

410

-

410

Deferred tax on share based payments

-

-

-

177

-

-

-

-

-

177

-

177

Dividends paid

-

-

-

-

(7,640)

-

-

-

-

(7,640)

-

(7,640)

Balance at 30 June 2018 (Unaudited)

794

25,855

(5)

1,338

25,469

1,402

(3,638)

50

150

51,415

3,234

54,649

1 Comparative information is restated for the adoption of IFRS 16 (note 10).

For the year ended 30 December 2018 (Restated)1

 

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 previously reported

794

25,855

(5)

751

24,331

1,691

(3,638)

50

150

49,979

3,113

53,092

Change of accounting policies (note 10)

-

-

-

-

(203)

-

-

-

-

(203)

-

(203)

Restated 1 January 2018

794

25,855

(5)

751

24,128

1,691

(3,638)

50

150

49,776

3,113

52,889

Profit for the year

-

-

-

-

14,696

-

-

-

-

14,696

561

15,257

Other comprehensive income

-

-

-

-

-

174

-

-

-

174

(12)

162

Total comprehensive income for the year

-

-

-

-

14,696

174

-

-

-

14,870

549

15,419

Share based payments

-

-

-

1,120

-

-

-

-

-

1,120

-

1,120

Deferred tax on share based payments

-

-

-

(34)

-

-

-

-

-

(34)

-

(34)

Acquisition of subsidiaries (note 7)

-

-

-

-

-

-

(894)

-

-

(894)

908

14

Dividends paid

-

-

-

-

(11,289)

-

-

-

-

(11,289)

-

(11,289)

Balance at 31 December 2018

794

25,855

(5)

1,837

27,535

1,865

(4,532)

50

150

53,549

4,570

58,119

1 Comparative information is restated for the adoption of IFRS 16 (note 10).

 

Unaudited consolidated cashflow statement for 6 months ended 30 June 2019

 

 

 

30 June

 

30 June

 

31 December

 

 

 

2019

 

2018

 

2018

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

(Restated)1

 

(Restated)1

 

 

 

£'000

 

£'000

 

£'000

 

Cash flows from operating activities

 

 

 

 

 

 

 

Profit before tax

 

11,282

 

11,835

 

21,031

 

Depreciation

 

2,444

 

2,015

 

4,176

 

Amortisation

 

2,385

 

1,828

 

3,792

 

Gain/(loss) on disposal of assets

 

11

 

(5)

 

27

 

Share based payments

 

1,275

 

410

 

1,120

 

Foreign exchange (gains)/losses

 

(193)

 

195

 

4

 

Finance income

 

(19)

 

(7)

 

(81)

 

Finance costs

 

(797)

 

(703)

 

3,991

 

Profit from operations before changes in working capital

 

16,388

 

15,568

 

34,060

 

 

 

 

 

 

 

 

 

Increase in inventories

 

(7,588)

 

(11,031)

 

(9,468)

 

Increase in trade and other receivables

 

(12,145)

 

(8,343)

 

(3,221)

 

Increase in trade and other payables

 

7,706

 

4,888

 

10,246

 

Cash inflow from operations

 

4,361

 

1,082

 

31,617

 

Income tax paid

 

(3,016)

 

(3,543)

 

(7,377)

 

Net cash inflow/(outflow) from operating activities

 

1,345

 

(2,461)

 

24,240

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Acquisition of businesses, net of cash and debt acquired

 

(15,869)

 

-

 

(6,724)

 

Deferred and contingent considerations paid

 

(2,955)

 

(5,507)

 

(5,507)

 

Purchase of intangible assets

 

(979)

 

(357)

 

(778)

 

Purchase of plant and equipment

 

(3,010)

 

(1,734)

 

(2,360)

 

Proceeds on disposal of plant and equipment

 

326

 

219

 

382

 

Interest received

 

19

 

7

 

81

 

Net cash outflow from investing activities

 

(22,468)

 

(7,372)

 

(14,906)

 

 

 

 

 

 

 

 

 

Cash from financing activities

 

 

 

 

 

 

 

Dividends paid

 

(8,442)

 

(7,640)

 

(11,289)

 

Invoice financing inflows/(outflows)

 

3,052

 

9,678

 

(8,704)

 

Proceeds from borrowings

 

24,976

 

159

 

12,240

 

Repayment of loans

 

(1,293)

 

(9)

