Marks Electrical Group plc

Annual financial results for the year ended 31 March 2025

FY25 performance in line, continued delivery, strategic and operational progress, well positioned for year ahead

Marks Electrical Group plc ("Marks Electrical" or "the Group"), the online electrical retailer, today announces its full year audited results for the 12 months ended 31 March 2025 ("the year" or "FY25").

Financial highlights

·      Record full-year revenue of £117.2m (FY24: £114.3m), with 2.6% year-on-year growth, despite a highly competitive backdrop.

·      Adjusted EBITDA⁽¹⁾ of £4.2m (FY24: £5.0m) as previously guided. Rapid growth in consumer electronics sales negatively impacted margin mix, offset by carefully controlled marketing and overhead costs.

·      Adjusted EPS of 1.54p⁽²⁾ (FY24: 2.45p), statutory loss per share of 1.38p (FY24: 0.41p).

·      Strong closing net cash⁽³⁾ position of £8.8m (FY24: £7.8m). Improvement in working capital and tight control of capital expenditure.

·      Proposed final dividend of 0.66p per share, leading to a total FY25 dividend payout of 0.96p (FY24: 0.96p). The dividend payout reflects the Group's strong, debt-free balance sheet and confidence in its future growth prospects.

Operational highlights

·      Broadly maintained position in Major Domestic Appliances ("MDA") market share in FY25 of 2.7% (FY24: 2.8%)⁽⁴⁾.

·      Strong growth in Consumer Electronics ("CE") market share to 0.7%⁽⁴⁾ in FY25 (FY24: 0.5%).

·      The new enterprise resource planning ("ERP") system Microsoft Dynamics 365 ("D365") is now fully operational across the business, supporting the technological advancement in moving to a cloud-based platform. This will enable the business to drive operational efficiencies.

·      Despite the strategic changes made throughout the year which impacted operations, our dedicated teams remained resilient and maintained an outstanding Trustpilot rating of 4.8, now based on over 100,000 reviews, demonstrating the enduring strengths of our differentiated and popular customer proposition.

Current trading and outlook

·      As announced in our pre close in April 2025, we had a strategic objective of re-focusing on the premium segment to improve unit economics and profitability. Our decision to move away from entry-priced products led to lower revenue during Q1-FY26 but this was expected given the strong growth we experienced in Q1-FY25. As we look ahead to the remainder of FY26, we anticipate improving revenue growth and higher gross margin than prior year, enabling us to reiterate our full year guidance.

Following the recent announcement that Josh Egan, the Group's current CFO, is leaving the business, the Board are pleased to announce that Dipesh Mistry will be appointed as Interim CFO. Dipesh is a qualified accountant and has a strong financial background having previously been a senior manager at Deloitte. He has been with Marks Electrical for the last two years, firstly leading the system implementation of D365, and more recently as Head of Operations. Josh will complete a comprehensive handover during the coming months and as outlined previously, a process to appoint a full time successor is underway, and an announcement will be made in due course.

Mark Smithson, Chief Executive Officer, commented:

"During a challenging year for the Group and in a market where consumers continue to remain price conscious, I am proud of the strategic and operational progress we have made.

Our ERP implementation brought minor disruption to the business during the cutover period, however, the transition has been successful and our teams have quickly embraced this transformational change. This has been a significant, long-term strategic investment for the business, which will allow automation of process improvements to make our operations more efficient at scale, and enable us to deliver growth, profitability and value for all our stakeholders.

As outlined previously, we expected our pivot back to a premium focused operating model to have an impact on the speed of our revenue growth. We initiated this change in late FY25, and the impact of this shift away from entry-priced products has led to lower sales in Q1 against a strong comparative in the prior year, which also impacted operating leverage. However, as we focus on the right product hierarchy and sales channels, we expect this to have longer-term benefits on unit economics, and as comparables ease in later quarters we expect a return to revenue growth during FY26.

Over the past couple of years we have invested in our operations to position Marks Electrical for long-term success. At the same time, we have continued to deliver profitable market share growth, strong cash flow generation and consistent returns in the form of dividends to shareholders thanks to our ability to allocate capital with discipline. Our relentless approach to providing exceptional customer service continues to be our core focus and we remain committed to becoming the UK's leading premium electrical retailer."

