Interim Results

RNS Number : 3939W

Inspecs Group PLC

18 August 2022

 

18 August 2022

INSPECS Group plc

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

Interim Results

INSPECS Group plc, a global eyewear and lens design house and manufacturer, presents its unaudited interim results for the six months ended 30 June 2022. 

Financial highlights:

· Revenue increased to $138.4m (H1 2021: $125.7m)

· Revenue increased to $145.5m (H1 2021: $125.7m), an increase of 15.8% at constant exchange rates ¹

· Operating profit increased to $5.8m (H1 2021: $2.5m ²)

· Gross profit margin 50.5% (H1 2021: 44.2% ², underlying 49.1% ³)

· Underlying EBITDA $15.1m (H1 2021: $16.8m ²)

· Underlying basic Earnings Per Share (EPS) of $0.15 (H1 2021: $0.17), with underlying diluted EPS of $0.14 (H1 2020: $0.16)

· Reported profit before tax of $0.8m (H1 2021: $3.5m loss ²)

· Reported loss after tax of $2.8m (H1 2021: $3.8m ²)

· Reported basic EPS of $(0.03) (H1 2021: $(0.04)), with diluted EPS of $(0.03) (H1 2021: $(0.04))

· Strong balance sheet with cash at 30 June 2022 of $30.6m (30 June 2021: $33.8m)

· Cash generated from operations $10.1m (H1 2021: $18.8m)

· Net debt excluding leasing $26.2m (31 December 2021: $32.8m)

Operational highlights:

· Norville new factory now fully operational and 'Labpack' distribution of complete frame and lens packages underway

· Planning permission and building design complete and approved on new factory in Vietnam

· Location for new Portugal factory sourced and building designed

· O'Neill, Superdry and Botaniq ranges now distributed by Group entities in the USA and Europe

· First delivery of lenses for Amazon's own eyewear division in Q2 of 2022

· Group companies working together to ensure enhanced distribution rates for our products

· Rationalisation of Hong Kong offices now complete

· The Group has completed the registration of its products as medical devices with the Medicines and Healthcare Regulatory Agency (MHRA), the European Database on Medical Devices (EUDAMED) and the Food and Drug Administration (FDA) in the USA

1  Constant currency exchange rates: figures at constant currency exchange rates have been calculated using the average exchange rates in effect for the corresponding period in the relevant comparative period (H1 2021).

2  The six-month period to 30 June 2021 has been restated following retrospective adjustments (note 11).

3  Underlying gross profit margin for H1 2021 excludes $6.1m purchase price allocation adjustment relating to inventory valuation following the acquisition of Eschenbach on 16 December 2020.

Robin Totterman, CEO of INSPECS, said:

"I am pleased to report an underlying EBITDA of $15.1m for the six months to 30 June 2022 (H1 2021: $16.8m). The Group EBITDA increased by $4.3m from $10.0m in H1 2021 to $14.3m in H1 2022. Our operating profit increased by $3.4m from $2.5m in H1 2021 to $5.8m in H1 2022.

The Group has made good progress against our strategic objectives during the period, specifically with the ongoing integration of the Group's businesses and increasing our distribution reach around the globe.

Our European business performed ahead of internal budget for the first half, however, our reported results were affected by a rapid decline in the Euro against the US Dollar in Q2, which is the current reporting currency of the Group. Given the evolution in Group global earnings since our IPO, the Board will review the reporting currency with our advisors in 2023. Our Norville factory relocation incurred additional downtime and costs but is now fully operational and increasing production.

Later this year we expect to start construction of our new factory in Portugal and increase our Vietnam production capacity through expansion, which will satisfy the increased demand from key accounts. Production is expected to begin towards the end of 2023, with distribution in Q1 of 2024.

Our Group order books are ahead as of 30 June 2022 compared to 30 June 2021, and we enter the second half of the year in a good position. Whilst we remain cautious of the overall economic outlook for the UK and European market, we remain focused on executing a number of strategic priorities that will increase production, enabling us to bring innovative new products to market and continue to deliver shareholder value."

