TIDMMRK
RNS Number : 6223T
Marks Electrical Group plc
16 November 2023
Marks Electrical Group plc
Results for the six months ended 30 September 2023
Continued trading momentum driven by premium next-day service
offerings
Marks Electrical Group plc ("Marks Electrical" or "the Group"),
a fast growing online electrical retailer, today announces its
unaudited results for the six months ended 30 September 2023 ("the
Period" or "H1-24" or "first half").
Financial highlights
-- Strong first half trading period with revenue growth of 24.8% to GBP53.9m (H1-23 GBP43.1m)
-- Adjusted EBITDA(1) of GBP2.3m (H1-23 GBP2.7m), with the
strategic decision to introduce our own installation service,
combined with inflationary pressures in distribution costs
impacting H1 margins, but expect this pressure to ease over H2 as
we benefit from improved operating leverage during the seasonal
peak trading period
-- Continued focus on working capital management, reducing
inventory days from 82 in H1-23 to 64 in H1-24 and driving a strong
operating cash conversion of 145% (H1-23 189%)
-- Free cash flow of GBP1.7m (H1-23 GBP4.5m), with GBP1.4m
invested in our vehicle fleet and distribution centre
-- Adjusted EPS of 1.11p (H1-23 1.66p)(3) , Statutory EPS of 0.83p (H1-23 1.66p)
-- Robust, debt-free balance sheet with closing net cash
position of GBP10.9m (H1-23 GBP7.7m), supporting an interim
dividend maintained at 0.30p per share (H1-23 0.30p), to be be paid
on 22 December 2023 to shareholders who are on the register at the
close of business on 1 December 2023, and shares will be marked
ex-dividend on 30 November 2023
Operational highlights
-- Growth in Major Domestic Appliances ("MDA") market share from
2.4% in H1-23 to 2.9% in H1-24, with our share in the online
segment of the market growing from 4.5% to 5.4%(4)
-- Growth in Consumer Electronics ("CE") market share from 0.3%
in H1-23 to 0.5% in H1-24, with our share in the online segment of
the market growing from 0.6% to 0.9%(4)
-- Strong performance driven across all major product categories
with particularly high growth in televisions (+71%), washer-dryers
(+74%) and American fridge-freezers (+36%)
-- Developed the Marks Electrical Academy, a purpose-built
training facility, where our drivers and installers are trained on
integrated, gas, electrical and freestanding connections and
appliance installations
-- Rapid growth in our premium service offerings with the
attachment rate for installation and connection services having
improved from 9% of all orders in H1-23 to over 15% in H1-24
-- Began the implementation of a new ERP system expected to complete in FY25
-- Proudly maintained our industry leading Trustpilot score of
4.8, reaching over 55,000 reviews with 95% of those reviews being 4
and 5 star, demonstrating the strength of our best-in-class
customer proposition
Outlook
-- Continued double-digit revenue growth in October and a strong
start to November leaves us well positioned for both the peak
Christmas trading period and to achieve our full year targets
Mark Smithson Chief Executive Officer, commented:
"We've made a strong start to the year with the Group's sales up
24.8%, whilst also delivering multiple operational improvements to
further enhance the customer experience. This relentless focus on
operational excellence and customer service has enabled us to
continue to gain share in a very competitive market, growing our
share in the first half from 2.4% to 2.9% of the overall MDA market
and from 4.5% to 5.4% in the online segment.
Our strategic decision to add in-house installation services to
our offering has strengthened the Group's premium service
proposition, alongside the creation of our own ME Academy training
facility. These additions, whilst margin dilutive in the short
term, will enable the Group to deliver long-term value creation and
position us as the UK's leading premium electrical retailer.
Despite the first half margin pressure, which occurred within
distribution costs, we continued to remain disciplined on marketing
costs, maintained our focus on overhead cost control and are
continuing to gain market share profitably, a key differentiator of
our growth strategy.
Our market-leading customer service and next day delivery,
combined with in-house installation expertise through our
vertically integrated operating model, provides a compelling and
unique offering, that sets us apart from the competition.
As momentum builds going into the peak trading period, with
continued double-digit revenue growth in October and a strong start
to November, our focus on operational excellence and customer
service, combined with our strong net cash position, provides us
with a robust platform to improve profitability in the second half
and achieve our full year targets."
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2023
2023 2022 GBP000
Key financial highlights: GBP000 GBP000
----------------------------------- ------------- ------------- ----------
Revenue 53,858 43,146 97,754
Adjusted EBITDA (1) 2,312 2,704 7,549
Adjusted EBITDA margin 4.3% 6.3% 7.7%
Adjusted EBIT 1,501 2,130 6,242
Adjusted EBIT margin 2.8% 4.9% 6.4%
Adjusted profit after tax 1,203 1,741 5,067
Adjusted earnings per share(3) 1.11p 1.66p 4.82p
Operating profit 914 2,031 5,938
Operating margin 1.7% 4.7% 6.1%
Statutory profit after tax 873 1,738 5,157
Statutory earnings per share 0.83p 1.66p 4.91p
Operating cash flow for conversion
(5) 3,358 5,117 8,886
Operating cash conversion 145% 189% 118%
Free cash flow 1,703 4,523 7,117
Net cash (6) 10,901 7,692 9,972
Return on Capital Employed
(2) 37% 49% 41%
(Notes)
(1) Adjusted EBITDA is a non-statutory measure defined as
earnings before interest, tax, depreciation, and amortisation and
adjusted for exceptional items, share-based payment charges and
revaluation of investments.
