Eyewear maker Inspecs said it had made a successful start to the current fiscal year despite swinging to an annual loss and still feeling the impact of the Covid-19 pandemic.

Inspecs, which went public in February 2020, said it had recorded sales of $67 million in the first quarter of 2021 and continued to win new customers. The expansion of its Vietnam plant has been completed, increasing group annual capacity to 8.5 million frames from 5 million, as the company added seven new in-house brands including Botaniq - its first “fully-sustainable” eyewear range.

The factory is currently fulfilling an order for a large US retailer and order books at the time of reporting were higher than at the same time in 2020 on a like-for-like basis.

“Whilst I remain cautious on future months while uncertainty remains surrounding the pandemic and its effects, our trading has been encouraging,” said chief executive Robin Totterman.

The London-listed company reported a pre-tax loss of $11.2m for the 12 months to December 31, compared with a pre-tax profit of $7.3m a year earlier.

Revenue declined to $47.4m from $61.2m, with the second half showing a marked improvement as the company handled pandemic trading conditions better.

Inspecs - FY key figures - $ million
  2020 2019 Change
Revenues 47.4 61.2 -22.5%
Gross Margin 43.3% 44.9% -1.6pp
Operating Margin (6.2%) 13.0% -19.2pp
Underlying EBITDA margin* 12.2% 21.2% -10.0pp
Pre-Tax (11.1) 7.3 -
Net Income (8.9) 6.4 -
* excl. Eschenbach      

Group revenue from the final six months of 2020 was $30.7m including a $7.1m contribution from acquisitions. Revenue growth compared with the first half excluding acquisitions was 41.3%.

Underlying earnings before interest, tax, depreciation and amortization (EBITDA) fell to $5.8m from $13m for the full year, excluding contributions from German eyewear maker Eschenbach, which Inspecs bought in December. The first and second semester respectively contributed $0.7 million and $5.1 million to the annual underlying EBITDA, reflecting the business’ recovery after the Covid-19 outbreak.

UK lens and frame maker Norville, bought last July, had created further vertical integration within the group and access to the lens market, while Eschenbach gave it a “strong platform” to the independent retail market in Europe and the US, the company said.

During the short period of ownership, Eschenbach contributed $2.9m of sales, and a negative $1.3m in EBITDA, for technical accounting reasons.

International Eyewear was being integrated into the UK operation of Inspecs and Norville, with the aim of selling frame and lens packages.

Totterman said the acquisitions had created “a well-balanced vertically integrated business serving both global retail chains and the independent optical market”.

The company said that Norville contributed $4.2m of revenues and a $0.7 million profit in the six months from acquisition and was preparing to move to a new state-of-the art facility in the autumn, which should increase scale and speed and add production efficiencies.

Analysts at house broker Peel Hunt said Eschenbach added a strong presence in the independent sector in Europe and had performed well since acquisition, helped by a lower cost base and improving end market.

Synergies were being delivered as expected, with Inspecs’ brands such as O’Neill and Superdry being added to Eschenbach’s distribution platform and bringing in-house some manufacturing at the German plant.

“Given the lead times, these initiatives are expected to start to make a material impact next year,” the broker said.

It added that the results were a strong performance given the ongoing Covid restrictions, and sales continued to improve at a similar rate, meaning the company was on track compared to the broker’s full-year sales forecast of $241m.

Additional sales should deliver higher margin, helped by lower costs due to lower travel and marketing, Peel Hunt added.

Inspecs said the enlarged group now had a worldwide distribution network serving more than 70,000 retail outlets giving further growth opportunities.

Overall group gross margin decreased to 43.3 percent from 45 percent. Excluding acquisitions, gross margin fell to 43.5 percent from 45 percent.

Totterman said the company maintained positive momentum in 2020 creating a strong platform for growth in 2021. It also assisted Britain’s National Health Service with supplies of protective eyewear while developing the business in “very difficult” Covid-related conditions.

Inspecs, which supplies retailers, global distributors and independent opticians in more than 80 countries, said it had been hit by the first global lockdown as its customers were forced to shutter stores.

This resulted in Inspecs’ factories being unable to deliver pre-ordered stock, as distribution depots were shut around the world, severely impacting the business.

The company said the economic landscape had improved since late spring of 2020, but during the rest of 2020 and 2021 there had been continued restrictions around the globe as governments tried to halt the spread of the coronavirus.

“This has meant that we are still experiencing continued headwinds in our business around the globe. However, the group remains profitable and cash generative in the first six months of 2021 with continuing debt reduction,” the company said.

A “significant number” of new global branded licences were added to the brand portfolio during the period, while the company launched a business-to-business website leading to the registration of 63% of its independent UK customers.