TIDMSPEC
RNS Number : 3110C
Inspecs Group PLC
18 June 2021
18 June 2021
INSPECS Group plc
("INSPECS" or "the Group")
Final Results
INSPECS Group plc, a leading designer, manufacturer and
distributor of eyewear frames, announces its Final Results for the
year ended 31 December 2020.
Key Financials
-- Group revenue $47.4m (2019: $61.2m)
-- Underlying EBITDA $5.8m* (2019: $13.0m)
-- Gross profit $20.5m (2019: $27.5m)
-- (Loss)/profit after tax $(8.9)m (2019: $6.4m)
-- Diluted EPS of $(0.13)c (2019: $0.11c)
-- Net assets of $145.8m (2019: $31.3m
* excluding the Eschenbach acquisition
Operational Highlights
-- Acquisition of Norville on 13 July 2020 giving further vertical
integration and access to the lens market
-- Acquisition of Eschenbach on 16 December 2020 giving a strong platform
to the independent retail market in Europe and the USA
-- Increased manufacturing capacity to over 8.5m frames, up 70% (2019:
5.0m)
-- Seven new in-house brands added including BOTANIQ (TM) , the Group's
first fully sustainable eyewear range
-- A significant number of new global branded licences added to the
brand portfolio
-- Awarded the international Green Product Award for fully recycled
and recyclable O'Neill Wove frame
-- Launched B2B website with 63% of independent UK customers registered
-- Contributed to the national and global COVID effort providing special
PPE eyewear for the NHS and other health providers around the globe
-- Awarded the Queen's Award for International Trade
Robin Totterman, CEO of INSPECS said :
"Despite what has been an extraordinary period for the business,
we have maintained positive momentum in 2020 creating a strong
platform for growth in 2021. Furthermore, I consider us very
fortunate to have been in a situation where we could both help the
various NHS trusts with PPE (eyewear) requirements and continue to
develop the business in what were very difficult COVID-related
conditions.
"Since our IPO in February 2020, the acquisitions of Norville
and Eschenbach have created a well-balanced vertically integrated
business serving both global retail chains and the independent
optical market. The enlarged Group now has a worldwide distribution
network serving over 70,000 retail outlets giving further growth
opportunities.
"I am pleased to report that the Group has performed well in the
first five months of 2021 despite continuing restrictions caused by
COVID-19. Whilst I remain cautious on future months while
uncertainty remains surrounding the pandemic and its effects, our
trading has been encouraging and I look forward to updating
shareholders on our first half performance in August, which should
start to demonstrate the enlarged Group's capabilities.
The Group has had a successful start to 2021, with sales of $67m
in the first quarter. The Group continues to win new customers and
in particular the Vietnam new facility is now completed and
operational. Our order books at the time of this report are higher
than at the same time in 2020 on a like for like basis. "
The Annual Report for the year ended 31 December 2020 will
shortly be available on the Group's website (
www.inspecs.com/investors-results-and-reports/ ) and will be sent
to shareholders. The INSPECS Annual General Meeting will be held on
19 July 2021.
For further information please contact:
INSPECS Group plc via FTI Consulting
Robin Totterman, CEO Tel: +44 (0) 20
Chris Kay, CFO 3727 1000
Peel Hunt (Nominated Adviser and Broker) Tel: +44 (0) 20
Adrian Trimmings 7418 8900
Andrew Clark
Will Bell
FTI Consulting (Financial PR)
Alex Beagley Tel: +44 (0) 20
Fern Duncan 3727 1000
Alice Newlyn
About INSPECS Group plc
INSPECS is a Bath-based designer, manufacturer and distributor
of eyewear frames and optically advanced spectacle lenses. The
Group produces a broad range of frames and lenses, covering
optical, sunglasses and safety, which are either "Branded" (either
under licence or under the Group's own proprietary brands), or
"OEM" (including private label on behalf of retail customers and
un-branded).
In December 2020, INSPECS acquired Eschenbach Optik, a leading,
global, eyewear supplier headquartered in Nuremberg, Germany, which
includes the American company Tura. The acquisition extended the
Group's presence internationally in key global markets. This
followed the acquisition of lens maker Norville in July 2020,
whereby INSPECS combined two heritage brands in British optical,
Savile Row frame maker, and Norville lens maker, further enhancing
its vertically integrated business model. As one of only a few
companies that can offer this one-stop-shop solution to global
retail chains, INSPECS is well positioned to continue to take
market share in the globally expanding eyewear market.
INSPECS customers include global optical and non-optical
retailers, global distributors and independent opticians, with its
distribution network covering over 80 countries and reaching
approximately 70,000 points of sale.
INSPECS has operations across the globe: with offices in the UK,
Portugal, Scandinavia, the US and China (Hong Kong, Macau and
Shenzhen), and manufacturing facilities in Vietnam, China, the UK
and Italy. With the acquisition of Eschenbach Optik, the Group's
international reach further extends across Europe and the American
markets.
The Group's growth strategy going forward is to: (i) continue to
grow organically; (ii) undertake further acquisitions (and drive
value through leveraging the Group's internal capabilities); and
(iii) extend the Group's manufacturing capacity.
More information is available at: https://INSPECS.com
CHAIRMAN'S STATEMENT
Overview
The Group is publishing its accounts for the year ended 31
December 2020 following a time when our people, customers and
suppliers faced unprecedented challenges as a result of the
COVID-19 pandemic and its effect on our business.
Since the outbreak of the pandemic, our first priority has been
the safety and welfare of people both working and connected to the
Group. In the first quarter of 2020, the pandemic affected our
production site in China, steps were taken by management in China
to keep production running on a reduced scale and ensure through
working with the authorities that the site complied with
fast-moving new legislation. Through regular inspection and liaison
with the authorities, we were able to continue production in
difficult circumstances.
As the virus spread, we were subsequently affected by the first
global lockdown when our customers were forced to close their
doors, although our online customers still remained open. This
meant that our factories could not deliver pre ordered stock, as
the distribution depots were shut around the world, severely
impacting our business. Our executive and senior management team
set in motion a cost reduction plan, as well as implementing a
program for people to work from home where practicable.
The net effect was borne out in our interim results which showed
a reduction in turnover to $16.7m and an underlying EBITDA of
$0.7m. I am pleased to report that our second half was a
significant improvement on our first half trading with turnover of
$30.7m and an underlying EBITDA of $3.8m.
Transformation
As outlined in our IPO documentation it was a key part of our
growth strategy to use the IPO funds to make strategic acquisitions
in keeping with our vertically integrated model. In July 2020, the
Group purchased the assets of Norville, a well-established lens
manufacturer with sites in Gloucester, Livingstone, Bolton and
Seaham. I would like to express my gratitude to those employees at
Norville who continued to keep the business alive during
administration in very uncertain times and then when INSPECS
acquired the assets of the business continued to work and help grow
the business. New senior management was quickly recruited by our
executive team.
I am pleased to report that the restructuring of the business
has already started with Norville achieving sales of $4.2m since
acquisition on the 14 July 2020. I am also pleased to report that a
new lease on a modern manufacturing facility has been completed and
the factory will move in the autumn of 2021 to a new
state-of-the-art facility allowing increased production
efficiencies and also speed up turnaround time. It is exciting to
see how many integration possibilities there are with lens
manufacturing and the rest of the Group.
Having successfully completed the Norville acquisition, the
executive team worked throughout the summer and autumn on the
purchase of Eschenbach Holdings GmbH, which was completed in
December 2020. Eschenbach again fits with the Group strategy for
growth. It has a number of very successful house brands and also
some major licensed global brands. The Eschenbach workforce is
approximately 580 people and mainly distributes to independent
opticians around the globe with its full-time sales workforce of
over 250 people. This acquisition now gives the Group a strong
European presence and with the addition of its subsidiary Tura Inc
in the USA, the Group now has direct access to the important
independent optical market in those regions. The acquisition also
included Eschenbach Optik, a low vision manufacturing, research
& development arm offers further optical expertise in this
growing market.
Results
The Group achieved a significant increase in revenue and
underlying EBITDA in the second half but overall turnover was down
22.5% to $47.4m from $61.2m and underlying EBITDA was down from
$13.0m to $4.5m.
Dividend
Due to the acquisitions in 2020 and the economic landscape, the
Group will not pay a dividend at present, but this will be reviewed
on a regular basis by the Board.
Outlook
The economic landscape has improved since late spring of 2020.
However, during 2020 and 2021 there have been continued
restrictions around the globe as governments endeavour to safeguard
communities and ensure that their hospital services are not
overwhelmed. This has meant that we are still experiencing
continued headwinds in our business around the globe. However, the
Group remains profitable and cash generative in the first six
months of 2021 with continuing debt reduction. I am sure that over
the next 12 months the executive team will continue to deliver on
its sustainable growth strategy for all our stakeholders.
The Group has had a successful start to 2021, with sales of $67m
in the first quarter. The Group continues to win new customers and
in particular the Vietnam new facility is now completed and
operational. Our order books at the time of this report are higher
than at the same time in 2020 on a like for like basis.
The Lord MacLaurin of Knebworth
Chairman
Chief Executive's report
It is over a year since the pandemic began to wreak havoc across
the globe, and only the countries and communities who have managed
to vaccinate a meaningful part of their population are beginning to
relax restraints.
I am greatly encouraged by the resilience and results our
customers and the Group have shown during the past year. As
a Group, our interaction with COVID-19 started in January 2020
when widespread lockdowns took hold in China and Vietnam. As soon
as our factories were able to open, the rest of the world, and
crucially to us, the warehouse and distribution hubs closed. For a
time, our factories were unable to deliver completed products on
order.
