REG - Inspecs Group PLC - Interim Results
10/09/2024 07:00
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RNS Number : 5028D Inspecs Group PLC 10 September 2024
10 September 2024
INSPECS Group plc
("INSPECS", "the Company" or "the Group")
Interim Results
Delivering operational efficiencies
INSPECS Group plc, a leading designer, manufacturer, and distributor of
eyewear (sunglasses, optical frames, lenses and low vision products) presents
its unaudited interim results for the six months ended 30 June 2024.
Financial review:
· As previously guided, revenue in the first half was below last year,
decreasing by 7.3% to £103.0m (H1 2023: £111.2m) due to the one-off elevated
level of sales in Q1 2023
· On a constant exchange rates basis(1), revenue decreased by 5.2% to £105.4m
(H1 2023: £111.2m)
· Gross profit margin significantly improved by 100 basis points to 52.4% (H1
2023: 51.4%)
· Operating expenses decreased by 3.6% to £50.7m (H1 2023: £52.6m) due to the
delivery of operational efficiencies
· As previously guided, Underlying EBITDA(2) reduced to £10.1m (H1 2023:
£12.1m) following a decrease in revenue in the period, partially offset by
cost savings
· Diluted Underlying EPS(3) of 2.72p (H1 2023: 4.28p)
· Strong cash generation, with cash generated from operations £12.0m (H1 2023:
£11.5m)
· Continued improvement in working capital, reduced by £2.4m (H1 2023:
increased by £0.6m)
· Net debt excluding leases(4) reduced by £4.4m in the six months to 30 June
2024 to £19.8m (31 December 2023: £24.2m)
· Whilst overall market conditions remain soft, H2 trading to date has exceeded
the prior year, with the order book as at 31 August 2024 7% higher than 31
August 2023
· The Board is confident in meeting market expectations for the full year
Operational review:
· Successful launch of a key eyewear brand into all stores of a major global
retailer
· Two major retail chains in the United Stated distributing additional brands
from Q4 2024
· Leading optical retailer in Canada distributing a major brand in all stores
from Q4 2024
· Travel retail revenue increased 45% as a result of a continued push into key
global outlets
· Further operational efficiency gains through the successful integration of
Inspecs USA, including consolidation of warehousing facilities
· Construction of the new Vietnam manufacturing facility completed on time and
on budget, with fit-out ongoing. The additional facility will enable us to
increase manufacturing capacity and ensure better operational efficiencies
from existing production
· Lenses segment revenue has increased by 22% compared to H1 2023 with an
additional key account signed. The new leadership team is now embedded within
Norville
1 Constant currency exchange rates: figures at constant currency
exchange rates have been calculated using the average exchange rates in effect
for the relevant comparative period (H1 2023).
2 Refer to table 'Underlying EBITDA and Underlying PAT'
3 Refer to note 5
4 Refer to note 8
Richard Peck, CEO of INSPECS, said:
"The Group has made steady progress during the period, with significantly
improved gross profit margins delivered across all divisions and strong cash
generation. We have achieved sustainable cost savings through the ongoing
implementation of operational efficiencies, particularly in the US, and we
will continue to undertake further initiatives during the second half.
"We have made good progress against our global distribution strategic pillar,
evidenced through the agreement of new distribution and the expansion of
existing partnerships with global retailers, as well as achieving revenue
growth in travel retail. Despite ongoing challenges relating to inflationary
pressures and the market readjusting after competitor acquisitions, the
optical market remains resilient.
"Trading in the second half to date has exceeded the prior year and our order
books are ahead of last year as of the end of August. It is expected that the
reduction in net debt will accelerate in the second half due to reduced
capital expenditure, following a period of increased investment in the new
Vietnam manufacturing facility. Whilst we remain cautious in relation to
market conditions and focused on the delivery of our cost saving initiatives
and planned shipments in Q4, the Board is confident in meeting market
expectations for the full year."
For further information please contact:
INSPECS Group plc via FTI Consulting
Richard Peck (CEO) Tel: +44 (0) 20 3727 1000
Chris Kay (CFO)
Peel Hunt (Nominated Adviser and Broker) Tel: +44 (0) 20 7418 8900
George Sellar
Andrew Clark
FTI Consulting (Financial PR) Tel: +44 (0) 20 3727 1000
Alex Beagley
Harriet Jackson
Amy Goldup
About INSPECS Group plc
INSPECS is a leading provider of eyewear solutions to the global eyewear
market. The Group produces a broad range of eyewear frames, low vision aids
and lenses, covering optical, sunglasses and safety, which are either
"Branded" (under licence or under the Group's own proprietary brands), or
"OEM" (unbranded or private label on behalf of retail customers).
INSPECS is building a global eyewear business through its vertically
integrated business model. Its continued growth is underpinned by six core
pillars: increasing the penetration of its own-brand portfolio, increasing
distribution, growing its travel retail markets, maximising group synergies,
expanding its manufacturing capacity and scaling the research and development
department as it develops new and innovative eyewear products.