For further information please contact:

INSPECS Group plc Robin Totterman (CEO) Chris Kay (CFO)	via FTI Consulting Tel: [phone]
Peel Hunt (Nominated Adviser and Broker) Adrian Trimmings Andrew Clark Lalit Bose	Tel: [phone]
FTI Consulting (Financial PR) Alex Beagley Harriet Jackson Alice Newlyn	Tel: [phone] [e-mail]

This announcement contains inside information for the purposes of the Market Abuse Regulation (Regulation (EU) No 596/2014) including as it forms part of domestic law in the United Kingdom by virtue of the European Union (Withdrawal) Act 2018. The person responsible for arranging release of this announcement on behalf of Inspecs is Chris Kay, Chief Financial Officer.

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 as well as unbranded).

INSPECS aims to be the leader in eyewear solutions through its vertically-integrated business model and has adopted a three-pillar growth strategy to achieve this: (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.

The Group has completed several significant acquisitions since its IPO in February 2020. In December 2020, INSPECS acquired Eschenbach, a leading global eyewear supplier, headquartered in Nuremberg, Germany, which includes the American company Tura. This followed the acquisition of lens maker Norville in July 2020, whereby INSPECS combined two British heritage brands, Savile Row frame maker, and Norville lens maker, further enhancing its vertically-integrated business model. In December 2021 the Group acquired Ego Eyewear, a design and licensing company which uses third party eyewear manufacturers to produce premium fashion brands, and BoDe, a distributor of optical frames and sunglasses principally to the German and neighbouring markets. 

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 75,000 points of sale.

INSPECS has operations across the globe: with offices and subsidiaries in the UK, Germany, Portugal, Scandinavia, the US and China (including Hong Kong, Macau and Shenzhen), and manufacturing facilities in Vietnam, China, the UK and Italy. With the acquisition of Eschenbach, the Group's international reach further extends across Europe and the American markets.

More information is available at: https://inspecs.com

CHIEF EXECUTIVE REVIEW

I am pleased to present our results for the six months ended 30 June 2022. The Group has performed well during the period, achieving sales of $138.4m (H1 2021: $125.7m) an increase of $12.7m or 10.1%. The Group made an underlying EBITDA of $15.1m compared to an adjusted $16.8m for the same period in 2021.

On a constant exchange basis ¹ , the Group revenues rose from $125.7m to $145.5m, an increase of $19.8m or 15.8%.

Two factors led to the Group not exceeding H1 2021 performance at the underlying EBITDA level. Firstly, our lens manufacturing site took longer than expected to reach optimal production following the move and as a result, we were not able to engage fully with our optical customers as delays were caused by infrastructure issues and the recalibration of machinery following the move. We are now starting to see steady progress at Norville and expect it to contribute to the Group profits in 2023.

Secondly, whilst our European business performed ahead of internal budget for the first half, our reported results were affected by a rapid decline in the Euro against the US Dollar. The Euro: US Dollar rate was 1.14 at the start of the year with a relatively small movement in Q1 closing at 1.11 to the Dollar. In Q2 the US Dollar sharply appreciated against the Euro, moving to parity in the quarter and closing in June 2022 at rate of 1.04. Our reporting currency at present is US Dollar and as such our European business and profits reflect this movement in currency. Given the evolution in Group global earnings since our IPO, the Board will review the reporting currency with its advisors and will assess the effect on our reporting in 2023.

In Vietnam, I am pleased to report that plans for our new factory have been submitted and we expect construction to commence later this year, with production expected to begin towards the end of 2023, with distribution in Q1 of 2024.

We have also reached agreement on the new production facility in Portugal based in Setubal near our Lisbon office. Construction is expected to start later this year and I expect the factory will go into production at the end of 2023.

 Our Italian small scale rolled gold eyewear facility will commence shipments of the premium product in Q4 of this year.

In Europe we have seen a solid market in Q2 rather than the rapid growth we saw in Q1 of 2021. I remain cautious of the overall economic outlook for the European market with continual issues arising from the Ukrainian situation and the global inflation currently prevalent in the marketplace.

We are seeing a similar picture in the USA but Tura continues to win market share.

In the UK, the business environment is similar to those we are experiencing in Europe but again our team is continuing to win market share and our design teams are working hard to ensure our products are on message.