The Group is performing well, most notably our US colleagues at
Tura under the watchful eye of Scott Sennet. Norville under Nevil
Trotter is coming on in leaps and bounds. I am confident that once
the move to the new location happens and new more scalable
manufacturing methods are implemented, we will see a significant
increase in the business.
International Eyewear is being integrated into the UK operation
of INSPECS and Norville with the aim of selling frame and lens
packages. Germany and much of Europe seem to go from lockdown to
lockdown, but despite this, the business is doing well.
Tura and Eschenbach Optik are solid businesses run by excellent
management who are keen to integrate with the rest of the Group.
Tura is far advanced on bringing INSPECS brands and our new
BOTANIQ(TM) range to market. They are working with Killine to
vertically integrate the business.
I'm delighted to report that INSPECS has won the coveted Queen's
Award for International Trade for a second time - the UK's most
prestigious business accolade. The Group has also won a number of
green and design awards - the International Green Award for our
recycled and recyclable O'Neill sunglasses 'Wove' and four
highly-coveted Red Dot Awards for Eschenbach's designs.
I would like to thank all our employees across the Group
companies who, regardless of location or seniority, all responded
fantastically to the unprecedented events that started to roll out
in the early part of 2020. Special thanks go to Michael Zhang in
China and Ha Bui in Vietnam and their teams for their efforts in
what was unchartered territory.
As the first lockdown hit, our management took immediate steps
to protect our employees and ensure their health and safety while
ensuring that INSPECS could continue to deliver its products to its
customer base despite multiple disruptions. Many of our staff took
voluntary pay reductions and reduced their hours. Our CFO, Chris
Kay, and I took an immediate 60% pay reduction and the Board a 20%
pay reduction in line with the rest of the Group. Most appreciated,
as this was despite the Board meeting more frequently throughout
the year to assist with acquisitions.
Acquisitions
The optical market is particularly dominated by a few major
players, and the cost of entry into this market is substantial. The
administration of Norville gave an opportunity for the Group to
enter this market at a considerably reduced cost. Once the
transaction was complete, the assets were purchased by Norville
(20/20) Limited, and the remaining 28 employees were transferred to
the new INSPECS subsidiary company. Since that date, we have
increased employment to 92 employees at Norville and saw month by
month growth from August onwards. The vertical integration allows
us to offer both high-quality lenses as well as a frame and lens
package to the opticians.
Eschenbach
Eschenbach was founded in 1913 and has an enviable reputation
for supplying high-quality eyewear in Germany and across the world,
with a significant subsidiary in the United States called Tura Inc,
which supplies US independent opticians. Eschenbach principally
operates in the independent market, whereas traditionally INSPECS
has operated in the chain market. Combining the two business will
allow for multiple integration opportunities across the business
platform and reduces the Group's risk, as we now supply both the
high-volume chain and independent optical markets around the globe.
Eschenbach's house brands, TitanFlex and Humphrey, were rated
number one in the German Market in 2019-20 and continue to show
significant growth.
Management
As a direct result of the acquisitions the Group has made since
2017, I think it is important to stress that our business now has a
wealth of talent across the globe with many capable individuals
having both the experience and the capabilities to step into roles
across the Group and help drive future growth.
Manufacturing investment
I wrote last year that we were expanding our Vietnam operation
from 4,300m(2) to 8,800m(2) , and I am pleased to report that this
new manufacturing facility was completed in 2020. We suffered
delays as a direct result of COVID-19 and the inability of our
Chinese technical experts to cross into Vietnam due to border
control restrictions. While it is disappointing that COVID-19 has
directly delayed the implementation of this plant, I am pleased to
report that manufacturing has now started with a large order to the
USA. Our new sustainable eco-friendly BOTANIQ(TM) range is being
produced in the new Vietnam facility.
COVID-19
COVID-19 undoubtedly disrupted our business during the last part
of Q1 2020 and through Q2 and partly into Q3 of 2020.
The optical industry has proven its resiliency by continuing to
trade, albeit at a reduced level, by adopting strict PPE
requirements early. Although footfall is significantly reduced,
conversion rates continue to be exceptional. In addition, shrinkage
(theft) is practically non-existent due to the need to pre-book
optical appointments. Whilst difficulties persist, the Group has
made significant adjustments to the new environment, and our
budgets and forecast for 2021 are based on continued disruption
within the market. As a true global distributor, the pandemic will
continue to have some effect on our normal business activity for
the foreseeable future. The Group will continue to ensure the
safety of its 1,800 employees across the globe and has new working
practices in place that permit the business to continue to
operate.
Outlook
2020 was the year of acquisitions. 2021 is the year of
integrating the new companies and developing synergies and
strategies across the Group to generate future growth. I am pleased
to report that steady progress has been made, and as a result, I am
confident in the Group's ability to create and maximise
opportunities and to deliver to all stakeholders. Current trading
to date remains positive.
Robin Totterman
Chief Executive Officer
F inancial review
Revenue
Revenue for the year ended 31 December 2020 was $47.4m, a
decrease of 22.5%. H2 Group revenue was $30.7m including $7.1m
contribution from acquisitions. Growth in H2 over H1 excluding
acquisitions was 41.3%.
Operating Expenses
Operating expenses increased by $1.5m. Excluding acquisitions,
operating expenses decreased $2.4m as the Group reduced costs to
offset restrictions in trade caused by COVID-19.
Gross Margin
The overall Group gross margin decreased from 45.0% to 43.3%.
Excluding acquisitions, the gross margin decreased from 45.0% to
43.5%.
Cash Position
The Group ended the year with cash balances of $30.0m compared
to an opening position of $6.5m as a result of share placing and
the acquisitions in the period.
Finance Income and Expense
The Group's net finance costs increased from $1.37m to $1.84m.
Excluding loan arrangement fees written off on refinancing ahead of
IPO, net finance costs reduced by $0.5m.
Depreciation and Amortisation
Group depreciation and amortisation costs increased from $3.1m
to $3.9m, including $0.7m from acquisitions in the year.
NET DEBT
The Group's opening net debt was $13.7m ($12.5m excluding
leases) and the closing net debt following IPO and two acquisitions
in the year was $47.2m ($26.9m excluding leases).
Earnings Per Share
Earnings per share for the year to 31 December 2020 is $(0.13)c
(2019: $0.12c) with EPS on a fully diluted basis of $(0.13)c
(2019: $0.11c).
Leverage
The Group's year-end leverage as a multiple of EBITDA, increased
from 0.8 in 2019 to 1.6 in 2020 as a result of funding the
acquisitions in the year. The leverage ratio has continued to drop
since the year-end against a required covenant level of 2.5 for the
12 months to 31 December 2021.
Equity Placing
On 11 December 2020 the Group issued 30.5 million shares at
GBP2.10 in order to fund the Eschenbach acquisition of $115.5m.
Underlying EBITDA
On 16 December 2020, the Group acquired Eschenbach which had
limited sales from 17 to 31 December 2020. As a result, Eschenbach
had a technical accounting underlying EBITDA loss of $(1.3)m for
the year to 31 December 2020. The Group targets underlying EBITDA
as a primary KPI and during the year, excluding the Eschenbach
acquisition, our underlying EBITDA decreased from $13.0m to $5.8m,
a decrease of 55%. I am pleased to report that excluding
Eschenbach, our H2 underlying EBITDA was $5.1m against H1 of
$0.7m.
