Always looking forward
Annual Report & Accounts 2021
Connected
A global network of retailers and brands
p24
Front Cover
Top: BOTANIQ™
Middle: BOTANIQ™
Bottom: Savile Row
Titanium
This page: Brendel
Opposite page:
Titanflex
Secure
Position of financial strength
p32
Transparent
Being a responsible business
p44
Responsible
Addressing critical environmental issues
p46
INSPECS Group plc —
01
Strategic ReportGroup overview 06Looking forward 10Chairman’s statement 12Chief Executive Officer’s review 16Acquisitions 2021 20Our strategy 22How our model works 24Our business model 26Market overview 30Chief Financial Officer’s review 32Key performance indicators 39Environmental, Social and Governance 40Section 172 statement 54Risk management 59Corporate GovernanceCorporate Governance statement 64Board of Directors 70Key Management 72Audit and Risk Committee Report 74Remuneration and Nomination Committee Report 76Directors’ Report 79Statement of Directors’ Responsibilities 82Financial StatementsIndependent Auditor’s Report to the Members of INSPECS Group plc 86Consolidated Income Statement 95Consolidated Statement of Other Comprehensive Income 95Consolidated Statement of Financial Position 96Consolidated Statement of Changes in Equity 98Consolidated Statement of Cash Flows 99Notes to the Consolidated Financial Statements 100Company Statement of Financial Position 142Company Statement of Changes in Equity 143Notes to the Company Financial Statements 144Appendix 1 – Reconciliation of Adjusted Underlying EBITDA 150Company Information and Advisers 151 Strategic Report
Our highlights
www.INSPECS.com
02 — Annual Report & Accounts 2021
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INSPECS has consolidated its position in 2021 as a leading
provider of solutions to the eyewear market. From the
largest optical chains to individual consumers we offer
eyewear, lenses and combined packages.
INSPECS has made two further strategic acquisitions in
2021 and information on each of these is given on pages 20
and 21 of our report.
The Group continues to expand, innovate and create
new opportunities in the global market.
Revenue
Adjusted Underlying EBITDA
$246.5m $27.6m
2021
2020
2019
$246.5m
$47.4m
$61.3m
2021
2020
2019
$27.6m
$5.8m
$13.0m
Gross margin
46.97%
2021
2020
2019
Profit & loss after tax
$(5.44)m
46.97%
2021
43.28%
2020
44.96%
2019
$(5.44)m
$(8.91)m
$6.44m
Eyewear units sold
10.4m
2021
2020
2019
Adjusted Underlying EBITDA EPS
$0.27c
10.4m
4.9m
7.3m
2021
2020
2019
Diluted EPS
$(0.05)c
2021
2020
2019
Cash flows from operating activities
$24.9m
$(0.05)c
2021
$(0.13)c
$0.11c
2020
2019
$0.27c
$0.08c
$0.24c
$24.9m
$0.4m
$12.2m
INSPECS Group plc —
03
Strategic Report
Strategic Report
Group overview
Looking forward
Chairman’s statement
Chief Executive Officer’s review
Acquisitions 2021
Our strategy
How our model works
Our business model
Market overview
Chief Financial Officer’s review
Key performance indicators
Environmental, Social and Governance
Section 172 statement
Risk management
06
10
12
16
20
22
24
26
30
32
39
40
54
59
01
Strategic re
04 — Annual Report & Accounts 2021
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Strategic re
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INSPECS Group plc —
05
Strategic Report
Group overview
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A diverse
& growing
platform
80
Countries served via
our distribution channels
420%
Revenue growth
We strive to be the first name
in eyewear solutions through a
vertically-integrated frame and
lens platform.
Sustained and resilient top line growth
INSPECS has performed well in 2021 with revenues
increasing to $246.5m ($47.4m in 2020), an increase
of 420% and an Adjusted Underlying EBITDA for the
year of $27.6m ($5.8m in 2020) a 375% increase.
During the year, the Group has made two strategic
acquisitions. These were BoDe Design based in
Germany and EGO Eyewear Limited and its
subsidiaries that principally operate in the UK, with
a design centre in Sweden and an operations centre
in Hong Kong. The Group also aquired the
trademarks, rights and licences of Hardy Amies
during the year.
06 — Annual Report & Accounts 2021
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INSPECS Group plc —
07
Strategic Report
Group overview continued
Enhancing a
strong platform
Established Group
Through its established group of eyewear companies, bolstered
by the recent acquisitions of BoDe Design and EGO Eyewear,
INSPECS offers end to end global eyewear solutions. Serving
over 75,000 retail outlets on six continents, INSPECS provides
award winning eyewear and lens product innovation, design,
manufacturing, marketing, customer care, and sustainable
solutions to all customers.
Well positioned
The eyewear market is consolidating at a rapid pace. With major
retailers across the world also looking to reduce their supplier
base, INSPECS offers viable solutions across the optical,
sunglass and low vision sectors driven by customer needs. By
being vertically integrated in optical frame and sunglass
manufacturing, and with the added benefit of horizontal
integration with lens and low vision aid manufacturing, INSPECS
offers a unique blend of product choice, innovation, flexibility,
and service.
Sustained growth
With BoDe Design, INSPECS has acquired a nimble and
dedicated sales force in Germany and Austria that complements
the already market-leading Eschenbach sales team by focusing
on optical frame and sunglass retail, as well as e-commerce
channels. In addition, the acquisition of EGO Eyewear has given
the Group a solid foundation to build on in the Nordic and
Japanese eyewear markets, adding prestigious brand licences
to the existing portfolio, including Barbour and Liberty London.
75,000
Retail outlets served
08 — Annual Report & Accounts 2021
Top: Superdry
Bottom: Brendel
Growing our
global footprint
INSPECS is proud of
its dynamic, diverse
and creative teams
that operate around
the globe.
Global team circa
1,800
29%
Organic revenue growth
Europe
Bath, UK Global HQ, Design, Sales, Logistics,
Distribution, Group Finance & Group HR
Birmingham, UK Design, Sales & Distribution
Gloucester, UK Lens manufacturing facility
Lisbon, Portugal Design & Logistics
Nürnberg, Germany Manufacturing, Design,
Sales, Logistics & Distribution
Gemünden, Germany Design, Sales, Logistics &
Distribution
Italy Manufacturing & Sales
Austria Sales
Czech Republic Sales
Denmark Sales
France Sales
Holland Sales
Poland Sales
Spain Sales
Sweden Design & Sales
Switzerland Sales
United States
New York Design & Sales
Muncy, Pennsylvania Logistics & Distribution
Clearwater, Florida Sales, Logistics & Distribution
Danbury, Connecticut Sales, Logistics & Distribution
Asia
Zhongshan, China Manufacturing
Shenzhen, China Quality Control
Wenzhou, China Manufacturing
Japan Sales
Hong Kong Logistics & Design
Macau Administration & Sales
Vietnam Manufacturing
At the end of the financial period our Group headcount comprised:
Distribution
Office based
Sales team and support
Lens manufacturing
Frame manufacturing
Executive and Senior Management
Total
2021
56
270
481
49
887
44
1,787
2020
2019
53
280
474
29
895
37
53
123
44
–
991
10
1,768
1,221
INSPECS Group plc —
09
Strategic Report
Looking forward
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We aim to deliver a high-performing,
globally-aligned eyewear company
that creates a dynamic platform for
growth, inspires customer loyalty and
exceeds expectations through our
commitment to product, innovation,
people and planet.
The business changed substantially in 2017 with the first part of
our vertical integration strategy. Acquiring our own high-volume
manufacturing base has transformed the Group from a wholesaler
and licensing company using third party manufacturers to a
producer of branded and private label products. This created a
transparent supply chain that includes our own manufacturing
sites in China, Vietnam, UK and Italy.
Since IPO in February 2020, INSPECS has continued its vertical
integration, adding lens manufacturing capability through the
acquisition of Norville and widening its sales distribution in
Europe and the USA with the acquisition of Eschenbach.
The acquisition in 2021 of EGO Eyewear brings further
distribution and additional licences, in particular Barbour, Liberty
London, Lyle & Scott and Viktor & Rolf. Our distribution into a
wider customer base in Germany and Austria is enhanced by the
acquisition of BoDe Design.
Our management teams are now utilising the vertically-integrated
platform to further develop opportunities for the Group in
existing and innovative products to enhance distribution to
current and new customers. In addition, the Group will also:
• Continue to expand production capacity of our Vietnam
manufacturing sites
• Deliver on the planning application in progress for the
development of a third site in Vietnam raising capacity to
12million+ units per annum in 2024
• Develop a new high-volume manufacturing plant in Europe
during 2023 to be based in Portugal
• Continue growth of our B2B platforms, where independent
opticians can shop online 24/7
• Continue to make strategic acquisitions, utilising synergies
within the Group
• Expand the business combining frame and lens packages
• Continue developing Eschenbach’s specialist low vision
offering
• Continue to grow our worldwide distribution network
10 — Annual Report & Accounts 2021
Our products for the market include:
Prescription eyewear
Ophthalmic frames produced under world-famous
brands, house brands and private labels for some of
the biggest optical retailers in the world.
Sunglasses
Eyewear designs for licenced and in-house brands,
supplying high-quality sunglasses from the catwalk to
the high street.
Safety eyewear
We offer prescription and regular safety specs under
the Caterpillar brand, as well as medical PPE.
Lenses
An independent, high-quality lens manufacturing
capability to the ophthalmic industry.
An enhanced product offer
The acquisition of Eschenbach in 2020 and the further acquisitions
of EGO Eyewear and BoDe Design in 2021 has put the Group in a
position to offer over 50 licenced and house brands to the global
eyewear market. The Group design teams in the UK, USA, Germany,
Portugal and Hong Kong have now been further enhanced by a
design team based in Stockholm through the acquisition of EGO
Eyewear. The Group is targeting regional and global sales
opportunities in chain and independent markets with our enhanced
offering.
Creating environmentally sustainable products forms part of our
future growth. Highlights include our own house brand
BOTANIQ™, which offers thoughtfully-designed, sustainable
eyewear and our award-winning O’Neill ‘Wove’ frame made from
recycled and recyclable materials.
Guided by a strong and experienced management team, our global
team of circa 1,800 people gives INSPECS Group a powerful
springboard for future growth.
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Outlook
Looking forward, the Group is well-positioned in the global
eyewear marketplace, strengthening its reputation for quality,
design, innovation and delivery.
The Group has had a successful start to 2022, and the Group
continues to win new customers. Our new Vietnam facility is now
completed and operational. Our order books at the time of this
report are higher than at the same time in 2021 on a like-for-like
basis.
The Group is progressing with design and work on an additional
plant in Vietnam to increase expected manufacturing capacity
from 7 million to 12 million+ units. In April, the Group conducted
a feasibility study and has sourced a new location in Portugal for
its first high-volume production plant in Europe to produce
premium quality eyewear for the European market that will
significantly reduce environmental impact and lead time to our
European customers.
We are pleased to report that Eschenbach has performed well
since its acquisition on 16 December 2020, and trading has been
positive in 2022.
In addition, our acquisitions in 2021 of BoDe Design and EGO
Eyewear have performed ahead of expectation in 2022.
The Group is constantly monitoring the affects of the political
situation arising in the Ukraine and its effect on both raw material
costs and the impact of higher energy prices. The Group
continues to negate these cost increases through more efficient
manufacturing, increasing pricing where appropriate on new
products and inter-group supply cost efficiencies. As a result, we
have been able to hold our margin, but the Group continues to
work on improving margins where possible.
Whilst COVID-19 will continue to cause challenges, all our
employees across the world have adapted successfully and
performed well in difficult circumstances. From this robust and
resilient position, the Group is well placed to deliver in the
coming years for all stakeholders.
Robin Totterman
Chief Executive Officer
Christopher Kay
Chief Financial Officer
INSPECS Group plc —
11
Strategic Report
Strategic Report
Chairman’s statement
Chairman’s statement
Continued
deliv
Lord Ian MacLaurin
12 — Annual Report & Accounts 2021
INSPECS Group plc is pleased to
announce its results for the year
ended 31 December 2021. The Group
has continued to deliver in what has
been another challenging year due
to restrictions from COVID-19 and has
produced a strong set of results
following on from the acquisition of
Eschenbach in December 2020.
I would like to thank all those across our various
businesses who have worked tremendously hard, in
difficult circumstances, to deliver these results for
our stakeholders.
ery
Gathering momentum
Although our results for the year to 31 December 2021 include a
full year of varying COVID-19 restrictions around the globe that
affected our business, I am pleased to report that our employees
rose to the challenge and were able to continue to deliver a strong
performance for the year.
The acquisitions of Eschenbach and TURA have given the Group a
better balance, by expanding into the independent optical market
where we had previously been focused primarily on large global
chains. The 12 months following the acquisition have produced
positive results and there is no doubt that we have a robust
platform for future growth.
As a result, our performance for the year has produced turnover of
$246.5m and an Adjusted Underlying EBITDA of $27.6m compared
to turnover of $47.4m and an Adjusted Underlying EBITDA of $5.8m
in 2020.
I am also particularly pleased that the Group has managed to
obtain, despite cost pressures, a gross margin increase from 43% in
2020, to 47% for the year to 31 December 2021.
The Group has reduced its loss before tax position from $11.2m to
$9.1m. This performance was achieved despite incurring one-off
costs of $17.4m (2020: $6.1m). See page 33 for details.
On the supply side, we suffered continual disruption in logistical
supply and production in our factories, but despite these issues,
the teams in Vietnam and China worked tirelessly to ensure that
production disruption was kept to a minimum.
The Group’s plans for further expansion in Vietnam and a major
new European facility will ensure stability of the supply chain and
increased capacity overall, fuelling the Group’s growth.
Continuing Investment
The acquisition of Norville in 2020 was part of the strategy to
enter into the lens market and in doing so be able to offer frame
and lens packages.
I would like to thank the team at Norville who, in a very difficult
year, have managed to keep production going even while moving
from their original plant to a new state-of-the-art lens-making
facility in Gloucester, UK. Moving a production plant at any time is
challenging, but this was achieved with great efficiency. Although
there was disruption to our trade, the long-term benefits of
an efficient and modern manufacturing plant will lay a solid
foundation for the future.
Two further acquisitions were made in 2021, and I’d like to welcome
BoDe and EGO Eyewear to the INSPECS Group family. I look
forward to seeing the positive impact these new members bring to
the company. Additionally, developing the Hardy Amies brand
through licensing and eyewear will further add to our premium
offering.
Previous page
Top left: Superdry
Bottom left:
Savile Row Titanium
Bottom right:
Savile Row Gold
INSPECS Group plc —
13
Strategic Report
Chairman’s statement continued
EGO
BoDe
14 — Annual Report & Accounts 2021
Top: Liberty
Middle: Superdry
Bottom: Barbour
International
Dividend
The Board intends to propose the Group’s first dividend of 1.25p
per share for the year to 2021 and continue with a progressive
dividend policy in future years.
Our people
I am always impressed by the dedication and enthusiasm of our
global teams who continue to make great strides in delivering the
Group’s strategy.
Our policy of sustainable expansion has proved to be successful
despite the continued pandemic disruption, global energy crisis
and general turmoil.
Finally, I would like to thank all of our stakeholders, who have
supported the Group over the last few years.
Outlook
I know that both the management team and all our employees are
excited about the prospects for 2022 and beyond, and therefore I
look with confidence over the medium and long-term prospects for
the Group as a whole and further development of its strategy that
is proving to be successful.
Lord MacLaurin
Chairman
29 June 2022
INSPECS Group plc —
15
Strategic Report
Chief Executive Officer’s review
Robin Totterman
Resi
16 — Annual Report & Accounts 2021
2021 has been yet another year to
remember! Barely had a glimmer of
light presented itself following the
pressures of the pandemic and its
related supply chain issues before the
energy crisis began. 2022 has already
been marked by the invasion of
Ukraine and I am inspired by the
bravery of the Ukrainian people.
lient
Previous page
Top left: Savile Row
Titanium
Bottom left: Titanflex
Bottom right: Comma
Top: Marketing Meeting
Middle: ESG &
Innovation Meeting
Bottom: Titanflex
INSPECS Group plc —
17
Strategic Report
Chief Executive Officer’s review continued
In the past year, the Group has continued its program of
integrating new businesses into the Group and working on
synergies to further build on its strengths. Our results for the year
show a turnover of $246.5m and an Adjusted Underlying EBITDA
of $27.6m compared to turnover in 2020 of $47.4m and an
Adjusted Underlying EBITDA of $5.8m. I am also particularly
pleased that the Group’s margin, despite cost pressures in 2021,
increased to 47.0% (43.3% in 2020).
I am delighted that the Group has once again won a number of
prestigious awards for innovation and design, including multiple
Red Dot awards and the SILMO d’Or, the industry’s highest
accolade.
The Group is performing well, notably our US businesses and our
Vietnam based factory, NEO, where both plants are now fully up
and running. The move from Norville’s old premises to a state-of-
the-art facility was successfully completed in the year, and we
expect to see improving results from the increase in automation
and upgrades through 2022. Eschenbach in Europe has had
another strong year, circumnavigating the various COVID-19
restrictions by increasing its B2B online platform, coupled with in
person meetings when restrictions allowed.
Acquisitions
Adding to the Group’s premium heritage eyewear offering, I am
delighted with our acquisition of iconic Savile Row brand Hardy
Amies, in October 2021. Sir Hardy was the official couturier to
Queen Elizabeth ll for more than 40 years, and one of the most
innovative and influential British designers of all time. We look
forward to working with existing and new licensees, as well as
launching an eyewear collection.
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A clear
vision
for the
future
18 — Annual Report & Accounts 2021
At the end of 2021, we acquired our German distributors BoDe
Design, who have been our long-term partner in Germany,
distributing to chains and online retailers. This energetic team’s
focus complements the Eschenbach business, which primarily sells
to independent opticians.
In December 2021, the Group also acquired EGO Eyewear Limited
and its subsidiaries, who have the licences for Barbour Eyewear,
Liberty London, Viktor & Rolf and Lyle & Scott, among others. EGO
mainly distributes brands to major optical chains and is known for
its innovative and creative designs. EGO’s design studio in
Stockholm adds to our existing teams in the UK, Portugal, Hong
Kong, Germany and New York.
Skunk works
Perhaps the most exciting future development at INSPECS is the
progress on our cutting-edge technologies (described in detail on
pages 52 to 53. The focus is on new material generation, smart
eyewear, lens technology and sustainability, with truly ground-
breaking and world-changing results. Agreements have been signed
with Bosch for the collaborative development of smart eyewear. The
Group has also started to supply lenses directly to Amazon.
Manufacturing Investment
Our Vietnam operation is now enhanced with a second plant, and
our total production facility is now 8,800 sqm2. The second factory
came on stream during 2021, and we were able to increase supply
by 72%. Our new sustainable, eco-friendly BOTANIQ™ range is
being produced there.
We are actively engaged in the design and planning of a third
facility to be completed by the end of 2023, that will add a further
8,000 sqm2 and increase our production capability in Vietnam from
7 million to over 12 million units.
We have also advanced our plans in building a factory in Portugal,
close to our existing Lisbon offices with a planned completion date
of 2023. This facility will give us an attractive major European
manufacturing base.
Outlook
The economic landscape improved during 2021, but I would note
that there was increased disruption within our Group as we entered
the late winter months of 2021. At present it would not seem
reasonable to second guess what measures Governments around
the world may have to resort to should the pandemic continue on in
2022, or further variants emerge.
However, the Group has a well-balanced platform and operates in a
resilient market and I am pleased to report that the first three
months of trading were ahead of our expectations.
We will continue to pursue our strategy of organic and acquisitive
growth. I am confident we will be able to meet our targets and
continue to grow in a sustainable and manageable way despite
continued supply chain challenges. We will also continue to
integrate the newly acquired companies across the Group,
generating further opportunities for growth. I remain confident in
the Group’s ability to deliver to all stakeholders.
I’m pleased to announce that the Group intends to pay its first
dividend of 1.25p for the year and continue with a progressive
dividend policy in future years.
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Robin Totterman
Chief Executive Officer
29 June 2022
The Group intends to pay
its maiden dividend of
1.25p
per share
19
Strategic Report
Acquisitions 2021
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Enhanced
offer
The Group further enhanced its
distribution and brand portfolio
with the acquisition of EGO
Eyewear and BoDe Design. The
Group also purchased the
trademarks, rights and licences to
Hardy Amies, an iconic legacy
designer brand.
20 — Annual Report & Accounts 2021
EGO has been designing and distributing beautiful
eyewear around the world since 1961. The company
was founded by Ronald Gezang’s father and has
been run by the family continually since 1961. The
company now has operations in London, Osaka,
Stockholm and Hong Kong and prides itself in
having one of the best design studios in the industry
in its Stockholm office.
They have an enviable reputation for high-quality,
well-designed and on fashion eyewear in the market today.
Its major brands include:
Its major brands include:
• Viktor & Rolf
• Valerie
• Lyle & Scott
• Barbour
• Liberty London
• Henri Lloyd
• Ivana Helsinki
• Day Birger
Et Mikkelsen
EGO EYEWEAR has an operations office based in Hong
Kong allowing direct communication with its
subcontracted manufacturers based in China, and already
integration opportunities exist both on distribution,
manufacturing and design following the acquisition.
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BoDe was established in 1999 and has continued
to be run by Stefan Bopp and Matthias Deter
since then. Based in Gemünden, Germany, the
company has enjoyed continual growth and now
supplies approximately 3,500 opticians across
the German and Austrian markets.
The company currently distributes BOTANIQ™,
Superdry and O’Neill for INSPECS in Germany
and Austria. It also has own licensed and in
house brands, Comma and ZWO, to enhance its
offering.
The company has its own distribution centre in
Gemünden, Germany.
In 2021, the Group acquired from the
administrator the worldwide trademarks, rights
and licences to the Hardy Amies brand. This
British fashion house was started by Sir Hardy
Amies and had an enviable reputation in the
couture and fashion markets for many years.
INSPECS Group will continue to expand the
licence fee income generated by the brand and
is currently designing a bespoke range of
eyewear for launch to the market in 2023.
INSPECS Group plc —
21
Strategic Report
Our strategy
INSPECS’ continued growth has
further established its position as
one of the world’s leading eyewear
companies.
Our model to achieve sustained
and balanced growth for the benefit
of all stakeholders is based on four
main drivers.
Grow
01
Grow our in-house eyewear
manufacturing capacity
In 2021, the Group commenced
production in our new manufacturing plant
in Vietnam. As a result, capacity in Vietnam
was raised from 4m units in 2020 to 7m in
2021. Planning permission and design for a
third site raising capacity to 12m units+ is
in progress in 2022.
02
Grow our lens
manufacturing capacity
and expand our high-end
products globally
In 2021, we moved our lens
manufacturing plant to a new site.
Our new state-of-the-art facility in
Gloucester commenced
production in December 2021,
raising capacity production nearly
four-fold from the previous plant.
22 — Annual Report & Accounts 2021
Growth
03
04
Expand our chain and
independent optical
customer base around
the globe
Make selective
acquisitions to boost
growth and profitability
in future years
INSPECS has continued despite
COVID-19 to increase its offering of
both branded and private label
eyewear to our global optical chains
and continues to grow the number of
independent opticians and chains
that it supplies.
The Group made three acquisitions in
2021 and is continuing to work on
further strategic acquisitions in 2022.
As a result, our brand portfolio has
increased by an additional two in-house
brands and 11 licensed brands.
Previous page
Left: Superdry
Left: CAT Precision
Right: Barbour
INSPECS Group plc —
23
Strategic Report
How our model works
Who we are
What we do
Design
Our design teams around the world
follow the latest trends in the market
and get inspiration from a variety of
industries, including consumer
fashion and beyond. Our design
teams are principally in the UK, USA,
Germany, Portugal, Sweden and
Hong Kong.
Manufacture
Our product development
teams work with our in-house
design teams before passing
them on to our production
teams. The Group now has
manufacturing plants in
Vietnam, China, UK and Italy
and has begun work on
additional manufacturing
sites in Vietnam and Portugal.
INSPECS Group plc is vertically
integrated from frame and lens
manufacturing to design, brands,
sales, marketing and distribution.
Manufacturing, design &
distribution
Manufacturing, design &
distribution
Design & distribution
Lens manufacturing
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Underpinned
by our strong
brands
Brands under Licence:
Brands are selected with potential
to grow market share in a
geographical region or for broader
global distributions. We are
specialists in working with brand
owners in partnership to help
deliver growth for both companies.
Eyewear manufacturing
24 — Annual Report & Accounts 2021
Market
Distribute
Our marketing teams work in
tandem with brand owners
and brand managers to bring
products to market.
Through our network of 75,000 optical
and retail outlets across 80 countries
our products are sold both in well-
known high street chains and
independent opticians globally.
Network
What sets us apart
Experience
• Vertically-integrated model providing
a complete eyewear solution
•
Innovative design and creativity
• Global experienced
manufacturing teams
•
In-house design
2021
75k
70k
30k
2020
2019
Brands
The Group continues to
expand its in house and
licenced brand offering to
the market for worldwide
distribution:
2021
50
37
12
2020
2019
y
r
d
r
e
p
u
S
Distributed eyewear units
Networks
• Ownership of our own lens
manufacturers with combination frame
and lens package capability
• Full traceability as a trusted supplier to
global retail chains
•
Independently audited factories
2021
10.4m
4.9m
7.3m
2020
2019
House Brands:
Private Label/OEM:
Targeting specific market segments
with our in-house brand offer, we
elevate group-owned patents and
manufacturing techniques by
building a brand around them and
successfully taking them to market.
We are helping some of the biggest
retailers in the world to grow by targeting
specific consumer opportunities in store.
Our 360-degree service delivers
expertly-designed private label eyewear
with the reassurance of traceable industry
benchmark in-house manufacture.
Responsible
• We operate as a fair organisation and all
our employees are key. We endeavour to
give the best industry working
environment for all our staff
INSPECS Group plc —
25
Strategic Report
Our business model
Our business model
Licensed
brands
Our teams around the globe
work with leading brands
to create award-winning
eyewear collections.
26 — Annual Report & Accounts 2021
The acquisition of
EGO introduced the
internationally
recognised Barbour
to the brand portfolio
INSPECS Group plc —
27
Strategic Report
Our business model continued
House
brands
28 — Annual Report & Accounts 2021
Savile Row Titanium
INSPECS Group plc —
29
Strategic Report
Market overview
Resilient. Essential.
Global eyewear market value in US Dollars (Billions)
2027
2026
2025
2024
2023
2022
2021
2020
0
50
100
197
188
179
170
167
200
152
147
140
150
The eyewear market has suffered
some disruption in 2021 as a result
of COVID-19 but has proved to be
resilient and, despite some
lockdowns around the globe, access
to ophthalmic eyewear has been
deemed to be essential and much
of the market has remained open.
The industry like others has noted cost inflation in raw materials
and in particular shipping and distribution costs. However, overall
the market has remained positive in 2021 despite these
headwinds.
The global eyewear market size reached US$140BN in 2020 and
is expected to grow to $197BN by 2027 a CAGR of 5% (source
Statista).
The eyewear market is made up of spectacles, contact lenses,
sunglasses and other eyewear products. This is typically broken
down into four categories: prescription (Rx) eyeglasses, non-
prescription sunglasses, over the counter readers and
contact lenses.
Driving forces
The key factors driving the market growth are:
• Ophthalmic disorders, increased awareness of eye examinations
and the perceptions of eyewear as a fashion accessory.
• Growth in social media is offering enhanced growth prospects
in the market and creating new channels for eyewear companies
to market their products.
• Health issues such as diabetes are influencing the need for
corrective eyewear.
• Growth in the aging population.
•
Increase in the use of mobile phones, digital screens and a rise
in computer vision syndrome (CVS).
• The growing popularity of online learning has resulted in
children developing CVS.
• Adoption of anti-fatigue and anti-glare glasses.
Distribution channels
The bricks and mortar segment represented 79% of the global
eyewear market in 2020.
E-Commerce segment of the market continues to grow,
encouraged by the increase in online shopping activity.
By 2027 the global
eyewear market is
expected to grow to
$197bn
30 — Annual Report & Accounts 2021
S
u
p
e
r
d
r
y
B
O
T
A
N
Q
™
I
Global eyewear
market 2020
Bricks and mortar
E-Commerce
Global eyewear
market split 2020
Optical frame
Contact lenses
Sunglasses
Source “expertmarketresearch”
60%
of the global eyewear
market is optical frames
INSPECS Group plc —
31
Strategic Report
Chief Financial Officer’s review
Building
momen
Chris Kay
32 — Annual Report & Accounts 2021
The Group has continued to build on
its enlarged base in 2021 and has
delivered a good set of results overall
in challenging circumstances. Our
order books for 2022 are positively
placed and together with our strategic
acquisitions in 2021 the Group is well
positioned for further growth in 2022.
Our FY21 results showed an increase in sales of
$199.1m to $246.5m. The Group delivered Adjusted
Underlying EBITDA of $27.6m (FY20: $5.8m).
Reported loss before tax of $9.1m (FY20: $11.2m) is
after incurring a purchase price adjustment ($6.0m),
exchange adjustments on borrowings ($5.4m) and
impairment of intangible assets ($3.4m).
tum
Previous page
Top left: O’Neill
Bottom left: Mini
Bottom right: BOTANIQ™
Revenue
Gross Profit
Operating Expenses
Adjusted Underlying EBITDA
Share-based payments
Depreciation, amortisation and
Impairment on intangible assets
Restructuring costs
Foreign Exchange on funding
for acquisitions
Post-acquisition insurance costs
Loss for acquisition in period
Purchase price adjustment
Operating profit/(loss) before
non-underlying costs
Loss before tax and non-
underlying costs
Reconciliation to reported results
Operating profit/(loss) before
non-underlying costs
Non-underlying costs
Negative goodwill on
bargain purchase
Movement in fair value on derivative
Exchange adjustments on borrowings
Share of associate profit
Net finance costs
Loss before tax
Tax credit
Loss after tax
FY21
246,471
115,771
(88,215)
27,556
(1,484)
(18,450)
–
–
–
(90)
(5,991)
FY20
47,415
20,522
(14,722)
5,800
(1,706)
(3,906)
(185)
(1,085)
(563)
(1,295)
–
1,541
(2,940)
(6,544)
(5,400)
1,541
(2,588)
–
–
(5,418)
(10)
(2,657)
(9,132)
3,697
(5,435)
(2,940)
(5,763)
506
(740)
(382)
–
(1,844)
(11,163)
2,250
(8,193)
Revenue
Total revenue for the year was $246.5m, an increase of $199.1m
from $47.4m in 2020. The increase in revenue was in part driven by
the acquisition of Eschenbach in late 2020, which contributed
$186.7m of revenue in 2021. Excluding the Eschenbach and Norville
acquisitions, revenue grew from $40.3m to $52.1m, an increase of
$11.8m or 29%.
