REG - Luceco PLC - 2021 Full Year Results
22/03/2022 07:16
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RNS Number : 5724F Luceco PLC 22 March 2022
22 March 2022
LUCECO PLC
2021 FULL YEAR RESULTS
Profit doubled over two years
Well positioned for continued market outperformance
Luceco plc ("Luceco", or the "Group" or the "Company"), a manufacturer and
distributor of high quality and innovative wiring accessories, LED lighting,
and portable power products, today announces its audited results for the year
ended 31 December 2021 ("2021" or "the year").
Year ended Reported results Adjusted(1) results
31 December (£m)
2021 2020 2019 Change vs 2020 2021 2020 2019 Change vs 2020
(%) (%)
Revenue 228.2 176.2 172.1 29.5% 228.2 176.2 172.1 29.5%
Gross margin % 37.1% 39.8% 37.5% (2.7ppts) 37.1% 39.8% 37.5% (2.7ppts)
Operating profit 35.3 29.6 20.2 19.3% 39.0 30.0 18.0 30.0%
Operating margin % 15.5% 16.8% 11.7% (1.3ppts) 17.1% 17.0% 10.5% 0.1ppts
Profit before tax 33.3 33.6 17.1 (0.9%) 37.4 28.7 15.8 30.3%
Profit after tax 27.1 27.9 13.1 (2.9%) 31.2 24.0 12.1 30.0%
Basic earnings per share 17.6p 18.0p 8.3p (2.2%) 20.2p 15.5p 7.7p 30.3%
Net Debt 38.1 18.3 27.4 108.2%
Covenant Net Debt : EBITDA(2) 0.7x 0.4x 1.0x 75.0%
Free cash flow 18.0 17.7 13.0 1.7% 18.8 22.7 18.9 (17.2%)
Return on capital invested 36.4% 35.7% 21.8% 0.7ppts
Dividend per share(3) 8.1p 6.2p 2.3p(3) 30.6%
1. The definitions of the adjustments made and reconciliations to the
reported figures can be found in note 1 of the consolidated financial
statements
2. Includes pro-forma adjustment for EBITDA of acquired businesses, as
shown in note 1 of the consolidated financial statements
3. 2020 excludes the one-off special interim dividend of 1.7p paid in 2020
in lieu of the suspended final dividend payment for 2019
Financial Highlights
· Revenue of £228.2m:
o £52.0m (29.5%) higher than 2020
o £56.1m (32.6%) higher than 2019
o Strongly outperforming a favourable market
· Adjusted Operating Profit increased by £9.0m (30.0%) to £39.0m:
o More than doubled versus pre-COVID 2019
o Temporary gross margin compression from input cost inflation, as expected
o Strong operating leverage on additional sales growth
o Adjusted Operating Margin increased by 0.1% to 17.1%
· Adjusted EPS increased by 30.3% to 20.2p
· Dividends increased by 1.9p (30.6%) to 8.1p, including proposed final
dividend of 5.5p
Business Highlights
· Business model enabled market outperformance and profitable growth:
o Vertical integration and operational agility ensured continued customer
service and share gain
· Successfully implemented selling price increases to mitigate cost
price inflation
· Demonstrable success in "Grow, Innovate, Sustain" strategy:
o Acquisition of DW Windsor, a leading UK-based exterior lighting brand
o Entry into EV charger market, a key growth opportunity for the Group,
including acquisition of UK-based charge point supplier Sync EV for £10.0m in
March 2022
o Sustaining progress with investment in manufacturing and fulfilment
ESG Success and Targets
· Carbon neutral operations in 2021
· Carbon Disclosure Project joined in 2021
· Science-Based Target Initiative ("SBTi") to be joined in 2022
· Targeting £100m of low carbon sales by 2025
Commenting on the results, Chief Executive Officer, John Hornby said:
"Luceco has a long history of market outperformance. The accelerated progress
we have made over the last two years, in which our profit has doubled, is the
product of our market focus and business model. We favour RMI construction
markets because of their resilience in uncertain times, and undoubtedly
benefited from that focus in 2021. But it was our advantaged business model,
with its inbuilt resilience and agility, combined with our "can-do" culture,
that allowed us to prosper more than most. We moved quickly, won new business
and saw growth opportunities across our diversified customer base.
Such strong progress in 2021 naturally creates a tough comparative,
particularly in the first half when UK residential RMI activity was at a
lockdown-driven peak. We therefore expect revenue in the first half of 2022 to
be broadly in line with last year. We are mindful that recent geopolitical
developments, and their associated impact on inflation, may make progress
harder during the year.
We have strong positions in attractive markets with an advantaged business
model and a clear strategy. We have a well-funded business with clear growth
opportunities, particularly from our recent entry into the electrical vehicle
charger market. We face the future better prepared than ever and I am
confident we have what it takes to continue to outperform our market."
A webcast and conference call for analysts and institutional investors will be
held at 9:30am GMT today, Tuesday 22 March 2022. To register for this event
please follow this link:
https://webcasting.brrmedia.co.uk/broadcast/61e989a97eb59509ae2fc7c0
(https://webcasting.brrmedia.co.uk/broadcast/61e989a97eb59509ae2fc7c0)
Luceco plc Contact
John Hornby, Chief Executive Officer 020 3128 8990 (Via MHP Communications)
Matt Webb, Chief Financial Officer 020 3128 8990 (Via MHP Communications)
MHP Communications Contact
Tim Rowntree 020 3128 8990
James Bavister 020 3128 8170
An open presentation and Q&A session for retail investors will be held via
the Investor Meet Company platform on 28 March 2022 at 11:00am BST. Investors
can register for the event via this link:
https://www.investormeetcompany.com/luceco-plc/register-investor
(https://www.investormeetcompany.com/luceco-plc/register-investor)
This announcement is released by Luceco plc and contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014
(MAR). It is disclosed in accordance with the Company's obligations under
Article 17 of MAR. Upon the publication of this announcement, this information
is considered to be in the public domain.
For the purposes of MAR and Article 2 of Commission Implementing Regulation
(EU) 2016/1055, this announcement is being made on behalf of Luceco plc by
Matt Webb, Chief Financial Officer.
Note to Editors
Luceco plc - Bringing Power To Life
Luceco plc (LSE:LUCE) is a manufacturer and distributor of high quality and
innovative wiring accessories, LED lighting and portable power products for a
global customer base.
For more information, please visit www.lucecoplc.com
(http://www.lucecoplc.com) .
Forward-looking statements
This announcement contains forward‑looking statements that are subject to
risk factors associated with, among other things, the economic and business
circumstances occurring from time to time in the countries, sectors and
markets in which the Group operates. It is believed that the expectations
reflected in these statements are reasonable, but they may be affected by a
wide range of variables which could cause actual results to differ materially
from those currently anticipated. No assurances can be given that the
forward‑looking statements in this announcement will be realised.
The forward‑looking statements reflect the knowledge and information
available at the date of preparation of this announcement and the Company
undertakes no obligation to update these forward‑looking statements. Nothing
in this announcement should be construed as a profit forecast.
Use of alternative performance measures
The commentary in both the Chief Executive Officer's and Chief Financial
Officer's Reviews uses alternative performance measures, which are described
as "Adjusted". Definitions of these measures can be found in note 1 of the
consolidated financial statements. The measures provide additional information
for users on the underlying performance of the business, enabling consistent
year-on-year comparisons.
CHIEF EXECUTIVE OFFICER'S REVIEW
Compelling financial outcomes
Luceco's performance throughout the COVID-19 pandemic has outperformed the
industry in terms of revenue, market share and profitability. Whilst our
pre-COVID financial momentum was strong, the results we have achieved over the
last two years have been particularly compelling, highlighting the Group's
operational agility and excellent customer service in uncertain times. I am
proud that our strong culture of moving quickly and delivering what we promise
has been strikingly clear in such a challenging environment.
Group revenue increased by 29.5% to £228.2m in 2021, with growth within each
product group. Revenue from our largest segment, Wiring Accessories, grew
28.5% to £104.5m, supported by key business wins and increased demand, which
we were able to meet given the control we have over our manufacturing and
supply chain. Our sources of growth broadened beyond residential renovation
activity as the year progressed, with increasing economic confidence resulting
in increased demand for LED retrofits into non-residential settings. Our LED
Lighting business generated revenue growth of 27.7% to £63.2m. In our
Portable Power segment, we secured business wins in the UK and Europe which
contributed to revenue growth of 33.3% to £60.5m for the year.
We also achieved healthy growth across each sales channel in the year. It was
an exceptionally strong start to 2021 in our Retail, Hybrid and Professional
Wholesale channels, all of which benefited from a rapid post-lockdown recovery
in residential demand as consumers spent more money on their homes. In the
second half of the year, we saw some natural normalisation in UK Residential
repair, maintenance and improvement ("RMI") Construction markets, leading to a
modest slowdown in growth within our Hybrid and Professional Wholesale
channels. Growth accelerated during the year in our overseas businesses, and
within the Professional Projects channel as confidence returned to UK
Non-Residential RMI Construction markets, underlining the benefit of our sales
channel diversity.
The rapid post-lockdown recovery, whilst very welcome, led to supply
constraints in our industry. Increasing optimism and buoyant demand resulted
in inflationary pressures and global supply chain disruption. We navigated
these issues well, succeeding in maintaining our superior customer service
levels by acting quickly to maintain product availability thanks to our
vertically integrated model. Price increases were successfully implemented
without impacting our competitiveness, demonstrating our competitive strength
and the industry-wide impact of the associated inflation.
Supply chain challenges are still present. Recent COVID outbreaks in China
have not impacted our business, but could conceivably result in some short
term disruption, albeit tempered by the inventory we hold elsewhere in our
supply chain. Recent devastating developments in Ukraine have triggered a
further round of input cost inflation. We do not yet know the full impact, but
our achievements this year highlight that we have the means to manage change
well. While general inflation and tighter monetary policy may have an impact
on discretionary construction, particularly in the residential sector, I have
every confidence that we will continue to outperform in whatever market we are
faced with.
Gross margins came under pressure for all manufacturers given inflation in raw
materials and freight costs. Cost inflation increased progressively through
the year, costing £13.6m in 2021 and expected to cost £25.0m on an
annualised basis. We swiftly and successfully implemented selling price
updates designed to offset the £25.0m annualised impact in full, albeit with
an inevitable modest lag due to notice periods and order lead times.
Temporary gross margin compression from the implementation lag was mitigated
by hedging arrangements, further manufacturing efficiency gains from
automation, and solid operating leverage on strong sales growth. The latter is
illustrated by the fact that in the last two years the Group has added no
extra overheads despite £52.5m of organic revenue growth. As a result of
these measures, the Group's Adjusted Operating Margin for the year was 17.1%,
marginally ahead of 2020 despite significant input cost inflation. Growth in
revenue and margins led to a 30.0% increase in Adjusted Operating Profit to
£39.0m (2020: £30.0m) and operating profit increased 19.3% to £35.3m
(2020: £29.6m). Strong cash generation, particularly in the second half, led
to Covenant Net Debt of 0.7x Covenant EBITDA (2020: 0.4x), below our capital
structure target of 1.0-2.0x. Our balance sheet remains strong and able to
support continued investment in future growth, both organically and by
acquisition. In 2021, we demonstrated our appetite for M&A through the
acquisition of DW Windsor.