The below table shows how Underlying EBITDA is calculated:
2020 2019
$'000 $'000
Revenue 47,415 61,247
-------- --------
GROSS PROFIT 20,522 27,536
-------- --------
Operating and distribution expenses,
net of other operating income (23,462) (19,591)
-------- --------
OPERATING (LOSS)/PROFIT (2,940) 7,945
-------- --------
Movement in fair value on derivative (740) 2,865
-------- --------
Operating (loss)/profit after movement
in fair value on derivative (3,680) 10,810
-------- --------
Add back: Amortisation 1,607 1,088
-------- --------
Add back: Depreciation 2,299 2,037
-------- --------
EBITDA 226 13,935
-------- --------
Add back: Share-based payment expense 1,706 1,917
-------- --------
Add back: Restructuring costs 185 -
-------- --------
Add back: Foreign exchange on funds
for acquisitions 1,085 -
-------- --------
Add back: Post acquisition insurance
costs 563 -
-------- --------
(Less)/add back: Movement in fair value
on derivative 740 (2,865)
-------- --------
Underlying EBITDA 4,505 12,987
-------- --------
OPERATING (LOSS)/PROFIT (2,940) 7,945
-------- --------
Non-underlying costs (5,763) (2,827)
-------- --------
Negative goodwill on bargain purchase 506 -
-------- --------
Movement in fair value on derivative (740) 2,865
-------- --------
Exchange adjustment on borrowings (382) 715
-------- --------
Less: Net finance costs (1,844) (1,365)
-------- --------
Add: Share of profit of associate - 14
-------- --------
(LOSS)/PROFIT BEFORE INCOME TAX (11,163) 7,347
-------- --------
Tax 2,250 (907)
-------- --------
(LOSS)/PROFIT FOR THE YEAR (8,913) 6,440
-------- --------
2020 2019
$'000 $'000
Underlying EBITDA 4,505 12,987
------ ------
Add back Eschenbach underlying EBTIDA
loss 1,295 -
------ ------
Underlying EBITDA excluding Eschenbach 5,800 12,987
------ ------
Chris Kay
Group Chief Financial Officer
18 June 2021
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2020
2020 2019
Notes $'000 $'000
Revenue 4 47,415 61,247
----- -------- --------
Cost of sales 8,11 (26,893) (33,711)
----- -------- --------
GROSS PROFIT 20,522 27,536
----- -------- --------
Other operating income 5 - 133
----- -------- --------
Distribution costs (787) (635)
----- -------- --------
Administrative expenses 8,11 (22,675) (19,089)
----- -------- --------
OPERATING (LOSS)/PROFIT (2,940) 7,945
----- -------- --------
Non-underlying costs 9 (5,763) (2,827)
----- -------- --------
Negative goodwill on bargain
purchase 7 506 -
----- -------- --------
Movement in derivatives (740) 2,865
----- -------- --------
Exchange adjustment on borrowings (382) 715
----- -------- --------
Finance costs 10 (1,880) (1,380)
----- -------- --------
Finance income 10 36 15
----- -------- --------
Share of profit of associate - 14
----- -------- --------
(LOSS)/PROFIT BEFORE INCOME
TAX (11,163) 7,347
----- -------- --------
Income tax credit/(charge) 12 2,250 (907)
----- -------- --------
(LOSS)/PROFIT FOR THE YEAR (8,913) 6,440
----- -------- --------
Attributable to:
Equity holders of the Parent (8,913) 6,440
----- -------- --------
Earnings per share
----- -------- --------
Basic profit for the year attributable
to the equity
holders of the Parent 13 $(0.13) $0.12
----- -------- --------
Diluted profit for the year
attributable to the equity
holders of the Parent 13 $(0.13) $0.11
----- -------- --------
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2020
2020 2019
$'000 $'000
(Loss)/profit for the year (8,913) 6,440
------- -------
Other comprehensive income
------- -------
Exchange differences on translation
of foreign operations (204) 1
------- -------
OTHER COMPREHENSIVE (LOSS)/INCOME
FOR THE YEAR, NET OF INCOME TAX (204) 1
------- -------
TOTAL COMPREHENSIVE (LOSS)/INCOME
FOR THE YEAR (9,117) 6,441
------- -------
Attributable to:
Equity holders of the parent (9,117) 6,441
------- -------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2020
2020 2019
Notes $'000 $'000
ASSETS
------ ------- ------
Non-current assets
------ ------- ------
Goodwill 69,087 12,798
------- ------
Intangible assets 56,305 17,482
------- ------
Property, plant and equipment 22,460 10,320
------- ------
Right-of-use asset 20,379 1,317
------- ------
Investment in associate 57 53
------- ------
Deferred tax 12,995 1,221
------- ------
181,283 43,191
------------------------------------- ------- ------
Current assets
------ ------- ------
Inventories 59,294 8,715
------- ------
Trade and other receivables 35,648 12,875
------- ------
Tax receivables 1,556 -
------- ------
Cash and cash equivalents 32,672 6,595
------- ------
129,170 28,185
------------------------------------- ------- ------
Total assets 310,453 71,376
------- ------
EQUITY
------ ------- ------
Shareholders' equity
------ ------- ------
Called up share capital 1,384 62
------- ------
Share premium 121,940 21,628
------- ------
Foreign currency translation
reserve (99) 1,031
------- ------
Share option reserve 867 2,840
------- ------
Merger reserve 7,296 -
------- ------
Retained earnings 14,429 5,787
------- ------
Total equity 145,817 31,348
------- ------
Notes 2020 2019
$'000 $'000
LIABILITIES
----- ------- ------
Non-current liabilities
----- ------- ------
Financial liabilities -
borrowings
----- ------- ------
Interest bearing loans
and borrowings 70,391 12,651
----- ------- ------
Deferred tax 24,694 2,917
----- ------- ------
95,085 15,568
----- ------- ------
Current liabilities
----- ------- ------
Trade and other payables 42,895 10,192
----- ------- ------
Right of return liabilities 4 12,824 476
----- ------- ------
Financial liabilities -
borrowings
----- ------- ------
Interest bearing loans
and borrowings 6,830 4,974
----- ------- ------
Bank overdrafts 2,642 93
----- ------- ------
Invoice discounting - 2,577
----- ------- ------
Derivatives - 3,536
----- ------- ------
Tax payable 4,360 2,612
----- ------- ------
69,551 24,460
----- ------- ------
Total liabilities 164,636 40,028
----- ------- ------
Total equity and liabilities 310,453 71,376
----- ------- ------
The financial statements were approved by the Board of Directors
on 18 June 2021.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
Foreign
currency Share
Called up Share translation option Retained Merger Total
share capital premium reserve reserve earnings reserve equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1
January 2019 62 21,628 1,030 647 (653) - 22,714
-------------- -------- ------------ -------- --------- --------- -------
Changes in equity -
-------------- -------- ------------ -------- --------- --------- -------
Profit for the
year - - - - 6,440 - 6,440
-------------- -------- ------------ -------- --------- --------- -------
Other comprehensive
income - - 1 - - - 1
-------------- -------- ------------ -------- --------- --------- -------
Total comprehensive
income - - 1 - 6,440 - 6,441
-------------- -------- ------------ -------- --------- --------- -------
Share-based
payment - - - 2,193 - - 2,193
-------------- -------- ------------ -------- --------- --------- -------
Balance at 31
December 2019 62 21,628 1,031 2,840 5,787 - 31,348
-------------- -------- ------------ -------- --------- --------- -------
Changes in equity
-------------- -------- ------------ -------- --------- --------- -------
Loss for the
year - - - - (8,913) - (8,913)
-------------- -------- ------------ -------- --------- --------- -------
Other comprehensive
loss - - (204) - - - (204)
-------------- -------- ------------ -------- --------- --------- -------
Total comprehensive
loss - - (204) - (8,913) - (9,117)
-------------- -------- ------------ -------- --------- --------- -------
Issue of share
capital 603 119,215 - - - (22) 119,796
-------------- -------- ------------ -------- --------- --------- -------
Exercise of
share options 99 2,725 - (3,140) 2,973 - 2,657
-------------- -------- ------------ -------- --------- --------- -------
Share-based
payment - - - 1,133 - - 1,133
-------------- -------- ------------ -------- --------- --------- -------
Share for share
exchange and
creation of
merger reserve 620 (21,628) (926) 34 (46,902) 68,802 -
-------------- -------- ------------ -------- --------- --------- -------
Capital reduction - - - - 61,484 (61,484) -
-------------- -------- ------------ -------- --------- --------- -------
Balance at 31
December 2020 1,384 121,940 (99) 867 14,429 7,296 145,817
-------------- -------- ------------ -------- --------- --------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2020
2020 2019
Notes $'000 $'000
Cash flows from operating
activities 15 403 12,224
----- --------- -------
Interest paid (1,144) (1,609)
----- --------- -------
Tax paid (7) (22)
----- --------- -------
Net cash (used in)/from
operating activities (748) 10,593
----- --------- -------
Cash flows from investing
activities
----- --------- -------
Purchase of intangible
fixed assets (167) (161)
----- --------- -------
Purchase of property plant
and equipment (2,452) (2,763)
----- --------- -------
Acquisition of subsidiaries,
net of cash acquired 7 (101,821) -
----- --------- -------
Interest received 10 36 15
----- --------- -------
Net cash used in investing
activities (104,404) (2,909)
----- --------- -------
Cash flow from financing
activities
----- --------- -------
Proceeds from the issue
of shares 115,761 -
----- --------- -------
New bank loans in the year 17,187 628
----- --------- -------
Bank loan principal repayments
in year (39) (4,733)
----- --------- -------
Repayment of other loans - (72)
----- --------- -------
Transaction costs on debt
refinancing (810) -
----- --------- -------
Movement in invoice discounting
facility (2,577) 975
----- --------- -------
Principal payments on leases (810) (836)
----- --------- -------
Net cash (used in)/from
financing activities 128,712 (4,038)
----- --------- -------
Increase in cash and cash
equivalents 23,560 3,646
----- --------- -------
Cash and cash equivalents
at beginning of the year 6,502 2,834
----- --------- -------
Effect of foreign exchange
rate changes (32) 22
----- --------- -------
Cash and cash equivalents
at end of year 30,030 6,502
----- --------- -------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2020
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 7-10 Kelso Place, Upper Bristol
Road, Bath BA1 3AU. On 10 January 2020, the reporting company
incorporated in 2019 acquired the pre-existing INSPECS Holdings
Limited in a 'share for share exchange' with no change in ultimate
ownership. This has been accounted for under the basis of merger
accounting given that the ultimate ownership before and after the
transaction remained the same. Merged subsidiaries undertakings are
treated as if they had always been a member of the Group.
Subsequently, on 27 February 2020 INSPECS Group Limited was
re-registered from a private to a public company with its shares
admitted to the AIM of the London Stock Exchange.
The principal activity of the Group in the year was that of
design, production, sale, marketing and distribution of high
fashion eyewear, lenses and OEM products worldwide. The principal
activity of the company was that of a holding company.
2. ACCOUNTING POLICIES
Basis of preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union, and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared on a
historical cost basis, except for share-based payments that have
been measured at fair value in accordance with IFRS 2 Share-based
payments.
The presentational currency for the consolidated and parent
company financial statements is the United States Dollar (US$)
rounded to the nearest thousand. The consolidated financial
statements provide comparative information in respect of the year
ended 31 December 2019.
Going Concern
The 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.
The Group continues to respond well to the challenges associated
with the COVID-19 pandemic which did cause disruption to the
business during 2020. This was predominantly experienced in the
first half of the year when major distribution hubs and the optical
retail markets were closed except for emergencies as lockdowns were
introduced around the globe in response to the pandemic. During
subsequent lockdowns later in the year, the optical retail market
was deemed essential which resulted in the Group gradually
returning to normal trading levels. For the rest of the year the
Group was therefore able to trade profitably and generate cash with
the supply chain unaffected.
Looking to the future, the Group has performed a going concern
review, going out until December 2022, considering both a base case
and a downside case (described below). Having reviewed this
forecast and having applied a reverse stress test (also described
below), the possibility that financial headroom could be exhausted,
and a covenant could be breached is considered to be remote.
