26 March 2024
LUCECO PLC - 2023 FULL YEAR
RESULTS
Profitability at the upper
end of expectations despite challenging markets.
Continued growth and strong
cash generation.
|
Luceco plc, the supplier of wiring
accessories, EV chargers, LED lighting, and portable power
products, today announces its audited results for the year ended 31
December 2023 ("2023" or "the year").
Year ended 31 December 2023
(£m unless otherwise stated)
|
2023
|
2022
|
Change (%)
|
|
|
|
|
Revenue
|
209.0
|
206.3
|
+1.3%
|
|
|
|
|
Adjusted Results1
|
|
|
|
Adjusted operating
profit
|
24.0
|
22.0
|
+9.1%
|
Adjusted profit before
tax
|
21.2
|
19.4
|
+9.3%
|
Adjusted profit after
tax
|
17.3
|
17.2
|
+0.6%
|
Adjusted basic earnings per
share
|
11.1p
|
11.1p
|
-
|
|
|
|
|
Statutory Results
|
|
|
|
Operating
profit2
|
22.2
|
13.7
|
+62.0%
|
Profit before tax
|
18.9
|
11.7
|
+61.5%
|
Profit after tax
|
16.7
|
11.0
|
+51.8%
|
Basic earnings per
share
|
10.8p
|
7.1p
|
+52.1%
|
|
|
|
|
Metrics
|
|
|
|
Adjusted1 operating
margin %
|
11.5%
|
10.7%
|
+0.8ppts
|
Covenant net debt
|
18.4
|
23.8
|
(22.7%)
|
Covenant net debt : Covenant
EBITDA3
|
0.6x
|
0.8x
|
(25.0%)
|
Adjusted1 free cash
flow
|
18.0
|
30.7
|
(41.4%)
|
Full year dividend per
share
|
4.8p
|
4.6p
|
+4.3%
|
|
|
|
|
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. Re-presented for
2022 - see note 1 of the consolidated financial
statements
3. Includes pro-forma
adjustment for EBITDA of acquired businesses, as shown in note 1 of
the consolidated financial statements
Performance highlights
·
2023 results at
the upper end of market expectations:
o Revenue: up 1.3% to £209.0m and like for like revenue up 1.7%
versus the prior year
o Adjusted operating
profit: up 9.1% to £24.0m reflecting a return to strong gross
margins, with overall Adjusted operating margin up 80 basis points
to 11.5%
o Adjusted EPS: 11.1p - equal to the prior year due to higher
UK tax impact
o Covenant Net Debt reduced by 22.7% year on year and Covenant
Net Debt : EBITDA ratio at 0.6x remains well below the target range
of 1.0-2.0x (FY 2022: 0.8x)
o Full year dividend of 4.8p up 4.3% with a 43% payout ratio,
with a final dividend of 3.2p
·
Luceco's
innovative products and diverse channel mix provide growth, despite
challenging markets:
o Secured market share gains with revenue growth despite
falling markets
o Performance supported by our key strategic positions within
our Hybrid sales channel
o Outstanding growth in our LED Lighting projects, benefitting
our environmental achievements
·
Strong free cash
flow generation of £18.0m with post year end acquisition of D-Line
for £8.6m:
o Free cash generation of £90.2m since 2019 has provided
optionality for acquisitions and a strong dividend
strategy
o Earnings enhancing acquisition of D-Line for £8.6m
(contingent consideration of £3.8m) - cable solutions provider with
a presence in the US/Europe which provides synergies for our UK and
international territories
·
Our strong 2023 performance has continued into
the start of 2024 and we are achieving further growth
·
Our order book, especially in the Retail and
Trade channels, is ahead of where it was this time last
year
·
We are monitoring the situation in the Red Sea,
the headwind we are seeing from additional freight costs has so far
been mitigated by other savings
·
Whilst we remain mindful of the uncertain
macroeconomic environment and the potential impact it may have on
our markets in 2024, the outlook for the current financial year
remains unchanged thanks to our attractive market positions, strong
business model and robust strategy
·
Luceco is well positioned to benefit from
operational leverage given its integrated, resilient and agile
business model
Commenting on the results, Chief Executive Officer, John
Hornby said:
"Luceco has delivered a strong set of results across all key
performance metrics in the year, despite ongoing macroeconomic
headwinds. With Adjusted operating profit up 9% to £24.0m and
strong free cash flow generation of £18m, we are pleased with the
Group's progress during the year.
"These results are testament to the strength of the Group's
market positions, clear strategy and business model. As a result of
the team's constant hard work, the Group is exceedingly well placed
for growth through organic and further M&A activity in 2024
with its strong operational leverage and strong balance
sheet.
"Whilst we are mindful of the economic environment in 2024,
we have a number of exciting product developments in progress,
which provide us with good medium and long-term opportunities for
growth together with our bolt on acquisition strategy, including
the exciting recent acquisition of D-Line."
A
meeting for analysts will be held at 9:30am GMT today, Tuesday 26
March 2024 at the offices of Liberum, 25 Ropemaker Street, London
EC2Y 9LY. To register to attend please email
luceco@mhpgroup.com.
To register to watch a live webcast of the meeting, please follow
this link:
https://stream.brrmedia.co.uk/broadcast/65d76c35994661e3abf8ad45
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.
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.
Performance highlights
Last year I highlighted the
strategic steps we are taking and how they leave us well positioned
for the future, so I am pleased our performance in 2023
demonstrated clear progress. Despite challenging market conditions
we achieved revenue of £209.0m (2022: £206.3m) and Adjusted
Operating Profit of £24.0m (2022: £22.0m). We outperformed a softer
market, taking market share and growing revenue by 1.7% on a
like-for-like basis. Our performance was driven by our key
strategic positions within the Hybrid sales channel, the cessation
of post-pandemic destocking and another outstanding year of growth
within our interior LED Lighting Projects team.
I have been pleased by the
improvement we have seen in our Adjusted Operating Margin, as
material and freight costs eased, albeit partially offset by
exchange rate headwinds and increasing wage costs. Our lean
operating model means we are well positioned to grow our margins
further when market conditions allow. I am also delighted that yet
again, we have delivered a strong cash flow performance, achieving
Adjusted Free Cash Flow of £18.0m. Careful working capital
management and strategic capital allocation, has meant that since
2019 the business has generated Adjusted Free Cash of £90.2m from
Adjusted Operating Profit of £115.0m. This sustained cash
performance over a four-year period highlights the strength of our
business model and underscores the Group's long‑term potential.
We end the year with Covenant Net
Debt of £18.4m, which gives us good optionality to invest in the
business to drive further growth, both organically as well as
through our exciting M&A pipeline.
Macroeconomic factors
Like most businesses, since the
pandemic we have experienced some rapid changes in macroeconomic
and geopolitical influences. I am delighted with the way we have
navigated these shifts, to consistently outperform whatever
conditions we face. 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. This temporary period of destocking appears to have
concluded in 2023, based on the analysis of EPOS data with our
customers who have returned to more normalised purchasing
patterns.
The other key theme for us was how
global supply and demand imbalances in the wake of the pandemic
resulted in significant industry‑wide input cost inflation. We
identified these trends early and reset selling prices accordingly
without impacting our competitive position. Lead times normalised
in 2022, following the peaks during the pandemic, and have remained
consistent in 2023. This more normalised demand has meant that we
have seen cost inflation subside, with material and freight and
duty prices easing in 2023. However, as anticipated and despite
protection from hedging arrangements, foreign exchange movements
have remained a headwind. Overall, our gross margin is beginning to
return to through-the-cycle levels, and demand from key customers
now more closely reflects end market conditions with
consumers.
Underlying demand
Our like-for-like revenue growth
of 1.7% in 2023 is put into context when we compare ourselves to
the wider construction market, with data from the Construction
Products Association ("CPA") indicating that output of our
addressable markets reduced 5.8% in the same timeframe.
Approximately 60% of our business is focused on delivering
residential repair, maintenance and improvement ("RMI") solutions
to professional installers and general consumers performing DIY.
Using CPA data, we estimate that this market's output reduced 8% in
2023, as it normalises following the RMI boom which peaked during
the pandemic. The retail sector in particular remains challenging,
with the Barclays Consumer Spending Index reporting a 4.7% average
reduction in DIY spending over the course of 2023.
Nevertheless, the strategic
positions we hold within the Hybrid sales channel in addition to
the work we have done to grow our share of the professional
contractor market, has enabled us to outperform this slow market to
deliver growth of 0.8% within this sector of our business. I am
pleased that the non-residential RMI arm of our business, which
makes up approximately 20% of the Group revenue, grew by 8.5% in
the year. This is supported by our strategic investment in our
Interior LED Lighting Projects team, who continue to take market
share by utilising our well‑rounded LED Lighting portfolio.
This result is even more pleasing when we consider that market
output contracted approximately 0.8% in the year, as businesses
seek to make temporary cost savings by reducing expenditure on
their estates.
Although sales within our Exterior
LED Lighting businesses reduced 2.4% in the year, slightly higher
than a market output reduction of 1.1%, profitability within these
businesses grew. The steps we are taking to drive synergies within
the DW Windsor business and our continued focus on higher margin
contracts has meant these businesses have taken another step
forwards in 2023. Within the new housing market, rising interest
rates have led to challenging market conditions for housebuilders,
with the CPA estimating a contraction in output of 17.1% in 2023.
However, we estimate this market makes up less than 5.0% of our
sales and despite market conditions, we were still able to grow
this smaller part of our business by 5.2%, aided by increasing
sales of EV chargers.
Whilst it is clear that the rising
cost of living has reduced discretionary consumer spending and
placed a headwind on
the markets in which we operate,
the fundamental growth drivers supporting our industry and business
remain. The drive towards net zero, consistent regulatory change,
new technology and an underlying need to invest in UK housing stock
mean we can be confident that our markets will deliver healthy and
stable growth over the long term.