(2) Return on Capital Employed (ROCE) is defined as Adjusted
EBIT / (Total Assets - Current liabilities)
(3) Adjusted EPS is a non-statutory measure of profit after tax,
adjusted for exceptional items, ERP replacement project,
share-based payment charges and revaluation of investments, over
the total diluted ordinary number of shares in issue.
(4) Based on the Group's analysis of GfK Market Intelligence
sales tracking GB data, Major Domestic Appliances. During the year
GfK reclassified floorcare from major domestic appliances to small
domestic appliances. As such the current year 2.9% is on the new
definition and the prior year 2.0% has been restated and is now
2.4%.
(5) Operating cash flow for cash conversion is defined as cash
generated from operations less outflows for lease payments and
exceptional items
(6) Net cash/(debt) represents cash and cash equivalents less
financial liabilities (excluding lease liabilities)
Results presentations
A live online presentation for sell-side analysts hosted by Mark
Smithson, CEO, and Josh Egan, CFO, will take place at 9.30am this
morning. Please contact markselectrical@dentonsglobaladvisors.com
for further information.
In addition, management will also provide a live online
presentation for investors at 2pm on 20 November 2023. The online
event is open to all existing and potential shareholders and
registration is free. Questions can be submitted during the
presentation and will be addressed at the end. To register, please
go to: link to sign up .
A recording of the presentation will be available shortly after
the event at this link: Marks Electrical content page .
Enquiries:
Marks Electrical Group plc
Via Dentons Global Advisors:
Mark Smithson, CEO
Tel: +44 (0)20 7664 5095
Josh Egan, CFO
Dentons Global Advisors (Financial PR)
Jonathan Brill / James Styles / Nishad Sanzagiri
Tel: +44 (0)20 7664 5095
markselectrical@dentonsglobaladvisors.com
Canaccord Genuity (NOMAD and Broker)
Max Hartley / George Grainger (NOMAD) / Kit Stephenson (Sales)
Tel: +44 (0) 207 886 2500
About Marks Electrical
Marks Electrical is a fast growing, highly scalable premium
electrical retailer which sells, delivers, installs and recycles a
wide range of household electrical products. The Group was founded
in Leicester in 1987 by Mark Smithson and has scaled into a
nationwide online retailer with a compelling growth track record,
thanks to its vertically integrated, low-cost, high-quality
operating model, supported by the ongoing structural shift of
consumers to purchase online. The Group operates within the UK
Major Domestic Appliances (MDA) and Consumer Electronics (CE)
market, estimated to be worth approximately GBP7 billion.
Primarily through its simple, clear and intuitive website -
markselectrical.co.uk - the Group offers over 4,500 products from
over 50 leading brands across its main product categories, which
include Cooking, Refrigeration, Washers & Dryers, Dishwashers
and Audio-Visual. These products are sourced from UK distributors
of the brands, with whom the Group maintains strong and direct
relationships. Marks Electrical delivers direct to customers in its
owned and branded vehicles, operated by the Group's skilled team of
delivery drivers, who are also able to offer installation and
recycling services.
For further information, visit the Marks Electrical corporate
website: https://group.markselectrical.co.uk and its retail
website: https://markselectrical.co.uk/.
Group CEO review
We've made a strong start to the year with the Group's sales up
24.8%, whilst also delivering multiple operational improvements to
enhance the customer experience.
Our strategic decision to add in-house installation services to
our offering has strengthened the Group's premium service
proposition, alongside the creation of our own "ME Academy"
training facility. These additions, whilst margin dilutive in the
short term, will enable the Group to deliver long-term value
creation and position us as the UK's leading premium electrical
retailer.
We proudly maintained our industry leading Trustpilot score of
4.8, reaching over 55,000 reviews with 95% of those reviews being 4
and 5 star, demonstrating the strength of our best-in-class
customer proposition and the continued focus that our teams across
the business put into delivering an excellent customer
experience.
Market share
Our primary focus remains on the Major Domestic Appliances (MDA)
segment, where we gained 50bps of market share from 2.4% to 2.9%
during our first half, with a greater improvement in the online
segment from 4.5% to 5.4%. This was a strong performance against a
relatively stable MDA market.
In Consumer Electronics (CE), we made further advances from 0.3%
to 0.5% market share, with our online market share growing from
0.6% to 0.9%. This still represents a very small market share and
we are excited about the growth opportunities ahead.
Despite the growth in our TV business being over 70%+ in the
first half, and with this being typically lower margin sales than
our core MDA business, thanks to our tight operational grip, we
were able to maintain our gross product margin at 24.9% with the
minor decline from 25.2% in H1-23 being driven by the CE mix
impact.
Strategic growth initiatives
Our strategy is to become the UK's leading premium electrical
retailer. To achieve this, we split our focus into four key
areas:
1. Customer proposition
Our unique operating model distinguishes us in the Major
Domestic Appliances sector, consistently providing next-day
delivery services for in-stock items to over 90% of the UK
population. Along with this, our installation services, covering
gas, electric, integrated and television installations, further
enhance our customer proposition and are available to over 70% of
the UK population.