The base case assumes COVID-19 related restrictions consistent
with those in place in January 2021 remain for the duration of 2021
with normal trading resuming in 2022, results in a 10% year on year
increase to sales. The restrictions in place at this time
restricted a return to office working, reduced footfall on the high
streets and reductions in non-prescription sales as a result of the
continuing closure of airports and non-essential retail. The base
case also assumes no cash flow mitigations are actioned during the
period covered by the going concern review.
The downside case assumes the same restriction remain as in the
base case but with a 10% reduction in sales from April 2021
compared to the base case, and these same restrictions also being
in place during 2022. In this scenario we also assumed some cost
saving measures being implemented at a conservative level. These
measures are consistent with those which were implemented in 2020
and which we therefore know the Group can achieve and relate to
reductions in factory overheads.
The directors consider the main risks to going concern to be
liquidity and compliance with covenants, and so have performed a
reverse stress test which incorporates the breach of the covenant.
The Group would breach a covenant before it runs out of cash in any
scenario.
The Group's borrowings with HSBC, amounting to $35.0m, contains
two covenants being one leverage ratio and one interest cover
ratio. Compliance with these covenants is based on 12 month rolling
EBITDA results and 12 month rolling interest payments respectively.
In addition, the newly acquired Eschenbach Group has covenants
relating to equity ration, leverage ratio and EBITDA. These
covenants are less sensitive than the HSBC covenants and the Group
would be able to repay these loans before a covenant breach using
available cash. The Group has the ability to transfer cash across
different Group entities as needed.
In order for the business to breach one of the HSBC covenants,
the reverse stress test requires that, after implementing all
available mitigating scenarios, there is a 22% reduction to the
sales forecasted in the base case from April 2021 through to
December 2022 along with a 4% drop in gross margin. This scenario
also factors in full repayment of all borrowings aside from the
HSBC facility and settlement of an uncertain tax position at the
highest possible range.
This scenario would see the Group breach the leverage ratio
covenant test resulting in the total borrowed amount becoming
payable on demand. In this case, cash flow mitigations would be
implemented, mostly reductions in discretionary spending and
changes to supplier payment timings which are based on the Group's
previous ability to implement such steps. The directors believe
that this scenario is remote as a result of the historic evidence
gained from our performance during 2020, which was a year impacted
significantly by COVID-19. Throughout 2020 the Group's cash
collections have remained strong, with bad debt write offs similar
to a usual year. In the current year to date the Group is trading
ahead of budget and cash collections remain strong.
Therefore, the directors are confident in the ongoing resilience
of the Group, and its ability to continue in operation and meet its
commitments as they fall due over the going concern period.
Accordingly, the directors adopt the going concern basis in
preparing the financial statements.
Basis of consolidation
The consolidated financial information incorporates the
financial statements of the Group and all of its subsidiary
undertakings. The financial statements of all Group companies are
adjusted, where necessary, to ensure the use of consistent
accounting policies. Acquisitions are accounted for under the
acquisition method from the date control passes to the Group. On
acquisition, the assets and liabilities of a subsidiary are
measured at their fair values. Any excess of the cost of
acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill.
Business combination and goodwill
Business combinations are accounted for using the acquisition
method. The cost of an acquisition is measured as the aggregate of
the consideration transferred, which is measured at acquisition
date fair value, and the amount of any non-controlling interests in
the acquiree. Acquisition-related costs are expensed as
incurred.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition
date.
Goodwill is initially measured at cost (being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interests and any previous interest
held over the net identifiable assets acquired and liabilities
assumed). If the fair value of the net assets acquired is in excess
of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value of
net assets acquired over the aggregate consideration transferred,
then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group's cash-generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Investment in associate undertaking
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
in control or joint control over those policies.
The considerations made in determining significant influence or
joint controls are similar to those necessary to determine control
over subsidiaries. The Group's investment in its associate is
accounted for using the equity method.
Under the equity method, the investment in an associate is
initially recognised at cost. The carrying amount of the investment
is adjusted to recognise changes in the Group's share of net assets
of the associate since the acquisition date.
The income statement reflects the Group's share of the results
of operations of the associate. Any change in OCI of those
investees is presented as part of the Group's OCI.
The aggregate of the Group's share of profit or loss of an
associate is shown on the face of the income statement outside
operating profit and represents profit or loss after tax and
non-controlling interests in the subsidiaries of the associate.
The financial statement of the associate is prepared for the
same reporting period as the Group. When necessary, adjustments are
made to bring the accounting policies in line with those of the
Group.
After application of the equity method, the Group determines
whether it is necessary to recognise an impairment loss on its
investment in its associate. At each reporting date, the Group
determines whether there is objective evidence that the investment
in the associate is impaired. If there is such evidence, the Group
calculates the amount of impairment as the difference between the
recoverable amount of the associate and its carrying value, and
then recognises the loss within 'Share of profit of an associate'
in the income statement.
Upon loss of significant influence over the associate, the Group
measures and recognises any retained investment at its fair value.
Any difference between the carrying amount of the associate upon
loss of significant influence or joint control and the fair value
of the retained investment and proceeds from disposal is recognised
in profit or loss.
Current and non-current classifications
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification.
An asset is considered current when it is:
-- Expected to be realised or intended to be sold or consumed
within the usual parameters of trading activity and as a minimum
within 12 months after the reporting period;
Or
-- Cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months
after the reporting period.
The Group classifies all other assets as non-current.
A liability is current when:
-- It is expected to be settled in the normal parameters of
trading activity and as a minimum is due to be settled within 12
months after the reporting period;
Or
-- There is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting
period.
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as
non-current assets and liabilities.
Revenue recognition
Revenue from the sales of goods is recognised at the point in
time when control of the asset is transferred to the customer,
generally on delivery of the goods. Revenue is recognised at the
fair value of the consideration received or receivable for sale of
goods to external customers in the ordinary nature of the business.
The fair value of the consideration takes into account trade
discounts, settlement discounts, volume rebates and the right of
return.
Rights of return
Under IFRS 15 a sale with right of return is recognised if the
customer receives any combination of the following:
-- a full or partial refund of any consideration paid;
-- a credit that can be applied against amounts owed, or that will be owed, to the entity; and
-- another product in exchange.
The Group includes within the liability arrangements where the
Group has historically accepted a right to return with the
combination of a credit being applied against amounts owed or where
another product is offered in exchange. This includes returns that
are as a result of quality issues, whereby a replacement is
provided to the customer free of charge. The Group estimates the
impact of potential returns from customers based on historical data
on returns. A refund liability is recognised for the goods that are
expected to be returned (i.e. the amount not included in the
transaction price). A right of return asset (and corresponding
adjustment to cost of sales) is also recognised for the right to
recover the goods from the customer, to the extent that these goods
are not considered impaired.
Intangible assets (other than goodwill)
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles are not
capitalised and the related expenditure is reflected in profit or
loss in the period in which the expenditure is incurred.
Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets
with finite lives is recognised in the profit or loss in the
expense category that is consistent with the function of the
intangible assets.
An intangible asset is derecognised upon disposal (i.e. at the
date the recipient obtains control) or when no future economic
benefits are expected from its use or disposal. Any gain or loss
arising upon derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying
amount of the asset) is included in the profit or loss.
Amortisation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows:
Patents and licences 1-4 years
Computer software 3 years
Trademarks 5 years
Customer relationships 10-20 years
Customer order book 6 months
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any impairment losses. The cost of an
item of property, plant and equipment comprises its purchase price
and any directly attributable costs of bringing the asset to its
working condition and location for its intended use.
Expenditure incurred after items of property, plant and
equipment have been put into operation, such as repairs and
maintenance, is charged to profit or loss in the period in which it
is incurred. In situations when it is probable that future economic
benefits associated with the item will flow to the Group and the
cost can be measured reliably then the expenditure for a major
inspection is capitalised in the carrying amount of the asset as a
replacement. Where significant parts of property, plant and
equipment are required to be replaced at intervals, the Group
recognises such parts as individual assets with specific useful
lives and depreciates them accordingly.
Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows:
Freehold Property over 33 years
Leasehold Improvements over the lease term
Fixtures and Fittings over 5 years
Computer Equipment over 3-5 years
Plant and Machinery over 3-7 years
Construction in Progress is not depreciated
The carrying values of property plant and equipment are reviewed
for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable.
Where parts of an item of property, plant and equipment have
different useful lives, the cost of that item is allocated on a
reasonable basis among the parts and each part is depreciated
separately. Residual values, useful lives and the depreciation
method are reviewed, and adjusted if appropriate, at least at each
financial year end.
An item of property, plant and equipment including any
significant part initially recognised is derecognised upon disposal
or when no future economic benefits are expected from its use or
disposal. Any gain or loss on disposal or retirement recognised in
profit or loss in the year the asset is derecognised is the
difference between the net sales proceeds and the carrying amount
of the relevant asset.
Leases
The Group applied a single recognition and measurement approach
for all leases for which it is the lessee, except for short-term
leases and leases of low-value assets. The Group recognises
right-of-use assets representing the right to use the underlying
assets and lease liabilities to make lease payments.
Right-of-use asset
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses. The cost of
right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made
at or before the commencement date less any lease incentives
received. Right-of-use assets are depreciated on a straight-line
basis over the shorter of the lease term and the estimated useful
lives of the assets, as follows:
Leasehold Property over 2-5 years
Plant and Machinery over 3 years
Motor vehicles over 3 years
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
payments (including in substance fixed payments) less any lease
incentives receivable. They also include any amounts expected to be
paid under residual value guarantees.