Strategic highlights
Throughout 2023, we have continued
to deliver on our purpose to help people harness power sustainably
in everyday life. In addition to delivering a robust set of
financial results, I am pleased with the work we have done to
further progress our strategic priorities to Innovate, Grow and
Sustain.
Innovate
The key first step in us carrying
out our purpose is to innovate. Our ability to see and do things
differently creates value for our stakeholders, driving growth of
the business, allowing us to sustain our competitive advantage and
contribute towards the transition to net zero. We continually focus
on developing new products and enhancing our existing range with
increased functionality that fits our customers' needs. Our global
team of over 100 product development specialists, drive a
development process which is customer‑centric, rapid and carries
relatively low execution risk. It has been a key driver of the
Group's success.
I am delighted by the strides we
have made in 2023 to enhance our product portfolio. We continue to
make advances in the development of our EV chargers, with 2023
bringing the launch of our second series of chargers sold under the
BG Sync EV brand. Building on the platform from our first series of
chargers, this new range is available in both 7.4kW, for home use,
and 22kW for commercial spaces. The 22kW charger is a key strategic
development, enabling vehicles to charge three times faster, and
allowing us to sell our chargers within commercial and higher-end
residential markets. Furthermore, both products are produced using
the same core components and designs, allowing them to be
manufactured at scale, using the same tooling and processes, by our
team in China.
Within our LED Lighting range, we
have refreshed our offering of downlights with the launch of the
new F-type range. This new range of low-profile downlights strikes
an ideal balance between functionality, design, performance and
cost. With its SpeedFit housing design for ease of installation and
its availability with colour changing functionality, the F-type
range provides practical innovation that our customers actually
need. This innovation with purpose, is key to our strategy,
enabling us to both take market share and create value through
differentiated products that command higher margins.
Following significant new product
launches in 2022, we continue to enhance our portfolio of Wiring
Accessories and Masterplug products. Thanks to our vertically
integrated manufacturing model, we can swiftly make low investment
adjustments within our existing ranges to suit changing market
trends. We were able to do this again in 2023, with the release of
a new matt black finish within our premium Nexus Metal socket range
and the release of screwless designs, for a sleeker finish within
our core offering. I am also pleased to report that DW Windsor is
beginning to benefit from our expertise and manufacturing capacity,
both in the UK and China, which will help us transform the business
further. Following a year of transition in 2022, DW Windsor made
good progress in 2023 and we hope that over time these efforts will
deliver similar benefits to those being seen in Kingfisher
Lighting.
Our bold and innovative culture
extends beyond our development specialists, with the whole business
playing a part. A fantastic example of this has been the
development of our specialised interior projects customer services
team in 2023.
Using their expert knowledge, this
team manage the implementation of our interior lighting projects
from start to finish, allowing our sales experts to focus on what
they do best.
Grow
Despite challenging market
conditions, we continue to grow the business both organically as
well as through targeted M&A. Through years of experience, our
excellent sales teams have become adept at using the innovative
products we create to extend our market reach. A prime example of
this is the success we have had in 2023 through our BG Evolve
decorative Wiring Accessories range. Launched in 2022, the modern
and stylish switches and sockets of the Evolve range provide
consumers with a new premium solution for high-end builds and
retrofits. The launch of this new range has enabled us to further
extend our product portfolios by entering the adjacent premium
Wiring Accessories market. I am delighted that in 2023 we have sold
over 500,000 Wiring Accessories products from the Evolve portfolio,
with strong interest across our Retailers, Wholesalers and Hybrid
channels, generating £2.6m of revenue.
Our ability to grow organically is
not just limited to new product launches. The excellent
relationships we have with our customers means we can work together
to ensure the right products are being made available to the end
consumer. As we have moved through 2023, our sales teams have
successfully extended existing product ranges to generate £4m of
new business wins. Ultimately, our customers choose our products as
they know they can sell them to the end consumer, and this leaves
us well placed for future organic growth.
We are also taking further steps
to increase the speed of growth within our Interior LED Lighting
Projects team. Our experience has taught us that, when given the
right level of support, a new sales team member can deliver strong
annualised sales within three years. We are increasing the pace at
which we recruit within this high growth area and as a result we
successfully grew sales within this team by 24% to £12.6m in 2023.
We have complemented the Group's long history of organic growth
with acquisitions funded by our consistently strong cash flow. In
2023 we made a strategic investment of £1.7m in eEnergy Group plc
("eEnergy"). eEnergy is a net zero energy services provider that
empowers organisations to achieve net zero by tackling energy waste
and transitioning to clean energy. The business is already an
important customer for our LED Lighting Projects business. As the
economy decarbonises it is well positioned to become an
increasingly relevant channel in the non‑residential segment, and we look
forward to supporting the growth of eEnergy and exploring the
potential for increased co‑operation between our
businesses.
A further year of cash generation,
driven by organic growth in addition to synergy creation from
previous acquisitions, means we end the year with Covenant Net Debt
of £18.4m. With the right foundations for a successful "buy and
build" strategy, we continue to explore M&A opportunities that
have a strong strategic fit and the potential to deliver future
growth.
Sustain
Our sustain strategy is focused on
taking action to contribute to society's sustainability goals as
well as investing in our people and our industry. Taking these
actions now will ensure we sustain our competitive advantage into
the future. During 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 this was
reaffirmed with a "B" rating from the Carbon Disclosure Project in
the first quarter of 2024 relating to the 2023 year. This is our
third year of reporting to the platform, so we are delighted our
progress integrating climate-related issues into our business
operations has been reflected with a strong grade.
We generated £80m of revenue from
low carbon products in 2023 and we continue to focus on this key
area as society charts its path towards net zero emissions. The
actions we are taking today to invest in our EV charging portfolio
and high efficiency LED lighting solutions, leave us well
positioned to achieve our goal of £100m revenue from low carbon
products by 2025. In the UK, we have held nearly 50 contractor
continuous professional development training events in 2023, hosted
in conjunction with our major professional wholesale customers. In
particular, we have extended the training we provide on the
installation of EV chargers, and I am pleased with the positive
feedback these have received.
We continue to invest in the next
generation of contractors. For the second year running we were
proud to sponsor the prestigious eFIXX 30 under 30 awards, aimed at
recognising talented, young electricians in the UK. We invest in
our business model to sustain and accelerate future growth. As
travel restrictions to China have eased, it has been hugely
beneficial for me and our team of designers to visit our facility
in China more regularly. I am pleased with the progress we have
made to extend and automate our production of EV chargers and DW
Windsor products, which provide us with a great platform from which
to scale as we move forwards.
I am also excited by our £2.5m
investment to relocate our Kingfisher Lighting business to an
enhanced manufacturing facility in Mansfield. Since our acquisition
of Kingfisher Lighting six years ago, the business has grown sales
by 49%, and this investment in its manufacturing capability will
enable the team at Kingfisher to sustain their competitive
advantage supplying low carbon products.
In summary, I am once again hugely
proud of the progress the entire Luceco team have made in the year.
Our bold and innovative culture continues to drive the business
forwards with the right actions being taken now to deliver on our
long‑term
strategy.
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 entering adjacent markets where we see a competitive
advantage. As a result, we now hold enviable positions across a
range of industries that are supported by long-term growth
drivers.
Our extensive, strategically built
product range, combined with our strong sales channel access and
vertically integrated model means we are able to successfully
compete within multiple markets. Moving forwards, our growing
portfolio of EV chargers in addition to innovative new ranges
within our core offering will enable us to extend our reach within
new and existing markets. Each of our four
distinct construction markets has exhibited attractive long-term
growth. We are 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.
Although our markets are
attractive, the opportunities they create can only be harnessed by
those with the correct processes and knowledge. Our advantaged
business model allows us to innovate, manufacture new products at
our own facilities and bring new ranges to market quickly and
efficiently under our trusted brands.
Outlook
Trading in early 2024 has been in
line with our expectations, with improved gross margin and lower
input costs balancing less residential RMI activity. Whilst the
macroeconomic outlook for 2024 remains difficult to judge, I am
encouraged by our healthy underlying trading momentum which leaves
us well positioned to progress further during the year
ahead.
JOHN HORNBY
Chief Executive Officer
25 March 2024
Chief Financial Officer's
review
|
Summary of reported results
|
|
|
Summary results (£m)
|
Reported
2023
|
Reported
2022
|
Revenue
|
209.0
|
206.3
|
Operating profit
|
22.2
|
13.7
|
Profit before tax
|
18.9
|
11.7
|
Taxation
|
(2.2)
|
(0.7)
|
Profit for the period
|
16.7
|
11.0
|
Operating profit of £22.2m was
£8.5m higher than 2022 due to improving revenue and gross margin in
the year partly offset by operating cost increases. In 2022,
we have re-presented the results to show the impact of currency
hedging aligned with the associated cost of sales. This has
the effect of changing gross profit and operating profit, however,
revenue, profit before tax, profit after tax and earnings per share
all remain unchanged.
Adjusting items
Certain alternative performance
measures ('APMs') have been included within this report. These APMs
are used by the Board to monitor and manage the performance of the
Group, in order to ensure that decisions taken align with the
Group's long-term interests. A table summarising the reconciliation
of adjusted measures to statutory measures is included in note 1 of
consolidated financial statements.
The following adjusting items were
applied in the year:
· Amortisation of acquired intangibles: £1.9m and
acquisition-related costs of £0.4m
·
Fair value movements of hedging
portfolio which have not completed in the period (£0.5m credit) and
interest swaps (£0.5m charge)
Adjusted Operating Profit for the
year, excluding the items above, was therefore £24.0m (2022:
£22.0m).
Income statement
Revenue
Revenue of £209.0m was £2.7m
(1.3%) higher than 2022 as business growth returned:
|
Bridge from
2022
|
Revenue bridge:
|
£m
|
Change %
|
2022
|
206.3
|
|
Acquisitions/closures
|
(1.4)
|
(0.7%)
|
Like-for-like
(decrease)/increase1
|
3.6
|
1.7%
|
Constant Currency2
|
208.5
|
1.1%
|
Currency movements
|
0.5
|
0.2%
|
TOTAL
|
209.0
|
1.3%
|
1. Like-for-like revenue increase excludes the impact of
currency movements and acquisitions, see note 10 of the
consolidated financial statements
2. 2023 revenue translated at 2022 exchange rates
Like-for-like revenue, excluding
the impact of currency, increased by £3.6m in the period, up
1.7%. On a reported basis, revenue grew by £2.7m, or 1.3%.