^Notes

^{(1) Adjusted EBITDA is a non-statutory measure defined as earnings before interest, tax, depreciation, and amortisation and adjusted for non-underlying items, share-based payment charges and buying group rebates receivable.}

^{(2) Adjusted EPS is a non-statutory measure of profit after tax, adjusted for non-underlying items (ERP implementation costs), share-based payment charges and buying group rebates receivable, over the total diluted ordinary number of shares in issue.}

^{(3) Net cash represents cash and cash equivalents less financial liabilities (excluding lease liabilities).}

^{(4) Based on the Group's analysis of GfK Market Intelligence sales tracking GB data, Major Domestic Appliances and Consumer Electronics.}

Publication of Annual Report and Accounts

The Annual Report and Accounts for the year ended 31 March 2025, which includes the Group's FY25 audited financial statements, is now available on the Marks Electrical corporate website at https://group.markselectrical.co.uk.

Notice of 2025 Annual General Meeting

Marks Electrical is also pleased to announce that the notice of its 2025 annual general meeting ("AGM") is available to view on the Marks Electrical corporate website at https://group.markselectrical.co.uk. The AGM will take place at 2:00 pm on Thursday, 7 August 2025, at the registered office at 4 Boston Road, Leicester, LE4 1AU.

If you plan to attend the AGM, we would be grateful if you could inform us by emailing the Secretary no later than closed of business on Tuesday, 5 August 2025, at [email protected]. Shareholders are encouraged to vote on the resolutions to be put to the AGM by proxy whether or not they intend to attend and should do so before the deadline of 2:00 pm on Tuesday, 5 August 2025. Details on how to vote at the AGM are set out in the Notice of AGM.

For those shareholders who have elected to receive hardcopies of the Annual Report and Accounts and Notice of AGM, these will be posted to you as soon as practical.

Enquiries:

Marks Electrical Group plc                                                                                              Via DGA Group:

Mark Smithson (CEO)                                                                                                                          Tel: +44 (0)20 7664 5095

Josh Egan (CFO)                                                                                                                 

DGA Group (Financial PR)

Jonathon Brill / James Styles / Nishad Sanzagiri                                                                                Tel: +44 (0)20 7664 5095

[email protected]                                                                                                                                                                                                 

Canaccord Genuity (NOMAD and Broker)

Max Hartley / George Grainger                                                                                                            Tel: +44 (0)20 7886 2500                                                                                      

About Marks Electrical

Marks Electrical is a highly scalable, technology driven e-commerce electrical retailer which sells, delivers, installs and recycles a wide range of household electrical products. The Group was founded in Leicester in 1987 by Mark Smithson and has scaled into a nationwide online retailer with a compelling growth track record, thanks to its vertically integrated, low-cost, high-quality operating model, supported by the ongoing structural shift of consumers to purchase online. The Group operates within the UK Major Domestic Appliances (MDA) and Consumer Electronics (CE) market, estimated to be worth approximately £7 billion.

Primarily through its simple, clear and intuitive website - markselectrical.co.uk - the Group offers over 4,500 products from over 50 leading brands across its main product categories, which include Cooking, Refrigeration, Washers & Dryers, Dishwashers and Audio-Visual. These products are sourced from UK distributors of the brands, with whom the Group maintains strong and direct relationships. Marks Electrical delivers direct to customers in its owned and branded vehicles, operated by the Group's skilled team of delivery drivers, who are also able to offer installation and recycling services.

For further information, visit the Marks Electrical corporate website: https://group.markselectrical.co.uk and its retail website: https://markselectrical.co.uk/.

Group Chief Executive Officer's review

FY25 was a period of significant strategic change for the business:

• We successfully implemented our new business-wide, Enterprise Resource Planning ("ERP") system, D365, which replaced our legacy Everest platform; and

• We exited the Euronics buying group as a full member, and established new trading relationships with over 50 brand partners.

Despite these major structural changes for both the commercial and operational teams, we continued to drive revenue growth, albeit not at the pace we have achieved in prior years. For the full year, we achieved £117.2m revenue, which was up 2.6%. Our cash position improved year-on-year, and we generated an adjusted EBITDA of £4.2m at 3.6% margin, which was lower than we set out to achieve, but positive in light of the significant changes made across the business throughout the year. Whilst we can mark this down as a year of change, we need to harness the enduring benefits that these milestones will bring to the business, and improve both revenue growth and profitability in the years ahead. We anticipate that in the long-term our decision to exit the Euronics buying group will improve gross margin.