 

(2,107)

 

Interest paid

 

(962)

 

(522)

 

(1,362)

 

Interest on leases

 

(173)

 

(125)

 

(268)

 

Capital element of lease payments

 

(969)

 

(867)

 

(1,725)

 

Net cash inflow/(outflow) from financing activities

 

16,189

 

674

 

(13,215)

 

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(4,934)

 

(9,159)

 

(3,881)

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period/year

 

16,357

 

20,010

 

20,010

Effects of exchange rate changes

 

267

 

(331)

 

228

Cash and cash equivalents at end of period/year

 

11,690

 

10,520

 

16,357

               

 

Comprising:

 

 

 

 

 

 

Cash at bank

 

16,201

 

24,806

 

16,685

Bank overdrafts

 

(4,511)

 

(14,286)

 

(328)

 

 

11,690

 

10,520

 

16,357

1 Comparative information is restated for the adoption of IFRS 16 (note 10).

 

Notes to the interim consolidated financial information

1.    General information

The interim financial information for the period to 30 June 2019 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 2018.

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 2018, except as amended for the implementation of IFRS 16 'Leases', which was adopted on 1 January 2019. The audited financial statements for the year ended 31 December 2018 complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").

The Group has elected to apply the full retrospective approach to the transition to IFRS 16. The full retrospective approach requires the transition to be implemented with restatement of the prior year results as if IFRS 16 had always been applied. Adoption of the IFRS 16 has resulted in the recognition of Right of use assets and lease liabilities 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 2018, which were prepared under IFRS, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.

Use of alternative performance measures

The Group has defined certain measures that it uses to understand and manage performance. These measures are not defined under IFRS and they may not be directly comparable with other companies' adjusted measures. These non-GAAP measures are not intended to be a substitute for any IFRS measures of performance, but management has included them as they consider them to be key measures used within the business for assessing the underlying performance.

Growth at constant currency: This measure shows the year on year change in performance after eliminating the impact of foreign exchange movement, which is outside of management's control.

Organic growth: This is defined as growth at constant currency growth excluding acquisitions until the first anniversary of their consolidation.

Adjusted operating profit: Adjusted operating profit is disclosed to indicate the Group's underlying profitability. It is defined as profit before acquisition related expenses, share based payments and associated employer taxes and amortisation of brand, customer and supplier relationship intangible assets.

Adjusted EBITDA: This represents operating profit before acquisition related expenses, share based payments and associated employer taxes, depreciation and amortisation.

 

Adjusted profit before tax: This is profit before tax adjusted for acquisition related expenses, share based payments and associated employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements.

Adjusted profit after tax: This is profit after tax adjusted for acquisition related expenses, share based payments and associated employer taxes, amortisation of brand, customer and supplier relationship intangible assets, changes in deferred or contingent considerations and put option liabilities over non-controlling interests, foreign exchange gains or losses on borrowings for acquisitions, fair value movements on derivatives for borrowings, and financing fair value remeasurements and the tax thereon.

Adjusted EPS: This is adjusted profit after tax less profit, amortisation of brand, customer and supplier relationship intangible assets and tax thereon due to non-controlling interests divided by the weighted number of shares outstanding.

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 outstanding 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 financial reporting date and dividing it by the weighted average number of shares outstanding 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

2019
 

 

June

2018

(Restated)1

 

December

2018

(Restated)1

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

8,753

 

8,981

 

14,696

Weighted average number of shares outstanding2

79,078,793

 

79,448,200

 

79,448,200

Dilutive (potential dilutive) effect of share options

1,175,685

 

605,798

 

725,002

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

80,254,478

 

80,053,998

 

80,173,202

 

 

 

 

 

 

Basic earnings per share

11.06p

 

11.30p

 

18.50p

Diluted earnings per share

10.90p

 

11.22p

 

18.33p

1   Comparative information is restated for the adoption of IFRS 16 (note 10).

2   Comparative earnings per share calculations were based on the number of shares issued rather than the number of shares outstanding and therefore excluded the weighted average number of own shares held. Comparative earnings per share calculations have not been restated for the weighted average number of own shares held as the effect is not material.

