REG - Luceco PLC - 2023 Interim Results
05/09/2023 07:00
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RNS Number : 3464L Luceco PLC 05 September 2023
5 September 2023
LUCECO PLC - 2023 INTERIM RESULTS
Encouraging first half performance, continued improving momentum and strong
orderbook, remaining vigilant in a changing economic environment
Luceco plc, the supplier of wiring accessories, EV chargers, LED lighting, and
portable power products, today announces its unaudited results for the six
months ended 30 June 2023 ("H1 2023" or "the period").
2023 Summary results
Six months ended 30 June 2023 H1 2023 H1 2022 Change (%)
(£m unless otherwise stated)
Revenue 101.1 106.4 (5.0%)
Adjusted Results(1)
Adjusted operating profit 10.8 11.5 (6.1%)
Adjusted profit before tax 9.4 10.5 (10.5%)
Adjusted profit after tax 7.7 9.0 (14.4%)
Adjusted basic earnings per share 5.0p 5.8p (13.8%)
Statutory Results
Operating profit 9.8 10.0 (2.0%)
Profit before tax 6.2 4.6 +34.8%
Profit after tax 5.3 4.2 +26.2%
Basic earnings per share 3.4p 2.7p +25.9%
Metrics
Adjusted(1) Operating margin % 10.7% 10.8% (0.1ppts)
Covenant Net Debt 37.6 53.9 (30.2%)
Covenant Net Debt : Covenant EBITDA(2) 1.3x 1.4x (7.1%)
Adjusted(1) Free cash flow (8.0) (2.8) (185.7%)
Dividend per share 1.6p 1.6p 0.0%
1. The definitions of the adjustments made and reconciliations to the
reported figures can be found in note 1 of the condensed consolidated
financial statements
2. Includes pro-forma adjustment for EBITDA of acquired businesses, as
shown in note 1 of the condensed consolidated financial statements
Performance highlights
• 2023 results slightly ahead of the July trading update:
◦ Revenue: £101.1m in line with the expected slow down seen in the residential
Repair, Maintenance and Improvement ("RMI") market (H1 2022: £106.4m)
◦ Adjusted Operating Profit: £10.8m (H1 2022: £11.5m) reflecting a return to
strong gross margins, up over 5 percentage points versus H1 2022 to 39.4%
◦ Adjusted EPS: 5.0p (H1 2022: 5.8p)
◦ Covenant Net Debt reduced by 30.2% year on year and Covenant Net Debt : EBITDA
ratio remains at the lower end of the target range at 1.3x (H1 2022: 1.4x)
• Improving momentum in H1 2023:
◦ Customer stocking has appeared to return to normal levels at the end of H1
2023 following post-pandemic destocking
◦ Non-residential demand continues its favourable trend
◦ Despite economic headwinds, revenue decline has been less than expected
◦ Material and freight costs pressures have subsided
◦ Operational synergies at DW Windsor, within the most recent addition to the
Group, contributed to a strong first half performance with near double digit
operating margin and some key contract wins
◦ EV business has grown further, with a strong pipeline of new products
Outlook
· Despite ongoing weakness in our core markets, we have made further
progress since the July trading update and we now expect full year 2023
adjusted operating profit to show clear progress on last year. This is above
the current range of market expectations.
· We remain mindful of the uncertain macroeconomic environment and the
potential impact it may have on our markets in 2024.
Commenting on the results, Chief Executive Officer, John Hornby said:
"It has been an encouraging first half for Luceco. Our gross profit margin
improved as material and freight cost pressures continued to ease during the
period, albeit partially offset by wage pressures. We continue to build an
attractive M&A pipeline and we have further strengthened our balance
sheet.
We have a number of exciting product developments in progress, which provide
us with good medium and long-term opportunities for growth. A strong order
book supports a reassuring outlook for the remainder of the year. Historically
the Group has enjoyed a stronger second half and, whilst we are mindful of the
current economic environment, we expect a similar trend this year."
Results information
A meeting for analysts will be held at 9:30am BST today, Tuesday 5 September
2023 at the offices of Liberum, 25 Ropemaker Street, London EC2Y 9LY. To
register to attend please email luceco@mhpgroup.com
(mailto:luceco@mhpgroup.com) . To register to watch a live webcast of the
meeting, please follow this link:
https://stream.brrmedia.co.uk/broadcast/64df4eadaed457815bbbbcc2
(https://stream.brrmedia.co.uk/broadcast/64df4eadaed457815bbbbcc2)
The Company will host a presentation for private investors on the Investor
Meet Company platform on Wednesday 6th September at 4:00pm BST. Those wishing
to attend can register via the following link:
https://www.investormeetcompany.com/luceco-plc/register-investor
(https://www.investormeetcompany.com/luceco-plc/register-investor)
Luceco plc Contact
John Hornby, Chief Executive Officer 020 3128 8276 (Via MHP)
Will Hoy, Chief Financial Officer 020 3128 8276 (Via MHP)
MHP Contact
Tim Rowntree 020 3128 8004
Ollie Hoare 020 3128 8276
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 as
it forms part of the domestic law of the UK by virtue of the European Union
(Withdrawal) Act 2018 (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 as it forms part of the domestic law of the UK by virtue of the
European Union (Withdrawal) Act 2018, this announcement is being made on
behalf of Luceco plc by Will Hoy, Chief Financial Officer.
Note to Editors
Luceco plc - Bringing Power To Life
Luceco plc (LSE:LUCE) is a supplier of wiring accessories, EV chargers, LED
lighting, and portable power products.
Luceco plc ("Luceco", "the Group" or "the Company").
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
condensed 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's review
Performance highlights
During the first half of 2023, we achieved revenue of £101.1m (H1 2022:
£106.4m) and Adjusted Operating Profit of £10.8m (H1 2022: £11.5m), which
is slightly ahead of the performance reported in our July trading update.
During the period we have increased our gross margin, as material and freight
costs continue to ease, albeit these have been partially offset by increasing
wage costs.
Customer stock movements
In 2021, the combination of strong end user demand and exceptionally
constrained global supply chains caused our distributor customers to
materially increase their stock of our products, adding to our sales, as
previously reported. In 2022 and in the first half of 2023, they largely
unwound the extra inventory added as both demand and supply chain constraints
eased, reducing our sales.
As of June 2023, this period of destocking appears to be complete, based on
the analysis of EPOS data with our customers who have returned to more
normalised purchasing patterns.
Cost inflation
Following the global supply and demand imbalances during the pandemic we have
finally seen cost inflation subside with material and freight and duty prices
continuing to ease. Our gross margin is beginning to return to
through-the-cycle levels which is encouraging.
Underlying demand
Despite strong economic headwinds and unfavourable leading indicators we have
not seen the extent of the reduction in revenue that might have been expected
in the first half of the year.
We have seen resilient demand in the residential professional and
non-residential sectors which has helped maintain activity levels at this
higher than expected rate.
Whilst this position has been encouraging, we are cognisant of the current
macroeconomic climate and will remain vigilant in the second half of the year
and into the early part of 2024 as pressure increases further on discretionary
consumer spending.
Supply chain management
Lead times normalised in 2022 following the peaks during the pandemic and have
remained consistent in the current period - accordingly we have been managing
our own inventory position to the new normalised demands.