Our objective throughout the year was to maintain stability whilst undertaking the significant operational changes of leaving the buying group and implementing the new ERP system, measures that have ensured the business is better positioned for long-term success.

Over the past two years, consumers have been highly price-conscious, which, given our premium focus, continues to have an impact on our average order value, resulting in customer order volumes growing faster than revenue. For the full year, we saw order unit growth of over 8% versus a revenue growth of 2.6%, demonstrating the ongoing consumer preference for more entry-priced products. This impact diluted our margin, when taking into account the relatively fixed cost of delivery.

As we look ahead, our objective will be to pivot back to premium products and enhance the unit economics of each delivery, in order to start improving profitability from current levels, ultimately enabling the Group to deliver long-term value creation and position us as the UK's leading premium electrical retailer. Delivering premium products alongside exceptional customer service is what we do best and is where personally we will refocus our efforts in the year ahead.

Market share - a small share of a big opportunity

We are predominantly focused on the MDA market but have also been rapidly expanding our footprint in the CE market, primarily in the television category.

During the year, the MDA market was up by a mere 1.4% in value terms, with the CE market growing by 1.1%. Both markets saw marked declines in their average unit prices, with volume growth outstripping value growth. During this period, we saw minor reductions in our MDA market share from 2.8% to 2.7% and grew our CE market share from 0.5% to 0.7%.

Whilst our market share growth in MDA has not been as strong as in prior periods, due to the lower average order values and significant strategic change we have been undergoing, we continued to acquire customers and grow the brand awareness of Marks Electrical, a key pillar of our strategy. Furthermore, the excellent growth we saw in CE added additional customers that were either returning to, or experiencing Marks Electrical for the first time.

Our tiny share of the £7bn MDA and CE market, with significant scope for market share gains underpins our strategy for driving brand awareness in the years ahead.

Our strategy for growth

Our strategic approach is very clear - we put the customer at the heart of everything we do and have four key elements to our strategy for growth:

Customer proposition

Our operating model continues to be unique across the MDA sector in that we consistently offer next-day delivery for in-stock items, throughout our wide range of products, to over 90% of the UK population. In addition, our installation service offering provides customers with the ability to add integrated, gas, electric and television installation services to their order, which can be carried out within a rapid time frame.

This proposition centres around the vertical integration of our delivery model, with our own fleet, employed drivers and installers, in-house training academy, and our centralised single-site distribution centre, maximising efficiency and service quality.

During the period, we made further advancements in developing our customer proposition, including:

• Further training in our ME Academy, our leading in-house product installation facility for driver, installer and customer service training;

• Further developed our website to continually improve the customer journey.

Brand awareness

A key to our success is to grow our brand awareness.

Due to our focus on the structural changes of leaving the buying group and implementing the new ERP system, we carried out fewer brand awareness initiatives during the period. This in turn will have impacted our slower than usual revenue growth rate at 2.6%, versus double-digit in the prior years.

The locations in which we carried out smaller scale brand awareness activities saw elevated order growth in key geographies, demonstrating the efficiency and impact of our marketing capabilities. Furthermore, we also spent significant time developing our relationships with our brand partners' marketing teams, in order to offer them innovative opportunities to advertise with us going forward.

Whilst we are proud of the progress we have made, we also recognise that there is significant opportunity for further brand awareness growth, as more people across the UK come into contact with our brand for the first time and this will inevitably drive faster revenue growth.

Operational capacity

Across the four pillars of our strategy, operational capacity is one that was in significant focus in FY24 as we invested materially in our warehouse capabilities and fleet size. In FY25, this activity has been centred around technology and the replacement of our legacy ERP system.

Following our significant expenditure of £5.6m on the project, through FY24 and FY25, we successfully went live in September 2024 and whilst we faced a number of inevitable teething issues, we are proud to report that the move across to the new system was a success and is powering the Company across our business operations.

We see significant scope for further technology enhancements, enabling us to improve our level of automation and sophistication, both improving the customer journey and operational leverage. Already, in just a few months, we have implemented new processes that save valuable time and drive efficiency.