The Group has operations across the globe: with offices and subsidiaries in
the UK, Europe, the US and China (including Hong Kong, Macau and Shenzhen),
and manufacturing facilities in Vietnam, China, the UK and Italy.
INSPECS customers are global optical and non-optical retailers, global
distributors and independent opticians. Its distribution network covers over
80 countries and reaches approximately 75,000 points of sale.
More information is available at: www.INSPECS.com (http://www.INSPECS.com)
CHIEF EXECUTIVE REVIEW
As previously communicated, revenue and EBITDA in the first half of 2024 were
expected to be lower due to the one-off elevated level of sales in Q1 2023.
The Group experienced a more normalised trading pattern in the period, the
impact of which was compounded by the widely reported global inflationary
pressures as well as the market readjusting to recent competitor acquisitions.
As a result, the Group recorded revenue of £103.0m (H1 2023: £111.2m) and an
Underlying EBITDA of £10.1m compared to £12.1m for the same period in 2023.
Pleasingly, gross profit margin increased to 52.4% (H1 2023: 51.4%) as a
result of improved operational efficiency and sales mix, with our continued
focus on delivering operational efficiencies also reducing operating expenses
by £1.9m to £50.7m from £52.6m.
Frames and Optics
Revenue within our Frames and Optics distribution business decreased 8.5% to
£94.2m (H1 2023: £102.9m) however, gross profit margin improved by 150 basis
points to 51.8% with increasing synergies being realised.
During the period the Group successfully launched a key brand into all stores
of a major global retailer and agreed distribution with two major retail
chains in the United States for additional brands from Q4 2024. The Group also
agreed distribution with a leading optical retailer in Canada for a further
major brand in all stores from Q4 2024.
There is also an opportunity to increase penetration globally though the
worldwide distribution network that we are establishing. Notably our push into
worldwide travel retail outlets is proving very successful as revenue from
travel retail has increased 45% in the period and we will continue to expand
our distribution into new global outlets in the second half.
The Group also successfully integrated Inspecs USA's sales and warehousing
facilities during the period, streamlining operations within this region.
Manufacturing
Revenue from the manufacturing business for H1 2024 was £9.0m, compared to
£9.9m in H1 2023 but we expect to see increased activity in the second half
with order books at 31 August 2024 exceeding those at 31 August 2023. Gross
profit margin increased by 400 basis points to 46.2% in H1 due to increased
sales of patented concept frames and reduced material costs.
Construction of our new manufacturing facility in Vietnam has been completed
on time and on budget, and the fit-out of the facility is currently ongoing.
Once manufacturing fully commences, this will increase the manufacturing
capacity of the Group to circa 12 million units per year in the medium term
and enhance the operational efficiency of existing production.
Lenses
Revenue from our lens manufacturing business increased 21.6% to £2.5m (H1
2023: £2.1m) and gross profit margin increased by 220 basis points to 42.3%.
The new leadership team is well embedded, and growth has been delivered in
both key accounts and independent sales channels, with a significant new key
account signed and further negotiations ongoing.
Research and development
Significant progress continues to be made in relation to our smart eyewear
range, alongside the development of additional innovative eyewear channels,
resulting in further consultancy revenues during H1 2024. A new low vision aid
will also be launched in the second half of 2024.
ESG
During the period, we have launched several impactful community projects,
including a food bank initiative in Nuremberg, Germany aiming to tackle food
waste and food insecurity in the local area, underscoring our commitment to
making a meaningful difference in the local communities in which we operate.
We also continued to refine our climate approach, holding several Steering
Group meetings to enhance our management and reporting of climate-related
risks and opportunities. Looking ahead, we remain dedicated to driving
progress across our Group ESG Roadmap and continuously improving our
strategies to address climate-related challenges and opportunities.
Outlook
As of 31 August, trading in the second half to date has exceeded the prior
year and our order books are also 7% ahead. Whilst we remain cautious in
relation to market conditions and we remain focused on delivery of our cost
saving initiatives, we are confident in delivering on market expectations for
the full year.
I would like to thank all our teams across the globe for their continuing hard
work and dedication in achieving our long-term goal of developing INSPECS
Group into one of the world's leading eyewear companies.
Richard Peck
10 September 2024
FINANCIAL REVIEW
Revenue
Revenue was £103.0m in the half, down from £111.2m in H1 2023, a decrease of
7.3%. On a constant exchange rate basis revenues decreased 5.2% to £105.4m
from £111.2m (H1 2023).
Gross Profit Margin
The Group's gross profit margin increased to 52.4% in H1 2024 from 51.4% in H1
2023, driven by margin improvement in each of the reporting segments. The
Group continues to actively manage its gross profit margin and is targeting
further efficiencies.
Operating Profit
The Group's operating profit decreased 27.2% to £3.3m (H1 2023: £4.6m).
Administrative expenses
Administrative costs decreased by £1.5m to £47.8m in H1 2024 from £49.3m in
H1 2023, driven by the Group's focus on operational efficiency.
Underlying EBITDA
The Group's Underlying EBITDA decreased from £12.1m in H1 2023 to £10.1m in
H1 2024. Underlying EBITDA margin decreased from 10.8% in H1 2023 to 9.8% in
H1 2024.
