RNS Number : 6033C
Midwich Group PLC
03 September 2024
 

3 September 2024

Midwich Group plc

("Midwich", the "Company" or the "Group")

Interim results for the six months ended 30 June 2024

Robust performance with record gross margins despite market challenges; full year expectations unchanged

Midwich Group (AIM: MIDW), a global specialist audio visual distributor to the trade market, today announces its Interim Results for the six months ended 30 June 2024 ("H1 2024").

Statutory financial highlights


Six months ended




30 June 2024

 £m

30 June 2023

 £m

Growth

%


Revenue

646.1

610.4

5.8%







Gross profit

111.8

99.6

12.2%


Gross profit %

17.3%

16.3%

 







Operating profit

12.8

18.6

(30.9%)







Profit before tax

10.1

15.6

(34.9%)


Profit after tax

7.4

11.6

(36.1%)







Reported EPS - pence

6.50

12.14

(46.5%)







Interim dividend per share - pence

 

 

5.5

5.5



Adjusted financial highlights


Six months ended




30 June 2024

 £m

30 June 2023

 £m

Growth

%

Growth at constant currency %

Revenue

646.1

610.4

5.8%

7.5%






Gross profit

111.8

99.6

12.2%

14.1%

Gross profit %

17.3%

16.3%

 







Adjusted operating profit1

22.0

26.4

(16.8%)

(15.1%)

Adjusted operating profit %

3.4%

4.3%

 

 






Adjusted profit before tax1

17.2

21.8

(20.8%)

(20.1%)






Adjusted profit after tax1

12.6

16.1

(21.9%)







Adjusted EPS - pence1

11.22

16.93

(33.7%)


 

1Definitions of the alternative performance measures are set out in Note 2

 

Financial highlights

·    

Revenue increased 5.8% (7.5% at constant currency) to £646.1m.

·    

Acquired businesses contributed 8.7% growth (at constant currency) with organic revenues down 1.2% despite market share gains.

·    

Significant improvement in gross margins to 17.3% from 16.3% in the prior year, driven by continued shift in sales mix towards technical products, in line with the Group's strategy.

·    

Operating cash conversion in line with Board's expectations at 13%, which reflects typical seasonal investments in working capital (H1 2023: 27%). Full year expectations remain at 70-80%.

·    

Adjusted net debt of £132.2m at period end with leverage^ at 2.0x, to reduce to approximately 1.8-1.9x by the year end.

·    

Interim dividend declared of 5.5 pence per share (Interim 2023: 5.5p).

Operational highlights

·    

Against a backdrop of continued challenging market conditions in several key markets, the Group's diverse product and geographic portfolio resulted in revenue growth of 7.5% at constant currency, and further market share gains with many of the Group's key vendors.

·    

Technical product revenue grew by over 13%, reflecting a mix of both organic growth and the impact of acquisitions, with technical products now almost two thirds of the Group's revenue. This included strong performances in the technical video, audio, LED and rental categories driven by end user investments in live events and entertainment.

·    

Strong performance in North America, with sales up 69.0%, organic revenue up 16.8% and record gross margins of 19.7%.

·    

In January 2024, the Group acquired California based The Farm, a sales representative to manufacturers acting as the exclusive value added sales agent on behalf of its vendor partners, primarily in the audio and technical video segments.

 

Post period trading and outlook

·    

A positive start to the second half, with a return to growth in July, and the Board continues to expect organic sales growth in H2 2024.

·    

The Group has now made substantial progress with its overhead reduction programme, which is expected to be largely complete in the current financial year and deliver estimated annualised savings of over £5m from early FY25.

·    

On 31 July 2024, the Group acquired the remaining 70% stake in Dry Hire Lighting Limited ("DHL"), a supplier to the UK live events market.

·    

Management also continues to pursue selective bolt-on acquisition opportunities across a number of regions.

·    

Whilst the Board expects macroeconomic conditions to remain challenging in certain markets for the remainder of this year, there have been early signs of the market stabilising, reflected in positive trading in the first two months of the second half. As a result of this, and the continued focus on the Group's long-term strategy, the Board continues to expect trading performance for the full year to be in line with its previous expectations.

 

^For these purposes Adjusted EBITDA includes proforma EBITDA for acquisitions acquired in the last 12 months.

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

 

"Our performance in H1 2024 demonstrated the robustness of Midwich's offering, against a tough market backdrop, with the Group delivering revenue growth of 7.5% at constant currency and a significant improvement in our Group gross profit percentage, moving from 16.3% in H1 2023 to a new record of 17.3%.

The AV market at the end of 2023, and through the first half of 2024, was affected by a degree of oversupply of mainstream products and associated discounting. Demand in corporate and education markets remained subdued, although this was largely offset by ongoing strength in the live event and entertainment sectors. This change in mix is reflected in both a further increase in the mix of technical video and audio products sold by the Group and the higher gross margins.  

Whilst it is prudent to assume macroeconomic conditions in certain markets, such as the UK & Ireland, will likely remain challenging for the remainder of 2024, we have seen some signs of the market stabilising in recent weeks, with market survey data indicating a recovery in pricing in the second half of the year. Trading since the start of July has been in line with the Board's expectations and slightly ahead of 2023.

The Group has acted to become even stronger during recent months, ahead of the anticipated market recovery, with a focus on adding new vendor opportunities, further targeted acquisitions and a tight focus on overhead efficiencies. These actions position the Group well to return to operating profit growth in H2 2024.

I would like to thank our team, customers and vendors for their unwavering support during 2024 to date."

 

There will be a meeting and webinar for sell-side analysts and investors at 10:45am BST today, 3 September 2024, the details of which can be obtained from FTI Consulting: midwich@fticonsulting.com.

For further information:

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

+44 (0) 1379 649200

Investec Bank plc (NOMAD and Joint Broker to Midwich)

Carlton Nelson / Ben Griffiths

+44 (0) 20 7597 5970

Berenberg (Joint Broker to Midwich)
Ben Wright / Richard Andrews

+44 (0) 20 3207 7800

FTI Consulting
Alex Beagley / Tom Hufton / Matthew Young

+44 (0) 20 3727 1000

 

About Midwich Group

 

Midwich Group is a specialist AV distributor, with operations in the UK and Ireland, EMEA, Asia Pacific and North America. The Group's long-standing relationships with over 800 vendors, including blue-chip organisations, support a comprehensive product portfolio across major audio visual categories such as displays, projectors, technical AV, broadcast, professional audio, lighting and unified communications. 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 24,000 trade customers, most of which are professional AV integrators and IT resellers serving sectors such as corporate, education, retail, residential and hospitality.

Initially a UK only distributor, the Group now has almost 1,900 employees across the UK and Ireland, EMEA, North America 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 continued to navigate challenging trading conditions in the first half of 2024, particularly in the UK & Ireland, and has delivered a solid result despite this backdrop. In line with our long-term strategy, we achieved further sales growth in higher margin technical products, with the result that gross margins increased to record levels in the period. Technical products now represent almost two thirds of the Group's revenue compared to 21% at IPO in 2016.

When market conditions are more challenging, maintaining a consistent high service level to our customers and vendors becomes an even greater priority for the Group, so we remain a long-term trusted partner. We continue to work hard to provide exceptional service and have also increased our market share with many of the Group's key vendors in the period. Our focus on developing our offering in the AV market continues to be beneficial for our customers and vendors alike.

The impact of subdued demand in corporate and education markets, driven by wider macro-economic factors, has continued beyond our, and the wider AV industry's, expectations at the beginning of the year. We believe that this resulted in some oversupply of products and associated discounting. Whilst we have largely maintained gross margins in mainstream product categories, revenue declined in this category. Demand in the live event and entertainment sectors has remained strong which resulted in a further increase in the mix of technical video and audio products sold by the Group and the higher gross margins.