In calculating the present value of lease payments, the Group
uses its incremental borrowing rate at the lease commencement date
because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the lease
payments or a change in the assessment of an option to purchase the
underlying asset.
The Group's lease liabilities are included in interest-bearing
loans and borrowings.
The Group applies the short-term lease recognition exemption to
its short-term leases of machinery and equipment (i.e. those leases
that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option). It also applies the
lease of low-value assets recognition exemption to leases of office
equipment that is considered to be low value. Lease payments on
short-term leases and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and estimated
selling price less costs to sell after making due allowance for
obsolete and slow-moving items. Inventories are recognised as an
expense in the period in which the related revenue is
generated.
Cost is determined on an average cost basis. Cost includes the
purchase price and other directly attributable costs to bring the
inventory to its present location and condition.
At the end of each period, inventories are assessed for
impairment. If an item of inventory is impaired, the identified
inventory is reduced to its selling price less costs to complete
and sell and an impairment charge is recognised in the income
statement.
Royalties
Royalties payable reflect balances owed to brand owners for the
right to use the brand name. The royalty is payable based on a
pre-agreed percentage of sales volumes, with some arrangements also
having minimum royalty payments for specific periods. Royalties
payable are recognised on delivery of the products covered by such
arrangements, with an additional accrual made where it is
considered that the sales level required to meet the minimum
payment will not be met.
Financial instruments - initial recognition and subsequent
measurement
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition and
subsequently measured at amortised cost.
Subsequent measurement
For purposes of subsequent measurement, the financial assets of
the Group are classified as financial assets at amortised cost
(debt instruments).
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured
using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when
the asset is derecognised, modified or impaired.
The Group's financial assets at amortised cost includes trade
receivables, other receivables and loans to Group undertakings.
The Group does not have any financial assets at fair value
through OCI or financial assets at fair value through profit or
loss.
Derecognition
A financial asset (or, where applicable, a part of a financial
asset or part of a Group of similar financial assets) is primarily
derecognised (i.e. removed from the Group's consolidated statement
of financial position) when the rights to receive cash flows from
the asset have expired.
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a pass-through arrangement, it
evaluates if, and to what extent, it has retained the risks and
rewards of ownership.
When it has neither transferred nor retained substantially all
of the risks and rewards of the asset, nor transferred control of
the asset, the Group continues to recognise the transferred asset
to the extent of its continuing involvement. In that case, the
Group also recognises an associated liability. The transferred
asset and the associated liability are measured on a basis that
reflects the rights and obligations that the Group has
retained.
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as
financial liabilities at fair value through profit or loss, loans
and borrowings or payables, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The Group's financial liabilities include trade and other
payables, loans and borrowings including bank overdrafts.
Subsequent measurement
For purposes of subsequent measurement, financial liabilities
are classified in two categories:
-- Financial liabilities at fair value through profit or loss.
-- Financial liabilities at amortised cost (loans and borrowings).
As at 31 December 2020, the Group has not designated any
financial liability as at fair value through profit or loss. As at
31 December 2019, options to subscribe for C equity shares were
held as derivatives with the movement in fair value passing through
profit or loss, with this liability being settled during the
current year.
Financial liabilities at amortised cost (loans and
borrowings)
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest rate ("EIR") method. Gains and losses are recognised in
profit or loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included as finance costs
in the income statement. This category generally applies to
interest-bearing loans and borrowings.
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the income
statement.
Refinancing
Where a loan arrangement is replaced with a subsequent facility
which is materially different in relation to repayment structure or
interest rate, any capitalised loan arrangement fees in respect of
the previous loan are expensed, with transaction costs relating to
the new loan capitalised and held against the value of the related
liability.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive.
For trade receivables and contract assets, the Group applies a
simplified approach in calculating ECLs. Therefore, the Group does
not track changes in credit risk, but instead recognises a loss
allowance based on lifetime ECLs at each reporting date.
The Group considers a financial asset in default when internal
or external information indicates that the Group is unlikely to
receive the outstanding contractual amounts in full before taking
into account any credit enhancements held by the Group. A financial
asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
Cash and cash equivalents
For the purpose of the consolidated statement of cash flows,
cash and cash equivalents comprise cash on hand and demand
deposits, and short term highly liquid investments that are readily
convertible into known amounts of cash, are subject to an
insignificant risk of changes in value, and have a short maturity
of generally within three months when acquired, less bank
overdrafts which are repayable on demand and form an integral part
of the Group's cash management.
For the purpose of the consolidated statement of financial
position, cash and cash equivalents comprise cash on hand and at
banks, including term deposits, and assets similar in nature to
cash, which are not restricted as to use.
Classification of shares as debt or equity instruments
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability. An equity instrument is a contract that
evidences a residual interest in assets or an entity after
deducting all its liabilities. Accordingly, a financial instrument
is treated as equity if:
-- There is no contractual obligation to delivery cash or other
financial assets or to exchange financial assets or liabilities on
terms that may be unfavourable; and
-- The instrument is a non-derivative that contains no
contractual obligation to deliver a variable number of shares or is
a derivative that will be settled only by the company exchanging a
fixed amount of cash or other assets for a fixed number of the
company's own equity instruments.
Costs associated with the issue or sale of equity instruments
are allocated against equity to the extent that the issue is a new
issue, or expensed to the profit and loss for existing equity
instruments.
Share-based payments
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payments, whereby employees
render services as consideration for equity instruments
(equity-settled transactions).
The cost of equity-settled transactions is determined by the
fair value at the date when the grant is made using an appropriate
valuation model, further details of which are given in the detailed
notes to the accounts. That cost is recognised in employee benefits
expense together with a corresponding increase in share option
reserve, over the period in which the service and, where
applicable, the performance conditions are fulfilled (the vesting
period).
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group's
best estimate of the number of equity instruments that will
ultimately vest. The expense or credit in the income statement for
a period represents the movement in cumulative expense recognised
as at the beginning and end of that period.
Service performance conditions are not taken into account when
determining the grant date fair value of awards, but the likelihood
of the conditions being met is assessed as part of the Group's best
estimate of the number of equity instruments that will ultimately
vest. Any other conditions attached to an award, but without an
associated service requirement, are considered to be non-vesting
conditions. Non-vesting conditions are reflected in the fair value
of an award and lead to an immediate expensing of an award unless
there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest
because service conditions have not been met. Where awards include
a non-vesting condition, the transactions are treated as vested
irrespective of whether the non-vesting condition is satisfied,
provided that all other performance and/or service conditions are
satisfied.
If the terms of an equity-settled award are modified, the
minimum expense recognised is the grant date fair value of the
unmodified award provided the original vesting terms of the award
are met. An additional expense, measured as at the date of
modification, is recognised for any modification that increases the
total fair value of the share-based payment transaction or is
otherwise beneficial to the employee. Where an award is cancelled
by the entity or by the counterparty, any remaining element of the
fair value of the award is expensed immediately through profit or
loss. The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted earnings
per share, to the extent that they are dilutive.
Taxation
Income tax comprises current and deferred tax. Income tax
relating to items recognised outside profit or loss is recognised
outside profit or loss, either in other comprehensive income or
directly in equity.
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities,
based on the tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period, taking
into consideration interpretations and practices prevailing in the
countries in which the Group operates.
Tax liabilities are recognised when it is considered probable
that there will be a future outflow of funds to a taxing authority.
Uncertainties regarding availability of tax losses, in respect of
enquiries raised and additional tax measurements issued, may be
measured using the expected value method or single best estimate
approach, depending on the nature of the uncertainty. Tax
provisions are based on management's interpretation of country
specific tax law and the likelihood of settlement. Management uses
professional firms and previous experience when assessing tax
risks.
Deferred tax is provided, using the liability method, on all
temporary differences at the end of the reporting period between
the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes. Deferred tax liabilities are
recognised for all taxable temporary differences, except:
-- when the deferred tax liability arises from the initial
recognition of goodwill or an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss; and
-- in respect of taxable temporary differences associated with
investments in subsidiaries, when the timing of the reversal of the
temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable
future.
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that
it is probable that taxable profit will be available against which
the deductible temporary differences, the carryover of unused tax
credits and unused tax losses can be utilised, except:
-- when the deferred tax asset relating to the deductible
temporary differences arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
-- in respect of deductible temporary differences associated
with investments in subsidiaries, deferred tax assets are only
recognised to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available
to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at the end of each
reporting period and are recognised to the extent that it has
become probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of
the reporting period.
Deferred tax assets and deferred tax liabilities are offset if
and only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred taxes
relate to income taxes levied by the same taxation authority on
either the same taxable entity and the same taxation authority or
different taxable entities which intend either to settle current
tax liabilities and assets on a net basis, or to realise the assets
and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilities or assets are
expected to be settled or recovered.
Foreign currencies
These financial statements are presented in US$, which is the
Group's presentational currency. Each entity in the Group
determines its own functional currency and items included in the
financial statements of each entity are measured using that
functional currency. Foreign currency transactions recorded by the
entities in the Group are initially recorded using their respective
functional currency rates prevailing at the dates of the
transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency rates of
exchange ruling at the end of the reporting period. Differences
arising on settlement or translation of monetary items are
recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was measured.
The gain or loss arising on translation of a non-monetary item
measured at fair value is treated in line with the recognition of
the gain or loss on change in fair value of the item (i.e.,
translation difference on the item whose fair value gain or loss is
recognised in other comprehensive income or profit or loss is also
recognised in other comprehensive income or profit or loss,
respectively).
The functional currency of INSPECS Group plc is GBP. The
functional currencies of certain overseas subsidiaries are
currencies other than the GBP. As at the end of the reporting
period, the assets and liabilities of these entities are translated
into GBP at the exchange rates prevailing at the end of the
reporting period and their income statements are translated into
GBP at the average exchange rates for the year.