During H1-24 we have seen significant growth in our premium
next-day service offerings with installation services achieving
over 7,000 installation orders in the first half, vs. 2,500 in the
prior year (+180%), and over 11,000 freestanding connection
services vs. 5,000 in the prior year (+120%). All of this whilst
maintaining our industry leading Trustpilot score of 4.8.
Our strategic partnerships with a diverse range of premium
brands, combined with our focus on best-in-class, in-house
installation and connection services, enables us to deliver an
excellent customer offering and positions us favourably to continue
gaining profitable market share.
Our customer proposition centres around the vertical integration
of our delivery model, using our own fleet of vehicles, employed
drivers and installers, enhanced by our in-house training facility
ME Academy, enabling us to deliver high standards of installation
and connection training to improve the customer experience.
2. Brand awareness
We have continued to invest in our brand awareness campaigns
during H1-24, with further activity in television, radio and
out-of-home advertising, including:
-- Continued investment in television marketing, including Sky
and Channel 4, introducing a range of new adverts throughout the
period featuring our mascot MRK 1;
-- Strategically investing in radio ads with stations that fit
our customer demographic, to target premium product sales;
-- Out-of-home focus located in areas of strategic importance for maximum impact; and
-- Increased presence on social media platforms.
We served over 100,000 customers during H1-24 with 24.5% of
these being returning customers. This demonstrates our market
leading customer service levels driving repeat business once
someone has come into contact with the Marks Electrical brand.
3. Operational capacity
In H1-24, we completed significant enhancements to our warehouse
and distribution centre. We invested in improved racking and very
narrow aisle (VNA) systems, optimising capacity and expediting
order picking. Additionally, we increased our loading and unloading
capacity by introducing new dock levellers. These levellers allow
for efficient rear unloading of HGVs, substantially reducing
unloading times, and increasing our stock throughput capacity for
outbound loading.
We developed our in-house vehicle maintenance centre by
acquiring new equipment and expanding our team, resulting in
increased vehicle availability and reduced fleet downtime, with
fewer vehicles off-site for extended periods.
We increased our delivery capacity by adding 20 new vehicles,
supporting the rapid growth of our installation team. Additional
delivery vehicles are scheduled for delivery in H2-24, further
enhancing our delivery capacity and demonstrating our confidence in
the growth opportunities ahead.
4. Financial performance
Our financial performance has been robust with 24.8% revenue
growth and gross product margin of 24.9% in H1-24, highlighting the
strength of our product and customer value proposition.
The strategic decision to introduce our own installation
service, combined with inflationary pressures in distribution costs
impacted H1-24 margins, but we expect this pressure to ease over
H2-24 as we benefit from improved operating leverage during the
peak trading period.
Our laser-focus on working capital management continued and we
were able to improve inventory efficiency, reducing inventory days
from 82 days in H1-23 to 64 days in H1-24. We have delivered an
operational cash conversion of 145%, finishing the period with a
net cash position of GBP10.9m, demonstrating the highly cash
generative nature of our operating model.
We believe that the combination of profitable growth, high
return on capital, and dividend income offers an attractive
proposition for total shareholder returns.
Outlook - well placed to deliver profitable market share
growth
Our current share of the UK MDA market of 2.9% and online share
of 5.4% continues to provide significant scope and opportunity for
growth. Our market-leading customer service and next day delivery,
combined with in-house installation expertise through our
vertically integrated operating model, provides a compelling and
unique offering, that sets us apart from the competition.
As momentum builds going into the peak trading period, with
continued double-digit revenue growth in October and a strong start
to November, our focus on operational excellence and customer
service, combined with our net cash position, provides us with a
robust platform to improve profitability in the second half and
achieve our full year targets.
Mark Smithson
Chief Executive Officer
Financial review
The Group made a strong start to FY24, against a broadly flat
market back-drop. Sales growth was widespread across product
categories, with notable increases in televisions, washer dryers,
ovens, and energy-efficient major domestic appliances. Throughout
this period, we maintained our focus on profitable market share
expansion, despite headwinds in distribution and installation
costs. While these factors put pressure on H1-24 margins, we expect
this to ease over H2-24 as we benefit from operating leverage in
the peak trading period.
In order to help improve understanding of the income statement
dynamics, we have added additional disclosure and are now reporting
gross product profit margin and distribution and installation costs
as separate line items.
Revenue and gross product profit
In H1-24 the Group delivered a strong revenue performance, up
24.8% to GBP53.9 million. Gross product profit margin was 24.9%,
down 30bps from H1-23, driven by product mix as a result of our
70%+ growth in television which typically attracts a lower margin
than Major Domestic Appliances (MDA).
We expect an improvement in gross product profit margin in
H2-24, as we enter the peak trading period.
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2023
2023 2022 GBP000
GBP000 GBP000
---------------------------- ------------- ------------- ----------
Revenue 53,858 43,146 97,754
Cost of Sales* (40,471) (32,294) (71,543)
----------------------------- ------------- ------------- ----------
Gross product profit 13,387 10,852 26,211
Gross product profit margin 24.9% 25.2% 26.8%
----------------------------- ------------- ------------- ----------
*The presentation of cost of sales and gross profit has been
redefined in the H1-24 results and comparatives have been amended.
This change splits our gross product profit and distribution and
installation costs. This decision was made to aid the
understandability of movements within gross margin for the users of
the financial statements.