We believe that we have the best team in the industry and our long-term view (supported by independent market research) remains that the AV industry will continue to grow at above GDP rates going forwards. However, the ongoing delayed market recovery resulted in some short-term pressure on adjusted operating margins. We expect these to recover through operating leverage as the market returns to normal, but the Group has also acted to deliver targeted efficiencies to improve profitability in the second half of 2024.

Working capital management continues to be a key focus for the Group with a small operating cash inflow in the period reflecting the normal seasonal investment in working capital. We expect operating cash generation for the full year to be in line with our long-term trend of 70-80% of adjusted EBITDA.

Trading performance

Revenue in H1 2024 grew by 7.5% (constant currency basis) to £646.1m. Organic revenue declined by 1.2%. Compared with H1 2023, organic revenue grew strongly in North America, but was slightly lower in other regions. Based on our customer and vendor data, combined with independent market data, we believe that the decline in these territories is significantly less than the overall market decline, with Midwich maintaining or expanding its market share in key markets.

The Group gross margin percentage of 17.3%, was a 1.0 percentage point improvement on H1 2023, and also a Group record. There were strong gross margin improvements in both North America and EMEA due to the increased mix of technical product sales, which reflected the positive impact of recent acquisitions. In a challenging market, the robust gross margin performance in the UK & Ireland was testament to the quality of our teams and the added value that they provide to our customers.

Overheads increased as expected during the period. The majority of the overhead increase was attributable to the acquisitions completed in the last twelve months, together with labour cost inflation, which is now showing signs of easing, and further investment in the Middle East. The adjusted operating profit margin reduced to 3.4% in H1 2024 from 4.3% in H1 2023.

Given the challenging market conditions, we have identified targeted cost actions to improve future profitability. These actions are expected to be largely completed in the current year with estimated annualised savings of over £5m from early 2025. The exceptional costs (approximately £3m) associated with these actions will be excluded from adjusted operating profit.

Products

Overall revenue from the two mainstream product areas (displays and projection) declined by around 10%, reflecting the wider market dynamics. These mainstream categories now account for less than a third of Group revenue as we continue to diversify into specialist areas. The gross margin on mainstream categories was broadly in line with the same period last year.

Revenue in the technical product areas grew by over 13%, through a mix of both organic growth and the impact of acquisitions. There were strong performances in the technical video, audio, LED and rental categories driven by end user investments in live events and entertainment. The overall margin on these categories also improved compared to the same period last year.

The Board continues to believe that the complexity and breadth of the AV market highlight the need for manufacturers to use a high-quality specialist distributor, such as Midwich. We continue to have significant success with the roll out of brand relationships acquired over the last few years, together with the expansion of existing relationships into new territories. The Group has a strong pipeline of new brands which will have a positive impact from the second half of 2024.

Customers

The Group's focus has always been on seeking to provide our customers with consistently high levels of service and support. Although our customer base tends to be adaptable and resilient, we are aware that softer demand in some areas, combined with higher interest rates, have caused some challenges. We continue to use our distribution expertise and value add advice to support our customers through these challenges and to accommodate the needs of the channel.

Strategy

The Group's strategy remains clearly focused on markets and product areas where it can leverage its value add services, technical expertise, and sales and marketing skills. Services, expertise and geographies are developed either in-house or through acquisitions.

Using its market knowledge and skills, the Group provides its vendors with support to build and execute plans to grow market share. The Group supports its customers to win and then deliver successful projects.

Historically, the Group has successfully used acquisitions to enter new geographical markets and to add both expertise and new product areas. Once acquired, and integrated, businesses are supported to grow organically and increase profitable market share. The Group continues to pursue a strong pipeline of opportunities, either self-sourced or, increasingly, through approaches by business owners who wish to join a strong AV focused group.

The Group has continued to deliver on this strategy in 2024, with the successful integration of the businesses acquired in 2023, the addition of two acquisitions in the year to date, and the ongoing development of our Middle East business.

The Board continues to focus on strengthening the Group's product offering, technical expertise and geographical reach.

Acquisitions

The Group completed one small acquisition during H1 2024 and exercised its put and call option to acquire the remaining 20% of its Middle Eastern business during the period.

In January 2024, the Group acquired The Farm North West LLC and The Farm Norcal LLC ("The Farm"), a west coast manufacturers' representative and technical services provider. Based in Silicon Valley, The Farm has now been integrated into the Group's U.S. operation, Starin Marketing, to expand its geographical footprint and enhance its current levels of customer and manufacturer support.  

On 31 July 2024, post the period-end, the Group acquired the remaining 70% of DHL, having previously acquired a 30% stake in 2023. DHL is a provider of dry hire lighting services to trade customers primarily operating in the UK live events market.

These acquisitions bring new technologies, customers and vendor relationships, further delivering on the Group's strategy to grow earnings both organically and through selective acquisitions of strong, complementary businesses.

The acquisition pipeline remains healthy, and the management team continues to review attractive opportunities in a number of markets and regions.

 

Outlook

Whilst the Board believes it is prudent to assume macroeconomic conditions in certain markets, such as the UK & Ireland, will likely remain challenging for the remainder of 2024, market survey data indicates an expected return to growth in mainstream product demand in a number of our key geographies during H2 2024.

The Group has a strong pipeline of new vendor opportunities as well as selected bolt-on acquisition opportunities it continues to review which, when combined with a tight focus on overheads efficiencies in H2, means that the Board's expectations of adjusted operating profit for the full year remain in line with its expectations. Despite some softness in the AV market so far in 2024, according to research published by industry trade body AVIXA in July 2024, the global AV market is expected to grow at an annualised rate of 5.4% in the five years to 2029.

The Board concurs that the wider AV industry is well positioned for long-term growth and believes that the Group is very well placed to take advantage of growth opportunities. In particular, the Group's ongoing focus on more specialist areas of the market should help to sustain higher gross margins and drive incremental profit opportunities.

The Board believes that, despite early signs of improvement, the Group's major markets will remain challenging across the remainder of 2024. However, order books remain steady and underpin the Board's confidence in the Group's outlook for the current year and beyond.

Trading since the end of H1 has been in line with the Board's expectations for the full year.



 

Regional highlights

 


Six months ended






30 June

2024

 £m

30 June

2023

 £m

Total growth

%

Growth at constant currency

%

Organic growth     
%


Revenue







UK & Ireland

233.1

234.0

(0.4%)

(0.3%)

(4.2%)


EMEA

274.6

281.3

(2.4%)

(0.2%)

(2.9%)


Asia Pacific

23.3

25.2

(7.7%)

(4.1%)

(4.1%)


North America

115.1

69.9

64.7%

69.0%

16.8%


Total Global

646.1

610.4

5.8%

7.5%

(1.2%)









Gross profit margin







UK & Ireland

17.0%

17.7%

(0.7) ppts




EMEA

16.7%

15.5%

1.2 ppts




Asia Pacific

15.8%

17.5%

(1.7) ppts




North America

19.7%

14.5%

5.2 ppts




Total Global

17.3%

16.3%

1.0 ppts











Adjusted operating profit1







UK & Ireland

8.5

13.9

(39.0%)

(38.8%)



EMEA

11.2

12.5

(10.8%)

(8.6%)



Asia Pacific

(0.5)

0.1





North America

5.3

3.0

79.3%

84.0%



Group costs

(2.5)

(3.1)





Total Global

22.0

26.4

(16.8%)

(15.1%)










Adjusted net finance costs

(4.8)

(4.6)





Adjusted profit before tax1

17.2

21.8

(20.8%)

(20.1%)

 









1Definitions of the alternative performance measures are set out in Note 2

All percentages referenced in this section below are at constant currency unless otherwise stated.