Our team at Skunk Works has been expanded in H1 with two additional employees. We are now starting to see the first commercial benefits of our investment with orders starting to flow from Amazon and we continue to work with Bosch Sensonics on the further development of smart eyewear.

We also continue our work on the development of biodegradable eyewear and packaging to reduce the environmental effect of eyewear. Our recyclable and sustainable products are now in the marketplace, and there has been a good reaction from the market for these products.

We are complementing our finance team with the recruitment of key additional employees to provide greater bandwidth across the Group.

Overall, this was a good H1 despite adverse foreign exchange movements and a delay in achieving optimal production levels following the Norville factory move. Our order books continue to grow and are ahead at 30 June 2022 compared to 30 June 2021, and the Group is working hard on delivering sustained, profitable growth for all our stakeholders.

I would like to thank all our employees on what has been a busy six months and look forward to the second half of 2022 and the medium term with confidence.

Robin Totterman

18 August 2022

FINANCIAL REVIEW

Revenue

Revenue increased to $138.4m from $125.7m in H1 FY21, an increase of 10.1%. This was driven by the continuing integration of Eschenbach and volume growth across the diversity of markets that we now operate in. On a constant exchange rate ¹ revenues rose from $125.7m (H1 2021) to $145.5m, an increase of $19.8m or 15.8%.

Underlying Gross Margin

The Group's underlying gross margin increased from 49.1% to 50.5%. The Group continues to actively manage its gross profit margin despite cost inflation.

Operating Profit

The Group operating profit increased 132% to $5.8m (H1 2021: $2.5m).

Underlying EBITDA

The Group underlying EBITDA decreased from $16.8m in H1 2021 to $15.1m in H1 2022.

Finance Expenses

Our net finance costs increased from $1.1m to $1.8m reflecting the rise in interest rates and drawdown in late 2021 of the RCF facility to fund the acquisitions of EGO Eyewear and BoDe Design. Net finance costs include $0.5m (H1 2021: $0.2m) relating to the amortisation of capitalised loan arrangement fees.

Depreciation and amortisation

The increase in depreciation and amortisation is driven by the expansion and the assets owned by the Group.

	Period ended 30 June 2022	Period ended 30 June 2021
Depreciation	3.9m	4.1m
Amortisation	4.5m	3.5m
Total	8.4m	7.6m

Profit/(Loss) Before Tax

Profit before tax for the period of $0.8m is after charging $1.2m of non-underlying costs and a foreign exchange loss on borrowings of $2.1m, being a non-cash item.

Cash Generation

The Group generated a net cash inflow from operating activities of $10.1m in H1 2022 compared to S18.8m (H1 2021).

Cash Position

The Group's cash at 30 June 2022 was $30.6m compared to $33.8m at 30 June 2021.

Net Debt

The Group's net debt excluding leasing has decreased from $32.8m at 31 December 2021 to $26.2m as at 30 June 2022.

Leverage

The Group's leverage including leasing reduced by 5% from 1.9 at 31 December 2021 to 1.8 at 30 June 2022.

The Group's leasing increased in the first half due to a new lease on the offices in New York and the renewal of new leases for motor vehicles for the Group's sales staff. This increased our leasing liability under IFRS 16 from $22.4m as at 31 December 2021 to $24.5m as at 30 June 2022. Despite this, net debt including leasing reduced by $4.4m over the last 6 months.

Inventory

Our sales to inventory ratio has remained flat compared to 30 June 2021.

	Period ended 30 June 2022	Period ended 30 June 2021
Turnover	138.4m	125.7m
Inventory	51.5m	46.1m
Sales to inventory ratio	2.7	2.7

Current asset ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations, or those due within one year.

The Groups current asset ratio has decreased from 1.8 to 1.6 which reflects the additional borrowing taken out to acquire EGO Eyewear and BoDe Designs in late 2021.

	Period ended 30 June 2022	Period ended 30 June 2021
Current Assets	125.6m	117.8m
Current Liabilities	79.0m	66.0m
Ratio	1.6	1.8

Quick ratio

The quick ratio is an indicator of a company's short-term liquidity position and measures a company's ability to meet its short-term obligations with its most liquid assets.

The quick ratio has decreased in line with the current asset ratio, as they are driven by the same factor of additional borrowing to fund the acquisitions at the end of 2021.