Finance Expenses
Net finance costs have risen marginally from £2.0m in H1 2023 to £2.1m in H1
2024 reflecting the increase in interest rates versus the prior period. Net
finance costs include £0.1m (H1 2023: £0.1m) relating to the amortisation of
capitalised loan arrangement fees.
Depreciation and amortisation
Period ended 30 June 2024 £m Period ended 30 June 2023
£m
Depreciation 3.0 3.4
Amortisation 3.2 3.3
Total 6.2 6.7
The decrease in depreciation is split between owned and right of use assets.
Profit Before Tax
Profit before tax for the period was £1.3m (H1 2023: £3.8m), after a lower
£0.2m gain on exchange relating to borrowings, compared to a gain of £1.2m
in H1 2023.
Tax charge
The tax charge for the period of £2.4m (H1 2023: £1.7m) is driven by a
current tax charge of £2.2m (H1 2023: £2.2m) and a deferred tax charge of
£0.1m (H1 2023: £0.5m credit). The credit in H1 2023 is driven by the
unwinding of deferred tax balances arising on acquisitions.
Cash Generation
The Group generated cash from operations of £12.0m (H1 2023: £11.5m)
reflecting continual improvements in working capital efficiency of the Group.
Net Debt
The Group has again delivered strong cash generation in the first half and as
a result, net debt (excluding leases) reduced by £4.4m to £19.8m as at 30
June 2024 (31 December 2023: £24.2m). During the period, the Group invested
£1.8m on the purchase of tangible and intangible owned assets, including fit
out costs for the new Vietnam facility, and paid a further £1.9m of deferred
and contingent consideration relating to the EGO and BoDe acquisitions. The
reduction in net debt of the group is expected to accelerate in future periods
as cash flows used in investing activities returns to usual levels.
Financing
The Group finances its operation through the following borrowings and
facilities.
Expires Balance at Balance at
30 June 2024
31 December 2023
£m
£m
Group revolving credit facility October 2025 28.8 29.2
Term loans October 2025 6.3 7.7
Revolving credit facility USA 1-year rolling 7.4 6.5
Invoice discounting 1-year rolling 1.8 0.9
Other 0.1 -
Total 44.4 44.3
Leverage (using debt to equity ratio)
The Group's leverage position is shown below:
30 June
2024
Actual ratio 1.63
Required ratio 2.25
The Group remains within its banking covenants and forecasts that, subject to
market conditions, it will continue to remain within banking covenants for the
length of the arrangement.
Inventory
Our revenue to inventory ratio has remained consistent compared to 30 June
2023.
Period ended 30 June 2024 Period ended 30 June 2023
£m £m
Revenue 103.0 111.2
Inventory 39.7 42.3
Revenue to inventory ratio 2.6 2.6
Current asset ratio
The current ratio is a liquidity ratio that measures a company's ability to
pay short-term obligations, or those due within one year. This has remained
consistent on the comparative period.
Period ended 30 June 2024 Period ended 30 June 2023
£m £m
Current Assets 97.3 107.4
Current Liabilities 67.3 69.7
Ratio 1.4 1.5
Quick ratio
The quick ratio is an indicator of a company's short-term liquidity position
and measures a company's ability to meet its short-term obligations with its
most liquid assets. This has remained consistent on the comparative period.
Period ended 30 June 2024 Period ended 30 June 2023
£m £m
Current Assets 97.3 107.4
Less Inventory (39.7) (42.3)
57.6 65.1
Current Liabilities 67.3 69.7
Ratio 0.9 0.9
Net working capital
Period ended 30 June 2024 Period ended 30 June 2023
£m £m
Trade and other receivables 33.0 37.4
Inventory 39.7 42.3
Trade and other payables (35.5) (38.9)
Net working capital 37.2 40.8
Working capital as a percentage of revenue 36.1% 36.7%
Net working capital has reduced following a reduction of the inventory base
and improved receivables collection.
Earnings per Share
The Group's Basic Underlying EPS for the 6 months to 30 June 2024 was 2.86p
compared to 4.53p for the 6 months to 30 June 2023.
Dividend
The Group does not currently intend to pay a dividend in relation to 2024. The
Board continues to review its dividend policy on a regular basis.