Gross margin
The Group’s gross margin overall was 47.0% compared to 43.3% in
2020, an increase of 3.7 points from the previous year. This increase
was partly due to the mix of sales between independent opticians
and our traditional chain business.
Adjusted Underlying EBITDA
The Group targets Adjusted Underlying EBITDA as its key operating
performance indicator. Our Adjusted Underlying EBITDA increased
by $21.8m, from $5.8m to $27.6m, an increase of 375% in 2021.
INSPECS Group plc —
33
Strategic Report
Chief Financial Officer’s review continued
Operating expenses
Our operating expenses increased from $23.5m in 2020 to $114.2m in 2021. The increase was driven primarily by the additional operating
expenses of Eschenbach and Norville. A more detailed analysis of these expenses is shown below:
Revenue
Gross Profit
Distribution
Wages & Salaries
Admin
Total Operating expenses
Year Ended
31 December
2021
$’000
246,471
115,771
(7,795)
(62,160)
(44,275)
(114,230)
Acquisitions
Eschenbach &
Norville
$’000
194,290
91,940
(6,640)
(51,716)
(31,035)
(89,391)
Adjusted Year
Ended
31 December
2021
$’000
52,181
23,831
(1,155)
(10,444)
(13,240)
(24,839)
Adjusted Year Ended
31 December 2020 excluding
Eschenbach & Norville
$’000
40,298
17,532
(451)
(9,280)
(9,080)
(18,811)
Percentage
change
29%
36%
156%
13%
46%
32%
The table below sets out our operating costs adjusted for the acquisitions of Eschenbach and Norville as a percentage of revenue.
Revenue
Gross Profit
Distribution
Wages & Salaries
Admin
Adjusted Year
Ended
31 December
2021
$’000
52,181
(23,831)
(1,155)
(10,444)
(13,240)
Adjusted Year
Ended
31 December
2020
$’000
40,298
17,532
(451)
(9,280)
(9,080)
Percentage
of revenue
–
46%
2%
20%
25%
Percentage
of revenue
–
44%
1%
23%
23%
Percentage
change
–
2%
1%
3%
2%
Loss before tax
In 2021 the Group made a statutory loss before tax of $9.1m (FY20: loss $11.2m), a reduction in loss of $2.1m. The Group made an Adjusted
Underlying EBITDA of $27.6m (FY20: $5.8m). The Group strategy is to grow the business by making strategic earning enhancing
acquisitions, and also to improve the performance of the organic businesses. Acquisitions affect the difference between our Adjusted
Underlying EBITDA and the loss before tax in the form of one-off items which are included in the reconciliation below:
Adjusted Underlying EBITDA
Non-cash adjustments
1. Depreciation and amortisation
2. Purchase Price Allocation (“PPA”) adjustments
3. Intangible asset impairment
4. Exchange adjustments on borrowings
5. Share based payment
6. Other
SUB TOTAL
Non-underlying costs
Net finance costs
Loss before tax
34 — Annual Report & Accounts 2021
2021
$m
27.6
(15.0)
(6.0)
(3.4)
(5.4)
(1.5)
(0.1)
(3.8)
(2.6)
(2.7)
(9.1)
2020
$m
5.8
(3.9)
–
–
(0.4)
(1.7)
(3.4)
(3.6)
(5.8)
(1.8)
(11.2)
Key items impacting the current year’s results are as follows:
Purchase Price Allocation (“PPA”) adjustment
On 16 December 2020 following the acquisition of the Eschenbach Group of companies, finished goods acquired were revalued to their fair
value in accordance with IFRS3. This inventory has sold through in 2021 and has given rise to an additional one-off charge of $5.99m.
Impairment of intangible assets
During the year, the Board reviewed Group activities in order to consider any indicators of impairment which may affect the carrying value
of intangible assets.
It was noted that an indicator of impairment arose relating to a customer relationship with a carrying value of $3.7m as at 31 December
2021. As a result, an impairment review was completed to compare the recoverable amount of the asset against its carrying value. This
review has given rise to a non-cash impairment charge of $3.45m.
Exchange adjustments on borrowings
Following the acquisition of Eschenbach in December 2020, INSPECS Ltd acquired the shareholder loans of Eschenbach which are
denominated in Euros. The functional currency of INSPECS Ltd is GBP giving rise to exchange adjustments recognised in the year.
Tax
Following the acquisition of the Killine Group of companies in 2017, the Group provided an uncertain tax reserve for potential challenges in
relation to transfer pricing. During 2021, a further transfer pricing review was undertaken by our external advisors and following this review,
part of the uncertain tax provision amounting to $2.2m has been released. During 2022, a further review of uncertain tax provisions is being
carried out in relation to the remaining balance of $0.6m.
Prior year adjustments
During the current period it was determined that certain balances reported as cash balances in 2020 that pertained to Eschenbach, did not
meet the requirement that they are readily convertible into cash. A prior year adjustment has therefore been made to reclassify $6.3m from
cash and cash equivalents to trade and other receivables in the comparative balance sheet.
During the year, a detailed review of TURA Inc., a subsidiary of the Eschenbach Group that was acquired in December 2020, was
undertaken. Adjustments have been made to the acquisition balance sheet in 2020 following this review. The net impact of these
adjustments resulted in a increase to goodwill of $744k (see note 2 of the financial statements for further details).
Cash position
During the year the Group generated $25.2m in cash flows from operating activities (2020: $403k). The Group has used the cash generated
to continue to invest in new plant and equipment, further acquisitions and enhancing the Group’s long term growth strategy.
An analysis of how the Group has deployed its free cash flow in the year is set out below.
Cash and cash equivalents at the beginning of year
Net cash from/(used) in operating activities
Net cash used in investing activities
Net cash from financing activities
Increase in cash and cash equivalent
Foreign exchange movements in the year
Cash and cash equivalents including overdrafts at the year end
The breakdown of net cash used in investing activities is
Purchase of intangible fixed assets
Purchase of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Interest received
31 December
2021 $’000
23,776
20,017
(15,661)
1,704
6,060
(77)
29,759
(1,508)
(6,137)
(8,134)
118
31 December
2020 $’000
6,502
(748)
(110,658)
128,712
17,306
(32)
23,776
(167)
(2,452)
(108,075)
36
INSPECS Group plc —
35
Strategic Report
Chief Financial Officer’s review continued
Working capital
The Group closely monitors its working capital position to ensure that it has sufficient resources to meet its day-to-day requirements and to
fund further investing activities to supply its customer base. The Group’s working capital position is set out below.
Debtors
Percentage
Year ended 31 December 2021
Year ended 31 December 2020
Total
>30 Days
>60 Days
>90 Days
29.4m
100%
18.4m
63%
6.6m
22%
4.4m
15%
Total
25.1m
100%
>30 Days
11.8m
47%
>60 Days
6.9m
28%
>90 Days
6.4m
25%
Inventory
Our sales to inventory ratio adjusted for the Eschenbach acquisition increased from 3.8 to 4.4.
Turnover
Inventory
Sales to inventory ratio
31 December 2021
246.5m
55.7m
4.4
31 December 2020
Less Eschenbach
44.4m
11.6m
3.8
31 December 2020
47.4m
55.5m
0.9
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.
In December 2021 the Group acquired two entities and the worldwide trademarks, rights and licences to the Hardy Amies brand, this
resulted in an increase in current liabilities. The acquisitions are for the ongoing benefit of the Group, and not the short-term position.
Current Assets
Current Liabilities
Ratio
Year ended
31 December 2021
Year ended
31 December 2020
131.1m
82.9m
1.6
124.7m
68.4m
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 small reduction in the ratio is due to the acquisitions made at the end of the year, as noted in the current asset ratio.
Year ended
31 December 2021
Year ended
31 December 2020
131.1m
(55.7)m
75.4m
82.9m
0.9
124.7m
(55.5)m
69.2m
68.4m
1.0
Current Assets
Less Inventory
Current Liabilities
Ratio
36 — Annual Report & Accounts 2021
Earnings per share
The Group’s loss per share decreased from $(0.13) in 2020, to
$(0.05) in 2021, a reduction of 62% per share. On an Adjusted
Underlying EBITDA basis, earning per share increased from $0.08 in
2020 to $0.27 in 2021, an increase of 225% per share.
Dividend
The Group intends to propose its maiden dividend of 1.25p per
share and continue with a progressive dividend policy in future
years.
Going concern
The Directors have undertaken a comprehensive assessment of the
Group’s ability to trade out to 31 December 2023. Details of this are
given in the Directors’ report on pages 79 to 81. Taking this into
consideration the Directors have a reasonable expectation that the
Group and the company have adequate resources to continue to
trade throughout the review period and therefore the Directors
continue to adopt the going concern basis in preparing the
consolidated parent and company financial statements.
Chris Kay
Chief Financial Officer
29 June 2022
Net debt
During the year the Group increased its $35.0m Revolving Credit
Facility (RCF) with HSBC by $1.5m, which was drawn down to
$35.3m at 31 December 2021. A new multi-currency term loan of
$18.7m was agreed with HSBC. An additional $10.0m RCF was
agreed with HSBC, which was drawn down to $6.0m at 31
December 2021.
The additional financing received during the period allowed the
consolidation of loans from across the Group, this included the
repayments of loans within the Eschenbach Group, repayment of
COVID-19 support loans, and the acquisitions of BoDe and EGO
Eyewear.
The Group has significant cash reserves, resulting in the net debt
position as set out below.
Year ended
31 December
2021
Year ended
31 December
2020
($millions)
($millions)
29.8
(62.5)
(22.4)
(55.1)
(32.7)
26.4
(59.6)
(20.3)
(53.5)
(33.2)
Cash at Bank
Borrowings
Leasing
Net Debt
Net Debt (excluding leasing)
Depreciation and amortisation
The increase in depreciation and amortisation is driven by a full
year of the charge on the assets of the Eschenbach Group acquired
on the 16 December 2020.
31 December
2021
31 December
2020
($millions)
($millions)
Depreciation
Amortisation
Total
7.4
7.6
15.0
Leverage (using debt to equity ratio)
The Group’s leverage position is shown below including and
excluding leasing finance:
Including leasing finance
Excluding leasing finance
Required ratio
2021
1.9
1.2
2.0
2.3
1.6
3.9
2020
1.6
1.4
2.5
The Group’s leverage is constantly updated, and a rolling
projection for 12 months is reviewed to ensure compliance with the
Group’s covenants.
INSPECS Group plc —
37
Strategic Report
38 — Annual Report & Accounts 2021
’
O
N
e
i
l
l
l
s
u
n
g
a
s
s
e
s
Key performance indicators
Our business focuses on eight key performance
indicators that are used by the Board and Senior
Management to review future outcomes and the
successful delivery of the Group’s overall strategy.
Turnover
$246.5m
420%
2021
2019
2020
$246.5m
$47.4m
$61.3m
Net current assets
$48.2m
(14)%
2021
2020
2019
$48.2m
$56.2m
$3.73m
Gross profit
$115.8m
464%
2021
2019
2020
$115.8m
$20.5m
$27.5m
Gross profit margin
47.0%
3.7PTS
2021
2020
2019
Eyewear units sold
10.4m
112%
2021
2020
2019
47.0%
43.3%
45.0%
10.4m
4.9m
4.6m
Fully diluted EPS
$(0.05)c
69%
2021
2020
$(0.05)c
$(0.13)c
$0.11c
2019
Adjusted Underlying EBITDA
Net cash from operating activities
$27.6m
375%
2021
2020
2019
$27.6m
£5.8m
$13.0m
$20.0m
2,776%
2021
2020
2019
$20.0m
$(0.75)m
$10.6m
INSPECS Group plc —
39
Strategic Report
Environmental, Social and Governance
Always
looking
forward
Over the last 12 months our
sustainability framework has been
developed, clearly demonstrating
the roadmap to our commitment to
addressing critical environmental
issues along with maintaining a
positive environment for all our
employees around the globe.
We approach the management of Environmental, Social and
Governance (ESG) with the same care and discipline as any
other business risk. We continue to invest in this area of the
business and use external expertise and systems to support
our commitment to ESG across each part of our Group.
Our Group vision of ‘Always Looking Forward’ embeds
itself into our ESG strategy and our purpose of innovation,
commitment and integrity are reflected throughout.
We consider ESG to be fundamental to the Group.
40 — Annual Report & Accounts 2021
In this report we look at the areas
that matter to us and continue
with our key pillars:
Environmental matters
What we can do, what we will do
and what we are doing to make
INSPECS Group a leading
environmentally responsible
eyewear company.
Read more 46
Social matters
We are committed to the
continued building of our positive
and inclusive culture.
Read more 44
Governance matters
We want to make sure we always
act in the best interests of our
stakeholders in the business,
improve our performance and
unlock new opportunities.
Read more 62
INSPECS Group plc —
41
Strategic Report
Environmental, Social and Governance continued
Chemical waste
Accountability
and measurement
The Group will continue to use
environmentally friendly chemical
products and where these cannot
be used the Group will ensure the
minimum use and correct disposal
of chemical products.
The Group will continue to invest in
a sustainability department that will
be tasked with not only new ideas
but monitoring and tracking our
performance and reporting to all
our stakeholders.
Working with
our employees
Utility
consumption
As a Group we will endeavour to
learn from our employees who have
demonstrated ideas and plans
across the Group to reduce waste.
With manufacturing operations in
the Group we have a dedicated
department that targets continued
reduction in our energy and water
consumption across the Group.
Supply chain
Recycling
The Group will endeavour to work
with all our stakeholders to ensure
that our distribution around the
globe has a long-term goal of
reducing its effect on the
environment.
The Group will continue to develop
its recycling efforts across the
globe. This will include lighting,
heating, electronics, paper,
packaging and supplies.
In 2021 we focused on developing our ESG
framework. We have based our framework on the
core elements of the Global Reporting Initiative
(GRI). ESG is not just an offshoot of our business,
but forms the core of what we do and what we
want to achieve. Our commitment to our
sustainable path, in line with the UN’s Sustainable
Development Goals, will help us drive the
business forward over the years to come.
Our mission is to deliver a high performing,
globally aligned eyewear company that creates a
dynamic platform for growth, ignites consumer
excitement and exceeds all expectations through
our commitment to product, innovation, people
and planet.
We recognise our responsibility to tackle labour
and human rights issues, our policies and
procedures provide us with a robust framework
to allow us to operate responsibly. Part of the
framework is to engage in Ethical Trade Audits,
enabling us to gain insight into working
conditions throughout the factories we use both
in the UK and overseas. INSPECS has engaged
with the Sedex Members Ethical Trade Audit
(SMETA) which is a not for profit membership
organisation that works with buyers and suppliers
to deliver improvements in responsible and
ethical business practices in global supply chains.
Alongside our commitment to carbon offsetting
via tree planting, environmental projects, using
green energy and looking at ways to provide a
greener working environment, we are also
supplying and developing more sustainable
products and packaging.
42 — Annual Report & Accounts 2021
Commitment to our ESG and the UN’s Sustainable Development Goals (SDG)
In 2021 INSPECS has partnered with Diginex, who provide software
platforms designed to assist companies in monitoring, improving
and reporting on their ESG. This has enabled the Group to build an
ESG report around the core GRI standards. We will have a
sustainability report that will help us monitor our ESG performance
around the Group.
The UN’s SDGs relevant to INSPECS are shown in the table below.
The data is collected by each entity allowing us to see both an
individual picture and a consolidated view for the Group. We will use
it to help us set targets and improve our performance year on year.
The data collected is fully auditable and using it we will be well
placed to demonstrate our emissions and our commitment to
continuous improvement utilising the valuable data produced.
Reporting framework
ESG
Topics
Core metrics
Linked frameworks
Linked sustainable development goals
General &
Governance
Organisational profile
Strategy
Ethics and integrity
Governance
Stakeholder engagement
Reporting practice
Economic
Economic performance
Anti-corruption
Environmental
Emissions
Energy
Waste
Water and effluents
Social
Employment
Occupational health
and safety
Diversity and
equal opportunity
Child labour
Forced or
compulsory labour
INSPECS Group plc —
43
Strategic Report
Environmental, Social and Governance
continued
Our ESG responsibilities
People
Corporate Social Responsibility
Our corporate responsibility is to protect human
rights and we seek to ensure that our high-quality
products are sourced and manufactured in a fair,
ethical, environmentally and socially responsible way.
The business is responsible for the end-to-end
processes and procedures which are established to
ensure traceable quality control and transparency
through the Group’s operational processes, from
design to distribution.
The Group’s approach to sustainability seeks to address both
environmental and social impacts, whilst meeting clients
demands.
We seek to ensure that our partners and affiliates have similarly
high standards, respect local laws and customs along with
meeting international laws and regulations. We will never
knowingly deal with any organisation which is connected to
slavery or human trafficking.
People
INSPECS Group is founded on respect and honesty in business
and this approach permeates throughout our leadership and
wider teams.
Our commitment to our shareholders and our people in building
a successful sustainable business, a great workplace and a
respect of people sit at the very heart of the Group.
Our Health, Safety and Wellbeing policies and initiatives support
all of our employees to lead a positive work-life balance. We
offer a range of benefits that are continually being reviewed
throughout the Group.
Diversity & Inclusion
Our diverse, open and inclusive culture is paramount to how
we operate and INSPECS acknowledges that this is an evolving
process in which it will invest and ensure that our ambition is
maintained. We will continue to listen to our employees and
respond to employee needs on an ongoing and real-time basis.
INSPECS will not allow any discrimination in any of its business
operations nor engage with other organisations where such
activity is detected.
INSPECS offers a unique ‘energy’ to our teams, we are
surrounded by so many exciting product offerings, continued
development and our ability to embrace new ideas. We will
continue to evaluate our wellness, learning and enrichment
programs, as well as other offerings as we seek to attract and
develop talent.
44 — Annual Report & Accounts 2021
Employee mix
Gender
Length of service
71% Female
29% Male
23% < 2 years service
77% > 2 years service
Category
Age
55% Production
24% Sales
21% Administration
11% < 30 years
69% 30-50 years
20% > 50 years
Gender diversity
Board
Total
2021
2020
Female
2021
2020
Male
2021
2020
Total employees
Total
2021
2020
Female
2021
2020
Male
2021
2020
6
6
1
1
5
5
1672
1098
1187
714
485
384
2021
Male – 83%
Female – 17%
2020
Male – 83%
Female – 17%
2021
Male – 29%
Female – 71%
2020
Male – 35%
Female – 65%
Health & Safety
A safe environment where risks are appropriately managed is
very important to us. The Company is governed by health and
safety laws in the countries in which we operate. This includes laws
regulating matters for the protection of the environment and the
management and disposal of hazardous substances. Our factories
are regularly audited to ensure we meet all our health and
safety requirements.
With the continued impact of COVID-19 throughout the year, our
employees returned to their work environments, whether that was
in an office or at one of our manufacturing or distribution sites.
To ensure their safety and well-being we continue to review our
procedures. We have comprehensive protocols around the Group,
which include regular testing, health surveys, temperature checks
on arrival and social distancing. Our factories went above and
beyond to ensure their staff were safe and able to continue to
remain operational.
Neo, our Vietnam based production facility, went to exceptional
lengths to maintain employee safety and continue production.
Following local government guidelines they set up a dormitory for
up to 370 members of the team to allow a COVID-19 free safe place
for the team. The local government were so impressed with the
system that Neo had introduced, it was then used as an example to
help other factories in the area.
There were no serious injuries, notices or prosecutions in any
part of our operations during the year ended 31 December 2021.
All sites followed working policies in conjunction with their local
Government’s advice for COVID-19. We had 15 minor injuries for
a variety of reasons, including cuts and trips. In 2020, the total
number of health and safety incidents for the Group was 8, all of
which were minor injuries predominantly related to trips and cuts.
INSPECS Group plc —
45
Strategic Report
Environmental, Social and Governance continued
Energy
Our environmental impacts consist of energy used to
heat, light, and operate our offices and factories. We
will continue investment in renewable energy and
efficiency programs to improve our environmental
impact. With the introduction of our Diginex platform
we are now well placed to record all our emission
detail accurately.
In 2021 we took further steps towards carbon neutrality across our
worldwide offices by 2030. Eschenbach and TURA continued to
utilise renewable energy sources and the UK business has also
switched to renewable energy. We will continue this across the
Group where possible.
We state our energy use and carbon emissions in compliance with
Streamlined Energy and Carbon Reporting (SECR). We also include
information related to the Task Force on Climate Related Financial
Disclosures (TCFD). Under both of these frameworks we look at our
annual Greenhouse Gas (GHG) emissions for the Group.
Streamlined Energy and Carbon Reporting (SECR) Greenhouse Gas emissions
(tCO2e) and Consumption (kWh) Totals
* 2020 data includes values for Eschenbach and is for comparison purposes only.
* 2021 data does not include values for BoDe and EGO due to the late timing of the acquisitions.
The total emissions (tCO2e) figures for energy supplies reportable for the Group are as follows:
Global GHG emissions data
Scope 1
Unit
2021
2020
Combustion of fuel (stationary and mobile), process emissions and refrigerants
tCO2e
1,316.66
1,250.11
Scope 2
Electricity purchased and heat and steam generated for own use:
Location-based
Market-based
Scope 3
Business travel, water supply and treatment, transmission and distribution losses
from purchased electricity, upstream leased assets
Total GHG emissions – location based
Total GHG emissions – market based
tCO2e
tCO2e
3186.69
2736.25
3,090.33
2,552.06
tCO2e
tCO2e
tCO2e
632.45
5,135.80
4,685.36
644.19
4,984.63
4,446.36
The location-based method reflects the average emissions intensity of grids on which energy consumption occurs (using mostly grid-
average emission factor data). The market-based method reflects emissions from electricity that companies have purposefully chosen,
using source or supplier-specific emission factor where available.
Scope 1, 2 and 3 emissions (tCO2e): This reporting period vs previous reporting period
Scope 1
1,316.66
1,250.11
2021
2020
Scope 2
2021
2020
Scope 3
2021
2020
632.45
644.19
46 — Annual Report & Accounts 2021
3,186.69
3,090.33
The total consumption (kWh) figures for energy supplies reportable are as follows:
Utility and scope
Scope 2
Grid-Supplied Electricity
Scope 1
Gaseous and other fuels*
Scope 1
Fleet Transportation
Scope 3
Business Transportation**
Scope 3
Leased assets***
Total
* Excludes refrigerants as the data cannot be converted to kWh.
** Excludes non-car business travel as the data cannot be converted to kWh.
*** Excludes water as the data cannot be converted to kWh.
Intensity ratio
Intensity metric
Scope 1 and Scope 2
Emissions per full time
equivalent employees (tCO2e)
Scope 1 and Scope 2
Emissions per $1m
turnover (tCO2e)
2021
Intensity
Metric
2020
Intensity
Metric
2.48
2.39
18.69
22.9
Annual carbon emissions by region
Carbon
emissions
Vietnam
China
UK
Europe
USA
2021
Consumption
(kWh)
2020
Consumption
(kWh)
6,068,841
6,102,445
1,262,675
1,001,481
4,472,623
4,394,722
173,525
54,087
1,727,282
1,711,469
13,704,946
13,264,204
GHG emission methodology
We have calculated our calendar year 2020 and 2021 carbon
footprint in accordance with the GHG Protocol, which is the
internationally recognised standard for corporate carbon reporting.
A bottom up, consumption-based approach to calculating
emissions has been undertaken across all our sites globally. We
calculate our direct emission figures using actual consumption data
from smart meters and accurate meter reads/invoicing. However,
access to this type of data is not always possible. Where data was
not available, electricity and water consumption were estimated
using a kWh or cubic meter per full time employee factor. 0.48% of
emissions were calculated from estimated source data.
SECR commitment
Our Scope 1 and 2 emissions come from energy used in our own
operations, largely in our two factories located in China and
Vietnam which produced nearly 60% of our total global emissions
in 2021. We will continuously review how our factories run to
identify opportunities to improve energy efficiency.
While our offices greenhouse gas footprint is relatively small, we
are committed to eliminating these emissions too. By switching to
renewable energy where possible and reducing energy use by
upgrading to low-energy LED lighting. We continue to look for
other methods to reduce our waste and embrace new projects.
Throughout the Group we ensure recycling and re-purposing are at
the top of our agenda for the waste we generate.
We continually review our shipping, dispatch, production and office
procedures to ensure minimum waste. With the innovative
development of our Skunk Works department we are developing
new ways to recycle waste to maximise its use.
INSPECS Group plc —
47
Strategic Report
Environmental, Social and Governance continued
Financial Year
Governance
Strategy
Update
Strategy target
Phase
Phase 1
Phase 2:
Risks, Opportunities
2020
2021
Governance within
reporting lines for SECR with
Director of ESG – reporting
to the Board.
Implement Governance
Structure
Phase 2:
Governance and Systems
2021 and beyond
Board Approval for systems
to capture the Group data.
Meet or exceed local
requirements.
Strategy is met – reporting
for the UK division to align
the Group for 2021
Detailed Risk &
Opportunities assessment –
Group analysis and
capabilities
Continuously review ESG
guidance in line with UN
SDG’s.
Manage all ESG related risks
as an integral part of the
business’s material aspects.
Reporting will take place
as part of our ESG and
annual report.
INSPECS monitors the physical risks from climate change which
have an impact on our lives and our business. We have not
identified any physical risks which are considered to have a material
impact. While the world transitions to a low carbon economy, we
are positioning ourselves so that we maximise the opportunities
that building a more sustainable future will bring. We are
embracing the opportunity to improve our operations and our
product offering to align our future with an environmentally
positive outlook. As part of our Operational Management
Committees (OMC) and our Group Risk Management Committee
(GRMC), we include sustainability to ensure that communication
and Group engagement is paramount along with the direct
involvement from the Board.
Our risk framework and committees have been put together to
ensure a balanced view to identifying, reducing and mitigating risks
to enable fast and safe growth along with ensuring all opportunities
around the Group are explored. Assessments have been made in
relation to all of INSPECS’ offices, and the financial impact of
achieving carbon neutral is relatively modest as we have already in
2021 offset all of our carbon in relation to the principal offices
around the world. In relation to our supply chain, this has not yet
been financially modelled as calculations are underway to ascertain
the amount of carbon used by both our third party suppliers and
internal factories and we expect in the 2022 Annual Report to give
further information in relation to our supply chain carbon cost.
Roadmap to achieving
Carbon Neutrality
Planet
As a Group, our
offices to be Carbon
Neutral by 2030
Looking ahead, the needs of our
customers will increasingly be
defined by sustainable choices.
Our long-term success, the
stability of our environment and
our overall wellbeing depend on
us all making the right choices.
48 — Annual Report & Accounts 2021
Our achievements
Our SDGs, as listed on page 43 reflect how we address our environmental responsibilities.
Our long-term commitment is to help our customers have the choice in making more
sustainable decisions.
Environmental
highlights:
Commitment to
brands, innovation,
people and planet.
Environment
• Ongoing commitment to offsetting
our carbon footprint through tree
planting and sustainable projects
This is the equivalent of:
31,500 trees estimated for 2021
1,500 trees planted for 2020
• Enhance local communities
through education and
regenerating biodiversity
• Accessible for employees to enjoy
Green energy
•
Implemented throughout our
global offices
Waste
•
Increased recycling across
the Group
• Renewable – Sustainable –
• Re-purpose stock initiatives
Dependable
• Over 60% of UK car fleet
already electric
• Cutting waste with improved
forecasting
Sustainability
• New collections
incorporating sustainable
and recycled materials
• Commitment to sustainable
product development
Planet
People
Each of our major
operations to engage
with local community
projects each year
Packaging
100% recyclable by 2025
Product
Innovative development
projects to increase our
sustainable product
offering
Procurement
Collaborate with
our key suppliers
to integrate ESG best
practice and enhance
supply chain
sustainability
INSPECS Group plc —
49
Strategic Report
Environmental, Social and Governance continued
Continuous innovation is key to INSPECS.
Never content with the status quo, we
deliver what our customers want, need and
expect by providing the most cutting-edge
technologies coupled with top-notch
design. Being an industry leader means
experimenting with bold new concepts.
Our Skunk Works department has focused
on four key categories this year:
Continuous
innov
01
New Material
Generation
Investigate, create and
develop new polymers for
the eyewear industry
02
Smart Eyewear
Explore opportunities within
this arena, a foothold within
the field of technology
01 – Polymer development
02 – Bluelight lenses
03 – JWW
04 – BOTANIQ™
50 — Annual Report & Accounts 2021
ation
03
04
Lens Technology
Sustainability
Utilise the knowledge and
expertise at Norville to
develop new concepts
Focused efforts to create
a more sustainable
platform through materials
and packaging
INSPECS Group plc —
51
Strategic Report
Environmental, Social and Governance
continued
SkunkWorks
Innovation…
New material generation
This category was sub divided into three key areas –
sustainable, recycled and progressive.
To provide alternative material applications within the Group,
we have developed Graphene infused eyewear and recycled
disposable face coverings amongst others.
Smart eyewear development
On 29 April 2022 INSPECS Limited signed a Memorandum of
understanding (MOU) with Bosch Sensortec GmbH for the
development of smart eyewear for potential launch in 2023.
Lens technology
Exploring combinations of filters, processes and encapsulation
techniques throughout 2021 led to new innovative methods and
further understanding the limitations of material boundaries.
Micro laser engraving, together with thin edge technologies
were employed to resolve complex lens lamination.
The acquisition of a lens casting unit has allowed us to further
explore methods currently unavailable to us in the fields of
photochromics and over casting substrates.
Sustainability
Working closely with a research and development laboratory in
Holland, we are currently developing a series of highly
sustainable monomers produced in nature by numerous micro
organisms that are yet to be realised in eyewear. Although highly
experimental, early results are positive and we are excited to be
at the forefront of our industry.