	Period ended 30 June 2022	Period ended 30 June 2021
Current Assets	125.6m	117.8m
Less Inventory	(51.5)m	(46.1)m
	74.1	71.7
Current Liabilities	79.0m	66.0m
Ratio	0.9	1.1

Earnings per Share

The Group's underlying basic earnings per share of the 6 months to 30 June 2022 was $0.15 compared to $0.17 for the 6 months to 30 June 2021.

Underlying EBITDA

The below table shows how Underlying EBITDA is calculated:

				6 months ended 30 June 2022			6 months ended 30 June 2021 restated			12 months ended 31 December 2021
				$'000			$'000			$'000
	Revenue			138,359			125,746			246,471
	Gross Profit			69,825			55,615			115,771
	Operating expenses			(64,002)			(53,157)			(114,230)
	Operating profit			5,823			2,458			1,541
	Add back: Amortisation and impairment on intangible assets			4,548			3,451			11,020
	Add back: Depreciation			3,895			4,131			7,430
	EBITDA			14,266			10,040			19,991
	Add back: Share based payment expense			842			680			1,484
	Add back: Purchase price allocation (PPA) adjustment on Eschenbach inventory			-			6,104			5,991
	Add back: Underlying EBITDA (loss) for acquisitions in the period			-			-			90
	Underlying EBITDA			15,108			16,824			27,556
	Underlying Earnings per Share
				$			$			$
	Basic underlying Earnings per Share for the period attributable to the equity holders of the parent			0.15			0.17			0.27
	Diluted underlying Earnings per Share for the period attributable to the equity holders of the parent			0.14			0.16			0.26
Underlying EBITDA segmental information Underlying EBITDA by reportable segment (as defined in note 4) for the six months ended 30 June 2022 is as follows:   Frames and Wholesale Lenses Total before Adjustments   Total   Optics adjustments & & elimination eliminations   $'000   $'000 $'000 $'000 $'000     $'000 Revenue 126,806 16,200 2,424 145,430 (7,071) 138,359 Operating profit/(loss) 6,496 3,017 (2,845) 6,668 (845) 5,823 Add back: Amortisation 3,978 570 - 4,548 - 4,548 Depreciation 2,895 561 439 3,895 - 3,895 Share based payments 584 258 - 842 - 842 Underlying EBITDA 13,953 4,406 (2,406) 15,953 (845) 15,108 INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the period ended 30 June 2022
		Notes			Unaudited 6 months ended 30 June 2022				Unaudited restated 6 months ended 30 June 2021
					$'000				$'000
REVENUE		4			138,359				125,746
Cost of sales					(68,534)				(70,131)
GROSS PROFIT					69,825				55,615
Distribution costs					(3,568)				(1,774)
Administrative expenses					(60,434)				(51,383)
OPERATING PROFIT					5,823				2,458
Non-underlying costs		9			(1,202)				(1,248)
Exchange adjustments on borrowings					(2,093)				(3,619)
Share of profits of associates					(1)				-
Finance costs					(1,809)				(1,123)
Finance income					51				19
PROFIT/(LOSS) BEFORE INCOME TAX					769				(3,513)
Income tax					(3,547)				(324)
LOSS FOR THE PERIOD					(2,778)				(3,837)
OTHER COMPREHENSIVE INCOME:
Exchange adjustment on consolidation					(9,312)				3,963
TOTAL COMPREHENSIVE (LOSS)/PROFIT FOR THE PERIOD					(12,090)				126
Earnings per share
Basic EPS for the period attributable   to the equity holders of the parent		5			(0.03)				(0.04)
Diluted EPS for the period attributable   to the equity holders of the parent		5			(0.03)				(0.04)