Strategic highlights
I am pleased with the continued progress we have made against our business
strategy to Grow, Innovate and Sustain, which leaves us well positioned to
make further progress and continue our competitive advantage.
Grow
Our Grow strategy takes a two-pronged approach of organic and M&A growth.
Our organic growth is driven by being agile and innovative to our customer
needs. We can achieve this because we make a significant amount of our
products in-house and also because of the Group's culture and desire to design
and build new and innovative products.
The Group generates strong operational cash flow and this can be used to fund
acquisitions. The recent acquisition of Sync EV in 2022 has given us a
valuable foothold in the rapidly growing EV charger market, whilst our DW
Windsor acquisition provides a more diversified infrastructure related revenue
stream - which is holding firm in this tight consumer spending period.
Kingfisher Lighting has recently won a contract, as one of seven key
suppliers, to provide lighting for the Premiership Floodlighting scheme -
which should provide a revenue stream from the second half of 2023 to 2027.
Through organic growth and M&A, we have increased our sales of
professionally installed products over recent years, a key strategic priority,
to complement our historic weighting towards consumer installed products. This
has given us greater access to a typically higher margin and more resilient
market. Our growth in the non-residential construction market has proven
particularly beneficial as consumer-led construction has normalised post-COVID
and institutions have increasingly demanded LED retrofit projects to combat
energy cost increases.
Innovate
The Group has approximately 100 product development specialists globally.
Their focus is on developing new products whilst continually enhancing our
existing range. Our product development process is customer-centric, rapid and
carries relatively low execution risk due to our extensive and close
relationships with distributors and retailers. It has been a key driver of the
Group's historic success.
A key new development in the year has been the introduction our new 22kw EV
charger which will have applications in the commercial and higher end
residential space - developed in-house in the UK in conjunction with our
production facility in China.
We are pleased to report that DW Windsor is beginning to utilise our expertise
and manufacturing capacity, both in the UK and China, for its product base
which will help us transform the business further.
We continue to innovate our core offering to deliver higher margin products,
with a particular focus on redesigning products to simplify their installation
by professional contractors.
Sustain
Our Sustain strategy is becoming more prominent and important to the Group -
we see this being a key competitive advantage for the future with the Group
already highly geared towards a green oriented product range.
During the first half of 2023 we received validation from the Science Based
Targets initiative ("SBTi"), targeting a 42% reduction in operational
emissions and a 27.5% reduction in value chain emissions by 2031. Our
operations continue to offer one of the lowest operational carbon footprints
in our industry and our progress was recognised with an upgraded rating by the
Carbon Disclosure Project in 2022 from a "C" to a "B". We continue to make
further progress in this area during 2023.
We remain committed to working closely with contractors on training seminars
and with the development of the next generation of contractors.
How we create value
Our attractive markets
Over the course of the last decade, we have worked hard to grow our share of
existing markets as well as enter adjacent markets where we see a competitive
advantage. As a result, we now hold enviable positions across a range of
industries that are poised for future growth.
Residential construction and DIY markets have slowed and demand declined in
the period but this is following a relative buoyant 2021 performance boosted
by lockdowns. These markets remain more active than they were in 2019.
Consumers continue to spend more time living and working from home than they
did pre-pandemic, which continues to be a benefit to the Group.
Non-residential construction markets are expected to be broadly flat this year
with continuing higher energy prices driving increased interest in our
energy-saving LED lighting retrofit projects.
I am also encouraged that the infrastructure market, which we serve through
our Kingfisher Lighting and DW Windsor businesses, is expected to be stable
for 2023. Our customers operating within the infrastructure market have long
recognised the benefits that premium exterior lighting can have on an
environment, but given the current cost of energy, these advantages have
become even more pertinent.
I am confident that the right fundamental drivers are in place in each of our
chosen markets for us to see sustained growth over the coming years, despite
operating in a period of short-term macroeconomic uncertainty. What is more, I
am certain that we have the right strategy in place to outperform these
markets over the long term.
Our advantaged business model
Our advantaged business model is a key reason why we capture opportunities in
our chosen markets. Over the course of the pandemic our vertical integration
gave us unmatched control of supply, enabling us to provide greater product
availability to our customers and fuelling our own market share gains.
Our business model enabled us to remain agile as short-term demand changed as
a result of our customers' stock movements. As our operating environment
altered, our close control of our own manufacturing and distribution channels
enabled us to respond quickly by flexing our inventory levels, generating cash
and maintaining good gross margins.
Although our markets are attractive, the opportunities they create can only be
harnessed by those with the correct processes and knowledge. Regulatory change
is a key part of our industry, with new wiring regulations introduced
approximately every two years.
Our advantaged business model allows us to redesign to meet these new
regulations, manufacture the new product at our own facilities and bring the
product to market quickly and efficiently under our trusted brands. The same
advantages apply when considering the end consumers' increasing desire for
more technology and increased functionality, which we can respond to more
quickly than others.
Outlook
Encouragingly, trading in the first half of 2023 has been slightly ahead of
our expectations, illustrating the robustness of our business model despite
headwinds from economic indicators. We will continue to remain cautious and
vigilant in the latter half of this year and in the early part of 2024, but I
am encouraged by the healthy underlying trading performance across our
business and the strong order book for Q3 2023 illustrating Luceco's leading
positions in our core markets. When economic pressures ease, the Group is very
well placed to grow and expand at a fast pace.
JOHN HORNBY
Chief Executive Officer
5 September 2023
Chief Financial Officer's review
Summary of reported results
Summary results (£m) H1 2023 H1 2022
Revenue 101.1 106.4
Operating profit 9.8 10.0
Profit before tax 6.2 4.6
Taxation (0.9) (0.4)
Profit for the period 5.3 4.2
Operating profit of £9.8m was just below the prior half year of £10.0m -
despite the macroeconomic headwinds and a higher operating cost base largely
as a result of UK wage inflation. Improvements in gross margin as cost
pressures ease are helping margins move towards through-the-cycle levels.
Adjusting items
Adjusting items are those which we consider unusual by virtue of their size or
incidence and therefore not representative of our underlying trading
performance. We have identified £1.0m of such items within our reported
operating profit for 2023 (H1 2022: £1.5m). They consist of:
· Amortisation of acquired intangibles: £1.0m (H1 2022: £0.9m)
· Acquisition related costs: nil (H1 2022: £1.1m)
· Restructuring costs: nil (H1 2022: £0.5m credit)
Adjusted Operating Profit for the period, excluding the items above, was
therefore £10.8m (H1 2022: £11.5m).
Income statement
Revenue
Revenue of £101.1m was £5.3m (5.0%) lower than H1 2022 with the main
movements summarised below:
Bridge from H1 2023/2 Bridge from H1 2021/2
Revenue bridge: £m Change % £m %
2022/2021 106.4 108.2
Acquisitions/closures (1.3) 13.6
Like-for-like (decrease)/increase(1) (6.2) (5.8%) (17.8) (16.5%)
Constant Currency(2) 98.9 104.0
Currency movements 2.2 2.4
TOTAL 101.1 (5.0%) 106.4 (1.7%)
1. Like-for-like revenue increase excludes the impact of currency
movements and acquisitions, see note 10 of the condensed consolidated
financial statements
2. 2023 revenue translated at 2022 exchange rates and 2022 revenue
translated at 2021 exchange rates
Total revenue declined by a modest 5.0% against the backdrop of difficult
economic conditions, with revenue falling less than the Group had previously
anticipated.