In addition to the development of sustainable polymers and
accessories made from recycled plastic bottles, we are currently
investigating the potential of seaweed harvesting to create
packaging, information tags and POS solutions.
Top – Graphene infused compound
Middle – Multiple smart eyewear studies
Bottom – Concept integration development
52 — Annual Report & Accounts 2021
Strategic Report
Section 172 statement
The Board of INSPECS Group continues to
uphold and develop the high standards of
corporate governance already established.
In line with the Section 172 statement the Board considers the
long-term effects of key decisions on stakeholders, and this helps
INSPECS Group to maintain suitable and beneficial relationships for
the future. The Board’s commitment is to work in conjunction with
the INSPECS Group strategy and understand the importance of
governance.
The Board engages with all areas of the business to gather data
that is relevant to the decisions being made.
The main considerations to promote the success of the company
for the benefit of all stakeholders are set out below:
Our employees
Our investors
Our customers
Training and career prospects
The employees of the Group have annual
appraisals and the Group operates an LTIP
share option scheme for the future
leadership. The company actively
encourages all employees to have access to
further training to enhance their skills and
develop their careers.
Health & Safety
Individual entities review Health & Safety
monthly and report findings to the Group
ESG Director. These findings are reviewed
at each Board meeting and form part of the
standing agenda.
Diversity and fair pay
The Group has the highest standards in
relation to diversity and fair pay for all
employees regardless of their age, sex or
ethnicity.
Demonstrate a clear investment
case and strategy for continued
sustained growth
The CEO and CFO hold meetings with
institutional shareholders throughout the
year, including communication post interim
and final publications of the yearly accounts.
Ensure good risk management
and corporate governance
All Directors and senior executives have a
shared governance and risk understanding,
with our Audit and Risk Committee in place
and continual Board involvement in
governance of key elements. Reports and
Accounts are available at Companies House
and on the company website.
Demonstrate KPIs
Quarterly turnover numbers are released
to the market maintaining a relevant
information flow to all stakeholders.
Continue our ethical behaviour
in all business matters
We are committed to working with our
suppliers, business partners and key
stakeholders to ensure their business is
ethical and responsible. Honesty and
transparency are integral to our business
operation.
Continue to create new
well-designed products
The Group design hubs are in the UK,
Portugal, Germany, Hong Kong and the USA.
They regularly engage directly with
customers to create new and exciting ranges
each year.
Deliver to our customers on time
Our communication with our customers and
suppliers is key, especially while we continue
to navigate problems due to COVID-19.
Demonstrate to our customers
our traceable supply chain
The Group maintains independent audit
facilities available to our chains to monitor
and audit our factories at their request.
Engage in customer feedback to
ensure continual improvement of
our supply chain
The Group reviews its six monthly or annual
feedback reports from our global chains and
utilises these to help in constantly improving
our performance.
Develop more sustainable
products for our customer base
We continue to develop sustainable eyewear
ranges which have won multiple awards.
During 2021 the Group won a record 3 major
sustainability awards for its products.
54 — Annual Report & Accounts 2021
The Board continually reviewed and
considered the ongoing effects of
COVID-19 on the business during
2021 and will continue to monitor
its effects during 2022.
In accordance with Section 172 of the Companies Act 2006
the items listed to the right demonstrates how the Board has
fulfilled its duties.
This provides a summary of the Board’s strategic aims,
decision-making process, and the key stakeholders of the
company whom the Board considered and engaged with.
Stakeholder benefits arising from the decisions are shown
below. Further information that demonstrates how the
Directors have fulfilled their duties are shown within the
Strategic Report and Directors’ Report. Any new member to
the Board, as part of their induction will receive training on
the Section 172 statement and the Group’s risk framework
along with all other aspects of the business.
The Board of INSPECS believes that it has acted and made
decisions in a way considered most likely to promote the
success of the company for the benefit of its members. In
doing so we gave regard to:
01
The likely long-term
consequences of any
decision
02
The interests of the
company’s employees
03
The need to foster the
company’s business
relationships with
suppliers, customers
and others
04
The impact of the
company’s operations
on the community and
the environment
05
The company’s desire
to maintain a
reputation for business
conduct of the highest
standard
06
The need to act fairly
between members of
the company
Our Communities
The Group now operates globally and we are expected to operate in
a responsible way ensuring consideration to those around us and
continuing to minimise our effect on the environment.
How we Engage
The Group continues to design and develop using PPE and recycled
materials. Our new facility in Gloucester has allowed us to introduce
improved environmental measures, including water usage systems,
LED lighting and electric car chargers. We continue to develop our tree
planting initiative to offset our carbon footprint and look to further
embrace sustainable products in 2022.
Our Suppliers
Fair trading and payment terms
The Group ensures that all suppliers are paid and treated equally and
the Board reviews average supplier days.
Collaboration and long-term partnerships
We engage with our key suppliers for the long term and aim to create
a partnership of supply.
Supplier engagement checks
We monitor key suppliers to ensure compliance with modern
slavery laws.
Environment
Ensuring the Group takes into effect climate
change on both its business and its supply chain
and continues to manage its pollution and waste
The Group continues to move to renewable energy where possible
and is establishing an annual review of key operations and the effect
of climate change on those operations. The Group will continue to
explore efficient supply chain routes and develop a range of
environmentally friendly products.
Key decisions
01 The Board has continued to support
growth through acquisitions
To continue our growth the Board has enhanced our brand
portfolio, created licensing opportunities and has expanded
our sales distribution network by completing two acquisitions
in 2021.
02 Maintaining employee engagement and productivity
The Board have continued to support a location flexible
arrangement, allowing employees to combine on site and off
site work where possible. This, combined with the measures
in place at our factories, has allowed the business to trade
effectively despite the ongoing pandemic.
03 Promotion of sustainability throughout the Group
The Board promotes the development of fully sustainable
products and packaging, and fully support new initiatives
towards a carbon neutral future. The Board assisted in the
implementation of ESG reporting and having sustainability
teams embedded around our operating businesses.
04 Capital resources
The Board engaged and monitored the continual investment
into our manufacturing plants and reviewed the new loan
agreements with HSBC which were signed in October 2021.
This was to help sustain the future growth of the business.
The Board also reviewed the budgets for 2022 and the cash
flows and capital requirements of the Group out to 2023.
INSPECS Group plc —
55
Strategic Report
Section 172 statement continued
A perfect
fit
During the year, the Group
made two further strategic
acquisitions, namely BoDe
Design and EGO Eyewear, in
addition to the worldwide
trademarks, rights and licences
to the Hardy Amies brand.
When reviewing the opportunity to acquire
these businesses the Board assessed their
strategic fit, projected returns and risks
associated with the acquisitions along with
reputational and finance risks.
56 — Annual Report & Accounts 2021
These acquisitions continue our
strategy of developing strategic
distribution of our products to
both chain and independent
opticians around the world.
Robin Totterman
INSPECS Group plc CEO
In reviewing the acquisitions,
the Board focused on:
How the acquisitions aligned with the overall
strategic plan.
The company’s ability to execute and finance
the acquisitions.
Review of detailed internal documents provided for the
Board on each of the acquisitions.
Review of the impact financially on the results following
the acquisitions and the projected cash flows on both
leverage and earning per share.
Review and discussion on the quality of the
management team contained in the acquisitions.
Overall, following detailed discussion and review the
Board accepted the business and financial analysis
supplied. They unanimously instructed the executive
team to execute the transactions.
The Board allocated additional time to allow debated
discussions and support during the acquisitions.
The Board also reviewed the attained financial and
legal due diligence prepared on the acquisitions by its
corporate advisors. This was an inclusive approach and
the Board also sought the views of the senior
non-executive management within the Group.
INSPECS Group plc —
57
Left: Barbour International
Right: Superdry
Strategic Report
58
— Annual Report & Accounts 2021
M
a
r
c
O
P
o
o
’
l
Risk management
Addressing risk at INSPECS
Our risk
management
framework covers
every part of our
business.
The Board meets regularly to identify risks in our operations as
they arise. Having identified a new risk, the Board receives an
assessment of the risk and then reviews and approves plans to
mitigate it.
Risk Responsibility
The Board of INSPECS has the overall responsibility for risk
management and ensuring mitigation and continual monitoring
of risk. Each division has an Operational Risk Management
Committee (OMC) responsible for implementing controls and
processes across their area of the business. The OMC’s have
been formed with a senior member of each part of the Group and
they enlist their management team to review the risks identified
in the framework. The OMC meet at least twice yearly to review
the Group’s risk framework and report their findings to the Group
Risk Management Committee (GRMC). The GRMC is headed by
the Group ESG Director and the Group Chief Treasury Officer
and calls on both internal and external experts.
The GRMC review the outcomes of the risk review and report to
the Board’s Audit and Risk Committee with any material findings.
This ensures continual management, by both the Board and the
key employees, of the inherent risks in the business. The GRMC
also draw on the expertise of the Group to help other entities
identify risks and discuss potential opportunities.
In addition to this, the Eschenbach Group have a financial based
risk system which is incorporated in the risk framework to ensure
Group continuity. The GRMC make sure that the framework is a
reporting mechanism to be individualised so it is relevant to each
division and that they are material to the development,
performance and future prospects of the entity and the Group.
The Board has zero tolerance in relation to health and safety
issues within our control in all jurisdictions within which we
operate. Health and Safety issues are discussed in each Board
meeting as part of the standard agenda.
01
Identify risk through
continual assessment
02
Mitigate risk
03
Manage and monitor
INSPECS Group plc —
59
Strategic Report
Risk management continued
Key Group risk assessment
Key: Low:
Medium:
High:
Scope area and risk description
Potential consequences of risk event
Mitigation
IT - Cyber risk and new system
implementations.
• Inability to access systems and loss of data
• Increase Cyber security protocols and tool sets
• Cost of ransom and loss of revenue
• Inability to use the software
across the group
• Cyber Risk insurance to be kept up to date in all
Group entities
• Working towards multiple Cyber Security
accreditations
New risk
Probability of risk occurring
Estimated impact of risk event occurring
Pandemic – Continuing risk of
the COVID-19 virus and
emergence of a new virus.
• Risk to employees
• Supply chain disruption and reduced
productivity
• Loss of revenue
• Utilise the skills and lessons learnt during the
COVID-19 pandemic to reduce the impact of office
and factory closures
• Remote working where possible
• Continued stress testing of finances to ensure robust
stability
Reduced risk
Probability of risk occurring
Estimated impact of risk event occurring
Size and Complexity of the
Group –
Lack of cohesion, culture and
synergy between key
management and resources.
• Missed opportunities to improve product for the
global market and failing to recognise potential
cost savings
• Additional resource to be recruited where necessary
to ensure smooth integration
• Continue to improve communication between Group
• Duplication of effort and failure to use resources
entities
available within the group
• Poor integration of new businesses leading to
loss of potential synergies of acquisition
• Annual physical meetings
• Group adopting similar operating systems where
applicable
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
Culture – The Group’s values
and behaviours towards risk are
not present throughout the
individual entities.
• Vague or ill-defined risk awareness leading to
under-performing, loss of talent and potential
reputational damage
• Group Corporate Risk register to allow regular
communication and reviews
• Roll-out of group polices and procedures to embed
culture
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
Supply Chain – Disruption to
either our factory production or
our subcontracted production
and escalating costs of labour,
raw materials and energy.
• Reduced revenue
• Robust relationships with key suppliers
• Reduced supply to internal and external
• Diversification of suppliers to mitigate dependence
customers
• Budgets to include known increases in costs
• Negative customer and brand impact
• Productivity reviews
• Rising labour, energy and raw material costs will
affect the profitability of the business
• Ensuring awareness of local employment/labour laws
• Review product costs to the market
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
Treasury and financial
control – Inefficient use of
cash resources.
• Additional borrowing required to fund business
activities increasing interest and set-up fees
• Chief Treasury Officer positioned to monitor treasury
and cash custody
• FX risk
• Breach of banking covenants
• Cash flow risk and risk to future project funding
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
People – People are critical to
the Group to ensure that it can
meet the needs of its customers
and achieve its overall strategy.
• Reduce the effectiveness of the group’s ability to
• Senior management are part of the group LTIP
trade
Scheme to maximise retention.
• May impact the intended growth in the business
• Cross-functional input to reduce reliance on single
individuals
• Remuneration Committee seeks to ensure rewards
are commensurate with performance
• The Group strives to be one of the best places for
employees to work and build a successful career
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
60 — Annual Report & Accounts 2021
Scope area and risk description
Potential consequences of risk event
Mitigation
Data protection and GDPR
– Loss of data used to conduct
our business and information
on customers received under
GDPR.
• Negative reputational impact
• Policies and training constantly updated within the
• Could lead to both reputational and
Government penalties
group
New risk
Probability of risk occurring
Estimated impact of risk event occurring
Economic and political risk
– Recession in local or global
economy.
• Reduced customer demand
• Board constantly monitors economic changes that
• Costs may increase due to government policy
may affect the Group
and legislation
• Diversified regional supply chain established and
multi-channel revenue streams
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
Environmental – Risk of
non-compliance with local
Government guidelines for
emissions and reporting.
• Inability to state and review environmental
• 3rd party reporting platform for each entity to
position accurately
• Reputational/ brand damage
• Possible risk of fines
comply with reporting needs
• Board approval for sustainability roadmap to
improving our impact on the environment
New risk
Probability of risk occurring
Estimated impact of risk event occurring
Governance – Risk of policies
& procedures not adhering
to plc AIM requirements
and group compliance.
• Negative employee, customer and brand impact
if legal, ethical and regulatory requirements are
not being met
• Work with external partners such as Diginex and
Macfarlanes to ensure awareness and compliance with
appropriate polices
• High legal costs for any breach
• Ensure company has appropriately experienced Board
New risk
Probability of risk occurring
Estimated impact of risk event occurring
Licences – Loss of licence
due to breach of contract
and reputational damage
to Licensor.
• Reputational damage
• Negative impact on cash flow, turnover and
profit
• Potential of over stocking position
• Full awareness of contractual obligations for each
licence and a review process to ensure trading is
within boundaries
• Keeping a varied portfolio of brands and ensuring
awareness of the licensors position in the marketplace
• The Group is increasingly less reliant on one single
brand as the portfolio evolves
New risk
Probability of risk occurring
Estimated impact of risk event occurring
Social – Risk of non-compliance
with local Government HR and
Health & Safety regulations and
reporting requirements.
• Breach of regulations leading to potential
• Each HR and H&S entity to report to the group ESG
grievance procedures
• Negative working environment leading to low
productivity
• Safety negligence
director to ensure awareness and continuity of
processes and procedures
• H&S audited by an external source to ensure
compliance with regulations
• Manufacturing government and social regulations
externally audited
New risk
Probability of risk occurring
Estimated impact of risk event occurring
Product Safety – Safety risk for
our consumers.
• Risk of litigation
• Brand/Reputational damage
• Recall of products affecting revenue
• Products are tested and certified by independent
laboratories
• Regulatory approval in the markets we trade in
• Maintain public and product liability insurance
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
Quality – Poor or inconsistent
quality.
• Reduced future demand for the group’s products
• Dedicated in-house, secondary and chain Quality
• Reduced revenue
• Negative reputational impact
Control (‘QC’) teams
Exisiting risk
Probability of risk occurring
Estimated impact of risk event occurring
Climate change – Potential
negative impact of climate
change on the business.
• Climate change may lead to disruption to the
Group and supply chains and/or disruptive
short-term events
• Increased carbon offsetting via tree planting initiative
and green energy schemes
• Continued development of fully sustainable products
• Actions required to reduce carbon usage and
to mitigate the impacts of climate change may
result in an increase in operational costs or
capital expenditure
and packaging
• Further diversification of supply chains around the globe
• Main offices have already moved to carbon neutral
New risk
Probability of risk occurring
Estimated impact of risk event occurring
INSPECS Group plc —
61
Corporate Governance
Corporate governance is important
in promoting the values of the
Group both internally to
employees and externally to our
stakeholders. The Board
recognises and values the
importance of good corporate
governance and how it drives
operational, financial practices and
risk management.
Corporate Governance
Corporate Governance statement
Board of Directors
Key Management
Audit and Risk Committee Report
Remuneration and Nomination Committee Report
Directors’ Report
Statement of Directors’ Responsibilities
64
70
72
74
76
79
82
02
Govern
62 — Annual Report & Accounts 2021
ance
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INSPECS Group plc —
63
Corporate Governance
Corporate Governance statement
Introduction
from the
Chairman
Lord Ian MacLaurin
Chairman
Dear shareholder,
I am pleased to present the Corporate
Governance Report for 2021. This report
should be read in conjunction with the report
on page 69, in which we have set out how we
have complied with the QCA Corporate
Governance Code. As I have outlined in my
report on page 12 to 15, 2021 has been a
strong year of growth for the company with
revenue, cash flows and Adjusted Underlying
EBITDA all up from last year and the continuing
development of the company strategy to grow
the business in a sustainable manner.
64 — Annual Report & Accounts 2021
Governance
The Board believes that effective delivery of the company strategy
requires strong corporate governance supported by a robust
structure that allows the Board to engage in constructive debate
and be challenged by its members. This allows the directors to
make strategic decisions. The Board recognises the importance of
having suitably qualified Non-Executive Directors who are
independent in character and free from any relationship that could
affect their judgment. Our Non-Executive team for the year
consisted of Richard Peck who has over 38-years industry
experience within eyewear together with Angela Farrugia who has a
wealth of experience in relation to brands and consumer products,
and finally Christopher Hancock who is a Chartered Accountant and
has been involved in many corporate transactions over the years
and is able to support our Executive Team on acquisitions.
The Board firmly believes that driving our long-term goals should
not be at the expense or detriment to others with whom we engage
and also the environment in which we operate. We are committed
to generating our long-term goals for all stakeholders with as little
impact as possible on the planet.
Engagement with our stakeholders
The Board is conscious that there are a number of stakeholders
within our business and considers the interest of each of these
stakeholder groups in its discussions. During the year we have had
a comprehensive investor relation program in place with the
Executive Team carrying out a number of meetings with our
shareholders during the year. Our Non-Executive Directors engage
with our shareholders as appropriate and also with our auditors,
nomads and our corporate advisers.
The culture of the business is a key part of our success and in the
year to 31 December 2021 the Non-Executive Directors have
visited the Group’s operations where possible. However, due to
COVID-19 restrictions they have not travelled overseas, they hope
to be able to do as soon as travel restrictions are lifted, in particular
with respect to our operations in Vietnam and China.
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Looking ahead
Following our performance in the year to 31 December 2021 the
Board is now focused on improving the business performance in
2022. Despite the difficulties of managing the business during the
uncertainty caused by the COVID-19 Pandemic and regretfully the
turmoil in Ukraine that has happened in the Spring of 2022, the
Board continually discuss our risk management structures as it is
clear the Group needs to be prepared for uncertain times ahead.
We have placed a significant emphasis during the year on the
safety of our employees with further additional investments for
COVID-19 compliance, communication training and employee
welfare programs.
We have made significant progress in relation to our ESG reporting.
The Group is actively engaged in reducing our carbon footprint
and is now looking in some detail at our supply chain. We continue
to allow flexible home working where appropriate.
We will continue to focus on delivering attractive long-term returns
for shareholders, behaving responsibly to all of our stakeholders,
employees, suppliers and customers and importantly the
community in which our business operators.
Lord MacLaurin
Chairman
INSPECS Group plc —
65
Corporate Governance
Corporate Governance statement continued
How the Board operates
The Board is responsible for the Group’s overall strategy and for
the overall management of the Group. The Strategic Report on
pages 4 to 61 outlines the key approach of the Board to ensuring
and promoting the long-term sustainable growth of the company
for all shareholders.
The main matters for consideration by the Board include:
• Financial reporting and financial controls.
• Monitoring of health and safety across the Group.
• Approval of material contracts and Group expenditure.
• Communication with stakeholders.
• Financing and capital adequacy of the Group.
• Agreeing budgets and forecasts.
• Reviewing acquisitions.
• Oversight of the Executive team.
Overview of governance structures
The Board structure is designed to ensure that it focuses on the
Group strategy whilst at the same time monitoring its performance
and reviewing the controls and risk of the Group. The Board
considers that the governance structures below allow for the
operation of the Group in an open and straight forward culture
without over delegation of responsibilities.
Shareholders
Board
The Board is responsible for overviewing the Group’s strategy and ensuring that it delivers long term growth in a sustainable manner for
the benefit of the Group’s shareholders and stakeholders.
Board Committees
Each Board committee has a documented terms of reference agreed by the Board. These are regularly reviewed and are available on
the company’s corporate governance website.
Audit and Risk Committee
The Committee is responsible for:
• Overseeing the Group’s financial
reporting
Remuneration and Nomination
Committee
The remuneration and nomination
Committee is responsible for:
• Overseeing the Group’s internal
• Reviewing the structure, size, and
Sustainability Committee
This Committee was established
in 2022
The sustainability Committee is
responsible for:
control framework and risk
management process
• Overseeing the relationship with the
external auditor and monitoring their
independence
composition of the Board
• Succession planning for Directors
and other Senior Executives
• Promoting diversity
• Setting, reviewing, and
recommending the policy on the
remuneration of the Executive
Directors
• Overseeing the senior management
team and general workforce
remuneration approach
• Monitoring the implementation of
the remuneration policy
• Overseeing the alignment of the
reward, incentives and culture
• Overseeing the Group’s
sustainability framework, focus
and strategy
• Monitoring the Group’s sustainability
impact and performance
• Providing guidance on developing
environmental challenges, which
includes environmental risk and the
impact these will have in the Group
• Overseeing the Group’s ESG
reporting, including external audit
and assurance requirements
Additional information is available on
pages 74 to 75.
Additional information is available on
pages 76 to 78.
Executive officers
The executive team is responsible for the day to day running of the Group’s business, improving its performance and ensuring
future long term growth and development.
Senior management
The Group has a wealth of experienced senior managers across the globe all of whom have high levels of industry experience.
More details of our key management are shown on pages 72 and 73 of the report.
66 — Annual Report & Accounts 2021
Board meetings
The Board was scheduled in 2021 to hold six meetings during the
year to review four quarterly updates and two one-day meetings to
agree the interim and year-end financial accounts. However, due to
COVID-19 and the acquisitions in the year, it was agreed that the
whole Board would meet on a regular basis to review and challenge
these transactions. As such and due to COVID-19 and the
acquisitions the Board met more frequently than was originally
planned.
Scheduled Meetings
Board
Remuneration
Committee
Audit and Risk
Committee
Lord Ian MacLaurin
Robin Totterman
Christopher Kay
Christopher Hancock
Richard Peck
Angela Farrugia
* In attendance.
7
8
8
8
8
8
–
–
1*
1
1
–
4
–
4*
4
4
–
Directors are expected to attend all meetings of the Board and the
Committees on which they sit. In the event of a Board member not
being able to attend their respective Committee or the Board their
comments are passed to the Chairman.
Board committees
The Board has delegated some specific responsibilities to the
Audit and Risk Committee, Remuneration and Nomination
Committee and Sustainability Committee. The respective reports
are shown on pages 74 to 78.
Board composition
The Board believes it has the right skill sets, knowledge and up to
date experience to perform its duties responsibly. Allowing them to
deliver on the Group’s strategy of long-term growth of the
company for the benefit of all stakeholders.
The Board fully supports the Financial Conduct Council’s aim of
encouraging diversity. A full breakdown of gender representation
for directors is shown on page 45 of this report.
Board and Board committee
effectiveness review
The Board carried out an internal review of its effectiveness in 2022
on it’s 2021 performance, this review included the following:
• Response to new events and unscheduled developments
• Review of financial information and performance of
the business
• Acquisitions
• Conduct rigorous discussion and debate
• Setting strategy
• Composition of the Board and future development
• Training and development
• Operational effectiveness
INSPECS Group plc —
67
Relationship with stakeholders
Continuing engagement with shareholders and stakeholders in the
Group is of prime importance to the Board. This communication is
both by the Annual Report and Accounts and its interim accounts
and RNS releases when appropriate. The Group communicates
through its website www.INSPECS.com and investor information is
available on the website.
The Non-Executive team is available to discuss matters that
stakeholders may wish to raise and the Executive team holds
meetings with investors on a timely basis. In the period under
review feedback from stakeholders did not give rise to a change
in the Group strategy.
The Group has regular reviews from material customers on its
performance and these are closely monitored, and the Group
maintains regular communication with a wide range of
stakeholders.
Annual general meeting
The Annual General Meeting of the company will take place on 11
August 2022. The Notice of Annual General Meeting and the
Ordinary and Special Resolutions to be put before the meeting are
contained in the Notice of the Annual General Meeting
accompanying this Annual Report. The AGM is an opportunity for
shareholders to ask questions relating to the company and it will be
held at the company’s office in Bath and also available on Zoom
with details of how to join given in the notice of meeting.
Corporate governance code
The Board recognises the corporate responsibility in the way that
INSPECS operates around the globe. In January 2020 the Board
approved the adoption of the Quoted Companies’ Alliance
Corporate Governance Code for small and mid-sized quoted
companies, known as the QCA Code.
The Board is accountable to a wide range of stakeholders and to
ensuring its primary goal of long-term sustained growth whilst
acting in a sustainable manner. Examples of our continued work on
sustainability are covered in pages 40 to 53 of this report.
The Board has ultimate responsibility for internal control and how
we manage this process is shown on pages 74 and 75.
Our gender diversity is shown on pages 44 and 45 of this report.
The principal elements of internal control are as follows:
Corporate Governance
Corporate Governance statement continued
Board members’ independence
The Board considers and ensures that each of the Non-Executive
Directors are independent of management. The Board is led by the
Chairman who ensures fair and constructive debate where
appropriate.
The founder and CEO has a substantial shareholding in the Group,
but this does not detract from the Board’s ability to exercise
independent judgement and enquiry.
All Non-Executive Directors are considered to be independent in
both their character and judgement and confirm that they are free
of relationships or other circumstances that could impact on their
independence.
The Board had two Committees and a new third Committee
dealing with sustainability and ESG which has been set up in
April 2022.
The Audit and Risk Committee is responsible for overseeing the
Group’s financial reporting, risk management, internal controls and
liaises closely with the Group’s external auditors. Full details of this
Committee’s work is set out on pages 74 to 75 of this report.
The Remuneration and Nomination Committee is responsible for
establishing procedures for setting executive remuneration policy
and executive pay. The Committee met during the year and full
details of its work during the year is given on pages 76 to 78
of this report. The Committee also is responsible for leading
Board appointments.
The ESG Committee is responsible for overseeing and reporting to
the Board on a six monthly basis the environmental, social and
governance matters across the Group.
Conflicts of interest
The Board ensures that each member of the Board declares any
interest in matters to be discussed and regularly reminds Board
members of their duty to disclose any potential conflicts of interest.
Directors’ and officers’ liability insurance
The Group has purchased Directors’ and Officers’ insurance
during the period and holds insurance to the benefit of the
Executive team.
Senior independent director
Christopher Hancock is the Senior Independent Director and is
also Deputy Chair-elect and will act as the Chairman’s alternate
when required.
Development
The company Secretary ensures that all Directors are kept up to
date with changes in relevant legislation. This includes liaising with
the Group’s advisers, principally our Nomads, Peel Hunt and our
Group corporate lawyers Macfarlanes.
Election of Directors
All Directors will offer themselves for re-election at the forthcoming
Annual General Meeting.
68 — Annual Report & Accounts 2021
The QCA Corporate Governance Code
Governance Principles
Compliant
Explanation
Further Reading
Deliver growth
1
2
3
4
Establish a strategy and business
model which promotes long-term
value for shareholders.
Seek to understand and meet
shareholders’ needs and
expectations.
Take into account wider
stakeholders and social
responsibilities and their
implications for long-term
success.
Embedded effective risk
management, considering both
opportunities and threats
throughout the organisation.
Maintain a dynamic management framework
5
6
7
8
9
Maintain the Board as a well-
functioning, balanced team led
by the Chairman.
Ensure that between them the
Directors have the necessary
up-to-date experience, skills and
capabilities.
Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement.
Promote a corporate culture that
is based on ethical values and
behaviours.
Maintain governance structure
and processes that are fit for
purpose and support good
decision-making by the Board.
Build trust
10
Communicate how the company
is governed and is performing
by maintaining dialogue with
shareholders and other relevant
stakeholders.
The Board is responsible for Group strategy and its
implementation. This strategy is debated and
tracked by the Board who monitor its progress.
See pages 22 to 29 to learn
more about our strategy and
business model.
Meetings are held with investors and analysts at
half-yearly interim and final accounts. The AGM
provides a forum for all shareholders to meet and
hear from the Directors. Shareholder comments and
suggestions are welcomed by the Board.
See page 54 to see how
we communicate. Further
information is available
our on website
www.INSPECS.com.
The Board has identified the key stakeholders in the
business and discusses the impact of the long-term
growth strategy and how our business model may
affect these stakeholders.
See pages 54 and 55 to see
how we communicate and
deal with our stakeholders.
The Audit and Risk Committee regularly reviews
risks to the Group, both internal and external.
Health and Safety is of paramount importance and
a standard Board meeting agenda item.
See pages 59 and 61 for
further detailed information
on risk management.
The Board consists of four experienced relevant
Non-Executive Directors and the CEO and CFO. The
Board has a wealth of experience on strategy,
operations and financial matters. The Chairman
engages in open debate and new goals are
challenged.
See Board Director
information pages 70 and 71
for further guidance.
The Board believes that it has the required skills and
correct balance of capabilities to manage the Group.
Members of the Board keep their skill levels up in a
variety of ways throughout the year.
See pages 70 and 71 of our
Corporate Governance
Report.
During 2022 the Board undertook an evaluation of
it’s 2021 performance to ensure the Board had the
required necessary collective skills. This review will
continue to take place on an annual basis.
The criteria to be used to
evaluate the Board is set out
on page 67.
The Board promotes and encourages, across the
Group, the core values of the Group. The aim is to
deliver continual improvement in both the economic
performance of the Group but also its social
responsibility to the wider community.
The Board’s governance model is widely known as
the unitary system. The Board is aided by three
subcommittees to undertake specific work. The
Board has regular information flows and has regular
meetings to ensure they have the ability to review,
debate and make well-informed decisions.