4.    Segmental reporting

 

June 2019

 

 

UK & Ireland

£'000

Continental Europe

£'000

Asia

Pacific

£'000

Other

 

£'000

Total

 

£'000

 

 

 

 

 

 

 

 

Revenue

154,078

137,975

22,789

-

314,842

 

 

 

 

 

 

 

 

Gross profit

27,406

20,714

4,122

-

52,242

 

Gross profit %

17.8%

15.0%

18.1%

-

16.6%

 

 

 

 

 

 

 

 

Adjusted operating profit

9,760

5,057

1,195

(1,382)

14,630

 

 

 

 

 

 

 

 

Cost of acquisitions

-

-

-

(306)

(306)

 

Share based payments

(535)

(399)

(98)

(243)

(1,275)

 

Employer taxes on share based payments

(83)

(145)

(9)

(43)

(280)

 

Amortisation of brand, customer and supplier relationships

(1,277)

(888)

(138)

-

(2,303)

 

 

 

 

 

 

 

 

Operating profit

7,865

3,625

950

(1,974)

10,466

 

Net interest received

 

 

 

 

816

 

Profit before tax

 

 

 

 

11,282

 

 

Other segmental information

 

 

June 2019

 

 

UK & Ireland

£'000

Continental Europe

£'000

Asia

Pacific

£'000

Other

 

£'000

Total

 

£'000

 

Segment assets

127,048

143,751

19,655

375

290,829

 

Segment liabilities

(98,282)

(114,017)

(16,007)

(350)

(228,656)

 

Segment net assets

28,766

29,734

3,648

25

62,173

 

Depreciation

1,198

1,057

189

-

2,444

 

Amortisation

1,323

916

146

-

2,385

 

 

 

 

 

 

 

 

 

Other segmental information

 

UK

£'000

International

£'000

Total

£'000

 

Non-current assets

28,624

48,031

76,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 2018 (Restated)1

 

 

UK & Ireland

£'000

Continental Europe

£'000

Asia

Pacific

£'000

Other

 

£'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

9,107

3,670

1,751

(1,058)

13,470

 

 

 

 

 

 

 

 

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 of brands, customer and supplier relationships

(1,278)

(450)

(19)

-

(1,747)

 

 

 

 

 

 

 

 

Operating profit

7,541

3,042

1,679

(1,137)

11,125

 

Net interest received

 

 

 

 

710

 

Profit before tax

 

 

 

 

11,835

 

 

Other segmental information

 

 

 

 

 

 

June 2018 (Restated)1

 

 

UK & Ireland

£'000

Continental Europe

£'000

Asia

Pacific

£'000

Other

 

£'000

Total

 

£'000

 

Segment assets

140,187

77,574

13,006

783

231,550

 

Segment liabilities

(123,470)

(45,201)

(8,113)

(117)

(176,901)

 

Segment net assets

16,717

32,373

4,893

666

54,649

 

Depreciation

1,097

786

132

-

2,015

 

Amortisation

1,337

467

24

-

1,828

 

 

 

 

 

 

 

 

Other segmental information

 

UK

£'000

International

£'000

Total

£'000

 

Non-current assets

25,114

22,911

48,025

 

                                       

1   Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.

 

December 2018 (Restated)1

 

 

UK & Ireland

£'000

Continental Europe

£'000

Asia

Pacific

£'000

Other

 

£'000

Total

 

£'000

 

 

 

 

 

 

Revenue

315,808

222,017

35,857

-

573,682

 

 

 

 

 

 

Gross profit

54,890

33,086

6,586

-

94,562

Gross profit %

17.4%

14.9%

18.4%

-

16.5%

 

 

 

 

 

 

Adjusted operating profit

19,541

10,276

2,935

(2,485)

30,267

 

 

 

 

 

 

Costs of acquisitions

-

-

-

(365)

(365)

Share based payments

(557)

(382)

(106)

(75)

(1,120)

Employer taxes on share based payments

(72)

(109)

(14)

(26)

(221)

Amortisation of brands, customer and supplier relationships

(2,557)

(1,005)

(58)

-

(3,620)

 

 

 

 

 

 

Operating profit

16,355

8,780

2,757

(2,951)

24,941

Net interest paid

 

 

 

 

(3,910)

Profit before tax

 

 

 

 

21,031

1   Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.