 

UK & Ireland ("UK&I")

Revenue in the UK&I was in line with H1 2023, but down 4.2% on an organic basis. The Group has its highest market shares in this region and the challenging market backdrop resulted in relatively soft demand, and a degree of oversupply and associated discounting in mainstream product categories. Stronger demand in markets such as live events, entertainment and hospitality supported further growth in technical product sales. After an exceptional performance in H1 2023, gross margins held up well in the period at 17.0% (H1 2023: 17.7%). The two small acquisitions completed in H2 2023 have now been fully integrated.

Based on industry data, combined with our own analysis of customer and vendor activity, we believe that the mainstream market should begin to recover in the second half of 2024. Our long-term focus on increasing the mix of technical product sales has helped us grow or maintain market shares in the UK&I and we remain confident that the pro AV market will continue to grow faster than GDP in the medium term.

 

Overheads in the UK&I increased, as expected, in the period, reflecting the impact of the 2023 acquisitions and labour cost inflation. This resulted in a decline in adjusted operating profit of 38.8% to £8.5m (H1 2023: £13.9m). Stronger mainstream product demand and the impact of additional new brands, combined with targeted cost reductions, are expected to result in a stronger operating profit performance in the second half of the year.

EMEA

In EMEA, the Group's biggest region by revenue, sales fell by only 0.2% on a constant currency basis. Organic revenue declined by 2.9% reflecting a reduction in mainstream product sales largely offset by increased technical product revenue. Although the mainstream markets have been challenging in Northern Europe, we have continued to build market share across EMEA, with notable performances in Southern Europe and the Middle East, where strong demand for technical solutions, including pro audio and live event solutions, continued. The acquisitions completed in 2023 are contributing well.

Gross profit margins improved to 16.7% (H1 2023: 15.5%) because of favourable product mix and the benefit of the acquisition of prodyTel in November 2023.

Adjusted operating profit in EMEA was £11.2m (H1 2023: £12.5m), down 8.6% on the prior year due to the combined impact of lower revenue and further investment in growth areas such as the Middle East. A seasonally stronger second half, combined with cost efficiencies, is expected to result in a return to operating profit growth in H2 2024.

Asia Pacific

Revenue in Asia Pacific was down 4.1% on the prior year (H1 2023: +2.3%). New brands, added in the last twelve months, are now beginning to build momentum in the region with a return to growth in the second quarter of the year. Demand for larger projects also increased in the period.

The Asia Pacific gross profit margin of 15.8% (H1 2023: 17.5%) reflected a higher mainstream product mix. The adjusted operating loss in Asia Pacific was £0.5m (H1 2023: £0.1m profit).

North America

Revenue in North America increased by 69.0% (H1 2023: 18.7%) reflecting both a full contribution from SFM in Canada (acquired in June 2023), and further market share gains in the United States. Organic revenue growth of 16.8% (H1 2023: 5.3%) reflected demand for unified communications solutions, an increase in customer wallet share and higher project activity.

The record gross margins in the region at 19.7% (H1 2023: 14.5%) are attributable to the positive mix impact from the acquisition of SFM and The Farm (January 2024). The Farm, which enhances the region's sales capabilities, has now been fully integrated into the Starin business.

Adjusted operating profit in North America was significantly ahead of the prior year at £5.3m (H1 2023: £3.0m).

Group costs

Group costs for the half year were £2.5m (H1 2023: £3.1m) reflecting the focus on costs and lower levels of performance-related staff costs.

Operating profit

Adjusted operating profit for the period at £22.0m (H1 2023: £26.4m) is stated before the impact of acquisition related expenses of £0.3m (H1 2023: £0.3m), restructuring costs of £0.5m (2023: nil), share based payments and associated employer taxes of £2.6m (H1 2023: £2.8m) and amortisation of acquired intangibles of £5.8m (H1 2023: £4.8m). The reported operating profit for the period was £12.8m (H1 2023: £18.6m).

Exceptional costs

In response to the more challenging mainstream product market conditions, the Group made some targeted cost reductions in both discretionary expenditure and headcount in the period as part of a productivity programme that has continued into the second half of the year. This programme is expected to result in savings of c.£3.5m in H2 2024, with associated one-off costs of c.£3.0m (including £0.5m in H1 2024). These one-off costs are deemed to be exceptional and have been excluded from the Group's adjusted profit measures. Annualised savings from this programme are expected to be over £5m from early 2025.

 

Movement in foreign exchange

Compared to the prior year, Sterling strengthened in the period. These movements reduced reported revenue and adjusted operating profit in H1 by 1.7% and 1.6% respectively. Based on current exchange rates this trend is expected to continue for the remainder of the year. Note, the Group makes most of its sales and purchases in local currency; this provides a natural hedge for transactional activity.

 

Net finance costs

Adjusted net finance costs for the period were an expense of £4.8m (H1 2023: £4.6m) and mainly relate to the financing costs of the Group's revolving credit facility which is used to fund its acquisition investments.

Reported net finance costs were £2.7m (H1 2023: £3.0m). The adjustments to net finance costs include fair value movements in derivatives and foreign exchange movement on borrowings for acquisitions of (£0.6m) (H1 2023: (£1.5m)), valuation changes in deferred and contingent considerations of (£0.9m) (H1 2023: £0.3m), and movements in put option liabilities over non-controlling interests of (£0.6m) (H1 2023: (£0.4m)).

Taxation

The reported tax charge for the period was £2.8m (H1 2023: £4.0m). The adjusted effective tax rate was 27.1%; (H1 2023: 26.1%) calculated based on the adjusted tax charge divided by adjusted profit before tax. The increase in effective tax rate is mainly attributable to the introduction of corporation tax in the United Arab Emirates and geographic mix.

Cash flows and net debt

The Group had an adjusted net cash inflow from operations before tax of £3.6m for the period (H1 2023: £8.2m inflow). The first half is traditionally more working capital intensive when compared with the full year due to the seasonality of demand, especially in the education sector. A continued focus on cash management resulted in a reduction in total working capital, as a percentage of annualised revenue, compared to the same period in the prior year. The Board is comfortable that the Group's long-term average annual cash conversion rate (70-80%) remains sustainable.

Gross capital spend on tangible assets was £2.7m (H1 2023: £2.4m) and included investment in rental assets in UK&I. An investment of £4.9m in intangible fixed assets (H1 2023: £5.9m) was predominantly in relation to the Group's new ERP solution, which went live in its first country at the end of the period.

Adjusted net debt (excluding leases liabilities), was £132.3m at 30 June 2024 (£102.1m at 30 June 2023), equivalent to 2.0x adjusted EBITDA.

The adoption of IFRS 16 in 2019 resulted in an increase in recognised lease liabilities (predominantly for office, showroom and warehouse facilities). Lease liabilities excluded from adjusted net debt totalled £21.8m at 30 June 2024 (£22.8m 30 June 2023). Total net debt was £154.1m at 30 June 2024 (£124.9m at 30 June 2023).

The Group's has a revolving credit facility of £175m which is primarily used for acquisition investments. Approximately 63% of the facility was drawn at 30 June 2024 (54% at 31 December 2023). This facility is supported by six banks, runs to June 2028 and has an adjusted net debt to adjusted EBITDA covenant ratio of 3 times and an adjusted interest cover covenant of 4 times adjusted EBITDA. The EBITDA covenant is calculated on a historical twelve-month basis and includes the full benefit of the prior year's earnings of any businesses acquired. Other borrowing facilities are to provide working capital financing. The Group has access to total facilities of c.£300m.  