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

As at 30 June 2022

			Note					Unaudited As at 30 June 2022 $'000							Unaudited restated As at 30 June 2021 $'000								Audited As at 31 December 2021 $'000
ASSETS
NON-CURRENT ASSETS
Goodwill								73,139							73,631								81,359
Intangible assets								46,793							50,738								54,454
Property Plant and equipment								46,885							42,620								46,838
Investment in associates								111							57								48
Deferred tax								9,936							12,352								12,540
								176,864							179,398								195,239
CURRENT ASSETS
Inventories								51,534							46,058								55,664
Trade and other receivables			6					41,946							37,689								42,229
Tax receivable								1,497							246								3,468
Cash and cash equivalents								30,585							33,834								29,759
								125,562							117,827								131,120
TOTAL ASSETS								302,426							297,225								326,359
EQUITY
SHAREHOLDERS' EQUITY
Called up share capital								1,389							1,384								1,389
Share premium								122,291							121,940								122,291
Foreign currency translation reserve								(6,494)							3,874								2,818
Share option reserve								2,843							1,547								2,001
Merger reserve								7,296							7,296								7,296
Retained earnings								6,651							10,592								9,429
TOTAL EQUITY								133,976							146,633								145,224
LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities - borrowings
Interest bearing loans and borrowings				8				64,511							63,191								69,194
Contingent and deferred consideration								7,680							-								8,505
Deferred tax								17,267							21,406								20,517
								89,458							84,597								98,216
CURRENT LIABILITIES
Trade and other payables				7				48,798							38,549								53,317
Right of return liability								10,793							12,331								11,100
Financial liabilities - borrowings
Interest bearing loans and borrowings				8				15,966							10,191								13,289
Invoice discounting				8				860							-								2,433
Tax payable								2,575							4,924								2,780
								78,992							65,995								82,919
TOTAL LIABILITIES								168,450							150,592								181,135
TOTAL EQUITY AND LIABILITIES								302,426							297,225								326,359

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the period ended 30 June 2022

	Called up share capital		Share premium		Foreign currency translation reserve		Share option reserve			Retained earnings	Merger reserve		Total equity
	$000		$000		$000		$000			$000	$000		$000
SIX MONTHS ENDED 30 JUNE 2022
Balance at 1 January 2022	1,389		122,291		2,818		2,001			9,429	7,296		145,224
Loss for the period	-		-		-		-			(2,778)	-		(2,778)
Other comprehensive loss	-		-		(9,312)		-			-	-		(9,312)
Total comprehensive loss	-		-		(9,312)		-			(2,778)	-		(12,090)
Share-based payments	-		-		-		842			-	-		842
Balance at 30 June 2022 (unaudited)	1,389		122,291		(6,494)		2,843			6,651	7,296		133,976
SIX MONTHS ENDED 30 JUNE 2021
Balance at 1 January 2021 (restated)	1,384		121,940		(89)		867			14,429	7,296		145,827
Loss for the period	-		-		-		-			(3,837)	-		(3,837)
Other comprehensive income	-		-		3,963		-			-	-		3,963
Total comprehensive loss	-		-		3,963		-			(3,837)	-		126
Share-based payments	-		-		-		680			-	-		680
Balance at 30 June 2021 (unaudited)	1,384		121,940		3,874		1,547			10,592	7,296		146,633
INTERIM CONSOLIDATED STATEMENT OF CASH FLOW For the period ended 30 June 2022
						Unaudited 6 months ended 30 June 2022			Unaudited restated 6 months ended 30 June 2021
						$000			$000
Cash flows from operating activities
Profit/(loss) before income tax						769			(3,513)
Depreciation charges						3,895			4,131
Amortisation charges						4,548			3,451
Share based payments						842			680
Exchange adjustments on borrowings						2,093			3,619
Loss from associate						1			-
Finance costs						1,809			1,123
Finance income						(51)			(19)
						13,906			9,472
(Increase)/decrease in inventories						(1,462)			10,128
(Increase)/decrease in trade and other receivables						(3,997)			4,017
Increase/(decrease) in trade and other payables						1,682			(4,862)
Cash generated from operations						10,129			18,755
Interest paid						(1,786)			(1,115)
Tax paid						(3,492)			-
Net cash flow from operating activities						4,851			17,640
Cash flows (used in)/from investing activities
Purchase of intangible fixed assets						(77)			(86)
Purchase of property plant and equipment						(1,330)			(2,697)
Interest received						51			19
Net cash flows (used in)/from investing activities						(1,356)			(2,764)
Cash flow from financing activities
Bank loan principal repayments in period						(2,909)			(3,102)
Principal payments on leases						(2,043)			(1,920)
New loans in the period						2,127			-
Net cash flows used in financing  activities						(2,825)			(5,022)
Net increase in cash and cash  equivalents						670			9,854
Cash and cash equivalents at  beginning of the period						29,759			23,776
Net foreign currency movements						156			204
Cash and cash equivalents  at end of period						30,585			33,834