 

Other segmental information

December 2018 (Restated)1

 

 

UK & Ireland

£'000

 

Continental Europe

£'000

Asia

Pacific

£'000

Other

 

£'000

Total

 

£'000

Segment assets

117,144

91,977

19,689

342

229,152

Segment liabilities

(103,076)

(52,891)

(14,710)

(356)

(171,033)

Segment net assets/(liabilities)

14,068

39,086

4,979

(14)

58,119

Depreciation

2,222

1,670

284

-

4,176

Amortisation

2,672

1,050

70

-

3,792

 

Other segmental information

 

UK

£'000

International

£'000

Total

£'000

Non-current assets

23,222

31,702

54,924

1   Comparative information is restated for the adoption of IFRS 16 (note 10).

 

5.    Finance costs

 

 

June 2019

 

June 2018

 

December 2018

 

 

 

(Restated)1

 

(Restated)1

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Interest on overdrafts and invoice discounting facilities

535

 

418

 

1,042

Interest on leases

172

 

125

 

268

Interest on other loans and fair value movements on derivatives relating to foreign exchange

208

 

4

 

151

Foreign exchange gains or losses on borrowings for acquisitions and fair value movements on derivatives for borrowings

129

 

-

 

-

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

(924)

 

(147)

 

2,219

Interest, foreign exchange and other finance costs of put option liabilities over non-controlling interests

(917)

 

(1,103)

 

311

 

(797)

 

(703)

 

3,991

1   Comparative information is restated for the adoption of IFRS 16 (note 10).

6.    Share capital

 

The total allotted share capital of the Parent Company is:

Allotted, issued and fully paid

 

June 2019

 

June 2018

 

December 2018

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

Shares issued

525,212

5

 

-

-

 

-

-

Closing balance

79,973,412

799

 

79,448,200

794

 

79,448,200

794

 

During the period Midwich Group plc issued 300,212 shares in order to settle the put option liability and acquire the remaining shares in Holdan Limited, and issued 225,000 shares into an employee benefit trust. There were no share transactions effected during the comparative period or the year to 31 December 2018.

 

Employee benefit trusts

In 2016 Midwich Group plc allocated 480,700 shares into Midwich Group plc 2016 Share Incentive Plan, an employee benefit trust. As at 30 June 2019 392,800 of these shares were transferred to Midwich Employees' Share Trust, a separate employee benefit trust for the SIP. During the period 7,700 shares were transferred to employees from the Midwich Employees' Share Trust, as share options were exercised. During the period Midwich Group plc set up Midwich Group plc 2019 Jersey Employee Benefit Trust, a new employee benefit trust and issued 225,000 to shares to the trust.

 

A reconciliation of LTIP option movements during the current and comparative period, and the year to 31 December 2018 is as follows:

 

 

Six months to June 2019

 

Six months to June 2018

 

Twelve months to December 2018

 

 

 

 

 

 

Outstanding at 1 January

1,460,900

 

788,000

 

788,000

Granted

-

 

75,000

 

684,400

Lapsed

(9,400)

 

(1,000)

 

(11,500)

Outstanding at period end

1,451,500

 

862,000

 

1,460,900

 

A reconciliation of SIP option movements during the current and comparative period, and the year to 31 December 2018 is as follows:

 

 

Six months to June 2019

 

Six months to June 2018

 

Twelve months to December 2018

 

 

 

 

 

 

Outstanding at 1 January

284,300

 

227,000

 

227,000

Granted

-

 

91,500

 

91,500

Lapsed

(6,100)

 

(12,500)

 

(34,200)

Exercised

(7,700)

 

-

 

-

Outstanding at period end

270,500

 

306,000

 

284,300

 

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

MobilePro AG

Distribution of audio visual products to trade customers

17 January 2019

100%

882

Prase Engineering SpA

Distribution of professional audio products to trade customers

31 January 2019

80%

11,534

AV Partner AS

Distribution of audio visual products to trade customers

3 May 2019

100%

5,467

Bauer & Trummer GmbH

Distribution of professional broadcast equipment to trade customers

23 August 2018

100%

3,311

Sound Directions France SAS

Distribution of professional audio products to trade customers

5 September 2018

100%

682

Blonde Robot Pty Limited

Distribution of audio visual products to trade customers

4 December 2018

65%

1,687

 

2019 acquisitions

Fair value of consideration transferred:

2019

MobilePro AG

 

Prase Engineering SpA

 

AV Partner AS

 

£'000

 

£'000

 

£'000

Cash

882

 

6,108

 

3,225

Deferred and contingent considerations

-

 

5,426

 

2,242

Total

882

 

11,534

 

5,467

 

During the period the Group recognised acquisition costs of £17k in relation to the acquisition of the remaining shares of Holdan Limited, £44k in relation to the acquisition of MobilePro AG, £109k in relation to the acquisition of Prase Engineering SpA, £70k in relation to the acquisition of AV Partner AS, £42k in relation to other acquisitions not completed before the end of the period, £9k in relation to the incorporation of Midwich Asia Pte Limited, and £15k on other potential future acquisitions.