Like-for-like revenue declined by £6.2m compared to H1 2022 predominantly as
a result of the expected reduction in residential DIY activity.
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 largely fulfilled via Professional Wholesale
Performance by sales channel was as follows:
Like-for-like revenue by sales channel: H1 2023 H1 2023 Change v H1 2022 %
£m % of total
Retail 20.3 20.9% (30.6%)
Hybrid 23.5 24.2% 23.7%
Professional Wholesale 24.5 25.2% (6.8%)
Professional Projects 29.0 29.7% 4.7%
Like-for-like revenue 97.3 100.0% (5.8%)
Currency impact 2.2
Acquisitions 1.6
TOTAL 101.1 (5.0%)
Nearly all of the destocking impact we experienced in 2022 arose within the
Retail and Hybrid channels - the Hybrid channel has recovered in the period
but the Retail channel continued to destock during the first half of 2023.
From analysis of customer EPOS data, the products which have seen the largest
destocking have been our Portable Power products. This was caused due to
unusually high demand during the pandemic impacting their normalised customer
stocking levels. The Professional Wholesale channel declined in line with the
expected trade slow-down.
The Professional Projects channel had an increase in the period of 4.7% which
continues the strong performance from Kingfisher Lighting and growing
commercial and institutional demand for LED retrofits in the UK with high
electricity prices and as the climate agenda becomes more of a focus.
Revenue by geographical location of customer: H1 2023 H1 2022 Change v
£m £m H1 2022 %
UK 86.5 85.5 +1.2%
Europe 6.3 11.2 (43.8%)
Middle East and Africa 3.8 3.3 +15.2%
Asia Pacific 1.2 2.4 (50.0%)
Americas 3.3 4.0 (17.5%)
Total revenue 101.1 106.4 (5.0%)
The change in revenue by geography has a number of characteristics by location
of the customer.
Within the UK, professional residential and non-residential demand has
remained strong and this has supported some overall growth of 1.2%.
European sales reduced in the period following the closure of our operations
in Germany and France in the prior period with no sales in the current year.
The sales decline in the Americas is attributable to a key customer in the US
DIY channel that over stocked in 2021 and we have seen further destocking
impacts during the first half of 2023, which appears to now be complete.
Profitability
Adjusted Operating Profit of £10.8m for H1 2023 was £0.7m lower than H1
2022. The key drivers were as follows:
Bridge from Bridge from
Adjusted Operating profit H1 2022 H1 2021
£m £m
2022/21 11.5 19.2
Acquisitions/closures 0.2 0.1
Like-for-like increase/(decrease)(1) 0.8 (6.1)
Currency movements (1.7) (1.7)
TOTAL 10.8 11.5
1. Like-for-like profit movements exclude the impact of currency
movements and acquisitions/closures
Encouragingly, the like for like increase in Adjusted Operating Profit in the
period was £0.8m, versus a decline of £6.1m in H1 2022. This is driven by a
strong increase in gross profit margin in the period of 8.1ppts year on year,
excluding the impact of currency. The overall operating margin would be 12.7%
versus the reported 10.7% excluding the impact of currency, so this has
impacted the Group's operating profit by £1.7m against the prior year.
Overall, the improvement in gross margin was largely driven by a combination
of stronger product mix and reduction in material, freight and duty costs.
This overall gross profit increase was offset by higher operating costs due
largely to labour/wage cost inflation.
The table below provides a more detailed view of the currency impact in the
period:
Adjusted Currency impact Adjusted H1 2023 Constant Currency Adjusted
H1 2023 at Constant variance to H1 2022 H1 2022
actual(1) Currency(2) actual
£m £m £m
£m % £m %
Revenue 101.1 2.2 2.1% 98.9 (7.5) (7.0%) 106.4
Cost of sales (61.3) (3.9) 5.6% (57.4) 12.8 (18.2%) (70.2)
Gross profit 39.8 (1.7) (4.7%) 41.5 5.3 14.6% 36.2
Gross margin % 39.4% (2.6ppts) 42.0% 8.0ppts 34.0%
Operating costs (29.0) - - (29.0) (4.3) 17.4% (24.7)
Operating profit 10.8 (1.7) (14.8%) 12.5 1.0 8.7% 11.5
Operating margin % 10.7% (1.9ppts) 12.6% 1.8ppts 10.8%
1. Six months ended 30 June 2023 translated at H1 2023 average
exchange rates
2. Six months ended 30 June 2023 translated at H1 2022 average
exchange rates
Operating costs
Adjusted Operating Costs increased by £4.3m to £29.0m (17.4%). The impact of
labour/wage inflation in the period was a key driver for overall cost
increases representing £2.9m of the overall cost increase. Additionally, the
business has seen increases is normal working practice costs, such as travel,
fuel and transportation as they return to pre-COVID levels.
Net finance expense
The Adjusted Net Finance Expense increased by just £0.4m to £1.4m in the
first half following increases in floating interest rates.
This increase was partially mitigated by swaps which fixed the interest rate
applicable to approximately 70% of our borrowings on a rolling three-year
basis with 30% of our borrowing remaining at floating interest rates.
Taxation
We currently expect a Group adjusted effective tax rate of c.18% for the year
ended 31 December 2023, which incorporates the impact of the new UK
corporation tax rate which has been effective from April 2023 at 25%.
Adjusted Free Cash Flow
Adjusted(1) Adjusted(2) H1 2022
Adjusted(1) Free Cash Flow (£m) H1 2023
Operating profit 10.8 11.5
Depreciation and amortisation 3.8 3.2
EBITDA 14.6 14.7
Changes in working capital (17.7) (9.7)
Other items 0.6 0.7
Operating Cash flow (2.5) 5.7
Operating cash conversion(2) (23.1%) 49.6%
Net capital expenditure (2.4) (2.4)
Interest paid (1.3) (1.1)
Tax paid (1.8) (5.0)
Free Cash Flow (8.0) (2.8)
Free Cash Flow as % Revenue (7.9%) (2.6%)
1. A reconciliation of the reported to Adjusted results is shown
within note 1 of the condensed consolidated financial statements
2. Adjusted Operating Cash Conversion is defined as Adjusted
Operating Cash Flow divided by Adjusted Operating Profit
The cash generation in the second half of 2022 was exceptional due to the
unwind of stock and debtors following the unusual trading patterns during the
COVID pandemic. As a result, our cash generation in the first half of 2023 has
been negative as we return to normalised working capital conditions. Our trade
receivables have seen a cash outflow in the period of £11.0m as a normalised
debtor position returns.
Capital expenditure
The Group's net capital expenditure consists of capitalised product
development costs and the purchase of physical assets. Capital expenditure was
£2.4m in first half in line with the prior year (H1 2022: £2.4m) and was
2.4% of revenue (H1 2022: 2.3%). We continue to see opportunities to invest in
low risk, high return automation projects in our Chinese production facility
and continue to invest in R&D projects, particularly in relation to
acquired businesses.
Capital structure and returns
Return on capital
Return on Capital Invested was lower than prior year at 15.7% (H1 2022:
25.6%). As previously flagged, our returns will naturally reduce as Luceco
transitions from a Group created organically to one also growing via M&A
(with its required investment in goodwill). We expect average Return on
Capital Invested through the economic cycle to be 20% or higher as M&A
activity is fully integrated into the Group.