See pages 64 to 68 of the
Corporate Governance
Report.
See more information on the
Committee Reports on
pages 74 to 79.
INSPECS has open communication with a wide
range of stakeholders. This includes regular
updates with investors, yearly and half yearly
reports and regulatory news service releases on
key corporate matters.
See pages 54 and 55 of the
Strategic Report.
INSPECS Group plc —
69
Corporate Governance
Board of Directors
Board of Directors
Lord MacLaurin
Chairman
Tenure
Lord MacLaurin has served as Board Chairman since 8 March 2017.
Skills, competence and experience
Lord Ian MacLaurin is a well-known figure in business with a stellar track record
of successfully leading plc companies through significant change. Having
served as a Chairman of Tesco between 1985 and 1997, which he is credited
with building up into the UK’s largest retailer, Lord MacLaurin went on to serve
as the Chairman of Vodafone between 1999 and 2006. His tenure in the House
of Lords lasted over two decades. Lord MacLaurin brings invaluable insights
and experience to the Group’s ambitious and global growth plans.
Angela Farrugia
Independent Non-Executive Director
Tenure
Angela was appointed as a member of the Board on 12 May 2020.
Skills, competence and experience
Founder of one of the most successful brand management companies in the
world, Angela formed TLC (The Licensing Company Ltd) in London in 1996.
Creating a new breed of agency, the business grew to encompass 24 offices
in 16 countries and amassed a roster of leading brand representations in
various sectors, generating over $12.4bn in retail sales annually for its clients.
In addition to 22 years operating experience gained within a challenging
international business environment.
Richard Peck
Non-Executive Director
Tenure
Richard has served as a Board member since 10 January 2020.
Skills, competence and experience
Richard Peck has over 38 years of optical experience. Richard brings a wealth
of experience from working in other leading eyewear companies, such as
David Clulow and Luxottica, where he held the position of Managing Director
Retail Northern Europe between 2010 and 2018. Richard’s retail background
increases the Board’s diversity of skills, knowledge and experience.
Christopher Hancock FCA
Chair of the Audit and Risk Committee &
Remuneration and Nomination Committee
Tenure
Christopher has served as a Board member for
INSPECS Holdings Limited since 8 March 2017.
Skills, competence and experience
Christopher Hancock FCA has 31 years experience in business development,
restructuring and corporate finance. Christopher qualified as a chartered
accountant with Arthur Andersen before entering investment banking, where
he spent 10 years with JP Morgan. He established his own consultancy practice
in 2009 and co founded an FCA regulated corporate finance and investment
management firm in 2012. Christopher brings a broad range of experience
in business development, M&A and corporate finance in public markets.
C
C
70 — Annual Report & Accounts 2021
Executive team
Robin Totterman
Group Chief Executive Officer
Tenure
Robin has been a Board member since founding INSPECS in 1988.
Skills, competence and experience
Robin Totterman is an entrepreneur and forerunner in the branded eyewear
industry with over 31 years experience in eyewear licensing, design,
manufacture and wholesale. Robin’s passion for design and fashion brought
the first branded eyewear to the UK optical market (Jean-Paul Gaultier).
His ability to recognise value and seize opportunity saw him complete the
acquisition of Killine in 2017, creating a vertically integrated Group rivalled
by only a small number of eyewear firms. Prior to INSPECS, Robin worked
at UBS and Banque Paribas.
Chris Kay
Group Chief Financial Officer
Tenure
Chris has been involved with INSPECS since it was founded in 1988 and has served
as a Board member for INSPECS Holdings Limited since 13 November 2013.
Skills, competence and experience
Chris Kay is a qualified chartered accountant and became a partner of Thorne
Lancaster Parker, a UK accountancy and taxation firm, in 1992. He became
Finance Director of INSPECS in 2013 and works closely with Robin Totterman
on strategy for the Group. Chris’ business development and M&A experience
was pivotal to the execution and integration of INSPECS’ Killine Group acquisition
in 2017 and further acquisitions of Norville and Eschenbach in 2020.
Committee Membership Key
Audit & Risk Committee
Remuneration & Nomination Committee
Group Projects & Acquisitions Committee
C
Chairman
INSPECS Group plc —
71
Corporate Governance
Key Management
Marc Lefebvre
Ha Bui
Michael Zhang
Jorg Zobel
Peter Braunhofer
Matthias Anke
Scott Sennett
Ken Bradley
Jennifer Coppel
Nevil Trotter
Sean Donnachie
Paul Jones
72 — Annual Report & Accounts 2021
Ronald Gezang
Johanna Gezang
Steve Tulba
Clare Lovett
Adam Loewy
Vance Wright
Monika Hladik
Matt Dorling
Stefan Bopp
Matthias Deter
Jon Bloom
Angela Eman
Elliott Smith
Group’s senior team
The Group’s senior team play an integral part in ensuring the strategic plans are
managed throughout the business. Working closely with each subsidiary senior team
to oversee finance, risk and all ESG areas. The Group’s senior team report to the
Board and the Board Committees on all matters.
INSPECS Group plc —
73
Corporate Governance
Audit and Risk Committee Report
The members of the Audit and Risk Committee
are all independent Non-Executive Directors in
compliance with the QCA Code. The Audit and Risk
Committee is chaired by Christopher Hancock and
is responsible for the following main areas.
Christopher Hancock FCA
Audit and Risk Committee Chair
74 — Annual Report & Accounts 2021
• Reviewing and monitoring the financial performance of
the Group
• Reviewing the integrity of the financial statements
• Reviewing the internal control and risk management systems
• Advising on the suitability and independence of the
external auditors
• Reviewing extent of non-audit services provided to the Group
• Engaging with the external auditors and ensuring the scope of
the audit is acceptable
• Monitoring the disclosures in the Annual Reports and Accounts
• Reviewing changes in accounting policies
• Review of the Group’s continuing IT development and
access controls
• Review of the Annual Report and Accounts to ensure its
completeness and fairness and understandability
• Review of interim announcements
• Review of going concern, key judgements and significant
accounting policies
• Reviewing the carrying values of intangible and tangible assets
External audit
The external auditors EY were reappointed on 19 July 2021. The fee
for the audit to 31 December 2021 is $1,404,000 (2020: $1,239,000).
The Audit and Risk Committee undertakes a review of the
effectiveness and independence of the Group auditors. The fee
increase in 2021 was primarily due to the enlarged size of the
Group with all material components now audited by EY.
Meetings, attendance and time commitment
The Audit and Risk Committee has unrestricted access to the
Group’s auditors and is mandated to meet twice a year. In addition
the Committee has meetings with external auditors without
management present. The Group CFO attends the meetings of the
Committee by invitation.
Internal audit
The Group does not have an internal audit function. However, due
to the enlarged Group size it is expected that an external
consultant will lead an internal audit process in 2022.
Risk governance
The Audit and Risk Committee met four times in the year to
consider the risks faced by the Group and to ensure that
policies are in place to mitigate them. The results of this review
are set out under Risk Management on pages 59 to 61.
Internal control environment
The Group uses both manual and automated systems to control, monitor and report
risk matters. The principal elements of the Group’s internal control are:
• Close management and monitoring of the Group’s Executive Directors
• Monitoring the organisational structure and promoting risk based decision-making
• A comprehensive annual budgeting process producing detailed profit and loss,
balance sheets, and cash flows on a rolling 12-month basis
• Comprehensive monthly reporting of KPI’s, key risk
areas, capital expenditure and banking facilities
Significant financial judgements
During the year the Audit and Risk Committee considered the following significant
issues regarding the financial statements and having reviewed were satisfied that they
were appropriately stated.
• COVID-19 and the effects on the Group at both the performance and also at
the going concern level. The Committee continues to monitor the effect of
COVID-19 and the impact on any assets as a result of the disruption to trade
caused by COVID-19
• The Committee reviewed management response to the continuing price increases
affecting the business including shipping, distribution, labour and energy increases
facing the Group
• The Committee reviewed the acquisition of the EGO Eyewear and BoDe Design
businesses, the fair value of intangible assets and valuation of goodwill. For the
acquisitions, KPMG were appointed to carry out the conversion of the principal
statements from local GAAP to IFRS accounting standards, as well as the
identification and valuation of intangible assets arising on the acquisition and the
allocation of goodwill
• Goodwill and intangible assets are significant values in the balance sheets and
the Committee reviewed any potential impairment that might be required, the
cash flows of the CGU (cash-generating units) and the discount rates applicable
to the CGU
• The Committee reviewed revenue recognition assessments impacting on new
acquisitions in 2021
• The Committee reviewed the tax provisions recognised relating to transfer pricing
and permanent establishment risks and the updated associated reports produced
by KPMG
• The Committee reviewed IAS 7, cash and cash equivalents whereby assets must
be readily convertible to known amounts of cash, in relation to the prior year
adjustment related to debt factoring arrangements of the Eschenbach Group
• The Committee has reviewed the going concern forecast for the period to
31 December 2023. This review focused in particular on the headroom on the
leverage ratio and considered management’s response to the continuing price
increases affecting the business including shipping, distribution, labour and energy
facing the Group and supply chain risks due to COVID-19 local lockdowns
• The Committee has reviewed management’s investigation into balance sheet
reconciliation issues noted at Tura. The investigation included performing
extensive reviews of balance sheet accounts, interviews with key employees and
analysis of journals by an external forensic accountant. This has resulted in a prior
year adjustment on stock, prepayments and right of return liability – refer to page
107 for the prior year adjustments noted
• The Committee has reviewed the prior period adjustment recorded at Eschenbach
over its debt factoring arrangement whereby receivables are not readily
convertible at the year end and therefore it was considered appropriate to
reclassify these from cash – refer to page 107 for the prior year adjustment noted
Whistleblowing, Fraud and Bribery Acts
The Group has in place a whistleblowing policy which sets out a formal process by
which employees may in confidence raise concerns in respect of the Group’s activities.
These also include any financial improprieties in reporting or other matters. The
Group is committed in all respect to a zero-tolerance position with regards to bribery.
INSPECS Group plc —
75
O’Neill Wove Frame
4
Meetings during 2021
Attendance
Christopher Hancock
Lord MacLaurin
Richard Peck
Christopher Kay*
* In Attendance
3
Committee members
Christopher Hancock
Lord MacLaurin
Richard Peck
Corporate Governance
Remuneration and Nomination Committee Report
The Remuneration and Nomination Committee is
chaired by Christopher Hancock. Its members Lord
MacLaurin and Richard Peck are all independent
Directors, in line with the QCA code. The Committee
has no personal interest in the Group other than as
shareholders and have no conflicts from the day to
day running of the business.
Mandate
The Committee operates under the Board’s agreed terms of
reference and is responsible for:
• Considering and monitoring the Group’s policy in relation to
employment terms and packages of the Executive Directors and
key employees in the Group
• Evaluating the performance of the Executive Directors and
making recommendations to the Board relating to their
remuneration and terms of employment
• Reviewing and approving the LTIP share option plan and
proposals for the issue of share options and pension
arrangements
Remuneration policy
The Committee’s aim in setting the remuneration policy is to attract
and motivate high calibre senior management within the Group
and to focus them on delivery of the Group’s strategic and
business objectives.
The remuneration package of each of the Executive Directors is
now designed to include a performance related bonus and
non-performance remuneration that includes salary, taxable
benefits and pension contributions.
The performance bonus now includes the share awards as granted
on IPO under the LTIP and a new salary performance bonus based
on the Group’s performance to budget.
The main elements of the remuneration package for Executive
Directors are:
• Base salary
• Performance based annual bonus
• Long-term share incentives
• Benefits
Christopher Hancock FCA
Remuneration and Nomination
Committee Chair
76 — Annual Report & Accounts 2021
Long-term incentive plan (LTIP): Following admission to AIM on 27 February 2020,
options were granted at the mid-market price to Executive Directors and key senior
employees. During the year further options were granted under the LTIP to both the
Executive and Senior Employees. The total amount of options granted to the Board
and their respective issue price of the options is listed below.
Name
Lord MacLaurin
Robin Totterman
Christopher Kay
Christopher Hancock
Richard Peck
Angela Farrugia
Senior employees
Senior employees
Option
Granted
Date
50,000
26/02/2021
150,000
22/12/2020
50,000
23/12/2021
549,460
150,000
183,153
50,000
50,000
50,000
50,000
27/02/2020
22/12/2020
26/02/2021
23/12/2021
26/02/2021
22/12/2020
22/12/2020
2,845,745
31/12/2020
1,177,882
31/12/2021
Price
£
2.10*
2.10
3.70
1.95
2.10
3.25
3.70
2.10*
2.10
2.10
2.02**
3.51**
*Options granted to Lord MacLaurin and Christopher Hancock were to reflect their work on the Eschenbach
acquisition on 16 December 2020. No further share options have been granted to Non-Executive Directors.
** Weighted Average
These options have a three year vesting period from the date of grant. The total
options outstanding as at 31 December 2021 were 5,356,240 and this represents
5.27% of the company’s issued share capital as at 31 December 2021 amounting to
101,671,525 shares of 0.01p each.
2021 Annual bonus
The Group met its annual performance targets in 2021 and as a result the Executive
and Non-Executive team returned to full pay for the year to 31 December 2021.
However, the Board decided to not pay any additional bonus in 2021. For 2022 the
Committee has commissioned an independent report by KPMG into Executive and
Non-Executive pay due to the rapid growth of the business.
Service contracts
The Executive Directors signed new service contracts on 27 February 2020. They have
no fixed duration. These service contracts are terminable with six months’ notice.
The CEO and CFO are invited to attend the Remuneration and Nomination Committee
meetings as appropriate but will make themselves absent as and when required.
Directors’ interest in shares
The interests of the Directors as at 31 December 2021, including their family, in the
Ordinary Shares of the company were.
Lord MacLaurin
Robin Totterman
Christopher Kay
Christopher Hancock
Richard Peck
Angela Farrugia
2021
2020
78,346
78,346
19,861,213
19,381,048
2,200,000
2,191,426
16,440
9,523
11,904
16,440
9,523
11,904
INSPECS Group plc —
77
1
Meeting during 2021
Attendance
Christopher Hancock
Lord MacLaurin
Richard Peck
Christopher Kay*
* In Attendance
3
Committee members
Christopher Hancock
Lord MacLaurin
Richard Peck
Corporate Governance
Remuneration and Nomination Committee Report continued
Directors’ employment and pension
contributions to 31 December 2021
Transaction with Directors
The only material transaction between the Directors and the
company were as follows:
Remuneration and
pension contribution
of individual
Directors
Lord MacLaurin
Robin Totterman
Christopher Kay
Christopher Hancock
Richard Peck
Angela Farrugia
USD
Salary or
fees
Taxable
benefits
Total
remuneration
56,494
328,095
291,640
61,630
61,630
46,222
–
1,524
28,129
–
–
–
56,494
329,618
319,769
61,630
61,630
46,222
Directors’ employment and pension
contributions to 31 December 2020
Remuneration and
pension contribution of
individual Directors
Lord MacLaurin
Robin Totterman
Christopher Kay
Christopher Hancock
Richard Peck
Angela Farrugia
USD
Salary or
fees
Taxable
benefits
Total
remuneration
34,828
185,802
137,345
42,102
42,102
27,726
–
3,383
14,839
–
–
–
34,828
189,185
152,184
42,102
42,102
27,726
Kelso Place LLP
Rent payable by INSPECS Limited on Kelso Place, the headquarters
of the company. This rent is reviewed to ensure it is on a normal
commercial basis and amounted to $182,275 in the year to
31 December 2021 (2020: $113,000). The building is owned by
Kelso Place LLP of which Robin Totterman is the controlling partner.
Kelso Place waived 3 months’ rent during 2020 to reflect trading
conditions affected by COVID-19.
Thorne Lancaster Parker
Christopher Kay, a Director of the company is also a partner in
Thorne Lancaster Parker. During the year the partnership charged
INSPECS Limited $53,000 (2020: $65,000) in respect of professional
services provided. On 31 December 2021, INSPECS Limited owed
Thorne Lancaster Parker $nil (2020: $nil) in respect of the above,
with this balance included within trade payables. During the year
the partnership charged Norville (20/20) Limited $14,000 (2020:
$7,000) in respect of professional services provided, with $4,000
being owed at the end of the year (2020: $nil).
Farm Street Partners
Christopher Hancock is a partner of Farm Street Partners which
charged the Group monitoring fees of $nil (2020: $13,000) during
the year. No balance was outstanding at 31 December 2021 (2020:
$nil).
The charge for 2020 related to fees prior to Christopher Hancock
becoming a Director of INSPECS Group plc.
BXS Projects Limited
Angela Farrugia is a Director of BXS Projects Limited which charged
the Group $nil (2020: $10,000). No balance was outstanding at
31 December 2021 (2020: $nil).
The charge for 2020 related to fees prior to Angela Farrugia
becoming a Director of INSPECS Group plc.
Share price movement
The price movement of the shares in the company following
admission to the London AIM from the lowest to highest in the year
is set out below:
Admission to AIM 27 February 2020 £1.95
Highest market price in the year
Lowest market price in the year
£4.05
£3.30
78 — Annual Report & Accounts 2021
Directors’ Report
The Directors present their report together with the audited
financial statements for the period ended 31 December 2021.
The Corporate Governance Statement on pages 64 to 69 also
forms part of this Directors’ Report.
Review of business
The Chairman’s Statement on pages 12 to 15 and the Strategic
Report on pages 6 to 61 provides a review of the business, the
Group’s trading for the year ended 31 December 2021, key
performance indicators and an indication of future developments.
Result and dividend
The Group has reported its Consolidated Financial Statements in
accordance with International Financial Report Standards (UK IFRS).
The Group results for the year are set out in the Consolidated
Statement of Comprehensive Income on page 94. The company
financial statements have been prepared under FRS 101 for the year
ended 31 December 2021.
The Group’s revenue of $246.5 (FY20: $47.4.m), gross margin of
47% (FY20: 43%) and loss after tax of $5.4m (FY20: loss $8.9)
represent an encouraging year for the business given the continued
challenging circumstances relating to COVID-19.
Directors’ interest
The Directors’ interest in the share capital of the company at
31 December 2020 and 2021 is shown below:
Robin Bjorn Christian Totterman
19,861,213
19,381,048
2021
2020
Christopher Kay
Lord Ian MacLaurin
Christopher Hancock
Angela Farrugia
Richard Peck
2,200,000
2,191,426
78,346
16,440
11,904
9,523
78,346
16,440
11,904
9,523
Political donations
The Group made no political donations in the financial period.
Period ended
Revenue ($m)
Gross Margin %
Loss after tax ($m)
Reported IFRS
31 December
2021
31 December
2020
246.5m
47.0
(5.4m)
47.4m
43.3
(8.9m)
Disclosure of information to auditor
As far as the Directors are aware, there is no relevant audit
information (that is, information needed by the Group’s auditor in
connection with preparing their report) of which the Group’s
auditor is unaware, and each Director has taken all reasonable steps
that he or she ought to have taken as a Director in order to make
himself or herself aware of any relevant audit information and to
establish that the Group’s auditor is aware of that information.
The Board is recommending a final dividend of 1.25 pence per
share.
Directors
The Directors of the Group during the period were:
Executive
Robin Totterman
Christopher Kay
Non-Executive
Lord Ian MacLaurin
Christopher Hancock
Richard Peck
Angela Farrugia
The names of the Directors, along with their brief biographical
details are given on pages 70 and 71.
Financial risks
The financial risk management objectives of the Group, including
credit risk, interest rate risk and foreign exchange risk, are provided
in note 33 to the Consolidated Financial Statements on page 137.
Share capital structure
At 31 December 2021, the company’s issued share capital was
£1,016,715 divided into 101,671,525 Ordinary Shares of 0.01p each.
The holders of Ordinary Shares are entitled to one vote per share at
the general meetings of the company.
INSPECS Group plc —
79
Corporate Governance
Directors’ Report continued
Substantial shareholders
At 31 December 2021, the company had been notified of the
following substantial shareholders comprising of 3% or more of the
issued Ordinary Share capital:
% of issued share capital
Robin Bjorn Christian Totterman
Canaccord Genuity Group Inc
Aberdeen Standard Investments
Amati Global Partners
Tellworth Investments
BlackRock
Janus Henderson Group plc
Liontrust Asset Management
Invesco
Royal London Asset Management
Chelverton Asset Management Ltd
19.61%
14.49%
7.69%
6.50%
4.79%
4.32%
4.20%
3.89%
3.87%
3.85%
3.54%
Share option schemes
Details of employee share scheme are set out in note 33 to the
Consolidated Financial Statements.
Purchase of own shares
There was no purchase of our own shares in the period.
Going concern
As a result of COVID-19 the Group saw some disruption in 2021.
The disruption was mainly in our supply chain and the Optical
retail market remained open in 2021. The Group was able to trade
successfully and generate cash despite some disruption in the
supply chain and increased costs towards the second half of 2021
for raw materials, energy and transportation. The Group has
improved its Gross Margin in 2021 and the results, despite
disruption, were in line with our forecast.
The Directors have considered the Group’s financial review,
borrowing levels, leverage and capital expenditure to the end of
31 December 2023 as part of its comprehensive review.
The Board considered a base case, two downside scenarios and a
reverse stress test to assess the effect of further COVID-19
restrictions on the supply chain, increased costs of living and
reduced consumer demand, sales, profitability, and cash
generation. The scenarios were as follows:
• The base case is the board approved budget which has been
updated to April 2022. The budget was prepared assuming that
some COVID-19 restrictions, consistent with those in place in
January 2021, are in place in 2022 and 2023. The restrictions in
place at this time resulted in reduced footfall on the high streets
and at airports resulting in reduced sales of non-prescription
items. Consideration has also been made of increased costs and
challenges in fulfilling orders because of the risk of disruptions
in the supply chain.
• The budget does not assume any acquisition expenditure.
• The budget was prepared before the Ukrainian/Russian conflict.
However, the Group does not currently have any operations in
Russia or Ukraine or source materials from these locations. The
main effect from the current crisis is on raw material costs driven
by the increase in the price of oil. The Group expects to be able
to maintain its budgeted margin throughout 2022 and 2023.
• A downside scenario updated the base case scenario with a
further 10% reduction in sales from October 2022 as the Group
has certainty over its customer orders up to this point. We have
also assumed some cost saving at a conservative level by
reducing expected bonus payments to senior employees. A
second downside scenario was performed which used the same
assumptions but made consideration of the poor trading in April
2022 due to a lockdown in Shanghai which resulted in a
significant number of orders being held at the port.
• A reverse stress test scenario updated our base case scenario
with a further 22% reduction in sales and 3% reduction in gross
margin from October 2022 which results in a covenant breach in
June 2023. We also assumed some controllable cost saving by a
reduction in employee expenses and removed discretionary
CAPEX spending.
The Group’s borrowings with HSBC, amounting to $54.8m, contains
three covenants; leverage ratio, cashflow cover and interest cover.
Compliance on these covenants is based on 12 monthly rolling
EBITDA results and 12 month rolling interest payments respectively.
In June 2022, the Group successfully renegotiated an amendment
to the covenants with HSBC whereby the required leverage ratio
was increased to December 2022 and the lease on the new Norville
factory is treated as a 10-year lease for the purposes of calculating
the net debt figure used in the leverage ratio. This increased the
headroom available to the business in response to adverse trading
conditions in April 2022 as mentioned above that saw the
headroom reduced. The cash available to the business means that
the covenants are more sensitive than liquidity.
The Group has considered the reasonably plausible downside
scenarios which are informed by the degree of headroom on
covenants at December 2021 and March 2022 which were limited.
These scenarios do not result in any covenant breach throughout
the going concern period The group mitigates this risk by having
diverse delivery routes and has the ability to withstand further
increases in freight costs. Because of the aggregate improvement
in the past 12 months trading since COVID-19 restrictions were
lifted across the UK and Europe, we forecast that headroom will
increase to 27.9% at the next covenant test in June 2022.
80 — Annual Report & Accounts 2021
Further, the Group has considered the reverse stress test scenario,
which models a breach in the leverage ratio covenant test in June
2023. In this case, the Directors have available the cost saving
strategies that were implemented in 2020 that could be
reintroduced with no support from the Government. However,
such a scenario would see 2023 underlying EBITDA being less than
half of that achieved in 2021, a year that was impacted by COVID-19
and when the Group had fewer revenue and profit generating
entities. As a result, the directors consider that this scenario is a
remote possibility.
On this basis, the Board has reasonable expectations that the
Group and Company has adequate resources to continue as a
Going Concern to 31 December 2023. Accordingly, the directors
adopt the going concern basis in preparing the financial
statements.
Post balance sheet events
The Board considers that no other material post balance sheet
events occurred between the end of the period and the date of
publication of this report.
Future developments
The Board intends to continue to pursue the business strategy as
outlined in the Strategic Report on pages 22 and 23.
Stakeholder involvement policies
The Directors believe that the involvement of employees,
customers and suppliers is an important part of the business
culture and contributes to the successes achieved to date (see our
Sustainability Report on pages 40 to 53).
Ethical business practices
The company has a zero tolerance to bribery and corruption and is
committed to ensure that it has appropriate procedures in place to
counter this risk. A formal policy is in place and continual training is
undertaken. The anti-bribery and whistleblowing policy is reviewed
annually by the Audit and Risk Committee.
Auditor reappointment
The auditor, EY LLP, has indicated its willingness to be reappointed
and, in accordance with section 489 of the companies Act 2006, a
resolution for reappointment will be proposed at the AGM.
Annual General Meeting
The Annual General Meeting will be held on 11 August 2022.
The ordinary business comprises receipt of the Directors’ Report
and audited financial statements for the year ended 31 December
2021, the re-election of Directors, the reappointment of EY as
auditor and authorisation of the Directors to determine the
auditor’s remuneration. Special resolutions are also proposed to
authorise the Directors, to a limited extent consistent with
pre-emption Group guidelines, to allot new shares, to disapply
statutory pre-emptions rights and to make market purchases of the
company’s shares. The Notice of Annual General Meeting sets out
the ordinary and special resolutions to be put to the meeting.
Approval
This Directors’ Report was approved on behalf of the Board on
29 June 2022.
Equal opportunities
The Group is committed to eliminating discrimination and
encouraging diversity. Its aim is that its people will be truly
representative of all sections of society and that each person feels
respected and is able to perform to the best of their ability. The
Group aims for its people to reflect the businesses diverse
customer base.
Christopher Kay
Chief Financial Officer
Director
29 June 2022
The Group will not make assumptions about a person’s ability to
carry out their work, for example based on their ethnic origin,
gender, sexual orientation, marital status, religion or other
philosophical beliefs, age or disability. Likewise, it will not make
general assumptions about capabilities, characteristics and
interests of particular groups that may influence the treatment of
individuals, the assessment of their abilities and their access to
opportunities for training, development and promotion.
INSPECS Group plc —
81
Corporate Governance
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law, the Directors have prepared
the Group financial statements in accordance with International
Financial Report Standards (UK IFRS), as adopted by the European
Union, the parent company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’), and applicable law. Under company law,
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of
the Group and parent company, and of the profit or loss of the
Group and the parent company for that period.
The Directors are responsible for the maintenance and integrity
of the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors’ confirmation
The directors consider that the Annual Report and Accounts,
taken as a whole are fair, balanced and understandable. They
provide the information necessary for shareholders to assess the
Group and parent company’s position and performance, business
model and strategy.
In preparing these financial statements, the Directors are
required to:
On behalf of the Board
Robin Totterman
Chief Executive Officer
29 June 2022
• Select suitable accounting policies and then apply them
consistently
• State whether applicable International Financial Report
Standards (UK IFRS) have been followed for the Group financial
statements and United Kingdom Accounting Standards,
comprising FRS 101, have been followed for the parent company
financial statements, subject to any material departures
disclosed and explained in the financial statements
• Make judgements and accounting estimates that are reasonable
and prudent
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent company will continue in business
The Directors are also responsible for safeguarding the assets of
the Group and the parent company, and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for the maintenance of accounting
records that are sufficient to show and explain the Group and the
parent company’s transactions and disclose, with reasonable
accuracy at any time, the financial position of the Group and the
parent company, and enable them to ensure that the financial
statements comply with the Companies Act 2006.
82 — Annual Report & Accounts 2021
C
A
T
P
r
e
c
i
s
i
o
n
INSPECS Group plc —
83
Financial Statements
Financial Statements
Independent Auditor’s Report to
the Members of INSPECS Group plc
Consolidated Income Statement
Consolidated Statement of Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Appendix 1 – Reconciliation of Underlying EBITDA
Company Information and Advisers
86
95
95
96
98
99
100
142
143
144
150
151
03
Financial st
84
— Annual Report & Accounts 2021
l
y
e
d
a
R
l
e
d
n
e
r
B
atements
INSPECS Group plc —
85
Financial Statements
Independent Auditor’s Report
to the members of Inspecs Group plc
Opinion
In our opinion:
•
INSPECS Group plc’s group Financial Statements and Parent Company Financial Statements (the “financial statements”) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2021 and of the Group’s loss for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with UK adopted international accounting standards;
• the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of INSPECS Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 December 2021 which comprise:
Group
Parent Company
Consolidated income statement for the year ended 31 December 2021 Company statement of financial position as at 31 December 2021
Consolidated statement of comprehensive income for the year
then ended
Consolidated statement of financial position as at 31 December 2021
Statement of changes in equity for the year then ended
Related notes 1 to 8 to the financial statements including a summary
of significant accounting policies
Consolidated statement of changes in equity for the year then
ended
Consolidated statement of cash flows for the year then ended
Related notes 1 to 36 to the financial statements, including a
summary of significant accounting policies
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK
adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure
Framework” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group and Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
• Obtaining management’s assessment and understanding the process undertaken by management to perform the going concern assessment,
including the evaluation of any operational and economic impacts of COVID-19, increases to the cost of living, and the risk of reduced demand
for products due to inflation or recession on the Group;
• Confirming our understanding of the impact of the lockdown in Shanghai to the business in light of April 2022’s results. We performed stress
testing to identify the frequency and severity of repeated, discrete lockdowns that would be required to breach financial covenants and
whether the reduction in EBITDA has no more than a remote possibility of occuring;
• Testing the clerical accuracy of the model used to prepare the Group’s going concern assessment to 31 December 2023, including the
forecast covenant compliance;
• Confirming the availability of debt facilities and review of underlying terms, including covenants to 31 December 2023 and amendments
to these made in June 2022, and confirming the repayments due within this period are accurately included;
• Assessing the reliability of the cashflow forecast by analysing management’s historical forecasting accuracy. We understood key inputs
underpinning the Group’s forecasts which includes sales receipts and cash payment schedules, and challenged these using supporting
evidence including debt agreements, existing facilities, FY22 period performance to date including April’s reduced trading and
independent industry forecasts;
• Evaluating management’s key assumptions underpinning the Group’s forecasts (such as revenue growth, gross margins and cost
reductions), by comparing to externally produced market analyses;
86 — Annual Report & Accounts 2021
• Challenging, based on our own independent sensitivity testing, whether the downside case prepared by management could lead to a
covenant breach. Our assessment included consideration of the impact and likelihood of:
– The loss of major customers,
– The loss of significant brand licences,
– Ongoing or sudden impositions of COVID-19 restrictions,
– Increases in costs, such as freight, that are unable to be passed on to customers.