 

On acquisition of Prase Engineering SpA the Group recognised £2,886k in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest.

 

Fair value of acquisitions

2019

MobilePro AG

 

Prase Engineering SpA

 

AV Partner AS

 

£'000

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

Goodwill

451

 

370

 

1,195

Intangible assets - customer relationships

165

 

1,504

 

1,193

Intangible assets - supplier contracts

327

 

3,110

 

2,241

Intangible assets - brands

534

 

382

 

142

Right of use assets

1,548

 

69

 

1,370

Plant and equipment

59

 

2,497

 

8

 

3,084

 

7,932

 

6,149

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

3,742

 

3,604

 

1,285

Trade and other receivables

2,162

 

8,830

 

983

Current tax

-

 

-

 

33

Cash and cash equivalents

42

 

1,439

 

13

 

5,946

 

13,873

 

2,314

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

(3,747)

 

(4,370)

 

(839)

Borrowings and financial liabilities

(1,749)

 

(90)

 

-

Current tax

(1)

 

(403)

 

-

 

(5,497)

 

(4,863)

 

(839)

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings and financial liabilities

(2,093)

 

(69)

 

(1,370)

Deferred tax liabilities

(218)

 

(1,286)

 

(787)

Other provisions

(340)

 

(1,169)

 

-

 

(2,651)

 

(2,524)

 

(2,157)

 

 

 

 

 

 

Non-controlling interests

-

 

(2,884)

 

-

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

882

 

11,534

 

5,467

 

Goodwill acquired in 2019 relates to the workforce, synergies and sales know how. Goodwill arising on all the acquisitions has been allocated to the Continental Europe segment.

Gross contractual amounts of trade and other receivables acquired in 2018 were £12,110k, with bad debt provisions of £135k.

Net cash outflow on acquisition of subsidiaries

 

MobilePro AG

 

Prase Engineering SpA

 

AV Partner AS

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Consideration paid in cash

882

 

6,108

 

3,225

Less: cash and cash equivalent balances acquired

(42)

 

(1,439)

 

(13)

Plus: borrowings acquired

3,842

 

159

 

1,370

Net cash outflow

4,682

 

4,828

 

4,582

2018 acquisitions

Fair value of consideration transferred:

2018

Bauer & Trummer GmbH

 

Sound Directions France SAS

 

Blonde Robot Pty Limited

 

£'000

 

£'000

 

£'000

Cash

1,354

 

628

 

1,687

Deferred and contingent considerations

1,957

 

54

 

-

Total

3,311

 

682

 

1,687

 

Acquisition costs of £119k in relation to the acquisition of Bauer & Trummer GmbH, £47k in relation to the acquisition of Sound Directions France SAS, £83k in relation to the acquisition of Blonde Robot Pty Limited, and £116k in relation to other acquisitions not completed before the end of the year were expensed to the income statement during the year ended 31 December 2018.

 

On acquisition of Blonde Robot Pty Limited the Group recognised £894k in relation to the initial present value of the put option liabilities to acquire the remaining non-controlling interest.

 

Fair value of acquisitions

2018 (Restated)1

Bauer & Trummer GmbH

 

Sound Directions France SAS

 

Blonde Robot Pty Limited

 

£'000

 

£'000

 

£'000

Non-current assets

 

 

 

 

 

Goodwill

1,022

 

174

 

935

Intangible assets - customer relationships

1,051

 

105

 

1,808

Intangible assets - supplier contracts

1,349

 

159

 

427

Intangible assets - brands

337

 

18

 

270

Right of use assets

1,153

 

179

 

210

Plant and equipment

140

 

23

 

86

 

5,052

 

658

 

3,736

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

702

 

61

 

1,164

Trade and other receivables

550

 

698

 

2,309

Cash and cash equivalents

327

 

211

 

-

 

1,579

 

970

 

3,473

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

(1,045)

 

(628)

 