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

Dividend

The Board is pleased to declare an interim dividend of 5.5 pence per share (H1 2023: 5.5p). This will be paid on 18 October 2024 to those shareholders on the Company's register as at 13 September 2024. The last day to elect for dividend reinvestment ("DRIP") is 27 September 2024.

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

Stephen Fenby

Managing Director


Unaudited consolidated income statement for the 6 months ended 30 June 2024


Note


30 June

2024


30 June

2023


31 December 2023




Unaudited


Unaudited


Audited




£'000


£'000


£'000









Revenue

4


646,134


610,442


1,289,144

Cost of sales



(534,369)


(510,868)


(1,072,675)

Gross profit

4


111,765


99,574


216,469









Distribution costs



(74,405)


(61,126)


(130,873)

Administrative expenses



(28,012)


(23,411)


(51,029)

Other operating income



3,479


3,514


7,016

Operating profit

4


12,827


18,551


41,583









Adjusted operating profit

4


21,997


26,424


59,593

Costs of acquisitions



(302)


(306)


(1,489)

Restructuring costs



(503)


-


-

Share based payments



(2,419)


(2,385)


(4,738)

Employer taxes on share based payments



(131)


(370)


(603)

Amortisation of brands, customer and supplier relationships



(5,815)


(4,812)


(11,180)




12,827


18,551


41,583









Share of profit after tax from associate

 


30


-


24

Finance income

 


275


63


293

Finance costs

5


(2,984)


(3,018)


(5,353)

Profit before taxation

 


10,148


15,596


36,547

Taxation



(2,758)


(4,037)


(7,621)

Profit after taxation



7,390


11,559


28,926









Profit for the financial period/year attributable to:

 







The Company's equity shareholders



6,620


10,959


26,817

Non-controlling interests



770


600


2,109




7,390


11,559


28,926

Basic earnings per share

3


6.50p


12.14p


27.98p

Diluted earnings per share

3


6.33p


11.76p


27.06p

 

 

 

 

 

 

 

 

Unaudited consolidated statement of comprehensive income for 6 months ended 30 June 2024



30 June


30 June


31 December



2024


2023


2023



Unaudited


Unaudited


Audited



£'000


£'000


£'000








Profit for the period/financial year


7,390


11,559


28,926

 







Other comprehensive income







Items that will not be reclassified subsequently to profit or loss:







Actuarial gains and (losses) on retirement benefit obligations


-


-


(172)

 







Items that will be reclassified subsequently to profit or loss:







Foreign exchange losses on consolidation


(2,481)


(6,307)


(5,432)

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


(2,481)


(6,307)


(5,604)








Total comprehensive income for the period/financial year


4,909


5,252


23,322








Attributable to:







Owners of the Parent Company


4,574


5,015


21,681

Non-controlling interests


335


237


1,641



4,909


5,252


23,322



 

Unaudited consolidated statement of financial position as at 30 June 2024


Note


30 June


30 June


31 December

 



2024


2023


2023

 



Unaudited


Unaudited


Audited

 



£'000


£'000


£'000

Assets

 







Non-current assets

 







Investments



329


-


299

Goodwill



54,285


38,443


51,216

Intangible assets



120,679


86,095


117,009

Right of use assets



19,032


20,955


21,051

Property, plant and equipment



16,537


15,890


16,640

Deferred tax assets



839


3,092


617




211,701


164,475


206,832

Current assets

 







Inventories



184,322


168,262


165,588

Trade and other receivables



239,442


236,967


223,826

Derivative financial instruments



2,455


4,033


2,084

Cash and cash equivalents



31,229


20,095


56,135




457,448


429,357


447,633

Current liabilities

 







Trade and other payables



(242,089)


(220,621)


(230,915)

Derivative financial instruments



(9)


(176)


(26)

Put option liabilities over non-controlling interests



(16,295)


(9,301)


(21,958)

Deferred and contingent considerations



(875)


(9,642)


(11,694)

Borrowings and financial liabilities



(57,786)


(65,531)


(49,146)

Current tax



(372)


(2,685)


(179)




(317,426)


(307,956)


(313,918)

Net current assets

 


140,022


121,401


133,715

Total assets less current liabilities

 


351,723


285,876


340,547









Non-current liabilities

 







Trade and other payables

 


(3,654)


(1,694)


(3,915)

Put option liabilities over non-controlling interests

 


(786)


(6,231)


(743)

Deferred and contingent considerations

 


(5,882)


-


(3,685)

Borrowings and financial liabilities



(127,498)


(79,481)


(113,180)

Deferred tax liabilities



(18,458)


(12,563)


(18,920)

Other provisions



(3,978)


(3,635)


(3,960)




(160,256)


(103,604)


(144,403)

 

 


 

 

 

 

 

Net assets

 


191,467


182,272


196,144

 








Equity

 







Share capital

6


1,042


1,033


1,033

Share premium



116,959


116,959


116,959

Share based payment reserve



9,039


10,404


10,843

Investment in own shares

6


(618)


(20)


(616)

Retained earnings



65,630


51,448


63,093

Translation reserve



(1,654)


(588)


392

Put option reserve



(14,783)


(10,799)


(18,649)

Capital redemption reserve



50


50


50

Other reserve



150


150


150

Equity attributable to owners of Parent Company



175,815


168,637


173,255

Non-controlling interests



15,652


13,635


22,889

Total equity

 


191,467


182,272


196,144

 

 








Unaudited consolidated statement of changes in equity for 6 months ended 30 June 2024

For the period ended 30 June 2024

 

 

Share
capital

Share premium

Investment in own shares

Retained
earnings

 

Other reserves

Equity attributable to owners of the Parent

Non-controlling interests

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 





(note 7)




 









Balance at 1 January 2024

1,033

116,959

(616)

63,093

(7,214)

173,255

22,889

196,144

Profit for the period

-

-

-

6,620

-

6,620

770

7,390

Other comprehensive income

-

-

-

-

(2,046)

(2,046)

(435)

(2,481)

Total comprehensive income for the year

-

-

-

6,620

(2,046)

4,574

335

4,909

Shares issued (note 6)

9

-

(9)

-

-

-

-

-

Share based payments

-

-

-

-

2,300

2,300

-

2,300

Deferred tax on share based payments

-

-

-

-

(425)

(425)

-

(425)

Share options exercised

-

-

7

3,678

(3,679)

6

-

6

Acquisition of non-controlling interest (note 9)

-

-

-

3,706

3,866

7,572

(7,572)

-

Dividends paid (note 14)

-

-

-

(11,467)

-

(11,467)

-

(11,467)

Balance at 30 June 2024 (unaudited)

1,042

116,959

(618)

65,630

(7,198)

175,815

15,652

191,467

 

For the period ended 30 June 2023

 

 

Share
capital

Share premium

Investment in own shares

Retained
earnings

 

Other reserves

Equity attributable to owners of the Parent

Non-controlling interests

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 





(note 7)




 









Balance at 1 January 2023

889

67,047

(5)

46,023

6,782

120,736

13,398

134,134

Profit for the period

-

-

-

10,959

-

10,959

600

11,559

Other comprehensive income

-

-

-

-

(5,944)

(5,944)

(363)

(6,307)

Total comprehensive income for the year

-

-

-

10,959

(5,944)

5,015

237

5,252

Shares issued (note 6)

144

49,912

(23)

-

-

50,033

-

50,033

Share based payments

-

-

-

-

2,357

2,357

-

2,357

Deferred tax on share based payments

-

-

-

-

(124)

(124)