Underlying EBITDA and Underlying PAT
The below table shows how Underlying EBITDA and Underlying PAT are calculated:
6 months ended 30 June 2024 6 months ended 30 June 2023 12 months ended 31 December 2023
£'000 £'000 £'000
Revenue 103,047 111,199 203,292
Gross Profit 54,012 57,147 103,547
Operating expenses (50,696) (52,592) (100,659)
Operating profit 3,316 4,555 2,888
Add back: Amortisation 3,221 3,252 6,910
Add back: Depreciation 2,969 3,361 6,129
EBITDA 9,506 11,168 15,927
Add back: Share based payment expense 972
206 526
Add back: Earn out on acquisition 380 366 1,140
Underlying EBITDA 10,092 12,060 18,039
Less: Depreciation (2,969) (3,361) (6,129)
Less: Net interest (excluding amortisation of loan arrangement fees) (3,774)
(1,987) (1,846)
Underlying Profit Before Tax (PBT) 5,136 6,853 8,136
Current tax charge (2,233) (2,248) (2,932)
Underlying Profit After Tax (PAT) 2,903 4,605 5,204
Underlying EPS Pence Pence Pence
Basic Underlying EPS for the period attributable to the equity holders of the
parent
2.86 4.53 5.12
Diluted Underlying EPS for the period attributable to the equity holders of
the parent
2.72 4.28 4.85
Underlying EBITDA segmental information
Underlying EBITDA by reportable segment (as defined in note 4) for the six
months ended 30 June 2024 is as follows:
Frames & Manufacturing Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 94,169 9,028 2,516 105,713 (2,666) 103,047
Operating profit/(loss) 5,586 1,222 (1,196) 5,612 (2,296) 3,316
Add back:
Amortisation 2,897 43 9 2,949 272 3,221
Depreciation 2,374 250 262 2,886 83 2,969
Share based payments 39 90 - 129 77 206
Earn out on acquisitions 380 - - 380 - 380
Underlying EBITDA 11,276 1,605 (925) 11,956 (1,864) 10,092
Underlying EBITDA by reportable segment (as defined in note 4) for the six
months ended 30 June 2023 is as follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 102,876 9,922 2,069 114,867 (3,668) 111,199
Operating profit/(loss) 7,272 887 (1,248) 6,911 (2,356) 4,555
Add back:
Amortisation 2,809 433 10 3,252 - 3,252
Depreciation 2,663 347 336 3,346 15 3,361
Share based payments 198 161 - 359 167 526
Earn out on acquisitions 366 - - 366 - 366
Underlying EBITDA 13,308 1,828 (902) 14,234 (2,174) 12,060
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2024
Notes Unaudited Unaudited
6 months ended 6 months ended
30 June 2024
30 June 2023
£'000 £'000
REVENUE 4 103,047 111,199
Cost of sales (49,035) (54,052)
GROSS PROFIT 54,012 57,147
Distribution costs (2,944) (3,328)
Administrative expenses (47,752) (49,264)
OPERATING PROFIT 3,316 4,555
Non-underlying costs 9 (94) -
Exchange adjustments on borrowings 155 1,210
Share of loss of associates (2) (4)
Finance costs (2,146) (2,103)
Finance income 94 145
PROFIT BEFORE INCOME TAX 1,323 3,803
Income tax (2,350) (1,720)
(LOSS)/PROFIT FOR THE PERIOD (1,027) 2,083
OTHER COMPREHENSIVE LOSS:
Exchange adjustment on consolidation (756) (3,973)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (1,783) (1,890)
(Loss)/earnings per share Pence Pence
Basic EPS for the period attributable 5 (1.01) 2.05
to the equity holders of the parent
5 (1.01) 1.94
Diluted EPS for the period attributable
to the equity holders of the parent
Underlying EBITDA by reportable segment (as defined in note 4) for the six
months ended 30 June 2023 is as follows:
Frames and Wholesale Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 102,876 9,922 2,069 114,867 (3,668) 111,199
Operating profit/(loss) 7,272 887 (1,248) 6,911 (2,356) 4,555
Add back:
Amortisation 2,809 433 10 3,252 - 3,252
Depreciation 2,663 347 336 3,346 15 3,361
Share based payments 198 161 - 359 167 526
Earn out on acquisitions 366 - - 366 - 366
Underlying EBITDA 13,308 1,828 (902) 14,234 (2,174) 12,060
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2024
Notes
Unaudited
6 months ended
30 June 2024
Unaudited
6 months ended
30 June 2023
£'000
£'000
REVENUE
4
103,047
111,199
Cost of sales
(49,035)
(54,052)
GROSS PROFIT
54,012
57,147
Distribution costs
(2,944)
(3,328)
Administrative expenses
(47,752)
(49,264)
OPERATING PROFIT
3,316
4,555
Non-underlying costs
9
(94)
-
Exchange adjustments on borrowings
155
1,210
Share of loss of associates
(2)
(4)
Finance costs
(2,146)
(2,103)
Finance income
94
145
PROFIT BEFORE INCOME TAX
1,323
3,803
Income tax
(2,350)
(1,720)
(LOSS)/PROFIT FOR THE PERIOD
(1,027)
2,083
OTHER COMPREHENSIVE LOSS:
Exchange adjustment on consolidation
(756)
(3,973)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
(1,783)
(1,890)
(Loss)/earnings per share
Pence
Pence
Basic EPS for the period attributable
to the equity holders of the parent
5
(1.01)
2.05
Diluted EPS for the period attributable
to the equity holders of the parent
5
(1.01)
1.94
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Note Unaudited Unaudited As at
31 December 2023
As at As at
30 June 2024
30 June 2023 £'000
£'000 Restated
£'000
ASSETS
NON-CURRENT ASSETS
Goodwill 55,743 55,578 55,578