(1,746)

Current tax

-

 

-

 

(53)

Derivative financial instruments

-

 

-

 

(23)

Borrowings and financial liabilities

(265)

 

(52)

 

(1,776)

 

(1,310)

 

(680)

 

(3,598)

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Borrowings and financial liabilities

(1,116)

 

(173)

 

(211)

Deferred tax

(894)

 

(93)

 

(747)

Other provisions

-

 

-

 

(58)

 

(2,010)

 

(266)

 

(1,016)

 

 

 

 

 

 

Non-controlling interests

-

 

-

 

(908)

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

3,311

 

682

 

1,687

1   Comparative information is restated for the adoption of IFRS 16 (note 10).

Goodwill acquired in 2018 relates to the workforce, synergies and sales know how. Goodwill arising on the Bauer & Trummer GmbH and Sound Directions France SAS acquisitions has been allocated to the Continental Europe segment. Goodwill arising on the Blonde Robot Pty Limited acquisition has been allocated to the APAC segment.

Gross contractual amounts of trade and other receivables acquired in 2018 were £3,589k, with bad debt provisions of £32k.

 

Net cash outflow on acquisition of subsidiaries

 

Bauer & Trummer GmbH

 

Sound Directions France SAS

 

Blonde Robot Pty Limited

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Consideration paid in cash

1,354

 

628

 

1,687

Less: cash and cash equivalent balances acquired

(327)

 

(211)

 

-

Plus: borrowings acquired

1,381

 

225

 

1,987

Net cash outflow

2,408

 

642

 

3,674

 

8.    Acquisition of non-controlling interest

 

On 29 April 2019, the Group the acquired the remaining 10.5% non-controlling interest in Holdan Limited of £843k, for a consideration of £1,875k. £1,089k of the put option reserve was transferred to retained earnings when the put option liability 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 2019

Six months to 30 June 2018

At 30 June 2019

At 30 June 2018

At 31 December 2018

 

 

Average

Average

 

 

 

 

 

 

 

 

 

EUR/GBP

1.143

1.136

1.118

1.131

1.115

AUD/GBP

1.824

1.777

1.814

1.788

1.809

NZD/GBP

1.917

1.921

1.895

1.950

1.902

USD/GBP

1.292

-

1.273

-

1.277

CHF/GBP

1.297

-

1.241

-

-

NOK/GBP

11.176

-

10.851

-

-

                   

 

Applying the current period foreign exchange rates across the first half of 2018 had the following impact on reported results:

 

EUR

AUD

NZD

 

£000

£000

£000

 

 

 

 

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

(653)

(401)

3

 

 

 

 

Decrease in profit before tax due to change in foreign exchange rate:

(29)

(40)

-

 

 

 

 

Increase/(decrease) in net debt due to change in foreign exchange rate:

175

(17)

(2)

 

10.  Changes in accounting standards

 

The Group has adopted IFRS 16 from 1 January 2019 using the full retrospective approach. Comparative financial results have been restated as if IFRS 16 had always been adopted. Adoption of IFRS 16 requires that leases longer than 12 months are recognised as liabilities and initially measured at the present value of the future lease payments. The present value of future lease payments is discounted at the implicit interest rate of the lease if it can be readily determined and at the lessee's incremental borrowing rate if the implicit interest rate can't be easily determined. Leases are subsequently measured at amortised cost.

The adoption of IFRS 16 also requires the recognition of right of use assets, which are initially measured at the same value as the lease liability but are subsequently measured at the original value of the lease liability cost less accumulated depreciation and impairment losses.

As a result of the adoption of IFRS 16 the Group reports an increase in depreciation and interest costs with a corresponding decrease in rental costs in the statement of financial performance.

The impact of adopting IFRS 16 on the financial performance and position of the Group for the comparative periods is as follows:

 

 

 

30 June 2018

 

30 June 2018

 

30 June 2018

 

 

 

Previously presented

 

Impact of IFRS 16

 

Restated

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Revenue

 

 

264,099

 

-

 

264,099

Cost of sales

 

 

(221,220)

 

-

 

(221,220)

Gross profit

 

42,879

-

 

42,879

 

 

 

 

 

 

 

 

Distribution costs

 

 

(26,803)

 

-

 

(26,803)

Administrative expenses

 

 

(6,495)

 

99

 

(6,396)

Other operating income

 

 

1,445

 