-

(124)

Share options exercised

-

-

8

3,854

(3,854)

8

-

8

Dividends paid (note 14)

-

-

-

(9,388)

-

(9,388)

-

(9,388)

Balance at 30 June 2023 (unaudited)

1,033

116,959

(20)

51,448

(783)

168,637

13,635

182,272

 

 

 

 

 

 

 

 

 

For the year ended 31 December 2023 (audited)

 

 

Share
capital

Share premium

Investment in own shares

Retained
earnings

 

Other reserves

Equity attributable to owners of the Parent

Non-controlling interests

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

(note 6)




(note 7)




 









Balance at 1 January 2023

889

67,047

(5)

46,023

6,782

120,736

13,398

134,134

Profit for the year

-

-

-

26,817

-

26,817

2,109

28,926

Other comprehensive income

-

-

-

(172)

(4,964)

(5,136)

(468)

(5,604)

Total comprehensive income for the year

-

-

-

26,645

(4,964)

21,681

1,641

23,322

Shares issued (note 6)

144

49,912

(23)

-

-

50,033

-

50,033

Shares purchases (note 6)

-

-

(600)

-

-

(600)

-

(600)

Share based payments

-

-

-

-

4,661

4,661

-

4,661

Deferred tax on share based payments

-

-

-

-

(434)

(434)

-

(434)

Share options exercised

-

-

12

5,407

(5,409)

10

-

10

Acquisition of subsidiaries (note 8)

-

-

-

-

(7,850)

(7,850)

7,850

-

Dividends paid (note 14)

-

-

-

(14,982)

-

(14,982)

-

(14,982)

Balance at 31 December 2023

1,033

116,959

(616)

63,093

(7,214)

173,255

22,889

196,144

 

 

 

 



 

Unaudited consolidated cashflow statement for 6 months ended 30 June 2024

 



30 June


30 June


31 December

 



2024


2023


2023

 



Unaudited


Unaudited


Audited

 



£'000


£'000


£'000

 

Cash flows from operating activities

 






 

Profit before tax


10,148


15,596


36,547

 

Depreciation


4,956


3,817


9,286

 

Amortisation


5,938


5,067


11,818

 

(Gain)/loss on disposal of assets


46


(65)


763

 

Share based payments


2,300


2,357


4,661

 

Foreign exchange (gains)/losses


(1,513)


(3,529)


(2,467)

 

Share of profit after tax from associate


(30)


-


(24)

 

Finance income


(275)


(63)


(293)

 

Finance costs


2,984


3,018


5,353

 

Profit from operations before changes in working capital


24,554


26,198


65,644

 

(Increase)/decrease in inventories


(18,734)


2,353


10,524

 

(Increase)/decrease in trade and other receivables


(15,213)


(9,138)


9,637

 

Increase/(decrease) in trade and other payables


10,716


(15,094)


(9,429)

 

Cash inflow from operations

 

1,323


4,319


76,376

 

Income tax paid


(5,290)


(6,134)


(12,586)

 

Net cash inflow/(outflow) from operating activities

 

(3,967)


(1,815)


63,790

 








 

Cash flows from investing activities

 






 

Acquisition of businesses net of cash acquired


(2,803)


(20,215)


(42,359)

 

Deferred consideration paid


(12,325)


(9,300)


(9,300)

 

Investment in associate


-


-


(275)

 

Purchase of intangible assets


(4,929)


(5,945)


(10,364)

 

Purchase of plant and equipment


(2,680)


(2,442)


(5,605)

 

Proceeds on disposal of plant and equipment


189


226


198

 

Interest received


276


63


293

 

Net cash outflow from investing activities

 

(22,272)


(37,613)


(67,412)

 








 

Cash from financing activities

 






 

Gross proceeds on issue of shares


-


51,250


51,250

 

Costs associated with shares issued


-


(1,217)


(1,217)

 

Purchase of own shares


-


-


(600)

 

Proceeds on exercise of share options


6


8


10

 

Acquisition of non-controlling interest


(5,036)


-


(61)

 

Dividends paid


(11,467)


(9,388)


(14,982)

 

Invoice financing inflows


3,368


2,948


(3,009)

 

Proceeds from borrowings


17,328


1,525


39,228

 

Repayment of loans


(571)


(16,436)


(19,690)

 

Interest paid


(4,816)


(4,240)


(9,360)

 

Interest on leases


(443)


(419)


(651)

 

Capital element of lease payments


(2,362)


(2,235)


(5,235)

 

Net cash inflow from financing activities

 

(3,993)


21,796


35,683

 

 

 






 

Net decrease in cash and cash equivalents


(30,232)


(17,632)


32,061

Cash and cash equivalents at beginning of period/year


52,053


20,938


20,938

Effects of exchange rate changes


(36)


(409)


(946)

Cash and cash equivalents at end of period/year

 

21,785


2,897


52,053

 

Comprising:







Cash at bank


31,229


20,095


56,135

Bank overdrafts


(9,444)


(17,198)


(4,082)



21,785


2,897


52,053

Notes to the interim consolidated financial information

1.    General information

 

The interim financial information for the period to 30 June 2024 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 UK adopted International Accounting Standards ("IAS"), and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2023.

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 2023. The audited financial statements for the year ended 31 December 2023 were prepared in accordance with UK adopted International Accounting Standards ("IAS") in conformity with the requirements of the Companies Act 2006.

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

The statutory accounts for the year ended 31 December 2023, have been delivered to the Registrar of Companies. The auditors reported on these accounts; their report was unqualified; did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006, and did not include reference to any matters to which the auditor drew attention by way of emphasis.

Use of alternative performance measures

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

Constant currency: This eliminates the impact of foreign exchange movement, which is outside of management's control.

Growth at constant currency: This measure shows the year on year change in performance at constant currency.

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, restructuring costs, share based payments and associated employer taxes and amortisation of brand, customer and supplier relationship intangible assets and impairments. Share based payments are adjusted to the provide transparency over the costs.

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

Adjusted net finance costs: These represent the net financing costs of the Group's credit facilities less interest income and excludes non-cash items relating to 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 before tax: This is adjusted operating profit less adjusted finance costs.

Adjusted taxation: This represents taxation less the tax impact of the adjusting items included within adjusted profit before tax.

Adjusted profit after tax: This is adjusted profit before profit less adjusted taxation.

Adjusted EPS: Adjusted EPS is EPS calculated using the basis of adjusted profit after tax instead of profit after tax after deducting adjustments to profit after tax due to non-controlling interests. 

Adjusted net debt: Net debt is borrowings less cash and cash equivalents. Adjusted net debt excludes leases.

Adjusted net debt: Adjusted EBITDA: This is calculated as per the Group's RCF debt facility covenant and includes the benefit of proforma annualised earnings for acquisitions completed in the last 12 months.

3.    Earnings per share

 

Basic earnings per share is calculated by dividing the profit after tax attributable to equity shareholders of the Company by the weighted average number of shares outstanding during the year. Shares outstanding is the total shares issued less the own shares held in employee benefit trusts. Diluted earnings per share is calculated by dividing the profit after tax attributable to equity shareholders of the Company by the weighted average number of shares in issue during the year adjusted for the effects of all dilutive potential Ordinary Shares.