Intangible assets 26,930 32,248 29,813
Property Plant and equipment 34,718 33,840 35,600
Investment in associates 97 105 98
Deferred tax 2,576 2,103 2,826
120,064 123,874 123,915
CURRENT ASSETS
Inventories 39,679 42,349 40,848
Trade and other receivables 6 32,974 37,432 35,855
Tax receivable 74 1,719 386
Cash and cash equivalents 24,616 25,862 20,070
97,343 107,362 97,159
Assets held for sale 832 832 832
TOTAL ASSETS 218,239 232,068 221,906
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 1,017 1,017 1,017
Share premium 89,508 89,508 89,508
Foreign currency translation reserve 4,679 5,461 5,435
Share option reserve 3,428 3,153 3,222
Merger reserve 5,340 5,340 5,340
Retained earnings (2,032) 1,698 (1,005)
TOTAL EQUITY 101,940 106,177 103,517
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings 45,605 51,525 48,234
Deferred consideration - 652 652
Deferred tax 3,427 3,969 3,647
49,032 56,146 52,533
CURRENT LIABILITIES
Trade and other payables 7 35,463 38,921 36,375
Right of return liability 11,222 11,862 11,297
Financial liabilities - borrowings
Interest bearing loans and borrowings 14,276 13,140 13,000
Invoice discounting 1,804 2,089 887
Deferred and contingent consideration 1,231 1,333 2,111
Tax payable 3,271 2,400 2,186
67,267 69,745 65,856
TOTAL LIABILITIES 116,299 125,891 118,389
TOTAL EQUITY AND LIABILITIES 218,239 232,068 221,906
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2024
Called up share capital Share premium Foreign currency translation reserve Share option reserve Retained earnings Merger reserve Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
SIX MONTHS ENDED 30 JUNE 2024
Balance at 1 January 2024 1,017 89,508 5,435 3,222 (1,005) 5,340 103,517
Loss for the period - - - - (1,027) - (1,027)
Other comprehensive loss - - (756) - - - (756)
Total comprehensive loss - - (756) - (1,027) - (1,783)
Share-based payment charge - - - 206 - - 206
Balance at 30 June 2024 (unaudited) 1,017 89,508 4,679 3,428 (2,032) 5,340 101,940
SIX MONTHS ENDED 30 JUNE 2023
Balance at 1 January 2023 1,017 89,508 9,434 2,703 (461) 5,340 107,541
Profit for the period - - - - 2,083 - 2,083
Other comprehensive loss - - (3,973) - - - (3,973)
Total comprehensive loss - - (3,973) - 2,083 - (1,890)
Share-based payment charge - - - 526 - - 526
Share options forfeited - - - (76) 76 - -
Balance at 30 June 2023 (unaudited) 1,017 89,508 5,461 3,153 1,698 5,340 106,177
INTERIM CONSOLIDATED STATEMENT OF CASH
FLOW
For the period ended 30 June 2024
Unaudited Unaudited
6 months ended 6 months ended
30 June 2024 30 June 2023
£000 £000
Cash flows from operating activities
Profit before income tax 1,323 3,803
Depreciation charges 2,969 3,361
Amortisation charges 3,221 3,252
Share based payments 206 526
Earn out on acquisitions - 366
Exchange adjustments on borrowings (155) (1,210)
Share of loss from associate 2 4
Finance costs 2,146 2,103
Finance income (94) (145)
9,618 12,060
Decrease in inventories 1,202 5,809
Decrease/(increase) in trade and other receivables 2,921 (5,503)
Decrease in trade and other payables (1,712) (866)
Cash generated from operations 12,029 11,500
Interest paid (2,081) (1,831)
Tax paid (783) (1,248)
Net cash flow from operating activities 9,165 8,421
Cash flows used in investing activities
Purchase of intangible fixed assets (631) (124)
Purchase of property plant and equipment (1,206) (1,361)
Acquisition of subsidiary, net of cash acquired (129) -
Cash paid in relation to deferred consideration (700) -
Interest received 94 145
Net cash flows used in investing
activities (2,572) (1,340)
Cash flow from financing activities
Bank loan principal repayments in period (1,712) (1,010)
Proceeds from borrowings 1,265 -
Movement in invoice discounting facility 917 599
Loan transaction costs (224) (70)
Principal payments on leases (1,849) (1,999)
Net cash flows used in financing
activities (1,603) (2,480)
Net increase in cash and cash
equivalents 4,990 4,601
Cash and cash equivalents at 20,070 22,153
beginning of the period
Net foreign currency movements (444) (892)
Cash and cash equivalents 24,616 25,862
at end of period
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS
For the period ended 30 June 2024
1. GENERAL INFORMATION
INSPECS Group plc is a public company limited by shares and is incorporated in
England and Wales. The address of the Company's principal place of business is
Kelso Place, Upper Bristol Road, Bath BA1 3AU.
The principal activity of the Group in the period was that of design,
production, sale, marketing and distribution of high fashion eyewear and OEM
products worldwide.
2. ACCOUNTING POLICIES
Going concern
Based on the Group's forecasts, the interim financial statements have been
prepared on the going concern basis as the Directors have assessed that there
is a reasonable expectation that the Group will be able to continue in
operation and meet its commitments as they fall due over the going concern
period to 30 September 2025.