Against the backdrop of a year when Luceco's overall addressable
market experienced a 5.8% decline, the Group's performance in 2023
compares highly favourably.
Digging deeper into the results,
the Group performed strongly in non-residential markets, up around
8%, and within Residential RMI, up circa 1.1%. This again
represents an increase in market share, noting that these two
markets fell by 0.8% and 8.0% respectively. Whilst the New
Residential market was down significantly, this represents less
than 5% of Group revenue so we have been relatively insulated from
this market decline. A contributing factor to the Group's strong
relative performance has been the softer comparative in 2022 due to
significant customer destocking following the exceptional pandemic
year of 2021.
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:
|
2023
£m
|
2023
% of total
|
2022
% of total
|
Change vs 2022
%
|
Retail
|
46.4
|
22.4%
|
27.7%
|
(10.4%)
|
Hybrid
|
49.3
|
23.9%
|
20.2%
|
29.2%
|
Professional Wholesale
|
52.2
|
25.2%
|
28.9%
|
(6.3%)
|
Professional Projects
|
59.0
|
28.5%
|
23.2%
|
2.4%
|
Like-for-like revenue
|
207.1
|
100.0%
|
100.0%
|
1.7%
|
Currency impact
|
0.5
|
|
|
|
Acquisitions/closures
|
1.4
|
|
|
|
TOTAL
|
209.0
|
|
|
1.3%
|
Our key growth channel was Hybrid,
growing revenue by 29.2% during the year, largely resulting from
more significant destocking in the 2022 comparative due to
pandemic‑boosted
activity across residential repair and maintenance in DIY and
professional markets. Nearly all of the destocking impact
experienced in 2022 arose within the Retail and Hybrid channels.
These customers hold greater inventory of our products relative to
their size because they buy from us on long lead times direct from
China on a Free On Board basis and therefore hold the product for
longer. The amount of inventory cover they needed rose sharply in
2021 as demand increased and delivery times from China extended. In
2023, the normalisation of stock levels has resulted in more
favourable comparatives to 2022.
The slowdown in the Professional
Wholesale channel has been reflective of the more challenging
market conditions, as traditional electrical wholesalers buy from
us on short lead times in the country in which they operate,
meaning they had less need to destock in 2022. Our Professional
Projects channel grew modestly in the year with 2.4% growth, but
the standout performance was from our UK projects business which
goes from strength to strength, where the UK has seen growing
demand for LED retrofits as a result of rising electricity prices
and the growing green agenda.
Revenue by geographical location of
customer:
|
2023
£m
|
2022
£m
|
Change
vs
2022
%
|
UK
|
173.6
|
165.3
|
5.0%
|
Europe
|
12.9
|
19.7
|
(34.5%)
|
Americas
|
8.6
|
8.0
|
7.5%
|
Middle East and Africa
|
8.3
|
8.7
|
(4.6%)
|
Asia Pacific
|
5.6
|
4.6
|
21.7%
|
Total revenue
|
209.0
|
206.3
|
1.3%
|
Understanding our revenue by
geography and location of the customer, we have seen strong growth
in the UK, up 5.0%, partly helped by the 2022 destocking creating a
lower comparative. European sales reduced in the year following the
closure of our operations in Germany and in Spain revenue reduced
following a change in market strategy, which should bear fruit in
future years.
Sales improved in the Americas
largely as a result of stronger sales in the North American market
as key customers in the US DIY channel normalised their buying
patterns. Sales in the Middle East and Africa fell by 4.6% but
increased in Asia Pacific by 21.7% helped by new customers
wins.
Profitability
Adjusted Operating Profit of
£24.0m for 2023 was £2.0m ahead of 2022. The key drivers were as
follows:
Adjusted Operating profit
|
Bridge
from
2022
£m
|
Bridge
from
2021
£m
|
2022/2021
|
22.0
|
39.0
|
Acquisitions/closures
|
0.6
|
1.2
|
Like-for-like
increase/(decrease)1
|
3.5
|
(17,1)
|
Currency movements
|
(2.1)
|
(1.1)
|
2023/2022
|
24.0
|
22.0
|
1.
Like-for-like profit movements exclude the impact of currency
movements and acquisitions/closures
The net impact of acquisitions and
closures is a result of the Germany closure in 2022, giving a £0.6m
improvement year-on-year in 2023. Overall Adjusted Operating
profitability, excluding acquisitions/closures and at Constant
Currency, was an improvement of £3.5m, driven largely by the
stronger performance across the UK business channels.
The currency headwind had a £2.1m
impact on Adjusted Operating Profit in the year. Excluding the
impact of currency, the Adjusted Operating Profit of the Group
would have been £26.1m, most of which is due to the impact of the
exchange rates of RMB on Chinese products and the USD on the sales
of products. Cost inflation for the Group was 11.0%, excluding the
impact of currency, which was largely wage related due to the cost
of living increases that have occurred in the UK.
Overall Adjusted Operating Margin
of 11.5% is a gradual improvement on 2022 which was 10.7%, however
we believe the Group's strong operating leverage can further
improve the margin to low to mid double-digits once the
macroeconomic conditions improve.
The table below provides a more
detailed view of the currency impact in the period:
|
Adjusted
2023
actual1
£m
|
Currency
impact
|
Adjusted
2023
at
Constant
Currency2
£m
|
Constant
Currency
variance to
2022
|
Adjusted
2022
actual
£m
|
£m
|
%
|
£m
|
%
|
Revenue
|
209.0
|
0.5
|
0.2%
|
208.5
|
2.2
|
1.1%
|
206.3
|
Cost of sales
|
(126.7)
|
(2.3)
|
1.7%
|
(124.4)
|
7.6
|
(5.8%)
|
(132.0)
|
Gross profit
|
82.3
|
(1.8)
|
(2.4%)
|
84.1
|
9.8
|
13.2%
|
74.3
|
Gross margin %
|
39.4%
|
|
(0.9ppts)
|
40.3%
|
|
4.3ppts
|
36.0%
|
Operating costs
|
(58.3)
|
(0.3)
|
0.5%
|
(58.0)
|
(5.7)
|
11.0%
|
(52.3)
|
Operating profit
|
24.0
|
(2.1)
|
(9.5%)
|
26.1
|
4.1
|
18.6%
|
22.0
|
Operating margin
%
|
11.5%
|
|
(1.0ppts)
|
12.5%
|
|
1.8ppts
|
10.7%
|
1. Year ended 31
December 2023 translated at 2023 average exchange rates
Operating costs
Adjusted Operating Costs increased
by £6.0m to £58.3m. The majority of the increase came from wage
increases and associated costs (approximately £4.0m) plus the
further impact of increased travel costs as post-pandemic
conditions normalised.
Net finance expense
Adjusted Net Finance Expense
increased by just £0.2m reflecting an increase in borrowing and
interest rates. In the prior year we entered into swaps to fix the
interest rate applicable to approximately 70% of our borrowings on
a rolling three‑year basis (subject to small changes driven by the impact of
debt leverage on lending margin in the future). 30% of our
borrowing remains at floating interest rates.
Taxation
The effective tax rate on Adjusted
Profit Before Tax increased by 7.1ppts to 18.4% in 2023 following
some advantageous tax rates in 2022. Work done over recent years to
maximise available tax incentives, particularly those relating to
research and development, had lowered this to c.15%, but the
increase in the underlying tax rate in the UK to 25% has pushed the
overall Group tax charge higher. The rate is expected to increase
further in 2024 with the UK corporation tax rate at 25% for the
full year.
Adjusted Free Cash Flow
Adjusted Free Cash Flow (£m)
|
Adjusted1
2023
|
Adjusted1 2022
|
Operating profit
|
24.0
|
22.0
|
Depreciation and
amortisation
|
7.4
|
7.1
|
EBITDA
|
31.4
|
29.1
|
Changes in working
capital
|
0.2
|
13.4
|
Other items
|
1.0
|
1.2
|
Operating Cash flow
|
32.6
|
43.7
|
Operating cash
conversion2
|
135.8%
|
198.6%
|
Net capital expenditure
|
(8.2)
|
(5.6)
|
Interest paid
|
(2.8)
|
(2.7)
|
Tax paid
|
(3.6)
|
(4.7)
|
Free Cash Flow
|
18.0
|
30.7
|
Free Cash Flow as % Revenue
|
8.6%
|
14.9%
|
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 continues to generate
strong free cash flow which has been a key feature of the business.
Despite the record free cash flow generation in 2022, the Group
achieved Adjusted Free Cash Flow of £18.0m which is an outstanding
result in 2023, with second half cash generation being
particularly strong. This Adjusted Free Cash Flow was an impressive
8.6% of revenue and extremely strong Operating Cash Conversion of
135.8%. We are not expecting this exceptional level of cash
conversion to occur going forward.
Capital expenditure
The Group's net capital
expenditure consists of capitalised product development costs and
the purchase of physical assets. Capex of £8.2m (2022: £5.6m)
represented 3.9% of revenue (2022: 2.7%) which is in 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 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
higher than the prior year at 20.6% (2022: 18.2%) and into our
target of 20% or higher. As previously flagged, our returns will
naturally reduce as Luceco transitions from a Group created
organically to one growing via M&A as well (with its required
investment in goodwill).
Capital structure
The business continues to
consistently generate ample cash flow to support its dividend
policy and fund M&A activity.