 

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

 


June

2024

June

2023

December

2023

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

6,620

10,959

26,817

Weighted average number of shares outstanding

101,918,847

90,242,805

95,852,306

Dilutive (potential dilutive) effect of share options

2,688,918

2,974,694

3,233,327

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

104,607,765

93,217,499

99,085,633





Basic earnings per share

6.50p

12.14p

27.98p

Diluted earnings per share

6.33p

11.76p

27.06p

 

 

 

 

4.    Segmental reporting

 

 

30 June 2024

 

 

Asia
Pacific

 

 








 

Revenue

233,123

274,608

23,301

115,102

-

646,134

 








 

Gross profit

 

Gross profit %

17.0%

16.7%

15.8%

19.7%

-

17.3%

 








 

Adjusted operating profit

 








 

Cost of acquisitions

-

-

-

-

(302)

(302)

 

Restructuring costs

(94)

(323)

(54)

(13)

(19)

(503)

 

Share based payments

(910)

(750)

(117)

(69)

(573)

(2,419)

 

Employer taxes on share based payments

(35)

(54)

2

(3)

(41)

(131)

 

Amortisation of brand, customer and supplier relationships

(2,191)

(2,026)

(126)

(1,472)

-

(5,815)

 








 

Operating profit

 

Share of profit after tax from associate






30

 

Net interest expense






(2,709)

 

Profit before tax

 

 

Other segmental information



 

June 2024

 

 

UK & Ireland

Asia
Pacific

 

 

Segment assets

284,049

252,758

24,679

107,585

78

669,149

 

Segment liabilities

(222,984)

(156,462)

(21,536)

(76,082)

(618)

(477,682)

 

Segment net assets

 

Depreciation

2,181

1,622

334

819

-

4,956

 

Amortisation

2,214

2,050

132

1,542

-

5,938

 

 


 

 

 

 

 


Segment country information


UK

Germany

USA

Other

Total

 

Non-current assets


94,226

27,554

28,751

61,170

211,701

 

Deferred tax assets


-

-

-

839

839

 

Non-current assets excluding deferred tax


94,226

27,554

28,751

60,331

210,862

 

 

 

 

 

 

 

 

 

 

 

30 June 2023

 

 

Asia
Pacific

 

 








 

Revenue

234,022

281,284

25,252

69,884

-

610,442

 








 

Gross profit

 

Gross profit %

17.7%

15.5%

17.5%

14.5%

-

16.3%

 








 

Adjusted operating profit

 








 

Cost of acquisitions

-

-

-

-

(306)

(306)

 

Share based payments

(947)

(733)

(158)

(48)

(499)

(2,385)

 

Employer taxes on share based payments

(112)

(167)

(12)

(5)

(74)

(370)

 

Amortisation of brand, customer and supplier relationships

(2,142)

(1,781)

(136)

(753)

-

(4,812)

 








 

Operating profit

 

Share of profit after tax from associate






-

 

Net interest expense






(2,955)

 

Profit before tax

 

 

Other segmental information



 

June 2023

 

 

UK & Ireland

Asia
Pacific

 

 

Segment assets

246,154

241,682

23,532

81,069

1,395

593,832

 

Segment liabilities

(187,844)

(170,034)

(19,600)

(32,691)

(1,391)

(411,560)

 

Segment net assets

 

Depreciation

1,501

1,666

275

375

-

3,817

 

Amortisation

2,248

1,812

144

863

-

5,067

 








Other segmental information

 

 

Non-current assets


73,239

91,236

164,475

 

Deferred tax assets


1,806

1,286

3,092

 

Non-current assets excluding deferred tax


71,433

89,950

161,383

 

 

  

 

 

 

 

 

 

31 December 2023

 

 

UK & Ireland

£'000

EMEA

£'000

Asia

Pacific

£'000

North America

£'000

Other

 

£'000

Total

 

£'000

 








 

Revenue

474,722

589,270

47,643

177,509

-

1,289,144

 








 

Gross profit

85,699

92,287

8,025

30,458

-

216,469

 

Gross profit %

18.1%

15.7%

16.8%

17.2%

-

16.8%

 








 

Adjusted operating profit

27,110

28,122

(245)

9,425

(4,819)

59,593

 








 

Costs of acquisitions

-

-

-

-

(1,489)

(1,489)

 

Share based payments

(1,905)

(1,389)

(274)

(102)

(1,068)

(4,738)

 

Employer taxes on share based payments

(180)

(258)

(13)

(9)

(143)

(603)

 

Amortisation of brands, customer and supplier relationships

(5,247)

(3,614)

(267)

(2,052)

-

(11,180)

 








 

Operating profit

19,778

22,861

(799)

7,262

(7,519)

41,583

 

Share of profit after tax from associate






24

 

Interest






(5,060)

 

Profit before tax

 

 

 

 

 

36,547

 

December 2023

 

 

UK & Ireland

£'000

EMEA

£'000

Asia

Pacific

£'000

North America

£'000

 

Other

 

£'000

Total

 

£'000

 

Segment assets

265,463

276,633

22,471

89,838

60

654,465

 

Segment liabilities

(197,062)

(182,015)

(18,575)

(59,936)

(733)

(458,321)

 

Segment net assets

68,401

94,618

3,896

29,902

(673)

196,144

 

Depreciation

3,570

3,640

642

1,434

-

9,286

 

Amortisation

5,623

3,684

284

2,227

-

11,818

 

 







 


Segment country information


UK

£'000

Germany

£'000

USA

£'000

Other

£'000

Total

£'000

Non-current assets


92,509

29,404

20,942

63,977

206,832

Deferred tax assets


-

310

135

172

617

Non-current assets excluding deferred tax


92,509

29,094

20,807

63,805

206,215

 

 

 

 



 

5.    Finance costs

 

 

June 2024

 

June 2023

 

December 2023


£'000

 

£'000

 

£'000







Interest on overdraft and invoice discounting

1,061


1,413


3,894

Interest on leases

451


419


651

Interest on loans

3,460


2,756


5,214

Fair value movements on foreign exchange derivatives

87


141


54

Other interest costs

4


2


88

Fair value movements on derivatives for borrowings

(192)


(763)


1,219

Foreign exchange gains on borrowings for acquisitions

(430)


(751)


(554)

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

(873)


243


(4,150)

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

(584)


(442)


(1,063)


2,984


3,018


5,353

 

6.    Share capital

 

The total allotted share capital of the Parent Company is:

Allotted, issued and fully paid

 

June 2024

 

June 2023

 

December 2023

Classed as equity:

Number

£'000

 

Number

£'000

 

Number

£'000

Issued and fully paid ordinary shares of £0.01 each









Opening balance

103,251,326

1,033


88,879,912

889


88,879,912

889

Shares issued

993,800

9


14,371,414

144


14,371,414

144

Closing balance

104,245,126

1,042


103,251,326

1,033


103,251,326

1,033

 

During the period Midwich Group plc issued 993,800 shares (2023: 2,312,476) into an employee benefit trust. During the prior period the Group also issued 12,058,938 shares for total proceeds less issue cost of £50,033k.