• Challenging the controllable mitigating actions such as implementing reduced working weeks, pay reductions and reduced capital
expenditure that management could take in a downside scenario;
• Performing a “reverse stress test” scenario that would lead to a covenant breach and challenging management’s assessment as to
whether the scenario is remote by considering current year trading performance, the circumstances behind April 2022’s decline, and
external market data;
• Assessing the appropriateness of the going concern disclosure on page 100.
Our key observations
• The directors’ assessment forecasts that the Group will maintain sufficient liquidity through the going concern assessment period in the
base case scenario. A 22% reduction in revenue and a 3% reduction in gross margin is required in the reverse stress test to cause a
breach of covenant in June 2023 which management consider to be remote. A breach of covenant is the main risk to the Group, not
liquidity, due to the cash available to the business.
• The leverage ratio covenant had limited headroom at 31 December 2021 and is the most sensitive to adverse performance of the
business. Management negotiated an amendment to the covenants whereby the leverage ratio was increased to December 2022 and a
purchase option on a lease on a new factory is treated as an exceptional item for the purposes of calculating the net debt figure used in
the leverage ratio.
• Management has available to them controllable mitigating actions, including deferring capital expenditure and discretionary spending,
that can be taken over the going concern period. We note that no debt repayments are due on the revolving credit facility within the
assessment period.
Going concern has also been determined to be a key audit matter. Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Parent Company’s
ability to continue as a going concern for a period to 31 December 2023. Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
We performed an audit of the complete financial information of 5 components and audit procedures on
specific balances for a further 3 components.
The components where we performed full or specific audit procedures accounted for 90% of adjusted
EBITDA, 83% of Revenue and 96% of Total assets.
Key audit matters
• Acquisition accounting
• Inappropriate revenue recognition
• Valuation of goodwill
• Valuation of uncertain tax positions
Materiality
• Overall group materiality of $824,000 which represents 3% of adjusted EBITDA.
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into
account size, risk profile, the organisation of the Group and effectiveness of group-wide controls and changes in the business environment
when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the Group Financial Statements, and to ensure we had adequate quantitative coverage of
significant accounts in the financial statements, of the 33 reporting components of the Group, we selected 8 components covering entities
within the UK, Hong Kong, Germany and the USA which represent the principal business units within the Group.
Of the 8 components selected, we performed an audit of the complete financial information of 5 components (“full scope components”)
which were selected based on their size or risk characteristics. For the remaining 3 components (“specific scope components”), we
performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on
the significant accounts in the financial statements either because of the size of these accounts or their risk profile.
INSPECS Group plc —
87
Financial Statements
Independent Auditor’s Report continued
to the members of Inspecs Group plc
The reporting components where we performed audit procedures accounted for 90% (2020: 93%) of the Group’s adjusted EBITDA, 83%
(2020: 96%) of the Group’s Revenue and 96% (2020: 100%) of the Group’s Total assets. For the current year, the full scope components
contributed 77% (2020: 86%) of the Group’s adjusted EBITDA, 74% (2020: 80%) of the Group’s Revenue and 85% (2020: 98%) of the Group’s
Total assets. The specific scope component contributed 13% (2020: 7%) of the Group’s adjusted EBITDA, 9% (2020: 17%) of the Group’s
Revenue and 5% (2020: 2%) of the Group’s Total assets. The audit scope of these components may not have included testing of all
significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group. In addition,
we conducted specified procedures over a number of account balances relating to 2 reporting units, representing 0% (2020: 0%) of the
Group’s adjusted EBITDA, 0% (2020: 0%) of the Group’s revenue and 6% (2020: 0%) of the Group’s total assets, in response to the specific
risks associated with these.
Of the remaining 23 components that together represent 10% of the Group’s adjusted EBITDA, none are individually greater than 1% of the
Group’s adjusted EBITDA. For these components, we performed other procedures, including analytical review testing of consolidation
journals and intercompany eliminations and foreign currency translation recalculations to respond to any potential risks of material
misstatement to the Group financial statements.
The table below illustrates the coverage obtained from the work performed by our audit teams.
2021
2020
Reporting components
Number
% of Group
adjusted
EBITDA
% of Group
Revenue
% of Group
Assets
Number
% of Group
adjusted
EBITDA
% of Group
Revenue
% of Group
Assets
Full scope
Specific scope
Specified procedures
Full, specific, and specified
procedures coverage
Remaining components
Total reporting components
5
3
2
10
23
33
77%
13%
0%
90%
10%
74%
9%
0%
83%
17%
85%
5%
6%
96%
4%
100%
100%
100%
6
3
0
9
23
32
86%
7%
0%
93%
7%
80%
17%
0%
96%
4%
98%
2%
0%
100%
0%
100%
100%
100%
Changes from the prior year
The approach to audit scoping is similar to the prior year audit. Our scoping changes from the prior year due to the change in either risk
assigned to the components or contribution by the component include the following:
• The previous parent entity for the Inspecs Group has been moved from full scope to review scope only given limited transactions now
take place within this entity.
•
Inspecs USA was classified as specific scope in prior year. The entity has also been demoted to review scope only in current year due to
a decrease in size compared to the overall increase in Group.
• We performed specified procedures relating to the Ego and BoDe entities as these were acquisitions made during the financial period.
The Eschenbach top company consolidation has been removed from full scope testing as consolidation is no longer required in
Germany due to the exemptions taken in the current year.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the
components by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating under
our instruction. Of the 5 full scope components, audit procedures were performed on 2 of these directly by the primary audit team
and 3 by component audit teams. For the 3 specific scope components, where the work was performed by component auditors,
we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had been obtained as a
basis for our opinion on the group as a whole.
The group audit team followed a programme of planned visits that has been designed to ensure that the Senior Statutory Auditor visits
overseas entities every second year on a planned rotation policy where this is possible. During the current year’s audit cycle, visits were
undertaken by the primary audit team to the component teams in both Germany (Eschenbach Optik) and USA (Tura). These visits involved
discussing the audit approach with the component teams, meeting with local management, attending pre-closing meetings and reviewing
relevant audit working papers on risk areas.
The primary team had also intended to visit Hong Kong in the current year. However, due to the ongoing local travel restrictions this was
not possible. Consequently, Hong Kong was visited virtually by the Senior Statutory Auditor in the current year. Virtual meetings were held
and involved meeting with the EY component team to discuss and direct their audit approach, reviewing key working papers and
understanding the significant audit findings in response to the risk areas. Meetings were also held virtually with local management,
obtaining updates on local regulatory matters and projections for trade going forward.
The primary team interacted regularly with the component teams where appropriate during various stages of the audit, reviewed relevant
88 — Annual Report & Accounts 2021
working papers and were responsible for the scope and direction of the audit process. This, together with the additional procedures
performed at group level, gave us appropriate evidence for our opinion on the group financial statements.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact the Group. The Group has determined that the
most significant future impacts from climate change on its operations will be from supply chain disruption and possible cost increases to
reduce carbon usage. These are explained on pages 48 and 61 of the Strategic report, which form part of the “Other information,” rather
than the audited financial statements. Our procedures on these disclosures therefore consisted solely of considering whether they are
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be
materially misstated.
Our audit effort in considering climate change was focused on ensuring that the effects of climate risks disclosed on pages 48 and 61 have
been appropriately reflected in asset values and associated disclosures where values are determined through modelling future cash flows,
being the goodwill impairment assessment. Details of our procedures and findings on goodwill impairment are included in our key audit
matters below.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a
whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
We obtained management’s assessment of purchase
price accounting adjustments to be booked and perform detailed
testing, including consideration of contradictory evidence to
critically assess the key inputs to the calculation including:
• Evaluating any growth or discount rates used by comparison to
industry norm
• Obtaining third party evidence where available and critically
assessing the independence of that third party to provide the
evidence
We obtained bank confirmations and loan agreements
to validate the funding raised to enter into undertake
the acquisitions and to support the consideration paid.
We involved our valuations specialists to support us in assessing
the assumptions used to calculate the fair value of any material
assets purchased.
We obtained management’s calculation of the contingent
consideration liability; we agreed the basis for the calculation to
the original contract and performed sensitivity analysis of key
assumptions.
We examined the journals posted by management to account for
the acquisitions under IFRS 3. We obtained supporting evidence
for material amounts and critically assessed the accounting for
compliance with the accounting standards.
We validated that the journals booked into the consolidation were in
line with the supporting accounting records.
We assessed whether the disclosures in the financial statements
relating to the acquisitions were complete
and met the disclosure requirements of IFRS.
Acquisition Accounting
The Group has undertaken two
acquisitions in the year: Ego for
$15.2m and BoDe for $3.5m
including contingent consideration.
There have been estimates and
judgements required to calculate
fair values and IFRS conversion
adjustments required under IFRS 3
and these estimates as subject to
management bias.
The following estimates and
judgements have been determined
to be the most significant:
• Fair value adjustments booked
relating to the intangible assets
• Calculation of the contingent
consideration relating to the
acquisitions
There is also a further risk relating
to the accounting for these
non-routine transactions as they are
booked as manual topside journals.
A small error in accounting or
booking of these journals could lead
to a material misstatement.
The Group has reassessed
acquisition accounting entries
booked in relation to the
Eschenbach acquisition in the prior
year. There have been purchase
price accounting adjustments made
to estimates during the acquisition
period which has resulted in an
increase to goodwill of $2,877k.
Key observations
communicated
to the Audit Committee
We involved specialists to
challenge the estimates and
judgements made by
management to calculate
purchase price adjustments
booked upon acquisition.
We have performed
substantive testing relating
to manual adjustments
calculated and assessed the
appropriateness of
disclosures in the financial
statements. We concluded
the methodology applied as
appropriate.
Prior period adjustments as
set out in note 2 have been
recognised in accordance
with IAS 8 and appropriately
disclosed. We have
performed extended audit
procedures relating to the
Tura component to conclude
that prior period
adjustments are complete.
INSPECS Group plc —
89
Financial Statements
Independent Auditor’s Report continued
to the members of Inspecs Group plc
Key observations
communicated
to the Audit Committee
Risk
Our response to the risk
In addition, during the audit there
were prior period errors identified
at two of the Eschenbach
components which has further
increased goodwill by $744k.
We obtained management’s assessment of the changes
in estimates to be booked as purchase price accounting and prior
period adjustments and performed detailed testing, including
consideration of contradictory evidence to critically assess the key
inputs to the calculation including:
There is a risk that these
adjustments are inappropriately
calculated or are not complete.
There is a risk that the prior period
adjustments arose as a result of an
intentional misstatement of the
financial information at the
components.
• Performing sensitivity analysis relating to key assumptions
• Agreeing underlying data supporting the calculations to third
party evidence. We read the report prepared by Group
management relating to the errors identified following their
investigation
We read the report prepared by management specialists who
were engaged to investigate the reconciling differences.
We obtained management’s calculation of prior period
adjustments booked to be booked and performed detailed
testing, including consideration of contradictory evidence to
critically assess the key inputs to the calculation including:
• Validating amounts booked to third party evidence where
available
• Evaluating the completeness of adjustments booked at Tura by
undertaking a full balance sheet review at a lower testing
threshold.
• Involving our forensic specialists to perform and review
extended journal entry testing and support us in concluding
whether there was any evidence of intentional misstatement of
financial information.
We considered whether errors could be present in other
Eschenbach components as part of our workpaper review over
significant components.
We performed full scope audit procedures over this risk area in
the UK, which covered 100% of the risk amount.
All procedures were performed by or directed by the EY primary
audit team with support from component teams
in Germany and USA.
Inappropriate Revenue Recognition
(2021 $246.5m, 2020 $47.4m)
Enquiries of management were made as to the existence of rebate
or return arrangements with key customers
A sample of rebate and returns provisions was selected with
inputs to these calculations validated through critically assessment
of the assumptions and estimations made.
Agreed calculations to customer contracts or agreements where
available or payments subsequent to year-end.
We performed full and specific scope audit procedures over this
risk area in 6 locations, which covered 82% of the risk amount.
Revenue performance is a focus for
stakeholders who expect a year-on-
year growth in revenues. Most of the
Group’s sales arrangements typically
require little judgement to be
exercised, with revenue being
recognised on the delivery of goods.
However, there is a risk that
management may override controls
to intentionally misstate revenue
transactions by recording fictitious
manual journals to revenue;
specifically, in relation to the right of
return provision.
Based upon the procedures
performed, including those in
respect of manual
adjustments to revenue and
cut off, we did not identify
any evidence of material
misstatement
in the revenue recognised
during
the year.
90 — Annual Report & Accounts 2021
Risk
Our response to the risk
Valuation of Goodwill
(2021 $81.4m, 2020 $72.7m
(restated))
There is a risk that goodwill arising
from past and recent acquisitions is
impaired. There is goodwill relating
to legacy acquisitions of $81.4m
included in the balance sheet.
Management is required to carry
out an impairment review of
goodwill under IFRS, which will
involve judgement regarding the
future results of the business and
the discount rates applied to future
cash flow forecasts and growth
rates.
Valuation of Uncertain Tax
Positions
(2021 $0.6m, 2020 $2.8m)
There are existing transfer pricing
and permanent establishment
provisions recognised in relation to
the Killine group totalling $0.6m at
31 December 2021.
Given the increased levels of
judgement and estimation involved,
there is a risk that management has
not identified all uncertain tax
provisions or has incorrectly
calculated the uncertain tax position
provisions arising within the Group.
We validated that the CGUs identified were the lowest level at
which management monitors goodwill.
We validated that the cash flow forecasts used in the valuation
were consistent with information approved by the Board and
reviewed the historical accuracy of management’s forecasts.
We evaluated the implied growth rates beyond FY21 by
considering evidence available to support these assumptions,
their consistency with findings from other areas of our audit and
by performing sensitivity analyses.
The discount rates and long-term growth rates applied within the
model were assessed by an EY business valuation specialist,
including comparison to economic and industry forecasts.
For all relevant CGUs, we performed sensitivity analyses by stress
testing key assumptions in the model to consider the degree to
which these assumptions would need to change before an
impairment charge is triggered.
We evaluated management’s consideration of the possible impact
of climate change on the long term forecasts through considering
the discount rate sensitivity.
We performed full scope audit procedures over this risk area in the
UK, which covered 100% of the risk amount. All procedures were
performed by the EY primary audit team.
We involved tax specialists to critically assess the assumptions
made by management in calculating the UTPs.
Our tax specialists walked through calculations prepared by
management and validated for clerical accuracy and consistency
with the requirements of IFRIC 23.
We obtained management’s specialists report to support the
basis for releasing part of the provision in the current year, and
involved our specialists to critically assess the findings in this
report.
We assessed the tax risks identified as part of the due diligence
exercise for the BoDe and Ego acquisitions and assessed the
completeness and valuation of any UTPs identified as a result.
We performed full scope audit procedures over this risk area in
the UK, which covered 100% of the risk amount. All procedures
were performed by the EY primary audit team.
Key observations
communicated
to the Audit Committee
Based on the procedures
performed, we are satisfied
that the carrying value of
goodwill is materially
correct. We consider the
disclosure in the annual
report is appropriate,
including the disclosures
relating to sensitivity
analysis.
Based on the procedures
performed, we consider the
amounts provided relating
to uncertain tax positions
are reasonable and
complete. We consider the
Group’s disclosures
are also appropriate.
In the prior year, our auditor’s report included a key audit matter in relation to the accounting for the IPO listing in February 2020. As all
accounting was completed in relation to this event in 2020 , this key audit risk has been removed for 2021.
INSPECS Group plc —
91
Financial Statements
Independent Auditor’s Report continued
to the members of Inspecs Group plc
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit
procedures.
We determined materiality for the group to be $824,000 (2020: $1,059,000), which is 3% of adjusted EBITDA (2020: 0.5% of total assets).
We consider that adjusted EBITDA provides the most relevant performance measure to the stakeholders of the group. Adjusted EBITDA is
used as the key highlight by management in their investor presentations and strategic report. This is a change from the previous year which
was based on total assets due to the focus in prior year being over cash generations from the IPO funding immediate acquisitions within
the business.
We determined materiality for the parent company to be $963,000 (2020: £476,000), which is 0.5% (2020: 0.5%) of total assets. In
performing our procedures, materiality was capped at the Group allocated materiality of $300,000 (Not applicable within 2020).
Starting
basis
Adjustments
• Statutory EBITDA - $19,991,000
• Adjusted for IFRS 3 PPA inventory release, acquisition costs and gains on disposals - $7,475,000
Materiality
• Totals $27,466,000 adjusted EBITDA
• Materiality of $824,000 (3% of materiality basis)
During the course of our audit, we reassessed initial materiality and noted no need to change the basis that our original materiality was
based on.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% (2020: 50%) of our planning materiality, namely $411,000 (2020: $530,000). We have set performance
materiality at this percentage due to a high number of corrected and uncorrected misstatements identified in the prior financial period and
the significant change in the business seen in the year as a result of the Eschenbach acquisition made at the end of 2020.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale
and risk of the component to the group as a whole and our assessment of the risk of misstatement at that component. In the current year,
the range of performance materiality allocated to components was $44,000 to $300,000 (2020: $64,000 to $397,000).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $41,000 (2020: $53,000),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
92 — Annual Report & Accounts 2021
Other information
The other information comprises the information included in the annual report set out on pages 1 to 82 other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this
report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 82, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
INSPECS Group plc —
93
Financial Statements
Independent Auditor’s Report continued
to the members of Inspecs Group plc
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including
fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most
significant are frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the
reporting framework (UK adopted International Accounting Standards, United Kingdom Generally Accepted Accounting Practice, the
Companies Act 2006 and the UK Corporate Governance Code) and the relevant tax laws and regulations in the jurisdictions in which the
Group operates.
• We understood how INSPECS Group plc is complying with those frameworks by making enquiries of management, the directors and
those responsible for legal and compliance procedures. We corroborated our inquiries through our review of board minutes, papers
provided to the Audit Committee and attendance at meetings of the Audit Committee as well as consideration of the results of our
audit procedures across the group.
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by meeting
with management from various parts of the business to understand where it considered there was susceptibility to fraud. We also
considered performance targets and their influence on efforts made by management to manage earnings or influence the perceptions
of investors. We considered the programmes and controls that the group has established to address risks identified, or that otherwise
prevent, deter and detect fraud; and how senior management monitors those programs and controls. Where the risk was considered to
be higher, we performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and
were designed to provide reasonable assurance that the financial statements were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our
procedures involved enquiries of group management, those charged with governance and legal counsel, as well as journal entry testing,
with a focus on manual consolidation journals and journals indicating significant or unusual transactions based on our understanding of
the business. Through our testing we challenged the assumptions and judgements made by management in respect of significant
one-off transactions in the financial year and significant accounting estimates as referred to in the key audit matters section above. At a
component level, our full and specific scope component audit team’s procedures included enquiries of component management;
journal entry testing; and focused testing, including in respect of the key audit matter of revenue recognition. We also leveraged our
data analytics platform in performing our work on the order to cash and purchase to pay processes to assist in identifying higher risk
transactions for testing.
• Where we identified potential non-compliance with laws and regulations, we developed an appropriate audit response and
communicated directly with components impacted. Our procedures involved: understanding the process and controls to identify
non-compliance, inquiring of key stakeholders, understanding the fact patterns in each case and using specialists including our forensics
team to support us in concluding on the matters identified as applicable.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
John Howarth (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Bristol
29 June 2022
94 — Annual Report & Accounts 2021
Consolidated Income Statement
for the year ended 31 December 2021
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit/(loss)
Non-underlying costs
Negative goodwill on bargain purchase
Movement in derivatives
Exchange adjustment on borrowings
Finance costs
Finance income
Share of profit of associate
Loss before income tax
Income tax credit
Loss for the year
Attributable to:
Equity holders of the Parent
Earnings per share
Basic loss for the year attributable to the equity holders of the Parent
Diluted loss for the year attributable to the equity holders of the Parent
Consolidated Statement of Other Comprehensive Income
for the year ended 31 December 2021
Loss for the year
Other comprehensive income/(loss)
Exchange differences on translation of foreign operations
Other comprehensive income/(loss) for the year, net of income tax
Total comprehensive loss for the year
Attributable to: Equity holders of the Parent
The notes on pages 100 to 141 form part of these Financial Statements.
Notes
4
7,10
7,10
8
30
33
9
9
16
11
12
12
2021
$’000
246,471
(130,699)
115,772
(7,795)
(106,436)
1,541
(2,588)
–
–
(5,418)
(2,775)
118
(10)
(9,132)
3,697
(5,435)
2020
$’000
47,415
(26,893)
20,522
(787)
(22,675)
(2,940)
(5,763)
506
(740)
(382)
(1,880)
36
–
(11,163)
2,250
(8,913)
(5,435)
(8,913)
$(0.05)
$(0.05)
$(0.13)
$(0.13)
2021
$’000
(5,435)
2,907
2,907
(2,528)
(2,528)
2020
$’000
(8,913)
(194)
(194)
(9,107)
(9,107)
INSPECS Group plc —
95
Financial Statements
Consolidated Statement of Financial Position
as at 31 December 2021
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use asset
Investment in associate
Deferred tax
Current assets
Inventories
Trade and other receivables
Tax receivables
Cash and cash equivalents
Total assets
EQUITY
Shareholders’ equity
Called up share capital
Share premium
Foreign currency translation reserve
Share option reserve
Merger reserve
Retained earnings
Total equity
Notes
2021
$’000
2020
Restated
$’000
13
14
15
24
16
28
17
18
19
20
21
21
21
21
81,359
54,454
24,569
22,269
48
12,540
195,239
55,664
42,229
3,468
29,759
131,120
326,359
1,389
122,291
2,818
2,001
7,296
9,429
145,224
72,708
56,305
22,460
20,379
57
12,771
184,680
55,495
41,186
1,556
26,418
124,655
309,335
1,384
121,940
(89)
867
7,296
14,429
145,827
The notes on pages 100 to 141 form part of these Financial Statements. Registered Company number: 11963910.
96 — Annual Report & Accounts 2021
LIABILITIES
Non-current liabilities
Financial liabilities – borrowings
Interest-bearing loans and borrowings
Contingent and deferred consideration
Deferred tax
Current liabilities
Trade and other payables
Right of return liabilities
Financial liabilities – borrowings
Interest-bearing loans and borrowings
Bank overdrafts
Invoice discounting
Tax payable
Total liabilities
Total equity and liabilities
Notes
2021
$’000
2020
Restated
$’000
23
27
28
22
4
23
23
23
29
69,194
8,505
20,517
98,216
53,317
11,100
13,289
–
2,433
2,780
82,919
181,135
326,359
70,391
–
24,678
95,069
42,902
12,145
6,830
2,642
–
3,920
68,439
163,508
309,335
The notes on pages 100 to 141 form part of these Financial Statements. Registered Company number: 11963910.
The Financial Statements were approved by the Board of Directors on 29 June 2022 and were signed on its behalf by:
R B C Totterman
Director
C D Kay
Director
INSPECS Group plc —
97
Financial Statements
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Balance at 1 January 2020
Changes in equity
Loss for the year
Other comprehensive loss
Total comprehensive loss
Issue of share capital
Exercise of share options
Share-based payment
Share for share exchange and creation
of merger reserve
Capital reduction
Balance at 31 December 2020
Changes in equity
Loss for the year
Other comprehensive income
Total comprehensive loss
Exercise of share options
Share-based payments
Notes
20,21
21
20,21
20,21
21
20,21
21
21
20,21
21
Called up
share
capital
$’000
Share
premium
$’000
Foreign
currency
translation
reserve
$’000
Share
option
reserve
$’000
Retained
earnings
$’000
Merger
reserve
$’000
62
21,628
1,031
2,840
5,787
–
–
–
–
–
–
603
119,215
99
–
2,725
–
–
(194)
(194)
–
–
–
(8,913)
–
(8,913)
–
–
–
–
–
(22)
119,796
(3,140)
2,973
1,133
–
–
–
2,657
1,133
620
(21,628)
(926)
–
–
1,384
121,940
–
(89)
34
–
(46,902)
68,802
61,484
(61,484)
–
–
867
14,429
7,296
145,827
Total
equity
$’000
31,348
(8,913)
(194)
(9,107)
–
–
–
–
–
–
–
5
–
–
–
–
351
–
–
2,907
2,907
–
–
–
–
–
(350)
1,484
2,001
(5,435)
–
(5,435)
435
–
–
–
–
–
–
(5,435)
2,907
(2,528)
441
1,484
9,429
7,296
145,224
Balance at 31 December 2021
1,389
122,291
2,818
The notes on pages 100 to 141 form part of these Financial Statements.
98 — Annual Report & Accounts 2021
Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Cash flows from operating activities
Interest paid
Tax paid
Net cash from/(used in) operating activities
Cash flows from investing activities
Purchase of intangible fixed assets
Purchase of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Interest received
Net cash used in investing activities
Cash flow from financing activities
Proceeds from the issue of shares
Proceeds from the exercise of share options
New bank loans in the year
Bank loan principal repayments in year
Transaction costs on debt refinancing
Movement in invoice discounting facility
Principal payments on leases
Net cash from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents including overdraft at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents including overdraft at end of year
The notes on pages 100 to 141 form part of these Financial Statements.
Notes
26
14
15
6
9
21
25
25
25
25
19
2021
$’000
24,895
(1,968)
(2,910)
20,017
(1,508)
(6,137)
(8,134)
118
(15,661)
–
355
26,751
(22,873)
(782)
2,477
(4,224)
1,704
6,060
23,776
(77)
29,759
2020
Restated
$’000
403
(1,144)
(7)
(748)
(167)
(2,452)
(108,075)
36
(110,658)
115,761
–
17,187
(39)
(810)
(2,577)
(810)
128,712
17,306
6,502
(32)
23,776
INSPECS Group plc —
99
Financial Statements
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021
1. General information
INSPECS Group plc is a public company limited by shares and is incorporated in England and Wales (Company number 11963910). The
address of the Company’s principal place of business is 7–10 Kelso Place, Upper Bristol Road, Bath BA1 3AU.
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
The Consolidated Financial Statements have been prepared in accordance with UK adopted international accounting standards, and those
parts of the Companies Act 2006 applicable to companies reporting under International Financial Reporting Standards (‘IFRS’).
The Consolidated Financial Statements have been prepared on a historical cost basis, except where fair value measurement is required
under IFRS as described below in the accounting policies.
The presentational currency for the Consolidated and Parent Company Financial Statements is the United States Dollar (USD) rounded to the
nearest thousand. The Consolidated Financial Statements provide comparative information in respect of the year ended 31 December 2020.
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
to 31 December 2023.
The Board considered a base case, two downside scenarios and a reverse stress test to assess the effect of further COVID-19 restrictions
on the supply chain, increased costs of living and reduced consumer demand, sales, profitability, and cash generation. The scenarios were
as follows:
• The base case is the board approved budget which has been updated to April 2022. The budget was prepared assuming that some
COVID-19 restrictions, consistent with those in place in January 2021, are in place in 2022 and 2023. The restrictions in place at this time
resulted in reduced footfall on the high streets and at airports resulting in reduced sales of non-prescription items. Consideration has
also been made of increased costs and challenges in fulfilling orders because of the risk of disruptions in the supply chain.
• The budget does not assume any acquisition expenditure.
• The budget was prepared before the Ukrainian/Russian conflict. However, the Group does not currently have any operations in Russia or
Ukraine or source materials from these locations. The main effect from the current crisis is on raw material costs driven by the increase
in the price of oil. The Group expects to be able to maintain its budgeted margin throughout 2022 and 2023.
• A downside scenario updated the base case scenario with a further 10% reduction in sales from October 2022 as the Group has
certainty over its customer orders up to this point. We have also assumed some cost saving at a conservative level by reducing expected
bonus payments to senior employees. A second downside scenario was performed which used the same assumptions but made
consideration of the poor trading in April 2022 due to a lockdown in Shanghai which resulted in a significant number of orders being
held at the port.
• A reverse stress test scenario updated our base case scenario with a further 22% reduction in sales and 3% reduction in gross margin
from October 2022 which results in a covenant breach in June 2023. We also assumed some controllable cost saving by a reduction in
employee expenses and removed discretionary CAPEX spending.
The Group’s borrowings with HSBC, amounting to $54.8m, contains three covenants; leverage ratio, cashflow cover and interest cover.
Compliance on these covenants is based on 12 monthly rolling EBITDA results and 12 month rolling interest payments respectively. In June
2022, the Group successfully renegotiated an amendment to the covenants with HSBC whereby the required leverage ratio was increased
to December 2022 and the lease on the new Norville factory is treated as a 10-year lease for the purposes of calculating the net debt figure
used in the leverage ratio. This increased the headroom available to the business in response to adverse trading conditions in April 2022 as
mentioned above that saw the headroom reduced. The cash available to the business means that the covenants are more sensitive than
liquidity.
The Group has considered the reasonably plausible downside scenarios which are informed by the degree of headroom on covenants at
December 2021 and March 2022 which were limited. These scenarios do not result in any covenant breach throughout the going concern
period. The group mitigates this risk by having diverse delivery routes and has the ability to withstand further increases in freight costs.