£m
|
2023
|
2022
|
Change
|
Reported net debt
|
£22.8m
|
£29.4m
|
(22.4%)
|
Less: IFRS 16 finance
leases
|
(£5.1m)
|
(£6.3m)
|
(18.8%)
|
Finance Leases - pre-IFRS
16
|
£0.7m
|
£0.7m
|
-
|
Covenant Net Debt
|
£18.4m
|
£23.8m
|
(22.7%)
|
Covenant Net Debt : Covenant EBITDA
|
0.6x
|
0.8x
|
(25.0%)
|
Very strong cash generation once
again ensured that overall net debt fell and resulted in the
Covenant Net Debt leverage falling to 0.6x. The Group's
non‑utilised
facilities totalled £58.6m, 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 2026. The Group's balance sheet remains strong and
provides the opportunity for selective M&A activity.
The Company's covenant position
and headroom at 31 December 2023 were as follows:
2023 covenant position
|
Covenant
|
Actual
|
Headroom
|
Covenant Net Debt : Covenant
EBITDA
|
3.0 :
1
|
0.6 : 1
|
Covenant Net Debt headroom:
£78.2m1
Covenant EBITDA headroom:
£26.1m
|
Covenant EBITDA : Adjusted Net
Finance Expense
|
4.0 :
1
|
11.5 : 1
|
Covenant EBITDA headroom:
£21.0m
Net Finance Expense headroom:
£5.2m
|
1.
Headroom with increased facility. Current facility headroom is
£57.7m.
The key measures which management
use to evaluate the Group's use of its financial resources and
capital management are set out below:
|
|
|
|
2023
|
2022
|
Adjusted1 Earnings Per
Share (pence)
|
11.1
|
11.1
|
Covenant Net Debt : Covenant
EBITDA (times)
|
0.6x
|
0.8x
|
Adjusted1 Free Cash
Flow (£m)
|
18.0
|
30.7
|
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. 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 a
final dividend of 3.2p, taking the full‑year dividend to 4.8p, representing
a payout of 43% of earnings. The final dividend will be paid on 17
May 2024 to shareholders on the registrar on 12 April
2024.
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
|
Adjusted1
|
Reported
|
|
2023
|
2022
|
Change
|
2023
|
2022
|
Change
|
Revenue
|
£82.6m
|
£73.7m
|
12.1%
|
£82.6m
|
£73.7m
|
12.1%
|
Operating profit
|
£15.0m
|
£13.9m
|
7.9%
|
£15.3m
|
£11.7m
|
30.8%
|
Operating margin %
|
18.2%
|
18.9%
|
(0.7ppts)
|
18.5%
|
15.9%
|
2.6ppts
|
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
most profitable segment, generating 62% of the Group's operating
profit and 39% of its revenue, under a brand established over 80
years ago.
Sales into the Wiring Accessories
segment were £82.6m, which was over 12% better than 2022, largely
driven by the Hybrid channel which had normalised following the
destocking in 2022. In particular, UK core electrical switches and
sockets have been a stronger driver during the period. The
Professional channel was challenging and was behind the prior year
by around 5%.
The Adjusted Operating margin was
18.2% (2022: 18.9%) which remains a key driver for the Group's
overall profitability.
LED Lighting
|
Adjusted1
|
Reported
|
|
2023
|
2022
|
Change
|
2023
|
2022
|
Change
|
Revenue
|
£79.0m
|
£81.4m
|
(2.9%)
|
£79.0m
|
£81.4m
|
(2.9%)
|
Operating profit
|
£4.7m
|
£3.4m
|
38.2%
|
£3.2m
|
£0.3m
|
966.7%
|
Operating margin %
|
5.9%
|
4.2%
|
1.7ppts
|
4.1%
|
0.4%
|
3.7ppts
|
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 now
represents 38% of Group revenue.
Revenue declined marginally in the
year by 2.9%, but overall Adjusted Operating Profit increased by
£1.3m as Adjusted Operating Margin improved in the period by 1.7
percentage points. The decline versus the prior year is largely due
to the impact of the closure of lower margin operations in France
and Germany in the prior year, which were LED focused. On a
like-for‑like
basis and at constant exchange rates, LED sales were broadly flat
year-on-year. 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.
Portable Power
|
Adjusted1
|
Reported
|
|
2023
|
2022
|
Change
|
2023
|
2022
|
Change
|
Revenue
|
£47.4m
|
£51.2m
|
(7.4%)
|
£47.4m
|
£51.2m
|
(7.4%)
|
Operating profit
|
£4.3m
|
£4.7m
|
(8.5%)
|
£3.7m
|
£1.7m
|
117.6%
|
Operating margin %
|
9.1%
|
9.2%
|
(0.1ppts)
|
7.8%
|
3.3%
|
4.5ppts
|
1. A
reconciliation of the reported to Adjusted results is shown within
note 1 of the 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
23% of Group revenue and 18% of Group Adjusted Operating Profit.
Revenue in the period was 7.4% lower than the prior year due to
some final destocking in the first half of 2023, largely relating
to cable reel product categories.
EV charger sales totalled just
less than £8m, a growth rate of 44.4% in the period, which was
highly encouraging despite a slight slowdown in the EV vehicle
market in the second half of the year. We remain excited about the
opportunities that this new sector will provide as the vehicle
market moves towards electrification by 2035 within the UK - our
current key marketplace. During the year 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 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 72 to 73 and the Group's Going Concern
Statement can be found on page 130 of the Annual Report and
Accounts.
WILL HOY
Chief Financial Officer
25 March 2024
Environmental, Social and
Governance ("ESG") update
|
We continue to make progress on our ESG
workstreams:
· We committed to
the Science Based Targets Initiative SBT 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 both 2023 and 2022 from ("C") previously
·
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
·
£80m of revenue from low carbon product
categories in full year 2023, 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
2023
Supply Chain
·
Insourcing of EV charger production within our
China manufacturing facility with 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 2024
are as follows:
· Begin
the alignment with the IFRS S2 Standard
· Start
the development of the transition plan
· Development of TM65 for all new Luceco product
ranges
· TM66
Target (DW Windsor)
· Respond to the CDP
·
Independent assurance of GHC
inventory
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 66 to 71 in the
2023 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 73 of the 2023 Annual Report and Accounts considers the
prospects of the Group should a number of these risks crystallise
together.
Principal risks
Concentration risks associated with
operations
|
Risk and impact:
· The
Group's products are overwhelmingly sourced from one country
(China) and a large proportion are made in one location
(Jiaxing)
· Disruption to our Jiaxing facility could compromise our
ability to serve our customers
· General
disruption, including to shipping routes between China and our
selling markets (particularly the UK) could increase our costs or
limit our ability to serve our markets. There has been some
disruption in the Red sea in the first quarter of 2024
· China could be impacted by events in Ukraine/Russia, which
impacts our ability to manufacture products
|
Mitigation
UK buffer stock is held in the
event of supply disruption in China
All suppliers are provided with
visibility of forward orders and supply issues are discussed
upfront
Production facilities in China are
spread across multiple buildings on the same site to mitigate
risk
The Group owns its product designs
and production tooling, allowing manufacturing to be moved between
suppliers more easily
Business Continuity Plans are in
place for Jiaxing site
Business Interruption Insurance is
in place for the Jiaxing site, Telford site and our OEM supplier of
Portable Power products
|
Concentration risks associated with customers and
products:
|
Risk and impact:
· The
Group has a number of key customers representing circa 50% of Group
revenue. A change in demand from these customers could result in
reduced sales and profits
· The Group's
committed order book extends 2-3 months forward. Orders thereafter
are uncommitted
· Geopolitical instability creates prices changes and shortages
of materials and the impact of inflation on input costs from energy
and material costs impacting product cost and profitability.
This has been prevalent with copper based products due to
increasing global demand as electrification escalates in many
sectors
· A
change in energy prices could increase the Group's operating costs,
reduce profits and/or price competitiveness
· The Group has a material exposure to the purchase price of
copper. An adverse move could reduce profits and/or price
competitiveness
|
Mitigation
Key customers typically follow a
tender process, providing visibility of business wins and
losses
Large customers typically take
6-12 months to implement a large range change throughout their
networks, giving us time to react
The cost of range changes for
large customers is high, reducing the likelihood of
occurrence
Relationships with the Group's
large customers are particularly established
Capacity at our factory and at our
OEM partners in China can be changed quickly and cost
effectively
The Group hedges its USD:RMB and
copper exposures according to a Board-approved policy. The hedging
matches the duration of any fixed selling price commitment offered
to customers
The Group has fixed price gas and
electricity contracts covering a significant proportion of its
energy use
Application of the hedging policy
is reviewed by the Board
|
Macroeconomic, political and environmental:
|
Risk and impact:
·
A deterioration in
trade relations between the UK and China could disrupt product
supply and/or increase costs
· The
Group has a concentrated exposure to the UK market. UK economic
headwinds could reduce profits.
· A
failure to respond to governmental, cultural, customer or investor
requirements on ESG in the following areas: changing customer
behaviour and demands (e.g. electric vehicle charging), increased
stakeholder concern, negative feedback or non-compliance on ESG
strategy, increased severity and frequency of extreme weather
events accelerating ESG progress. All of which could result in
reduced profits or a reduced share price
|
Mitigation
We have clear ESG objectives tied
to management compensation plans. Our progress is visible via
independent bodies such as CPD and SBTi
The Group is expanding and
developing its product range of low carbon products (e.g. LED
lighting and electric vehicle chargers)
The Group is diversified by market
segment within the UK, reducing risk
The Group is largely exposed to
the RMI cycle, which is less susceptible to macroeconomic
forces
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
A "China Plus 1" sourcing strategy
is being developed
Management liaises closely with
investors and customers to understand their future ESG needs and
responds accordingly
|
Loss of IT / data:
|
Risk and impact:
· Loss
of IT functionality would compromise operations, leading to
increased costs or lost sales
· Loss
of sensitive data from our IT environment would expose the Group to
regulatory, legal or reputational risk
· Increased cloud server usage increases risk of data loss or
compromise and cyber risk is on a upward trend impacting operations
and reputational risk
|
Mitigation
Market-leading cyber security
tools and monitoring are in place
Market-leading data backup tools
are in place
IT disaster recovery plans are in
place throughout the Group
We conduct regular penetration
testing
We conduct regular Group-wide
cyber security training for employees
IT incidents are reported to the
Board
|
People and labour shortages:
|
Risk and impact:
· Loss
of key employees could damage business relationships or result in a
loss of knowledge
· A
shortage of available labour for key roles could disrupt operations
and impact long-term progress
· Depending on the job role and team, COVID-19 has changed
employee's 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 this change in working practices
could lead to loss of employees and an inability to attract
talent
|
Mitigation
Key relationships are typically
shared between more than one employee
The Group's service offering is
multi-faceted, reducing the risk that the loss of an employee would
result in lost sales
Retention of key employees is
driven by long-term personal development and incentive plans and
ensuring compensation is regularly benchmarked for competitiveness.
