Eyewear frames designer and distributor Inspecs has successfully raised £23.5m of growth funding after sealing its IPO and starting trading on London's junior AIM market today.
Some £94m has been raised through a placing priced at 195p with £23.5m of new money coming into the coffers of the Bath-based company, which comes to market expecting to pay a dividend that grows in line with earnings, although selling shareholders are also taking £70.5m off the table.
ATTRACTIVE OPTICS
Set to trade under the wonderfully apt ticker ‘SPEC’, Inspecs makes and supplies eyewear frames to global retailers and brands including Superdry (SDRY), Hype, Farah, O’Neill, Radley and Caterpillar.
It is chaired by former Tesco (TSCO) and Vodafone (VOD) chairman Lord Ian MacLaurin and guided by chief executive Robin Totterman (pictured), who has significant skin in the game with a 26.7% (post-float) stake.
Totterman says the IPO ‘marks a truly exciting moment for Inspecs as we embark on the next stage of our growth journey in order to capitalise on the significant market opportunity that exists in the globally expanding eyewear industry’.
EYE-CATCHING STRENGTHS
Inspecs’ competitive strengths include its vertically integrated business model. This makes it one of only a few companies capable of providing a one-stop-shop to global retail chains.
Also giving the optical frames-to-sunglasses seller an edge is a global distribution network built on strong relationships with the likes of Specsavers, Vision Express, Boots and Sam’s Club to name a few.
Mainly making and supplying affordable mid-market and entry-level priced frames, the IPO should help fuel Inspecs’ organic and acquisitive growth ambitions in a fragmented global eyewear market worth over $131bn in 2018.
This industry is forecast to expand at a compound annual growth rate north of 7% from 2019 to 2025 according to research firm Bizwit.
Long-term growth drivers for Inspecs include increased awareness regarding eye examinations, the rising number of ophthalmic disorders driven by ageing populations and the increasing prosperity in emerging markets, which management believes will power sales of fashionable eyewear.
For the 6 months to June 2019, Inspecs reported sales and underlying EBITDA of $30.4m and $6.6m respectively, up from $26.7m and $5m a year earlier. Since 30 June 2019, the company has continued to expand with existing customers and win new ones too.
BUT KEEP AN EYE ON???
However, the admission document does flag some significant risks, including the fact that Inspecs competes globally against other national and international eyewear makers and wholesalers. As such, it could be hit by increased levels of competition from rival manufacturers and wholesalers able to prise away customers with more attractive terms.
Increased use of contact lenses and laser eye surgery are other considerations that risk-averse investors need to weigh.
Inspecs is also dependent on a concentrated customer base and key licensed brands with the top five customers speaking for almost half of revenue in 2018. The top two licensed brands, namely Superdry and O’Neill, accounted for over one third of group revenue.
The loss of either licensed brand would impact its results. Inspecs is a business with international dimensions, which investors who prize geographic diversity should welcome, although it does have manufacturing facilities located in coronavirus hot spots China and Italy, besides London and Vietnam.