The resulting exchange differences are recognised in other
comprehensive income and accumulated in the foreign currency
translation reserve. On disposal of a foreign operation, the
component of other comprehensive income relating to that particular
foreign operation is recognised in profit or loss. On translation
to US$ for presentation, the assets and liabilities of the
consolidated entity are translated into US$ at the exchange rates
prevailing at the end of the reporting period and the income
statement is translated into US$ at the average exchange rates for
the year.
Any goodwill arising on the acquisition of a foreign operation
and any fair value adjustments to the carrying amounts of assets
and liabilities arising on acquisition are treated as assets and
liabilities of the foreign operation and translated at the closing
rate at the period end.
For the purpose of the consolidated statement of cash flows, the
cash flows of overseas subsidiaries are translated at the exchange
rates ruling at the dates of the cash flows. Frequently recurring
cash flows of overseas subsidiaries which arise throughout the
period are translated at the average exchange rates for the
year.
Pensions and other post-employment benefits
The Group operates defined contribution pension schemes, where
the amounts are charged to the statement of comprehensive income
are the contributions payable in the year. Differences between
contributions payable in the year and the contributions actually
paid are shown as either accruals or prepayments.
Non-underlying items
Non-underlying items those that in the directors' view should be
separately disclosed due to their nature to enable a full
understanding of the Group's financial performance.
New and amended standards and interpretations
Amendments to IFRS 16 COVID-19 Related Rent Concessions
On 28 May 2020, the IASB issued COVID-19-Related Rent
Concessions - amendment to IFRS 16 Leases. The amendments provide
relief to lessees from applying IFRS 16 guidance on lease
modification accounting for rent concessions arising as a direct
consequence of the COVID-19 pandemic. As a practical expedient, a
lessee may elect not to assess whether a COVID-19 related rent
concession from a lessor is a lease modification. A lessee that
makes this election accounts for any change in lease payments
resulting from the COVID-19 related rent concession the same way it
would account for the change under IFRS 16, if the change were not
a lease modification. The amendment applies to annual reporting
periods beginning on or after 1 June 2020. Earlier application is
permitted. This amendment had no impact on the consolidated
financial statements of the Group.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
The preparation of the Group's financial statements 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
affected in the future.
Estimates involve the determination of the quantum of accounting
balances to be recognised. Judgements typically involve decisions
such as whether to recognise an asset or liability.
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 year, are described below:
Impairment of goodwill
The Group determines whether goodwill is impaired at least on an
annual basis. This requires an estimation of the value in use of
the cash-generating units to which the goodwill is allocated.
Estimating the value in use requires the Group to make an estimate
of the expected future cash flows from the cash-generating units
and also to choose a suitable discount rate in order to calculate
the present value of those cash flows. The carrying amount of
goodwill at 31 December 2020 was $68,088,000 (2019: $12,798,000).
No provision for impairment of goodwill was made as at the end of
the reporting period.
Impairment of intangible assets
The carrying value of intangible assets are reviewed for
impairment when events or changes in circumstances indicate that
the carrying amount may not be recoverable in accordance with the
accounting policies as disclosed in the financial statements. The
recoverable amount is the higher of its fair value less costs of
disposal and its value in use, the calculations of which involve
the use of estimates about the future cash flows generated by each
asset or the relevant cash-generating units to which the asset
belongs. When value in use calculations are undertaken, management
must estimate the expected future cash flows from the asset or
cash-generating unit and choose a suitable discount rate in order
to calculate the present value of those cash flows.
Uncertain tax positions
Tax authorities could challenge and investigate the Group's
transfer pricing or tax domicile arrangements. As a growing,
international business, there is an inherent risk that local tax
authorities around the world could challenge either historical
transfer pricing arrangements between other entities within the
Group and subsidiaries or branches in those local jurisdictions, or
the tax domicile of subsidiaries or branches that operate in those
local jurisdictions.
As a result, the Group has identified it is exposed to uncertain
tax positions, which it has measured using an expected value
methodology. Such methodologies require estimates to be made by
management including the relative likelihood of each of the
possible outcomes occurring, the periods over which the tax
authorities may raise a challenge to the Group's transfer pricing
or tax domicile arrangements; and the quantum of interest and
penalties payable in additions to the underlying tax liability.
Judgements made by management which are considered to have a
material impact on the financial statements are as follows:
Recognition of intangible assets
In recognising the intangible assets arising on acquisition of
subsidiary entities, the intangible assets must first be
identified. This requires management judgement as to the value
drivers of the acquired business and its interaction with the
marketplace and stakeholders. In calculating the fair value of the
identified assets, management must use judgement to identify an
appropriate calculation technique and use estimates in deriving
appropriate forecasts and discount rates as required. Management
have used external experts to mitigate the risk of these judgements
and estimates on the intangible assets identified and valued.
Deferred tax
Deferred tax assets are recognised for unused tax losses to the
extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax
assets that can be recognised, based upon the likely timing and the
level of future taxable profits, together with future tax planning
strategies.
4. REVENUE
The revenue of the Group is attributable to the one principal
activity of the Group.
a) Geographical analysis
The Group's revenue by destination is split in the following
geographic areas:
2020 2019
$'000 $'000
United Kingdom 14,014 15,242
------ ------
Europe (excluding UK) 14,097 18,657
------ ------
North America 12,040 16,038
------ ------
South America 450 975
------ ------
Asia 4,032 6,187
------ ------
Australia 2,782 4,148
------ ------
47,415 61,247
------ ------
In the year ended 31 December 2020, the Group had one customer
which account for more than 10% of the Group's revenues. The
revenue generated from this customer was $9,483,000 (2019:
$11,289,000). The revenue from this customer is generated across
all segments as identified in note 6.
b) Right of return assets and liabilities
2020 2019
$'000 $'000
Right of return asset 1,967 96
-------- ------
Right of return liability (12,824) (476)
-------- ------
The right of return asset is presented as a component of
inventory and the right of return liability is presented separately
on the face of the balance sheet.
5. OTHER INCOME
2020 2019
$'000 $'000
Royalty income - 62
------ ------
Sundry income - 71
------ ------
- 133
------ ------
Royalty income relates to remuneration received from customers
for the design of concept frames. Sundry income in 2019 relates to
income from an insurance claim.
6. 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 (previously Branded) product distribution
-- Wholesale - being OEM and manufacturing distribution
-- Lenses - being manufacturing and distribution of lenses
The acquisition of Norville (20/20) Limited during 2020 (see
note 7) has led to an additional operating and reporting segment of
'Lenses' in 2020. In addition, the acquisition of Eschenbach
Holdings GmbH (see note 7) has resulted in a change to the
'Branded' reporting segment, to form the 'Frames and Optics'
reporting segment of which Eschenbach is a part during the year to
31 December 2020.
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 assess their performance.