Capital structure
The business continues to consistently generate ample cash flow to support its
dividend policy and fund M&A activity.
£m H1 2023 H1 2022 Change
Reported net debt £42.8m £60.2m (28.9%)
Less: IFRS 16 Finance Leases (£5.8m) (£7.0m) (17.1%)
Finance Leases - pre-IFRS 16 £0.6m £0.7m (14.3%)
Covenant Net Debt £37.6m £53.9m (30.2%)
Covenant Net Debt : Covenant EBITDA 1.3x 1.4x (7.1%)
The Group's Covenant Net Debt : Covenant EBITDA ratio of 1.3x remains at the
lower end of the 1-2x target. The Group has generated less cash in the period
as the Group's working capital requirements increased as activity recovered
following the impact of destocking at the end of 2022. The Group's
non-utilised facilities totalled £39.9m, with an option (subject to lender
consent) to add a further £40.0m under the terms of its syndicated bank
facility signed in October 2021. The facility matures in September 2025 and
the Group has an option to trigger a one-year extension thereafter. The
Group's balance sheet is therefore in a position to plan and execute organic
growth and M&A activity.
The Company's covenant position and headroom at 30 June 2023 were as follows:
H1 2023 covenant position Covenant Actual Headroom
Covenant Net Debt : Covenant EBITDA 3.0 : 1 1.3 : 1 Covenant Net Debt headroom: £51.2m(1)
Covenant EBITDA headroom: £17.1m
Covenant EBITDA : Adjusted Net Finance Expense 4.0 : 1 21.1 : 1 Covenant EBITDA headroom: £24.0m
Net Finance Expense headroom: £6.0m
1. Headroom with increased facility. Current facility headroom is
£39.9m.
The key measures which management use to evaluate the Group's use of its
financial resources and capital management are set out below:
H1 2023 H1 2022
Adjusted(1) Earnings Per Share (pence) 5.0 5.8
Covenant Net Debt : Covenant EBITDA (times) 1.3x 1.4x
Adjusted(1) Free Cash Flow (£m) (8.0) (2.8)
1. Note 1 in the notes to the condensed consolidated financial
statements provides an explanation of the Group's alternative performance
measures.
The Group complied with its covenant requirements throughout the first half
with significant headroom on all metrics. The Group has conducted a review of
going concern work for the first half of 2023 and this is outlined in note 1
of the condensed consolidated financial statements. The Group has a 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 proposing to pay an interim dividend of 1.6p per share,
equivalent to the same dividend as the prior half year. This will be paid to
shareholders on 20 October 2023 who are on the register on 15 September 2023
and the last day for dividend reinvestment (DRIP) elections is 29 September
2023. This equates to a payout ratio of 42% which, slightly ahead of the prior
year's 40% payout ratio.
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.
Wiring Accessories
Adjusted(1) Reported
H1 2023 H1 2022 Change H1 2023 H1 2022 Change
Revenue £41.1m £36.5m +12.6% £41.1m £36.5m +12.6%
Operating profit £7.1m £7.9m (10.1%) £7.1m £7.9m (10.1%)
Operating margin % 17.3% 21.6% (4.3ppts) 17.3% 21.6% (4.3ppts)
1. A reconciliation of the reported to Adjusted results is shown
within note 1 of the condensed consolidated financial statements
Wiring Accessories is the Group's most profitable segment, generating nearly
two thirds of the Group's operating profit and 41% of its revenue, under a
brand established over 80 years ago.
Sales from the Wiring Accessories segment were £41.1m which was a significant
improvement of 12.6% over the prior period. Strong sales from the Hybrid
channel helped deliver this result in core electrical switches particularly
from the UK. Wiring Accessories remains the most significant contributor to
Group profitability and its contribution has returned to more normalised
levels as destocking has been completed and material and freight costs have
eased.
LED Lighting
Adjusted(1) Reported
H1 2023 H1 2022 Change H1 2023 H1 2022 Change
Revenue £37.8m £40.8m (7.4%) £37.8m £40.8m (7.4%)
Operating profit £1.9m £1.2m +58.3% £1.1m £0.7m +57.1%
Operating margin % 5.0% 2.9% +2.1ppts 2.9% 1.7% +1.2ppts
1. A reconciliation of the reported to Adjusted results is shown
within note 1 of the condensed consolidated financial statements
The Group entered the lighting market in 2013 as the industry adopted LED
technology and it now represents 37% of Group revenue.
Revenue from the LED Lighting segment was £3.0m (7.4%) lower than 2022. Part
of the decline versus the prior year is due to the impact of the closure of
lower margin operations in France and Germany in the prior year, which were
LED focussed. On a like for like basis, LED sales fell by just 3.0% in the
period. Demand has been particularly strong in the professional projects space
in the period, as demand for energy-saving retrofits within the
non-residential and infrastructure sectors continues to grow. Adjusted
Operating Profit of £1.9m was ahead of 2022 by £0.7m which has been achieved
by improving operating margin in the DW Windsor acquisition due to
rationalisation and stronger product strategy.
Portable Power
Adjusted(1) Reported
H1 2023 H1 2022 Change H1 2023 H1 2022 Change
Revenue £22.2m £29.1m (23.7%) £22.2m £29.1m (23.7%)
Operating profit £1.8m £2.4m (25.0%) £1.6m £1.4m +14.3%
Operating margin % 8.1% 8.2% (0.1ppts) 7.2% 4.8% 2.4ppts
1. A reconciliation of the reported to Adjusted results is shown
within note 1 of the condensed consolidated financial statements
The Portable Power segment consists of two main elements:
· Cable reels, extension leads and associated accessories sold under
the Masterplug brand
· EV chargers sold under the BG Sync EV brand
The Group enjoys a leading position in the UK portable power market. The
business generates 22% of Group revenue and 17% of Group Adjusted Operating
Profit. Revenue in the period was 23.7% lower than the prior year due to final
customer destocking particularly impacting cable reel product categories.
Adjusted operating margin remained consistent with the prior year at 8.1% (H1
2022: 8.2%).
We are still encouraged by the EV charger sales which were over £4.1m in the
period, a significant increase over the prior year of 145%. We remain excited
about the opportunities that this new sector will provide as the vehicle
market moves towards electrification by 2030. At the end of the period we
launched our 22kw EV charger which will be utilised in many commercial
operations in the future and high end residential premises.
Going concern
The directors have reviewed the current financial performance and liquidity of
the business and assessed its resilience
to a reduction in sales through a series of scenarios. The directors report
that, having reviewed current performance
and forecasts, they have a reasonable expectation that the Group has adequate
resources to continue its operations for
the foreseeable future. For this reason, they have continued to adopt the
going concern basis in preparing the interim
financial statements.
WILL HOY
Chief Financial Officer
5 September 2023
Environmental, Social and Governance ("ESG") update
We continue to make progress on our ESG workstreams:
· We committed to the Science Based Targets Initiative (SBTi) and this
was validated by the SBTi during the first half of the year. This means we
have committed to reductions in carbon emissions over the near-term consistent
with the Paris Agreement
· Achievement of an improved management-level score ("B") from the
Carbon Disclosure Project in 2022 from ("C") previously - we are focussed on
improving this again in 2023
· We have delivered significant progress against our low carbon product
revenue target and are on track to achieve £100m of such revenue by 2025
· We continue to improve our packaging specifications, particularly
around plastic packaging.