NOTES TO THE INTERIM CONSOLIDATED STATEMENTS For the period ended 30 June 2022

1.  GENERAL INFORMATION

INSPECS Group plc is a public company limited by shares and is incorporated in England and Wales. The address of the Company's principal place of business is Kelso Place, Upper Bristol Road, Bath BA1 3AU.

The principal activity of the Group in the period was that of design, production, sale, marketing and distribution of high fashion eyewear and OEM products worldwide.

2.  ACCOUNTING POLICIES

Going concern

Based on the Group's forecasts considered in the light of the COVID-19 situation and current economic climate the Directors have adopted the going concern basis in preparing the interim financial statements.

The assessment has considered the Group's current financial position as follows:

• The Group improved its cash position during the period with net debt including leasing dropping from $(55.2)m at 31 December 2021 to $(50.8)m at 30 June 2022.

• Cash generated from operations in the period amounted to $10.1m (2021 H1: $18.8m).

• The Group has a strong balance sheet, with net assets of $134.0m and net current assets of $46.6m.

The assessment has considered the current measures being put in place by the Group to preserve cash and ensure continuity of operations through:

• Ensuring continuation of its supply chain buildings on the benefit of having its own manufacturing sites and by securing alternative third-party supply lines.

• Maintaining geographical sales diversification, focusing sales to online customers and seeking new revenue streams around the globe.

• Ability to service both the major global retail chains and significant distribution to the independent eyewear market following the acquisitions completed over the last two years.

Basis of preparation

The interim consolidated financial statements for the six months ended 30 June 2022 have been prepared in accordance with IAS 34 Interim Financial Reporting and with accounting policies that are consistent with the Group's Annual Report and Financial Statements for the period ended 31 December 2021.

The comparative financial information for the period ended 30 June 2021 in this interim report does not constitute statutory accounts for that period under 434 of the Companies Act 2006 and is unaudited.

Accounting policies are included in detail within the latest Annual Report.

3.  CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The preparation of the Group's historical information requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities in the future.

Estimation uncertainty

In addition to the impact of COVID-19 discussed within the going concern section of note 2, the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are described below.

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 addition to the underlying tax liability. As a result, the Group has made a provision of $672,000 as at 30 June 2022 ($3,067,000 as at 30 June 2021), in line with the accounting methodology used as at 31 December 2021.

4.  SEGMENT INFORMATION

The Group operates in three operating segments, which upon application of the aggregation criteria set out in IFRS 8 Operating Segments results in three reporting segments:

• Frames and Optics (previously Branded) product distribution.

• Wholesale - being OEM and manufacturing distribution.

• Lenses - being manufacturing and distribution of lenses.

The criteria applied to identify the operating segments are consistent with the way the Group is managed. In particular, the disclosures are consistent with the information regularly reviewed by the CEO and the CFO in their role as Chief Operating Decision Makers, to make decisions about resources to be allocated to the segments and to assess their performance.

The reportable segments subject to disclosure are consistent with the organisation model adopted by the Group during the six months ended 30 June 2022 are as below:

	Frames and		Wholesale		Lenses			Total before				Adjustments				Total
	Optics							adjustments &				& elimination
								eliminations
	$'000		$'000		$'000			$'000				$'000				$'000
Revenue
External	122,988		13,095		2,276			138,359				-				138,359
Internal	3,818		3,105		148			7,071				(7,071)				-
	126,806		16,200		2,424			145,430				(7,071)				138,359
Cost of sales	(63,583)		(8,860)		(1,970)			(74,413)				5,879				(68,534)
Gross profit	63,223		7,340		454			71,017				(1,192)				69,825
Expenses	(56,727)		(4,323)		(3,299)			(64,349)				347				(64,002)
Operating profit/(loss)	6,496		3,017		(2,845)			6,668				(845)				5,823
Exchange adjustment   on borrowings															(2,093)
Non-underlying   costs															(1,202)
Finance costs															(1,809)
Finance income															51
Loss of associate															(1)
Taxation															(3,547)
Loss for the period															(2,778)