The reportable segments subject to disclosure are consistent
with the organisational model adopted by the Group during the
financial year ended 31 December 2020 and are as follows:
Total before
adjustments
Frames and & Adjustments
Optics Wholesale Lenses eliminations & eliminations Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenue
---------- --------- -------- ------------- --------------- --------
External 21,259 21,979 4,177 47,415 - 47,415
---------- --------- -------- ------------- --------------- --------
Internal 2,204 2,381 59 4,644 (4,644) -
---------- --------- -------- ------------- --------------- --------
23,463 24,360 4,236 52,059 (4,644) 47,415
---------- --------- -------- ------------- --------------- --------
Cost of sales (14,987) (13,678) (2,203) (30,868) 3,975 (26,893)
---------- --------- -------- ------------- --------------- --------
Gross profit 8,476 10,682 2,033 21,191 (669) 20,522
---------- --------- -------- ------------- --------------- --------
Expenses (12,898) (5,594) (1,634) (20,126) 570 (19,556)
---------- --------- -------- ------------- --------------- --------
Depreciation (636) (1,422) (241) (2,299) - (2,299)
---------- --------- -------- ------------- --------------- --------
Amortisation (514) (1,093) - (1,607) - (1,607)
---------- --------- -------- ------------- --------------- --------
Operating (loss)/profit (5,572) 2,573 158 (2,841) (99) (2,940)
---------- --------- -------- ------------- --------------- --------
Exchange adjustment
on borrowings (382)
---------- --------- -------- ------------- --------------- --------
Movement in derivatives (740)
---------- --------- -------- ------------- --------------- --------
Non-underlying
costs (5,763)
---------- --------- -------- ------------- --------------- --------
Negative goodwill
on bargain purchase 506
---------- --------- -------- ------------- --------------- --------
Finance costs (1,880)
---------- --------- -------- ------------- --------------- --------
Finance income 36
---------- --------- -------- ------------- --------------- --------
Share of profit -
of associate
---------- --------- -------- ------------- --------------- --------
Taxation 2,250
---------- --------- -------- ------------- --------------- --------
Loss for the
year (8,913)
---------- --------- -------- ------------- --------------- --------
Total assets 401,874 72,021 7,409 481,304 (183,846) 297,458
---------- --------- -------- ------------- --------------- --------
Total liabilities (304,479) (6,809) (6,185) (317,473) 259,112 (58,361)
---------- --------- -------- ------------- --------------- --------
Deferred tax
asset 12,995
---------- --------- -------- ------------- --------------- --------
Current tax liability (4,360)
---------- --------- -------- ------------- --------------- --------
Deferred tax
liability (24,694)
---------- --------- -------- ------------- --------------- --------
Borrowings (77,221)
---------- --------- -------- ------------- --------------- --------
Group net assets 145,817
---------- --------- -------- ------------- --------------- --------
Other disclosures
---------- --------- -------- ------------- --------------- --------
Capital additions 203 1,864 736 2,803 - 2,803
---------- --------- -------- ------------- --------------- --------
The reportable segments subject to disclosure are consistent
with the organisational model adopted by the Group during the
financial year ended 31 December 2019 and are as follows:
Total before
adjustments
& Adjustments
Branded Wholesale eliminations & eliminations Total
$'000 $'000 $'000 $'000 $'000
Revenue
--------- --------- ------------- --------------- ---------
External 27,729 33,518 61,247 - 61,247
--------- --------- ------------- --------------- ---------
Internal 2,175 3,256 5,431 (5,431) -
--------- --------- ------------- --------------- ---------
29,905 36,773 66,678 (5,431) 61,247
--------- --------- ------------- --------------- ---------
Cost of sales (18,723) (20,194) (38,917) 5,206 (33,711)
--------- --------- ------------- --------------- ---------
Gross profit 11,182 16,579 27,761 (225) 27,536
--------- --------- ------------- --------------- ---------
Expenses (9,772) (6,743) (16,515) (84) (16,599)
--------- --------- ------------- --------------- ---------
Other income 35 98 133 - 133
--------- --------- ------------- --------------- ---------
Depreciation (417) (1,620) (2,037) - (2,037)
--------- --------- ------------- --------------- ---------
Amortisation (18) (1,070) (1,088) - (1,088)
--------- --------- ------------- --------------- ---------
Operating profit 1,010 7,244 8,254 (309) 7,945
--------- --------- ------------- --------------- ---------
Exchange adjustment on borrowings 715
--------- --------- ------------- --------------- ---------
Movement in derivatives 2,865
--------- --------- ------------- --------------- ---------
Non-underlying costs - Initial
public offering (2,827)
--------- --------- ------------- --------------- ---------
Finance costs (1,380)
--------- --------- ------------- --------------- ---------
Finance income 15
--------- --------- ------------- --------------- ---------
Share of profit of associate 14
--------- --------- ------------- --------------- ---------
Taxation (907)
--------- --------- ------------- --------------- ---------
Profit for the year 6,440
--------- --------- ------------- --------------- ---------
Total assets 56,815 66,018 122,833 (52,678) 70,155
--------- --------- ------------- --------------- ---------
Total liabilities (42,618) (4,676) (47,294) 33,956 (13,338)
--------- --------- ------------- --------------- ---------
14,197 61,342 75,539 (18,722) 56,817
--------- --------- ------------- --------------- ---------
Deferred tax asset 1,221
--------- --------- ------------- --------------- ---------
Current tax liability (2,612)
--------- --------- ------------- --------------- ---------
Deferred tax liability (2,917)
--------- --------- ------------- --------------- ---------
Derivative liability (3,536)
--------- --------- ------------- --------------- ---------
Borrowings (17,625)
--------- --------- ------------- --------------- ---------
Group net assets 31,348
--------- --------- ------------- --------------- ---------
Other disclosures
--------- --------- ------------- --------------- ---------
Capital additions 143 2,782 2,924 - 2,924
--------- --------- ------------- --------------- ---------
Total assets are the Group's gross assets excluding deferred tax
asset. Total liabilities are the Group's gross liabilities
excluding loans and borrowings, current and deferred tax
liabilities and derivative liabilities.
Non-underlying costs, as well as net finance costs and taxation
are not allocated to individual segments as they relate to Group
wide activities as opposed to individual reporting segments.
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 sales 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.
Non-current operating assets
2020 2019
$'000 $'000
United Kingdom 3,256 5,410
------- ------
Europe 112,848 183
------- ------
North America 10,686 150
------- ------
Asia 41,441 36,175
------- ------
168,231 41,918
------- ------
Non-current assets for this purpose consist of property, plant
and equipment, right-of-use assets, goodwill and intangible
assets.
7. business combinations
Acquisition of Norville (20/20) Limited
Norville (20/20) Limited was incorporated on 10 July 2020 with
INSPECS Limited as its immediate parent. On 13 July 2020 this
entity acquired assets of The Norville Group Ltd (in
administration) for a cash consideration of $3,027,000 from the
Administrators. As the total fair value of the net assets acquired
$3,523,000 exceeds the initial consideration of $3,027,000 the gain
on the bargain purchase of $506,000 has been recognised in profit
and loss at the acquisition date.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of
Norville (20/20) Limited as at the date of acquisitions were:
Fair value
recognised
on acquisition
$'000
Assets
----------------
Property, plant and equipment 1,931
----------------
Inventories 2,070
----------------
Total identifiable assets at fair value 4,001
----------------
Liabilities
----------------
Deferred tax liability (478)
----------------
Total identifiable liabilities at fair value (478)
----------------
Total identifiable net assets at fair value 3,523
----------------
Negative goodwill arising on acquisition (506)
----------------
Foreign exchange on consolidation 10
----------------
Purchase consideration transferred 3,027
----------------
Under UK tax legislation, a gain on bargain purchase is taxable
to the extent that it relates to the bargain purchase of intangible
fixed assets. After review there was no fair value assigned to the
intangible assets acquired, therefore none of the goodwill arising
from the bargain purchase is expected to be taxable for income tax
purposes.
From the date of acquisition, Norville (20/20) Limited
contributed $4,236,000 of revenue and a profit of $664,000 to the
Group loss before tax from continuing operations. Norville (20/20)
Limited was not trading prior to its acquisition by the Group.
Transaction costs of $123,000 were expensed and are included
within 'Non-underlying costs - Acquisitions'.
Acquisition of Eschenbach Holdings GmbH
On 16 December 2020 Inspecs Limited acquired the entire share
capital of Eschenbach Holdings GmbH and its subsidiaries, for a
cash consideration of $115,496,000. Eschenbach held shareholder
loans which were purchased at fair value, with the residual
consideration for the remaining net assets of Eschenbach.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of
Eschenbach Holdings GmbH as at the date of acquisitions were:
Fair value
recognised
on acquisition
$'000
Assets
----------------
Property, plant and equipment 8,466
----------------
Intangible assets 39,407
----------------
Right-of-use asset 19,552
----------------
Cash and cash equivalents 19,322
----------------
Trade and other receivables 24,477
----------------
Tax receivable 2,452
----------------
Inventories 48,343
----------------
Deferred tax assets 9,174
----------------
Total identifiable assets at fair value 171,193
----------------
Liabilities
----------------
Trade and other payables 44,623
----------------
Interest bearing loans and borrowings 21,462
----------------
Overdraft 2,620
----------------
Lease liability 19,552
----------------
Income tax payable 1,341
----------------
Deferred tax liability 21,199
----------------
Total identifiable liabilities at fair value 110,797
----------------
Total identifiable net assets at fair value 60,396
----------------
Goodwill arising on acquisition 55,100
----------------
Purchase consideration transferred 115,496
----------------
From the date of acquisition, Eschenbach Holdings GmbH
contributed $2,881,000 of revenue and $(1,999,000) to loss before
tax from continuing operations. If the combination had taken place
at the beginning of the year, revenue from continuing operations
for the Group would have been $186,817,000 and loss before tax from
continuing operations for the Group would have been
$(7,424,000).
Transaction costs of $2,931,000 were expensed and are included
within 'Non-underlying costs - Acquisitions'.
Analysis of cash flows on acquisitions
The combined impact on cashflow of the two acquisitions made
during the year was as follows:
$'000
----------
Consideration for Norville (20/20) Limited (3,027)
----------
Consideration for Eschenbach Holdings GmbH (115,496)
----------
Acquired with Eschenbach Holdings GmbH:
----------
Cash and cash equivalents 19,322
----------
Overdraft (2,620)
----------
Net cash flow on acquisition (101,821)
----------
8. EMPLOYEEs AND DIRECTORS
2020 2019
$'000 $'000
Included in cost of sales
------- -------
Wages and salaries 4,899 4,329
------- -------
Social security costs 102 96
------- -------
Pension costs 39 8
------- -------
5,040 4,434
------- -------
Included in administration costs
------- -------
Wages and salaries 8,238 9,268
------- -------
Social security costs 955 580
------- -------
Pension costs 360 162
------- -------
Share-based payment expense 1,706 1,917
------- -------
11,259 11,926
------- -------
16,299 16,360
------- -------
The average number of employees during the year was as
follows:
2020 2019
Administration 153 176
----- -----
Selling and operations 72 54
----- -----
Production 873 992
----- -----
1,098 1,222
----- -----
Directors' remuneration during the year was as follows:
2020 2019
$'000 $'000
Directors' salaries 455 1,148
------- -------
Directors' pension contributions 33 3
------- -------
Share options 159 539
------- -------
647 1,690
------- -------
Information regarding the highest paid director is as
follows:
2020 2019
$'000 $'000
Total remuneration 311 792
------- -------
The number of directors to whom employer pension contributions
were made by the Group during year is 2 (2019: 2). This was in the
form of a defined contribution pension scheme.
9. NON-UNDERLYING COSTS
Non-underlying items are those that in the directors' view
should be separately disclosed by virtue of their size, nature or
incidence to enable a full understanding of the Group's financial
performance in the year and business trends over time.
Non-underlying costs incurred during the year are as follows:
2020 2019
$'000 $'000
Initial public offering 2,709 2,827
------ ------
A cquisitions 3,054 -
------ ------
5,763 2,827
------ ------
On 27 February 2020, INSPECS Group plc was admitted to the AIM
of the London Stock Exchange. In relation to this, costs of
$2,709,000 (2019: $2,827,000) were incurred through the Income
Statement in relation to the listing of existing shares.
Acquisition costs of $123,000 and $2,931,000 were incurred
during the period relating to the purchase of Norville (20/20)
Limited and Eschenbach Holdings GmbH respectively (see note 7).