Key achievements by area
Products and services
· Acquisition of Sync EV and launch of single-phase Mode 3 EV chargers
under the joint BG Sync EV brand
· £78m of revenue from low carbon product categories in full year
2022, delivering significant progress against our £100m low carbon product
revenue target for 2025
· 3.5-fold increase in revenue from the sale of lighting control
devices into lighting projects in full year 2022
Supply Chain
· Insourcing of EV charger production within our China manufacturing
facility with 100% renewable electricity supply
· Acquisition of DW Windsor with UK manufacturing capability and 100%
renewable electricity supply
· Evaluation of key suppliers' physical climate risk exposure to
understand vulnerabilities within our supply chain
Research and Development
· Specialist R&D function in China and the UK
· Development of higher power, three-phase EV chargers for larger homes
and commercial premises
· Investigating on-street EV charging solutions within DW Windsor
· Dedicated optical engineer focusing on improvements to lens design to
improve lighting efficiency
· Working towards the development of environmental product declarations
(EPD) and industry best practise on circular design in lighting
Operations
· Sourced renewable electricity for all group operations in 2022 and
for 2023, bringing our scope 2 emissions to zero.
· Offsetting residual Scope 1 emissions for 2022 and for 2023
· Investment into energy efficiency and automation projects within the
China manufacturing facility
· Evaluation of our key locations (manufacturing and distribution
centres) to better understand physical climate risk exposure to understand
vulnerabilities across direct operations
· All plastic packaging is recyclable with a minimum 30% recycled
content
Our ESG objectives for 2023 are as follows:
· Formally engage with key customers to better understand their climate
ambitions and to communicate our strategy
· Undertake detailed energy audits of our UK operations as part of the
Energy Savings Opportunity Scheme
· Develop a Research and Development roadmap for over the short,
medium, and long-term that will help us deliver our Scope 3 science-based
target
· Begin work to develop a set of product design criteria that help to
improve the sustainability of our products
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 64 to 71 in the 2022 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 72
to 74 of the 2022 Annual Report and Accounts considers the prospects of the
Group should a number of these risks crystallise together.
Statement of Directors' responsibilities
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted for use in the
UK;
· the interim management report includes a fair, balanced and
understandable review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
Approved by a Committee of the Board on 5 September 2023 and signed on its
behalf.
JOHN HORNBY
Chief Executive Officer
WILL HOY
Chief Financial Officer
5 September 2023
CONDENSED CONSOLIDATED INCOME STATEMENT
For the period ended 30 June 2023
Adjusted Adjustments(1) H1 2023 Adjusted Adjustments(1) H1 2022
H1 2023 H1 2023 H1 2022 H1 2022
Note £m £m £m £m £m £m
Revenue 2 101.1 - 101.1 106.4 - 106.4
Cost of sales (61.3) - (61.3) (70.2) 0.7 (69.5)
Gross profit 39.8 - 39.8 36.2 0.7 36.9
Distribution expenses (4.3) (4.3) (5.7) - (5.7)
Administrative expenses (24.7) (1.0) (25.7) (19.0) (2.2) (21.2)
Operating profit 2,3 10.8 (1.0) 9.8 11.5 (1.5) 10.0
Finance expense (1.4) (2.2) (3.6) (1.0) (4.4) (5.4)
Net finance expense (1.4) (2.2) (3.6) (1.0) (4.4) (5.4)
Profit before tax 9.4 (3.2) 6.2 10.5 (5.9) 4.6
Taxation 4 (1.7) 0.8 (0.9) (1.5) 1.1 (0.4)
Profit for the period 7.7 (2.4) 5.3 9.0 (4.8) 4.2
Earnings per share (p)
Basic 5 5.0p (1.6p) 3.4p 5.8p (3.1p) 2.7p
Fully diluted 5 4.9p (1.5p) 3.4p 5.7p (3.0p) 2.7p
1. Definition of the adjustments made to the reported figures can be
found in note 1 in the notes to the condensed consolidated financial
statements
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2023
H1 2023 H1 2022
£m £m
Profit for the period 5.3 4.2
Other comprehensive income - amounts that may be reclassified to profit or
loss in the future:
Foreign exchange translation differences - foreign operations (3.2) 2.8
Total comprehensive income for the year 2.1 7.0
All results are from continuing operations.
The accompanying notes form part of these financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET
At 30 June 2023
H1 2023 H1 2022 FY 2022
Note £m £m £m
Non-current assets
Property, plant and equipment 7 19.7 21.9 21.4
Right-of-use assets 5.7 6.8 6.1
Intangible assets 8 40.5 41.4 41.7
Financial assets held for trading 0.8 - 0.5
Deferred tax asset 0.7 - 0.8
67.4 70.1 70.5
Current assets
Inventories 45.7 55.7 47.5
Trade and other receivables 63.7 63.2 52.9
Financial assets held for trading 0.8 2.1 0.7
Current tax asset 1.6 2.5 1.2
Cash and cash equivalents 3.2 5.3 5.3
115.0 128.8 107.6
Total assets 182.4 198.9 178.1
Current liabilities
Trade and other payables 42.9 44.9 49.8
Financial liabilities held for trading 4.8 1.4 2.3
Other financial liabilities 2.1 2.0 2.0
49.8 48.3 54.1
Non-current liabilities
Interest-bearing loans and borrowings 9 40.1 58.5 28.4
Other financial liabilities 3.8 5.0 4.3
Deferred tax liability 1.8 2.1 2.3
Financial liabilities held for trading - 0.5 -
Provisions 2.1 1.6 2.3
47.8 67.7 37.3
Total liabilities 97.6 116.0 91.4
Net assets 84.8 82.9 86.7
Equity attributable to equity holders of the parent
Share capital 0.1 0.1 0.1
Share premium 24.8 24.8 24.8
Translation reserve (0.6) 3.0 2.6
Treasury reserve (7.4) (8.6) (8.7)
Retained earnings 67.9 63.6 67.9
Total equity 84.8 82.9 86.7
The accompanying notes form part of these financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2023
Share Share Translation Retained Treasury Total
capital premium reserve earnings reserve equity
£m £m £m £m £m £m
Balance at 1 January 2022 0.1 24.8 0.2 69.3 (6.7) 87.7