-

 

1,445

Operating profit

 

 

11,026

 

99

 

11,125

 

 

 

 

 

 

 

 

Finance income

 

 

7

 

-

 

7

Finance costs

 

 

821

 

(118)

 

703

Profit before taxation

 

 

11,854

 

(19)

 

11,835

Taxation

 

 

(2,736)

 

10

 

(2,726)

Profit after taxation

 

 

9,118

 

(9)

 

9,109

 

 

 

 

30 June 2018

 

30 June 2018

 

30 June 2018

 

 

 

Previously presented

 

Impact of IFRS 16

 

Restated

 

 

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

 

 

9,068

 

348

 

9,416

Intangible assets

 

 

20,720

 

-

 

20,720

Right of use assets

 

 

-

 

9,190

 

9,190

Property, plant and equipment

 

 

7,990

 

(396)

 

7,594

Deferred tax assets

 

 

930

 

175

 

1,105

 

 

 

38,708

 

9,317

 

48,025

Current assets

 

 

 

 

 

 

 

Inventories

 

 

74,015

 

-

 

74,015

Trade and other receivables

 

 

84,704

 

-

 

84,704

Cash and cash equivalents

 

 

24,806

 

-

 

24,806

 

 

 

183,525

 

-

 

183,525

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(89,529)

 

-

 

(89,529)

Deferred and contingent considerations

 

 

(384)

 

-

 

(384)

Borrowings and financial liabilities

 

 

(66,015)

 

(1,229)

 

(67,244)

Current tax

 

 

(2,785)

 

-

 

(2,785)

 

 

 

(158,713)

 

(1,229)

 

(159,942)

Net current assets

 

 

24,812

 

(1,229)

 

23,583

Total assets less current liabilities

 

 

63,520

 

8,088

 

71,608

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(156)

 

-

 

(156)

Put option liabilities over non-controlling interests

 

 

(4,092)

 

-

 

(4,092)

Borrowings and financial liabilities

 

 

(324)

 

(8,296)

 

(8,620)

Deferred tax liabilities

 

 

(4,091)

 

-

 

(4,091)

 

 

 

(8,663)

 

(8,296)

 

(16,959)

 

 

 

 

 

 

 

 

Net assets

 

 

54,857

 

(208)

 

54,649

 

 

 

 

 

 

 

 

 

 

 

31 December 2018

 

31 December 2018

 

31 December 2018

 

 

 

 

Previously presented

 

Impact of IFRS 16

 

Restated

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

573,682

 

-

 

573,682

 

Cost of sales

 

 

(479,120)

 

-

 

(479,120)

 

Gross profit

 

 

94,562

 

-

 

94,562

 

 

 

 

 

 

 

 

 

 

Distribution costs

 

 

(56,329)

 

-

 

(56,329)

 

Administrative expenses

 

 

(16,511)

 

194

 

(16,317)

 

Other operating income

 

 

3,025

 

-

 

3,025

 

Operating profit

 

 

24,747

 

194

 

24,941

 

 

 

 

 

 

 

 

 

 

Finance income

 

 

81

 

-

 

81

 

Finance costs

 

 

(3,751)

 

(240)

 

(3,991)

 

Profit before taxation

 

 

21,077

 

(46)

 

21,031

 

Taxation

 

 

(5,792)

 

18

 

(5,774)

 

Profit after taxation

 

 

15,285

 

(28)

 

15,257

 

                       

 

 

 

 

31 December 2018

 

31 December 2018

 

31 December 2018

 

 

 

Previously presented

 

Impact of IFRS 16

 

Restated

 

 

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Goodwill

 

 

11,188

 

380

 

11,568

Intangible assets

 

 

24,766

 

-

 

24,766

Right of use assets

 

 

-

 

10,141

 

10,141

Property, plant and equipment

 

 

7,391

 

(363)

 

7,028

Deferred tax assets

 

 

1,222

 

199

 

1,421

 

 

 

44,567

 

10,357

 

54,924

Current assets

 

 

 

 

 

 

 

Inventories

 

 

74,379

 

-

 

74,379

Trade and other receivables

 

 

83,139

 

-

 

83,139

Derivative financial instruments

 

 

25

 

-

 

25

Cash and cash equivalents

 

 

16,685

 

-

 

16,685

 

 

 

174,228

 

-

 

174,228

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(97,729)

 

-

 