Because of the aggregate improvement in the past 12 months trading since COVID restrictions were lifted across the UK and Europe, we
forecast that headroom will increase to 27.9% at the next covenant test in June 2022.
Further, the Group has considered the reverse stress test scenario, which models a breach in the leverage ratio covenant test in June 2023.
In this case, the Directors have available the cost saving strategies that were implemented in 2020 that could be reintroduced with no
support from the Government. However, such a scenario would see 2023 underlying EBITDA being less than half of that achieved in 2021,
a year that was impacted by COVID-19 and when the Group had fewer revenue and profit generating entities. As a result, the directors
consider that this scenario is a remote possibility.
On this basis and as outlined in the Director’s report, the Board has reasonable expectations that the Group and Company has adequate
resources to continue as a Going Concern to 31 December 2023.
100 — Annual Report & Accounts 2021
Basis of consolidation
The consolidated financial information incorporates the Financial Statements of the Group and all of its material 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 recorded as goodwill.
Business combinations 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 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 reassesses 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. Goodwill is tested annually for impairment.
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
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.
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.
INSPECS Group plc —
101
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
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. 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
Computer software
Trademarks
1–4 years
3 years
5-10 years
Customer relationships
8–20 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
33 years
Leasehold Improvements
over the lease term
Fixtures and Fittings
Computer Equipment
Plant and Machinery
5 years
3–5 years
3–7 years
Construction in progress is not depreciated
102 — Annual Report & Accounts 2021
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
2–5 years
Plant and Machinery
Motor Vehicles
3 years
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 are considered to be low value. Lease payments on short-term
leases and leases of low-value assets are recognised as expenses 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.
INSPECS Group plc —
103
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
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 include 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; and
• Financial liabilities at amortised cost (loans and borrowings).
As at 31 December 2021 and 31 December 2020, the Group has not designated any financial liability as at fair value through profit or loss.
Financial liabilities at amortised cost (loans and borrowings)
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the 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.
104 — Annual Report & Accounts 2021
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, that 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.
INSPECS Group plc —
105
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
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 USD, 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. 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.
106 — Annual Report & Accounts 2021
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 USD for presentation, the assets and liabilities of the consolidated entity are translated into
USD at the exchange rates prevailing at the end of the reporting period, equity balances are translated at historic exchange rates and the
income statement is translated into USD 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 average exchange
rates for the year.
Pensions and other post-employment benefits
The Group operates defined contribution pension schemes, where the amounts 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.
Provisions
A provision is required when a present obligation (legal or constructive) has arisen as a result of a past event and it is probably that a future
outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the
obligation. When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the
reporting period. Warranty provisions are held in relation to returns that are as a result of quality issues, whereby a replacement is provided
to the customer free of charge.
Non-underlying items
Non-underlying items are 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. These include income and expenditure that is considered outside of the usual course of business and
therefore is separately identified to allow the users of the Financial Statements comparability versus prior periods.
Prior year adjustments
Material prior period errors are corrected retrospectively in the first set of Financial Statements authorised for issue after their discovery by
restating the comparative amounts for the prior periods presented. A reconciliation between the corrected figures and those reported for
key statements is also provided. During the year, prior year errors have been identified in relation to the Eschenbach Group acquired in
December 2020. These errors and the required adjustments are detailed below:
A: Prior year adjustment – Classification of cash and cash equivalents
Under IAS 7, cash and cash equivalents must be readily convertible to known amounts of cash. During the current period it has been
determined that certain balances receivable under debt factoring arrangements within the Eschenbach Group are not readily convertible
as at the year-end date (see note 18). A prior year adjustment has therefore been made to reclassify $6,254,000 from cash and cash
equivalents to trade and other receivables.
B: Prior year adjustment – Tura Inc. Prepayments and accruals
Under IAS 1 the Group accounts are prepared on an accruals basis. During 2021 it was identified that there were items held as
prepayments which related to expenses incurred in the previous period. This resulted in trade and other receivables being overstated by
$716,000, trade and other payables being understated by $7,000, goodwill being understated by $552,000 and tax payable being
overstated by $171,000.
C: Prior year adjustment – Tura Inc. Right of return
Under IFRS 15 a right of return liability is recognised for the goods that are expected to be returned for a refund. This was incorrectly
calculated excluding discounts and rebates, however the liability should reflect the amount to be refunded. A prior year adjustment has
therefore been made to reduce the liability by $945,000 and reducing the corresponding right of return asset by $66,000. Deferred tax has
been overstated by $208,000, with goodwill overstated by $671,000.
D: Prior year adjustment – Tura Inc. Inventory
In accordance with IAS 2 inventories should comprise all costs of purchase and other costs incurred in bringing inventories to their present
location and condition. During the year errors were identified in relation to the treatment of freight costs and scrappage adjustments within
inventory. A detailed review of inventory reconciliations was performed resulting in a reduction in inventory of $1,132,000, an increase in
goodwill of $864,000 and a reduction in tax payable of $268,000.
The above adjustments B to D all relate to before the acquisition date of Tura Inc. as part of the Eschenbach Group on 16 December 2020
and therefore there is no impact on the Consolidated Income Statement for the year ended 31 December 2020. These adjustments arose
due to a lack of review processes in place at Tura Inc. prior to the acquisition, which have since been rectified.
INSPECS Group plc —
107
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
These prior year restatements have the following impact on the key Financial Statements as at 31 December 2020:
BALANCE SHEET
Non-current assets
Goodwill
Deferred tax
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Non-current liabilities
Deferred tax
Current liabilities
Trade and other payables
Right of return liabilities
Tax payable
31 December 2020
after PPA
adjustments
Prior year
adjustment
Restated
31 December 2020
$’000
$’000
$’000
71,964
12,995
56,693
35,648
32,672
744
(224)
(1,198)
5,538
(6,254)
72,708
12,771
55,495
41,186
26,418
24,694
(16)
24,678
42,895
13,090
4,360
7
(945)
(440)
42,902
12,145
3,920
TOTAL NET ASSETS
145,827
-
145,827
STATEMENT OF CASH FLOWS
Acquisition of subsidiaries, net of cash acquired
Increase in cash and cash equivalents
Cash and cash equivalents including overdraft at end of year
(101,821)
23,560
30,030
(6,254)
(6,254)
(6,254)
(108,075)
17,306
23,776
New and amended standards and interpretations
The following standards have been published and are mandatory for accounting periods beginning after 1 January 2022 but have not been
early adopted by the Group or Company and could have an impact on the Group and Company Financial Statements:
• Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Amendments to
IAS 1: Classification of Liabilities as Current or Non-current – Deferral of Effective Date – effective 1 January 2023.
• Amendments to IFRS 3: Business Combinations – Reference to the Conceptual Framework – effective 1 January 2022.
• Amendments to IAS 16: Property, Plant and Equipment – effective 1 January 2022.
• Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets – effective 1 January 2022.
• Annual Improvements to IFRS Standards 2018-2020 Cycle – 1 January 2022.
None of the new standards not yet in issue are expected, once adopted, to give rise to a significant change in the reported results or
financial position of the Group or Company.
108 — Annual Report & Accounts 2021
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 2021 was $81,359,000 (2020 restated: $72,708,000). No
provision for impairment of goodwill was made as at the end of the reporting period. See note 13 for further details.
Impairment of intangible assets
The carrying values 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. Further details in relation to impairment tests completed
in the current year are given in note 14.
Right of return liability
Management apply assumptions in determining the right of return liability and the associated right of return asset. These assumptions are
based on analysis of historical data trends, but require estimation of appropriate time periods and expected return rates. The right of
return liability at the period end is $11,100,000 (2020: $12,145,000) with an offsetting right of return asset (held within inventory) of
$1,581,000 (2020 restated: $1,493,000). If the provision were to increase by 5%, this would lead to an additional charge to the profit and
loss of $476,000, with it being considered that a movement in the right of return liability having an offsetting impact on the right of return
asset.
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 that 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. The provision held in relation
to uncertain tax liabilities as at 31 December 2021 is $623,000 (2020: $2,839,000). Further details are given in note 29.
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. See note 28
for further details.
INSPECS Group plc —
109
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
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:
United Kingdom
Europe (excluding UK)
North America
South America
Asia
Africa
Australia
2021
$’000
30,248
121,930
82,114
517
3,281
3,034
5,347
246,471
2020
$’000
14,014
14,097
12,040
450
4,032
–
2,782
47,415
For the year ended 31 December 2021 the Group had no customers which accounted for more than 10% of the Group’s revenue. For the
year ended 31 December 2020 the Group had one customer which accounted for more than 10% of the Group’s revenues, with the revenue
generated from this customer amounting to $9,483,000.
b) Right of return assets and liabilities
Right of return asset
Right of return liability
2021
2020
$’000
1,581
Restated
$’000
1,493
(11,100)
(12,145)
The right of return asset is presented as a component of inventory (note 17) and the right of return liability is presented separately on the
face of the balance sheet.
110 — Annual Report & Accounts 2021
5. Segment information
The Group operates in three operating segments, which upon application of the aggregation criteria set out in IFRS 8 Operating Segments
results in three reporting segments:
• Frames and Optics product distribution.
• 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 organisational model adopted by the Group during the financial year
ended 31 December 2021 and are as follows:
Revenue
External
Internal
Cost of sales
Gross profit
Expenses
Depreciation
Amortisation and impairment
Operating profit/(loss)
Exchange adjustment on borrowings
Non-underlying costs
Finance costs
Finance income
Share of loss of associate
Taxation
Loss for the year
Total assets
Total liabilities
Deferred tax asset
Current tax liability
Deferred tax liability
Borrowings
Group net assets
Other disclosures
Capital additions
Frames and
Optics
$’000
Wholesale
$’000
Lenses
$’000
Total before
adjustments &
eliminations
$’000
Adjustments &
eliminations
$’000
Total
$’000
211,527
3,438
214,965
27,437
4,664
32,101
7,507
246,471
–
246,471
90
8,192
7,597
254,663
(8,192)
(8,192)
–
246,471
(115,964)
(16,922)
(4,977)
(137,863)
7,164
(130,699)
99,001
15,179
2,620
116,800
(1,028)
115,772
(84,672)
(5,669)
(6,386)
2,274
(6,857)
(1,209)
(4,632)
2,481
(4,797)
(96,326)
545
(95,781)
(552)
(7,430)
(2)
(11,020)
–
–
(2,731)
2,024
(483)
(7,430)
(11,020)
1,541
(5,418)
(2,588)
(2,775)
118
(10)
3,697
(5,435)
436,102
75,568
13,986
525,656
(211,837)
313,819
(327,303)
(7,444)
(10,813)
(345,560)
270,205
(75,355)
12,540
(2,780)
(20,517)
(82,483)
145,224
2,471
1,300
3,874
7,645
–
7,645
INSPECS Group plc —
111
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
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 (restated):
Revenue
External
Internal
Cost of sales
Gross profit
Expenses
Depreciation
Amortisation
Operating (loss)/profit
Exchange adjustment on borrowings
Movement in derivatives
Non-underlying costs
Negative goodwill on bargain purchase
Finance costs
Finance income
Share of profit of associate
Taxation
Loss for the year
Total assets
Total liabilities
Deferred tax asset
Current tax liability
Deferred tax liability
Borrowings
Group net assets
Other disclosures
Capital additions
Frames and
Optics
$’000
Wholesale
$’000
Lenses
$’000
Total before
adjustments &
eliminations
$’000
Adjustments &
eliminations
$’000
Total
$’000
21,259
2,204
23,463
21,979
2,381
24,360
(14,987)
(13,678)
4,177
59
4,236
(2,203)
47,415
4,644
52,059
(30,868)
–
47,415
(4,644)
(4,644)
3,975
–
47,415
(26,893)
8,476
10,682
2,033
21,191
(669)
20,522
(12,898)
(636)
(514)
(5,572)
(5,594)
(1,422)
(1,093)
2,573
(1,634)
(20,126)
570
(19,556)
(241)
–
158
(2,299)
(1,607)
(2,841)
–
–
(99)
(2,299)
(1,607)
(2,940)
(382)
(740)
(5,763)
506
(1,880)
36
–
2,250
(8,913)
400,982
(303,805)
72,021
(6,809)
7,409
480,412
(183,848)
296,564
(6,185)
(316,799)
259,110
(57,689)
12,771
(3,920)
(24,678)
(77,221)
145,827
203
1,864
736
2,803
–
2,803
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.
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.
112 — Annual Report & Accounts 2021
Non-current operating assets
United Kingdom
Europe
North America
Asia
2021
$’000
9,795
129,441
4,589
36,580
180,405
2020
Restated $’000
3,256
116,472
10,686
41,441
171,855
Non-current assets for this purpose consist of property, plant and equipment, right-of-use assets, goodwill and intangible assets.
6. Business combinations
Acquisition of BoDe Design GmbH
BoDe Design GmbH was incorporated on 14 October 2021 with INSPECS Limited as its immediate Parent. On 6 December 2021 this entity
acquired the partnership assets of BoDe Design Vertriebs GmbH & Co. KG, a limited partnership under German law for an initial cash
consideration of $1,987,000 with a further contingent consideration based on financial performance over the next three years.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of BoDe Design GmbH as at the date of acquisition were:
Assets
Property, plant and equipment
Intangible assets
Right-of-use asset
Cash and cash equivalents
Trade and other receivables
Inventories
Total identifiable assets at fair value
Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Overdraft
Lease liability
Income tax payable
Deferred tax liability
Total identifiable liabilities at fair value
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Initial purchase price
Contingent deferred consideration
Total consideration
Fair value
recognised on
acquisition
$000
24
1,813
269
33
178
919
3,236
1,010
170
39
269
109
353
1,950
1,286
2,221
1,987
1,520
3,507
INSPECS Group plc —
113
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
From the date of acquisition, BoDe Design GmbH contributed $75,000 of revenue and a loss of $106,000 to the Group loss before tax from
continuing operations. If the partnership assets of BoDe Design Vertriebs GmbH & Co. KG were acquired at the beginning of the year,
revenue from continuing operations for the Group would have been $250,216,000 and loss before tax from continuing operations for the
Group would have been $8,637,000.
Transaction costs of $395,000 were expensed and are included within ‘Non-underlying costs – Acquisitions’.
Acquisition of EGO Eyewear Limited
On 22 December 2021, INSPECS Limited acquired the entire share capital of EGO Eyewear Limited and its subsidiaries, for an initial cash
consideration of $8,251,000 with a further deferred consideration partly based on performance over the next three years.
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of EGO Eyewear as at the date of acquisitions were:
Assets
Property, plant and equipment
Intangible assets
Right-of-use asset
Cash and cash equivalents
Trade and other receivables
Total identifiable assets at fair value
Liabilities
Trade and other payables
Lease liability
Deferred tax liability
Total identifiable liabilities at fair value
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
Initial purchase price
Deferred consideration
Contingent deferred consideration
Total consideration
Fair value
recognised on
acquisition
$000
1
8,605
142
2,110
3,213
14,071
3,824
135
2,070
6,029
8,042
7,122
8,251
2,712
4,201
15,164
From the date of acquisition, EGO Eyewear contributed $163,000 of revenue and a loss of $15,000 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 $256,084,000 and loss before tax from continuing operations for the Group would have been $7,234,000.
Transaction costs of $881,000 were expensed and are included within ‘Non-underlying costs – Acquisitions’.
114 — Annual Report & Accounts 2021
Analysis of cash flows on acquisitions
The combined impact on cash flow of the two acquisitions made during the year was as follows:
Initial purchase price for BoDe Design GmbH
Initial purchase price for EGO Eyewear Limited
Acquired with BoDe Design GmbH:
Cash and cash equivalents
Overdraft
Acquired with EGO Eyewear Limited:
Cash and cash equivalents
Net cash flow on acquisition
Prior period business combinations
$’000
(1,987)
(8,251)
33
(39)
2,110
(8,134)
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.
The initial accounting for the acquisition of Eschenbach Holdings GmbH had previously been provisionally determined and were based on
a provisional assessment of the fair value of the assets and liabilities acquired. The information needed to assess the provision required
against certain inventory categories was not available by the date the Financial Statements for 31 December 2020 were approved for issue
by the Board of Directors. During 2021, the information needed to determine an appropriate estimate for this inventory provision was
made available and an increase in the inventory provision was deemed required, therefore decreasing the fair value of inventory. The
comparative statements as at 31 December 2020 were adjusted to reflect the new available information on the provisional amounts (see
note 35). As a result, there was a decrease in inventories of $2,258,000.
Information needed to assess the right of return liability and associated right of return asset for certain sales entities within the Eschenbach
Group was not available by the date of approval of the Financial Statements for 31 December 2020. Further analysis has enabled this
information to be obtained during 2021, with the resultant adjustments increasing the warranty provision by $495,000, decreasing the right
of return liability by $229,000 and decreasing the right of return asset by $344,000.
In addition, prior period adjustments have been identified relating to the acquisition balance sheet of Eschenbach Holdings GmbH, as
discussed in note 2. These adjustments led to an increase in goodwill on acquisition to $58,677,000, with the impact of these adjustments
to the balance sheet as at 31 December 2020 shown in note 35 and the restated acquisition balance sheet shown below.
INSPECS Group plc —
115
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of Eschenbach Holdings GmbH as at the date of acquisition is as follows:
Assets
Property, plant and equipment
Intangible assets
Right-of-use asset
Cash and cash equivalents
Trade and other receivables
Tax receivable
Inventories
Deferred tax assets
Total identifiable assets at fair value
Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Overdraft
Lease liability
Income tax payable
Deferred tax liability
Total identifiable liabilities at fair value
Total identifiable net assets at fair value
Goodwill arising on acquisition
Purchase consideration transferred
7. Employees and Directors
Included in cost of sales
Wages and salaries
Social security costs
Pension costs
Included in administration costs
Wages and salaries
Social security costs
Pension costs
Share-based payment expense
116 — Annual Report & Accounts 2021
Fair value
$000
8,466
39,407
19,552
13,118
29,970
2,452
44,578
8,952
166,495
43,954
21,462
2,620
19,552
905
21,183
109,676
56,819
58,677
115,496
2020
$’000
4,899
102
39
5,040
8,238
955
360
1,706
11,259
2021
$’000
7,178
376
51
7,605
50,536
9,626
515
1,484
62,161
69,766
16,299
The average number of employees during the year was as follows:
Administration
Selling and operations
Production
Directors’ remuneration during the year was as follows:
Directors’ salaries
Directors’ pension contributions
Share options
Information regarding the highest paid Director is as follows:
Total remuneration
2021
348
411
913
1,672
2021
$’000
811
35
373
1,219
2021
$’000
523
2020
153
72
873
1,098
2020
$’000
455
33
159
647
2020
$’000
311
The number of Directors to whom employer pension contributions were made by the Group during year is 2 (2020: 2). This was in the form
of a defined contribution pension scheme.
Further information about the remuneration of individual Directors is provided in the Remuneration and Nomination Committee Report on
pages 76 to 78.
8. 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:
Initial public offering
Acquisition costs
Other professional service costs
2021
$’000
–
1,352
1,236
2,588
2020
$’000
2,709
3,054
–
5,763
Acquisition costs of $395,000 and $881,000 were incurred during the period relating to the purchase of BoDe Design GmbH and EGO
Eyewear Limited respectively (see note 6). A further $76,000 was incurred in relation to the acquisition of assets of Hardy Amies. Other
professional service costs of $1,236,000 relate to accounting transition and valuation following the acquisition of Eschenbach Holdings
GmbH at the end of the prior year. Non-underlying costs incurred in the year to 31 December 2020 include $2,709,000 relating to the
listing of existing shares on to the AIM of the London Stock Exchange. An additional $3,054,000 were incurred in relation to the
acquisitions of Eschenbach Holdings GmbH and Norville (20/20) Limited.
INSPECS Group plc —
117
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
9. Finance costs and finance income
Finance costs
Bank loan interest
Other loan interest
Invoice discounting interest and charges
Loan transaction costs
Lease interest
Total finance costs
Finance income
Interest receivable
10. Loss before income tax
The loss before income tax is stated after charging/(crediting):
Cost of inventories recognised as expense
Short-term leases
Depreciation own assets (note 15)
Depreciation – Right-of-use assets (note 24)
Amortisation and impairment – Intangibles (note 14)
Restructuring costs
Post-acquisition insurance costs
Foreign exchange on funding for acquisitions
Other foreign exchange differences (gain)/loss
Fees payable to the Company’s auditor for audit services:
Audit of the Company and Group accounts
Audit of the subsidiaries
Fees payable to the Company’s auditor for non-audit services:
Costs associated with IPO
The disclosure of the 2020 fees payable to the Company’s auditor for audit services has been reapportioned.
118 — Annual Report & Accounts 2021
2021
$’000
1,785
–
57
477
456
2,775
2020
$’000
516
39
50
1,249
26
1,880
118
36
2021
$’000
95,628
486
3,423
4,007
11,020
–
–
–
(1,171)
2021
$’000
574
830
–
2020
$’000
21,045
83
1,539
760
1,607
185
563
1,085
305
2020
$’000
929
310
285
11. Income tax
Analysis of tax expense
Current tax:
Current tax on profits for the year
Overseas current tax expense
Adjustment in respect of prior years
Total current tax
Deferred tax: (see note 28)
Deferred tax income relating to the origination and reversal of timing differences
Effect of changes in tax rates
Adjustment in respect of prior years
Total deferred tax
Total tax credit reported in the consolidated income statement
2021
$’000
1,618
469
(128)
1,959
(4,430)
(1,122)
(104)
(5,656)
(3,697)
2020
$’000
24
208
–
232
(2,478)
(4)
–
(2,482)
(2,250)
Factors affecting the tax credit
The tax credit assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below:
Loss before income tax
Loss multiplied by standard rate of corporation tax in the UK of 19.00% (2020: 19.00%)
Effects of:
Non-deductible expenses – Amortisation of intangible assets
Non-deductible expenses – Other expenses
(Decrease)/increase in provision for uncertain tax liabilities
Income taxed in nil rate regime
Share-based payment
Different tax rate for overseas subsidiaries
Transfer pricing adjustments
Tax rate changes
Income not taxable
Effects of Group relief
Amounts not recognised on deferred tax
Adjustments in respect of prior year
Tax credit
2021
$’000
(9,132)
(1,735)
853
517
(2,224)
–
(136)
(1,313)
1,017
(1,122)
-
156
520
(230)
(3,697)
2020
$’000
(11,163)
(2,121)
184
1,622
381
(404)
(1,924)
(84)
51
(4)
(176)
70
155
–
(2,250)
Income not taxable for tax purposes relates to income generated in jurisdictions within which there is a nil taxation rate. Movements in
other comprehensive income relating to foreign exchange on consolidation are not taxable.
INSPECS Group plc —
119
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
12. 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 2021 and the comparative period. In accordance with IAS 33, 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. Basic earnings per share is therefore $(0.05)
loss (2020: $(0.13) loss), with diluted earnings per share $(0.05) loss (2020: $(0.13) loss).
The following table reflects the income and share data used in the basic and diluted EPS calculations:
ORDINARY SHARES
Loss attributable to the ordinary equity
holders of the Parent for basic earnings
Weighted average number of Ordinary Shares for basic EPS
Effect of dilution from:
Share options
Weighted average number of Ordinary Shares adjusted
for the effect of dilution where appropriate
Refer to note 20 for details in relation to the shares in issue and their rights.
2021
$’000
(5,435)
2020
$’000
(8,913)
Number of shares Number of shares
101,309,670
69,227,355
5,025,903
3,624,059
106,335,573
72,851,414
13. Goodwill
COST
At 1 January 2021
Additions
Exchange adjustment
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
COST
At 1 January 2020
Additions
Exchange adjustment
At 31 December 2020
NET BOOK VALUE
At 31 December 2020
120 — Annual Report & Accounts 2021
$’000
72,708
9,343
(692)
81,359
81,359
$’000
Restated
12,798
58,677
1,233
72,708
72,708
Impairment testing of goodwill
Goodwill acquired through business combinations has been allocated to the cash-generating unit of Twenty20 Limited ($12,859,000 as at
31 December 2021), Eschenbach Group GmbH ($58,792,000 as at 31 December 2021), INSPECS Limited ($234,000 as at 31 December
2021), BoDe Design GmbH ($2,265,000 as at 31 December 2021) and EGO Eyewear Limited ($7,186,000 as at 31 December 2021) for
impairment testing.
The recoverable amount of each cash-generating unit has been determined based on individual value in use calculations using cash flow
projections covering a five-year period approved by senior management. The forecasts for 2022 have been prepared based on Board
approved budgets for 2022. Financial years 2023 to 2026 were forecasted assuming a 7% increase in turnover based on synergies within
the expanding Group of companies. Management have assumed a constant gross profit margin and increased administration expenses by
5% per annum. From 2027 onwards we have assumed a 2% terminal growth rate. These assumptions have been used across all CGUs, with
management considering that each CGU has similar potential for growth in the market in which it operates. In addition, no major changes
have occurred in the existing political, legal and economic conditions in those locations in which each cash-generating unit operates (see
also note 33).
The impact of climate change has been considered as part of our goodwill impairment review. If climate change has a negative impact on
the operating costs of the Group there could be a potential impact on the discounted cashflow growth rates used in the models. Sensitivity
analysis performed and set out below for each CGU demonstrates that the discount rates can increase considerably before an impairment
is triggered. Therefore, at present management have concluded that the impact of climate change would not be expected to trigger an
impairment.
The discount rates used are before tax and reflects specific risks where considered required relating to the cash-generating unit. Discount
rates used for each value in use calculation, along with relevant sensitivity analysis is detailed by CGU as follows:
Twenty20 Limited
The discount rate applied to the cash flow projections was 8.2% plus a 2.5% Company specific risk premium. Based on management’s
assessment there is no impairment adjustment required on goodwill.
To recognise an impairment provision, the discount rate would have to exceed 36.0%.
To recognise an impairment provision the cash flow into perpetuity would need to be discounted by 52.3% with the applicable discount
rate for the five-year period to 2026 remaining at 10.7%.
INSPECS Limited
The discount rate applied to the cash flow projections was 7.3%. Based on management’s assessment there is no impairment adjustment
required on goodwill.
To recognise an impairment provision, the discount rate would have to exceed 633.9%.
Eschenbach Holdings GmbH
The discount rate applied to the cash flow projections was 7.1%. Based on management’s assessment there is no impairment adjustment
required on goodwill.
To recognise an impairment provision the cash flow into perpetuity would need to be discounted by 29.5% with the applicable discount
rate for the five-year period to 2026 remaining at 7.1%.
To recognise an impairment on discount rate alone, the rate would need to increase to 23.7%.
BoDe Design GmbH
The discount rate applied to the cash flow projections was 7.1% plus a 2.5% Company specific risk premium. Based on management’s
assessment there is no impairment adjustment required on goodwill.
To recognise an impairment provision, the discount rate would have to exceed 33.8%.
To recognise an impairment provision the cash flow into perpetuity would need to be discounted by 66.9% with the applicable discount
rate for the five-year period to 2026 remaining at 9.6%.
EGO Eyewear Limited
The discount rate applied to the cash flow projections was 7.1% plus a 2.5% Company specific risk premium. Based on management’s
assessment there is no impairment adjustment required on goodwill.
To recognise an impairment provision, the discount rate would have to exceed 13.8%.
To recognise an impairment provision the cash flow into perpetuity would need to be discounted by 14.4% with the applicable discount
rate for the five-year period to 2026 remaining at 9.6%.
INSPECS Group plc —
121
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Patents and
licences
$’000
Customer
relationships
$’000
Trademarks
$’000
Customer
order book
$’000
Computer
software
$’000
322
1
45
–
–
41,274
9,212
–
–
18,788
406
704
–
(1,685)
(1,441)
368
48,801
18,457
180
77
–
–
1
5,849
2,883
3,453
–
(231)
258
11,954
310
3,626
–
–
(175)
3,761
68
794
–
(65)
(21)
776
5
80
–
(65)
(20)
-
1,348
17,321
110
36,847
14,696
776
2,025
54,454
Patents and
licences
$’000
Customer
relationships
$’000
Trademarks
$’000
Customer
order book
$’000
Computer
software
$’000
–
1,582
233
11
92
–
(14)
322
128
59
–
(7)
180
19,909
18,849
–
–
2,516
41,274
2,904
1,127
–
1,818
5,849
18,637
–
–
151
18,788
–
291
–
19
310
68
–
(1,640)
58
68
1,582
5
(1,640)
58
5
63
142
35,425
18,478
2,197
56,305
Totals
$’000
63,102
10,420
1,508
(65)
(3,190)
71,775
6,797
7,567
3,453
(65)
(431)
Totals
$’000
22,429
39,407
167
(1,640)
2,739
63,102
4,947
1,607
(1,640)
1,883
6,797
2,650
7
759
–
(43)
3,373
453
901
–
–
(6)
705
1,842
75
–
28
2,650
333
125
–
(5)
453
14. Intangible assets
COST
At 1 January 2021
Acquisition of a subsidiary
Additions
Disposals
Exchange differences
At 31 December 2021
AMORTISATION
At 1 January 2021
Amortisation for the year
Impairment
Disposals
Exchange differences
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
COST
At 1 January 2020
Acquisition of a subsidiary
Additions
Disposals
Exchange differences
At 31 December 2020
AMORTISATION
At 1 January 2020
Amortisation for the year
Disposals
Exchange differences
At 31 December 2020
NET BOOK VALUE
At 31 December 2020
122 — Annual Report & Accounts 2021
The individual intangible assets, excluding goodwill, which are material to the Financial Statements are:
Intangible asset
Customer relationships
2021
2020
Remaining
amortisation
period (years)
$’000
Remaining
amortisation
period (years)
$’000
36,847
Between 1 and 15
35,425
Between 10 and 16
Impairment review of individual customer relationship
During the period, an indicator of impairment was noted relating to a customer relationship with a carrying value of $3,700,000 as at 31
December 2021. As a result, an impairment review was completed to compare the recoverable amount of the asset against its carrying
value. Following this review, the Directors consider that an impairment of $3,453,000 was required, leaving a balance of $247,000 against
this customer relationship.