Total comprehensive income
Profit for the period - - - 4.2 - 4.2
Currency revaluations of investments - - 1.8 - - 1.8
Currency translation differences - - 1.0 - - 1.0
Total comprehensive income for the period - - 2.8 4.2 - 7.0
Transactions with owners in their
capacity as owners:
Dividends - - - (8.5) - (8.5)
Purchase of own shares - - - - (2.3) (2.3)
Disposal of own shares - - - (0.4) 0.4 -
Deferred tax on share-based payment transactions - - - (1.7) - (1.7)
Share-based payments charge - - - 0.7 - 0.7
Total transactions with owners in their capacity as owners - - - (9.9) (1.9) (11.8)
Balance at 30 June 2022 0.1 24.8 3.0 63.6 (8.6) 82.9
Balance at 1 January 2023 0.1 24.8 2.6 67.9 (8.7) 86.7
Total comprehensive income
Profit for the period - - - 5.3 - 5.3
Currency revaluations of investments - - (0.1) - - (0.1)
Currency translation differences - - (3.1) - - (3.1)
Total comprehensive income for the period - - (3.2) 5.3 - 2.1
Transactions with owners in their
capacity as owners:
Dividends - - - (4.7) - (4.7)
Disposal of own shares - - - (1.3) 1.3 -
Deferred tax on share-based payment transactions 0.1 0.1
Share-based payments charge - - - 0.6 - 0.6
Total transactions with owners in their capacity as owners - - - (5.3) 1.3 (4.0)
Balance at 30 June 2023 0.1 24.8 (0.6) 67.9 (7.4) 84.8
The accompanying notes form part of theses financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the period ended 30 June 2023
Note Adjusted Adjustments(1) H1 2023 Adjusted Adjustments(1) H1 2022
H1 2023 H1 2023 £m H1 2022 H1 2022 £m
£m £m £m £m
Cash flows from operating activities
Profit for the period 7.7 (2.4) 5.3 9.0 (4.8) 4.2
Adjustments for:
Depreciation and amortisation 7,8 3.8 1.0 4.8 3.2 0.9 4.1
Finance expense 1.4 2.2 3.6 1.0 4.4 5.4
Taxation 4 1.7 (0.8) 0.9 1.5 (1.1) 0.4
Share-based payments charge 0.6 - 0.6 0.7 - 0.7
Other non-cash items - - - - 0.5 0.5
Operating cash flow before movement in working capital 15.2 - 15.2 15.4 (0.1) 15.3
(Increase)/decrease in trade and other receivables (11.0) - (11.0) 9.2 - 9.2
Decrease/(increase) in inventories 0.8 - 0.8 4.5 (0.1) 4.4
(Decrease)/increase in trade and other payables (7.5) - (7.5) (23.4) (0.1) (23.5)
Cash from operations (2.5) - (2.5) 5.7 (0.3) 5.4
Tax paid (1.8) - (1.8) (5.0) - (5.0)
Net cash from operating activities (4.3) - (4.3) 0.7 (0.3) 0.4
Cash flows from investing activities
Acquisition of property, plant and equipment 7 (1.9) - (1.9) (1.7) - (1.7)
Acquisition of other intangible assets 8 (0.6) - (0.6) (0.8) - (0.8)
Disposal of tangible assets 7 0.1 - 0.1 0.1 - 0.1
Acquisition of subsidiary - - - (7.9) - (7.9)
Net cash used in investing activities (2.4) - (2.4) (10.3) - (10.3)
Cash flows from financing activities
Origination of borrowings 11.7 - 11.7 21.2 - 21.2
Interest paid (1.3) - (1.3) (1.1) - (1.1)
Dividends paid (4.7) - (4.7) (8.5) - (8.5)
Finance lease liabilities (1.0) - (1.0) (1.0) (0.2) (1.2)
Purchase of own shares - - - (2.3) - (2.3)
Net cash from financing activities 4.7 - 4.7 8.3 (0.2) 8.1
Net (decrease)/increase in cash and cash equivalents (2.0) - (2.0) (1.3) (0.5) (1.8)
Cash and cash equivalents at 1 January 5.3 6.9
Effect of exchange rate fluctuations on cash held (0.1) 0.2
Cash and cash equivalents at 30 June 3.2 - 5.3
1. The definitions of the adjustments made
to the statutory figures can be found in note 1 in the notes to the condensed
consolidated financial statements
The accompanying notes form part of theses financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the period ended 30 June 2023
1. Basis of preparation
Luceco plc (the "Company") is a company incorporated and domiciled in the
United Kingdom. These condensed consolidated interim financial statements
("interim financial statements") for the period ended 30 June 2023 comprise
the Company and its subsidiaries (together referred to as the "Group"). The
Group is primarily involved in the supply of wiring accessories, EV chargers,
LED lighting and portable power products to global markets (see note 2).
This condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK.
The annual financial statements of the group for the year ending 31 December
2023 will be prepared in accordance with UK-adopted international accounting
standards. As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of financial statements has
been prepared applying the accounting policies and presentation that were
applied in the preparation of the company's published consolidated financial
statements for the year ended 31 December 2022 which were prepared in
accordance with UK-adopted international accounting standards ("UK-adopted
IFRS").
The interim financial statements do not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. Statutory accounts for the
year ended 31 December 2022 were approved by the Board of Directors and have
been delivered to the Registrar of Companies. The audit report on those
accounts was unqualified and did not contain any statement under section
498(2) or (3) of the Companies Act 2006.
The interim financial information have been reviewed, not audited.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group is described
in the 2022 Annual Report and Accounts. Risk is an inherent part of doing
business and the Directors believe that the Group is well placed to manage the
key risks it faces.
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 and our cash flow forecasts support this. The Group has reported a
profit before tax of £6.2m for the six months to June 2023 (2022: £4.6m),
has net current assets of £65.2m (30 June 2022: £80.5m and 31 December 2022:
£53.5m) and net assets of £84.8m (30 June 2022: £82.9m and 31 December
2022: £86.7m), net debt of £42.8m (30 June 2022: £60.2m and 31 December
2022: £29.4m) and net cash outflow from operating activities of £4.3m (six
months to 30 June 2022: inflow £0.4m and 12 months to 31 December 2022:
inflow £38.6m). The bank facilities mature on 30 September 2025.
