Inspecs earnings hit by euro weakness, factory moving costs

Eyewear and lens designer and manufacturer Inspecs reported first-half revenue of $138.4m on Thursday, up from $125.7m year-on-year, although earnings were hit by currency headwinds and the costs of a factory relocation.

The AIM-traded company said operating profit for the six months ended 30 June totalled $5.8m, up from $2.5m year-on-year, while its gross profit margin expanded to 50.5% from 44.2%.

Underlying EBITDA totalled $15.1m, down from $16.8m, and underlying basic earnings per share slipped to 15 US cents from 17 cents, with underlying diluted earnings down to 14 cents from 16 cents.

The firm swung to a reported profit before tax of $0.8m from a loss of $3.5m a year ago, while its reported loss after tax narrowed to $2.8m from $3.8m.

Inspecs said it had a “strong” balance sheet, with cash at period end on 30 June totalled $30.6m, compared to $33.8m at the same time last year.

Cash generated from operations fell to $10.1m in the period, from $18.8m year-on-year, while net debt excluding leasing narrowed to $26.2m from $32.8m at the end of December.

“The group has made good progress against our strategic objectives during the period, specifically with the ongoing integration of the group's businesses and increasing our distribution reach around the globe,” said chief executive officer Robin Totterman.

“Our European business performed ahead of internal budget for the first half, however, our reported results were affected by a rapid decline in the euro against the US dollar in the second quarter, which is the current reporting currency of the group.

“Given the evolution in group global earnings since our initial public offering, the board will review the reporting currency with our advisors in 2023.”

Totterman said the company’s Norville factory relocation incurred additional downtime and costs in the period, but was now fully operational and increasing production.

“Later this year we expect to start construction of our new factory in Portugal and increase our Vietnam production capacity through expansion, which will satisfy the increased demand from key accounts.

“Production is expected to begin towards the end of 2023, with distribution in the first quarter of 2024.”

Group order books were ahead as of 30 June compared to the same time in 2021, Robin Totterman said, with the company entering the second half of the year in a “good” position.

“Whilst we remain cautious of the overall economic outlook for the UK and European market, we remain focused on executing a number of strategic priorities that will increase production, enabling us to bring innovative new products to market and continue to deliver shareholder value.”

At 1100 BST, shares in Inspecs Group were down 9.17% at 218p.

Reporting by Josh White at Sharecast.com.