These plans are reviewed by the Nomination and Remuneration
Committees
Workforce engagement surveys
ensure employee needs are identified and addressed, promoting
retention
Adoption of hybrid practices
within appropriate teams and locations
|
Acquisitions:
|
Risk and impact:
· An
ill-judged acquisition could reduce Group profit and return on
capital
· Unable to grow or develop an acquired business in line with
expectations, leading to lower profits
· The
Group's acquisition strategy could compromise/distract the
execution of strategy in other areas
|
Mitigation
Our acquisition strategy is set by
the Board
Board members possess significant
M&A experience
The acquisition strategy is
implemented by an experienced in-house team
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:
· The
Group could infringe upon the IP of others, leading to legal
claims
· The
Group's products could fail to meet regulatory requirements or
experience quality failures, resulting in legal claims and/or
reputational damage
· The
Group's businesses could fail to meet regulatory requirements in
their countries of operation
· The
Group could fail to comply with local tax laws, particularly
regarding transfer pricing
|
Mitigation
The Group receives IP advice from
external experts
The Group's products are certified
for use prior to launch by external experts
The Group has extensive quality
assurance resources in the UK and China
Suppliers are required to adhere
to a strict Code of Conduct
Supplier compliance with the Code
of Conduct is audited by our in-house teams
Product liability claims are
reported to the Board
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:
· The
Group could fail to provide sufficient funding liquidity for its
operations
· The
Group has a material exposure to movements in the USD and RMB
currency rates. An adverse move could reduce short-term profits
and/or long-term competitiveness
· The
Group could fail to report its financial performance accurately,
leading to inappropriate decision-making and regulatory
breaches
· The
Group could suffer fraud across its widespread
operations
|
Mitigation
The Group hedges its currency
exposures according to a Board-approved policy. The hedging matches
the duration of any fixed selling price commitment offered to
customers
The Group has a clear Capital
Structure policy that is designed to provide sufficient
liquidity
The Capital Structure policy is
implemented by Treasury experts and monitored by the
Board
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 2023 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
WILL HOY
Chief Financial Officer
25 March 2024
CONSOLIDATED INCOME
STATEMENT
|
For the year ended 31 December 2023
|
|
2023
|
20221
|
Note
|
£m
|
£m
|
Revenue
|
2
|
209.0
|
206.3
|
Cost of sales
|
|
(126.2)
|
(138.3)
|
Gross profit
|
|
82.8
|
68.0
|
Distribution expenses
|
|
(8.6)
|
(9.2)
|
Administrative expenses
|
|
(52.0)
|
(45.1)
|
Operating profit
|
2,3
|
22.2
|
13.7
|
Finance expense
|
|
(3.3)
|
(2.0)
|
Net finance expense
|
|
(3.3)
|
(2.0)
|
Profit before tax
|
|
18.9
|
11.7
|
Taxation
|
4
|
(2.2)
|
(0.7)
|
Profit for the period
|
|
16.7
|
11.0
|
Earnings per share (p)
|
|
|
|
Basic
|
5
|
10.8p
|
7.1p
|
Fully diluted
|
5
|
10.7p
|
7.0p
|
1.
Re-presented in respect of 2022 is detailed in note 1
Adjusted1 Results
|
|
2023
|
2022
|
Note
|
£m
|
£m
|
Adjusted operating
profit
|
1
|
24.0
|
22.0
|
Adjusted profit before
tax
|
1
|
21.2
|
19.4
|
Adjusted profit after
tax
|
1
|
17.3
|
17.2
|
Adjusted basic earnings per
share
|
5
|
11.1p
|
11.1p
|
Adjusted diluted earnings per
share
|
5
|
11.1p
|
11.0p
|
1.
See note 1 for alternative performance measures
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
|
For the year ended 31 December 2023
|
2023
|
2022
|
|
£m
|
£m
|
Profit for the period
|
16.7
|
11.0
|
Other comprehensive income -
amounts that may be reclassified to profit or loss in the
future:
|
|
|
Foreign exchange translation
differences - foreign operations
|
(2.5)
|
2.4
|
Other comprehensive income -
amounts that will not be reclassified to profit or loss:
|
|
|
Changes in the fair value of
equity investments at fair value through other comprehensive
income
|
0.6
|
-
|
Total comprehensive income for the year
|
14.8
|
13.4
|
All results are from continuing
operations.
The accompanying notes form part
of these financial statements.
CONSOLIDATED BALANCE
SHEET
|
At 31 December 2023
|
|
2023
|
2022
|
|
Note
|
£m
|
£m
|
Non-current assets
|
|
|
|
Property, plant and
equipment
|
7
|
20.0
|
21.4
|
Right-of-use assets
|
|
7.6
|
6.1
|
Intangible assets
|
8
|
40.1
|
41.7
|
Investment
|
|
2.3
|
-
|
Financial assets measured at fair
value through profit or loss
|
|
0.4
|
0.5
|
Deferred tax asset
|
|
2.5
|
0.8
|
|
|
72.9
|
70.5
|
Current assets
|
|
|
|
Inventories
|
|
40.8
|
47.5
|
Trade and other
receivables
|
|
55.7
|
52.9
|
Financial assets measured at fair
value through profit or loss
|
|
0.3
|
0.7
|
Current tax asset
|
|
2.5
|
1.2
|
Cash and cash
equivalents
|
|
4.6
|
5.3
|
|
|
103.9
|
107.6
|
Total assets
|
|
176.8
|
178.1
|
Current liabilities
|
|
|
|
Trade and other
payables
|
|
47.9
|
49.8
|
Financial liabilities measured at
fair value through profit or loss
|
|
1.5
|
2.3
|
Other financial
liabilities
|
|
2.0
|
2.0
|
|
|
51.4
|
54.1
|
Non-current liabilities
|
|
|
|
Interest-bearing loans and
borrowings
|
9
|
22.3
|
28.4
|
Other financial
liabilities
|
|
3.1
|
4.3
|
Deferred tax liability
|
|
3.6
|
2.3
|
Financial liabilities measured at
fair value through profit or loss
|
|
0.3
|
-
|
Provisions
|
|
2.3
|
2.3
|
|
|
31.6
|
37.3
|
Total liabilities
|
|
83.0
|
91.4
|
Net assets
|
|
93.8
|
86.7
|
Equity attributable to equity holders of the
parent
|
|
|
|
Share capital
|
|
0.1
|
0.1
|
Share premium
|
|
24.8
|
24.8
|
Othe reserve
|
|
0.7
|
2.6
|
Treasury reserve
|
|
(8.6)
|
(8.7)
|
Retained earnings
|
|
76.8
|
67.9
|
Total equity
|
|
93.8
|
86.7
|
The accompanying notes form part
of these financial statements.
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
|
For the year ended 31 December 2023
|
Share
|
Share
|
Translation
|
Financial
|
Retained
|
Treasury
|
Total
|
|
capital
|
premium
|
reserve
|
Assets
at FVOCI
|
earnings
|
reserve
|
equity
|
|
£m
|
£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
|
-
|
-
|
-
|
-
|
11.0
|
-
|
11.0
|
Currency revaluations of
investments
|
-
|
-
|
2.5
|
-
|
-
|
-
|
2.5
|
Currency translation
differences
|
-
|
-
|
(0.1)
|
-
|
-
|
-
|
(0.1)
|
Total comprehensive income for the period
|
-
|
-
|
2.4
|
-
|
11.0
|
-
|
13.4
|
Transactions with owners in their
capacity as owners:
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
-
|
(10.9)
|
-
|
(10.9)
|
Purchase of own shares
|
-
|
-
|
-
|
-
|
-
|
(2.4)
|
(2.4)
|
Disposal of own shares
|
-
|
-
|
-
|
-
|
(0.4)
|
0.4
|
-
|
Deferred tax on share-based
payment transactions
|
-
|
-
|
-
|
-
|
(1.6)
|
-
|
(1.6)
|
Corporation tax on foreign
currency translation differences on investments in overseas
entities
|
-
|
-
|
-
|
-
|
(0.5)
|
-
|
(0.5)
|
Share-based payments
charge
|
-
|
-
|
-
|
-
|
1.0
|
-
|
1.0
|
Total transactions with owners in their capacity as
owners
|
-
|
-
|
-
|
-
|
(12.4)
|
(2.0)
|
(14.4)
|
Balance at 31 December 2022
|
0.1
|
24.8
|
2.6
|
-
|
67.9
|
(8.7)
|
86.7
|
|
|
|
|
|
|
|
|
Balance at 1 January 2023
|
0.1
|
24.8
|
2.6
|
-
|
67.9
|
(8.7)
|
86.7
|
Total comprehensive income
|
|
|
|
|
|
|
|
Profit for the period
|
-
|
-
|
-
|
-
|
16.7
|
-
|
16.7
|
Investment revaluation
|
-
|
-
|
-
|
0.6
|
-
|
-
|
0.6
|
Currency translation
differences
|
-
|
-
|
(2.5)
|
-
|
-
|
-
|
(2.5)
|
Total comprehensive income for the period
|
-
|
-
|
(2.5)
|
0.6
|
16.7
|
-
|
14.8
|
Transactions with owners in their
capacity as owners:
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
-
|
(7.2)
|
-
|
(7.2)
|
Purchase of own shares
|
-
|
-
|
-
|
-
|
-
|
(1.6)
|
(1.6)
|
Disposal of own shares
|
-
|
-
|
-
|
-
|
(1.7)
|
1.7
|
-
|
Deferred tax on share-based
payment transactions
|
|
|
|
-
|
0.2
|
|
0.2
|
Share-based payments
charge
|
-
|
-
|
-
|
-
|
0.9
|
-
|
0.9
|
Total transactions with owners in their capacity as
owners
|
-
|
-
|
-
|
-
|
(7.8)
|
0.1
|
(7.7)
|
Balance at 31 December 2023
|
0.1
|
24.8
|
0.1
|
0.6
|
76.8
|
(8.6)
|
93.8
|
The accompanying notes form part of
theses financial statements.