Strong operational performance - strength of business model
In my last review, I said that 2020 had been a year like no other. We saw
further upheaval and volatility in 2021 and I must thank my colleagues for
their continued dedication, resilience, and adaptability in a challenging and
ever-changing environment.
Our advantaged business model has helped us gain market share for an extended
period, with market conditions in the last two years accentuating this growth.
Our superior product availability has been evident throughout the COVID period
and I am proud that we have remained so agile in such a challenging
environment.
Our vertically integrated manufacturing and distribution model proved itself
more than ever in a year defined by supply chain disruption. It enabled us to
add capacity more quickly than those businesses reliant on outsourced models,
further increasing our market share. Output from our manufacturing facility in
China continued to increase, to record levels, aided by strong regional
supplier relationships which we utilised to mitigate global shortages of key
components such as integrated circuits. We acted quickly to increase our
inventory cover to help offset extended supplier lead times which have almost
doubled in the last two years. Earlier in the year, we temporarily increased
safety stocks in our sales organisation to ensure product availability and
continuity of customer service in an unsettled supply chain. Also key to
maximising service to our customers was the investment we made in our UK
Distribution Centre to both improve capacity and order fill rates, as well as
lowering operating costs. With supply chain uncertainty continuing in 2022,
the advantages of our business model position the Group comparatively well to
respond rapidly to change.
Strategic progress
Even with the presence of COVID‑related challenges, we managed to progress
our strategic priorities in the year and to redefine them under three simple
headings: Grow, Innovate and Sustain.
Grow
Luceco has a proven track record of growth. Since 2000, we have grown our
sales twice as fast as the UK market and supplemented that by launching our
successful business model overseas. We now have leading positions of scale in
our key UK end markets, and yet have £1.8bn of share still available to us in
the markets we currently address. Our strategy is to seize this opportunity.
Given the white space around us, we prioritise our growth opportunities with
care and then exploit them in full. Our focus over the last three years has
been to maximise the potential of our most profitable source of growth, namely
the sale of all existing products to all existing customers through our
well‑developed UK infrastructure, with a particular focus on growing our
share of sales to professional installers. This has proved successful as
customers have rewarded our structural ability to deliver, accentuated during
the pandemic, with new business that has been very beneficial to profit.
We have used our balance sheet to accelerate share gains with professional
installers with the acquisition of DW Windsor, which is highly complementary
to our existing UK outdoor lighting offering. We have a decent pipeline of
other M&A opportunities at various stages of progression.
Our continual re-appraisal of growth opportunities led us to invest to
accelerate growth in our Southern European business in the year. This will be
funded in part by our exit from Northern Europe in 2022, where regrettably the
structure of the market has made progress harder and long-term prospects less
attractive than other available opportunities.
Innovate
Luceco also has a proven track record of using innovation to grow. We use it
to upsell higher function, higher margin devices in existing product
categories, and to enter new product categories that can be sold to existing
customers. I am pleased to say we made progress on both fronts in 2021.
We expanded our range of USB wiring accessories by being the first in the UK
market to integrate high power USB-C connectivity, which an increasing number
of consumer electronic devices use, into mains sockets. We hope this will
future-proof our USB wiring device offering, which has been a very successful
product line for the Group. We also expanded our range of consumer Smart Home
devices, particularly in lighting. Both are now being sold successfully to our
existing customer base.
Our push into new product categories, with a focus on those that are
professionally installed, was accelerated by the recent launch of both private
realm EV chargers and commercial power products. The market potential of both
categories totals £700m in the UK alone and we are very well positioned to
take our share of this opportunity. Our lower power Mode 2 EV charger range
launched mid-year, generating sales of £1m. Our higher power Mode 3 charger
will launch in early Q2 2022 under our established British General brand and
we expect keen interest from our loyal electrical contractor customers.
Sustain
The Group's investment in its infrastructure, to sustain the competitive
advantage it has built, bore fruit in 2021. We implemented new software to
manage our fulfilment operations, which improved order fill rate, logistics
efficiency and delivery capacity. Investment in fulfilment capabilities in the
UK has increased output by 40% in five years with no change in footprint.
Similarly in Southern Europe, we moved our operations into a larger
distribution centre that can support growth (which has averaged 42% per annum
over the last five years).
Purpose and culture
Strategies only succeed if they are set within the context of a clear purpose
and supportive culture: we have both at Luceco.
Our purpose as an organisation is to bring power into people's lives
sustainably. I am proud to say that our products play an expanding role in
everyday life and they are increasingly the choice of discerning professional
installers who want to get the job done right.
Our products support essential societal climate goals by offering a
diminishing carbon footprint and by supporting the adoption of "green"
substitution such as LED lighting and EV charging. I am proud to announce that
we are targeting annual revenue of £100m from such low carbon products by
2025, underlining both the size of the market opportunity presented to us by
decarbonisation, as well as our desire to help society to achieve essential
climate goals.
Our culture has come to the fore in the last two years. We have been bold,
agile and innovative. Our teams have worked incredibly hard and closely
together throughout the customer journey to deliver exceptional service in
very trying circumstances. I am very proud of their achievements.
Attractive market backdrop
We estimate the total value of markets we address with our current product
portfolio to be worth £2.0bn in the UK alone. Continued expansion into new
product categories installed by professional electricians opens up a market
worth up to £3.5bn in the UK alone. In short, our markets offer ample room
for further growth. They also exhibit healthy, long-term growth. We estimate
that 80% of our business is driven by RMI construction activity, the majority
of which is professionally installed. Since 2000, UK RMI construction has
expanded by 16% more than UK GDP and has grown in 18 of the subsequent 21
years.
The events of the last two years have underlined the relative resilience of
our markets, a period in which construction has rebounded faster than wider
economic activity. I am delighted that consistent growth faster than the
competition,
means we now have leading positions in such structurally attractive end
markets.
John Hornby
Chief Executive Officer
22 March 2022
CHIEF FINANCIAL OFFICER'S REVIEW
In 2019, I reported that the deployment of our advantaged business model in
our attractive and relatively stable end markets should lead to the consistent
delivery of compelling Group financial performance. I supported this with the
publication of detailed "through the economic cycle" financial targets to
capture our ambition and aid investor decision-making.
Both the original targets and the subsequent performance are summarised below,
including 2021. The fact that we have largely achieved or exceeded the targets
despite the unprecedented economic disruption of COVID underlines both our
structural resilience, as well as our greater long-term potential.
Component Metric Target(1) 2019 results 2020 results 2021 results
Revenue Total revenue growth 5 to 10% 5.0% 2.4% 29.5%
Profit Adjusted Operating Margin % 15 to 20% 10.5% 17.0% 17.1%
Cash Adjusted Operating Cash Conversion % >100% 151.1% 113.7% 89.7%
Adjusted Free Cash Flow Margin % 10 to 15% 11.0% 12.9% 8.2%
Dividends Earnings payout ratio 40 to 50% 7.8% 40.0% 40.0%
Capex Net capital expenditure as % revenue 3 to 4% 2.1% 2.5% 2.8%
Capital structure and returns Return on Capital Invested % 30 to 40% 21.8% 35.7% 36.4%
Covenant Net Debt(2) : Covenant EBITDA 1.0 to 2.0x 1.0x 0.4x 0.7x
Adjusted Net Cash Flow(3) as % revenue 5.0% 8.2% 8.6% 2.8%
1. Expected performance range through the economic cycle for the
existing business excluding the impact of future acquisitions
2. Covenant Net Debt excludes IFRS 16 Finance Leases for bank purposes
3. Adjusted Free Cash Flow less dividends and EBT share purchases (i.e.
cash remaining for acquisitions or capital returns)
The table highlights that 2021 was a truly outstanding year.
We grew revenue by 29.5%. New business wins, favourable channel access and our
ability to maintain excellent product availability when competitors were
impacted by supply chain disruption allowed us to make the most of undoubtedly
favourable market conditions.
Expanding our Adjusted Operating Margin in a year in which annualised input
cost inflation was greater in quantum than 2019's entire Adjusted Operating
Profit illustrates quite how far we have come in maximising profit and
managing risk.
Cash conversion was understandably held back slightly by extra investment in
inventory to minimise supply chain volatility. However, its impact on overall
cash generation was limited by faster cash collection from customers, leaving
the business with only slightly increased Covenant Net Debt leverage despite
money spent on acquisitions.
The original financial targets were set as performance ranges to be maintained
throughout the economic cycle. We do not want the upper limits of the range to
inadvertently suggest a limit to our ambition, so the targets have been reset
largely as minimum performance expectations to better capture our proven
resilience in tough economic times and confidence in our long-term potential.
Component Metric Old target New target(1)
Revenue Total revenue growth 5 to 10% >5%
Profit Adjusted Operating Margin % 15 to 20% >15%
Cash Adjusted Operating Cash Conversion % >100% >100%
Adjusted Free Cash Flow Margin % 10 to 15% >10%
Dividends Earnings payout ratio 40 to 60% 40 to 60%
Capex Net capital expenditure as % revenue 3 to 4% 3 to 4%
Capital structure and returns Return on Capital Invested % 30 to 40% >30%
Covenant Net Debt(2) : Covenant EBITDA 1.0 to 2.0x 1.0 to 2.0x
Adjusted Net Cash Flow(3) as % revenue 5.0% >5.0%
1. Minimum performance for the existing business excluding the impact of
future acquisitions
2. Covenant Net Debt excludes IFRS 16 Finance Leases for bank purposes
3. Adjusted Free Cash Flow less dividends and EBT share purchases (i.e.
cash remaining for acquisitions or capital returns)
Summary of reported results
Summary results (£m) 2021 2020
Revenue 228.2 176.2
Operating profit 35.3 29.6
Profit before tax 33.3 33.6
Taxation (6.2) (5.7)
Profit for the year 27.1 27.9
Profit for the year reduced by £0.8m to £27.1m. Whilst the Group delivered
strong conversion of revenue growth into underlying profit growth, this
progress was held back by restructuring costs incurred in Germany and France
and changes in the fair value of our hedging portfolio. Weakening of the US
dollar versus Chinese renminbi increased the value of our hedges in 2020,
creating a one-off profit in that year, and this was not repeated in 2021.
Adjusting items
Operating profit was £35.3m in 2021. Adjustments of £3.7m were excluded from
Adjusted Operating Profit of £39.0m.
The Adjustments were as follows:
· Restructuring costs from the closure of operations in Germany and
France: £2.3m, of which £0.5m will be paid in cash, delivering annual
savings of £0.8m
· Amortisation of acquired intangibles and related acquisition
costs: £1.4m, of which £0.7m was paid in cash.