(97,729)

Put option liabilities over non-controlling interests

 

 

(1,746)

 

-

 

(1,746)

Deferred and contingent considerations

 

 

(4,005)

 

-

 

(4,005)

Borrowings and financial liabilities

 

 

(35,151)

 

(1,687)

 

(36,838)

Current tax

 

 

(2,892)

 

-

 

(2,892)

 

 

 

(141,523)

 

(1,687)

 

(143,210)

Net current assets

 

 

32,705

 

(1,687)

 

31,018

Total assets less current liabilities

 

 

77,272

 

8,670

 

85,942

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(736)

 

-

 

(736)

Put option liabilities over non-controlling interests

 

 

(4,654)

 

-

 

(4,654)

Deferred and contingent considerations

 

 

(757)

 

-

 

(757)

Borrowings and financial liabilities

 

 

(7,211)

 

(8,897)

 

(16,108)

Deferred tax liabilities

 

 

(5,512)

 

-

 

(5,512)

Other provisions

 

 

(56)

 

-

 

(56)

 

 

 

(18,926)

 

(8,897)

 

(27,823)

 

 

 

 

 

 

 

 

Net assets

 

 

58,346

 

(227)

 

58,119

 

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.  Events after the reporting period

 

On 1 July 2019 the Group acquired 100% of Entertainment Equipment Supplies SL, a specialist distributor of lighting and lighting infrastructure products based in San Sebastian, Spain.

13.  Adjustments to reported results

 

 

Six months ended

 

30 June

30 June

 

2019

2018

 

 

(Restated)1

 

£000

£000

 

 

 

Operating profit

10,466

11,125

Cost of acquisitions

306

43

Share based payments

1,275

410

Employer taxes on share based payments

280

145

Amortisation of brands, customer and supplier relationships

2,303

1,747

Adjusted operating profit

14,630

13,470

Depreciation

2,444

2,015

Amortisation of patents and software

82

81

Adjusted EBITDA

17,156

15,566

Increase in adjusted inventories

(7,588)

(11,031)

Increase in adjusted trade and other receivables

(12,145)

(8,343)

Increase in adjusted trade and other payables

7,426

4,888

Adjusted cash flow from operations

4,849

1,080

Adjusted EBITDA cash flow conversion

28.3%

6.9%

 

 

 

Profit before tax

11,282

11,835

Cost of acquisitions

306

43

Share based payments

1,275

410

Employer taxes on share based payments

280

145

Amortisation of brands, customer and supplier relationships

2,303

1,747

Foreign exchange losses on borrowings for acquisitions

129

-

Finance costs - deferred and contingent considerations

(924)

(147)

Finance costs - put option liabilities over non-controlling interests

(917)

(1,103)

Adjusted profit before tax

13,734

12,930

 

 

 

Profit after tax

9,033

9,109

Cost of acquisitions

306

43

Share based payments

1,270

410

Employer taxes on share based payments

280

145

Amortisation of brands, customer and supplier relationships

2,303

1,747

Foreign exchange losses on borrowings for acquisitions

129

-

Finance costs - deferred and contingent considerations

(924)

(147)

Finance costs - put option liabilities over non-controlling interests

(917)

(1,103)

Tax impact

(1,026)

(481)

Adjusted profit after tax

10,459

9,723

 

 

 

 

Profit after tax

9,033

9,109

Non-controlling interest

(280)

(128)

Profit after tax attributable to  equity holders of the Parent Company

8,753

8,981

 

 

 

Adjusted profit after tax

10,459

9,723

Non-controlling interest

(280)

(128)

Amortisation attributable to NCI

(144)

(63)

Deferred tax on amortisation attributable to NCI

70

15

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

10,105

9,547

 

 

 

Weighted average number of ordinary shares

79,078,793

79,448,200

Diluted weighted average number of ordinary shares

80,254,478

80,053,998

 

 

 

Basic adjusted earnings per share

12.78p

12.02p

Diluted adjusted earnings per share

12.59p

11.93p

1 Comparative information is restated for the adoption of IFRS 16 (note 10) and reclassification of the amortisation for patents and software within the adjusted profit alternative performance measures.

 

14.  Interim dividend

 

The interim dividend proposed for the six months to 30 June 2019 of 4.85 pence (30 June 2018: 4.60 pence) relates to profits earned over the period.

 


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Interim Results - RNS