Distribution and installation costs
The strategic decision to introduce our own installation
service, combined with inflationary pressures in driver costs
impacted our H1-24 distribution and installation cost base. The
200bps cost increase from 7.1% of sales to 9.1% of sales was the
main contributor to the overall Group EBITDA margin decline in the
first half.
Whilst the addition of in-house installation services are margin
dilutive in the short term, the services are now break even,
whereas outsourcing the services in the prior year was a
loss-making activity in order to generate the product sale, which
we considered to be unsustainable. As the business grows and
density improves, there will be improved operating leverage on the
installation cost base.
Long-term, having this service vertically integrated strengthens
our proposition, enhancing the overall value opportunity and
assisting in positioning us as the UK's leading premium electrical
retailer.
We expect distribution and installation costs in H2-24 to be
broadly similar to H1-24, as a percentage of sales.
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2023
2023 2022 GBP000
GBP000 GBP000
Distribution & installation
costs (4,907) (3,043) (7,249)
----------------------------- ------------- ------------- ----------
Distribution & installation
costs as % of revenue 9.1% 7.1% 7.4%
----------------------------- ------------- ------------- ----------
Advertising and marketing costs
During H1-24, advertising and marketing costs remained
consistent year-on-year, at 5.6% of revenue. Marketing was
allocated across various channels, including digital marketing,
social, TV, radio and out-of-home campaigns in order to ensure we
managed the correct mix of performance marketing and brand
awareness.
We anticipate a slightly lower level of investment in
advertising & marketing in H2-24 to keep us on track for our
5.0% of sales target and to leverage the investments made in the
first half.
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2023
2023 2022 GBP000
GBP000 GBP000
-------------------------------- ------------- ------------- ----------
Revenue 53,858 43,146 97,754
Advertising and marketing costs (2,995) (2,421) (4,906)
--------------------------------- ------------- ------------- ----------
Advertising and marketing as
% of revenue 5.6% 5.6% 5.0%
--------------------------------- ------------- ------------- ----------
Other operating expenses (excluding depreciation)
Other operating expenses decreased as a percentage of revenue to
5.9% in H1-24 versus 6.3% in H1-23, and 6.7% in FY23, as we
retained a tight control on our operating cost base.
We anticipate improved operating leverage in H2-24, keeping us
in line with stated full year target of 5.5 - 6.5% of revenue.
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2023
2023 2022 GBP000
GBP000 GBP000
---------------------------- ------------- ------------- ----------
Revenue 53,858 43,146 97,754
Other operating expenses (3,173) (2,684) (6,507)
----------------------------- ------------- ------------- ----------
Other operating expenses as
% of revenue 5.9% 6.2% 6.7%
----------------------------- ------------- ------------- ----------
Adjusted earnings before Interest, Tax, Depreciation and
Amortisation ("EBITDA")
The Group achieved Adjusted EBITDA for the period of GBP2.3m
representing a margin of 4.3%, down 200bps against H1-23. This
decrease in margin year on year is a direct result of the increase
in distribution and installation costs as previously detailed.
We anticipate an improvement in Adjusted EBITDA margin in H2-24,
as we benefit from peak trading and improved operating
leverage.
Six months Six months
ended ended
30 September 30 September
2023 2022
GBP000 GBP000
----------------------------------- ------------- -------------
Statutory profit after tax 873 1,738
Addback:
Tax 291 379
Net finance (income)/costs (55) 32
ERP costs 439 -
Share based payment costs 149 99
Less:
Revaluation of investments (195) (118)
------------------------------------ ------------- -------------
Adjusted EBIT 1,502 2,130
------------------------------------ ------------- -------------
Depreciation and amortisation 772 619
(Profit)/Loss on disposal of fixed
assets 38 (45)
------------------------------------ ------------- -------------
Adjusted EBITDA 2,312 2,704
------------------------------------ ------------- -------------
Adjusted EBITDA margin 4.3% 6.3%
------------------------------------ ------------- -------------
Statutory Profit after tax
During the year statutory profit after tax was GBP0.9m, down
GBP0.8m versus H1-23 at GBP1.7m. This decrease is primarily due to
increased distribution and installation costs and exceptional costs
incurred in relation to our ERP implementation project.
ERP implementation project
During the period we incurred costs of GBP0.4m in relation to
our ERP implementation project, which is anticipated to span FY24
and FY25. For the purposes of aiding comparability, these costs are
removed from adjusted financial performance measures. During the
period the project had a cash outflow of GBP0.2m due to invoice
timing.
Share-based payments
The Group issued new awards under its long-term incentive plan
during the year to senior and junior management. This,
combined with the market value options and free shares awarded
in FY23 resulted in a P&L charge of GBP0.1m (2023:
GBP0.1m).
This charge and related professional fees are removed from
adjusted financial performance measures.
Depreciation
Depreciation has increased to GBP0.8m (H1-23: GBP0.6m), this was
driven by:
-- Fleet modernisation and growth to accommodate the increase in sales volumes; and
-- Leasehold improvements including; office refurbishment to
increase capacity, dock levellers, the ME Academy training facility
and new racking to improve warehouse efficiency.