Revenue
Revenue increased by £52.0m (29.5%) to £228.2m. The primary drivers are
shown below:
Change
Revenue bridge: £m %
2020 revenue 176.2
Like-for-like increase(1) 56.9 32.3%
Acquisition 3.6 2.0%
2021 in Constant Currency(2) 236.7 34.3%
Currency movements (8.5) (3.6%)
2021 revenue 228.2
1. Like-for-like revenue increase excludes the impact of currency
movements and acquisitions, see footnote 2 for currency calculation
2. 2021 revenue translated at 2020 exchange rates
Like-for-like growth of 32.3% was significantly greater than that of the
market. Our ability to continually deliver competitively priced, high quality
products even amid COVID-driven disruption was rewarded with new tender wins
with our most strategic customers and in our most profitable product
categories. Our overweight positions with multi-channel capable distributors
who themselves outperformed the market during COVID was also beneficial. The
UK Residential RMI market, consisting of both consumer and professional
renovation activity and into which approximately two-thirds of our sales are
made, enjoyed a very strong start to the year as people continued with
COVID-driven home improvement projects. Whilst this activity naturally
moderated as the year progressed, it was compensated by increasing activity
overseas and within the UK Non‑Residential RMI market. Consequently,
like-for-like growth of 36% versus a pre-COVID 2019 comparative was maintained
throughout the year, highlighting the benefits of our increasingly diversified
sources of growth.
We group our customers into the following sales channels:
· Retail: Distributors serving consumers only, including DIY sheds,
pure-play online retailers and grocers
· Hybrid: Distributors serving both consumers and professionals,
typically with multi-channel service options
· Professional Wholesale: Distributors serving professionals only,
largely via a branch network
· Professional Projects: Sale agreed by Luceco direct with
professionals, but fulfilled via Professional Wholesale
Performance by sales channel was as follows:
Revenue by sales channel: £m % of Growth v 2020 % Growth v 2019 %
2021 Total
Retail 83.0 35.1% 37.9% 38.2%
Hybrid 59.8 25.3% 39.4% 74.1%
Professional Wholesale 59.3 25.0% 24.7% 26.5%
Professional Projects 34.6 14.6% 34.2% 13.2%
TOTAL at Constant Currency 236.7 100.0% 34.3% 37.7%
Currency impact (8.5)
TOTAL 228.2 29.5% 32.6%
Our growth in 2020, early in the pandemic, was heavily skewed towards the
Hybrid channel, which consists of multi-channel capable distributors that
remained open and gained share when traditional branch networks within the
Professional Wholesale channel were forced to close.
It is notable that our growth in 2021 became more broadly based. Fewer COVID
restrictions allowed Retail, Hybrid and Professional Wholesale customers to
make the most of buoyant Residential RMI market conditions. We supplemented
this with new business wins, particularly within the Wiring Accessories
category, as competitors who lack our vertically integrated model struggled to
meet healthy demand. We also benefited from our leadership of the DIY/small
electrical contractor market, where market conditions were at their most
buoyant.
2021 also saw the return to growth of our Professional Projects channel,
largely consisting of LED projects sold into commercial and institutional
settings, as fewer COVID restrictions encouraged business owners to spend
discretionary capex. A sales decline of 6.3% versus a pre-COVID 2019
comparative in the first half was replaced by growth of 10.3% in the second
half.
2021 also brought a broader base of growth overseas, particularly in the
second half, as international markets increasingly benefited from their
vaccine rollout programmes:
Revenue by geographical location of customer 2021 2020
£m £m Change
%
UK 181.2 140.3 29.2%
Europe 24.0 18.4 30.4%
Middle East and Africa 7.6 7.0 8.6%
Asia Pacific 10.6 6.7 58.2%
Americas 4.8 3.8 26.3%
Total revenue 228.2 176.2 29.5%
UK revenue grew by 29.2% in the period, which was broadly based by channel, as
described above.
European growth emanated from our rapidly expanding Southern European business
based in Barcelona, which moved into a new distribution facility in the year
to sustain future growth. Our operations in France were subsumed therein to
share resources and save cost. Our progress in Southern Europe contrasted with
that of our Northern European business which incurred an Adjusted Operating
Loss of £0.5m in the year. We announced the closure of this business towards
the end of the year, with an associated one-off cost of £1.6m related to
asset write-downs and stock provisions. We will cease operations there in the
first half of 2022, allowing resources to be redeployed to better effect
elsewhere.
Revenue in the Americas grew significantly in the period following strong
growth in our Mexican business and increased sales of Portable Power products
to US DIY chains.
Sales in the Middle East and Africa recovered strongly from a disappointing
start to the year as a more active global economy drove up energy prices and
therefore appetite for regional construction projects in the Gulf states.
Growth in Asia Pacific benefited from market share gains with retailers in
Thailand and the Philippines.
Profitability
Adjusted Operating Profit grew by £9.0m to £39.0m. Adjusted Operating Margin
increased by 0.1 percentage points to 17.1%. This was delivered by strong
revenue growth, tight control of overheads and the close management of rapid
input cost inflation, as follows:
Adjusted Operating Profit £m
2020 Adjusted Operating Profit 30.0
Input cost inflation (10.0)
Currency movements (3.6)
Selling price increases 7.0
Manufacturing efficiency gain 1.9
Operating leverage on sales growth 13.8
Acquisition (0.1)
2021 Adjusted Operating Profit 39.0
Input cost inflation added £10.0m to the cost base in 2021, the majority of
which arose from industry-wide increases in sea freight and copper prices.
Strengthening of the Chinese renminbi, the currency in which the Group makes
most of its purchases, increased our cost base in 2021 by a further £3.6m.
Both factors therefore produced a cost headwind totalling £13.6m in the year
and at current prices they would increase our annualised cost base by £25.0m,
with the remaining £11.4m to flow through in later years as hedging
arrangements and inventory cover unwinds.
We combated this input cost inflation with gradual selling price increases and
manufacturing efficiency gains totalling £8.9m. Whilst this left a net profit
headwind of £4.7m in 2021, we expect to close this gap in full as selling
price updates already in place deliver their full annualised benefit in 2022
and beyond. We therefore expect our Adjusted Gross Margin from now on to
exceed the 35.8% delivered in the second half of 2021 and for it to return to
over 40% in time.
The net profit headwind from cost inflation and currency in 2021 was more than
compensated by very fulsome conversion of rapid top line growth into bottom
line profit. It is notable that the Group has added no additional overheads
since 2019 to support £52.5m of additional organic sales. This reflects
highly synergistic sources of growth and tight control of discretionary
spending.
The net result was 30% growth in Adjusted Operating Profit and a 0.1
percentage point expansion in Adjusted Operating Margin to 17.1% in 2021 - an
excellent outcome in a tumultuous year.
Inflationary trends stabilised in the final quarter of 2021 compared to the
second and third quarters but have resumed in the wake of recent tragic
events in Ukraine. We are mindful of the impact that real wage deflation could
have on consumer spending, including home improvement, and therefore remain
vigilant.
The table below provides a more detailed view of the currency impact in the
year:
Adjusted Currency impact Adjusted 2021 Constant Currency Adjusted
2021 at Constant variance to 2020 2020
actual(1) Currency(2) actual
£m £m £m
£m % £m %
Revenue 228.2 (8.5) (3.6%) 236.7 60.5 34.3% 176.2
Cost of sales (143.5) 5.1 (3.4%) (148.6) (42.6) 40.2% (106.0)
Gross profit 84.7 (3.4) (3.9%) 88.1 17.9 25.5% 70.2
Gross margin % 37.1% (0.1ppts) 37.2% (2.6ppts) 39.8%
Operating costs (45.7) (0.2) 0.4% (45.5) (5.3) 13.2% (40.2)
Operating profit 39.0 (3.6) (8.5%) 42.6 12.6 42.0% 30.0
Operating margin % 17.1% (0.9ppts) 18.0% 1.0ppts 17.0%
1. Year ended 31 December 2021 translated at 2021 average exchange rates
2. Year ended 31 December 2021 translated at 2020 average exchange rates
Operating costs
Adjusted Operating Costs increased by £5.5m to £45.7m.
£1.7m of the increase relates to DW Windsor, acquired by the Group in October
2021. £0.8m relates to extra delivery costs from much increased sales. £0.8m
relates to increased share-based payment charges and National Insurance
payable on exercised options. The remaining £2.2m relates to a number of
smaller increases within professional fees, travel and entertainment as well
as strategic investment in IT and marketing.
2022 is likely to see a circa £2.0m increase in National Insurance costs as
particularly valuable employee share options reach maturity. The final amount
will depend upon to what extent, and at what price, option holders exercise
their awards. Option costs will then reduce in subsequent years.
Net finance expense
Covenant Net Debt increased by £14.4m to £30.6m, largely reflecting the
acquisition of DW Windsor for £16.3m in the year. Adjusted Net Finance
Expense increased by £0.3m to £1.6m, reflecting the increased indebtedness
and arrangement fees payable on our newly increased banking facilities which
now provide access to up to £120m of borrowing capacity.
Another year of strong cash generation enabled the Group to maintain a strong
balance sheet, with Covenant Net Debt leverage in the year at 0.7x Covenant
EBITDA despite cash spent on acquisitions.
Taxation
The effective tax rate on Adjusted Profit Before Tax increased slightly by
0.2% to 16.6% in 2021. The Group's mix of profits by country would indicate a
typical effective tax rate of circa 19.5%. We outperformed this in 2021
because of work done over recent years to maximise tax incentives in China. As
a result, it is reasonable to expect the Group to maintain an effective tax
rate below 19% in 2022 until a higher UK corporation tax rate takes effect in
2023.
Adjusted Free Cash Flow
Adjusted(1) Free Cash Flow (£m) Adjusted(1) Adjusted(1)
2021 2020
Operating profit 39.0 30.0
Depreciation and amortisation 6.7 6.1
EBITDA 45.7 36.1
Changes in working capital (12.6) (3.1)
Other items 1.9 1.1
Operating Cash Flow 35.0 34.1
Operating cash conversion(2) 89.7% 113.7%
Net capital expenditure (6.4) (4.4)
Interest paid (1.7) (1.3)
Tax paid (8.1) (5.7)
Free Cash Flow 18.8 22.7
Free Cash Flow as % Revenue 8.2% 12.9%
1. A reconciliation of the reported to Adjusted results is shown
within note 1 of the consolidated financial statements
2. Adjusted Operating Cash Conversion is defined as Adjusted
Operating Cash Flow divided by Adjusted Operating Profit
The Group converted 89.7% of Adjusted Operating Profit into Adjusted Operating
Cash Flow, slightly short of its target of >100%. This reflects prudent
investment in additional inventory to maintain service and mitigate cost
inflation. Delivery times from China increased by 38 days to 135 in 2021,
necessitating a 27 day increase in inventory cover to 134 days. The resulting
£14.6m organic increase in inventory was partly funded by collecting cash
from customers on average 11 days quicker - a great performance in the
circumstances. The Group expects healthy cash conversion in 2022 as supply
chain stability allows stock to be gradually reduced.
The Group delivered strong Adjusted Free Cash Flow of £18.8m (2020: £22.7m).