The assessment has considered the Group's current financial position as
follows:
• The Group further improved its cash position during the period with
net debt including leases decreasing to £37.1m from £42.1m at 31 December
2023.
• Cash generated from operations in the period amounted to £12.0m
(2023 H1: £11.5m).
• The Group balance sheet has net assets of £101.9m and net
current assets of £30.1m.
The assessment has considered the current measures being put in place by the
Group to preserve cash and ensure continuity of operations through:
• Ensuring continuation of its supply chain, building on the
benefit of having its own manufacturing sites and by securing alternative
third-party supply lines.
• Maintaining geographical sales diversification, focusing sales
to online customers and seeking new revenue streams around the globe.
• Ability to service both the major global retail chains and
significant distribution to the independent eyewear market following the
acquisitions completed over recent periods.
Banking facilities
The Group's banking facilities are due for renewal in October 2025. The Group
is currently discussing with its lender to renew the facilities to mature no
earlier than October 2028, with an expectation that the new facility will be
agreed by the end of December 2024.
Basis of preparation
The interim consolidated financial statements for the six months ended 30 June
2024 have been prepared in accordance with IAS 34 Interim Financial Reporting
and with accounting policies that are consistent with the Group's Annual
Report and Financial Statements for the period ended 31 December 2023.
Accounting policies are included in detail within the latest Annual Report.
The financial information for the period ended 30 June 2024 and the
comparative financial information for the period ended 30 June 2023 in this
interim report does not constitute statutory accounts for either period under
section 434 of the Companies Act 2006 and are unaudited.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
The preparation of the Group's historical information requires management to
make judgements, estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and their accompanying
disclosures, and the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amounts of the assets or liabilities in
the future.
Estimation uncertainty
In addition to the going concern section of note 2, the key assumptions
concerning the future and other key sources of estimation uncertainty at the
end of the reporting period, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial period, are described below.
Right of return liability
Management applies assumptions in determining the right of return liability
and the associated right of return asset. These assumptions are based on
analysis of historical data trends but require estimation of appropriate time
periods and expected return rates. The right of return liability at the period
end is £11,222,000 (31 December 2023: £11,297,000) in line with the
calculation methodology used as at 31 December 2023.
4. SEGMENT INFORMATION
The Group operates in three operating segments, which upon application of the
aggregation criteria set out in IFRS 8 Operating Segments results in three
reporting segments:
• Frames and Optics product distribution.
• Manufacturing (previously Wholesale) - being OEM and manufacturing
distribution.
• Lenses - being manufacturing and distribution of lenses.
The criteria applied to identify the operating segments are consistent with
the way the Group is managed. In particular, the disclosures are consistent
with the information regularly reviewed by the CEO and the CFO in their role
as Chief Operating Decision Makers, to make decisions about resources to be
allocated to the segments and to assess their performance.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
4. SEGMENT INFORMATION (CONTINUED)
The reportable segments subject to disclosure are consistent with the
organisation model adopted by the Group during the six months ended 30 June
2024 are as below:
Frames and Manufacturing Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 92,009 8,453 2,441 102,903 144 103,047
Internal 2,160 575 75 2,810 (2,810) -
94,169 9,028 2,516 105,713 (2,666) 103,047
Cost of sales (45,379) (4,859) (1,451) (51,689) 2,654 (49,035)
Gross profit/(loss) 48,790 4,169 1,065 54,024 (12) 54,012
Expenses (43,204) (2,947) (2,261) (48,412) (2,284) (50,696)
Operating profit/(loss) 5,586 1,222 (1,196) 5,612 (2,296) 3,316
Non-underlying costs (94)
Exchange adjustment 155
on borrowings
Share of loss of associates (2)
Finance costs (2,146)
Finance income 94
Taxation (2,350)
Loss for the period (1,027)
Reported segments relating to the balance sheet as at 30 June 2024 are as
follows:
Frames and Manufacturing Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000
£'000 £'000 £'000
Total assets 325,169 59,578 10,329 395,076 (179,413) 215,663
Total liabilities (183,004) (5,107) (16,395) (204,506) 156,590 (47,916)
142,165 54,471 (6,066) 190,570 (22,823) 167,747
Deferred tax asset 2,576
Deferred tax liability (3,427)
Current tax liability (3,271)
Borrowings (61,685)
Group net assets 101,940
Total assets are the Group's gross assets excluding deferred tax asset. Total
liabilities are the Group's gross liabilities excluding loans and borrowings,
deferred and current tax liabilities.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
4. SEGMENT INFORMATION (CONTINUED)
The reportable segments subject to disclosure are consistent with the
organisation model adopted by the Group during the six months ended 30 June
2023 are as below:
Frames and Manufacturing Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000 £'000 £'000 £'000
Revenue
External 100,220 9,016 1,963 111,199 - 111,199
Internal 2,656 906 106 3,668 (3,668) -
102,876 9,922 2,069 114,867 (3,668) 111,199
Cost of sales (51,174) (5,731) (1,240) (58,145) 4,093 (54,052)
Gross profit 51,702 4,191 829 56,722 425 57,147
Expenses (44,430) (3,304) (2,077) (49,811) (2,781) (52,592)
Operating profit/(loss) 7,272 887 (1,248) 6,911 (2,356) 4,555
Exchange adjustment 1,210
on borrowings
Share of loss of associates (4)
Finance costs (2,103)
Finance income 145
Taxation (1,720)
Profit for the period 2,083
Reported segments relating to the balance sheet as at 31 December 2023 are as
follows:
Frames and Manufacturing Lenses Total before Adjustments Total
Optics adjustments & & elimination
eliminations
£'000 £'000 £'000
£'000 £'000 £'000
Total assets 320,836 64,585 9,672 395,093 (176,013) 219,080
Total liabilities (182,225) (5,543) (14,408) (202,176) 151,741 (50,435)
138,611 59,042 (4,736) 192,917 (24,272) 168,645
Deferred tax asset 2,826
Deferred tax liability (3,647)
Current tax liability (2,186)
Borrowings (62,121)
Group net assets 103,517
Total assets are the Group's gross assets excluding deferred tax asset. Total
liabilities are the Group's gross liabilities excluding loans and borrowings,
deferred and current tax liabilities.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
4. SEGMENT INFORMATION (CONTINUED)
Acquisition costs, finance costs and income, and taxation are not allocated to
individual segments as the underlying instruments are managed on a Group
basis.