 

Own shares held in employee benefit trusts

 

June 2024

 

June 2023

 

December 2023

 

Number

£'000

 

Number

£'000

 

Number

£'000

Issued and fully paid ordinary shares of £0.01 each









Opening balance

1,770,282

616


501,460

5


501,460

5

Shares issued

993,800

9


2,312,476

23


2,312,476

23

Shares purchased

-

-


-

-


149,838

600

Exercise of share options

(830,958)

(7)


(833,092)

(8)


(1,193,492)

(12)

Closing balance

1,933,124

618


1,980,844

20


1,770,282

616

 

 

 

 

 

 

 

 

A reconciliation of LTIP option movements during the current and comparative period, and the year to 31 December 2023 is as follows:

 

 

Six months to June 2024

 

Six months to June 2023

 

Twelve months to December 2023







Outstanding at 1 January

3,885,946


4,115,317


4,115,317

Granted

-


-


1,047,711

Lapsed

7,000


(10,200)


(177,490)

Exercised

(746,058)


(827,992)


(1,099,592)

Outstanding at period end

3,146,888


3,277,125


3,885,946

Weighted average remaining contractual life

0.9 years


1.0 years


1.1 years

 

A reconciliation of SIP option movements during the current and comparative period, and the year to 31 December 2023 is as follows:

 

 

Six months to June 2024

 

Six months to June 2023

 

Twelve months to December 2023







Outstanding at 1 January

276,300


280,800


280,800

Granted

186,600


111,300


111,300

Lapsed

(11,400)


(3,300)


(21,900)

Exercised

(84,900)


(5,100)


(93,900)

Outstanding at period end

366,600


383,700


276,300

Weighted average remaining contractual life

2.0 years


1.6 years


1.4 years

 

7.    Other reserves

 

Movement in other reserves for the year ended 30 June 2024 (Unaudited)

 

 

Share based payment reserve

Translation reserve

Put option reserve

Capital redemption  reserve

Other reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000








Balance at 1 January 2024

10,843

392

(18,649)

50

150

(7,214)

Other comprehensive income

-

(2,046)

-

-

-

(2,046)

Total comprehensive income for the period

-

(2,046)

-

-

-

(2,046)

Share based payments

2,300

-

-

-

-

2,300

Deferred tax on share based payments

(425)

-

-

-

-

(425)

Share options exercised

(3,679)

-

-

-

-

(3,679)

Acquisition of non-controlling interest (note 9)

-

-

3,866

-

-

3,866

Balance at 30 June 2024

9,039

(1,654)

(14,783)

50

150

(7,198)

 

 

 

 

 

 

Movement in other reserves for the year ended 30 June 2023 (Unaudited)

 

 

Share based payment reserve

Translation reserve

Put option reserve

Capital redemption  reserve

Other reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000








Balance at 1 January 2023

12,025

5,356

(10,799)

50

150

6,782

Other comprehensive income

-

(5,944)

-

-

-

(5,944)

Total comprehensive income for the period

-

(5,944)

-

-

-

(5,944)

Share based payments

2,357

-

-

-

-

2,357

Deferred tax on share based payments

(124)

-

-

-

-

(124)

Share options exercised

(3,854)

-

-

-

-

(3,854)

Balance at 30 June 2023

10,404

(588)

(10,799)

50

150

(783)

 

Movement in other reserves for the year ended 31 December 2023 (Audited)

 

 

Share based payment reserve

Translation reserve

Put option reserve

Capital redemption  reserve

Other reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000








Balance at 1 January 2023

12,025

5,356

(10,799)

50

150

6,782

Other comprehensive income

-

(4,964)

-

-

-

(4,964)

Total comprehensive income for the year

-

(4,964)

-

-

-

(4,964)

Share based payments

4,661

-

-

-

-

4,661

Deferred tax on share based payments

(434)

-

-

-

-

(434)

Share options exercised

(5,409)

-

-

-

-

(5,409)

Acquisition of subsidiary (note 8)

-

-

(7,850)

-

-

(7,850)

Balance at 31 December 2023

10,843

392

(18,649)

50

150

(7,214)

 

 

 

 

8.    Business combinations

 

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

 

Subsidiaries acquired

 

Acquisition

Principal activity

Date of acquisition

Proportion acquired (%)

Fair value of consideration

£'000

The Farm

 

Distribution of audio visual products to trade customers

19 January 2024

100%

7,613

prodyTel

Distribution of professional audio products to trade customers

10 November 2023

51%

8,170

Pulse Cinemas

Distribution of specialist home cinema products to trade customers

31 July 2023

100%

1,715

Video Digital

Distribution of broadcast products to trade customers

21 July 2023

100%

1,364

HHB

Distribution of professional audio products to trade customers

12 July 2023

100%

21,078

76 Media

Distribution of broadcast products to trade customers

5 July 2023

100%

1,123

Toolfarm

Distribution of video editing software to trade customers

5 July 2023

100%

5,057

SF Marketing

Distribution of audio visual products to trade customers

31 May 2023

100%

21,369

2024 acquisitions

Fair value of consideration transferred 2024


The Farm


£'000

Cash

2,948

Deferred consideration

292

Contingent consideration

4,373

Total

7,613

 

Acquisition costs of £302k in relation to the acquisitions of The Farm and other acquisitions not completed by the period end were expensed to the income statement during the period ended 30 June 2024.

 

 

 

 

Fair value of acquisitions 2024

 

The Farm


£'000

Non-current assets


Goodwill

3,512

Intangible assets - brands

352

Intangible assets - customer relationships

1,135

Intangible assets - supplier relationships

3,895

Right of use assets

236

Property, plant and equipment

3


9,133

Current assets


Trade and other receivables

403

Cash and cash equivalents

145


548

Current liabilities


Trade and other payables

(218)

Borrowings and financial liabilities

(32)

 

(250)

Non-current liabilities


Borrowings and financial liabilities

(205)

Deferred tax

(1,613)


(1,818)

 


Non-controlling interests

-

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

7,613

 

Goodwill acquired in 2024 relates to the workforce, synergies and sales know how. Goodwill arising on the The Farm acquisition has been allocated to the North America segment.

 

Net cash outflow on acquisition of subsidiaries 2024

 

The Farm


£'000

 


Consideration paid in cash

2,948

Less: cash and cash equivalent balances acquired

(145)

Net cash outflow

2,803

Plus: borrowings acquired

237

Net debt outflow

3,040

 


 

 

Fair value of considerations 2023

SF Marketing

HHB

prodyTel

Others


£'000

£'000

£'000

£'000

Cash

20,215

13,087

7,406

7,706

Deferred consideration

1,154

-

-

689

Contingent consideration

-

7,991

764

864

Total

21,369

21,078

8,170

9,259

 

Costs of £1,489k were expensed to the income statement during the year in relation to acquisitions.

 

Fair value of acquisitions 2023

SF Marketing

HHB

prodyTel

Others


£'000

£'000

£'000

£'000

Non-current assets





Goodwill

3,792

4,259

4,744

3,391

Intangible assets - patents and software

284

-

-

2

Intangible assets - brands

1,702

702

487

680

Intangible assets - customer relationships

2,485

5,082

3,751

1,722

Intangible assets - supplier relationships

6,924

7,095

9,052

4,493

Right of use assets

972

140

297

55

Property, plant and equipment

686

36

162

239


16,845

17,314

18,493

10,582

Current assets





Inventories

10,792

3,836

959

702

Trade and other receivables

9,217

2,674

1,784

1,176

Derivative financial instruments

21

-

-

-

Cash and cash equivalents

118

3,794

634

1,510


20,148

10,304

3,377

3,388

Current liabilities





Trade and other payables

(9,690)

(3,092)

(1,093)

(2,672)

Borrowings and financial liabilities

(700)

-

-

(3)

Current tax

-

-

(129)

(146)


(10,390)

(3,092)

(1,222)

(2,821)

Non-current liabilities





Borrowings and financial liabilities

(2,781)

(501)

(357)

(117)

Deferred tax

(2,453)

(2,947)

(4,271)

(1,773)


(5,234)

(3,448)

(4,628)

(1,890)

Non-controlling interests

-

-

(7,850)

-

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

21,369

21,078

8,170

9,259

 

Goodwill acquired in 2023 relates to the workforce, synergies, sales and purchasing knowledge and experience. Goodwill arising on the SF Marketing, Toolfarm and 76 Media acquisitions has been allocated to the North America segment. Goodwill arising on the Video Digital and prodyTel acquisitions has been allocated to the Europe Middle East and Africa segment. Goodwill arising on the HHB and Pulse Cinemas acquisitions has been allocated to the United Kingdom and Republic of Ireland segment.