This represented 8.2% of revenue (2020: 12.9%), consisting of a disappointing
margin of 4.6% in the first half and 11.5% in the second half as supply chains
stabilised.
Capital expenditure
The Group's net capital expenditure consists of capitalised product
development costs and the purchase of physical assets. It increased by £2.0m
to £6.4m (2020: £4.4m) and equalled 2.8% of revenue (2020: 2.5%), marginally
below our target range of 3-4%. We continue to see opportunities to invest in
low risk, high return automation projects in our Chinese production facility
which we intend to accelerate now that COVID-19 driven disruption appears to
be reducing.
Return on capital
Return on Capital Invested is broadly consistent with the prior year at 36.4%
(2020: 35.7%) thanks to strong profitability and tight control of capital
expenditure and working capital.
The Group continually reviews the deployment of its capital to ensure it is
invested in areas with the greatest opportunity for future returns. It has set
clear investment criteria for the deployment of additional capital. Its
investment in product development activities is focused on the low-risk
expansion of ranges sold through existing distribution channels. It
continually invests in projects that improve internal efficiency and deliver a
quick, relatively assured payback. Through these means, it aims to improve its
return on capital over time.
Acquisitions
DW Windsor Group was acquired for £16.3m in cash in October 2021 with no
deferred or contingent consideration. Based in Hertfordshire, UK, it operates
through two business units: DW Windsor and Urban Control.
DW Windsor is a leader in the design and UK-based manufacture of high quality
outdoor and streetlighting equipment for the specification market, selling
mainly to UK local authority end customers. It is highly complementary to the
Group's Kingfisher Lighting business, which supplies non-public sector
projects, and we are excited about the opportunity to offer the expanded
product portfolio to both customer groups.
Urban Control provides network solutions for infrastructure assets
facilitating data collection and control, including the monitoring and control
of streetlights.
For the unaudited 12-month period ended 30 September 2021 (adjusted for
non-underlying items) DW Windsor generated revenue of £23.9m, operating
profit of £1.9m and EBITDA of £2.3m. It generated an Adjusted Operating Loss
of £0.1m in the period from the date of acquisition to 31 December 2021 in
what is a seasonally slow period for the business. The integration of the
business is on track and we are beginning to exploit product development,
sales and sourcing synergies.
Capital structure
Adjusted Free Cash Flow of £18.8m (2020: £22.7m) was used to fund the
acquisition of DW Windsor Group outlined in the section above. The business
continues to consistently generate ample funds to support a dividend at the
40% payout level and to fund M&A activity.
£m 2021 2020 Change
Reported net debt £38.1m £18.3m 108.2%
Less: IFRS 16 Finance Leases (£8.2m) (£2.8m) 192.9%
Finance Leases - pre-IFRS 16 £0.7m £0.7m -
Covenant Net Debt £30.6m £16.2m 88.9%
Covenant Net Debt : Covenant EBITDA 0.7 0.4 0.3
At 31 December 2021, the Group's non-utilised facilities totalled £43.2m,
with an option (subject to lender consent) to add a further £40.0m under the
terms of its new syndicated bank facility signed in October 2021. The facility
matures in September 2024 with two subsequent one-year renewal options. The
Group therefore has significant capacity to fund future acquisitions.
The Company's covenant position and headroom at 31 December 2021 was as
follows:
2021 full-year covenant Covenant Actual Headroom
Covenant Net Debt : Covenant EBITDA 3.0 : 1 0.7 : 1 Covenant Net Debt headroom: £110.1m(1)
Covenant EBITDA headroom: £36.7m
Covenant EBITDA : Adjusted Net Finance Expense 4.0 : 1 29.3 : 1 Covenant EBITDA headroom: £40.5m
Net Finance Expense headroom: £10.1m
1. Headroom with increased facility. Current facility headroom is
£43.2m.
The key measures which management use to evaluate the Group's use of its
financial resources and capital management are set out below:
2021 2020
Adjusted(1) Earnings Per Share (pence) 20.2 15.5
Covenant Net Debt : Covenant EBITDA (times) 0.7 0.4
Adjusted(1) Free Cash Flow (£m) 18.8 22.7
1. Note 1 in the notes to the consolidated financial
statements provides an explanation of the Group's alternative performance
measures.
The Group complied with its covenant requirements throughout the year with
significant headroom on all metrics. The Group has conducted a full going
concern review and this is outlined on page 117 of the Annual Report and
Accounts. The Group has a very strong balance sheet and significant facility
headroom under even a realistic severe but plausible downside scenario. No
covenant breaches occur in any of our severe but plausible downside scenarios,
all of which are before any mitigating actions, illustrating our financial
resilience.
Dividends
The Board is recommending to pay dividends equal to 40% of earnings. It is
therefore proposing a final dividend of 5.5p per share which, with the interim
dividend of 2.6p per share, is a full-year dividend of 8.1p. The final
dividend will be paid on 20 May 2022 to shareholders on the register on 7
April 2022.
Operating segment review
The revenue and profit generated by the Group's operating segments are shown
below. Operating profits are stated after the proportional allocation of fixed
central overheads. The profit contribution for each segment, before fixed
central overheads, is also shown, to illustrate the likely profit impact of
future growth.
Wiring Accessories
Adjusted(1) Reported
2021 2020 Change 2021 2020 Change
Revenue £104.5m £81.3m 28.5% £104.5m £81.3m 28.5%
Contribution profit £36.3m £29.5m 23.1% £36.3m £29.5m 23.1%
Contribution margin % 34.7% 36.3% (1.6ppts) 34.7% 36.3% (1.6ppts)
Operating profit £29.2m £23.0m 27.0% £29.2m £23.0m 27.0%
Operating margin % 27.9% 28.3% (0.4ppts) 27.9% 28.3% (0.4ppts)
1. A reconciliation of the reported to Adjusted results is
shown within note 1 of the consolidated financial statements
Wiring Accessories is the Group's largest and most profitable segment,
generating 46% of Group revenue, with a brand established over 80 years ago.
We continue to significantly outperform in this category, delivering segmental
revenue growth of 28.5% since 2020 and 49.1% since 2019. We have gained an
increasing market share over an extended period thanks to our advantaged
business model. However, the accelerated outperformance in the last two years
has been driven by: business wins with strategic accounts, strong demand in
the circuit protection category due to regulatory changes, and superior
product availability, principally thanks to our vertical integration, in the
second half's recovering market.
Despite increasing input prices and supply chain restraints, Adjusted
Operating Margin reduced only marginally by 40 basis points.
LED Lighting
Adjusted(1) Reported
2021 2020 Change 2021 2020 Change
Revenue £63.2m £49.5m 27.7% £63.2m £49.5m 27.7%
Contribution profit £7.4m £5.7m 29.8% £4.1m £5.3m (22.6%)
Contribution margin % 11.7% 11.5% 0.2ppts 6.5% 10.7% (4.2ppts)
Operating profit £3.4m £2.8m 21.4% £0.1m £2.4m (95.8%)
Operating margin % 5.4% 5.7% (0.3ppts) 0.2% 4.8% (4.6ppts)
1. A reconciliation of the reported to Adjusted results is shown within
note 1 of the consolidated financial statements
The Group entered the lighting market in 2013 as the industry adopted LED
technology and it represents 28% of Group revenue.
The Group has developed a wide range of products which it sold initially
through UK channels and subsequently through its wider overseas network. It
has built a circa £63m revenue business in seven years, largely organically
but bolstered by the acquisition of Kingfisher Lighting in 2017 and DW Windsor
in 2021.
It continues to invest in both its product line and in the sales resources
necessary to grow the business. The focus for future growth in this segment is
on professional-grade products and expansion in international markets. This
investment inevitably takes time to mature, which holds back margins in the
short term.
Segmental growth accelerated in the second half of the year with revenue of
£36.3m versus £26.9m in the first half of 2021. This was due to an increase
in LED retrofit activity as outlined in the sales channels commentary above.
Portable Power
Adjusted(1) Reported
2021 2020 Change 2021 2020 change
Revenue £60.5m £45.4m 33.3% £60.5m £45.4m 33.3%
Contribution profit £10.3m £7.5m 37.3% £9.9m £7.5m 32.0%
Contribution margin % 17.0% 16.5% 0.5ppts 16.4% 16.5% (0.1ppts)
Operating profit £6.4m £4.2m 52.4% £6.0m £4.2m 42.9%
Operating margin % 10.6% 9.3% 1.3ppts 9.9% 9.3% 0.6ppts
1. A reconciliation of the reported to Adjusted results is shown within
note 1 of the consolidated financial statements
The Group enjoys a leading position in the UK portable power market and this
represents 26% of Group revenue.
Revenue in the period was 33.3% higher than the prior year and 26.6% higher
than 2019 as the Group won new business with retailers in Europe and the USA.
Our use of outsourced manufacturing and Free on Board ("FOB") delivery means
low overhead costs, allowing good conversion of the sales growth into profit,
offsetting input cost inflation. Adjusted Operating Margin improved from 9.3%
in the prior year to 10.6% in the current year.
Going concern and viability statement
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future and
as such have applied the going concern principle in preparing the Annual
Report and Accounts. This is considered in more detail in note 1 of the
consolidated financial statements. The Group's Viability Statement can be
found on pages 66 to 67 and the Group's Going Concern Statement can be found
on page 117 of the 2021 Annual Report and Accounts.
MATT WEBB
Chief Financial Officer
22 March 2022
Environmental, Social and Governance ('ESG') update
2021 has been a further year of progression of our sustainability program even
against a challenging backdrop resulting from COVID-19 and supply chain
constraints. Our product portfolio combined with our Business Model and
experience puts us in a strong position to capture future ESG opportunities,
however we recognise there is more to do and we look forward to continuing to
progress our sustainability agenda moving forwards.
Leveraging our Business Model
The nature of the Group's Business Model means we are able consider and
minimise our impact on the environment right through from initial product
designs, to how those designs are made, through to how our orders are
fulfilled.
Design: Our efficient product designs not only help manage our costs but
further enable our customers to enjoy our products knowing they have chosen a
more sustainable option.
· As far as possible, we use recycled materials for packaging our
products and we are further enhancing our products with increased use of
recycled materials, particularly recycled plastics.
· Our designers intensely focus on driving down the power
consumption of our products using the most efficient designs and technologies.
Make: The way we produce our products is a key component in our environmental
considerations and will be a significant area of focus as we progress our
environmental agenda.
• Emissions arising from production are controlled at source
through lean and efficient manufacturing processes which minimise inefficient
rework or quality issues.
• We ensure wherever possible that the energy used to power our
sites is sourced renewably.
• We employ a solar PV array at our China manufacturing facility,
which delivers 8% of our total electricity consumptions.
• We obtain high-quality carbon offsets, to mitigate emissions we
have not yet been able completely mitigate.
Market: The way we build relationships and understanding with our customers
means we are not only well positioned to adapt to their changing needs, but
also to advise them on their individual requirements.
• Our electric vehicle charging range is expanding and we are
excited about the benefits this will have on our customers and society as a
whole.