CONSOLIDATED CASH FLOW
STATEMENT
|
For the year ended 31 December 2023
|
Note
|
2023
£m
|
20221
£m
|
Cash flows from operating activities
|
|
|
|
Profit for the period
|
|
16.7
|
11.0
|
Adjustments for:
|
|
|
|
Depreciation and
amortisation
|
7,8
|
9.3
|
8.9
|
Finance expense
|
|
3.3
|
2.0
|
Taxation
|
4
|
2.2
|
0.7
|
Loss on disposal of tangible
assets
|
|
0.2
|
0.1
|
Increase in provisions
|
|
-
|
0.1
|
Share-based payments
charge
|
|
0.8
|
1.0
|
Other non-cash items
|
|
(0.5)
|
6.8
|
Operating cash flow before movement in working
capital
|
|
32.0
|
30.6
|
(Increase)/decrease in trade and
other receivables
|
|
(3.1)
|
19.2
|
Decrease in inventories
|
|
5.9
|
12.0
|
(Decrease) in trade and other
payables
|
|
(2.2)
|
(18.5)
|
Cash from operations
|
|
32.6
|
43.3
|
Tax paid
|
|
(3.6)
|
(4.7)
|
Net cash from operating activities
|
|
29.0
|
38.6
|
Cash flows from investing activities
|
|
|
|
Acquisition of property, plant and
equipment2
|
7
|
(6.4)
|
(4.1)
|
Acquisition of other intangible
assets
|
8
|
(1.8)
|
(1.7)
|
Disposal of tangible
assets
|
7
|
-
|
0.2
|
Acquisition of
subsidiary
|
|
-
|
(7.8)
|
Investment
|
|
(1.7)
|
-
|
Net cash used in investing activities
|
|
(9.9)
|
(13.4)
|
Cash flows from financing activities
|
|
|
|
(Repayment) of
borrowings
|
|
(6.1)
|
(8.9)
|
Interest paid
|
|
(2.8)
|
(2.7)
|
Dividends paid
|
|
(7.2)
|
(10.9)
|
Finance lease
liabilities
|
|
(2.1)
|
(2.2)
|
Purchase of own shares
|
|
(1.6)
|
(2.4)
|
Net cash from financing activities
|
|
(19.8)
|
(27.1)
|
Net (decrease)/increase in cash
and cash equivalents
|
|
(0.7)
|
(1.9)
|
Cash and cash equivalents at 1
January
|
|
5.3
|
6.9
|
Effect of exchange rate
fluctuations on cash held
|
|
-
|
0.3
|
Cash and cash equivalents at 31 December
|
|
4.6
|
5.3
|
1.
Re-presented in respect of 2022 is detailed in note 1
2.
Includes £2.5m of Land and Buildings relating to a long lease (999
year) property shown in Right of Use Assets
The accompanying notes form part of
theses financial statements.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
|
For the year ended 31 December 2023
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
2023 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 2023, 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 2023 and 31 December 2022 but is derived
from those accounts. Statutory accounts for 2022 have been
delivered to the Registrar of Companies, and those for 2023 will be
delivered in due course. The Auditors have reported on the 2023
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 2023 Annual Report and Accounts on pages 117
to 123.
The 2023 Annual Report and
Accounts and the Notice of the 2023 Annual General Meeting will be
published on the Company's website at 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.
The Group's accounting policies
can be referred to in note 1 of the consolidated financial
statements in the 2023 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 and our cash flow forecasts support this.
The Group has reported a profit before tax of £18.9m for the year
to 31 December 2023 (2022: £11.7m), has net current assets of
£52.5m (2022: £53.5m) and net assets of £93.8m (2022: £86.7m), net
debt of £22.8m (2022: £29.4m) and net cash from operating
activities of £29.0m (2022: £38.6m). The bank facilities mature on
30 September 2026 as detailed below:
The capital resources at the
Group's disposal at 31 December 2023 and 29 February
2024:
·
A revolving credit facility of £80.0m, £22.3m
drawn at 31 December 2023 and £28.4m drawn at 29 February
2024
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
measure
but excluding the
adjusting items.
A
breakdown of the
adjusting items from 2023
and
2022, which reconciles
the
adjusted measures to
statutory figures, can be
found
later in this document
|
Allows
management to
assess
the performance
of the
business after
removing
large/unusual
items or
transactions that
are not
reflective of the
underlying business
operations
|
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 period
|
Allows
management
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
|
Low Carbon Sales
|
Revenue
|
Segmental operating revenue
|
EV
charger revenue and LED revenue less sales from lighting
columns
and
downlight accessories
|
Provides
management with a measure of low
carbon
sales
|
Adjusted EBITDA
|
Operating profit
|
Consolidated income statement
|
EBITDA
excluding the adjusting items excluded from Adjusted Operating
Profit except for any adjusting items that relate to depreciation
and amortisation
|
Provides
management with an approximation of cash generation from the
Group's underlying operating activities
|
Covenant EBITDA
|
Operating profit
|
Consolidated income statement
|
As above
definition of "Adjusted EBITDA" but including EBITDA generated from
acquisitions between 1 January and the date of acquisition and
excluding share-based payment expense
|
Aligns
with the definition of EBITDA used for bank covenant
testing
|
Contribution profit
|
Operating profit and operating costs
|
Consolidated income statement
|
Contribution profit is after allocation of directly
attributable adjusted operating expenses for each operating
segment
|
Provides
management with an assessment of profitability by operating
segment
|
Contribution margin
|
Operating profit and operating costs
|
Consolidated income statement
|
Contribution margin is contribution profit, as above, divided
by revenue for each operating segment
|
Provides
management with an assessment of margin by operating
segment
|
Adjusted Operating Cash
Flow
|
Cash
flow from operations
|
Consolidated cash flow statement
|
Adjusted
Operating Cash Flow is the cash from operations but excluding the
cash impact of the adjusting items excluded from Adjusted Operating
Profit
|
Provides
management with an indication of the amount of cash available for
discretionary investment
|
Adjusted Free Cash Flow
|
Net
increase/(decrease) in cash and cash equivalents
|
Consolidated cash flow statement
|
Adjusted
Free Cash Flow is calculated as Adjusted Operating Cash Flow less
cash flows in respect of investing activities (except for those in
respect of acquisitions or disposals), interest and taxes
paid
|
Provides
management with an indication of the free cash generated by the
business for return to shareholders or reinvestment in M&A
activity
|
Adjusted Net Cash Flow
|
Net
increase/(decrease) in cash and cash equivalents
|
Consolidated cash flow statement
|
Adjusted
Free Cash Flow less cash flows relating to dividend payments and
the purchase of own shares
|
Provides
management with an indication of the net cash flows generated by
the business after dividends and share purchases
|
Adjusted Operating Cash
Conversion
|
None
|
Consolidated cash flow statement and consolidated income
statement
|
Operating Cash Conversion is defined as Adjusted Operating
Cash Flow divided by Adjusted Operating Profit
|
Allows
management to monitor the conversion of operating profit into
cash
|
Return on Capital Invested
("ROCI")
|
None
|
Operating profit and Net assets
|
Adjusted
Operating Profit divided into the sum of net assets and net debt
(average for the last two years) expressed as a
percentage
|
To
provide an assessment of how profitability capital is being
deployed in the business
|
Re-presented prior year comparative
Revenue, profit before and
after tax and EPS all unchanged
During the year the Group has
amended its presentation of its net finance expense line. In the
2022 Annual report and Accounts the company combined the finance
interest together with the impact of re-measurement of the fair
value of the hedging portfolio. Given that the impact of the
hedging relates to the purchase of goods bought in a foreign
currency, the Board believes it is preferable for the reader to
show this as a cost of sale item rather than a net finance expense
item. This leaves the finance expense line with borrowing and cash
interest impacts only. Accordingly, the presentation of the
accounts has been restated for 2022 and the impact is as follows
from the 2022 Reported numbers:
The revised presentation has no
impact on reported profit before tax, cash flows or net assets as
reported previously.
|
2022
|
|
2022
|
Reported
|
Presentation restatement
|
Re-presented
|
Revenue
|
206.3
|
-
|
206.3
|
Cost of sales
|
(132.0)
|
(6.3)
|
(138.3)
|
Gross profit
|
74.3
|
(6.3)
|
68.0
|
Distribution expenses
|
(9.2)
|
-
|
(9.2)
|
Administrative expenses
|
(45.1)
|
-
|
(45.1)
|
Operating profit
|
20.0
|
(6.3)
|
13.7
|
Finance expense
|
(8.3)
|
6.3
|
(2.0)
|
Net finance expense
|
(8.3)
|
6.3
|
(2.0)
|
Profit before tax
|
11.7
|
-
|
11.7
|
Taxation
|
(0.7)
|
-
|
(0.7)
|
Profit for the period
|
11.0
|
-
|
11.0
|
Earnings per share (p)
|
|
|
|
Basic
|
7.1p
|
-
|
7.1p
|
Fully diluted
|
7.0p
|
-
|
7.0p
|
2.
Re-presented 2022 is detailed in note 1
The following is the impact on the
cashflow, it has no impact on any subtotal items, just within the
Operating cash flow before movement in working capital
section.