Six months Six months Year ended
ended ended 31 March
30 September 30 September 2023
2023 2022 GBP000
GBP000 GBP000
------------------------------ ------------- ------------- ----------
Right of use assets: vans 203 228 455
Right of use assets: property 282 283 566
Property, plant and equipment 287 108 326
------------------------------- ------------- ------------- ----------
Total Depreciation 772 619 1,347
------------------------------- ------------- ------------- ----------
Taxation
Tax expense is recognised based on management's best estimate of
the average annual income tax rate expected for statutory
the pre-tax income of the interim period. The expense for the
six months ended 30 September 2023 is GBP291,000 (H1-23:
GBP379,000). The Group's adjusted consolidated effective tax rate
for the six months ended 30 September 2023 is 25.0% (H1-23: 17.9%)
in line with the increase in the corporation tax rate from 19% to
25% effective from 1 April 2023. The deferred tax liability is
expected to reverse within 36 months.
Earnings per share
Basic earnings per share ("EPS"), which is calculated for both
the current and comparative period based upon the weighted average
number of shares in the year, is 0.83p per share (H1-23: 1.66p per
share).
Adjusted EPS is 1.11p per share (H1-23: 1.66p per share), the
table below shows the reconciliation between statutory and adjusted
earnings per share. See Note 3 to the financial statements for
further details.
Six months Six months
ended ended
30 September 30 September
2023 2022
GBP000 GBP000
---------------------------------------- ------------- -------------
Statutory profit after tax 873 1,738
Addback:
Exceptional items 439 -
Tax effect of exceptional items (110) -
----------------------------------------- ------------- -------------
Underlying profit for the period 1,202 1,738
Charges relating to share-based
payments net of tax 111 99
Fair value gains net of tax (146) (89)
Adjusted profit for earnings per share 1,167 1,748
----------------------------------------- ------------- -------------
Fully diluted number of ordinary shares 105,248,083 104,949,050
Adjusted earnings per share 1.11p 1.66p
----------------------------------------- ------------- -------------
Cashflow and statement of financial position
During H1-24 the Group achieved and adjusted cash flow from
operations of GBP3.8m and free cash flow of GBP1.7m. This
operational cashflow generation is primarily due to working capital
improvements, including the negotiation of new terms with suppliers
enabling a GBP2.5m increase in payables, and improved efficiency in
inventory turn through a reduction in inventory days.
During the period, the Group has made selected capital
investments to accommodate growth, including the conversion of a
new office space, increased fleet capacity through the addition of
20 more vehicles, and warehouse improvements to increase efficiency
and stock capacity. In addition to operational improvements, during
the period we developed the ME Academy, a bespoke, purpose-built
in-house training centre for our drivers and installers. In H1-24
the total capital expenditure amounted to GBP1.4m (H1-23:
GBP0.08m).
The Group closed the period in a net cash position of GBP10.9m
versus GBP10.0m at FY23 and GBP7.7m at H1-23.
Six months Six months
ended ended
30 September 30 September
2023 2022
GBP000 GBP000
------------------------------------ ------------- -------------
Underlying profit before tax 1,603 2,117
Addback:
Finance (income)/costs (55) 32
(Profit)/Loss on disposal of fixed
assets 38 (45)
Depreciation and amortisation 772 619
Revaluation of investments (195) (118)
Share based payment cost 148 99
(Increase)/decrease in inventories 227 60
(Increase)/decrease in receivables (993) (542)
Increase/(decrease) in payables 2,533 3,379
Payables movement in relation to
ERP (236) -
------------------------------------- ------------- -------------
Underlying cash flow from operating
activities 3,842 5,601
------------------------------------- ------------- -------------
Less:
Outflows for lease payments (484) (484)
------------------------------------- ------------- -------------
Underlying operating cash flow
for conversion 3,358 5,117
------------------------------------- ------------- -------------
Operating cash conversion 145% 189%
Investing activities (1,350) (82)
Tax paid (350) (475)
Interest received/(paid) 45 (37)
Underlying free cash flow 1,703 4,523
------------------------------------- ------------- -------------
Events after the reporting period
There have been no material events to report after the end of
the reporting period.
Current trading and outlook
Whilst the addition of in-house installation services and driver
cost increases added pressure to the first half margin, we believe
that long-term, having these services vertically integrated
enhances the overall value creation and assists in positioning us
as the UK's leading premium electrical retailer. Furthermore, a s
we benefit from improved gross product profit margin and operating
leverage during the peak trading period in H2-24, we expect to
improve our Adjusted EBITDA margin and remain on track to achieve
our full year targets.
Consolidated Statement of comprehensive income
Six months ended 30 September 2023
Six months Six months Six months Six months
ended ended ended ended Year ended
30 September 30 September 30 September 30 September 31 March
2023 2023 2023 2022 2023
Underlying Non-underlying Statutory Statutory Statutory
Notes GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Revenue 53,858 - 53,858 43,146 97,754
Cost of Sales * (40,471) - (40,471) (32,294) (71,543)
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Gross product profit
* 13,387 - 13,387 10,852 26,211
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Distribution costs* (4,907) - (4,907) (3,043) (7,249)
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Gross profit * 8,480 - 8,480 7,808 18,962
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Administrative expenses (6,979) - (6,979) (5,678) (13,024)
Share based payment expenses (148) - (148) (99) -
Operating exceptional
charges 6 - (439) (439) - -
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Total administrative
expenses (7,127) (439) (7,566) (5,777) (13,024)
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Operating profit 1,353 - 914 2,031 5,938
Fair value gains through
the profit and loss 195 - 195 118 481
Finance income 79 - 79 - 71
Finance expenses (24) - (24) (32) (67)
Profit before income
tax 1,603 (439) 1,164 2,117 6,423
Tax on profit 4 (401) 110 (291) (379) (1,266)
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Profit for the financial
period 1,202 (329) 873 1,738 5,157
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Other comprehensive income - - - -
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Total comprehensive income
for the period 1,202 (329) 873 1,738 5,157
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
Earnings per share
Statutory basic and diluted
earnings per share - - 0.83p 1.66p 4.91p
----------------------------- ----- ------------- --------------- ------------- ------------- ----------
*The presentation of cost of sales and gross profit has been
redefined in the H1-24 results and comparatives have been amended.