• Our experienced project sales teamwork with the customer to
bring ideas they may not have considered, such as absence detection, bringing
an end to lights being left on when not required.
Fulfil: It has been a challenging year for our teams focused on managing the
delivery of our products given current global supply chain constraints, but we
are proud to have progressed our environmental agenda even against this
backdrop.
• We have invested in a new Warehouse Management System at our
Telford site, designed to increase levels of automation as well as minimise
waste and inefficiency. Better planning of stock availability has resulted in
a significant reduction in the number of deliveries required to fulfil each
customer order, lowering associated emissions.
• We are reviewing the packaging dimension of all our product
ranges not only to reduce packaging, but also to ensure maximum efficiency
when shipping.
• We continue to focus on Free on Board sales, which significantly
reduce the miles over which our products travel to customers.
Our key achievements and targets set in 2021 are:
• Carbon neutral operations in 2021: electricity moved to
renewable sources and residual emissions offset with high quality Voluntary
Emission Reduction certificates.
• Targeting £100m of low carbon sales by 2025: currently
consisting of sales of highly efficient LED luminaires and EV chargers.
• Carbon Disclosure Project joined in 2021
• Science-Based Target Initiative ("SBTi") to be joined in 2022
Our ESG objectives for 2022 are as follows:
• Make significant progress towards delivering £100m of revenue
from low carbon products in 2025
• Commit to the Science Based Target Initiative ("SBTi") and seek
the validation of associated emission reductions targets
• Ensure all products sold in the year use recyclable plastic
packaging
• Ensure 30% of plastic packaging used in the year is recycled
PRINCIPAL RISKS AND UNCERTAINTIES
The Board is responsible for identifying, reviewing and managing business and
operational risk. It is also responsible for determining the level of risk
appetite it is prepared to take in the ordinary course of business to achieve
the Group's strategic objectives and to ensure that appropriate and sufficient
resource is allocated to the management and mitigation of risk.
In addition to the risk management framework, the Board has delegated
responsibility to the Audit Committee for reviewing the overall process of
assessing business risks and managing the impact on the Group. The Group's
risk management process is set out below.
The principal risks identified, and actions taken to minimise their potential
impact are included below. This is not an exhaustive list but those the Board
believes may have an adverse effect on the Group's cash flow and
profitability.
See also pages 60 to 65 in the 2021 Annual Report and Accounts.
In determining whether it is appropriate to adopt the going concern basis in
the preparation of the financial statements, the Directors have considered
these principal risks and uncertainties. The Viability Statement on pages 66
to 67 of the 2021 Annual Report and Accounts considers the prospects of the
Group should a number of these risks crystallise together.
Risk management process
The senior management team maintains a register of identified business risks
(financial and non-financial) which it categorises in terms of probability of
occurrence and the potential impact on the Group should the risk crystallise.
Mitigating actions undertaken and recommendations for further reduction of
risk are also included. Recommended actions are put forward to the Executive
Directors for consideration.
The Executive Directors review and challenge the content of the risk register
and the recommendations. Risk mitigation actions are agreed, and a plan is
created. Each action is assigned an owner who is responsible for carrying out
the required action within an agreed timescale. The Executive Directors review
the progress made against any actions that have been carried forward.
The Audit Committee regularly reviews risk management and is provided an
update in respect of progress made in the reduction of existing risks, summary
of newly identified risks and the actions agreed to reduce them to an
acceptable level.
These risks are reviewed in conjunction with the Audit Committee's other
responsibilities including the internal control framework, external audit
process and financial reporting.
The Audit Committee provides an update and appropriate recommendation to the
Board, where required, for the Board to consider in conjunction with the
strategic objectives of the Group.
Independent assurance is provided through the annual statutory audit and the
periodic internal control reviews and the monitoring of, and adherence to,
policies and procedures by an external assurance provider.
Senior management Executive Directors Audit Committee The Board Independent assurance
Reviews and updates the risk register for new risks, identifies mitigations in Review and challenge the risks identified and the actions proposed to mitigate Monitors and reviews the risks in conjunction with the internal control Holds overall responsibility for effective internal control, risk management Periodic internal control reviews and monitoring of adherence to policies and
place and recommends actions to reduce risk. them; approve and monitor agreed actions. framework, audit process and financial reporting. and the risk appetite of the Group. procedures by an external audit and assurance provider. Statutory audit by a
registered auditor.
Principal risks
Risks associated with the coronavirus
Risk and impact: Mitigation
· Operational disruption or enforced site closure limits the rate of Regular review of local virus case data to respond to emerging threats to
product supply operations
· Risk of unexpected changes in product demand COVID-19-secure protocols are in place at relevant global sites
· Communication and corporate alignment are compromised by remote Sales order book and access to customer sales data gives visibility of
working and/or inability to travel to international operating sites changing demand patterns
Virtual communication tools ensure close collaboration
Increased communication with team members during the pandemic
Concentration risks associated with operations
Risk and impact: Mitigation
· The Group's products are overwhelmingly sourced from one country UK buffer stock is held in the event of supply disruption in China
(China) and a large proportion are made in one location (Jiaxing)
All suppliers are provided with visibility of forward orders and supply issues
· Disruption to our Jiaxing facility could compromise our ability to are discussed upfront
serve our customers
Production facilities in China are spread across multiple buildings on the
· General disruption to trading between China and our selling markets same site to mitigate risk
(particularly UK) could increase our costs or limit our ability to serve our
markets The Group owns its product designs and production tooling, allowing
manufacturing to be moved between suppliers more easily
· China could be impacted by events in Ukraine/Russia, which impacts
our ability to manufacture products Business Continuity Plans are in place for Jiaxing site
Business Interruption Insurance is in place for the Jiaxing site and our OEM
supplier of Portable Power products
Concentration risks associated with customers and products:
Risk and impact: Mitigation
· The Group has a number of key customers representing circa 50% of Key customers typically follow a tender process, providing visibility of
Group revenue. Loss of a key customer could result in reduced sales and business wins and losses
profits
Large customers typically take 6-12 months to implement a large range change
· The Group's committed order book extends 2-3 months forward. Orders throughout their networks, giving us time to react
thereafter are uncommitted
The cost of range changes for large customers is high, reducing the likelihood
· Geopolitical instability creates prices changes and shortages of of occurrence
materials and the impact of inflation on input costs from energy and material
costs impacting product cost and profitability Relationships with the Group's large customers are particularly established
· The Group has a material exposure to movements in the USD:RMB FX Capacity at our factory and at our OEM partners in China can be changed
rate. An adverse move could reduce short term profits and/or long-term quickly and cost effectively
competitiveness
The Group hedges its USD:RMB and copper exposures according to a
· The Group has a material exposure to the purchase price of copper. An Board-approved policy. The hedging matches the duration of any fixed selling
adverse move could reduce profits and/or price competitiveness price commitment offered to customers
Application of the hedging policy is reviewed by the Board
Macroeconomic, political and environmental:
Risk and impact: Mitigation
· A failure to respond to governmental, cultural, customer or investor The Group has commenced participation in the Carbon Disclosure Project and
requirements on ESG in the following areas: changing customer behaviour and prepared itself for participation in the Science-Based Target Initiative
demands (e.g. electric vehicle charging), increased stakeholder concern, beginning in 2022
negative feedback or non-compliance on ESG strategy, increased severity and
frequency of extreme weather events accelerating ESG progress. All of which The Group is expanding and developing its product range of low carbon products
could result in reduced profits or a reduced share price (e.g. LED lighting and electric vehicle charging)
· The Group has a concentrated exposure to the UK market. UK economic The Group is largely exposed to the RMI cycle, which is less susceptible to
headwinds from global input prices, higher living costs and geopolitical macroeconomic forces
instability could lead to lower profits or a reduced share price.
The Group's overseas businesses are expected to grow faster than the UK,
diluting the UK exposure
UK buffer stock is held in the event of supply disruption in China
Airfreight can be used to expedite deliveries if required
Management liaises closely with investors and customers to understand their
future ESG needs and responds accordingly
Loss of IT / data:
Risk and impact: Mitigation
· Loss of IT functionality would compromise operations, leading to Market-leading cyber security tools are in place following engagement with
increased costs or lost sales cyber security consultants
· Loss of sensitive data from our IT environment would expose the Group Market-leading data backup tools are in place
to regulatory, legal or reputational risk
IT disaster recovery plans are in place throughout the Group
· Increased cloud server usage increases risk of data loss or
compromise and cyber risk is on a upward trend impacting operations and We conduct regular penetration testing
reputational risk
IT incidents are reported to the Board
Loss of key employees:
Risk and impact: Mitigation
· Loss of key employees could damage business relationships or result Key relationships are typically shared between more than one employee
in a loss of knowledge
The Group's service offering is multi-faceted, reducing the risk that the loss
· Depending on the job role and team, COVID-19 has changed employee's of an employee would result in lost sales
and employer's work place expectations. A more fluid working environment in
both the office and home is more common place. The risk of not adapting to Retention of key employees is driven by long-term personal development and
this change in working practices could lead to loss of employees and an incentive plans. These plans are reviewed by the Nomination and Remuneration
inability to attract talent Committees
Workforce engagement surveys ensure employee needs are identified and
addressed, promoting retention
Adoption of hybrid practices within appropriate teams
Acquisitions:
Risk and impact: Mitigation
· An ill-judged acquisition could destroy shareholder value Our acquisition strategy is set by the Board
· Unable to grow or develop an acquired business in line with Board members possess significant M&A experience
expectations leading to lower profits
The acquisition strategy is implemented by an experienced in-house team
· The Group's acquisition strategy could compromise/distract the
execution of strategy in other areas The Group's key markets are relatively stable, meaning acquisition targets
typically have an established track record
Individual acquisitions are typically small relative to the size of the Group,
reducing the impact of each deal and reducing potential distraction
The Group conducts extensive due diligence prior to acquisition
All acquisitions are approved by the Board
Legal and Regulatory
Risk and impact: Mitigation
· The Group could infringe upon the IP of others, leading to legal The Group receives IP advice from external experts
claims
The Group's products are certified for use prior to launch by external experts
· The Group's products could fail to meet regulatory requirements or
experience quality failures, resulting in legal claims and/or reputational The Group has extensive quality assurance resources in the UK and China
damage
Suppliers are required to adhere to a strict Code of Conduct
· The Group's businesses could fail to meet regulatory requirements in
their countries of operation Supplier compliance with the Code of Conduct is audited by our in-house teams
· The Group could fail to comply with local tax laws, particularly Product liability claims are reported to the Board
regarding transfer pricing
Product liability insurance is in place globally
The Group's transfer pricing policies are reviewed regularly with the help of
external experts
Finance and treasury
Risk and impact: Mitigation
· The Group could fail to provide sufficient funding liquidity for its The Group has a clear Capital Structure policy that is designed to provide
operations sufficient liquidity
· The Group could fail to report its financial performance accurately, The Capital Structure policy is implemented by Treasury experts and monitored
leading to inappropriate decision-making and regulatory breaches by the Board
· The Group could suffer fraud across its widespread operations The Treasury team prepares regular cash flow forecasts
The Group's financial statements require relatively few judgements or
estimates, reducing the risk of misstatement
The Group's accounting policies and internal accounting manual are approved by
the Board
The Group operates two main accounting centres in the UK and China, which are
overseen closely by the Group Finance team
The Group has invested in market-leading financial accounting and reporting
software
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The following statement will be contained in the 2021 Annual Report and
Accounts.