We continue to believe that investing across our business in people, processes and equipment will ensure that we retain talent and provide them with the best tools to provide customers with a market-leading experience.

Financial performance

Our performance in terms of profitability in FY25 was lower due to two major factors:

• Significant growth in CE versus MDA creating a negative margin mix effect; and

• The trade down from consumers, which impacted the business, given the premium weighting of our product offering. This impact has been market driven but has been particularly exacerbated in our business and impacts the distribution cost of delivery.

Despite this, we continued to deliver volume growth in excess of 8%, revenue growth of 2.6%, remained profitable at 3.6% adjusted EBITDA margin and retained a healthy net cash position of £8.8m, with £5.7m of underlying free cash flow.

We maintained our dividend of £1.0m, despite our lower profitability, cementing the confidence we have in the future direction of the business, and also bought back £0.3m shares into an employee benefit trust, to prevent the dilutive impact of future share options.

As we look forward, we aim to pivot the business back towards premium products, improving the Group's underlying unit economics. This will drive margin improvements in the years ahead and be a contributing factor in our strengthening net cash position.

Our Return On Capital Employed("ROCE") remains strong at 16% and we believe this combination of profitable market share growth, high return on capital and dividend income, with a disciplined capital allocation policy, provides a compelling proposition to drive attractive long-term shareholder returns and despite lower profitability in the current year, we are focused on driving improvements in FY26 and beyond. 

Outlook - focused on delivering profitable market share growth

Whilst FY25 was a year of strategic investment and change, with multiple significant operational developments impacting performance, we are still growing volume and revenue, gaining market share, and continue to generate material cash to support further growth and returns to shareholders. This is all being achieved whilst providing excellent customer service against a highly competitive back-drop.

Looking beyond FY25, we will also harness our disciplined approach to cost control to best manage the significant increases brought about by the more recently announced rises to employer National Insurance and the National Minimum Wage, following the UK Government's Autumn Budget. We estimate the changes to cost the business in the region of £0.75m per annum, and will be taking action where possible to mitigate this impact.

As momentum continues to develop and our brand awareness increases, our focus on operational excellence supported by technology and cash flow generation provides us with a robust platform to generate continued profitable market share growth and become the UK's leading premium electrical retailer.

Mark Smithson

Chief Executive Officer

Financial review

During the year, the Group made significant strategic progress, with both the exit from Euronics buying group and the implementation and cut over to D365 being major strategic milestones. Whilst these developments are critical for the long-term success of the business, the sales growth was impacted by the focus that the team had to apply to these projects.

Volume growth was strong during the year, with MDA volume growth in excess of 5% and CE volume growth in excess of 50%. With revenue growth of 2.6%, there was a material decline in average order value of 7.9% with market share in MDA remaining broadly flat and growing by 20bps in CE.

The growth we experienced in CE impacted the margin mix, as CE typically trades at a lower gross margin than MDA. This impact has led to a decline in gross profit margin year on year from 25.4% to 24.4%. With this decline occurring, we have sought to mitigate the impact where possible by maintaining a tight control on costs across the business throughout the year, but have been additionally challenged by the drop in average order value impacting the efficiency of distribution costs.

Throughout the year, we have also ensured that cash flow is managed very closely to maximise the cash conversion opportunity, despite lower profitability. The tight control on working capital, combined with lower capex has allowed us to drive a strong underlying free cash flow which in-part has been invested in our system replacement, and has allowed us to increase our closing net cash position by £1.0m year-on-year, to £8.8m. At the end of the year, our net asset poistion was £11.3m.

The Group's statutory revenue for the year was £117.2m, up 2.6% from £114.3m in 2024. Gross profit for the year was £28.6m, down 1.4% from £29.0m in 2024, with a gross margin of 24.4%, down 100 bps from 2024. The key driver of the fall in gross margin was a mix shift in favour of CE, which typically trades at a lower margin than MDA.

Statutory operating loss was £1.7m, down from £0.5m operating profit in 2024. The primary reason for the decrease in operating profit was due to the lower trading profitability as well as the impact of the cost incurred to replace our legacy enterprise resourcing planning system with D365 and the associated fees incurred.

Statutory loss before tax was £1.7m driven by the exceptional costs referenced above, as well as the weaker trading profitability.