Deferred tax and borrowings are not allocated to individual segments as they
are managed on a Group basis.
Adjusted items relate to elimination of all intra-Group items including any
profit adjustments on intra-Group revenues that are eliminated on
consolidation, along with the profit and loss items of the parent company.
Adjusted items in relation to segmental assets and liabilities relate to the
elimination of all intra-Group balances and investments in subsidiaries, and
assets and liabilities of the parent company.
The revenue of the Group is attributable to the one principal activity of the
Group.
Geographical analysis
The Group's revenue by destination is split in the following geographic areas:
Unaudited Unaudited
6 months ended 6 months ended
30 June 2024 30 June 2023
£'000 £'000
United Kingdom 12,971 13,621
Europe (excluding UK) 48,527 52,161
North America 35,398 37,428
South America 822 1,315
Asia 1,830 2,993
Australia 3,342 3,515
Other 157 166
103,047 111,199
5. EARNINGS PER SHARE
Basic Earnings per Share ("EPS") is calculated by dividing the profit or loss
for the period attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by dividing the profit or loss attributable to
ordinary equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period plus the weighted average number
of ordinary shares that would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares, to the extent that the
inclusion of such shares is not anti-dilutive. During the period to 30 June
2024 the Group made a reported loss after tax; therefore, diluted EPS is not
applicable as the impact of potential ordinary shares is anti-dilutive.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
5. EARNINGS PER SHARE (continued)
Reported Basic earnings per share is (1.01)p (30 June 2023: 2.05p), with
reporting diluted earnings per share of (1.01)p (30 June 2023: 1.94p). The
below table reflects the income and share data used in the basic and diluted
EPS calculations. Earnings for the Underlying EPS are the 'Underlying Profit
After Tax' as shown in the table 'Underlying EBITDA and Underlying PAT'.
6 months ended 30 June 2024 Basic weighted average number of Ordinary Shares ('000) Total Earnings per share (pence)
earnings (£'000)
Basic EPS 101,672 (1,027) (1.01)
Diluted EPS 106,824 (1,027) (1.01)
Basic Underlying EPS 101,672 2,903 2.86
Diluted Underlying EPS 106,824 2,903 2.72
6months ended 30 June 2023 Basic weighted average number of Ordinary Shares ('000) Total Earnings per share (pence)
earnings (£'000)
Basic EPS 101,672 2,083 2.05
Diluted EPS 107,492 2,083 1.94
Basic Underlying EPS 101,672 4,605 4.53
Diluted Underlying EPS 107,492 4,605 4.28
12 months ended 31 December 2023 Basic weighted average number of Ordinary Shares ('000) Total Earnings per share (pence)
earnings (£'000)
Basic EPS 101,672 (997) (0.98)
Diluted EPS 107,246 (997) (0.98)
Basic Underlying EPS 101,672 5,207 5.12
Diluted Underlying EPS 107,246 5,207 4.85
Within INSPECS Group plc, each Ordinary share carries the right to participate
in distributions, as respects dividends and as respects capital on winding up.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
12 months ended 31 December 2023 Basic weighted average number of Ordinary Shares ('000) Total Earnings per share (pence)
earnings (£'000)
Basic EPS 101,672 (997) (0.98)
Diluted EPS 107,246 (997) (0.98)
Basic Underlying EPS 101,672 5,207 5.12
Diluted Underlying EPS 107,246 5,207 4.85
Within INSPECS Group plc, each Ordinary share carries the right to participate
in distributions, as respects dividends and as respects capital on winding up.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
6. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited As at
As at As at 31 December
30 June 2024 30 June 2023 2023
Restated
£'000 £'000 £'000
Trade receivables 24,717 26,298 24,168
Prepayments 1,984 3,381 2,193
Other receivables 6,273 7,753 9,494
32,974 37,432 35,855
7. TRADE AND OTHER PAYABLES
Unaudited Unaudited As at
31 December
2023
As at As at
30 June 2024 30 June 2023
£'000 £'000 £'000
Trade payables 22,901 23,715 21,368
Social security and other taxes 3,143 4,723 3,379
Royalties 2,669 3,216 4,255
Accruals 6,750 7,267 7,373
35,463 38,921 36,375
8. NET DEBT
Unaudited Unaudited As at
31 December
2023
As at As at
30 June 2024 30 June 2023
£'000 £'000 £'000
Cash and cash equivalents 24,616 25,862 20,070
Interest bearing borrowings excl. leases
(42,628) (46,449) (43,383)
Invoice discounting (1,804) (2,089) (887)
Net debt excluding leases (19,816) (22,676) (24,200)
Lease liability (17,253) (18,216) (17,851)
Net debt including leases (37,069) (40,892) (42,051)
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
9. NON-UNDERLYING COSTS
Non-underlying costs during the six months to 30 June 2024 relate to costs
associated with the acquisition of A-Optikk AS during the period (£22,000)
and restructuring costs in relation to the integration of Inspecs USA with
Tura (£72,000).