The capital resources at the Group's disposal at 30 June 2023:
· A revolving credit facility of £80.0m, £40.1m drawn at 30 June 2023
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 at
the year end 2022 and for the first half of 2023 have completed a reverse
stress test which is implausible. The assumptions in the 2022 year end
scenarios 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 condensed 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
condensed consolidated income statement and condensed 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 Condensed 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 H1 2023 items or transactions that
and H1 2022, which reconciles are not reflective of the
the adjusted measures to underlying business
statutory figures, can be operations
found later in this document
Adjusted Operating Costs Operating Gross profit less Operating profit Condensed consolidated income statement
Adjusted Operating Profit Operating profit Condensed consolidated income statement
Adjusted Basic EPS Basic EPS Condensed consolidated income statement
Constant Currency Current period reviewed translated at the average exchange rate of the prior Allows management
period
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 Condensed 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
Low Carbon Sales Revenue Segmental operating revenue EV charger revenue and LED revenue less sales from lighting columns Provides management with a measure of low
and downlight accessories carbon sales
Adjusted EBITDA Operating profit Condensed consolidated income statement EBITDA excluding the adjusting items excluded from Adjusted Operating Profit Provides management with an approximation of cash generation from the Group's
except for any adjusting items that relate to depreciation and amortisation underlying operating activities
Covenant EBITDA Operating profit Condensed 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 and excluding
share-based payment expense
Contribution profit Operating profit and operating costs Condensed consolidated income statement Contribution profit is after allocation of directly attributable adjusted Provides management with an assessment of profitability by operating segment
operating expenses for each operating segment
Contribution margin Operating profit and operating costs Condensed 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 Condensed consolidated cash flow 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 Condensed consolidated cash flow 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 (except for those in respect of business for return to shareholders or reinvestment in M&A activity
acquisitions or disposals), interest and taxes paid
Adjusted Net Cash Flow Net increase/(decrease) in cash and cash equivalents Condensed consolidated cash flow statement Adjusted Free Cash Flow less cash flows relating to dividend payments and the Provides management with an indication of the net cash flows generated by the
purchase of own shares business after dividends and share purchases
Adjusted Operating Cash Conversion None Condensed consolidated cash flow statement and condensed consolidated income Operating Cash Conversion is defined as Adjusted Operating Cash Flow divided Allows management to monitor the conversion of operating profit into cash
statement 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 and net debt To provide an assessment of how profitability capital is being deployed in the
(average for the last two years) expressed as a percentage business
The following tables indicate how alternative performance measures are
calculated:
H1 2023 H1 2022
Adjusted 12 months rolling EBITDA £m £m
Adjusted Operating Profit 21.3 31.3
Adjusted Depreciation and Amortisation 7.7 7.0
Adjusted 12 months rolling EBITDA 29.0 38.3
H1 2023 H1 2022
Covenant EBITDA £m £m
Adjusted 12 months rolling EBITDA 29.0 38.3
EBITDA from acquisitions from 1 January to the date of acquisition and share 0.6 0.7
based payment expense
Covenant EBITDA 29.6 39.0
H1 2023 H1 2022
Adjusted Operating Cash Conversion £m £m
Cash from operations (from condensed consolidated cash flow statement) (2.5) 5.4
Adjustments to operating cash flow (from condensed consolidated cash flow - 0.3
statement)
Adjusted Operating Cash Flow (2.5) 5.7
Adjusted Operating Profit 10.8 11.5
Adjusted Operating Cash Conversion (23.1%) 49.6%
H1 2023 H1 2022
Adjusted Net Cash Flow as % of revenue £m £m
Adjusted Free Cash Flow (see below) (8.0) (2.8)
Purchase of own shares - (2.3)
Dividends (4.7) (8.5)
Adjusted Net Cash Flow (12.7) (13.6)
Revenue 101.1 106.4
Adjusted Net Cash Flow as % of revenue (12.6%) (12.8%)
H1 2023 H1 2022
Adjusted Free Cash Flow as % of revenue £m £m
Adjusted Operating Cash Flow (see table above) (2.5) 5.7
Net Cash used in investing activities excluding acquisitions (from condensed (2.4) (2.4)
consolidated cash flow statement)
Interest paid (from condensed consolidated cash flow statement) (1.3) (1.1)
Tax paid (from condensed consolidated cash flow statement) (1.8) (5.0)
Adjusted Free Cash Flow (8.0) (2.8)
Revenue 101.1 106.4
Adjusted Free Cash Flow as % of revenue (7.9%) (2.6%)
H1 2023 H1 2022
Return on Capital Investment £m £m
Net assets 84.8 82.9
Net debt 42.8 60.2
Capital invested 127.6 143.1
Average capital invested (from last two years) 135.4 122.5
Adjusted Operating Profit (from above) 21.3 31.5
Return on Capital Invested (Adjusted Operating Profit/average capital 15.7% 25.6%
invested)
The following table reconciles all adjustments from the reported to the
adjusted figures in the income statement:
Adjusted Amortisation of acquired intangibles and related acquisition costs(1) Re-measurement 2023 Reported
H1 2023 £m to fair value of hedging portfolio(2) Adjustments H1 2023
£m £m £m £m
Revenue 101.1 - - - 101.1
Cost of sales (61.3) - - - (61.3)
Gross profit 39.8 - - - 39.8
Distribution expenses (4.3) - - - (4.3)
Administrative expenses (24.7) (1.0) - (1.0) (25.7)
Operating profit 10.8 (1.0) - (1.0) 9.8
Net finance expense (1.4) - (2.2) (2.2) (3.6)
Profit before tax 9.4 (1.0) (2.2) (3.2) 6.2
Taxation (1.7) 0.2 0.6 0.8 (0.9)
Profit for the period 7.7 (0.8) (1.6) (2.4) 5.3
Gross margin 39.4% - - - 39.4%
1. Relating to Kingfisher Lighting, DW Windsor and Sync EV
2. Relating to currency/interest hedges
Adjusted Amortisation of acquired intangibles and related acquisition costs(1) Re-measurement Restructuring(3) H1 2022 Reported
H1 2022 £m to fair value of hedging portfolio(2) £m Adjustments H1 2022
£m £m £m £m
Revenue 106.4 - - - - 106.4
Cost of sales (70.2) - - 0.7 0.7 (69.5)
Gross profit 36.2 - - 0.7 0.7 36.9
Distribution expenses (5.7) - - - - (5.7)
Administrative expenses (19.0) (2.0) - (0.2) (2.2) (21.2)
Operating profit 11.5 (2.0) - 0.5 (1.5) 10.0
Net finance expense (1.0) - (4.4) - (4.4) (5.4)
Profit before tax 10.5 (2.0) (4.4) 0.5 (5.9) 4.6
Taxation (1.5) 0.3 0.8 - 1.1 (0.4)
Profit for the period 9.0 (1.7) (3.6) 0.5 (4.8) 4.2
Gross margin 34.0% 34.7%
1. Relating to Kingfisher Lighting, DW Windsor and Sync EV
2. Relating to currency/interest hedges
3. Relating to the closure of Germany and France operation
Standards and interpretations issued
The following UK-adopted IFRS have been issued and have been applied in these
financial statements. Their adoption did not have a material effect on the
financial statements, unless otherwise indicated, from 1 January 2023:
• IFRS 17 Insurance contracts (as issued on 18 May 2017) including amendments to
IFRS 17 (issued on 25 June 2020)
• Definition of Accounting Estimates: Amendments to IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors
• Disclosure of Accounting policies: Amendments to IAS 1 Presentation of
Financial Statements and IFRS Practice Statement 2 Making Materiality
Judgements
• Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction
• Amendments to IFRS 17 Insurance Contracts: Initial application of IFRS 17 and
IFRS 9 - Comparative information
• Amendments to IAS 12: International Tax Reform-Pillar Two Model Rules
The following UK adopted IFRS have been issued but have not been applied and
adoption is not expected to have a material effect on the financial
statements, unless otherwise indicated, from 1 January 2024:
• Amendments to IFRS 16 Leases: Lease Liability in a Sale and Leaseback (issued
on 22 September 2022)
• Amendments to IAS 1 Presentation of Financial Statements: Classification of
Liabilities as Current or Non-current (July 2020) Non-current liabilities with
Covenants (Oct 2022)
• Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures: Supplier Finance Arrangements (issued on 25 May 2023)
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
H1 2023 Adjustments H1 2023 H1 2022 Adjustments H1 2022
£m £m £m £m £m £m
Revenue
Wiring Accessories 41.1 - 41.1 36.5 - 36.5
LED Lighting 37.8 - 37.8 40.8 - 40.8
Portable Power 22.2 - 22.2 29.1 - 29.1
101.1 - 101.1 106.4 - 106.4
Operating profit
Wiring Accessories 7.1 - 7.1 7.9 - 7.9
LED Lighting 1.9 (0.8) 1.1 1.2 (0.5) 0.7
Portable Power 1.8 (0.2) 1.6 2.4 (1.0) 1.4
Operating profit 10.8 (1.0) 9.8 11.5 (1.5) 10.0
Revenue by location of customer
H1 2023 H1 2022
£m £m
UK 86.5 85.5
Europe 6.3 11.2
Middle East and Africa 3.8 3.3
Asia Pacific 1.2 2.4
Americas 3.3 4.0
Total revenue 101.1 106.4
3. Expenses recognised in the condensed consolidated income statement
Included in the condensed consolidated income statement are the following:
H1 2023 H1 2022
£m £m
Research and development costs expensed as incurred 2.0 1.9
Depreciation of property, plant and equipment and right-of-use assets 3.0 2.9
Amortisation of intangible assets 1.8 1.2
4. Income tax expense
A tax charge for the six-month period has been included in the condensed
consolidated income statement of £0.9m (H1 2022: £0.4m) and has been
calculated using the anticipated effective tax rate on the taxable profit of
the Group. The anticipated adjusted effective tax rate for the year ending 31
December 2023 is 18.1% (H1 2022: 8.7%).