Acquisition of a subsidiary
For each acquisition, an exercise to value the net assets and apportion the consideration paid has taken place, with the determined
balances recognised within these Financial Statements. We engaged external consultants to assist in the valuation of the intangible assets,
which have been valued using the income method. Adjustments to provisional fair values are made up to 12 months from the original
acquisition date with any revisions asset or liability values being adjusted through goodwill. Goodwill represents the value of the
accumulated workforces and synergies expected to be realised following the acquisition.
15. Property, plant and equipment
Some of the Group’s property, plant and equipment are subject to a charge to secure against the Group’s bank loans.
COST
At 1 January 2021
Acquisition of a subsidiary
Additions
Disposals
Transfers
Exchange differences
At 31 December 2021
DEPRECIATION
At 1 January 2021
Charge for the year
Eliminated on disposals
Exchange differences
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
Freehold
property
$’000
Leasehold
improvement
$’000
Plant &
machinery
$’000
Fixtures &
fittings
$’000
Computer
equipment
$’000
Construction
in progress
$’000
Total
$’000
10,590
862
10,829
3,269
1,102
1,282
27,934
–
550
–
1,416
(271)
12,285
569
511
–
(13)
–
21
–
–
(19)
864
200
118
–
1
4
957
(289)
–
(83)
11,418
3,847
1,856
(289)
18
1,067
319
5,432
20
647
–
–
(217)
3,719
219
719
–
(29)
909
1
153
(275)
–
(3)
–
3,809
–
(1,416)
(57)
25
6,137
(564)
–
(650)
978
3,618
32,882
639
219
(275)
3
586
–
–
–
–
–
5,474
3,423
(564)
(20)
8,313
11,218
545
5,986
2,810
392
3,618
24,569
INSPECS Group plc —
123
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Freehold
property
$’000
Leasehold
improvement
$’000
Plant &
machinery
$’000
Fixtures &
fittings
$’000
Computer
equipment
$’000
Construction
in progress
$’000
COST
At 1 January 2020
Acquisition of a subsidiary
Additions
Disposals
Exchange differences
At 31 December 2020
DEPRECIATION
At 1 January 2020
Charge for the year
Eliminated on disposals
Exchange differences
At 31 December 2020
NET BOOK VALUE
6,484
3,695
39
–
372
10,590
348
209
–
12
569
398
523
6
(82)
17
862
210
68
(82)
4
200
Total
$’000
14,501
10,397
2,467
(323)
892
6,433
3,040
1,186
(187)
357
278
2,989
8
(40)
34
745
150
182
(14)
39
163
–
1,046
–
73
10,829
3,269
1,102
1,282
27,934
2,870
1,131
(187)
33
3,847
217
32
(40)
10
219
536
99
(14)
18
639
–
–
–
–
–
4,181
1,539
(323)
77
5,474
At 31 December 2020
10,021
662
6,982
3,050
463
1,282
22,460
16. Investments in associate
Share of net assets of associate
COST
At 1 January 2021
Share of profit
Exchange difference
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
Revenue
Expenses
Loss before tax
Income tax
Share of loss of associate for the year ended 31 December 2021
Interest in
associate
$’000
57
(10)
1
48
48
$’000
456
(495)
(39)
–
(10)
The Group’s associated undertaking is Ruain Zuoyou Glasses Co Ltd, a Company registered in China. 25% of the share capital of Ruain
Zuoyou is owned by the Group, with Zhongshan Torkai Optical Co Limited being the direct owner of these shares.
124 — Annual Report & Accounts 2021
17. Inventories
Raw materials
Work in progress
Finished goods
The above includes amounts in respect of right of return assets and the amount for each year is as below:
Finished goods – Right of return asset
2021
$’000
4,068
3,812
47,784
55,664
2021
$’000
1,581
2020
Restated
$’000
5,102
2,646
47,747
55,495
2020
Restated
$’000
1,493
Inventories are stated after provisions for impairment of $9,646,000 (2020: $9,153,000). The prior year comparative has been restated to
include the increased stock provision as referenced in note 6.
18. Trade and other receivables
Current:
Trade receivables
Prepayments
Other receivables
2021
$’000
29,362
3,396
9,471
42,229
2020
Restated
$’000
25,149
5,703
10,334
41,186
Part of the Group uses an invoice factoring facility to prefinance certain trade receivables and assist with trade receivables collection. Other
receivables include $7,097,000 (2020 restated: $8,209,000) relating to retentions held by the factorer at the period end until rebate
arrangements relating to the preceding period are finalised, at which point they are paid to the Group. At the comparative year-end, this
balance was incorrectly classified as cash, therefore a prior year adjustment has been recorded (see notes 2 and 36). An ageing analysis of
the trade receivables as at the end of the reporting period, based on the invoice date and net of loss allowance, is as follows:
Invoiced in last month
1–2 months
2–3 months
Over 3 months
Set out below is the movement in the allowance for expected credit losses of trade receivables.
At 1 January
Acquired with acquisition of subsidiary
Movement in the year
Exchange adjustment
At 31 December
2021
$’000
18,404
6,616
2,113
2,229
29,362
2021
$’000
556
–
36
(37)
555
2020
$’000
11,787
6,948
4,069
2,345
25,149
2020
$’000
19
520
20
(3)
556
INSPECS Group plc —
125
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
The Group’s trading terms with its customers are mainly on credit. The credit period is generally 30 to 90 days. Each customer has a
maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to
minimise credit risk. Overdue balances are reviewed regularly by senior management. The Group’s large retail chain customers order on
purchase orders which are paid within 30 to 60 days and the remaining customer base is well diversified and hence there is considered to
be no significant credit risk. Acquisitions during the current and comparative year have further diversified the reliance on major customers
and therefore have further mitigated credit risk. Trade receivables are non-interest-bearing and are stated net of loss allowance.
Impairment under IFRS 9
An impairment analysis is performed at each reporting date to measure expected credit losses. The provision rates are based on days past
due for groupings of customer segments with similar loss patterns (i.e. by customer type and rating). The calculation reflects the
probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the reporting date
about past events, current conditions and forecasts of future economic conditions. Generally, trade receivables are written off if past due
for more than one year and are not subject to enforcement activity.
19. Cash and cash equivalents
Cash at bank and in hand
2021
$’000
2020
Restated $’000
29,759
29,759
26,418
26,418
At the end of the reporting period, the cash and cash equivalents of the Group denominated in Renminbi (‘RMB’) amounted to $2,738,000
(2020: $2,879,000). The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control
Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange
RMB for other currencies through a bank authorised to conduct foreign exchange business.
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods of
between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective
short-term time deposit rates. The bank balances and time deposits are deposited with creditworthy banks with no recent history of
default.
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 31 December:
Cash at bank and in hand
Bank overdrafts
20. Called up share capital
Authorised and issued share capital:
Number:
101,671,525 (2020: 101,290,898)
Class:
Nominal value
Ordinary
£0.01
2021
$’000
29,759
–
29,759
2021
$’000
1,389
1,389
2020
Restated
$’000
26,418
(2,642)
23,776
2020
$’000
1,384
1,384
Each Ordinary Share carries the right to participate in distributions, as respects dividends and as respects capital on winding up.
A further 380,627 shares have been created during the year as a result of the exercise of share options.
126 — Annual Report & Accounts 2021
21. Reserves
Share premium
This reserve records the amount above the nominal value of the sums received for shares issued, less transaction costs.
At 1 January
Share for share exchange
Issue of shares to third parties on initial public offering
Issue of shares to PE investors on initial public offering (note 30)
Issue of shares on secondary placing
Exercise of share options
At 31 December
Foreign currency translation reserve
This reserve records the foreign currency translation adjustment on consolidation.
At 1 January
Share for share exchange
Other comprehensive income
At 31 December
2021
$’000
121,940
–
–
–
–
351
122,291
2021
$’000
(89)
–
2,907
2,818
2020
$’000
21,628
(21,628)
30,659
4,452
84,104
2,725
121,940
2020
Restated
$’000
1,031
(926)
(194)
(89)
Share option reserve
The share option reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key
management personnel, as part of their remuneration.
At 1 January
Share for share exchange
Share-based payment charge
Exercise of share options
Deferred tax on share options (note 28)
At 31 December
2021
$’000
867
–
1,484
(437)
87
2,001
2020
$’000
2,840
34
1,133
(2,973)
(167)
867
The share-based payment charge for the year is recognised against the reserve as per IFRS 2 Share-Based Payments.
Share options exercised in the period include both cash settled (resulting in the issue of 274,730 shares) and net settled (resulting in the
issue of 105,897 shares). The cash settled share options resulted in an increase in share capital of $4,000 and share premium of $351,000.
As options have been exercised during the year, the reserve relating to these options has been released to retained earnings, with a further
$87,000 (2020: $167,000) released against the deferred tax asset held in relation to the options exercised.
INSPECS Group plc —
127
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Merger reserve
This reserve arose on the share for share exchange between INSPECS Holdings Limited and INSPECS Group plc on 10 January 2020.
At 1 January
Issue of share capital
Share for share exchange and creation of merger reserve
Capital reduction
At 31 December
22. Trade and other payables
Current:
Trade payables
Amounts owed to related parties
Other payables
Social security and other taxes
Royalties
Accruals
2021
$’000
7,296
–
–
–
7,296
2020
$’000
–
(22)
68,802
(61,484)
7,296
2021
2020
$’000
32,801
196
934
5,776
4,435
9,175
53,317
Restated
$’000
22,404
169
1,510
5,422
5,865
7,532
42,902
The trade payables are non-interest-bearing and are normally settled on credit terms of 30–90 days. Amounts owed to related parties are
unsecured, interest free, have no fixed date of repayment and are repayable on demand.
23. Financial liabilities – borrowings
Current:
Bank overdraft
Invoice discounting
Bank loans
Lease liabilities
Non-current:
Bank loans
Lease liabilities
2021
$’000
–
2,433
9,979
3,310
13,289
2021
$’000
50,113
19,081
69,194
2020
$’000
2,642
–
3,855
2,975
6,830
2020
$’000
53,092
17,299
70,391
At the balance sheet date, the available invoice discounting facility was $1,621,000 (2020: $3,000,000). The invoice discounting facility
bears interest at 2.00% over base rate throughout 2021 (2020: 1.85%). The invoice discounting facility is secured by way of fixed and
floating charges over the trade receivables of INSPECS Limited. The facility has no fixed end date, with a notice period of three months.
128 — Annual Report & Accounts 2021
On 27 October 2021, the Group entered a new multi-currency term loan with HSBC for $18,700,000. Repayments under this loan are
$900,000 per quarter plus interest. Interest is payable at the applicable Margin Rate plus LIBOR calculated daily on a 360-day year basis.
The Margin Rate is 1.90%, 2.15% or 2.40% dependent upon the Group’s leverage ratio. On 22 December 2021, the Group entered into an
additional $10,000,000 revolving credit facility, with the balance drawn down under this arrangement as at 31 December 2021 being
$6,000,000. Interest is payable at LIBOR plus 2.25% calculated daily on a 360-day year basis. The arrangement is subject to annual renewal
by the bank and therefore the balance is shown as a current liability.
This facility is in addition to the $35,000,000 available revolving credit facility, which was increased by a further $1,500,000 on 27 October
2021 to $36,500,000. The balance drawn down under this arrangement as at 31 December 2021 is $35,302,000. Interest is payable at the
applicable Margin Rate plus LIBOR calculated daily on a 360-day year basis. The Margin Rate is 1.90%, 2.15% or 2.40% dependent upon the
Group’s leverage ratio. The arrangement expires in January 2023.
An arrangement fee of $768,000 was payable on this refinancing. The additional financing received during the period allowed the
consolidation of loans from across the Group, with repayments of loans made in particular within the Eschenbach part of the business.
Remaining loans in the Group are at 2.0% and are repayable in between one and five years.
The Group’s bank loans and overdrafts are secured against the business assets of the Group.
The Group’s lease liabilities are secured against the assets concerned.
24. Right-of-use assets and leases
The Group has lease contracts for various items of plant, machinery, vehicles and other equipment used in its operations. Leases of plant
and machinery, motor vehicles and leasehold properties generally have lease terms between three and five years. The Group’s obligations
under its leases are secured by the lessor’s title to the leased assets. The Group’s right-of-use assets are as follows:
COST
At 1 January 2021
Acquisition of a subsidiary
Additions
End of lease
Exchange differences
At 31 December 2021
DEPRECIATION
At 1 January 2021
Charge for the year
Eliminated on end of lease
Exchange differences
At 31 December 2021
NET BOOK VALUE
At 31 December 2021
Leasehold
properties
$’000
Plant &
machinery
$’000
Motor
vehicles
$’000
19,556
273
5,973
(315)
(1,340)
24,147
1,331
2,920
(315)
(93)
3,843
718
–
16
(24)
(41)
669
31
279
(24)
(9)
277
1,517
138
834
(69)
(86)
2,334
50
808
(69)
(28)
761
Total
$’000
21,791
411
6,823
(408)
(1,467)
27,150
1,412
4,007
(408)
(130)
4,881
20,304
392
1,573
22,269
INSPECS Group plc —
129
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
COST
At 1 January 2020
Acquisition of a subsidiary
Additions
End of lease
Exchange differences
At 31 December 2020
DEPRECIATION
At 1 January 2020
Charge for the year
Eliminated on end of lease
Exchange differences
At 31 December 2020
NET BOOK VALUE
At 31 December 2020
Leasehold
properties
$’000
Plant &
machinery
$’000
Motor vehicles
$’000
2,953
17,550
114
(1,251)
190
19,556
1,839
664
(1,251)
79
1,331
38
674
–
–
6
718
25
5
–
1
31
222
1,328
28
(84)
23
1,517
32
91
(84)
11
50
Total
$’000
3,213
19,552
142
(1,335)
219
21,791
1,896
760
(1,335)
91
1,412
18,225
687
1,467
20,379
Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and borrowings) and the movements
during the period:
2021
$’000
20,274
411
6,822
456
(4,224)
–
(1,348)
22,391
3,310
19,081
2020
$’000
1,229
19,552
142
26
(810)
(44)
179
20,274
2,975
17,299
At 1 January
Acquisition of a subsidiary
Additions
Interest charge
Payments
Reduction in lease terms
Exchange adjustment
As at 31 December
Current
Non-current
130 — Annual Report & Accounts 2021
25. Changes in liabilities from financing activities
1 January
2021
$’000
New loans
$’000
Repayments
$’000
Reclassification
between
current and
non-current
$’000
Transaction
costs on
debt
refinancing
$’000
Acquired on
acquisition
of subsidiary
$’000
Foreign
exchange on
consolidation
$’000
31 December
2021
$’000
New leases
$’000
Due in one year
Bank loans
Lease liabilities
Invoice
discounting
facility
Due after one year
(3,855)
(2,975)
(6,028)
–
4,092
4,224
(3,946)
(4,691)
–
(2,477)
–
–
Bank loans
(53,092)
(20,723)
18,781
Lease liabilities
(17,299)
–
–
3,946
4,691
(478)
–
–
–
–
–
–
–
–
(176)
–
–
–
(6,822)
(411)
412
132
(9,979)
(3,310)
44
(2,433)
975
760
(50,113)
(19,081)
Total liabilities
from financing
activities
(77,221)
(29,228)
27,097
–
(478)
(6,822)
(587)
2,323
(84,916)
Balances at the end of each reporting period are summarised in note 23, with balances above being shown under interest-bearing loans
and borrowings on the balance sheet.
1 January
2020
$’000
New loans
$’000
Repayments
$’000
Reclassification
between
current and
non-current
$’000
Transaction
costs on
debt
refinancing
$’000
Acquired on
acquisition
of
subsidiary
$’000
Foreign
exchange on
consolidation
$’000
31 December
2020
$’000
New leases
$’000
Due in one year
Bank loans
Lease liabilities
Invoice
discounting
facility
(4,228)
(746)
(2,577)
Due after one year
–
–
–
39
810
5,357
(257)
2,577
–
Bank loans
(12,168)
(17,187)
Lease liabilities
(483)
–
–
–
(5,357)
257
(1,249)
–
–
–
–
–
–
–
–
(3,771)
(2,714)
(3)
(68)
(3,855)
(2,975)
–
–
–
(17,691)
(98)
(16,838)
(689)
(137)
(53,092)
(17,299)
Total liabilities
from financing
activities
(20,202)
(17,187)
3,426
–
(1,249)
(98)
(41,014)
(897)
(77,221)
Balances at the end of each reporting period are summarised in note 23, with balances above being shown under interest-bearing loans
and borrowings on the balance sheet.
INSPECS Group plc —
131
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
26. Analysis of cash flows given in the statement of cash flows
A reconciliation of profit for the year to cash generated from operations is shown below:
Loss before income tax
Adjustments for:
Depreciation
Amortisation and impairment of intangible assets
Share of loss of associate
Gain on bargain purchase
Share-based payment
Movement in fair value of derivatives
Exchange adjustment on borrowings
Exchange adjustment on trading
Finance costs
Finance income
Changes in working capital
(Increase)/decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash flows from operating activities
Notes
15,24
14
16
32
33
10
9
9
6,17
6,18
6,22
2021
$’000
(9,132)
7,430
11,020
10
–
1,484
–
5,418
(1,171)
2,775
(118)
149
1,923
5,107
24,895
2020
$’000
(11,163)
2,299
1,607
–
(506)
1,706
740
382
–
1,880
(36)
648
3,005
(159)
403
27. Contingent and deferred consideration
Contingent and deferred considerations payable relate to the acquisitions of BoDe Design GmbH and EGO Eyewear Limited (see note 6).
In relation to BoDe Design GmbH, the full balance of $1,529,000 is contingent based on the performance of the entity each year until the
end of 2025. In relation to EGO Eyewear Limited, $2,747,000 is deferred consideration payable in equal instalments in 2023, 2024 and
2025. The remaining balance is contingent based on the performance of the entity each year until the end of 2024. The split of the
contingent and deferred consideration between each entity is as follows:
BoDe Design GmbH
EGO Eyewear Limited
2021
$’000
1,529
6,976
8,505
2020
$’000
–
–
–
132 — Annual Report & Accounts 2021
28. Deferred tax
On 1 January 2021
Acquired on acquisition of subsidiary
Credit/(charge) for the year:
Derecognition of losses brought forward
Losses in the year
Temporary timing differences
Deferred tax credit to profit and loss
Deferred tax credit to share option reserve
Exchange adjustment
On 31 December 2021
On 1 January 2020
Acquired on acquisition of subsidiary
Credit/(charge) for the year:
Losses in the year
Temporary timing differences
Gain on bargain purchase
Other
Deferred tax credit/(charge) to profit and loss
Deferred tax charge to share option reserve
Exchange adjustment
On 31 December 2020
The deferred tax balances consist of the tax effect of timing differences in respect of:
Unused trade losses
Right of return liability
Lease liability
Other short-term differences
Total deferred tax asset
Deferred
tax asset
$’000
12,771
–
(422)
1,012
(186)
404
87
(722)
12,540
Deferred
tax asset
Restated
$’000
1,221
8,952
3,043
(551)
–
(3)
2,489
(167)
276
12,771
Deferred
tax liability
$’000
(24,678)
(2,423)
–
–
5,124
5,124
–
1,460
(20,517)
Deferred
tax liability
Restated
$’000
(2,917)
(21,182)
–
–
(486)
265
(221)
–
Total
$’000
(11,907)
(2,423)
(422)
1,012
4,938
5,528
87
738
(7,977)
Total
Restated
$’000
(1,696)
(12,230)
3,043
(551)
(486)
262
2,268
(167)
(358)
(24,678)
(82)
(11,907)
2021
2020
$’000
4,144
1,178
5,106
2,112
12,540
Restated
$’000
3,448
2,197
6,182
944
12,771
INSPECS Group plc —
133
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Right of use asset
Right of return asset
Intangible assets
Inventory
Property, plant and equipment
Other short-term differences
Total deferred tax liability
2021
2020
$’000
(5,056)
(362)
(11,937)
(1,324)
(1,586)
(252)
(20,517)
Restated
$’000
(6,032)
(508)
(12,991)
(2,438)
(1,882)
(827)
(24,678)
In addition to the deferred tax assets and liabilities recognised, the Group has tax losses that arose in a subsidiary of $1,692,000 (2020:
$1,150,000) that are available indefinitely for offsetting against future taxable profits of the Company in which the losses arose. A deferred
tax asset has not been recognised in respect of these losses as these losses may not be used to offset against taxable profits elsewhere in
the Group and there is no evidence of these losses being utilised by the subsidiary in the future.
If the Group were able to recognise all unrecognised deferred tax assets, the loss would decrease by $332,000 (2020: $219,000).
29. Tax payable
Corporation tax payable
Uncertain tax liabilities
2021
2020
$’000
2,157
623
2,780
Restated
$’000
1,081
2,839
3,920
The Group has identified it is exposed to uncertain tax positions in relation to tax authorities challenging that local subsidiaries are not
being remunerated under historical transfer pricing arrangements or that the Group has created a taxable presence and asset taxing rights
over profits they consider to be allocable in the given territory. The Group considers that it is possible that these uncertain tax positions will
result in a future outflow of funds to one or more local tax authorities and has recognised current tax liabilities for these uncertainties.
As discussed in the 2020 Annual Report, during 2021 a further transfer pricing review was undertaken by external advisors. Following this
review, part of the uncertain tax provision amounting to $2,216,000 has been released, as the possibility of an outflow relating to this
provision is now considered remote.
During 2022 a further review of uncertain tax provisions is being carried out in relation to the remaining balance of $623,000.
Due to the range of potential outcomes that the Directors have identified, these liabilities have been measured using an expected value
methodology. Key assumptions underpinning the expected value calculations are (i) relative probabilities of such tax liabilities crystallising
in one or more of the jurisdictions in which the Group operates, (ii) the tax periods over which tax authorities would seek to challenge the
Group’s transfer pricing or tax domicile arrangements; and (iii) the quantum of interest and penalties that would be applicable in the event
that the Group was found to be liable for tax amounts by one or more tax authorities. If the probability of tax liabilities crystallising is
increased by 5%, the provision against uncertain tax liabilities increases to $740,000. If the probability of tax liabilities crystallising is
decreased by 5%, the provision against uncertain tax liabilities decreases to $506,000.
It is reasonably possible, on the basis of the Directors’ existing knowledge, that different outcomes to the assumptions set out above,
within the next financial year, could require a material adjustment to the carrying amount of the uncertain tax liabilities.
134 — Annual Report & Accounts 2021
30. Derivatives
On 9 February 2017, options over C Ordinary Shares in INSPECS Holdings Limited were issued to private equity investors. These options
were exercisable upon (i) the completion of a relevant exit event, including an initial public offering; and (ii) cumulative returns to the
private equity investors on their B Ordinary Shares being below a minimum return amount prescribed in the option agreement. These
options were considered to meet the definition of a derivative over the Group’s own equity instruments and were recognised as a financial
liability measured at fair value through profit or loss due to the variable number of C Ordinary Shares that could be issued.
As part of the share for share exchange on 10 January 2020, these options were exchanged for options over Ordinary Shares in INSPECS
Group plc, with the corresponding derivative liability held over these options novated to INSPECS Group plc. On 27 February 2020, these
options were exercised with the derivative being revalued at this date to reflect the fair value of options being exercised before the
derivative itself was then utilised. This revaluation gave rise to the $740,000 charge recognised through the Income Statement during the
year ended 31 December 2020.
Movements in the derivative during the current and comparative year are shown below:
Novated to INSPECS Group plc on 10 January 2020
Revaluation of derivative on 27 February 2020
Foreign exchange movement
Derivative utilised on exercise of options
Derivative held as at 31 December 2020 and 2021
$’000
(3,536)
(740)
(176)
4,452
–
31. Related party disclosures
The Group has taken advantage of the exemption, not to disclose related party transactions with wholly owned subsidiaries within the
Group. Below are transactions and balances with related parties that are not owned.
a) Kelso Place LLP
Mr R Totterman is a designated member and controlling owner of Kelso Place LLP. During the year Kelso Place LLP leased the Bath head
office building to INSPECS Limited. As at 31 December 2021, a right-of-use asset with net book value of $319,000 (2020: $127,000) and
lease liability of $320,000 (2020: $124,000) related to this lease, with depreciation of $174,000 (2020: $152,000) and interest of $10,000
(2020: $6,000) charged to the income statement. At the year-end, the Group owed Kelso Place LLP $205,000 (2020: $169,000) in respect of
the above.
b) Thorne Lancaster Parker
Mr C D Kay, a Director of the Company is also a Partner in Thorne Lancaster Parker. During the year the partnership charged INSPECS
Limited $53,000 (2020: $65,000) in respect of professional services provided. On 31 December 2021, INSPECS Limited owed Thorne
Lancaster Parker $nil (2020: $nil) in respect of the above. During the year the partnership charged Norville (20/20) Limited $14,000 (2020:
$7,000) in respect of professional services provided, with $4,000 being owed at the end of the year (2020: $nil). This balance included
within trade payables
c) Farm Street Partners
C M J Hancock is a partner of Farm Street Partners which charged the Group monitoring fees of $nil (2020: $13,000) during the year. No
balance was outstanding at 31 December 2021 (2020: $nil). The charge for 2020 related to fees prior to C M J Hancock becoming a
Director of INSPECS Group plc.
d) BXS Projects Limited
A Farrugia is a Director of BXS Projects Limited which charged the Group $nil (2020: $10,000). No balance was outstanding at 31 December
2021 (2020: $nil). The charge for 2020 related to fees prior to A Farrugia becoming a Director of INSPECS Group plc.
e) Key management personnel
The key management personnel of INSPECS Group plc at 31 December 2021 are R B C Totterman and C D Kay. The total employee
benefits payable in the period were $328,000 (2020: $189,000) and $292,000 (2020: $152,000) respectively. In addition, share-based
payments totalled $287,000 (2020: $159,000) in relation to these individuals.
INSPECS Group plc —
135
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
32. Share-based payments
Certain employees of the Group have been granted options over the shares in INSPECS Group plc. The options are granted with a fixed
exercise price and are exercisable between three and ten years after the date of grant.
The Company recognises a share-based payment expense based on the fair value of the awards granted, and an equivalent credit directly
in equity to the share option reserve. On exercise of the shares by the employees, the Company is charged the intrinsic value of the shares
by INSPECS Group plc and this amount is treated as a reduction of the capital contribution recognised directly in equity. Share options
outstanding at the end of the year have the following expiry date and exercise prices:
Exercise price per
option $
Number of share
options
1.27
2.52
2.87
2.93
4.53
4.87
5.09
4.95
2021
$’000
1,484
–
1,484
412,102
1,923,110
1,460,000
100,000
641,036
90,000
275,000
454,999
2020
$’000
1,133
573
1,706
Grant date
11 October 2019
27 February 2020
22 December 2020
26 February 2021
26 February 2021
21 June 2021
31 August 2021
23 December 2021
Expiry date
1 July 2022
27 February 2025
22 December 2025
26 February 2026
26 February 2026
21 June 2026
31 August 2026
23 December 2026
The option weighted average exercise price is $3.14 per share. Options were valued at the date of grant.
The expense recognised for employee services received during the year is shown in the following table:
Expense arising from equity-settled share-based payment transactions
Taxes charged to the Group in respect of options exercised
Total expenses arising from share-based payment transactions
Movements during the year
The following tables illustrates the number and weighted average exercise price (‘WAEP’) of and movements in share options during the
year:
At 1 January
Granted as part of share for share exchange
Granted during the year
Exercised during the year
Forfeited during the year
As at 31 December
WAEP
At 1 January
Share for share exchange
Granted during the year
Exercised during the year
Forfeited during the year
As at 31 December
136 — Annual Report & Accounts 2021
Number
2021
4,327,307
–
1,561,035
(412,095)
(120,000)
5,356,247
2021
$
2.41
–
4.67
(1.27)
(2.67)
3.14
Number
2020
58,965
8,054,558
3,503,110
(7,275,589)
(13,737)
4,327,307
2020
$
67.46
(66.07)
1.44
(0.39)
(0.03)
2.41
The following table lists the inputs to the models used for the valuation of the options issued during the year.
Options granted
26 February
2021
Options granted
21 June
2021
Options granted
31 August
2021
Options granted
23 December
2021
Number of options in issue as at 31 December 2021
741,036
90,000
275,000
454,999
Dividend yield (%)
Expected volatility
Risk-free interest rate
Exercise price
Ordinary Share price at grant date
Expected life of share options/SARs (years)
Model used
1.0%
28.9%
0.31%
$2.93 and $4.53
$2.93
5 years
1.0%
28.3%
0.41%
$4.87
$4.87
1.0%
28.2%
0.31%
$5.09
$5.09
1.0%
27.6%
0.76%
$4.95
$4.95
5 years
5 years
5 years
Black Scholes option analysis
The determination of the risk-free interest rate has been based on the UK Sovereign Curve for each grant made during 2021.
33. Financial risk management
The financial assets of the Group comprise trade receivables, deposits and other receivables, and cash and cash equivalents which are
categorised as financial assets at amortised cost. The carrying amounts of these financial assets are the amounts shown on the
consolidated statement of financial position or in the corresponding notes to the Financial Statements.
The financial liabilities of the Group comprise trade payables, bank loans, other loans, financial liabilities included in other payables and
accruals, and lease liabilities which are categorised as financial liabilities at amortised cost. The carrying amounts of these financial liabilities
are the amounts shown on the consolidated statement of financial position or in the corresponding notes to Financial Statements.
The fair values of the financial assets and liabilities are included at the amounts at which the instruments could be exchanged in current
transactions between willing parties, other than in forced or liquidation sale transactions. At the end of the reporting period, the carrying
amounts of the financial assets and financial liabilities of the Group approximated to their fair values.
The Group’s principal financial instruments comprise cash and cash equivalents, bank loans and other loans. The main purpose of these
financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade
receivables and trade payables, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are foreign currency risk, credit risk and liquidity risk which arise in the normal
course of its business. The Board of Directors reviews and agrees policies to analyse and formulate measures to manage each of these risks
which are summarised below.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group’s exposure to the risk of changes in market interest rates relate primarily to the Group’s long-term debt
obligations with floating interest rates.