£m
|
2022
Reported
|
Presentation
restatement
|
2022
Re-presented
|
Cash flows from operating activities
|
|
|
|
Profit for the period
|
11.0
|
-
|
11.0
|
Adjustments for:
|
|
|
|
Depreciation and
amortisation
|
8.9
|
-
|
8.9
|
Finance expense
|
8.3
|
(6.3)
|
2.0
|
Taxation
|
0.7
|
-
|
0.7
|
Loss on disposal of tangible
assets
|
0.1
|
-
|
0.1
|
Increase in provisions
|
0.1
|
-
|
0.1
|
Share-based payments
charge
|
1.0
|
-
|
1.0
|
Other non-cash items
|
0.5
|
6.3
|
6.8
|
Operating cash flow before movement in working
capital
|
30.6
|
-
|
30.6
|
(Increase)/decrease in trade and
other receivables
|
19.2
|
-
|
19.2
|
Decrease in inventories
|
12.0
|
-
|
12.0
|
Decrease in trade and other
payables
|
(18.5)
|
-
|
(18.5)
|
Cash from operations
|
43.3
|
-
|
43.3
|
Tax paid
|
(4.7)
|
-
|
(4.7)
|
Net cash from operating activities
|
38.6
|
-
|
38.6
|
Cash flows from investing activities
|
|
|
|
Acquisition of property, plant and
equipment
|
(4.1)
|
-
|
(4.1)
|
Acquisition of other intangible
assets
|
(1.7)
|
-
|
(1.7)
|
Disposal of tangible
assets
|
0.2
|
-
|
0.2
|
Acquisition of
subsidiary
|
(7.8)
|
-
|
(7.8)
|
Net cash used in investing activities
|
(13.4)
|
-
|
(13.4)
|
Cash flows from financing activities
|
|
|
|
Repayment of borrowings
|
(8.9)
|
-
|
(8.9)
|
Interest paid
|
(2.7)
|
-
|
(2.7)
|
Dividends paid
|
(10.9)
|
-
|
(10.9)
|
Finance lease
liabilities
|
(2.2)
|
-
|
(2.2)
|
Purchase of own shares
|
(2.4)
|
-
|
(2.4)
|
Net cash from financing activities
|
(27.1)
|
-
|
(27.1)
|
Net decrease in cash and cash
equivalents
|
(1.9)
|
-
|
(1.9)
|
Cash and cash equivalents at 1
January
|
6.9
|
-
|
6.9
|
Effect of exchange rate
fluctuations on cash held
|
0.3
|
-
|
0.3
|
Cash and cash equivalents at 31 December
|
5.3
|
-
|
5.3
|
The following table reconciles all
adjustments from the reported to the adjusted figures in the income
statement:
|
2023
£m
|
Amortisation of acquired intangibles and related acquisition
costs1
£m
|
Re-measurement
to fair
value of hedging portfolio2
£m
|
2023
Adjustments
£m
|
Adjusted
2023
£m
|
Revenue
|
209.0
|
-
|
-
|
-
|
209.0
|
Cost of sales
|
(126.2)
|
-
|
(0.5)
|
(0.5)
|
(126.7)
|
Gross profit
|
82.8
|
-
|
(0.5)
|
(0.5)
|
82.3
|
Distribution expenses
|
(8.6)
|
-
|
-
|
-
|
(8.6)
|
Administrative expenses
|
(52.0)
|
2.3
|
-
|
2.3
|
(49.7)
|
Operating profit
|
22.2
|
2.3
|
(0.5)
|
1.8
|
24.0
|
Net finance expense
|
(3.3)
|
-
|
0.5
|
0.5
|
(2.8)
|
Profit before tax
|
18.9
|
2.3
|
-
|
2.3
|
21.2
|
Taxation
|
(2.2)
|
(1.7)
|
-
|
(1.7)
|
(3.9)
|
Profit for the period
|
16.7
|
0.6
|
-
|
0.6
|
17.3
|
1. Relating to
Kingfisher Lighting, DW Windsor and Sync EV
2. Relating to
currency hedges/interest swaps
|
2022
£m
|
Amortisation of acquired intangibles and related acquisition
costs1
£m
|
Re-measurement
to fair
value of hedging portfolio2
£m
|
Restructuring3
£m
|
2022
Adjustments
£m
|
Adjusted
2022
£m
|
Revenue
|
206.3
|
-
|
-
|
-
|
-
|
206.3
|
Cost of sales
|
(138.3)
|
-
|
6.3
|
-
|
6.3
|
(132.0)
|
Gross profit
|
68.0
|
-
|
6.3
|
-
|
6.3
|
74.3
|
Distribution expenses
|
(9.2)
|
-
|
-
|
-
|
-
|
(9.2)
|
Administrative expenses
|
(45.1)
|
3.0
|
-
|
(1.0)
|
2.0
|
(43.1)
|
Operating profit
|
13.7
|
3.0
|
6.3
|
(1.0)
|
8.3
|
22.0
|
Net finance expense
|
(2.0)
|
-
|
(0.6)
|
-
|
(0.6)
|
(2.6)
|
Profit before tax
|
11.7
|
3.0
|
5.7
|
(1.0)
|
7.7
|
19.4
|
Taxation
|
(0.7)
|
(0.6)
|
(1.1)
|
0.2
|
(1.5)
|
(2.2)
|
Profit for the period
|
11.0
|
2.4
|
4.6
|
(0.8)
|
6.2
|
17.2
|
1. Relating to
Kingfisher Lighting, DW Windsor and Sync EV
2. Relating to
currency hedges/interest swaps
3. Relating to the
closure of Germany and France operations
The following tables indicate how
alternative performance measures are calculated:
|
2023
|
2022
|
Adjusted 12 months rolling EBITDA
|
£m
|
£m
|
Adjusted Operating Profit
|
24.0
|
22.0
|
Adjusted Depreciation and
Amortisation
|
7.4
|
7.1
|
Adjusted 12 months rolling EBITDA
|
31.4
|
29.1
|
|
2023
|
2022
|
Covenant EBITDA
|
£m
|
£m
|
Adjusted 12 months rolling
EBITDA
|
31.4
|
29.1
|
EBITDA from acquisitions from 1
January to the date of acquisition and share based payment
expense
|
0.8
|
1.2
|
Covenant EBITDA
|
32.2
|
30.3
|
|
2023
|
2022
|
Adjusted Operating Cash Conversion
|
£m
|
£m
|
Cash from operations (from
consolidated cash flow statement)
|
32.6
|
43.3
|
Adjustments to operating cash flow
(from consolidated cash flow statement)
|
-
|
0.4
|
Adjusted Operating Cash Flow
|
32.6
|
43.7
|
Adjusted Operating Profit
|
24.0
|
22.0
|
Adjusted Operating Cash Conversion
|
135.8%
|
198.6%
|
|
2023
|
2022
|
Adjusted Net Cash Flow as % of revenue
|
£m
|
£m
|
Adjusted Free Cash Flow (see
below)
|
18.0
|
30.7
|
Purchase of own shares
|
(1.6)
|
(2.4)
|
Dividends
|
(7.2)
|
(10.9)
|
Adjusted Net Cash Flow
|
9.2
|
17.4
|
Revenue
|
209.0
|
206.3
|
Adjusted Net Cash Flow as % of revenue
|
4.4%
|
14.9%
|
Adjusted Free Cash Flow as % of revenue
|
2023
£m
|
2022
£m
|
Adjusted Operating Cash Flow (see
table above)
|
32.6
|
43.7
|
Net Cash used in investing
activities excluding acquisitions (from consolidated cash flow
statement)
|
(8.2)
|
(5.6)
|
Interest paid (from consolidated
cash flow statement)
|
(2.8)
|
(2.7)
|
Tax paid (from consolidated cash
flow statement)
|
(3.6)
|
(4.7)
|
Adjusted Free Cash Flow
|
18.0
|
30.7
|
Revenue
|
209.0
|
206.3
|
Adjusted Free Cash Flow as % of revenue
|
8.6%
|
14.9%
|
|
2023
|
2022
|
Return on Capital Investment
|
£m
|
£m
|
Net assets
|
93.8
|
86.7
|
Net debt
|
22.8
|
29.4
|
Capital invested
|
116.6
|
116.1
|
Average capital invested (from last
two years)
|
116.4
|
121.0
|
Adjusted Operating Profit (from
above)
|
24.0
|
22.0
|
Return on Capital Invested (Adjusted Operating Profit/average
capital invested)
|
20.6%
|
18.2%
|
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
|
•
|
Definition of Accounting Estimates
- Amendments to IAS 8
|
•
|
Disclosure of Accounting policies
- Amendments to IAS 1
|
•
|
Deferred Tax related to Assets and
Liabilities arising from a single Transaction - Amendments to IAS
12
|
•
|
International Tax Reform - Pillar
Two Model Rules, Amendments to IAS 12 (effective 23 May
2023)
|
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:
•
|
Non-current Liabilities with
Covenants - Amendments to IAS 1 and Classification of Liabilities
as Current or Non-current, amendments to IAS 1
|
•
|
Lease Liability in a Sale
Leaseback - Amendments to IFRS 16
|
•
|
Supplier Finance Arrangements -
Amendments to IAS 7 and IFRS 7
|
•
|
Lack of Exchangeability -
Amendments to IAS 21 (effective 1 January 2025)
|
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
2023
|
Adjustments
|
Reported
2023
|
Adjusted
2022
|
Adjustments
|
Reported
2022
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
|
|
|
|
|
|
Wiring Accessories
|
82.6
|
-
|
82.6
|
73.7
|
-
|
73.7
|
LED Lighting
|
79.0
|
-
|
79.0
|
81.4
|
-
|
81.4
|
Portable Power
|
47.4
|
-
|
47.4
|
51.2
|
-
|
51.2
|
|
209.0
|
-
|
209.0
|
206.3
|
-
|
206.3
|
Operating profit
|
|
|
|
|
|
|
Wiring Accessories
|
15.0
|
0.3
|
15.3
|
13.9
|
(2.2)
|
11.7
|
LED Lighting
|
4.7
|
(1.5)
|
3.2
|
3.4
|
(3.1)
|
0.3
|
Portable Power
|
4.3
|
(0.6)
|
3.7
|
4.7
|
(3.0)
|
1.7
|
Operating profit
|
24.0
|
(1.8)
|
22.2
|
22.0
|
(8.3)
|
13.7
|
Revenue by location of customer
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
UK
|
173.6
|
165.3
|
Europe
|
12.9
|
19.7
|
Americas
|
8.6
|
8.0
|
Middle East and Africa
|
8.3
|
8.7
|
Asia Pacific
|
5.6
|
4.6
|
Total revenue
|
209.0
|
206.3
|
Non-current assets by location
|
|
|
|
2023
|
2022
|
|
£m
|
£m
|
UK
|
57.3
|
52.1
|
China
|
15.3
|
17.6
|
Other
|
0.3
|
0.8
|
Non-current assets
|
72.9
|
70.5
|
3. Expenses recognised in the consolidated income
statement
Included in the consolidated
income statement are the following:
|
2023
|
2022
|
|
£m
|
£m
|
Research and development costs
expensed as incurred