 

 

Net cash outflows of acquisitions 2023

 

SF Marketing

HHB

prodyTel

Others


£'000

£'000

£'000

£'000

 





Consideration paid in cash

20,215

13,087

7,406

7,706

Less: cash and cash equivalent balances acquired

(118)

(3,794)

(634)

(1,509)

Net cash outflow

20,097

9,293

6,772

6,197

Plus: borrowings acquired

3,481

501

357

120

Net debt outflow

23,578

9,794

7,129

6,317

 

9.    Acquisition of non-controlling interest

 

During the period to 30 June 2024 the Group exercised a call option to acquire the remaining 20% non-controlling interest in Midwich International Limited, which had a value of £7,572k. The present value of the option exercised was £9,627k, of which £5,036k was paid during the period. The remaining liability is due to be paid in 2025. £3,866k of the put option reserve was transferred to retained earnings when this call option was exercised and the put option was extinguished.

 

10.  Currency impact

The Group reports in Pounds Sterling (GBP) but has significant revenues and costs as well as assets and liabilities that are denominated in other currencies including Euros (EUR), Dollars (USD) Canadian Dollars (CAD) and Australian Dollars (AUD). The table below sets out the exchange rates in the current and prior periods.

 

Six months to 30 June 2024

Six months to 30 June 2023

At 30 June 2024

At 30 June 2023

At 31 December 2023

 

 

Average

Average

 

 

 







EUR/GBP

1.170

1.144

1.180

1.165

1.154

AUD/GBP

1.915

1.841

1.893

1.910

1.868

NZD/GBP

2.076

1.987

2.074

2.075

2.013

USD/GBP

1.267

1.236

1.264

1.271

1.275

CHF/GBP

1.121

1.128

1.136

1.137

1.073

NOK/GBP

13.437

12.925

13.461

13.619

12.947

AED/GBP

4.650

4.540

4.641

4.667

4.678

QAR/GBP

4.608

4.500

4.600

4.626

4.637

SAR/GBP

4.750

4.583

4.743

4.769

4.769

CAD/GBP

1.713

1.648

1.730

1.682

1.682

 

The following tables illustrate the effect of changes in foreign exchange rates in the EUR, AUD, NZD, USD, CHF, NOK, AED, QAR, SAR and CAD relative to the GBP on the profit before tax and net assets. The amounts are calculated retrospectively by applying the current period exchange rates to the prior period results so that the current period exchange rates are applied consistently across both periods. Changing the comparative result illustrates the effect of changes in foreign exchange rates relative to the current period result.

 

 

 

Applying the current period exchange rates to the results of the prior period has the following effect on the translation of profit before tax and net assets of foreign entities:

 

Profit before tax

 

 

Revised 2023

2023

Impact

Impact

 

 

£'000

£'000

£'000

%

 

 

 

 



EUR


15,387

15,596

(209)

(1.3%)

AUD


15,602

15,596

6

-%

NZD


15,597

15,596

1

-%

USD


15,569

15,596

(27)

(0.2%)

CHF


15,593

15,596

(3)

-%

NOK


15,590

15,596

(6)

-%

AED


15,514

15,596

(82)

(0.5%)

QAR


15,585

15,596

(11)

(0.1%)

SAR


15,602

15,596

6

-%

CAD


15,587

15,596

(9)

(0.1%)

All currencies


15,262

15,596

(334)

(2.1%)

 

Net assets

 

 

Revised 2023

2023

Impact

Impact

 

 

£'000

£'000

£'000

%

 

 

 

 



EUR


181,474

182,272

(798)

(0.4%)

AUD


182,304

182,272

32

-%

NZD


182,274

182,272

2

-%

USD


182,355

182,272

83

-%

CHF


182,274

182,272

2

-%

NOK


182,300

182,272

28

-%

AED


182,371

182,272

99

0.1%

QAR


182,290

182,272

18

-%

SAR


182,274

182,272

2

-%

CAD


181,684

182,272

(588)

(0.3%)

All currencies


181,152

182,272

(1,120)

(0.6%)

 

11.  Events after the reporting date

 

On 31 July 2024, the Group acquired the remaining 70% of the share capital of Dry Hire Lighting Limited, a Company based in High Wycombe, United Kingdom. The business specialises in the rental of lighting products to the trade market. The consideration is comprised of an initial payment of £3.0m, a deferred consideration of £0.5m due later in 2024, and a contingent consideration of up to £0.8m payable in 2026.

12.  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.

 

 

 

 

13.  Adjustments to reported results

 


Six months ended


30 June 2024

30 June 2023


£000

£000




Operating profit

12,827

18,551

Cost of acquisitions

302

306

Restructuring costs

503

-

Share based payments

2,419

2,385

Employer taxes on share based payments

131

370

Amortisation of brands, customer and supplier relationships

5,815

4,812

Adjusted operating profit

21,997

26,424

Depreciation

4,956

3,817

Amortisation of patents and software

123

255

Adjusted EBITDA

27,076

30,496

(Increase)/decrease in inventories

(18,734)

2,353

(Increase) in trade and other receivables

(15,213)

(9,138)

Increase/(decrease) in adjusted1 trade and other payables

10,466

(15,492)

Adjusted cash flow from operations

3,595

8,219

Adjusted EBITDA cash flow conversion

13.3%

27.0%




Profit before tax

10,148

15,596

Cost of acquisitions

302

306

Restructuring costs

503

-

Share based payments

2,419

2,385

Employer taxes on share based payments

131

370

Amortisation of brands, customer and supplier relationships

5,815

4,812

Derivative fair value and foreign exchange gains and losses on acquisition borrowings

(622)

(1,514)

Finance costs - deferred and contingent considerations

(873)

243

Finance costs - put option liabilities over non-controlling interests

(584)

(443)

Adjusted profit before tax

17,239

21,755




Profit after tax

7,390

11,559

Cost of acquisitions

302

306

Restructuring costs

503

-

Share based payments

2,419

2,385

Employer taxes on share based payments

131

370

Amortisation of brands, customer and supplier relationships

5,815

4,812

Derivative fair value and foreign exchange gains and losses on acquisition borrowings

(622)

(1,514)

Finance costs - deferred and contingent considerations

(873)

243

Finance costs - put option liabilities over non-controlling interests

(584)

(443)

Tax impact

(1,917)

(1,636)

Adjusted profit after tax

12,564

16,082

 

 

 

 

 

 

 

 



Profit after tax

7,390

11,559

Non-controlling interest (NCI)

(770)

(600)

Profit after tax attributable to equity holders of the Parent Company

6,620

10,959




Adjusted profit after tax

12,564

16,082

Non-controlling interest

(770)

(600)

Share based payments attributable to NCI

(9)

(7)

Employer taxes on share based payments attributable to NCI

-

-

Amortisation of brands, customer and supplier relationships attributable to NCI

(472)

(243)

Tax impact attributable to NCI

119

45

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

11,432

15,277




Weighted average number of ordinary shares

101,918,847

90,242,805

Diluted weighted average number of ordinary shares

104,607,765

93,217,499

 

 

 

Adjusted basic earnings per share

11.22p

16.93p

Adjusted diluted earnings per share

10.93p

16.39p

 

1 Excludes the movement in cash settled share based payments

 

14.  Dividends

 

During the period the Group declared a final dividend of 11.00 pence per share. (30 June 2023: 10.50 pence per share). After the period end the Group declared an interim dividend for the six months to 30 June 2024 of 5.50 pence (30 June 2023: 5.50 pence per share) that relates to profits earned over the period.

 

 

 

 

 

 

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