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in interest rates on that proportion of loans and
borrowings affected. With all other variables held constant, the Group’s loss before tax is affected through the impact on floating rate
borrowings as follows, based on the outstanding loan to the bank as at 31 December 2021:
2021
2020
Loan balance
$’000
59,803
56,947
Increase/decrease
in basis points
50 BP
50 BP
Effect
on loss
before tax
$’000
299
285
INSPECS Group plc —
137
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange
rates. The Group’s exposure to the risk of changes in foreign exchange rates relates to both the Group’s operating activities (when revenue
or expense is denominated in a foreign currency) and the Group’s borrowing (both internal and external) when held in a different currency
to the functional currency of the Company in which they are held.
The Group manages its foreign currency risk by selling and buying in the same currencies where possible but does not enter into any
material hedging transactions or derivatives. The ability of the Group to organise its sales and purchases in similar currencies allows a
natural hedge in some circumstances against currency fluctuations.
Exchange adjustments on borrowings has resulted in a a charge to the profit and loss account of $5,418,000 (2020: $382,000). Following
the acquisition of Eschenbach Holdings GmbH in December 2020, INSPECS Limited acquired the shareholder loans of Eschenbach which
are denominated in Euros. The functional currency of INSPECS Limited is GBP, with a loss on foreign exchange on this loan recognised of
$5,580,000 during the year before this loan was converted to equity in December 2021. This is offset by gains on foreign exchange in
relation to intercompany loans denominated in other currencies and external financing giving the total foreign exchange on borrowings of
$5,418,000 for the year.
The following table demonstrates the sensitivity at the end of the reporting period to a reasonable possible change in the United States
Dollar (USD), Euro (EUR) and Macau Pataca (MOP) exchange rates, with all other variables held constant, of the Group’s profit before tax
(due to changes in the fair value of monetary assets and liabilities). These currencies have been selected for sensitivity analysis as they
represent the local currencies covering the majority of the trading locations of the Group, and compared against the Pound Sterling (GBP)
as this is the functional currency of the Group. There is no impact on the Group’s equity except on the retained profits.
2021
If the GBP weakens against the USD
If the GBP strengthens against the USD
If the GBP weakens against the EUR
If the GBP strengthens against the EUR
If the GBP weakens against the MOP
If the GBP strengthens against the MOP
Increase/
(decrease) in
exchange rate
%
Increase/
(decrease) in loss
before tax
$
5
(5)
5
(5)
5
(5)
21,000
(21,000)
(51,000)
51,000
(356,000)
356,000
Credit risk
The Group trades only with parties who have been assessed via a credit check. Receivables balances are monitored on an ongoing basis
and the Group’s history of credit losses of trade receivables is not significant. The credit risk of the Group’s other financial assets arises from
default of the counterparty, with a maximum exposure equal to the carrying amounts of these financial assets.
The Group maintains regular control over its trade receivables and normal terms are between 30 and 60 days across the Group. The
percentage of debtors outside of these terms is shown in the analysis below.
2021
$’000
2020
$’000
21,822
4,225
1,186
2,129
29,362
26%
16,584
3,904
3,330
1,331
25,149
34%
Increase/
(decrease)
$’000
5,238
321
(2,144)
798
4,213
Trade receivables
Current
Past due 1-30 days
Past due 31-60 days
Past due 61+ days
Total
Percentage over terms
138 — Annual Report & Accounts 2021
Raw material costs and inflation
The Group subcontracts with third party suppliers on fixed terms and thus any immediate commodity risk is mitigated in the short term on these
transactions. On the Group’s own manufactured products, raw materials in 2021 accounted for 9% of cost of sales (2020: 32%), with the reduction
in this risk due to the acquisitions made during 2020 and 2021. This risk is further mitigated by the use of different suppliers and the diversification
of production locations across the Group. The risk of inflation may lead to cost increases for goods and services, including shipping costs. The
eyewear market continues to grow and over the long term, the Group can mitigate the loss of any margins through an increase in its selling price.
Cash deposits
The Group invests its excess cash in either weekly or monthly deposits with either HSBC or OCBC. The Group considers these deposits to
carry a very low risk and typically return an interest rate of around 0.5%.
Liquidity risk
For the management of the liquidity risk, the Group monitors and maintains a sufficient level of cash and bank balances deemed adequate
by management, along with utilising an invoice discounting facility, to finance the Group’s operations and mitigate the effects of fluctuation
in cash flows. Management reviews and monitors its working capital requirements regularly. The Group reviews on a monthly basis the cash
generation and the requirement for capital repayments on the bank loan in its detailed working capital model to ensure sufficient liquidity
for operating purposes across the Group. The table below summarises the gross undiscounted cash flows of the Group’s financial liabilities:
Bank overdrafts (including invoice discounting facility)
Interest-bearing loans and borrowings (excluding items below)
Lease liabilities
Other financial liabilities – right of return
Other financial liabilities – contingent and deferred
consideration
Trade and other payables
Capital risk management
The Group’s capital management objectives are:
Less than 1
year
1 to 2 years
$’000
2,433
10,567
3,492
11,110
–
53,317
$’000
–
3,862
2,859
–
2,708
–
2 to 5 years
$’000
Over 5 years
$’000
–
47,768
9,851
–
5,797
–
–
–
6,553
–
–
–
Total
$’000
2,433
62,197
22,755
11,110
8,505
53,317
• to ensure the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
• to provide an adequate return to shareholders by pricing products and services commensurate with the level of risk.
To meet these objectives, the Group reviews the budgets and forecasts on a regular basis to ensure there is sufficient capital to meet the
needs of the Group.
The capital structure of the Group consists of shareholders’ equity as set out in the consolidated statement of changes in equity. All
working capital requirements are financed from existing cash resources and borrowing. The loan covenant ratios achieved by the Group,
and required by the bank, as at the end of each year were as follows:
Leverage
Interest cover
2021
2020
Actual
1.9
12.3
Required
Below 2.0
Above 4.0
Actual
1.6
17.1
Required
Below 2.5
Above 4.0
Political risk
Political uncertainty or instability can lead to reduced customer demand or supply chain issues when impacting a country or countries with
which material trade is completed. The current events impacting Russia and Ukraine are not expected to have a material impact on the
Group, with no sales made to Russia, and sales to Ukraine being not significant to the Group. The impact on supply chains is also not
considered significant, with alternative supply chain routes available where required.
34. Contingent liabilities
The Company’s UK subsidiary Algha Group Limited (registered number 03240950) has taken advantage of the audit exemption under
section 479A of the Companies Act 2006 for the year ended 31 December 2021. Consequently, the Company has provided the statutory
guarantee in relation to the subsidiary’s liabilities. The third-party liabilities of the subsidiary as of 31 December 2021 amounted to $1,000
(2020: $63,000).
INSPECS Group plc —
139
Financial Statements
Notes to the Consolidated Financial Statements continued
for the year ended 31 December 2021
35. Prior year adjustment and purchase price allocation adjustment
Prior year adjustments were required as discussed in note 2. In addition, the balance sheet as at 31 December 2020 has been restated to
include the impact of adjustments to the acquisition balance sheet of Eschenbach Group GmbH, as discussed in note 6. The Group
reconciliation of equity as at 31 December 2020 is shown below:
Eschenbach
acquisition
balance
sheet
adjustment
$’000
31 December
2020
$’000
Adjusted
$’000
Prior year
adjustments
$’000
Note
Restated
31 December
2020
$’000
Note
ASSETS
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use asset
Investment in associate
Deferred tax
Current assets
Inventories
Trade and other receivables
Tax receivable
Cash and cash equivalents
Total assets
EQUITY
Called up share capital
Share premium
Foreign currency translation reserve
Share option reserve
Merger reserve
Retained earnings
Total equity
LIABILITIES
Non-current liabilities
Financial liabilities – borrowings
Deferred tax
Current liabilities
Trade and other payables
Right of return liabilities
Financial liabilities - borrowings
Overdraft
Tax payable
Total liabilities
69,087
56,305
22,460
20,379
57
12,995
181,283
59,294
35,648
1,556
32,672
2,877
A
–
–
–
–
–
2,877
(2,601)
A
–
–
–
129,170
(2,601)
71,964
56,305
22,460
20,379
57
12,995
184,160
56,693
35,648
1,556
32,672
126,569
744
–
–
–
–
(224)
520
(1,198)
5,538
–
(6,254)
(1,914)
310,453
276
310,729
(1,394)
1,384
121,940
(99)
867
7,296
14,429
145,817
70,391
24,694
95,085
42,895
12,824
6,830
2,642
4,360
69,551
164,636
A
–
–
10
–
–
–
10
–
–
–
–
266
A
–
–
–
266
266
276
1,384
121,940
(89)
867
7,296
14,429
145,827
70,391
24,694
95,085
42,895
13,090
6,830
2,642
4,360
69,817
164,902
–
–
–
–
–
–
–
–
(16)
(16)
7
(945)
–
–
(440)
(1,378)
(1,394)
B
B
B
B
B
B
B
B
B
72,708
56,305
22,460
20,379
57
12,771
184,680
55,495
41,186
1,556
26,418
124,655
309,335
1,384
121,940
(89)
867
7,296
14,429
145,827
70,391
24,678
95,069
42,902
12,145
6,830
2,642
3,920
68,439
163,508
Total equity and liabilities
310,453
140 — Annual Report & Accounts 2021
310,729
(1,394)
309,335
A: Eschenbach acquisition balance sheet adjustment
Following the acquisition of Eschenbach Holdings GmbH, the assets and liabilities acquired and the goodwill arising were provisionally
determined for the Financial Statements as of 31 December 2020. During the year, this has been finalised (see note 6) with the impact of
the required adjustment on the balance sheet as at 31 December 2020 shown above. This results in an increase in goodwill of $2,877,000, a
decrease in inventories (following an increase in inventory provisioning) of $2,601,000 and an increase in right of return liabilities of
$266,000 with the movement in foreign exchange rates between the date of acquisition and the year-end resulting in a movement through
the foreign currency translation reserve of $10,000.
B: Prior year adjustments
Refer to note 2.
36. 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.
INSPECS Group plc —
141
Financial Statements
Company Statement of Financial Position
as at 31 December 2021
ASSETS
Non-current assets
Investments
Current assets
Loans to Group undertakings
Total assets
EQUITY
Shareholders’ equity
Called up share capital
Share premium
Foreign currency translation reserve
Share option reserve
Merger reserve
Retained earnings
Total equity
LIABILITIES
Total liabilities
Total equity and liabilities
Notes
2021
$’000
2020
$’000
3
4
5
6
6
6
6
76,762
76,147
115,331
192,093
117,202
193,349
1,389
122,291
(2,295)
2,001
7,296
61,411
192,093
–
192,093
1,384
121,940
(157)
867
7,296
62,019
193,349
–
193,349
The notes on pages 144 to 149 form part of these Financial Statements. Registered Company number: 11963910.
As permitted by section 408(3) of the Companies Act 2006, a separate Income Statement dealing with the results of the Parent Company,
has not been presented. The Parent Company loss for the period ended 31 December 2021 was $1,043,000 (2020: $2,438,000 loss).
The Financial Statements were approved by the Board of Directors on 29 June 2022 and were signed on its behalf by:
R B C Totterman
Director
C D Kay
Director
142 — Annual Report & Accounts 2021
Company Statement of Changes in Equity
for the year ended 31 December 2021
Called up
share
capital
$’000
Share
premium
$’000
Foreign
currency
translation
reserve
$’000
Share
option
reserve
$’000
Notes
Balance at 1 January 2020
Changes in equity
Loss for the year
Other comprehensive loss
Total comprehensive loss
Issue of share capital
Exercise of share options
Share-based payments
Share for share exchange and creation
of merger reserve
Capital reduction
Balance at 31 December 2020
Changes in equity
Loss for the year
Other comprehensive loss
Total comprehensive loss
Share-based payments
Exercise of share options
6
5,6
5,6
6
5,6
6
6
6
5,6
–
–
–
–
–
–
–
–
603
119,215
99
–
682
–
2,725
–
–
–
–
–
(157)
(157)
–
–
–
–
–
1,384
121,940
(157)
–
(2,138)
(2,138)
–
–
–
–
5
–
–
–
–
351
–
–
1,484
(350)
(3,140)
2,973
–
–
–
–
–
1,133
2,874
–
867
–
–
–
Retained
earnings
$’000
–
(2,438)
–
(2,438)
Merger
reserve
$’000
–
–
–
–
Total
equity
$’000
–
(2,438)
(157)
(2,595)
–
(22)
119,796
–
–
2,657
1,133
68,802
72,358
–
–
61,484
(61,484)
–
62,019
7,296
193,349
(1,043)
–
(1,043)
–
435
–
–
–
–
–
(1,043)
(2,138)
(3,181)
1,484
441
Balance at 31 December 2021
1,389
122,291
(2,295)
2,001
61,411
7,296
192,093
The notes on pages 144 to 149 form part of these Financial Statements.
INSPECS Group plc —
143
Financial Statements
Notes to the Company Financial Statements
for the year ended 31 December 2021
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.
The principal activity of the Company was that of a holding Company.
2. Accounting policies
These Financial Statements were prepared in accordance with the Companies Act 2006 as applicable to Financial Reporting Standard 101
Reduced Disclosure Framework (‘FRS 101’), FRS 101 and applicable accounting standards. The Financial Statements have been prepared on
the historical cost basis, and as a going concern. Historical cost is generally based on the fair value of the consideration given in exchange
for the assets.
As permitted by section 408(3) of the Companies Act 2006, no separate profit and loss account has been presented for the Company. As
permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available in the preparation of the Financial
Statements in relation to the presentation of a statement of cash flows.
Investments
Investments held as fixed assets comprise the Company’s investment in subsidiaries and are shown at fair value on the date of acquisition,
less any provision for impairment. In the case of the share for share exchange which occurred in the prior period, the number and
aggregate value of the shares issued was specified in the share for share exchange agreement.
An annual review of investments is performed for indicators of impairment. If indicators of impairment are identified investments are tested
for impairment to ensure that the carrying value of the investment is supported by their recoverable amount.
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.
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 subsequent measurement
Financial assets are classified, at initial recognition and subsequently measured at amortised cost, and are subject to impairment. Gains
and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Company’s financial assets at amortised cost include loans to Group undertakings.
The Company 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 is primarily derecognised when the rights to receive cash flows from the asset have expired.
Impairment of financial assets
The Company 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.
The Company considers a financial asset in default when internal or external information indicates that the Company is unlikely to receive
the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. A financial asset is
written off when there is no reasonable expectation of recovering the contractual cash flows.
144 — Annual Report & Accounts 2021
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 consolidated accounts. That cost is recognised in employee benefits
expense in the Company within which the relevant employee is employed, 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 Company’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.
Details of the Group’s share option scheme are provided in note 32 of the Consolidated Financial Statements.
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.
Foreign currencies
These Financial Statements are presented in USD, which is the Company’s presentational currency. The functional currency of the Company
is GBP. 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 resulting exchange differences are recognised in other comprehensive income and
accumulated in the foreign currency translation reserve.
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:
Expected credit loss
In accordance with IFRS 9, the expected credit loss model is used to determine an expectation of an economic loss of an asset. Application
of this model to the loans to Group undertakings within the Company requires estimation by management. An expected credit loss
calculation has been performed by management, which has deemed that the required provision is considered immaterial and no provision
has been recognised against the Group undertakings shown in note 4 due to the recovery risk being deemed immaterial.
Judgements made by management which are considered to have a material impact on the Financial Statements are as follows:
Carrying value of investments
An annual review of investments is performed to identify any indicators of impairment which, if found, would result in an impairment review being
performed. Judgement is required by management in performing this review, including in the identification and interpretation of any indicators.
INSPECS Group plc —
145
Financial Statements
Notes to the Company Financial Statements continued
for the year ended 31 December 2021
3. Investments
COST AND NET BOOK VALUE
At 1 January 2021
Additions for share-based payments in subsidiaries
Foreign exchange
At 31 December 2021
Shares in
subsidiaries
$’000
76,147
1,484
(869)
76,762
Investments held are shown below. Investments held directly by the Company are marked *. The remaining investments are held indirectly
by the Company.
Subsidiaries
Registered office
INSPECS Holdings Limited*
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
Nature of
business
Holding
Company
Class of
shares
% holding
Ordinary
100.00
INSPECS Limited8
INSPECS USA LC8
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
Eyewear trading
Ordinary
18401 US Highway 19N, Clearwater, Florida 33764, USA
Eyewear trading
Ordinary
Algha Group Limited8
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
Eyewear
manufacturing
Ordinary
INSPECS Scandinavia AB8
184 40 Akersberga, Stockholm, Sweden
Eyewear trading
Ordinary
Maronglow Limited1
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
UK Optical Limited8
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
American Optical UK Limited8 7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
Dormant
Ordinary
Dormant
Ordinary
Dormant
Ordinary
Twenty20 Limited2
Elian Fiduciary Services (Cayman) Limited, 89 Nexus Way,
Camana Bay, Grand Cayman KY1-9007, Cayman Islands
Bandoma Limited3
Suite 6, Watergardens 4, Gibraltar
Ice Foster Limited3
Killine Group Limited4
Killine Optical Limited3
Nemours Chambers, Road Town, Tortola,
British Virgin Islands
Elian Fiduciary Services (Cayman) Limited, 89 Nexus Way,
Camana Bay, Grand Cayman KY1-9007, Cayman Islands
Alameda Dr. Carlos D’Assumpcao, nos 335–341, Edificio
Centro Hotline, 21 andar A, em Macau
Holding
Company
Holding
Company
Holding
Company
Holding
Company
Ordinary
Ordinary
100.00
Ordinary
100.00
Ordinary
100.00
Eyewear trading
Ordinary
100.00
Neo Optical Company
Limited5
Neo Town Industrial Zone, Yen Dung District,
Bac Giang Province, Vietnam
Eyewear
manufacturing
Ordinary
100.00
Rua Soares de Passos, 10A/10B
Eyewear design
Ordinary
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
On Sight Services-Sociedade
Unipessoa, Lda3
O.W. Ventures Limited3
Unit 305–7, 3/F, Laford Centre, 838 Lai Chi Kok Road,
Cheung Sha Wan, Kowloon, Hong Kong
Zhongshan Torkai Optical
Co Limited6
Shagou Industrial Park, Banfu County, Zhongshan,
Guangdong, China
Neway (Macao Commercial
Offshore) Limited9
Alameda Dr. Carlos D’Assumpcao, nos 335–341 Edificio
Hot line, 21 andar D, em Macau
Kudos S.R.L.1
Via Noai 5, Domeggi Di Cadore, CAP 32040, Italy
Corporate
management
Eyewear
manufacturing
Ordinary
100.00
Ordinary
100.00
Eyewear trading
Ordinary
100.00
Eyewear
manufacture
Ordinary
100.00
Eyewear trading
Ordinary
100.00
Primoptic Limited7
Yardine Limited3
Alameda Dr. Carlos D’Assumpcao, nos 335–341,
Edificio Centro hotline, 21 andar A, em Macau
Nemours Chambers Limited, Road Town, Tortola,
British Virgin Islands
Holding
Company
Ordinary
100.00
INSPECS Asia Limited8
10F Sing Ho Finance Building, 166–168 Gloucester
Road, Hong Kong
Quality Control
Services
Ordinary
100.00
Duval Company Group
Limited3
Nemours Chambers, Road Town, Tortola,
British Virgin Islands
Holding
Company
Ordinary
100.00
146 — Annual Report & Accounts 2021
Subsidiaries
Registered office
Norville (20/20) Limited2
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
Nature of
business
Class of
shares
% holding
Lens
manufacturer
Ordinary
100.00
BoDe Design GmbH2
Hofweg 20, 97737 Gemunder am Main, Germany
Eyeware trading
Ordinary
EGO Eyewear Limited2
7–10 Kelso Place, Bath, Somerset, BA1 3AU, UK
Eyeware trading
Ordinary
EGOptiska AB16
Johannesgränd 1, Stockholm, Sweden
Eyeware trading
Ordinary
EGOptiska International AB16
Johannesgränd 1, Stockholm, Sweden
Eyeware trading
Ordinary
EGO Eyewear (HK) Limited16
Yau Tsim Mong, Hong Kong
Eyeware trading
Ordinary
EGO Eyewear AB16
Johannesgränd 1, Stockholm, Sweden
Eyeware trading
Ordinary
Greights AB16
Johannesgränd 1, Stockholm, Sweden
Eyeware trading
Ordinary
Eschenbach Holding GmbH2 Fürther Straße 252, 90429, Nuremberg, Germany
Eschenbach Beteiligungs
GmbH10
Fürther Straße 252, 90429, Nuremberg, Germany
Holding
Company
Holding
Company
Ordinary
Ordinary
100.00
Eschenbach Optik GmbH14
Althardstraße 70, Regensdorf, Switzerland
Eyeware trading
Ordinary
Eschenbach Optik B.V.14
Osloweg 134, Groningen, Netherlands
Eyeware trading
Ordinary
Eschenbach Optik spol s. r.o.14 K Fialce 35, Prague, Czech Republic
Eschenbach Optik sp. z o.o.14 ul. Biedronki 60, Warsaw, Poland
Eschenbach Optik GmbH14
Brunnenfeldstraße 14, Linz, Austria
Eyeware trading
Ordinary
Eyeware trading
Ordinary
Eyeware trading
Ordinary
Eschenbach Optik s.a.r.l14
64 rue Claude Chappe, Plaisir, France
Eyeware trading
Ordinary
Eschenbach Optik s.r.l.14
Via C.Colombo 10, Torino, Italy
Eyeware trading
Ordinary
Eschenbach Optik of
America, Inc.14
22 Shelter Rock Lange, Danbury, USA
Eyeware trading
Ordinary
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Eschenbach Optik of Japan
Co.Ltd.14
2-15-4 Kanda-Tsukasamachi, Chiyoda-ku,
Tokyo, Japan
Eyeware trading
Ordinary
100.00
Eschenbach Optik S.L.14
Consell de Cent 106-108, Barcelona, Spain
Eyeware trading
Ordinary
Eschenbach Optik GmbH11
Fürther Straße 252, 90429, Nuremberg, Germany
Eyeware trading
Ordinary
100.00
100.00
100.00
100.00
100.00
100.00
50.00
100.00
100.00
100.00
100.00
Block A, Tian An Cyber Times Che Gong Miao, Futian
District, Shenzhen, China
Eyeware trading
Ordinary
Fürther Straße 252, 90429, Nuremberg, Germany
Eyeware trading
Ordinary
100.00
Fürther Straße 252, 90429, Nuremberg, Germany
Eyeware trading
Ordinary
100.00
Eschenbach Optik
(Shenzhen)14
Josef Eschenbach
GmbH’+ Co.14
Josef Eschenbach
Verwaltung GmbH15
Eschenbach International
GmbH11
Fürther Straße 252, 90429, Nuremberg, Germany
Eschenbach UK Holdings Ltd12 27 Blackberry Lane, Halesowen¸ B63 4NX, UK
Holding
Company
Holding
Company
Ordinary
100.00
Ordinary
100.00
International Eyewear Ltd13
27 Blackberry Lane, Halesowen¸ B63 4NX, UK
Eyeware trading
Ordinary
TURA, Inc.12
123 Girton Drive, Muncy, USA
Eschenbach Optik A/S11
Boskærvej 18, Vejle, Denmark
Ruain Zuoyou Glasses Co Ltd17 Building 35, Shidai industrial zone, Mayu, Ruian,
Zhejiang, P.R.China
Eyeware trading
Ordinary
Eyeware trading
Ordinary
Eyeware trading
Ordinary
100.00
100.00
100.00
25.00
1 The shares are held by Algha Group Limited
10 The shares are held by Eschenbach Holding GmbH
2 The shares are held by INSPECS Limited
11 The shares are held by Eschenbach Beteiligungs GmbH
3 The shares are held by Killine Group Limited
12 The shares are held by Eschenbach International GmbH
4 The shares are held by Twenty20 Limited
13 The shares are held by Eschenbach UK Holdings Ltd
5 The shares are held by Killine Optical Limited
14 The shares are held by Eschenbach Optik GmbH
6 The shares are held by Bandoma Limited
15 The shares are held by Josef Eschenbach GmbH
7 The shares are held by Duval Company Group Limited
16 The shares are held by EGO Eyewear Limited
8 The shares are held by INSPECS Holdings Limited
17 The shares are held by Zhongshan Torkai Optical Co Limited
9 The shares are held by Yardine Limited
18 The shares are held by EGO Eyewear AB
INSPECS Group plc —
147
Financial Statements
Notes to the Company Financial Statements continued
for the year ended 31 December 2021
4. Loans to Group undertakings
At 31 December 2020
Interest during the year
Foreign exchange
At 31 December 2021
Loans to
Group
undertakings
$’000
117,202
(906)
(965)
115,331
Amounts owed by Group undertakings are unsecured, with no interest charged and have no set repayment date. Due to the amounts
having no set repayment date they have been classified as current assets.
5. Called up share capital
Authorised and issued share capital:
Number:
101,671,525 (2020: 101,290,898)
Class:
Ordinary
Nominal value
£0.01
2021
$’000
1,389
1,389
2020
$’000
1,384
1,384
Each Ordinary Share carries the right to participate in distributions, as respects dividends and as respects capital on winding up.
A further 380,627 shares have been created during the year as a result of the exercise of share options.
6. Reserves
Share premium
This reserve records the amount above the nominal value of the sums received for shares issued, less transaction costs.
At 1 January
Issue of share capital
Exercise of share options
At 31 December
2021
$’000
121,940
–
351
122,291
2020
$’000
–
119,215
2,725
121,940
Foreign currency translation reserve
With regards to the foreign currency translation reserve in the Company, this is in relation to translating the Parent Company’s accounts
into the presentation currency of USD.
2021
$’000
(157)
(2,138)
(2,295)
2020
$’000
–
(157)
(157)
At 1 January
Other comprehensive loss
At 31 December
148 — Annual Report & Accounts 2021
Share option reserve
The share option reserve is used to recognise the value of equity-settled share-based payments provided to employees, including key
management personnel, as part of their remuneration.
At 1 January
Share for share exchange
Share-based payment charge
Exercise of share options
Deferred tax on share options
At 31 December
2021
$’000
867
–
1,484
(437)
87
2,001
2020
$’000
–
2,874
1,133
(2,973)
(167)
867
The share-based payment charge for the year is recognised against the reserve as per IFRS 2 Share-Based Payments.
Share options exercised in the period include both cash settled (resulting in the issue of 274,730 shares) and net settled (resulting in the
issue of 105,897 shares). The cash settled share options resulted in an increase in share capital of $4,000 and share premium of $351,000.
As options have been exercised during the year, the reserve relating to these options has been released to retained earnings, with a further
$87,000 (2020: $167,000) released against the deferred tax asset held in relation to the options exercised.
Merger reserve
This reserve arose on the share for share exchange between INSPECS Holdings Limited and INSPECS Group plc on 10 January 2020.
Issue of share capital
Share for share exchange and merger reserve
Capital reduction
At 31 December
2021
$’000
7,296
–
–
–
7,296
2020
$’000
–
(22)
68,802
(61,484)
7,296
7. Contingent liabilities
The Company’s UK subsidiary Algha Group Limited (registered number 03240950) has taken advantage of the audit exemption under
section 479A of the Companies Act 2006 for the year ended 31 December 2021. Consequently, the Company has provided the statutory
guarantee in relation to the subsidiary’s liabilities. The third-party liabilities of the subsidiary as of 31 December 2021 amounted to $1,000
(2020: $63,000).
8. 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.
INSPECS Group plc —
149
Financial Statements
Appendix 1
Reconciliation of underlying EBITDA (unaudited)
for the year ended 31 December 2021
Revenue
Gross profit
Operating and distribution expenses, net of other operating income
Operating profit/(loss)
Movement in fair value on derivative
Operating profit/(loss) after movement in fair value on derivative
Add back: Amortisation and impairment on intangible assets
Add back: Depreciation
EBITDA
Add back: Share-based payment expense
Add back: Restructuring costs
Add back: Foreign exchange on funding for acquisitions
Add back: Post-acquisition insurance costs
Add back: Movement in fair value on derivative
Underlying EBITDA
Operating profit/(loss)
Non-underlying costs
Negative goodwill on bargain purchase
Movement in fair value on derivative
Exchange adjustment on borrowings
Less: Net finance costs
Add: Share of (loss)/profit of associate
Loss before income tax
Tax
Loss for the year
Underlying EBITDA
Add back: Purchase Price Allocation (‘PPA’) release on Eschenbach inventory through cost of sales
Add back: Underlying EBITDA (loss) for acquisitions in the period
Adjusted Underlying EBITDA
150 — Annual Report & Accounts 2021
2021
$’000
246,471
115,771
(114,230)
1,541
–
1,541
11,020
7,430
19,991
1,484
–
–
–
–
21,475
1,541
(2,588)
–
–
(5,418)
(2,657)
(10)
(9,132)
3,697
(5,435)
2021
$’000
21,475
5,991
90
27,556
2020
$’000
47,415
20,522
(23,462)
(2,940)
(740)
(3,680)
1,607
2,299
226
1,706
185
1,085
563
740
4,505
(2,940)
(5,763)
506
(740)
(382)
(1,844)
–
(11,163)
2,250
(8,913)
2020
$’000
4,505
–
1,295
5,800
REGISTRARS
Equiniti,
Aspect House,
Spencer Road,
Lancing BN99 6DA
FOR INVESTOR RELATIONS
ENQUIRIES PLEASE CONTACT:
investor.relations@inspecs.com
FOR ENQUIRIES PLEASE
CONTACT FTI CONSULTING:
Alex Beagley, Harriet Jackson, Alice Newlyn
on 0203 727 1000 or inspecs@fticonsulting.com
Company Information and Advisers
REGISTERED OFFICE
INSPECS Group plc,
7–10 Kelso Place
Upper Bristol Road,
Bath BA1 3AU
NOMINATED ADVISER AND
BROKER TO THE COMPANY
Peel Hunt LLP,
120 London Wall,
London EC2Y 5ET
LEGAL ADVISERS TO
THE COMPANY
Macfarlanes LLP,
20 Cursitor Street,
London EC4 1LT
AUDITORS
Ernst & Young LLP,
The Paragon Counterslip,
Bristol BS1 6BX
Always looking forward
Annual Report & Accounts 2021
Annual Report 2021
inspecs.com/investors/results-and-reports
Registered Office
INSPECS Group plc
7–10 Kelso Place
Upper Bristol Road,
Bath, BA1 3AU
www.INSPECS.com