|
2.3
|
1.9
|
Depreciation of property, plant
and equipment and right-of-use assets
|
5.9
|
6.0
|
Amortisation of intangible
assets
|
3.4
|
2.9
|
4. Income tax expense
|
2023
|
2022
|
|
£m
|
£m
|
Current tax expense
|
|
|
Current year - UK
|
2.9
|
2.3
|
Current year - overseas
|
-
|
(0.9)
|
Adjustment in respect of prior
years
|
(0.5)
|
(0.3)
|
Current tax expense
|
2.4
|
1.1
|
Deferred tax expense/(credit)
|
|
|
Origination and reversal of
temporary differences
|
0.9
|
(0.2)
|
Adjustment in respect of prior
years
|
(1.3)
|
(0.1)
|
Effect of tax rate change on opening
balance
|
0.2
|
(0.1)
|
Deferred tax (credit)
|
(0.2)
|
(0.4)
|
Total tax expense
|
2.2
|
0.7
|
|
2023
|
2022
|
Reconciliation of effective tax rate
|
£m
|
£m
|
Profit for the year
|
16.7
|
11.0
|
Total tax expense
|
2.2
|
0.7
|
Profit before taxation
|
18.9
|
11.7
|
Tax using the UK corporation tax
rate of 19.0% (2021: 19.0%)
|
4.4
|
2.2
|
Effect of tax rates in foreign
jurisdictions
|
(0.5)
|
-
|
R&D tax credits
|
(0.4)
|
(0.4)
|
Non-deductible expenses
|
0.1
|
0.2
|
Adjustment in respect of previous
periods
|
(1.8)
|
(0.4)
|
Transfer pricing adjustments
(related to China)
|
-
|
(1.0)
|
Effect of rate change in calculation
of deferred tax
|
0.3
|
0.1
|
Movement in deferred tax not
recognised
|
0.1
|
-
|
Deferred tax on share-based
payments
|
-
|
0.3
|
Fixed asset differences related to
tax and book value
|
-
|
(0.1)
|
Utilisation of unrecognised overseas
brought forward tax losses
|
-
|
(0.2)
|
Total tax expense
|
2.2
|
0.7
|
The adjustment in respect of
previous periods of a £1.8m credit 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 of which £1.2m
relates to a tax deduction in respect of shares issued on the
acquisition of DW Windsor.
Factors which may affect future current and total tax
charges
An increase in the UK
corporation tax 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 2023 and 31 December 2022 has been
calculated based on these rates, reflecting the expected timing of
reversal of the related temporary differences.
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.
|
2023
|
2022
|
|
£m
|
£m
|
Earnings for calculating basic
earnings per share
|
16.7
|
11.0
|
Adjusted for:
|
|
|
Restructuring of
European operations
|
-
|
(1.0)
|
Amortisation of
acquired intangibles and related acquisition costs
|
2.3
|
3.0
|
Remeasurement to
fair value of hedging portfolio
|
-
|
5.7
|
Income tax on
above items
|
(0.5)
|
(1.5)
|
Other tax
items
|
(1.2)
|
-
|
Adjusted earnings for calculating adjusted basic earnings per
share
|
17.3
|
17.2
|
|
2023
|
2022
|
|
Number
|
Number
|
Weighted average number of ordinary shares
|
Million
|
Million
|
Basic
|
155.2
|
154.3
|
Dilutive effect of share options on
potential ordinary shares
|
1.3
|
2.6
|
Diluted
|
156.5
|
156.9
|
|
2023
|
2022
|
|
Pence
|
Pence
|
Basic earnings per share
|
10.8
|
7.1
|
Diluted earnings per
share
|
10.7
|
7.0
|
Adjusted basic earnings per share
|
11.1
|
11.1
|
Adjusted diluted earnings per share
|
11.1
|
11.0
|
6. Dividend
Amounts recognised in the
financial statements as distributions to equity shareholders as
follows:
|
2023
|
2022
|
|
£m
|
£m
|
Final dividend for the year ended 31
December 2022 of 3.0p (2021: 5.5p) per ordinary share
|
4.7
|
8.5
|
Interim dividend for the year ended
31 December 2023 of 1.6p (2022: 1.6p) per ordinary share
|
2.5
|
2.4
|
Total dividend recognised during the year
|
7.2
|
10.9
|
7. Property, plant and equipment
During the year, the Group
purchased assets at a cost of £6.4m (2022: £4.1m); including land
and buildings £2.7m (of which £2.5m relates to a long lease (999
year) property shown in Right of Use assets), plant and equipment
£2.5m, tooling £1.4m, construction in progress £(0.4)m, and
fixtures and fittings £0.2m. Assets with a net book value of £0.2m
were disposed of (2022 £0.3m). Total depreciation for the period
was £3.9m (2022: £4.1m).
During the year there were lease
additions totalling £3.5m (including land and buildings as detailed
above) and a depreciation charge of £2.0m. The net book value of
right-of-use assets at 31 December 2023 was £7.6m (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 year,
the Group incurred internally generated development costs of £1.8m
(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 year was £3.4m (2022: £2.9m).
In the 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 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 2023. Goodwill has been
allocated to cash-generating units and can be referred to in the
Group's 2023 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 2023 Annual
Report and Accounts.
|
2023
|
2022
|
|
£m
|
£m
|
Non-current liabilities
|
|
|
Revolving credit facility
|
22.3
|
28.2
|
Overdrafts
|
-
|
0.2
|
|
22.3
|
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
|
|
2023
|
2022
|
2023
|
2022
|
USD
|
1.24
|
1.23
|
1.27
|
1.21
|
EUR
|
1.15
|
1.17
|
1.15
|
1.13
|
RMB
|
8.81
|
8.30
|
9.00
|
8.34
|
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:
|
2023
|
2022
|
|
£m
|
£m
|
Remuneration (including benefits in
kind)
|
5.1
|
5.1
|
Element of share-based payments
expense
|
0.9
|
1.0
|
|
6.0
|
6.1
|
12. Post balance sheet events
On the 29 February 2024, the Group
acquired the entire issued share capital of D-Line (Europe) Limited
("D-Line") for £8.6m initial cash consideration and up to £3.8m of
contingent consideration. D-Line is a supplier of cable management
solutions consisting of decorative cable trunking and accessories,
fire-rated cable supports, floor cable protector and cable
organisers, with headquarters in Tyne and Wear in the UK. The
business supplies retail, wholesale and eCommerce customers mainly
in the UK, Europe and North America. The business supports its
customers in North America from a sales and distribution facility
in Kentucky, USA. For the unaudited 12 month period ended 30
November 2023 D-Line generated revenue of £17.0m and underlying
operating profit of £1.4m.
13. Annual General Meeting (AGM)
The 2024 AGM will take place on 14
May 2024 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 2023 to 31 December 2023 and was approved by the
Board on 25 March 2024. A copy of the 2023 Annual Report and
Accounts will be published on the Luceco PLC investor relations
website, www.lucecoplc.com
as soon as practicable.
Additional information
Financial calendar
Item
|
Date
|
Ex-dividend date
|
11 April 2024
|
Dividend record date
|
12 April 2024
|
Dividend reinvestment plan final
date for election
|
25 April 2024
|
Annual General Meeting
|
14 May 2024
|
Dividend paid
|
17 May 2024
|
2024 Half year end
|
30 June 2024
|
2024 Half year trading
update
|
23 July 2024
|
2024 Half year results
|
10 September 2024
|
2024 Q3 Trading update
|
24 October 2024
|
2024 Year end
|
31 December 2024
|
2024 Year end preliminary
statement
|
March 2025
|
Contacts
Type
|
Name
|
Address
|
Website/Email/Phone
|
Company's registered office
|
Luceco plc
|
Building E Stafford Park
1
Stafford Park
Telford
TF3 3BD
|
www.lucecoplc.com
ir@luceco.com
|
Independent auditor
|
KPMG LLP
|
Chartered Accountants
One Snowhill
Snow Hill Queensway
Birmingham
B4 6GH
|
www.kpmg.co.uk
|
Financial advisors and brokers
|
Numis Securities
|
45 Gresham Street
London
EC2V 7BF
|
www.numis.com
|
|
Liberum Capital
|
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9LY
|
www.liberum.com
|
Company registrar
|
Link Group
|
Central Square
29 Wellington Street
Leeds
LS1 4DL
|
shareholderenquiries@linkgroup.co.uk
Tel: +44 (0)371 664
0300
|
Company Secretary
|
Company Matters
(part of Link Group)
|
6th Floor
65 Gresham Street
London
EC2V 7NQ
|
luceco@linkgroup.co.uk
Tel: +44 (0)333 300
1950
|
Financial PR
|
MHP
|
60 Great Portland
Street
London
W1W 7RT
|
luceco@mhpgroup.com
Tel: +44 (0)20 3128
8100
|