The change made splits our gross product profit and distribution
and installation costs. This decision was made to aid the
understandability of movements within gross margin for the users of
the financial statements.
Consolidated Balance sheet
At 30 September 2023
At At
30 September 31 March
2023 2023
Notes GBP000 GBP000
--------------------------------- ----- ------------- ----------
Non-current assets
Property, plant and equipment 2,667 1,559
Right-of-use asset 915 1,418
Investments 1,911 1,716
5,493 4,693
--------------------------------- ----- ------------- ----------
Current assets
Inventories 13,973 14,200
Trade and other receivables 4,985 3,982
Cash and cash equivalents 10,901 9,972
29,859 28,154
--------------------------------- ----- ------------- ----------
Total assets 35,352 32,847
--------------------------------- ----- ------------- ----------
Current liabilities
Trade and other payables (19,146) (16,545)
Lease liabilities (862) (921)
Current tax liabilities 4 (243) (302)
(20,251) (17,768)
--------------------------------- ----- ------------- ----------
Non-current liabilities
Lease liabilities (48) (473)
Deferred tax 4 (782) (782)
Total liabilities (21,081) (19,023)
--------------------------------- ----- ------------- ----------
Net assets 14,271 13,824
--------------------------------- ----- ------------- ----------
Shareholders' equity
Called up share capital 1,049 1,049
Share premium 4,815 4,694
Treasury shares (3) (4)
Merger reserve (100,000) (100,000)
Retained earnings 108,410 108,085
--------------------------------- ----- ------------- ----------
Total equity shareholders' funds 14,271 13,824
--------------------------------- ----- ------------- ----------
The interim financial statements of Marks Electrical Group plc
were approved by the Board on 15 November 2023 and signed on its
behalf by:
Josh Egan
Chief Financial Officer
Consolidated Statement of changes in equity
Six months ended 30 September 2023
Called Share Treasury Total
up share premium Merger shares Retained shareholders'
capital GBP000 reserve GBP000 earnings equity
Notes GBP000 GBP000 GBP000 GBP000
----------------------------------- ------ --------- -------- --------- -------- --------- --------------
At 31 March 2022 1,049 4,694 (100,000) (4) 103,671 9,410
------------------------------------------- --------- -------- --------- -------- --------- --------------
Total comprehensive income
for the period - - - - 5,157 5,157
Contributions by and distributions
to owners:
-Dividends paid - - - - (1,017) (1,017)
-Share based payment charge - - - - 274 274
At 31 March 2023 1,049 4,694 (100,000) (4) 108,085 13,824
------------------------------------------- --------- -------- --------- -------- --------- --------------
Total comprehensive income
for the period - - - - 873 873
Contributions by and distributions
to owners:
-Dividends paid - - - - (693) (693)
-Share based payment charge - - - - 145 145
-Sale of treasury shares - 121 - 1 - 122
At 30 September 2023 1,049 4,815 (100,000) (3) 108,410 14,271
------------------------------------------- --------- -------- --------- -------- --------- --------------
All the results arise from continuing operations.
Consolidated Cash flow
Six months ended 30 September 2023
Six months Six months
ended ended Year ended
30 September 30 September 31 March
2023 2022 2023
GBP000 GBP000 GBP000
---------------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
Profit for the period 873 1,738 5,157
Adjustments for non-cash items:
Depreciation of property, plant and equipment 287 108 326
Depreciation of right-of-use assets 485 511 1,021
(Profit)/loss on disposal of property, plant
and equipment 38 (45) (41)
Fair value gains (195) (118) (481)
Share based payment expense 148 99 304
Interest (income)/expense (55) 32 (4)
Taxation charged 291 379 1,266
Movements in working capital:
(Increase) in inventories 227 60 189
Decrease/(increase) in receivables (993) (542) (1,345)
Increase in payables 2,533 3,379 3,461
Cash flow generated from operations 3,639 5,601 9,853
Corporation tax paid (350) (475) (784)
---------------------------------------------------- ------------- ------------- -----------
Net cash flow generated from operations 3,289 5,126 9,069
---------------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (1,367) (99) (1,049)
Deposits on right-of-use assets - (33) (33)
Proceeds from sale of property, plant and equipment 17 45 45
Income from investments - 5 58
Interest received 69 - 61
Net cash used by investing activities (1,281) (82) (918)
---------------------------------------------------- ------------- ------------- -----------
Cash flows from financing activities
Sale of treasury shares 122 - -
Interest paid on lease liabilities (24) (37) (67)
Principal repayment of lease liabilities (484) (484) (967)
Equity dividends paid (693) (703) (1,017)
Net cash used by financing activities (1,079) (1,224) (2,051)
---------------------------------------------------- ------------- ------------- -----------
Net increase in cash and cash equivalents 929 3,820 6,100
Cash and cash equivalents at the beginning of
the period 9,972 3,872 3,872
Cash and cash equivalents at end of the period 10,901 7,692 9,972
---------------------------------------------------- ------------- ------------- -----------
Notes to the unaudited financial statements
Six months ended 30 September 2023
1 General Information
Marks Electrical Group plc (the "Company") is a public limited
company incorporated in the United Kingdom under the Companies Act
2006 (registration number 13509635). The Company is domiciled in
the United Kingdom and its registered address is 4 Boston Road,
Leicester, LE4 1AU. The Company's ordinary shares are listed on the
AIM market, of the London Stock Exchange.