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.
H1 2023 H1 2022 FY 2022
£m £m
Earnings for calculating basic earnings per share 5.3 4.2 11.0
Adjusted for:
Restructuring of European operations - (0.5) (1.0)
Amortisation of acquired intangibles and related acquisition costs 1.0 2.0 3.0
Remeasurement to fair value of hedging portfolio 2.2 4.4 5.7
Income tax on above items (0.8) (1.1) (1.5)
Adjusted earnings for calculating adjusted basic earnings per share 7.7 9.0 17.2
H1 2023 H1 2022 FY 2022
Number Number Number
Weighted average number of ordinary shares Million Million Million
Basic 155.2 154.3 154.3
Dilutive effect of share options on potential ordinary shares 1.4 3.7 2.6
Diluted 156.6 158.0 156.9
H1 2023 H1 2022 FY 2022
Pence Pence Pence
Basic earnings per share 3.4 2.7 7.1
Diluted earnings per share 3.4 2.7 7.0
Adjusted basic earnings per share 5.0 5.8 11.1
Adjusted diluted earnings per share 4.9 5.7 11.0
6. Dividend
An interim dividend of 1.6 pence per share will be paid to shareholders on 20
October 2023. This compares to a 1.6 pence interim dividend in 2022.
7. Property, plant and equipment
During the six months ended 30 June 2023, the Group purchased assets at a cost
of £1.9m (H1 2022: £1.7m and FY 2022: £4.1m); including plant and equipment
£1.5m, tooling £0.9m, construction in progress £(0.7)m, land and buildings
£0.1m and fixtures and fittings £0.1m. Assets with a net book value of
£0.1m were disposed of (H1 2022: £0.1m and FY 2022 £0.3m). Total
depreciation for the period was £2.0m (H1 2022: £1.9m and FY 2022: £4.1m).
During the year there were lease additions totalling £0.6m and a depreciation
charge of £1.0m. The net book value of right-of-use assets at 30 June 2023
was £5.7m (30 June 2022: £6.8m and 31 December 2022: £6.1m).
The Group has not included any borrowing costs within additions in 2023 (2022:
£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.
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 six
months ended 30 June 2023, the Group incurred internally generated development
costs of £0.6m (H1 2022: £0.8m and FY 2022: £1.7m). 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. Amortisation for the six
months ended 30 June 2023 was £1.8m (H1 2022: £1.2m and FY 2022: £2.9m).
In the condensed consolidated income statement these amounts have been
included within "adjustments" in calculating the Adjusted Operating
Profit/loss (refer to note 1 in the Notes to the condensed consolidated
financial statements).
There have been no triggers to necessitate an impairment of goodwill since the
review undertaken as part of the year ended 31 December 2022. Goodwill has
been allocated to cash-generating units and can be referred to in the Group's
2022 Annual Report and Accounts.
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 2022 Annual Report and
Accounts.
H1 2023 H1 2022 FY 2022
£m £m £m
Non-current liabilities
Revolving credit facility 36.3 58.5 28.2
Overdrafts 3.8 - 0.2
40.1 58.5 28.4
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
H1 2023 H1 2022 H1 2023 H1 2022
USD 1.23 1.24 1.27 1.21
EUR 1.14 1.19 1.16 1.16
RMB 8.54 8.45 9.18 8.13
11. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial risks that include
currency risk, interest rate risk, credit risk and liquidity risk.
These interim financial statements do not include all financial risk
management information and disclosures required in
the Annual Report and Accounts. They should therefore be read in conjunction
with the Group's Annual Report and Accounts for the year ended 31 December
2022. There have been no changes to the risk management policies since the
year ended 31 December 2022.
12. Related party transactions
The Group has related party relationships with its subsidiaries and with its
Directors. Transactions between Group companies, which are related parties,
have been eliminated on consolidation and are not disclosed in this note.
There have been no related party transactions with Directors other than in
respect of remuneration.
13. Date of approval of financial information
The interim financial information covers the period 1 January 2023 to 30 June
2023 and was approved by the Board on 5 September 2023. Further copies of the
interim financial information can be found at www.lucecoplc.com
(http://www.lucecoplc.com) .
INDEPENDENT REVIEW REPORT TO LUCECO PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed consolidated
statement of changes in equity, condensed consolidated balance sheet,
condensed consolidated cash flow statement and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting as
adopted for use in the UK and the Disclosure Guidance and Transparency Rules
("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the UK.
A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other information
contained in the half-yearly financial report and consider whether it contains
any apparent misstatements or material inconsistencies with the information in
the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of conclusion section of this report,
nothing has come to our attention that causes us to believe that the Directors
have inappropriately adopted the going concern basis of accounting, or that
the Directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK-adopted international accounting standards.
The Directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the Directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusion relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis of conclusion section of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
Gordon Doherty
for and on behalf of KPMG LLP
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
5 September 2023
Additional information
Financial calendar
Item Date
Interim dividend record date 15 September 2023
Interim dividend reinvestment elections (DRIP) 29 September 2023
Interim dividend payment date 20 October 2023
2023 Q3 trading update 07 November 2023
2023 Year end 31 December 2023
2023 Full year trading update 30 January 2024
2023 Full year results statement 26 March 2024
AGM 14 May 2024
2024 Half year end 30 June 2024
2024 Half year trading update 23 July 2024
2024 Half year result statement 10 September 2024
Contacts
Type Name Address Website/Email/Phone
Company's registered office Luceco plc Building E Stafford Park 1 www.lucecoplc.com (http://www.lucecoplc.com)
Stafford Park ir@luceco.com
Telford
TF3 3BD
Independent auditor KPMG LLP Chartered Accountants www.kpmg.co.uk (http://www.kpmg.co.uk)
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
Financial advisors and brokers Numis Securities 45 Gresham Street www.numis.com (http://www.numis.com)
London
EC2V 7BF
Liberum Ropemaker Place www.liberum.com (http://www.liberum.com)
Level 12
25 Ropemaker Street
London
EC2Y 9LY
Company registrar Link Group Central Square shareholderenquiries@linkgroup.co.uk
(mailto:shareholderenquiries@linkgroup.co.uk)
29 Wellington Street
Leeds
Tel: +44 (0)371 664 0300
LS1 4DL
Company Secretary Company Matters 6(th) Floor luceco@linkgroup.co.uk (mailto:luceco@linkgroup.co.uk)
(part of Link Group) 65 Gresham Street
London Tel: +44 (0)333 300 1950
EC2V 7NQ
Financial PR MHP 60 Great Portland Street luceco@mhpgroup.com (mailto:luceco@mhpgroup.com)
London
W1W 7RT Tel: +44 (0)20 3128 8100
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