10. SHARE-BASED PAYMENTS
Certain employees of the Group are granted options over the shares in INSPECS
Group. The options are granted with a fixed exercise price and have a vesting
date three years after date of grant.
The Group recognises a share-based payment expense based on the fair value of
the awards granted, and an equivalent credit directly in equity to share
option reserve. On exercise of the shares by the employees, the Group is
charged the intrinsic value of the shares by INSPECS Group plc and this amount
is treated as a reduction of the capital contribution, and it is recognised
directly in equity.
Share options outstanding at the end of the period have the following expected
lives and exercise prices:
Grant date Expected life of Exercise price per option £ Number of share options
options
11 October 2019 3-5 years 1.01 412,102
27 February 2020 3-5 years 1.95 1,923,110
22 December 2020 3-5 years 2.10 890,000
26 February 2021 3-5 years 3.25 641,036
21 June 2021 3-5 years 3.51 90,000
31 August 2021 3-5 years 3.70 275,000
23 December 2021 3-5 years 3.70 279,999
28 February 2022 3-5 years 3.75 641,036
11. RESTATED STATEMENT OF FINANCIAL POSITION
The 2023 Annual Report and Accounts included a restated Statement of Financial
Position for the year to 31 December 2022 relating to a prior year adjustment
concerning the offsetting of deferred tax assets and liabilities (see note 35
of the 2023 Annual Report and Accounts). The 30 June 2023 comparative
Statement of Financial Position has therefore also been restated within these
interims, as below. In addition, the treatment of a receivable associated with
a sublease has been restated below, such that it aligns with the treatment
within the 2023 Annual Report and Accounts.
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
As Reported Adjustments As at
30 June 2023 Restated
as at £'000
30 June 2023 £'000
£'000
ASSETS
NON-CURRENT ASSETS
Goodwill 55,578 - 55,578
Intangible assets 32,248 - 32,248
Property Plant and equipment 33,840 - 33,840
Investment in associates 105 - 105
Net investment - sublease 675 (675) -
Deferred tax 6,337 (4,234) 2,103
128,783 (4,909) 123,874
CURRENT ASSETS
Inventories 42,349 - 42,349
Trade and other receivables 36,647 785 37,432
Net investment - sublease 110 (110) -
Tax receivable 1,719 - 1,719
Cash and cash equivalents 25,862 - 25,862
106,687 675 107,362
Assets held for sale 832 - 832
TOTAL ASSETS 236,302 (4,234) 232,068
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital 1,017 - 1,017
Share premium 89,508 - 89,508
Foreign currency translation reserve 5,461 - 5,461
Share option reserve 3,153 - 3,153
Merger reserve 5,340 - 5,340
Retained earnings 1,698 - 1,698
TOTAL EQUITY 106,177 - 106,177
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings 51,525 - 51,525
Deferred consideration 652 - 652
Deferred tax 8,203 (4,234) 3,969
60,380 (4,234) 56,146
CURRENT LIABILITIES
Trade and other payables 38,921 - 38,921
Right of return liability 11,862 - 11,862
Financial liabilities - borrowings
Interest bearing loans and borrowings 13,140 - 13,140
Invoice discounting 2,089 - 2,089
Deferred and contingent consideration 1,333 - 1,333
Tax payable 2,400 - 2,400
69,745 - 69,745
TOTAL LIABILITIES 130,125 - 125,891
TOTAL EQUITY AND LIABILITIES 236,302 (4,234) 232,068
NOTES TO THE INTERIM CONSOLIDATED STATEMENTS (continued)
For the period ended 30 June 2024
12. POST BALANCE SHEET EVENTS
Since the end of the interim period on 30 June 2024 there were no material
events that the directors consider material to the users of these interim
statements.
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