The principal activity of the Company and its subsidiaries (the
"Group") throughout the period is the supply of domestic electrical
appliances and consumer electronics in the United Kingdom.
2 Accounting policies
2.1 Basis of preparation
This consolidated financial information has been prepared in
accordance with UK adopted international accounting standards.
There are no new standards, interpretations and amendments which
are not yet effective in these financial statements, expected to
have a material effect on the Group's future financial
statements.
The financial information has been prepared on a going concern
basis under the historical cost convention unless otherwise
specified within these accounting policies. The financial
information and the notes to the financial information are
presented in thousands ('GBP'000') except where otherwise
indicated. The functional and presentation currency of the Group is
pound sterling.
The figures for the period to 30 September 2023 and the
comparative period to 30 September 2022 have not been audited or
reviewed. The figures for 31 March 2023 have been extracted from
the financial statements for the year to 31 March 2023, which have
been delivered to the Registrar of Companies. The interim financial
statements do not constitute statutory accounts within the meaning
of the Companies Act 2006.
The policies have been consistently applied to all periods
presented, unless otherwise stated. The principal accounting
policies adopted in the preparation of the financial statements are
set out below. These policies have been consistently applied to all
the periods presented, unless otherwise stated.
2.2 Going concern
The Group has traded positively during the period, delivering
sales growth of 24.8%, whilst remaining profitable with a closing
cash position of GBP10.9m.
Management have prepared detailed financial projections for the
period to 30 November 2024. These projections are based on the
Group's detailed annual business plan. Sensitivity analysis has
been performed to model the impact of more adverse trends compared
to those included in the financial projections in order to estimate
the impact of severe but plausible downside risks.
The key sensitivity assumptions applied include:
-- A material slow-down in e-commerce sales;
-- A significant increase in input costs, including goods sold
and distribution costs.
Mitigating actions available to the Group were applied and the
Board challenged the assumptions used.
The Board of Directors has completed a rigorous going concern
assessment and taken the following actions to test or enhance the
robustness of the Group's liquidity levels for the period to 30
November 2024. As part of its assessment, the Board has
considered:
-- The cash flow forecasts and the revenue projections for the
Group
-- Reasonably possible changes in trading performance, including
severe yet plausible downside scenarios
-- An assessment of historical forecasting accuracy by comparing
forecast cash flow to those actually achieved by the Group
-- The Group's robust policy towards liquidity and cash flow
management
-- The Group's ability to successfully manage the principal
risks
-- The current cost of living crisis
-- Inflation pressures facing the Group and its employees
After reviewing the forecasts and risk assessments and making
other enquiries, the Board has formed the judgement at the time of
approving the financial statements that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence for at least twelve months from the date of
approval of these financial statements.
2.3 Consolidation
The Group financial statements include those of the parent
Company and its subsidiaries, drawn up to 31 March 2023.
Subsidiaries are entities over which the Company obtains and
exercises control through voting rights. Income, expenditure,
unrealised gains and intra-group balances arising from transactions
within the Group are eliminated.
At the time of the IPO, the acquisition of the trading
subsidiaries was achieved by way of share for share exchange and
the difference between the par value of the shares issued and the
fair value of the cost of investment was recorded as an addition to
the merger reserve. The parent company statement of financial
position shows a merger reserve of GBP59,999,999 and an investment
of GBP159,999,998.
On a Group basis, an accounting policy was adopted based on the
predecessor method as this is not a business combination but rather
a group re-organisation and thus falls outside the scope of IFRS 3.
IFRS does not specifically state how group re-organisations are
accounted for. Therefore, in accordance with IAS 8, the Directors
have considered the accounting for group re-organisations using
merger accounting principles, as set out in FRS 102, The Financial
Reporting Standard applicable in the UK and Republic of Ireland.
Under this method, the financial statements of the parties to the
combination are aggregated and presented as though the combining
entities had always been part of the same group. The investment by
Marks Electrical Group plc in Marks Electrical Limited was
eliminated and the difference between the fair value and nominal
value of the shares was adjusted through the merger reserve in the
Group statement of financial position.
2.4 Operating exceptional charges
The Group presents exceptional items on the face of the
statement of comprehensive income these are material items of
income and expense which the Directors consider, because of their
size or nature and expected non-recurrence, merit separate
presentation to facilitate financial comparison with prior periods
and to assess trends in financial performance. Exceptional items
are included in Administration expenses in the consolidated
statement of comprehensive income but not considered to be part of
the underlying trading performance of the business.