10. FINANCE COSTS AND FINANCE INCOME
2020 2019
$'000 $'000
Finance costs
------ ------
Bank loan interest 516 930
------ ------
Other loan interest 39 92
------ ------
Invoice discounting interest & charges 50 41
------ ------
Loan transaction costs 1,249 286
------ ------
Lease interest 26 31
------ ------
Total finance costs 1,880 1,380
------ ------
Finance income
------ ------
Interest receivable 36 15
------ ------
11. PROFIT BEFORE INCOME TAX
The profit before income tax is stated after
charging/(crediting):
2020 2019
$'000 $'000
Cost of inventories recognised as
expense 21,045 21,579
------ ------
Short term leases 83 200
------ ------
Depreciation own assets 1,539 1,301
------ ------
Depreciation - Right-of-use assets 760 736
------ ------
Amortisation - Intangibles 1,607 1,088
------ ------
Restructuring costs 185 -
------ ------
Post acquisition insurance costs 563 -
------ ------
Foreign exchange on funding for
acquisitions 1,085 -
------ ------
Other foreign exchange differences 305 (623)
------ ------
2020 2019
$'000 $'000
------ ------
Fees payable to the company's auditor
for audit services:
------ ------
Audit of the company and Group accounts 26 20
------ ------
Audit of the subsidiaries 1,213 644
------ ------
Fees payable to the company's auditor
for non-audit services:
------ ------
Costs associated with IPO 285 1,229
------ ------
IFRS conversion costs - 232
------ ------
Tax services - 33
------ ------
12. INCOME TAX
Analysis of tax expense
2020 2019
$'000 $'000
Current Tax:
------- ------
Current tax on profits for the year 24 485
------- ------
Overseas current tax expense 208 453
------- ------
Adjustment re prior years - 12
------- ------
Total current tax 232 950
------- ------
Deferred Tax:
------- ------
Deferred tax income relating to
the origination and reversal of
timing differences (2,478) (43)
------- ------
Effect of changes in tax rates (4) -
------- ------
Total deferred tax (2,482) (43)
------- ------
Total tax expense reported in the
consolidated income statement (2,250) 907
------- ------
Factors affecting the tax expense
The tax assessed for the year is (higher)/lower than the
standard rate of corporation tax in the UK. The difference is
explained below:
2020 2019
$'000 $'000
(Loss)/profit before income tax (11,163) 7,347
-------- -------
(Loss)/profit multiplied by standard
rate of corporation
tax in the UK of 19.00% (2019:
19.00%) (2,121) 1,396
-------- -------
Effects of:
-------- -------
Non-deductible expenses - Amortisation
of intangible assets 184 183
-------- -------
Non-deductible expenses - Other
expenses 1,622 (42)
-------- -------
Increase in provision for uncertain
tax liabilities 381 463
-------- -------
Income taxed in nil rate regime (404) (1,222)
-------- -------
Share-based payment (1,924) 42
-------- -------
Different tax rate for overseas
subsidiaries (84) 59
-------- -------
Transfer pricing adjustments 51 6
-------- -------
Tax rate changes (4) (54)
-------- -------
Income not taxable (176) -
-------- -------
Effects of Group relief 70 -
-------- -------
Amounts not recognised on deferred
tax 155 -
-------- -------
Adjustments in respect of prior
year - 76
-------- -------
Tax expense (2,250) 907
-------- -------
Income not taxable for tax purposes relates to income generated
in jurisdictions within which there is a nil taxation rate.
Movements in other comprehensive relating to foreign exchange on
consolidation are not taxable.
13. EARNINGS PER SHARE ("EPS")
Basic EPS is calculated by dividing the profit or loss for the
year attributable to ordinary equity holders of the Parent by the
weighted average number of ordinary shares outstanding during the
year.
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
year 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. A loss has been made in the year
to 31 December 2020. In accordance with IAS33, potential ordinary
shares shall be treated as dilutive when, and only when, their
conversion to ordinary shares would decrease earnings per share, or
increase loss per share from continuing operations. As a loss is
made, including the dilution of potential ordinary shares reduces
the loss per share and therefore the outstanding options should not
be treated as dilutive when calculating EPS. The comparative figure
has been adjusted for the impact of the subdivision of shares and
the share for share exchange as discussed in note 14, as if these
shares had always been in issue to allow comparability.
Basic earnings per share is therefore $(0.13) loss (2019: $0.12
profit), with diluted earnings per share $(0.13) loss (2019: $0.11
profit).
The following table reflects the income and share data used in
the basic and diluted EPS calculations:
2020 2019
ORDINARY SHARES $'000 $'000
Loss attributable to the ordinary equity
holders of the Parent for basic earnings (8,913) -
---------------- ----------------
Number of shares Number of shares
---------------- ----------------
Weighted average number of Ordinary
Shares for basic EPS 69,227,355 31,301,362
---------------- ----------------
Effect of dilution from:
---------------- ----------------
Share options - 5,771,538
---------------- ----------------
Weighted average number of Ordinary
Shares adjusted
for the effect of dilution where
appropriate 69,227,355 37,072,900
---------------- ----------------
2020 2019
B ORDINARY SHARES $'000 $'000
Profit attributable to the ordinary equity
holders of the Parent for basic earnings - 6,440
---------------- ----------------
Number of shares Number of shares
---------------- ----------------
Weighted average number of Ordinary Shares
for basic EPS - 18,597,160
---------------- ----------------
Effect of dilution from:
---------------- ----------------
Share options - -
---------------- ----------------
Weighted average number of Ordinary Shares
adjusted
for the effect of dilution where appropriate - 18,597,160
---------------- ----------------
2020 2019
C ORDINARY SHARES $'000 $'000
Profit attributable to the ordinary equity
holders of the Parent for basic earnings - -
---------------- ----------------
Number of shares Number of shares
---------------- ----------------
Weighted average number of Ordinary Shares
for basic EPS - 4,120,950
---------------- ----------------
Effect of dilution from:
---------------- ----------------
Share options - -
---------------- ----------------
Weighted average number of Ordinary Shares
adjusted
for the effect of dilution where appropriate - 4,120,950
---------------- ----------------
Refer to note 14 for details in relation to the shares in issue
and their rights, and changes in the equity structure during the
year.
14. CALLED UP SHARE CAPITAL
Authorised and issued share capital:
2020 2019
Number: Class: Nominal value $'000 $'000
101,290,898 (2019: nil) Ordinary GBP0.01 1,384 -
----------- -------------- ------ ------
Nil (2019: 227,870) Ordinary GBP0.10 - 44
----------- -------------- ------ ------
Nil (2019: 135,385) B Ordinary GBP0.10 - 18
----------- -------------- ------ ------
1,384 62
--------------------------------------------------- ------ ------
Each Ordinary Share carries the right to participate in
distributions, as respects dividends and as respects capital on
winding up.
On 10 January 2020, all B ordinary shares of INSPECS Holdings
Limited were converted into ordinary shares of INSPECS Group
Limited and a subdivision of INSPECS Holdings Limited shares was
enacted, with 363,255 shares with a nominal value of GBP0.10 each
converted into 3,632,550 share with a nominal value of GBP0.01
each. Also on 10 January 2020, a share for share exchange occurred
between INSPECS Holdings Limited and INSPECS Group Limited,
subsequently INSPECS Group plc. As part of this share for share
exchange, all ordinary shares in INSPECS Holdings were exchanged
for ordinary shares of INSPECS Group. Share options in INSPECS
Holdings were also exchange for share options in INSPECS Group,
including the options over C ordinary shares, which were converted
to options over ordinary shares in INSPECS Group. Lastly, as part
of the share for share exchange on 10 January 2020, 1 share in
INSPECS Holdings Limited after the subdivision was exchanged for
13.7 shares in INSPECS Group Limited, leaving 49,898,522 Ordinary
shares as the entire share capital of INSPECS Group Limited.
On 27 February 2020, as part of the initial public offering of
shares of INSPECS Group plc, 12,051,282 new shares were issued to
the London AIM at GBP1.95 generating a cash inflow of $30,313,000
(GBP23,500,000).
On 11 December 2020 a further 30,476,191 shares were issued to
the London AIM at a share price of GBP2.10, generating a cash
inflow of $85,448,000 (GBP64,000,000).
A further 8,864,903 shares have been created during the year as
a result of the exercise of share options.
15. ANALYSIS OF CASHFLOWS GIVEN IN THE STATEMENT OF
CASHFLOWS
A reconciliation of profit for the year to cash generated from
operations is shown below
2020 2019
Notes $'000 $'000
(Loss)/profit before income
tax (11,163) 7,347
-------- -------
Adjustments for:
------ -------- -------
Depreciation charges 2,299 2,037
-------- -------
Amortisation charges 1,607 1,088
-------- -------
Share of profit of associate - (14)
-------- -------
Gain on bargain purchase (506) -
-------- -------
Share-based payment 1,706 1,917
-------- -------
Movement in fair value
of derivatives 740 (2,875)
-------- -------
Exchange adjustment on
borrowings 382 (715)
-------- -------
Finance costs 1,880 1,380
-------- -------
Finance income (36) (15)
-------- -------
Changes in working capital
------ -------- -------
Decrease in inventories 648 2,074
-------- -------
Decrease in trade and
other receivables 3,005 912
-------- -------
Decrease in trade and
other payables (159) (912)
-------- -------
Cash flows from operating
activities 403 12,224
-------- -------
16. POST BALANCE SHEET EVENTS
Since the balance sheet date, but before these financial
statements were approved, there were no material events that the
directors consider material to the users of these financial
statements.
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END
FR FRMRTMTMBBJB
(END) Dow Jones Newswires
June 18, 2021 02:00 ET (06:00 GMT)
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