Revenue and gross product margin

The Group continued to grow in 2025 reaching a new high of £117.2m representing a growth rate of 2.6% against 2024 (2024: £114.3m). This result was achieved against a MDA market which was up a moderate 1.4% during the period and a CE market that was up by 1.1%.

The continuation of growing brand awareness and increasing order volumes demonstrates the sustainability of the strategic approach to customer service being the key differentiator to achieving our growth ambitions.

Growth in the first half of the year (April to September) was strong at 9.3%, with the third quarter (October to December) being a weak period for the business, largely impacted by our change to our new ERP, which required us to reduce the number of delivery days during cut-over, and our strategic bet on CE growth in the peak trading period not playing out as we had anticipated. Our fourth quarter (January to March) bounced back to growth of 2.8%, as the system was more settled and we rotated our stock position back into our core premium MDA focus areas.

During the year, we saw a decline in our gross product margin to 24.4% (2024: 25.4%) as a result of a higher CE contribution in the gross margin mix, which typically trades at a lower margin than MDA.

Distribution costs

During the year we saw a stabilisation in our distribution costs following a sharp increase in the prior year. Distribution costs for the year were up 3.6% against a revenue increase of 2.6%. However, despite this 10bps increase in distribution costs as a percentage of sales, the cost per delivery improved as delivery volumes were 8.8% higher in the year, leading to a reduction in delivery cost per unit of 3.5%, which was a marked improvement on the prior year.

Advertising and marketing costs

Total advertising costs for the year were £5.8m, in line with the prior year (2024: £5.8m) and advertising as a percentage of revenue was controlled at 5.0% (2024: 5.0%).

The Group focuses on both online marketing and offline brand building activities, both with equal importance, to drive brand awareness and ultimately lead to conversion.

Online marketing spend is dedicated to search engine optimisation, pay-per-click activities, affiliate programmes and marketplace listing fees. We made significant strides during the year in optimising our digital spend whilst also benefiting from improvement in our organic rankings.

Our coverage across radio and television was lower during 2025 as we focused activities on out-of-home brand building in strategic geographic locations. This activity was across a range of media outlets including digital display screens, transportation and fixed locations.

Other operating expenses

Given the impact of lower product margin and higher distribution costs, it was imperative that other operating expenses were tightly controlled. Our outturn in the second half of the year fell short of our expectations and our overhead base was capable of sustaining higher sales levels. The impact of this was that overheads increased from 6.0% of sales in the prior year to 6.3% of sales in 2025.

This modest increase was partly driven by some one-off benefits in the overhead base in the prior year, however operational efficiency remains a key priority for us to drive operating leverage as sales growth improves.

Adjusted EBITDA

The Group achieved adjusted EBITDA in the year of £4.2m (2024: £5.0m). Margin decreased by 80bps to 3.6% (2024:4.4%) primarily due to gross product margin declining as a result of the higher CE sales mix, which typically trades at lower margin than MDA.

Statutory (loss)/profit after tax

During the year, statutory loss after tax was (£1.4)m (2024: profit £0.4m). The decrease year-on-year was due to the lower trading profitability.

Share-based payments

The Group issued further awards under its long-term incentive plan("LTIP") during the year to senior and junior management. In addition, as the Initial Public Offering ("IPO") Market Value Option ("MVO") option were underwater, the Board decided in its discretion to make a smaller award to key management team members that had participated in the IPO MVO option and had made a significant contribution to the strategic growth of the business in the last three years. This, combined with the LTIP plan charges resulted in a charge of £0.7m (2024: £0.4m). This charge and related professional fees are removed from adjusted financial performance measures.

Depreciation and amortisation

Depreciation and amortisation increased by £0.3m to £2.0m during the year (2024: £1.7m), primarily due to the addition of various warehouse equipment, vehicles leases, and a renewed property lease.

Taxation

The underlying tax charge for 2025 is £0.5m with an effective underlying tax rate of 38.5%, 13.5% higher than the statutory corporation tax rate. The two drivers of this difference relate to timing differences between capital allowances and depreciation, and LTIP charges that are considered out of the money and therefore treated as non-deductible for tax purposes.

Earnings per share

Basic statutory earnings per share ("EPS"), which is calculated for both the current and comparative year based upon the weighted average number of shares in the year, is a loss of (1.38)p (2024: earnings 0.41p).