2.5 Significant accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
IFRS 13 fair value fixed asset investments
Estimates and assumptions are used to determine the carrying
value of unlisted investments at fair value through statement of
comprehensive income. The fixed asset investment in CIH
("Euronics") entitles the Group to a share of profit based on
purchases made during any given period. The fixed asset investment
is made up of an initial buy-in cost plus share of profits accrued
since entering Euronics. Due to the timing of Euronics producing
their annual results, the Group estimates the current periods
profit share, based on a percentage of total purchases from
Euronics. The profits from Euronics are seldom distributed;
however, if the Group were to leave Euronics, the total accrued
profits including the initial buy-in cost would become payable in
full.
Long-term equity incentive plans
In calculating the charge in the statement of comprehensive
income for the share-based remuneration for employees and
Directors, estimates and judgements must be made on various inputs
to valuation model to determine a theoretical fair value. A
Black-Scholes pricing model is used to measure the fair value of
the employee share options using six variables, the volatility,
type of option, share price on issue, time, strike price and the
risk-free rate. Other conditions which are required to be met in
order for an employee to become fully entitled taken into
consideration, such as employee attrition rates.
3. Earnings per share
(a) Earnings
Six months Year ended
ended 31 March
30 September 2023
2023 GBP000
GBP000
------------------- ------------- -----------
Statutory earnings 873 5,157
-------------------- ------------- -----------
(b) Number of shares
Six months Year ended
ended 31 March
30 September 2023
2023
-------------------------------------------- ------------- -----------
Basic weighted average number of shares 104,949,050 104,949,050
Dilutive effect of share options and awards 299,033 85,183
Diluted weighted average number of shares 105,248,083 105,034,233
--------------------------------------------- ------------- -----------
(c) Earnings per share
Six months Year ended
ended 31 March
30 September 2023
2023
------------------------------------- ------------- -----------
Statutory earnings
Basic statutory earnings per share 0.83p 4.91p
Diluted statutory earnings per share 0.83p 4.91p
3.1 Non-Statutory earning per share
(a) Earnings
Six months
ended Year ended
30 September 31 March
2023 2023
GBP000 GBP000
-------------------------------- ------------- ----------
Statutory earnings 873 5,157
Add:
ERP costs net of tax 329 -
Share-based payments net of tax 111 271
Less:
Fair value gains net of tax (146) (361)
Adjusted earnings 1,167 5,067
--------------------------------- ------------- ----------
(b) Number of shares
Six months Year ended
ended 31 March
30 September 2023
2023
-------------------------------------------- ------------- -----------
Basic weighted average number of shares 104,949,050 104,949,050
Dilutive effect of share options and awards 299,033 85,183
Diluted weighted average number of shares 105,248,083 105,034,233
--------------------------------------------- ------------- -----------
(c) Earnings per share
Six months Year ended
ended 31 March
30 September 2023
2023
------------------------------------ ------------- -----------
Adjusted earnings
Basic adjusted earnings per share* 1.12p 4.83p
Diluted adjusted earnings per share 1.11p 4.82p
------------------------------------- ------------- -----------
Adjusted earnings per share is a non-statutory measure the Group
is using to provide comparability and ease of understanding to the
users of the financial statements. This includes adjustments to the
earnings and the number of shares.
Adjusted earnings exclude all exceptional costs, plus the add
back of the revaluation in the investment of the Group's buying
group, as disclosed above.
The number of ordinary shares as at 31 March 2023 through to 30
September 2023 has been used as the basis for the current and prior
periods adjusted earnings per share calculation.
4. Taxation
Income tax expense is recognised based on management's best
estimate of the average annual income tax rate expected for the
full financial year applied to the pre-tax income of the interim
period. The income tax expense for the six months ended 30
September 2023 is GBP291,000 (H1-23: GBP379,000). The Group's
adjusted consolidated effective tax rate for the six months ended
30 September 2023 is 25.0% (H1-23: 17.9%).
5. Dividends paid
Six months
ended Year ended
30 September 31 March
2023 2023
GBP000 GBP000
--------------------------------------------- ------------- ----------
Dividends paid during the period:
Final dividend for 2023: 0.66p (2022: 0.67p) 693 703
Interim dividend for 2024: Nil (2023: 0.30p) - 314
--------------------------------------------- ------------- ----------
Dividends paid 693 1,017
Final dividend for 2024: Nil (2023: 0.66p) - 693
--------------------------------------------- ------------- ----------
Dividends paid and issued during the period totalled GBP692,586
(2023: GBP703,159).
An interim dividend has been proposed to be paid 22 December
2023 for 0.30p per share totalling GBP314,746.
6. Operating exceptional charges
During the period the Group began the implementation of a new
ERP system. The ERP implementation is expected to be complete in
FY25 and the Group will incur professional fees in relation to the
set up and integration of the new system until completion. All
costs are expected to be expensed through the statement of
comprehensive income and in order to aid comparability, will be
disclosed separately as non-underlying items. During H1-24
GBP439,000 was incurred as an expense with a tax benefit of
GBP110,000.
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END
IR BABJTMTBBTRJ
(END) Dow Jones Newswires
November 16, 2023 02:00 ET (07:00 GMT)
Marks Electrical (LSE:MRK)
過去 株価チャート
から 5 2024 まで 6 2024
Marks Electrical (LSE:MRK)
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から 6 2023 まで 6 2024