We confirm that to the best of our knowledge:
• The financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole; and
• The Strategic Report includes a fair review of the development
and performance of the business and the position of the issuer and the
undertakings included in the consolidation, taken as a whole, together with a
description of the principal risks and uncertainties that they face.
• We consider the Annual Report and Accounts, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
JOHN HORNBY
Chief Executive Officer
MATT WEBB
Chief Financial Officer
22 March 2022
Consolidated Income Statement
for the year ended 31 December 2021
Adjusted Adjustments(1) 2021 Adjusted Adjustments(1) 2020
Note £m £m £m £m £m £m
Revenue 2 228.2 - 228.2 176.2 - 176.2
Cost of sales (143.5) - (143.5) (106.0) - (106.0)
Gross profit 84.7 - 84.7 70.2 - 70.2
Distribution expenses (7.8) - (7.8) (8.6) - (8.6)
Administrative expenses (37.9) (3.7) (41.6) (31.6) (0.4) (32.0)
Operating profit 2,3 39.0 (3.7) 35.3 30.0 (0.4) 29.6
Finance income - - - - 5.3 5.3
Finance expense (1.6) (0.4) (2.0) (1.3) - (1.3)
Net finance expense (1.6) (0.4) (2.0) (1.3) 5.3 4.0
Profit before tax 37.4 (4.1) 33.3 28.7 4.9 33.6
Taxation 4 (6.2) - (6.2) (4.7) (1.0) (5.7)
Profit for the period 31.2 (4.1) 27.1 24.0 3.9 27.9
Earnings per share (pence)
Basic 5 20.2p (2.6p) 17.6p 15.5p 2.5p 18.0p
Fully diluted 5 19.8p (2.6p) 17.2p 15.2p 2.5p 17.7p
1. Definition of the adjustments made to the reported figures can be found
in note 1 in the notes to the consolidated financial statements
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2021
2021 2020
£m £m
Profit for the period 27.1 27.9
Other comprehensive income - amounts that may be reclassified to profit or
loss in the future:
Foreign exchange translation differences - foreign operations 0.3 0.8
Total comprehensive income for the year 27.4 28.7
All results are from continuing operations.
The accompanying notes form part of these financial statements.
Consolidated Balance Sheet
at 31 December 2021
2021 2020
Note £m £m
Non-current assets
Property, plant and equipment 7 21.2 17.8
Right-of-use assets 7.8 2.7
Intangible assets 8 32.9 21.5
Investment in associate 2.1 -
Financial assets held for trading 4.3 1.4
Deferred tax asset 0.1 0.5
68.4 43.9
Current assets
Inventories 57.3 37.2
Trade and other receivables 69.7 71.8
Financial assets held for trading 0.4 4.1
Cash and cash equivalents 6.9 6.7
134.3 119.8
Total assets 202.7 163.7
Current liabilities
Trade and other payables 66.5 63.6
Current tax liabilities 1.8 3.1
Financial assets held for trading 0.1 0.5
Other financial liabilities 2.2 1.2
70.6 68.4
Non-current liabilities
Interest-bearing loans and borrowings 9 36.8 22.2
Other financial liabilities 6.0 1.6
Provisions 1.6 1.1
44.4 24.9
Total liabilities 115.0 93.3
Net assets 87.7 70.4
Equity attributable to equity holders of the parent
Share capital 0.1 0.1
Share premium 24.8 24.8
Translation reserve 0.2 (0.1)
Treasury reserve (6.7) (6.8)
Retained earnings 69.3 52.4
Total equity 87.7 70.4
The accompanying notes form part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Share Share Translation Retained Treasury Total
capital premium reserve earnings reserve equity
£m £m £m £m £m £m
Balance at 1 January 2020 0.1 24.8 (0.9) 27.2 (4.1) 47.1
Total comprehensive income
Profit for the period - - - 27.9 - 27.9
Currency revaluations of investments - - 0.3 -
Currency translation differences - - 0.5 - -
Total comprehensive income for the period - - 0.8 27.9 - 28.7
Transactions with owners in their capacity as owners:
Dividends - - - (4.9) - (4.9)
Purchase of own shares - - - - (2.7) (2.7)
Deferred tax on share-based payment transactions - - - 1.2 - 1.2
Share-based payments charge - - - 1.0 - 1.0
Total transactions with owners in their capacity as owners - - - (2.7) (2.7) (5.4)
Balance at 31 December 2020 0.1 24.8 (0.1) 52.4 (6.8) 70.4
Total comprehensive income
Profit for the period - - - 27.1 - 27.1
Currency revaluations of investments - - (1.1) - - (1.1)
Currency translation differences - - 1.4 - - 1.4
Total comprehensive income for the period - - 0.3 27.1 - 27.4
Transactions with owners in their capacity as owners:
Dividends - - - (11.2) - (11.2)
Purchase of own shares - - - - (1.3) (1.3)
Disposal of own shares - - - (1.3) 1.4 0.1
Deferred tax on share-based payment transactions - - - 0.7 - 0.7
Share-based payments charge - - - 1.6 - 1.6
Total transactions with owners in their capacity as owners - - - (10.2) 0.1 (10.1)
Balance at 31 December 2021 0.1 24.8 0.2 69.3 (6.7) 87.7
Consolidated Cash Flow Statement for the year ended 31 December 2021
Note Adjusted Adjustments(1) 2021 Adjusted Adjustments(1) 2020
£m £m £m £m £m £m
Cash flows from operating activities
Profit for the period 31.2 (4.1) 27.1 24.0 3.9 27.9
Adjustments for:
Depreciation and amortisation 7,8 6.7 1.0 7.7 6.1 0.4 6.5
Financial income - - - - (5.3) (5.3)
Financial expense 1.6 0.4 2.0 1.3 - 1.3
Taxation 4 6.2 - 6.2 4.7 1.0 5.7
Loss on disposal of tangible assets - - - 0.1 - 0.1
Increase in provisions 0.2 - 0.2 - - -
Share-based payments charge 1.7 - 1.7 1.0 - 1.0
Operating cash flow before movement in working capital 47.6 (2.7) 44.9 37.2 - 37.2
Decrease/(increase) in trade and other receivables 6.2 - 6.2 (23.5) (5.0) (28.5)
(Increase)/decrease in inventories (14.6) 1.5 (13.1) (4.8) - (4.8)
Decrease/(increase) in trade and other payables (4.2) 0.4 (3.8) 25.2 - 25.2
Cash from operations 35.0 (0.8) 34.2 34.1 (5.0) 29.1
Income taxes paid (8.1) - (8.1) (5.7) - (5.7)
Net cash from operating activities 26.9 (0.8) 26.1 28.4 (5.0) 23.4
Cash flows from investing activities
Acquisition of property, plant and equipment 7 (5.7) - (5.7) (3.3) - (3.3)
Acquisition of other intangible assets 8 (0.9) - (0.9) (1.1) - (1.1)
Disposal of tangible assets 7 0.2 - 0.2 - - -
Acquisition of subsidiary (16.3) - (16.3) - - -
Investment in associate (2.1) - (2.1) - - -
Net cash used in investing activities (24.8) - (24.8) (4.4) - (4.4)
Cash flows from financing activities
Origination/(Repayment) of borrowings 14.5 - 14.5 (3.8) - (3.8)
Interest paid (1.7) - (1.7) (1.3) - (1.3)
Dividends paid (11.2) - (11.2) (4.9) - (4.9)
Finance lease liabilities (1.4) - (1.4) (1.1) - (1.1)
Purchase of own shares (1.3) - (1.3) (2.7) - (2.7)
Net cash from financing activities (1.1) - (1.1) (13.8) - (13.8)
Net increase in cash and cash equivalents 1.0 (0.8) 0.2 10.2 (5.0) 5.2
Cash and cash equivalents at 1 January 6.7 1.4
Effect of exchange rate fluctuations on cash held - 0.1
Cash and cash equivalents at 31 December - 6.9 - 6.7
1. The definitions of the adjustments made to the statutory figures can be
found in note 1 in the notes to the consolidated financial statements
The accompanying notes form part of theses financial statements.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2021
1. Basis of preparation
Luceco plc (the 'Company') is a company incorporated and domiciled in the
United Kingdom. These consolidated financial statements for the year ended 31
December 2021 comprise the Company and its subsidiaries (together referred to
as the "Group"). The Group is primarily involved in the manufacturing and
distributing of high quality and innovative wiring accessories, LED lighting
and portable power products to global markets (see note 2).
The financial information is derived from the Group's consolidated financial
statements for the year ended 31 December 2021, which have been prepared on
the going concern basis in accordance with UK adopted international accounting
standards (UK adopted IFRS) in conformity with the requirements of the
Companies Act 2006. The financial statements have been prepared on the
historical cost basis except for certain financial instruments which are
carried at fair value.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 December 2021 and 31 December 2020
but is derived from those accounts. Statutory accounts for 2020 have been
delivered to the Registrar of Companies, and those for 2021 will be delivered
in due course. The Auditors have reported on the 2021 statutory accounts;
their report was (i) unqualified and (ii) did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors'
report can be found in the Company's full 2020 Annual Report and Accounts on
pages 105 to 112.
The 2021 Annual Report and Accounts and the Notice of the 2021 Annual General
Meeting will be published on the Company's website
at http://www.lucecoplc.com (http://www.lucecoplc.com/) as soon as
practicable. They will also be submitted to the National Storage Mechanism
where they will be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
The Group's accounting policies can be referred to in note 1 of the
consolidated financial statements in the 2021 Annual Report and Accounts.
Going concern
The Directors have concluded that it is reasonable to adopt a going concern
basis in preparing the financial statements. This is based on an expectation
that the Company and the Group have adequate resources to continue in
operational existence for at least 12 months from the date of signing these
accounts. The Group has reported a profit before tax of £33.3m for the year
to 31 December 2021 (2020: £33.6m), has net current assets of £63.7m (2020:
£51.4m) and net assets of £87.7m (2020: £70.4m), net debt of £38.1m (2020:
£18.3m) and cash generated from operations of £26.1m (2020: £23.4m). The
bank facilities mature on 30 September 2024 as detailed below:
The capital resources at the Group's disposal at 31 December 2021 and 28
February 2022 were as follows:
• A revolving credit facility of £80.0m, £36.8m drawn at 31
December 2021 and £36.8m drawn at 28 February 2022
The revolving credit facility requires the Group to comply with the following
quarterly financial covenants:
• Closing Covenant Net Debt of no more than 3.0 times Covenant
EBITDA for the preceding 12-month period
• Covenant EBITDA of no less than 4.0 times Covenant Net Finance
Expense for the preceding 12‑month period
The Directors ran scenario tests on the severe but plausible downside case.