Reported segments relating to the balance sheet as at 30 June 2022 are as follows:

	Frames and		Wholesale		Lenses			Total before				Adjustments				Total
	Optics							adjustments &				& elimination
								eliminations
	$'000		$'000		$'000			$'000				$'000				$'000
Total assets	406,690		75,084		12,489			494,263				(201,773)				292,490
Total liabilities	(302,238)		(7,914)		(12,626)			(322,778)				254,647				(68,131)
	104,452		67,170		(137)			171,485				52,874				224,359
Deferred tax asset																9,936
Deferred tax liability															(17,267)
Current tax liability															(2,575)
Borrowings															(80,477)
Group net assets															133,976

Total assets are the Group's gross assets excluding deferred tax asset. Total liabilities are the Group's gross liabilities excluding loans and borrowings, and deferred tax liability.

The reportable segments subject to disclosure are consistent with the organisation model adopted by the Group during the six months ended 30 June 2021 are as below:

	Frames and		Wholesale		Lenses			Total before				Adjustments				Total
	Optics							adjustments &				& elimination
								eliminations
	$'000		$'000		$'000			$'000				$'000				$'000
Revenue
External	109,233		12,261		4,252			125,746				-				125,746
Internal	1,216		1,382		26			2,624				(2,624)				-
	110,449		13,643		4,278			128,370				(2,624)				125,746
Cost of sales	(60,471)		(9,442)		(2,473)			(72,386)				2,255				(70,131)
Gross profit	49,978		4,201		1,805			55,984				(369)				55,616
Expenses	(48,865)		(1,988)		(2,598)			(53,451)				294				(53,157)
Operating profit/(loss)	1,113		2,213		(793)			2,533				(75)				2,458
Exchange adjustment   on borrowings															(3,619)
Non-underlying   costs - acquisitions															(1,248)
Finance costs															(1,123)
Finance income															19
Taxation															(324)
Loss for the period															(3,837)

Reported segments relating to the balance sheet as at 31 December 2021 are as follows:

	Frames and		Wholesale		Lenses			Total before				Adjustments				Total
	Optics							adjustments &				& elimination
								eliminations
	$'000		$'000		$'000			$'000				$'000				$'000
Total assets	436,102		75,568		13,986			525,656				(211,837)				313,819
Total liabilities	(327,303)		(7,444)		(10,813)			(345,560)				270,205				(75,355)
	108,799		68,124		3,173			180,096				58,368				238,464
Deferred tax asset																12,540
Deferred tax liability															(20,517)
Current tax liability															(2,780)
Borrowings															(82,483)
Group net assets															145,224

Total assets are the Group's gross assets excluding deferred tax asset. Total liabilities are the Group's gross liabilities excluding loans and borrowings, and deferred tax liability.

Acquisition costs, finance costs and income, and taxation are not allocated to individual segments as the underlying instruments are managed on a Group basis.

Deferred tax and borrowings are not allocated to individual segments as they are managed on a Group basis.

Adjusted items relate to elimination of all intra-Group items including any profit adjustments on intra-Group 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.

The revenue of the Group is attributable to the one principal activity of the Group.

Geographical analysis

The Group's revenue by destination is split in the following geographic areas:

			Unaudited 6 months ended 30 June 2022		Unaudited 6 months ended 30 June 2021
			$'000s		$'000s
United Kingdom			12,995		12,339
Europe (excluding UK)			71,061		68,721
North America			45,487		40,968
South America			461		169
Asia			6,701		2,369
Australia			1,654		1,180
			138,359		125,746

5.  EARNINGS PER SHARE

Basic Earnings per Share ("EPS") is calculated by dividing the profit for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares, to the extent that the inclusion of such shares is not anti-dilutive. During the periods ended 30 June 2022 and 30 June 2021 the Group made a loss; therefore, diluted EPS is not applicable as the impact of potential ordinary shares is anti-dilutive. Basic earnings per share is therefore $(0.03) (30 June 2021 restated: $(0.04)), with diluted earnings per share $(0.03) (30 June 2021 restated: $(0.04)). The following table reflects the income and share data used in the basic and diluted EPS calculations:

			30 June 2022		30 June 2021 Restated
SHARES
			$'000		$'000
Loss attributable to the
equity holders of the parent for basic earnings			(2,778)		(3,837)
			Number of shares		Number of shares
Weighted average number of
shares for basic EPS			101,671,525		101,290,898
Effect of dilution from:
Share options			5,356,247		4,211,782
Weighted average number of shares
adjusted for the effect of dilution			107,027,772		105,502,680
Within INSPECS Group plc, each Ordinary share carries the right to participate in distributions, as respects dividends and as respects capital on winding up.

6.  TRADE AND OTHER RECEIVABLES

			Unaudited As at 30 June 2022		Unaudited As at 30 June 2021		As at 31 December 2021
			$'000		$'000		$'000
Trade receivables			30,413		27,000		29,362
Prepayments			3,971		2,859		3,396
Other receivables			7,562		7,830		9,471
			41,946		37,689		42,229

7.  TRADE AND OTHER PAYABLES

	Unaudited			Unaudited		As at   31 December 2021
	As at			As at
	30 June 2021			30 June 2021
	$'000			$'000		$'000
Trade payables	27,282		19,678				32,801
Amounts owed to related parties	224		147				196
Other payables	587		614				934
Social security and other taxes	5,579		6,380				5,776
Royalties & provisions	6,870		2,453				4,435
Accruals	8,256		9,277				9,175
	48,798			38,549		53,317

8.  NET DEBT

	Unaudited			Unaudited		As at   31 December 2021
	As at			As at
	30 June 2022			30 June 2021
	$'000			$'000		$'000
Cash and cash equivalents		30,585		33,834			29,759
Interest bearing borrowings excl. leasing		(55,974)		(54,630)			(60,092)
Invoice discounting		(860)		-			(2,433)
Net debt excluding leasing		(26,249)		(20,796)			(32,766)
Lease liability		(24,503)		(18,752)			(22,391)
Net debt including leasing	(50,752)			(39,548)		(55,157)

9.  NON-UNDERLYING COSTS

Non-underlying costs in the period relate to accounting alignment of acquisitions which occurred in 2021 as well as work on ongoing acquisition and restructuring.

10.  SHARE-BASED PAYMENTS

Certain employees of the Group are granted options over the shares in INSPECS Group. The options are granted with a fixed exercise price and have vesting dates of between one and three years after date of grant.

The Group recognises a share-based payment expense based on the fair value of the awards granted, and an equivalent credit directly in equity to share option reserve. On exercise of the shares by the employees, the Group is charged the intrinsic value of the shares by INSPECS Group plc and this amount is treated as a reduction of the capital contribution, and it is recognised directly in equity.

Share options outstanding at the end of the period have the following expiry date and exercise prices:

Grant date

Expected life of options

Exercise price per option $

Number of share options

11 October 2019		3-5 years	1.27	412,102
27 February 2020		3-5 years	2.52	1,923,110
22 December 2020		3-5 years	2.87	1,460,000
26 February 2021		3-5 years	2.93	100,000
26 February 2021		3-5 years	4.53	641,036
21 June 2021		3-5 years	4.87	90,000
31 August 2021		3-5 years	5.09	275,000
23 December 2021		3-5 years	4.95	454,999

The exercise price under each option agreement is denominated in GBP, with the USD balance shown above converted at the rate the option was issued.

11.  RESTATED UNDERLYING EBITDA

The 2021 Annual Report and Accounts included restated primary statements for the year to 31 December 2020 relating to prior year adjustments in Tura Inc. The 30 June 2021 comparative primary statements have also been restated within these interims, with the impact on Underlying EBITDA for the six months to 30 June 2021 being as follows:

		$'000
Underlying EBITDA 30 June 2021 interims as released	17,708
Adjustments relating to freight and scrappage	(884)
Restated underlying EBITDA 30 June 2021	16,824

12.  POST BALANCE SHEET EVENTS

Since the end of the interim period on 30 June 2022 there were no material events that the directors consider material to the users of these interim statements.

 

END

 

 

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