Adjusted EPS is 1.54p per share (2024: 2.45p per share), with the material reduction year-on-year being driven by lower gross product margin. The table below shows the reconciliation between statutory and adjusted earnings per share. See Note 3 to the financial statements for further details.

Cash flow and statement of financial position

During the year, the Group achieved an adjusted cash flow from operating activities of £6.7m (2024: £4.5m) with an adjusted operating cash flow for conversion of £5.6m (2024: £3.6m) at 133% (2024: 71%) and underlying free cash flow of £5.7m (2024: £0.9m), resulting in a closing net cash position of £8.8m (2024: £7.8m).

The Group invested £0.4m in its warehouse equipment and vehicles, which was materially lower than the prior year (2024: £1.0m) given the significant capital investments previously made.

Investments were made into the fleet during the year, with the addition of 12 new vehicles purchased using finance lease agreements, which are recorded in right of use assets.

A further significant cash outflow during the year was for the development and implementation of the Group's new ERP software, D365, where £2.9m has been spent in FY25, in addition to the £2.7m incurred in FY24. The project is now complete, and no further expenses are expected in FY26.

During the year, the Group saw a working capital inflow of £2.5m (2024: £(0.5)m outflow), with higher stock levels offset by trade creditors and an overall reduction in receivables due to restructuring the annual rebate cash flows with suppliers. The exceptional working capital adjustments relate to the timing impact of payments to the Group's ERP implementation provider.

The Group finished the year in a net cash position of £8.8m (2024: £7.8m) and during the year, additionally secured a committed revolving credit facility and overdraft with Lloyds Banking Group of £5.0m, which was undrawn at the period end.

Events after the reporting period

There have been no material events to report after the end of the reporting period.

Current trading and outlook

Our strategic objective of re-focusing on the premium segment to improve unit economics and profitability is underway. This decision to move away from entry-priced products is expected to lead to lower revenue during Q1-FY26 given the strong growth we experienced in Q1-FY25, however, as we look ahead to the remainder of FY26, we anticipate improving revenue growth and higher gross margin than prior year. We continue to remain confident that our fundamental strategy of profitable market share gains and excellent customer service will help us in delivering further growth and shareholder value.

Dividend Declaration

We delivered an adjusted EPS of 1.54p during the year and are recommending a final dividend of 0.66p per share, whilst this represents a higher payout ratio than our stated 20% objective, we are confident in the future prospects of the Group and our current net cash position. The final dividend will be paid (subject to shareholder approval at the AGM) on 7 August 2025 to shareholders who are on the register at the close of business on 11 July 2025, and shares will be marked ex-dividend on 10 July 2025. For further information on dividends, see Note 6.

Josh Egan

Chief Financial Officer

Consolidated Statement of comprehensive income

Year ended 31 March 2025

 
All the results arise from continuing operations.

Consolidated Statement of financial position

At 31 March 2025

Year ended 31 March 2025

All the results arise from continuing operations.

Consolidated Cash flow

Year ended 31 March 2025

Notes to the financial statements

Year ended 31 March 2025

1       General Information

The financial statements of Marks Electrical Group plc ("Company") for the year ended 31 March 2025 ("FY25") were authorised for issue by the Board of Directors on 24 June 2025 and signed on its behalf by Josh Egan.

The Company is a public limited company, limited by shares, incorporated in the United Kingdom under the Companies Act 2006 (registration number 13509635). The Company is domiciled in the United Kingdom and its registered address is 4 Boston Road, Leicester, LE4 1AU, England. The Company's ordinary shares are listed on the AIM market, of the London Stock Exchange. The principal activity of the Company and its subsidiaries ("Group") throughout the period is the supply of domestic electrical appliances and consumer electronics in the United Kingdom.

2       Accounting policies

2.1       Basis of preparation

The annual financial information presented in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 March 2025 or 2024 but is based on, and consistent with, that in the audited financial statements for the year ended 31 March 2025, and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Statutory financial statements for the year ended 31 March 2024 have been delivered to the Registrar of Companies, the auditors reported on those financial statements; their report was unmodified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006.

