Interim Results

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 basis1, 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 EBITDA2 reduced to £10.1m (H1 2023: £12.1m) following a decrease in revenue in the period, partially offset by cost savings

·     

Diluted Underlying EPS3 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 leases4 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

Richard Peck (CEO)

Chris Kay (CFO)

 

via FTI Consulting

Tel: +44 (0) 20 3727 1000

Peel Hunt (Nominated Adviser and Broker)

George Sellar

Andrew Clark

 

 

Tel: +44 (0) 20 7418 8900

FTI Consulting (Financial PR)

Alex Beagley

Harriet Jackson

Amy Goldup 

Tel: +44 (0) 20 3727 1000

 

 

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

 

 

 

 

 

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
30 June 2024
£m

Balance at
31 December 2023
£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

£m

Period ended 30 June 2023

£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

£m

Period ended 30 June 2023

£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

£m

Period ended 30 June 2023

£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

£m

Period ended 30 June 2023

£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


 

206


 

526


972



 


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)


 

(1,987)


 

(1,846)


(3,774)



 


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
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

As at
30 June 2024

£'000


Unaudited

As at
30 June 2023

Restated

£'000

 

As at
31 December 2023

£'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

6 months ended

30 June 2024

 

 

Unaudited

6 months ended

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

 beginning of the period


20,070

 

22,153

Net foreign currency movements


(444)


(892)

Cash and cash equivalents

 at end of period

 

 

24,616

 

25,862

 

 

 

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

  on borrowings











155

 

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

  on borrowings











 

1,210

 

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

6 months ended

30 June 2024


 

Unaudited

6 months ended

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 (£'000)

Earnings per share (pence)

 

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

 

 

6 months ended 30 June 2023

Basic weighted average number of Ordinary Shares ('000)

 

Total

earnings (£'000)

Earnings per share (pence)

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 (£'000)

Earnings per share (pence)

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

As at

30 June 2024


 

Unaudited

As at

30 June 2023

Restated


 

As at

31 December

2023

 

 

 



             £'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

options

Exercise price per option £

Number of share 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

as at
30 June 2023

£'000


Adjustments

£'000

 

As at
30 June 2023 Restated

£'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.

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

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
UK 100

Latest directors dealings