The assumptions in this scenario were as follows: Concentration risks with
associated operations (25% reduction in revenue for three months followed by
50% reduction for three months and 20% increase in shipping costs during the
period) and macroeconomic, political and environmental risks (18 month
recession with a 10% reduction in revenue and gross profit). These severe but
plausible downside scenarios do not lead to any breach in covenants nor any
breach in facility. All modelling has been conducted without any mitigation
activity. There have been no changes to post balance sheet liquidity
positions.
The Directors are confident that the Group and Company will have sufficient
funds to continue to meet its liabilities
as they fall due for at least 12 months from the date of approval of the
financial statements and therefore have
prepared the financial statements on a going concern basis.
Statutory and non-statutory measures of performance - adjusted measures
The financial statements contain all the information and disclosures required
by the relevant accounting standards and regulatory obligations that apply to
the Group.
The Group's performance is assessed using a number of financial measures which
are not defined under IFRS (the financial reporting framework applied by the
Group). Management uses the adjusted or alternative performance measures
(APMs) as a part of their internal financial performance monitoring and when
assessing the future impact of operating decisions. The APMs disclose the
adjusted performance of the Group excluding specific items. The measures allow
a more effective year-on-year comparison and identification of core business
trends by removing the impact of items occurring either outside the normal
course of operations or as a result of intermittent activities such as a
corporate acquisition. The Group separately reports acquisition costs, other
exceptional items and other specific items in the Consolidated Income
Statement which, in the Directors' judgement, need to be disclosed separately
by virtue of their nature, size and incidence in order for users of the
financial statements to obtain a balanced view of the financial information
and the underlying performance of the business.
In following the guidelines on Alternative Performance Measures (APMs) issued
by the European Securities and Markets Authorities, the Group has included a
Consolidated Income Statement and Consolidated Cash Flow Statement that have
both Statutory and Adjusted performance measures. The definitions of the
measures used in these results are below and the principles to identify
adjusting items have been applied on a basis consistent with previous years.
Nature of measure Related IFRS measure Related IFRS source Definition Use/relevance
Adjusted Gross Profit Margin Gross Profit Margin Consolidated Income Statement Based on the related IFRS Allows management to
measure but excluding the assess the performance
adjusting items. of the business after
A breakdown of the removing large/unusual
adjusting items from 2021 items or transactions that
and 2020, which reconciles are not reflective of the
the adjusted measures to underlying business
statutory figures, can be operations
found on the following page
Adjusted Operating Costs Operating Gross profit less Operating profit Consolidated Income Statement
Adjusted Operating Profit Operating profit Consolidated Income Statement
Adjusted Basic EPS Basic EPS Consolidated Income Statement
Constant Currency Current period reviewed translated at the average exchange rate of the prior Allows management
year
to identify the relative
year-on-year performance
of the business by removing
the impact of currency
movements that are outside
of management's control
EBITDA Operating profit Consolidated Income Statement Consolidated earnings before interest, tax, depreciation and amortisation Provides management with an approximation of cash generation from the Group's
operational activities
Adjusted EBITDA Operating profit Consolidated Income Statement Consolidated earnings before interest, tax, depreciation and amortisation and Provides management with an approximation of cash generation from the Group's
the adjusting items excluded from Adjusted Operating Profit aside from the underlying activities
amortisation of acquired intangibles
Covenant EBITDA Operating profit Consolidated Income Statement As above definition of 'Adjusted EBITDA' but including EBITDA generated from Aligns with the definition of EBITDA used for bank covenant testing
acquisitions between 1 January and the date of acquisition
Contribution profit Operating profit and operating costs Consolidated Income Statement Contribution profit is after allocation of adjusted operating expenses for Provides management with an assessment of profitability by operating segment
each operating segment
Contribution margin Operating profit and operating costs Consolidated Income Statement Contribution margin is contribution profit, as above, divided by revenue for Provides management with an assessment of margin by operating segment
each operating segment
Adjusted Operating Cash Flow Cash flow from operations Consolidated Income Statement Adjusted Operating Cash Flow is the cash from operations but excluding the Provides management with an indication of the amount of cash available for
cash impact of the adjusting items excluded from Adjusted Operating Profit discretionary investment
Adjusted Free Cash Flow Net increase/(decrease) in cash and cash equivalents Consolidated Income Statement Adjusted Free Cash Flow is calculated as Adjusted Operating Cash Flow less Provides management with an indication of the free cash generated by the
cash flows in respect of investing activities, interest and taxes paid business for return to shareholders or reinvestment in M&A activity
Adjusted Operating Cash Conversion None Consolidated Cash Flow Statement and Consolidated Income Statement Operating Cash Conversion is defined as Adjusted Cash from operations divided Allows management to monitor the conversion of operating profit into cash
by Adjusted Operating Profit
Return on Capital Invested ("ROCI") None Operating profit and Net assets Adjusted Operating Profit divided into the sum of net assets, net debt and To provide an assessment of how profitability capital is being deployed in the
non-recourse debt factoring (average for the last two years) expressed as a business
percentage
The following tables indicate how alternative performance measures are
calculated:
2021 2020
Adjusted EBITDA £m £m
Adjusted Operating Profit 39.0 30.0
Adjusted Depreciation and Amortisation 6.7 6.1
Adjusted EBITDA 45.7 36.1
2021 2020
Covenant EBITDA £m £m
Adjusted EBITDA 45.7 36.1
EBITDA from acquisitions from 1 January 2021 to the date of acquisition 1.2 -
Covenant EBITDA 46.9 36.1
2021 2020
Adjusted Operating Cash Conversion £m £m
Cash from operations (from Consolidated Cash Flow Statement) 34.2 29.1
Adjustments to operating cash flow (from Consolidated Cash Flow Statement) 0.8 5.0
Adjusted Operating Cash Flow 35.0 34.1
Adjusted Operating Profit 39.0 30.0
Adjusted Operating Cash Conversion 89.7% 113.7%
2021 2020
Adjusted Net Cash Flow as % of revenue £m £m
Adjusted Free Cash Flow (see below) 18.8 22.7
EBT Purchases (1.3) (2.7)
Dividends (11.2) (4.9)
Adjusted Net Cash Flow 6.3 15.1
Revenue 228.2 176.2
Adjusted Net Cash Flow as % of revenue 2.8% 8.6%
2021 2020
£m £m
Adjusted Operating Cash Flow (see table above) 35.0 34.1
Net Cash used in investing activities excluding acquisitions (from (6.4) (4.4)
Consolidated Cash Flow Statement)
Interest paid (from Consolidated Cash Flow Statement) (1.7) (1.3)
Tax paid (from Consolidated Cash Flow Statement) (8.1) (5.7)
Adjusted Free Cash Flow 18.8 22.7
Revenue 228.2 176.2
Adjusted Free Cash Flow as % revenue 8.2% 12.9%
2021 2020
Return on Capital Investment £m £m
Net assets 87.7 70.4
Net debt 38.1 18.3
Capital invested 125.8 88.7
Average capital invested (from last two years) 107.3 84.1
Adjusted Operating Profit (from above) 39.0 30.0
Return on Capital Invested (Adjusted Operating Profit/average capital 36.4% 35.7%
invested)
The following table reconciles all adjustments from the reported to the
adjusted figures in the income statement:
2021 Amortisation of acquired intangibles and related acquisition costs(1) Re-measurement Restructuring(3) 2021 2021
£m £m to fair value of hedging portfolio(2) £m Adjustments Adjusted
£m £m £m
Revenue 228.2 - - - - 228.2
Cost of sales (143.5) - - - - (143.5)
Gross profit 84.7 - - - - 84.7
Distribution expenses (7.8) - - - - (7.8)
Administrative expenses (41.6) 1.4 - 2.3 3.7 (37.9)
Operating profit 35.3 1.4 - 2.3 3.7 39.0
Net finance expense (2.0) - 0.4 - 0.4 (1.6)
Profit before tax 33.0 1.4 0.4 2.3 4.1 37.4
Taxation (6.2) 0.1 (0.1) - - (6.2)
Operating profit 27.1 1.5 0.3 2.3 4.1 31.2
Gross margin 37.1% 37.1%
1. Relating to Kingfisher Lighting and DW Windsor
2. Relating to currency hedges
3. Relating to the closure of Germany and France operation
Amortisation of acquired intangibles and related acquisition costs(1) Re-measurement 2020 2020
2020 £m to fair value of hedging portfolio(2) Adjustments Adjusted
£m £m £m £m
Revenue 176.2 - - - 176.2
Cost of sales (106.0) - - - (106.0)
Gross profit 70.2 - - - 70.2
Distribution expenses (8.6) - - - (8.6)
Administrative expenses (32.0) 0.4 - 0.4 (31.6)
Operating profit 29.6 0.4 - 0.4 30.0
Net finance expense 4.0 - (5.3) (5.3) (1.3)
Profit before tax 33.6 0.4 (5.3) (4.9) 28.7
Taxation (5.7) - 1.0 1.0 (4.7)
Operating profit 27.9 0.4 (4.3) (3.9) 24.0
Gross margin 39.8% 39.8%
1. Relating to Kingfisher Lighting
2. Relating to currency hedges
Standards and interpretations issued
The following UK-adopted IFRSs have been issued but have not been applied in
these financial statements. Their adoption is not expected to have a material
effect on the financial statements unless otherwise indicated from 1(st)
January 2021:
• Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current
• Amendments to References to the Conceptual Framework in IFRS 3
• Amendments to IAS 16: Property, Plant and Equipment - Proceeds
before Intended Use
• Annual Improvements to IFRS Standards 2018-2020
• Amendments to IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors to introduce a new definition for accounting estimates
• Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statements 2 Making Materiality Judgements
• Amendments to IAS 12 Income Taxes - Deferred Tax Related to
Assets and Liabilities Arising from a Single Transaction
2. Operating segments
The Group's principal activities are in the manufacturing and supply of Wiring
Accessories, LED Lighting and Portable Power equipment. For the purposes of
management reporting to the Chief Operating Decision-Maker (the Board), the
Group consists of three operating segments which are the product categories
that the Group distributes. The Board does not review the Group's assets and
liabilities on a segmental basis and, therefore, no segmental disclosure is
included. Inter-segment sales are not material. Revenue and operating profit
are reported under IFRS 8 Operating Segments.