The preliminary financial report for the year ended 31 March 2025 follows the same accounting policies as the 2024 Annual Report. This preliminary financial report does not include all of the notes of the type normally included in an annual financial report and should therefore be read in conjunction with the Marks Electrical Group plc 2024 Annual Report.

This consolidated financial information has been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The financial information has been prepared on a going concern basis under the historical cost convention unless otherwise specified within these accounting policies. The financial information and the notes to the financial information are presented in thousands ('£'000') except where otherwise indicated. The functional and presentation currency of the Group is pound sterling.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated.

2.2       Going concern

The Group has traded positively during the year, delivering sales growth of 2.6%, with a net operating cash flow of £3.8m.

Management have prepared detailed financial projections for the period to 30 June 2026. These projections are based on the Company's detailed annual business plan. Sensitivity analysis has been performed to model the impact of more adverse trends compared to those included in the financial projections in order to estimate the impact of severe but plausible downside risks.

The key sensitivity assumptions applied include:

·      a material slow-down in ecommerce sales; and

·      a substantial decline in gross margin.

Mitigating actions available to the Company were applied and the Board challenged the assumptions used.

The Board of Directors has completed a rigorous going concern assessment and taken the following actions to test or enhance the robustness of the Company's liquidity levels for the period to 30 June 2026. As part of its assessment, the Board has considered:

·      The cash flow forecasts and the revenue projections for the Company;

·      Reasonably possible changes in trading performance, including a severe yet plausible downside scenario;

·      The Company's robust policy towards liquidity and cash flow management;

·      The Company's ability to successfully manage the principal risks outlined in this report;

·      The current cost of living crisis.

·      Inflation pressures facing the Company and its employees.

Under the severe yet plausible scenario the Company remains with the limits of its revolving credit facility, with no mitigating actions required.

After reviewing the forecasts and risk assessments and making other enquiries, the Board has formed the judgement at the time of approving the financial statements that there is a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from the date of approval of these financial statements.

2.3       Consolidation

The Group financial statements include those of the parent Company and its subsidiaries, drawn up to 31 March 2025.

Subsidiaries are entities over which the Company obtains and exercises control through voting rights. Income, expenditure, unrealised gains and intra-Group balances arising from transactions within the Group are eliminated.

At the time of the Company's admission to trading on the AIM market of the London Stock Exchange ("IPO"), the acquisition of the trading subsidiaries was achieved by way of share for share exchange and the difference between the par value of the shares issued and the fair value of the cost of investment was recorded as an addition to the merger reserve. Following impairment, the parent Company statement of financial position shows a merger reserve of £nil and an investment of £43,237,000.

On a Group basis, an accounting policy was adopted based on the predecessor method as this is not a business combination but rather a group re-organisation and thus falls outside the scope of IFRS 3. IFRS does not specifically state how group re-organisations are accounted for. Therefore, in accordance with IAS 8, the Directors have considered the accounting for group re-organisations using merger accounting principles, as set out in FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland. Under this method, the financial statements of the parties to the combination are aggregated and presented as though the combining entities had always been part of the same group. The investment by Marks Electrical Group plc in Marks Electrical Limited was eliminated and the difference between the fair value and nominal value of the shares was adjusted through the merger reserve in the Group statement of financial position.

2.4       Revenue recognition

Product and services revenue

Revenue from contracts with customers is recognised when or as the Group satisfies a performance obligation by transferring a promised good or service to a customer. A good or service is transferred when the customer obtains control of that good or service.

The transfer of electrical appliances and consumer electronics sold by the Group coincides with the delivery of the item to the customer and the customer taking physical possession. The Group principally satisfies its performance obligations at a point in time and recognises revenue on delivery to the customer. This policy therefore applies to all products delivered to customers as well as services provided upon the day of delivery such as delivery fees, waste removal and installation of products.

Revenue is measured at the fair value of the consideration received, excluding sales taxes or duty. Revenue includes a provision for anticipated returns, which is based upon historical returns performance, the provision is held within trade and other receivables.

Amounts received in advance for electrical appliances sales are recorded as contract liabilities within trade and other payables (net customer advances) and revenue is recognised as the performance obligations are met.

Commission revenue

Commission revenue is revenue the Group has achieved through acting as an agent for a third party. The Group currently acts as an agent selling product protection plans for Domestic and General ("D&G").