Adjusted Reported Adjusted Reported
2021 Adjustments 2021 2020 Adjustments 2020
£m £m £m £m £m £m
Revenue
Wiring Accessories 104.5 - 104.5 81.3 - 81.3
LED Lighting 63.2 - 63.2 49.5 - 49.5
Portable Power 60.5 - 60.5 45.4 - 45.4
228.2 - 228.2 176.2 - 176.2
Operating profit
Wiring Accessories 29.2 - 29.2 23.0 - 23.0
LED Lighting 3.4 (3.3) 0.1 2.8 (0.4) 2.4
Portable Power 6.4 (0.4) 6.0 4.2 - 4.2
Operating profit 39.0 (3.7) 35.3 30.0 (0.4) 29.6
The following table provides an analysis of adjustments made to each segment
2021 2020
Total Amortisation of acquired intangibles and related costs(1) Restructuring(2) Total Amortisation of acquired intangibles and related costs(1)
£m £m £n £m £m
Cost of sales
Wiring Accessories - - - - -
LED Lighting - - - - -
Portable Power - - - - -
Gross Profit - - - - -
Administration expenses
Wiring Accessories - - - - -
LED Lighting (3.3) (1.4) (1.9) 0.4 0.4
Portable Power (0.4) - (0.4) - -
Total (3.7) (1.4) (2.3) 0.4 0.4
Operating profit
Wiring Accessories - - - - -
LED Lighting (3.3) (1.4) (1.9) 0.4 0.4
Portable Power (0.4) - (0.4) - -
Operating profit (3.7) (1.4) (2.3) 0.4 0.4
1. Relating to Kingfisher Lighting in 2020 and Kingfisher Lighting and DW
Windsor in 2021
2. Relating to currency hedges
Revenue by location of customer
2021 2020
£m £m
UK 181.2 140.3
Europe 24.0 18.4
Middle East and Africa 7.6 7.0
Americas 10.6 6.7
Asia Pacific 4.8 3.8
Total revenue 228.2 176.2
Revenues exceeded 10% or more of total revenue for one customer. This
customer's revenue represents 30% (2020:
31%) of total revenue and is across all operating segments.
Non-current assets by location
2021 2020
£m £m
UK 51.1 29.2
China 16.3 14.1
Other 1.0 0.6
Total non-current assets 68.4 43.9
3. Expenses recognised in the Consolidated Income Statement
Included in the Consolidated Income Statement are the following:
2021 2020
£m £m
Research and development costs expensed as incurred 3.0 2.2
Depreciation of property, plant and equipment and right-of-use assets 5.3 4.3
Amortisation of intangible assets 2.4 2.2
4. Income tax expense
2021 2020
£m £m
Current tax expense
Current year - UK 5.4 5.4
Current year - overseas 0.6 1.0
Adjustment in respect of prior years 0.6 (0.4)
Current tax expense 6.6 6.0
Deferred tax expense/(credit)
Origination and reversal of temporary differences (0.6) (0.1)
Adjustment in respect of prior years 0.2 (0.2)
Deferred tax (credit)/expense (0.4) (0.3)
Total tax expense 6.2 5.7
2021 2020
Reconciliation of effective tax rate £m £m
Profit for the year 27.1 27.9
Total tax expense 6.2 5.7
Profit before tax 33.3 33.6
Tax using the UK corporation tax rate of 19.0% (2020: 19.0%) 6.3 6.4
Effect of tax rates in foreign jurisdictions - 0.1
Tax credits (0.4) -
Non-deductible expenses 0.1 0.3
Adjustment in respect of previous periods 0.5 (0.6)
Effect of rate change in calculation of deferred tax 0.2 -
Deferred tax on share-based payments (0.3) (0.3)
Utilisation of unrecognised overseas brought forward tax losses (0.2) (0.2)
Total tax expense 6.2 5.7
A tax reduction of £0.2m within overseas tax occurred in the period due to
the utilisation of brought forward overseas trading losses previously not
recognised as a deferred tax asset due to it being deemed unlikely that they
could be utilised. The adjustment in respect of previous periods of £0.5m
relates to differences between the Group's tax provisions at the date of the
accounts being signed and the completion of the final Group's tax returns.
Factors which may affect future current and total tax charges
An increase in the UK corporation rate from 19% to 25% (effective 1 April
2023) was substantively enacted on 24 May 2021. This will increase the
company's future current tax charge accordingly. The deferred tax liability at
31 December 2021 has been calculated based on these rates, reflecting the
expected timing of reversal of the related temporary/timing differences (2020:
19%).
5. Earnings per share
Earnings per share is calculated based on the profit for the period
attributable to the owners of the Group. Adjusted earnings per share is
calculated based on the adjusted profit for the period, as detailed below,
attributable to the owners of the Group. These measures are divided by the
weighted average number of shares outstanding during the period.
2021 2020
£m £m
Earnings for calculating basic earnings per share 27.1 27.9
Adjusted for:
Restructuring of European operations 2.3 -
Amortisation of acquired intangibles and related acquisition costs 1.4 0.4
Remeasurement to fair value of hedging portfolio 0.4 (5.3)
Income tax on above items - 1.0
Adjusted earnings for calculating adjusted basic earnings per share 31.2 24.0
2021 2020
Number Number
Weighted average number of ordinary shares Million million
Basic 154.1 154.7
Dilutive effect of share options on potential ordinary shares 3.8 2.7
Diluted 157.9 157.4
2021 2020
Pence Pence
Basic earnings per share 17.6 18.0
Diluted earnings per share 17.2 17.7
Adjusted basic earnings per share 20.2 15.5
Adjusted diluted earnings per share 19.8 15.2
6. Dividend
Amounts were recognised in the financial statements as distributions to equity
shareholders as follows:
2021 2020
£m £m
Final dividend for the year ended 31 December 2020 of 4.7p (2019: 1.7p) per 7.2 2.6
ordinary share
Interim dividend for the year ended 31 December 2021 of 2.6p (2020: 1.5p) per 4.0 2.3
ordinary share
Total dividend recognised during the year 11.2 4.9
7. Property, plant and equipment
During the year, the Group purchased assets at a cost of £5.7m (2020:
£3.3m); including plant and equipment £2.9m, tooling £1.5m, construction in
progress £0.7m, land and buildings £0.4m and fixtures and fittings £0.2m.
In addition, assets with a net book value of £0.9m were acquired through the
acquisition of DW Windsor Group Limited. Assets with a net book value of
£0.2m were disposed of (2020: £0.1m). Total depreciation for the period was
£3.5m (2020 £3.1m).
During the year there were lease additions totalling £3.4m and a depreciation
charge of £1.8m. In addition, lease assets with a net book value of £3.6m
were acquired through the acquisition of DW Windsor Group Limited. The net
book value of right-of-use assets at 31 December 2021 was £7.8m (31 December
2020: £2.7m).
The Group has not included any borrowing costs within additions in 2021 (2020:
£nil). There were no funds specifically borrowed for the assets and the
amount eligible as part of the general debt instruments pool (after applying
the appropriate capitalisation rate) is not considered material.
For further information refer to note 9 of the consolidated financial
statements in the 2021 Annual Report and Accounts.
8. Intangible assets and goodwill
Development expenditure is capitalised and included in intangible assets when
it meets the criteria laid out in IAS 38, "Intangible Assets". During the
year, the Group incurred internally generated development costs of £0.9m
(2020: £1.1m). The Group has not included any borrowing costs within
capitalised development costs. There were no funds specifically borrowed for
this asset and the amount eligible as part of the general debt instruments
pool (after applying the appropriate capitalisation rate) is not considered
material. As a result of the acquisition of DW Windsor Group Limited during
the year, the Group recognised £5.4m of goodwill, £2.5m of development
costs, £3.2m of customer relationships and £1.8m of brand names.
Amortisation totalled £2.4m (2020: £2.2m). Net book value at 31 December
2021 was £32.9m (31 December 2020: £21.5m).
Goodwill impairment is reviewed annually. Further details on the review
conducted at 31 December 2021 can be found in note 10 to the 2021 Annual
Report and Accounts. No impairment charge was recorded in either 2021 or 2020.
9. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings, which are measured at amortised cost.
For more information about the Group's exposure to interest rate and foreign
currency risk, please refer to note 20 in the 2021 Annual Report and
Accounts.
2021 2020
£m £m
Non-current liabilities
Revolving credit facility 36.8 13.6
Secured bank loans - Invoice financing - 8.6
36.8 22.2
Bank loans are secured by a fixed and floating charge over the assets of the
Group.
10. Exchange rates
The following significant Sterling exchange rates were applied during the
year:
Average rate Reporting date spot rate
2021 2020 2021 2020
USD 1.38 1.28 1.35 1.36
EUR 1.16 1.12 1.19 1.11
RMB 8.87 8.92 8.59 8.91
11. Related party transactions
Transactions with key personnel
Key personnel include executive and non-executive Board members and the senior
management team. The compensation of key management personnel, including
executive Directors, is as follows:
2021 2020
£m £m
Remuneration (including benefits in kind) 6.9 7.2
Element of share-based payments expense 1.7 1.0
8.6 8.2
12. Post Balance Sheet Events
The Group held a 20% investment in associate with EV Charge Points UK T/A EVCP
Limited ("Sync EV") for £2.1m from August 2021, based in Crawley, England.
The business manufactures electrical equipment for the electric vehicle
charging sector. On 21 March 2022, the remaining 80% of the business was
acquired by the Group at a cash and debt free enterprise value of £8.0m.
13. Annual General Meeting
The 2022 AGM will take place on 12 May 2022 at Numis Securities, 45 Gresham
Street, London EC2V 7BF. The notice of AGM and any related documents will be
sent to shareholders within the prescribed timescales. Shareholders will be
encouraged to submit their proxy votes online.
14. Date of approval of financial information
The financial information covers the year 1 January 2021 to 31 December 2021
and was approved by the Board on 22 March 2022. A copy of the 2021 Annual
Report and Accounts will be published on the Luceco plc investor relations
website, www.lucecoplc.com (http://www.lucecoplc.com) as soon as practicable.
Additional information
Financial calendar
Dividend record date 7 April 2022
Dividend reinvestment plan final date for election 28 April 2022
Annual General Meeting 12 May 2022
Dividend paid 20 May 2022
Half-year end 30 June 2022
Half-year end trading update 19 July 2022
Half-year interim management statement 6 September 2022
Year end 31 December 2022
Full-year preliminary statement March 2023
Company's registered office
Luceco plc
Building E Stafford Park 1
Stafford Park
Telford TF3 3BD
www.lucecoplc.com (http://www.lucecoplc.com)
ir@luceco.com
Independent auditor
KPMG LLP
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham B4 6GH
Financial advisors and brokers
Numis Securities
45 Gresham Street
London EC2V 7BF
Liberum
Ropemaker Place
Level 12, 25 Ropemaker Street
London EC2Y 9LY
Company registrar
Link Group
10th floor, Central Square
29 Wellington Street
Leeds LS1 4DL
Email: shareholderenquiries@linkgroup.co.uk
(mailto:shareholderenquiries@linkgroup.co.uk)
Tel: UK: 0371 664 0300 (calls are charged at the standard
geographic rate and will vary by provider)
International: +44 (0)371 664 0300
Company secretariat
Company Matters (part of Link Group)
6(th) Floor, 65 Gresham Street
London EC2V 7NQ
Email: luceco@linkgroup.co.uk (mailto:luceco@linkgroup.co.uk)
Tel: 020 7954 9547
Financial PR
MHP Communications
6 Agar Street
London WC2N 4HN
Email: luceco@mhpc.com (mailto:luceco@mhp.com)
Tel: 020 3128 8990
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