The Group introduces the customer to D&G for the product protection plan, at which point the Group has met its performance obligation. The product protection plans are rolling agreements whereby the end customer pays a monthly fee for the plan. The Group receives commission for these plans annually in advance.

Revenue from commissions on product protection plans is accounted for based on the fair value of anticipated future commissions receivable throughout the estimated duration of the plan, plus the initial commission received. Recognition of revenue occurs upon the Group fulfilling its responsibilities to the customer at the time of sale. These recognised amounts are determined by factors such as the plan's duration, historical customer attrition rates as provided by D&G, and are held as a contract asset on the balance sheet within trade and other receivables and discounted accordingly.

3.      Earnings per share

3.1    Statutory earnings per share

(a)   Earnings

(b)   Number of shares

(c)   Earnings per share

3.2    Non-Statutory earnings per share

(a)   Earnings

(b)   Number of shares

(c)   Earnings per share

Adjusted earnings per share is a non-statutory measure the Group is using to provide comparability and ease of understanding to the users of the financial statements. This includes adjustments to the earnings and the number of shares.

Adjusted earnings exclude all non-underlying items, expenses relating to share-based payments, plus the add back of the buying group rebate receivable and costs related to the on-going implementation of the new Enterprise Resource Planning ("ERP") system disclosed in Note 5.

The number of ordinary shares during the year ended 31 March 2025 remained constant. At the year end, there was no dilutive effect on the Group's shares.

4.      Operating segments

IFRS 8 'Operating Segments' requires the Group to determine its operating segments based on information which is provided internally. Based on the internal reporting information and management structures within the Group, it has been determined that there is only one operating segment, being the Group, as the information reported includes operating results at a consolidated Group level only. There is also considered to be only one reporting segment, which is the Group, the results of which are shown in the consolidated statement of comprehensive income.

Management has determined that there is one operating and reporting segment based on the reports reviewed by senior management which is the chief operating decision-maker. Senior management is made up of Executive Directors and heads of department. Senior management is responsible for the strategic decision-making of the Group.

5.      Non-underlying costs

ERP system implementation costs

During the year, the Company completed the implementation of a new ERP system. The non-underlying costs in relation to the new ERP system in the year totalled £2,905,000 (2024: £2,727,000) being made up of £2,503,000 (2024: £2,496,000) implementation consultancy fees, £139,000 (2024: £76,000) in wages and salaries, £248,000 (2024: £93,000) in technology costs and £15,000 (2024: £62,000) in other legal and professional fees.

Exceptional emoluments

The Company also incurred exceptional emoluments of £279,000, in relation to one-off awards payable to employees that participated in the market value option at the time of listing.

6.      Dividends

(1) The Board is recommending a final dividend of 0.66p per share (£689,319) that will be subject to final approval by shareholders at the 2025 AGM.

The 0.66p represents a typical two-third share of the annualised amount. The dividend has not been accrued into the consolidated statement of

financial position.

7.      Share capital and reserves

Share Capital

Share capital comprises the nominal value of the Company's shares of £0.01 each.

Share premium

The share premium reserve is the premium paid on the Company's £0.01 ordinary shares. During the year ended 31 March 2022, 4,545,454 shares were issued for £1.10 each, resulting in a net premium of £4,694,000 consisting of £4,954,000 premium paid less £260,000 placing costs. During the year, the Company sold treasury shares at a premium to the purchase price leading to a £3,000 (2024: £121,000) increase in share premium.

Merger reserve

The merger reserve relates to the merger relief under section 612 of the Company's Act, on the acquisition of Marks Electrical Limited, a 100% owned subsidiary of the Group.

On 8 October 2021, Marks Electrical Group plc acquired the 100 ordinary shares (100% of the share capital) in Marks Electrical Limited, in return for the issue of 99,999,999 ordinary shares with a nominal value of £1.00 each, at a price of £1.60 each, bringing the total consideration to £160,000,000. This transaction falls under section 612 of the Companies Act and merger relief was applied. On consolidation under the predecessor method a merger reserve of £100,000,000 was recognised.

Treasury shares

Treasury reserve relates to shares acquired by the Group's employee benefit trust. At the year end the Group held 681,266 (2024: 259,961) treasury shares.

Retained Earnings

Retained earnings are the accumulated profits and losses of the Group net of dividends and other adjustments.